REG - Keras Resources PLC - Final Results for the Year Ended 31 December 2022
06/07/2023 07:00
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RNS Number : 1243F Keras Resources PLC 06 July 2023
6 July 2023
Keras Resources plc ('Keras' or the 'Company')
Final Results
Keras Resources plc (AIM: KRS) announces its final results for the year ended
31 December 2022.
Highlights
Utah - Diamond Creek Phosphate Mine ("Diamond Creek") - one of the
highest-grade organic phosphate mines in the US, a fully integrated mine to
market asset
· 4,750 tons of phosphate were mined and delivered to the laydown
area at Diamond Creek in 2022
· Total sales of 4,276 tons for the year to 31 December 2022
· Key product developments for the balance of 2023 will include
completing research into including liquid organic product(s) with higher
phosphate ("P(2)O(5)") availability into our portfolio, and finalising the
construction of granulator plant to produce blended organic granulates;2023
summer mining season commencing in July
· 100% held subsidiary Falcon Isle Resources LLC ("Falcon Isle") is
currently operating profitably at the company level and has commenced repaying
loans made to it by Keras
Corporate
· £1,950,000 (before costs) fundraising completed May 2022
· At a general meeting held on 25 July 2022 a resolution was passed
consolidating the ordinary share capital on the basis of 1 new ordinary share
of 1p for every 100 old ordinary shares of 0.01p. Following the passing of
that resolution the number of ordinary shares in issue was reduced to
79,735,731
· Post year end Keras signed an agreement with the Republic of
Togo (the "State") relating to the Nayéga Manganese project ("Nayéga"),
under which Keras agreed to transfer all its intellectual knowledge on Nayéga
to the State and provide advisory and brokerage services to expedite the
development of Nayéga and the State paid Keras a cash consideration
of $1,700,000 in July 2023
· Board Changes
o Graham Stacey assumed the role as CEO on 1 June 2022
o Russell Lamming assumed the role as Non-Executive Chairman from Brian
Moritz on 1 September 2022
o Brian remains a Non-Executive Director and Company Secretary
o Claire Parry joined the Board as an independent Non-Executive Director on
1 September 2022
o Also on 1 September 2022 Dave Reeves, who was CEO for many years following
the Company's flotation, resigned from the Board to concentrate on his role as
managing director of Calidus Resources Ltd in Australia
Graham Stacey, Keras Resources Chief Executive Officer, commented, "Having
acquired 100% of Falcon Isle in April, 2022 has been a year of consolidation
taking full management control of the business and repositioning ourselves as
a mining business in the North American organic agricultural sector. The
organic rock phosphate segment space remains a niche component of the vast USA
agricultural and produce industry, but research broadly forecasts the segment
to grow at a consolidated annual rate in excess of 8% in volume terms and 14%
in USD terms which is the underlying reason for our decision to acquire the
outstanding 49% shareholding in Falcon Isle.
Reporting a maiden profit for Falcon Isle in our first year of ownership has
been an incredibly rewarding result from a small but very focussed team in
Utah. We've demonstrated the fundamentals of the business in its current form
- producing sized dry products only, but from industry engagements at trade
shows and from continuing communication with industry players we've learned
that there's a need for us to broaden our product range to include liquid and
blended granulated products - liquids to serve the fertigation and hydroponic
sectors, and granulates to align with traditional fertilizer value chain in
terms of distribution and application. Testwork to produce a high available
phosphate organic liquid product is ongoing and we look forward to reporting
on developments in that segment. Having taken delivery of our granulator plant
at the end of 2021 we took the decision to pause construction at our Spanish
Fork site pending negotiations with potential partners to construct the plant
to produce specific blended granulates rather than simply phosphate products
which again talks to the need for a more diverse product range as we continue
to gain traction in the organic market. I look forward to reporting on our
granulate strategy in the near future.
From a Group perspective, we believe that putting a line under the uncertainty
related to our investment in Togo was a positive move and the cash received
from our divestment underpins the strategy of focussing the Group's activities
in North America. Our ongoing role in developing the Nayéga Mine with the
Togolese State will remain an important source of cash flow for the Group as
we continue to optimise and grow Falcon Isle in Utah.
Since the end of the year Kershner Grosso & Co ("Kershner Grosso"), an
asset management firm headquartered in Saratoga Springs, NY, acquired a block
of 10.03% of the shares in the Company previously owned by First Uranium
Corporation, and have since acquired additional shares on the market bringing
their shareholding to 13.16%. It has been very pleasing to receive this
support from Kershner Grosso as long-term investors recognising the future
growth profile in the organic sector and we look forward to building on the
strong relationship we have with Chris Grosso and his team going forward and
delivering on our shared vision for the sector.
Posting of Annual Report and Notice of AGM and General Meeting
Copies of the Company's full Annual Report and Financial Statements (the
"Annual Report") will be made available to download from the
Company's website today at https://kerasplc.com/results-and-reports/
(https://kerasplc.com/results-and-reports/) and will also be posted to
shareholders on 7 July 2023 along with the notice of its Annual General
Meeting ("AGM") to be held at Coveham House, Downside Bridge Road, Cobham KT11
3EP, on the 31(st) July 2023, a Proxy Form and a letter detailing
shareholders' option to receive electronic communication from the Company
going forward.
Suspension from trading
Shareholders should note that trading in the Company's ordinary shares will
remain suspended pending the publication of the Annual Report and Accounts for
the year ended 31 December 2022 on the Company's website.
The Company will apply to have trading in its ordinary shares lifted
immediately once the Annual Report and Accounts have been made available on
the Company's website.
For the purposes of MAR and Article 2 of Commission Implementing Regulation
(EU) 2016/1055, this announcement is being made on behalf of Graham Stacey,
Chief Executive Officer. This announcement contains inside information for
the purposes of Article 7 of Regulation (EU) 596/2014.
**ENDS**
For further information please visit www.kerasplc.com
(http://www.kerasplc.com/) , follow us on Twitter @kerasplc or contact the
following:
Graham Stacey Keras Resources plc info@kerasplc.com
Nominated Adviser & Joint Broker SP Angel Corporate Finance LLP +44 (0) 20 3470 0470
Ewan Leggat / Charlie Bouverat
Joint Broker Shard Capital Partners LLP +44 (0) 207 186 9900
Damon Heath / Erik Woolgar
Notes:
Keras Resources (AIM: KRS) wholly owns the Diamond Creek organic phosphate
mine in Utah, US. Diamond Creek is one of the highest-grade organic
phosphate deposits in the US and is a fully integrated mine to market
operation with in-house mining and processing facilities. The operation
produces a variety of organic phosphate products that can be tailored to
customer organic fertiliser requirements.
The Company is focused on continuing to build market share in the
fast-growing US organic fertiliser market and build Diamond Creek into the
premier organic phosphate producer in the US.
chairman's statement
I am pleased to provide an update on our progress since the last report and to
set out our outlook for the business going forward.
The main activity of the Group is now in progressing our organic phosphate
business in Utah, USA, where Keras increased its ownership from 51% to 100% on
30 March 2022.
The Diamond Creek phosphate mine
The Diamond Creek phosphate mine, which is believed to be one of the highest
grade organic rock phosphate deposits in the US, comprises an opencast
operation located on an 840 acre Federal Lease, and the Spanish Fork
Processing Facility; both owned and operated by Falcon Isle Resources LLC and
Falcon Isle Holdings LLC (collectively 'Falcon Isle'). Prior to the
acquisition of the 49% outside interest on 30 March 2022, Falcon Isle was a
51% subsidiary of Keras during 2021, since which it has been a wholly owned
subsidiary. Keras now has full management control with Graham Stacey also
being appointed CEO of Falcon Isle where he can focus his efforts on the
development of that business.
Diamond Creek is located approximately 80km south-east of Salt Lake City, and
our focus going forward is to build the operation into the premier high-grade
organic phosphate producer in the US. Our focus and target market is in
supporting sustainable agriculture and we are strong advocates for the
benefits of enhancing soil health and reducing the impact that synthetic
fertilisers have on water resources. Our organic phosphate fertilizer products
help farmers realise better crop growth and yields, and reduce the soil
degradation seen when farmers use chemically manufactured fertilisers, while
at the same time reducing the carbon footprint associated with growing their
crops.
The mine is fully permitted, and the Spanish Fork processing plant is close to
infrastructure and ideally located to take advantage of Salt Lake City's
resources including labour, supplies, industrial engineering and financial
services. The integrated mining and processing operation has compelling
economics with a low capex, low-intensity seasonal mining operation and our
in-house processing plant has flexibility to process a variety of organic rock
phosphate products throughout the year. The mined material requires
crushing, milling and bagging before being sold as high-grade organic rock
phosphate fertiliser - a 23% total phosphorus pentoxide ('P(2)0(5)') premium
product and importantly with minimum 12% available P(2)0(5) which is
significantly higher than our competitors in the US. Falcon Isle is currently
investigating ways to expand its product offering and potential customer base
by offering both granulated and liquidised fertilizers.
The mine has a pre-stripped area with production drilling information
delineating approximately 2 years of planned production still in-situ.
However, we believe there is significant scope to increase the current life of
mine at Diamond Creek with historic "surface mineable resources" representing
in excess of 60 years of production.
In 2022, 4,750 tons of phosphate were mined and delivered to the laydown area
at Diamond Creek. Sales totalled 4,276 tons of phosphate for the year.
Since Keras took control of the marketing function and with both the mining
and processing facilities now operating as planned developing market share
will be our primary focus for the next two years. Production rhythm is key
to the supply of both consistent quantity and quality products which Keras's
operational control has now enabled.
A key component of our marketing effort will be growth tests across a range of
crops and soil types. This process is planned to run for the balance of 2023
and will provide focussed market feedback to support of our product use across
crop types, regions and planting seasons.
We are now looking forward to commencing our mining season at Diamond Creek
which takes place during the summer season from July to October 2023, while
the mine site is free of snow.
Falcon Isle is currently operating profitably at the company level and has
commenced repaying loans made to it by Keras.
Nayéga manganese mine / Togo
The Group's interests in Togo are accounted for at 31 December 2022 as assets
held for sale. Keras holds an 85% interest in Société Générale de Mines
("SGM"), which owns the Research Permits for the Nayéga manganese project
("Nayéga") in the Republic of Togo ("State").
On 17 May 2023 an agreement was signed between Keras and the State whereby it
was agreed that Nayéga is a Togolese strategic asset and the exploitation
permit will be awarded to Société Togolaise de Manganèse, a Togolese
incorporated company 100% owned by the State ("STM") and Keras will no longer
pursue the Nayéga exploitation permit. Keras will transfer all its
intellectual knowledge on Nayéga to the State and provide advisory and
brokerage services to fast track the development of Nayéga.
The State agreed to pay Keras a cash consideration of US$1.7m, which amount
has now been received by Keras, and thereafter Keras will be paid advisory
fees of 1.5% of gross revenue for 3 years and brokerage fees of 6.0% of gross
revenue for the lesser of 3.5 years or 900,000 tonnes of beneficiated
manganese ore produced and sold from Nayéga.
Financial review
The Consolidated Statement of Comprehensive Income for the year shows a loss
of £847,000 (15 months to 31 December 2021 - loss £1,948,000).
The loss for the year includes costs relating to Togo. The carrying value of
assets relating to the Nayéga mine at 31 December 2022 is materially equal to
their estimated initial disposal value amounting to $1.7m, after allowing for
costs of the sale. No amount is included in respect of the value of future
income receivable from Nayéga.
Also included in the consolidated loss is a severance payment of $340,000
payable to the previous CEO of Falcon Isle.
In May 2022 Keras raised £1,950,000 (before costs) by an issue of new
ordinary shares. These funds were used for the first tranche of US$800,000 of
the cost of acquiring the former minority interest in Falcon Isle, including
loans owed to the vendor, and for general working capital. The second tranche
of $800,000, plus $240,000 of the severance payment referred to above, has
been paid from the $1.7m received from the Republic of Togo. As the payment
was made after 1 July 2023 there was a technical default for late payment,
which default has been remedied within the 30 day period provided for in the
agreement.
At a general meeting held on 25 July 2022 a resolution was passed
consolidating the ordinary share capital on the basis of 1 new ordinary share
of 1p for every 100 old ordinary shares of 0.01p. Following the passing of
that resolution the number of ordinary shares in issue was reduced to
79,735,731.
Directors and Management
On 1 June 2022 Graham Stacey took over the role of Chief Executive Officer
from me, and I moved into the role of Non-Executive Director.
On 1 September 2022, I took over from Brian Moritz as Non-Executive Chairman.
Brian remains a Non-Executive Director and Company Secretary, and will
continue to provide valuable oversight of the Company's finances.
At the same date Claire Parry joined the Board as an independent non-executive
director. I would like to welcome Claire on behalf of myself and my
colleagues.
Also on 1 September 2022 Dave Reeves, who was CEO for many years following the
Company's flotation, resigned from the Board to concentrate on his role as
managing director of Calidus Resources Ltd in Australia. I would like to thank
Dave for his dedicated work over the years and wish him well for the future.
Outlook
With the securing of 100% ownership of our high-grade organic phosphate
Diamond Creek mine, drawing a line under the uncertainty related to Nayéga
and securing an agreement with the Togolese State whereby the $1.7m cash
payment and ongoing cashflows for the next 3 years will further underpin the
cashflow generative Diamond creek operation, we believe the Company is
excellently positioned to deliver into the growing North American organic
agricultural sector. This sector is underpinned by the macro-economic
tailwinds of the global fertiliser markets, and we remain bullish on our
premium phosphate product and our position as we continue to build market
share.
Plans for expansion to broaden our product mix are underway and we continue to
negotiate new offtake agreements with our repeat customers. The construction
of a downstream granulator plant is planned for 2023 to allow us to further
expand the range of our products from five sized dry products to include two
sized blend granulates which will attract a price premium in markets that we
are not currently supplying. Now that we are fully in charge of operations the
Directors are confident that Falcon Isle will be an increasingly profitable
and valuable asset for the Group, and we look forward to updating our
shareholders on our progress as we continue to ramp up production and build
our position and market share of the fast-growing US organic phosphate market.
Finally, I would like to take this opportunity to thank my colleagues on the
Board and our management team for their hard work, and shareholders for their
continuing support.
Russell Lamming
Chairman
5 July 2023
STRATEGIC REPORT
Having acquired 51% in Falcon Isle Resources LLC in December 2020, we reported
on the acquisition of the remaining 49% in Falcon Isle on 30 March 2022 - a
firm commitment to the Company's strategy of delivering growth from Falcon
Isle's Diamond Creek Mine and downstream processing assets and, in time, from
other assets in the US which we will look to evaluate in terms of their
synergies with commodities contributing to a sustainable future.
The year to 31 December 2022 was therefore one of consolidation - building on
existing client relationships and introducing our PhosAgri brand to
prospective clients at trade shows. To this end we attended the Organic
Growers Summit in Monterey on California's west coast and the World Ag Expo in
Tulare California, both pivotal to the agricultural sector in California's
Central Valley. Two key take aways from these events revolved around the
sector's demand for both liquid and granular organic products, each aimed
directly at improving phosphate availability from organic rock phosphate and
therefore improved return on organic fertilizer purchase for organic growers.
While sales of our existing range of dry sized products improved markedly
from 2021 (2,197t) to 2022 (4,276t), we recognise that granulates and
solubilised products will represent a material component of the organic sector
demand going forward.
To this end, having acquired and taken delivery of a granulator plant to our
Spanish Fork facility during 2022 we are in discussions with two potential
partners to construct the plant off-site which will give us and our partner
the ability to produce a range of bespoke granulated organic fertiliser blends
rather than simply a phosphate granule which would limit our market options. A
site selection decision is expected during the second half of 2023 as the
feasibility of the sites are evaluated in terms of bulk infrastructure supply
(power, water and natural gas), zoning to support long-term production and
proximity to source materials and downstream markets.
With regard to producing liquid products, we have four testwork processes
underway to progress the solubilising and/or microbial/bacterial digestion of
our finer 100# or 350# products into liquid products which can be used in
liquid blends in fertigation (drip fed irrigation) and hydroponic
applications. The application of liquid organic products at higher available
phosphate (P(2)O(5)) (testwork presented to date suggests potential for
>20% from our micronized 350# product) ensures quicker absorption, provides
for tighter quality control, reduces losses in the application processes and
provides us access to a rapidly growing indoor controlled environment
agricultural ('CEA') sector.
These opportunities are exciting developments for us and as a historically
mineral resources/mining business we look forward to researching additional
product augmentation opportunities as we learn more about the organic
agricultural sector. Each product development will broaden our market reach,
to grow annual sales to enforce our strategy to enhance shareholder value
through broadening our product mix and building market share for our products
within the North American organic fertilizer market.
Another meaningful operational improvement has been the centralisation of all
our Falcon Isle crushing and milling operations at our Spanish Fork site. This
will continue to reduce operating costs by eliminating unnecessary ore
transport between sites previously established for different crushing and/or
milling operations. Value engineering initiatives will continue to streamline
operations and rationalise costs to ensure consistent product quality and
volumes, all aimed at increasing margins.
In the longer-term, enhancing value of that asset will involve both organic
expansion as well as identifying value-accretive projects/businesses with
natural synergies to increase scale and to add value to the Company,
ultimately to build the operation into the premier organic phosphate producer
in the US.
Additional future value enhancements include developing opportunities around
carbon sequestration and the associated carbon credits. Diamond Creek's
organic phosphate products have the potential to tap directly into this
rapidly growing market and the Company is looking at developing and enhancing
the value of this aspect of its portfolio and in-turn generate greater returns
for shareholders.
The business model has established the Company as an increasingly efficient,
high-quality and low-cost producer direct into the North American fertiliser
market.
As noted in the Chairman's Statement our Togolese asset, which was being held
for sale as at 31 December 2022, was sold on 18 May 2023, although we expect
to generate income in Togo for at least the next three years. From the
Company's point of view disposing of SGM is consistent with our strategy to
deliver shareholder value by concentrating our efforts in the US.
In exploring and developing mines to exploit mineral deposits, the Group
accepts that not all its exploration will be successful but also that the
rewards for success can be high. It therefore expects that its shareholders
will be invested for potential capital growth, taking a long-term view of
management's good track record in mineral discovery and development. The
Directors have continued to invest in the Company and currently hold
approximately 9.04% of the issued shares in Keras, after allowing for the
substantial fund raisings since the period end. We believe this stake provides
further evidence of the Board's belief in and commitment to its strategy.
To date, the Group has financed its activities through equity raisings. As the
Group's projects become more advanced, the Board will seek mining and/or
offtake finance and may also investigate strategic opportunities to obtain
funding for projects from future customers via pre-payments, royalties, and
other marketing arrangements.
Mining projects
United States
Keras acquired an interest in Falcon Isle, holder of the Diamond Creek
phosphate mine, in July 2020, and increased its interest to 51% in December
2020. Keras acquired the outstanding 49% in March 2022. The mine is situated
approximately 80km SSE of Salt Lake City, Utah. Diamond Creek is a fully
permitted, high-grade direct shipping ore ('DSO'), low capex organic phosphate
mine, which has significant historical estimated in-situ tonnage (mineral
resources have not been classified according to modern International Reporting
Standards) with sufficient phosphate ore exposed in-situ to provide for the
2023 and 2024 mining seasons before any overburden stripping is required.
The phosphate mineralisation is concentrated in the sedimentary shale beds of
the Meade Peak Member of the Phosphoria Formation. The mineralised zone is
c.3m thick and averages 23% total P(2)O(5) with guaranteed available P(2)O(5)
of 12%. Historic reports vary with "surface mineable resources" ranging from
3.10Mt to 4.60Mt. At an internally estimated peak production rate of
23.5ktpa, the opencast resources alone represent a significant mine life.
The 2022 mining campaign was completed in October 2022 with a total of 4,750
ore tons extracted from the mine. Primary crushing during the reporting period
was undertaken using a contrctor-operated mobile crusher on the mine site,
with downstream processing conducted through a combination of contractor
toll-milling (producing 10mesh and -50mesh products) and Falcon Isle owned
milling plant comprising front-end feed, primary crush, milling, ultra-fine
dust extraction, 50lb and 1ton bagging circuits to produce -100 mesh and -350
mesh powders. As noted previously a granulation plant was procured and
delivered to our Spanish Fork site during the fourth quarter of 2021 with
construction and commissioning initially planned for the second half of 2022.
Pending discussions with potential partners in development of the granulation
side of our business, construction has been postponed to enable us to conclude
agreements relating to the feasibility of proposed sites for the granulator
plant. The construction phase of the plant will be approximately 3 months post
conclusion of the feasibility assessment which is estimated to be concluded
during the fourth quarter of 2023. Our initial intention to construct the
granulator plant in a building adjacent to our milling plant in Spanish Fork,
however as we've established ourselves in the organic agricultural sector it
became apparent that we could extract greater value from a blended granulate
incorporating nitrogen, phosphate, potassium as well as other minor valuable
fertiliser constituents. We therefore elected to investigate opportunities to
collaborate with partners to select sites to achieve this. These discussions
remain ongoing and we look forward to reporting on finailisation of these
discussions and construction progress.
Our products have received Organic Certification by all three key
certification agencies in the USA - California ('CDFA'), Washington State
('WSDA') and the federal Organic Materials Review Institute ('OMRI'). As a
Direct Shipping Ore ('DSO') it requires no chemical/synthetic upgrade
processes which is the basis for our organic certification. Our rock phosphate
contains low heavy metal impurities, significantly higher available P(2)O(5)
than any other organic rock phosphate in North America, and a calcium content
of >25%.
West Africa
Through the Company's 85% interest in the Nayéga manganese project in Togo,
Keras developed the asset through exploration, and definitive feasibility
study ('DFS') culminating in successful trial mining during the first quarter
of 2019. During the final quarter of 2022 Keras was notified that the Togolese
State had intended to declare manganese, among other metals and minerals, as
strategic state assets and that a process would be implemented to investigate
how the State would take greater ownership and participate in the development
and operation of these assets.
Considering the investment made by Keras between 2012 and 2019 this clearly
represented a departure from Togolese Mining Law as well as the Mining
Convention drafted between the parties as to how the State would benefit from
the Nayéga Mine. However, the Company remained in ongoing discussions with
the State to understand how this State declaration would pan out. As was
recently announced on 18 May 2023, Keras and the State entered into an
agreement in terms of which Keras would no longer pursue the granting of an
Exploitation Permit and that the State would establish a wholly owned
manganese holding vehicle - STM which would be responsible for the development
of all manganese assets within Togo.
Given the circumstances, Keras negotiated the disposal of all historical
Nayéga technical studies commissioned and funded by Keras to the State. While
it was not the ideal outcome for the Company, the State acknowledged that the
newly formed STM would require a period of technical information and skills
transfer. Keras therefore entered into the agreement in good faith in the
knowledge that there would be an ongoing revenue stream for a three year
period post re-commencement of the mine. This in addition to a USD1.7m cash
payment for the technical studies will provide Keras with an initial
compensation for development expenditures as well as an ongoing revenue stream
for advisory and brokerage services provided to STM meaning that Keras is not
walking away from the project and the State values Keras's institutional
knowledge.
Keras is therefore satisfied with the outcome and will continue to provide
routine technical advisory and product sale brokerage services to STM.
Sustainability
Keras is committed to responsible mining and upholding ESG best practice
across our business. We are similarly committed to our stakeholders and are
focused on looking to create value and benefits for all whilst seeking to
manage and mitigate the potential impacts that our operations may have. We are
focussed on mining an essential resource that can contribute to a more
sustainable future and importantly sustainable and regenerative agriculture.
With the Diamond Creek mine we are running a simple operation with only
crushing & milling requirements and will look to maintain our low carbon
footprint. We are focused on meeting our commitments across the ESG space and
will continue to be proactive in this area as we look to develop and sustain a
positive legacy.
Risk Management
The Board regularly reviews the risks to which the Group is exposed and
ensures through its meetings and regular reporting that these risks are
minimised as far as possible.
The principal risks and uncertainties facing the Group at this stage in its
development are:
Market Risk
Unlike marketing globally traded, indexed commodities into international
markets, growing market share within the niche organic fertiliser market
within North America presents risk in terms of pricing and volume.
The Group has employed a head of marketing to develop and implement a
marketing strategy which will be a key focus area to build market share. The
business has a range of existing customers, three of which are anchor clients
having provided commitments to purchase a pleasing base load of our planned
annual production. Our marketing strategy rollout will include presence at
industry trade exhibitions and conferences, as well as regular regional direct
contact visits with a comprehensive schedule of contacts within the wholesale
and distribution segments of the organic fertiliser market. Our business model
will largely be driven by uptake from co-operative type clients with wide
distribution networks, rather than selling directly to farmers themselves.
Exploration Risk
The Group's business has been primarily mineral exploration and evaluation
which are speculative activities and whilst the Directors are satisfied that
good progress is being made, there is no certainty that the Group will be
successful in the definition of economic mineral resources, nor that it will
proceed to the development of any of its projects or otherwise realise their
value.
The Group aims to mitigate this risk when evaluating new business
opportunities by targeting areas of potential where there is at least some
historical drilling or geological data available.
Resource Risk
All mineral projects carry risk associated with defined grade and continuity.
Mineral resources and reserves are calculated by the Group in accordance with
accepted industry standards and codes but are always subject to uncertainties
in the underlying assumptions which include geological projection and
commodity price assumptions.
The Group reports exploration targets, mineral resources and ore reserves in
accordance with internationally approved codes where our operations/projects
are located, which set minimum standards for public reporting of mineral
exploration results, mineral resources and ore reserves.
Development Risk
Delays in permitting, financing and commissioning a project may result in
delays to the Group meeting development and/or production targets. Changes in
commodity prices can affect the economic viability of mining projects and
affect decisions on continuing exploration activity
Mining and Processing Technical Risk
Notwithstanding the completion of metallurgical testwork, trial mining and
pilot studies indicating the technical viability of a mining operation,
variations in mineralogy, mineral continuity, ground stability, ground water
conditions and other geological conditions may still render a mining and
processing operation economically or technically non-viable.
The Group has a small team of mining professionals experienced in geological
evaluation, exploration, financing and development of mining projects. To
mitigate development risk, the Group supplements this from time to time with
engagement of external expert consultants and contractors.
Environmental Risk
Exploration and development of a project can be adversely affected by
environmental legislation and the unforeseen results of environmental studies
carried out during evaluation of a project. Once a project is in production
unforeseen events can give rise to environmental liabilities.
As Keras undertakes mining operations, any disturbance to the environment
during this phase is required to be rehabilitated, with specific requirements
for closure and closure funding in accordance with the prevailing regulations
of the countries in which we operate as well as to international
best-practice.
Given the Group's size and scale it is not considered practical or cost
effective to collect and report data on carbon emissions.
Financing & Liquidity Risk
The Group has had an ongoing requirement to fund its activities through the
equity markets and may in future need obtain finance for further project
development. There is no certainty such funds will be available when needed.
To date, Keras has managed to raise funds primarily through equity placements
despite the very difficult markets that currently exist for raising funding in
the junior mining industry.
Political Risk
All countries carry political risk that can lead to interruption of activity.
Politically stable countries can have enhanced environmental and social
permitting risks, risks of strikes and changes to taxation whereas less
developed countries can have, in addition, risks associated with changes to
the legal framework, civil unrest and government expropriation of assets.
Partner Risk
Whilst there has been no past evidence of this, the Group can be adversely
affected if joint venture or equity partners are unable or unwilling to
perform their obligations or fund their share of future developments. Keras no
longer operates with either equity or joint venture partners having secured
100% of the Diamond Creek project.
Bribery Risk
The Group has adopted an anti-corruption and bribery policy and whistle
blowing policy under the Bribery Act 2010. Notwithstanding this, the Group may
be held liable for offences under that Act committed by its employees or
subcontractors, whether or not the Group or the Directors had knowledge of the
commission of such offences.
Financial Instruments
Details of risks associated with the Group's financial instruments are given
in Note 29 to the financial statements. Keras does not utilise any complex or
derivative financial instruments.
COVID-19
Travel and shipping restrictions in place globally during 2021 had a direct
impact on timing and cost of delivery of plant and equipment to the USA.
However, given recent developments the Directors do not believe that Covid 19
will have a material effect on the Company or its operations going forward.
Insurance Coverage
The Group maintains a suite of insurance coverage that is appropriate for the
Group and Company. This is arranged via a specialist mining insurance broker
and coverage includes public and products liability, travel, property and
medical coverage and assistance while Group employees and consultants are
travelling on Group business. This is reviewed at least annually and adapted
as the Group's scale and nature of activities changes. Keras also has
Directors and Officers insurance in place.
Internal Controls and Risk Management
The Directors are responsible for the Group's system of internal financial
control. Although no system of internal financial control can provide absolute
assurance against material misstatement or loss, the Group's system is
designed to provide reasonable assurance that problems are identified on a
timely basis and dealt with appropriately.
In carrying out their responsibilities, the Directors have put in place a
framework of controls to ensure as far as possible that ongoing financial
performance is monitored in a timely manner, that corrective action is taken
and that risk is identified as early as practically possible. The Directors
review the effectiveness of internal financial control at least annually.
The Board, subject to delegated authority, reviews capital investment,
property sales and purchases, additional borrowing facilities, guarantees and
insurance arrangements.
The Board takes account of the significance of social, environmental and
ethical matters affecting the business of the Group. At this stage in the
Group's development the Board has not adopted a specific policy on Corporate
Social Responsibility as it has a limited pool of stakeholders other than its
shareholders. Rather, the Board seeks to protect the interests of Keras'
stakeholders through individual policies and through ethical and transparent
actions.
The Group has adopted an anti-corruption and bribery policy and a whistle
blowing policy as stated previously.
Shareholders
The Directors are always prepared, where practicable and subject to
confidentiality under the AIM Rules, to enter into dialogue with shareholders
to promote a mutual understanding of objectives. The Annual General Meeting
provides the Board with an opportunity to informally meet and communicate
directly with investors.
Employees
The Group operates primarily through contractors. Notwithstanding this, the
Group engages its contract employees to understand all aspects of the Group's
business and seeks to remunerate them fairly, being flexible where
practicable. The Group gives full and fair consideration to applications for
employment received regardless of age, gender, colour, ethnicity, disability,
nationality, religious beliefs, transgender status or sexual orientation. The
Group takes account of employees' interests when making decisions and welcomes
suggestions from employees aimed at improving the Group's performance.
The Group currently operates in the USA and Togo. It recruits locally as many
of its employees and contractors as practicable.
The Company has four directors, three are male and one is female.
Suppliers and Contractors
The Group recognises that the goodwill of its contractors, consultants and
suppliers is important to its business success and seeks to build and maintain
this goodwill through fair dealings. The Group has a prompt payment policy and
seeks to settle all agreed liabilities within the terms agreed with suppliers.
Contractors are appointed based on a detailed assessment of their
capabilities, capacity and track record.
Health and Safety
The Board recognises that it has a responsibility to provide strategic
leadership and direction in the development of the Group's health and safety
strategy in order to protect all of its stakeholders. The Group does not have
a formal health and safety policy at this time. This is re-evaluated as and
when the Group's nature and scale of activities expand.
Section 172 statement
The Directors believe they have acted in the way most likely to promote the
success of the Company for the benefit of its members as a whole, as required
by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
· Consider the likely consequences of any decision in the
long-term;
· Act fairly between the members of the Company;
· Maintain a reputation for high standards of business conduct;
· Consider the interests of the Company's employees;
· Foster the Company's relationships with suppliers, customers and
others; and
· Consider the impact of the Company's operations on the community and
the environment.
The Company's operations and strategic aims are set out throughout the
Strategic Report and in the Chairman's Statement, and relationships with
stakeholders are also dealt with in the Corporate Governance Statement.
Graham Stacey
Director
This Strategic Report was approved by the Board of Directors on 5 July 2023
THE BOARD
RUSSELL LAMMING
Non-Executive Chairman
Russell Lamming is a qualified geologist with an honours degree in geology
from the University of the Witwatersrand and a Bachelor of Commerce in
Economics from the University of Natal. Russell has a broad range of
experience including directorship of a South African mining consultancy and
precious metals analyst for a leading international broker and was the CEO of
AIM listed Chromex Mining and Goldplat Plc. He has strong relationships in
London and internationally and has raised considerable funds for resource
companies over the years.
GRAHAM STACEY
Chief Executive Officer
Graham holds an honours degree in Mining Engineering from WITS University in
Johannesburg (1995), and an MBA from the WITS Business School (2004) and a
Mine Manager's Certificate of Competency (2001). Graham has over 25 years'
experience across a range of commodities in the resources sector, including
direct operational management in the coal, PGE and chrome businesses in South
Africa, manganese in Togo and rock phosphate in the USA, as well in a
technical consulting role (2004-2008). He is a Competent Person and Competent
Valuator as a longstanding member of the South African Institute of Mining and
Metallurgy (SAIMM), and has wide ranging experience in mine design, project
execution, operations and mineral resource management. He was previously a
director of AIM listed Chromex Mining. Following the acquisition of 100% of
Falcon Isle he has been appointed as CEO of that company.
BRIAN MORITZ
Non-Executive Director
Brian is a Chartered Accountant and former Senior Partner of Grant Thornton,
London. He formed Grant Thornton's Capital Markets Team which floated over 100
companies on AIM under his chairmanship. In 2004 he retired from Grant
Thornton to concentrate on bringing new companies to the market as a director.
He concentrates on mining companies, primarily in Africa, and was formerly
chairman of African Platinum PLC (Afplats) and Metal Bulletin PLC as well as
currently being chairman of several junior mining companies.
CLAIRE PARRY
Non-Executive Director
Claire is a Chartered Accountant and a partner in the Canterbury office of
Azets, a top 10 UK accounting firm. With over 20 years in the industry she
specialises in the application of IFRS and accounting and financial control
generally for smaller quoted companies, primarily in the natural resources
sector.
CORPORATE GOVERNANCE STATEMENT
To the extent applicable, and to the extent able (given the current size and
structure of the Company and the Board), the Company has adopted the Quoted
Companies Alliance Corporate Governance Code. Details of how the Company
complies with the principles contained in the Code are set out below.
No key governance matters have arisen since the publication of the last Annual
Report.
Taking account of the Company's size and nature, the Board considers that the
current Board is a cost effective and practical method of directing and
managing the Company. As the Company's activities develop in size, nature
and scope, the size of the Board and the implementation of additional
corporate governance policies and structures will be reviewed. Further
disclosures under the Code are included on the Company's website.
Principle 1: Establish a strategy and business model which promote long term
value for shareholders.
The Company's strategy is to identify mining projects which can be developed
to create value and income for shareholders. In June 2017 this strategy was
successfully demonstrated when the Company's Australian gold exploration
assets were floated on the Australian Securities Exchange (ASX) with the name
Calidus Resources Limited. In November 2019 the Company's shares in Calidus
were demerged and transferred to the Company's shareholders by way of a
capital reduction.
The demerger has permitted the Board to examine other projects, and in
particular the Diamond Creek phosphate mine in Utah, USA, where the Company
has completed the staged acquisition of 100% equity interest in March 2022.
This is now the Company's main project.
The Company had, for some years, been seeking to convert the Research Permits
held by its 85% owned subsidiary, Société Générale de Mines SA, over the
Nayéga manganese project in Togo, to an Exploitation Permit. Since 31
December 2022 the Company has sold its intellectual property and other assets
relating to Nayéga to a newly formed parastatal company, so that it no longer
operates in Togo but will continue to provide advisory and brokerage services
to the Togolese State.
Principle 4: Embed effective risk management, considering both opportunities
and threats, throughout the organisation.
The risks facing the Company are detailed in the Strategic Report. The Board
seeks to mitigate such risks so far as it is able to do, but certain important
risks cannot be controlled by the Board.
In particular, products the Company is seeking to identify and mine are traded
globally at prices reflecting supply and demand rather than the cost of
production. So far as the Company is concerned, the substantial decline in the
price of iron ore rendered two previous projects non-viable, both of which had
appeared to have substantial value on a discounted cash flow basis, and they
were abandoned.
While the Company will only invest in exploration projects where there is a
legal right to convert an initial exploration licence to a mining licence, in
practice it may be difficult to obtain such conversion for political reasons.
There is no legal way that the Company can protect itself against this
possibility.
Principle 5: Maintain the Board as well-functioning, balanced team led by the
chair.
The Board has been substantially changed during the year under review, both as
regards its composition and as regards the roles of the individual directors.
Brief CVs of the current directors are set out separately in this Annual
Report.
Previously the board comprised four founder directors, none of whom qualified
as independent as all had material shareholdings resulting largely from their
support of previous fund raisings.
Dave Reeves, who is resident in Western Australia, retired as a non-executive
director on 1 September 2022. He was replaced by Claire Parry, who is
considered to be an independent non-executive director.
Graham Stacey, the CEO since 1 June 2022, works full time for the Company,
with primary responsibility for the Diamond Creek phosphate mine in Utah, USA.
The other directors, Russell Lamming (CEO until 1 June 2022 and non-executive
chairman from 1 September 2022), Brian Moritz (non-executive chairman until 1
September 2022) and Claire Parry are non-executive directors. As Utah is in a
time zone 7 hours different from the UK, Board meetings are normally conducted
by video conference or by telephone, supplemented by physical meeting when
Graham Stacey is in the UK.
The CEO is in regular touch with the Directors. He also holds frequent
informal discussions with other directors. Throughout the year such
discussions average approximately two per week.
Non-executive directors are committed to devote 30 days per annum to the
Company, but they are likely to exceed that required time commitment. Standard
director's fees are currently £48,000 per annum for the Chairman and £24,000
per annum for each non-executive director, below the median for AIM companies.
Brian Moritz also acts as Company Secretary and has board responsibility for
accounting matters and receives an extra £12,000 per annum in respect of
those responsibilities. No further amounts are paid for serving on Board
committees.
Principle 6: Ensure that between them the directors have the necessary
up-to-date experience, skills and capabilities.
Brief CVs of the directors are disclosed elsewhere in this Annual Report.
Each of the directors maintains up to date skills by a combination of
technical journals, courses, conferences and trade shows.
As an exploration and mining Company the Board requires skills in the area of
geology and mining. Russell Lamming is a qualified geologist and Graham
Stacey is a qualified mining engineer. Each has a long history of achievement
in this area. Importantly, each of them has been in charge of the construction
and operation of mines.
Brian Moritz and Claire Parry are Chartered Accountants. In addition to his
financial skills, Brian Moritz has previously been registered as a Nominated
Adviser and has wide experience of corporate transactions.
The advice of Azets, a top 10 UK accounting firm in which Claire Parry is a
partner, is sought on technical accounting matters, in particular in relation
to compliance with IFRS.
Principle 7: Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement.
Recently the Board has successfully achieved a major objective by acquiring a
phosphate mine in Utah, USA, constructing a processing plant and commencing
production. The next stage for this mine is to expand its product range and
client base.
The Board will concentrate on achieving profitable production and positive
cash flow from its existing project while continuing to seek other mining
projects.
Given the current state of the Company's development the directors believe
that the Board operates efficiently and cost effectively and that the cost of
an external review process is not justified.
Principle 8: Promote a corporate culture that is based on ethical values and
behaviours.
So far as possible the Company recruits locally for staff and sub-contractors.
In Utah, the Group's product is a natural organic fertilizer which plays its
part in reducing reliance on artificial manufactured fertilizers.
Company has adopted a comprehensive anti-corruption and whistle blowing policy
and an ethical policy which is strictly applied.
Principle 10: Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders.
The Board communicates with its stakeholders through social media and
webcasts, as well as by announcements on RNS. It welcomes the ability to meet
and engage with shareholders at general meetings.
The audit committee normally meets twice per annum, on its own to consider and
approve the interim results, and with the auditors to consider the annual
report and matters raised by the auditors based on their audit. So far as
possible recommendations by the auditors are immediately implemented. As the
CEO is also present as an observer at such meetings, no further report is
submitted to the Board.
The remuneration committee meets on an ad hoc basis when required. Fees paid
to the non-executive directors are settled by the Chief Executive Officer, as
the non-executive directors comprise the remuneration committee.
Brian Moritz
Director
DIRECTORS' REPORT
The Directors present their report together with the audited financial
statements of the Group for the year ended 31 December 2022.
The Group's projects are set out in the Strategic Report.
Review of business and financial performance
Further details on the financial position and development of the Group are set
out in the Chairman's Statement, the Strategic Report and the annexed
financial statements.
Results
The Group reports a loss for the year of £997,000 (15 months to 31 December
2021 - loss £2,014,000).
Major events after the balance sheet date
Since the end of the year the Company has agreed to transfer its interests in
the Nayéga manganese project to the Republic of Togo on the terms set out in
Note 31.
Dividends
The Directors do not recommend payment of a dividend for the year ended 31
December 2022 (15 months to 31 December 2021 - £nil).
Political donations
There were no political donations during the year (15 months to 31 December
2021 - £nil).
Going concern
The Directors continue to adopt the going concern basis in preparing the
financial statements as further explained in Note 2 to the financial
statements.
Directors' indemnities
The Group maintains Directors and Officers liability insurance providing
appropriate cover for any legal action brought against its Directors and/or
officers.
Audit Committee
The Audit Committee, which currently comprises B Moritz and C Parry, and is
chaired by B Moritz, is responsible for ensuring the financial performance,
position and prospects of the Group are properly monitored and reported on and
for meeting the auditors and reviewing their reports relating to accounts and
internal controls. Meetings of the Audit Committee are held at least twice a
year, at appropriate times in the reporting and audit cycle. The Audit
Committee reports to the Board on its proceedings after each meeting on all
matters for which it has responsibility. The members of the Audit Committee
are subject to annual re-election by the Board.
Remuneration Committee
The Remuneration Committee, which comprises B Moritz and C Parry and which is
chaired by B Moritz, reviews the performance of the executive directors and
sets their remuneration, determines the payment of bonuses to executive
directors and considers the future allocation of share options and other
equity incentives pursuant to any share option scheme or equity incentive
scheme in operation from time to time to Directors and employees. Meetings
of the Remuneration Committee are held on an ad hoc basis as required. The
Remuneration Committee reports to the Board on its proceedings on all matters
for which it has responsibility. The members of the Remuneration Committee
are subject to annual re-election by the Board.
Directors
The following Directors held office throughout the period:
B Moritz
D Reeves (resigned 1 September 2022)
R Lamming
G Stacey
C Parry (appointed 1 September 2022)
Directors' interests
The beneficial interests of the Directors holding office on 31 December 2022
in the issued share capital of the Company, including spouses of Directors,
were as follows:
31 December 2022 31 December 2021
Percentage Percentage of issued ordinary share capital
Number of Ordinary Shares of issued ordinary share Number of Ordinary Shares
capital
R Lamming 4,611,845 5.78% 416,184,497 6.61%
G Stacey 437,390 0.59% 43,739,000 0.69%
B Moritz 2,125,821 2.67% 177,582,118 2.82%
C Parry - - - -
On 26 April 2022 B Moritz, and R Lamming subscribed for 35,000,000 and
45,000,000 Ordinary Shares of 0.01p each respectively at 0.12p per share. Each
share subscribed received a warrant to subscribe for 1 new Ordinary Share at
any time up to 31 May 2024, at an exercise price of 0.18p per share.
On 25 July 2022 every 100 existing ordinary shares of 0.01p each were
consolidated into 1 ordinary share of 1p each. The figures presented in the 31
December 2022 column above are shown after the consolidation.
Since 31 December 2022 there have been no changes in these shareholdings.
Directors' remuneration and service contracts
Details of remuneration payable to Directors as disclosed in note 11 to these
financial statements:
Year to 31 December 15 months to 31 December
Remuneration Share-based payments 2022 2021
£'000 Total Total
£'000 £'000 £'000
B Moritz 40 - 40 52
D Reeves 10 - 10 30
C Parry 8 - 8
R Lamming 118 4 122 237
G Stacey 114 - 114 22
290 4 294 341
Statement of Directors' responsibilities
The Directors are responsible for preparing the strategic report, the
directors' report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
Group financial statements in accordance with UK-adopted International
Accounting Standards ("UK-adopted IAS") in conformity with the requirements
of the Companies Act 2006 and the company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 "Reduced Disclosure Framework", and
applicable law).
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Parent Company and of the profit or loss of the Group
and Parent Company for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable and
prudent;
· state whether the consolidated financial statements comply
with UK-adopted IAS and the parent company financial statements are prepared
in accordance with UK GAAP/FRS 101 in conformity with the requirements of the
Companies Act 2006, subject to any material departures disclosed and explained
in the financial statements; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
The Company is compliant with AIM Rule 26 regarding the Company's website.
Statement of disclosure to auditor
Each Director at the date of approval of this report confirms that;
So far as they are aware,
· there is no relevant audit information of which the
Company's auditor is unaware; and
· they have taken all steps that they ought to have taken to
make themselves aware of any relevant audit information and to establish that
the auditor is aware of that information.
Auditor
A resolution to re-appoint PKF Littlejohn LLP as auditor will be proposed at
the Annual General Meeting. PKF Littlejohn LLP has indicated its willingness
to continue in office.
By order of the Board
Brian Moritz
Director
5 July 2023
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF KERAS RESOURCES PLC
Opinion
We have audited the financial statements of Keras Resources Plc (the 'parent
company') and its subsidiaries (the 'group') for the year ended 31 December
2022 which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated and Parent Company Statements of Financial Position, the
Consolidated and Parent Company Statements of Changes in Equity, the
Consolidated and Parent Company Statements of Cash Flows and notes to the
financial statements, including significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK-adopted international accounting standards. The financial reporting
framework that has been applied in the preparation of the parent company
financial statements is United Kingdom Accounting Standards, including FRS 101
Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting
Practice) and as applied in accordance with the provisions of the Companies
Act 2006.
In our opinion, the financial statements:
· give a true and fair view of the state of the group's and of the
parent company's affairs as at 31 December 2022 and of the group's loss for
the period then ended;
· the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
· the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted Accounting
Practice and as applied in accordance with the provisions of the Companies Act
2006; and
· the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group's and parent company's ability to continue to adopt
the going concern basis of accounting included reviewing cashflow forecasts
covering a period of 12 months from the date of approval of these financial
statements, considering the levels of discretionary and non-discretionary
expenditure forecasted, challenging and conducting sensitivity analysis using
the key inputs and assumptions underpinning said forecasts, ascertaining the
group and parent company's current cash position and reviewing the group and
parent company's performance since the period end. Whilst the group made a
significant loss in the period and has forecasted significant growth in
revenues over the going concern period, the group and parent company has
notable cash reserves and a notable proportion of the costs forecasted are
discretionary therefore if forecasted growth targets are not met,
discretionary costs could be reduced or deferred accordingly.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group's or parent company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
For the purposes of determining whether the financial statements are free from
material misstatement, we define materiality as the magnitude of misstatement
that makes it probable that the economic decisions of a reasonably
knowledgeable person, relying on the financial statements, would be changed,
or influenced. We also determine a level of performance materiality which we
use to assess the extent of testing needed to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole.
Materiality for the group financial statements as a whole was set as £121,000
(2021: £109,000). This was calculated based upon 2% of gross assets (2021: 2%
of gross assets) due to the group's significant capitalised exploration costs,
assets held for sale and cash reserves being key balances of interest within
the financial statements and the fact that though generating revenues, the
group is not yet profit generating. Performance materiality and the triviality
threshold for the consolidated financial statements was set at £84,700 (2021:
£76,300) and £6,050 (£5,450) respectively due to the assessed risk and our
accumulated knowledge of the group.
Materiality for the parent company financial statements as a whole was set as
£105,000 (2021: £43,700). This was calculated based upon 2% of gross assets
(2021: 5% of loss before tax) due to the focus on the investment in and loans
due from Falcon Isle Resources LLC. Performance materiality and the triviality
threshold for the parent company was set at £73,500 (2021: £30,600) and
£5,250 (2021: £2,185) respectively due to the assessed risk and our
accumulated knowledge of the Company.
We also agreed to report to those charged with governance any other audit
misstatements below the triviality thresholds established above which we
believe warranted reporting on qualitative grounds.
Our approach to the audit
The scope of our audit was influenced by our application of materiality. The
quantitative and qualitative thresholds for materiality determine the scope of
our audit and the nature, timing, and extent of our audit procedures.
In designing our audit, we considered areas involving significant accounting
estimates and judgements by the directors as well as future events that are
inherently uncertain. These included the recoverable value of the parent
company's investment in its subsidiary and the amounts due to the parent
company by its subsidiaries and the recoverable value of capitalised
exploration costs. We also addressed the risk of management override of
internal controls, including among other matters consideration of whether
there was evidence of bias that represented a risk of material misstatement
due to fraud.
We performed an audit of the financial information of the group's four
components in order to obtain the assurance required for the group audit
opinion. All of the components were assessed as being significant due to their
results for the year, the value of their assets, liabilities and capital and
reserves as at 31 December 2022 and the assessed risks in respect of their
results for the year and their assets, liabilities and capital and reserves.
Of the four reporting components of the group, two are located in the United
Kingdom, one is located in the United States of America and one is located in
Togo. PKF Littlejohn LLP audited the ultimate parent company, situated in the
United Kingdom, and its subsidiaries, situated in the United Kingdom, United
States of America and Togo. The Engagement Partner conducted audit work in the
United Kingdom but interacted regularly with the Management team in the United
States of America and Togo during all stages of the audit and was responsible
for the scope and direction of the audit process. This, in conjunction with
additional procedures performed, gave us appropriate evidence for our opinion
on the group financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter How our scope addressed this matter
Carrying value of intangible assets
As at 31 December 2022 the Group has intangible assets with a carrying value Our work in this area included but was not limited to:
of £3,558k which represents capitalised exploration and evaluation costs.
§ Confirming that the group held good title to the underlying licenses and
Given the value of the balance and the significant estimates and judgements assessing whether any indicators of impairment exists.
required to be made by management when conducting their impairment
assessments, there is a risk that the exploration costs capitalised may be § Obtaining Management's impairment assessments in relation to intangible
materially misstated as they are impaired and/or costs capitalised in the year assets and supporting discounted cashflow forecasts. Reviewing their
have been inappropriately capitalised in accordance with the eligibility assessment and their supporting value in use calculates for reasonableness;
requirements of IFRS 6. considering whether any of the IAS 36 impairment indicators have been met and
considering if the recoverable value exceeds the carrying value.
We consider Management's assessment of impairment is reasonable in concluding
that no impairment is required to be recognised at the year end.
Assets held for sale - Sale of Societe General De Mine
During the year, the Company entered into discussions to dispose of its Our work in this area included but was not limited to:
Togolese operations and negotiations with an interested party have continued
post year-end, leading to the completion of a transaction in May 2023. · Obtaining management's justification for the classification the
Management have therefore classified this segment as a held for sale asset as segment as a held for sale asset. Reviewing, discussing with management and
per IFRS 5. obtaining corroborative evidence where possible; considering whether the
recognition criteria per IFRS 5 is met;
Given the value of the assets and liabilities of this segment and the
significant judgement and estimation required in assessing the fair value of · Obtaining from management their justification for the fair value
the asset held for sale, there is a risk the segment has not been correctly determined and any supporting workings and documentation. Reviewing and
classified as a held for sale asset and accounted for in accordance with IFRS discussing with management; challenging the key inputs and assumptions in
5 and that the fair value less cost to sell has not been correct calculated their valuation and considering whether the fair value less costs to sell is
and thus the assets held for sale may be impaired. reasonable.
· Ensuring that the segment's assets and liabilities have been
appropriately presented within the financial statements and that they
represent the lower or the carrying value of the segment's net assets is value
and fair value less costs to sell.
· Obtaining the agreement signed post year-end, reviewing and
considering the reasonableness of management's assessment and the estimates
and judgements made in respect of the assets held for sale.
We consider Management's classification of the segment as held for sale and
the estimation of fair value less cost to sell to be reasonable.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial period for which the financial statements are
prepared is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches not
visited by us; or
· the parent company financial statements are not in agreement with
the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law
are not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the group and parent company
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors
are responsible for assessing the group and the parent company's ability to
continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the group and parent company and the
sector in which they operate to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial statements. We
obtained our understanding in this regard through discussions with management,
industry research and our cumulative audit knowledge and experience of the
sector.
· We determined the principal laws and regulations currently relevant
to the group and parent company in this regard to be those arising from UK
Company Law, rules applicable to issuers on AIM, UK and US employment law and
local mining, environmental and health and safety laws in the US.
· We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by the group
with those laws and regulations. These procedures included, but were not
limited to:
o Discussions with management regarding compliance with laws and regulations
by the parent company and components;
o Review of board minutes; and
o Review of regulatory news announcements made throughout and post
period-end.
· We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override
of controls, that the potential for management bias exists in relation to the
carrying value of intangible assets, the carrying value of investments in and
loans due from subsidiaries and the carrying value of assets held for sale and
we addressed these by challenging the assumptions and judgements made by
management when auditing these significant accounting estimates and
judgements.
· As in all of our audits, we addressed the risk of fraud arising
from management override of controls by performing audit procedures which
included, but were not limited to: the testing of journals; reviewing
accounting estimates for evidence of bias; discussing with management as to
whether there were any instances or suspicions of fraud since 1 January 2022
within the parent company or components and evaluating the business rationale
of any significant transactions that are unusual or outside the normal course
of business.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
Daniel Hutson (Senior Statutory Auditor)
15 Westferry Circus
For and on behalf of PKF Littlejohn
LLP
Canary Wharf
Statutory
Auditor
London E14 4HD
5 July 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Continuing operations for the year ended 31 December 2022 Discontinued operations for the year ended 31 December 2022 Total for the year ended 31 December Continuing operations for the 15 months ended 31 December 2021 Discontinued operations for the 15 months ended 31 December 2021 Total for the 15 months ended 31 December
£'000 £'000 2022 £'000 £'000 2021
Notes £'000 £'000
Revenue 7,8 994 - 994 452 - 452
Cost of sales (263) - (263) (496) - (496)
Gross profit 731 - 731 (44) - (44)
Administrative expenses 9 (1,414) (110) (1,524) (1,388) (60) (1,448)
Loss from operating activities (683) (110) (793) (1,432) (60) (1,492)
Finance costs 12 (183) (21) (204) (43) - (43)
Net finance costs (183) (21) (204) (43) - (43)
Share of net loss of associates accounted for using the equity method - - - (116) - (116)
Loss on acquisition of controlling ownership
17 - - - (363) - (363)
Loss before taxation (866) (131) (997) (1,954) (60) (2,014)
Tax 13 - - - - - -
Loss for the year (866) (131) (997) (1,954) (60) (2,014)
Other comprehensive income - items that may be subsequently reclassified to
profit or loss
Exchange translation on foreign operations 115 35 150 (7) 73 66
Total comprehensive loss for the period/year (751) (96) (847) (1,961) 13 (1,948)
Loss attributable to:
Owners of the Company (963) (113) (1,076) (1,675) (54) (1,729)
Non-controlling interests 97 (18) 79 (279) (6) (285)
Loss for the year (866) (131) (997) (1,954) (60) (2,014)
Total comprehensive loss attributable to:
Owners of the Company (824) (83) (907) (1,679) 9 (1,670)
Non-controlling interests 73 (13) 60 (282) 4 (278)
Total comprehensive loss for the period/year (751) (96) (847) (1,961) 13 (1,948)
Earnings per share
Basic and diluted loss per share (pence) 26 (1.148) (0.033)
The notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
31 December 2022 31 December 2021
£'000 £'000
Notes
Assets
Property, plant and equipment 14 381 554
Right of use asset 15 121 215
Intangible assets 16 3,558 4,606
Non-current assets 4,060 5,375
Inventory 20 668 273
Trade and other receivables 21 191 94
Assets held for sale 23 1,558 -
Cash and cash equivalents 22 207 166
Current assets 2,624 533
Total assets 6,684 5,908
Equity
Share capital 25 797 630
Share premium 25 5,838 4,033
Other reserves 25, 27 282 111
Retained deficit (2,990) (1,721)
Equity attributable to owners of the Company 3,927 3,053
Non-controlling interests (146) 229
Total equity 3,781 3,282
Liabilities
Trade and other payables 28 1,158 1,658
Liabilities held for sale 23 471 -
Lease liabilities - current 18 126 107
Current liabilities 1,755 1,765
Trade and other payables 28 1,148 749
Lease liabilities - non-current 18 - 112
Non-current liabilities 1,148 861
Total liabilities 2,903 2,626
Total equity and liabilities 6,684 5,908
The financial statements were approved by the Board of Directors and
authorised for issue on 5 July 2023. They were signed on its behalf by:
Brian Moritz
Director
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Attributable to owners of the Company
Notes Share Share premium Share Exchange reserve Retained earnings/(deficit) Total Non-controlling interests Total equity
capital option
/warrant reserve £'000 £'000
£'000 £'000 £'000 £'000
£'000 £'000
Balance at 1 January 2022 630 4,033 100 11 (1,721) 3,053 229 3,282
Loss for the year - - - - (1,076) (1,076) 79 (997)
Other comprehensive income - - - 169 - 169 (19) 150
Total comprehensive loss for the period - - - 169 (1,076) (907) 60 (847)
Issue of ordinary shares 25 167 1,845 - - - 2,012 - 2,012
Costs of share issue 25 - (40) - - - (40) - (40)
Share option expense 27 - - 9 - - 9 - 9
Share option forfeit 27 - - (7) - 7 - - -
Acquisition of non-controlling interest 17 - - - - (200) (200) (435) (635)
Transactions with owners, recognised directly in equity 167 1,805 2 - (193) 1,781 (435) 1,346
Balance at 31 December 2022 797 5,838 102 180 (2,990) 3,927 (146) 3,781
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 15 MONTH PERIOD ENDED 31 DECEMBER 2021
Notes Share Share premium Share Exchange reserve Retained (deficit)/earnings Total Non-controlling interests Total equity
capital option £'000
£'000 reserve £'000 £'000 £'000
£'000 £'000 £'000
Balance at 1 October 2020 487 2,637 63 (47) 8 3,148 (140) 3,008
Loss for theperiod - - - - (1,729) (1,729) (285) (2,014)
Other comprehensive income - - - 58 - 58 8 66
Total comprehensive loss for the year - - - 58 (1,729) (1,671) (277) (1,948)
Issue of ordinary shares 25 143 1,469 - - - 1,612 - 1,612
Costs of share issue 25 - (73) - - - (73) - (73)
Share option expense 27 - - 37 - - 37 - 37
Non-controlling interest on acquisition of subsidiary 17 - - - - - - 646 646
Total transactions with owners, recognised directly in equity 143 1,396 37 - - 1,576 646 2,222
Balance at 31 December 2021 630 4,033 100 11 (1,721) 3,053 229 3,282
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2022
Year ended 31 December 2022 15 months ended 31 December 2021
£'000 £'000
Notes
Cash flows from operating activities
Loss from operating activities (997) (2,014)
Adjustments for:
Depreciation and amortisation 14,15,16 179 172
Share of loss of equity accounted associate - 116
Expenses settled in shares 109 -
Finance costs recognised 12 204 -
Equity-settled share-based payments 27 9 37
(496) (1,616)
Changes in:
- inventory (395) (216)
- trade and other receivables (97) 111
- trade and other payables 119 540
Cash generated by/(used in) operating activities (869) (1,181)
Finance costs (52) -
Taxes paid - -
Net cash generated by/(used in) operating activities (921) (1,181)
Cash flows from investing activities
Cash acquired on acquisition - 158
Acquisition of property, plant and equipment - (188)
Exploration and licence expenditure - (538)
Consideration for purchase of minority interest in subsidiary 17 (286) -
Net cash used in investing activities (286) (568)
Cash flows from financing activities
Net proceeds from issue of share capital 25 1,641 1,477
Loans received 100 -
Repayment of loans (375) -
Payment of lease obligations (93) -
Net cash flows from financing activities 1,273 1,477
Net increase/(decrease) in cash and cash equivalents 66 (272)
Cash and cash equivalents at beginning of period/year 166 438
Foreign exchange differences (25) 73
Cash and cash equivalents at 31 December 22 207 166
Significant non-cash transactions
During the year, share capital was issued in return for non-cash consideration
being the settlement of £231,000 due to creditors and £100,000 in respect of
loans.
The notes are an integral part of these consolidated financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
31 December 2022 31 December 2021
£'000 £'000
Notes
Assets
Property, plant and equipment 14 - 2
Investments 17 2,594 1,959
Non-current assets 2,594 1,961
Loans 19 3,686 2,081
Trade and other receivables 21 45 20
Cash and cash equivalents 22 54 122
Current assets 3,785 2,223
Total assets 6,379 4,184
Equity
Share capital 25 797 630
Share premium 25 5,838 4,033
Other reserves 25, 27 102 100
Retained deficit (2,190) (729)
Total equity attributable to owners of the Company 4,547 4,034
Liabilities
Trade and other payables 28 767 150
Current liabilities 767 150
Trade and other payables 28 1,065 -
Non-current liabilities 1,065 -
Total liabilities 1,832 150
Total equity and liabilities 6,379 4,184
The Company has elected to take the exemption under Section 408 of the
Companies Act 2006 from presenting the Parent Company profit and loss account.
The Parent Company loss for the period was £1,467,879 (15 months to 31
December 2021: loss of £1,014,000).
The financial statements of Keras Resources PLC, company number 07353748, were
approved by the Board of Directors and authorised for issue on 5 July 2023.
They were signed on its behalf by:
Brian Moritz
Director
The notes are an integral part of these consolidated financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2022
Share Share premium Share option Retained earnings/ (deficit) Total
capital /warrant reserve £'000 equity
£'000 £'000
£'000 £'000
Balance at 1 October 2020 487 2,637 63 285 3,472
Loss for the period - - - (1,014) (1,014)
Total comprehensive loss for the period - - - (1,014) (1,014)
Issue of ordinary shares 143 1,469 - - 1,612
Costs of share issue - (73) - - (73)
Share option expense - - 37 - 37
Transactions with owners, recognised directly in equity 143 1,396 37 - 1,576
Balance at 31 December 2021 630 4,033 100 (729) 4,034
Balance at 1 January 2022 630 4,033 100 (729) 4,034
Loss for the year - - - (1,468) (1,468)
- - - (1,468) (1,468)
Total comprehensive loss for the year
Issue of ordinary shares 167 1,845 - - 2,012
Costs of share issue - (40) - - (40)
Share option expense - - 9 - 9
Share option forfeit - - (7) 7 -
Transactions with owners, recognised directly in equity 167 1,805 2 7 1,981
Balance at 31 December 2022 797 5,838 102 (2,190) 4,547
The notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. Reporting entity
Keras Resources PLC is a company domiciled in England and Wales. The address
of the Company's registered office is Coveham House, Downside Bridge Road,
Cobham KT11 3EP. The Group currently operates as a miner of and explorer for
mineral resources.
The Group consists of Keras Resources Plc and all of its subsidiaries.
2. Going concern
The Directors have adopted the going concern basis in preparing the Group and
Company financial statements. The Group's and Company's business activities
together with the factors likely to affect its future development, performance
and position are set out in the Chairman's Statement and Strategic Report. In
addition, note 29 to the Financial Statements includes the Group's policies
and processes for managing its financial risk management objectives.
Since the end of the year the Company has agreed to sell its manganese mining
interests in Togo to the Republic of Togo. The consideration of $1,700,000 was
received in July 2023, and the amount received, after payment of costs
associated with the sale, has been used to pay the 2023 instalment of the
consideration for the acquisition of the 49% interest in Falcon Isle, as
described below, as well as for general working capital.
During the year, the Company acquired the minority 49% interest in Falcon
Isle, and agreed to repay loans made by the vendor to Falcon Isle, for a total
consideration of $3.2 million. In addition a severance payment of $340,000 is
payable to the previous CEO of Falcon Isle. The consideration amount is
payable in four annual instalments of $800,000 commencing on 1 July 2022 with
the severance payments being due being split $240,000 on 1 July 2023 and the
balance of $100k being due on 1 July 2024. The first instalment has been paid,
and the second instalment together with $240,000 of the severance payment has
been settled from the proceeds of the disposal of the Togolese interests as
set out above.
Falcon Isle is currently generating positive cash flow, which is forecast to
increase as its client base and product range are expanded. In addition, the
agreement with the Republic of Togo for the provision of advisory and
brokerage services, described in Note 31, is expected to generate substantial
cash flow over the next three years.
On this basis, the Directors have a reasonable expectation that the Group and
Company will have adequate resources to continue in operational existence for
the foreseeable future. As such, the Directors continue to adopt the going
concern basis of accounting.
3. Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards in conformity with the Companies
Act 2006("UK-adopted IAS"), and the Companies Act 2006 as applicable to
entities reporting in accordance with UK-adopted IAS.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical
cost basis unless otherwise stated.
3. Basis of preparation (continued)
(c) Functional and presentation currency
These consolidated financial statements are presented in Pounds Sterling
('GBP' or '£'), which is the Group's functional currency and is considered by
the Directors to be the most appropriate presentation currency to assist the
users of the financial statements. All financial information presented in
GBP has been rounded to the nearest thousand, except when otherwise indicated.
(d) Basis of parent company preparation
The parent company meets the definition of a qualifying entity under FRS 101
Reduced Disclosure Framework.
As permitted by FRS 101, the Company has taken advantage of the following
disclosure exemptions from the requirements of IFRS:
(a) the requirements of IFRS 7 'Financial Instruments: Disclosure';
(b) the requirements within IAS 1 relating to the presentation of certain
comparative information;
(c) the requirements of IAS 7 'Statement of Cash Flows' to present a statement
of cash flows;
(d) paragraphs 30 and 31 of IAS 8 'Accounting policies, changes in accounting
estimates and errors' (requirement for the disclosure of information when an
entity has not applied a new IFRS that has been issued but it not yet
effective); and
(e) the requirements of IAS 24 'Related Party Disclosures' to disclose related
party transactions and balances between two or more members of a Group.
(e) Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with
IFRS requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. 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 judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised if the revision affects only that period, or in the
period of revision and future periods of the revision if it affects both
current and future periods.
Critical estimates and assumptions that have the most significant effect on
the amounts recognised in the consolidated financial statements and/or have a
significant risk of resulting in a material adjustment within the next
financial year are as follows:
Deferred consideration and the loan payable to previous minority shareholder
The deferred consideration due in respect of the acquisition of the remaining
49% of Falcon Isle Resources LLC has been discounted at a rate of 12%, being
the rate at which interest will accrue in the event of a default. Further
details can be found in Note 17.
(e) Use of estimates and judgements (continued)
Carrying value of intangible assets
Intangible assets consists of prospecting and exploration rights. Those
acquired with subsidiaries are recognised at fair value at the date of
acquisition. Other rights acquired and evaluation expenditure are recognised
at cost.
Impairment of intangible assets
Intangible assets have been assessed during the current year for any
impairment and it was concluded that they are fairly valued. The recoverable
amount from the cash generating unit (CGU), in the USA, was assessed by
performing a 10-year discounted cashflow (DCF) model and it was concluded
that the recoverable amounts exceeded the intangible asset value indicating no
impairment.
Key assumptions
The recoverable amount for the CGU is based on value-in-use which is derived
from discounted cash flow calculations. The key assumptions applied in
value-in-use calculations are those regarding forecast mine production, sales
per product type, operating profit, phosphate prices and discount rates.
Forecast operating profits
For the CGU, the Group prepared cash flow projections derived from the most
recent forecast for the year ending 31 December 2023. Forecast revenue, fixed
and variable costs are based on recent performance and expectations of
future changes in the market, operating model and cost base.
Growth rates
For the medium-term, sales growth of 120% was assumed on the basis of
consistent historic sales growth, as well as planned growth projects.
Discount Rate
A post-tax real discount rate used to assess the forecast free cashflows from
the CGU was derived from its weighted average cost of capital, taking into
account specific factors relating to the country it operates in. These rates
are reviewed annually and adjusted for the risks specific to the business
being assessed and the market in which the CGU operates. The real post-tax
discount rate used during the period for the USA was 10%.
Sensitivity analysis
A sensitivity analysis on the key model parameters has been performed and
management has concluded that no reasonably foreseeable change in the key
assumptions would result in an impairment of the intangible assets of the
Group's CGU.
Assets held for sale
On classification as held-for-sale, assets and disposal groups are measured at
the lower of the carrying amount and fair value less costs to sell, with any
adjustments taken to profit or loss (or other comprehensive income in the case
of a revalued asset). The fair value was estimated to be the contract disposal
value less costs as detailed in Note 23.
3. Basis of preparation (continued)
(e) Use of estimates and judgements (continued)
Intercompany receivables (Company only)
All loans to subsidiaries are currently unsecured and interest free and
repayable on demand. Management have reviewed the forecasts prepared and are
satisfied that no impairment of this amount is required.
Fair value of share options and warrants
The determination of the fair values of the schemes issued have been made with
reference to the Black-Scholes model with the inputs set out in Note 27.
4. Significant accounting policies
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements, and have been
applied consistently by Group entities.
(a) Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using the acquisition method when
control is transferred to the Group. The consideration transferred in the
acquisition is generally measured at fair value, as are identifiable net
assets acquired. Any goodwill that arises is tested annually for impairment.
Any gain on a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to the issue of
debt or equity securities. The consideration transferred does not include
amounts related to the settlement of pre-existing relationships. Such
amounts generally are recognised in profit or loss.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that
control commences until the date that control ceases. On disposal of
subsidiaries, any amounts previously recognised in other comprehensive income
in respect of that entity are accounted for as if the Group had directly
disposed of the related assets or liabilities. This might mean that amounts
previously recognised in other comprehensive income are reclassified to profit
or loss.
(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements.
(b) Foreign currency
Transactions in foreign currencies are translated into the respective
functional currencies of Group entities at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the reporting
date.
Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value in a foreign currency are translated to the functional
currency at the exchange rate when the fair value was determined.
Non-monetary items that are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date of the transaction.
4. Significant accounting policies (continued)
(i) Foreign operations
The assets and liabilities of foreign operations, including goodwill and the
fair value adjustments arising on acquisition, are translated to GBP at
exchange rates at the reporting date. The income and expenses of foreign
operations are translated to GBP at exchange rates at the dates of the
transactions.
Foreign currency differences are recognised in other comprehensive income and
accumulated in the translation reserve except to the extent that the
translation difference is allocated to non-controlling interests. When a
foreign operation is disposed of in its entirety or partially such that
control, significant influence or joint control is lost, the cumulative amount
in the translation reserve related to that foreign operation is reclassified
to profit or loss as part of the gain or loss on disposal. If the Group
disposes of part of its interest in a subsidiary but retains control, then the
relevant proportion of the cumulative amount is reattributed to
non-controlling interests. When the Group disposes of only part of an
associate or joint venture while retaining significant influence or joint
control, the relevant proportion of the cumulative amount is reclassified to
profit or loss.
(c) Financial instruments
(i) Financial assets
The Group's financial assets measured at amortised cost comprise trade and
other receivables, cash and cash equivalents and financial assets at fair
value through other comprehensive income in the consolidated statement of
financial position.
Trade receivables and intra group balances are initially recognised at fair
value. New impairment requirements use an expected credit loss model to
recognise an allowance. For receivables a simplified approach to measure
expected credit losses during a lifetime expected loss allowance is available
and has been adopted by the Group. During this process the probability of
non-payment of the receivables is assessed. This probability is then
multiplied by the amount of the expected loss arising from default to
determine the lifetime expected credit loss for the receivables. For trade
receivables, which are reported net, such provisions are recorded in a
separate provision account with the loss being reported within the
consolidated statement of comprehensive income. On confirmation that the
trade and intra group receivable will not be collectable, the gross carrying
value of the asset is written off against the provision.
(ii) 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 into the other
financial liabilities category. Such financial liabilities are recognised
initially at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at
amortised cost using the effective interest method. Other financial
liabilities comprise trade and other payables.
(iii) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares are recognised as a deduction
from equity, net of any tax effects.
4. Significant accounting policies (continued)
(d) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated
depreciation and any accumulated impairment losses. Cost includes
expenditure that is directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items (major components) of
property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment
(calculated as the difference between the net proceeds from disposal and the
carrying amount of the item) is recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it is probable that the future
economic benefits associated with the expenditure will flow to the Group.
Ongoing repairs and maintenance is expensed as incurred.
(iii) Depreciation
Items of property, plant and equipment are depreciated on a straight-line
basis in the statement of comprehensive income over the estimated useful lives
of each component.
Items of property, plant and equipment are depreciated from the date that they
are installed and are ready for use, or in respect of internally constructed
assets, from the date that the asset is completed and ready for use.
The estimated useful lives of significant items of property, plant and
equipment are as follows:
· plant and
equipment 10 years
· office
equipment 2
years
· computer
equipment 2 years
· motor
vehicles
5 years
Depreciation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
4. Significant accounting policies (continued)
(e) Intangible assets
(i) Prospecting and exploration rights
Rights acquired with subsidiaries are recognised at fair value at the date of
acquisition. Other rights acquired and evaluation expenditure are recognised
at cost.
(ii) Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful
lives are measured at cost less accumulated amortisation and any accumulated
impairment losses.
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All
other expenditure, including expenditure on internally generated goodwill and
brands, is recognised in profit or loss as incurred.
(iv) Amortisation
Intangible assets are amortised in profit or loss over their estimated useful
lives, from the date that they are available for use.
The estimated useful lives are as follows:
· Prospecting and exploration rights - Life of mine
based on units of production
Amortisation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
Amortisation is included within administrative expenses in the statement of
comprehensive income.
(f) Impairment
(i) Non-derivative financial assets
A financial asset not classified as at fair value through profit or loss is
assessed at each reporting date to determine whether there is objective
evidence that it is impaired. A financial asset is impaired if there is
objective evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset, and had an impact on the
estimated future cash flows from that asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or
delinquency by a debtor, restructuring of an amount due to the Group on terms
that the Group would not consider otherwise, indications that a debtor or
issuer will enter bankruptcy, adverse changes in the payment status of
borrowers or issuers, economic conditions that correlate with defaults or the
disappearance of an active market for a security. In addition, for an
investment in an equity security, a significant or prolonged decline in its
fair value below its cost is objective evidence of impairment.
4. Significant accounting policies (continued)
(f) Impairment (continued)
(i) Non-derivative financial assets (continued)
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial assets measured at
amortised cost (loans and receivables) at both a specific asset and collective
level. All individually significant assets are assessed for specific
impairment. Those found not to be specifically impaired are then
collectively assessed for any impairment that has been incurred but not yet
identified. Assets that are not individually significant are collectively
assessed for impairment by grouping together assets with similar risk
characteristics.
In assessing collective impairment, the Group uses historical trends of the
probability of default, the timing of recoveries and the amount of loss
incurred, adjusted for management's judgement as to whether current economic
and credit conditions are such that the actual losses are likely to be greater
or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost
is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows discounted at the asset's original
effective interest rate. Losses are recognised in profit or loss and
reflected in an allowance against loans and receivables. Interest on the
impaired asset continues to be recognised. When an event occurring after the
impairment was recognised causes the amount of impairment loss to decrease,
the decrease in impairment loss is reversed through profit or loss.
Financial assets at fair value through other comprehensive income
Impairment losses on financial assets at FVOCI are recognised by reclassifying
the losses accumulated in the fair value reserve to profit or loss. The
amount reclassified is the difference between the acquisition cost (net of any
principal repayment and amortisation) and the current fair value, less any
impairment previously recognised in profit or loss. Impairment
losses recognised in profit or loss for an investment in an equity instrument
classified as FVOCI are not reversed through profit or loss.
(ii) Non-financial assets
The carrying amounts of the Group's non-financial assets are reviewed at each
reporting date to determine whether there is any indication of impairment.
If any such indication exists, the asset's recoverable amount is estimated.
Indefinite-lived intangible assets are tested annually for impairment or when
there is an indication of impairment. An impairment loss is recognised if
the carrying amount of an asset or Cash Generating Unit ('CGU') exceeds its
recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU. For the purpose
of impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or CGUs. Subject to an
operating segment ceiling test, CGUs to which goodwill has been allocated are
aggregated so that the level at which impairment testing is performed reflects
the lowest level at which goodwill is monitored for internal reporting
purposes. Goodwill acquired in a business combination is allocated to groups
of CGUs that are expected to benefit from the synergies of the combination.
4. Significant accounting policies (continued)
(f) Impairment (continued)
(ii) Non-financial assets (continued)
Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU (group of CGUs), and then to
reduce the carrying amounts of the other assets in the CGU (group of CGUs) on
a pro rata basis.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
(g) Employee benefits
Share-based payments
The grant-date fair value of share-based payment awards granted to employees
is recognised as an employee expense, with a corresponding increase in equity,
over the period that the employees become unconditionally entitled to the
awards. The amount recognised as an expense is adjusted to reflect the
number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognised
as an expense is based on the number of awards that meet the related service
and non-market performance conditions at the vesting date. For share-based
payment awards with non-vesting conditions, the grant-date fair value of the
share-based payment is measured to reflect such conditions and there is no
adjustment for differences between expected and actual outcomes.
(h) Revenue
Revenue from the sale of processed products is recognised when ownership of
the product passes to the purchaser in accordance with the relevant sales
contract. Ownership passes either upon delivery or once the product is
collected where customers arrange delivery.
(i) Finance income and finance costs
Finance income comprises interest income on bank funds. Interest income is
recognised as it accrues in profit or loss, using the effective interest
method.
Finance costs comprise interest expense on borrowings. Borrowing costs are
recognised in profit or loss in the period in which they are incurred.
(j) Taxation
Tax expense comprises current and deferred tax. Current and deferred tax is
recognised in profit or loss except to the extent that it relates to a
business combination, or items recognised directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantially enacted at the
reporting date, and any adjustment to tax payable in respect of previous
years. Current tax payable also includes any tax liability arising from the
declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is not recognised
for:
· temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss;
4. Significant accounting policies (continued)
· temporary differences related to investments in
subsidiaries and jointly controlled entities to the extent that it is probable
that they will not reverse in the foreseeable future; and
· taxable temporary differences arising on the
initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and they
relate to taxes levied by the same tax authority on the same taxable entity,
or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will
be realised simultaneously.
Deferred tax assets are recognised for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable that
future taxable profits will be available against which they can be used.
Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be
realised; such reductions are reversed when the probability of future taxable
profits improves.
(k) Leases
The Group leases certain property, plant and equipment. Leases of plant and
equipment where the Group has substantially all the risks and rewards of
ownership are classified as finance leases under IFRS 16. Finance leases are
capitalised on the lease's commencement at the lower of the fair value of the
leased assets and the present value of the minimum lease payments. Other
leases are either small in value or cover a period of less than 12 months.
The lease liability is initially measured at the present value of the lease
payments that are not paid. Lease payments generally include fixed payments
less any lease incentives receivable. The lease liability is discounted using
the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. The Group estimates the
incremental borrowing rate based on the lease term, collateral assumptions,
and the economic environment in which the lease is denominated. The lease
liability is subsequently measured at amortized cost using the effective
interest method. The lease liability is remeasured when the expected lease
payments change as a result of new assessments of contractual options and
residual value guarantees.
The right-of-use asset is recognised at the present value of the liability at
the commencement date of the lease less any incentives received from the
lessor. Added to the right-of-use asset are initial direct costs, payments
made before the commencement date, and estimated restoration costs. The
right-of-use asset is subsequently depreciated on a straight-line basis from
the commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
Each lease payment is allocated between the liability and finance charges. The
corresponding rental obligations, net of finance charges, are included in
lease liabilities, split between current and non-current depending on when the
liabilities are due. The interest element of the finance cost is charged to
the Statement of Profit and Loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period. Assets obtained under finance leases are depreciated over
their useful lives. The lease liabilities are shown in Note 18.
(l) Inventories
Inventories for processed material and ore stockpiles are valued at the lower
of cost and net realisable value. Costs allocated to processed material are
based on average costs and include all costs of purchase, conversion and other
costs in bringing these inventories to their existing location and
condition. Costs allocated to ore stockpiles are based on average costs,
which include an appropriate share of direct mining costs, direct labour and
material costs, mine site overhead, depreciation and amortisation. If
carrying value exceeds net realisable amount, a write down is recognised.
The write down may be reversed in a subsequent period if the circumstances
which caused it no longer exist.
(m) Segment reporting
Segment results that are reported to management include
items directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
(n) Equity reserves
Share premium includes any premiums received on issue of share capital. Any
transaction costs associated with the issue of shares are deducted from share
premium.
The share option/warrant reserve is used to recognise the fair value of
equity-settled share based payment transactions.
The exchange reserve is used to record exchange differences arising from the
translation of foreign subsidiaries into the presentation currency.
The financial assets at FVOCI reserve is used to record unrealised accumulated
changes in fair value on financial assets.
(o) Discontinued operation
A discontinued operation is a component of the Group's business, the
operations and cash flows of which can be clearly distinguished from the rest
of the Group and which:
· represents a separate major line of business or geographic area
of operations;
· is part of a single co‑ordinated plan to dispose of a separate
major line of business or geographic area of operations; or
· is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at
the earlier of disposal or when the operation meets the criteria to be
classified as held‑for‑sale.
When an operation is classified as a discontinued operation, the comparative
statement of profit or loss and OCI is re‑presented as if the operation had
been discontinued from the start of the comparative year.
5. New standards and interpretations
The current standards, amendments and interpretations have been adopted in the
year and have not had a material impact on the reported results in the
Company's financial statements:
· Amendments to the Conceptual Framework for Financial Reporting
· Amendments to IFRS 3 Definition of a Business
· Amendments to IAS 1 and IAS 8 Definition of Material
· Amendments to IFRS 9, IAS 39 and IFRS 7 Interest rate benchmark
reform
The adoption of the following mentioned standards, amendments and
interpretations in future years:
Effective date - period beginning on or after
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction (Amendments to IAS 12)
Definition of Accounting Estimates (Amendments to IAS 8) 1 January 2023
Disclosure of Accounting policies (Amendments to IAS 1 and IFRS Practice 1 January 2023
Statement 2
IFRS 17 Insurance Contracts 1 January 2023
Amendments to IFRS 17 1 January 2023
Initial Application of IFRS 17 and IFRS 9-Comparative Information 1 January 2023
Amendments to IAS 1 Presentation of Financial Statements 1 January 2024*
• Non-current Liabilities with Covenants
• Deferral of Effective Date Amendment
• Classification of Liabilities as Current or Non-Current
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) 1 January 2024*
* These standards, amendments and interpretations have not yet been endorsed by the UK and the dates shown are the expected dates. The directors have undertaken a project to review the above standards, amendments and interpretations. Management do not expect these standards to materially impact the financial statements.
6. Determination of fair values
A number of the Group's accounting policies and disclosures require the
determination of fair value, for both financial and non-financial assets and
liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. When applicable further
information about the assumptions made in determining fair values is disclosed
in the notes specific to that asset or liability.
(i) Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a
business combination is the estimated amount for which a property could be
exchanged on the date of acquisition between a willing buyer and a willing
seller in an arm's length transaction after proper marketing wherein the
parties had each acted knowledgeably. The fair value of items of plant and
equipment is based on the market approach and cost approaches using quoted
market prices for similar items when available and depreciated replacement
cost when appropriate. Depreciated replacement cost reflects adjustments for
physical deterioration as well as functional and economic obsolescence.
(ii) Intangible assets
The fair value of other intangible assets is based on the discounted cash
flows expected to be derived from the use and eventual sale of the assets.
(iii) Trade and other receivables
The fair value of trade and other receivables is estimated at the present
value of future cash flows, discounted at the market rate of interest at the
reporting date. This fair value is determined for disclosure purposes or
when such assets are acquired in a business combination.
(iv) Share-based payments
The fair value of the employee share options is measured using the
Black-Scholes formula. Measurement inputs include the share price on the
measurement date, the exercise price of the instrument, expected volatility
(based on an evaluation of the Company's historic volatility, particularly
over the historic period commensurate with the expected term), expected term
of the instruments (based on historical experience and general option holder
behaviour), expected dividends, and the risk-free interest rate (based on
government bonds). Service and non-market
performance conditions attached to the transactions are not taken into account
in determining fair value.
(v) Investments - other
When one is available, the Group measures the fair value of an instrument
using the quoted price in an active market for that instrument. A market is
regarded as active if transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information on an ongoing
basis. A discount is applied to the value of any Performance shares to reflect
the possibility that the milestones for conversion into ordinary shares may
not be met.
7. Revenue
Revenue comprises:
Group:
Year ended 31 December 2022 15 months ended 31 December 2021
£'000 £'000
Sale of phosphate (USA) 994 452
994 452
8. Operating segments
The Group considers that it operated during the period in two distinct
business areas, being that of manganese exploration and development in West
Africa, which is now treated as an asset held for sale, and phosphate mining
in Utah, USA. These business areas form the basis of the Group's operating
segments. For each segment, the Group's CEO (the chief operating decision
maker) reviews internal management reports on at least a quarterly basis.
Other operations relate to the Group's administrative functions conducted at
its head office and by its intermediate holding company together with
consolidation adjustments.
Information regarding the results of each reportable segment is included
below. Performance is measured based on segment result before tax, as
included in the internal management reports that are reviewed by the Group's
Managing Director. Segment results are used to measure performance as
management believes that such information is the most relevant in evaluating
the performance of certain segments relative to other entities that operate
within the exploration industry.
Information about reportable segments
Year ended 31 December 2022
Other operations
Manganese Phosphate £'000 Total
£'000 £'000 £'000
External revenue - 994 - 994
Cost of sales - 263 - 263
Depreciation, amortisation and impairment 34 144 1 179
(Loss)/profit before (131) 68 (934) (997)
Tax
Assets 1,558 5,027 99 6,684
Exploration and capital expenditure - 3,558 - 3,558
Liabilities 471 601 1,831 2,903
8. Operating segments (continued)
Information about reportable segments (continued)
15 months ended 31 December 2021
Other operations
Manganese Phosphate £'000 Total
£'000 £'000 £'000
External revenue - 452 - 452
Cost of Sales - 496 - 496
Depreciation, amortisation and impairment 43 143 1 187
- 116 - 116
Share of associate loss to date of becoming a subsidiary
(Loss)/profit before tax (60) (569) (1,385) (2,014)
Assets 1,535 4,229 144 5,908
Exploration and capital expenditure 1,332 3,274 - 4,606
Liabilities 360 2,113 155 2,628
Information about geographical segments
Year ended 31 December 2022
West Africa US Other Total
£'000 £'000 £'000 £'000
External revenue - 994 - 994
Cost of sales - 263 - 263
Depreciation, amortisation and impairment 34 144 1 179
(Loss)/profit before (131) 68 (934) (997)
tax
Assets 1,558 5,027 99 6,684
Exploration and capital expenditure - 3,558 - 3,558
Liabilities 471 601 1,831 2,903
8. Operating segments (continued)
Information about geographical segments (continued)
I15 months ended 31 December 2021
West
Africa US Other Total
£'000 £'000 £'000 £'000
External revenue - 452 - 452
Cost of Sales - 496 - 496
Interest expense - - - -
Depreciation, amortisation and impairment 43 143 1 187
Share of associate loss - (116) - (116)
(Loss)/profit before tax (44) (569) (1,385) (2,014)
Assets 1,541 4,229 138 5,908
Exploration and capital expenditure 1,332 3,274 - 4,606
Liabilities 360 2,113 155 2,628
9. Expenses
Year ended 31 December 2022 15 months ended 31 December 2021
Expenses include: £'000 £'000
Depreciation and amortisation expense 179 187
Auditor's remuneration
- Audit fee 41 33
Foreign exchange differences 13 12
Auditor's remuneration for the period in respect of the Company amounted to
£15,000 (Period ended 31 December 2021: £11,000).
10. Personnel expenses
Year ended 31 December 2022 15 months ended 31 December 2021
£'000 £'000
Wages and salaries 382 672
Social security costs 26 -
Pension costs 7 -
Fees 114 100
Equity-settled share-based payments (see note 27) 9 37
538 809
10. Personnel expenses (continued)
The average number of employees (including directors) during the period was:
Year ended 31 December 2022 15 months ended 31 December 2021
Directors 4 4
Other 2 3
6 7
11. Directors' emoluments
Year ended 31 December 2022
Executive Non-executive
directors directors Total
£'000
£'000 £'000
Wages and salaries (incl. fees) 232 58 290
232 58 290
15 months ended 31 December 2021
Executive Non-executive directors
directors £'000 Total
£'000 £'000
Wages and salaries (incl. fees) 234 82 316
234 82 316
Fees in respect of the services of D Reeves are payable to a third party,
Wilgus Investments (Pty) Limited.
These amounts are disclosed by director in the Directors' report on page 17.
Emoluments disclosed above include the following amounts payable to the
highest paid director:
Year ended 31 December 2022 15 months ended 31 December 2021
£'000 £'000
Emoluments for qualifying services 118 219
12. Finance costs
Recognised in loss for period
Year ended 15 months ended
31 December 31 December
2022 2021
£'000 £'000
Discount unwinding on deferred consideration and loan payable to previous
minority shareholder
152 -
Other 52 43
204 43
The Discount unwinding disclosed above relates to the
deferred consideration explained in Note 17.
13. Taxation
Current tax
Year ended 31 December 2022 15 months ended 31 December 2021
£'000 £'000
Tax recognised in profit or loss
Current tax
Current period - -
Deferred tax
Origination and reversal of temporary differences - -
Total tax - -
Reconciliation of effective tax rate
Year ended 31 December 2022 15 months ended 31 December 2021
£'000 £'000
Loss before tax (continuing operations) (997) (2,014)
Tax using the Company's domestic tax rate of 19.0% (2021: 19.0%) (189) (383)
Effects of:
Expenses not deductible for tax purposes 29 2
Overseas (profits)/losses 10 116
Equity-settled share-based payments 2 7
Tax losses carried forward not recognised as a deferred tax asset 148 258
- -
The UK corporation tax rate was 19% throughout the year.
13. Taxation (continued)
UK budget on 3 March 2021 announced the intention to increase the tax rate
from the current rate of 19% to 25%, with effect from April 2023.
None of the components of other comprehensive income have a tax impact.
Factors that may affect future tax charges
At the year end, the Group had unused tax losses available for offset against
suitable future profits of approximately £7,907,000 (Period ended 31 December
2021: £7,128,000). A deferred tax asset has not been recognised in respect of
such losses due to uncertainty of future profit streams.
14. Property, plant and equipment
Group
Plant and equipment Office and computer equipment
£'000 Total
£'000
£'000
Cost
Balance at 1 October 2020 329 25 354
Acquisition of Falcon Isle 172 - 172
Additions 185 3 188
Disposals - - -
Effect of movements in exchange rates (25) - (25)
Balance at 31 December 2021 661 28 689
Balance at 1 January 2022 661 28 689
Effect of movements in exchange rates 59 - 59
Transfers to assets held for sale (Note 23) (323) (16) (339)
Balance at 31 December 2022 397 12 409
Depreciation and impairment provisions
Balance at 1 October 2020 67 24 91
Depreciation for the year 34 2 36
Depreciation on disposals - - -
Effect of movements in exchange rates 8 - 8
Balance at 31 December 2021 109 26 135
Balance at 1 January 2022 109 26 135
Depreciation for the period 47 1 48
Effect of movements in exchange rates 6 - 6
Transfers to assets held for sale (145) (16) (161)
Balance at 31 December 2022 17 11 28
Carrying amounts
At 1 October 2020 262 1 263
At 31 December 2021 552 2 554
At 31 December 2022 380 1 381
Depreciation is recognised within administrative expenses.
14. Property, plant and equipment (continued)
Company
Computer equipment
£'000
Cost
Balance at 1 October 2020 5
Transfers 3
Balance at 31 December 2021 8
Balance at 1 January 2022 8
Additions -
Balance at 31 December 2022 8
Depreciation and impairment provisions
Balance at 1 October 2020 5
Depreciation for the year 1
Balance at 31 December 2021 6
Balance at 1 January 2022 6
Depreciation for the period 2
Balance at 31 December 2022 8
Carrying amounts
At 31 December 2021 2
At 31 December 2022 -
15. Right of use assets
Group
Land and buildings
£'000
Cost
Balance at 1 October 2020 -
Additions 314
Balance at 31 December 2021 314
Balance at 1 January 2022 314
Effect of movements in exchange rates 39
Balance at 31 December 2022 353
Depreciation and impairment provisions
Balance at 1 October 2020 -
Depreciation for the year 99
Balance at 31 December 2021 99
Balance at 1 January 2022 99
Depreciation for the period 118
Effect of movements in exchange rates 15
Balance at 31 December 2022 232
Carrying amounts
At 1 October 2020 -
At 31 December 2021 215
At 31 December 2022 121
Depreciation is recognised within administrative expenses.
16. Intangible assets - Group
Prospecting and exploration rights
£'000
Cost
Balance at 1 October 2020 1,227
Acquisition of Falcon Isle 3,046
Additions 538
Disposals (158)
Effect of movement in exchange rates (10)
Balance at 31 December 2021 4,643
Balance at 1 January 2022 4,643
Additions -
Disposals -
Effect of movements in exchange rates 349
Transfers to assets held for sale (1,379)
Balance at 31 December 2022 3,613
Amortisation and impairment losses
Balance at 1 October 2020 158
Amortisation 37
Disposals (158)
Balance at 31 December 2021 37
Balance at 1 January 2022 37
Amortisation 13
Effect of movements in exchange rates 5
Balance at 31 December 2022 55
Carrying amounts
At 1 October 2020 1,069
At 31 December 2021 4,606
At 31 December 2022 3,558
The carrying value of the prospecting and exploration rights is supported by
the estimated resource and current market values.
Amortisation is recognised within administrative expenses.
17. Investments in subsidiaries and associates
Company - subsidiaries
2022 2021
£'000 £'000
Equity investments
Balance at beginning of period 1,959 -
Additions - Increased investment in Falcon Isle Resources LLC 635 1,959
Balance at 31 December 2,594 1,959
Country of Ownership interest
Activity incorporation 2022 2021
Directly
Southern Iron Limited Investment Guernsey 100% 100%
Falcon Isle Resources LLC Mining USA 100% 51%
Keras US LLC Holding company USA 100% 100%
Indirectly
Société Générale des Mines SA Exploration Togo 85% 85%
Falcon Isle Holdings LLC Holding company USA 100% 100%
Registered offices of subsidiary companies are:
· Southern Iron Limited, 1st Floor, Elizabeth House, Les Ruettes
Brayes, St Peter Port, Guernsey
· Société Générale des Mines, Quartier Adidogome Apedokoe 02, BP
20022, Lome, Togo
· Falcon Isle Resources LLC, Falcon Isle Holdings LLC and Keras US LLC,
8 The Green, Suite B8, Dover, Kent, Delaware 19901, USA
Société Générale des Mines SA and Southern Iron Limited have been
classified as assets held for sale at the year end, see Note 23 for further
details.
Group and Company - associates
2022 2021
£'000 £'000
Accounted for using the equity method
At 1 October / January - 1,622
Additions - including acquisition costs - 453
Share of loss for the period - (116)
Transfer to investment in subsidiary - (1,959)
At 31 December - -
The interest in Falcon Isle was acquired for nominal consideration under a
binding heads of terms dated 28 July 2020. Under this agreement the Company
agreed to provide US$2.5m in loans to Falcon Isle payable in agreed
tranches. Falcon Isle is the 100% owner of the Diamond Creek phosphate
mine located in in Utah (USA) which is a fully permitted, high grade direct
shipping ore organic phosphate operating mine.
At 30 September 2020 the Company had advanced US$ 1.9m to Falcon Isle,
resulting in an equity interest of 40% and bringing the cost of the investment
in the associate to £1,626,000.
On 31 December 2020 the Company advanced the balance of $0.6m and its equity
interest has increased to a controlling interest of 51%.
17. Investments in subsidiaries and associates (continued)
The initial acquisitions were accounted for under the equity method of
accounting but upon achieving control on 31 December 2020, the acquisition
method of accounting has been applied.
The investment in associate was revalued prior to acquisition to fair value
based on the price paid to acquire the additional 11% shareholding. Under IFRS
3, on acquisition of the controlling stake, the Group remeasured its original
40% investment in Falcon Isle. This led to a loss on change of ownership of
£363,000 being recognised in the Consolidated Statement of Comprehensive
Income.
On acquisition the non-controlling interest, valued based upon net assets at
acquisition, was valued at £645,000. No goodwill has arisen from the
acquisition.
On 29 March 2022, the Company agreed to acquire the outstanding 49% equity
interest in Falcon Isle for consideration of $1,383,473 and loans totalling
$1,816,527 made by the vendor to Falcon Isle, for total consideration of $3.2
million, payable in four annual tranches of $800,000 commencing on 1July 2022
and as such the deferred consideration and loan due to the vendor has been
discounted at 12% with the discount being applied against the investment in
full. As a result the non-controlling interest has been eliminated against the
consideration with the remaining balance of £199,311 transferred to retained
earnings. The tranche due on 1 July 2023 was paid late, which constituted an
event of default under the agreement. This default has been remedied within
the 30 day period provided for in the agreement.
18. Lease liabilities
The following lease liabilities arose in respect of the recognition of right
of use assets with a net book value of £121k (2021 - £215k). The Group holds
one lease that it accounts for under IFRS 16.
Maturity analysis 2022 2021
£'000 £'000
Within one year 129 115
In one to five years - 115
Total undiscounted liabilities 129 230
Future finance charges (3) (11)
Lease liabilities in the financial statements 126 219
Current liabilities - Within one year 126 107
Non-current liabilities - In one to five years - 112
126 219
The entities in the group were not party to any other leases as at 31 December
2022 and 31 December 2021.
19. Loans
Company - current
2022 2021
£'000 £'000
Balance at beginning of period 2,081 1,534
Funds advanced to subsidiaries 756 547
Impairment of loans (534) -
Purchase of subsidiary loans 1,383 -
Balance at 31 December 3,686 2,081
All loans to subsidiaries are currently unsecured and interest free and
repayable on demand. All loans are denominated in GBP with the exception of
the loan purchased from the Falcon Isle Resources LLC non-controlling interest
of $1,816,527.
20. Inventories
2022 2021
£'000 £'000
Phosphate, including processed material held for sale 668 273
668 273
21. Trade and other receivables
Group
2022 2021
£'000 £'000
Trade receivables 69 7
Other receivables 85 87
Prepayments 37 -
191 94
Company
2022 2021
£'000 £'000
Other receivables 8 20
Prepayments 37 -
45 20
Other receivables are stated at their nominal value less allowances for
non-recoverability.
The Group and Company's exposure to credit and currency risk is disclosed in
note 29. Trade receivables are net of a provision for bad debts of £nil
(2021: £nil). No bad debt expense has been recognised in the current or prior
years.
22. Cash and cash equivalents
Group
2022 2021
£'000 £'000
Bank balances 207 166
Cash and cash equivalents 207 166
Company
2022 2021
£'000 £'000
Bank balances 54 122
Cash and cash equivalents 54 122
There is no material difference between the fair value of cash and cash
equivalents and their book value.
23. Assets held for sale
Through its 100% owned, Guernsey incorporated
subsidiary, Southern Iron Ltd, Keras holds an 85% interest in Société
Générale des Mines SA ("SGM") which holds research permits for the Nayéga
manganese project in northern Togo ("Nayéga"). The research permits are
effectively the equivalent of a mining exploration licences and cover a 19,903
ha area in northern Togo.
Keras completed feasibility studies on Nayéga in 2015
and 2019 and completed a metallurgical bulk sample of 10,000 tonnes of
saleable manganese product in 2019. In October 2019, the Council of Ministers
of the Republic of Togo published a decree granting the right for large-scale
exploitation of the manganese deposit at Nayéga to SGM. Since that date Keras
has concentrated its efforts in Togo on obtaining the required exploitation
permit. The terms of the permit and associated protocols have been agreed;
however, the exploitation permit approval has not been forthcoming.
Keras will no longer pursue the Nayéga exploitation permit and will sell all
the IP comprising reports, feasibility studies etc to a newly formed mining
company set up by the state for $1.7m less costs leaving net proceeds of
$1.33m and as such no impairment has been recognised and all assets and
liabilities of SGM have been classified as held for sale as follows:
2022
£'000
Property, plant and equipment 178
Prospecting and exploration rights 1,379
Cash and cash equivalents 1
1,558
Trade and other payables (471)
1,087
The operating, financing and investing cashflows in respect of discontinued
operations were immaterial in 2022 and in 2021 amounted to £233k, £88k and
(£329k) respectively.
24. Retirement benefit schemes
2022 2021
Defined contribution schemes £'000 £'000
Charge to profit or loss in respect of defined contribution schemes 7 7
The Group operates a defined contribution pension
scheme for all qualifying employees. The assets of the scheme are held
separately from those of the Group in an independently administered fund.
At the year end, an amount of £2,042 (2021 - £2,042)
was held in trade and other payables in respect of accrued unpaid pension
contributions.
25. Capital and reserves
Share capital
Number of ordinary shares
Presented after share consolidation Presented before share consolidation
31 December 2022 31 December 2022 31 December 2021
Shares of 1p each Shares of 0.01p each Shares of 0.01p each
62,960,731 6,296,073,068 4,866,007,851
In issue at beginning of period 16,775,000 1,677,500,000 1,369,565,217
Issued for cash
31 December 2022
Shares of 1p each
62,960,731
16,775,000
31 December 2022
Shares of 0.01p each
6,296,073,068
1,677,500,000
31 December 2021
Shares of 0.01p each
4,866,007,851
1,369,565,217
Issued in settlement of debt - - 60,500,000
In issue at 31 December/ - fully paid 79,735,731 7,973,573,100 6,296,073,068
All ordinary shares rank equally with regard to the Company's residual assets.
The holders of ordinary shares are entitled to receive dividends as declared
from time to time, and are entitled to one vote per share at general meetings
of the Company.
Issues of ordinary shares
On 5 May 2022 1,000,000,000 ordinary shares of 0.01p each were issued at 0.12p
per share of which 880,000,000 were issued for cash, 83,333,333 to settle
loans and 36,666,667 to settle creditors.
On 17 May 2022 677,500,000 ordinary shares of 0.01p each were issued at 0.12p
per share of which 521,366,666 were issued for cash and 156,133,333 to settle
creditors.
Consolidation of shares
On 25 July 2022 every 100 existing ordinary shares of 0.01p each was
consolidated into 1 ordinary share of 1p each. The figures presented in the 31
December 2022 column above are shown after the consolidation.
25. Capital and reserves (continued)
Warrants
31 December 2022 31 December 2021
Presented after share consolidation Presented before share consolidation
Average exercise price Number Average exercise price Number Average exercise price Number
In issue at beginning of period 18p 4,347,856 0.18p 434,785,608 0.24p 984,357,334
Issued in period 18p 16,775,000 0.18p 1,677,500,000 0.20p 684,785,608
Lapsed 18p (4,347,856) 0.18p (434,785,608) 0.23p (1,234,357,334)
In issue at 31 December 18p 16,775,000 0.18p 1,677,500,000 0.18p 434,785,608
The figures presented in the 31 December 2022 column above are shown after the
consolidation and as such each exercise price has been multiplied by 100 and
each number of shares divided by 100.
On 16 April 2022 1,000,000,000 warrants were agreed to be issued to
subscribers for the Ordinary Shares agreed to be issued for cash on 16 April
2022 on the basis of 1 warrant for every 2 shares subscribed. The warrants
are exercisable at price of 0.18p at any time up to 31 May 2024.
On 18 May 2022 677,500,000 warrants were agreed to be issued to subscribers
for the Ordinary Shares agreed to be issued for cash on 18 May 2022 on the
basis of 1 warrant for every 2 shares subscribed. The warrants are
exercisable at price of 0.18p at any time up to 31 May 2024.
The warrants had a fair value of £nil at the balance sheet date and were
considered to fall outside the scope of IFRS2.
The weighted average remaining contractual life of the warrants outstanding is
1 year and 152 days.
Other reserves
Share option/warrant reserve
The share option/warrant reserve comprises the cumulative entries made to the
consolidated statement of comprehensive income in respect of equity-settled
share-based payments as adjusted for share options cancelled.
Exchange reserve
The exchange reserve comprises all foreign currency differences arising from
the translation of the financial statements of foreign operations.
26. Earnings per share
Basic and diluted earnings/(loss) per share
The calculation of basic earnings/(loss) per share at 31 December 2022 is
based on the following (loss)/profit attributable to ordinary shareholders and
a weighted average number of ordinary shares in issue.
Loss attributable to ordinary shareholders (£)
Year ended 31 December 2022
15 months ended 31 December 2021
Continuing operations (751,000) (1,948,000)
Discontinued operations (96,000) -
Loss attributable to ordinary shareholders (847,000) (1,948,000)
Basic weighted average number of ordinary shares
Year ended 31 December 2022
15 months ended 31 December 2021
Issued ordinary shares at beginning of year 62,960,731 48,660,079
Effect of shares issued 10,807,397 10,854,832
Weighted average number of ordinary shares 73,768,128 59,514,911
Diluted weighted average number of shares
Year ended 31 December 2022
Basic weighted average number 73,768,128
Effect of share options in issue 1,300,000
Effect of warrants in issue 11,510,197
Weighted average number of ordinary shares 86,578,325
As a result of the group being loss making the earning per share is presented
on a basic weighted average number of shares basis and not diluted.
Consolidation of shares
On 25 July 2022 every 100 existing ordinary shares of 0.01p each was
consolidated into 1 ordinary share of 1p each. The figures presented in the
table above for both the current and prior period are shown after the impact
of the consolidation.
27. Share-based payments
Number of share options Average exercise price
Presented after share consolidation Presented before share consolidation Presented after share consolidation Presented before share consolidation
2022 2022 2021 2022 2022 2021
pence Pence pence
Outstanding at 1 January 2022 1,450,000 145,000,000 120,000,000 16 0.16 0.16
Granted in the period - - 25,000,000 - - 0.12
Forfeited in the period (150,000) (15,000,000) - 12 0.12 -
Outstanding at 31 December 2022 1,300,000 130,000,000 145,000,000 16 0.16 0.16
Exercisable at 31 December 2022 1,033,333 103,333,333 70,000,000 16 0.16 0.16
The figures presented in the 31 December 2022 column above are shown after the
consolidation of shares completed in July 2022 and as such each exercise price
has been multiplied by 100 and each number of shares divided by 100.
The Company established an Enterprise Management Incentive Scheme to
incentivise Directors and senior executives. On 17 January 2020, 120,000,000
options were granted at £0.001639 with 10,000,000 vesting immediately,
30,000,000 vesting on 9 March 2020, 30,000,000 vesting on 17 January 2021,
30,000,000 vesting on 17 January 2022 and 20,000,000 vesting on 17 January
2023. The options lapse if not exercised within 5 years. Of the total,
90,000,000 options were granted to R Lamming, a Director.
The Black Scholes pricing model was used to calculate the share based payment
charge incorporating an annual volatility rate of 55%, expected life of
between 2 and 5 years and risk free investment rate of between 0.23% and
0.39%. The charge for the year ended 31 December 2022 for these rights which
was included in administrative and exploration expenses amounted to £4,485
(2021 - £25,233).
On 7 April 2021, 10,000,000 options were granted at £0.001183 with 3,333,333
vesting on 1 April 2022, 3,333,333 vesting on 1 April 2023 and 3,333,334
vesting on 1 April 2024. The options lapse if not exercised within 5 years.
The Black Scholes pricing model was used to calculate the share based payment
charge incorporating an annual volatility rate of 57%, expected life of
between 4 and 6 years and risk free investment rate of between 0.6% and 0.93%.
The charge for the period ended 31 December 2022 for these rights which was
included in administrative and exploration expenses amounted to £4,370 (2021
- £5,450).
27. Share-based payments (continued)
On 27 May 2021, 15,000,000 options were granted at £0.001121 with 5,000,000
vesting on 17 May 2022, 5,000,000 vesting on 17 May 2023 and 5,000,000 vesting
on 17 May 2024. The Black Scholes pricing model was used to calculate the
share based payment charge incorporating an annual volatility rate of 57%,
expected life of between 4 and 6 years and risk free investment rate of
between 0.6% and 0.93%. The charge for the year ended 31 December 2022 for
these rights which was included in administrative and exploration expenses
amounted to £nil (2021 - £6,706). The employee which these options were
granted to left the company during the year and as such the options lapsed and
the balance within the share based payment reserve relating to these options
of £6,706 was transferred to retained earnings.
28. Trade and other payables
Group - Current
2022 2021
£'000 £'000
Trade payables 262 962
Accrued expenses 59 93
Amounts due to Falcon Isle Resources' minority interest - 593
Other payables 209 11
Deferred consideration and loans to previous minority shareholders 628 -
1,158 1,658
Group - Non-Current
2022 2021
£'000 £'000
Amounts due to Falcon Isle Resources' minority interest - 749
Other payables 83 -
Deferred consideration and loans to previous minority shareholders 1,065 -
1,148 749
Company - Current
2022 2021
£'000 £'000
Trade payables 68 46
Accrued expenses 60 91
Other payables 11 13
Deferred consideration and loans to previous minority shareholders 628 -
767 150
Company - Non-Current
2022 2021
£'000 £'000
Deferred consideration and loans to previous minority shareholders 1,065 -
1,065 -
There is no material difference between the fair value of trade and other
payables and accruals and their book value. The Group's and Company's
exposure to currency and liquidity risk related to trade and other payables is
disclosed in Note 29.
28. Trade and other payables (continued)
Deferred consideration and loans to previous minority shareholders relates to
the acquisition of the outstanding 49% equity interest in Falcon Isle and
loans totalling $1,816,527 made by the vendor to Falcon Isle, for total
consideration of $3.2 million, payable in four annual tranches of $800,000
commencing on 1 July 2022 and as such the deferred consideration and loans to
previous minority shareholders has been discounted at 12%.
29. Financial instruments
Financial risk management
The Group's operations expose it to a variety of financial risks that include
liquidity risk. The Group has in place a risk management programme that
seeks to limit the adverse effect of such risks on its financial performance.
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.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at the reporting date was as
follows.
Group
Financial assets at amortised cost
Carrying amount
Credit risk 2022 2021
£'000 £'000
Trade and other receivables 191 94
Cash and cash equivalents 207 166
398 260
Expected credit loss assessment
Balance Expected loss rate % Loss allowance
Trade receivables £'000 £'000
Current 19 - -
1-30 days overdue 7 - -
31-60 days overdue 28 - -
61-90 days overdue 9 - -
Over 90 days overdue 6 - -
69 -
The director considers that the carrying amount of trade and other receivables
is approximately equal to their fair value.
29. Financial instruments (continued)
Company
Financial assets at amortised cost
Carrying amount
2022 2021
£'000 £'000
Loans 2,586 2,081
Trade and other receivables 45 20
Cash and cash equivalents 54 122
2,685 2,223
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset.
The Group reviews its facilities regularly to ensure it has adequate funds for
operations and expansion plans.
The following are the contractual maturities of financial liabilities,
including estimated interest payments and excluding the impact of netting
agreements.
Group
2022
Carrying amount Contractual cash flows 3 months 3-12 months 2-5 years
£'000 £'000 or less £'000 £'000
£'000
Non-derivative financial assets
Inventory 668 668 668 - -
Trade and other receivables 191 191 191 - -
Assets held for sale 1,558 1,558 1,558 - -
Cash and cash equivalents 207 207 207 - -
2,624 2,624 2,624 - -
Non-derivative financial liabilities
Trade and other payables 2,306 2,306 331 828 1,147
Liabilities held for sale 471 471 471 - -
Lease liabilities 126 126 31 95 -
2,903 2,903 833 923 1,147
Liquidity gap (279) (279) 1,791 (923) (1,147)
29. Financial instruments (continued)
Group
2021
Carrying amount Contractual cash flows 2 months 2-12 months 2-5 years
£'000 £'000 or less £'000 £'000
£'000
Non-derivative financial assets
Inventory 273 273 273 - -
Trade and other receivables 94 94 94 - -
Cash and cash equivalents 166 166 166 - -
533 533 533 - -
Non-derivative financial liabilities
Trade and other payables 2,407 2,407 168 1,490 749
Lease liabilities 219 219 19 88 112
2,626 2,626 187 1,578 861
Liquidity gap (2,093) (2,093) 346 (1,578) (861)
Company
2022
Carrying amount Contractual cash flows 3 months 3-12 months 2-5 years
£'000 £'000 or less £'000 £'000
£'000
Non-derivative financial assets
Loans 3,686 3,686 3,686 - -
Trade and other receivables 45 45 45 - -
Cash and cash equivalents 54 54 54 - -
3,785 3,785 3,785 - -
Non-derivative financial assets
Trade and other payables 1,832 1,832 139 628 1,065
1,832 1,832 139 628 1,065
Liquidity gap 1,953 1,953 3,646 (628) (1,065)
29. Financial instruments (continued)
Company
2021
Carrying amount Contractual cash flows 2 months 2-12 months 2-5 years
£'000 £'000 or less £'000 £'000
£'000
Non-derivative financial assets
Loans 2,081 2,081 2,081 - -
Trade and other receivables 20 20 20 - -
Cash and cash equivalents 122 122 122 - -
2,223 2,223 2,223 - -
Non-derivative financial liabilities
Trade and other payables 150 150 25 125 -
150 150 25 125 -
Liquidity gap 2,073 2,073 2,198 (125) -
Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices will affect the Group's
income or the value of its holdings of financial instruments. The objective
of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimising the return.
Currency risk
The Group is exposed to foreign currency risk on purchases that are
denominated in currencies other than GBP. The currencies giving rise to this
risk are primarily the CFA Franc and the US dollar.
The carrying amounts of the group's foreign currency denominated monetary
assets and liabilities at the reporting date are as follows:
GBP USD CFA
£'000 £'000 £'000
Cash and cash equivalents 52 155 -
Trade and other receivables 46 145 -
Trade and other payables (138) (2,168) -
40 (1,868) -
Fair values
The fair values of financial instruments such as trade and other
receivables/payables are substantially equivalent to carrying amounts
reflected in the balance sheet.
Capital management
The Group's objective when managing capital is to safeguard its accumulated
capital in order to provide an adequate return to shareholders by maintaining
a sufficient level of funds, in order to support continued operations.
The Group considers its capital to be total shareholders' equity which at 31
December 2022 for the Group totalled £3,927,000 (2021: £3,053,000) and for
the Company totalled £4,547,000 (2021: £4,034,000).
30. Related parties
The Group's related parties include its key management personnel and others as
described below.
No guarantees have been given or received and all outstanding balances are
usually settled in cash.
As part of a placing in April 2022 which raised a total of £1,200,000 by the
issue of 1,000,000,000 new ordinary shares (before consolidation) at 0.12p per
share, the Directors subscribed for 200,000,000 Placing Shares in aggregate.
Brian Moritz, Russell Lamming and Dave Reeves subscribed for 35,000,000
(£42,000), 45,000,000 (£54,000) and 120,000,000 (£144,000) new ordinary
shares respectively.
Azets, a firm in which Claire Parry is a partner, charged the Company £9,340
plus VAT for accounting services during the period from 1 September to 31
December 2022.
Other related party transactions
Transactions with Group companies
The Company had the following related party balances from financing
activities:
2022 2021
£'000 £'000
Southern Iron Limited
- Loans and receivables (interest free) 1,100 1,622
Falcon Isle Resources LLC
- Loans and receivables (interest free) 2,586 459
2,586
459
Southern Iron Limited had the following related party balances from financing
activities:
Société Générale des Mines SA
- Loans and receivables (interest free) 1,100 1,777
31. Subsequent events
On 17 May 2023 Keras signed an agreement with the Republic of Togo (the
"State") relating to the Nayéga Manganese project ("Nayéga") in Northern
Togo. Under this agreement Keras agreed that Nayéga is a Togolese strategic
asset and Keras will no longer pursue the Nayéga exploitation permit. Keras
agreed to transfer all its intellectual knowledge on Nayéga to the State and
provide advisory and brokerage services to expedite the development of
Nayéga.
The State agreed to pay Keras a cash consideration of $1,700,000 which was
received in July 2023, and thereafter;
· Keras will be paid an advisory fee of 1.5% of gross revenue
generated from the Nayéga mine for the provision of advisory services for
three years; and
· Keras will be paid 6.0% of gross revenue generated from the
Nayéga mine for the provision of brokerage services for the lesser of three
and a half years or 900,000 tonnes of beneficiated manganese ore produced and
sold from Nayéga.
In addition, Keras will liquidate its interest in Société Générale des
Mines SA, the company through which Keras holds its interest in Nayéga.
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