REG - GCM Resources PLC - Final Results for the year ended 30 June 2021
22/12/2021 07:00
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RNS Number : 4081W GCM Resources PLC 22 December 2021
22 December 2021
GCM Resources plc
("GCM" or the "Company")
(AIM:GCM)
Final Results for the year ended 30 June 2021
Notice of Annual General Meeting
GCM Resources plc announces the publication of its final audited results for
the year ended 30 June 2021 (the "Annual Report and Accounts") and that the
Company's 2021 Annual General Meeting will be held at 10.00 a.m. on Thursday
20 January 2022, 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 2021, in a year where progress has not met our expectations, primarily
due to the effects of the Coronavirus Pandemic. Consider that towards the end
of 2020, it appeared the world was emerging from the pandemic, with countries
slowly opening up their borders and re-emerging from national lockdowns.
However, this momentum was arrested by the rapid emergence of the "Delta
Variant", which completely stifled business activity for the majority of 2021.
For instance, in Bangladesh rolling lockdowns from March to August 2021
severely restricted movement and kept government and private business offices
mostly closed. It has been an extremely frustrating period for GCM and on
behalf of the Board, I once more extend our appreciation for the continued
support of our shareholders.
We have remained focussed on delivering returns on shareholder investment
through packaging the Project in its best possible form with the key step
still being approval from the Bangladesh Government. It is worth reflecting,
however, on what actually constitutes the Project. Firstly, and most
importantly, the Project's core asset is the proposed Phulbari open-pit coal
mine development, which would deliver over 15 Mtpa high quality thermal coal
for at least 30 years. Based on the latest, highly energy-efficient
Ultra-Supercritical power plant technology, the Phulbari coal mine's full
production would support 6,600MW. Secondly, to ensure the mine's economic
sustainability, we have put in place arrangements with development partner
Power Construction Corporation of China, Ltd. ("PowerChina") to establish a
minimum power plant output totalling 4,000MW. This would ensure a reliable
market for the bulk of the Phulbari coal and provide time to determine the
best market for the remaining production.
During this last Financial Year, we secured a strategic coal mine development
partner with the signing of a Framework Agreement on 12 October 2020 with
China Nonferrous Metal Industry's Foreign Engineering and Construction Co.,
Ltd. ("NFC"). On 6 December 2020, PowerChina agreed to an extension of the
original memorandum of understanding ("MoU") established with NFC and
PowerChina relating to coal mine development, to allow formal continuing
discussions in regards to PowerChina taking a higher level of participation in
the Project. This MoU was extended for six months on 6 June 2021 and again
extended on 22 November 2021 to run through to 6 December 2022. Also, on 19
January 2021 the Joint Venture Agreements with PowerChina for the initial
4,000MW (two 2,000MW Stages) were extended to 15 March 2022.
Other steps taken in Financial Year 2021 include:
· On 8 January 2021, we undertook a Board reorganisation with the
aim of increasing the level of Non-Executive Director participation. This saw
myself (Mohd. Najib Bin Abdul Aziz) being appointed Non-Executive Chairman and
expansion of the Board to now include two Non-Executive Directors. Datuk
Michael Tang PJN continues as Executive Director and Chief Executive Officer.
Also, to enhance the Board's working knowledge of the Project and Bangladesh,
on 22 January 2021 Gary Lye was appointed Executive Director while continuing
in roles as GCM's Chief Operating Officer and Chief Executive Officer of our
subsidiary, Asia Energy Corporation (Bangladesh) Pty Ltd.
· On 26 March 2021, the Company successfully placed 13,446,661 new
ordinary shares of 1 pence each with institutional and professional investors
at a price of 7.5 pence per share (the "Issue Price") via an accelerated
bookbuild (the "Placing"). The Placing raised gross proceeds of £1.01 million
and the Issue Price was a discount of approximately 19 per cent to the
mid-market closing price on 25 March 2021.
Outside the Reporting Period there were a number of other developments:
· On 31 August 2021, an MoU was signed with Sion Corporation of
Japan ("SION"), 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 will be produced by the Project. This will
include investigations into the production of SION's composite material
CircuLite from fly-ash and the application of CircuLite to various
environmental and agricultural improvements within Bangladesh.
· On 22 September 2021, the Chinese President Xi Jinping delivered
a pre-recorded address to the United Nations General Assembly where he stated
as the world emerged from this pandemic, efforts to revitalise economies would
also include the pursuit of "greener", more balanced development and a need
for inclusive growth. In this regard he stated China would step up efforts to
assist Developing Countries access "green" and "low carbon" energy, and that
China would not build new coal-fired power projects abroad.
It is noted that no further details were provided, there has been no immediate
change in China's policy and the impact on China's future financing of
coal-fired power projects would not really be understood until a policy is
framed and it is seen how that policy is implemented.
It is also noted that since that UN Meeting the world entered a deepening
energy crisis, reminiscent of the 1970's energy shortage. Although there's
been some drop from "sky-high" fuel prices, supply/demand issues are expected
to keep prices high. Lessons from this are clear: the Renewable Energy Pathway
is not straightforward, even in Developed Countries; Renewable Energy systems
at this juncture are not reliable for Base Load Power; Countries having their
own energy resources are scrambling to lift production of existing fossil fuel
operations and
are looking to develop greenfield opportunities; and a Strategic Mix of "own
fuels" and "imported fuels" provides the best energy security as countries
move towards integrating Renewable Energy systems.
· The COP 26 UN Climate Change Conference took place from 31
October to 12 November 2021. Although the Conference announced a Global Coal
to Clean Power Transition initative whereby countries were invited to make
their commitments on how to phase out coal-based energy in the form of
political non-binding statements, the response varied, with key countries such
as China, Australia, India, Japan and the USA not signing up. It was reported
Bangladesh also did not participate in this initiative.
Being the Chair of the Climate Vulnerable Forum (CVF) that represents the
interests of the 48 climate-vulnerable Least Developed and Developing
Countries, Bangladesh's major statements at the COP 26 were directed at how
these countries would deal with loss and damage caused by the effects of
climate change. A principal focus was to obtain commitment from the Developed
Countries to fulfil their commitments of providing US$100 billion annually to
be directed at adaptation and mitigation measures.
With 11,775MW coal-fired power plants commissioned or in the pipeline, the
Bangladesh Government demonstrates coal-fired power will remain significant in
its own strategic energy mix for several decades as it moves to integrate
Renewable Energy. Whilst the option remains to install power plants at the
Phulbari coal mine site, there is also the potential to supply coal to the
country's already commissioned and under construction coal-fired plants. We
have amended our Proposal to Government accordingly and in this scenario,
Greenhouse Gas emissions (CO(2)) from large-scale shipping of that quantity of
coal to Bangladesh would be eliminated (replaced by rail / barging over far
less distance). This, coupled with Phulbari coal's higher energy enabling
"more power for less coal", will directly reduce Bangladesh's Greenhouse Gas
Emissions (CO(2)) by over 30% compared to imported coal.
It is recognised that social and economic development is also necessary for
the Least Developed and Developing Countries to be better prepared and more
capable to combat the effects of Climate Change. An important component is
access to expansive low-cost energy and power. In addition to the
aforementioned Greenhouse Gas Emissions (CO(2)) reduction, utilising
Phulbari's coal will not only potentially save the Bangladesh Government many
Billions of Dollars on its fuel and power generation costs but also would
enable power to be delivered at a lower tariff, thus helping to drive economic
development.
On 19 October 2021, the Company announced it was pursuing extension of the
Framework Agreement with NFC for mine development (which expired on 12 October
2021) and we remain confident of agreeing such an extension, however, noting
there are additional procedures required to complete the extension as a result
of recent and as yet unclarified guidance from the Chinese Government in
regards to such agreements.
Our team in Bangladesh has been pursuing how the Phulbari coal mine could
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.
This is an exciting development both for GCM and the Project as the Carbon
Offsetting amounts to almost five times the calculated mine Greenhouse Gas
Emission (CO(2)) and clearly establishes the Phulbari coal mine can be a Net
Zero Carbon "Green Mine" operation. This opens up new opportunities and we
have begun discussions with our NFC and PowerChina development partners.
Unfortunately, Financial Year 2021, like 2020 will also be remembered for the
Coronavirus Pandemic and its negative effect on business. GCM has maintained
its business, ensured the safety of its staff (all of our Bangladesh staff
eligible for vaccinations were vaccinated in March this year) and also managed
to position the Project for presentation to the Bangladesh Government in a
form that is well suited to the times. We believe the Project is potentially
Bangladesh's "Energy Security Pathway for its Renewable Energy Transition".
Finally, I would like to once again thank the shareholders and all our
stakeholders, for your continued commitment and support for GCM and its
prospects. I also extend my appreciation to the Board and staff for their
hard work, and I extend mine and the Board's thanks to James Hobson whom was a
valuable addition to the Board during 2021, but unfortunately on 30 November
2021 resigned from the Board to concentrate on his new personal venture.
Mohd. Najib Abdul Aziz
Non-Executive Chairman
21 December 2021
Group Strategic Report
Strategy and business model
GCM Resources plc ("GCM") remains committed to a strategy of developing the
Phulbari coal deposit as a captive, large-scale, open pit mining operation
supporting over 6,000MW of highly energy-efficient Ultra-Supercritical power
generation (the "Project"). In fact, based on a power plant feasibility study
undertaken in conjunction with our development partner, PowerChina, the
Phulbari coal mine annual production would support some 6,600MW.
GCM's strategy and business model is based on forming partnerships with
various internationally renowned companies, specifically Chinese State-owned
enterprises, to assist with obtaining the necessary government approvals, the
requisite financing and developing the coal mine and power plants. The
business model incorporates consultants to provide crucial guidance and
lobbying support both in Bangladesh and Internationally.
A fundamental pillar of our business model has always been the establishment
of a reliable domestic market for the Phulbari coal mine's full production,
i.e., to ensure it is economically sustainable and be able to secure project
finance. The market solution we have been promoting with our development
partner has been to set up new power plants (in stages) matching the mine's
ramp-up to 15Mtpa nameplate production. This resulted in Joint Venture
Agreements covering 4,000MW, leaving flexibility in marketing the remaining
coal mine production.
While this business model essentially remains valid, it has been modified,
taking into account an element of uncertainty regarding financing of new
coal-fired power projects. This uncertainty became evident from the Chinese
President's recent address to the United Nations General Assembly which cast
doubt over China financing new coal-fired power projects abroad. Although
there has been no further clarification or policy statement, the business
model has been expanded to include a large part or all of the Phulbari coal
production being marketed to the Bangladesh Government coal-fired power
plants. This market is growing and, according to recent reports, will reach in
excess of 10,000MW power generating capacity, i.e., some 40% more than the
Phulbari's production can support. It also is a 'Win - Win" as the Project
would have a secure market and the Bangladesh Government would secure a high
quality coal supply with reduced supply and cost risks, save billions of
dollars on excessive coal tonnage imports and power generating costs and at
the same time be able to supply power at lower tariffs.
GCM believes its strategy and business model will deliver the project
approval. The Project in turn will deliver the Bangladesh Government the
lowest coal-based energy price and cheapest electricity which will underpin
expansion and competitiveness of its industries, produce new higher paying
jobs and grow its economy. This will greatly support the Government in
realising its Vision 2041 being 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.
With the assistance of Hong Kong based Dyani Corporation Limited ("Dyani"),
the Company developed close working relationships with the Chinese
state-owned-enterprises China Gezhouba Group International Engineering Co
Limited ("CGGC"), Power Construction Corporation of China Ltd ("PowerChina")
and China Nonferrous Metal Industry's Foreign Engineering and Construction
Co., Ltd. ("NFC"). Currently the following agreements 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.
· Framework Agreement with NFC for developing the open pit coal
mining operation based on the Phulbari coal basin's world class 572 million
tonnes (JORC 2004 compliant) high quality thermal and semi-soft coking coal
resource. Noting that this Agreement expired in October 2021 and discussions
are actively underway to extend the arrangement.
Power Proposal documents required by the Government for approval of the
initial 4,000MW power plants have been prepared and the overall Project
Proposal has been expanded to include:
· Significant benefits of supplying coal directly to the
Government's own power plants;
· Large-scale Solar Power Park (up to 2,330MW) 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 reduction in Green House Gas Emissions (CO(2))
of over 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 in lock-downs with international borders largely
closed due to the Coronavirus pandemic (exacerbated by the virulent "Delta
Variant"). Government offices were closed with face-to-face meetings not
possible. To put it in perspective, in Bangladesh movement of people and
opening of government and private business offices did not happen until
mid-August 2021 (outside the reporting period) and a "business as usual"
situation is still evolving.
Despite the pandemic, GCM managed to remain in close contact with its
development partners. On 12 October 2020, arrangements with mine development
partner NFC progressed to signing a Framework Agreement. It was agreed to
jointly develop the Project's proposed coal mine and that a Joint Venture
would be established with NFC acquiring a 5% interest from GCM, based on a
valuation. NFC agreed to arrange financing and in return would be appointed
EPC contractor for mine development. Discussions are currently underway with
NFC and other Chinese Government officials to extend this Agreement.
On 6 December 2020, PowerChina agreed to an extension of the original
memorandum of understanding ("MoU") established with NFC and PowerChina
relating to coal mine development, to allow continuing discussions aimed at
PowerChina taking a higher level of participation in the Project. This MoU was
further extended on 6 June 2021, and 23 November 2021 and now runs through to
6 December 2022. Also, on 19 January 2021 the Joint Venture Agreements with
PowerChina for the initial 4,000MW (two Stages) power plants were extended to
15 March 2022.
Outside the reporting period, on 31 August 2021, GCM signed an MoU with a
consortium of Sion Corporation of Japan ("SION"), 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.
GCM's team in Bangladesh has strengthened the Project Proposal by bolstering
the case for Phulbari coal being supplied to the Government's own coal-fired
power plants (expected to exceed 10,000MW). There is a compelling case with
huge monetary savings for the Government in terms of coal purchases and power
generation. The Proposal also now includes a large Solar Power Park within the
Project area, which could be operational within the first two years of Project
approval and would 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 over 30% by using Phulbari's coal instead of
Imported.
The Company remains committed to ensuring the local community and local
authorities remain fully informed on the Project. Our social licence
ultimately is built upon a successful relationship with the local community.
Our field teams continued to work with the local community, maintaining social
distancing, wearing masks and complying with other necessary health safety
guidelines to exchange information regarding the Project. We are pleased to
report the positive trend in the level of local community support continues.
The Project's Resettlement Action Plan remains valid with our field teams
having completed an update of village populations and households in the
Project area throughout 2019 and recently completed a land price study.
The Board is pleased to have delivered against its strategy of forming
development partnerships covering coal mine and power plants and to have now
expanded the Project Proposal to showcase coal being supplied to the
Government's own coal-fired power plants and to include the huge reduction in
Greenhouse Gas Emissions (CO(2)) and exciting prospect of a large-scale Solar
Power Park. These features have been discussed with Government officials in
preparation for presenting the Proposal for the Bangladesh Government's
approval.
The Company appointed WH Ireland Limited as it Nominated Advisor and Broker on
11 January 2021.
Finance review
The Group recorded a loss of £1,874,000 during the year ended 30 June 2021
compared to a loss of £1,515,000 during the previous year. The loss increased
from the comparative year principally due to an increase in non-cash,
share-based payments accrued in accordance with the Group's agreements with
Dyani in relation to pre-development expenditure. The increase was from
£420,000 in 2020 to £809,000 this year, as a result of a 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 £717,000
(2020: £69,000). Net cash used in operations for the year was £326,000
(2020: £572,000), cash used in investing activities was £557,000 (2020:
£366,000), and cash inflow from financing was £1,531,000 (2020: £622,000).
The Group has continued its aim to maintain tight control of expenditure
incurred during the year: Administrative expenses were down by 21.7% to
£717,000 for the year ended 30 June 2021 (2020: £916,000) as a result of a
one-off consulting expense in the prior year, however, finance costs increased
by 201.6% to £383,000 (2020: £127,000). Capitalised expenditure in
relation to the mine proposal was £552,000 for the year ended 30 June 2021
compared to £377,000 in the previous year. Overall costs excluding
pre-development expenditure decreased by 29.5% to £682,000 from £968,000 in
the prior year, as noted above.
To finance its operations during the year, GCM drew down £600,000 from the
short-term loan facility with Polo Resources Limited ("Polo") (the "Polo Loan
Facility"). The Polo Loan has not been increased during the year and remains
at a facility of £3,500,000. The terms of the loan facility were amended in
March 2021, with two of the salient amendments being an increase in the
interest rate to 15%, but also Polo 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. (See Note 12 for detailed terms). In addition to the funding from
Polo, GCM also completed a successful Placing in conjunction with WH Ireland
Ltd, raising Gross proceeds of £1,009,000 in April 2021.
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 £167,000 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 four 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 January 2022 (the
"Additional Funding").
Corporate Social Responsibility
GCM's vision, goal and planned actions are in line with the basic values of
integrity and fairness for all stakeholders. GCM's social licence to operate
requires an on-going acceptance of the Project with its proposed mining
operation and the Company (and subsidiary Asia Energy) by community
stakeholders and the general public. For any large mining project to be
successful it is crucial to develop and maintain a partnership with all
concerned stakeholders, particularly at the local level.
Physical activity in the Project area during 2020-21 was restricted due to the
Coronavirus pandemic and the Bangladesh Government's Coronavirus management
plans which resulted in lockdowns with restricted movement. However, GCM's
field teams still managed to work with the local community, maintaining social
distancing, wearing masks and complying with other necessary health safety
guidelines to exchange information regarding the Project. The network of over
60 local grass-roots community liaison assistants, selected from across the
Project area, were invaluable in maintaining two-way communication with the
local community. The trend in local community support continues to rise.
Field teams have also completed an update of the Resettlement Action Plan's
population database and number of potentially 'project affected people' and
also completed a land price survey.
The Project will improve the economic and social well-being of people in the
Project area. Community feedback delivers consistent messages that the
majority want development of their area (rated as one of the poorest in
Bangladesh) and stress the importance of job opportunities and other benefits.
Some 17,000 jobs are expected to be directly and indirectly created as a
consequence of developing the mine and associated infrastructure. However,
many thousands of additional jobs would be created by 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) 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.
GCM is conscious of the fact that the Project would be developed within an
area that is over 80% open farm land. The Project's Agricultural Improvement
Plan aims to off-set the impact of mining on agriculture by providing
year-round irrigation water to the adjacent farms and providing farmers with
improved inputs, training and marketing assistance all aimed at increasing
agricultural output in the region.
The Project will require resettlement of approximately 40,000 people, with
12,000 people moving to a new town extension and the remainder moving to new
village sites or electing to use the opportunity to move to other areas in
Bangladesh. This resettlement is to occur in six phases over a period of
approximately 10-12 years from commencement of development and is intended to
be carried out under international scrutiny.
The Resettlement Action Plan details the compensation packages which include
range of measures such as long-term livelihood restoration support,
replacement homes, retraining, employment and various financial assistance
allowances. Apart from new housing there will be religious centres, schools,
health centres, electricity, reticulated water supply and improved sanitation.
The Company also intends to provide skills training and offer preferential
employment opportunities to the Project affected people and will establish
community reference groups so the local community can have input to planning
and implementation.
GCM further reiterates its commitment to developing the Project in accordance
with the highest international and national environmental and social
standards. The Company remains to be a signatory of the UN Global Compact, the
world's largest voluntary corporate responsibility initiative, and is
committed to complying with the social and environmental policies and
standards of the International Finance Corporation (World Bank), the Equator
Principles, the Asian Development Bank's (ADB) Safeguard Policies as well as
the current policies and laws of Bangladesh.
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 being captive to and packaged to
supply either: (a) up to 6,000 MW of state-of-the-art highly energy efficient
Ultra-Supercritical power plants, or (b) to supply all or in part of the
Phulbari captive open pit coal mine production to the Government's own power
plants (the "Project"), is not approved by the Government of Bangladesh.
However, the Project has also been expanded and 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 over
30%, save the Government Billions of Dollars in energy and power generation
cost and allow a reduced power tariff supplying cheaper power allowing
industries to both expand and become more competitive. The Board has also
embarked on a strategy which involves bringing in strategic development
partners as it believes this will be 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
is also in contact with Government officials to prepare for delivery of the
expanded Proposal. The Company has also endeavoured to reduce this risk by
employing the services of credible consultants / lobbyists, 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-enterprises PowerChina and NFC do not proceed and thus undermining
the Company's strategy of presenting the Project as a captive coal mine with
6,000MW power generation that would take sufficient thermal coal production to
ensure 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 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 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
is continuing dialogue with the development partners aimed at further
strengthening these strategic partnerships; 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 in contact with Government officials to
prepare 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,
making the Project more attractive. 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 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, at present it is heavily reliant
on imported fuels, which exposes the country to inherent world-market risks in
terms of maintaining supply and controlling cost.
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
21 December 2021
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
For year ended 30 June
Notes 2021 2020
£000 £000
Operating expenses
Pre-development expenditure 16 (809) (420)
Exploration and evaluation costs 35 (52)
Administrative expenses (717) (916)
Operating loss 3 (1,491) (1,388)
Finance costs (383) (127)
Loss before tax (1,874) (1,515)
Taxation 6 - -
Loss for the year (1,874) (1,515)
Other comprehensive income - -
Total comprehensive expense for the year (1,874) (1,515)
Loss per share
Basic (pence per share) 7 (1.5p) (1.45p)
Diluted (pence per share) 7 (1.5p) (1.45p)
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 2019 9,864 50,497 5,835 (27,564) 38,632
Total comprehensive loss - - - (1,515) (1,515)
Share issuances (net of costs)((1)) 1,392 3,037 (4,348) - 81
Shares to be issued - - 420 - 420
Share based payments - - (201) - (201)
Balance at 30 June 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
Consolidated Balance
Sheet
Company number 04913119
As at 30 June
Notes 2021 2020
£000 £000
Current assets
Cash and cash equivalents 717 69
Other receivables 8 13 16
Total current assets 730 85
Non-current assets
Property, plant and equipment 8 13
Right of use assets 13 59 33
Intangible assets 9 42,179 41,627
Total non-current assets 42,246 41,673
Total assets 42,976 41,758
Current liabilities
Payables 11 (1,422) (1,073)
Lease liabilities 13 (40) (27)
Borrowings 12 - (3,220)
Total current liabilities (1,462) (4,320)
Non-current liabilities
Lease liabilities 13 (22) (21)
Borrowings 12 (4,203) -
Total non-current liabilities (4,225) (21)
Total liabilities (5,687) (4,341)
Net assets 37,289 37,417
Equity
Share capital 14 12,048 11,256
Share premium account 14 55,611 53,534
Other reserves 14 583 1,706
Accumulated losses (30,953) (29,079)
Total equity 37,289 37,417
These financial statements were approved by the Board of Directors and were
signed on their behalf by:
Keith Fulton
Executive Director
21 December 2021
Consolidated Cash Flow Statement
For year ended 30 June
2021 2020
£000 £000
Cash flows from/(used in) operating activities
(Loss) before tax (1,874) (1,515)
Adjusted for:
Pre-development expenditure 16 809 420
Finance costs 383 127
Other non-cash expenses - 18
(682) (950)
Movements in working capital:
Decrease in operating receivables 2 13
Increase in operating payables 354 219
Cash used in operations (326) (572)
Net cash used in operating activities (326) (572)
Cash flows used in investing activities
Payments for property, plant and equipment - -
Payments for intangible assets (557) (366)
Net cash used in investing activities (557) (366)
Cash flows from financing activities
Issue of ordinary share capital 1,009 22
Share issue costs (78) -
Proceeds from borrowing 600 600
Net cash from financing activities 1,531 622
Total increase/(decrease) in cash and cash equivalents 648 (316)
Cash and cash equivalents at the start of the year 69 385
Cash and cash equivalents at the end of the year 717 69
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 21 December
2021, 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
international accounting standards in conformity with the requirements of the
Companies Act 2006 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 2021.
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.
Utilising Phulbari's coal will enable cheaper electricity than imported coal
options. The Group's strategy is to combine the planned coal mine with 6,000MW
power plants in conjunction with large Chinese State-owned engineering
enterprises. The last twelve months progress which has been made in pursuit of
this strategy is highlighted with the Group Strategic Report.
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 £42,179,000 as at
30 June 2021.
Going concern
As at 30 June 2021, the Group had £717,000 in cash and £732,000 in net
current liabilities. The directors and management have prepared a cash flow
forecast to December 2022, 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 January 2022, 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 7.5 pence per share at the
lender's option. 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, 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
four months. The Company intends to explore alternative funding options over
the next two months, with the aim to complete and secure the necessary
third-party funding by the end of January 2022.
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 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 was 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 balances 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
boards 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 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 is now in the current 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.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at banks and
in hand.
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.
The application of the new and amended standards and interpretations during
the year did not have any impact on the accounting policies, financial
position or performance of the Group, with the following noted below;
IFRS 16 Leases - Accounting policy from 1 July 2019 applied
Leased assets are capitalised on inception of the lease as right-of-use
assets. A corresponding lease liability, representing the present value of the
lease payments is also recognised and split between current and non-current
liabilities accordingly.
The lease liability includes; fixed payments, variable lease payments
dependent on an index or rate (initially measured using the index or rate on
the lease commencement date) and in substance fixed payments. The variable
aspect of variable payments is recognised when the rate or index takes effect
resulting in an adjustment to the liability and right-of-use asset. Currently
the Group's lease portfolio does not contain variable or in substance lease
payments.
The discounted lease liability is calculated where possible using the interest
rate implicit in the lease or where this is not attainable the incremental
borrowing rate is utilised. The incremental borrowing rate is the rate the
Group would have to pay to borrow the funds necessary to obtain a similar
asset under similar conditions. The Group calculates the incremental borrowing
rate using risk free rate of the country where the asset is held, adjusted for
length of the lease and a risk premium.
Lease payments are allocated against the principal and finance cost. Finance
costs, representing the unwinding of the discount on the lease liability are
charged to the income statement to produce a constant periodic rate of
interest on the remaining liability.
Right-of-use assets are measured at cost including; the discounted initial
lease liability, lease payments made at or before the commencement date, any
initial direct costs reduced any lease incentives received.
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 tbc tbc
Amendments to IAS 37 Provisions, Contingent Assets and Contingent Liabilities tbc tbc
Annual Improvements to IFRS 2018-20 Cycle tbc tbc
Amendments to IAS 1 Presentation of Financial Statements - classification of tbc tbc
Liabilities as Current or Non-current
Amendments to IAS 8 Accounting Policies, Changes to Accounting Estimates and
Errors
tbc: still subject to UK endorsement
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
2021 2020
£000 £000
The operating loss is stated after charging:
Directors' remuneration 488 391
Other staff costs ((1)) 7 6
Operating lease rentals ((2)) 4 11
Depreciation of property, plant and equipment ((3)) - -
((1) Other staff costs for 2020 financial year were £367,000 of which £7,000
was expensed in administrative expenses, £nil expensed in exploration and
evaluation costs and £360,000 capitalised (20120 £6,000 expensed in
administrative expenses, £nil expensed in exploration and evaluation costs
and £393,000 capitalised).)
((2) Operating lease rental costs for 2021 financial year were £44,000 of
which £4,000 was expensed and £40,000 capitalised (2020: £80,000 of which
£11,000 was expensed and £69,000 capitalised). )
((3) Total depreciation for 2021 was £5,000 which was capitalised to
intangibles (2020: £6,000 capitalised).)
During the year Phulbari-related exploration and evaluation costs amounting to
(£35,000) were (credited)/expensed in accordance with the Group's accounting
policy on exploration and evaluation costs (2020:expensed £52,000).
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.
2021 2020
£000 £000
Audit of the group and company financial statements 32 32
Audit of subsidiaries - -
Total audit 32 32
Total fees 32 32
5. Amounts paid for Directors' services, and staff costs
2021 2020
£000 £000
Amounts paid for Directors' services
Amounts paid for Directors' services 488 391
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 (2020: £303,600).
Staff costs
Wages and salaries((1)) 360 393
Social security costs 7 6
367 399
((1) Excludes amounts paid for Directors' services.)
The average monthly number of employees during the year was: 2021 2020
Number Number
Exploration and evaluation 14 14
Administration 3 3
17 17
6. Taxation
Reconciliation of the tax charge in the income statement
2021 2020
£000 £000
Loss on ordinary activities before tax (1,874) (1,515)
UK corporation tax @ 19% (2021) and 19% (2020) (356) (288)
Unrecognised deferred tax assets during the year 351 297
Non-deductible expenditure 5 (9)
Total tax (credit)/expense reported in the income statement - -
Unrecognised deferred tax assets
2021 2020
£000 £000
Deferred tax asset
Tax losses carried forward 4,110 3,760
Impairment 891 891
Other 1 1
5,002 4,652
Less: deferred tax assets de-recognised (5,002) (4,652)
- -
At 30 June 2021 tax losses for which a deferred tax asset was not recognised
amounted to £21,701,000 (2020: £19,792,000). Deferred tax assets are only
recognised 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
2021 2020
£000 £000
(Loss) for the year (1,874) (1,515)
Thousands Thousands
Weighted average number of shares
Basic and diluted weighted average number of shares 121,733 104,676
(Loss) per share
Basic (pence per share) (1.5p) (1.45p)
Diluted (pence per share) (1.5p) (1.45p)
There are 9,300,000 potentially dilutive options along with 1,012,378
potentially dilutive shares to be issued at 30 June 2021 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
2021 2020
£000 £000
Current
Prepayments 9 12
Other receivables 4 4
13 16
9. Intangible assets
Exploration & evaluation expenditure Mineral rights Total
£000 £000 £000
At 1 July 2019 40,103 1,147 41,250
Additions - exploration & evaluation 377 - 377
At 30 June 2020 40,480 1,147 41,627
Additions - exploration & evaluation 552 - 552
Cost and net book value at 30 June 2021 41,032 1,147 42,179
Cost and net book value at 30 June 2020 40,480 1,147 41,627
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 2021 2020
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
2021 2020
£000 £000
Trade payables 579 527
Related party accrued payable 843 546
1,422 1,073
Refer to note 20 for details of the related party accrued payable.
12. Borrowings
2021 2020
£000 £000
Loan from related party
Balance as at 1 July 3,220 2,343
Loan instalments drawndown 600 600
Interest charges 383 277
Balance as at 30 June 4,203 3,220
Refer to note 20 for details of the loan from related party.
The Company on 26 March 2021, as part of the completed equity 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:
2021 2020
£000 £000
Buildings 59 29
Vehicles - 12
59 33
Lease liabilities
2021 2020
£000 £000
Classified as;
Current 40 27
Non-current 22 21
62 48
The interest expense incurred on lease liabilities was £6,000 (2020:
£5,000), and capitialised in accordance with the Group's policy on
exploration and evaluation assets. Cash outflows in respect of right of use
assets were £49,000 (2020: £66,000).
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 (£4.33 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 2019 98,639 - 9,864
Shares issued 13,921 - 1,392
At 30 June 2020 112,560 - 11,256
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
Share issues
On 23 January 2020, 13,721,354 shares were issued to consultants in accordance
with the terms of the their agreements, at prices from 14p to 38.25p, for a
total non cash consideration of £4,347,635.
On 15 April 2020, 200,000 shares were issued to former director on the
exercising of their share options at a price of 11p per share for a total of
£22,000.
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.
14. Issued share capital (continued)
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.
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.
2021 2020
£000 £000
Share based payments not settled 583 1,706
583 1,706
15. Notes supporting statement of cashflows
Cash and cash equivalents for the purposes of the statement of cash flows
comprises:
2021 2020
£000 £000
Cash at bank available on demand 717 69
717 69
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 2019 2,343 2,343
Cash flows 600 600
Non-cash flows: Interest accrued 277 277
Balance at 30 June 2020 3,220 3,220
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
16. Significant non-cash transactions
The significant non-cash transactions during the year were as follows:
· £809,000 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 £365,000 (3,557,449 shares at
10.25p per share) a success fee for a milestone achievement, and £144,000
(800,000 shares at 18p 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:
2021 2020
£000 £000
Charged/(credited) to intangibles
Conditional shares 6 (201)
6 (201)
Share Warrants
During the year ended 30 June 2021, the Company granted 672,333 warrants to
subscribe for ordinary shares (2020: nil). No warrants were exercised or
lapsed during the year. (2020: nil). As at 30 June 2021, 672,333 warrants were
in issue. (2020: nil).
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.
2021 2021 2020 2020
Options WAEP Options WAEP
Thousands Thousands
At 1 July 9,300 £0.11 9,500 £0.11
Exercised during the year - - (200) (£0.11)
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 2021 have an exercise price of £0.11
(2020: £0.11) and a weighted average contractual life of 2.9 years (2020: 3.9
years), including those granted options whose term was extended during the
year. No options were exercised during the year. The 9,300,000 options in
issue at 31 May 2020, had their expiry date extended to 31 May 2024.
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:
2021 2020
Thousands Thousands
At 1 July 210 313
Conditional shares lapsed - (103)
At 30 June 210 210
The grant details of the conditional shares outstanding as at 30 June 2021 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 2021 is £459,000 (2020: £453,000) 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 £6,000 for the year ended
30 June 2021 is directly attributable to the Phulbari Coal and Power Project,
and accordingly capitalised to intangibles on this basis (2020: credit
£201,000).
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:
2021 2020
£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 2021 was £717,000 (2020: £69,000).
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 2021 was as follows:
2021 2020
£000 £000
Cash and cash equivalents 717 69
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 policies for further detail. The table below summarises the
contractual maturity profile of the Group's financial liabilities as at 30
June 2021 and 2020.
Within 1 to 3 3 to 12 2 - 5 years Total &
30 days months months Carrying value
£000 £000 £000 £000 £000
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
2020
Payables 1,004 26 43 - 1,073
Lease liabilities 2 5 20 21 48
Borrowings - - 3,220 - 3,220
1,006 31 3,283 21 4,341
18. Financial Instruments (continued)
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
2021 2020 2021 2020
£000 £000 £000 £000
Financial assets
Cash and cash equivalents Amortised cost 717 69 717 69
Receivables Amortised cost 13 16 13 16
Financial liabilities
Creditors Amortised cost 1,422 1,073 1,422 1,073
Borrowings Amortised cost 4,203 3,220 4,203 3,220
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, Dyani Corporation Limited, success
fees conditional upon achieving key milestones relating to the advancement of
the proposed 6,000MW coal fired power plant at the mine-mouth of the Phulbari
Coal and Power Project, in North-West Bangladesh. As at 30 June 2021 the
outstanding milestones were as follows:
Success Fee - Mine
· a one-time fee equal to 2% of Issued Capital, to be paid within
five business days following the execution of an Acceptable MOU with a
Strategic Partner in respect to the Mine; and
· a one-time fee equal to 4% of Issued Capital if an Acceptable
Framework Agreement in respect to the Mine has been entered into, or 6% of
Issued Capital if an Acceptable Framework Agreement with respect to the Mine
has not been entered into, to be paid within five business days following the
execution of an Acceptable Definitive Agreement with a Strategic Partner in
respect to the Mine.
Success Fee - Power Plant 1
· Fee 1 - a one-time fee equal to 5% of the Issued Capital, to be
paid within five business days following the execution of all Acceptable
Definitive Agreements with a Strategic Partner in respect to Power Plant 1
Success Fee - Power Plant 3
· a one-time fee equal to 4% of Issued Capital, if an Acceptable
Framework Agreement with respect to Power Plant 3 has been entered into, or 6%
of Issued Capital if an Acceptable Framework Agreement with respect to Power
Plant 3 has not been entered into, to be paid within five business days
following the execution of all Acceptable Definitive Agreements with a
Strategic Partner in respect to Power Plant 3.
19. Contingent liabilities (continued)
Consultant success fees
The Group is also obliged to pay a consultant, DG Infratech PTE. Limited,
success fees conditional upon achieving key milestones relating to the
advancement of the proposed 6,000MW coal fired power plant at the mine-mouth
of the Phulbari Coal and Power Project, in North-West Bangladesh. As at 30
June 2021 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; and
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; and
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; and
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 2021.
20. Related Party Transactions
Key management personnel
2021 2020
£000 £000
Short-term benefits 651 597
Termination benefits - -
Share based payments 1 12
652 675
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 2021
the Group had utilised £3.2 million of the loan facility (2020: £2,600,000)
and an interest accrual of £1,003,000 (2020: £620,000). The terms of the
loan were amended in March 2021, refer to note 12 of the Financial Statements.
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 2021, 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 (2020: £6,000) and management services of £297,600 paid to a
management services company (2020: £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 2021 the amount owing to the management services company of
Datuk Michael Tang PJN was £843,000 (2020: £546,000).
21. Events after the end of the reporting period
The following events took place subsequent to 30 June 2021, for which there
has been no adjustment to the 30 June 2021 financial statements:
- On 31 August 2021, the Company agreed a memorandum of
understanding ("MOU") with Sion Corporation of Japan ("SION"), Versatech
Energy Innovation Limited ("VERSATECH"), and AC Biode Co. Ltd ("AC BIODE")
for providing a suitable and effective environmental solution for the
management of the fly-ash waste product that will be produced by the Phulbari
Coal and Power Project ("the Project"). This will include, inter alia,
investigations into the production of the composite material CircuLite from
fly-ash produced by the Project and the application of CircuLite to various
environmental and agricultural improvements within Bangladesh.
- On 19 October 2021, the Company announced that it is in
discussions with China Nonferrous Metal Industry's Foreign Engineering and
Construction Co., Ltd. ("NFC") to agree a 12 month extension of the framework
agreements announced on 15 October 2020 which expired on 12 October 2021.
- On 1 November 2021 the Company announced the resignation of James
Hobson from his position as an Independent Non-Executive Director. Mr Hobson's
resignation takes effect from 1 December 2021. The Company is currently in the
process of recruiting a replacement Independent Non-Executive director.
- On 23 November 2021 the Company announced, Power Construction
Corporation of China, Ltd. ("PowerChina") had agreed to an extension for a
period of a further 12 months from 6 December 2021 to 6 December 2022 on the
same terms as the previous memorandum of understanding ("MoU") which is
primarily focused on the Phulbari coal mine development. This will allow
PowerChina and GCM to determine the modality for PowerChina to become a Mine
Development Partner, subject to the approval of PowerChina internal
compliance and all other relevant regulatory agencies.
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