REG - GCM Resources PLC - Final Results and Notice of AGM
19/12/2022 14:00
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RNS Number : 2047K GCM Resources PLC 19 December 2022
19 December 2022
GCM Resources plc
("GCM" or the "Company")
(AIM:GCM)
Final Results for the year ended 30 June 2022
Notice of Annual General Meeting
GCM Resources plc announces the publication of its final audited results for
the year ended 30 June 2022 (the "Annual Report and Accounts") and that the
Company's 2022 Annual General Meeting will be held at 10.00 a.m. on Wednesday
18 January 2023, at QEII Centre, Broad Sanctuary, Westminster, London, SW1P
3EE.
The Annual Report and Accounts and the Notice of Annual General Meeting will
be posted to shareholders today. Copies are available on request from the
Company and will be available on the Company's website (www.gcmplc.com
(http://www.gcmplc.com) ). The Annual Report & Financial Statements are
also available on the 'Financial Reports' page of the Company's website.
For further information:
GCM Resources plc WH Ireland Ltd
Keith Fulton James Joyce
Finance Director Andrew De Andrade
+44 (0) 20 7290 1630 +44 (0) 20 7220 1666
GCM Resources plc
Tel: +44 (0) 20 7290 1630
info@gcmplc.com; www.gcmplc.com (http://www.gcmplc.com)
Executive Chairman's Statement
The Board presents the Company's Annual Report and Accounts for the year ended
30 June 2022, covering a period that started with optimism as the world
emerged from the Coronavirus Pandemic and business activity begun on a
trajectory to normality, but quickly saw business confidence deteriorate over
the second half of the reporting period as the effects of the Ukraine conflict
kicked in.
The Project remains focused on its core asset, being the Phulbari coal mine
capable of supporting some 6,600MW power generation, but also incorporates the
option for up to 4,000MW associated power plant developments. The
post-pandemic business revival saw a considerable rise in the Project's
significance for Bangladesh, as energy prices hiked in response to demand
outstripping supply and shipping costs following suit. During this period,
compared to pre-pandemic levels, the coal price more than doubled and
Liquified Natural Gas ("LNG") was up almost 10 times. Over the second half of
the reporting year the Ukraine conflict exacerbated the energy supply - demand
deficit resulting in a world-wide energy and power crisis. As a consequence,
the Project's significance for Bangladesh in terms of energy cost and
reliability of supply sky-rocketed. Furthermore, as Europe scrambles to shore
up energy supplies, many of the Least Developed Countries ("LDC") found
themselves unable to not only afford the enormous energy cost but also secure
reliable energy supply.
Over the past decade, Bangladesh has demonstrated an ever-growing dependency
on imported energy supplies. The world-wide energy and power crisis is now
forecast to be protracted and has already become an enormous challenge for LDC
economies. The Bangladesh Government reacted quickly and opted for an
"Austerity Strategy", i.e., restricting the import of energy to take pressure
off Foreign Exchange Reserves. The downside has been a reduction in business
activity and slowing of the economy. At the same time, the local currency
depreciated some 35% against the US Dollar, making imports in general and
energy imports in particular even more expensive, leading to inflation and an
ongoing significant rise in the cost of living.
There does now appear to be a growing awareness both in Government and civil
society that over-dependence on imported energy to power industrial and
economic development is inherently high risk and that a balance in energy
supply between domestic and imported should be pursued. This was witnessed
recently when the Bangladesh State Minister for the Ministry of Power, Energy,
and Mineral Resources spoke at length in Parliament in response to questions
regarding why extraction of the Country's domestic coal resources is lagging.
The State Minister's lengthy response, as reflected on the Parliament Hansard,
notes that open pit coal mining is only possible at Phulbari Coal reserve and
cited the main concern remains the impact on farming. We view this as a very
positive development and are confident that the Project's comprehensive
"Agricultural Improvement Plan", developed within the scope of the Project's
Environmental and Social Impact Assessment, will negate fears regarding impact
on farming, particularly given that coal mining is a temporary change in land
use and following coal extraction the mine void is backfilled with the land
progressively rehabilitated and returned to agriculture.
Our team in Dhaka has made presentations at senior level of government to gain
support for the Project and refine the Project Proposal. Feedback, which
confirms the recent statements by the State Minister, has been encouraging
with the Proposal now placing significant emphasis on government involvement,
coal price and foreign reserve savings, agriculture improvement, water
conservation, social management and assistance with enabling associated
infrastructure such as rail upgrade. We are also being guided by our local
Consultant Lobbyist on further refinements to the Proposal and timing for
delivery.
During this last Financial Year, our team continued to work closely with
development partner, Power Construction Corporation of China, Ltd.
("PowerChina"). Central to the discussions has been the Project Proposal and
how to ensure the Government and People of Bangladesh, investors and
shareholders will derive maximum benefit. To this end, on 6 December 2021, the
MOU focused on coal mine development was extended for 12-months with the aim
of defining the modality for PowerChina to become a Mine Development Partner,
subject to the approval of PowerChina internal compliance and all other
relevant regulatory agencies. Furthermore, on 11 March 2022, the power station
Joint Venture Agreements with PowerChina for the initial 4,000MW (two 2,000MW
Stages) were extended for two years to 15 March 2024.
Other steps taken in Financial Year 2022 include:
· On 31 August 2021, an MoU was signed with Sion Corporation of
Japan, Versatech Energy Innovation Limited and AC Biode Co. Ltd for providing
a suitable and effective environmental solution for the management of the
fly-ash waste product that could be produced by the Project.
· On 2 March 2022, the Company successfully raised £2.13million
through a placing (the "Placing") of 25,291,828 shares and a subscription for
16,171,777 shares of new ordinary 1p shares in the Company at a price of 5.14
pence per share, representing a discount of approximately 36.9% to the closing
mid-market share price on 1 March 2022.
Outside the Reporting Period:
· On 22 August 2022, the Company announced that it had agreed a
further extension of the consultancy agreement with DG Infratech Pte Ltd
("DGI"), a Bangladeshi controlled company, for an additional two years. DGI's
prime role is to provide advisory and lobbying services in relation to the
Company's business, namely to achieve project approval.
· On 12 December 2022, the Company announced that the MOU with
PowerChina, focused on coal mine development, has been extended for a further
12-months to 6 December 2023.
Overarching Operating Enviromnent:
The United Nations Climate Change Conference COP26 occurred within the current
reporting year and the recent COP27, just outside this period. There is no
doubting Climate Change is occurring and the LDC are most vulnerable to
extreme weather events, i.e., in general they lack the necessary specialist
expertise, emergency response systems and financial resources to prepare for
and deal with the aftermath of such events. However, while the Developed
Countries are promoting a rapid move to "renewable energy" as a means to
combat Climate Change, the reality is the LDC are, in the main, low Greenhouse
Gas ("GHG") emitters and also are well behind in power consumption per capita
and power generating capacity to drive industrial growth and economic
development. In addition the current range of renewable energy, largely being
solar and wind, are not suitable for base-load power which the LDC do struggle
to provide. This is reinforced by the Developed World still largely being
reliant on thermal energy for base-load power.
Bangladesh has maintained its stance regarding coal in its long-term energy
mix with 11,775MW coal-fired power plants commissioned or in the pipeline.
Progress is being made with: the Payra 1,320MW Coal-fired Power Plant
commissioned in 2019-20; the first unit (660MW) of the 1,320MW Rampal
Coal-fired Power Plant to be commissioned in November this year and the second
660MW unit due next year; the 1,320MW Banshkhali Coal-fired Power Plant
scheduled for commissioning in March 2023; with work on the Matabari 1,320MW
Coal-fired Power Plant continuing.
We are confident the Project will become a key part of Bangladesh's "Energy
Security and transition to Renewable Energy" and that the Phulbari coal mine
will become a "Net Zero Carbon" or "Green Mine" operation through:
· Utilising electrically powered mining equipment;
· Developing a large-scale Solar Power Park (Carbon-Offsetting)
within the Project area which would supply to the grid and also power the
Phulbari mining operation; and
· Additional Carbon Offsetting through progressive development of
an extensive forest plantation as part of the land rehabilitation plant.
Furthermore, utilsiing the high-energy Phulbari coal in power generation will
potentially reduce Bangladesh's overall GHG emissions by up to 30% against
current imported coal options as less Phulbari coal is consumed per kWh and
coal transportation is vastly simplified, i.e., international shipping over
long distances and lightering are both eliminated.
Finally, I thank our shareholders and stakeholders for their patience and
support and provide assurance that we now have a robust Project Proposal that
will assist the Bangladesh Government negate the effects of the long term
energy crisis and provide some relief to exposure to the volatile world energy
market. At the same time it encourages involvement by the Government,
reinforcing its ownership of and benefits accruing from the strategically
important Phulbari coal rsource.
Mohd. Najib Abdul Aziz
Non-Executive Chairman
19 December 2022
Group Strategic Report
Strategy and business model
GCM remains committed to its core strategy of developing the Phulbari coal
deposit as a captive, large-scale, open pit mining operation supporting some
6,600MW of highly energy-efficient Ultra-Supercritical power generation. Over
the reporting period this strategy has been enhanced to include installation
of a large-scale Solar Power Park (up to 2,500MW) within the Project area, to
be installed within the first two years of gaining land access; operating the
Phulbari coal mine as a "Net Zero Carbon" or "Green Mine"; and participation
modalities for Government.
GCM's strategy and business model is based on establishing partnerships with
internationally renowned companies, specifically Chinese State-owned
enterprises, to assist with obtaining the necessary government approvals and
finance, and to be involved in construction and operation of the coal mine and
possible power plants. Consultants are also employed to provide guidance and
lobbying support both in Bangladesh and Internationally.
The business model relies on establishing a reliable domestic market for the
Phulbari coal mine's full production. This is vital to underpin the Project's
economic sustainability and is a prerequisite to obtaining project finance. In
the past we have focused on a coal market solution with development partner,
PowerChina, involving new power plants commissioned in stages to match the
mine's ramp-up to 15Mtpa nameplate production. To this end, Joint Venture
Agreements("JV's") remain in place covering 4,000MW, with the remaining coal
mine production destined for the domestic market.
While this business model essentially remains valid, we have made changes in
emphasis with the 4,000MW proposed under the JV's with PowerChina now being an
option in the Project Proposal. This was driven by the fact that there is
already significant new coal-fired power plant capacity being developed by
other parties (with the Government) which is rapidly evolving into a
significant domestic market capable of absorbing the full Phulbari coal mine
production. The Chinese President's address to the United Nations General
Assembly on 22 September 2021 is also a consideration as it did cast doubt
over China financing new coal-fired power projects outside of China. There has
been no further clarification or follow-up policy statement and there is
speculation that the definition of "new" may possibly not include power plants
that were already at the planning stage. Certainly, the world-wide energy
crisis has changed the power landscape with many countries reverting to
coal-fired power, including many in the European block. Due to these
circumstances, therefore, we consider the risk adverse option for the Project
is to focus on supplying coal to other power plants in the first instance.
This will be a 'Win - Win" as the Bangladesh Government would secure a high
quality coal supply with reduced supply and cost risks and save billions of
dollars on excessive coal tonnage imports and power generating
costs.
GCM is confident its enhanced strategy and business model will deliver the
project approval. The Project will: reduce the Country's exposure to the
volatile energy market; deliver a long-term positive impact on Foreign
Exchange Reserves; deliver the lowest coal-based energy price and cheapest
electricity, underpinning expansion and competitiveness of industries, produce
new higher paying jobs, and grow the economy. It potentially will be an
economic "step-jump" for Bangladesh, supporting its move to become a
Developing Country by 2026 and helping achieve its Vision 2041 to:
· End absolute poverty and to be graduated into higher
middle-income status by 2031; and
· Eradicate poverty on way to becoming a developed nation by 2041
Progress in-line with the strategy
The Company delivered a "Feasibility Study and Scheme of Development" for the
coal mine component of the Project in October 2005. This mine development
proposal remains robust, having been fully evaluated through the Definitive
Feasibility Study ("DFS"). The DFS combines over two hundred individual
studies by a team of international and national experts, with a view to
delivering a world-class mining project plan, based on proven international
best mining practices. It includes a comprehensive Environmental and Social
Impact Assessment ('ESIA").
With the assistance of Hong Kong based Dyani Corporation Limited ("Dyani"),
the Company developed close working relationships with the Chinese
state-owned-enterprises. Currently the following arrangements are in place to
support GCM's strategy for delivering the Project:
· Joint Venture Agreements with PowerChina for 4,000MW of
mine-mouth power plants; and
· MOU with PowerChina aimed at defining the modality for PowerChina
to become a Mine Development Partner.
Power Proposal documents required by the Government for approval of the
initial 4,000MW power plants have been prepared. Presentations have been made
at senior level of government to galvanise support for the Project and refine
the Proposal which has been expanded to include:
· Options for participation by Government;
· Significant benefits of supplying coal directly to the
Government's sanctioned power plants;
· Large-scale Solar Power Park (up to 2,500MW) on the Project area
within the first couple of years;
· "Green Mine" with Carbon Offsetting (including forest) resulting
in Net Carbon Zero mining operation; and
· Very significant Green House Gas emission reduction of some 30%
using Phulbari coal vs. Imported Coal
As GCM does not yet generate any revenue, the Board expects that the Group's
operations will continue to be funded by a combination of equity and debt
financing.
Continuing for the foreseeable future, the Company's cash expenditure is not
expected to increase and, as far as possible, obligations to key stakeholders
will be primarily satisfied by the issue of new ordinary shares in the capital
of the Company ("Ordinary Shares"), to both incentivise those stakeholders and
preserve cash.
Year in review
GCM began the reporting year with international business confidence growing as
the world emerged from the Coronavirus Pandemic. However, Bangladesh continued
with periods of restricted movement of people and closure of government and
private business offices until mid-August 2021.
Despite these periods of restricted movement, GCM's Dhaka team managed to
initiate discussions at senior level of government to gain support for the
Project and refine the Proposal to better address concerns and needs of
Government. The initial recommendation was to prepare a fact sheet comparing
Phulbari coal with imported coal supporting power hubs at various strategic
location throughout Bangladesh. The results were compelling with Phulbari's
high energy coal enabling many billions of dollars of annual savings. These
discussions continued throughout the reporting period and resulted in
refinement of Project presentations and the Project Proposal. The GCM team was
supported by its development partner, PowerChina, in various key meetings.
On 31 August 2021, GCM signed an MoU with a consortium of Sion Corporation of
Japan, Versatech Energy Innovation Limited and AC Biode Co. Ltd for providing
management of the Project's power plant fly-ash waste product. SION has
developed a multifunctional material, CircuLite, which can be manufactured
from fly-ash and would have wide application in Bangladesh for environmental
pollution control and in agricultural for soil conditioning.
On 6 December 2021, the MOU with PowerChina, focused on coal mine development,
was extended for 12-months. PowerChina has reiterated its desire to
particpiate in the coal mine development and working under this MOU the
parties aim to define the extent of this participation.
On 11 March 2022, the power station Joint Venture Agreements with PowerChina
for the initial 4,000MW (two 2,000MW Stages) were extended for two years to 15
March 2024.
Outside the reporting period:
· On 22 August 2022, the Company agreed a further extension of the
consultancy agreement with DG Infratech Pte Ltd ("DGI"), a Bangladeshi
controlled company, for an additional two years. DGI's prime role is to
provide advisory and lobbying services to facilitate delivery of the Project
Proposal and gain project approval.
· On 12 December 2022, the Company announced that the MOU with
PowerChina, focused on coal mine development, has been extended for a further
12-months to 6 December 2023.
The Project Proposal has been enhanced to address the concerns and needs of
the Bangladesh Government and incorporate options for Government
participation. Principal focus is obtaining Coal Supply Agreements for coal
supply to existing and planned coal-fired power projects and to work with the
Government on additional joint venture arrangements for coal transportation
and marketing, infrastructure development and Industrial Mineral co-product
marketing.
The Project Proposal also includes a large Solar Power Park within the Project
area, which could be operational within the first two years of Project
approval and supply power to the mine as well as the National Grid. The
Project's Agricultural Improvement and Land Rehabilitation Plans also create
significant additional Carbon Offsetting. The net result is the Project could
have a Carbon Zero "Green Mine" and the Government could reduce its Greenhouse
Gas Emissions (CO(2)) by some 30% by using Phulbari's coal instead of
imported.
GCM's field team are working closely with the local community and local
authorities to ensure they remain fully informed on the Project. This field
effort is bolstered by over 60 "Community Liaison Assistants" recruited from
across the Project area. They are not employees but are members of the local
community that assist with delivery of our messages and conveyance of
community feedback.
The Board is pleased with its progress against its strategy of forming
development partnerships covering coal mine and power plants and that it now
has a holistic Project Proposal that addresses Government's needs and
concerns, sets out options for Government participation, supplies coal for
large-scale power generation through a "Green Mine" approach, saves the
Country billions of dollars annually in Foreign Exchange and at the same time
delivers GHG emissions reduction and significant renewable energy in the form
of a large-scale Solar Park. The Proposal has been prepared based on feedback
from senior level of Government. Timing of delivery of the Proposal for
Government approval is being guided by our appointed local Consultant
Lobbyist, DGI.
WH Ireland Limited remains our Nominated Advisor and Broker since their
appointment on 11 January 2021. As part of the 'Placing and Subscription"
fundraising completed on 2 March 2022, ETX Capital was appointed as a Joint
Broker.
Finance review
The Group recorded a loss of £1,679,000 during the year ended 30 June 2022
compared to a loss of £1,874,000 during the previous year. The loss decreased
from the comparative year principally due to a decrease in non-cash,
share-based payments accrued in accordance with the Group's agreements with
Dyani & DG in relation to pre-development expenditure. The decrease was
from £809,000 in 2021 to £414,000 this year as a result of prior year
milestone payment to the consultant being reached in 2021, but their
continuing partnership allows the Group to continue its progress in-line with
GCM's strategy of developing power generation as a new business stream, with
no slow-down in pursuing continuing project progress.
The Group recorded a net increase in cash at the end of the year to £961,000
(2021: £717,000). Net cash used in operations for the year was £846,000
(2021: £326,000), cash used in investing activities was £520,000 (2021:
£557,000), and cash inflow from financing was £1,610,000 (2021:
£1,531,000).
The Group has continued its aim to maintain tight control of expenditure
incurred during the year: Administrative expenses were up by 4.6% to £750,000
for the year ended 30 June 2022 (2021: £717,000) which included £30,000
non-cash expenditure, however, finance costs increased by 25.3% to £480,000
(2021: £383,000) as a result of the amended terms to the Polo Loan Facility
both in the current and prior year. Capitalised expenditure in relation to
the mine proposal was £563,000 for the year ended 30 June 2022 compared to
£552,000 in the previous year.
To finance its operations during the year, GCM completed a successful Placing
and Subscription in conjunction with ETX Capital & WH Ireland Ltd, raising
Gross proceeds of £2,130,000 in March 2022. In addition, GCM continues to
have available, the short-term loan facility with Polo Resources Limited
("Polo") (the "Polo Loan Facility"). The Polo Loan has not been increased or
drawn down during the year and remains at a facility of £3,500,000, with
£3,200,000 drawn to date. The terms of the loan facility were amended in
March 2022 as part of the completed placing and subscriptions, such that the
lender may request conversion by the issuance of new ordinary shares in the
Company at 5.14 pence per share (being the Issue Price) subject to any
necessary regulatory approvals. All other terms of the agreement remained
unchanged. (See Note 12 for detailed terms).
As at the date of this report, the Company had drawn down £3,200,000 of the
Polo Loan Facility and the Company currently has approximately £840,000 in
available cash resources, which along with the remaining £300,000 of the Loan
Facility the Director's believe will only be sufficient to fund the Company's
cash requirements for the next seven months, assuming the Company's currently
forecast cash costs. The Company is exploring other financing options, and
is confident of securing additional funding by the end of June 2023 (the
"Additional Funding").
Corporate Social Responsibility
Mining is not a 'one go' process like other large development projects. GCM's
management team appreciates that the success of mining operations is
underpinned by an ability to listen to the communities within which they
operate, deal with their concerns, keep them fully informed, improve
livelihoods and, not only minimise environmental impacts, but improve the
local environment.
GCM is committed to developing the Project in accordance with highest
international and national environmental and social standards as defined in:
· International Finance Corporation (World Bank) policies and
standards;
· Equator Principles;
· Asian Development Bank's (ADB) Safeguard Policies; and
· Prevailing policies and laws of Bangladesh.
GCM is also a signatory of UN Global Compact, the World's largest voluntary
corporate responsibility initiative, and embraces the core values pertaining
to human rights, labour standards, the environment and anti-corruption.
One of the Project's key success factors is the successful implementation of
the Project's Resettlement Action Plan ("RAP"). This was prepared as part of
the coal mine's comprehensive Environmental and Social Impact Assessment and
involved several rounds of surveys covering families within and immediately
adjacent to the Project Area. A demographic survey was also carried out in
2019 to update the population and household trends. GCM is committed to lift
the amenity of its local community and will ensure the RAP will deliver:
· Full and fair compensation;
· Full compensation prior to displacement;
· Fairness, transparency and choice;
· Higher living standards (town/village sites improved amenities);
· Financial grants to enhance livelihoods;
· Training and preferential employment; and
· Support of farmers to enhance agricultural production.
GCM maintains facilities in the Project area and its resident field team is in
close contact with the community and local authorities. Our communication
strategy also involves over 60 Community Liaison Assistants ("CLA's"),
recruited from across the Project Area. The strength of the CLA's comes from
them also having their own communication networks, i.e., two-way communication
is greatly enhanced. The Community feedback remains consistent: the majority
want development of their area (rated as one of the poorest in Bangladesh);
they want job opportunities; and above all they want a better life for their
children.
The Project will deliver over 17,000 jobs directly and indirectly created as a
consequence of the mine development alone. However, many thousands of
additional jobs would come from having an expansive reliable power supply
enabling new industrial development. One such industrial opportunity would
come through industrial mineral co-products that can be extracted from the
mine overburden material removed to access the coal. These co-products (in
very large quantities) would become available soon after removal of overburden
commences (several years ahead of coal extraction) and include clay for bricks
and pottery, China Clay for ceramics, silica sand for glass manufacturing and
a range of sand, gravels and rock aggregates for the construction industry.
Conservative estimates of the value of these co-products amounts to some US$17
Billion over the life of the Project.
Risks and uncertainties
The predominant risks and uncertainties faced by the Company are set out
below:
Political and economic - risk that the Company's new approach, being to
establish the Phulbari open pit coal mine as captive to and packaged to
either: (a) in the first instance, supply all or part of the Phulbari coal
mine production to the Government's own power plants, supporting up to 6,600MW
state-of-the-art highly energy efficient Ultra-Supercritical power plants, or
(b) as a back-up option, supply all or in part of the Phulbari coal mine
production to power plants developed by GCM and its Development Partner(s), is
not approved by the Government of Bangladesh. However, the Project has also
been enhanced with the addition of a large-scale Solar Power Park (supplying
the mine and National Grid) and a range of Carbon Offsetting measures that
would enable the coal mine to be Carbon Net Zero (a "Green Mine"). The use of
Phulbari coal instead of imported coal would also reduce Bangladesh's
Greenhouse Gas Emissions (CO(2)) by some 30%, save the Government billions of
dollars in Foreign Exchange and energy and power generation cost, and allow
cheaper power to facilitate industrial expansion and boost competitiveness.
The Board believes the protracted world-wide energy crisis has greatly
enhanced the value of the Project to the Government and People of Bangladesh
and improved the likelihood for approval. The Board also believes its strategy
of maintaining experienced development partners is an attractive proposition
for the Government and does provide the best opportunity for realising the
huge benefits the Project is capable of delivering. The Company's Bangladesh
team and appointed consultants / lobbyists maintain contact with Government
officials to prepare for delivery of the expanded Proposal, however, it
recognises that the timing of approval remains in the hands of the Government.
The Company retains its right to seek legal redress in accordance with the
terms of the Contract with the Government in the event approval is not
ultimately forthcoming. Refer to Note 1 of the consolidated financial
statements for further information.
Strategic - risk that the strategic partnership with the Chinese
state-owned-enterprise PowerChina does not proceed, thus undermining the
Company's strategy of presenting the Project as a captive coal mine with
reliable market options for its full coal mine production and jeopardising the
mine's economic sustainability. As explained in the "Political and economic
risk" section, the Company has already expanded the Proposal to promote all or
part of the Phulbari captive open pit coal mine production being sold in the
first instance to the Government's own power plants, thus reducing or
eliminating the dependency on having mine-mouth power plants as the sole
market for the Phulbari coal. The current and prolonged world energy crisis
with escalated coal and LNG prices (increasing pressure of Bangladesh's
Foreign Exchange Reserves) also makes the proposition of the Government using
Phulbari coal for its power plants much more attractive.
The Company has also taken steps to further reduce this risk through recent
signed agreements and continuing dialogue with the development partner aimed
at further strengthening the strategic partnership; and has in place
incentive-based schemes with Dyani to enhance the relationships with the
Chinese government organisations and with the Bangladeshi controlled entity,
DGI, to assist with taking the Project through the government approval process
to implementation. The Company's Bangladesh team is also working to prepare
Government officials for delivery of the expanded Proposal.
Financing - risk that the Company will not be able to raise necessary funds as
and when required to take the Project through the government approval process
to implementation stage. The Directors are confident that the necessary funds
will be obtained as and when required. For further details refer to the
Directors' Report.
Commercial - risk that the Project's economic viability is undermined by
sustained adverse movement of coal price and key cost elements. The current
and prolonged world energy crisis with escalated coal and LNG prices makes the
proposition of the Government using Phulbari coal for its power plants much
more attractive. Analysts predict the supply/demand forces will support
continuing high coal prices in the medium term, thus using Phulbari coal will
give the Government some protection against supply and cost escalation risk
and save billions of dollars in Foreign Exchange. To further reduce economic
viability risk there will be a rise and cost provision for the coal mine with
the coal supply agreements for the power plants. Bangladesh has several new
power projects under construction and others in the pipeline with the full
capacity set out in a recent Government report to be in excess of 10,000MW,
i.e., some 40% more than can be supported by the Phulbari coal mine's full
production.
Legal - risk that the mining lease and exploration licences are revoked. The
Group continues to comply with all terms of the Contract with the Government
for "Exploration and Mining of Coal in Northern Bangladesh" and is careful to
ensure that all ongoing conditions of the Contract and the associated mining
lease and exploration licences are met. GCM has received a recent
comprehensive legal opinion that the Contract is enforceable under Bangladesh
and International law.
Health and safety, social and environmental risks - The Group remains
committed to developing the Project and meeting the highest international
social and environmental standards as detailed in the Corporate Social
Responsibility section within this Strategic Report.
Climate Change risk - Increased awareness and action against climate change
will put pressure on governments and financing organisations to reduce
exposure to fossil fuel related power generation. This could affect future
Bangladeshi Government policy towards coal fired generation and limit funding
appetite for the Project. Bangladesh is scheduled to officially become a
developing country in 2026 as the UN committee recommended that the country
should get five years, instead of three, to prepare for the transition due to
the impact of Covid-19 on its economy. Until 2026, the country will continue
to enjoy the trade benefits as an LDC. The Bangladesh Government has also
recently adopted its Vision 2041 which aims to end absolute poverty and to be
graduated into higher middle-income status by 2031 and eradicate poverty on
way to becoming a developed nation by 2041.
Bangladesh has minimal emissions and is far behind the developed countries in
terms of GDP and power generation per capita. Considering the year 2019
(immediately prior to the COVID pandemic and the worldwide economic slowdown)
published figures indicate its contribution to the world's CO(2) production
was some 0.25 percent, i.e. Bangladesh is not a significant emitter.
Vision 2041 identifies two fundamental energy and power sector pillars
necessary to support the Vision: (i) Adopting a least-cost power generation
expansion path; and (ii) Promoting supply of low-cost primary energy. To
achieve this, it needs to steadily grow its power generation capacity
(efficient low cost power) to drive industrial development and create
sustainable new well-paying jobs. To this end, even if the Phulbari full coal
production was consumed in over 6,000MW of power being generated in the year
2019, Bangladesh's contribution to the world's CO(2) production would still
have been minimal at less than 0.35%.
The Bangladesh Government recognises the importance of commercial fuel
diversity for its power generation, however, it remains heavily reliant on
imported fuels, which exposes the country to inherent world-market risks in
terms of maintaining supply and controlling cost. The world-wide protracted
energy crisis has raised serious questions over Bangladesh's dependence on
imported energy products. It has forced the Government to adopt an austerity
approach involving restricting energy imports and cutting back on power
generation, principally driven by falling Foreign Exchange Reserves. Civil
society and many political figures are now calling for a rapid move to develop
the country's domestic coal land gas resources to ensure energy security and
save on Foreign Exchange.
The Phulbari Project remains focused entirely on serving Bangladesh's domestic
requirements, adhering to its policies and laws and supporting its development
goals. The Project will assist Bangladesh achieve its NDC targets as it
balances issues to achieve its Development goals. By using Phulbari's high
quality coal high energy efficient low emission Ultra-Supercritical power
plants the country will not only eliminate greenhouse emissions associated
with coal shipping and handling, but importantly it will realise a large
amount of clean coal technology produced power at tariffs that will make its
industries more competitive. This will help drive Bangladesh economic
development and ability to deal with the effects of climate change.
Board engagement with stakeholders
This section serves as our section 172 statement and should be read in
conjunction with the rest of the Strategic Report and the Company's Corporate
Governance Statement.
Section 172 of the Companies Act 2006 requires a Director of a company to act
in the way he or she considers, in good faith, and would be most likely to
promote the success of the company for the benefit of its members as a whole.
In doing this, section 172 requires a Director to have regard, among other
matters, to: the likely consequences of any decision in the long term; the
interests of the company's employees; the need to foster the company's
business relationships with suppliers, governments, local communities, and
others; the impact of the company's operations on the community and the
environment; the desirability of the company maintaining a reputation for high
standards of business conduct; and the need to act fairly with members of the
company.
The Directors uses its Board meetings as a mechanism for giving careful
consideration to the factors set out above in discharging their duties under
section 172.
Stakeholder engagement
Key stakeholder groups we engage with are listed below, together with an
explanation of why we focus on them and how we engage them.
Employees
The success of the Group is dependent upon the hard work and dedication of all
our employees. The Board ensures a continuing investment in existing employees
who are supported through professional, technical and on-the-job training
relevant to their functional areas, as well as other relevant role-specific
training. The Board directs executives and senior managers to keep staff
informed of the progress and development of the Company on a regular basis
through formal and informal meetings and regular communications. In addition,
the Board ensures funds are provided for regular events to encourage employee
participation in local community initiatives.
Government Agencies & Local Communities
The Group operates in the regulated mining sector in Bangladesh. The Board
ensures the Company adopts a positive focus on maintaining productive
relations with local communities and all levels of government. As a result,
the Chief Executive Officer and Chief Operating Officer regularly conduct
consultations with multi-levels of government agencies to ensure that all
regulatory approvals and permits remain in good order. Development of local
community improvement programmes are undertaken with consultation of local
government and community representatives in order to maintain positive and
productive relationships necessary to advance the Phulbari project.
As a mining exploration Group, the Board takes seriously its ethical
responsibilities to the communities and environment in which it works.
Wherever possible, local communities are engaged in the geological operations
& support functions required for field operations. The regions in which
the Group operates have native title laws. The Company is respectful of
native title rights and engages proactively with local communities. In
addition, we are careful to manage the environmental obligations of our work,
and in particular undertake site rehabilitation programmes, and prepare mine
management plans, in accordance with local laws and regulations. Our goal is
to meet or exceed standards, in order to ensure we maintain our social licence
to operate from the communities with which we interact.
Contractors & Suppliers
Our proposed Joint Venture associates, consultants and suppliers are key
business partners, and the quality of goods and services we receive are
essential to supporting operations and to enhance the project process with our
goal to successfully submit our project proposal to the Bangladesh Government
for approval.
During the year, the Board committed significant resources into fostering
improved relationships with our key partners. As directed by the Board,
management collaborates and continually works with our partners and the full
supply chain, sharing best practice and seeking out synergies to improve.
Lender
For the entire reporting period the Chairman, CEO and FD, on behalf of the
Board have been in regular contact with its lender. An extension to the loan
agreement was agreed during the year, which enabled the Group to continue on a
stable financial platform.
Investors
Investors are considered key stakeholders, and consequently investor relations
are a focus area for Directors. Where possible the Board engages investors on
Group performance following project updates and results announcements with
face-to-face meetings or scheduled calls. Over the past year however these
consultations have been severely impacted by the legal & country specific
restrictions placed upon Directors given the world economic climate under the
Covid-19 pandemic.
On behalf of the Board,
Datuk Michael Tang PJN
Chief Executive Officer
19 December 2022
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
For year ended 30 June
Notes 2022 2021
£000 £000
Operating expenses
Pre-development expenditure 16 (414) (809)
Exploration and evaluation costs (35) 35
Administrative expenses (750) (717)
Operating loss 3 (1,199) (1,491)
Finance costs (480) (383)
Loss before tax (1,679) (1,874)
Taxation 6 - -
Loss for the year (1,679) (1,874)
Other comprehensive income - -
Total comprehensive expense for the year (1,679) (1,874)
Loss per share
Basic (pence per share) 7 (1.1p) (1.5p)
Diluted (pence per share) 7 (1.1p) (1.5p)
Consolidated Statement of Changes in Equity
For year ended 30 June
Share capital Share premium account Share based payments not settled Accumulated losses Total
£000 £000 £000 £000 £000
Balance at 1 July 2020 11,256 53,534 1,706 (29,079) 37,417
Total comprehensive loss - - - (1,874) (1,874)
Share issuances 792 2,155 (1,938) - 1,009
Share issuance costs - (78) - - (78)
Shares to be issued - - 809 - 809
Share based payments - - 6 - 6
Balance at 30 June 2021 12,048 55,611 583 (30,953) 37,289
Total comprehensive loss - - - (1,679) (1,679)
Share issuances 447 2,086 (372) - 2,161
Share issuance costs - (121) - - (121)
Shares to be issued - - 414 - 414
Share based payments - - 17 - 17
Balance at 30 June 2022 12,495 57,576 642 (32,632) 38,081
Consolidated Balance
Sheet
Company number 04913119
As at 30 June
Notes 2022 2021
£000 £000
Current assets
Cash and cash equivalents 961 717
Other receivables 8 436 13
Total current assets 1,397 730
Non-current assets
Property, plant and equipment 3 8
Right of use assets 13 19 59
Intangible assets 9 42,742 42,179
Total non-current assets 42,764 42,246
Total assets 44,161 42,976
Current liabilities
Payables 11 (1,369) (1,422)
Lease liabilities 13 (27) (40)
Total current liabilities (1,396) (1,462)
Non-current liabilities
Lease liabilities 13 (1) (22)
Borrowings 12 (4,683) (4,203)
Total non-current liabilities (4,684) (4,225)
Total liabilities (6,080) (5,687)
Net assets 38,081 37,289
Equity
Share capital 14 12,495 12,048
Share premium account 14 57,576 55,611
Other reserves 14 642 583
Accumulated losses (32,632) (30,953)
Total equity 38,081 37,289
These financial statements were approved by the Board of Directors and were
signed on their behalf by:
Keith Fulton
Executive Director
19 December 2022
Consolidated Cash Flow Statement
For year ended 30 June
2022 2021
£000 £000
Cash flows from/(used in) operating activities
(Loss) before tax (1,679) (1,874)
Adjusted for:
Pre-development expenditure 16 414 809
Finance costs 480 383
Other non-cash expenses 30 -
(755) (682)
Movements in working capital:
(Increase)/Decrease in operating receivables (23) 2
(Decrease)/Increase in operating payables (68) 354
Cash used in operations (846) (326)
Net cash used in operating activities (846) (326)
Cash flows used in investing activities
Payments for intangible assets (520) (557)
Net cash used in investing activities (520) (557)
Cash flows from financing activities
Issue of ordinary share capital 1,731 1,009
Share issue costs (121) (78)
Proceeds from borrowing - 600
Net cash from financing activities 1,610 1,531
Total increase in cash and cash equivalents 244 648
Cash and cash equivalents at the start of the year 717 69
Cash and cash equivalents at the end of the year 961 717
Notes to the Consolidated Financial Statements
1. Accounting policies
GCM Resources plc is domiciled in England and Wales, was incorporated in
England and Wales as a Public Limited Company on 26 September 2003 and
admitted to the London Stock Exchange Alternative Investment Market ("AIM") on
19 April 2004.
The financial report was authorised for issue by the Directors on 19 December
2022, and the Consolidated Balance Sheet was signed on the Board's behalf by
Keith Fulton.
Basis of preparation
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards and applied in accordance with
the Companies Act 2006. The accounting policies which follow set out those
policies which apply in preparing the financial statements for the year ended
30 June 2022.
The functional and presentational currency of each of the entities in the
Group is pounds sterling, and all values are rounded to the nearest thousand
pounds (£000) except where otherwise indicated.
Political and economic risks - carrying value of intangible asset
The principal asset is in Bangladesh and accordingly subject to the political,
judicial, fiscal, social and economic risks associated with operating in that
country.
The Group's principal project relates to thermal coal and semi-soft coking
coal, the markets for which are subject to international and regional supply
and demand factors, and consequently future performance will be subject to
variations in the prices for these products.
GCM, through its subsidiaries, is party to a Contract with the Government of
Bangladesh which gives it the right to explore, develop and mine in respect of
the licence areas. The Group holds a mining lease and exploration licences in
the Phulbari area covering the prospective mine site. The mining lease has a
30-year term from 2004 and may be renewed for further periods of 10 years
each, at GCM's option.
In accordance with the terms of the Contract, GCM submitted a combined
Feasibility Study and Scheme of Development report on 2 October 2005 to the
Government of Bangladesh. Approval of the Scheme of Development from the
Government of Bangladesh is necessary to proceed with development of the mine.
GCM continues to await approval.
The Group has received no notification from the Government of Bangladesh (the
"Government") of any changes to the terms of the Contract. GCM has received
legal opinion that the Contract is enforceable under Bangladesh and
International law, and will consequently continue to endeavour to receive
approval for development.
Accordingly, the Directors believe that the Phulbari Coal and Power Project
(the "Project") will ultimately receive approval, although the timing of
approval remains in the hands of the Government. To enhance the prospects of
the Project, GCM has engaged in a strategy to align the Project with the needs
and objectives of the Government. This includes the option to supply coal to
both the Government's commissioned and in the pipeline power plants, which
total 11,755MW. The Government is seeking to grow its economy and deliver
electricity at prices that will ensure competitiveness of its industries. The
Group's strategy of developing the Phulbari coal deposit as a captive,
large-scale, open pit mining operation supporting some 6,600MW of highly
energy-efficient Ultra-Supercritical power generation will enable cheaper
coal-fired electricity than imported coal options. This evolving strategy has
been enhanced to include installation of a large-scale Solar Power Park (up to
2,500MW) within the Project area, to be installed within the first two years
of gaining land access; operating the Phulbari coal mine as a "Net Zero
Carbon" or "Green Mine"; and participation modalities for Government.
Until approval of the Scheme of Development from the Government of Bangladesh
is received there is continued uncertainty over the recoverability of the
intangible mining assets. The Directors consider that it is appropriate to
continue to record the intangible mining assets at cost, however if for
whatever reason the Scheme of Development is not ultimately approved the Group
would impair all of its intangible mining assets, totalling £42,742,000 as at
30 June 2022.
Going concern
As at 30 June 2022, the Group had £961,000 in cash and £1,000 in net current
assets. The directors and management have prepared a cash flow forecast to
December 2023, which shows that the Group will require further funds to cover
operating costs to advance the Phulbari Coal and Power Project and meet its
liabilities as and when they fall due. Based on current forecasts,
additional funding will need to be either raised from third parties or drawn
down under the short-term loan facility with Polo Resources Limited ("Polo
Loan Facility") by the end of June 2023, in order to meet current operating
cost projections. The Directors also note that, under the amended terms of
the existing Polo Loan Facility, the lender agreed not to serve a repayment
request in cash for 5 years from the date of amended terms, 26 March 2021, or
alternatively convert to shares at 5.14 pence per share at the lender's option
(as amended on 1 March 2022). The Company does not currently have secured
funding arrangements in place to cover this loan or further potential
expenditure which may be needed to advance the Project and, accordingly,
should Polo request repayment of the Polo Loan Facility, (under certain terms
of the Loan Facility) GCM will need to raise funds in a short amount of time,
which may not be available on terms acceptable to the Board or on a workable
timeframe.
The Company currently has £300,000 available for drawdown under the Polo Loan
Facility at the date of this report, and based on projected future cash
expenditure, the remaining amount available for drawdown under the Polo Loan
Facility at the date of this report is not expected to be sufficient to
support the Company's operations for the twelve months from the date of this
report. At the current run rates, along with the Company's existing cash
resources, this is only expected to provide sufficient capital for the next
seven months. The Company intends to explore alternative funding options
over the second quarter of 2023, with the aim to complete and secure the
necessary third-party funding by the end of June 2023.
In forming the conclusion that it is appropriate to prepare the financial
statements on a going concern basis the Directors have made the following
assumptions that are relevant to the next twelve months:
- Sufficient additional funding can be obtained for working
capital purposes; and
- In the event that operating expenditure increases significantly
as a result of successful progress with regards to the Phulbari Coal and Power
Project, sufficient funding can be obtained.
While the Directors remain confident that necessary funds will be available as
and when required, as at the date of this report these funding arrangements
are not secured, the above conditions and events represent material
uncertainties that may cast significant doubt over the Group's and Company's
ability to continue as a going concern. The financial statements have been
prepared on a going concern basis. The financial statements do not include the
adjustments that would result if the Group and Company were unable to continue
as a going concern.
Upon achieving approval of the Phulbari Coal and Power Project, significant
additional financial resources will be required to proceed to development.
Use of judgements, estimates and assumptions
The preparation of the consolidated financial statements requires management
to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses.
The estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of revision and future periods if the revision affects both current and future
periods.
Intangibles
In assessing the recoverability of intangible assets, if an impairment trigger
under IFRS 6 is identified then intangibles are tested for impairment.
Management has identified impairment triggers to be the market capitalisation
of the Company compared to the recognised amount on the balance sheet and the
delay in obtaining approval of the Scheme of Development. To assess for
recoverability, estimates are used to determine the expected net return on
investment. The estimated return on investment takes into account estimated
recoverable reserves, coal prices, development and production costs, capital
investment requirements, discount rates and environmental and social costs
among other things. Management has considered the estimated return on
investment to be significantly higher than the current carrying value and
therefore no impairment has been accounted for. The headroom in the value in
use calculation compared to the carrying value is not sensitive to probable
changes in the key underlying assumptions. Refer to "Political and economic
risks - carrying value of intangible asset" section within Note 1 for further
details in respect of the recoverability of intangible mining assets and the
Board's judgement regarding the ultimate approval of the project being
secured.
Power plant development costs
Power project expenditure is expensed as pre-development expenditure until it
is probable that future economic benefits associated with the Project will
flow to the Group and the costs can be measured reliably. To assess whether
it is probable that future economic benefits will arise from the power plant
development costs, management judgement was required and considered: objective
evidence that the power plant is technically and economically feasible, and
objective evidence that the appropriate authorities of the Government of
Bangladesh have, or are likely to approve power plant development. All power
project expenditure were accordingly expensed in the year.
Amendments to the short-term loan
Judgement was required in determining the accounting for the Group's
short-term loan which was restructured during the current and prior year. The
restructure was considered to represent a significant modification with the
loan restructured to allow the lender the continuing right to convert the
outstanding loan balance and accrued interest to new ordinary shares, but to
defer the repayment period. Previous judgement was required in assessing
whether the restructured facility represented a compound financial instrument
in accordance with IAS32 Financial Instruments: Presentation or a prima facie
on demand loan facility. Management concluded that as the loan has no maturity
date and must be repaid within 14 days of receiving a request, it is in effect
a rolling 14-day short term loan, however as a further amendment has been
claused as such the lender would not serve a repayment request on the Borrower
for 5 years from March 2021, the loan was reclassified in the prior year being
classed as a non-current liability. Accordingly, the loan continues to be
categorised as an on demand loan facility with no value attributed to the
conversion feature and the loan carried forward at its face value.
Basis of consolidation
Where the Company has control over an investee, it is classified as a
subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and
its subsidiaries (the "Group") as if they formed a single entity. Intercompany
transactions and balances between group companies are therefore eliminated in
full. The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the statement of
financial position, the acquiree's identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the
consolidated statement of comprehensive income from the date on which control
is obtained. They are deconsolidated from the date on which control ceases.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. Such cost includes costs directly
attributable to making the asset capable of operating as intended.
Depreciation is charged to the income statement on a straight-line basis over
the estimated useful lives of each part of an item of property, plant and
equipment. The estimated useful lives in the current and comparative periods
are as follows:
· buildings 7 - 40 years
· plant and equipment 3 - 15 years
· vehicles 5 - 7 years
The residual value, the useful life and the depreciation method applied to an
asset are reassessed at least annually.
Power project development costs
Power project expenditure is expensed as pre-development expenditure until it
is probable that future economic benefits associated with the project will
flow to the Group and the costs can be measured reliably. When it is probable
that future economic benefits will flow to the Group, all costs associated
with developing a power plant project are capitalised as power project
expenditure within property, plant and equipment category of tangible
non-current assets. The capitalised expenditure will include appropriate
technical and administrative expenses but not general overheads. Power
project assets are not depreciated until the asset is ready and available for
use.
Intangible assets
Acquired intangible assets, are measured initially at cost and are amortised
on a straight-line basis over their estimated useful lives.
Exploration and evaluation costs are capitalised as exploration and evaluation
assets on an area of interest basis in accordance with IFRS 6. Costs such as
geological and geophysical surveys, drilling and commercial appraisal costs,
and other directly attributable costs of exploration and appraisal including
technical and administrative costs, are capitalised as intangible exploration
and evaluation assets.
Exploration and evaluation assets are only recognised if the rights of the
area of interest are current and either:
(i) the expenditures are expected to be recouped through
successful development and mining of the area of interest, or by its sale; or
(ii) activities in the area of interest have not reached a
stage which permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves and active and significant operations in, or
in relation to, the area of interest are continuing or planned for the future.
Exploration and evaluation assets are assessed for impairment if sufficient
data exists to determine technical feasibility and commercial viability, and
facts and circumstances suggest that the Group should test for impairment. In
the event that there is an indicator of impairment, the Group performs an
impairment test in accordance with its policy on impairment as stated below.
For the purposes of impairment testing, exploration and evaluation assets are
allocated to cash-generating units to which the exploration activity relates.
Once the technical feasibility and commercial viability of the extraction of
mineral resources in an area of interest are demonstrable, exploration and
evaluation assets attributable to that area of interest are first tested for
impairment and then reclassified from intangible assets to mining property and
development assets within property, plant and equipment.
Impairment
The Group assesses at each reporting date whether there is an indication that
an asset may be impaired. If any such indication exists, or when annual
impairment testing for an asset is required, the Group makes an estimate of
the asset's recoverable amount. An asset's recoverable amount is the higher of
an asset's or cash-generating unit's fair value less costs to sell and its
value in use and is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of those from other
assets or groups of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to
its recoverable amount. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. Impairment losses of continuing operations are
recognised in the income statement in those expense categories consistent with
the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there
has been a change in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for
the asset in prior years. Such reversal is recognised in profit or loss. After
such a reversal the depreciation charge is adjusted in future periods to
allocate the asset's revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
Financial Instruments
Financial instruments are recognised when the Group becomes a party to the
contractual provisions of the instrument and are subsequently measured at
amortised cost.
Classification and measurement of financial assets
The initial classification of a financial asset depends upon the Group's
business model for managing its financial assets and the contractual terms of
the cash flows. The Group's financial assets are measured at amortised costs
and are held within a business model whose objective is to hold assets to
collect contractual cash flows and its contractual terms give rise on
specified dates to cash flows that represent solely payments of principal and
interest.
The Group's cash and cash equivalents and other receivables are measured at
amortised cost. Other receivables are initially measured at fair value. The
Group holds other receivables with the objective to collect the contractual
cash flows and therefore measures them subsequently at amortised cost.
Cash and cash equivalents
Cash includes cash on hand and demand deposits with any bank or other
financial institution. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash which are
subject to an insignificant risk of changes in value.
Impairment of financial assets
The Group recognises loss allowances for expected credit losses ("ECL's") on
its financial assets measured at amortised cost. Due to the nature of its
financial assets, the Group measures loss allowances at an amount equal to the
lifetime ECLs. Lifetime ECLs are the anticipated ECLs that result from all
possible default events over the expected life of a financial asset. ECLs are
a probability-weighted estimate of credit losses.
Classification and measurement of financial liabilities
A financial liability is initially classified as measured at amortised cost or
FVTPL. A financial liability is classified as measured at FVTPL if it is
held-for-trading, a derivative or designated as FVTPL on initial recognition.
The Group's accounts payable, accrued liabilities and short-term debt are
measured at amortised cost.
Accounts payable and accrued liabilities are initially measured at fair value
and subsequently measured at amortised cost. Accounts payable and accrued
liabilities are presented as current liabilities unless payment is not due
within 12 months after the reporting period.
Short-term debt is initially measured at fair value, net of transaction costs
incurred. Subsequently they are measured at amortised cost using the effective
interest rate method. Short-term debt is classified as current when payment is
due within 12 months after the reporting period.
The Group has no financial liabilities measured at FVTPL.
Where there is a modification to a financial liability, the financial original
liability is de-recognised and a new financial liability is recognised at fair
value in accordance with the Group's policy.
Other loans and borrowings
All loans and borrowings which are financial instruments are initially
recognised at the present value of cash payable to the lender (including
interest). After initial recognition they are measured at amortised cost using
the effective interest rate method. The effective interest rate amortisation
is included in finance costs in the income statement.
Income tax
Income tax on the profit or loss for the year comprises current and deferred
tax. Income tax is recognised in the income statement except to the extent
that it relates to items recognised outside profit and loss, in which case it
is recognised in other comprehensive income or directly in equity as
appropriate.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantially enacted at the balance sheet date,
and any adjustment to tax payable in respect of previous years.
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements, with the following exceptions:
· where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a transaction that is
not a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss;
· in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures, where the timing
of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable
future; and
· deferred income tax assets are recognised only to the extent that
it is probable that taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax losses
can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted
basis at the tax rates that are expected to apply when the related asset is
realised or liability is settled, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Foreign currency transactions
Transactions in currencies other than pounds sterling are recorded at the
foreign exchange rate ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at the balance sheet date
are translated at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the income
statement. Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the exchange rate
at the date of the transaction.
Share based payments
The cost of equity-settled transactions is measured by reference to the fair
value at the date at which they are granted and is recognised as an expense
over the vesting period, which ends on the date on which the recipients become
fully entitled to the award. Fair value is determined using an appropriate
pricing model. In valuing equity-settled transactions, no account is taken of
any vesting conditions, other than conditions linked to the price of the
shares of the Company (market conditions) or to conditions not related to
performance or service (non-vesting conditions).
Where equity settled share based payments are made to non-employees the cost
of equity-settled transactions is measured by reference to fair value of the
goods or services received and measured at the date the entity obtains the
goods or the counterparty renders the service.
Where the fair value of the goods or services received cannot be estimated
reliably, the entity measures the goods or services received, and the
corresponding increase in equity, indirectly, by reference to the fair value
of the equity instruments granted, measured at the date the entity obtains the
goods or the counterparty renders service.
At each balance sheet date before vesting, the cumulative expense is
calculated, representing the extent to which the vesting period has expired
and management's best estimate of the achievement or otherwise of non-market
conditions, number of equity instruments that will ultimately vest or in the
case of an instrument subject to a market condition or non-vesting condition,
be treated as vesting as described above. This includes any award where
non-vesting conditions within the control of the Group or the employee are not
met. Where the equity-settled share based payment is directly attributable to
exploration and evaluation activities, the movement in cumulative expense
since the previous balance sheet date is capitalised, with a corresponding
entry in equity. Otherwise, the movement in cumulative expense is recognised
in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on
the difference between the fair value of the original award and the fair value
of the modified award, both as measured on the date of the modification. No
reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested
on the date of cancellation, and any cost not yet recognised in the income
statement for the award is expensed immediately. Any compensation paid up to
the fair value of the award at the cancellation or settlement date is deducted
from equity, with any excess over fair value being treated as an expense in
the income statement.
New standards and interpretations applied
The Group has adopted all of the amended standards and interpretations during
the year that are relevant to its operations, none of which had a material
impact on the financial statements.
New standards and interpretations not applied
IASB and IFRIC have issued a number of new standards and interpretations with
an effective date after the date of these financial statements. These will be
adopted in the period that they become mandatory, unless otherwise indicated.
Information on the new standards which could impact the Group is presented
below
Effective date Adoption date
International Accounting Standards (IAS / IFRSs)
Amendments to IAS 16 Property Plant and Equipment 1 January 2022 1 January 2022
Amendments to IAS 37 Provisions, Contingent Assets and Contingent Liabilities 1 January 2022 1 January 2022
Annual Improvements to IFRS 2018-20 Cycle 1 January 2022 1 January 2022
Amendments to IFRS 3 Business Combinations - Reference to the Conceptual 1 January 2022 1 January 2022
Framework
Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract 1 January 2022 1 January 2022
Amendments to IFRS 16 - Leases: Covid 19 related rent concessions 1 January 2022 1 January 2022
Based on the current and foreseeable operations, the adoption of the above
standards and interpretations will not have a material impact on the Group's
financial statements in the period of initial application.
2. Segment analysis
The Group operates in one segment being the exploration and evaluation of
energy related projects. The only significant project within this segment is
the Phulbari Coal and Power Project (the Project) in Bangladesh.
3. Operating loss
2022 2021
£000 £000
The operating loss is stated after charging:
Directors' remuneration 611 488
Other staff costs ((1)) 10 7
Operating lease rentals ((2)) 12 4
Depreciation of property, plant and equipment ((3)) - -
((1) Other staff costs for 2022 financial year were £186,000 of which
£10,000 was expensed in administrative expenses, £nil expensed in
exploration and evaluation costs and £176,000 capitalised (2021 £7,000
expensed in administrative expenses, £nil expensed in exploration and
evaluation costs and £360,000 capitalised).)
((2) Operating lease rental costs for 2022 financial year were £20,000 of
which £12,000 was expensed and £8,000 capitalised (2021: £44,000 of which
£4,000 was expensed and £40,000 capitalised).)
((3) Total depreciation for 2022 was £5,000 which was capitalised to
intangibles (2021: £5,000 capitalised).)
During the year Phulbari-related exploration and evaluation costs amounting to
£35,000 were expensed in accordance with the Group's accounting policy on
exploration and evaluation costs (2021: (credited) £35,000).
4. Auditor's remuneration
The Group paid the following amounts to its auditors in respect of the audit
of the financial statements and for other services provided to the Group.
2022 2021
£000 £000
Audit of the group and company financial statements 34 32
Audit of subsidiaries - -
Total audit 34 32
Total fees 34 32
5. Amounts paid for Directors' services, and staff costs
2022 2021
£000 £000
Amounts paid for Directors' services
Amounts paid for Directors' services 611 488
The amounts paid for Directors' services during the year are disclosed in
further detail in the Directors' Report . The aggregated remuneration of the
highest paid director is £303,600 (2021: £303,600).
Staff costs
Wages and salaries((1)) 176 360
Social security costs 10 7
186 367
((1) Excludes amounts paid for Directors' services.)
The average monthly number of employees during the year was: 2022 2021
Number Number
Exploration and evaluation 14 14
Administration 3 3
17 17
6. Taxation
Reconciliation of the tax charge in the income statement
2022 2021
£000 £000
Loss on ordinary activities before tax (1,679) (1,874)
UK corporation tax @ 19% (2022) and 19% (2021) (319) (356)
Unrecognised deferred tax assets during the year 301 351
Non-deductible expenditure 18 5
Total tax (credit)/expense reported in the income statement - -
Unrecognised deferred tax assets
2022 2021
£000 £000
Deferred tax asset
Tax losses carried forward 4,411 4,110
Impairment 891 891
Other 1 1
5,303 5,002
Less: deferred tax assets de-recognised (5,303) (5,002)
- -
At 30 June 2022 tax losses for which a deferred tax asset was not recognised
amounted to £23,216,000 (2021: £21,701,000). Deferred tax assets are only
recognised at UK Corporation Tax Rate of 19% (2021: 19%) should it become more
likely than not that taxable profit or timing differences, against which they
may be deducted, will arise.
7. Loss per share
2022 2021
£000 £000
(Loss) for the year (1,679) (1,874)
Thousands Thousands
Weighted average number of shares
Basic and diluted weighted average number of shares 151,246 121,733
(Loss) per share
Basic (pence per share) (1.1p) (1.5p)
Diluted (pence per share) (1.1p) (1.5p)
There are 9,300,000 potentially dilutive options, and 702,333 warrants along
with 2,927,532 potentially dilutive shares to be issued at 30 June 2022 which
are not included in the calculation of diluted earnings per share because they
were anti‑dilutive for the period as their conversion to Ordinary Shares
would decrease the loss per share.
8. Other Receivables
2022 2021
£000 £000
Current
Prepayments 29 9
Other receivables 7 4
Share Capital Unpaid (1) 400 -
436 13
(1) The Company received full receipt of the outstanding funds for
the share subscription on 5 July 2022.
9. Intangible assets
Exploration & evaluation expenditure Mineral rights Total
£000 £000 £000
At 1 July 2020 40,480 1,147 41,627
Additions - exploration & evaluation 552 - 552
At 30 June 2021 41,032 1,147 42,179
Additions - exploration & evaluation 563 - 563
Cost and net book value at 30 June 2022 41,595 1,147 42,742
Cost and net book value at 30 June 2021 41,032 1,147 42,179
The mineral rights will be amortised over the licence period (including
extensions) once commercial production commences at the Phulbari Coal and
Power Project.
The exploration and evaluation expenditure will have an indefinite useful life
until approval is obtained for the Phulbari Coal and Power Project. At that
time, the asset will be transferred to mining property and development assets
within property, plant and equipment in accordance with accounting policy.
10. Investments
Principal undertakings
Investments in which the Group holds 20% or more of the nominal value of any
class of share capital are as follows:
Country of Ownership interest
Incorporation 2022 2021
Subsidiaries
South African Coal Limited England and Wales 100% 100%
Asia Energy Corporation Pty Limited Australia 100% 100%
Asia Energy Corporation (Bangladesh) Pty Limited Australia 100% 100%
Asia Energy (Bangladesh) Pvt Ltd Bangladesh 100% 100%
Fair Value Through Other Comprehensive Income
Peoples Telecommunication and Information Services Ltd (PeoplesTel) Bangladesh 37% 37%
The investment in PeoplesTel has been accounted for as financial asset at Fair
Value Through Other Comprehensive Income as GCM does not have significant
influence. The investment was fully impaired during the year ended 30 June
2010.
11. Payables
2022 2021
£000 £000
Trade payables 575 579
Related party accrued payable 794 843
1,369 1,422
Refer to note 20 for details of the related party accrued payable.
12. Borrowings (Non-current liabilities)
2022 2021
£000 £000
Loan from related party
Balance as at 1 July 4,203 3,220
Loan instalments drawndown - 600
Interest charges 480 383
Balance as at 30 June 4,683 4,203
Refer to note 20 for details of the loan from related party.
The Company on 1 March 2022, as part of the completed placing and
subscriptions, amended the terms of the loan facility, such that the lender
may request conversion by the issuance of new ordinary shares in the Company
at 5.14 pence per share (being the Issue Price) subject to any necessary
regulatory approvals. All other terms of the agreement remained unchanged.
The Company on 26 March 2021, as part of the completed placing, extended and
amended the terms of the loan facility provided by Polo Resources Limited (the
"Facility") of which, as was announced on 7 January 2021, there is £300,000
of the initial £3.5 million facility remaining undrawn. The lender has agreed
that it will not serve a repayment request on the company for 5 years from the
date of the agreement replacing the previous provision that it was payable on
demand with 90 days' notice. The Company and Polo Resources Limited have
agreed an increase in the interest rate from 12% to 15% per annum rising by
1.5% on the third anniversary and by a subsequent 1.5% on each anniversary
thereafter. Furthermore, the lender may request conversion by the issuance of
new ordinary shares in the Company at 7.5 pence per share (being the Issue
Price) subject to any necessary regulatory approvals. The Company may elect to
repay all or part of the outstanding loan at any time giving 60 days' notice
and with the agreement of Polo Resources Limited. Any share issue to the
Lender is conditional upon the Lender's interest, together with the interest
of any parties with which it is in concert, remaining below 30% of the
Company's issued capital. All other principal terms of the loan facility
remain unchanged. Refer page 39 for details of Management judgement used in
accounting for the loan amendment.
13. Leases and Commitments
Right of use assets
The statement of financial position shows the following amounts relating to
leases:
2022 2021
£000 £000
Buildings 19 59
Vehicles - -
19 59
Lease liabilities
2022 2021
£000 £000
Classified as;
Current 27 40
Non-current 1 22
28 62
The interest expense incurred on lease liabilities was £3,000 (2021:
£6,000), and capitialised in accordance with the Group's policy on
exploration and evaluation assets. Cash outflows in respect of right of use
assets were £47,000 (2021: £49,000).
Other commitments
In addition, under the terms of the Prospecting License agreement with the
Bangladesh authorities for contract licence areas B, G and H respectively, an
annual fee of 500 Taka (£4.49 at year-end exchange rate) is payable for each
hectare within the licence area. The Group currently leases 5,480 hectares
within these licence areas. The licence has a 30 year term from 2004 and may
be renewed for further periods of 10 years each, at GCM's option.
14. Issued share capital
Ordinary Shares Deferred A Shares Total share capital
Thousands Thousands £000
Allotted, called up and fully paid:
At 1 July 2020 112,560 - 11,256
Shares issued 6,022 - 602
Total pre capital reorganisation 118,582 - 11,858
Capital reorganisation (see below) 118,582 118,582 -
Shares issued 19,011 - 190
At 30 June 2021 137,593 118,582 12,048
Shares issued 44,712 - 447
At 30 June 2022 182,305 118,582 12,495
Share issues
On 8 September 2020, 6,021,621 shares were issued to consultants in accordance
with the terms of the their agreements, at prices from 14p to 26.5p, for a
total non cash consideration of £1,276,873.
On 1 April 2021, 13,446,661 shares were issued on completion of a successful
placing at a price of 7.5p, raising gross cash proceeds of £1,008,500.
On 7 May 2021, 5,564,591 shares were issued to consultants in accordance with
the terms of the their agreements, at prices from 10.25p to 18p, for a total
non cash consideration of £661,638.
On 1 March 2022, 25,291,828 placing shares and 16,171,777 subscription shares
were issued on the completion of a successful fund raise at 5.14p per share,
raising gross cash proceeds of £2,130,000.
On 7 April 2022, 3,248,740 shares were issued to consultants and a director in
accordance with the terms of their agreements, at prices from 4.25p to 18p,
for total non cash consideration of £402,000.
Capital reorganisation
On 25 February 2021 at the Annual General Meeting the shareholders approved
the sub-division of the existing ordinary shares of 10p each into new ordinary
shares of 1p each and deferred A shares of 9p each. The rights attached to the
new ordinary shares are in all material aspects the same as the rights
attaching to the existing ordinary shares.
Ordinary shares have the right to receive dividends as declared and, in the
event of winding up the Company, to participate in the proceeds from sale of
all surplus assets in proportion to the number of and amounts paid up on
shares held. Ordinary shares entitle their holder to one vote, either in
person or by proxy, at a meeting of the Company.
The Deferred Shares have no voting rights and do not carry any entitlement to
attend general meetings of the Company; nor will they be admitted to AIM or
any other market. They carry only a priority right to participate in any
return of capital to the extent of £1 in aggregate over the class. In
addition, they carry only a priority right to participate in any dividend or
other distribution to the extent of £1 in aggregate over the class. In each
case a payment to any one holder of Deferred Shares shall satisfy the payment
required. The Company will be authorised at any time to effect a transfer of
the Deferred Shares without reference to the holders thereof and for no
consideration pursuant to and in accordance with the Act. Accordingly, the
Deferred Shares will, for all practical purposes, be valueless and it is the
Board's intention, at an appropriate time, to have the Deferred Shares
cancelled, whether through an application to the Companies Court or otherwise
in accordance with the Act.
Reserves
Share capital
The balance held in share capital relates to the nominal net proceeds on issue
of the Company's equity share capital, comprising £0.01 ordinary shares, and
£0.09 deferred A shares.
Share premium account
The share premium account represents the premium received over the nominal
value of ordinary shares on issue of the Company's equity. The share premium
account has been reduced by expenditure associated with issuing shares such as
listing costs.
Other reserves
This reserve records the fair value of conditional shares awarded but not
settled, and consultants service payments to be also settled by way of share
issues.
2022 2021
£000 £000
Share based payments not settled 642 583
642 583
15. Notes supporting statement of cashflows
Cash and cash equivalents for the purposes of the statement of cash flows
comprises:
2022 2021
£000 £000
Cash at bank available on demand 961 717
961 717
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions:
Current loans and borrowings Total
£000 £000
Balance at 1 July 2020 3,220 3,220
Cash flows 600 600
Non-cash flows: Interest accrued 383 383
Balance at 30 June 2021 4,203 4,203
Balance at 1 July 2021 4,203 4,203
Cash flows - -
Non-cash flows: Interest accrued 480 480
Balance at 30 June 2022 4,683 4,683
16. Significant non-cash transactions
The significant non-cash transactions during the year were as follows:
· £414,000 of expenses were incurred by consultants for their
services. The consulting payment included £300,000 (2,142,857 shares at 14p
per share) as payment for a retainer, and £114,000 (2,581,818 shares at 18p
& 4.125p per share) for a second consultant retainer. These retainer fee
shares which had not been issued to the consultants at year end have been
included in other reserves for shares to be issued.
17. Share based payments
The charge/(credit) for share based payments during the year is shown in the
following table:
2022 2021
£000 £000
Charged/(credited) to intangibles
Conditional shares 17 6
17 6
Share Warrants
During the year ended 30 June 2022, the Company granted 30,000 warrants to
subscribe for ordinary shares (2021: 672,333). No warrants were exercised or
lapsed during the year (2021: nil). As at 30 June 2022, 702,333 warrants were
in issue (2021: 672,333).
17. Share based payments (continued)
Options
The following table illustrates the number and weighted average exercise
prices (WAEP) of, and movements in, share options during the year.
2022 2022 2021 2021
Options WAEP Options WAEP
Thousands Thousands
At 1 July 9,300 £0.11 9,300 £0.11
Exercised during the year - - - -
Outstanding at 30 June 9,300 £0.11 9,300 £0.11
Exercisable at 30 June 9,300 £0.11 9,300 £0.11
The options outstanding at 30 June 2022 have an exercise price of £0.11
(2021: £0.11) and a weighted average contractual life of 1.9 years (2021: 2.9
years), including those granted options whose term was extended during the
year. No options were exercised during the year.
Conditional shares scheme
GCM has a conditional share scheme for Directors, employees, associates,
consultants and contractors. Ordinary shares will be issued for nil cash
consideration, conditional upon the Group achieving milestones including
approval by the Government of Bangladesh of the Scheme of Development for the
Phulbari Coal and Power Project. The awards granted are classified as
equity-settled, and therefore the fair value is determined by reference to the
share price at the date of the grant, as required by IFRS 2.
Movement in non-vested conditional shares:
2022 2021
Thousands Thousands
At 1 July 210 210
Conditional shares lapsed - -
At 30 June 210 210
The grant details of the conditional shares outstanding as at 30 June 2022 are
as follows:
Share price at Conditional shares
grant date Thousands
£
Grant date
25 August 2005 £6.32 40
9 March 2006 £4.99 30
46 July 2009 £0.84 140
210
The cumulative cost recognised in equity in relation to the conditional shares
as at 30 June 2022 is £476,000 (2021: £459,000) after taking into account:
· Expected timeframe for milestones to be achieved
· Probability of successful completion of milestones
· The conditional shares awarded to employees are subject to their
employment at the time milestones are reached
The increase in the cost of conditional shares of £17,000 for the year ended
30 June 2022 is directly attributable to the Phulbari Coal and Power Project,
and accordingly capitalised to intangibles on this basis (2021: expensed
£6,000).
18. Financial Instruments
The Group holds cash as a liquid resource to fund the obligations of the
Group.
The Group's strategy for managing cash is to maximise interest income whilst
ensuring its availability to match the profile of the Group's expenditure.
This is achieved by regular monitoring of interest rates and periodic review
of expenditure forecasts.
The Group has a policy of not hedging and therefore takes market rates in
respect of foreign exchange risk; however it does review its currency
exposures on a regular basis. The Group has no significant monetary assets or
liabilities that are denominated in a foreign currency.
The financial liabilities of the Group include trade payables and a short-term
loan from a related party. Trade payables are recognised at fair value on
initial recognition and subsequently measured at amortised cost. The
short-term loan was recognised based on the present value of cash payable to
the lender. As the short-term loan is payable within 12 months, the present
value of the cash payable was equal to the principal value of the loan.
Interest rate risk
The interest rate maturity profile of the financial assets of the Group is as
follows:
2022 2021
£000 £000
Floating rate - within 1 year
Cash and cash equivalents - -
Other interest bearing financial instruments which are subject to fixed rate
interest charges are the Group's borrowings as disclosed in Note 12.
Other financial instruments of the Group which are non-interest bearing and
are therefore not subject to interest rate risk, are, non-interest-bearing
cash and cash equivalents as at 30 June 2022 was £961,000 (2021: £717,000).
Credit risk
The Group considers the credit ratings of banks in which it holds funds in
order to manage exposure to credit risk and counterparty risk. Funds are held
in banks with credit ratings ranging from AAA -AA. The maximum credit risk at
30 June 2022 was as follows:
2022 2021
£000 £000
Cash and cash equivalents 961 717
Liquidity risk
The Group ensures that it has sufficient cash to meet all its commitments when
required, through equity and short term loan funding, please refer to the
accounting policiesfor further detail. The table below summarises the
contractual maturity profile of the Group's financial liabilities as at 30
June 2022 and 2021.
Within 1 to 3 3 to 12 2 - 5 years Total &
30 days months months Carrying value
£000 £000 £000 £000 £000
2022
Payables 1,296 1 72 - 1,369
Lease liabilities 3 9 15 1 28
Borrowings - - - 4,683 4,683
1,299 10 87 4,684 6,080
2021
Payables 1,281 86 55 - 1,422
Lease liabilities 3 7 30 22 62
Borrowings - - - 4,203 4,203
1,284 93 85 4,225 5,687
Currency risk
The Group has no significant monetary assets or liabilities that are
denominated in a foreign currency.
Fair values of financial assets and liabilities
Financial instrument classification Book value Fair value
2022 2021 2022 2021
£000 £000 £000 £000
Financial assets
Cash and cash equivalents Amortised cost 961 717 961 717
Receivables Amortised cost 436 13 436 13
Financial liabilities
Creditors Amortised cost 1,369 1,422 1,369 1,422
Borrowings Amortised cost 4,683 4,203 4,683 4,203
Management have assessed that the fair value of cash, current receivables and
current payables approximate their carrying amounts due to the short-term
maturities of these instruments.
19. Contingent liabilities
Royalty
The Group is obliged to pay Deepgreen Minerals Corporation Pty Limited US$1
per tonne of coal produced and sold from the Phulbari mine. The Directors are
of the opinion that a provision is not required in respect of these matters,
as coal has not yet been produced at Phulbari.
Consultant success fees
The Group is obliged to pay a consultant, DG Infratech PTE. Limited, success
fees conditional upon achieving key milestones relating to the advancement of
the proposed Phulbari Coal and Power Project, in North-West Bangladesh. As at
30 June 2022 the outstanding milestones were as follows:
Success Fee - Coal Project's Scheme of Development
· a one-time fee equal to 5% of Issued Capital, to be paid within
five business days following GCM'S receipt of the written approval of the Coal
Project's Scheme of Development.
Success Fee - Power Plants
· a one-time fee equal to 2% of Issued Capital, to be paid within
five business days following GCM'S receipt of the written approval in respect
of each group of Power Plants.
Success Fee - Commencement of Development
· a one-time fee equal to 4% of Issued Capital, to be paid within
five business days following GCM'S commencement of development of the Coal
Project.
The Directors are of the opinion that a provision is not required in respect
of these success fees, as the milestones had not been met as at 30 June 2022.
20. Related Party Transactions
Key management personnel
2022 2021
£000 £000
Short-term benefits 643 651
Share based payments 39 1
682 652
Related party loan
GCM is beneficiary to a £3.5 million loan facility from its largest
shareholder, with a current interest rate of 15% per annum. As at 30 June 2022
the Group had utilised £3.2 million of the loan facility (2021: £3,200,000)
and an interest accrual of £1,483,000 (2021: £1,003,000). The terms of the
loan were amended in March 2022 & March 2021, refer to note 12 of the
Company Financial Statements. . Note Polo Resources Ltd is a related party
by way of Michael Tang being a Director of both Companies.
Management services company
As disclosed in the Directors Report, for the year ended 30 June 2022, the
remuneration for the services of Datuk Michael Tang PJN, Executive Chairman of
the Company, was £303,600, which comprised of directors fees amounting to
£6,000 (2021: £6,000) and management services of £297,600 paid to a
management services company (2021: £297,600).
For the period September 2018 to March 2021 Datuk Michael Tang PJN offered to
defer the payments due to his management services company until further notice
in order to assist the Company. The total debt as a result of the deferment of
£769,000 has not been paid and is being accrued accordingly
As at 30 June 2022 the amount owing to the management services company of
Datuk Michael Tang PJN was £793,000 (2021: £843,000).
21. Events after the end of the reporting period
The following events took place subsequent to 30 June 2022, for which there
has been no adjustment to the 30 June 2022 financial statements:
- On 22 August 2022, the Company agreed to a further extension of
the consultancy agreement (the "Consultancy Agreement") with DG Infratech Pte
Ltd, a Bangladeshi controlled company ("DGI" or the "Consultant"), for an
additional two years, on similar terms as previously contracted.
- On 12 December 2022, the Company announced that the MOU with
PowerChina, focused on coal mine development, has been extended for a further
12-months to 6 December 2023.
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now considered to be in the public domain.
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