REG - Zanaga Iron Ore - ZIOC 2023 Annual Results announcement
01/07/2024 07:00
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RNS Number : 4831U Zanaga Iron Ore Company Ltd 01 July 2024
Zanaga Iron Ore Company Audited Results for the Year to 31 December 2023
1 July 2024
2023 Highlights and post reporting period end events to 30 June 2024
Zanaga Iron Ore Project (the "Project" or the "Zanaga Project")
· 30Mtpa staged development project ("30Mtpa Project")
o 2024 Feasibility Study update process ("2024 FS update") completed,
delivering positive results and further underlining the robust economics of
the Company's 30 Mtpa Project (including both 12Mtpa Stage One ("Stage One"),
plus 18Mtpa Stage Two expansion ("Stage Two")).
§ 12Mtpa Stage One
- Capital investment of US$ 1.94 billlion
- Operating cost of US$ 31.5 / dmt FOB
- Net Present Value of US$ 3.68 billion
- Internal Rate of Return of 26.2%
§ 18Mtpa Stage Two optional expansion
- Capital investment of US$ 1.87 billion
- Operating cost of US$ 24.9 / dmt FOB
- Total combined Net Present Value of US$ 7.36 billion
- Internal Rate of Return of 28.2%
o Chinese iron ore technical expert engineering firm ("Chinese EPC Partner"),
engaged to lead the 2024 FS update process, now undertaking an optimisation
study on the applicability of unique technology relating to the Zanaga 30Mtpa
Project ("Optimisation Study") with the potential to provide further capital
and operating cost savings beyond the results of the 2024 FS Update.
o FEED phase preparation
§ Preparation for the Front End Engineering and Design (FEED) phase of the
Zanaga Project is underway, including solicitation of cost and schedule
estimates for the various workstreams associated with the FEED phase.
o Other strategic initiatives
§ Hydro power MoU signed with China Machinery Engineering Corporation
("CMEC") relating to hydroelectric power solutions for the Zanaga Project and
associated funding of such power projects (announced on 29 December 2023)
§ Port MoU: Discussions underway with large scale port development companies
interested in participating in the development of port infrastructure for the
Zanaga Project.
§ Strategic partner initiative: Approaches recevied from multiple parties
interested in the development of the Zanaga Project, particularly following
the completion of the 2024 FS update. Discussions continue and the Company
will provide further updates in due course.
· Early Production Project ("EPP Project" or "EPP") remains under
investigation
o Multiple production scenarios remain under investigation on processing
facilities and suitable logistics solutions, with a focus on an export
solution through the Republic of Congo ("RoC").
Corporate
· Loan funding agreement
o To fund the Project's continuing work programme and budget, as well as the
working capital requirements of ZIOC, Glencore Projects entered into a loan
facility (the "Loan Facility") with Jumelles Ltd in June 2022, providing up to
US$1.8 million of loan capital.
§ Loan repayable by 31 July 2024
§ As at 29 June 2024, following a number of repayment instalments, ZIOC had
outstanding US$744k of the Loan Facility including accrued interest
· Shard Merchant Capital Ltd ("SMC") equity subscription agreements
("Shard ESAs")
o Second SMC equity subscription agreement (ESA) update ("2023 ESA")
§ Net proceeds of £1,667,755 (US$2,124,527) received from the facility to
date, following the placement by SMC of the first two tranches of shares (a
combined total of 24 million shares)
§ On 28 June 2024, SMC subscribed for 12 million shares of no par value in
ZIOC, as part of the final third tranche of the 2023 ESA
o New ESA signed with SMC on 29 June 2024 ("2024 ESA")
§ Following the successful completion of the 2023 ESA, ZIOC has entered into
the 2024 ESA with SMC
§ Under the terms of the 2024 ESA the Company will issue and SMC will
subscribe for up to 36 million ordinary shares of no par value in the Company
("Subscription Shares") in up to three tranches of up to 12 million shares
each.
§ Pursuant to the 2024 ESA, 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.
o Proceeds of the Shard ESAs applied to general working capital, including
the provision of further contributions to the Zanaga Project's operations
· Appointment of Mr Martin Knauth at Chief Executive Officer
o Senior mining executive with extensive experience in the industry spanning
more than 30 years in a wide range of cultures, countries and commodities,
with notable success in project development, operations and transformational
growth phases
· Appointment of Shard Capital Partners LLP as joint Corporate Broker
· Cash balance of US$0.9m as at 31 December 2023 and a cash balance of
US$0.1m as at 28 June 2024
Clifford Elphick, Non-Executive Chairman of ZIOC, commented:
"I am pleased to report that ZIOC has progressed through another critical
milestone, delivering on expectations in completing the updated cost estimates
of the 30Mtpa Feasibility Study with its Chinese EPC Contractor partner, while
also advancing our understanding of the application of new iron ore processing
technology to reduce estimated costs further. Following the streamlining of
ownership and control of the Zanaga Project in 2022, the updated FS now
enables ZIOC to engage with new strategic entities interested in participating
in the Zanaga Project going forward."
The Company will post its Annual Report and Accounts for the year ended 31
December 2023 ("2023 Annual Report and Accounts") to shareholders on
approximately 10 July 2024.
The 2023 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
Panmure Liberum Capital Limited
Nominated Adviser, Financial
Scott Mathieson, John More
Adviser and Corporate Broker +44 20
3100 2000
Shard Capital Partners LLP
Corporate Broker
Damon Heath
+44
207 186 9952
About us:
Zanaga Iron Ore Company Limited (AIM ticker: ZIOC) is an iron ore exploration
and development company, with the Company's flagship asset being its 100%
owned Zanaga Iron Ore Project located in the Republic of Congo, for which the
Government Mining Licence, Environmental Permit and Mining Convention are all
in place.
Chairman's Statement
Dear Shareholder,
Following the acquisition of the controlling shareholding in the Zanaga
Project in December 2022, we continue to progress in-country activities with
the intention of re-energising the 12Mtpa Stage One project following
completion of the 2024 FS update process. Iron ore prices have maintained
robust levels for a substantial period of time and high quality iron ore
projects like the Zanaga Project are now well positioned for development.
Iron Ore Market
The iron ore market has demonstrated continued robust demand and pricing has
remained stable in recent months. China continues to consume significant
quantities of iron ore to feed its substantial steel industry and intitiatives
to produce lower carbon emission 'green steel' provide furher support for
premium pricing related to high grade iron ore products. This provides further
impetus for the development of high grade iron ore projects such as the Zanaga
Project.
2024 FS update process
In 2023 the Company partnered with a Chinese iron ore technical expert
engineering firm ("Chinese EPC Partner") as part of a process to update the
economic evaluation of the Zanaga 30 Mtpa staged development project.
Using the 2014 Feasibility Study's ("2014 FS") infrastructure designs,
flowsheets and material take off lists, direct and indirect cost estimates
were updated to current market pricing using Chinese major equipment and
contractor pricing for both phases of 12 Mtpa Stage One haematite ("Stage
One"), plus 18 Mtpa Stage Two magnetite expansion ("Stage Two") projects,
inclusive of buried concentrate pipeline and port infrastructure.
A second phase of optimisation work ("Optimisation Study") is under
consideration and involves investigating the potential to apply proprietary
iron ore processing technology that the Chinese EPC Partner possesses, with
the potential to provide further capital and operating cost savings beyond the
results of the 2024 FS Update.
The 2024 FS update was completed to a (+/- 20% accuracy) full feasibility
study level of definition, with the following positive results:
§ 12Mtpa Stage One
- Capital investment of US$ 1.94 billlion
- Operating cost of US$ 31.5 / dmt FOB
- Net Present Value of US$ 3.68 billion
- Internal Rate of Return of 26.2%
§ 18Mtpa Stage Two optional expansion
- Capital investment of US$ 1.87 billion
- Operating cost of US$ 24.9 / dmt FOB
- Total combined Net Present Value of US$ 7.36 billion
- Internal Rate of Return of 28.2%
The Company believes these positive results provide much greater confidence in
the Project's economic feasibility in today's market and cost environment, and
with this, provides a key catalyst for potential strategic investors to
consider funding of the next logical Project phase, being the front end
engineering and design (FEED) program to further define the Project's physical
elements and risk abatement strategies.
EPP Project
Whilst ZIOC's focus during 2023 was on advancing the 2024 FS update process,
the Project Team continued 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.
The Project Team continued to advance efforts to develop optionality relating
to the viability of the EPP Project. The Project Team has continued 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 2023 the Company had cash reserves of US$0.9m. As at 29 June
2024, ZIOC has outlined a 2024 Project Work Programme and Budget as outlined
below. The Company had cash reserves of US$0.1m as at 28 June 2024.
In order to raise additional funding the Company entered a Subscription
Agreement with SMC (as described above - see the Company's release of 28 June
2024.) 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. For
illustrative purposes only, if the average price at which SMC places the final
tranche of the 2023 ESA and all three tranches of the 2024 ESA (a combined
total of 48,000,000 shares) was 7 pence, the net proceeds received by ZIOC
from such sales would be approximately £3.19m. 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 review, and in order to
preserve the cash position of the Company, it has been agreed with the
Directors since January 2023 that fees previously deferred would be
reviewed.
Subscription Agreement with Shard Merchant Capital Ltd
The Company has been pleased with the success of the 2023 ESA with SMC which
has provided the Company with access to funding through a relatively low cost
structure that minimised dilution to shareholders.
The proceeds received by the Company from SMC pursuant to the Subscription
Agreement have been applied to general working capital, including the
provision of further contributions to the Zanaga Project's operations.
As a result the Company has entered into a new 2024 ESA with SMC. An overview
of the two ESAs is provided below:
1) 2023 ESA
a. On 1 July 2023 ZIOC announced that the Company had entered into a
Subscription Agreement with SMC, a financial services provider.
b. Under the Subscription Agreement, the Company agreed to issue and SMC
agreed to subscribe for up to 36 million ordinary shares of no par value in
the Company ("Subscription Shares") in three tranches of 12 million shares
each
c. Net proceeds of £1,667,755 (US$2,124,527) have been received from
the facility to date, following the placement by SMC of the first two tranches
of shares (a combined total of 24 million shares)
d. On 29 June 2024, SMC subscribed for 12 million shares of no par value
in ZIOC, as part of the final third tranche of the 2023 ESA
2) 2024 ESA
a. The Company entered into a new Subscription Agreement (the 2024 ESA)
with SMC on 29 June 2024.
b. Under the Subscription Agreement, the Company will issue and SMC has
subscribed for 36 million ordinary shares of no par value in the Company
("Subscription Shares") in three tranches of 12 million shares each (First
tranche to be issued immediately).
Chief Executive Officer appointment
On 14 December 2023, ZIOC appointed Mr Martin Knauth as Chief Executive
Officer. Mr Knauth is a senior mining executive with extensive experience in
the industry spanning more than 30 years in a wide range of cultures,
countries and commodities, with notable success in project development,
operations and transformational growth phases, as well as establishment of
performance cultures. With previous experience in Australia, Kazakhstan,
Madagascar, Cuba, the DRC and many other jurisdictions, working for such
companies as Western Mining Corp, Vale, Sherritt Metals International, KAZ
Minerals and Glencore. He has a strong record in establishing and maintaining
positive relationships with governments, communities, employees and other
Project stakeholders critical to the Company's success.
Mr Knauth holds a Bachelor's degree in Mining Engineering from the University
of Queensland, a Masters degree in Mineral Economics from Curtin University
and is a Member of the AusIMM.
Mr Knauth brings extensive experience in project development, operations and
transformational growth phases in the mining industry. These positive
attributes are essential to moving the Zanaga Project forward, especially in
light of the recently announced strategic objectives of the Company.
Appointment of joint Corporate Broker
In March 2024 ZIOC appointed Shard Capital Partners LLP ("SCP") as joint
Corporate Broker, alongside Panmure Liberum Capital Limited, who are also the
Company's Nominated Advisor. The addition of SCP to our advisory team
provides further support to ZIOC, and additional resources as the Company
looks to advance to the next stage of development on the Zanaga Project.
Outlook
Following the completion of the 2024 FS Update, and with ZIOC now positioned
as 100% owner of the Zanaga Project, we are now able to engage with strategic
entities interested in partnering on the Zanaga Project going forward. It is
pleasing to have secured the support of Glencore throughout the process of
delivering the 2024 FS Update and we look forward to working with the Glencore
team in unlocking value from the project for all stakeholders.
Despite globally uncertainty, the Project Team have continued to progress
numerous workstreams with the potential to add significant value to the
options available for the development of the Zanaga Project.
Our investigations of opportunities that have the potential to unlock existing
infrastructure solutions, as well as options available for lowering capital
and operating costs of the project 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 a unique large scale tier one asset with multiple
potential development options from a scale perspective.
The Project Team have dedicated significant effort to securing updated
development costs associated with the flagship 30Mtpa project, and are pleased
with the results of the 2024 FS Update, bringing the cost estimates of the
30Mtpa Zanaga Project in line with current market pricing. ZIOC's Chinese EPC
Partner, who led the 2024 FS update process, also posseses substantial
technical capabilities in iron ore process plant design and engineering, as
well as unique technology expertise in iron ore process. The Optimisation
Study underway has the potential to further enhance the value of the Project
and we look forward to advancing this work going forward.
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.
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 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.
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.
2024 FS update study results
In 2023 the Company's Chinese EPC Partner led a process to update the economic
evaluation of the Zanaga 30 Mtpa staged development project. Using the 2014 FS
infrastructure designs, flowsheets and material take off lists, direct and
indirect cost estimates were updated to current market pricing using Chinese
major equipment and contractor pricing for both Stage One and Stage Two of the
Zanaga Project, inclusive of buried concentrate pipeline and port
infrastructure.
The Optimisation Study is under consideration and involves investigating the
potential to apply proprietary iron ore processing technology that the Chinese
EPC Partner possesses, with the potential to provide further capital and
operating cost savings beyond the results of the 2024 FS Update.
2024 FS update results
Unit Stage One Stage Two
12Mtpa
+18Mtpa
(30Mtpa Total)
Capital Cost US$ m 1,935 1,871
Operating Cost (Average, Life of Mine) US$ /dmt 31.5 24.9
Net Present Value US$ m 3,681 7,357
Internal Rate of Return % 26.2 28.2
Note: Iron ore prices based on AME Group's long term real iron ore price
forecast for 65% Fe IODEX. Operating costs exclude royalties payable.
These results compare favourably against the previous 2014 FS capital and
operating costs estimates, as outlined below;
Unit Stage One Stage Two
12Mtpa
+18Mtpa
(30Mtpa Total)
Capital Cost US$ m 2,219 2,489
Operating Cost (Average, Life of Mine) US$ /dmt 32.1 25.7
Since 2014, the Company has conducted a number of technical and economic
review exercises using third party western technical consulting firms, which
resulted in high level estimations of the costs to develop the project at that
time, but only to a Preliminary Economic Assessment (PEA) or Pre-Feasibility
Study (PFS) level of definition. The 2024 FS update was concluded to a higher
degree (+/- 20% accuracy) full feasibility study level of definition. In
addition, the results provided by ZIOC's Chinese EPC Partner were
independently reviewed and validated by a third-party technical consulting
firm.
The Company believes these positive results provide much greater confidence in
the Project's economic feasibility in today's market and cost environment, and
with this, provides a key catalyst for potential strategic investors to
consider funding of the next logical Project phase, being the front end
engineering and design (FEED) program to further define the Project's physical
elements and risk abatement strategies.
Corporate initiatives update
In September 2023, the Company outlined its strategic objectives, including
the intention to secure MoUs with a number of potential partners to progress
the Zanaga Iron Ore Project. An update on each MoU workstream is provided
below:
1) Hydro power MoU
a) In December 2023, following CMEC's preliminary inspections and
engineering of potential hydroelectric sites near the Zanaga Project, a
memorandum of understanding ("MoU") was signed with China Machinery
Engineering Corporation ("CMEC") relating to hydroelectric power solutions for
the Zanaga Project and associated funding of such power projects. The
following objectives were agreed:
i) Advance engineering and related studies for the identified
hydroelectric sites near the Zanaga Project.
ii) Draft arrangements for the funding of development and operation of
the identified hydroelectric project(s), between the government of the
Republic of Congo and third Parties.
2) Port MoU
a) Port infrastructure discussions are underway with a large port
infrastructure development firm seeking to expand the existing port of
Pointe-Noire. Consideration is also being given to potential development
solutions for a large bulk mineral port capable of supporting the 30Mtpa
staged development project.
3) Strategic partner initiative
a) Following the completion of the acquisition of Glencore's
shareholding in the Zanaga Project in December 2022, and with the benefit of
the 2024 FS udpate process results, a number of potential strategic partners
have approached ZIOC with an interest in participating in the development of
the Zanaga Project. Discussions continue and the Company will provide further
updates in due course.
Next Steps
Throughout the remainder of 2024, the Project Team will focus on engaging with
our selected Chinese EPC partner to investigate applicability of new iron ore
processing technology to the Zanaga Project, while continuing to investigate
potential opportunities for smaller scale production utilising existing
infrastructure, supporting the initiative to secure strategic partners
interested in the development of the Project.
Financial Review
Results from operations
The financial statements contain the results for the Group's twelfth full year
of operations following its incorporation on 19 November 2009. The Group made
a total comprehensive loss in the year of US$3.6m (2022: total comprehensive
income US$4.7m). The total comprehensive income for the year comprised:
2023 2022
US$000
US$000
General expenses (2,739) (516)
Net foreign exchange (loss) 15 -
Share of loss of associate - (436)
Gain on revaluation of investment - 9,050
Profit / (Loss) before tax (2,724) 8,098
Share of other comprehensive income / (loss) of associate - foreign exchange - 61
Reclassification of share of other comprehensive (loss) / income of associate - (3,447)
Total comprehensive income / (loss) (2,724) 4,712
General expenses of US$2.7m (2022: US$0.5m) consists of Administration
expenditure in Congo of US$1.0m, director fees US$0.4m (2022: Nil), technical
fees US$0.8m (2022: Nil) long Term Incentivisation Plan ("LTIP") Nil (2022
US$0.2m) and US$0.5m (2022: US$0.3m) of other general operating expenses.
Financial Position
ZIOC's Net Asset Value ("NAV") of US$85.2m (2022: US$85.2m) comprises of
US$nil (2021: US$37.3m) investment in Jumelles, US$85.3m of exploration and
evaluation assets.US$0.7m of PPE, US$0.9m (2022: US$0.3m) of cash balances and
US$1.0m (2022: US$1.1m) of other net current liabilities.
2023 2022
US$000 US$000
Investment in Associate - -
Exploration and evaluation assets 85,300 85,300
PPE 648 703
Cash 899 310
Net current assets/(liabilities) (1,030) (1,110)
Net assets 85,817 85,203
Subscription Agreement concluded with Shard Merchant Capital Ltd
As outlined in the Chairman's Statement above, on 1 July 2023 ZIOC entered
into a 2023 ESA with SMC, a financial services provider. Under the terms of
the agreement the Company will issue and SMC will subscribe for up to 36
million ordinary shares of no par value in the Company in up to three tranches
of up to 12 million shares each.
Pursuant to the 2023 ESA, 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$0.58m during 2023 (2022: decrease of US$0.08m).
Operating activities utilised US$1.4m (2022: US$0.5m). The Company raised
funds of US$1m from the Shard facility during the year and $1.3m was drawndown
from the Glencore loan facilty
Fundraising activities
The fundraising activities carried out in 2023 of US$1m (2022: US$0.2m) 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) unaudited
by MHA, 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 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.
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 Company 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 the Company 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). 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 to the proposed
development of the Zanaga Project and the proposed timeline for its
development. Moreover, the poor current global equity and credit environment
may pose additional challenges to the ability of the Company to secure equity
or debt finance or to secure equity or debt finance on acceptable terms,
including as to rates of interest. Current negative global market conditions
and increasing political and geopolitical tensions could also adversely impact
the ability to finance the Zanaga Project. 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. Current negative global market conditions and increasing political
and geopolitical tensions could also adversely impact the ability to finance
the Company. 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.
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 economic factors
In terms of currency 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. Furthermore, current fluctuations in inflation, interest
rates, and supply chain reliability has the potential to adversely impact the
Company and Jumelles today, while also potentially adversely impacting the
economic viability of the Zanaga Project, as well as the ability to secure
finance for the development of the Zanaga Project. Such risks are 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 income for year ended 31
December 2023
2023 2022
Note US$000 US$000
Gain on revaluation of investment 6b - 9,050
General and administrative expenses (2,723) (516)
Share of loss of associate 6b - (436)
Operating (loss) / profit (2,723) 8,098
(Loss) / Pofit before tax (2,723) 8,098
Taxation 5 - -
(Loss) / Profit for the year (2,723) 8,098
Items that may be reclassified subsequently to profit or loss: 6b - 61
Share of other comprehensive income of associate - foreign exchange
translation
Reclassification of share of other comprehensive loss of associate 6b - (3,447)
Other comprehensive loss - (3,386)
Total comprehensive (loss) / income (2,723) 4,712
(Loss) / Earningsper share
Basic (Cents) 12 (0.4) 0.3
Diluted (Cents) 12 (0.4) 0.3
(Loss) / Profit and total comprehensive income / (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
as at 31 December 2023
2023 2022
Note US$000 US$000
Non-current assets 6a 85,300 85,300
Exploration and evaluation assets
Property, plant and equipment 6a 648 703
85,948 86,003
Current assets
Other receivables 7 1,193 113
Cash and cash equivalents 8 899 310
2,092 423
Total Assets 88,040 86,426
Non-current liabilities
Lease liability 9a 104 104
Current liabilities
Loans and borrowings 9b 1,685 385
Trade and other payables 9c 423 724
Lease Liability 9a 11 11
Net assets 85,817 85,202
Equity attributable to equity holders of the Parent Company
Share capital 10 317,027 313,689
Accumulated deficit (231,141) (228,418)
Foreign currency translation reserve (69) (69)
Total equity 85,817 85,202
The notes form an integral part of the financial statements.
These financial statements were approved by the Board of Directors and were
authorised for issue on 30 June 2024 and were signed on its behalf by:
Mr Clifford Elphick
Director
Consolidated statement of changes in equity
for year ended 31 December 2023
Foreign
Note currency
Share Accumulated translation Total
Capital deficit reserve Equity
US$000 US$000 US$000 US$000
Balance at 1 January 2022 270,935 (236,516) 3,317 37,736
Profit for the year - 8,098 - 8,098
Other comprehensive loss - - (3,386) (3,386)
Total comprehensive income for the year - 8,098 (3,386) 4,712
Transactions with owners in their capacity as owners:
Issue of shares as consideration for acquisition of assets 42,591 - - 42,591
Consideration for share-based payments 163 - - 163
Balance at 31 December 2022 313,689 (228,418) (69) 85,202
Balance at 1 January 2023 313,689 (228,418) (69)
85,202
Loss for the year - (2,723) - (2,723)
Other comprehensive income - - - -
Total comprehensive income for the year - (2,723) - (2,723)
Transactions with owners in their capacity as owners:
Issue of ordinary shares 2,395 - - 2,395
Issue of shares as remuneration 11 943 - - 943
Balance at 31 December 2023 317,027 (231,141) (69) 85,817
Consolidated cash flow statement
for year ended 31 December 2023
2023 2022
Note US$000 US$000
Cash flows used in operating activities
(Loss) / Profit for the year (2,723) 8,098
Adjustments for:
Share based payments 943 163
Net exchange loss 16 -
Gain on revaluation of investment in associate 6b - (9,050)
Share of loss in associate 6b - 436
Working capital changes:
- Decrease in other receivables 7 1,080 130
- (Decrease)/increase in trade and other payables 9c (1,103) 126
Net cash used in operating activities (1,787) (97)
Cash flows used in investing activities
Investment in associate 6b - (95)
Net cash used in investing activities - (95)
Cash flows generated by financing activities
Glencore loan 1,300 -
Proceeds from share issuance 990 -
Net cash flow generated by financing activities 2,290 -
Net increase/(decrease) in cash and cash equivalents 503 (192)
Cash and cash equivalents at beginning of year 310 387
Acquired as acquisition of assets (refer note 6b) - 115
Effect of movements in exchange rates on cash held 86 -
Cash and cash equivalents at end of year 8 899 310
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") with 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 Limited 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.
o In December 2022, ZIOC acquired Glencore's 50% plus one share in Jumelles
in exchange for 286,340,379 new Shares in ZIOC, enabling ZIOC to secure 100%
ownership of Jumelles
Relationship between Jumelles and its shareholders since February 2011 until
December 2022
Since the acquisition by ZIOC of Glencore's majority stake in Jumelles in
December 2022 the JVA is no longer effective and ZIOC has 100% ownership of
Jumelles.
Future funding requirements and going concern basis of preparation
The Directors have prepared the accounts on a going concern basis. At 31
December 2023 the Company had cash reserves of US$0.9m. As at 29 June 2024,
ZIOC has outlined a 2024 Project Work Programme and Budget as outlined below.
The Company had cash reserves of US$0.1m as at 27 June 2024.
In order to raise additional funding the Company entered a Subscription
Agreement with SMC (as described above - see the Company's release of 28 June
2024.) 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. For
illustrative purposes only, if the average price at which SMC places the final
tranche of the 2023 ESA and all three tranches of the 2024 ESA (a combined
total of 48,000,000 shares) was 7 pence, the net proceeds received by ZIOC
from such sales would be approximately £3.19m. 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 review, and in order to
preserve the cash position of the Company, it has been agreed with the
Directors since January 2023 that fees previously deferred would be
reviewed.
Volatility in currencies
Various factors, including the the Russia/Ukraine war and its impact on global
markets as well as supply chain issues and inflation 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 Material accounting policies
The material 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 United
Kingdom("UK Adopted IFRS"). UK Adopted IFRS comprise standards and
interpretations approved by the International Accounting Standards Board
("IASB") and the International Financial Reporting Interpretations Committee
("IFRIC") as adopted by the United Kingdom.
These consolidated financial statements comprise the Company and its
subsidiaries (together referred as 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. All
amounts have been rounded to the nearest thousand, unless otherwise indicated.
These financial statements were authorised for issue by the Company's board of
directors on 30 June 2024.
New standards, amendments and interpretations
The following IFRSs standards and amendments are effective from 1 January 2023
· Definition of Accounting Estimates (Amendments to IAS 8)
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2)
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
· International Tax Reform - Pillar Two Model Rules - (Amendments
to IAS 12)
The amendments listed above did not have a material impact on the amounts
recognsied in prior periods and are not expected to significantly affect the
current or future periods.
New and revised IFRS Standards in issue but not yet effective
· Lease liability in a sale and leaseback transaction (Amendments
to IFRS 16)
· Classification of Liabilities as Current or Non-current
(Amendments to IAS 1)
· Non-Current Liabilities with Covenants ( Amendments to IAS 1)
· Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
· Lack of Exchangeability (Amendments to IAS 21)
·
These standards, amendments or interpretations are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
Measurement convention
These financial statements have been prepared on the historical cost basis.
The preparation of financial statements in conformity with UK 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 all entities over which the group has control. . The group
controls an entity where the group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the group. They are deconsolidated from the date that control
ceases.
In case of acquisition of assets that do not qualify as a business, these are
recognisedas acquired when the company obtains control over the asset, which
is typically evidenced by legal ownership or the ability to direct the use and
obtain the economic benefits.
Acquired assets are initially measured at their fair value, which represents
the amount for which the asset could be exchanged between knowledgeable,
willing parties in an arm's length transaction.
Consideration paid for the asset acquisition is allocated to the individual
assets and liabilities acquired based on their respective fair values at the
date of acquisition. The fair value of acquired assets is determined using
appropriate valuation techniques, such as market comparisons, income-based
approaches, or other relevant methods.
The initial recognition and measurement of acquired assets and liabilities
occur at the date when the company obtains control over the assets, which is
typically the date of legal transfer or other events signalling control.
Subsequent measurement depends on the nature of the asset and is driven by the
applicable standards.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the transferred
asset.
Changes in ownership interests
An entity remeasures the previously held equity interest to fair value at the
date on which it obtains control and recognises any resulting gain or loss in
profit or loss or other comprehensive income, as appropriate.
Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency').
(ii) Transactions and balances
Transactions in foreign currencies are translated into the functional currency
using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions, and from
the translation of monetary assets and liabilities denominated in foreign
currencies at year end exchange rates, are generally recognised in profit or
loss.
All foreign exchange gains and losses are presented in the statement of profit
or loss on a net basis within general and administrative expenses.
(iii) Group companies
The results and financial position of foreign operations (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
· assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet
· income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average exchange rates
(unless this is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses
are translated at the dates of the transactions), and
· all resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the translation of any net
investment in foreign entities are recognised in other comprehensive income.
When a foreign operation is sold, the associated exchange differences are
reclassified to profit or loss, as part of the gain or loss on sale.
Leases
Assets and liabilities arising from a lease are initially measured measured at
the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or if that rate
cannot be readily determined the Groups incremental borrowing rate . Lease
liabilities include the net present value of the following lease payments:
· fixed payments (including in-substance fixed payments), less any
lease incentives receivable
· variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement date
· amounts expected to be payable by the group under residual value
guarantees
· the exercise price of a purchase option if the group is
reasonably certain to exercise that option, and
· payments of penalties for terminating the lease, if the lease
term reflects the group exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability
· any lease payments made at or before the commencement date less
any lease incentives received
· any initial direct costs, and
· restoration costs.
Impairment of non financial assets
Assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair
value less costs of disposal and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets (cash-generating units).
Non-financial assets other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at the end of each reporting
period.
Share-based payments
Employees
The Group makes equity-settled share-based payments to certain employees and
similar persons as part of a Long-Term Incentive Plan ('LTIP'). The fair value
of options granted is recognised as an expense within general and
administrative expenses, with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value of the
options granted:
· including any market performance conditions (e.g. the entity's
share price).
· excluding the impact of any service and non-market performance
vesting conditions (e.g. profitability, sales growth targets and remaining an
employee of the entity over a specified time period).
· including the impact of any non-vesting conditions (e.g. the
requirement for employees to save or hold shares for a specific period of
time).
The total expense is recognised over the vesting period, which is the period
over which all of the specified vesting conditions are to be satisfied. At the
end of each period, the entity revises its estimates of the number of options
that are expected to vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to original estimates, if
any, in profit or loss, with a corresponding adjustment to equity
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.
Non-employees
Where the Group receives goods or services from a third party in exchange for
a fixed number of its own equity instruments, the equity instruments and
related goods or services are measured at the fair value of the goods or
services received. These 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.
Non-derivative financial instruments
Financial assets and financial liabilities are initially recognised 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 amounts due from related parties and trade receivables,
which are recognised initially at the amount of consideration that is
unconditional, unless they contain significant financing components when they
are recognised at fair value. They are subsequently measured at amortised cost
using the effective interest method, less loss allowance. See note 13 for a
description of group's impairment policies.
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 balances with financial institutions.
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.
Financing income and expenses
Interest income and interest payable is recognised in profit or loss as it
accrues, using the effective interest method.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method.
Borrowing costs
Borrowing costs are expensed in the period in which they are incurred unless
they relate to a qualifying asset, in which these are capitalised.
Taxation
The income tax expense or credit for the period is the tax payable on the
current period's taxable income, based on the applicable income tax rate for
each jurisdiction, adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in the countries
where the company and its subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation
and considers whether it is probable that a taxation authority will accept an
uncertain tax treatment. The group measures its tax balances either based on
the most likely amount or the expected value, depending on which method
provides a better prediction of the resolution of the uncertainty, and any
adjustment to tax payable in respect of previous years.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. .
However, deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill. Deferred income tax is also not accounted for
if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that, at the time of the
transaction, affects neither accounting nor taxable profit or loss and does
not give rise to equal taxable and deductible temporary differences.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or
the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary
differences between the carrying amount and tax bases of investments in
foreign operations where the company is able to control the timing of the
reversal of the temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets and liabilities and where the
deferred tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent
that it relates to items recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Segmental Reporting
The Group has one operating segment, being its investment in the Project, held
through Jumelles.
Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the company, excluding any
costs of servicing equity other than ordinary shares
• by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares
issued during the year and excluding treasury shares
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account:
• the after-income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares, and
• the weighted average number of additional ordinary shares that
would have been outstanding assuming the conversion of all dilutive potential
ordinary shares
Exploration and evaluation assets
Subsequent Measurement
Subsequent to initial recognition, evaluation and exploration assets are
carried at cost less any accumulated impairment losses. The company
capitalizes costs incurred during the exploration and evaluation phase,
provided these costs meet the criteria for asset recognition.
Reclassification
When technical feasibility and commercial viability of extracting a mineral
resource are demonstrable, evaluation and exploration assets are assessed for
impairment and any impairment loss is recognized before reclassification to
development assets.
Impairment
Evaluation and exploration assets are reviewed for impairment indicators at
each reporting date. An impairment loss is recognized if the carrying amount
of the asset exceeds its recoverable amount. The recoverable amount is the
higher of fair value less costs of disposal and value in use.
Indicators of impairment include:
- The right to explore the area has expired or will expire in the near
future and is not expected to be renewed.
- Substantive expenditure on further exploration and evaluation is not
budgeted or planned.
- Exploration for and evaluation of mineral resources in the specific
area have not led to the discovery of commercially viable quantities of
mineral resources, and the entity has decided to discontinue such activities
in the specific area.
- Sufficient data exist to indicate that, although development in the
specific area is likely to proceed, the carrying amount of the E&E asset
is unlikely to be recovered in full from successful development or by sale.
Derecognition
Evaluation and exploration assets are derecognized upon disposal or when no
future economic benefits are expected from their use. Any gain or loss arising
from derecognition is included in the profit or loss for the period.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. Where parts of an item of property, plant
and equipment have different useful lives, they are accounted for as separate
components of the item of property, plant and equipment and each component is
depreciated over its estimated useful life.
Depreciation is charged to the consolidated income statement on a
straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment. The estimated useful lives are as follows:
- Fixtures and fittings 3-10 years
- Motor vehicles 4 years
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
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
The preparation of the Group's consolidated financial statements requires
management to make judgements, estimates and assumptions that affect the
reported amounts of expenses, assets and liabilities, and the accompanying
disclosures as at the reporting date. However, uncertainty about these
assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amounts of assets or liabilities affected in future
periods.
Judgements
In the process of applying the Group's accounting policies, management has
made the following judgements, which has the most significant effect on the
amounts recognised in the consolidated financial statements:
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
undertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are reflected
in the assumptions when they occur.
· Given the material risk but also upside potential, in our
opinion, detailed disclosure in the Financial Statements should be made that:
o the potential of the project is material, given the results of the 2014
FS, the material reserves, etc.
o the estimated Future Value considers the material risk at this phase,
driven by the early/greenfield stage of the project, the relatively long
development period of more than four years and large capital cost, and major
project assumptions which might change in due course, but also country risk
effects.
o the volatility of the markets, including the global uncertain geopolitical
situation and country risks adds to the risks that affect the project.
o the sensitivity of the project to the weighted average cost of capital
("WACC") (and other major assumptions) could be indicated as: +/-0.5% change
in the discount rate would change the value of the project by approximately
-/+US$ 50-54m.
o due to the above factors, material risk and volatility of the Future Value
could be expected under better/worse market or operational conditions.
(i) Deferred taxes
At each balance sheet, the Group assesses whether the realisation of future
tax benefits is sufficiently probable to recognise deferred tax assets. This
assessment requires the use of significant estimates with respect to
assessment of future taxable income. The recorded amount of total deferred tax
assets could change if estimates of projected future taxable income or if
changes in current tax regulations are enacted. Refer note 5 for further
information on potential tax benefits for which no deferred tax asset is
recognised.
4 Note to the comprehensive income statement
Operating profit/(loss) before tax is stated after charging/(crediting):
2023 2022
US$000 US$000
Share-based payments (see Note 11) 587 163
Net foreign exchange loss/(gain) 16 (34)
Directors' fees 356 -
Auditor's remuneration 113 107
Other than the Company Directors, the Group did not directly employ any staff
in 2023 (2022: Nil). The Directors received US$356k remuneration for their
services as Directors of the Group (2022: Nil).
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 % (2022: Nil %).
In case of the wholly-owned subsidiary, Jumelles Limited (acquired during the
current year), the Avenant to the MPD Convention applied from August 2010
provides corporate income tax exemption to foreign companies providing
services to MPD for the benefit of the Zanaga project during the exploration
and feasibility phase of the project. In 2011 a service note from the
Congolese tax authorities gave further precisions and interpretations on the
tax exemptions. The Mine Operating Agreement signed in August 2014 contains a
detailed tax regime and in effect at the authorisation date.
Under the Mine Operating Agreement provisions of corporate tax exemption are
as follows:
Complete exemption from corporate income tax during the First Exemption Period
of 5 years from the First Financial Year which is defined as the financial
year of the mining code ("SEM") as:
(i) after the year, in the course of which the date of
Commercial Production Stage 1 occurs.
(ii) in relation to which previously reported tax deficits
(ordinary losses and amortisations deemed deferred) have been set off against
taxable profits.
(iii) in the course of which the SEM achieves a taxable profit.
An additional period of complete exemption from corporate income tax for a
period of 5 years. However this exemption will only apply to 50% of the
taxable profit and will be applicable from the First Financial Year of the
Second Exemption Period which refers to the financial year of the SEM as:
(i) after the year, in the course of which the date of
Commercial Production Stage 2 occurs.
(ii) in relation to which it is established that the tax
deficits previously reported (ordinary losses and amortisations deemed
deferred) have been previously imputed in their totality to taxable profits.
(iii) in the course of which the SEM achieves a taxable profit.
Deferred tax assets
At 31 December 2023, the Company had no recognised deferred tax assets. The
primary reason for this decision is the uncertainty surrounding the timing and
likelihood of generating future taxable profits. The Company is currently in
the exploration and evaluation stage, and it is not yet certain when , or if,
it will begin generating profits.
6a Property, Plant and Equipment
Motor Right of Fixtures Exploration Total
vehicles use asset and fittings assets
US$000 US$000 US$000 US$000 US$000
Cost
Balance at 1 January 2022 43 100 603 85,300 86,046
Additions - - - - -
Balance as at 31 December 2023 43 100 603 85,300 86,046
Depreciation
Balance at 1 January 2022 43 - - 43
Charge for period - - 55 - 55
Balance at 31 December 2022 43 - 55 - 98
Net book value
Balance at 31 December 2023 - 100 548 85,300 85,948
Balance at 31 December 2022 - 100 603 85,300 86,003
The Right-of-use assets consist of office space and airstrip.
6b Investment in Associate
US$000
Balance at 1 January 2022 37,269
Share of profit or loss (436)
Share of currency translation reserve 61
Additional investment during the year 95
Disposal - on account of acquisition of controlling stake (36,998)
Balance at 31 December 2022 -
Balance at 1 January 2023 -
Share of profit or loss -
Share of currency translation reserve -
Additional investment during the year -
Disposal - on account of acquisition of controlling stake -
Balance at 31 December 2023 -
On 16 December 2022, the Company acquired the remaining stake in Jumelles from
Glencore, thereby gaining control, with 100% stake in Jumelles. The
consideration for this acquisition was made by issuing ordinary shares of the
Company.
Summarised financial information of the associate as on the date of
acquisition is set out below.
15 December 2022
US$000
Non-current Assets:
Property, plant and equipment 703
Exploration and other evaluation assets 85,300
Total non-current assets 86,003
Current assets 125
Non-current liabilities (100)
Current liabilities (944)
Net assets 85,084
Share capital 293,103
Additional paid in capital 41,242
Translation reserve (6,112)
Accumulated deficit (243,149)
85,084
The acquisition was determined to involve assets that do not qualify as a
business, therefore the purchase was an asset acquisition and not a business
combination. This was primarily due to the absence of a skilled workforce and
contracts for development or extraction activities. As a result, the Company
allocated the consideration paid to the acquired assets and liabilities based
on their respective fair values. These fair values were deemed equal to their
existing carrying values as at the acquisition date.
The main assumptions used for the valuation were using a discounted flow model
(DCF) using a discount rate of 18%.
In addition, the Company revalued its investment in the associate and recorded
a gain in statement of comprehensive income in amount of US$ 5,603,000 in
accordance with the accounting policies outlined in Note 2.
Previously accumulated Foreign currency translation reserve on this investment
of US$ 3,447,000 were also processed through the statement of comprehensive
income.
7 Other receivables
2023 2022
US$000 US$000
Receivables 1,193 113
Other receivables 1,193 113
8 Cash and cash equivalents
2023 2022
US$000 US$000
Cash and cash equivalents 899 195
Acquired as acquisition of assets (refer note 6b) - 115
899 310
9a Lease liability
2023 2022
US$000 US$000
Current portion 11 11
Non-current portion 104 104
9b Loans and borrowings
2023 2022
US$000 US$000
Loan from Glencore 1,685 385
9c Trade and other payables
2023 2022
US$000 US$000
Accounts payable 423 279
Other payables - 445
423 725
No amounts payable are due in more than 12 months (31 December 2022: US$nil).
10 Share capital
In thousands of shares Ordinary Ordinary
Shares Shares
2023 2022
In issue at 1 January 593,374 307,034
Shares issued 51,615 286,340
In issue at 31 December 644,989 593,374
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 2023 or in the prior year
(2022: US$nil).
Share capital changes in 2023
24,000,000 shares were issued to Shard capital which were further placed into
the market (12,000,000 post year end in January 2024), 13,981,828 shares
issued to directors and 13,633,335 shares issued to consultants in 2023. There
were no share repurchases.
Nature and purpose of reserves
Foreign currency translation reserve
The foreign currency translation reserve comprises of all foreign currency
differences arising from translation of the financial statements of foreign
operations.
11 Share-based payments
Employees
There are no new awards that have been issued during the current and previous
years ended 31 December 2023 and 31 December 2022 respectively.
The following fully vested awards are currently in operation:
Award 6 (2014) Award 8 (2014) Award 9 (2014) Total
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Price Exercise Price Exercise Price Exercise Price
(£) Number (£) Number (£) Number (£) Number
At 1 January 2022 * 0.01 1,002,771 0.01 1,013,418 0.01 2,000,000 £0.01 3,002,771
(US$0.04)
Granted 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
Exercised 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
At 31 December 2022 * 0.01 1,002,771 N/A 1,013,418 0.01 Nil £0.01 Nil
At 1 January 2023 * 0.01 1,002,771 0.01 1,013,418 0.01 2,000,000 £0.01 3,002,771
(US$0.04)
Granted 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
Exercised 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
At 31 December 2023 * 0.01 1,002,771 0.01 1,013,418 0.01 2,000,000 £0.01 3,002,771
Award 6 (2014) Award 8 (2014) Award 9 (2014) Total
Range of exercise prices * £0.00-£0.01 £0.01 £0.01 £0.00 - £0.02
(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
Weighted average share price at date of exercise (£) N/A N/A N/A N/A
Total share awards vested 1,137,338 1,013,418 4,000,000
Weighted average remaining contractual life (Days) 39 Nil Nil
N/A
Expiry date 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 for determination of fair value of
options granted :
Award 6 (2014) Award 8 (2014) Award 9 (2014)
Option pricing model used Black-Scholes Black-Scholes Black-Scholes
Weighted average share price at date of grant £0.19 £0.19 £0.19
(US$$0.31) (US$$0.31) (US$$0.31)
Weighted average expected option life 5.0 years 4.0 years 4.6 years
Expected volatility (%) 91% 91% 91%
Dividend growth rate (%) Zero Zero Zero
Risk-free interest rate (%) 1.75% for 1.75% for 1.75% for
12 month expected life 12 month expected life 12 month expected life
2.25% in excess 2.25% in excess 2.25% in excess
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.
Non-employees
In October 2023 the Group issued 11,148,494 to board members and consultants
for deferred fees plus a further 2,833,334 share under the retenion Scheme.
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 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, which has now occurred. 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
2023 2022
Granted during the year - -
Exercised during the year 13,633,335 -
Outstanding at the end of the year - 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:
2022
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 therefore has been excluded from the inputs into the model. The share
options are granted with a number of non-market performance conditions that
relate 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
considered in the fair value measurement on the grant date but to estimate the
expected vesting period over which the equity-settled share-based payment
charged to profit or loss. 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$547k.
In addition, there are 1,600,000 options outstanding which were issued to a
consultant in 2014 at 18.5p that have vested but have not yet been exercised.
12 Earnings / (Loss) per share
2023 2022
Profit (Loss) (US$,000) (2,724) 8,098
Weighted average number of shares (thousands)
Basic
Issued shares at beginning of period (a) 318,081 307,034
Shares issued during the year (b) 51,615 286,340
Weighted average of new shares issued (c) - 11,767
Weighted average number of shares at 31 December - basic (a+c) 644,989 318,081
Loss per share
Basic (Cents) (0.4) 0.3
Diluted (Cents) (0.4) 0.3
13 Financial Risk Management and Fair value measurements
I. 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:
2023 2022
US$000 US$000
Cash and cash equivalents 899 310
Receivables 1,193 113
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.
The Group has assessed its receivables for impairment in accordance with IFRS
9. Based on this assessment, the Company concluded that there are no expected
credit losses (ECL) to be recognized in respect of these receivables.
(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 on a continuous basis, the amount of liquid funds that may
be required for business operations, in order to secure funding needed for
business activities.
The maturity profile of the Group's financial liabilities based on the
contractual terms is as follows:
$'000 Less than 1 month 1 - 6 months Less than 12 months Total
2023
Borrowings - 1,685 - 1,685
Lease liabilities - - 104 104
Accounts payable - 439 - 439
Total - 2,124 104 2,228
2022
Borrowings - - 385 385
Lease liabilties 11 - 104 115
Accounts payable - 723 0 723
Total 11 723 489 1,223
(c) Market risk
(i) Foreign currency risk
Foreign currency risk is the risk that changes in foreign exchange rates will
affect the Group's income or value of its holdings of financial instruments,
if any.
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.
The Group's exposure to foreign currency risk at the end of the reporting
period is as follows:
31/12/2023 31/12/2022
XAF EURO GBP XAF EURO GBP
$ 000 $ 000 $ 000 $ 000 $ 000 $ 000
Cash and cash equivalents 243 - 634 100 - 195
Receivables 5 - 1,188 10 - 103
Payables (38) - (155) (55) (69) (279)
Total 210 - 1,667 (55) (69) (19)
The following significant exchange rates applied during the year:
Reporting date Reporting date
Average rate spot rate Average rate spot rate
2022 2022 2022 2022
Against US Dollars US$ US$ US$ US$
Pounds Sterling 1.2439 1.2739 1.2369 1.2098
(ii) Sensitivity analysis
A 10% weakening of the following currencies against US Dollar at the end of
the reporting period 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 has been applied to risk
exposures existing at that date. This analysis further assumes that all other
variables remain constant.
Equity Profit or loss Equity Profit or loss
2023 2023 2022 2022
US$000 US$000 US$000 US$000
Pounds Sterling (182) (182) (29) (29)
A 10% strengthening of the above currencies against the US Dollar at the end
of the reporting period 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.
Fair value of financials assets and liabilities
All the financial assets and liabilities are measured at amortised cost. The
carrying amounts of all financial assets and liabilities are a reasonable
approximation of their fair values.
14 Commitments for expenditure
None.
15 Related parties
I. Subsidiaries
(a) Wholly-owned subsidiaries
- Zanaga UK Services Limited
- Jumelles Limited
(b) Indirectly wholly-owned subsidiaries (held by Jumelles Limited)
- MPD Congo
- Jumelles M Limited
II. Entities that have significant influence
- Glencore International AG*
The following transactions occurred with related parties during the period:
Transactions for the period Closing balance
(payable)/receivable
2023 202 2023 2022
US$000 US$000 US$000 US$000
Funding:
Loan from Glencore to Jumelles Limited 1,300 385 1,685 385
16 Transactions with key management personnel
2023 2022
US$000 US$000
Directors' fees 357 -
Total 357 -
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
As announced by the Company on 28 June 2024, the Company has entered into a
new Subscription Agreement (the 2024 ESA) with SMC.
12 million shares issued to SMC were placed in January 2024.
Under the Subscription Agreement, the Company will issue and SMC has
subscribed for 36 million ordinary shares of no par value in the Company
("Subscription Shares") in three tranches of 12 million shares each (First
tranche to be issued immediately).
*** 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
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