REG - Zanaga Iron Ore - Annual Results
01/07/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220701:nRSA9204Qa&default-theme=true
RNS Number : 9204Q Zanaga Iron Ore Company Ltd 01 July 2022
1 July 2022
Zanaga Iron Ore Company Audited Results for the Year to 31 December 2021
2021 Highlights and post reporting period end events to June 2022
· Zanaga Iron Ore Project (the "Project" or the "Zanaga Project") 30Mtpa
staged development project (12Mtpa Stage One ("Stage One"), plus 18Mtpa Stage
Two expansion ("Stage Two"))
o Initiative completed to update the cost estimates associated with Stage One,
as outlined in the 2014 Feasibility Study (the "FS Review"), with results
announced in May 2021
o External independent technical expert engineering firms engaged by Jumelles
Limited ("Jumelles"), the joint venture company between ZIOC and Glencore, to
oversee and provide input into the FS Review
o Successfully ascertained potential capital and operating costs associated
with the construction of Stage One
o FS review indicated that capital and operating cost estimates for Stage One
remained approximately within the guidance levels outlined in the 2014
Feasibility Study ("2014 FS")
· Early Production Project ("EPP Project" or "EPP")
o Multiple production scenarios remain under investigation on processing
facilities and suitable logistics solutions, with a particular focus on an
export solution through the Republic of Congo ("RoC")
o Increased engagement underway with other mining project developers in RoC
to explore potential collaboration opportunities, especially in relation to
logistics solutions and alternatives for upgrades to existing infrastructure
· Ore Reserve estimate re-statement
o The Zanaga Project's updated 2.1 billion tonne Ore Reserve estimate,
announced in May 2021, re-stated by SRK and updated based on market pricing as
of 31 December 2020, and remains based on the 30Mtpa Feasibility Study and 6.9
billion tonne Mineral Resource
· Work programme and budget for 2022, and $1.2m Jumelles Ltd working
capital loan facilty, agreed with Glencore Projects Pty Ltd ("Glencore"), a
subsidiary of Glencore plc
Corporate
· Funding update - Shard Merchant Capital Ltd ("SMC") equity subscription
agreement
o In 2021 SMC subscribed for 14 million shares of no par value in ZIOC, as
part of the 21 million ordinary share facility signed in 2020
o Proceeds of £1,141,574.94 received to date, following 18,000,000 shares
being placed by SMC, with a further 3,000,000 ordinary shares remaining to be
placed
o Proceeds applied to general working capital, including the provision of
further contributions to the Zanaga Project's operations
· Cash balance of US$0.4m as at 31 December 2021 and a cash balance of
US$0.3m as at 29 June 2022
· Outbreak of COVID-19 has not had a material impact upon the Group
although the continuing prevalence of the pandemic constrains a number of
commercial activities
Clifford Elphick, Non-Executive Chairman of ZIOC, commented:
"During 2021 it was pleasing to conclude an updated costing exercise, using
independent technical experts to evaluate the Stage One development costs.
Furthermore, an update exercise was undertaken to evaluate the Ore Reserve for
the Project. This resulted in the reconfirmation of the Zanaga Ore Reserve -
which remains one of the largest ore reserves globally.
The Zanaga Project Team have continued to progress key initiatives at the
Project. Significant work is underway to evaluate options to move the Early
Production Project forward in collaboration with other projects in RoC.
The iron ore market has experienced continued strong demand from China and is
benefitting from sustained strong iron ore prices, despite a recent pull back
from previous highs. The Project Team have been working for some time to
evaluate potential avenues to bringing the project into production, and
continue to make every effort to work with local stakeholders and partners in
assessing these options. We hope to report soon on the Project Team's
findings"
The Company will post its Annual Report and Accounts for the year ended 31
December 2021 ("2021 Annual Report and Accounts") to shareholders on
approximately 9 July 2022.
The 2021 Annual Report and Accounts will be available on the Company's website
www.zanagairon.com (http://www.zanagairon.com/) today.
For further information, please contact:
Zanaga Iron Ore
Corporate Development and
Andrew Trahar
Investor Relations Manager
+44 20 7399 1105
Liberum Capital Limited
Nominated Adviser, Financial
Scott Mathieson, Edward Thomas
Adviser and Corporate Broker +44 20
3100 2000
About us:
Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (AIM ticker: ZIOC)
is the owner of 50% less one share in the Zanaga Iron Ore Project based in the
Republic of Congo (Congo Brazzaville) through its investment in its associate
Jumelles Limited. The Zanaga Iron Ore Project is one of the largest iron ore
deposits in Africa and has the potential to become a world-class iron ore
producer.
Chairman's Statement
Dear Shareholder,
In these challenging times globally, iron ore prices continue to hold up and
we continue to progress in-country activities of the Zanaga Project Team
("Project Team"). The efforts of Jumelles, the joint venture between the
Company and Glencore, have shown much promise - particularly with regard to
investigations of existing logistics solutions in country and the ability to
collaborate with our neighbours to unlock the potential of Zanaga's vast
resource.
Iron Ore Market
The iron ore market has experienced continued strong demand from China and is
benefitting from sustained strong iron ore prices, despite a recent pull back
from previous highs. Product premiums remain robust, as we had preiviously
forecasted, and look set to remain in place for high quality products similar
to the Zanaga Project's planned production.
30Mtpa Staged Development Project
Two key activities were completed by the Project Team in 2021 in relation to
the Stage One of the 30Mtpa Project.
1) FS review
The Project Team concluded an FS review process which involved an updated
costing exercise, using independent technical experts to evaluate the Stage
One Project development costs. This resulted in confirmation that the
Project's 2014 FS cost estimates remain reliable in today's market
environment.
2) Ore Reserve Statement Update
The Project Team completed a process to update the Ore Reserve estimate. The
Zanaga Project's 2.1 billion tonne Ore Reserve estimate was re-stated by SRK
and updated based on market pricing as of 31 December 2020, and announced in
May 2021.
EPP Project
The Project Team continue to undertake a process to evaluate the potential
development of an EPP Project that would be quicker to construct than the
larger 30Mtpa staged development project and would utilise existing road, rail
and port infrastructure. After careful consideration the team have concluded
that a solution contained within the Republic of Congo would be best for the
Zanaga Project and hence have dedicated significant time recently to
developing a clearer cost estimate and optimised engineering solution on this
basis.
Engagement with other mining project developers in RoC has been increased in
order to explore potential collaboration opportunities, especially in relation
to logistics solutions and alternatives for upgrades to existing
infrastructure.
The Project Team continue to advance study work in an effort to improve their
understanding of the viability of the EPP Project. The Project Team continue
to evaluate the potential for the EPP Project to operate as a standalone
project, or as an initial pathway to production during the construction period
of the flagship 30Mtpa Staged Development Project.
Cash Reserves and Project Funding
At 31 December 2021 the Company had cash reserves of US$0.4m. On 29 June 2022,
Glencore and ZIOC have agreed a 2022 Project Work Programme and Budget for the
Project of up to US$1.3m plus US$0.1m of discretionary spend. ZIOC has agreed
to contribute towards this work programme and budget an amount comprising
US$0.09m; the remaining budget amount will be funded via a loan facility
provided directly to Jumelles Ltd by Glencore thus requiring less funding by
ZIOC over the next 12 months compared to the historical levels observed. On 29
June 2022, Glencore and the group signed a side letter to the Jumelles loan
facility confirming that there will be no dilution of the group's holding in
Jumelles as a result of this change in funding structure.
The Company had cash reserves of US$0.3m as at 29 June 2022. In order to raise
additional funding the Company entered a Subscription Agreement with SMC (as
described above - see the Company's release of 26 June 2020.) The financing
structure with SMC enables the Company to access funding for the costs that
the Company is expected to meet in the near future. Due to the fact that SMC
have 3,000,000 shares still to be placed into the market, for illustrative
purposes only, if the average price at which SMC places the remaining
3,000,000 shares was 2.05 pence (being ZIOC's mid-market closing share price
on 27 June 2022), the net proceeds received by ZIOC from such sales would be
approximately £0.06m. Based on the current cost base at the Zanaga Project,
the direct loan facility to Jumelles Ltd, the current low corporate overheads
of ZIOC, the agreed cash preservation plan adopted by the Company (described
on page 51 of the 2021 Annual Report), the Company's existing cash reserves
and (on the basis of cautious assumptions made by the Company in its funding
model) the funds expected to be obtained from the funding facility established
by the Subscription Agreement with SMC, the board of directors of ZIOC (the
"Board") believes that the Company will be adequately positioned to support
its operations going forward in the near future. As the final cash amounts to
be received for each tranche of issued shares, and the timing of this receipt,
are dependent on SMC successfully selling the shares prior to transferring
funds to the Company, the Board is of the view that the going concern basis of
accounting is appropriate. However, the Board acknowledges that there is a
material uncertainty which could give rise to significant doubt over the
Company's ability to continue as a going concern and, therefore, that the
Company may be unable to realise its assets and discharge its liabilities in
the normal course of business. Nevertheless, based on and taking into account
the foregoing factors, the Board are satisfied the Company will have
sufficient funds to meet its own working capital requirements up to, and
beyond, twelve months from the approval of these accounts.
The Company continues to review the costs of its operational activities with a
view to conserving its cash resources. As part of such ongoing review, and in
order to preserve the cash position of the Company, it has been agreed with
the Directors (since January 2019) and Management (since September 2019) that
fees are deferred. Additionally, the Directors and management have indicated
to the Company that they will assist the cash preservation plan of the
Company. The way in which this could be achieved is being progressed.
Subscription Agreement with Shard Merchant Capital Ltd
As previously announced, on 26 June 2020 ZIOC announced that the Company had
entered into a Subscription Agreement with SMC, a financial services provider.
Under the Subscription Agreement, and over the course of 2020 and 2021, the
Company issued and SMC subscribed for 21 million ordinary shares of no par
value in the Company ("Subscription Shares") in three tranches of 7 million
shares each (First tranche in 2020 and the subsequent tranches in 2021).
As a result of such transactions, as at 24 June 2022 18,000,000 ordinary
shares in the Company have been placed and the Company has received the
aggregate net sum of £1,141,574.94.
As at 24 June 2022, 3,000,000 ordinary shares in the Company still remain to
be placed by SMC. Pursuant to the Subscription Agreement, SMC has undertaken
to use its reasonable endeavours to place the relevant Subscription Shares
that it has subscribed for and to pay to ZIOC 95% of the gross proceeds of any
such sales.
The Subscription Agreement provides a number of attractive advantages to ZIOC,
which are highlighted below:
· Relatively low level of dilution to ZIOC shareholders
· ZIOC has the ability to repurchase any unsold Subscription Shares
from SMC, subject to legal requirements - an important element of flexibility
for ZIOC. Any Subscription Shares re-purchased will be cancelled, limiting
dilution further
· Low cost of capital - SMC will retain only 5% of the gross proceeds
of any sale of Subscription Shares
The proceeds received by the Company from SMC pursuant to the Subscription
Agreement have been and will be applied to general working capital, including
the provision of further contributions to the Zanaga Project's operations.
ZIOC is pleased that a financing structure is in place which has given and
continues to give the Company access to funding through a relatively low cost
structure which minimises dilution to shareholders.
Outlook
Despite the significant challenges faced globally, the Project Team have
progressed numerous workstreams which continue to add value to the options
available for the development of the Zanaga Project.
The investigations of opportunities to unlock existing infrastructure
solutions have been a key focus of the team and we hope to provide an update
on these intitiatives in due course.
Clifford Elphick
Non-Executive Chairman
Business Review
The Zanaga Project remains uniquely positioned as an attractive tier one asset
with multiple potential development options from a scale perspective. China's
strong demand for iron ore, coupled with a lack of investment in the
development of new iron ore mines in the last few years, has led strong iron
ore prices being maintained in 2021.
The Project Team dedicated significant effort in 2021 to securing updated
development costs associated with the flagship 30Mtpa project. In addition,
the EPP Project remains an area of significant interest for the Project Team
and work continues to explore the potential to utilise existing logistics
infrastructure to enable initial production to take place, particularly
through collaboration and joint infrastructure intiaitives underway
investigation in RoC.
30Mtpa Staged Development Project
The Project Team's ultimate objective remains to develop the flagship 30Mtpa
staged development mining project. As a reminder, the Stage One project plans
to produce 12Mtpa of premium quality 66% Fe content iron ore pellet feed
product at bottom quartile operating costs for more than 30 years on a
standalone basis.
The Stage Two expansion of 18Mtpa is nominally scheduled to suit the project
mine development, construction timing and forecast cash flow generation, and
would increase the Project's total production capacity to 30Mtpa. The product
grade would increase to an even higher premium quality 67.5% Fe content due to
the addition of 18Mtpa of 68.5% Fe content iron ore pellet feed production, at
an even lower operating cost. The capital expenditure for the additional
18Mtpa production, including contingency, could potentially be financed from
the cash flows from the Stage One phase.
12Mtpa Stage One project cost review
As previously announced, the Zanaga Project Team has continually taken steps
to monitor evolving improvements into its strategy for assessing the options
available for the development of the Zanaga Project. The Project Team has
maintained its view that high quality products will continue to achieve
significant price premiums in the future and has sought to lock in this
additional revenue benefit into the Project's development plan.
As a result, Jumelles commissioned a report, led by Coffey Geotechnics Ltd (a
Tetra Tech Company ("Tetra Tech")), to assess the potential capital and
operating costs associated with Stage One of the 30mtpa staged development
project outlined in the 2014 Feasibility Study ("2014 FS"). The review of the
2014 FS cost estimates, announced in April 2021, indicated that capital and
operating costs associated with the Stage One 12Mtpa project were broadly in
line with the estimates provided in 2014.
The review indicated that the costs of the 12 Mtpa Stage One Project were
estimated to be between 2.5% above and 2.9% below the estimate provided in the
2014 FS. Operating costs were expected to be approximately in line with the
estimate provided in 2014, with an estimated variance of + or - 2%.
It was encouraging to see that the costs estimated for the construction of the
Zanaga Project remained in broad alignment with the costs outlined in the 2014
FS, especially as iron ore prices had risen substantially beyond the levels
seen in 2014, and continue to remain at elevated levels. It is important to
recognise that these numbers have not yet been re-estimated to a high level of
definition and are only estimates as to the potential costs of bringing the
project into production in the current market. In order to better define these
estimates the Project Team would require further work to be conducted ahead of
considering a full re-estimate of the 2014 FS. Unfortunately inflation in 2022
of construction and operating costs is now being experienced due to the war in
Ukraine and disruptions to global supply chains. This will need to be
monitored going forward and the Project Team have been contiuously evaluation
avenues to capitalise on the current high iron ore prices despite the
underlying challenges to costs of operations globally.
The Project Team will continue to engage in activity to ascertain
opportunities for optimisation and improvement of the 30Mtpa staged
development project and will update the market as these improvements develop.
Reserves & Resource Statement
SRK Consulting (UK) Limited ("SRK") was appointed to provide consent to the
re-statement of Ore Reserves for the Zanaga Project. The restatement exercise
confirmed that the Ore Reserves reported in April 2021 are reported in
accordance with the terms and definitions of the JORC Code and are restated to
be so with an effective date of 31 December 2020.
In rendering its opinion as expressed herein, SRK concluded:
· That the 2014 Ore Reserves are reported in accordance with the terms
and definitions of the "The Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves published by the Joint Ore
Reserves Committee of the Australasian Institute of Mining and Metallurgy,
Australian Institute of Geoscientists and Minerals Council of Australia, as
amended (the "JORC Code (2012)"): www.jorc.org) (about%3Ablank) ";
· That the 2014 Ore Reserves remain valid as of 31 December 2021
EPP Project
The Project Team continue to undertake a process to evaluate the potential
development of an EPP Project that would be quicker to construct than the
larger 30Mtpa staged development project and would utilise existing road, rail
and port infrastructure. After careful consideration the team have concluded
that a solution contained within the Republic of Congo would be best for the
Zanaga Project and hence have dedicated significant time recently to
developing a clearer cost estimate and optimised engineering solution on this
basis.
Engagement with other mining project developers in RoC has been increased in
order to explore potential collaboration opportunities, especially in relation
to logistics solutions and alternatives for upgrades to existing
infrastructure.
The Project Team continue to advance study work in an effort to improve their
understanding of the viability of the EPP Project. The Project Team continue
to evaluate the potential for the EPP Project to operate as a standalone
project, or as an initial pathway to production during the construction period
of the flagship 30Mtpa Staged Development Project.
Next Steps
During H2 2022, the Project Team will continue to investigate potential
opportunities for smaller scale production utilising existing infrastructure
while continuing work on progressing the 30Mtpa project.
Financial Review
Results from operations
The financial statements contain the results for the Group's eleventh full
year of operations following its incorporation on 19 November 2009. The Group
made a total comprehensive loss in the year of US$1.9m (2020: total
comprehensive loss US$1.8m). The total comprehensive income for the year
comprised:
2021 2020
US$000
US$000
General expenses (1,214) (1,074)
Net foreign exchange (loss) (12) (25)
Share of loss of associate (672) (724)
Loss before tax (1,898) (1,823)
Currency translation - 8
Share of other comprehensive (loss)/income of associate -foreign exchange (17) 3
Total comprehensive (loss) (1,915) (1,812)
General expenses of US$1.2m (2020: US$1.1m) consists of LTIP US$0.5m (2020
US$0.7m) and US$0.7m (2020: US$0.4m) of other general operating expenses.
The share of loss of associate reflected above relates to ZIOC's investment in
the Project, through Jumelles, which, generated a loss of US$1.3m in the year
to 31 December 2021 (2020: loss US$1.3m). During the year Jumelles spent a net
US$1.3m (2020 US$1.4m) on exploration, net of a currency translation loss of
US$0.34m (2020: loss US$0.17m).
Financial Position
ZIOC's Net Asset Value ("NAV") of US$37.7m (2020: US$37.6m) comprises of
US$37.3m (2020: US$37.4m) investment in Jumelles, US$0.4m (2020: US$0.4m) of
cash balances and US$0.08m (2020: US$0.2m) of other net current assets.
2021 2020
US$000 US$000
Investment in Associate 37,269 37,354
Cash 387 352
Net current assets/(liabilities) 80 (126)
Net assets 37,736 37,580
Cost of investment
The Investment in Associate relates to the carrying value of the investment in
Jumelles which as at 31 December 2021 continued to own 100% of the Project.
During 2021, under the existing 2021 Funding Agreement between the Company and
Glencore, the Company contributed a further US$0.6m (2020: US$0.6m). Though a
long term project, in the light of currently forecast market conditions, the
carrying value of the exploration asset continues to be held in Jumelles at
US$80m (2020: US$80m). The Company accounts for 50% less one share of
Jumelles.
As at 31 December 2021, Jumelles had aggregated assets of US$81m (2020:
US$81.4m) and aggregated liabilities of US$0.6m (2020: US$0.8m). Assets
consisted of US$80m (2020: US$80m) of capitalised exploration assets, US$0.8m
(2020: US$1.1m) of other fixed assets, US$0.2m cash (2020: US$0.3m) and US$nil
other assets (2020: US$nil). Net of a currency translation loss of US$0.34
(2020: gain US$0.17m) a net total of US$nil (2020: US$nil) of exploration
costs were capitalised during the year.
Subscription Agreement concluded with Shard Merchant Capital Ltd
As outlined in the Chairman's Statement above, on 25 June 2020 ZIOC entered
into a Subscription Agreement with SMC, a financial services provider.
Subsequent to the launch of the SMC transaction, 21 million shares in ZIOC
have been issued to SMC. As at 24th June 2022 18,000,000 ordinary shares in
the Company have been subsequently placed by SMC and the Company has received
the aggregate net sum of £1,141,574.94.
As at 24th June 2022, 3,000,000 ordinary shares in the Company still remain to
be placed by SMC. Pursuant to the Subscription Agreement, SMC has undertaken
to use its reasonable endeavours to place the relevant Subscription Shares
that it has subscribed for and to pay to ZIOC 95% of the gross proceeds of any
such sales.
Cash flow
Cash balances increased by US$0.03m during 2021 (2020: decrease of US$0.4m),
net of interest income US$nil (2020: US$nil) and a foreign exchange gain of
US$0.02m (2020: loss of US$0.02m) on bank balances held in UK Sterling.
Additional investment in Jumelles required under the 2021 Funding Agreement
(outline details in Note 1 to the financial statements) utilised US$m (2020:
US$0.6m) and operating activities utilised US$4m (2020: US$0.4m). The Company
raised funds of US$1m from the Shard facility during the year.
Fundraising activities
The fundraising activities carried out in 2021 (2020: US$0.6) were those
relating to the SMC facility which are described earlier in this announcement.
Reserves & Resource Statement
The Zanaga Project has defined a 6.9bn tonne Mineral Resource and a 2.1bn
tonne Ore Reserve, reported in accordance with the JORC Code (2012), and
defined from only 25km of the 47km strike length of the orebody so far
identified.
Ore Reserve Statement
The Ore Reserve estimate (announced by the Company on 5 May 2021) was prepared
by independent consultants, SRK Consulting (UK) Ltd ("SRK") and is based on
the 30Mtpa Feasibility Study and the 6,900Mt Mineral Resource (announced by
the Company on 8 May 2014).
As stipulated by the JORC Code, Proven and Probable Ore Reserves are of
sufficient quality to serve as the basis for a decision on the development of
the deposit. Based on the studies performed, the mine plan as reported in the
2014 FS was reassessed in respect of the updated sales revenue, operating
expenditure and capital expenditures and confirmed as at 31 December 2020 to
be technically feasible and economically viable.
Ore Reserve Category Tonnes (Mt(Dry)) Fe (%) SiO(2) (%) Al(2)O(3) (%) P (%)
Proved 774 37.3 35.1 4.7 0.04
Probable 1,296 31.8 44.7 2.3 0.05
Total 2,070 33.9 41.1 3.2 0.05
Notes:
Long term price assumptions are based on a CFR IODEX 65%Fe forecast of
US$90tdry (USc138/dmtu) with adjustments for quality, deleterious elements,
moisture and freight.
Discount Rate 10% applied on an ungeared 100% equity basis
Mining dilution ranging between 5% and 6%
Mining losses ranging between 1% and 5%
Note: The full Ore Reserve Statement is available on the Company's website
(www.zanagairon.com)
Mineral Resource
Classification Tonnes (Mt) Fe (%) SiO(2) (%) Al(2)O(3) (%) P (%) Mn (%) LOI (%)
Measured 2,330 33.7 43.1 3.4 0.05 0.11 1.46
Indicated 2,460 30.4 46.8 3.2 0.05 0.11 0.75
Inferred 2,100 31 46 3 0.1 0.1 0.9
Total 6,900 32 45 3 0.05 0.11 1.05
Reported at a 0% Fe cut-off grade within an optimised Whittle shell
representing a metal price of 130 USc/dmtu. Mineral Resources are inclusive of
Reserves. A revised Mineral Resource, prepared in accordance with the
Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves (the JORC Code, 2012 Edition) was announced on 8 May 2014 and is
available on the Company's website (www.zanagairon.com).
Note: The figures shown are rounded; they may not sum to the subtotals shown
due to the rounding used.
The Mineral Resource was estimated as a block model within constraining
wireframes based upon logged geological boundaries. Tonnages and grades have
been rounded to reflect appropriate confidence levels and for this reason may
not sum to totals stated.
Geological Summary
The Zanaga iron ore deposit is located within a North-South oriented
(metamorphic) Precambrian greenstone belt in the eastern part of the Chaillu
Massif in South Western Congo. From airborne geophysical survey work, and
morphologically, the mineralised trend constitutes a complex elongation in the
North-South direction, of about 47 km length and 0.5 to 3 km width.
The ferruginous beds are part of a metamorphosed, volcano-sedimentary
Itabirite/banded iron formation ("BIF") and are inter-bedded with amphibolites
and mafic schists. It exhibits faulted and sheared contacts with the
crystalline basement. As a result of prolonged tropical weathering the BIF has
developed a distinctive supergene iron enrichment profile.
At surface there is sometimes present a high grade ore (+60% Fe), classified
as canga, of apparently limited thickness (<5m) capping a discontinuous,
soft, high grade, iron supergene zone of structure-less hematite/goethite of
limited thickness (<7m). The base of the high-grade supergene iron zone
grades quickly at depth into a relatively thick, leached, well-weathered to
moderately weathered friable hematite Itabirite with an average thickness of
approximately 25 metres and grading 45-55% Fe.
The base of the friable Itabirite zone appears to correlate with the
moderately weathered/weakly weathered BIF boundary, and fresh BIF comprises
bands of chert and magnetite/grunerite layers.
Competent Persons
The statement in this announcement relating to Ore Reserves is based on
information compiled by Dr Iestyn Humphreys, FIMM, AIME, PhD who is a
Corporate Consultant, and Practice Leader with SRK. He has sufficient
experience relevant to the style of mineralisation and type of deposit under
consideration and to the activity he is undertaking to qualify as a Competent
Person as defined in the JORC Code (2012). The Competent Person, Dr Iestyn
Humphreys, confirms that the Ore Reserve Estimate is accurately reproduced in
this announcement and has given his consent to the inclusion in the report of
the matters based on his information in the form and context within which it
appears.
The information in this announcement that relates to Mineral Resources is
based on information compiled by Malcolm Titley, BSc MAusIMM MAIG, of CSA
Global (UK) Ltd. Malcolm Titley takes overall responsibility for the report as
Competent Person. He is a Member of the Australasian Institute of Mining and
Metallurgy ("AUSIMM") and has sufficient experience, which is relevant to the
style of mineralisation and type of deposit under consideration, and to the
activity he is undertaking, to qualify as a Competent Person in terms of the
JORC Code. The Competent Person, Mr Malcolm Titley, has reviewed this Mineral
Resource statement and given his permission for the publication of this
information in the form and context within which it appears.
Definition of JORC Code
The Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves (2012) as published by the Joint Ore Reserves Committee of
the Australasian Institute of Mining and Metallurgy, Australian Institute of
Geoscientists and Minerals Council of Australia.
Principal Risks & Uncertainties
The principal business of ZIOC currently comprises managing ZIOC's interest in
the Zanaga Project, including the Jumelles group, and monitoring the
development of the Project and engaging in discussions with potential
investors. The principal risks facing ZIOC are set out below. Risk assessment
and evaluation is an essential part of the Group's planning and an important
aspect of the Group's internal control system. Overall these potential risks
have remained broadly constant over the past year with the exception of the
implications of COVID-19 on the long term outlook for the iron ore market.
Risks relating to the agreement with Glencore and development of the Zanaga
Project
The Zanaga Project is majority controlled at both a shareholder and director
level by Glencore. The ability of the Company to control the Zanaga Project
and its operations and activities, including the future development of the
Project (including any variant such as an EPP development) and the future
funding requirements of Jumelles, is therefore limited.
The future development of the mine and related infrastructure (including any
variant such as an EPP development) will be determined by the Jumelles board.
There can be no certainty that the Jumelles board will approve the
construction of the mine and related infrastructure or any variant thereof
such as an EPP development, including the taking of preparatory steps
associated with the construction of the mine and related infrastructure, such
as front end engineering and design, or the undertaking of work needed to
assess the viability of an EPP development or any component part of an EPP
development. Such risk is reviewed constantly and any relevant changes
considered.
Risks relating to future funding of the Zanaga Project
Under the Joint Venture Agreement between the Company, Glencore and Jumelles
of 3 December 2009, as amended (the "JVA"), there is no obligation on the
Company or Glencore to provide further funding to Jumelles. The Company and
Glencore have reached agreement on a work programme and funding of the Zanaga
Project for 2022. As such agreement relates to 2022, there is a risk that
after 31 December 2022 Jumelles may be subjected to funding constraints and
this could have an adverse impact upon the Project. Moreover, discretionary
amounts are contained in the 2022 work programme and budget; these require the
joint approval of ZIOC and Glencore. It is possible that as regards certain
items, joint approval would not be forthcoming. Such risk is reviewed
constantly and any relevant changes considered.
Risks relating to iron ore prices, markets and products
The ability to raise finance for the Project is largely dependent on movements
in the price of iron ore. Iron ore prices have historically been volatile and
are primarily affected by the demand for and price of steel and the level of
supply of iron ore. Such prices are also affected by numerous other factors
beyond the Company's and the Jumelles group's control, including the relative
exchange rate of the U.S. dollar with other major currencies, global and
regional demand, political and economic conditions, production levels and
costs and transportation costs in major iron ore producing regions.
While it appears to be the case that there has been some degree of
stabilisation of iron ore prices in the global market for iron ore, the
duration of such stabilisation remains uncertain. The level of iron ore prices
in the global market for iron ore continues to be subject to uncertainty,
particularly in light of the impact of the COVID 19 pandemic. Although the
2014 FS identifies the product from the Project and the potential demand for
such product within a range of iron ore prices, there are no assurances that
the demand for the Project's product will be sufficient in quantity or in
price to ensure the economic viability of the Project or to enable finance for
the development of the Project to be raised. Furthermore, the range of iron
ore prices in the 2014 FS will need to be reviewed so as to reflect changed
market conditions and changed expectations relating to the supply and demand
for iron ore. Such risk is reviewed constantly and any relevant changes
considered.
Risks relating to an EPP
For some considerable period, an initiative has been and is being carried out
to investigate the possibility of a low-cost small scale start-up, using
existing infrastructure, focussing on a standard 62% Fe benchmark iron ore
product or a high grade 65% Fe pellet feed iron ore product that would involve
simple 'processing' applications. In conjunction with this, the possibility of
a low-cost small scale start-up involving the production of a pellet feed
concentrate and conventional pelletisation continues to be investigated. This
initiative also involves the assessment of methods of providing the necessary
power requirements as well as logistical support to enable the product to be
transported to an available exit port. There will also be the need to put in
place the appropriate contractual and permitting arrangements. There is a risk
that such kind of start-up is found not to be viable or is not proceeded with
for other reasons or is delayed. Such risk is reviewed constantly and any
relevant changes considered.
Risks relating to financing the Zanaga Project
Any decision of the Jumelles board to proceed with construction of the mine
and related infrastructure (or any variant such as a low capital cost, small
scale start-up EPP Project) is itself dependent upon the ability of Jumelles
to raise the necessary debt and equity to finance such construction and the
initial operation of the mine (or any variant such as a low-cost small scale
start-up). Jumelles may be unable to obtain debt and/or equity financing in
the amounts required, in a timely manner, on favourable terms or at all and
should this occur, it is highly likely to pose challenges to the proposed
development of the Zanaga Project and the proposed timeline for its
development. Moreover, the global credit environment may pose additional
challenges to the ability of Jumelles to secure debt finance or to secure debt
finance on acceptable terms, including as to rates of interest. Such risk is
reviewed constantly and any relevant changes considered.
Risks relating to financing of the Company
The Company will not generate any material income until an operating stage of
the Project has been constructed and mining and export of the iron ore has
successfully commenced at commercial volumes. In the meantime the Company will
continue to expend its cash reserves. Should the Company seek to raise
additional finance, it may be unable to obtain debt and/or equity financing in
the amounts required, in a timely manner, on favourable terms or at all.
If construction of the mine and related infrastructure proceeds (including any
preparatory steps associated with the construction of the mine and related
infrastructure) or any small scale start-up proceeds, and ZIOC elects to fund
its pro rata equity share of construction capital expenditure, there is no
certainty as to its ability to raise the required finance or the terms on
which such finance may be available.
If ZIOC raises additional funds (including for the purpose of funding the
construction of the Project or any part of the Project, including any
small-scale start-up) through further issuances of securities, the holders of
ordinary shares could suffer significant dilution, and any new securities that
ZIOC issues could have rights, preferences and privileges superior to those of
the holders of the ordinary shares.
If the Company fails to generate or obtain sufficient financial resources to
develop and operate its business, this could materially and adversely affect
the Company's business, results of operations, financial condition and
prospects. Such risk is reviewed constantly and any relevant changes
considered.
Risk relating to Ore Reserves estimation
Ore Reserves estimates include diluting materials and allowances for losses,
which may occur when the material is mined. Appropriate assessments and
studies have been carried out and include consideration of and modification by
realistically assumed mining, metallurgical, economic, marketing, legal,
environmental, social and governmental factors. These assessments demonstrate
at the time of reporting that extraction could reasonably be justified. Ore
Reserve estimates are by their nature imprecise and depend, to a certain
extent, upon statistical inferences and assumptions which may ultimately prove
unreliable. Estimated mineral reserves or mineral resources may also have to
be recalculated based on changes in iron ore or other commodity prices,
further exploration or assessment or development activity and/or actual
production experience. Such risk is reviewed constantly and any relevant
changes considered.
Host country related risks
The operations of the Zanaga Project are located mainly in the RoC. These
operations will be exposed to various levels of political, regulatory,
economic, taxation, environmental and other risks and uncertainties. As in
many other countries, these (varying) risks and uncertainties can include, but
are not limited to: political, military or civil unrest; fluctuations in
global economic and market conditions impacting on the economy; terrorism;
hostage taking; extreme fluctuations in currency exchange rates; high rates of
inflation; labour unrest; nationalisation; changes in taxation; illegal
mining; restrictions on foreign exchange and repatriation. In addition, the
RoC is an emerging market and, as a result, is generally subject to greater
risks than in the case of more developed markets.
HIV/AIDS, malaria and other diseases are prevalent in the RoC and,
accordingly, the workforce of the ZIOC group and of the Jumelles group will be
exposed to the health risks associated with the country. The operating and
financial results of such entities could be materially adversely affected by
the loss of productivity and increased costs arising from any effect of
HIV/AIDS, malaria and other diseases on such workforce and the population at
large.
Weather conditions in the RoC can fluctuate severely. Rainstorms, flooding and
other adverse weather conditions are common and can severely disrupt transport
in the region where the Jumelles group operates and other logistics on which
the Jumelles group is dependent.
The host country related risks described above could be relevant both as
regards day-to-day operations and the raising of debt and equity finance for
the Project. The occurrence of such risks could have a material adverse effect
on the business, prospects, financial condition and results of operations of
the Company and/or the Jumelles group. Such risk is reviewed constantly and
any relevant changes considered.
Risks relating to the Project's licences and the regulatory regime
The Project's Mining Licence was granted in August 2014 and a Mining
Convention has been entered into. With effect from 20 May 2016, the Zanaga
Mining Convention has been promulgated as a law of the RoC, following
ratification by the Parliament of the RoC and publication in the Official
Gazette.
The holder of a mining licence is required to incorporate a Congolese company
to be the operating entity and the Congolese Government is entitled to a free
participatory interest in projects which are at the production phase. This
participation cannot be less than 10%. Under the terms of the Mining
Convention, there is a contingent statutory 10% free participatory interest in
favour of the Government of the RoC as regards the mine operating company and
a contingent option for the Government of the RoC to buy an additional 5%
stake at market price.
The granting of required approvals, permits and consents may be withheld for
lengthy periods, not given at all, or granted subject to conditions which the
Jumelles group may not be able to meet or which may be costly to meet. As a
result, the Jumelles group may incur additional costs, losses or lose revenue
and its business, result of operations, financial condition and/or growth
prospects may be materially adversely affected. Failure to obtain, renew,
enforce or comply with one or more required approvals, permits and consents
could have a material adverse effect on the business, prospects, financial
condition and results of operations of the Company and/or the Jumelles group.
Mitigation of such risks is in part dependent upon the terms of the Mining
Convention and compliance with its terms. Such risk is reviewed constantly and
any relevant changes considered.
Transportation and other infrastructure
The successful development of the Project (including any low-cost small scale
start-up) depends on the existence of adequate infrastructure and the terms on
which the Project can own, use or access such infrastructure. The region in
which the Project is located is sparsely populated and difficult to access.
Central to the Zanaga Project becoming a commercial mining operation is access
to a transportation system through which it can transport future iron ore
product to a port for onward export by sea. In order to achieve this it will
be necessary to access a port at Pointe-Indienne, which is still to be
constructed, or some other exit port in the case of a low-cost small scale
start-up.
The nature and timing of construction of the proposed new port are still under
discussion with the government of the RoC and other interested parties. In
relation to the pipeline and Project facilities at the proposed new port and
(to the extent needed) other infrastructure, the necessary permits,
authorisations and access, usage or ownership rights have not yet been
obtained.
Failure to construct the proposed pipeline and/or facilities at the proposed
new port and/or other needed infrastructure or a failure to obtain access to
and use of the proposed new port and/or other needed infrastructure or a
failure to do this in an economically viable manner or in the required
timescale could have a material adverse effect on the Project.
In the case of a low-cost small scale start-up, failure to put in place the
necessary logistical requirements (including trucking, rail transportation and
port facilities) and/or other needed infrastructure or a failure to obtain
access to and use of the proposed logistical requirements or a failure to do
this in an economically viable manner or in the required timescale could have
a material adverse effect on the Project.
The availability of reliable and continuous delivery of sufficient quantity of
power to the Project at an affordable price will also be a significant factor
on the costs at which iron ore can be produced and transported to any proposed
exit port and will impact on the economic viability of the Project.
Reliable and adequate infrastructure (including an outlet port, roads,
bridges, power sources and water supplies) are important determinants which
affect capital and operating costs and the ability of the Jumelles group to
develop the Project, including any low-cost small scale start-up. Failure or
delay in putting in place or accessing infrastructure needed for the
development of the Zanaga Project could have a material adverse effect on the
business, prospects, financial condition and results of operations of the
Company and/or the Jumelles group. Such risk is reviewed constantly and any
relevant changes considered.
Risks associated with access to land
Pursuant to the laws of the RoC, mineral deposits are the property of the
government with the ability to purchase surface rights. Generally speaking,
the RoC has not had a history of native land claims being made against the
state's title to land. There is no guarantee, however, that such claims will
not occur in the future and, if made, such claims could have a deleterious
effect on the progress of development of the Project and future production.
The Mining Convention envisages that the RoC will carry out a process to
expropriate the land required by the Zanaga Project and place such land at the
disposal of the holder of the Mining Licence in order to build the mine and
the infrastructure, including the pipeline, required for the realisation of
the Zanaga Project. This means that the rights of the Jumelles company which
holds the Mining Licence to the relevant land will be subject to negotiation
between the Congolese government and such company. Alternatively, if the land
is not declared DUP (i.e. is expropriated by the State under its sovereign
powers) then the Jumelles group will have to reach agreement with the local
land owners which may be a more time consuming and costly process. Such risk
is reviewed constantly and any relevant changes considered.
Risks relating to timing
Any delays in (i) obtaining rights over and access to land and infrastructure;
(ii) obtaining the necessary permits and authorisations; (iii) the
construction or commissioning of the mine, the pipeline or facilities at or
offshore an exit port or power transmission lines or other infrastructure; or
(iv) negotiating the terms of access to the exit port and supply of power and
other infrastructure (including an offshore loading facility); or (v) raising
finance to fund the development of the mine and associated infrastructure,
could prevent altogether or impede the development of the Zanaga Project,
including the ability of the Zanaga Project to export its future iron ore
products whether on the anticipated timelines or at projected volumes and
costs or otherwise. Such delays or a failure to complete the proposed
infrastructure or the terms of access to infrastructure or to do this in an
economically viable manner, could have a material adverse effect on the
business, results of operations, financial condition and prospects of the
Company and/or the Jumelles group. Such risk is reviewed constantly and any
relevant changes considered.
Environmental risks
The operations and activities of the Zanaga Project are subject to potential
risks and liabilities associated with the pollution of the environment and the
disposal of waste products that may occur as a result of its mineral
exploration, development and production, including damage to preservation
areas, over-exploitation and accidental spills and leakages. Such potential
liabilities include not only the obligation to remediate environmental damage
and indemnify affected third parties, but also the imposition of court
judgments, administrative penalties and criminal sanctions against the
relevant entity and its employees and executive officers. Awareness of the
need to comply with and enforcement of environmental laws and regulations
continues to increase. Notwithstanding precautions taken by entities involved
in the development of the Project, breaches of applicable environmental laws
and regulations (whether inadvertent or not) or environmental pollution could
materially and adversely affect the financial condition, business, prospects
and results of operations of the Company and/or the Jumelles group. Such risk
is reviewed constantly and any relevant changes considered.
Health and safety risks
The Jumelles group is required to comply with a range of health and safety
laws and regulations in connection with its business activities (including
laws and regulations relating to the COVID-19 pandemic) and will be required
to comply with further laws and regulations if and when construction of the
Project commences and the mine goes into operation. A violation of health and
safety laws relating to the Jumelles group and/or the Project's operations, or
a failure to comply with the instructions of the relevant health and safety
authorities, could lead to, amongst other things, a temporary shutdown of all
or a portion of the business activity of the Jumelles group and/or the
Project's operations or the imposition of costly compliance measures. Where
health and safety authorities and/or the RoC government require the business
activity of the Jumelles group and/or the Project to shut down or reduce all
or a portion of its activities of operations or to implement costly compliance
measures, whether pursuant to applicable health and safety laws and
regulations, or the more stringent enforcement of such laws and regulations,
such measures could have a material adverse effect on the financial condition,
business, prospects, reputation and results of operations of the Company
and/or the Jumelles group. Such risk is reviewed constantly and any relevant
changes considered.
COVID-19
The duration of COVID-19 pandemic and its potential or actual impact upon
global markets, countries, populations and businesses is still uncertain. As a
result of the measures taken by the government and other authorities in the
RoC, the business and other activities of governmental agencies and
authorities, of business enterprises and of individuals has been affected. The
impact that this situation could have upon the business activities of the
Jumelles group and its personnel as well as the risks, is being monitored.
While the Jumelles group would seek to manage such situation and to minimise
the risks, there is the possibility that the Project and the business
activities of the Jumelles group could be adversely affected by the COVID-19
pandemic and its impact upon global markets and upon countries. Such adverse
effect could include there being constraints on the movement of people and
goods across borders and within countries. Additionally, these factors could
adversely affect and place constraints on ZIOC and its own business
activities. As noted within note 17 of the financial statements, the outbreak
thus far has had no material impact upon the business operation or financial
situation of the Company. Such risk is reviewed constantly and any relevant
changes considered.
Risks relating to third party claims
Due to the nature of the operations to be undertaken in respect of the
development of the Zanaga Project, there is a risk that substantial damage to
property or injury to persons could be sustained during such development. Any
such damage or injury could have a material adverse effect on the financial
condition, business, prospects, reputation and results of operations of the
Company and/or the Jumelles group. Such risk is reviewed constantly and any
relevant changes considered.
Risks relating to outsourcing
The 2014 FS envisages that certain aspects of the Zanaga Project will be
carried out by third parties pursuant to contracts to be negotiated with such
third parties. Any low-cost small scale start-up is also likely to involve the
undertaking of various key elements of the Project by third parties. There is
a risk that agreement might not be reached with such third parties or that the
terms of any such agreement are more stringent than currently anticipated;
this could adversely impact upon the Project and/or the proposed timescale for
carrying out the Project. Such risk is reviewed constantly and any relevant
changes considered.
Fluctuation in exchange rates
The Jumelles group's functional and reporting currency is the U.S. dollar, and
most of its in country costs are and will be denominated in CFA francs and
Euros. Consequently, the Jumelles group must translate the CFA franc and Euro
denominated assets and liabilities into U.S. dollars. To do so, non-U.S.
dollar denominated monetary assets and liabilities are translated into U.S.
dollars using the closing exchange rate at the reporting period end date.
Consequently, increases or decreases in the value of the U.S. dollar versus
the Euro (and consequently the CFA franc) and other foreign currencies may
affect the Jumelles group's financial results, including its assets and
liabilities in the Jumelles group's balance sheets. These factors will affect
the financial results of the Company. In addition, ZIOC holds the majority of
its funds in Pounds Sterling, and incurs the majority of its corporate costs
in Pounds Sterling, but its contributions to funding the Jumelles group in
2021 and 2022 are calculated in U.S. dollars. Consequently, any fluctuation in
exchange rates between Pounds Sterling versus the U.S. dollar or the Euro,
could also adversely affect the financial results of the Company. Such risk is
reviewed constantly and any relevant changes considered.
Cash resources
The Company has limited cash resources. Although the Company has taken steps
to conserve and replenish its cash resources, there is a risk that a shortage
of such cash resources will adversely affect the Company. Such shortage could
result in further expenditure cuts being introduced by the Company, both in
its internal and its external operations. Volatile and uncertain economic
global conditions in means that there can be no certainty as to when the
Zanaga resource is likely to be developed. The challenging economic conditions
as well as difficulties of monetising this resource given its location impact
upon the ability of the Jumelles group to raise new finance for the Project as
well as on the Company's ability to raise new finance for itself. The
Company's existing cash resources may continue to come under increasing
pressure unless a more predictable investment, travel and trading climate
materialises in the foreseeable future which benefits the Project and the
Company can take steps which result in an improvement of its financial
position. Such risk is reviewed constantly and any relevant changes
considered.
Financial Statements
Consolidated statement of total comprehensive loss
for year ended 31 December 2021
2021 2020
Note US$000 US$000
Administrative expenses (1,226) (1,099)
Share of loss of associate 6b (672) (724)
Operating loss (1,898) (1,823)
Loss before tax (1,898) (1,823)
Taxation 5 - -
Loss for the year (1,898) (1,823)
Items that will not be reclassified subsequently to profit or loss: (17) 8
Share of other comprehensive (loss)/income of associate - foreign exchange
translation
Items that may be reclassified subsequently to profit or loss: 6b - 3
Foreign exchange translation - foreign operations
Other comprehensive (loss) / income (17) 11
Total comprehensive loss (1,915) (1,812)
(Loss) per share
Basic (Cents) 12 (0.6) (0.6)
Diluted (Cents) 12 (0.6) (0.6)
Loss and total comprehensive loss for the year is attributable to the equity
holders of the Parent Company and are from continuing operations.
The notes form an integral part of the financial statements.
Consolidated statement of financial position
for year ended 31 December 2021
2021 2020
Note US$000 US$000
Non-current assets
Property, plant and equipment 6a - -
Investment in Associate 6b 37,269 37,354
37,269 37,354
Current assets
Other receivables 7 233 58
Cash and cash equivalents 8 387 352
620 410
Total Assets 37,889 37,764
Current liabilities
Trade and other payables 9 (153) (184)
Net assets 37,736 37,580
Equity attributable to equity holders of the Parent Company
Share capital 10 270,935 268,864
Accumulated deficit (236,516) (234,617)
Foreign currency translation reserve 3,317 3,333
Total equity 37,736 37,580
The notes form an integral part of the financial statements.
These financial statements were approved by the Board of Directors on 30 June
2022 and were signed on its behalf by:
Mr Clifford Elphick
Director
Consolidated statement of changes in equity
for year ended 31 December 2021
Foreign
currency
Share Accumulated translation Total
Capital deficit reserve Equity
US$000 US$000 US$000 US$000
Balance at 1 January 2020 267,592 (232,794) 3,322 38,120
Issued Capital 565
Consideration for share-based payments 707 - - 565
Loss for the year (1,823) - 707
Other comprehensive loss - - - (1,823)
Total comprehensive loss - (1,823) 11 11
Balance at 31 December 2020 268,864 (234,617) 3,333 37,580
Balance at 1 January 2021 268,864 (234,617) 3,333 37,580
Issued Capital 1,525 - - 1,525
Consideration for share-based payments 546 - - 546
Loss for the year - (1,898) - (1,898)
Other comprehensive loss - - (17) (17)
Total comprehensive loss - (1,898) (17) (1,915)
Balance at 31 December 2021 270,935 (236,516) 3,317
37,736
Consolidated cash flow statement
for year ended 31 December 2021
2021 2020
Note US$000 US$000
Cash flows used in operating activities
Loss for the year (1,898) (1,823)
Adjustments for:
(Increase in other receivables (175) (11)
(Decrease)/increase in trade and other payables (31) 9
Share based payments 547 707
Net exchange loss 12 25
Share of Loss in associate 672 724
Net cash used in operating activities (873) (369)
Cash flows generated by financing activities -
Proceeds from share issuance 1,524 564
Net cash flow generated by financing activities 1,524 564
Cash flows used in investing activities
Interest received - -
Investment in Associate (604) (578)
Net cash used in investing activities (604) (578)
Net increase/(decrease) in cash and cash equivalents 47 (383)
Cash and cash equivalents at beginning of year 352 755
Effect of exchange rate difference (12) (20)
Cash and cash equivalents at end of year 8 387 352
The notes form an integral part of the financial statements.
Notes to the financial statements
1 Business information and going concern basis of preparation
Background
Zanaga Iron Ore Company Ltd (the "Company"), was incorporated on 19 November
2009 under the name of Jumelles Holdings Limited. The Company changed its name
on 1 October 2010. The Company is incorporated in the British Virgin Islands
("BVI") and the address of its registered office, is situated at 2nd Floor,
Coastal Building, Wickham's Cay II, Road Town, P.O. Box 2221, Tortola, British
Virgin Islands. On 18 November 2010, the Company's share capital was admitted
to trading on the AIM Market ("AIM") of the London Stock Exchange
("Admission"). The Company's principal place of business as an investment
holding vehicle is situated in Guernsey, Channel Islands.
At 31 December 2010 the Company held 100% of the share capital of Jumelles
Limited subject to the then Call Option.
On 14 March 2011 the Company incorporated and acquired the entire share
capital of Zanaga UK Services Limited for US$2, a company registered in
England and Wales which provides investor management and administrative
services.
In 2007, Jumelles became the special purpose holding company for the interests
of its then ultimate 50/50 founding shareholders, Garbet Limited ("Garbet")
and Guava Minerals Limited ("Guava"), in MPD Congo which, owns and operates
100% of the Zanaga Project in the RoC (subject to a minimum 10% free carried
interest in MPD Congo in favour of the Government of the RoC).
In December 2009 Garbet and Guava contributed their then respective 50/50
joint shareholding in Jumelles to the Company.
Guava is majority owned by African Resource Holdings Limited ("ARH"), a BVI
company that specialises in the investment and development of early stage
natural resource projects in emerging markets. Guava owns approximately 27.39%
of the share capital of the Company.
At the time that Garbet was a shareholder in the Company, it was majority
owned by Strata Limited ("Strata"), a private investment holding company based
in Guernsey, which specialises in the investment and development of early
stage natural resource projects in emerging markets, predominately Africa.
Until 3 April 2017 Garbet owned approximately 41.49% of the share capital of
the Company. Pursuant to a transaction effected on 2 April 2017 Garbet ceased
to hold any shares in the Company. As part of such transaction the shares in
the Company which were held by Garbet were transferred directly or indirectly
to Garbet's shareholders and the shareholders of Garbet's holding company,
Strata.
Jumelles has three subsidiary companies, namely Jumelles M Limited, Jumelles
Technical Services (UK) Limited and MPD Congo.
Transactions involving Xstrata and Glencore
· As a result of transactions entered into on 16 October 2009 and 3
December 2009, Xstrata acquired a majority stake in Jumelles in return for
providing funding towards ongoing exploration of the Zanaga exploration
licence area, the preparation of a pre-feasibility study (the "PFS") and a
feasibility study (the "FS"). In addition a joint venture agreement which
regulated the respective rights of the Company, Jumelles and Xstrata in
relation to Jumelles was entered into. >Subsequently:
o Xstrata merged with the Glencore group on 2 May 2013 to form Glencore
Xstrata and the holding company of the merged group subsequently changed its
name to Glencore.
o the Feasibility Study was completed in March 2014 and paid for.
Relationship between Jumelles and its shareholders since February 2011
The Company, Jumelles and Xstrata Projects agreed to regulate their respective
rights in relation to the Project following exercise of the Call Option under
the terms of the joint venture agreement ("JVA"). Under the terms of the JVA
(as amended), all significant decisions regarding the conduct of Jumelles'
business (other than certain protective rights which require the agreement of
shareholders holding at least 95% of the voting rights in Jumelles) are made
by the Board of Directors.
Glencore has the right to appoint three directors to the Jumelles Board while
ZIOC has a right to appoint two directors. At any Jumelles Board meeting, the
directors nominated by Glencore have between them such number of votes as
represents Glencore's voting rights in the general meetings of Jumelles and
the directors nominated by ZIOC have between them such number of votes as
represents ZIOC's voting rights in the general meetings of Jumelles.
As a consequence of the provisions of the JVA (in its original version and as
subsequently amended), , Glencore controls Jumelles at both a shareholder and
director level and therefore controls what was the Company's sole mineral
asset, the Zanaga Project. Going forward the Company accounted for this as an
Investment in Associate in respect of the Project with Glencore.
Since the acquisition by Glencore of its majority stake in Jumelles, the
principal business of the Company has been to manage its 50% less one share
interest in the Project and to work with Glencore and the Zanaga Project team
in the promotion of the development of the Project and the raising of finance.
Future funding requirements and going concern basis of preparation
The Directors have prepared the accounts on a going concern basis. At 31
December 2021 the Company had cash reserves of US$0.4m.
On 29 June 2022, Glencore and ZIOC have agreed a 2022 Project Work Programme
and Budget for the Project of up to US$1.3m plus US$0.1m of discretionary
spend. ZIOC has agreed to contribute towards this work programme and budget an
amount comprising US$0.09m; the remaining budget amount will be funded via a
loan facility provided directly to Jumelles Ltd by Glencore thus requiring
less funding by ZIOC over the next 12 months compared to the historical levels
observed. On 29 June 2022, Glencore and the group signed a side letter to the
Jumelles loan facility confirming that there will be no dilution of the
group's holding in Jumelles as a result of this change in funding structure.
The Company had cash reserves of US$0.3m as at 29 June 2022. In order to raise
additional funding the Company entered a Subscription Agreement with SMC (as
described above - see the Company's release of 26 June 2020.) The financing
structure with SMC enables the Company to access funding for the costs that
the Company is expected to meet in the near future. Due to the fact that SMC
have 3,000,000 shares still to be placed into the market, for illustrative
purposes only, if the average price at which SMC places the remaining
3,000,000 shares was 2.05 pence (being ZIOC's mid-market closing share price
on 27 June 2022), the net proceeds received by ZIOC from such sales would be
approximately £0.06m. Based on the current cost base at the Zanaga Project,
the direct loan facility to Jumelles Ltd, the current low corporate overheads
of ZIOC, the agreed cash preservation plan adopted by the Company (described
below), the Company's existing cash reserves and (on the basis of cautious
assumptions made by the Company in its funding model) the funds expected to be
obtained from the funding facility established by the Subscription Agreement
with SMC, the board of directors of ZIOC (the "Board") believes that the
Company will be adequately positioned to support its operations going forward
in the near future. As the final cash amounts to be received for each tranche
of issued shares, and the timing of this receipt, are dependent on SMC
successfully selling the shares prior to transferring funds to the Company,
the Board is of the view that the going concern basis of accounting is
appropriate. However, the Board acknowledges that there is a material
uncertainty which could give rise to significant doubt over the Company's
ability to continue as a going concern and, therefore, that the Company may be
unable to realise its assets and discharge its liabilities in the normal
course of business. Nevertheless, based on and taking into account the
foregoing factors, the Board are satisfied the Company will have sufficient
funds to meet its own working capital requirements up to, and beyond, twelve
months from the approval of these accounts.
The Company continues to review the costs of its operational activities with a
view to conserving its cash resources. As part of such ongoing review, and in
order to preserve the cash position of the Company, it has been agreed with
the Directors (since January 2019) and Management (since September 2019) that
fees are deferred. Additionally, the Directors and management have indicated
to the Company that they will assist the cash preservation plan of the
Company. The way in which this could be achieved is being progressed.
In common with many exploration and development companies in the mining
sector, the Company raises funding in phases as its project develops. As the
Zanaga Project is still in the development stage and the cash resources of the
Company are diminishing, the Company recognises that steps will need to be
taken to raise additional investment either at the corporate level or at the
Zanaga Project level, or a combination of the two. The raising of additional
funds is linked to the progress that is made in relation to the development of
the Zanaga Project. The initiatives that are being undertaken in relation to
the development of the Zanaga Project have been described earlier in this
announcement. There are a range of options for raising funds which the Company
is pursuing. It is recognised that there is a risk that the Company may be
unable to obtain debt and/or equity financing in the amounts required, in a
timely manner, on favourable terms or at all and should this occur, it is
highly likely to pose challenges for the Company and could adversely have an
impact upon the proposed development of the Zanaga Project and the proposed
timeline for its development.
If construction of the mine and related infrastructure proceeds (including any
preparatory steps associated with the construction of the mine and related
infrastructure), and the Company elects to fund its pro rata equity share of
construction capital expenditure, it will need to raise further funds. There
is no certainty as to the Company's ability to raise the required finance or
the terms on which such finance may be available.
In addition, any decision of the Jumelles Board to proceed with construction
of the mine and related infrastructure (or any variant such as a low-cost
small scale start-up) is itself dependent upon the ability of Jumelles to
raise the necessary debt and equity to finance such construction and the
initial operation of the mine. Jumelles itself may be unable to obtain debt
and/or equity financing in the amounts required, in a timely manner, on
favourable terms or at all and should this occur, it is highly likely to pose
challenges to the proposed development of the Zanaga Project and the proposed
timeline for its development.
The Company still believes that once the proposed staged development of the
Zanaga Project occurs, the Project offers high grade ore at competitive cost,
thereby offering an attractive rate of return, at an acceptable level of risk.
However, in order to carry out such staged development, it is still the case
that substantial capital expenditure will be required both at the prospective
mine site and in respect of transportation and other associated infrastructure
and for working capital. Revenues from mining are dependent upon such
development being financed and taking place.
At a time when the staged development of the Project takes place (or, if
viable, a small-scale start-up takes place) the Company will need to obtain
additional funding should it decide to elect to fund its share of any such
development of the mine. If such staged development continues to be deferred
due to unfavourable market conditions, the Company will need at the
appropriate time to explore options to raise additional funding, pending the
staged development (or, if viable, a small-scale start-up) taking place.
Volatility in currencies
Various factors, including the Brexit process and its aftermath as well as the
impact that COVID-19 has had on global markets has resulted in increased
volatility in currency rates applicable to Pounds Sterling. Such volatility is
likely to continue. As the Company's cash resources are held in Pounds
Sterling, such volatility could adversely affect the Company's financial
position and results where it is obliged to make payments of sums denominated
in other currencies. This particularly applies to contributions made by the
Company to funding the Jumelles group as these amounts are calculated in
United States dollars.
2 Accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all the periods presented, unless otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with the
International Financial Reporting Standards as adopted by the European Union
("Adopted IFRS"). Adopted IFRS comprises standards and interpretations
approved by the International Accounting Standards Board ("IASB") and the
International Financial Reporting Interpretations Committee ("IFRIC") as
adopted by the European Union.
The financial statements consolidate those of the Company and its subsidiary
Zanaga UK Services Limited (together, the "Group") and the Company's
investment in an associate which is accounted for using the equity method.
The company's presentation currency and functional currency is US dollars.
New standards, amendments and interpretations
The following IFRSs standards and amendments are effective from 1 January
2021:
· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16). These amendments are not expected to have any
material impact upon the finan-cial statements.
The above listed standards and amendments have been adopted by the Company.
The amendments do not have a material impact on the Company's business or on
the Company's financial statements and as such there are no presentation or
measurement changes within the financial statements. .
New and revised IFRS Standards in issue but not yet effective
The following amendments are in issue, adopted by the European Union but are
not effective for the current period:
· Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to
IFRS 16)
· Reference to the Conceptual Framework (Amendments to IFRS 3)
· Property, Plant and Equipment - Proceeds before Intended Use
(Amendments to IAS 16)
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS
37)
· Annual Improvements to IFRS Standards 2018-2020
No material impact upon the Company's financial statements are anticipated
from these amendments.
Measurement convention
These financial statements have been prepared on the historical cost basis of
accounting.
The preparation of financial statements in conformity with Adopted IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise judgement in the process of applying the Group's
accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in Note 3.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of
subsidiaries are included in the financial statements from the date that
control commences until the date that control ceases.
Associates
Investments in associates are recorded using the equity method of accounting
whereby the investment is initially recognised at cost and adjusted thereafter
for the post-acquisition changes in the Group's share of the net assets of the
associate. The Group profit or loss and other comprehensive income includes
the Group's share of the associate's profit or loss and other comprehensive
income. The investment is considered for impairment annually.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses
arising from the intra-group transactions, are eliminated in preparing the
financial statements.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are retranslated to
the functional currency at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in equity.
Share-based payments
The Group makes equity-settled share-based payments to certain employees and
similar persons as part of LTIP (a long-term incentive plan). The fair value
of the equity-settled share-based payments is determined at the date of the
grant and expensed, with a corresponding increase in equity, on a straight
line basis over the vesting period, based on the Group estimate of the awards
that will eventually vest, save for any changes resulting from any
market-performance conditions.
Where awards were granted to employees of the Group's associate and similar
persons, the equity-settled share-based payments were recognised by the Group
as an increase in the cost of the investment with a corresponding increase in
equity over the vesting period of the awards. In equity accounting for the
Group's share of its associate, the Group has accounted for the cost of equity
settled share-based payments as if it were a subsidiary.
The shares issued under the 2010 LTIP were acquired by an Employee Benefit
Trust which subscribed for the shares at zero value. These shares are held by
the Employee Benefit Trust until the vesting conditions have been met and the
share options are exercised. During Q4 2017, all the outstanding share options
were exercised and a small number of surplus shares held by the Employee
Benefit Trust were distributed to beneficiaries of the Trusts. The Employee
Benefit Trust has now been discontinued.
Subsequent awards of share options have been structured as standard share
options and did not involve the use of an employee benefit trust.
Information on the share awards is provided in Note 11 to these financial
statements.
Share-based payments to non-employees
Where the Group received goods or services from a third party in exchange for
its own equity instruments and the amount of equity instruments is fixed, the
equity instruments and related goods or services are measured at the fair
value of the goods or services received and are recognised as the goods are
obtained or the services rendered. Equity instruments issued under such
arrangements for the receipt of services are only considered to be vested once
provision of services is complete. Such awards are structured as standard
share options.
Non-derivative financial instruments
Financial assets and financial liabilities are recognised in the Group's
consolidated statement of financial position when the Group becomes a party to
the contractual provisions of the instrument in accordance with IFRS 9.
Financial assets are initially recognised at their fair value, including, in
the case of instruments not recorded at fair value through profit or loss,
directly attributable transaction costs. Financial assets are subsequently
measured at amortised cost, at fair value through other comprehensive income
(FVTOCI) or at fair value through profit or loss (FVTPL) depending upon the
business model for managing the financial assets and the nature of the
contractual cash flow characteristics of the instrument.
Financial liabilities, other than derivatives, are initially recognised at
fair value of consideration received net of transaction costs as appropriate
and subsequently carried at amortised cost.
Non-derivative financial instruments in the balance sheet comprise other
receivables, cash and cash equivalents, and trade and other payables.
(i) Impairment of financial assets
A loss allowance for expected credit losses is determined for all financial
assets, other than those at FVTPL, at the end of each reporting period. The
expected credit loss recognised represents a probability-weighted estimate of
credit losses over the expected life of the financial instrument.
The expected credit loss allowance is determined on the basis of twelve month
expected credit losses and where there has been a significant increase in
credit risk, lifetime expected credit losses. Financial assets are credit
impaired when there is no realistic likelihood of recovery.
(ii) Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
party.
The Group derecognises financial liabilities when the Group's obligations are
discharged, cancelled or have expired.
On derecognition of a financial asset/financial liability in its entirety, the
difference between the carrying amount of the financial asset/financial
liability and the sum of the consideration received and receivable/paid and
payable is recognised in profit and loss.
Other receivables
Other receivables include receivables from related parties. Where financial
assets are included within this line item, these are managed within a business
model to collect the contract cashflows, which represent solely payments of
principal and interest. Other receivables are subsequently measured at
amortised cost.
Trade and other payables
Trade and other payables are initially recognised at the fair value of
consideration received net of transaction costs as appropriate and
subsequently measured at amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. These are
managed within a business model to collect the contract cashflows, which
represent solely payments of principal and interest These are subsequently
measured at amortised cost and are determined to have a low credit risk due to
being held with highly credit rated financial institutions. As such, these
balances are not assessed to determine whether there has been a significant
increase in credit risk.
Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares are recognised as a deduction
from equity.
When share capital recognised as equity is repurchased, the amount of
consideration paid, including directly attributable costs, is recognised as a
change in equity. Repurchased shares are cancelled.
Impairment of investment in associate
The carrying amounts of the Group's investment in associate are reviewed at
each reporting period end to determine whether there is any indication of
impairment. The investment is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated
future cash flows of that investment. If any such indication exists, the
investment's recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of the
investment or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the income statement.
(i) Calculation of recoverable amount
The recoverable amount of the Group's investments carried at amortised cost is
calculated as the present value of estimated future cash flows, discounted at
the original effective interest rate (i.e. the effective interest rate
computed at initial recognition of these financial assets).
(ii) Reversals of impairment
An impairment loss is reversed when there is an indication that the impairment
loss may no longer exist and there has been a change in the estimates used to
determine the recoverable amount.
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.
Financing income and expenses
Interest income and interest payable is recognised in profit or loss as it
accrues, using the effective interest method.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the end of each reporting
period, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the end
of each reporting period.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
difference can be utilised.
Segmental Reporting
The Group has one operating segment, being its investment in the Project, held
through Jumelles. Financial information regarding this segment is provided in
Note 6b.
Subsequent events
Post year-end events that provide additional information about the Group's
position at the end of each reporting period (adjusting events) are reflected
in the financial statements. Post year-end events that are not adjusting
events are disclosed in the notes to financial statements where material.
Please see note 17.
3 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
note 2, the directors are required to make judgements (other than those
involving estimations) that have a significant impact on the amounts
recognised and to make estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Key source of estimation uncertainty - Carrying value of Investment in
Associate
The value of the Group's investment in Jumelles depends very largely on the
value of Jumelles' interest in the Project. Jumelles assesses at least
annually whether or not its exploration projects may be impaired. This
assessment can involve significant estimation uncertainty as to the likelihood
that a project will continue to show sufficient commercial promise to warrant
the continuation of exploration and evaluation activities. It is reasonably
possible, on the basis of existing knowledge, that changes in assumptions
within the next financial year could require a material adjustment to the
carrying amount of the Investment in Associate.
The long-term iron ore price and discount rate assumptions for the Zanaga
project were $58/tonne (CFR IODEX 62% Fe forecast with adjustments for
quality, deleterious elements, moisture and freight) and 11.34%, respectively.
A 1.5% reduction in the long-term iron ore price or a 0.4% increase in the
discount rate applied would result in the remaining carrying value being fully
impaired. A movement in the opposite direction of the long-term iron ore price
and discount rate by the same percentages would result in a reversal of the
impairment recorded to the original carrying value of $100 million. The
Group's share of these outcomes would be limited to 49.99% of the amount
recognised at the Jumelles level. . It should be noted that the current 62% Fe
IODEX price is $123/tonne, signifcantly higher than the price assumptions used
in the estimation.
4 Note to the comprehensive income statement
Operating loss before tax is stated after charging/(crediting):
2021 2020
US$000 US$000
Share-based payments (see Note 11) 547 707
Net foreign exchange loss/(gain) (12) (25)
Directors' fees - -
Auditor's remuneration 70 60
Other than the Company Directors, the Group did not directly employ any staff
in 2021 (2020: nil). The Directors received a total of US$nil remuneration for
their services as Directors of the Group (2020: US$nil. The amounts paid as
Directors' fees are shown in the Directors' Remuneration Report in the 2021
Annual Report. The Directors' interests in the share capital of the Group are
shown in the Directors' Remuneration Report in the 2021 Annual Report.
5 Taxation
The Group is exempt from most forms of taxation in the BVI, provided the Group
does not trade in the BVI and does not have any employees working in the BVI.
All dividends, interest, rents, royalties and other expense amounts paid by
the Company, and capital gains are realised with respect to any shares, debt
obligations or other securities of the Company, are exempt from taxation in
the BVI.
The effective tax rate for the Group is Nil % (2020: Nil %).
6a Property, Plant and Equipment
Fixtures Total
and fittings
US$000 US$000
Cost
Balance at 1 January 2021 and 31 December 2021 43 43
Depreciation
Balance at 1 January 2021 43 43
Charge for period - -
Balance at 31 December 2021 43 43
Net book value
Balance at 31 December 2021 - -
Balance at 31 December 2020 - -
There are no assets held under lease contracts.
6b Investment in Associate
US$000
Balance at 1 January 2020 37,492
Additions 578
Share of comprehensive loss (724)
Share of currency translation reserve 8
Balance at 31 December 2020 37,354
Balance at 1 January 2021 37,354
Additions 604
Share of post-acquisition comprehensive loss (672)
Share of post-acquisition currency translation reserve (17)
Balance at 31 December 2021 37,269
At 31 December 2021, the investment represents a 50% less one share
shareholding in Jumelles being 2,000,000 shares of the total share capital of
4,000,001 shares. Originally recorded at cost, the investment has been
adjusted for changes in the Company's share of the net assets of the
associate, less impairment. The investment has been impaired down to the
Company's share of the impaired value of the Project declared in the accounts
of the associate.
The additions to the investment during the year were due to the additional
US$0.60m of investment agreed in accordance with the 2021 Funding Agreement
(2020 US$0.58m).
The Company's investment in Jumelles continues to be accounted for as an
associate using the equity method of accounting as Glencore has control of the
business as described in note 1.
As at 31 December 2021, Jumelles had aggregated assets of US$81m (2020:
US$81.4m) and aggregated liabilities of US$0.6m (2020: US$0.8m). For the year
ended 31 December 2021 there was no impairment charge (2020: US$nil) and
Jumelles incurred a loss before tax of US$1.3m (2020: US$1.4m). There was no
tax charge for 2021 (2020: US$nil). Currency translation of the underlying
Congolese asset generated a translation loss of US$nil (2020: US$nil).
Summarised financial information in respect of the Group's associate,
reflecting 100% of the underlying associate's relevant figures is set out
below.
2021 2020
US$000 US$000
Non-current Assets:
Property, plant and equipment 828 1,054
Exploration and other evaluation assets 80,000 80,000
Total non-current assets 80,828 81,054
Current Assets 202 388
Non-current Liabilities (117) (126)
Current Liabilities (469) (702)
Net current liabilities (384) (440)
Net assets 80,444 80,614
Share capital 293,103 293,103
Translation reserve 41,052 39,845
Translation reserve (4,846) (4,812)
Accumulated deficit (248,865) (247,522)
80,444 80,614
7 Other receivables
2021 2020
US$000 US$000
Prepayments and receivables 199 24
Amounts receivable from the Jumelles group 34 34
Other receivables 233 58
8 Cash and cash equivalents
2021 2020
US$000 US$000
Cash and cash equivalents 387 352
9 Trade and other payables
2021 2020
US$000 US$000
Accounts payable 153 184
153 184
No amounts payable are due in more than 12 months (2020: US$nil due in more
than 12 months).
10 Share capital
In thousands of shares Ordinary Ordinary
Shares Shares
2021 2020
In issue at 1 January 293,034 286,304
Shares issued 14,000 7,000
In issue at 31 December 307,034 293,034
The Company is able to issue an unlimited number of no par value shares. 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 meetings of the
Company. No dividends have been paid or declared in 2021 or in the current
year (2020: US$nil).
Share capital changes in 2021
14,000,000 shares were issued in 2021 as part of the SMC transaction as
described in note 1. There were no share repurchases.
11 Share-based payments
Employees
No awards were issued in 2021.
Awards currently in operation are as follows:
Award 1 (fully vested)
These awards vested on the publication of the results of the VEE, which was
achieved in October 2011.
Award 2 (fully vested)
These awards fully vested in 2012 on the expiry of two years following
Admission.
Award 6 (fully vested)
These awards have fully vested.
Award 8 (fully vested)
These awards vested on the date of grant in July 2014.
Award 9 (fully vested)
These awards have fully vested.
Details of current awards are as follows:
Award 1 (2010) Award 2 (2010) Award 6 (2014) Award 8 (2014) Award 9 (2014) Total
Weighted Weighted Weighted Weighted Weighted Weighted
Average Average Average Average Average Average
Exercise Price Exercise Price Exercise Price Exercise Price Exercise Price Exercise Price
(£) Number (£) Number (£) Number (£) Number (£) Number (£) Number
At 1 January 2020 * £0.02 2,727,345 £0.02 995,382 0.01 1,204,619 0.01 1,013,418 0.01 4,000,000 £0.01 9,940,764
(US$0.04) (US$0.04) (US$0.04)
Granted N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Forfeited N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Exercised N/A Nil 0.02 Nil 0.01 Nil 0.01 Nil 0.1 Nil N/A Nil
Lapsed N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
At 31 December 2020 * 0.02 Nil N/A Nil 0.01 1,002,771 N/A Nil 0.01 2,000,000 £0.01 3,002,771
At 1 January 2021 * £0.02 Nil £0.02 Nil 0.01 1,002,771 0.01 Nil 0.01 2,000,000 £0.01 3,002,771
(US$0.04) (US$0.04) (US$0.04)
Granted N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Forfeited N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Exercised N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Lapsed N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
At 31 December 2021 * N/A Nil N/A Nil 0.01 Nil N/A Nil 0.01 Nil £0.01 Nil
Award 1 (2010) Award 2 (2010) Award 6 (2014) Award 8 (2014) Award 9 (2014) Total
Range of exercise prices * £0.00-£0.02 £0.02 £0.00-£0.01 £0.01 £0.01 £0.00 - £0.02
(US$0.00-US$0.04)
(US$0.04)
(US$0.00-US$0.02)
(US$0.00-US$0.04)
(US$0.02) (US$0.02)
Weighted average fair value of share awards granted in the period * N/A N/A N/A) N/A) N/A N/A
Weighted average share price at date of exercise (£) N/A N/A N/A N/A N/A N/A
Total share awards vested 2,727,345 995,382 1,137,338 1,013,418 4,000,000 8,337,685
Weighted average remaining contractual life (Days) Nil Nil 39 Nil Nil
N/A
Expiry date 18 May 2021 18 May 2021 29 July 2024** 29 July 2024 29 July 2024 N/A
* Sterling amounts have been converted into US Dollars at the grant dates
exchange rates of: Awards 1,2, US$1.547:£1.00, Subsequent awards US$
1.6944:£1.00.
** Excepting 199,076 share options with expiry date 7 July 2023
The following information is relevant in the determination of the fair value
of options granted during 2010 and 2014 which has applied option valuation
principles during the year under the above equity-settled schemes:
Award 1 (2010) Award 2 (2010) Award 6 (2014) Award 8 (2014) Award 9 (2014)
Option pricing model used Black-Scholes Black-Scholes Black-Scholes Black-Scholes Black-Scholes
Weighted average share price at date of grant £1.56 £1.56 £0.19 £0.19 £0.19
(US$2.41)
(US$2.41)
(US$$0.31) (US$$0.31) (US$$0.31)
Weighted average expected option life 0.7 years 1.0 years 5.0 years 4.0 years 4.6 years
Expected volatility (%) 50% 50% for less than 91% 91% 91%
1 year expected life,
55% for more than
1 year expected life
Dividend growth rate (%) Zero Zero Zero Zero Zero
Risk-free interest rate (%) 0.51% for 0.69% for 1.75% for 1.75% for 1.75% for
6 month expected life 12 month expected life 12 month expected life 12 month expected life 12 month expected life
0.69% for 1.12% for 2.25% in excess 2.25% in excess 2.25% in excess
12 month expected life 24 month expected life 24 month expected life 24 month expected life 24 month expected life
* Sterling amounts have been converted into US Dollars at the grant dates
exchange rates of: Awards 1,2, US$1.547:£1.00, Subsequent awards US$
1.6944:£1.00.
The volatility assumption of awards 1 & 2 were measured by reference to
the historic volatility of comparable companies based on the expected life of
the option. Subsequent awards referenced the volatility of the Company's own
history since the 2010 flotation.
Non-employees
In August 2019 the Group entered into a new incentive plan which granted share
options in the Group to two non employee individuals and Harris Geoconsult
Limited who all provide consulting services to the Group. On 29 August 2019,
13,633,335 options were granted under this scheme. The scheme will be settled
in equity instruments of the Group and is therefore treated as an
equity-settled share-based payment arrangement. The options vest in multiple
tranches based on the Group achieving key performance milestone including:
(a) The approval by Jumelles of the Early Production Project (EPP),
including its potential technical and financial feasibility, as the basis for
advancing the development of the Zanaga Project;
(b) Raising finance either for the Group or separately for the development
phase of the Zanaga Project; or
(c) The completion of a significant merger or acquisition involving the
Group or any member of the Jumelles Group acquiring a material interest (as
determined by the Group board) in a third party or a third party acquiring a
material interest (as determined by the Group board) in the Group or a member
of the Jumelles Group.
All unvested options will also vest on the occurrence of certain events, such
as a change of control of the Company. Once vested all options will also vest
on the occurrence of certain events, such as a change of control of the
Company. Once vested all options are exercisable within seven years of the
grant date of award. The options have a nominal exercise price of 0.01p (one
hundredth of one penny). The number of share options are as follows:
In number of shares Number of options Number of options
2021 2020
Granted during the year - -
Exercised during the year - -
Outstanding at the end of the year 13,633,335 13,633,335
Exercisable at the end of the year - -
The services to be provided in exchange for the options are unidentifiable at
the date of the grant and therefore the Group has measured the fair value of
the services with reference to the fair value of the options granted. The fair
value is measured using a Black Scholes model. Measurement inputs and
assumptions as follows:
2021
Fair value at grant date 0.09
Share price at valuation date 0.09
Exercise price Nominal
Expected volatility (weighted average) N/A
Option life (weighted average life in years) 2.4
Expected dividends Nil
Risk-free interest rate (based on national government bonds) N/A
As the options are effectively nil-cost options the expected volatility and
risk free rate does not impact the fair value under the Black Scholes model
and therefor been excluded from the model inputs. The share options are
granted with a number of non-market performance conditions relating to
achievement of specific performance milestones for the Group as set out above.
In addition, the option holders must continue to provide consulting services
to the Group as at the vesting date. Such conditions are not taken into
account in the grant date value measurements of services received. The
achievement of the non-market performance conditions are estimated by
management to determine expected vesting period over which to spread the
equity-settled share-based payment charge. As at year end the expected vesting
date of each tranche of options is between 30 June 2020 and 31 December 2021
resulting in a weighted average option life of 2.4 years.
The total expenses recognised for the year relating to equity-settled
share-based payments is US$547k.
In addition, there are 1,600,000 options outstanding which were issued to a
consultant in 2014 at 18.5p that have vested but have not yet been exercised.
12 Loss per share
2021 2020
Profit (Loss) (Basic and diluted) (US$,000) (1,898) (1,823)
Weighted average number of shares (thousands)
Basic
Issued shares at beginning of period 293,034 286,034
Effect of shares issued 14,000 7,000
Weighted average number of shares at 31 December - basic 307,034 293,034
Loss per share
Basic (Cents) (0.6) (0.6)
Diluted (Cents) (0.6) (0.6)
There are potential ordinary shares outstanding, refer to Notes 10 and 11 for
details of these potential ordinary shares. The effects of these potential
shares are not considered in the calculation of diluted loss per share.
13 Financial instruments
Financial Risk Management
The Group's activities expose it to a variety of financial risks: credit risk,
liquidity risk and market risk (comprising currency risk and interest rate
risk). The Group seeks to minimise potential adverse effects of these risks on
the Group's financial performance. The Board has overall responsibility for
managing the risks and the framework for monitoring and coordinating these
risks. The Group's financial risk management policies are set out below:
(a) 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, and arises principally from the Group receivables related
parties. The Group has a credit policy in place and exposure to credit risk is
monitored on an ongoing basis. At 31 December, the Group's maximum exposure to
credit risk was as follows:
2021 2020
US$000 US$000
Cash and cash equivalents 387 352
Amounts receivable from Jumelles Group 34 34
Significant concentrations of credit risk manifest with the Group's banking
counterparties with which the cash and cash equivalents are held, and accounts
receivable from Jumelles.
(b) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment
obligations when due, or that it is unable, on an ongoing basis, to borrow
funds in the market on an unsecured or secured basis at an acceptable price to
fund actual or proposed commitments. Prudent liquidity risk management implies
maintaining sufficient cash and cash equivalents and availability of adequate
committed funding facilities.
The Group evaluates and follows continuously the amount of liquid funds needed
for business operations, in order to secure the funding needed for business
activities and loan repayments. The availability and flexibility of the
financing is needed to ensure the Group's financial position, as detailed in
Note 1.
The maturity profile of the Group's financial liabilities based on the
contractual terms is as follows:
$'000 Less than 1 months 1 month to 6 months Greater than 6 months Total
2020
Accounts payable 83 - 70 153
2020
Accounts payable 84 - 100 184
(c) Market risk
(i) Foreign currency risk
The functional currency of the Group is the US dollar. Currency risk is the
risk of loss from movements in exchange rates related to transactions and
balances in currencies other than the U.S. dollar. The foreign currency
denominated financial assets and liabilities are not hedged, thus the changes
in their value are charged or credited to profit and loss.
As at 31 December 2021 the foreign currency denominated assets include cash
balances held in Sterling of US$387,322 (2020: US$351,772), other receivables
denominated in Sterling of US$232,972 (2020: US$58,440), and payables of
US$153,283 (2020: US$184,459) denominated in Sterling.
The following significant exchange rates applied during the year:
Reporting date Reporting date
Average rate spot rate Average rate spot rate
2021 2021 2020 2020
Against US Dollars US$ US$ US$ US$
Pounds Sterling 1.33680 1.3532 1.3037 1. 3672
(ii) Sensitivity analysis
A 10% weakening of the following currencies against the US Dollar at 31
December 2021 would have increased/(decreased) equity and profit or loss by
the amounts shown below. This calculation assumes that the change occurred at
the end of each reporting period and had been applied to risk exposures
existing at that date. This analysis assumes that all other variables, in
particular other exchange rates and interest rates, remain constant.
Equity Profit or loss Equity Profit or loss
2021 2021 2020 2020
US$000 US$000 US$000 US$000
Pounds Sterling (35) (35) (35) (35)
A 10% strengthening of the above currencies against the US Dollar at 31
December would have had the equal but opposite effect on the above currencies
to the amounts shown above, on the basis that all other variables remain
constant.
(iii) Capital management
The Board's policy is to maintain a stable capital base so as to maintain
investor and market confidence. Capital consists of share capital and retained
earnings. The Directors do not intend to declare or pay a dividend in the
foreseeable future but, subject to the availability of sufficient
distributable profits, intend to commence the payment of dividends when it
becomes commercially prudent to do so.
The Company has a share incentive programme which is now administered by the
Board. The share incentive programme is discretionary and the Board will
decide whether to make share awards under the share incentive programme at any
time. In Q4 2017 all then outstanding share options over already issued shares
in the LTIP split interest scheme were exercised, a small number of surplus
shares were distributed to beneficiaries of the Employee Benefit Trust
involved in the scheme and the LTIP split interest scheme was then
discontinued.
14 Commitments for expenditure
The Group had no capital commitments or off-balance sheet arrangements at 31
December 2021 (31 December 2020: nil). Subsequently, Glencore and ZIOC have
agreed a 2022 Project Work Programme and Budget for the Project of up to
US$1.2m plus US$0.1m of discretionary spend. ZIOC has agreed to contribute
towards this work programme and budget an amount comprising US$0.1m, the
remaining funds will be provided by a Glencore loan facilty into Jumelles.
15 Related parties
The Group's relationships with Jumelles and Glencore are described in Note 1.
The following transactions occurred with related parties during the period:
Transactions for the period Closing balance
(payable)/receivable
2021 2020 2021 2020
US$000 US$000 US$000 US$000
Funding:
Due from Jumelles 604 578 34 34
16 Transactions with key management personnel
2021 2020
US$000 US$000
Directors' fees - -
Total - -
The Directors have no material interest in any contract of significance
subsisting during the financial year, to which the Group is a party.
17 Subsequent Events
Jumelles Loan Facility
On 29 June 2022, Glencore and ZIOC agreed a 2022 Project Work Programme and
Budget for the Project of up to US$1.3m plus US$0.1m of discretionary spend.
ZIOC has agreed to contribute towards this work programme and budget an amount
comprising US$0.09m; the remaining budget amount will be funded via a loan
facility provided directly to Jumelles Ltd by Glencore thus requiring less
funding by ZIOC over the next 12 months compared to the historical levels
observed. On 29 June 2022, Glencore and the group signed a side letter to the
Jumelles loan facility confirming that there will be no dilution of the
group's holding in Jumelles as a result of this change in funding structure.
*** End of Financial Statements ***
Glossary
AL(2)O(3) Alumina (Aluminium Oxide)
Fe Total Iron
JORC Code The 2004 or 2012 Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves as published by the Joint Ore Reserves
Committee of the Australasian Institute of Mining and Metallurgy, Australian
Institute of Geoscientists and Minerals Council of Australia.
LOI Loss on ignition
LOM Life of mine
Mineral Resource A concentration or occurrence of material of intrinsic economic interest in or
on the Earth's crust in such form, quality and quantity that there are
reasonable prospects for eventual economic extraction. The location, quantity,
grade, geological characteristics and continuity of a Mineral Resource are
known, estimated or interpreted from specific geological evidence and
knowledge. Mineral Resources are sub-divided, in order of increasing
geological confidence, into Inferred, Indicated and Measured categories.
Mn Manganese
Ore Reserve The economically mineable part of a Measured and/or Indicated Mineral
Resource. It includes diluting materials and allowances for losses, which may
occur when the material is mined. Appropriate assessments and studies have
been carried out, and include consideration of and modification by
realistically assumed mining, metallurgical, economic, marketing, legal,
environmental, social and governmental factors. These assessments demonstrate
at the time of reporting that extraction could reasonably be justified. Ore
Reserves are sub-divided in order of increasing confidence into Probable Ore
Reserves and Proved Ore Reserves. A Probable Ore Reserve has a lower level of
confidence than a Proved Ore Reserve but is of sufficient quality to serve as
the basis for a decision on the development of the deposit.
P Phosphorus
PFS Pre-feasibility Study
SiO2 Silica
Beneficiation The process of improving (benefiting) the economic value of the ore by
removing the waste minerals, which results in a higher grade product
(concentrate)
Pelletisation The process of compressing or moulding a material into the shape of a pellet
Mtpa Million Tonnes Per Annum
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FMMPTMTTJBBTRecent news on Zanaga Iron Ore
See all newsREG - Zanaga Iron Ore - Board Appointments
AnnouncementREG - AIM - AIM Notice - 27/03/2025
AnnouncementREG - Zanaga Iron Ore - Tranche 2 Private Placement Completion & Upsizing
AnnouncementREG - Zanaga Iron Ore - Project Development Strategy Update
AnnouncementREG - Zanaga Iron Ore - Buyback of Glencore Shares and Board Change
Announcement