REG - Kefi Gold and Copper - Results for the year ended 31 December 2021
06/06/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220606:nRSF6847Na&default-theme=true
RNS Number : 6847N Kefi Gold and Copper PLC 06 June 2022
6 June 2022
KEFI Gold and Copper plc
("KEFI" or the "Company")
Results for the year ended 31 December 2021
KEFI (AIM: KEFI), the gold and copper exploration and development company with
projects in the Federal Democratic Republic of Ethiopia and the Kingdom of
Saudi Arabia, is pleased to announce its audited financial results for the
year ended 31 December 2021.
Notice of AGM and Annual Report
The Annual General Meeting will be held at 10.00am on Thursday 30 June 2022
at Marlin Waterloo, Lower Ground Floor, 111 Westminster Bridge Road, Waterloo,
SE1 7HR, United Kingdom.
Information on the resolutions to be considered at the AGM can be found in the
Notice of AGM that has been made available to shareholders of the Company as
an electronic communication along with forms of proxy and direction (the "AGM
Materials") as well as the Annual Report and Accounts for the year ended 31
December 2021 (the "Annual Report"). The AGM Materials and Annual Report are
available on KEFI's website at www.kefi-minerals.com
(http://www.kefi-minerals.com) .
Market Abuse Regulation (MAR) Disclosure
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
Enquiries
KEFI Gold and Copper plc
Harry Anagnostaras-Adams (Managing Director) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance LLP (Nominated Adviser) +44 (0) 20 3470 0470
Jeff Keating, Adam Cowl
Tavira Securities Limited (Lead Broker) +44 (0) 20 7100 5100
Oliver Stansfield, Jonathan Evans
WH Ireland Limited (Joint Broker) + 44 (0) 20 7220 1666
Katy Mitchell, Andrew de Andrade
IFC Advisory Ltd (Financial PR and IR) +44 (0) 20 3934 6630
Tim Metcalfe, Florence Chandler
Further information can be viewed at www.kefi-minerals.com
(http://www.kefi-minerals.com)
EXECUTIVE CHAIRMAN'S REPORT
Due to the improvement in the local working environment in both Ethiopia
(security) and Saudi Arabia (regulatory) since late 2021, KEFI now has three
(not one) advanced projects in two countries. Combined with the recently
reported excellent exploration results at Hawiah and Al-Godeyer in Saudi
Arabia, KEFI now has a much-improved position as an early-mover in both
countries and with a more balanced portfolio of advancing projects.
We can at last focus on a sequential development path to build a mid-tier
mining company with aggregate annual production of 365,000 ounces of gold and
gold equivalent, in which KEFI will have a beneficial interest of 187,000
ounces of gold and gold equivalent.
Our reported Mineral Resources provide a solid starting position for our
imminent growth. Since mid-2021, total Mineral Resources have increased from
3.9 million to 4.7 million gold-equivalent ounces. KEFI's beneficial interest
in the in-situ metal content of our three projects now totals 2.1 million
gold-equivalent ounces. KEFI's current market capitalisation of circa £30
million equates to only $19 per gold-equivalent ounce compares very favourably
to the prevailing gold price range during 2022 of approximately
$1,830-2000/ounce.
The underlying intrinsic value of KEFI's assets has increased from December
2020 to December 2021 based on the three projects' NPV (at an 8% discount rate
and using 31 December 2021 metal prices). At that same deck of metal prices,
NPV per share has grown from 3 pence as at mid-2020 to 7 pence as at mid-2021
and 9 pence as at mid-2022 (calculated on the shares in issue today).
The growth in underlying intrinsic value is due to our progress in Saudi
Arabia in particular - at the Hawiah Copper-Gold Project and the Jibal Qutman
Gold Project. These statistics are merely illustrative indicators, but the
same pattern emerges whether one assumes prevailing metal prices or analysts'
consensus forecast metal prices.
Our operating alliances are with the following strong organisations:
· Partners:
o in Saudi Arabia: Abdul Rahman Saad Al Rashid and Sons Ltd ("ARTAR")
o in Ethiopia:
§ Federal Government of the Democratic Republic of Ethiopia
§ Oromia Regional Government
· Principal contractor for process plants in both Ethiopia and Saudi Arabia:
Lycopodium Ltd ("Lycopodium").
· Senior project finance lenders for Tulu Kapi:
o East African Trade and Development Bank Ltd ("TDB")
o African Finance Corporation Limited ("AFC")
Ethiopia - Tulu Kapi
Until a few years ago, Ethiopia had been one of the world's top 10 growth
countries for nearly 20 years and now, having overcome its recent security
issues, is demonstrating a clear determination to expedite economic recovery
and pursue its economic objectives. Tulu Kapi will be the country's first
large-scale mining project for some 30 years and is designed to the highest
international standards. It therefore is imposing many demands on a regulatory
system which the Ethiopian Government is upgrading. Under strong Ministerial
leadership, the Government is determined to build a modern minerals sector.
There is significant potential to increase Tulu Kapi's current Ore Reserves of
1.05 million ounces of gold and Mineral Resources of 1.7 million ounces.
Economic projections for the Tulu Kapi open pit indicate the following returns
assuming a gold price of US$1,591/ounce:
· Average EBITDA of $100 million per annum (KEFI's now planned c. 70% interest
being c. $70 million);
· All-in Sustaining Costs ("AISC") of $826/ounce, (note that royalty costs
increase with the gold price); and
· All-in Costs ("AIC") of $1,048/ounce.
The assumptions underlying these projections are detailed in the Annual
Report.
We reactivated Tulu Kapi project launch preparations in early 2022. Ethiopia's
Ministry of Mines has recently been formally advised that progress is on
schedule to have secured project finance by mid-year if the security situation
is satisfactory and if the few remaining regulatory administrative tasks are
also completed punctually.
Saudi Arabia - Jibal Qutman
Jibal Qutman was KEFI's first discovery in Saudi Arabia with Mineral Resources
in excess of 700,000 ounce of gold.
As a result of a new regulatory system and indications from the Saudi Arabia's
Government that the Mining Licence would progress in 2022, development
planning studies have recommenced at Jibal Qutman.
The current gold price is considerably higher than the $1,200/ounce used in
2015 when the Company lodged its initial Mining Licence application. Another
key change is that several alternative processing options are likely to have
become more attractive since 2015.
Several consultants have recently been engaged to evaluate processing options
for Jibal Qutman and update elements of the Mining Licence application. This
work includes open-pit design and scheduling, metallurgy, processing options
and updating the Environmental and Social Impact Assessment.
Saudi Arabia - Hawiah
Hawiah was discovered in September 2019 and now ranks in the:
· top three base metal projects in Saudi Arabia; and
· top 15% VMS projects worldwide.
A three-year 42,000m drilling program has delineated a Mineral Resource of
24.9 million tonnes at 0.90% copper, 0.85% zinc, 0.62g/t gold and 9.8g/t
silver. As a scale-comparison with Tulu Kapi, Hawiah's recoverable metal is
now estimated to be in the order of 2.2 million gold-equivalent ounces versus
Tulu Kapi's 1.2 million ounces of gold.
The team is progressing at great speed on this exciting project which is
located close to major infrastructure. We are working towards completing a
Preliminary Feasibility Study ("PFS") and an updated Mineral Resource in late
2022.
Two Exploration Licences ("ELs") located immediately west of the Hawiah EL
were granted in December 2021. Initial exploration of these Al Godeyer ELs has
confirmed similar copper-gold mineralisation to the Hawiah VMS deposit and
indicated good continuity of the mineralised horizon.
Conclusion
KEFI is preparing to develop the Tulu Kapi Gold Project, advancing development
studies on the Jibal Qutman Gold Project, progressing the PFS for the Hawiah
Copper-Gold Project and testing exploration targets in Ethiopia and Saudi
Arabia.
Simultaneous with the triggering of full development at Tulu Kapi, we intend
to re-commence exploration programs in Ethiopia and expand our exploration
program in Saudi Arabia. In Ethiopia, the initial focus will be underneath the
planned open pit where we already have established an initial resource for
underground mining at an average grade of 5.7g/t gold. We also intend to
follow-up drilling which indicated good potential for nearby gold deposits in
the Tulu Kapi District. In Saudi Arabia, further drilling is in progress at
Hawiah and the adjacent Al Godeyer prospect.
Along with my fellow Directors, I am very sensitive to the need to generate
returns on investment. It is frustrating and disappointing that the pandemic
and the geopolitics of both Ethiopia and Saudi Arabia has retarded our
progress in recent years and we have been unable to achieve targeted progress.
However, our operating environment has turned for the better in both countries
and we can now progress on all fronts.
By emphasizing conventional project-level development financing, we seek to
alleviate the past responsibility of KEFI shareholders to provide all funding
and therefore more than 80% of the development capital is planned to be
contributed by our partners and other syndicate parties. However, exploration
and other pre-development funding will continue to rely exclusively on equity
funding by KEFI and its in-country partners.
The Directors expect that as milestones are achieved, the Company's share
price should naturally narrow the gap between the Company's market
capitalisation and what we believe to be the significantly higher fundamental
valuations of the Company's projects using conventional measures such as NPV.
We are indeed at an opportune moment, created by our team's hard work, your
support as shareholders and the serendipity of markets strengthening as we
launch our projects. The Directors are deeply appreciative of all personnel's
tenacity and steadfast dedication and of the support the Company receives from
shareholders and other stakeholders.
Executive Chairman
Harry Anagnostaras-Adams
1 June 2022
FINANCE DIRECTOR'S REVIEW
KEFI is a first-mover within a fast-changing geopolitical environment and has
been financing its activities in the midst of a global pandemic - a
challenging environment indeed. We see the current global supply chain strains
as an aftershock which will abate but leave a legacy of cost inflation which
has already impacted our projects. We have been adjusting our planning
assumptions since the pandemic began.
Successful implementation will see KEFI emerge in 2024 as a profitable gold
producer of 140,000 ounces per annum. Our growth plans in Ethiopia and Saudi
Arabia are likely to lead to much higher gold equivalent production within the
following few years.
Subject to the signing of Tulu Kapi's umbrella financing agreement in June
2022 and its adherence over the following few months, the Company has been
positioned to commence full construction of the Tulu Kapi mine at the end of
the current wet season. Implementation of this plan provides KEFI with project
ownership levels as follows:
· c. 70% of the Ethiopian mining development and production operation, via the
shareholding in TKGM;
· 100% of the Ethiopian exploration projects, via the shareholding in KEFI
Minerals (Ethiopia) Limited ("KME"); and
· 30% of the Saudi development and exploration projects, via the shareholding in
G&M.
KEFI has funded all of its past activities with approximately £72 million
equity capital raised at then prevailing share market prices. This avoided the
superimposing of debt-repayment risk onto the risks of exploration, permitting
and other challenges that always exist during the early phases of project
exploration and development in frontier markets. We do however avail ourselves
of unsecured advances from time to time as arranged by our Corporate Broker to
provide working capital pending the achievement of a short-term business
milestone.
Overall, the current finance plan is shown below and caters for all planned
development expenditure at TKGM in addition to all exploration and corporate
funding requirements, estimated at c.$356 million (including the mining fleet
provided by the contractor of US$56 million, the original budget of US$240
million and provisions for cost-inflation US$50 million) which is dependent
upon final procurement price confirmations. These estimates were made in
mid-2022 and took into account cost-inflation in the industry until then. We
are now re-checking pricing for project launch and final finance planning. The
various offers and commitments are made on a non-binding basis for
finalisation as we now move to project launch. The financing syndicate has
expressed willingness to adjust and refine amongst itself when final
procurement and budget prices, expected in the coming two months, are set. It
will be optimised by KEFI and the TKGM syndicate which has already
conditionally indicated the following participation as at 31 May 2022:
$ M
56 Mining fleet to be provided by the mining contractor
140 Senior project debt, to be repaid out of operating cash surpluses
196
Equity Risk Capital
38 Government and Local Investors directly into TKGM
122 KEFI-funded component, separate and in addition to historical investment
160 Total TKGM capital requirement, subject to final procurement clarifications
356 Total of original project budget, plus provision for cost-inflation plus
mining fleet
KEFI Component to be funded as follows:
60 Subordinated non-convertible, offtake-linked debt
15 Subordinated debt convertible into KEFI shares at VWAP in 3 years
20 Subordinated convertible at a premium over market in H2-2022
27 Recent issues of KEFI shares and the exercise of the attached warrants
122 Provided by KEFI
The following needs to be carried out so as to proceed to earliest project
finance settlement:
· Field activities to demonstrate readiness to launch from a security viewpoint;
· Final construction and mining pricing updates confirmed; and
· Definitive individual party documentation to be approved with relevant
Government agencies, including the Ministry of Mines and the Central Bank of
Ethiopia, so that execution may proceed by all syndicate parties. Early
preparatory works have commenced to give clearance to both banks to lend on
same terms.
Ownership Value and Ownership Dilution
An £8.0 million Placing completed in April 2022 will mainly be used to fund:
· selected development activities at Tulu Kapi,
· exploration at Hawiah and the adjacent Al Godeyer prospect; and
· development planning at Jibal Qutman.
This paves the way for full construction in Ethiopia from October 2022 at the
end of the local wet season, with the initial signing at end of June 2022
setting out any residual conditions to be satisfied.
From an ownership value perspective and measuring the Company's underlying
assets on an NPV basis, compared with the position as at the time of the last
AGM, this plan has resulted in the indicative value of KEFI's share of its
three main assets having more than tripled from $154 million in June 2020 to
c.$471 million (£348 million) in May 2022. This is the result of KEFI raising
its planned interest in Tulu Kapi from 45% to c.70%, making a significant
discovery at Hawiah and now, due to progress with regulatory approvals, the
inclusion of Jibal Qutman. The basis for these estimates is prevailing metal
prices and other explanations provided in the footnotes below.
From an ownership dilution perspective, successful completion of the finance
plan will necessarily increase issued capital, hopefully via the exercise of
the recently issued warrants at 1.6 pence per share. But ownership dilution
will be minimised because much of the capital is being raised at the project
level and some of the share issues by KEFI will be at prices two and three
years after project finance completion.
Financial Risk Management
In designing the balance sheet senior debt gearing overall, the senior debt to
equity ratio for TKGM is 47%:53% ($140 million:$160 million) excluding equity
funded historical pre-development costs and 37%:63% ($140 million:$240
million) including equity funded historical pre-development costs.
And in structuring the TKGM project finance, a number of key parameters had a
driving influence on Company policy:
· The breakeven gold price after debt service is c.$1,107/ounce (flat) for 10
years, while over the past 10 years the gold price was under that price for
only 2.4% of the time; and
· At current analyst consensus gold price of $1,641/ounce, senior debt could be
repaid within 2 years of production start.
It is important that we now proceed to financial completion in accordance with
the latest plans agreed with the Government. Indeed, the Government has warned
of administrative consequences if we fail to do so and all of our finance
syndicate members have made it clear that they wish to proceed according to
plan subject only to normal safety and compliance procedures.
We have conditionally assembled all of the development finance, mostly at the
project level from our small, efficient and economical corporate office in
Nicosia, Cyprus. Other than our Nicosia-based financial control/corporate
governance team, all operational staff are based at the sites for project
work. This approach increases efficiency at a lower cost.
Accounting Policy
KEFI writes off all exploration expenditure in Saudi Arabia.
KEFI's carrying value of the investment in KME, which holds the Company's
share of Tulu Kapi is £14.3 million as at 31 December 2021. It is important
to note KEFI's planned circa.70% beneficial interest in the underlying
valuation of Tulu Kapi is c.£191 million based on project NPV at an assumed
gold price of $1,830/ounce and including the underground mine.
In addition, the balance sheet of TKGM at full closing of all project funding
will reflect all equity subscriptions which are currently estimated to exceed
£113 million or $156 million (Ethiopian Birr equivalent).
John Leach
Finance Director
1 June 2022
Footnotes:
· Long term analysts' consensus forecast is sourced from CIBC Global Mining
Group Analyst Consensus Long Term Commodity Price Forecasts 30 April 2022.
· NPV calculations are based on:
Metal prices as at 31 December 2021 of US$1,830/ounce for gold, $9,750/tonne
for copper, $3,590/tonne for zinc and $23/ounce for silver; and 8% discount
rate applied against net cash flow to equity, after debt service and after
tax.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KEFI GOLD AND COPPER PLC
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group's
and of the Parent Company's affairs as at 31 December 2021 and of the Group's
loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with
UK adopted international accounting standards;
• the Parent Company financial statements have been properly prepared in
accordance with UK adopted international accounting standards and as applied
in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of Kefi Gold and Copper Plc (the
'Parent Company') and its subsidiaries (the 'Group') for the year ended 31
December 2021 which comprise the consolidated statement of comprehensive
income, the statements of financial position, the consolidated statement of
changes in equity, the company statement of changes in equity and the
consolidated statement of cash flow, the company statement of cash flows and
notes to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and UK adopted international accounting
standards and, as regards the Parent Company financial statements, as applied
in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Material uncertainty relating to going concern
We draw your attention to note 2 of the financial statements which explains
that the Parent Company and the Group's forecasts indicate that they will
require additional funding in Q3 of 2022 to meet working capital needs and
other obligations and that while there is potential access to short term
funding from shareholders and other alternatives on offer it is currently not
committed. These conditions, along with other matters set out in note 2,
indicate the existence of a material uncertainty which may cast significant
doubt over the Parent Company's and the Group's ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the Directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. We have highlighted going concern as a
key audit matter as a result of the estimates and judgements required by the
Directors in their going concern assessment and the effect on our audit
strategy. We performed the following work in response to this key audit
matter:
· We obtained the Directors' going concern assessment and supporting forecasts
and performed a detailed review of the cash flow forecasts, challenging the
key assumptions based on empirical data and comparing of historic actual
monthly expenditure.
· We discussed with the Directors how they intend to raise the funds necessary
for the Group to continue as a going concern in the required timeframe and
considered their judgement in light of the Group's previous successful
fundraisings and strategic financing. We reviewed agreements and term sheets
from potential investors in connection with the planned project financing, and
documentation from the potential sources for financing planned for September
2022.
· We have agreed any projected fund raises to term sheets and any funds raised
since year end to bank, we ensured these were reflected in the cash flow
forecast.
· We reviewed the adequacy and completeness of the disclosures in the financial
statements in the context of our understanding of the Group's operations and
plans, and the requirements of the financial reporting framework.
· We reviewed correspondence with the Ethiopian Ministry of Mines and the
opinion of Kefi's legal advisors, in order to assess the mining licence
validity.
· We discussed the impact of Covid-19 with management and the Audit Committee
including their assessment of risks and uncertainties associated with areas
such as the Group's workforce, supply chain that are relevant to the Group's
business model and operations. We compared this against our own assessment of
risks and uncertainties based on our understanding of the business and sector
information.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Overview
99% (2020: 98%) of Group loss before tax
Coverage 100% (2020: 100%) of Group total assets
2021 2020
Carrying value of exploration assets P P
Going concern P P
Key audit matters
Group financial statements as a whole
Materiality
£430k (2020: £400k) based on 1.5% (2020: 1.5%) of total assets
Materiality
Group financial statements as a whole
£430k (2020: £400k) based on 1.5% (2020: 1.5%) of total assets
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including the Group's system of internal control, and assessing
the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
The Group operates through the Parent Company based in the United Kingdom
whose main function is the incurring of administrative costs and providing
funding to the subsidiaries in Ethiopia as well as one joint venture company
in Saudi Arabia. In addition to the Parent Company, the two Ethiopian
subsidiaries are considered to be significant components, while the Saudi
Arabian joint venture is not considered a significant component. The financial
statements also include a number of non-trading subsidiary undertakings, as
set out in note 13.1, which were considered to be not significant components.
In establishing our overall approach to the group audit, we determined the
type of work that needed to be performed in respect of each component. A full
scope audit of the Ethiopian subsidiaries were carried out by a locally based
component auditor, which was a BDO network firm. All significant risks were
audited by the BDO Group audit team.
The joint venture company and the non-trading subsidiaries of the Group were
subject to analytical review procedures performed by the Group audit team.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of
involvement needed in order to be able to conclude whether sufficient
appropriate audit evidence has been obtained as a basis for our opinion on the
Group financial statements as a whole. Our involvement with component auditors
included the following:
· Detailed Group reporting instructions were sent to the component auditor,
which included the principal areas to be covered by the audits, and set out
the information to be reported to the Group audit team.
· The Group audit team was actively involved in the direction of the audits
performed by the component auditor for Group reporting purposes, along with
the consideration of findings and determination of conclusions drawn.
· The Group audit team reviewed the component auditor's work papers remotely,
and engaged with the component auditor by video calls and emails during their
planning, fieldwork and completion phases.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In addition to the matter
described in the Material uncertainty related to going concern section of our
report, we determined the following matter to be a key audit matter
Key audit matter How the scope of our audit addressed the key audit matter
Carrying Value of Exploration Assets (see note 12) The exploration and evaluation assets of the Group, as disclosed in note 12, We considered the indicators of impairment applicable to the Tulu Kapi
represent the key assets for the Group. Costs are capitalised in accordance exploration asset, including those indicators identified in IFRS 6 and
with the requirements set out in IFRS 6: 'Exploration for and Evaluation of reviewed the Directors' assessment of these indicators. The following work was
Mineral Resources' ("IFRS 6"). undertaken:
The Directors are required to assess whether there are potential indicators of We reviewed the licence documentation to confirm that the exploration permits
impairment for the Tulu Kapi exploration asset and whether an impairment test are valid, and to check whether there is an expectation that these will be
was required to be performed. No indicators of impairment to the asset were renewed in the ordinary course of business.
identified, and disclosure to this effect has been included in the financial
statements.
We have reviewed correspondence with the Ethiopian Ministry of Mines for any
conditions regarding the validity of the licence.
There are a number of estimates and judgements used by management in assessing
the exploration and evaluation assets for indicators of impairment under IFRS
6. These estimates and judgements are set out in Note 4 of the financial
statements and the subjectivity of these estimates along with the material We made specific inquires of the Directors and reviewed market announcements,
carrying value of the assets make this a key audit area. budgets and plans which confirms the plan to continue investment in the Tulu
Kapi project subject to sufficient funding being available, as disclosed in
note 2.
Based on our knowledge of the Group, we considered whether there were any
other indicators of impairment not identified by the Directors.
We have reviewed the adequacy of disclosures provided within the financial
statements in relation to the impairment assessment against the requirements
of the accounting standards.
Key observations:
Based on our work performed we considered the Directors' assessment and the
disclosures of the indicators of impairment review included in the financial
statements to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. We consider materiality to be
the magnitude by which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole and performance materiality as follows:
Group financial statements Parent company financial statements
2021 2020 2021 2020
£k £k £k £k
Materiality 430 400 330 230
Basis for determining materiality 1.5% total assets
Rationale for the benchmark applied We consider total assets to be the financial metric of the most interest to
shareholders and other users of the financial statements given the Group and
Parent Company's status as a mining exploration company and therefore consider
this to be an appropriate basis for materiality.
Performance materiality 320 300 247 172
Basis for determining performance materiality 75% of materiality for the financial statements as a whole. This is based on
our overall assessment of the control environment and the low level of
expected misstatements.
Component materiality
We set materiality for each significant component of the Group based on 1.5%
total assets (2020: 1.5%), based on the size and our assessment of the risk of
material misstatement of that component. Component materiality was set at
£280k (2020: £230k). In the audit of each component, we further applied
performance materiality levels of 75% (2020: 75%) of the component materiality
to our testing to ensure that the risk of errors exceeding component
materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual
audit differences in excess of £21k (2020: £20k). We also agreed to report
differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during
the course of the audit, we are required by the Companies Act 2006 and ISAs
(UK) to report on certain opinions and matters as described below.
Strategic report and Directors' report In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic report and the Directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the Strategic report and the Directors' report have been prepared in
accordance with applicable legal requirements.
· In the light of the knowledge and understanding of the Group and
Parent Company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the
Directors' report.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the Parent Company,
or returns adequate for our audit have not been received from branches not
visited by us; or
· the Parent Company financial statements are not in agreement with the
accounting records and returns; or
· certain disclosures of Directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we require
for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors' Responsibilities, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group's and the Parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including
fraud
We obtained an understanding of the legal and regulatory frameworks that are
applicable to the Company. We determined that the most significant which are
directly relevant to specific assertions in the financial statements are those
related to the reporting framework (UK adopted international accounting
standards, the Companies Act 2006. AIM rules and the QCA Corporate Governance
Code), and terms and requirements included in the Group's exploration and
evaluation licenses. Our procedures included:
· We understood how the Company is complying with those legal and regulatory
frameworks by making enquiries to the Directors, and those responsible for
legal and compliance procedures. We corroborated our enquiries through our
review of board minutes and other supporting documentation.
· We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout
the audit.
· Directing the component auditor to ensure an assessment is performed on the
extent of the components' compliance with the relevant local and regulatory
framework. Reviewing this work and holding meetings with relevant Directors to
form our own opinion on the extent of Group wide compliance
· Reviewing minutes from board meetings of those charges with governance to
identify any instances of non-compliance with laws and regulations
We have considered the potential for material misstatement in the financial
statements, including misstatement arising from fraud and considered that the
areas in which fraud might occur were management override and missapropriation
of cash. Our procedures to respond to these risks included:
· We made enquiries of Management and the Board into any actual or suspected
instances of fraud.
· Testing the appropriateness of journal entries made through the year by
applying specific criteria to detect possible irregularities and fraud;
· Performing a detailed review of the Group's year end adjusting entries and
investigating any that appear unusual as to nature or amount and agreeing to
supporting documentation;
· For significant and unusual transactions, particularly those occurring at or
near year end, obtaining evidence for the rationale of these transactions and
the sources of financial resources supporting the transactions;
· Assessed whether the judgements made in accounting estimates were indicative
of a potential bias (refer to key audit matters above); and
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we are
to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities
(http://insite.bdo.co.uk/sites/audit/Documents/www.frc.org.uk/auditorsresponsibilities)
. This description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Parent Company's
members those matters we are required to state to them in an auditor's report
and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Parent Company and
the Parent Company's members as a body, for our audit work, for this report,
or for the opinions we have formed.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
1 June 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2021
Notes Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
Revenue - -
Exploration costs - (25)
Administrative expenses 6 (2,190) (2,365)
Finance transaction costs 8.2 (84) (316)
Share-based payments and warrants-equity settled 18 (810) (51)
Share of loss from jointly controlled entity 20 (1,482) (1,088)
Impairment of jointly controlled entity 20 418 (585)
Operating loss 6 (4,148) (4,430)
Change in value of financial assets at fair value through profit and loss 14 - (16)
Other (loss)/income (75) 140
Gain on Dilution of Joint Venture 20 428 1,033
Foreign exchange loss (8) (347)
Finance costs 8.1 (1,121) (100)
Loss before tax (4,924) (3,720)
Tax 9 - -
Loss for the year (4,924) (3,720)
Loss attributable to:
-Owners of the parent (4,924) (3,720)
Loss for the period (4,924) (3,720)
Other comprehensive expense:
Exchange differences on translating foreign operations - -
Total comprehensive expense for the year (4,924) (3,720)
Total Comprehensive Income to:
-Owners of the parent (4,924) (3,720)
Basic diluted loss per share (pence) 10 (0.226) (0.224)
The notes are an integral part of these consolidated financial statements.
STATEMENTS OF FINANCIAL POSITION
31 December 2021
The The The Restated The Restated The
Group Company Group Company Company
Notes 2021 2021 2020 2020 1 Jan 2020
£'000 £'000 £'000 £'000 £'000
ASSETS
Non‑current assets
Property, plant and equipment 11 63 1 35 3 3
Intangible assets 12 28,361 - 24,510 - -
Investment in subsidiaries 13.1 - 14,331 - 13,680 12,575
Investments in jointly controlled entities 13.2 - - - - -
Receivables from subsidiaries 15.2 - 7,292 - 6,262 5,813
28,424 21,624 24,545 19,945 18,391
Current assets
Financial assets at fair value through OCI 14 - - 54 - -
Trade and other receivables 15.1 291 24 448 338 1,154
Cash and cash equivalents 16 394 149 1,315 1,192 65
685 173 1,817 1,530 1,219
Total assets 29,109 21,797 26,362 21,475 19,610
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 17 2,567 2,567 2,138 2,138 1.149
Deferred Shares 17 23,328 23,328 23,328 23,328 23,328
Share premium 17 35,884 35,884 33,118 33,118 25,452
Share options reserve 18 1,891 1,891 1,273 1,273 1,118
Accumulated losses (42,731) (47,310) (37,824) (40,736) (36,265)
Attributable to Owners of parent 20,939 16,360 22,033 19,121 14,782
Non-Controlling Interest 19 1,379 - 1,204 - -
Total equity 22,318 16,360 23,237 19,121 14,782
Current liabilities
Trade and other payables 21 5,556 4,202 3,125 2,354 3,864
Loan and borrowings 23 1,235 1,235 - 964
Total liabilities 6,791 5,437 3,125 2,354 4,828
Total equity and liabilities 29,109 21,797 26,362 21,475 19,610
The notes are an integral part of these consolidated financial statements.
The Company has taken advantage of the exemption conferred by section 408 of
Companies Act 2006 from presenting its own statement of comprehensive income.
Loss after taxation amounting to £6.8 million (2020: £5.1 million) has been
included in the financial statements of the parent company.
On the 1 June 2022, the Board of Directors of KEFI Gold and Copper PLC
authorised these financial statements for issue.
Harry Anagnostaras-Adams John Edward Leach
Executive Director- Chairman Finance Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2021
Attributable to the owners of the Company
Share Deferred Share premium Share Foreign Accum. Owners NCI Total
capital
shares options reserve exch losses Equity
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2020 1,149 23,328 25,452 1,118 - (34,640) 16,407 1,075 17,482
Loss for the year - - - - - (3,720) (3,720) - (3,720)
Total Comprehensive Income - - - - - (3,720) (3,720) - (3,720)
Recognition of share-based payments - - - 53 - - 53 - 53
Expired warrants - - - (665) - 665 - - -
Issue of share capital 989 - 8,056 767 - - 9,812 - 9,812
Share issue costs - - (390) - - - (390) - (390)
Non-controlling interest - - - - - (129) (129) 129 -
At 31 December 2020 2,138 23,328 33,118 1,273 - (37,824) 22,033 1,204 23,237
Loss for the year - - - - - (4,924) (4,924) - (4,924)
Other comprehensive income - - - - - - - - -
Total Comprehensive Income - - - - - (4,924) (4,924) - (4,924)
Recognition of share-based payments - - - 810 - - 810 - 810
Expired warrants - - - (192) - 192 - - -
Issue of share capital and warrants 429 - 2,985 - - - 3,414 - 3,414
Share issue costs - - (219) - - - (219) - (219)
Non-controlling interest - - - - - (175) (175) 175 -
At 31 December 2021 2,567 23,328 35,884 1,891 - (42,731) 20,939 1,379 22,318
The following describes the nature and purpose of each reserve within owner's
equity:
Reserve Description and purpose
Share capital: (Note 17) amount subscribed for ordinary share capital at nominal value
Deferred shares: (Note 17) under the restructuring of share capital, ordinary shares of in the capital of
the Company were sub-divided into deferred share.
Share premium: (Note 17) amount subscribed for share capital in excess of nominal value, net of issue
costs
Share options reserve (Note 18) reserve for share options and warrants granted but not exercised or lapsed
Foreign exchange reserve cumulative foreign exchange net gains and losses recognized on consolidation
Accumulated losses Cumulative net gains and losses recognized in the statement of comprehensive
income,
excluding foreign exchange gains within other comprehensive income
NCI (Non-controlling interest): (Note 19) the portion of equity ownership in a subsidiary not attributable to the parent
company
The notes are an integral part of these consolidated financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2021
Share Deferred shares Share premium Share Accumulated losses Total
capital
options reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2020 1,149 23,328 25,452 1,118 (36,265) 14,782
Loss for the year - - - - (5,136) (5,136)
Deferred Shares - - - - - -
Recognition of share-based payments - - - 53 - 53
Forfeited options - - - - - -
Expired warrants - - - (665) 665 -
Issue of share capital 989 - 8,056 767 - 9,812
Share issue costs - - (390) - - (390)
At 31 December 2020 2,138 23,328 33,118 1,273 (40,736) 19,121
Loss for the year - - - - (6,766) (6,766)
Recognition of share-based payments - - - 810 - 810
Forfeited options - - - - - -
Expired warrants - - - (192) 192 -
Issue of share capital and warrants 429 - 2,985 - - 3,414
Share issue costs - - (219) - - (219)
At 31 December 2021 2,567 23,328 35,884 1,891 (47,310) 16,360
The following describes the nature and purpose of each reserve within owner's
equity:
Reserve Description and purpose
Share capital (Note 17) amount subscribed for ordinary share capital at nominal value
Deferred shares: (Note 17) under the restructuring of share capital, ordinary shares of in the capital of
the Company were sub-divided into deferred share (Note 17).
Share premium: (Note 17) amount subscribed for share capital in excess of nominal value, net of issue
costs
Share options reserve: (Note 18) reserve for share options and warrants granted but not exercised or lapsed
Accumulated losses cumulative net gains and losses recognized in the statement of comprehensive
income
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December 2021
Notes Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (4,924) (3,720)
Adjustments for:
Depreciation of property, plant and equipment 11 17 43
Share based payments 18 - 624
Issue of options 18 810 51
Fair value loss to derivative financial asset 14 - 16
Gain on Dilution of Joint Venture 20.1 (428) (1,033)
Share of loss from jointly controlled entity 20 1,482 1,088
Impairment on jointly controlled entity 20 (418) 585
Exchange difference 159 244
Finance costs 8.1 1,121 100
(2,181) (2,002)
Changes in working capital:
Trade and other receivables (75) (123)
Trade and other payables 806 (67)
Cash used in operations (1,450) (2,192)
Interest paid - -
Net cash used in operating activities (1,450) (2,192)
CASH FLOWS FROM INVESTING ACTIVITIES
Project exploration and evaluation costs 12 (2,508) (3,029)
Acquisition of property plant and equipment 11 (46) (40)
Proceeds from sale of financial assets at fair value through OCI 14 54 -
Advances to jointly controlled entity 13.2 (510) (1,320)
Net cash used in investing activities (3,010) (4,389)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 17 1,045 7,331
Issue costs 17 (219) (335)
Proceeds from bridge loans 23.1.2 2,713 750
Repayment of convertible notes and bridge loans 23.1.2 - -
Net cash from financing activities 3,539 7,746
Net increase/(decrease) in cash and cash equivalents (921) 1,165
Cash and cash equivalents:
At beginning of the year 16 1,315 150
At end of the year 16 394 1,315
Cash and cash equivalents in the Consolidated Statement of Financial Position
includes restricted cash of £20,000 (2020: £20,000).
The notes are an integral part of these consolidated financial statements.
COMPANY STATEMENT OF CASHFLOWS
Year ended 31 December 2021
Notes Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (6,763) (5,136)
Adjustments for:
Depreciation of property plant equipment 2 2
Share based payments 18 - 624
Issue of options 18 810 51
Gain on Dilution of Joint Venture 20.1 (428) (1,033)
Share of loss from jointly controlled entity 20 1,482 1,088
Impairment on jointly controlled entity 20 (418) 585
Exchange difference 1,767 1,845
Expected credit loss 43 18
Finance costs 1,121 100
(2,384) (1,856)
Changes in working capital:
Trade and other receivablesss 82 (91)
Trade and other payables 1,562 (174)
Cash used in operations (740) (2,121)
Interest Paid - -
Net cash used in operating activities (740) (2,121)
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property plant and equipment - (2)
Investment in subsidiary 13.1 (651) (1,104)
Advances to jointly controlled entity 13.2 (510) (1,320)
Loan to subsidiary 15 (2,684) (2,069)
Net cash used in investing activities (3,845) (4,495)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 17 1,045 7,331
Issue costs 17 (219) (335)
Proceeds from bridge loans 23.1.2 2,713 750
Repayment of convertible notes and bridge loans 23.1.2 - -
Net cash from financing activities 3,539 7,746
Net increase/(decrease) in cash and cash equivalents (1,046) 1,130
Cash and cash equivalents:
At beginning of the year 16 1,195 65
At end of the year 16 149 1,195
Cash and cash equivalents in the Company Statement of Financial Position
includes restricted cash of £20,000 (2020: £20,000).
The notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended 31 December 2021
1. Incorporation and principal activities
Country of incorporation
KEFI Gold and Copper PLC (the "Company") was incorporated in United Kingdom as
a public limited company on 24 October 2006. Its registered office is at
27/28, Eastcastle Street, London W1W 8DH.The principal place of business is
Cyprus.
Principal activities
The principal activities of the Group for the year were:
· Exploration for mineral deposits of precious and base metals and other
minerals that appear capable of commercial exploitation, including
topographical, geological, geochemical and geophysical studies and exploratory
drilling.
· Evaluation of mineral deposits determining the technical feasibility and
commercial viability of development, including the determination of the volume
and grade of the deposit, examination of extraction methods, infrastructure
requirements and market and finance studies.
· Development of mineral deposits and marketing of the metals produced.
2. Accounting policies
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been consistently
applied throughout both periods presented in these financial statements unless
otherwise stated.
Basis of preparation and consolidation
The Company and the consolidated financial statements have been prepared in
accordance with UK adopted international accounting standardsin conformity
with the requirements of the Companies Act 2006. They comprise the accounts of
KEFI Gold and Copper PLC and all its subsidiaries made up to 31 December 2021.
The Company and the consolidated financial statements have been prepared under
the historical cost convention, except for the revaluation of certain
financial instruments.
Business combinations
Business combinations are accounted for using the acquisition method as at the
acquisition date. Subsidiaries are all entities over which the Group has power
to direct relevant activities and an exposure to variable returns.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control
ceases
When the excess is positive, goodwill is recognised in the statement of
financial position, if the excess is negative, a bargain purchase price is
recognised in profit or loss.
Transaction costs, other than those associated with the issue of debt or
equity securities, that the Group incurs in connection with a business
combination are expensed as incurred.
Any contingent consideration payable is measured at fair value at the
acquisition date. If the contingent consideration is classified as equity,
then it is not re-measured and settlement is accounted for within equity.
Otherwise, subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements
of subsidiaries have been included in the consolidated financial statements
from the date that control commences until the date that control ceases.
An investor controls an investee if and only if the investor has all the
following:
An investor controls an investee when it is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee.
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the
investee; and
(c) the ability to use its power over the investee to affect the amount of the
investor's returns.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any income and expenses arising
from intra-group transactions, are eliminated in preparing the consolidated
financial statements.
Going concern
The assessment of the Group's ability to continue as a going concern involves
judgment regarding future funding available for the development of the Tulu
Kapi Gold project, advancement of the Saudi Arabia exploration properties and
for working capital requirements. As part of this assessment, management have
considered funds on hand at the date of approval of the financial statements,
planned expenditures covering a period of at least 12 months from the date of
approving these financial statements and its suitability in the context of the
Group's long term strategic objectives. The Group also recognises that within
the going concern consideration period it will require funding for its share
of the construction development costs of the Tulu Kapi mine (Further details
on project financing plan are summarised on page 6 of the Finance Director's
Report).
TKGM reactivated Tulu Kapi project launch preparations in early 2022 and
funding requirements and project timing could be impacted by security concerns
in Ethiopia. Ethiopia's Ministry of Mines has been formally advised that the
overall project progress is on schedule and will remain so subject to a
satisfactory ongoing security situation. The Tulu Kapi project financing
syndicate's arrangements are being formalised and definitive agreements are in
preparation. Subject to these agreements and remaining regulatory and
administrative tasks being completed promptly, full construction can proceed
from as early as October 2022, being the end of the current wet season. Early
preparatory works have commenced, including the regulatory and administrative
tasks include items such as government and central bank approval, endorsement
of historical costs, working rules for the London clearing account to avoid
restrictions of capital controls and clearance for both banks to lend on same
terms. However, such tasks and approvals are not yet finalised.
At the date of approval of these accounts, the Group has a cash balance of
£2.5 million with no debt and all creditors under normal trading terms. The
forecasts show that absent the reduction of planned expenditure, the Group
will require additional funding in Q3 2022 to meet working capital needs and
other obligations. Should this precede financial close (ie full funding) of
the Tulu Kapi Gold Project, the Company has potential access to short term
funding from shareholders and other alternatives on offer, but currently not
committed, as has been the case in the past.
Accordingly, and as set out above, this indicates the existence of a
material uncertainty which may cast significant doubt over the Group and
Company's ability to continue as a going concern and, therefore, it may be
unable to realise its assets and discharge its liabilities in the normal
course of business. Based on historical experience and current ongoing
proactive discussions with stakeholders, the Board has a reasonable
expectation that definitive binding agreements will be signed. Accordingly,
the Board has a reasonable expectation that the Group will be able to continue
to raise funds to meet its objectives and obligations.
The financial statements therefore do not include the adjustments that would
result if the Group was unable to continue as a going concern.
Presentational changes and prior period adjustment
Identified a prior period adjustment in relation to the reclassification of
part of an intercompany receivable from current to non-current. As per IAS 1,
part of the intercompany receivable should have been classified as non-current
as it was not expected to be recovered in the next 12 months. This will have
an impact on the total non-current assets and current assets figure on the
company accounts but has no impact on the group statement of financial
position. In addition, this adjustment has no impact on overall net assets or
profit of the Company and the Group. The impact on the Company's financial
position as at 1 January 2020 and 31 December 2020 is as follows:
Company Statement of Financial Position. Adjustment to recognise reclassification of intercompany receivable Restated
31.12.2020 31.12.2020
£'000 £'000 £'000
Impact of Adjustment on Company Non-Current Assets and Current Assets
Company Non-current assets - 6,262 6,262
Receivables from subsidiaries
Company Current assets 6,600 (6,262) 338
Trade and other receivables
01.01.2020 01.01.2020
Company Non-current assets- Receivables from subsidiaries - 5,813 5,813
Company Current assets 6,967 (5,813) 1,154
Trade and other receivables
Functional and presentation currency
The individual financial statements of each Group entity are measured and
presented in the currency of the primary economic environment in which the
entity operates. The consolidated financial statements of the Group and the
statement of financial position and equity of the Company are in British
Pounds ("GBP") which is the functional currency of the Company and the
presentation currency for the consolidated financial statements. Functional
currency is also determined for each of the Company's subsidiaries, and items
included in the financial statements of the subsidiary are measured using that
functional currency. GBP is the functional currency of all subsidiaries.
(1). Foreign currency translation
Foreign currency transactions are translated into the presentational currency
using the exchange rates prevailing at the date of the transactions. Gains and
losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign
currencies are recognized in profit or loss in the statement of comprehensive
income.
(2). Foreign operations
On consolidation, the assets and liabilities of the consolidated entity's
foreign operations are translated at exchange rates prevailing at the
reporting date. Income and expense items are translated at the average
exchange rates for the period unless exchange rates fluctuate significantly in
which case they are recorded at the actual rate. Exchange differences arising,
if any, are recognized in the foreign currency translation reserve and as a
component of other comprehensive income, and recognized in profit or loss on
disposal of the foreign operation.
Revenue recognition
The Group had no sales or revenue during the year ended 31 December 2021
(2020: Nil).
Property plant and equipment
Property plant and equipment are stated at their cost of acquisition at the
date of acquisition, being the fair value of the consideration provided plus
incidental costs directly attributable to the acquisition less depreciation.
Depreciation is calculated using the straight-line method to write off the
cost of each asset to their residual values over their estimated useful life.
Property plant and equipment
The annual depreciation rates used are as follows:
Furniture, fixtures and office equipment 25%
Motor vehicles 25%
Plant and equipment 25%
Intangible Assets
Cost of licenses to mines are capitalised as intangible assets which relate to
projects that are at the pre-development stage. No amortisation charge is
recognised in respect of these intangible assets. Once the Group starts
production these intangible assets relating to license to mine will be
depreciated over life of mine.
Interest in jointly controlled entities
The group is a party to a joint arrangement when there is a contractual
arrangement that confers joint control over the relevant activities of the
arrangement to the group and at least one other party. Joint control exists
where unanimous consent is required over relevant decisions.
The group classifies its interests in joint arrangements as either:
- Joint ventures: where the group has rights to only the net assets of the joint
arrangement
- Joint operations: where the group has both the rights to assets and
obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group
considers:
· The structure of the joint arrangement
· The legal form of joint arrangements structured through a separate vehicle
· The contractual terms of the joint arrangement agreement
· Any other facts and circumstances (including any other contractual
arrangements).
The Group accounts for its interests in joint ventures using the equity
method. The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, and expenses in accordance with
its contractually conferred rights and obligations.
Finance costs
Interest expense and other borrowing costs are charged to the statement of
comprehensive income as incurred and is recognised using the effective
interest method.
Tax
The tax payable is based on taxable profit for the period. Taxable profit
differs from net profit as reported in the statement of comprehensive income
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. Tax is payable in the relevant jurisdiction at the rates described
in note 9.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are generally recognized for all
taxable differences and deferred tax assets are recognized to the extent that
taxable profits will be available against which deductible temporary
differences can be utilized. The amount of deferred tax is based on the
expected manner of realisation or settlement of the carrying amounts of assets
and liabilities, using tax rates that have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off deferred tax assets against deferred tax
liabilities and when the deferred taxes relate to the same fiscal authority.
Investments
Investments in subsidiary companies are stated at cost less provision for
impairment in value, which is recognized as an expense in the period in which
the impairment is identified, in the Company accounts.
Exploration costs
The Group has adopted the provisions of IFRS 6 "Exploration for and Evaluation
of Mineral Resources". The company still applies IFRS 6 until the project
financing is secured. Once financing is secured the project moves to the
development stage.
Exploration and evaluation expenditure, including acquisition costs of
licences, in respect of each identifiable area of interest is expensed to the
statement of comprehensive income as incurred, until the point at which
development of a mineral deposit is considered economically viable and the
formal definitive feasibility study is completed. At this point costs incurred
are capitalised under IFRS 6 because these costs are necessary to bring the
resource to commercial production.
Exploration expenditures typically include costs associated with prospecting,
sampling, mapping, diamond drilling and other work involved in searching for
ore. Evaluation expenditures are the costs incurred to establish the technical
and commercial viability of developing mineral deposits identified through
exploration activities. Evaluation expenditures include the cost of directly
attributable employee costs and economic evaluations to determine whether
development of the mineralized material is commercially justified, including
definitive feasibility and final feasibility studies.
Impairment reviews for deferred exploration and evaluation expenditure are
carried out on a project by project basis, with each project representing a
potential single cash generating unit. An impairment review is undertaken when
indicators of impairment arise such as: (i) unexpected geological occurrences
that render the resource uneconomic; (ii) title to the asset is compromised;
(iii) variations in mineral prices that render the project uneconomic; (iv)
substantive expenditure on further exploration and evaluation of mineral
resources is neither budgeted nor planned; and (v) the period for which the
Group has the right to explore has expired and is not expected to be renewed.
Development expenditure
Once the Board decides that it intends to develop a project, development
expenditure is capitalized as incurred, but only where it meets criteria for
recognition as an intangible under IAS 38 or a tangible asset under IAS 16 and
then amortized over the estimated useful life of the area according to the
rate of depletion of the economically recoverable reserves or over the
estimated useful life of the mine, if shorter.
Share based compensation benefits
IFRS 2 "Share based Payment" requires the recognition of equity settled share
based payments at fair value at the date of grant and the recognition of
liabilities for cash settled share based payments at the current fair value at
each statement of financial position date. The total amount expensed is
recognized over the vesting period, which is the period over which performance
conditions are to be satisfied. The fair value is measured using the Black
Scholes pricing model. The inputs used in the model are based on
management's best estimate, including consideration of the effects of
non-transferability, exercise restrictions and behavioural considerations.
Where the Group issues equity instruments to persons other than employees, the
statement of comprehensive income is charged with the fair value of goods and
services received.
Convertible loan notes
Convertible loan notes are regarded as compound instruments, consisting of a
liability component and an equity component. The component parts of compound
instruments are classified separately as financial liabilities and equity in
accordance with the substance of the contractual arrangement. At the date of
issue, the fair value of the liability component is estimated using the
prevailing market interest rate for a similar non-convertible instrument. This
amount is recorded as a liability on an amortised cost basis until
extinguished upon conversion or at the instrument's maturity date. The equity
component is determined by deducting the amount of the liability component
from the fair value of the compound instrument as a whole. This is recognised
and included in equity, net of income tax effects, and is not subsequently
remeasured.
When the terms of a new convertible loan arrangement are such that the option
will not be settled by the Company in exchange for a fixed number of its own
equity instruments for a fixed amount of cash, the convertible loan (the host
contract) is either accounted for as a hybrid financial instrument and the
option to convert is an embedded derivative or the whole instrument is
designated at fair value through profit and loss. Where the instrument is
bifurcated, the embedded derivative, where material, is separated from the
host contract as its risks and characteristics are not closely related to
those of the host contract. At each reporting date, the embedded derivative is
measured at fair value with changes in fair value recognised in the income
statement as they arise. The host contract carrying value on initial
recognition is based on the net proceeds of issuance of the convertible loan
reduced by the fair value of the embedded derivative and is subsequently
carried at each reporting date at amortised cost.
Prior to conversion the embedded derivative or fair value through profit and
loss instrument is revalued at fair value. Upon conversion of the loan, the
liability, including the derivative liability where applicable, is
derecognised in the statement of financial position. At the same time, an
amount equal to the redemption value is recognised within equity. Any
resulting difference is recognised in retained earnings. Where the Company
enters into equity drawdown facilities, whereby funds are drawn down initially
and settled in shares at a later date, those shares are recorded initially as
issued at fair value based on management's best estimation, with a subsequent
revaluation recorded based on the final value of the instrument at the date
the shares are issued or allocated. Where the value of the shares is fixed but
the amount is determined later, the fair value of the shares to be issued is
deemed to be the value of the amount drawn down, less any transaction and
listing costs.
Warrants
Warrants issued are recognised at fair value at the date of grant. The charge
is expensed on a straight-line basis over the vesting period. The fair value
is measured using the Black-Scholes model. Where warrants are considered to
represent a transaction cost attributable to a share placement, the fair value
is recorded in the warrant reserve and deducted from the share premium.
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are
originated. All other financial assets are recognised initially on the trade
date, which is the date that the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially all the risks
and rewards of ownership of the financial asset are transferred. Any
interest in such transferred financial assets that is created or retained by
the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in
the statement of financial position when, and only when, the Group has a legal
right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
The Group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired.
Amortised cost: These are financial assets where the objective is to hold
these assets in order to collect contractual cash flows and the contractual
cash flows are solely payments of principal and interest. They are initially
recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for impairment. Trade
and other receivables, as well as cash are classified as amortised cost.
Financial asset at fair value through other comprehensive income: Financial
assets (debt) which are held with the objective as above but which maybe
intended to be sold before maturity and also includes strategic equity
investments (that are not subsidiaries, joint ventures or associates) which
would be normally held at fair value through profit or loss, could on
irrevocable election be measured with fair value changes flow through OCI. On
disposal, the gain or loss will not be recycled to P&L.
Financial asset at fair value through profit and loss: Financial assets not
meeting the criteria above and derivatives.
Impairment of financial assets: Financial assets at amortised cost consist of
trade receivables, loans, cash and cash equivalents and debt instruments.
Impairment losses are assessed using the forward-looking Expected Credit Loss
(ECL) approach. Trade receivable loss allowances are measured at an amount
equal to lifetime ECL's. Loss allowances are deducted from the gross carrying
amount of the assets.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, and call deposits with
maturities of three months or less from the acquisition date that are subject
to an insignificant risk of changes in their fair value and are used by the
Group in the management of its short-term commitments.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated
liabilities on the date that they are originated. All other financial
liabilities are recognised initially on the trade date, which is the date that
the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations
are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities as other financial
liabilities. Such financial liabilities are recognised initially at fair
value less any directly attributable transaction costs. Subsequent to
initial recognition, these financial liabilities are measured at amortised
cost using the effective interest method.
Other financial liabilities comprise trade and other payables and borrowings.
Financial assets and liabilities at fair value through the profit or loss
Financial assets and liabilities at fair value through the profit or loss
comprise derivative financial instruments. Subsequent to initial recognition,
financial assets at fair value through the profit or loss are stated at fair
value. Movements in fair values are recognised in profit or loss unless they
relate to derivatives designated and effective as hedging instrument, in which
event the timing of the recognition in the profit or loss depends on the
nature of the hedging relationship. The Group does not currently have any such
hedging instruments.
New standards and interpretations applied
The IASB has issued new standards, amendments and interpretations to existing
with an effective date on or before 1 January 2021, these new standards are
not considered to have a material impact on the Group during the Year under
review.
New standards and interpretations not yet effective Certain new standards,
amendments and interpretations to existing standards have been published that
are mandatory for the Group's accounting periods beginning on or after 1
January 2022 or in later periods, which the Group has decided not to adopt
early.
Effective period commencing on or after
IFRS 3 Amendments to IFRS 3 'Business Combinations' 01 January 2022
IAS 16 Amendments to IAS 16: Property, plant and equipment 01 January 2022
IAS 37 Amendments to IAS 37: Provisions, contingent liabilities and contingent assets 01 January 2022
IAS 16 Amendments to IAS 16: Property, plant and equipment - Proceeds before intended 01 January 2022
use
Improvements to IFRSs' Improvements to IFRS 1, IFRS 9, IFRS 16 and IAS 41 01 June 2022
Amendments to IAS 8 ¹ Amendments to IAS 8: Definition of accounting estimates 01 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 ¹ Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of accounting 01 January 2023
policies
Amendments to IAS 12 ¹ Amendments to IAS 12: Deferred tax related to assets and liabilities arising 01 January 2023
from a Single transaction
Amendments IAS 1 ¹ Amendments to IAS 1: Classification of liabilities as current or noncurrent 01 January 2023
¹Not yet endorsed.
It is not anticipated that new standards, amendments and interpretations to
existing standards which have been published that are mandatory for the
Group's accounting periods beginning on or after 1 January 2022 or in later
periods will be significant or relevant to the Group.
New standards, amendments and interpretations that are not yet effective and
have not been early adopted
· Revisions to the Conceptual Framework for Financial Reporting.
The principal accounting policies adopted are set out above.
3. Financial risk management
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents
comprise cash at bank and in hand with an original maturity date of less than
three months. To mitigate our inherent exposure to credit risk we maintain
policies to limit the concentration of credit risk, and ensure liquidity of
available funds. We also invest our cash and equivalents in rated financial
institutions, primarily within the United Kingdom and other investment grade
countries, which are countries rated BBB- or higher by S&P the Group does
not have a significant concentration of credit risk arising from its bank
holdings of cash and cash equivalents.
Financial risk factors
The Group is exposed to market risk (interest rate risk and currency risk),
liquidity risk and capital risk management arising from the financial
instruments it holds. The risk management policies employed by the Group to
manage these risks are discussed below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group does not consider this risk to be significant.
The Company has borrowings outstanding from its subsidiaries, the ultimate
realisation of which depends on the successful exploration and realization of
the Group's intangible exploration assets. This in turn is subject to the
availability of financing to maintain the ongoing operations of the business.
The Group manages its financial risk to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably.
Market risk - Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Group's operating cash
flows are substantially independent of changes in market interest rates as the
interest rates on cash balances are very low at the moment. Borrowings issued
at variable rates expose the Group to cash flow interest rate risk. Borrowings
issued at fixed rates expose the Group to fair value interest rate risk. The
Group's management monitors the interest rate fluctuations on a continuous
basis and acts accordingly.
At the reporting date the interest rate profile of interest-bearing financial
instruments was:
2021 2020
£'000 £'000
Variable rate instruments
Financial assets 394 1,315
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 December 2021 would
have increased equity and profit or loss by the amounts shown below. This
analysis assumes that all other variables, in particular foreign currency
rates, remain constant. Given current interest rate levels, a decrease of 25
basis points has been considered, with the impact on profit and equity shown
below.
Equity Profit or Loss Equity Profit or Loss
2021 2021 2020 2020
£'000 £'000 £'000 £'000
Variable rate instruments
Financial assets - increase of 100 basis points 4 4 13 13
Financial assets - decrease of 25 basis points (1) (1) (3) (3)
Currency risk
Currency risk is the risk that the value of financial instruments will
fluctuate due to changes in foreign exchange rates. Currency risk arises when
future commercial transactions and recognized assets and liabilities are
denominated in a currency that is not the functional currency of the entity.
The Group is exposed to foreign exchange risk arising from various currency
exposures primarily with respect to the Australian Dollar, Euro, Turkish Lira,
US Dollar, CHF, Ethiopian Birr and Saudi Arabian Riyal. Since 1986 the Saudi
Arabian Riyal has been pegged to the US Dollar, it is fixed at USD/SAR 3.75.
The Group's management monitors the exchange rate fluctuations on a continuous
basis and acts accordingly.
The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows; with the
Saudi Arabian Riyal exposure being included in the USD amounts.
Liabilities Assets Liabilities Assets
2021 2021 2020 2020
£'000 £'000 £'000 £'000
Australian Dollar 67 - 47 3
Euro 366 - 127 -
Turkish Lira - - 7 -
US Dollar 2,126 12 1,694 10
Ethiopian Birr 1,256 511 630 363
Sensitivity analysis continued
A 10% strengthening of the British Pound against the following currencies at
31 December 2021 would have increased/(decreased) equity and profit or loss by
the amounts shown in the table below. This analysis assumes that all other
variables, in particular interest rates, remain constant. For a 10% weakening
of the British Pound against the relevant currency, there would be an equal
and opposite impact on the loss and equity.
Equity Profit or Loss Equity Profit or Loss
2021 2021 2020 2020
£'000 £'000 £'000 £'000
AUD Dollar 7 7 4 4
Euro 37 37 13 13
Turkish Lira - - 1 1
US Dollar 211 211 168 168
Ethiopia ETB 74 74 27 (8)
Liquidity risk
The Group and Companies raises funds as required on the basis of projected
expenditure for the next 6 months, depending on prevailing factors. Funds are
generally raised on AIM from eligible investors. The success or otherwise of
such capital raisings is dependent upon a variety of factors including general
equities and metals mark sentiment, macro-economic outlook and other factors.
When funds are sought, the Group balances the costs and benefits of equity and
other financing options. Funds are provided to projects based on the projected
expenditure.
Carrying Amount Contractual Cash flows Less than 1 year Between 1-5 year More than 5 years
£'000 £'000 £'000 £'000 £'000
The Group
31-Dec-21
Trade and other payables 5,556 5,556 5,556 - -
Loans and Borrowings 1,235 1,235 1,235 - -
6,791 6,791 6,791 - -
31-Dec-20
Trade and other payables 3,125 3,125 3,125 - -
Loans and Borrowings - - - - -
3,125 3,125 3,125 - -
The Company
31-Dec-21
Trade and other payables 4,201 4,201 4,201 - -
Loans and Borrowings 1,235 1,235 1,235 - -
5,436 5,436 5,436 - -
31-Dec-20
Trade and other payables 2,354 2,354 2,354 - -
Loans and Borrowings - - - - -
2,354 2,354 2,354 - -
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefit for other stakeholders and to maintain an optimal
capital structure to reduce the costs of capital. This is done through the
close monitoring of cash flows.
The capital structure of the Group consists of cash and cash equivalents of
£394,000 (2020: £1,315,000) and equity attributable to equity of the parent,
comprising issued capital and deferred shares of £25,895,000 (2020:
£25,466,000), other reserves of £37,775,000, (2020: £34,391,000) and
accumulated losses of £42,731,000 (2020: £37,824,000). The Group has no
long-term debt facilities.
Fair value estimation
The Group has certain financial assets and liabilities that are held at fair
value. The fair value hierarchy establishes three levels to classify the
inputs to valuation techniques to measure fair value:
Classification of financial assets and liabilities
Level 1 - quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 - inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs).
The fair value of trade and other receivables is estimated as the present
value of future cash flows discounted at the market rate of interest at the
reporting date. For receivables and payables with a remaining life of less
than one year, the notional amount is deemed to reflect fair value. All other
receivables and payables are, where material, discounted to determine the fair
value.
Differences arising between the carrying and fair value are considered not
significant and no-adjustment is made in these accounts. The carrying and fair
values of intercompany balances are the same as if they are repayable on
demand.
The fair values of the Group's loans and other borrowings are considered equal
to the book value as the effect of discounting on these financial instruments
is not considered to be material.
As at each of December 31, 2021 and December 31, 2020, the levels in the fair
value hierarchy into which the Group's financial assets and liabilities
measured and recognized in the statement of financial position at fair value
are categorized are as follows:
Carrying Amounts Fair Values
2021 2020 2021 2020
Financial assets £'000 £'000 £'000 £'000
Cash and cash equivalents (Note 16) - Level 1 394 1,315 394 1,315
Financial assets at fair value through OCI (Note 14) - Level 2 - 54 - 54
Trade and other receivables (Note 15) 291 448 291 448
Financial liabilities
Trade and other payables (Note 21) 5,556 3,125 5,556 3,125
Loans and borrowings (Note 23) 1,235 - 1,235 -
4. Use and revision of accounting estimates and judgements
The preparation of the financial report requires the making of estimations and
assumptions that affect the recognized amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent liabilities. The
estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgments
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
Accounting Judgement:
Going concern
The going concern presumption depends principally on securing funding to
develop the Tulu Kapi gold mining project as an economically viable mineral
deposit, and the availability of subsequent funding to extract the resource,
or alternatively the availability of funding to extend the Company's and
Group's exploration activities (Note 2).
Capitalisation of exploration and evaluation costs
The directors consider that the project in its Licence areas in Saudi Arabia
has not yet met the criteria for capitalization. These criteria include, among
other things, the development of feasibility studies to provide confidence
that mineral deposits identified are economically viable. Capitalized E&E
costs for the Group's project in Ethiopia have been recognized on acquisition,
and have continued to be capitalised since that date, in accordance with IFRS
6. The technical feasibility of the project has been confirmed, and once the
financing is secure the related assets will be reclassified as development
costs in line with above.
Estimates:
Share based payments.
Equity-settled share awards are recognised as an expense based on their fair
value at date of grant. The fair value of equity settled share options is
estimated through the use of option valuation models, which require inputs
such as the risk-free interest rate, expected dividends, expected volatility
and the expected option life, and is expensed over the vesting period. Some of
the inputs used are not market observable and are based on estimates derived
from available data. The models utilized are intended to value options traded
in active markets. The share options issued by the Group, however, have a
number of features that make them incomparable to such traded options. The
variables used to measure the fair value of share-based payments could have a
significant impact on that valuation, and the determination of these variables
require a significant amount of professional judgement. A minor change in a
variable which requires professional judgement, such as volatility or expected
life of an instrument, could have a quantitatively material impact on the fair
value of the share-based payments granted, and therefore will also result in
the recognition of a higher or lower expense in the Consolidated Statement of
Comprehensive Income. Judgement is also exercised in assessing the number of
options subject to non-market vesting conditions that will vest. These
judgments are reflected in note 18.
Impairment review of asset carrying values (Note 12)
Determining whether intangible exploration and evaluate assets are impaired
requires an assessment of whether there are any indicators of impairment, by
reference to specific impairment indicators prescribed in IFRS 6 (Note 2).
This requires judgement. This includes the assessment, on a project by project
basis, of the likely recovery of the cost of the Group's Intangible
exploration assets in the light of future production opportunities based upon
ongoing geological studies. This also involves the assessment of the period
for which the entity has the right to explore in the specific area, or if it
has expired during the period or will expire in the near future, if it is not
expected to be renewed. Management has a continued plan to explore. During the
latest review of the Micon due diligence review of the Tulu Kapi Gold Project
report dated the 10 August 2020 there were no indicators of impairment. TKGM
license developments are reflected in Note 12.
5. Operating segments
The Group has two operating segments, being that of mineral exploration and
corporate. The Group's exploration activities are located in the Kingdom of
Saudi Arabia (through the jointly controlled entity) and Ethiopia. Its
corporate costs which include administration and management are based in
Cyprus.
Corporate Ethiopia Saudi Arabia Adjustments Consolidated
£'000 £'000 £'000 £'000 £'000
2021
Corporate costs (3,007) (68) - - (3,075)
Foreign exchange (loss)/gain (1,777) 1,769 - (8)
-
Gain on Dilution of Joint Venture - - 428 - 428
Net Finance costs (1,205) - - -
(1,205)
(Loss)/gain before jointly controlled entity (5,989) 1,701 428 - (3,860)
Share of loss from jointly controlled entity - - (1,482) - (1,482)
Impairment of jointly controlled entity - - 418 - 418
Loss before tax (5,989) 1,701 (636) - (4,924)
Tax - - - - -
Loss for the year (5,989) 1,701 (636) - (4,924)
Total assets 15,966 19,200 - (6,057) 29,109
Total liabilities 3,885 8,963 - (6,057) 6,791
Corporate Ethiopia Saudi Arabia Adjustments Consolidated
£'000 £'000 £'000 £'000 £'000
2020
Corporate costs (2,252) (65) - - (2,317)
Foreign exchange (loss)/gain (1,577) 1,230 - (347)
-
Gain on Dilution of Joint Venture - - 1,033 - 1,033
Net Finance costs (416) - - -
(416)
(Loss)/gain before jointly controlled entity (4,245) 1,165 1,033 - (2,047)
Share of loss from jointly controlled entity - - (1,088) - (1,088)
Impairment of jointly controlled entity - - (585) - (585)
Loss before tax (4,245) 1,165 (640) - (3,720)
Tax - - - - -
Loss for the year (4,245) 1,165 (640) - (3,720)
Total assets 17,652 15,823 - (6,524) 26,951
Total liabilities 2,361 7,288 - (6,524) 3,125
6. Expenses by nature 2021 2020
£'000 £'000
Depreciation of property, plant and equipment (Note 11) 17 43
Directors' fees and other benefits (Note 22.1) 535 653
Consultants' costs 238 343
Auditors' remuneration - audit current year 72 114
Legal Costs 737 373
Ongoing Listing Costs 125 162
Other expenses 277 352
Shareholder Communications 121 245
Travelling Costs 68 80
Total Administrative Expenses 2,190 2,365
Share of losses from jointly controlled entity (Note 5 and Note 20) 1,482 1,088
Impairment of jointly controlled entity (Note 20) (418) 585
Share based option benefits to directors (Note 18) 407 14
Share based benefits to employees (Note 18) 148 21
Share based benefits to key management (Note 18) 255 16
Share based benefits to suppliers - -
Cost for long term project finance (Note 8) 84 316
Operating loss 4,148 4,405
The Group's stages of operations in Saudi Arabia as at the year-end and as at
the date of approval of these financial statements have not yet met the
criteria for capitalization of exploration costs. The Company only capitalises
direct evaluation and exploration costs for the Tulu Kapi gold project in
Ethiopia.
7. Staff costs 2021 2020
£'000 £'000
Salaries 1,170 688
Social insurance costs and other funds 220 97
Costs capitalised as exploration (1,325) (756)
Net Staff Costs 65 29
Average number of employees 49 44
Excludes Directors' remuneration and fees which are disclosed in note 22.1. TK
project direct staff costs of £1,325,000 are capitalised in evaluation and
exploration costs and all remaining salary costs are expensed. Most of the
group employees are involved in Tulu Kapi Project in Ethiopia
8. Finance costs and other transaction costs 2021 2020
£'000 £'000
8.1 Total finance costs
Interest on short term loan 1,121 100
Total finance costs 1,121 100
8.2 Total other transaction costs
Cost for long term project finance 84 316
Total other transaction costs 84 316
The above costs for long term project finance relate to pre-investigation
activities required to fund TK Gold project.
9. Tax
2021 2020
£'000 £'000
Loss before tax (4,924) (3,720)
Tax calculated at the applicable tax rates at 12.5% (624) (477)
Tax effect of non-deductible expenses 598 336
Tax effect of tax losses 70 286
Tax effect of items not subject to tax (44) (145)
Charge for the year - -
9. Tax
2021
2020
£'000
£'000
Loss before tax
(4,924)
(3,720)
Tax calculated at the applicable tax rates at 12.5%
(624)
(477)
Tax effect of non-deductible expenses
598
336
Tax effect of tax losses
70
286
Tax effect of items not subject to tax
(44)
(145)
Charge for the year
-
-
The Company is resident in Cyprus for tax purposes. A deferred tax asset of
£1,409k (2020: £1,601k) has not been accounted for due to the uncertainty
over future recoverability.
Cyprus
The corporation tax rate is 12.5%. Under certain conditions interest income
may be subject to defence contribution at the rate of 30%. In such cases this
interest will be exempt from corporation tax. In certain cases, dividends
received from abroad may be subject to defence contribution at the rate of 20%
for the tax year 2013 and 17% for 2014 and thereafter. Due to tax losses
sustained in the year, no tax liability arises on the Company. Under current
legislation, tax losses may be carried forward and be set off against taxable
income of the five succeeding years. As at 31 December 2021, the balance of
tax losses which is available for offset against future taxable profits
amounts to £ 11,269k (2020: £ 12,812k). Generally, loss of one source of
income can be set off against income from other sources in the same year. Any
loss remaining after the set off is carried forward for relief over the next 5
year period.
Tax Year 2017 2018 2019 2020 2021 Total
£'000 £'000 £'000 £'000 £'000 £'000
Losses carried forward 1,743 1,730 1,602 3,748 2,446 11,269
Ethiopia
KEFI Minerals (Ethiopia) Limited is subject to other direct and indirect taxes
in Ethiopia through its foreign operations. The mining industry in Ethiopia is
relatively undeveloped. As a result, tax regulations relating to mining
enterprises are evolving. There are transactions and calculations undertaken
during the ordinary course of business for which the ultimate tax
determination is uncertain. The Group recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the current and
deferred tax provisions in the period in which such determination is made.
The government of Ethiopia cut the corporate income tax rate for miners to 25%
more than three years ago from 35%, and has lowered the precious metals
royalty rate to 7% from 8%. According to the Proclamation, holders of a mining
licence are required to pay royalty on the sales price of the commercial
transaction of the minerals produced. Development expenditure of a licensee or
contractor shall be treated as a business intangible with a useful life of
four years. If a licensee or contractor incurs development expenditure before
the commencement of commercial production shall apply on the basis that the
expenditure was incurred at the time of commencement of commercial production.
The mining license stipulates that every mining company should allocate 5%
free equity shares to the Government of Ethiopia.
United Kingdom
KEFI Minerals (Ethiopia) Limited is resident in United Kingdom for tax
purposes. The corporation tax rate is 19%. In December 2016, KEFI Minerals
(Ethiopia) Limited elected under CTA 2009 section 18A to make exemption
adjustments in respect of the Company's foreign permanent establishment's
amounts in arriving at the Company's taxable total profits for each relevant
accounting period. This is an exemption for UK corporation tax in respect of
the profits of the Ethiopian branch.
10. Loss per share
The calculation of the basic and fully diluted loss per share attributable to
the ordinary equity holders of the parent is based on the following data:
Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
Net loss attributable to equity shareholders (4,924) (3,720)
Net loss for basic and diluted loss attributable to equity shareholders (4,924) (3,720)
Weighted average number of ordinary shares for basic loss per share (000's) 2,178,908 1,663,197
Weighted average number of ordinary shares for diluted loss per share (000's) 2,351,643 1,748,804
Loss per share:
Basic loss per share (pence) (0.226) (0.224)
There was no impact on the weighted average number of shares outstanding
during 2021 as all Share Options and Warrants were excluded from the weighted
average dilutive share calculation because their effect would be anti-dilutive
and therefore both basic and diluted earnings per share are the same in 2021.
11. Property, plant and equipment
Motor Vehicles Plant and equipment Furniture, fixtures and office equipment Total
£'000
£'000 £'000
£'000
The Group
Cost
At 1 January 2020 71 77 72 220
Additions - 25 14 39
At 31 December 2020 71 102 86 259
Additions - 12 33 45
At 31 December 2021 71 114 119 304
Accumulated Depreciation
At 1 January 2020 37 72 72 181
Charge for the year 34 3 6 43
At 31 December 2020 71 75 78 224
Charge for the year - 7 10 17
At 31 December 2021 71 82 88 241
Net Book Value at 31 December 2021 - 32 31 63
Net Book Value at 31 December 2020 - 27 8 35
The above property, plant and equipment is located in Ethiopia.
12. Intangible assets
Total exploration and project evaluation cost
£'000
The Group
Cost
At 1 January 2020 21,466
Additions 3,310
At 31 December 2020 24,776
Additions 3,851
At 31 December 2021 28,627
Accumulated Amortization and Impairment
At 1 January 2020 266
At 31 December 2020 266
Impairment Charge for the year -
At 31 December 2021 266
Net Book Value at 31 December 2021 28,361
Net Book Value at 31 December 2020 24,510
Costs can only be capitalised after the entity has obtained legal rights to
explore in a specific area but before extraction has been demonstrated to be
both technically feasible and commercially viable.
The additions of £3.9 million is directly associated with the TKGM gold
exploration project expenditure and is capitalized as intangible exploration
and evaluation cost. Such exploration and evaluation expenditure include
directly attributable internal costs incurred in Ethiopia and services
rendered by external consultants to ensure technical feasibility and
commercial viability of the TKGM project.
The Company TKGM mining licence is in good standing to 2035 subject to normal
compliance of Ethiopian mining regulations. The Ethiopian Ministry of Mines
(the "Ministry") has allowed until 8 August 2022 for full Project financing
and launch commitments to be achieved. The Ministry has been advised that
for this to be achieved site access and security will need to be at a standard
satisfactory to TKGM, its lenders and its investors. External independent
security assessment of the Project site, district, and transport routes are
now a standard operating procedure for TKGM and while conditions are improving
there is no guarantee that the requisite level of security will be achieved by
the Ministry's date.
13. Investments
13.1 Investment in subsidiaries
The Company Year Ended Year Ended 31.12.20
31.12.21 £'000
£'000
Cost
At 1 January 13,680 12,575
Additions 651 1,106
Dissolutions - (1)
At 31 December 14,331 13,680
The Company carrying value of KEFI Minerals Ethiopia which holds the
investment in the Tulu Kapi Gold project currently under development is
£14,331,000 as at the 31 December 2021.
During the year management reviewed the value of its investments in the
Company accounts to the project estimated NPV value. The result of the review
shows that the NPV value is higher than the cost recorded in the company
accounts.
As guidance to the shareholder further details are available in the front
section of this report in the Finance Director's Report on page 6 under the
Tulu Kapi project section.
Date of acquisition/ Effective
incorporation Country of incorporation proportion of
Subsidiary companies shares held
Mediterranean Minerals (Bulgaria) EOOD 08/11/2006 Bulgaria 100%-Direct
Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket¹ 08/11/2006 Turkey 100%-Indirect
KEFI Minerals (Ethiopia) Limited 30/12/2013 United Kingdom 100%-Direct
KEFI Minerals Marketing and Sales Cyprus Limited 30/12/2014 Cyprus 100%-Direct
Tulu Kapi Gold Mine Share Company 31/04/2017 Ethiopia 95%-Indirect
¹ Dogu voluntary liquidated during 2020.
Subsidiary companies The following companies have the address of:
Mediterranean Minerals (Bulgaria) EOOD 10 Tsar Osvoboditel Blvd., 3rd floor, Sredets Region, 1000 Sofia, the Republic
of Bulgaria.
Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket (Voluntary Zeytinalani Mah. 4183 SK. Kapı No:6 Daire:2 UrlaA Izmir.
Liquidated)
KEFI Minerals (Ethiopia) Limited 27/28 Eastcastle Street, London, United Kingdom W1W 8DH.
KEFI Minerals Marketing and Sales Cyprus Limited 23 Esekia Papaioannou Floor 2, Flat 21 1075, Nicosia Cyprus.
Tulu Kapi Gold Mine Share Company 1st Floor, DAMINAROF Building, Bole Sub-City, Kebele 12/13, H.No, New.
The Company owns 100% of Kefi Minerals (Ethiopia) Limited ("KME")
During 2020 the company voluntary liquidated its dormant subsidiary Doğu
Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket.
On 8 November 2006, the Company entered into an agreement to acquire from
Atalaya Mining PLC (previously EMED) the whole of the issued share capital of
Mediterranean Minerals (Bulgaria) EOOD, a company incorporated in Bulgaria, in
consideration for the issue of 29,999,998 ordinary shares in the Company.
Mediterranean Minerals (Bulgaria) EOOD owned 100% of the share capital of
Doğu Akdeniz Mineralleri ("Dogu"), a private limited liability Company
incorporated in Turkey, engaging in activities for exploration and developing
of natural resources
KME owns 95% of Tulu Kapi Gold Mine Share Company ("TKGM"), a company
incorporated in Ethiopia which operates the Tulu Kapi project. The Tulu Kapi
Gold Project mining license has been transferred to TKGM. The Government of
Ethiopia is entitled to a 5% free-carried interest ("FCI") in TKGM. This
entitlement is enshrined in the Ethiopian Mining Law and the Ethiopian Mining
Agreement between the Ethiopian Government and KME, as well as the
constitution of the project company and is granted at no cost. The 5% FCI
refers to the equity interest granted by the company holding the mining
license. The Ethiopian Government has also undertaken to invest a further
USD$20,000,000 (Ethiopian Birr Equivalent) in associated project
infrastructure in return for the issue of additional equity on normal
commercial terms ranking pari passu with the shareholding of KME. Such
additional equity is not entitled to a free carry. Upon completion of each
element of the infrastructure and approval by the Company, related additional
equity will be issued. At the date of this report no equity was issued.
The Company owns 100% of KEFI Minerals Marketing and Sales Cyprus ("KMMSC"), a
Company incorporated in Cyprus. The KMMSC was dormant for the year ended 31
December 2021 and 2020. KEFI Minerals Marketing and Sales Cyprus holds the
right to market gold produced from the Tulu Kapi Gold Project. It holds no
other assets. It is planned that KMMSC will act as agent and off-taker for the
onward sale of gold and other products in international markets.
13.2 Investment in jointly controlled entity
Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
The Group
At 1 January/31 December - -
Increase in investment 1,224 1,896
Exchange Difference (160) (223)
Loss for the year (1,482) (1,088)
Reversal of impairment/(Impairment) 418 (585)
On 31 December - -
The Company
At 1 January/31 December - -
Increase in investment 1,224 1,896
Exchange Difference (160) (245)
Impairment Charge for the year (1,064) (1,651)
On 31 December - -
Date of acquisition/ Country of incorporation Effective proportion of shares held
incorporation
Jointly controlled entity
Gold and Minerals Co. Limited (G&M) 04/08/2010 Saudi Arabia 31.2%-Direct
The Company owns 31.2% of G&M. More information is given in note 20.1.
During the year the Company diluted its holding in G&M from 34% to 31.2%
and this resulted in a gain of
£428,000.
14. Financial assets at fair value through Other Comprehensive Income (OCI)
Relates to bond sold in Ethiopia to the public to finance the construction of
the Grand Ethiopian Renaissance Dam. The full amount was repaid and received
in January 2021.
Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
The Group
At 1 January 54 70
Foreign currency movement - (16)
Repayment (54) -
On 31 December - 54
15. Trade and other receivables
15.1 Current Trade and other receivables
Year Ended 31.12.21 Year Ended
£'000 31.12.20
£'000
The Group
Share Placement(1) - 232
Other receivables 36 38
VAT receivable 255 178
291 448
¹ In December 2020 14,500,000 ordinary shares were issued and funds were
received post year end.
Year Ended 31.12.21 Restated Year Ended
£'000 31.12.20
£'000
The Company
Share Placement(1) - 232
Other Debtors 15 88
Prepayments 9 18
24 338
15.2 Receivables from subsidiaries
Year Ended 31.12.21 Restated Year Ended
£'000 31.12.20
£'000
The Company
Advance to KEFI Minerals (Ethiopia) Limited (Note 22.2) ² 3,166 3,918
Advance to Tulu Kaki Gold Mine Share Company (Note 22.2)¹ 4,430 2,605
Expected credit loss (304) (261)
7,292 6,262
In the current year identified a prior period adjustment in relation to the
reclassification of part of an intercompany receivable from current to
non-current. As per IAS 1, part of the intercompany receivable should have
been classified as non-current as it was not expected to be recovered in the
next 12 months (Refer to note 2).
Amounts owed by subsidiary companies total £7,819,000 (2020: £8,927,000). A
write off of £223,000 (2020: 2,404,000) has been made against the amount due
from the non-Ethiopian subsidiaries because these amounts are considered
irrecoverable.
The Company has borrowings outstanding from its Ethiopian subsidiaries, the
ultimate realisation of which depends on the successful exploration and
realisation of the Group's intangible exploration assets. Management is of the
view that if the Company disposed of the Tulu Kapi asset, the consideration
received would exceed the borrowings outstanding. Nonetheless, Management has
made an assessment of the borrowings as at 31 December 2021 and determined
that any expected credit losses would be £304,000 (2020: £261,000) for which
a provision has been recorded. The advances to KEFI Minerals (Ethiopia)
Limited and TKGM are unsecured, interest free and repayable on demand.
Settlement is subject to the parent company's operating liquidity needs. At
the reporting date, no receivables were past their due date.
¹The Company advanced £2,628,000 (2020: £1,993,000) to the subsidiary Tulu
Kapi gold Mine Share Company during 2021. The Company had a foreign exchange
translation loss of £800,000(2020: Loss £591,000) the current year loss was
because of the continued devaluation of the Ethiopian Birr.
²Kefi Minerals (Ethiopia) Limited: during 2021, the Company advanced £56,000
(2020: £76,000) to the subsidiary. The Company had a foreign exchange
translation loss of £808,000 (2020: Loss £1,008,000) the current year loss
was because of the continued devaluation of the Ethiopian Birr.
The TKGM and KME loans are denominated Birr. The Company bears the foreign
exchange risk on these loans and any movements in the Ethiopian Birr are
recorded in the income statement of the Company.
16.Cash and cash equivalents
Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
The Group
Cash at bank and in hand unrestricteds 374 1,295
Cash at bank restricted 20 20
394 1,315
The Company
Cash at bank and in hand unrestricted 129 1,172
Cash at bank restricted 20 20
149 1,192
17. Share capital
Authorized Capital
The articles of association of the Company were amended in 2010 and the
liability of the members of the Company is limited.
Issued and fully paid
Number of shares '000 Share Capital Deferred Share premium Total
Shares
At 1 January 2020 1,148,874 1,149 23,328 25,452 49,929
Share Equity Placement 10 Jan 2020 149,000 149 - 1,714 1,863
Share Equity Placement 14 May 2020 113,846 114 - 626 740
Share Equity Placement 28 May 2020 455,385 456 - 2,503 2,959
Conversion of Warrants to Equity 16 Oct 2020 8,462 8 47 55
Share Equity Placement 20 Nov 2020 186,000 186 - 2,790 2,976
Share Equity Placement 14 Dec 2020 76,360 76 - 1,145 1,221
Share issue costs - - - (390) (390)
Broker warrants: issue costs - - - (367) (367)
Warrants: fair value split of warrants issued to shareholders. (402) (402)
At 31 December 2020 2,137,927 2,138 23,328 33,118 58,584
Number of shares '000 Share Capital Deferred Share premium Total
Shares
At 1 January 2021 2,137,927 2,138 23,328 33,118 58,584
Conversion of Warrants to Equity 12 April 2021 15,000 15 - 83 98
Share Equity Placement 21 Dec 2021 414,378 414 - 2,902 3,316
Share issue costs - - - (219) (219)
At 31 December 2021 2,567,305 2,567 23,328 35,884 61,779
Number of Deferred Shares'000 £'000 £'000
Deferred Shares 1.6p 2021 2020 2021 2020
At 1 January - - - -
Subdivision of ordinary shares to deferred shares 680,768 680,768 10,892 10,892
At 31 December 680,768 680,768 10.892 10.892
Deferred Shares 0.9p 2021 2020 2021 2020
At 1 January 1,381,947 1,381,947 12,436 12,436
Subdivision of ordinary shares to deferred shares - - - -
At 31 December 1,381,947 1,381,947 12,436 12,436
The deferred shares have no value or voting rights.
2020
During the period the Company issued 989,052,146 new ordinary shares at
average price of 1.00 pence for working capital, goods and services, and debt
repayments (note 18.3).
2021
During the period the Company issued 414,375,788 Shares to shareholders, for
an aggregate consideration of £3,315,000. On issue of the shares, an amount
of £2,900,630 was credited to the Company's share premium reserve which is
the difference between the issue price and the nominal value 0.1 pence. The
funds raised were issued to repay working capital, goods and services, and
debt repayments (note 18.3).
Restructuring of share capital into deferred shares
On the 28 June 2019 at the AGM, shareholders approved that each of the
currently issued ordinary shares of 1.7p ("Old Ordinary Shares") in the
capital of the Company be sub-divided into one new ordinary share of 0.1p
("Existing Ordinary Shares") and one deferred share of 1.6p ("Deferred
Shares"). With effect from 8 July 2019 at 8.00am, each ordinary share in the
Company has a nominal value of 0.1p per share.
The Deferred Shares have no value or voting rights and were not admitted to
trading on the AIM market of the London Stock Exchange plc. No share
certificates were issued in respect of the Deferred Shares.
18. Share Based payments
18.1 Warrants
In note 18 when reference is made to the "Old Ordinary Shares" it relates to
the ordinary shares that had a nominal value of 1.7p each and were in issue
prior to the 8 July 2019 restructuring. Shares issued after the 8 July 2019
restructuring have a nominal value of 0.1p and will be referred to as
("Existing Ordinary Shares").
2020
The Company issued 149,000,000 short term warrants to subscribe for new
ordinary shares of 0.1p each at 2p per share in accordance with the December
2019 and January 2020 share placement and as approved by shareholders on 6
January 2020. The warrants expired on 30 April 2020. The Company performed a
fair value split by fair valuing the warrants using Black Scholes and assumed
that this value is the residual share amount.
On 16 December 2019, the Company issued 7,450,000 warrants to subscribe for
new ordinary shares of 0.1p each at 2p per share to Brandon Hill pursuant to
the Placing Agreement. The warrants expire 2 years from the date of issue (10
January 2020).
During May 2020, the Company issued 28,461,538 to the broker. These warrants
allow the broker to subscribe for new ordinary shares of 0.1p each at 0.65p
per share in pursuant to the Placing Agreement. The warrants expire within
three years of the date of First Admission.
During November 2020, the Company issued 11,175,000 broker warrants to
subscribe for new ordinary shares of 0.1p each at 1.60p per share to Brandon
Hill pursuant to the Placing Agreement. The warrants expire within three years
of the date of First Admission.
During the period 1 January 2021to 31 December 2021, 149,000,000 warrants
issued to shareholders expired and 8,461,538 were exercised by Brandon Hill.
2021
During December 2021, the Company asked for shareholder approval to issue
393,096,865 warrants, in connection with the December 2021 and January 2022
Placing Shares. The Placing shares have a right to be issued one Ordinary
Share for an exercise price of £0.016 and exercisable following a Warrant
Trigger Event provided that such Warrant Trigger Event occurs during a two
year period following the 17 January 2022 The Warrants will become
exercisable provided that, during a two year period following the January 2022
Admission, the on market share closing price of the Ordinary Shares for five
consecutive days reaches or exceeds 2.4 pence (being a 50% premium on the
Warrant exercise price) (the "Warrant Trigger Event"). If the Warrant
Trigger Event occurs, then (i) the holders of the Warrants may exercise the
Warrants within 30 days from the occurrence of the Warrant Trigger Event; and
(ii) the Warrants will expire following the end of the 30 day period
referenced above if not exercised. If the Warrant Trigger Event has not
occurred within two years following the 17 January 2022, then the Warrants
shall lapse and will no longer be capable of being exercised.
During the period 1 January 2021 to 31 December 2021,15,000,000 warrants were
cancelled or expired.
Details of warrants outstanding as at 31 December 2021:
Grant date Expiry date *Exercise price Expected Life Years Number of warrants
000's*
19-Sep-18 20-Sep-23 2.50p 5 years 2,000
02-Aug-19 02-Aug-22 2.50p 3 years 19,500
06 Jan 2020 06 Jan 2023 1.25p 3 years 7,450
29 May 2020 29 May 2023 0.65p 3 years 5,000
20 Nov 2020 20 Nov 2023 1.60p 3 years 11,175
45,125
Weighted average ex. Price Number of warrants* 000's
Outstanding warrants at 1 January 2021 1.56p 60,125
- exercised warrants 0.65p (15,000)
- expired warrants 2.50p -
- granted 2.13p -
Outstanding warrants at 31 December 2021 1.87p 45,125
The estimated fair values of the warrants were calculated using the Black
Scholes option pricing model.
The inputs into the model and the results for warrants and options granted
during the year are as follows:
Warrants Options
6-Jan-20 19-May-20 29-May-20 20-Nov-20 17-Mar-21
Closing share price at issue date
1.65p 0.75p 1.06p 1.68p 2.05p
Exercise price 2.00p 0.65p 0.65p 1.6p 2.55p
Expected volatility 109% 98% 99% 101% 89%
Expected life 0.4years 3yrs 3yrs 3yrs 4yrs
Risk free rate 0.63% 0.04% -0.03% 0.05% 0.028%
Expected dividend yield Nil Nil Nil Nil nil
Estimated fair value 0.27p 0.47p 0.73p 1.06p 1.21p
Expected volatility was estimated based on the historical underlying
volatility in the price of the Company's shares.
During 2021 no warrants were issued to shareholders or suppliers. During 2021
the company asked shareholders to approve the issue of 393,096,865 warrants to
shareholders that partook in the December 2021 and January 2022 share
placement. The issue of these warrants was approved at the General Meeting
held in January 2022. Further details are disclosed in this note.
Share options reserve table Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
Opening amount 1,273 1,118
Warrants issued costs - 769
Share options charges relating to employees (Note 6) 148 21
Share options issued to directors and key management (Note 6) 662 30
Forfeited options - -
Exercised warrants - -
Expired warrants - (665)
Expired options (192) -
Closing amount 1,891 1,273
18.2 Share options reserve
Details of share options outstanding as at 31 December 2021:
Grant date Expiry date *Exercise price *Number of shares 000's
19-Jan-16 18-Jan-22 7.14p 4,088
23-Feb-16 22-Feb-22 12.58p 176
05-Aug-16 05-Aug-22 10.20p 883
22-Mar-17 21-Mar-23 7.50p 7,024
01-Feb-18 31-Jan-24 4.50p 11,400
17-Mar-21 16-Mar-25 2.55p 104,039
127,610
Weighted average ex. Price* Number of shares* 000's
Outstanding options at 1 January 2021 7.35p 25,482
- granted 2.55p 104,039
- expired/forfeited 22.44p (1,911)
Outstanding options at 31 December 2021 3.21p 127,610
The Company has issued share options to directors, employees and advisers to
the Group.
On 19 January 2016, 4,717,059 options were issued which expire six years after
grant date and, vest in two equal annual instalments, the first upon the
achievement of practical completion of the planned processing plant at the
Tulu Kapi Gold Project and the second upon the achievement of nameplate
capacity for a twelve-month period.
On 23 February 2016,176,471 options were issued which expire six years after
grant date and vest immediately.
On 5 August 2016, 2,058,824 options were issued which expire six years after
grant date and vest in two equal annual instalments, the first upon the
achievement of practical completion of the planned processing plant at the
Tulu Kapi Gold Project and the second upon the achievement of nameplate
capacity for a twelve-month period.
On 22 March 2017, 9,535,122 options were issued which, expire after six years,
and vest in two equal annual instalments, the first upon the achievement of
practical completion of the planned processing plant at the Tulu Kapi Gold
Project and the second upon the achievement of nameplate capacity for a
twelve-month period.
On 1 February 2018, 9,600,000 options were issued to persons who discharge
director and managerial responsibilities ("PDMRs") and a further 3,000,000
options have been granted to other non-board members of the senior management
team. The options have an exercise price of 4.5p, expire after 6 years, and
vest in two equal annual instalments, the first upon the achievement of
practical completion of the planned processing plant at the Tulu Kapi Gold
Project and the second upon the achievement of nameplate capacity for a
twelve-month period.
On 17 March 2021, 85,813,848 options were issued to persons who discharge
director and managerial responsibilities ("PDMRs") and a further 18,225,153
options have been granted to other non-board members of the senior management
team. The options have an exercise price of 2.55p, expire after4 years, and
vest in three equal instalments, the first after one year, the second after
two years and the third after three years from the date of grant. Although the
directors approved and announced the issue of 119,747,339 options on the 17
March 2021 to certain directors and senior managers only 104,039,001 options
were eventually issued.
The option agreements contain provisions adjusting the exercise price in
certain circumstances including the allotment of fully paid Ordinary shares by
way of a capitalisation of the Company's reserves, a sub division or
consolidation of the Ordinary shares, a reduction of share capital and offers
or invitations (whether by way of rights issue or otherwise) to the holders of
Ordinary shares. The estimated fair values of the options were calculated
using the Black Scholes option pricing model. Expected volatility was
estimated based on the historical underlying volatility in the price of the
Company's shares.
For 2021, the impact of share option-based payments is a net charge to income
of £809,000 (2020: £51,000). At 31 December 2021, the equity reserve
recognized for share option-based payments, including warrants, amounted to
£1,891,000 (2020: £1,273,000).
18.2 Share Payments for services rendered and obligations settled
2020 Year
January 2020 placement of 149,000,000 shares
On 6 January 2020, following approval by shareholders, the Company issued
49,419,600 new ordinary shares ("Remuneration Shares") and 99,580,400 new
ordinary shares ("Settlement Shares") of 0.1p each in the capital of the
Company at an issue price of 1.25p. The net raise amounted to £1,862,500,
with liabilities and other obligations listed below settled in shares.
November and December 2020 placement of 92,109,407 shares
All Remuneration Shares, Settlement Shares and Placing Shares were issued at a
value of 1.60 pence per share. The net raise amounted to £1,473,750, with
liabilities and other obligations listed below settled in shares.
2021 Year
On 21 December 2021, the Company announced the placing of 324,900,000
Settlement Shares to settle outstanding debts and liabilities of approximately
£2.6 million. Thew shares were issued at a price of £0.008 per Ordinary
Share.
The total shares set off during 2021 and 2020 for services and obligations was
as follows:
2021 2020
Name Number of Remuneration and Settlement Shares Amount Number of Remuneration and Settlement Shares Amount
000 £'000 000 £'000
For services rendered and obligations settled - - 18,062 248
H Anagnostaras-Adams
J Leach - - 12,924 176
Norman Arthur Ling - - 2,000 25
Mark Tyler - - 2,000 25
Richard Lewin Robinson - - 1,000 13
Other employees and PDMRs - - 44,168 624
Amount to settle other Obligations - - 30,702 413
Total share based payments - - 110,856 1,524
Amount to settle loans
Unsecured Convertible loan facility - - 6,000 75
Unsecured working capital bridging finance 324,900 2,599 124,255 1739
324,900 2,599 241,111 3,338
The parties above agreed that the amounts subscribed in the share placements
during the year be set-off against the amount due by the Company at the date
of the share placement.
19. Non-Controlling Interest ("NCI")
Year Ended
£'000
As at 1 January 2020 1,075
Acquisitions of NCI -
Impact of 5% free carry on additions to assets during the year 129
Result for the year -
As at 1 January 2021 1,204
Acquisitions of NCI -
Impact of 5% free carry on additions to assets during the year 175
As at 31 December 2021 1,379
During 2018, the Government of Ethiopia received its 5% free carried interest
acquired in the Tulu Kapi Gold Project. The group recognized an increase in
non-controlling interest in the current year of £129,000 and a decrease in
equity attributable to owners of the parent of £129,000.
The NCI of £1,379,000 (2020: £1,204,000) represents the 5% share of the
Group's assets of the TKGM project which are attributable to the Government of
Ethiopia.
The Mining Proclamation entitles the Government of Ethiopia (GOE) to 5% free
carried interest in TKGM. The 5% NCI reflects the government interest in the
TKGM gold project. The GOE is not required to pay for the 5% free carry
interest. The GOE can acquire additional interest in the share capital of the
project at market price. The GOE has committed US $20,000,000 to install the
off-site infrastructure in exchange for earning equity in Tulu Kapi Gold Mine
Share Company. The shareholder agreement signed with the GOE in April 2017
states that once the infrastructure elements are properly constructed and
approved by Company the relevant shares will be issued to Ministry of Finance
and Economic Cooperation (MOFEC).
The financial information for Tulu Kapi Gold Mine Project as at 31 December
2021:
Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
Amounts attributable to all shareholders
Exploration and evaluation assets
28,361 24,620
Current assets
329 184
Cash and Cash equivalents
244 124
28,934
24,928
Equity
27,573 24,163
Current liabilities
1,361 765
28,934 24,928
Loss for the year - -
20. Jointly controlled entities
20.1 Joint controlled entity with Artar
Country of incorporation Effective proportion of shares held at 31 December
Company name Date of incorporation
Gold & Minerals Co. Limited 3 August 2010 Saudi Arabia 31.21%
Gold & Minerals Co. Limited has the following registered address: Olaya
District. 659, King Fahad Road, Riyadh, Kingdom of Saudi Arabia.
The summarised financial information below represents amounts shown in Gold
& Minerals Co Limited financial statements prepared in accordance with
IFRS and assuming they followed the group policy of expensing exploration
costs.
SAR'000 SAR'000 £'000 £'000
Amounts relating to the Jointly Controlled Entity Year Ended Year Ended Year Ended Year Ended
31.12.21 31.12.20 31.12.21 31.12.20
100% 100% 100% 100%
Non-current assets 2,097 381 411
74
Cash and Cash Equivalents 5,798 11,160 1,136 2,176
Current assets 801 546 157 106
Total Assets 8,696 12,087 1,704 2,356
Current liabilities (2,680) (2,626) (525) (512)
Total Liabilities (2,680) (2,626) (525) (512)
Net (Liabilities)/Assets 6,016 9,461 1,179 1,844
Share capital 81,300 2,500 15,935 487
Capital contributions partners 37,926 97,401 7,433 18,987
Accumulated losses (113,210) (90,440) (22,189) (17,630)
6,016 9,461 1,179 1,844
Exchange rates SAR to GBP
Closing rate 0.1960 0.1949
Income statement SAR'000 SAR'000 £'000 £'000
Loss from continuing operations (22,524) (15,785) (4,415) (3,279)
Other comprehensive income (246) 14 (48) 3
Translation FX Gain from SAR/GBP - - - 729
Total comprehensive income (22,770) (15,771) (4,463) (2,547)
Included in the amount above
Group
Group Share 31,21% (33.65%) of loss from continuing operations (1,482) (1,088)
Joint venture investment £'000 £'000
Opening Balance - -
Loss for the year (1,482) (1,088)
FX Loss (160) (223)
Additional Investment 1,224 1,896
Impairment 418 (585)
Closing Balance - -
In May 2009, KEFI announced the formation of a new minerals' exploration
jointly controlled entity, Gold & Minerals Co. Limited ("G&M"), a
limited liability company in Saudi Arabia, with leading Saudi construction and
investment group Abdul Rahman Saad Al-Rashid & Sons Company Limited
("ARTAR"). KEFI is the operating partner with a 31.21% shareholding in G&M
with ARTAR holding the other 68.79%. KEFI provides G&M with technical
advice and assistance, including personnel to manage and supervise all
exploration and technical studies. ARTAR provides administrative advice and
assistance to ensure that G&M remains in compliance with all governmental
and other procedures. G&M has five Directors, of whom two are nominated by
KEFI However, decisions about the relevant activities of G&M require the
unanimous consent of the five directors. G&M is treated as a jointly
controlled entity and has been equity accounted. KEFI has reconciled its share
in G&M's losses.
A loss of £1,482,000 was recognized by the Group for the year ended 31
December 2021 (2020: £1,088,000) representing the Group's share of losses in
the year.
As at 31 December 2021 KEFI owed ARTAR an amount of £285,700 (2020: 0) - Note
21.1.
During 2021 the Company diluted its interest in the Saudi joint-venture
company Gold and Minerals Limited ("G&M") from 33.65% to 31.21% by not
contributing its pro rata share of expenses to G&M. This resulted in a
gain of £428,181 (2020: £1,033,000) in the Company accounts. The accounting
policy for exploration costs recorded in the G&M audited financial
statements is to capitalise qualifying expenditure in contrast to the
Group's accounting policy relating to exploration costs which is to expense
costs through profit and loss until the project reaches development stage
(Note 2). Consequently, any dilution in the Company's interest in G&M
results in the recovery of pro rata share of expenses to G&M.
21. Trade and other payables
21.1 Trade and other payables
The Group Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
Accruals and other payables 2,499 1,510
Other loans 97 134
Payable to jointly controlled entity partner (Note 20.1) 285 -
Payable to Key Management and Shareholder (Note 22.3) 2,675 1,481
5,556 3,125
Other loans are unsecured, interest free and repayable on demand.
The Company Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
Accruals and other payables 1,242 873
Payable to jointly controlled entity partner (Note 20.1) 285 -
Payable to Key Management and Shareholder (Note 22.4) 2,675 1,481
4,202 2,354
The fair values of trade and other payables due within one year approximate to
their carrying amounts as presented above.
22. Related party transactions
The following transactions were carried out with related parties:
22.1
Compensation of key management personnel
The total remuneration of key management personnel was as follows:
Year Ended Year Ended
31.12.21 31.12.20
£'000 £'000
Short term employee benefits:
¹Directors' consultancy fees 496 489
Directors' other consultancy benefits 39 58
²Short term employee benefits: Key management fees 604 686
Short term employee benefits: Key management other benefits 32 39
1,171 1,272
Share based payments:
Share based payment: Director's bonus - 106
¹Share based payment: Directors' consultancy fees - -
Share option-based benefits to directors (Note 18) 407 14
²Share based payments short term employee benefits: Key management fees 272 292
Share option-based benefits other key management personnel (Note 18) 255 16
Share Based Payment: Key management bonus - -
934 428
2,105 1,700
¹Directors' fees paid to the Executive Director Chairman and Finance Director
are paid to consultancy companies of which they are beneficiaries.
²Key Management comprised the Managing Director Ethiopia, Head of Operations,
Head of Systems and Head of Planning.
Share-based benefits
The Company issued 85,813,848 share options to directors and key management
during March 2021. These Options have an exercise price of 2.55p per Ordinary
Share and expire after 4 years and, in normal circumstances, vest in three
equal instalments, the first after one year, the second after two years and
the third after three years from the date of grant.
Previously all options, except those noted in Note 18, expire six years after
grant date and vest in two equal annual instalments, the first upon the
achievement of practical completion of the planned processing plant at the
Tulu Kapi Gold Project and the second upon the achievement of nameplate
capacity for a twelve-month period.
22.2 Transactions with shareholders and related parties
The Group
Name Nature of transactions Relationship 2021 2020
£'000 £'000
Winchcombe Ventures Limited Receiving of management and other professional services which are capitalized Key Management and Shareholder
as E&E expenditure
554 578
Nanancito Limited Receiving of management and other professional services which are capitalized Key Management and Shareholder 232 298
as E&E expenditure
786 876
The Company
Name Nature of transactions Relationship 2021 2020
£'000 £'000
KEFI Minerals Marketing and Sales Cyprus Limited Finance Subsidiary - -
Tulu Kapi Gold Mine Share Company¹ Advance Subsidiary 4,433 2,605
Kefi Minerals (Ethiopia) Limited² Advance Subsidiary 3,166 3,918
Expected credit loss (304) (261)
7,295 6,262
The TKGM and KME loans are denominated Birr. The Company bears the foreign
exchange risk on these loans and any movements in the Ethiopian Birr are
recorded in the income statement of the Company. Further details on the
details of the movement of these loans are available in Note 15.
Management has made an assessment of the borrowings as at 31 December 2021 and
determined that any expected credit losses would be £304,000
The above balances bear no interest and are repayable on demand.
22.3 Payable to related parties
The Group 2021 2020
£'000 £'000
Name Nature of transactions Relationship
Nanancito Limited Fees for services Key Management and Shareholder 1,350 1,073
Winchcombe Ventures Limited Fees for services Key Management and Shareholder 834 280
Directors Fees for services Key Management and Shareholder 491 128
2,675 1,481
22.4 Payable to related parties
The Company 2021 2020
£'000 £'000
Name Nature of transactions Relationship
Nanancito Limited Fees for services Key Management and Shareholder 1,350 1,073
Winchcombe Ventures Limited Fees for services Key Management and Shareholder 834 280
Directors Fees for services Key Management and Shareholder 491 128
2,675 1,481
23. Loans and Borrowings
23.1.1 Short Term Working Capital Bridging Finance
Currency Interest Maturity Repayment
Unsecured working capital bridging finance GBP See table On Demand See table below
2020
Unsecured working capital bridging finance Balance 1 Jan 2020 Drawdown Amount Transaction Costs Interest Repayment Repayment Year Ended
£'000 Shares Cash 31 Dec 2020
£'000 £'000
£'000 £'000 £'000 £'000
Repayable in cash in less than a year 889 750 - 100 (1,739) - -
750 - 100 (1,739) - -
889
2021
Unsecured working capital bridging finance Balance 1 Jan 2021 Drawdown Amount Transaction Costs Interest Repayment Repayment Year Ended
£'000 Shares Cash 31 Dec 2021
£'000 £'000
£'000 £'000 £'000 £'000
Repayable in cash in less than a year - 2,713 - 1,121 (2,599) - 1,235
- 2,713 - 1,121 (2,599) - 1,235
The short term working capital finance is unsecured and ranks below other
loans. Although there was no binding agreement to convert the loans into
shares, the lenders agreed to convert the debt into shares and the loan
balance of £1,235,000 was fully repaid in 2022 during the relevant share
placements.
23.1.2 Reconciliation of liabilities arising from financing activities
2020 Reconciliation Cash Flows
Balance 1 Jan 2020 Inflow (Outflow) Fair Value Movement Finance Costs Shares Balance 31 Dec 2020
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Unsecured working capital bridging finance
Short term loans 889 750 - - 100 (1,739) -
889 750 - - 100 (1,739) -
Convertible notes
Sanderson unsecured convertible loan facility 23.2 75 - - - - (75) -
75 - - - - (75) -
2021 Reconciliation
Balance 1 Jan 2021 Inflow (Outflow) Fair Value Movement Finance Costs Shares Balance 31 Dec 2021
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Unsecured working capital bridging finance
Short term loans - 2,713 - - 1,121 (2,599) 1,235
- 2,713 - - 1,121 (2,599) 1,235
24. Contingent liabilities
The company has no contingent liabilities.
25. Capital commitments
The Group has the following capital or other commitments as at 31 December
2021 £1,184,000 (2020: £1,964,000),
31 Dec 2021 31 Dec 2020
£'000 £'000
Tulu Kapi Project costs 452 558
Saudi Arabia Exploration costs committed to field work that has been 732 1,406
recommenced
26. Events after the reporting date
Share Placement January 2022
Following the General Meeting on 13 January 2022 the Company admitted
371,817,944 new ordinary shares of the Company at a placing price of 0.8 pence
per Ordinary Share.
The total shares issued during January 2022 for services and obligations was
as follows:
2022
Name Number of Remuneration and Settlement Shares Amount
000 £'000
For services rendered and obligations settled
H Anagnostaras-Adams 22,500 180
J Leach 12,500 100
Mark Tyler 3,125 25
Richard Lewin Robinson 6,250 50
Other employees and PDMRs 173,530 1,510
Amount to settle other Obligations - -
Total share based payments 217,905 1,865
Amount to settle loans
Unsecured Convertible loan facility - -
Unsecured working capital bridging finance 153,913 1,235
371,818 3,100
In January 2022 393,096,865 warrants were issued that have a right to be
issued one Ordinary Share for an exercise price of 1.6 pence and exercisable
following a Warrant Trigger Event provided that such Warrant Trigger Event
occurs during a two year period following the January 2022 When the share
price of the Company closes for five consecutive days reaches or exceeds 2.4
pence (being a 50% premium on the Warrant exercise price) (the "Warrant
Trigger Event"). If the Warrant Trigger Event occurs then: (i) the holders of
the Warrants must exercise the Warrants within 30 days from the occurrence of
the Warrant Trigger Event; and (ii) the Warrants will expire following the
end of the 30-day period referenced above if not exercised.
Share Placement April and May 2022
In April 2022 the Company raised £4.4 million through the issue of
550,000,000 new Ordinary Shares at a placing price of 0.8 pence per Ordinary
Share.
In May 2022 the Company raised a further £3.6 million through the issue of
450,000,000 Ordinary Shares at the Placing Price of 0.8 pence per Ordinary
Share, following shareholder approval of the conditional placement at a
General Meeting
The Company granted one warrant per two Placing Shares at an exercise price of
1.6 pence exercisable for a period of two years from the May 2022 admission.
The 500,000,000 warrants become exercisable on the same Warrant Trigger Event
disclosed in the January 2022 note above.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SSWFLIEESELMRecent news on KEFI Gold and Copper
See all newsREG - Kefi Gold and Copper - Result of AGM
AnnouncementREG - Kefi Gold and Copper - AGM Statement
AnnouncementREG - Kefi Gold and Copper - Tulu Kapi Community Resettlement Programme
AnnouncementRCS - Kefi Gold and Copper - Investor Presentation
AnnouncementREG - Kefi Gold and Copper - Notice of AGM and Investor Presentation
Announcement