REG - Kefi Gold and Copper - Results for the year ended 31 December 2022
09/06/2023 07:00
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RNS Number : 1769C Kefi Gold and Copper PLC 09 June 2023
9 June 2023
KEFI Gold and Copper plc
("KEFI" or the "Company")
Results for the year ended 31 December 2022
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 2022.
AGM and Annual Report
As announced on 2 June 2023 the Annual General Meeting ("AGM") of the Company
will be held at 11:00 a.m. (EEST) (9:00 a.m. BST) on 30 June 2023 at Hilton
Park Nicosia,1 Achaion Street, Engomi, Nicosia, 2413, Cyprus. The notice of
AGM has been posted to shareholders and is available for download on the
Company's website: https://www.kefi-goldandcopper.com
(https://www.kefi-goldandcopper.com)
The Annual Report and Accounts for the year ended 31 December 2022 are also
available on KEFI's website at https://www.kefi-goldandcopper.com
(https://www.kefi-goldandcopper.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 (Executive Chairman) +357 994 57843
John Leach (Finance Director) +357 992 08130
SP Angel Corporate Finance LLP (Nominated Adviser and Joint Broker) +44 (0) 20 3470 0470
Jeff Keating, Adam Cowl
Tavira Financial Limited (Joint Broker) +44 (0) 20 7100 5100
Oliver Stansfield, Jonathan Evans
IFC Advisory Ltd (Financial PR and IR) +44 (0) 20 3934 6630
Tim Metcalfe, Florence Chandler
Further information can be viewed at https://www.kefi-goldandcopper.com
(https://www.kefi-goldandcopper.com)
EXECUTIVE CHAIRMAN'S REPORT
After some particularly frustrating years, the working environment in both
Ethiopia (security and regulatory) and Saudi Arabia (regulatory) was
transformed for the better during 2022. In Ethiopia, we are finally close to
launching the Tulu Kapi Gold Project this year. And as we advance in both
countries with an early-mover position, we can now expect to report an
escalating stream of achievements. What a welcome outlook after years of
challenge and frustration!
We now enjoy highly supportive mine-regulatory working environments in both
countries which are also prioritising projects like ours across all the
relevant Government agencies. Given that we have three advancing potential
development projects in these jurisdictions, the Company is now in a much
better risk/return position than it has ever been. It is indeed a refreshing
change and an exciting opportunity.
Financial markets, and the AIM Market in particular, have shown some
volatility and weakness flowing from global and UK political events. This has
reinforced KEFI's strategy of sourcing predominantly project-level and
subsidiary-level project financing.
At the same time, both the Saudi and Ethiopian local equity capital markets
have shown particular interest in natural resources, as have the Canadian and
Australian mining-focused stock markets. KEFI has appointed advisers to
consider a dual-listing of the Company's shares on major regional or
mining-focused stock exchanges.
Successful implementation of our plans will result in KEFI being a leader in
the Arabian-Nubian Shield with projected 2027 aggregate annual production of
327,000 gold-equivalent ounces, in which KEFI will have a beneficial interest
of 150,000 gold-equivalent ounces. These estimates reflect resources as they
stood at 2021 and current preliminary assessments.
Our reported Mineral Resources provide a solid starting position for growth.
Since mid-2020, KEFI's beneficial interest in the in-situ metal content of our
three projects has grown from 1.2 million gold-equivalent ounces to
approximately 2.1 million gold-equivalent ounces. KEFI's current market
capitalisation of circa £40 ($50) million equates to only $24 per
gold-equivalent ounce.
The growth in Mineral Resources is due to our progress in Saudi Arabia in
particular, where GMCO is now well-established as a leading explorer/developer
in the fast-emerging Saudi minerals sector with:
· one of the largest exploration teams in the country; and
· two major projects advancing towards development:
o Hawiah Copper Gold Project at the Pre-Feasibility Study ('PFS') stage; and
o Jibal Qutman Gold Project at the Definitive Feasibility Study ('DFS') stage.
GMCO's growth has coincided with the Saudi Government's widely publicised
recent initiatives to welcome international expertise and fast-track the
growth of its mining sector. In the past year or so, we have been awarded 14
Exploration Licences ("ELs"), many times the number we were awarded over the
previous thirteen years.
A notable reason for our solid position in the region is our alliancing
strategy. Our operating alliances are with the following strong organisations:
· Partners:
o in Saudi Arabia: Abdul Rahman Saad Al Rashid and Sons Company Ltd ("ARTAR")
o in Ethiopia:
§ Federal Government of the Democratic Republic of Ethiopia
§ Oromia Regional Government
· Principal contractors:
o for process plants in both Ethiopia and Saudi Arabia: Lycopodium
o for mining services in Ethiopia: PW Mining
· Senior project finance lenders for Tulu Kapi:
o East and Southern African Trade and Development Bank Ltd ("TDB")
o African Finance Corporation Limited ("AFC")
Ethiopia - Tulu Kapi
Having essentially overcome its recent security issues, Ethiopia is
demonstrating a clear determination to expedite economic recovery and once
again be among the world's top 10 growth countries, as it was for nearly 20
years up to 2017. A key part of the Ethiopian Government's strategy to achieve
this strong growth is for the mining sector to increase from 1% of GDP today
to 10% of GDP ten years from now. The Federal Government recently deployed
its world-recognized military around priority mining sites such as Tulu Kapi
and announced a number of incentives such as lower royalty rates to reinforce
its commitment to protect, support and encourage our industry.
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.
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 $1,815/ounce:
· Average EBITDA of $153 million per annum (KEFI's now planned c. 70% interest
being c. $107million);
· All-in Sustaining Costs ("AISC") of $947/ounce (note that royalty costs
increase with the gold price); and
· All-in Costs ("AIC") of $1,189/ounce.
The assumptions underlying these projections are detailed in the footnotes to
the table on page 10 of this Annual Report.
Saudi Arabia - Jibal Qutman
Whilst GMCO has been on the ground since 2008, mining de-regulation was only
implemented over the past two years. This has led to a surge in companies
looking to enter the Saudi minerals sector and one recent entrant has
announced one of the largest exploration programs ever committed anywhere -
testament to the international rating of the Saudi prospectivity. KEFI's
beneficial interest is planned to be 26.8% in GMCO and the shareholders'
agreement provides extra flexibility on a project-by-project basis by catering
for the possibility that one or other GMCO project can be sole-risked by
either shareholder if one partner chooses to opt out.
Jibal Qutman was KEFI's first discovery in Saudi Arabia with Mineral Resources
in excess of 700,000 ounces of gold.
In mid-2022, formal notification was received from the Saudi authorities that
land access issues which halted our mine development application in 2016 were
resolved. This enabled GMCO to commence the work required to complete a DFS,
with site activities again being allowed only from late 2022.
The current gold price and consensus outlook is considerably higher than the
$1,200/ounce used in our preliminary 2015 studies when the Company lodged its
initial Mining Licence application based on mining the 200,000 ounces of oxide
ore only, with a view to a low-risk start-up pending expansion of the
resources to justify a larger development scenario. Another key change over
the past 8 years is that recently granted ELs now cover more than 35km linear
extent or 270 square kilometres of the prospective fault zone north and south
of the known Jibal Qutman deposits, thus providing more opportunity to
discover near-surface gold mineralisation.
Development commitments will be duly considered after completion of the DFS.
And upon GMCO commitment, granting of the Mining Licence, regulatory approvals
and financing, GMCO could reasonably target commissioning gold production at
Jibal Qutman in 2025, coincidentally around the same time as Tulu Kapi in
Ethiopia.
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.
Our drilling since 2019 has so far delineated a Mineral Resource Estimate
("MRE") of 29.0 million tonnes at 0.89% copper, 0.94% zinc, 0.67g/t gold and
10.1g/t silver. As a scale-comparison with Tulu Kapi, Hawiah's in-situ metal
content is now estimated to be in the order of 2.48 million gold-equivalent
ounces versus Tulu Kapi's current 1.72 million ounces of gold.
Exploration commenced at the nearby Al Godeyer Project in early 2022 and
drilling quickly confirmed similar copper-gold mineralisation to the Hawiah
VMS deposit. The recently announced initial Al Godeyer MRE demonstrates the
potential for satellite orebodies to be discovered near the proposed Hawiah
processing plant.
We are finalising the Hawiah PFS and are continuing to drill to upgrade and
expand the resources within this major VMS district.
Summary and Conclusion
We all know that getting one's timing right from an investment viewpoint is an
elusive task - not only are there are many company specific issues, these are
entwined with external factors such as jurisdictional matters, metal prices
and capital market cycles. It is perhaps fair to say that KEFI's share price
has largely drifted with sectoral trends illustrated by the global Gold Junior
Mining Index (MVIS sub-index MVGDXJ). Notwithstanding that this index is for
much larger companies (market capitalisation ≥ $150 million) its performance
pattern is similar to that of KEFI's share price to date. The index was 68% at
the time of KEFI's IPO in 2006, historically peaked at 236% in 2011 when
KEFI's historical share price also peaked, and has declined since then to -8%
on 16 May 2023.
So - what do we have to achieve to break out - to get ahead of the pack? The
fundamentals of the company have never been stronger; nor have metal prices or
the local jurisdictional conditions and governmental support we are receiving.
What we must do now is to go into fast forward wherever possible without
compromising safety and financial commonsense. That will make our past years
of frustration worthwhile. It is also my view that capital markets behave
cyclically and it might be the case that we see a swing back to the mining
sector for capital allocation internationally, especially directed at those
companies who rank highly on ESG measures as well as the measures for
discovery, development and production.
KEFI is now preparing to develop the high-grade Tulu Kapi Gold Project,
completing its DFS-stage development studies on the Jibal Qutman Gold Project,
finalising the PFS for the Hawiah Copper-Gold Project and prospecting
exploration targets in Ethiopia and Saudi Arabia. And the timing is now
proving to be on our side.
Simultaneous with the triggering of full development at Tulu Kapi, we intend
to re-commence exploration programs in Ethiopia and intensify 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 satellite gold
deposits in the Tulu Kapi District. In Saudi Arabia, further drilling is being
undertaken during 2023 at Hawiah, Jibal Qutman and surrounding ELs. Regional
prospecting programs will also elevate as we are blessed with many other
walk-up drill targets.
Along with my fellow Directors, I am dedicated to the generation of returns on
investment. It has been frustrating that the working environments of both
Ethiopia and Saudi Arabia in recent years have not allowed us to achieve
targeted progress. However, I believe that both situations have turned for the
better and we are now pushing forward.
By emphasising conventional project-level development financing, we will
reduce the pressure on KEFI shareholders and its foundation partners to
provide all the funding. In fact, at Tulu Kapi more than 90% of the
development capital is planned at the project or subsidiary level from newly
introduced regional investors, bankers, contractors, and other syndicate
parties. However, exploration and other pre-development funding will likely
continue to rely exclusively on equity funding by KEFI and its foundation
partners in-country.
Going forward, one would normally 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 and patience as shareholders and now metal prices strengthening as we
launch our projects within improved political and regulatory environments. The
Directors are deeply appreciative of all personnel's tenacity, tireless
efforts and steadfast dedication together with the support the Company
receives from shareholders, our families and other stakeholders. Let us now
see some of the success the Company has worked for.
Recent developments have also triggered the next chapter of our organisational
development with several appointments having been made, including Mr. Eddy
Solbrandt as Group Chief Operating Officer ("COO") and Mr. Gareth Taylor as
GMCO's COO along with several other additions to the senior management team in
both Ethiopia and Saudi Arabia. The Board of Directors is also adjusting its
composition to handle approaching retirements and to add to the range of
skills and appropriate board expertise in preparation for the substantial
changes as KEFI moves into its exciting next stage with the development of our
projects.
Executive Chairman
Harry Anagnostaras-Adams
8 June 2023
FINANCE DIRECTOR'S REPORT
Financing Working Capital for KEFI's Activities to Date
KEFI has funded all activities to date with approximately £80 million equity
capital raised at then prevailing share market prices. This avoided
superimposing debt-repayment risk onto exploration, permitting and other risks
that always exist during the early phases of project exploration and
development in mining-frontier markets. We do however avail ourselves of
short-term unsecured advances from time to time as arranged by our Corporate
Broker to provide working capital pending the achievement of a short-term
business objectives.
The risks of management of working capital in the context of such high-growth
and high-risk exploration ventures is a matter which is highlighted by the
Directors in the Going Concern Note of the Financial Statements which
shareholders should refer to.
Financing Tulu Kapi Project Development
The current cost (including finance costs and working capital) to develop Tulu
Kapi is estimated to be c. $320 million, which was last updated in late 2022.
Our financing plans absorbed significant cost-inflation at that time due to
global supply chain strains for the mining sector exacerbated by the COVID
pandemic and the Ukraine war. Whilst cost-inflation appears to have abated,
pricing will be updated again as at project launch and final finance
arrangements will be refined accordingly.
The various funding offers and commitments are made on a non-binding basis for
finalisation as we move to project launch. The financing syndicate has
expressed willingness to adjust and refine amongst itself in line with final
procurement and budget prices.
The $320 million funding package is now expected to be sourced from $190
million debt (senior and subordinated) and $130 million equity-risk capital
(from Government $30 million, Regional Investors $80 million and from KEFI's
public shareholders $20 million). Over the course of the past year, we have
materially reduced (to $15 million) the portion of Regional Investors' equity
funding convertible into KEFI shares (as from Year 4 after investment at then
market prices, if not repaid by KEFI in cash in the interim) by agreeing
within the syndicate that a large component of the investment by Regional
Investors be in the form of Equity-Risk Ranking Notes to be issued by TKGM
(non-convertible into shares).
Also, the conditionality of the finance closing process has now been
significantly de-risked. When I wrote to you last year, the top three
conditions precedent required for final bank credit approvals were dependent
on Government and were as follows:
· Our two banks to have the same rights and protections in Ethiopia: in March
2023 Ethiopia and AFC announced country membership - a significant step which
also achieved our goals in this respect;
· Security around our project to be permanently elevated for the long term: in
April 2023 the Government mobilised the Federal military into the Tulu Kapi
district to lay world-class security foundations for our Project, which now
awaits successful completion of the remaining security requirements; and
· Banking procedures to be eased such that capital and operating can be serviced
promptly: whilst we were granted the right to offshore banking some years ago,
the detailed procedures are only now being clarified and we are pleased with
the direction this matter is taking.
The resolution of the remaining (the third matter listed above) critical
condition will therefore facilitate final credit approvals and signing of
definitive documentation between the respective syndicate members, which we
still target to achieve in June 2023. We are confident of these approvals from
our long-standing and hard-working syndicate but, of course, we must emphasise
that the pace of our progress overall is now essentially subject to the pace
of administrative progress with the relevant Government agencies. Be that as
it may, all parties are pushing and I am highly confident of the outcome.
KEFI and the Project syndicate remain focused on achieving Project launch as
soon as practicable, commencing full construction in Q4-2023, having by then
triggered procurement and community resettlement, and leading to gold
production from open pit ore in 2025.
Ownership Value and Ownership Dilution
The £6.4 million Placing currently being completed (subject to shareholder
approval) will mainly be used to fund:
· Project finance closing and project launch at Tulu Kapi;
· DFS-level development resource/reserve drilling plus metallurgical and other
studies at Jibal Qutman;
· PFS-level development resource/reserve drilling plus metallurgical and other
studies at Hawiah; and
· Earlier-stage exploration prospecting activities in Saudi Arabia including
drilling of satellite targets proximal to our advanced projects as well as
first-pass prospecting in newly granted licences at other prospects selected
from the Company's proprietary database.
In announcing the Placing, we also foreshadowed an intention for Directors and
management to be offered the opportunity to participate in the Placing at the
same price and subject to shareholder approval.
We strive to minimise ownership dilution by sourcing nearly all development
capital at the project or subsidiary level.
In respect of the Tulu Kapi Project, the $15 million portion of the overall
$320 million funding package which is planned to involve future KEFI share
issues (unless KEFI chooses to repay in cash) will be via instruments
convertible at prices prevailing during the fourth year after settlement, when
Tulu Kapi is in production. In the shorter term, part of the finance plan is
that the successful launch of the Project will hopefully facilitate the
exercise of warrants currently on issue and exercisable at 1.6 pence per
share, the proceeds of which are up to £14 million ($18 million).
Alternatives are also planned.
From an ownership value perspective and measuring the Company's underlying
assets on an NPV basis, this approach has already contributed to the
indicative value of KEFI's share of its three main assets having more or less
tripled from $153 million in June 2020 to c.$352 million (£281 million¹) in
May 2023. The basis for these estimates is KEFI's estimated beneficial
interest, post-financing, of the NPV of cash flows to shareholders as derived
using consensus forecast metal prices and other explanations provided in the
footnotes below.
Project Development Finance Risk Management
In designing the level of balance sheet debt gearing at the operating
joint-venture company level, the senior and subordinated debt to equity ratio
for TKGM is:
· 59%:41% ($190 million: $130 million) excluding equity funded historical
pre-development costs; and
· 47%:53% ($190 million: $213 million) including equity-funded historical
pre-development costs at average historical FX conversion rates.
Also, for structuring the TKGM project finance, several key parameters had a
driving influence on our approach:
· The breakeven gold price after senior and subordinated debt service and taxes
assuming a conservative gold price of $1,550/ounce for the purpose of
designing debt-obligations is c.$1,189/ounce, say $1,200/ounce - whilst we
note that industry average AISC is c. $1,200/ounce and that over the past 10
years the spot market gold price was under $1,200/ounce for only 12.5% of the
time.
· At current analyst consensus gold price of $1,815/ounce, senior and mezzanine
debt could be repaid within approximately 2 years of production start.
We have conditionally assembled all the development finance, mostly at the
project level from the work of our strong but small, efficient and economical
corporate office in Nicosia, Cyprus. Other than our Nicosia-based group
management, financial control/corporate governance team, all operational staff
are usually based at the sites for project work. This hands-on culture
increases efficiency at a lower cost for corporate overhead - critical at this
early stage.
Accounting Policy
KEFI writes off all exploration expenditure in Saudi Arabia but we will review
this upon completion of Board-approved DFS studies. KEFI's carrying value of
the investment in KME, which holds the Company's share of Tulu Kapi is only
£15.6 million as at 31 December 2022. It is important to note KEFI's planned
circa.70% beneficial interest in the underlying valuation of Tulu Kapi is
c.£125 ($156) million based on project NPV at a gold price of $1,815/ounce
and including the underground mine.
In addition, the balance sheet of TKGM at full closing of all project funding
will reflect (in Ethiopian Birr) all its fully capitalised pre-development
costs as well as its project finance development package.
John Leach
Finance Director
8 June 2023
Footnotes:
· NPV calculations are based on:
§ DFS financial model for Tulu Kapi open pit updated for refinements in
consultation with lenders, contractors and input pricing updates generally
plus PEA financial model for Tulu Kapi underground mine. Current financial
models for Jibal Qutman and Hawiah;
§ ¹Spot prices as at 30 April 2023 of $1,989/ounce for gold, $3.88/pound for
copper, $1.20/pound for zinc and $25/ounce for silver;
§ KEFI's beneficial interest in each project NPV calculation was assumed to be
70% in TKGM and 27% in JQ & Hawiah
§ ²Long-term analysts' consensus prices which average $1,815/ounce for gold,
$4.22/pound for copper, $1.28/pound for zinc and $23/ounce for silver (source:
S&P Global survey dated 2 May 2023); and
§ £/$ exchange rate = 1.25, 8% discount rate applied against net cash flow to
equity, after debt service and after tax.
Consolidated statement of comprehensive income
Year ended 31 December 2022
Notes Year Ended Year Ended
31.12.22 31.12.21
£'000 £'000
Revenue - -
Exploration costs - -
Administrative expenses 6 (2,400) (2,190)
Finance transaction costs 8.2 (368) (84)
Share-based payments and warrants-equity settled 18 (366) (810)
Share of loss from jointly controlled entity 20 (2,792) (1,482)
Impairment of jointly controlled entity 20 (109) 418
Operating loss 6 (6,035) (4,148)
Other income/(loss) - (75)
Gain on Dilution of Joint Venture 20 286 428
Foreign exchange loss (79) (8)
Finance costs 8.1 (527) (1,121)
Loss before tax (6,355) (4,924)
Tax 9 - -
Loss for the year (6,355) (4,924)
Loss attributable to:
-Owners of the parent (6,355) (4,924)
Loss for the period (6,355) (4,924)
Other comprehensive expense:
Exchange differences on translating foreign operations - -
Total comprehensive expense for the year (6,355) (4,924)
Total Comprehensive expense to:
-Owners of the parent (6,355) (4,924)
Basic and diluted loss per share (pence) 10 (0.180) (0.226)
The notes are an integral part of these consolidated financial statements.
Statements of financial position
31 December 2022
The The The The
Group Company Group Company
Notes 2022 2022 2021 2021
£'000 £'000 £'000 £'000
ASSETS
Non‑current assets
Property, plant and equipment 11 125 3 63 1
Intangible assets 12 31,356 - 28,361 -
Investment in subsidiaries 13.1 - 15,557 - 14,331
Investments in jointly controlled entities 13.2 - - - -
Receivables from subsidiaries 15.2 - 9,998 - 7,292
31,481 25,558 28,424 21,624
Current assets
Financial assets at fair value through OCI 14 - - - -
Trade and other receivables 15.1 463 71 291 24
Cash and cash equivalents 16 220 45 394 149
683 116 685 173
Total assets 32,164 25,674 29,109 21,797
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 17 3,939 3,939 2,567 2,567
Deferred Shares 17 23,328 23,328 23,328 23,328
Share premium 17 43,187 43,187 35,884 35,884
Share options reserve 18 3,747 3,747 1,891 1,891
Accumulated losses (48,781) (52,929) (42,731) (47,310)
Attributable to Owners of parent 25,420 21,272 20,939 16,360
Non-Controlling Interest 19 1,562 - 1,379 -
Total equity 26,982 21,272 22,318 16,360
Current liabilities
Trade and other payables 21 4,002 3,222 5,556 4,202
Loan and borrowings 23 1,180 1,180 1,235 1,235
Total liabilities 5,182 4,402 6,791 5,437
Total equity and liabilities 32,164 25,674 29,109 21,797
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 £6.1 million (2021: £6.8 million) has been
included in the financial statements of the parent company.
On the 8 June 2023, 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 2022
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 2021 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)
Total Comprehensive Expenses - - - - - (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
Loss for the year - - - - - (6,355) (6,355) - (6,355)
Other comprehensive expense - - - - - - - - -
Total Comprehensive expense - - - - - (6,355) (6,355) - (6,355)
Recognition of share-based payments - - - 366 - - 366 - 366
Expired warrants - - - (488) - 488 - - -
Issue of share capital and warrants 1,372 - 7,747 1,978 - - 11,097 - 11,097
Share issue costs - - (444) - - - (444) - (444)
Non-controlling interest - - - - (183) (183) 183 -
At 31 December 2022 3,939 23,328 43,187 3,747 - (48,781) 25,420 1,562 26,982
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 2022
Share Deferred shares Share premium Share Accumulated losses Total
capital
options reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 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
Loss for the year - - - - (6,107) (6,107)
Recognition of share-based payments - - - 366 - 366
Forfeited options - - - - - -
Expired warrants - - - (488) 488 -
Issue of share capital and warrants 1,372 - 7,747 1,978 - 11,097
Share issue costs - - (444) - - (444)
At 31 December 2022 3,939 23,328 43,187 3,747 (52,929) 21,272
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 2022
Notes Year Ended Year Ended
31.12.22 31.12.21
£'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (6,355) (4,924)
Adjustments for:
Depreciation of property, plant and equipment 11 24 17
Share based payments 18 - -
Issue of options 18 366 810
Gain on Dilution of Joint Venture 20.1 (286) (428)
Share of loss from jointly controlled entity 20 2,792 1,482
Impairment on jointly controlled entity 20 109 (418)
Exchange difference (53) 159
Finance costs 8.1 486 1,121
(2,917) (2,181)
Changes in working capital:
Trade and other receivables (172) (75)
Trade and other payables (72) 806
Cash used in operations (3,161) (1,450)
Interest paid - -
Net cash used in operating activities (3,161) (1,450)
CASH FLOWS FROM INVESTING ACTIVITIES
Project exploration and evaluation costs 12 (3,477) (2,508)
Acquisition of property plant and equipment 11 (86) (46)
Proceeds from sale of financial assets at fair value through OCI 14 - 54
Advances to jointly controlled entity 13.2 (1,682) (510)
Net cash used in investing activities (5,245) (3,010)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 17 6,849 1,045
Issue costs 17 (444) (219)
Proceeds from bridge loans 23.1.2 1,830 2,713
Repayment of convertible notes and bridge loans 23.1.2 (3) -
Net cash from financing activities 8,232 3,539
Net decrease in cash and cash equivalents (174) (921)
Cash and cash equivalents:
At beginning of the year 16 394 1,315
At end of the year 16 220 394
Cash and cash equivalents in the Consolidated Statement of Financial Position
includes restricted cash of £nil (2021: £20,000).
The notes are an integral part of these consolidated financial statements.
Company statement of cash flows
Year ended 31 December 2022
Notes Year Ended Year Ended
31.12.22 31.12.21
£'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (6,107) (6,763)
Adjustments for:
Depreciation of property plant equipment 2 2
Share based payments 18 - -
Issue of options 18 366 810
Gain on Dilution of Joint Venture 20.1 (286) (428)
Share of loss from jointly controlled entity 20 2,792 1,482
Impairment on jointly controlled entity 20 109 (418)
Exchange difference (255) 1,767
Expected credit loss 113 43
Finance costs 486 1,121
(2,780) (2,384)
Changes in working capital:
Trade and other receivables (47) 82
Trade and other payables 17 1,562
Cash used in operations (2,810) (740)
Interest Paid - -
Net cash used in operating activities (2,810) (740)
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property plant and equipment (4) -
Investment in subsidiary 13.1 (1,225) (651)
Advances to jointly controlled entity 13.2 (1,682) (510)
Loan to subsidiary 15 (2,615) (2,684)
Net cash used in investing activities (5,526) (3,845)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 17 6,849 1,045
Issue costs 17 (444) (219)
Proceeds from bridge loans 23.1.2 1,830 2,713
Repayment of convertible notes and bridge loans 23.1.2 (3) -
Net cash from financing activities 8,232 3,539
Net (decrease) in cash and cash equivalents (104) (1,046)
Cash and cash equivalents:
At beginning of the year 16 149 1,195
At end of the year 16 45 149
Cash and cash equivalents in the Company Statement of Financial Position
includes restricted cash of £nil (2021: £20,000).
The notes are an integral part of these consolidated financial statements.
Notes to the consolidated financial statements
Year ended 31 December 2022
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 standards in 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 2022.
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 in the Finance Director's Report).
TKGM reactivated Tulu Kapi project launch preparations in June-2022 with the
signing of an initial Umbrella Agreement. This was followed by a final
Umbrella Agreement in April 2023. However, funding requirements and project
timing could still be impacted by security concerns or other factors in
Ethiopia. The Ministry of Mines in Ethiopia has received official notification
that the project is currently progressing according to the planned timetable
and will continue to do so, provided that the security situation remains
satisfactory. There are a few remaining tasks that need to be addressed,
including the government's completion of necessary regulatory requirements and
the successful and timely finalization of project financing. The Company
maintains a close watch on the condition of security and uses an independent
security specialist to provide ongoing situational assessments and reports.
(Refer to "Security Risk" section of the Principal Risks and Uncertainties
Report for additional details).The Tulu Kapi project financing syndicate's
arrangements with project lenders AFC and TDB for $190 million project loan
facilities [has received approval of their respective credit committees
subject to normal conditions precedent including KEFI raising additional
equity (refer to "Financing Risk" of the Principal Risks and Uncertainties
Report for more details)], are being formalised and definitive agreements are
in preparation.
In May 2023, the Company announced the successful completion of an
unconditional placement of £5.5 million and, subject to shareholder approval
at the annual general meeting on 30 June 2023, a further placement of £0.9
million. As of the date of this financial report, £5.1 million has been
utilised by the Company to bring creditors into normal trading terms, repay
its debts and increase working capital. The balance of the placements will be
received subject to shareholder approval and share placement settlement terms.
Forecasts show that the Group will require additional funding in Q3 2023
to meet project development, working capital needs and other planned
expenditures. Should funding be required before 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.
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 2022
(2021: 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.
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.
On commencement of development, Exploration and evaluation expenditure are
reclassified to development assets, following assessment for any impairment.
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 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 Trinomial 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. After 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. After 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 following new standards and interpretations became effective on 1 January
2022 and have been adopted by the Group.
Effective period commencing on or after
IFRS 3 Amendments to IFRS 3: References to Conceptual Framework 01 January 2022
IAS 16 Amendments to IAS 16: Property, Plant and Equipment: Proceeds before Intended 01 January 2022
Use
IAS 37 Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling a Contract 01 January 2022
Improvements to IFRSs' Improvements to IFRS 1, IFRS 9, IFRS 16 and IAS 41 01 January 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 to IFRS 16 ¹ Amendments to IFRS 16: Liability in a Sale and Leaseback 01 January 2024
Amendments IAS 1 ¹ Amendments to IAS 1: Classification of liabilities as current or noncurrent 01 January 2024
Amendments IAS 1 ¹ Amendments to IAS 1: Non-current Liabilities with Covenants 01 January 2024
¹Not yet endorsed.
These amendments had no impact on the interim condensed consolidated financial
statements of the Group. The Group intends to use the practical expedients in
future periods if they become applicable.
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.
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early.
The Group is currently assessing the impact of these new accounting standards
and amendments.
The Group does not expect any other standards issued by the IASB, but not yet
effective, to have a material impact on the group.
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 this time. 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:
2022 2021
£'000 £'000
Variable rate instruments
Financial assets 220 394
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 December 2022 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
2022 2022 2021 2021
£'000 £'000 £'000 £'000
Variable rate instruments
Financial assets - increase of 100 basis points 2 2 4 4
Financial assets - decrease of 25 basis points (0.5) (0.5) (1) (1)
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
2022 2022 2021 2021
£'000 £'000 £'000 £'000
Australian Dollar 188 0 67 -
Euro 215 29 366 -
US Dollar 2,014 26 2,126 12
Ethiopian Birr 779 537 1,256 511
Sensitivity analysis continued
A 10% strengthening of the British Pound against the following currencies at
31 December 2022 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
2022 2022 2021 2021
£'000 £'000 £'000 £'000
AUD Dollar 19 19 7 7
Euro 19 19 37 37
US Dollar 199 199 211 211
Ethiopia ETB 24 24 74 74
Liquidity risk
The Group and Companies raise 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-22
Trade and other payables 4,003 4,003 4,003 - -
Loans and Borrowings 1,180 1,180 1,180 - -
5,183 5,183 5,183 - -
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 - -
The Company
31-Dec-22
Trade and other payables 3,222 3,222 3,222 - -
Loans and Borrowings 1,180 1,180 1,180 - -
4,402 4,402 4,402 - -
31-Dec-21
Trade and other payables 4,202 4,202 4,202 - -
Loans and Borrowings 1,235 1,235 1,235 - -
5,437 5,437 5,437 - -
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
£220,000 (2021: £394,000) and equity attributable to equity of the parent,
comprising issued capital and deferred shares of £27,267,000 (2021:
£25,895,000), other reserves of £46,934,000, (2021: £37,775,000) and
accumulated losses of £48,781,000 (2021: £42,731,000). 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).
Fair value estimation
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, 2022 and December 31, 2021, 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
2022 2021 2022 2021
Financial assets £'000 £'000 £'000 £'000
Cash and cash equivalents (Note 16) - Level 1 220 394 220 394
Financial assets at fair value through OCI (Note 14) - Level 2 - - - -
Trade and other receivables (Note 15) 463 291 463 291
Financial liabilities
Trade and other payables (Note 21) 4,002 5,556 4,002 5,556
Loans and borrowings (Note 23) 1,180 1,235 1,180 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
Exploration & Evaluation 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 recognized as an expense based on their fair
value at date of grant. The fair value of equity settled share options is
estimated using 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 several 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 evaluation 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 soon, if it is not expected to be
renewed. Management has a continued plan to explore. In the Tulu Kapi Gold
Project Information Memorandum dated November 2022 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 activities. The Group's exploration activities are 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
2022
Corporate costs (2,653) (112) - - (2,765)
Foreign exchange gain/(loss) 172 (251) - (79)
Gain on Dilution of Joint Venture - - 285 - 285
Net Finance costs (895) - - - (895)
(Loss)/gain before jointly controlled entity (3,376) (363) 285 - (3,454)
Share of loss from jointly controlled entity - - (2,792) - (2,792)
Impairment of jointly controlled entity - - (109) - (109)
Loss before tax (3,376) (363) (2,616) - (6,355)
Tax - - - - -
Loss for the year (3,376) (363) (2,616) - (6,355)
Total assets 21,089 21,074 - (9,999) 32,164
Total liabilities 3,988 11,194 - (9,999) 5,183
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)
Reversal of 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
6. Expenses by nature 2022 2021
£'000 £'000
Depreciation of property, plant and equipment (Note 11) 24 17
Directors' fees and other benefits (Note 22.1) 582 535
Consultants' costs 205 238
Auditors' remuneration - audit current year 97 72
Legal Costs 283 737
Ongoing Listing Costs 174 125
Other expenses 322 166
Financial Project Advisory Costs 161 111
Shareholder Communications 299 121
Travelling Costs 253 68
Total Administrative Expenses 2,400 2,190
Share of losses from jointly controlled entity (Note 5 and Note 20) 2,792 1,482
Impairment/ (reversal of impairment) of jointly controlled entity (Note 20) 109 (418)
Share based option benefits to directors (Note 18) 192 407
Share based benefits to employees (Note 18) 74 148
Share based benefits to key management (Note 18) 100 255
Share based benefits to suppliers - -
Cost for long term project finance (Note 8) 368 84
Operating loss 6,035 4,148
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 2022 2021
£'000 £'000
Salaries 1,299 1,170
Social insurance costs and other funds 281 220
Costs capitalised as exploration (1,516) (1,325)
Net Staff Costs 64 65
Average number of employees 51 49
Excludes Directors' remuneration and fees which are disclosed in note 22.1. TK
project direct staff costs of £1,516,000 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 2022 2021
£'000 £'000
8.1 Total finance costs
Interest on short term loan 527 1,121
Total finance costs 527 1,121
8.2 Total other transaction costs
Cost for long term project finance 368 84
Total other transaction costs 368 84
The above costs for long term project finance relate to pre-investigation
activities required to fund TK Gold project.
9. Tax
2022 2021
£'000 £'000
Loss before tax (6,355) (4,924)
Tax calculated at the applicable tax rates at 12.5% (794) (616)
Tax effect of non-deductible expenses 556 598
Tax effect of tax losses 270 70
Tax effect of items not subject to tax (32) (52)
Charge for the year - -
The Company is resident in Cyprus for tax purposes. A deferred tax asset of
£1,491k (2021: £1,409k) 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 2022, the balance of
tax losses which is available for offset against future taxable profits
amounts to £ 11,931k (2021: £ 11,269k). 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 2018 2019 2020 2021 2022 Total
£'000 £'000 £'000 £'000 £'000 £'000
Losses carried forward 1,753 2,110 3,790 2,402 1,876 11,931
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
31.12.22 31.12.21
£'000 £'000
Net loss attributable to equity shareholders (6,355) (4,924)
Net loss for basic and diluted loss attributable to equity shareholders (6,355) (4,924)
Weighted average number of ordinary shares for basic loss per share (000's) 3,537,301 2,178,908
Weighted average number of ordinary shares for diluted loss per share (000's) 4,632,172 2,351,643
Loss per share:
Basic loss per share (pence) (0.180) (0.226)
There was no impact on the weighted average number of shares outstanding
during 2022 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 2022.
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 2021 71 102 86 259
Additions - 12 33 45
At 31 December 2021 71 114 119 304
Additions 42 11 33 86
Write-offs - - (15) (15)
At 31 December 2022 113 125 137 375
Accumulated Depreciation
At 1 January 2021 71 75 78 224
Charge for the year - 7 10 17
At 31 December 2021 71 82 88 241
Charge for the year 2 11 11 24
Write offs (15) (15)
At 31 December 2022 73 93 84 250
Net Book Value at 31 December 2022 40 32 53 125
Net Book Value at 31 December 2021 - 32 31 63
The above property, plant and equipment is in Ethiopia.
12. Intangible assets
Total exploration and project evaluation cost
£'000
The Group
Cost
At 1 January 2021 24,776
Additions 3,851
At 31 December 2021 28,627
Additions 2,995
At 31 December 2022 31,622
Accumulated Amortization and Impairment
At 1 January 2021 266
At 31 December 2021 266
Impairment Charge for the year -
At 31 December 2022 266
Net Book Value at 31 December 2022 31,356
Net Book Value at 31 December 2021 28,361
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 addition of £3 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 Company has the attention of
the Ethiopian Ministry of Mines, National Bank of Ethiopia and the other
Ministries and agencies and expects to resolve outstanding issues. Once the
specific details regarding capital controls for internationally syndicated
project financing are officially confirmed and appropriate working conditions
are established to ensure smooth project operations, the finance syndicate can
proceed with seeking the necessary approvals. At the moment final approvals
are subject to the conditions precedent in the hands of Government in respect
of administrative matters and security.
13. Investments
13.1 Investment in subsidiaries
The Company Year Ended Year Ended 31.12.21
31.12.22 £'000
£'000
Cost
At 1 January 14,331 13,680
Additions 1,226 651
Dissolutions - -
At 31 December 15,557 14,331
The Company carrying value of KEFI Minerals Ethiopia which holds the
investment in the Tulu Kapi Gold project currently under development is
£15,557,000 as at the 31 December 2022.
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.
Date of acquisition/ Effective
incorporation Country of incorporation proportion of
Subsidiary companies shares held
Mediterranean Minerals (Bulgaria) EOOD 08/11/2006 Bulgaria 100%-Direct
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
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.
KEFI Minerals (Ethiopia) Limited 27/28 Eastcastle Street, London, United Kingdom W1W 8DH.
KEFI Minerals Marketing and Sales Cyprus Limited 2 Kadmou, Wisdom Tower, 1(st) Floor, 1105 Nicosia, Cyprus.
Tulu Kapi Gold Mine Share Company 1(st) Floor, DAMINAROF Building, Bole Sub-City, Kebele 12/13, H.No, New.
The Company owns 100% of Kefi Minerals (Ethiopia) Limited ("KME")
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. Dogu was liquidated in 2020.
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 2022 and 2021. 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
31.12.22 31.12.21
£'000 £'000
The Group
At 1 January/31 December - -
Increase in investment 2,850 1,224
Exchange Difference 51 (160)
Loss for the year (2,792) (1,482)
(Impairment)/Reversal of impairment (109) 418
On 31 December - -
The Company
At 1 January/31 December - -
Increase in investment 2,850 1,224
Exchange Difference 51 (160)
Impairment Charge for the year (2,901) (1,064)
On 31 December - -
Date of acquisition/ Country of incorporation Effective proportion of shares held
incorporation
Jointly controlled entity
Gold and Minerals Co. Limited (GMCO) 04/08/2010 Saudi Arabia 30%-Direct
The Company owns 30% of GMCO. More information is given in note 20.1. During
the year the Company diluted its holding in GMCO from 31.2% to 30% and this
resulted in a gain of
£286,000.
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
31.12.22 31.12.21
£'000 £'000
The Group
At 1 January - 54
Foreign currency movement - -
Repayment - (54)
On 31 December - -
15. Trade and other receivables
15.1 Current Trade and other receivables
Year Ended 31.12.22 Year Ended
£'000 31.12.21
£'000
The Group
( )
Prepayments & other receivables 122 36
VAT receivable 341 255
463 291
Year Ended 31.12.22 Year Ended
£'000 31.12.21
£'000
The Company
( )
Other Debtors 7 15
Prepayments 64 9
71 24
15.2 Receivables from subsidiaries
Year Ended 31.12.22 Year Ended
£'000 31.12.21
£'000
The Company
Advance to KEFI Minerals (Ethiopia) Limited (Note 22.2) ² 3,253 3,166
Advance to Tulu Kaki Gold Mine Share Company (Note 22.2) ¹ 7,162 4,430
Expected credit loss (417) (304)
9,998 7,292
Amounts owed by subsidiary companies total £10,642,000 (2021: £7,819,000). A
write-off of £227,000 (2021: £223,000) 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 2022 and determined that any expected credit losses would be
£417,000 (2021: £304,000) 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 £2,619,000 (2021: £2,628,000) to the subsidiary Tulu
Kapi gold Mine Share Company during 2022. The Company had a foreign exchange
translation gain of £113,000 (2021: Loss £800,000) the current year gain was
because of a minor appreciation of the Ethiopian Birr.
²Kefi Minerals (Ethiopia) Limited: during 2022, the Company advanced £Nil
(2021: £56,000) to the subsidiary. The Company had a foreign exchange
translation gain of £87,000 (2021: Loss £808,000) the current year gain was
because of a minor appreciation 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
31.12.22 31.12.21
£'000 £'000
The Group
Cash at bank and in hand unrestricted 220 374
Cash at bank restricted - 20
220 394
The Company
Cash at bank and in hand unrestricted 45 129
Cash at bank restricted - 20
45 149
17. Share capital
Issued 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 2022 2,567,305 2,567 23,328 35,884 61,779
Share Equity Placement 13 Jan 2022 371,818 372 - 2,725 3,097
Share Equity Placement 25 April 2022 550,000 550 - 3,850 4,400
Share Equity Placement 18 May 2022 450,000 450 - 3,150 3,600
Share issue costs - - - (444) (444)
Warrants: fair value split of warrants issued to shareholders. - - - (1,663) (1,663)
Broker warrants: issue costs (315) (315)
At 31 December 2022 3,939,123 3,939 23,328 43,187 70,454
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 2022 2021 2022 2021
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 2022 2021 2022 2021
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.
2022
On the 13 January 2022 the Company admitted 358,867,797 new ordinary shares of
the Company at a placing price of 0.8 pence per Ordinary Share and 12,950,147
new ordinary shares of the Company at a placing price of 1.74 pence per
Ordinary Share
The Company raised £8.0 million through the issue of 1,000,000,000 new
Ordinary Shares at a placing price of 0.8 pence per Ordinary Share. These new
Ordinary Shares were admitted in two tranches, 550,000,000 on 25 April 2022
and 450,000,000 on 18 May 2022, following shareholder approval of the
conditional placement at a
General Meeting of the Company.
2021
During April 2021, the Company issued 15,000,000 new ordinary shares of 0.1p
each in the capital of the Company at a price of 0.65p per share pursuant to
receiving a notice from a warrant holder to exercise warrants over these
shares.
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
"Ordinary Shares".
2022
The Company issued 393,096,865 short-term shareholder warrants to subscribe
for new ordinary shares of 0.1p each at 1.6p per share in accordance with the
January 2022 share placement and as approved by shareholders. The shareholder
warrants will become exercisable if, during a two-year period following the
date of Second Admission, the Warrant Trigger Event occurs. If the Warrant
Trigger Event occurs, then (i) the holders of the shareholder warrants must
exercise the shareholder warrants within 30 days from the occurrence of the
Warrant Trigger Event; and (ii) the shareholder warrants will expire following
the end of the 30-day period referenced above if not exercised. The
shareholder warrants shall lapse two years following the date of Second
Admission and will no longer be capable of being exercised.
In April and May of 2022, the Company authorized the issuance of 500,000,000
shareholder warrants. These shareholder warrants entitle the holders to
subscribe for new ordinary shares of 0.1p each at a price of 1.6p per share.
Shareholders approved the issuance of these shareholder warrants on May 17th,
2022. The Company allocated one warrant for every two Placing Shares, with an
exercise price of 1.6 pence per share. The shareholder warrants will be
exercisable for a period of two years from the date of Admission of the
Placing Shares. The Company has elected that the shareholder warrants become
exercisable if, within two years of the date of Admission of the Placing
Shares, the on-market share closing price of the ordinary shares reaches or
exceeds 2.4 pence for five consecutive days. This would be a 50% premium on
the shareholder warrants exercise price and is known as the "Warrant Trigger
Event." If the Warrant Trigger Event occurs, holders of the shareholder
warrants must exercise them within 30 days, and the shareholder warrants will
expire if not exercised by the end of this period.
The Shareholder warrants will lapse two years following the date of Second
Admission and will no longer be capable of being exercised.
The Company performed a fair value split by fair valuing the shareholder
warrants using Dilutive Variation of Trinomial Pricing Model. and assumed
that this value is the residual share amount. The model also takes into
account the dilution effect described above and as such is an appropriate
model for pricing warrants.
During May 2022, the Company issued 75,000,000 broker warrants to subscribe
for new ordinary shares of 0.1p each at 0.8p per share to Tavira Securities
Limited pursuant to the Placing Agreement. The warrants expire within three
years of the date of Second Admission.
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.
Details of warrants outstanding as at 31 December 2022:
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
29 May 2020 29 May 2023 0.65p 3 years 5,000
20 Nov 2020 20 Nov 2023 1.60p 3 years 11,175
13 Jan 2022 13 Jan 2024 1.60p 2 years 393,097
18 May 2022 17 May 2024 1.60p 2 years 500,000
18 May 2022 17 May 2025 0.80p 3 years 75,000
986,272
Weighted average ex. Price Number of warrants 000's
Outstanding warrants at 1 January 2022 1.87p 45,125
- granted 1.54p 968,097
- cancelled/expired/forfeited 2.15p (26,950)
- exercised
Outstanding warrants at 31 December 2022 1.54p 986,272
The estimated fair values of the warrants were calculated using the Black
Scholes option pricing model and Trinomial Model when deemed more appropriate.
The inputs into the model and the results for warrants and options granted
during the year are as follows:
Warrants Options
29-May-20 20-Nov-20 13-Jan-22 18-May-22 18-May-22 17-Mar-21
Closing share price at issue date 0.77p 0.71p 0.71p
1.06p 1.68p 2.05p
Exercise price 0.65p 1.6p 1.60p 1.60p 0.80p 2.55p
Expected volatility 99% 101% 89.37% 81.079% 99.72% 89%
Expected life 3yrs 3yrs 2yrs 2yrs 3yrs 4yrs
Risk free rate -0.03% 0.05% 0.835% 1.459% 1.475% 0.028%
Expected dividend yield Nil Nil Nil Nil Nil Nil
Estimated fair value 0.73p 1.06p 0.22p 0.16p 0.42p 1.21p
Expected volatility was estimated based on the historical underlying
volatility in the price of the Company's shares.
Share options reserve table Year Ended Year Ended
31.12.22 31.12.21
£'000 £'000
Opening amount 1,891 1,273
Warrants issued costs 1,978 -
Share options charges relating to employees (Note 6) 74 148
Share options issued to directors and key management (Note 6) 292 662
Forfeited options - -
Exercised warrants - -
Expired warrants (147) -
Expired options (341) (192)
Closing amount 3,747 1,891
18.2 Share options reserve
Details of share options outstanding as at 31 December 2022:
Grant date Expiry date Exercise price Number of shares 000's
22-Mar-17 21-May-23 7.50p 6,750
01-Feb-18 31-Jan-24 4.50p 9,600
17-Mar-21 16-May-25 2.55p 92,249
108,599
Weighted average ex. Price Number of shares000's
Outstanding options at 1 January 2022 3.21p 127,610
- granted - -
- forfeited 2.90p (13,864)
- cancelled/ expired 7.85p (5,147)
Outstanding options at 31 December 2022 3.03p 108,599
The Company has issued share options to directors, employees and advisers to
the Group.
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 subdivision 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 2022, the impact of share option-based payments is a net charge to income
of £366,000 (2021: £809,000). At 31 December 2022, the equity reserve
recognized for share option-based payments, including warrants, amounted to
£3,747,000 (2021: £1,891,000).
18.3 Share Payments for services rendered and obligations settled.
2022 Year
During the year the company granted the issuance of 515,796,693 new Ordinary
shares which were distributed across the following placements:
January 2022 Share Placement of 371,817,944
After the General Meeting held on 13 January 2022, the Company authorized the
issuance of 371,817,944 new Ordinary shares to fulfil financial obligations
totalling £3.1 million. In January 2022, a portion of these shares,
specifically 358,867,797 new ordinary shares, were issued at a price of 0.8
pence per Ordinary Share, with the purpose of settling an amount of £2.87
million. The remaining shares issued during January 2022, amounting to
12,950,147 new Ordinary Shares, were priced at VWAP of 1.74 pence per Ordinary
Share and were used to settle services and obligations amounting to £0.23.
million
April 2022 and May 2022 Share Placement of 143,978,749
During April 2022, the Company resolved its liabilities and other obligations
amounting to £0.63 million by issuing 79,188,312 new Ordinary Shares at a
placing price of 0.8 pence per Ordinary Share.
In May 2022, with the approval of shareholders at a General Meeting, the
Company settled liabilities and other obligations of £0.52 million by issuing
64,790,437 Ordinary Shares at the Placing Price of 0.8 pence per Ordinary
Share.
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. The shares were issued at a price of £0.008 per Ordinary
Share.
The total shares set off during 2022 and 2021 for services and obligations was
as follows:
2022 2021
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 22,500 - -
H Anagnostaras-Adams
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 1,925 15 - -
Total share-based payments 219,830 - -
1,880
Amount to settle loans
Unsecured Convertible loan facility - - - -
Unsecured working capital bridging finance 295,967 2,368 324,900 2,599
515,797 4,248 324,900 2,599
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 2021 1,204
Acquisitions of NCI -
Impact of 5% free carry on additions to assets during the year 175
Result for the year -
As at 1 January 2022 1,379
Acquisitions of NCI -
Impact of 5% free carry on additions to assets during the year 183
As at 31 December 2022 1,562
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 £183,000 and a decrease in
equity attributable to owners of the parent of £183,000.
The NCI of £1,562,000 (2021: £1,379,000) 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
2022:
Year Ended Year Ended
31.12.22 31.12.21
£'000 £'000
Amounts attributable to all shareholders
Exploration and evaluation assets
31,477 28,361
Current assets
381 329
Cash and Cash equivalents
175 244
32,033 28,934
Equity
31,254 27,573
Current liabilities
779 1,361
32,033 28,934
Result 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 30%
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
31.12.22 31.12.21 31.12.22 31.12.21
100% 100% 100% 100%
Non-current assets 2,889 2,097 637 411
Cash and Cash Equivalents 9,470 5,798 2,090 1,136
Current assets 625 801 138 157
Total Assets 12,984 8,696 2,865 1,704
Current liabilities (4,106) (2,680) (906) (525)
Total Liabilities (4,106) (2,680) (906) (525)
Net Assets 8,878 6,016 1,959 1,179
Share capital 121,424 81,300 26,810 15,935
Capital contributions partners 43,800 37,926 9,671 7,433
Accumulated losses (156,346) (113,210) (34,522) (22,189)
8,878 6,016 1,959 1,179
Exchange rates SAR to GBP
Closing rate 0.2208 0.1960
Income statement SAR'000 SAR'000 £'000 £'000
Loss from continuing operations (42,995) (22,524) (9,493) (4,415)
Other comprehensive expense - (246) - (48)
Translation FX Gain from SAR/GBP - - - -
Total comprehensive expense (42,995) (22,770) (9,493) (4,463)
Included in the amount above
Group
Group Share 30.00% (2021: 31.21%) of loss from continuing operations (2,792) (1,482)
Joint venture investment £'000 £'000
Opening Balance - -
Loss for the year (2,792) (1,482)
FX Gain/(Loss) 51 (160)
Additional Investment 2,850 1,224
Impairment/Reversal (109) 418
Closing Balance - -
In May 2009, KEFI announced the formation of a new minerals' exploration
jointly controlled entity, Gold & Minerals Co. Limited ("GMCO"), 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 30% shareholding in GMCO with
ARTAR holding the other 70%. KEFI provides GMCO 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 GMCO remains in compliance with all governmental and other
procedures. GMCO has five Directors, of whom two are nominated by KEFI
However, decisions about the relevant activities of GMCO require the unanimous
consent of the five directors. GMCO is treated as a jointly controlled entity
and has been equity accounted. KEFI has reconciled its share in GMCO's losses.
A loss of £2,792,000 was recognized by the Group for the year ended 31
December 2022 (2021: £1,482,000) representing the Group's share of losses in
the year.
As at 31 December 2022 KEFI owed ARTAR an amount of £1,169,000 (2021:
£285,700) - Note 21.1.
During 2022 the Company diluted its interest in the Saudi joint-venture
company Gold and Minerals Limited ("GMCO") from 31.21% to 30.00% by not
contributing its pro rata share of expenses to GMCO. This resulted in a gain
of £285,900 (2021: £428,181) in the Company accounts. The accounting policy
for exploration costs recorded in the GMCO 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 GMCO results in the recovery of pro rata
share of expenses to GMCO.
21. Trade and other payables
21.1 Trade and other payables
The Group Year Ended Year Ended
31.12.22 31.12.21
£'000 £'000
Accruals and other payables 2,427 2,499
Other loans 109 97
Payable to jointly controlled entity partner (Note 20.1) 1,169 285
Payable to Key Management and Shareholder (Note 22.3) 297 2,675
4,002 5,556
Other loans are unsecured, interest free and repayable on demand.
The Company Year Ended Year Ended
31.12.22 31.12.21
£'000 £'000
Accruals and other payables 1, 756 1,242
Payable to jointly controlled entity partner (Note 20.1) 1,169 285
Payable to Key Management and Shareholder (Note 22.4) 297 2,675
3,222 4,202
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
31.12.22 31.12.21
£'000 £'000
Short term employee benefits:
¹Directors' consultancy fees 533 496
Directors' other consultancy benefits 49 39
²Short term employee benefits: Key management fees 597 604
Short term employee benefits: Key management other benefits - 32
1,179 1,171
Share based payments:
Share based payment: Director's bonus - -
¹Share based payment: Directors' consultancy fees - -
Share option-based benefits to directors (Note 18) 192 407
²Share based payments short term employee benefits: Key management fees - 272
Share option-based benefits other key management personnel (Note 18) 100 255
Share Based Payment: Key management bonus - -
292 934
1,471 2,105
¹Directors' fees paid to the Executive Director Chairman and Finance Director
are paid to consultancy companies of which they are beneficiaries. Further
details on Directors' consultancy and other benefits are available on page 56
of the Annual Report.
²Key Management comprises Chief Operating Officer and the Managing Director
Ethiopia.
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 2022 2021
£'000 £'000
Winchcombe Ventures Limited Receiving of management and other professional services which are capitalized Key Management and Shareholder
as E&E expenditure
- 554
Nanancito Limited Receiving of management and other professional services which are capitalized Key Management and Shareholder - 232
as E&E expenditure
- 786
The Company
Name Nature of transactions Relationship 2022 2021
£'000 £'000
KEFI Minerals Marketing and Sales Cyprus Limited Finance Subsidiary - -
Tulu Kapi Gold Mine Share Company¹ Advance Subsidiary 7,162 4,433
Kefi Minerals (Ethiopia) Limited² Advance Subsidiary 3,253 3,166
Expected credit loss (417) (304)
9,998 7,295
¹The 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
movement of these loans are available in Note 15.
Management has made an assessment of the borrowings as at 31 December 2022 and
determined that any expected credit losses would be £417,000 (2021:304,000).
The above balances bear no interest and are repayable on demand.
22.3 Payable to related parties
The Group 2022 2021
£'000 £'000
Name Nature of transactions Relationship
Nanancito Limited Fees for services Key Management and Shareholder - 1,350
Winchcombe Ventures Limited Fees for services Key Management and Shareholder - 834
Directors & PDMR Fees for services Key Management and Shareholder 297 491
297 2,675
22.4 Payable to related parties
The Company 2022 2021
£'000 £'000
Name Nature of transactions Relationship
Nanancito Limited Fees for services Key Management and Shareholder - 1,350
Winchcombe Ventures Limited Fees for services Key Management and Shareholder - 834
Directors & PDMR Fees for services Key Management and Shareholder 297 491
297 2,675
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
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
-
2022
Unsecured working capital bridging finance Balance 1 Jan 2022 Drawdown Amount Transaction Costs Interest Repayment Repayment Year Ended
£'000 Shares/Netting Cash 31 Dec 2022
£'000 £'000
£'000 £'000 £'000 £'000
Repayable in cash in less than a year 1,235 1,830 - 486 (2,368) (3) 1,180
1,235 1,830 - 486 (2,368) (3) 1,180
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 £2,368,000 was fully repaid in 2022 during the relevant share
placements.
23.1.2 Reconciliation of liabilities arising from financing activities
2021 Reconciliation Cash Flows
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
Convertible notes
Sanderson unsecured convertible loan facility 23.2 75 - - - - (75) -
75 - - - - (75) -
2022 Reconciliation
Balance 1 Jan 2022 Inflow (Outflow) Fair Value Movement Finance Costs Shares/Netting Balance 31 Dec 2022
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Unsecured working capital bridging finance
Short term loans 1,235 (2,368) 1,180
1,830
(3)
-
486
1,235 (2,368) 1,180
1,830
(3)
-
486
24. Contingent liabilities
The company has no contingent liabilities.
25. Legal Allegations
There is a pending legal case against the Company for an amount of GBP 5.1
million from a claimant, Demissie Asafa Demissie (the "Claimant"). The Company
believes the claim for successful provision of financial advisory services is
spurious and without merit. Nonetheless, the amount claimed can only be
payable on successful closing of the Tulu Kapi Project finance, which has yet
to occur. The Company is making a counter claim and vigorously defending its
position. The Company has engaged legal counsel to represent its interests. At
this time, it is not possible to predict the outcome of this case or the
potential impact it may have on the Company's financial position or
operations. The Company will disclose any material developments related to
this case as and when required by applicable laws and regulations.
Having sought legal advice on this matter, the Group is of the opinion that
the allegations have no merit and that it is not appropriate to recognise any
contingent liability.
26. Capital commitments
The Group has the following capital or other commitments as at 31 December
2022 £4,238,000 (2021: £1,184,000),
31 Dec 2022 31 Dec 2021
£'000 £'000
Contracted for: Tulu Kapi Project costs 461 452
Not contracted for: Saudi Arabia Exploration costs committed to field work d 3,777 732
27. Events after the reporting date
Share Placement May 2023
On June 5, 2023, the Company introduced 785,714,285 new ordinary shares at a
placing price of 0.7 pence per share, resulting in a capital raise of £5.5
million. Additionally, a further £0.9 million is expected to be raised
through the issuance of 133,145,208 ordinary shares at the same placing price.
These 133,145,208 ordinary shares will be admitted after obtaining shareholder
approval for the conditional placement at the Annual General Meeting.
The shares that were issued on 5 June 2023 as well as the conditional
placement shares that are to be approved on 30 June 2023, will be employed
to extinguish the following obligations.
Name Number of Subscription Shares Amount
Current liabilities 000 £'000
For services rendered 98,325 688
Loans and borrowings
Unsecured working capital bridging finance 271,100 2,711
369,425 3,399
The parties above agreed that the amounts subscribed in the share placements
be set-off against the amount due by the Company at the date of the share
placement.
Dilution in Gold and Minerals
During 2023 the Company diluted its interest in the Saudi joint-venture
company Gold and Minerals Limited ("GMCO") from 30% to 26.8% by not
contributing its pro rata share of expenses to GMCO.
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AnnouncementREG - Kefi Gold and Copper - Corporate Update
AnnouncementREG - Kefi Gold and Copper - GMCO/ARTAR-Hancock wins tender for Saudi Arabia EL
AnnouncementREG - Kefi Gold and Copper - Co-Lenders’ Boards and Committees Approve Project
AnnouncementREG - Kefi Gold and Copper - Status of Tulu Kapi Finance Closing Process
Announcement