REG - Kavango Resources - Interim Results
16/09/2024 07:00
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RNS Number : 2345E Kavango Resources PLC 16 September 2024
16 September 2024
KAVANGO RESOURCES PLC ("KAVANGO" OR "THE COMPANY")
Interim Results
Kavango Resources plc (LSE: KAV), the Southern Africa focused metals
exploration company is pleased to announce its unaudited financial results for
the six months ended 30 June 2024.
SUMMARY
· Successfully raised gross proceeds of £3,085,366 (US$3,909,375), via
an underwritten accelerated bookbuild and subscriptions;
· After the reporting period, on 23 August 2024, raised a further
£2,000,000 (US$ 2,620,000) through a convertible loan note to Purebond
Limited;
· Commenced gold production at the Hillside project;
· Gross profit from mining activities in Zimbabwe of US$41,000;
· Net current assets of US$4,196,000, (including US$1,816,000 cash and
cash equivalents, US$1,822,000 trade and other receivables, US$700,000
financial assets & US$408,000 loan receivables)
· Expenditure in Botswana and Zimbabwe on exploration of US$828,000 and
US$1,060,000 respectively;
· Loss for the period of US$1,720,000 (June 2023 - US$1,417,000).
The Interim Management Report and financial results are set out in the
following pages.
Contacts
Kavango Resources plc
Ben Turney +46 7697 406 06
First Equity
Jason Robertson +44 207 374 2212
INTERIM MANAGEMENT REPORT 30 JUNE 2024
Kavango continued to make good progress through the first half of 2024, with
first production achieved in Zimbabwe, significant funding raised, and an
expansion of exploration programs in both Zimbabwe and Botswana.
Financing
Kavango successfully raised £3,085,366 (US$3,909,375) by the issue of
257,113,862 New Ordinary Shares in the capital of the Company, via an
underwritten accelerated bookbuild, at a price per share of 1.2 pence.
This equity investment demonstrates continued confidence in the Company by
Purebond and other investors, in what has remained a challenging market for
junior exploration companies. The Company has been able to deploy these funds
to accelerate exploration in both Zimbabwe and Botswana, and has invested into
development of production in Zimbabwe.
In August 2024 a further £2,000,000 of funding was provided by Purebond
through a convertible loan note, enabling work to be accelerated on both
production at Hillside and wider exploration.
A prospectus is presently underway for additional funding, and the Company
recently announced proposals for a referral listing on the Victoria Falls
Exchange in Zimbabwe.
Project status - Hillside, Zimbabwe
Kavango announced in May 2024 that it had agreed updated terms for exercise of
the Hillside call option with the vendors of the Hillside and Leopard South
Projects. Sale and Purchase Agreements for Hillside and Leopard South were
entered into between Kavango and the sellers, and the Mining Claims are in the
process of being transferred to Kavango's Zimbabwe subsidiary. The option on
Leopard North has in parallel been extended to 30 June 2025.
The decision to exercise the Hillside option was based upon review by the
Company of exploration results from the project, where positive results have
included (from drillhole BRDD001) 7.2m @ 9.95 g/t gold from 50.64m depth and
including 1.61m @ 31.57 g/t gold.
The Company has since expanded its drilling program at Hillside with the aim
of assessing the strike continuation of the mineralisation intersected in
BRDD001, as well as testing under an historic gold mine and extensive local
artisanal workings, and testing the strike continuation of an Induced
Polarisation ("IP") chargeability anomaly identified by the Company's
surveying.
Production commenced at Hillside under a Mining Contract, with first revenue
declared in March 2024. Kavango aims to increase production to 1 kilogram of
gold per month over the course of 2024. This marks significant progress in
Kavango's development by both providing a route to revenue, and also in
enabling the Company to navigate the challenges associated with production
ahead of the Company's aim of achieving larger scale production in the long
term.
Project status - Nara, Zimbabwe
The Nara project is based on a call option agreement valid until June 2025.
Kavango continues to gather data to enable it to evaluate the property prior
to possible exercise of the option. In March 2024 Kavango released its maiden
resource estimate, on two tailings deposits at Nara. This was subsequently
upgraded in April 2024, as set out below:
Mineral Resource Statement
Nara Tailings Mineral Resource statement, effective date 12 April 2024
Domain Category Tonnes (Kt) SG Au (g/t) Au (oz)
NARA Measured 77.7 1.80 0.54 1,347
East & West
Indicated 221.9 1.80 0.65 4,637
Sub tot Meas + Ind 299.6 1.80 0.62 5,984
Inferred 12.2 1.80 0.66 258
NOTES:
1. The Mineral Resource is reported at a cut off grade of 0
(zero) g/t Au.
2. Tonnage is based on a global density average of 1800kg/m(3)
estimated from density sampling carried out over the impoundment surfaces to a
depth of 4m.
3. Mineral Resource estimates are not precise calculations being
dependent on the interpretation of limited information on the location, shape
and continuity of the occurrence and on the available sampling results.
Therefore, reporting of tonnage and grade figures reflects this relative
uncertainty and figures are rounded to appropriate significant figures. As a
result, some error may be incurred when reporting global figures based on
rounded values.
4. The Mineral Resource Statement presented above has been
classified in accordance with the requirements of the 2012 edition of the
Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves (JORC 2012 Edition). The Competent Person who assumes
responsibility for reporting of the Mineral Resource is Dr John Arthur who
is a Competent Person as defined by the JORC Code 2012 Edition, having more
than 5 years experience that is relevant to the style of mineralisation and
type of deposit described herein, and to the activity for which he accepts
responsibility. The effective date of the Mineral Resource statement is 12
April 2024.
5. Resources are not constrained other than by the geological
boundary limits of the Mineralised unit and search radii limits approximated
from variographic analysis. At this stage no consideration has been made as
to what tonnes and grade would be reasonably expected to be extracted
profitably. Notwithstanding, the Competent Person considers the distance
constraints in both the dip and strike directions to be a reasonable
approximation and expectation of potential mining extents.
6. Mineral Resources which are not Ore Reserves do not have
demonstrated economic viability. The estimate of Mineral Resource reported
may be materially affected by environmental, permitting, legal, title,
taxation, sociopolitical, marketing, or other relevant issues.
7. The Inferred Mineral Resource in this estimate has a lower
level of confidence than that applied to the Indicated Mineral Resource and
must not be converted to an Ore Reserve. It is reasonably considered that
the majority of the Inferred Mineral Resource could be upgraded to an
Indicated Mineral Resource with continued exploration.
8. Currently, no Ore Reserves have been established for
the Nara Project
On 13 August 2024 the Company announced assay results from its first six
diamond holes drilled at Nara. These confirm the presence of a gold
mineralising system at Nara, highlighting anomalous gold zones underneath and
directly associated with surface artisanal gold-producing structures.
This followed a total of 85km of ground magnetic survey lines completed over
the project area to identify geological structures and contacts that may be
associated with gold mineralisation. The survey defined a 200m wide
interpreted shear corridor along 5km of strike within the property, hosting a
number of magnetic low lineaments interpreted as shear zones which may be
associated with gold mineralisation.
Seven lines of Stacked Schlumberger Sections were also completed for 6,600m
over selected target areas. The data from this is being inverted and modelled
to provide further drill targets. Several new, previously unknown Induced
Polarisation ("IP") anomalous zones have been identified, in addition to
further extensions of the existing structures already hosting mines and
artisanal workings. Kavango is now working to develop its understanding of
these new zones, before testing them with follow-up drilling.
Kavango is working closely with a mining consultant to evaluate the economic
viability of different possible future mining approaches at Nara. In parallel,
metallurgical and economic studies are continuing on both tailings from the
Nara dumps and on potential feed material from underground mines.
The combined work above is expected to provide the Company with the
information it requires ahead of a decision on exercise of the call option.
Project status - KCB (Kalahari Copper Belt), Botswana
Kavango has interests in 18 prospecting licences, totalling over 6,000 km(2)
in the KCB, where it is targeting copper-silver mineralisation.
Work has further accelerated in the period, and initially focussed on
completion of an airborne geophysical survey together with production of
inversions to model the data from this and integrate it with other data sets.
The geophysical survey consisted of 2,374 line-km of helicopter airborne Time
Domain Electromagnetic ("EM"), magnetic, and gravity data. The airborne survey
successfully tested whether the copper/silver prospective geological and
geophysical features it interpreted on some of the ground recently acquired
from ENRG Elements Ltd ("ENRG"), extend into the Company's pre-existing
adjacent licence areas. The data in particular allowed mapping of structure
and lithology, and interpretation of basins.
A key finding was the definition of a WSW-ENE trending ~9 milliGal gravity
high (Kara) underlying the Kara Anticline. This is one of two linear features
in the regional gravity, that may indicate the presence of basement highs
defining multiple edges between two deeper basins, one to the south (Ncojane
Basin) the other to the northeast (Ghanzi Basin) with a sub-basin to the north
(Talismanis Basin). Such basin margins along the KCB are considered
prospective sites for Cu-Ag mineralisation.
Preliminary interpretation of magnetic data from this survey combined with
re-processed regional magnetic data and satellite images, also clearly defined
fold hinge targets in the D'Kar Formation (DKF) that correlate with
preliminary AEM targets. Fold hinges are associated with mineralisation
elsewhere on the KCB, such as at Sandfire Resources' (ASX:SFR) Motheo Mine.
Historic drilling by ENRG, from whom Kavango in 2023 acquired a 90% interest
in six licences, confirms the existence of lower DKF in the fold structures
recently mapped and noted pathfinder minerals, pyrite, sphalerite, and galena.
This important work has allowed the definition of over 90 targets, with 10
priority targets selected for the Phase 1 drill programme, and which have
subsequently been enhanced by Gradient Array Induced Polarisation ("IP")
surveys on target areas that are interpreted to be underlain by lower DKF
stratigraphy.
Resultant potential drill targets have then been ranked and a first phase of
drilling, totalling approximately 5,000 m, designed to test trap site
structures associated with doubly plunging fold targets and anticlines
identified initially from modelling of AEM data as being relatively shallow,
at ~200-300m, commenced in June 2024. This remains in progress at the time of
writing.
Preliminary results are highly encouraging. The primary objectives of the
drill campaign were to confirm copper mineralising fluids passed through the
Karakubis Block and that structural trap sites for potential large-scale
copper/silver deposits are present. Both objectives were met drilling the
first target. Spot readings taken from handheld pXRF indicate the presence of
copper, silver, zinc and lead, suggesting the mobilisation of copper sulphides
in mineralising fluids within a large system. The Company has identified what
it believes to be lower D'Kar Formation stratigraphy, and has also detected
what it believes constitutes a wide zone of hydrothermal alteration. All of
this may provide a vector towards larger-scale mineralisation.
This systematic approach is considered by the Company to offer a thorough
methodology for identifying copper-silver mineralisation on the KCB. We look
forward to sharing results as this important program progresses.
Project status - Ditau, Botswana
Kavango has interests in four licences at Ditau. During the period a National
Instrument 43-101-Technical Report was completed by internationally recognised
mining advisor, SLR Consulting (Canada) Ltd and recommends next steps for
Kavango's exploration at Ditau. SLR conclude that Ditau is an attractive
early-stage exploration project with the potential to host a variety of
mineralisation styles, warranting a systematic exploration effort consisting
of detailed geophysical surveying and a significant amount of drilling.
Prospective mineralisation targets include for Banded Iron Formation
("BIF")-hosted orogenic gold, Iron oxide copper-gold ("IOCG"), and Rare earth
element ("REE")-bearing carbonatites. SLR has made recommendations for future
work programs, which Kavango is presently evaluating.
Project status - KSZ (Kalahari Suture Zone), Botswana
At KSZ the Company is exploring for nickel-copper-PGE mineralisation. During
the period a National Instrument 43-101-Technical Report was commissioned from
internationally recognised mining advisor, SLR Consulting (Canada) Ltd and is
expected to build on the Company's extensive previous work to recommend next
steps for Kavango's exploration. The Company will review these recommendations
shortly.
Principal risks and uncertainties
The principal risks and uncertainties facing our business are monitored on an
ongoing basis. The Board of Directors have reviewed the principal risks and
uncertainties disclosed in the 2023 annual report and concluded that they
remain applicable for the second half of the financial year. A detailed
description of these risks and uncertainties is set out on pages 9 to 12 of
the 2023 annual report.
Closing comments
I would like to thank Ben Turney, Hillary Gumbo, Brett Grist, Peter Wynter
Bee, and Jeremy Brett for their input over the last six months, along with the
operations teams in Botswana and Zimbabwe, and our senior geological
consultants Dave Catterall and Steve Smith, who have been instrumental in the
recent rapid advancement of our exploration programs. Brett Grist has provided
notice to the Company and will be leaving his role of COO at the end of
September 2024 for a new mining role in the Middle East; we would like to wish
him continued success and thank him for his work in helping to develop and
transform the Company over the last 2 ½ years. The recent addition of Alex
Gorman and Donald McAlister to the Company's Board brings further market and
financial experience to the Board and I am confident it will enable us to
deliver as the Company grows.
We look forward to advancing the planned referral listing on the Victoria
Falls Stock Exchange in Zimbabwe. This will provide an opportunity for
Zimbabwe-based investors to participate in Kavango's exploration and mining
development opportunities and will provide the Company with access to an
enlarged pool of capital and shareholder base, and meet Kavango's strategic
objective of promoting strong local ownership in its projects.
The appointment of Thamsanqa ("Tham") Mpofu as the Chairman of Kavango
Zimbabwe (Private) Limited, the Company's wholly owned subsidiary in Zimbabwe,
brings strong executive leadership on the ground as well as a wealth of
commercial and board-level experience, which will help us to deliver our
strategy in Zimbabwe.
I remain grateful for the continued support of our shareholders. Kavango has
thanks to this support been able to deliver exploration success in a difficult
market. The support of Purebond has been central to this, enabling Kavango to
focus on delivering an accelerated program, and which is already delivering
meaningful results that have the potential to add value for all shareholders.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
- The condensed consolidated interim financial statements have been
prepared in accordance with International Accounting Standards 34, Interim
Financial Reporting, as endorsed for use in the United Kingdom;
- Give a true and fair view of the assets, liabilities, financial
position and loss of the Group;
- The Interim Management Report includes a fair review of the
information required by DTR 4.2.7R of the Disclosure and Transparency Rules,
being an indication of important events that have occurred during the first
six months of the financial year and their impact on the set of interim
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
- The Interim Management Report includes a fair review of the
information required by DTR 4.2.8R of the Disclosure and Transparency Rules,
being the information required on related party transactions.
The Interim Management Report was approved by the Board of Directors and the
above responsibility statement was signed on its behalf by:
David Smith, Chairman
16 September 2024
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Total Comprehensive Income
For the Interim Period Ended 30 June 2024
Six months to 30 June 2024 Six months to 30 June 2023
(Unaudited) (Unaudited)
Notes US$'000 US$'000
Continuing operations
Revenue 209 -
Cost of sales (168) -
Gross profit 41 -
Administrative expenses 4 (1,045) (1,043)
Pre-licence exploration costs 5 (1,060) (249)
Other gains/(losses) - gain/(loss) on fair value of financial assets 10 325 (125)
Finance income 19 -
Loss before tax (1,720) (1,417)
Taxation - -
Loss for the period attributable to owners of the parent Company (1,720) (1,417)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Currency translation differences (112) 627
Other comprehensive income, net of tax (112) 627
Total comprehensive loss for the period attributable to owners of the parent (1,832) (790)
Company
Earnings per share from continuing operations attributable to owners of the
parent Company:
Basic and diluted loss per share (cents) 6 (0.13) (0.20)
Condensed Consolidated Statement of Financial Position
For the Interim Period Ended 30 June 2024
30 June 2024 31 Dec 2023
(Unaudited) (Audited)
Notes US$'000 US$'000
Assets
Non-current assets
Property, plant, and equipment 871 352
Intangible assets 7 15,398 14,586
Total non-current assets 16,269 14,938
Current assets
Inventories 7 -
Trade and other receivables 8 1,822 928
Loan receivables 9 408 -
Financial assets at fair value through profit or loss 10 700 378
Cash and cash equivalents 1,816 3,393
Total current assets 4,753 4,699
Total assets 21,022 19,637
Liabilities
Current liabilities
Trade and other payables 557 1,284
Total current liabilities 557 1,284
Total liabilities 557 1,284
Net assets 20,465 18,353
Equity
Share capital 11 1,989 1,663
Share premium 11 29,276 25,789
Share option reserve 1,804 1,673
Warrant reserve 609 609
Foreign exchange reserve (462) (350)
Reorganisation reserve (1,591) (1,591)
Retained losses (11,346) (9,626)
Equity attributable to owners of the company 20,279 18,167
Non-controlling interests 186 186
Total equity 20,465 18,353
Condensed Consolidated Statement of Changes in Equity
For the Interim Period Ended 30 June 2024
Equity attributable to owners of the company
Share Share Premium Reorganisation Reserve Share Option Reserve Warrant Reserve Foreign Exchange Reserve Retained deficit Shares to be issued Total Non-controlling interests Total
Capital Equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US'000
As at 1 January 2023 904 19,296 (1,591) 913 650 (1,019) (6,464) 7 12,696 - 12,696
Loss for the period - - - - - - (1,417) - (1,417) - (1,417)
Other comprehensive loss:
Foreign currency exchange difference - - - - - 627 - - 627 - 627
Total comprehensive loss for the period - - - - - 627 (1,417) - (790) - (790)
Warrants issued - - - - (322) - 322 - - - -
Issue of ordinary shares 177 1,596 - - - - - - 1,773 - 1,773
Costs of share issues - (19) - - - - - - (19) - (19)
Share-based payments - expensed - - - 302 - - - - 302 - 302
Share-based payments - capitalised - - - - - - - (7) (7) - (7)
Total transactions with owners 177 1,577 - 302 (322) - 322 (7) 2,049 - 2,049
As at 30 June 2023 1,081 20,873 (1,591) 1,215 328 (392) (7,559) - 13,955 - 13,955
As at 1 January 2024 1,663 25,789 (1,591) 1,673 609 (350) (9,626) - 18,167 186 18,353
Loss for the period - - - - - - (1,720) - (1,720) - (1,720)
Other comprehensive income:
Foreign currency exchange difference - - - - - (112) - - (112) - (112)
Total comprehensive loss for the period - - - - - (112) (1,720) - (1,832) - (1,832)
Issue of ordinary shares 326 3,583 - - - - - - 3,909 - 3,909
Costs of share issues - (96) - - - - - - (96) - (96)
Share-based payments - expensed - - - 131 - - - - 131 - 131
Total transactions with owners 326 3,487 - 131 - - - - 3,944 - 3,944
As at 30 June 2024 1,989 29,276 (1,591) 1,804 609 (462) (11,346) - 20,279 186 20,465
Condensed Consolidated Statement of Cash Flows
For the Interim Period Ended 30 June 2024
Six months to 30 June 2024 Six months to 30 June 2023
(Unaudited) (Unaudited)
Notes US$'000 US$'000
Cash flows from operating activities
Loss before taxation (1,720) (1,417)
Adjustments for:
Finance income 19 -
Share option expense 131 295
Fair value adjustments 10 (325) 125
Net cash used in operating activities before changes in working capital (1,895) (997)
(Increase) / decrease in trade and other receivables (245) 120
Decrease in trade and other payables (49) (79)
Increase in inventories (7) -
Net cash used in operating activities (2,196) (956)
Investing activities
Payments for property, plant and equipment (522) (6)
Loans advanced to third parties (402) (344)
Payments for intangible assets (828) (1,162)
Payments for intangible assets (deferred consideration) (678) -
Payment for Hillside Project acquisition held in escrow (650) -
Bank interest received 13 -
Net cash used in investing activities (3,067) (1,512)
Financing activities
Proceeds from issue of share capital and warrants 11 3,909 1,773
Cost of share issue 11 (96) (19)
Net cash generated from financing activities 3,813 1,754
Net decrease in cash and cash equivalents (1,450) (714)
Cash and cash equivalents at beginning of period 3,393 2,265
Effects of exchange rates on cash and cash equivalents (127) (36)
Cash and cash equivalents at end of the period 1,816 1,515
NOTES TO THE INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2024
1. Basis of preparation
These condensed consolidated interim financial statements include results of
Kavango Resources Plc ("the Company") and its subsidiaries ("the Group") and
have been prepared under the historical cost convention except for revaluation
of certain financial instruments and on a going concern basis and in
accordance with UK-adopted International Accounting Standards.
In the opinion of the Directors, the condensed consolidated interim financial
statements for this period fairly presents the financial position, results of
operations and cash flows for this period.
The Board of Directors approved these condensed consolidated interim financial
statements on 16 September 2024.
Statement of compliance
These condensed consolidated interim financial statements have been prepared
in accordance with UK-adopted International Accounting Standard 34 'Interim
Financial Reporting'. They do not constitute statutory accounts as defined in
s434 of the Companies Act 2006.
The condensed consolidated financial statements should be read in conjunction
with the audited consolidated annual financial statements for the year ended
31 December 2023, which have been prepared in accordance with UK-adopted
International Accounting Standards.
The condensed consolidated financial information for the year ended 31
December 2023 does not constitute the Company's statutory accounts for that
year, but is derived from those accounts. Statutory accounts for the year
ended 31 December 2023 have been delivered to the Registrar of Companies. The
auditors reported on those accounts and their report was unqualified and did
not contain a statement under s498(2) or (3) of the Companies Act 2006, but it
did draw attention to material uncertainty regarding going concern and an
outstanding balance of share placing proceeds US$ 632,000 (detailed in note
11).
The condensed consolidated interim financial statements for the period ended
30 June 2024 have not been audited or reviewed in accordance with the
International Standard on Review Engagements 2410 issued by the Auditing
Practices Board.
Accounting policies
The condensed consolidated interim financial statements have been prepared
using applicable accounting policies and practices consistent with those
adopted in the statutory audited consolidated annual financial statements for
the year ended 31 December 2023 and those expected to be in force for the year
ended 31 December 2024.
During the period ended 30 June 2024, the Group has become revenue-generating
and therefore the following accounting policies have been applied for the
first time:
Revenue recognition
The Group generates revenue from its mining contract in Zimbabwe. Revenue is
recognised at a point in time when the Group satisfies its performance
obligation by transferring fine gold to a customer. The transfer occurs when
the customer obtains control of the fine gold. Revenue is measured at the fair
value of the consideration received, excluding value added taxes or duty.
Inventories
Inventories consist of fine gold to be sold and consumables. Inventories are
carried at the lower of cost and net realisable value.
In addition, a number of amendments to accounting standards have become
applicable for the current reporting period. The Group did not have to change
its accounting policies or make retrospective adjustments as a result of
adopting these amended standards.
NOTES TO THE INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2024 (continued)
Critical accounting judgements and estimates
The preparation of the condensed consolidated interim financial statements
requires Directors to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
judgements and estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the audited consolidated financial statements for the year
ended 31 December 2023.
Going Concern
The condensed consolidated interim financial statements are prepared on a
going concern basis. In assessing whether the going concern assumption is
appropriate, the Directors have considered all relevant available information
about the current and future position of the Group, including the Group's cash
position and the required level of spending on exploration and corporate
activities for a period of not less than 12 months from the date of signing
these interim financial statements.
As part of this assessment, the Directors have noted that in order to sustain
the minimum level of exploration spending required by the Group's licence
conditions and minimum corporate overheads a further fundraising will be
required within the next 12 months. Whilst successful completion of future
fundraisings is inherently uncertain, the Directors are confident that the
required level of equity will be raised.
2. Financial risk management and financial instruments
Risks and uncertainties
The Board continually assesses and monitors the key financial risks of the
business. The key financial risks that could affect the Group's medium-term
performance and the factors that mitigate those risks have not substantially
changed from those set out in the Group's 2023 Annual Report and Financial
Statements, a copy of which is available from the Group's website:
www.kavangoresources.com. The key financial risks are market risk (including
currency risk and equity price risk), credit risk and liquidity risk.
3. Segmental disclosures
The Group previously had two reportable segments, Exploration and Corporate,
which are the Group's strategic divisions. In the period ended 30 June 2024
the Group started generating revenue from its mining contract in Zimbabwe,
which is considered to be a separate operating segment. The Group's reportable
segments are as following:
Exploration: the exploration operating segment is presented as an aggregate of
all licences in which the Group has economic interest as well as pre-licence
expenditure. Expenditure on exploration activities for each licence is used to
measure agreed upon expenditure targets for each licence to ensure the licence
clauses are met.
Mining: includes the results of the Group's mining contract operations in
Zimbabwe; and
Corporate: the corporate segment includes the holding and intermediate holding
companies' costs in respect of managing the Group.
Segmental results are detailed below:
NOTES TO THE INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2024 (continued)
3. Segmental disclosures (continued)
Mining Exploration Corporate Total
US$'000 US$'000 US$'000 US$'000
30 June 2024
Revenue 209 - - 209
Cost of sales (168) - - (168)
Gross profit 41 - - 41
Pre-licence exploration costs - (1,060) - (1,060)
Administrative and other costs - - (1,045) (1,045)
Gain on fair value of financial assets - - 325 325
Finance income - - 19 19
Loss before tax 41 (1,060) (701) (1,720)
30 June 2023
Pre-licence exploration costs - (249) - (249)
Administrative and other costs - - (1,043) (1,043)
Loss on fair value of financial assets - - (125) (125)
Loss before tax - (249) (1,168) (1,417)
Segmental assets and liabilities are detailed below:
Non-current assets Non-current liabilities
30 June 31 Dec 30 June 31 Dec
2024 2023 2024 2023
(Unaudited) (Audited) (Unaudited) (Audited)
US$'000 US$'000 US$'000 US$'000
Exploration - intangible assets and equipment (Botswana) 15,532 14,737 - -
Exploration: equipment (Zimbabwe) 737 201 - -
Mining: equipment (Zimbabwe) - - - -
Corporate (London) - - - -
Total of all segments 16,269 14,938 - -
Total assets Total liabilities
30 June 31 Dec 30 June 31 Dec
2024 2023 2024 2023
US$'000 US$'000 US$'000 US$'000
Exploration (Botswana) 16,105 14,892 167 175
Exploration (Zimbabwe) 1,494 402 126 45
Mining (Zimbabwe) 108 - 46 -
Corporate (London) 3,315 4,343 218 1,064
Total of all segments 21,022 19,637 557 1,284
NOTES TO THE INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2024 (continued)
4. Administrative expenses
Administrative expenses for the period ended 30 June 2024 of US$ 1,045,000 (June 2023: US$ 1,043,000) include a share-based payment charge of US$ 131,000 (June 2023: US$ 295,000) in relation to the Company's share options.
5. Pre-licence exploration costs
During the period ended 30 June 2024, the Group incurred pre-licence
exploration costs of US$ 1,060,000 (June 2023: US$ 249,000) in Zimbabwe. The
Group has options over several Claims areas in Zimbabwe, consisting of the
Nara Project, and the Hillside Projects. The Group incurs option fees to gain
access to the licence areas and perform exploration work to evaluate the
potential of each project. The ownership of exploration data collected remains
with the licence holders until the options are exercised.
In April 2024, the Group exercised the option to acquire the Hillside and
Leopard North Projects. As discussed in note 8, the acquisition process has
not yet completed.
The Group's options to acquire the Nara and Leopard North Projects expire in
June 2025.
6. Loss per share
The calculation of earnings per share is based on the loss attributable to
equity holders divided by the weighted average number of shares in issue
during the period.
Six months to 30 June 2024 Six months to 30 June 2023
(Unaudited) (Unaudited)
US$'000 US$'000
Loss for the period from continuing operations 1,720 1,417
Six months to 30 June 2024 Six months to 30 June 2023
(Unaudited) (Unaudited)
Number Number
Weighted average number of ordinary shares for the purpose of calculating 1,369,141,423 717,945,005
basic earnings per share
Six months to 30 June 2024 Six months to 30 June 2023
(Unaudited) (Unaudited)
US Cents US Cents
Basic and diluted loss per share 0.13 0.20
NOTES TO THE INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2024 (continued)
7. Intangible assets
Intangible assets comprise entirely of exploration and evaluation assets.
Six months to 30 June 2024 12 months to 31 Dec 2023 (Audited)
(Unaudited)
US$'000 US$'000
At 1 January 14,586 9,679
Additions 828 4,241
Translation differences (16) 666
At period end 15,398 14,586
During the period ended 30 June 2024, the additions balance relates to the
Group's exploration activity in Botswana. Details on the exploration activity
can be found in the Interim Management Report.
Impairment review
The Directors have undertaken a review to assess whether the following
impairment indicators existed as at 30 June 2024 or subsequently prior to the
approval of these condensed consolidated interim financial statements:
1. Licences to explore specific areas have expired or will expire in
the near future and are not expected to be renewed;
2. No further substantive exploration expenditure is planned for a
specific licence;
3. Exploration and evaluation activity in a specific licence area
have not led to the discovery of commercially viable quantities of mineral
resources and the Board has decided to discontinue such activities in the
specific area; and
4. Sufficient data exists to indicate that, although a development
in the specific area is likely to proceed, the carrying amount of the
exploration and evaluation asset is unlikely to be recovered in full of
successful development or by sale.
Following their assessment, the Directors concluded that no impairment
indicators exist and thus no impairment charge is necessary.
8. Trade and other receivables
30 June 2024 31 Dec 2023 (Audited)
(Unaudited)
US$'000 US$'000
Amounts due from shareholders (note 11) 632 637
VAT recoverable 157 107
Other receivables and prepayments 1,033 184
1,822 928
Other receivables and prepayments include the following:
During the period ended 30 June 2024, the Group advanced a short-term working
capital loan to Pambili Natural Resources Corporation ("Pambili"), a gold
exploration company listed on the TSX Venture Exchange in Canada, of US$
127,000 (December 2023: US$ nil). After the period end, US$ 100,000 of these
advances have been repaid.
In April 2024, the Company exercised the option to acquire the Hillside and
Leopard North Projects and transferred the exercise price of US$ 650,000 into
an escrow account. The acquisition has not completed by 30 June 2024 and the
funds remained in escrow.
NOTES TO THE INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2024 (continued)
9. Loans receivables
30 June 2024 31 Dec 2023 (Audited)
(Unaudited)
US$'000 US$'000
Loan advanced to Pambili 158 -
Loan advanced to Equity Drilling 250 -
408 -
Loan advanced to Pambili
During the period ended 30 June 2024, the Group provided a loan to Pambili of
US$ 152,000. The loan is unsecured and repayable by no later than 31 January
2025. The loan includes an arrangement fee of US$ 15,000 which is accounted
for as interest with a corresponding interest income of US$ 6,000 included
within finance income.
Loan advanced to Equity Drilling
During the period ended 30 June 2024, the Group provided a US$ 250,000 loan to
its drilling contractor, Equity Drilling Zimbabwe (Pvt) Limited, to facilitate
acquisition of drilling equipment in Zimbabwe. The loan is secured against the
assets and is interest-free. The loan is repayable no later than 31 December
2025 however the directors expect it to be repaid within 12 months.
10. Financial assets at fair value through profit or loss
30 June 2024 31 Dec 2023 (Audited)
(Unaudited)
US$'000 US$'000
Listed securities 700 378
700 378
Listed securities
Interest in listed entities comprises of the Company's investments in Power
Metal Resources PLC ("Power Metals") and Pambili. The fair values of the
shares is based on their unadjusted quoted market price, which represents a
Level 1 input within the fair value hierarchy of IFRS 13 Fair value
measurement ("IFRS 13").
At 31 December 2023, the fair value of Group's investment in Power Metals, an
AIM-listed metal exploration company, was US$ 109,000. The fair value
subsequently increased to US$ 244,000 as at 30 June 2024 with a gain of US$
136,000 recognised in profit or loss. A foreign exchange loss of US$ 1,000 has
also been recognised.
The Group served a binding conversion notice to Pambili on 29 November 2023,
which would give the Group 8,925,000 shares representing approximately 16.6%
of Pambili's enlarged issued share capital. As at 31 December 2023 and 30 June
2024, the allotment of these shares remained outstanding whilst Pambili
completed a linked transaction and sought the necessary approvals from TSX-V.
The fair value of the Group's interest in Pambili as at 31 December 2023 was
US$ 269,000 which increased to US$ 457,000 as at 30 June 2024 with the
corresponding gain of US$ 189,000 recognised in profit or loss. A foreign
exchange loss of US$ 2,000 has also been recognised.
On 4 July 2024, in order to facilitate the approval of the allotment of shares
by TSX-V, the Group agreed to reduce its shareholding from 16.6% to 14.0% with
a corresponding reduction in the number to shares to be issued from 8,925,000
to 7,704,910. A loss of US$ 53,000 had been recognised in profit or loss after
the period end and the shares have been issued.
NOTES TO THE INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2024 (continued)
11. Share capital and share premium
Ordinary shares Share Share premium Total
capital
No. US$'000 US$'000 US$'000
At 1 January 2024 1,305,569,314 1,663 25,789 27,452
Share placing 257,113,862 326 3,583 3,909
Issue costs - - (96) (96)
At 30 June 2024 1,562,683,176 1,989 29,276 31,265
On 16 May 2024, the Company successfully raised £3,085,366 (US$ 3,909,375)
gross proceeds by placing 257,113,862 new ordinary shares at 1p.
In November 2022 the Company raised US$ 4,164,000 through the issue of
194,444,437 shares and 194,444,437 3p warrants. Of this amount, as at 30 June
2024 and the date of approval of these condensed consolidated interim
financial statements, £500,000 (June 2024: US$ 632,000; December 2023: US$
637,000) remain outstanding from one subscriber, Arigo Capital, and are
included within the trade and other receivables balance (note 8). The
Directors are in continued discussions with Arigo Capital on arranging a
settlement solution and expect this to be resolved in the second half of 2024.
However, should the funds ultimately not be received, the Directors have the
ability to issue the shares to a new subscriber for a similar premium or may
cancel the shares. Therefore, no expected credit loss provision has been
recognised as at 30 June 2024 (December 2023: US$ nil).
12. Significant events after the reporting date
On 23 August 2024 the Company issued a £2,000,000 (US$ 2,620,000) convertible
loan note (the "CLN"). The CLN is for a term of 12 months and carries a 10%
interest per annum. The CLN is expected to be converted into ordinary shares
of the Company on publication of an FCA-approved prospectus at the price per
share achieved at a contemporaneous fundraise.
Other events after the reporting period are disclosed in notes 8 and 10.
13. Other matters
A copy of the Interim Management Report and the condensed consolidated interim
financial statements is available on Kavango's website:
www.kavangoresources.com (http://www.kavangoresources.com)
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