REG - Keras Resources PLC - Final Results
30/06/2022 07:16
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RNS Number : 7257Q Keras Resources PLC 30 June 2022
30 June 2022
Keras Resources plc ('Keras' or the 'Company')
Final Results
Keras Resources plc (AIM: KRS) announces its final results for the 15 months
ending 31 December 2021.
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
· Spanish Fork milling plant commissioned during June 2021 to increase
installed capacity and enable flexibility to produce a variety of sized
organic rock phosphate products
· 8,520 tonnes of phosphate mined at Diamond Creek during the summer of
2021
· Total sales of 4,657 tons from June 2020 through to May 2022
· Increased ownership of Diamond Creek in March 2022 from 51% to 100%
for a total consideration of US$3.2m
· 2022 summer mining season currently underway at Diamond Creek to
produce milled product for the spring 2023 season
· Construction of a downstream granulator plant is planned for 2022 to
further expand range of phosphate products to attract a price premium in
markets not currently supplied
· Marketing and sales being strengthened and new offtake agreements
with repeat customers negotiated
· Focus for 2022 and beyond is developing market share in US organic
fertiliser industry and building Diamond Creek into the premier organic
phosphate producer in the US
Corporate
· £550,000 and £1,000,000 fundraising completed December 2020 and
January 2021
· Further £1,950,000 (before costs) raised at a premium and supported
by a new cornerstone investor, First Uranium Resources Ltd, a Canadian public
company active in the North American phosphate market, to facilitate growing a
portfolio of North American phosphate projects
· Board Changes
o Graham Stacey appointed to the Board in November 2021 and assumed
responsibility for the Diamond Creek mine in March 2022 - assumed the role as
CEO on 1 June 2022
o Russell Lamming has stepped down as CEO and assumed the role as
Non-Executive Director as of 1 June 2022, and will become Non-Executive
Chairman as of 1 September 2022
o Brian Moritz stepping down as Non-Executive Chairman as of 1 September
2022, will assume the role as Non-Executive Director and remain as Company
Secretary
Graham Stacey, Keras Resources Chief Executive Officer, commented, "2021 was
not without its challenges, however, we were very pleased to have announced
the acquisition of full ownership and to have assumed full operational and
marketing control of Diamond Creek in March 2022. The completion of a £1.95m
capital raise which saw First Uranium Resources Ltd come in as a cornerstone
investor, and the acquisition of an additional 7% in the market by First
Uranium associate AxCap Ventures was particularly encouraging.
"We will now focus on delivering on the current summer mining season at
Diamond Creek to September 2022, continue to negotiate new offtake agreements
with repeat customers and more importantly identify new outlets for our
existing product mix. Near-term growth plans also include installing a
downstream granulator plant which will allow us to further broaden our current
product offering, attracting premium prices in the markets that those products
bring.
"We believe the Company is excellently positioned to deliver into the growing
organic agricultural sector underpinned by the macro-economic tailwinds of the
global fertiliser markets. Ultimately our mission is to penetrate and increase
our market share in the US organic fertiliser industry and to build Diamond
Creek into the premier organic phosphate producer in the US.
"I look forward to working closely with our new cornerstone investor(s) to
lever off synergies that their investment will bring and continuing to build
production and sales at Diamond Creek, as we move forward in this exciting
chapter in the Company's evolution and growth."
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 shortly
at https://www.kerasplc.com/constitutional-documents/
(https://www.kerasplc.com/constitutional-documents/) and will also be posted
to shareholders today along with the notice of its Annual General Meeting
("AGM") and General Meeting which are to be held at 11am and 11.15am
respectively on the 25(th) July 2022.
Chairman's Statement
I am pleased to provide an update on our progress since my last report and set
out our outlook for the business going forward.
The main activity of Keras is now in developing the Diamond Creek organic
phosphate mine in Utah, USA, and we announced on 30 March 2022 that Keras had
increased its ownership from 51% to 100%. Subsequently, Keras concluded a
£1.95m (before costs) fund raising, underpinned by a new cornerstone investor
who is focussed on growing a portfolio of North American phosphate projects.
The Diamond Creek phosphate mine
Despite facing challenges throughout the reporting period, we continued to
make significant progress with our fully integrated mine to market operation
at Diamond Creek in Utah which is believed to be one of the highest grade
organic rock phosphate deposits in the US.
The Diamond Creek phosphate mine, which is situated on an 840 acre Federal
Lease, and the Spanish Fork Processing Facility, are owned and operated by
Falcon Isle Resources LLC and Falcon Isle Holdings LLC (collectively 'Falcon
Isle'). Keras initially acquired a 51% equity interest in Falcon Isle in July
2020 for nominal consideration by agreeing to loan a total of $2.5m to Falcon
Isle in tranches. The last tranche of the loan was advanced at the end of
December 2020, so that Falcon Isle has been accounted for as a subsidiary of
Keras for 2021. Post-period end, in March 2022, we were pleased to announce
that Keras had agreed to acquire our partner's 49% equity interest in Falcon
Isle, increasing our holding from 51% to 100%, for a total consideration of
US$3.2m, which includes loans repaid to the vendor totalling US $1,816,527.
This agreement made Falcon Isle a wholly owned subsidiary of Keras, allowing
Graham Stacey, previously COO of Keras, to take over full management control
of the operation, and become CEO of the Group. Importantly, the agreement
avoided a lengthy and costly litigation process, operations recommenced
immediately, and we continue to meet customers' demand for our phosphate
product.
Located approximately 80km south-east of Salt Lake City, Diamond Creek is one
of the highest-grade organic phosphate deposits in the US, and our mission
going forward is to build the operation into the premier organic phosphate
producer in the US. Our focus and market segment is in supporting sustainable
agriculture and we are strong advocates for the benefits of enhancing soil
health. Our organic phosphate fertiliser products can help farmers realise
better crop growth and yields while reducing the soil degradation seen when
farmers use chemically manufactured fertilisers.
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, simple low-intensity seasonal mining operation and
our in-house processing plant has flexibility to beneficiate a variety of
organic rock phosphate products throughout the period. The mined material
only 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.
The project 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. Part of the funds raised recently will be
used to establish a NI 43-101 compliant mineral resource at Diamond Creek.
Immediately post Keras' injection of funding into Falcon Isle, beneficiation
was undertaken on a toll basis with a key contractor. The Company subsequently
took the decision to move processing in-house and construct a new plant at
Spanish Fork, 30km from Diamond Creek. This was to both increase the installed
capacity and enable flexibility to beneficiate a variety or organic phosphate
products to offer across our marketing campaign. The plant was fabricated and
shipped from Shanghai, with construction commencing on site in Spanish Fork in
February 2021 and commissioning was successfully completed at the end of June,
2021.
In November 2021 the Company announced it was in dispute with its 49% partner
in Falcon Isle due to a capital shortfall resulting in all operations at
Diamond Creek being temporarily halted and Keras engaging local US legal
representatives to enforce its rights under the terms of the initial
transaction. The 2021 mining season had already been completed prior to
operations being suspended and sales continued to be made from processed
material in stock over the winter period.
In 2021, 8,520 tons of phosphate were mined and delivered to the laydown area
at Diamond Creek. Sales totalled 4,657 tons of phosphate from June 2020
through to May 2022. 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' operational control and our recent fund-raise 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 2022
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 September, while the
mine site is free of snow.
Nayéga manganese mine / Togo
On the 18 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 the Company's subsidiary, Société Générale
des Mines ("SGM"). Since that date the Company has concentrated its efforts
on obtaining the required Exploitation Permit. The terms of the permit and
associated protocols have been agreed, and SGM has been converted from a
private to a public company, as required by law and in compliance with the
draft Mining Convention. However, the exploitation permit approval has not
been forthcoming.
Financial review
The Consolidated Statement of Comprehensive Income for the 15-month period
shows a loss of £1,948,000 (2020 - loss £1,257,000). The results of the two
periods are not strictly comparable due to the different lengths of the
periods reported on as a result of the change in year-end to 31 December.
The loss for the period under review has suffered from delays in realising the
value of the Diamond Creek mine which are referred to above.
Also included is a technical loss amounting to £398,000 due to the IFRS
requirement to treat the previous minority interest in Falcon Isle as having
been disposed of and the 51% majority acquired as a separate transaction.
During the period Keras undertook two fund raisings, in December 2020 and
January 2021, raising £550,000 and £1,000,000 respectively (before costs),
primarily to facilitate finance for the Diamond Creek mine, and also for
working capital generally.
In May 2022 Keras raised a further £1,950,000 (before costs) at a premium to
the previous share price, of which £960,000 was subscribed by a new
cornerstone investor, First Uranium Resources Ltd, a Canadian public company
active in the North American phosphate market. These funds will be used for
the first tranche of US$800,000 of the cost of acquiring the former minority
interest in Falcon Isle, the establishment of a NI 43-101 compliant Mineral
Resource at Diamond Creek, expansion of the Falcon Isle business into other
fields of activity and general working capital.
First Uranium initially acquired a 10.03% interest in the Company by
participating in the above Capital raise and, subsequent to this, AxCap
Ventures, an associated company of First Uranium, accumulated a further 7.04%
interest in Keras through on-market trades. First Uranium's support for the
Company is part of their focus on developing a portfolio of assets in the
North American phosphate market as it sees this as a key growth commodity
within the resource sector.
Directors and Management
Graham Stacey, who has been COO since 2020, was appointed to the Board in
November 2021 and assumed responsibility for the Diamond Creek mine in March
2022. He is in the process of relocating from Johannesburg to Utah. On 1 June
2022 Graham took over the role of Chief Executive Officer from Russell
Lamming, who has become a Non-Executive Director. I would like to welcome
Graham to the Board and thank Russell for his untiring work during his tenure
as CEO.
Later in the year, on 1 September 2022, Russell will take over from me as
Non-Executive Chairman. I will remain a Non-Executive Director and Company
Secretary, and I will continue to provide oversight of the Company's finances.
Outlook
With the closing of the £1.95m capital raise and securing 100% of our
high-grade organic phosphate Diamond Creek mine, we believe the Company is
excellently positioned to deliver into the growing 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 under way and we continue
to negotiate new offtake agreements with our repeat customers. The
construction of a downstream granulator plant is planned for 2022 to allow us
to further expand the range of our products from five sized dry products to
include two sized granulated products 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 a
profitable and valuable asset for the Group, and we look forward to updating
our shareholders on our progress as we continue to ramp up the production
profile 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.
Brian Moritz
Chairman
29 June 2022
Strategic Report
Having acquired 100% control of the Diamond Creek asset, the Group's strategy
is to progressively enhance shareholder value through building market share
for its products within the North American organic fertiliser market. At the
same time ongoing 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.
Diamond Creek is one of the highest-grade organic phosphate mines in the US,
and the Company's purpose is to build the operation into the premier organic
phosphate producer in the US. Keras supports sustainable, regenerative
agriculture and is an advocate for the benefits of enhancing soil health.
Diamond Creek's organic phosphate fertiliser products can help farmers realise
better crop growth and yields, reduce soil degradation, build and maintain
soil organic matter to improve overall soil health, and ultimately reduce
CO(2) levels in the atmosphere through carbon sequestration.
Organic fertilisers' significantly lower carbon footprint relative to
traditional synthetic/chemical fertilisers and will continue to support demand
and pricing for organic replacements including rock phosphate. Keras is
therefore also looking at developing opportunities around carbon sequestration
and the associated carbon credits to further augment its business and enhance
shareholder value. 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 Group's business model has established the Company as an efficient,
high-quality and low-cost producer direct into the North American fertiliser
market.
During the reporting period the Group was focussed largely on developing
operations at Diamond Creek to maximise operational efficiencies, build market
share and generate cashflow. The mine is owned by Falcon Isle, in which the
Company held a 51% equity interest during the reporting period, subsequently
increasing this to 100% in March 2022.
The Company is aware of a national geophysical survey being undertaken by the
Togolese Ministry of Mines and Energy and we do not expect the permitting
process at our Nayéga manganese project to be concluded prior to the survey
being completed.
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 21.3% 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.
Financial and Performance Review
Turnover in the period under review comprised sales of phosphate fertilisers
by Falcon Isle. Turnover of £452,000 was constrained by construction of the
processing plant, which was only operational for the final six months of the
period, as well as the problems with working capital referred to previously.
The results of the Group are set out in detail in the financial statements.
The Group reports a loss for the period of £1,948,000 (2020: loss
£1,257,000).
Fixed assets total £5,375,000 (2020: £1,332,000), which includes the bulk
sample plant and associated infrastructure at the Nayéga project, and the
Falcon Isle processing plant totalling £544,000 (2020: £262,000).
The Directors have assessed the carrying values of Falcon Isle and SGM and no
impairment has been deemed necessary.
Key Performance Indicators (KPIs)
During the period the Board monitored the following KPIs:
· Cash flow and working capital:
o Short (<3 months) and long-term cashflow models are prepared to monitor
and forecast the Group's funding needs;
o Management accounts prepared on a monthly basis for the Group's key
subsidiaries and quarterly on a consolidated basis.
Mining projects
North America
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% post the reporting period 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 2022 and 2023 mining seasons before any
overburden stripping is required. The phosphate mineralisation is
concentrated in the shale beds of the Meade Peak Member of the Phosphoria
Formation. The mineralised zone is c.3m thick at the base of the Meade Peake
Member 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 2021 mining campaign was completed in October 2021 with a total of 8,520
ore tons extracted from the mine. Beneficiation during the reporting period
was undertaken through a combination of contractor toll-milling (producing
10mesh and -50mesh products) and Falcon Isle owned milling infrastructure. A
new high-pressure rolls milling plant was successfully commissioned during
June 2021 which has the capacity to produce steady-state product of 23,500
tons per month. The plant comprises front-end feed, primary crush, milling,
dust extraction, 50lb and 1ton bagging circuits to produce a range of products
including -50 mesh, -100 mesh and -350 mesh powders in either 50lb bags or
1ton bags (totes). A granulation plant was procured and delivered to our
Spanish Fork site during September 2021 with construction and commissioning
planned for the second half of 2022 which will further broaden our product
range to include high margin granulated organic phosphate.
The product has 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. Our rock 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%.
Africa
Keras currently holds an 85% interest in the Nayéga manganese project in
Togo, which covers 19,903 hectares in northern Togo, held through Société
Générale des Mines SA (SGM). As set out in the Chairman's Statement, SGM is
still waiting for the issue of the exploitation permit.
Sustainability
Keras is committed to responsible mining and upholding ESG best practice
across our business. We care about all 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 deposits, or 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 have risk associated with defined grade and continuity.
Mineral reserves and resources 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 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 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 26 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 employees to understand all aspects of the Group's business
and seeks to remunerate its employees 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, all are male.
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 29 June 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 15 MONTHS ENDED 31 DECEMBER 2021
15 months ended 31 December Year ended 30 September 2020
2021 £'000
Notes £'000
Continuing operations
Revenue 452 -
Cost of sales (496) -
Gross profit (44) -
Administrative and exploration expenses (1,448) (1,235)
Loss from operating activities (1492) (1,235)
Finance costs 11 (43) (3)
Net finance costs (43) (3)
Share of net loss of associates accounted for using the equity method (116) (4)
Loss on change of ownership
15 (363) -
Loss before taxation (2,014) (1,242)
Tax 12 - -
Loss for the period/year (2,014) (1,242)
Other comprehensive income - items that may be subsequently reclassified to
profit or loss
Exchange translation on foreign operations 66 (15)
Total comprehensive loss for the period/year (1,948) (1,257)
Loss attributable to:
Owners of the Company (1,729) (1,181)
Non-controlling interests (285) (61)
Loss for the period/year (2,014) (1,242)
Total comprehensive loss attributable to:
Owners of the Company (1,670) (1,194)
Non-controlling interests (278) (63)
Total comprehensive loss for the period/year (1,948) (1,257)
Earnings per share
Basic and diluted loss per share (pence) 22 (0.033) (0.040)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
31 December 2021 30 September 2020
£'000 £'000
Notes
Assets
Property, plant and equipment 13 554 263
Intangible assets 14 4,606 1,069
Right of use asset 16 215 -
Investments accounted for using the equity method 15 - 1,622
Non-current assets 5,375 2,954
Inventory 18 273
Other investments 16 - -
Trade and other receivables 19 94 83
Cash and cash equivalents 20 166 438
Current assets 533 521
Total assets 5,908 3,475
Equity
Share capital 21 630 487
Share premium 4,033 2,637
Other reserves 111 16
Retained (deficit)/earnings (1,721) 8
Equity attributable to owners of the Company 3,053 3,148
Non-controlling interests 229 (140)
Total equity 3,282 3,008
Liabilities
Trade and other payables 24 1,658 467
Lease liabilities - current 16 107 -
Current liabilities 1,765 467
Trade and other payables 24 749 -
Lease liabilities - non-current 16 112 -
Non-current liabilities 861 -
Total liabilities 2,626 467
Total equity and liabilities 5,908 3,475
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 15 MONTHS ENDED 31 DECEMBER 2021
Attributable to owners of the Company
Share Share premium Share Exchange reserve Financial Retained earnings/(deficit) Total Non-controlling interests Total equity
capital option assets at
/warrant reserve FVOCI £'000 £'000
£'000 £'000 £'000 £'000
£'000 £'000 £'000
Balance at 1 October 2020 487 2,637 63 (47) - 8 3,148 (140) 3,008
Loss for the period - - - - - (1,729) (1,729) (285) (2,014)
Other comprehensive income - - - 58 - - 58 8 66
Total comprehensive loss for the period - - - 58 - (1,729) (1,671) (277) (1,948)
Issue of ordinary shares 143 1,469 - - - - 1,612 - 1,612
Costs of share issue - (73) - - - - (73) - (73)
Share-based payment transactions - - 37 - - - 37 - 37
Non-controlling interest on acquisition of subsidiary - - - - - - - 646 646
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 3,382
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Attributable to owners of the Company
Share Share premium Share Exchange reserve Financial assets at FVOCI Retained (deficit)/earnings Total Non-controlling interests Total equity
capital option £'000 £'000
£'000 reserve £'000 £'000 £'000
£'000 £'000 £'000
Balance at 1 October 2019 7,266 10,938 - (33) 3,459 (10,310) 11,320 (76) 11,244
Loss for the year - - - - - (1,181) (1,181) (61) (1,242)
Other comprehensive income - - - (16) - 4 (12) (3) (15)
Total comprehensive loss for the year - - - (16) - (1,177) (1,193) (64) (1,257)
Capital reduction (7,023) (10,938) - - - 17,961 - - -
Demerger and recycling of OCI reserve - - - - (3,459) (6,464) (9,923) - (9,923)
Issue of ordinary shares 244 2,718 - - - - 2,962 - 2,962
Costs of share issue - (81) - - - - (81) - (81)
Share-based payment transactions - - 63 - - - 63 - 63
Transfer - - - 2 - (2) - - -
Total transactions with owners, recognised directly in equity (6,779) (8,301) 63 2 (3,459) 11,495 (6,979) - (6,979)
Balance at 30 September 2020 487 2,637 63 (47) - 8 3,148 (140) 3,008
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 15 MONTHS ENDED 31 DECEMBER 2021
15 months ended 31 December 2021 Year ended 30 September 2020
£'000 £'000
Cash flows from operating activities
Loss from operating activities (2,014) (1,242)
Adjustments for:
Depreciation and amortisation 172 76
Share of loss of equity accounted associate 116 4
Compensation on cancellation of SARS scheme - 120
Equity-settled share-based payments 37 63
Foreign exchange differences 73 (39)
(1,616) (1,018)
Changes in:
- inventory (216) -
- trade and other receivables 111 2
- trade and other payables 540 278
Cash generated by/(used in) operating activities (1,181) (738)
Finance costs - -
Taxes paid - -
Net cash generated by/(used in) operating activities (1,181) (738)
Cash flows from investing activities
Cash acquired on acquisition (note 15) 158
Acquisition of property, plant and equipment (188) -
Exploration and licence expenditure (538) (1)
Investment in associate - (938)
Net cash used in investing activities (568) (939)
Cash flows from financing activities
Net proceeds from issue of share capital 1,477 1,931
Net cash flows from financing activities 1,477 1,931
Net (decrease)/increase in cash and cash equivalents (272) 254
Cash and cash equivalents at beginning of period/year 438 184
Cash and cash equivalents at 31 December/30 September 166 438
The following significant non-cash transactions took place in the period ended
31 December 2021:
· Shares were issued to settle a total of £55,000 due to creditors.
· The investment in Falcon Isle became a subsidiary as detailed in note
15 and the assets and liabilities were acquired.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
31 December 2021 30 September 2020
£'000 £'000
Notes
Assets
Property, plant and equipment 13 2 -
Investments 15 1,959 1,622
Non-current assets 1,961 1,622
Other investments 16 - -
Loans 17 2,081 1,534
Trade and other receivables 19 20 70
Cash and cash equivalents 20 122 428
Current assets 2,223 2,032
Total assets 4,184 3,654
Equity
Share capital 21 630 487
Share premium 4,033 2,637
Other reserves 100 63
Retained earnings/(deficit) (729) 285
Total equity attributable to owners of the Company 4,034 3,472
Liabilities
Trade and other payables 24 150 182
Current liabilities 150 182
Total liabilities 150 182
Total equity and liabilities 4,184 3,654
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 £1,014,000 (year to 30 September
2020: loss of £811,000).
The financial statements of Keras Resources PLC, company number 07353748, were
approved by the Board of Directors and authorised for issue on 29 June 2022.
They were signed on its behalf by:
Brian Moritz, Director
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2021
Share Share premium Share option Financial Retained earnings/ (deficit) Total
capital /warrant reserve assets at £'000 equity
£'000 £'000 FVOCI
£'000 £'000 £'000
Balance at 1 October 2019 7,266 10,938 - 3,459 (10,401) 11,262
Loss for the year - - - - (811) (811)
Other comprehensive income - - - - - -
Total comprehensive loss for the year - - - - (811) (811)
Capital reduction (7,023) (10,938) - - 17,961 -
Demerger and recycling of OCI reserve - - - (3,459) (6,464) (9,923)
Issue of ordinary shares 244 2,718 - - - 2,962
Costs of share issue - (81) - - - (81)
Share-based payment transactions - - 63 - - 63
Transactions with owners, recognised directly in equity (6,779) (8,301) 63 (3,459) 11,497 (6,979)
Balance at 30 September 2020 487 2,637 63 - 285 3,472
Balance at 1 October 2020 487 2,637 63 - 285 3,472
Loss for the period - - - - (1,014) (1,014)
Other comprehensive income - - - - - -
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-based payment transactions - - 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
COMPANY STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2021
15 months ended 31 December 2021 Year ended 30 September 2020
£'000 £'000
Cash flows from operating activities
Loss from operating activities (1,014) (811)
Adjustments for:
Depreciation 1 -
Share of loss of associate 116 4
Impairment/write off of loan - 4
Compensation on cancellation of SARS scheme - 120
Equity-settled share-based payments 37 63
Changes in:
- trade and other receivables 50 14
- trade and other payables 23 25
Cash generated by/(used in) operating activities (787) (581)
Finance costs - -
Net cash generated by (used in) operating activities (787) (581)
Cash flows from investing activities
Acquisition of property, plant and equipment (3) -
Investment in associate/subsidiary (446) (938)
Net cash used in investing activities (449) (938)
Cash flows from financing activities
Net proceeds from issue of share capital 1,477 1,931
Loans (to)/repaid by subsidiaries (547) (159)
Net cash flows from financing activities 930 1,772
Net increase/(decrease) in cash and cash equivalents (306) 253
Cash and cash equivalents at beginning of period/year 428 175
Cash and cash equivalents at 31 December/30 September 122 428
The following significant non-cash transactions took place in the period ended
31 December 2021:
· Shares were issued to settle a total of £55,000 due to
creditors.
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 accounting reference date has changed to 31 December to
be coterminous with the main trading 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 25 to the Financial Statements includes the Group's policies
and processes for managing its financial risk management objectives.
Since the end of the period, the Company has agreed to acquire the minority
49% interest in Falcon Isle, and to repay loans made by the vendor to Falcon
Isle, for a total consideration of $3.2 million. This amount is payable in
four annual instalments of $800,000 commencing on 1 July 2022.
Also since the end of the period, the Company has raised a further £1.95
million, before costs, by the issue of New Ordinary Shares. Part of this will
be used to pay the first instalment of $800,000 to the vendor of Falcon Isle.
The Nayéga mine in Togo is in a position to commence operations when the
exploitation licence is granted. Capital expenditure to expand production and
working capital will be primarily provided in the short term by a loan in
association with an offtake agreement which has been agreed in principle.
Should the Company divest its interest in the Nayéga mine, this is expected
to be a cash flow positive transaction.
The Directors do not believe that Covid 19 has had a material effect on the
Company or its operations other than travel restrictions which have restricted
the ability of management to visit operations. This has been mitigated by
increased home working and use of electronic communications. Such travel
restrictions have now been removed in most instances.
On this basis, the Directors have a reasonable expectation that the Group and
Company 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
international accounting standards in conformity with the Companies Act
2006("IFRSs"), and the Companies Act 2006 as applicable to entities reporting
in accordance with IFRS.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical
cost basis unless otherwise stated.
(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) 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:
· Carrying value of intangible
assets
- Notes 4(e)(i) and 14
· Intercompany receivables (Company
only) - Note 19
· Carrying value of investment in associate
- Note 15
· Fair value of share options and
warrants
- Note 21
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) Associates
Investments in associates are accounted for using the equity method of
accounting after initially being recognised at cost. Loans to associates
denominated in US$ are recognised in sterling in the financial statements at
the period end exchange rate.
(iv) Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and
liabilities of the subsidiary, and any related non-controlling interests and
other components of equity. Any resulting gain or loss is recognised in
profit or loss. Any interest retained in the former subsidiary is measured
at fair value when control is lost.
(v) 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.
(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.
Financial assets at fair value through other comprehensive income
These assets are initially measured at fair value. Subsequent to initial
recognition, they are measured at fair value and changes therein, other than
impairment losses and interest income, are recognised in OCI and accumulated
in the fair value reserve. When these assets are derecognised, any related
balance within the FVOCI reserve is reclassified to retained earnings.
(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.
(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.
(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.
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 of 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.
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.
(i) 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.
(j) 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.
(k) 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;
· 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.
(l) 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 6
(m) 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.
(n) 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.
(o) 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.
5. New standards and interpretations
There are no amendments to International Financial Reporting Standards (IFRS)
and International Accounting Standards (IAS) that have been implemented by the
Group in the period ended 31 December 2021 and have changed the Group's
accounting policies.
Standards, Amendments to published Standards and Interpretations issued but
not yet effective
Other new and amended standards and Interpretations issued by the IASB that
will apply for the first time in the next annual financial statements are not
expected to impact the Group as they are either not relevant to the Group's
activities or require accounting which is consistent with the Group's current
accounting policies.
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. Operating segments
The Group considers that it operated during the period in two distinct
business areas, being that of manganese production and exploration in West
Africa and phosphate mining in Utah, USA. These business areas form the
basis of the Group's operating segments. For each segment, the Group's
Managing Director (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
15 months ended 31 December 2021
Other operations
Manganese Phosphate £'000 Total
£'000 £'000 £'000
External revenue - 451 - 451
Cost of sales - 495 495
Interest expense - - - -
Depreciation, amortisation and impairment 43 143 1 187
Share of associate - 116 - 116
loss to date of becoming subsidiary
(Loss)/profit before (60) (569) (1,385) (2,014)
tax
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
Year ended 30 September 2020
Other operations
Manganese Phosphate £'000 Total
£'000 £'000 £'000
External revenue - - - -
Interest expense - - - -
Depreciation, amortisation and impairment 76 - - 76
Share of associate loss - (4) (4)
(Loss)/profit before tax (405) (4) (833) (1,242)
Assets 1,011 1,622 842 3,475
Exploration and capital expenditure 1 - - 1
Liabilities 285 - 182 467
Information about geographical segments
15 months ended 31 December 2021
West Africa US Other Total
£'000 £'000 £'000 £'000
External revenue - 451 - 451
Cost of sales - 496 - 496
Interest expense - - - -
Depreciation, amortisation and impairment 43 143 1 187
Share of associate loss to date of becoming subsidiary - (116) - (116)
(Loss)/profit before (44) (569) (1,385) (2,014)
tax
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
Year ended 30 September 2020
West
Africa US Other Total
£'000 £'000 £'000 £'000
External revenue - - - -
Interest expense - - - -
Depreciation, amortisation and impairment 76 - - 76
Share of associate loss - (4) - (4)
(Loss)/profit before tax (405) (4) (833) (1,242)
Assets 1,011 1,622 842 3,475
Exploration and capital expenditure 1 - - 1
Liabilities 285 - 182 467
8. Expenses
15 months ended 31 December 2021 Year ended 30 September 2020
Expenses include: £'000 £'000
Depreciation and amortisation expense 44 76
Auditor's remuneration
- Audit fee 33 23
Foreign exchange differences 12 4
Auditor's remuneration for the period in respect of the Company amounted to
£11,000 (year ended 30 September 2020: £10,000).
9. Personnel expenses
15 months ended 31 December 2021 Year ended 30
£'000 September 2020
£'000
Wages and salaries 672 446
Fees 100 158
Equity-settled share-based payments (see note 23) 37 183
809 787
Fees in respect of the services of D Reeves are payable to a third party,
Wilgus Investments (Pty) Limited.
Fees in respect of the services of R Lamming are payable to a third party,
Parallel Resources Limited for part of the previous period.
The average number of employees (including directors) during the period was:
15 months ended 31 December 2021 Year ended 30
September 2020
Directors 4 3
Key management personnel - 1
Other 3 3
7 7
10. Directors' emoluments
15 months ended 31 December 2021
Executive Non-executive
directors directors Total
£'000
£'000 £'000
Wages and salaries (incl. fees) 234 82 316
234 82 316
Year ended 30 September 2020
Executive Non-executive directors
directors £'000 Total
£'000 £'000
Wages and salaries (incl. fees) 152 66 218
Compensation payment resulting from SARS cancellation
120 - 120
272 66 338
These amounts are disclosed by director in the Directors' report on page 15.
Emoluments disclosed above include the following amounts payable to the
highest paid director:
15 months ended 31 December 2021 Year ended 30
£'000 September 2020
£'000
Emoluments for qualifying services 219 272
Key management personnel
Included in note 10 are emoluments paid to key management personnel in the
period which amounted to £70,000 (year ended 30 September 2020: £71,000).
11. Finance costs
Recognised in loss for period
15 months ended Year ended 30 September 2020
31 December £'000
2021
£'000
Other 43 3
43 3
12. Taxation
Current tax
15 months ended 31 December 2021 Year ended 30 September 2020
£'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
15 months ended 31 December 2021 Year ended 30 September 2020
£'000 £'000
Loss before tax (continuing operations) (2,014) (1,242)
Tax using the Company's domestic tax rate of 19.0% (2020: 19.0%) (383) (236)
Effects of:
Expenses not deductible for tax purposes 2 3
Overseas (profits)/losses 116 93
Equity-settled share-based payments 7 12
Tax losses carried forward not recognised as a deferred tax asset 258 128
- -
None of the components of other comprehensive income have a tax impact.
Factors that may affect future tax charges
At the period end, the Group had unused tax losses available for offset
against suitable future profits of approximately £7,128,000 (year ended 30
September 2020: £5,771,000). A deferred tax asset has not been recognised in
respect of such losses due to uncertainty of future profit streams.
13. Property, plant and equipment
Group
Plant and equipment Office and computer equipment Motor vehicles
£'000 Total
£'000 £'000
£'000
Cost
Balance at 1 October 2019 360 31 19 410
Additions - - - -
Disposals (39) (6) (19) (64)
Effect of movements in exchange rates 8 - - 8
Balance at 30 September 2020 329 25 - 354
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
Depreciation and impairment provisions
Balance at 1 October 2019 29 30 19 78
Depreciation for the year 76 - - 76
Depreciation on disposals (39) (6) (19) (64)
Effect of movements in exchange rates 1 - - 1
Balance at 30 September 2020 67 24 - 91
Balance at 1 October 2020 67 24 - 91
Depreciation for the period 34 2 - 36
Depreciation on disposals - - - -
Effect of movements in exchange rates 8 - - 8
Balance at 31 December 2021 109 26 - 135
Carrying amounts
At 30 September 2019 331 1 - 332
At 30 September 2020 262 1 - 263
At 31 December 2021 552 2 - 554
Company
Plant and Computer equipment
equipment £'000 Total
£'000 £'000
Cost
Balance at 1 October 2019 - 5 5
Transfers - - -
Balance at 30 September 2020 - 5 5
Balance at 1 October 2020 - 5 5
Additions - 3 3
Balance at 31 December 2021 - 8 8
Depreciation and impairment provisions
Balance at 1 October 2019 - 5 5
Depreciation for the year - - -
Balance at 30 September 2020 - 5 5
Balance at 1 October 2020 - 5 5
Depreciation for the period - 1 1
Balance at 31 December 2021 - 6 6
Carrying amounts
At 30 September 2019 - - -
At 30 September 2020 - - -
At 31 December 2021 - 2 2
14. Intangible assets - Group
Prospecting and exploration rights
£'000
Cost
Balance at 1 October 2019 1,206
Additions 1
Disposals -
Effect of movement in exchange rates 20
Balance at 30 September 2020 1,227
Balance at 1 October 2020 1,227
Acquisition of Falcon Isle (note 15) 3,046
Additions 538
Disposals (158)
Effect of movements in exchange rates (10)
Balance at 31 December 2021 4,643
Amortisation and impairment losses
Balance at 1 October 2019 155
Impairment -
Amortisation -
Disposals -
Effect of movements in exchange rates 3
Balance at 30 September 2020 158
Balance at 1 October 2020 158
Impairment -
Amortisation 37
Disposals (158)
Effect of movements in exchange rates -
Balance at 31 December 2021 37
Carrying amounts
Balance at 30 September 2019 1,051
Balance at 30 September 2020 1,069
Balance at 31 December 2021 4,606
The carrying value of the prospecting and exploration rights is supported by
the estimated resource and current market values.
15. Investments in subsidiaries and associates
Company - subsidiaries
2021 2020
£'000 £'000
Equity investments
Balance at beginning of period - -
Additions - from associates 1,959 -
Disposals - -
Balance at 31 December/30 September 1,959 -
Country of Ownership interest
Activity incorporation 2021 2020
Directly
Southern Iron Limited Investment Guernsey 100% 100%
Falcon Isle Resources LLC Mining USA 51% 40%
Indirectly
Société Générale des Mines SA Exploration Togo 85% 85%
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, 8 The Green, Suite B8, Dover, Kent, Delaware 19901,
USA
Group and Company - associates
2021 2020
£'000 £'000
Accounted for using the equity method
At 1 October 1,622 -
Additions - including acquisition costs 453 1,626
Share of loss for the period (116) (4)
Transfer to investment in subsidiary (1,959) -
At 31 December/30 September - 1,622
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%.
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.
Since 31 December 2021, on 29 March 2022, the Company agreed to acquire 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 commencing on 1 July 2022.
From the date of the acquisition on 31 December 2020 to 31 December 2021,
Falcon Isle Resources recognized revenue of £452,000 and incurred a loss of
£569,000. If the acquisition had occurred on 1 October 2020 the Group's
revenue and loss for the 15-month period ended 31 December 2021 would have
been £548,000 and £2,261,000 respectively.
The fair value of assets and liabilities acquired on acquisitions are as
follows:
Fair value
£'000
Intangibles 3,046
Fixed assets 172
Inventory 57
Receivables 122
Bank balances and cash 158
Trade and other payables (17)
Loans (1,330)
2,208
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.
16. Leases
The following lease liabilities arose in respect of the recognition of right
of use assets with a net book value of £219,000. The Group holds one lease
that it accounts for under IFRS 16.
The right of use assets are as follows:
£000
Balance at 30 September 2020 -
Additions 314
Depreciation (99)
Balance at 31 December 2021 215
The lease liability is as follows:
£000
Balance at 30 September 2020 -
Addition 314
Principal reduction (105)
Finance cost 10
Balance at 31 December 2021 219
Less: Current portion (107)
Non-current portion 112
A maturity analysis of the undiscounted minimum lease payments due are as
follows:
£000
Lease liabilities - minimum lease payments
No later than one year 116
Later than one year and no later than five years 116
Later than five years -
Total 232
17. Loans
Company - current
2021 2020
£'000 £'000
Balance at beginning of period 1,534 1,379
Funds advanced to subsidiaries 547 159
Repaid/impaired - (4)
Balance at 31 December/30 September 2,081 1,534
All loans to subsidiaries are currently unsecured and interest free and
repayable on demand. All loans are denominated in GBP.
18. Inventories
2021 2020
£'000 £'000
Phosphate, including processed material held for sale 273 -
273 -
19. Trade and other receivables
Group
2021 2020
£'000 £'000
Trade receivables 7 -
Other receivables 87 71
Prepayments - 12
94 83
Company
2021 2020
£'000 £'000
Other receivables 20 58
Prepayments - 12
20 70
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 24 and 25. Trade receivables are net of a provision for bad debts of
£nil (2020: £nil)
20. Cash and cash equivalents
Group
2021 2020
£'000 £'000
Bank balances 166 438
Cash and cash equivalents 166 438
Company
2021 2020
£'000 £'000
Bank balances 122 428
Cash and cash equivalents 122 428
There is no material difference between the fair value of cash and cash
equivalents and their book value.
21. Capital and reserves
Share capital
Number of old ordinary shares £0.001 each
31 December 2021 30 September 2020
In issue at beginning of year - 2,491,358,439
Issued for cash - 7,000,000
Issued in settlement of debt - -
Cancelled under capital reduction - (2,498,358,439)
In issue at 31 December/30 September - fully paid - -
Number of new ordinary shares £0.0001 each
In issue at beginning of period 31 December 2021 30 September 2020
Resulting from capital reduction 4,866,007,851
Issued for cash
- -
1,369,565,217 2,498,358,439
1,646,678,326
Issued in settlement of debt 60,500,000 720,971,086
In issue at 31 December/30 September - fully paid 6,296,073,068 4,866,007,851
Number of deferred shares
of £0.004 each
31 December 2021 30 September 2020
In issue at beginning of year - 1,193,794,390
Cancelled under capital reduction - (1,193,794,390)
In issue at 31 December/30 September - fully paid - -
Ordinary and deferred share capital
31 December 2021 30 September 2020
£'000 £'000
Balance at beginning of year 487 7,266
Share issues 143 244
Deferred shares cancelled - (4,775)
Capital reduction - (2,248)
Balance at 31 December/30 September 630 487
31 December 2021
4,866,007,851
-
1,369,565,217
30 September 2020
-
2,498,358,439
1,646,678,326
Issued in settlement of debt
60,500,000
720,971,086
In issue at 31 December/30 September - fully paid
6,296,073,068
4,866,007,851
Number of deferred shares
of £0.004 each
31 December 2021
30 September 2020
In issue at beginning of year
-
1,193,794,390
Cancelled under capital reduction
-
(1,193,794,390)
In issue at 31 December/30 September - fully paid
-
-
Ordinary and deferred share capital
31 December 2021
£'000
30 September 2020
£'000
Balance at beginning of year
487
7,266
Share issues
143
244
Deferred shares cancelled
-
(4,775)
Capital reduction
-
(2,248)
Balance at 31 December/30 September
630
487
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 18 December 2020, 400,000,000 ordinary shares were issued for cash at
£0.0011 per share.
On 18 December 2020 B Moritz and D Reeves, conditionally agreed to subscribe
for 36,363,636 and 63,636,364 shares each at £0.0011 per share, these were
issued on 18 January 2021 following a General Meeting to grant increased
authority to issue shares.
On 18 January 2021, 869,565,217 ordinary shares were agreed to be issued at
£0.00115 per share, of these, B Moritz conditionally agreed to subscribe for
17,391,304 shares and R Lamming conditionally agreed to subscribe for
26,086,957 shares in lieu of part of his salary. Of these shares, 600,000,000
were issued on 18 January 2021 and the balance of 269,565,217 were issued on
15 February 2021 following a General Meeting to grant increased authority to
issue shares.
On 18 January 2021, the company conditionally agreed to issue 48,000,000
ordinary shares at £0.00115 per share in settlement of amounts owing to
advisors. These were issued on 15 February 2021 following a General Meeting
to grant increased authority to issue shares.
On 8 November 2021 G Stacey agreed to convert £7,500 of his outstanding fees
into 12,500,000 new ordinary shares of 0.01pence each at a price of 0.06p per
share.
Warrants
31 December 2021 30 September 2020
Average exercise price Number Average exercise price Number
In issue at beginning of period 0.24p 984,357,334 0.36p 7,000,000
Lapsed 0.24p (984,357,334) - -
Issued in period 0.22p 250,000,000 0.24p 984,357,334
Lapsed 0.22p (250,000,000) - -
Issued in period 0.18p 434,785,608 - -
Exercised in period - - 0.36p (7,000,000)
In issue at 31 December/30 September 0.18p 434,785,608 0.24p 984,357,334
On 18 December 2020 250,000,000 warrants were agreed to be issued to
subscribers for the New Ordinary Shares agreed to be issued for cash on 18
December 2020 on the basis of 1 warrant for every 2 shares subscribed. The
warrants are exercisable at price of 0.22p at any time up to 31 December 2021.
On 18 January 2021 434,785,608 warrants were agreed to be issued to
subscribers for the New Ordinary Shares agreed to be issued for cash on 18
January 2021 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 28 February 2022.
The weighted average remaining contractual life of the
warrants outstanding is 59 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.
Fair value reserve
The fair value reserve comprised the cumulative net change in the fair value
of available-for-sale financial assets until the assets were derecognised or
impaired.
22. Earnings per share
Basic and diluted earnings/(loss) per share
The calculation of basic earnings/(loss) per share at 31 December 2021 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 (£)
15 months ended 31 December 2021
Year ended 30 September 2020
Continuing operations (1,948,000) (1,181,000)
Loss attributable to ordinary shareholders (1,948,000) (1,181,000)
Weighted average number of ordinary shares
15 months ended 31 December 2021
Year ended 30 September 2020
Issued ordinary shares at beginning of year 4,866,007,851 2,491,358,439
Effect of shares issued 1,085,483,160 444,668,141
Weighted average number of ordinary shares 5,951,491,011 2,936,026,580
The warrants in issue are considered to be antidilutive and as a result, basic
and diluted loss per share are the same.
23. Share-based payments
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 30 September 2020 for these rights which
was included in administrative and exploration expenses amounted to
£63,000.
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 2021 for these rights which was
included in administrative and exploration expenses amounted to £5,000.
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 options lapse if not exercised within 3 years of the
vesting dates.
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 2021 for these rights which was
included in administrative and exploration expenses amounted to £7,000.
24. Trade and other payables
Group - Current
2021 2020
£'000 £'000
Trade payables 962 104
Accrued expenses 93 228
Amounts due to Falcon Isle Resources' minority interest 593 -
Other payables 11 135
1,658 467
Group - Non-Current 2021 2020
£'000 £'000
Amounts due to Falcon Isle Resources' minority interest 749 -
749 -
Company - Current
2021 2020
£'000 £'000
Trade payables 46 21
Accrued expenses 91 97
Other payables 13 64
150 182
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 25.
25. 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
2021 2020
£'000 £'000
Trade and other receivables 94 67
Cash and cash equivalents 166 438
260 505
Company
Financial assets at amortised cost
Carrying amount
2021 2020
£'000 £'000
Loans 2,081 1,534
Trade and other receivables 20 56
Cash and cash equivalents 122 428
2,223 2,018
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
2021
Carrying amount Contractual cash flows 2 months 2-12 months
£'000 £'000 or less £'000
£'000
Non-derivative financial liabilities
Trade and other payables 1,658 (1,658) (168) (1,490)
Lease liabilities 107 (107) (19) (88)
1,765 (1,765) (187) (1,578)
Group
2020
Carrying amount Contractual cash flows 2 months 2-12 months
£'000 £'000 or less £'000
£'000
Non-derivative financial liabilities
Trade and other payables 467 (467) (78) (389)
467 (467) (78) (389)
Company
2021
Carrying amount Contractual cash flows 2 months or less 2-12 months
£'000 £'000 £'000 £'000
Non-derivative financial liabilities
Trade and other payables 150 (150) (25) (125)
150 (150) (25) (125)
Company
2020
Carrying amount Contractual cash flows 2 months or less 2-12 months
£'000 £'000 £'000 £'000
Non-derivative financial liabilities
Trade and other payables 182 (182) (30) (152)
182 (182) (30) (152)
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.
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 2021 for the Group totalled £3,053,000 (30 September 2020:
£3,148,000) and for the Company totalled £4,034,000 (30 September 2020:
£3,472,000).
26. 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.
Of the remuneration payable to D Reeves, £25,000 remains unpaid as at 31
December 2021(30 September 2020 - £31,000).
Other related party transactions
Transactions with Group companies
The Company had the following related party balances from financing
activities:
2021 2020
£'000 £'000
Southern Iron Limited
- Loans and receivables (interest free) 1,622 1,534
Falcon Isle Resources LLC
- Loans and receivables (interest free) 459 -
459
-
Southern Iron Limited had the following related party balances from financing
activities:
Société Générale des Mines SA
- Loans and receivables (interest free) 1,777 1,694
27. Subsequent events
Issues of New Ordinary Shares
On 26 April 2022 the Company announced the raising of a total
of £1,950,000 (before expenses) by the issue of up to 1,625,000,000 new
Ordinary Shares at a price of 0.12p per share. 1,000,000,000 new Ordinary
Shares were placed for cash consideration to raise £1,200,000 and the
balance of 625,000,000 new Ordinary Shares were issued through a Broker Option
following approval at a General Meeting of the company held on 16 May 2022.
Each new Ordinary 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.
Falcon Isle
On 29 March 2022, the Company agreed to acquire 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.
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