TIDMATN
RNS Number : 9673X
Aterian PLC
02 May 2023
Aterian Plc
(" Aterian " or the " Company")
Final Results for the Year Ended 31 December 2022
Aterian Plc (LSE: ATN) is pleased to announce its audited
results for the period ended 31 December 2022.
Chairman's Statement:
Dear Shareholder,
2022 marked a year of significant positive change for the
Company. On 24 October 2022, we completed the acquisition of 15
copper-silver and base metal exploration projects in the Kingdom of
Morocco, moved the market listing to the Main Market of the London
Stock Exchange ("LSE"), and changed the name of the Company from
Eastinco Mining and Exploration Plc to Aterian Plc. This
transaction has transformed the Company into a multi-jurisdiction,
multi-commodity, critical and strategic metals focussed exploration
and development company, and we are excited to welcome Elemental
Altus Royalties as a significant shareholder.
The rationale for this acquisition was to acquire exciting
prospective assets that fit into our strategy of targeting critical
and strategic metals to exploration. Currently, the renewable
energy, automotive and electronic manufacturing sectors are driving
the requirement to develop secure supply chains of critical and
strategic metals. This is the energy transformation from
carbon-based sources to renewable sources and storage systems. The
exploration conducted on the Moroccan assets highlights the strong
potential for the discovery of strategic metal deposits, in
particular copper and silver. We firmly believe the market
fundamentals for copper are excellent and specifically linked to
the nascent growing demand for renewable energy and the related
electrification of transportation globally. We are keen to invest
in Morocco to demonstrate the potential of our assets there and we
are keen to demonstrate the full potential of our assets in Rwanda
following a very positive shift in focus from Musasa to the
southern projects.
Importantly, the listing on the LSE will provide us with
exposure to a broader investor profile and greater liquidity in our
shares, providing a more solid platform to support the Company's
continued growth.
We continue to work towards our objective of becoming an
ethical, integrated exploration, development, and trading company
across multiple mineral assets and jurisdictions.
Business Review and Future Developments
Morocco Acquisition - Aterian Resources Limited
On 24 October 2022, the Company completed the acquisition of 15
mineral exploration projects covering 762 km(2) in the Kingdom of
Morocco from Altus Strategies PLC (now called Elemental Altus
Royalties Corp). The completion of the acquisition coincided with a
move to the Main Market of the LSE from the AQSE Growth Market, and
a change in name from Eastinco Mining and Exploration PLC to
Aterian PLC, shortly thereafter. The name change demonstrates the
change taking place and pays homage to the geological potential
offered by the Moroccan assets acquisition.
As consideration for the Moroccan assets held by the
UK-registered company Aterian Resources Limited, the Company issued
to Altus 241,173,523 ordinary shares and issued warrants
representing 10% of the enlarged share capital of the Company, at
the time of admission to the LSE. Warrants representing 5% of the
enlarged share capital of the Company have an exercise price of
GBP0.01 whilst the balance of the warrants has a GBP0.02 exercise
price. All the warrants are exercisable for a period of five years
from the admission date. The amount of assets recognised on the
acquisition was GBP3,241,000.
Aterian Resources Limited owns two Morocco registered
subsidiaries which hold the title to 50 permits, over 15 separate
projects with a combined land area of c.762 km(2) . The licences
are considered highly prospective for copper, silver, tin, and base
metals.
Rwanda Exploration
The main operational focus in 2022 shifted from the Musasa
project to the southern projects, where the geological team has
identified 22 zones of potential tantalum, niobium, and
lithium-hosting pegmatite, making this a very strong exploration
play.
Work has targeted the HCK-1 prospect, where shallow exploration
pitting has outlined a potential target zone of c.2,500 m in strike
length.
The width of the target zone is uncertain but, in several
locations, pitting intersected pegmatite over a horizontal distance
of c.100 m. A further positive outcome from our work is that 800 m
of the identified pegmatite target zone occurs in a "greenfield"
environment to the southeast of the main ridgeline hosting HCK-1.
This can be described simply as an area where there are no observed
artisanal workings, pegmatite outcrop, or surface expressions,
where the pegmatite remains blind to the surface, covered by soil
and regolith of variable thickness up to 4.50 m. A drone survey has
been flown over HCK-1, covering an area of 360 hectares, to provide
detailed imagery with topographic data and a current view of the
earlier artisanal workings.
A post-period event is the completion of a detailed ground-based
geophysical survey over HCK-1. The multi-method survey of Induced
Polarisation ("IP"), Electrical IP Tomography, and ground magnetics
was designed to provide additional information allowing for a
determination of the geological contacts of the main pegmatite zone
with the schistose country rock, controlling geological structures
and an approximation of the depth of weathering. The final report
of this work is pending, and it is expected that a limited scout
drilling programme will be planned based on the outcome of this
work, providing an opportunity to test the fresh bedrock for the
underlying lithium potential.
At the end of June 2022, we suspended operations on our Musasa
Project based on the recommendation of Quiver Ltd, our processing
consultants. Their assessment was to i) reconfigure the wash plant
and ii) undertake additional metallurgical test work to improve
overall metal recoveries. The Company's view is to refocus our
activities to the southern projects and suspend further investment
in production until such time as the new licence at Musasa is
granted and then reassess the situation. The original application
was made in May 2021. While suspending production was a
disappointment, we are excited at the prospect of potentially
expanding our potential exploration licence area. As a result,
management made the decision to fully impair the carrying value of
goodwill and property, plant and assets related to the Group's
Musasa Project amounting to GBP2,168,000 and GBP877,000
respectively. Appropriately, following the decision to cease work
on the Musasa Project the Eastinco Limited Managing Director and
Rwandan country manager, Daniel Hogan resigned.
Fieldwork undertaken at Musasa has been limited to geological
examination of the Kassava prospect. Kassava is one of five
identified mineralized LCT pegmatite targets occurring on the
project, where historic artisanal miners have excavated a 20 m x 30
m wide cut to a depth of c. 13 m, close to the centre of the
prospect. Field observations indicate Kassava to be a lens-shaped
body, with a maximum horizontal width of 80 m, with the exploration
pits covering a strike length of 250 m.
Financial Review
During the year under review the Group made a loss before
taxation of GBP4,383,0000 (2021: loss GBP1,351,000). The prudent
impairment of both the goodwill of GBP2,168,00 and property, plant
and equipment of GBP877,000 relating to the Musasa project in
Rwanda accounts for the majority of the 2022 loss. The consultant's
assessment was to reconfigure the wash plant and to undertake
additional metallurgical test work to improve overall metal
recoveries. As a result, we made write-downs to goodwill of
GBP2,168,000 and plant and equipment of GBP877,000.
Administrative costs were contained during the year at
GBP996,000 (2021: GBP1,02,000), largely as a result of a reduction
in Directors' remuneration from GBP200,000 in 2021 to GBP55,000 in
2022 offset by increases in other operating costs. All directors
signed new service agreements (at prudent but market rates)
effective from the Company's admission to the main market in
October 2022. Accordingly, these savings will not be repeated in
2023.
These losses and acquisition costs were funded in the main by
the placing of 85,4 million shares for a cash consideration of
GBP854,000.
The issue of options, and warrants and options during the year
resulted in a share-based payment expense of GBP335,000 (2012:
GBP267,000). Warrants issued to Altus as additional consideration
have also given rise to a share-based payment expense with a total
of GBP491,000 being capitalised as part of the acquisition.
Loss per share for the year was 0.76 pence against 0.24 pence in
2021.
At the year-end, cash balances were GBP110,000 although the
Group has the benefit of a working capital facility made available
by the Chairman. The raising of new funds for developing the
business is a key focus of the Board.
Director Changes
Mr. Simon Retter offered to resign as a Non-Executive Director
in November 2022 following the Admission to the LSE, and Mr. Kasra
Pezeshki and Mr. Alister Masterton-Hume officially joined the Board
of Directors as Non-Executive Directors on the 24 of October 2022.
Mr Retter formally left the Board in early 2023.
Outlook
As a Board, we believe the outlook for Aterian remains very
positive. We have encouraging results coming back from preliminary
work on the recently acquired Moroccan projects and have identified
a new rare-metal hosting pegmatite swarm in southern Rwanda with
lithium potential. We recently attended the Mining Indaba in Cape
Town where we received strong trade interest that supports and
vindicates our strategy to target critical and strategic metals
through the expansion of our portfolio. The market fundamentals
remain strong for the Group. I remain firmly optimistic about the
Group's prospects going forward and am encouraged by our developing
relationships. Furthermore, the launch of our trading operations
will allow us to develop more important relationships to drive
product trading and revenues.
On behalf of the Company, I would like to take this opportunity
to once again thank my fellow Board members, our employees, and our
shareholders for their continued support and patience.
Signed on behalf of the Board:
Charles Bray
Director
28 April 2023
This announcement contains information which, prior to its
disclosure, was inside information as stipulated under Regulation
11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310
(as amended).
For further information, please visit the Company's website:
www.aterianplc.com or contact:
Aterian Plc:
Charles Bray, Executive Chairman -
charles.bray@aterianplc.com
Simon Rollason, Director - simon.rollason@aterianplc.com
Financial Adviser and Broker:
Novum Securities Limited
David Coffman / George Duxberry
Colin Rowbury
Tel: +44 (0)207 399 9400
Financial PR:
Yellow Jersey PR - aterian@yellowjerseypr.com
Charles Goodwin / Bessie Elliot
Tel: +44 (0)20 3004 9512
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 DECEMBER 2022
Group
Notes Year to Year to
31-Dec-22 31-Dec-21
GBP'000 GBP'000
Revenue - -
Administrative expenses 4 (996) (1,020)
Impairment losses 5 (3,045) -
Share-based payment expense 21 (335) (267)
Provision for expected
credit losses - (64)
(4,376) (1,351)
---------------------- --------------------
Operating loss (4,376) (1,351)
---------------------- --------------------
Interest payable and similar
charges 6 (7) (18)
Loss before tax (4,383) (1,369)
Tax expense 7 - -
Loss after tax (4,383) (1,369)
Other comprehensive income:
Items that may be reclassified
to profit or loss
Loss / (gain) on translation
of foreign operations (50) 28
Total comprehensive loss (4,433) (1,341)
====================== ====================
Loss per share
Basic and diluted loss
per share (pence) 8 (0.76) (0.31)
All activities relate to continuing operations.
The accompanying notes are an integral part of these financial
statements
CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Group Company
-------------------------------------------- -----------------------------------------------
Notes 31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------------------- ------------------------- --------------------
Non-current
assets
Investments 9 - - 3,241 2,261
Goodwill 11 - 2,168 - -
Exploration
and
evaluation
assets 12 3,241 - - -
Trade and
other
receivables 14 - - 6 -
Amounts owed
by group
undertakings 14 - - - 1,703
Property,
plant and
equipment 13 421 1,226 6 -
Total
non-current
assets 3,662 3,394 3,253 3,964
---------------------- -------------------- ------------------------- --------------------
Current assets
Trade and
other
receivables 14 319 188 266 143
Cash and cash
equivalents 15 110 196 41 190
Total current
assets 429 384 307 133
---------------------- -------------------- ------------------------- --------------------
Total assets 4,091 3,778 3,560 4,297
====================== ==================== ========================= ====================
Equity and
liabilities
Share capital 20 9,647 5,671 9,647 5,671
Share premium 20 2,177 2,144 2,177 2,144
Share-based
compensation
reserve 21 2,441 1,615 2,441 1,615
Interest in
shares
in EBT 21 (839) (395) (839) (395)
Translation
reserve (314) (263) - -
Accumulated
losses (10,968) (6,629) (11,784) (6,373)
Other reserves - 80 - 58
Merger relief
reserve 1,200 1,200 1,200 1,200
Total equity 3,345 3,423 2,843 3,920
====================== ==================== ========================= ====================
Current
liabilities
Trade and
other
payables 16 395 197 366 219
Deferred
consideration 17 200 - 200 -
Total current
liabilities 595 197 566 219
---------------------- -------------------- ------------------------- --------------------
Non-current
liabilities
Borrowings 18 151 158 151 158
Total
non-current
liabilities 151 158 151 158
---------------------- -------------------- ------------------------- --------------------
Total equity
and
liabilities 4,091 3,778 3,560 4,297
====================== ==================== ========================= ====================
(*:) The correction of prior period errors is disclosed in note
2 of the notes to the financial statements.
The Company made a loss of GBP5,433,000 for the year 2022 (2021
- loss of GBP1,152,000).
These financial statements were approved by the Board and were
authorised for issue on 28 April 2023 and signed on their behalf
by:
Charles G Bray
Chairman
Company number: 07496976
The accompanying notes are an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 DECEMBER 2022
Share Share Share-based Interest Translation Other Merger Accumulated Total
capital premium compensation in shares reserve Reserve relief losses
reserve in EBT reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2021 4,301 2,144 1,348 (133) (291) 80 1,200 (5,326) 3,323
Loss for
the year - - - - - - - (1,369) (1,369)
Other
comprehensive
loss - - - - 28 - - 28
Transactions
with owners:
Transfer
from other
reserve to
accumulated
losses - - - - - - - 66 66
Share based
compensation - - 267 (262) - - - - 5
Issue of
new shares 1,370 - - - - - - - 1,370
At 31 December
2021 5,671 2,144 1,615 (395) (263) 80 1,200 (6,629) 3,423
================ ============== ==================== ============== ================== ============ =============== ================== ==================
Loss for
the year - - - - - - - (4,383) (4,383)
Other
comprehensive
loss - - - - (50) - - - (50)
Transactions
with owners:
Discounting
of loan notes - - - - - (36) - - (36)
Transfer
from other
reserve to
accumulated
losses - - - - - (44) - 44 -
Share based
compensation - - 826 (444) - - - - 382
Issue of
new shares 3,976 33 - - - - - - 4,009
At 31 December
2022 9,647 2,177 2,441 (839) (313) - 1,200 (10,968) 3,345
================ ============== ==================== ============== ================== ============ =============== ================== ==================
Share based compensation reserve
The entry to the share based compensation reserve in the year is
made up of GBP335,000 which was charged to the consolidated
statement of comprehensive income (note 21) and GBP491,000 which
related to warrants capitalised in connection with the Altus
acquisition (note 10).
COMPANY STATEMENT OF CHANGES IN EQUITY
YEARED 31 DECEMBER 2022
Share-based Interest Merger
Share Share compensation in shares Other relief Accumulated
capital premium reserve in EBT Reserve reserve losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2021 4,301 2,144 1,348 (133) 80 1,200 (5,221) 3,719
Loss for the
year - - - - - - (1,152) (1,152)
Transactions
with owners:
Other reserve
movement - - - - (22) - - (22)
Share based
compensation - - 267 (262) - - - 5
Issue of new
shares 1,370 - - - - - - 1,370
At 31
December
2021 5,671 2,144 1,615 (395) 58 1,200 (6,373) 3,920
================== ================== ====================== ============================ ================= =================== ================== ====================
Loss for the
year - - - - - - (5,432) (5,432)
Transactions
with owners:
Discounting
of loan
notes - - - - (36) - - (36)
Transfer from
other
reserve
to
accumulated
losses - - - - (22) - 22 -
Share based
compensation - - 826 (444) - - - 382
Issue of new
shares 3,976 33 - - - - - 4,009
At 31
December
2022 9,647 2,177 2,441 (839) - 1,200 (11,784) 2,843
================== ================== ====================== ============================ ================= =================== ================== ====================
Reserves Description and purpose
Share capital Nominal value of the contributions made by shareholders
in return for the issue of shares.
Share premium Amount subscribed for share capital in
excess of nominal value.
Share-based compensation Cumulative fair value of the charge/(credit) in
reserve respect of share options granted and recognised
as an expense in the Income Statement.
Translation reserve The translation reserve comprises translation
differences arising from the translation of financial
statements of the Group's foreign entities into
Sterling (GBP).
Other reserves The other reserve comprises differences arising
from the discounting of loan notes.
Merger relief reserve The merger relief reserve comprises differences
between the fair value and at par value of shares
issued for the acquisition of subsidiary
Interest in shares in Employees The Company set up an Employees Benefit Trust
Benefit Trust (EBT) on 6 March 2015 (the Equatorial EBT) for the benefit
of its employees. The cost of shares held by the
EBT are presented as a deduction from entity.
Accumulated losses Accumulated losses represents total losses.
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
YEARED 31 DECEMBER 2022
Note Group Company
31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21
GBP'000 GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
Loss after tax (4,383) (1,369) (5,433) (1,151)
Adjustments for:
Depreciation 22 2 - -
Share based expense 335 267 335 267
Costs not paid cash 50 - 50 -
Interest expense 7 18 7 18
Inter-company interest income - - (264) (224)
Provisions for expected credit
losses - 64 2,444 64
Provision for impairment
of investments 9 - - 2,261
Provision for impairment
of goodwill 11 2,168 - - -
Impairment of property plant
and equipment 13 877 - - -
Foreign exchange gains (134) (28) - -
Operating loss before working
capital changes (1,058) (1,046) (600) (1,027)
Changes in working capital:
(Increase) / decrease in
trade & other receivables 81 337 89 381
Increase / (decrease) in
trade & other payables 168 (490) 117 (294)
---------- ---------------------- ---------- ------------------
Net cash outflows from operating
activities (809) (1,199) (394) (940)
---------- ---------------------- ---------- ------------------
Cash flow from investing
activities
Purchase of plant and equipment (10) (239) (6) -
Asset acquisition including
directly attributable costs 10 (108) - (108) -
Funds advanced to subsidiary - - (482) -
---------- ---------------------- ---------- ------------------
Net cash used in investing
activities (118) (239) (596) -
---------- ---------------------- ---------- ------------------
Cash flow from financing
activities
Net proceeds from borrowings 18 - 567 - 567
Loan received 20 150 495 150 -
Cash proceeds from issue
of shares 691 520 691 520
---------- ---------------------- ---------- ------------------
Net cash flow from financing
activities 841 1,582 841 1,086
---------- ---------------------- ---------- ------------------
Net (decrease) / increase
in cash & cash equivalents (86) 144 (149) 141
Cash & cash equivalents at
beginning of the year 196 52 190 49
Effect of exchange rate movements
on cash - - - -
Cash and cash equivalents
at end of the year 110 196 41 190
========== ====================== ========== ==================
NOTES TO THE FINANCIAL STATEMENTS
YEARED 31 DECEMBER 2022
1. General information
Aterian plc ("the Company") is an investment company, focussed
on African mineral resource investment opportunities. The Company
operates through its 100% owned subsidiary, Eastinco Limited ("EME
Ltd"), a Rwandan tantalum, tin and tungsten exploration company and
Aterian Resources Limited which holds copper-silver and base metal
exploration projects in the Kingdom of Morocco.
On 24 October 2022, the Company completed the acquisition of 15
mineral exploration projects covering 762 km2 in the Kingdom of
Morocco from Altus Strategies PLC (now called Elemental Altus
Royalties Corp). The completion of the acquisition coincided with a
move to the Standard Sector of the London Stock Exchange from the
AQUIS Stock Exchange, and a change in name from Eastinco Mining and
Exploration PLC to Aterian PLC, shortly thereafter.
The Company is incorporated and domiciled in the UK. The address
of its registered office is 27-28 Eastcastle Street, London W1W
8DH.
The registered number of the company is 07496976.
2. Basis of preparation
2.1 General
These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS and IFRIC
interpretations) as adopted for use in the United Kingdom ("UK
adopted IFRS") and the Companies Act 2006. The financial statements
have been prepared under the historical cost convention except for
the valuation of assets acquired in an asset acquisition which are
measured at fair value.
The financial statements have been rounded to the nearest
thousand pounds.
The Company has taken the exemption under s408 Companies Act
2006 and has therefore not published its own profit and loss
account in these financial statements.
During the year, the Group identified a number of presentational
matters relating to the year ended 31 December 2021 which have been
adjusted in the year ended 31 December 2022. O n the basis that
this is immaterial, and the errors relate to disclosures, a prior
year adjustment was not made. In particular
-- The financial statements for the year ended 31 December 2021
overstated the number (but not the value) of shares issued by
50,000,000 ordinary shares Additionally, the brought forward number
of shares in issue was overstated by 510 shares. These financial
statements have corrected this by way of presentation restatement
in Note 20. The basic and diluted loss per share in 2021 has
remained unchanged at 0.31 pence.
-- The financial statements for the year ended 31 December 2021
understated the number (but not the value) of options issued by
12,346,660 and these financial statements have corrected this by
way of presentation restatement in Note 21.
2.2 Functional and presentation currency
The financial statements of the Group are presented in Pounds
Sterling, which is also the functional currency of the Company. The
individual financial statements of each of the Company's wholly
owned subsidiaries are prepared in the currency of the primary
economic environment in which it operates (its functional
currency).
2.3 Basis of consolidation
The consolidated financial statements comprise the financial
statements of Aterian Plc and its subsidiaries as at 31 December
2022. Subsidiaries are entities controlled by the Group. Control
exists when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the
Group has all of the following:
-- Power over the investee (i.e., existing rights that give it
the current ability to direct the relevant activities of the
investee)
-- Exposure, or rights, to variable returns from its involvement with the investee
-- The ability to use its power over the investee to affect its returns
-- Generally, there is a presumption that a majority of voting
rights results in control. When the Group has less than a majority
of the voting, or similar, rights of an investee, it considers all
relevant facts and circumstances in assessing whether it has power
over an investee, including:
-- The contractual arrangements with the other vote holders of the investee;
-- Rights arising from other contractual arrangements; and
-- The Group's voting rights and potential voting rights
The relevant activities are those which significantly affect the
subsidiary's returns. The ability to approve the operating and
capital budget of a subsidiary and the ability to appoint key
management personnel are decisions that demonstrate that the Group
has the existing rights to direct the relevant activities of a
subsidiary.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the statement of profit or loss and other comprehensive income from
the date the Group gains control until the date the Group ceases to
control the subsidiary.
When necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies in line with the
Group's accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full,
on consolidation.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises
the related assets (including goodwill), liabilities,
non-controlling interest and other components of equity, while any
resultant gain or loss is recognised in profit or loss. Any
investment retained is recognised at fair value.
The individual financial statements of each entity in the Group
are presented in the currency of the primary economic environment
in which the entity operates, which is the functional currency.
Business combinations are accounted for under the acquisition
method. Under the acquisition method, the results of the
subsidiaries acquired or disposed of are included from the date of
acquisition or up to the date of disposal. At the date of
acquisition, the fair values of the subsidiaries' net assets are
determined and these values are reflected in the Consolidated
Financial Statements. The cost of acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination, and
directly expensed.
Any excess of the purchase consideration of the business
combination over the fair value of the identifiable assets and
liabilities acquired is recognised as goodwill. Goodwill, if any,
is not amortised but reviewed for impairment at least annually.
Intra-group transactions, balances and unrealised gains on
transactions are eliminated; unrealised losses are also eliminated
unless the cost cannot be recovered. Where necessary, adjustments
are made to the financial statements of subsidiaries to ensure
consistency of accounting policies with those of the Group.
2.4 Business combinations
A business combination is defined as an acquisition of assets
and liabilities that constitute a business and is accounted for
using the acquisition method. A business is an integrated set of
activities and assets that is capable of being conducted and
managed for the purpose of providing goods or services to
customers, generating investment income (such as dividends or
interest) or generating other income from ordinary activities. A
business consists of inputs, including non-current assets, and
processes, including operational processes, that when applied to
those inputs, have the ability to create outputs that provide a
return to the Company and its shareholders. A business also
includes those assets and liabilities that do not necessarily have
all the inputs and processes required to produce outputs but can be
integrated with the inputs and processes of the Company to create
outputs.
When acquiring a set of activities or assets in the exploration
and development stage, which may not have outputs, the Company
considers other factors to determine whether the set of activities
or assets is a business.
The consideration transferred in a business combination is
measured at fair value, which is calculated as the sum of the
acquisition-date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the
acquiree and the equity interest issued by the Group in exchange
for control of the acquiree.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value at the
acquisition date, except that:
-- deferred tax assets or liabilities and assets or liabilities
related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 and IAS 19 respectively;
-- liabilities or equity instruments related to share-based
payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based
payment arrangements of the acquiree are measured in accordance
with IFRS 2 at the acquisition date (see below); and
-- assets (or disposal groups) that are classified as held for
sale in accordance with IFRS 5 are measured in accordance with that
Standard.
Acquisition-related costs of a business combination, other than
costs to issue equity securities, are expensed as incurred.
2.5 Asset acquisitions
Asset acquisitions
Where the Company has determined that the assets acquired do not
meet the definition of a business, the transaction is accounted for
as an asset acquisition. In such cases, the Company identifies and
recognises the individual assets acquired and liabilities assumed.
The cost of the group is allocated to the individual identifiable
assets and liabilities on the basis of their fair values at the
date of purchase. Such a transaction does not give rise to
goodwill. At the Group level, the transaction is an acquisition of
exploration and evaluation assets. At the Company level, the
acquisition is treated as an investment.
When determining the initial measurement of an asset
acquisition, the Company assesses both the fair value of the
consideration paid as well as the fair value of each asset acquired
and liability assumed. The consideration is presumed to equal to
the fair value of the net assets acquired unless there is evidence
to the contrary. The fair value of the consideration determines the
cost to be allocated over the group of assets acquired and
liabilities assumed. The fair values of the individual assets and
liabilities are used to determine the proportional amount of that
cost to be allocated to the identifiable assets and liabilities
that make up the transaction. No provision for deferred tax is
recognised on the acquisition.
Expenses incurred directly in relation to the acquisition are
capitalised as part of the cost of the assets acquired.
2.6 Going concern
The financial statements have been prepared on a going concern
basis. The Group has not yet earned revenues and as at 31 December
2022 was in the feasibility, optimisation and commissioning phase
of its ore processing plant in Rwanda. In Morocco, each of its
assets are in the early stages of exploration and feasibility
assessment. Continuing operations of the Group are currently
financed from funds raised from shareholders and this will likely
continue to be the case until revenue is generated from mining
and/or trading and subsequent ore sales. In the short term the
Chairman of the Company has made available to the Company a working
capital facility, but the Group will likely need to raise further
funds in order to progress the Group from the exploration phase
into feasibility and eventually into production of revenues.
As at 31 December 2022, the Group had cash and cash equivalents
of GBP110,000 and a working capital facility of GBP500,000 of which
GBP50,000 remains to be drawn. As at the date of this report, cash
balances were approximately GBP218,000. The Company also hopes to
raise additional equity to fund both day-to-day expenditure and
potential growth although there can be no certainty that such
funding will be forthcoming.
As part of their assessment, the Directors have prepared
financial cash-flow forecasts on the basis that cost reduction and
cost deferral measures can be implemented over the going concern
period The Company's base case financial projections show that the
Group will continue to operate within the available facilities
throughout the next 12 months. Much of the Group's planned
exploration expenditure is discretionary and, if necessary, could
be scaled back to conserve cash should circumstances coincide with
our expectations.
The Directors have agreed, if circumstances require, to defer
payment of their fees until such time as adequate funding is
received and if necessary, scale back all discretionary expenditure
including exploration expenditure.
The Directors have concluded that these circumstances give rise
to a material uncertainty relating to going concern, arising from
events or conditions that may cast significant doubt on the
entity's ability to continue as a going concern if a further fund
raise was unsuccessful. However, considering recent successful fund
raises the Directors are confident that they can continue to adopt
the going concern basis in preparing the financial statements.
The financial statements do not include any adjustment that may
arise in the event that the Group is unable to raise finance,
realise its assets and discharge its liabilities in the normal
course of business.
2.7 Changes in accounting policies
New standards, interpretations and amendments adopted from 1
January 2022
There were no new standards or interpretations impacting the
Group that will be adopted in the annual financial statements for
the year ended 31 December 2022, and which have given rise to
changes in the Group's accounting policies.
Standards and interpretations in issue but not yet effective or
not yet relevant
At the date of authorisation of these financial statements the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet
effective:
Effect annual
periods beginning
before or after
IAS 1 Disclosure of Accounting Policies (Amendments 1(st) January 2023
to IAS 1 and IFRS Practice Statement 2);
-------------------------------------------------- -------------------
IAS 8 Amendments regarding the definition of accounting 1(st) January 2023
estimates
-------------------------------------------------- -------------------
IAS 12 Amendments regarding deferred tax on leases 1(st) January 2023
and decommissioning obligations
-------------------------------------------------- -------------------
IFRS 17 Amendments to address concerns and implementation 1(st) January 2023
challenges that were identified after IFRS
17 was published
-------------------------------------------------- -------------------
IAS 1 Amendments to defer the effective date of 1(st) January 2023
January 2020 amendments regarding the disclosure
of accounting policies
-------------------------------------------------- -------------------
IFRS 16 Leases (Amendment - Liability in a Sale and 1(st) January 2024
Leaseback)
-------------------------------------------------- -------------------
IAS 1 Presentation of Financial Statements (Amendment 1(st) January 2024
- classification of Liabilities as Current
or Non-current)
-------------------------------------------------- -------------------
IAS 1 Presentation of Financial Statements (Amendment 1(st) January 2024
- Non-current Liabilities with
Covenants)
-------------------------------------------------- -------------------
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the Group's financial statements.
2.8 Segment reporting
An operating segment is a component of an entity that engages in
business activities from which it may earn revenues and incur
expenses (including revenue and expenses relating to transactions
with other components of the same entity) whose operating results
are reviewed regularly by the entity's chief operating decision
maker to make decision about resources to be allocated to the
segment and assess its performance and for which discrete financial
information is available.
The Directors are of the opinion that the Group is engaged in a
one operating segment being exploration activity in Africa.
2.9 Accounting for interest in own shares held though an Employees Benefit Trust
The funds advanced to acquire the shares have been accounted for
under IFRS as a deduction from equity rather than as an asset.
2.10 Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of on entity and a financial liability or equity
instrument of another.
(a) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and
subsequently measured at amortised cost, fair value through OCI, or
fair value through profit and loss.
The classification of financial assets at initial recognition
that are debt instruments depends on the financial asset's
contractual cash flow characteristics and the Group's business
model for managing them. The Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, it needs to give rise to
cash flows that are 'solely payments of principal and interest
(SPPI)' on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument
level.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are
classified in four categories:
-- Financial assets at amortised cost
-- Financial assets at fair value through OCI with recycling of
cumulative gains and losses (debt instruments)
-- Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses upon derecognition (equity
instruments)
-- Financial assets at fair value through profit or loss
Financial assets at amortised cost
This category is the most relevant to the Group. The Group
measures financial assets at amortised cost if both of the
following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured
using the effective interest rate (EIR) method and are subject to
impairment. Interest received is recognised as part of finance
income in the statement of profit or loss and other comprehensive
income. Gains and losses are recognised in profit or loss when the
asset is derecognised, modified or impaired. The Group's financial
assets at amortised cost include trade receivables (not subject to
provisional pricing) and other receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group's consolidated statement
of financial position) when:
-- The rights to receive cash flows from the asset have expired; or
-- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset.
Impairment of financial assets
The Group recognises an allowance for allowance for expected
credit losses ("ECLs") for all debt instruments not held at fair
value through profit or loss. ECLs are based on the difference
between the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original EIR. The expected
cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual
terms. ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which
there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
For trade receivables (not subject to provisional pricing) and
other receivables due in less than 12 months, the Group applies the
simplified approach in calculating ECLs, as permitted by IFRS 9.
Therefore, the Group does not track changes in credit risk, but
instead, recognises a loss allowance based on the financial asset's
lifetime ECL at each reporting date.
The Group considers a financial asset in default when
contractual payments are 90 days past due. However, in certain
cases, the Group may also consider a financial asset to be in
default when internal or external information indicates that the
Group is unlikely to receive the outstanding contractual amounts in
full before taking into account any credit enhancements held by the
Group.
A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows and usually
occurs when past due for more than one year and not subject to
enforcement activity. At each reporting date, the Group assesses
whether financial assets carried at amortised cost are credit
impaired. A financial asset is credit-impaired when one or more
events that have a detrimental impact on the estimated future cash
flows of the financial asset have occurred.
(b) Financial liabilities
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. All financial
liabilities are recognised initially at fair value and, in the case
of loans and borrowings and payables, net of directly attributable
transaction costs. The Group's financial liabilities include trade
and other payables, accruals and loan notes.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
Loans and borrowings, trade and other payables, and
accruals.
After initial recognition, interest-bearing loans and
borrowings, trade and other payables, and accruals are subsequently
measured at amortised cost using the EIR method. Gains and losses
are recognised in the statement of profit or loss and other
comprehensive income when the liabilities are derecognised, as well
as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss and other comprehensive
income.
This category generally applies to trade payables, other
payables and accruals.
Derecognition
A financial liability is derecognised when the associated
obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or loss and
other comprehensive income.
2.11 Taxation
Current tax is calculated according to local tax rules, using
tax rates and laws enacted or substantively enacted at the
reporting date. Current and deferred tax is recognised in profit or
loss unless it relates to an item recognised in other comprehensive
income or equity in which case the related current tax or deferred
tax is recognised in other comprehensive income or equity
respectively.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, determined using tax rates and
laws that are substantively enacted at the reporting date and are
expected to apply as or when the temporary differences reverse.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised.
2.11 Property, plant and equipment
Property, plant, and equipment (PPE) is carried at cost less
depreciation and accumulated impairment losses. Where parts of an
item of PPE have different useful lives, they are accounted for as
separate items of PPE.
The Group assesses at each reporting date whether items of PPE
are impaired.
Depreciation is provided on PPE, at rates calculated to write
off the cost less the estimated residual value of each asset, on a
straight-line basis, over their expected useful lives as
follows:
Mining equipment 10 years
Mining Assets (incl exploration and evaluation expenditure) 8
years
Office equipment 4 years
Motor vehicles 5 years
Computer equipment 2 years
Land not depreciated
Mine site not depreciated
Depreciation methods, useful lives and residual values are
reviewed if there is an indication of a significant change since
the last annual reporting date in the pattern by which the Group
expects to consume an asset's future economic benefits.
The Company capitalizes expenditures incurred in exploration and
evaluation (E&E) activities as project costs, categorized as
intangible assets (exploration and evaluation assets), when those
costs are associated with finding specific mineral resources.
Expenditure included in the initial measurement of project costs
and which are classified as intangible assets relate to the
acquisition of rights to explore. Capitalization of pre-production
expenditure ceases when the mining property is capable of
commercial production. Project costs are recorded and held at cost
and no amortization is recorded prior to commencement of
production. An annual review is undertaken of each area of interest
to determine the appropriateness of continuing to capitalize and
carry forward project costs in relation to that area of interest,
in accordance with the indicators of impairment as set out in IFRS
6. An impairment provision of GBP877,000 has been made in the year
ended 31 December 2022 (2021: nil) as more fully described in Note
13.
2.13 Intangible assets - Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired.
Cost comprises the fair value of assets given, liabilities
assumed, and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree. Contingent consideration
is included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to profit or loss. Where
the fair value of identifiable assets, liabilities and contingent
liabilities exceed the fair value of consideration paid, the excess
is credited in full to the consolidated statement of comprehensive
income on the acquisition date. An impairment provision of
GBP2,168,000 has been made in the year ended 31 December 2022
(2021: nil) as more fully described in Note 11.
2.14 Impairment of non-financial assets (excluding inventories and deferred tax assets)
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of an asset exceeds its recoverable amount (i.e.
the higher of value in use and fair value less costs to sell), the
asset is written down accordingly. Where it is not possible to
estimate the recoverable amount of an individual asset, the
impairment test is carried out on the smallest group of assets to
which it belongs for which there are separately identifiable cash
flows; its cash generating units ('CGUs'). Goodwill is allocated on
initial recognition to each of the Group's CGUs that are expected
to benefit from a business combination that gives rise to the
goodwill.
Impairment charges are included in profit or loss, except to the
extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill is
not reversed.
2.15 Investment in subsidiaries
The Company, through its 100% owned Rwanda registered
subsidiary, Eastinco Limited which was acquired on 15 October 2019,
is actively engaged in mineral exploration and development of its
portfolio of critical and strategic metals in Rwanda, with the
focus on extracting and recovery of tantalum and tin.
Eastinco Limited also holds a metal trading license, issued by
the authorities in Rwanda, which allows for the trading of metals
from our mine supply and third-party producers and suppliers.
The Company also holds a portfolio of 15 highly prospective
copper-silver and other base metal exploration projects in Morocco,
acquired in October 2022 through its 100% owned Moroccan
subsidiary, Aterian Resources Limited.
The Directors have reviewed evidence which might suggest whether
the investments in the subsidiaries have become impaired.
In particular, the Directors reviewed whether there exist:
-- significant financial difficulty in the subsidiaries;
-- a breach of contract, such as a default or past-due event;
-- it is becoming probable that the subsidiaries will enter
bankruptcy or another financial reorganisation;
-- the disappearance of any market for the debt of the
subsidiaries because of financial difficulties; or
-- the financial liabilities of the subsidiaries trade at a deep
discount that reflects likely incurred credit losses.
As more fully described in Note 9, the Directors have considered
the evidence in respect of the Company's investments in its Rwandan
subsidiaries and made full impairment against such investment
amounting to GBP2,2,61,000. The Company's subsidiaries as at 31
December 2022 were as follows:
Shareholding Nature of Business Country of Incorporation
Held directly:
Eastinco Limited 100% Mining & exploration Rwanda
Eastinco ME Ltd 100% Mining & exploration UK
Aterian Resources
Ltd 100% Mining & exploration UK
Held indirectly:
Musasa Mining
Ltd 85% Dormant Rwanda
Kinunga Mining
Ltd 70% Mining & exploration Rwanda
Atlantic Minerals
Ltd 100% Mining & exploration Seychelles
Adrar Resources
S.A.R.L.A.U. 100% Mining & exploration Morocco
Azru Resources
S.A.R.L.A.U. 100% Mining & exploration Morocco
Strat Co Limited 100% Dormant Isle of Man
Notes:
(i) The registered office of each of the UK subsidiaries is:
Eastcastle House, 27/28 Eastcastle Street, London, United Kingdom,
W1W 8DH.
(ii) The registered office of each of the Rwandan subsidiaries
is: Remera, Gasabo, Umujyi wa Kigali, Rwanda.
(iii) The registered office of each of the Morrocann
subsidiaries is: 18 Rue Jabel Tazekka, 4ème Etage, Appt 9, Agdal,
Rabat, Morocco.
(iv) The registered office of Strat Co Limited is: Alma House, 7
Circular Road, Douglas, Isle of Man, IM1 1AF.
2.16 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows,
cash and cash equivalents includes cash on hand and deposits held
at call with financial institutions and deposits with maturities of
three months or less from inception.
2.17 Foreign currencies
Assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange ruling at the reporting date.
Transactions in foreign currencies are translated into sterling at
the rate of exchange ruling at the date of the transaction.
Exchange differences are taken into account in arriving at the
operating result.
On consolidation of a foreign operation, assets and liabilities
are translated at the closing rate at the reporting date, income
and expenses where the average rate is not materially different to
the rates of exchange ruling at the dates of the transactions are
translated at average exchange rates. All resulting exchange
differences shall be recognised in other comprehensive income and
are accumulated in a separate component of equity. On disposal of
the foreign operation the accumulated gains or losses previously
recognised in entity are transferred to profit or loss and are
recognised as a part of the overall profit or loss on disposal of
the foreign operation.
2.18 Share-based payment arrangements
Equity-settled share-based payments are measured at fair value
at the date of issue.
Aterian Plc has granted both share options and warrants that
will be settled through the issuance of shares of the Company. The
cost of equity-settled transactions is measured by reference to the
fair value at the date on which they were granted and is recognised
as an expense over the vesting period, which ends on the date the
recipient becomes fully entitled to the award. Fair value is
determined by using the Black-Scholes option pricing model.
In valuing equity-settled transactions, no account is taken of
any service and performance conditions (vesting conditions), other
than performance conditions linked to the price of the shares of
the Company (market conditions). Any other conditions which are
required to be met in order for the recipients to become fully
entitled to an award are considered to be non-vesting conditions.
Market performance conditions and non-vesting conditions are taken
into account in determining the grant date's fair value.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market or
non-vesting condition, which are vesting irrespective of whether or
not the market or non-vesting condition is satisfied, provided that
all other performance or service conditions are satisfied.
At each reporting date before vesting, the cumulative expense is
calculated; representing the extent to which the vesting period has
expired and management's best estimate of the number of equity
instruments that will ultimately vest. The movement in the
cumulative expense since the previous reporting date is recognised
in profit and loss, with a corresponding entry in equity.
Where the terms of the equity-settled award are modified, or a
new award is designated as replacing a cancelled or settled award,
the cost based on the original award terms continues to be
recognised over the original vesting period. In addition, an
expense is recognised over the remainder of the new vesting period
for the incremental fair value of any modification, based on the
difference between the fair value of the original award and the
fair value of the modified award, both as measured on the date of
the modification. No reduction is recognised if the difference is
negative.
Where an equity-based award is cancelled (including when a
non-vesting condition within the control of the entity or employee
is not met), it is treated as if it had vested on the date of the
cancellation, and the cost not yet recognised in profit and loss
for the award is expensed immediately. Any compensation paid up to
the fair value of the award at the cancellation or settlement date
is deducted from equity, with any excess over fair value being
treated as an expense.
2.19 Retirement and termination benefit costs
Payments to defined contribution retirement benefit plans are
recognised as an expense when employees have rendered service
entitling them to the contributions. Payments made to state-managed
retirement benefit plans are accounted for as payments to defined
contribution plans where the Group's obligations under the plans
are equivalent to those arising in a defined contribution
retirement benefit plan.
The Group has several joint venture agreements in relation to
operating at the mining sites. These are not yet operational and
therefore no assets or liabilities have been consolidated into
these accounts as at 31 December 2023.
2.20 Exploration, evaluation and development expenditures
Exploration expenditue
Exploration expenditures reflect the costs related to the
initial search for mineral deposits with economic potential or
obtaining more information about existing mineral deposits.
Exploration expenditures typically include costs associated with
the acquisition of mineral licences, prospecting, sampling,
mapping, geophysical survey, laboratory work, diamond drilling and
other work involved in searching for mineral deposits. All
expenditures relating to exploration activities are expensed as
incurred except for the costs associated with the acquisition of
mineral licences which are capitalised.
Evaluation expenditure
Evaluation expenditures reflect costs incurred at projects
related to establishing the technical and commercial viability of
mineral deposits identified through exploration or acquired through
a business combination or asset acquisition.
Evaluation expenditures include the cost of:
-- establishing the volume (tonnage) and grade of deposits
through drilling of core samples, trenching and sampling activities
for an ore body that is classified as either a mineral resource or
a proven and probable reserve;
-- determining the optimal methods of extraction and metallurgical and treatment processes;
-- studies related to surveying, transportation and infrastructure requirements;
-- permitting activities; and
-- economic evaluations to determine whether development of the
mineralised material is commercially viable, including scoping,
prefeasibility and final feasibility studies.
Evaluation expenditures are capitalised if management determines
that there is evidence to support probability of generating
positive economic returns in the future. A mineral resource is
considered to have economic potential when it is expected that the
technical feasibility and commercial viability of extraction of the
mineral resource can be demonstrated considering long-term metal
prices. Therefore, prior to capitalising such costs, management
determines that the following conditions have been met:
-- There is a probable future benefit that will contribute to future cash inflows;
-- The Group can obtain the benefit and control access to it; and
-- The transaction or event giving rise to the benefit has already occurred.
The evaluation phase is complete once technical feasibility of
the extraction of the mineral deposit has been determined through
the preparation of a reserve and resource statement, including a
mining plan as well as receipt of required permits and approval of
the Board of Directors to proceed with development of the mine. On
such date, capitalised evaluation costs are assessed for impairment
and reclassified to development costs.
Development expenditure
Development expenditures are those that are incurred during the
phase of preparing a mineral deposit for extraction and processing.
These include pre-stripping costs and underground or open-pit
development costs to gain access to the ore that is suitable for
sustaining commercial mining, preparing land, construction of
plant, equipment and buildings and costs of commissioning the mine
and processing facilities. It also includes proceeds received from
pre-commercial production.
Expenditures incurred on development projects continue to be
capitalised until the mine and mill move into the production stage.
The Group assesses each mine construction project to determine when
a mine moves into the production stage. The criteria used to assess
the start date are determined based on the nature of each mine
construction project, such as the complexity of a plant or its
location. Various relevant criteria are considered to assess when
the mine is substantially complete and ready for its intended use
and moved into the production stage. The criteria considered
include, but are not limited to, the following:
-- the level of capital expenditures compared to construction cost estimates;
-- the completion of a reasonable period of testing of mine plant and equipment;
-- the ability to produce minerals in saleable form (within specification); and
-- the ability to sustain ongoing production of minerals.
If the factors that impact the technical feasibility and
commercial viability of a project change and no longer support the
probability of generating positive economic returns in the future,
expenditures will no longer be capitalised and the capitalised
development costs will be assessed for impairment.
2.21 Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its 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 consolidated
financial statements, are disclosed below:
Key judgements:
a) Acquisition of Aterian Resources Limited
As part of its preparation of consolidated financial statements
for the year ended 31 December 2022, the Company has considered
relevant accounting guidance and.in particular, whether the
acquisition of Aterian Resources Limited falls within IFRS3
Business Combinations. In determining whether the acquisition falls
within the scope of IFRS 3 the Company has considered a number of
factors outlined below.
A business combination must involve the acquisition of a
business, which generally has three elements:
-- Inputs - an economic resource (e.g. non-current assets,
intellectual property) that creates outputs when one or more
processes are applied to it
-- Process - a system, standard, protocol, convention or rule
that when applied to an input or inputs, creates outputs (e.g.
strategic management, operational processes, resource
management)
-- Output - the result of inputs and processes applied to those inputs
Considering this guidance, management has determined that
Aterian Resources' projects are in the exploratory phase and have
not yet started revenue-generating operations. In particular, it
holds research permits and a mining licence for mining projects,
mainly copper, in Morocco.
In assessing whether there are inputs and substantive process,
management has considered whether the business has outputs or
not.
Management believes there are no such outputs present on
acquisition. In these circumstances, when it does not have outputs,
then inputs should include an organized workforce and other inputs
that the workforce can develop or convert into outputs.
As an alternative to assessing whether the acquisition comprised
inputs, substantive process and all other features of business,
IFRS 3 introduced a new simplification option - The Concentration
of fair value test.
Whist optional, it is relevant to the Company as the principal
question in this test is:
Is substantially all of the fair value of the gross assets
concentrated in a single identifiable asset or group of similar
identifiable assets. The assembled workforce was small and of low
value. No other assets were acquired. Management has assessed this
to be the case and therefore considers the acquisition is not that
of a business falling under IFRS 3, i.e. it is an asset purchase
and the following accounting treatment applies:
-- The total transaction price of the acquisition is allocated
to individual items or group of similar items based on their
relative fair values;
-- No goodwill is recognised;
-- Transaction costs are capitalised; and
-- Contingent consideration is not recognised until it is
confirmed whether or not the conditions are met. In particular,
this applies to the Royalty Deeds and Musasa Royalty Deed.
In applying this test, management has judged that substantially
all the fair value is concentrated in a group of assets, these
being the Moroccan projects acquired. In particular, management
considered:
-- The Gross assets acquired (being exploration and evaluation
assets) do not include cash and cash equivalents, deferred tax
assets and goodwill arising from the effects of deferred tax
liabilities.
-- The fair value of the gross assets acquired includes any
consideration transferred in excess of the fair value of net
identifiable assets acquired.
-- A single identifiable asset must include any asset or group
of assets that would be recognised and measured as a single
identifiable asset in a business combination.
-- When assessing whether assets are similar, management has
considered the nature of each single identifiable asset and the
risks associated with managing and creating outputs from the assets
(that is, the risk characteristics).
On the basis of the above, management has concluded that the
acquired set of activities and assets is not a business.
Exploration and Evaluation assets acquired in a business
combination are initially recognised at fair value, including
resources and exploration potential that is considered to represent
value beyond proven and probable reserves. Similarly, the costs
associated with acquiring an E&E asset (that does not represent
a business) are also capitalised. They are subsequently measured at
cost less accumulated impairment. Once JORC-compliant (or
equivalent) resources and/or reserves are established and
development is sanctioned, E&E assets are to be tested for
impairment and transferred to 'Mines under construction'. No
amortisation is charged during the E&E phase.
Acquisition and other transaction expenses
The Company has considered how the costs of the acquisition,
which involved both issuing new shares and Admission to the
Official List (by way of Standard Listing) should be accounted for.
In accordance with IAS 32 Financial Instruments: Presentation, the
Company has allocated such costs as follows:
- Incremental costs that are directly attributable to issuing
new shares should be deducted from equity where such shares are
issued at a premium - in this case, all shares were issued at par
so no deduction has been made and all such costs have been expensed
- IAS 32.37; and
- Costs that relate to the stock market listing or are otherwise
not incremental and directly attributable to issuing new shares,
should be recorded as an expense in the statement of comprehensive
income.
- Costs that relate to the acquisition have been capitalised.
IAS 32.37 requires that: "The costs of an equity transaction are
accounted for as a deduction from equity (net of any related income
tax benefit)". Raising additional equity through the offering and
issuance of new shares is an equity transaction for this purpose,
but the listing procedure is not. Only costs attributable to the
offer of new shares may be deducted from equity.
The acquisition and listing was a combined exercise. Certain
costs, such as stamp duties and broking fees, are clearly
attributable to raising additional equity. Other costs, such as
listing fees, relate only to the listing and have been expensed.
The costs of due diligence are considered to be related to the
acquisition and thus, as an asset purchase, have been
capitalised.
The Company has identified the following costs to be directly
related to the acquisition and Admission:
Transaction costs GBP
--------------------------------------------------- -------
Total costs capitalised as part of the acquisition 87,958
--------------------------------------------------- -------
Costs expensed in profit and loss 308,440
--------------------------------------------------- -------
Total fair value of assets acquired 396,398
--------------------------------------------------- -------
b) Going concern
In their assessment of going concern, the Directors have
prepared cash flow forecasts which require a number of judgments to
be made including the Directors' ability to access further
financing and to implement cost saving and deferral measures, where
necessary.
The Directors have prepared a cash flow forecast to 30 September
2024 which assumes that the Group is not able to raise additional
funds within the going concern period and if that was the case, the
forecasts demonstrate that mitigating measures can be implemented,
or significant project expenditure delayed to reduce the cash
outflows to the minimal contracted and committed expenditure while
also maintaining the Group's licences and permits.
In this going concern analysis, the base case cash flow forecast
has been prepared on the following bases:
-- Separate budgets have been prepared for each of the Kinunga
and Musasa projects in Rwanda and the Moroccan projects, as well as
the Rwanda trading operations and corporate expenditure for the 18
months to September 2024.
-- Each project has an assumed sampling, mapping, drilling
testing and survey exploration programme with supporting overhead
functions and capital expenditure in a phased approach.
-- In Morocco, exploration is planned primarily for the Agdz and
Tata permits, with lower levels of expenditure for Azra, Jebilet
and others.
-- Trading activity commencing in Q2 with the first sales
proceeds being received in July 2023.
-- In particular, the Company anticipates Ore purchases that
will be sold to off-takers who are currently buying at between $215
and $225/Kg of Ta205. A trading cacility is subject to financial
due diligence and is expected to be concluded in May 2023. The
facility will incorporate a funding schedule with funds being
disbursed in tranches as agreed. Interest at 15% per annum will be
payable monthly in arrears and secured by a first-ranking fixed
charge over the Company's assets.
-- Trade funding is provided for 100% of the commodity acquisition costs.
-- Corporate expenditure is assumed to continue at current levels.
-- New equity funds are not assumed although the Directors are
in discussion with advisors and investors for an additional funding
round. We have similarly excluded related fundraising costs.
-- Inflationary assumptions have not been specifically factored
as the impact is not considered material.
The significant judgements involved in this going concern
assessment included consideration of a heightened inflationary
environment and the availability of working capital facilities. In
the Directors' judgement, many of the Group's expenditures are
fixed in nature and as a consequence inflation doesn't represent a
significant source of estimation uncertainty.
Based on their assessment of the financial position, the
Directors have a reasonable expectation that the Group will be able
to continue in operational existence for the next twelve months and
continue to adopt the going concern basis of accounting in
preparing these financial statements.
Key estimates:
a) Share-based payments
The Company recognises compensation expense for share-based
transactions by reference to the fair value of the related
instruments at the date at which they are granted. Estimating fair
value for share-based payments requires making assumptions and
determining the most appropriate inputs to the valuation model and
estimating the number of units expected to vest. This estimate is
based on a Black and Scholes model which utilises a key number of
assumptions The inputs used in the valuations are presented in note
20.
The sensitivity to changes in volatility assumptions is
particularly significant. An increase / decrease of 10% (from the
67% volatility rate assumed) would have the following impact on the
share-based payment expense for the year and the amounts recognised
within the purchase consideration of Aterian Resources,
respectively:
Purchase
Expense consideration
GBP GBP
10% increase in volatility 18,533 68,907
--------------------------- -------- --------------
10% decrease in volatility (18,807) (71,790)
--------------------------- -------- --------------
b) Impairment of intangible assets
The Group tests annually for impairment or more frequently if
there are indications that the Company's investments or the Group's
goodwill and exploration and evaluation assets might be
impaired.
IFRS requires management to test for impairment if events or
changes in circumstances indicate that the carrying amount of a
finite life asset may not be recoverable.
For the year ended 31 December 2022, the Group performed a
review for indicators of impairment in the values of its
intangibles and evaluated key assumptions. These included
considering any revisions to the mine plan, including current
estimates of recoverable mineral reserves and resources, recent
operating results and future expected production.
Management performed a detailed impairment review of the Rwandan
exploration assets. In management's opinion, the recoverable amount
of the Rwandan assets do not support either the Company's
investment carrying value of GBP2,261,000 or the Group's goodwill
of GBP2,168,000.
Management has determined that all expenditure capitalised in
relation to the Group's Musasa Project should be fully impaired on
the basis that all production activity has been suspended.
Accordingly, the Group's goodwill of GBP2,168,000 and the Company's
investment in Eastinco ME Limited, amounting to GBP2,261,000 have
been impaired.
The Company's investment in Aterian Resources Limited of GBP3.2m
was based on the agreed transaction price with Altus Strategies
Plc. The Directors have not conducted detailed impairment testing
at 31 December 2022 as no impairment triggers have been identified
during the period since acquisition in October 2022. The data
generated since acquisition and published on the Company's website
demonstrates the strong potential for economic discovery However,
the Directors have given consideration to a research note from the
Company's broker which was published when there were 10 projects
held in Morocco by Altus. The Company acquired 15 projects and
since this research, copper was identified on the Tata and Azrar
projects. Tata has the potential to be large-scale and would
significantly increase overall valuations. The research note
prepared in 2021 assigned a $5 million valuation to the 10
projects. In the Directors' opinion, based on test results since
acquisition, the carrying value of the Moroccan assets would be no
less than the agreed transaction price.
3. Directors' remuneration
Director salaries Fees and Share-based 2022 2021
salaries payment expense Totals Totals
GBP'000 GBP'000 GBP'000 GBP'000
Executive Directors
Charles Bray 26 3 29 -
Simon Rollason 24 - 24 200
Non-Executive
Directors
Simon Retter - 1 1 -
Devon Marais - 1 1 -
Alister Hume - - - -
Kasra Pezeshki - - - -
Mike Staten - - - -
---------- ----------------- -------- --------
50 5 55 200
---------- ----------------- -------- --------
4. Administrative expenses
2022 2021
GBP'000 GBP'000
Directors' salaries 50 200
Staff costs 91 71
Auditor's remuneration 75 63
Travel expenses 12 1
Metallurgical tests 55 -
Legal expenses 194 129
Professional fees 216 361
Accounting fees 30 27
Depreciation 22 2
Other expenses 251 166
996 1,020
-------- --------
Auditor's remuneration
2022 2021
GBP'000 GBP'000
Auditor's remuneration:
- Audit fee 75 63
75 63
-------- --------
Staff Costs
During the year the average number of employees (including
Directors) was 22 (2021: 38).
Aggregate staff costs including directors
comprise: 2022 2021
GBP'000 GBP'000
Salaries and wages 130 65
Staff welfare 3 2
Social security and pension contributions 8 4
Share capital issued as remuneration - 200
141 271
-------- --------
Key management personnel of the Group comprised the
directors.
5. Impairment losses
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. As more
fully described in Notes 11 and 13, the Group has made provisions
to fully impair the carrying value of goodwill and property, plant
and assets related to the Group's Musasa Project as follows:
2022 2021
GBP'000 GBP'000
Impairment of goodwill (Note11) 2,168 -
Impairment of property, plant and
equipment (Note 13) 877 -
3,045
-------- --------
6. Finance costs
2022 2021
GBP'000 GBP'000
Interest expense on loan notes 6 18
Interest on related party loan 1 -
7 18
-------- --------
7. Taxation
2022 2021
GBP'000 GBP'000
Current tax:
UK taxation - -
Overseas taxation - -
Total tax - -
-------- --------
Reconciliation of income tax
2022 2021
GBP'000 GBP'000
Loss before tax (4,383) (1,369)
--------- ---------
UK corporation tax rate 19% 19%
Tax at expected rate of corporation tax (833) (260)
Effects of:
Effect of overseas tax rates (16) (16)
Unutilised tax losses carried forward 849 276
Total tax - -
--------- ---------
The United Kingdom has a 19% tax rate, Rwanda has a 30% tax rate
and Morocco has a 31% tax rate. For the purposes of the
reconciliation of tax expense, the UK rate of corporation tax 19%
(2021: 19%) has been used. With effect from April 2023, the main
rate of corporation tax was increased to 25%.
The Group had losses for tax purposes of approximately GBP6.4
million as at 31 December 2022 (GBP2.1 million as at 31 December
2021) which, subject to agreement with taxation authorities, are
available to carry forward against future profits. Such losses have
no expiry date. The tax value of such losses amounted to
approximately GBP1.6 million (GBP530,000 as at 31 December 2021). A
deferred tax asset has not been recognised in respect of such
losses carried forward at the year end, as there is insufficient
evidence that taxable profits will be available in the foreseeable
future against which the deductible temporary difference can be
utilised.
8. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
2022 2021
Earnings GBP'000 GBP'000
Loss from continuing operations for the year attributable to
the equity holders of the Company (4,383) (1,369)
Number of shares
Weighted average number of ordinary shares for the purpose of
basic and diluted earnings per
share 579,581,027 436,493,246
---------------------------------------------------------------- ------------------------- -------------------------
Basic and diluted earnings per share (pence) (0.76) (0.31)
---------------------------------------------------------------- ------------------------- -------------------------
The potential number of shares which could be issued following
the exercise of options and warrants currently outstanding amounts
to 1.63 Billion. Dilutive earnings per share equals basic earnings
per share as, due to the losses incurred, there is no dilutive
effect from the existing share options and warrants.
9. Investments
Investment in Subsidiaries
2022 2021
GBP'000 GBP'000
Investment
Cost :
At the beginning of the year 2,261 2,261
Additions (Note 10) 3,241 -
At 31 December 5,502 2,261
Impairment
At the beginning of the year -
Impairment provision (2,261) -
At 31 December (2,261) -
Carrying Amount
At 31 December 3,241 2,261
-------------- -------------
Details of Subsidiaries are disclosed
in Note 2.15.
-------------- -------------
As more fully described in Note 13, mining activity at the
Group's Musasa Project has been suspended until such a time as the
wash plant becomes fully operational. Management concluded that the
mine assets capitalised in Eastinco Limited should be fully
impaired. Accordingly, management has concluded that the carrying
value of the Company's investment should also be fully impaired on
the basis that the carrying value represented the Company's
investment cost in acquiring the Musasa Project. Accordingly, an
impairment provision of the full carrying value of GBP2,261,000 has
recognised.
10. Acquisition of Aterian Resources Limited
On 21 November 2021, the Company entered into a sale and
purchase agreement with Altus Strategies Plc ("Altus" or "HoldCo")
and Altus Exploration Management Ltd ("AEM" or the "Seller")) to
acquire:
-- the 1 Ordinary share of GBP0.001 Aterian Resources Ltd (AEM's
100% owned subsidiary), (the "Company Sale Share"); and
-- the one ordinary share of USD$1.00 held by the Seller in
Atlantic Minerals Limited (the "Seychelles Subsidiary"),
constituting 50% of the entire issued share capital of the
Seychelles Subsidiary, (together, the "Sale Shares").
Completion of the acquisition took place on 24 October 2022.
Aterian Resources Limited, an indirect subsidiary of Altus holds
the licences for Altus's mineral projects in Morocco. These
projects are all in the exploratory phase. Under the terms of the
Acquisition Agreement, the total consideration to be paid by the
Company to AEM was satisfied in full by:
Consideration
The aggregate price for the Sale Shares was to be satisfied in
full by:
the allotment and issue of the Consideration Shares (being new
Ordinary Shares representing no less than 17.5% of the Enlarged
Share Capital of the Company (i.e. no less than 168,821,467 shares)
to the Seller at the Issue Price of GBP0.01 per share) on
Completion, credited as fully paid for a total consideration of
GBP1,688,215, subject only to Completion and Admission together
with the granting of the Initial Warrants (on the terms of the
Warrant Deed and entering into the Royalty Deeds and the Musasa
Royalty Deed; and the allotment and issue of Additional
Consideration Shares at the Issue Price of GBP0.01 credited as
fully paid, upon the later of the confirmation of the grant of the
SAgsz Mining Licence and:
a) Admission, representing no less than 7.5% of the Enlarged
Share Capital i.e. no less than 72,352,056 shares, of GBP723,520
(including the Additional Consideration Shares and the
Consideration Shares), the Additional Consideration Shares being
such number of shares that will ensure that if they had been in
issue at Admission, when taken together with the Consideration
Shares, they would in aggregate have been equal to 25.0% of the
enlarged issued share capital of the Company as at Admission, i.e.
241,173,525 shares (including the Consideration Shares and the
Additional Consideration Shares); and
b) the granting of Initial Warrants and Additional Warrants.
The Initial Warrants were warrants granted to the Seller by the
Company upon Admission to purchase such number of Buyer Shares as
to represent 5% of the Enlarged Share Capital (48,234,705 shares)
exercisable for a period of five years from Admission (subject to
extension as set out in the Warrant Deed), with an exercise price
equal to the First Exercise Price of GBP0.01; and
The Company also agreed to grant Additional Warrants to the
Seller to purchase such number of Buyer Shares as to represent 5%
of the Enlarged Share Capital (i.e. 48,234,705 shares) exercisable
for a period of five years from Admission (subject to extension as
set out in the Warrant Deed), with an exercise price of a 100%
premium to the First Exercise Price or GBP0.02p.
The Company also agreed to make the following payments to the
Seller:
a) upon Completion GBP50,000 in cash to the Seller; and
b) four subsequent payments of GBP50,000 each to the Seller
within 30 days of the end of each subsequent quarter following the
Completion Date with the final instalment being made on or before
18 months from the Completion Date i.e. a total cash payment of
GBP250,000 over 18 months. At 31 December 2022, GBP200,000 remained
outstanding.
Additional undertakings
The Company also agreed to:
-- subject to a minimum amount raised, allocate a sum at least
equal to the Agreed Work Amount from the proceeds raised from the
Placing, in connection with the development of the Projects in
accordance with a budget to be approved by the Board at Completion,
within 12 months of Admission;
-- procure that the Moroccan Subsidiaries pursuant to the
Royalty Deeds grant to Altus Royalties or its Affiliate a 2.5% net
smelter royalty in respect of their interest in Projects through
the Licences, which will include a right for the Company to
repurchase up to 1% of the net smelter royalty for USD500,000 per
0.5%;and
-- if within the 12 months after Admission the Company raises
further capital, the Company will procure that no less than 50% of
the net amount raised will be used to repay the Seller for any
amounts outstanding in relation to the GBP250,000 payment plan
referred to above and any remaining balance will fund Moroccan
mining exploration projects within the 12 months following the
capital being raised.
If within the first 3 months after Admission the Company or any
of the Moroccan Subsidiaries were granted a new mining licence in
Morocco (not including licences which relate to the Rwandan
Projects and the Moroccan Projects), the Company would procure that
Altus Royalties (or its Affiliate) is granted a 2.5% net smelter
return royalty over any production from that mining licence subject
to a right for the Company to repurchase up to 1% of the net
smelter royalty for USD500,000 per 0.5%.
If after 3 months of Admission but before the first anniversary
of Admission the Company or any of the Moroccan Subsidiaries were
granted a new mining licence in Morocco (not including licences
which relate to the Rwandan Projects and the Moroccan Projects),
the Company would procure that the Altus Royalties (or its
Affiliate) is granted a 1.5% net smelter return royalty over any
production from that mining licence subject to a right for the
Company to repurchase up to 1% of the net smelter royalty for
USD500,000.
If Altus or its Affiliate procure that EME or an Affiliate of
the Company are granted a new mining licence (not including
licences which relate to the Rwandan Projects and the Moroccan
Projects) within 24 months of Admission, then the Company will
procure that Altus Royalties (or its nominee) are granted:
i) a 1.5% net smelter return royalty over any production from such mining licences and,
ii) grant to Altus Royalties (or its Affiliate) an additional
1.5% net smelter return royalty over any production from such
mining licence (the "Additional Royalty")
with such royalties being granted on the substantially same
terms as the Royalty Deed provided that EME and/or any Affiliate of
the Company shall have the right to repurchase up to 1% of the net
smelter royalty for USD500,000 per 0.5%.
On Admission EME entered into the Musasa Royalty Deed whereby it
will grant to Altus Royalties a 0.5% net smelter royalty in respect
of its interest in Musasa Project through the Rwandan Licence
Application and an additional 1.5% net smelter royalty in respect
of its interest in Musasa Project through the Rwandan Licence
Application (Additional 1.5%) with the Additional 1.5% being
conditional upon the Company, or its Affiliate, having a right to
repurchase up to 1% of the net smelter royalty for USD500,000 per
0.5%.
The right to the 1.5% royalty and the right to the Additional
Royalty are both conditional upon the Seller or one of its
Affiliates purchasing new equity in the Company in any Qualifying
Financing such that its percentage participation in the Qualifying
Financing relative to the aggregate total of the capital raised in
the Qualifying Financing is at least equal to 50% of the aggregate
equity holding in the Company of the Seller and its Affiliates
immediately prior to the Qualifying Financing Closing. In the event
that this condition is not satisfied, the parties agreed that any
1.5% royalty so granted and Additional Royalty so granted shall be
terminated upon the relevant Qualifying Financing Closing with no
cost to the Company or any of its Subsidiaries. The parties will
enter into such documentation as is reasonably required to
terminate the relevant royalty deed.
In the event that the Takzim Permits in Morocco expire and the
Company or any of its Affiliates obtains a new licence or permit
over any of the ground that was covered by either of the Takzim
Permits as at Completion (New Permit Application) then provided the
Seller or its Affiliates provided all reasonable requested
assistance in respect of the New Permit Application then the Buyer
will procure that the Altus Royalties (or is Affiliate) is granted
a 2.5% net smelter return royalty over any production from that
mining licence on substantially the same terms as the Royalty Deed
subject to (i) the royalty including a right for the Company to
repurchase up to 1% of the net smelter royalty for USD500,000 with
such royalties being granted and (ii) the Seller procuring that any
royalties granted over the ground covered as at Completion by
either of the Takzim Permits will be terminated.
Allocation of Purchase Price
The total transaction price of the acquisition has been
allocated to individual items or group of similar items based on
their relative fair values. In this case, the 15 projects acquired
are considered to constitute a group of similar items.
No fair value adjustments were deemed necessary as book values
were considered to approximate their fair values.
A summary of the acquisition is set our below. The total
transaction price was GBP3,135,279. The Company has identified the
following assets acquired:
Fair
value
--------------------------------------------------------- -------
Transaction price GBP'000
--------------------------------------------------------- -------
Fair value of Consideration and Additional Consideration
Shares 2,412
--------------------------------------------------------- -------
Grant of Initial and Additional Warrants (Note 21) 491
--------------------------------------------------------- -------
Deferred consideration payable in cash 250
--------------------------------------------------------- -------
Expenses incurred on acquisition, capitalised 88
--------------------------------------------------------- -------
Total transaction price 3,241
--------------------------------------------------------- -------
Total identifiable net assets acquired:
--------------------------------------------------------- -------
Exploration and evaluation assets 3,241
--------------------------------------------------------- -------
Total fair value of assets acquired 3,241
--------------------------------------------------------- -------
The Company considers that the fair value of the assets acquired
is equal to the consideration given (comprising the issue of shares
at market value, warrants granted and valued by reference to
Black-Scholes methods and deferred cash payable) plus expenses
incurred directly on such acquisition. Accordingly, no gain or loss
has been recognised on acquisition.
The Acquisition Agreement provided for contingent consideration
in the form of royalties as described above. At the acquisition
date these were determined to be deferred contingent consideration
and the fair value has been assessed to be immaterial but will be
recognised if or when it becomes probable and reasonably estimable.
Likewise contingent consideration is payable on additional capital
raised. At the acquisition date, this was determined to have nil
value.
Transaction costs of GBP87,958 have been capitalised as part of
the acquisition and other transaction costs of GBP308,440 relating
to the Admission of the Company's ordinary shares to the Official
List of the London Stock Exchange have been expensed in the year
ended 31 December 2022.
The total cash outflows capitalised amounted to GBP137,958,
comprising GBP87,958 of expenses and GBP50,000 of deferred
consideration.
11. Goodwill
Goodwill represents the excess consideration over the net assets
on the acquisition of the Musasa Project held by Eastinco Ltd in
2019. Accordingly, the carrying value of goodwill was allocated to
the Rwandan cash generating unit (CGU).
2022 2021
GBP'000 GBP'000
Cost:
At the beginning of the year 2,168 2,168
At 31 December 2,168 2,168
Impairment:
At the beginning of the year - 2,168
Impairment provision 2,168 -
At 31 December 2,168 2,168
Carrying Amount
At 31 December - 2,168
-------- --------
Goodwill is reviewed at each reporting date. If any such
indication exists, an impairment loss is recognised in the profit
or loss as the difference between the carrying amount and the
present value of estimated future cash flows.
The Directors have undertaken an impairment assessment as more
fully described above in Note 2.21. Following their assessment, the
Directors concluded that an impairment charge for the entire
carrying value of GBP2,168,000 is necessary for the year ended 31
December 2022.
12. E&E Assets
The Company acquired the assets of Aterian Resources Limited in
Morocco at a total transaction price of GBP3,135,279 as described
in Note 10 above.
Moroccan Total
Assets
Cost GBP'000 GBP'000
At 1 January
2022 - -
Additions 3,241 3,241
At 31 December
2022 3,241 3,241
--------- --------
Amortisation
At 1 January
2022 - -
Charge for the
year - -
At 31 December
2022 - -
--------- --------
Net book value
At 31 December
2022 3,241 3,241
--------- --------
13. Property, plant and equipment
Group
Mine Mining Office Motor Computer Processing Land Total
Equipment Equipment vehicles Equipment Equipment
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2022 571 642 7 - 1 - 30 1,251
Foreign exchange
adjustment 53 29 - - - - 2 84
Additions - - - 6 1 3 - 10
At 31 December
2022 624 671 7 6 2 3 32 1,345
-------- ----------- ----------- ---------- ----------- ----------- -------- --------
Depreciation
At 1 January
2022 - 22 3 - - - - 25
Charge for the
year - 20 1 - 1 - - 22
Impairment provision 624 253 - - - - - 877
At 31 December
2022 624 295 4 - 1 - - 924
-------- ----------- ----------- ---------- ----------- ----------- -------- --------
Net book value
At 31 December
2022 - 376 3 6 1 3 32 421
-------- ----------- ----------- ---------- ----------- ----------- -------- --------
Mine Mining Office Motor Computer Processing Land Total
Equipment Equipment vehicles Equipment Equipment
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2021 595 428 7 - 1 - 29 1,060
Foreign exchange
adjustment (28) (20) - - - - - (48)
Additions 4 234 - - - - 1 239
At 31 December
2021 571 642 7 - 1 - 30 1,251
-------- ----------- ----------- ---------- ----------- ----------- -------- --------
Depreciation
At 1 January
2021 - 21 2 - - - - 23
Charge for the
year - 1 1 - - - - 2
At 31 December
2021 - 22 3 - - - - 25
-------- ----------- ----------- ---------- ----------- ----------- -------- --------
Net book value
At 31 December
2021 571 620 4 - 1 30 1,226
-------- ----------- ----------- ---------- ----------- ----------- -------- --------
The Property, Plant and Equipment held by the company is
immaterial.
Impairment reviews
IFRS requires management to undertake an annual test for
impairment of indefinite lived assets and, for finite lived assets,
to test for impairment if events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.
At the end of June, the Company temporarily suspended operations
on our Musasa Project based on the recommendation of Quiver Ltd, an
independent processing consultancy, to undertake additional
metallurgical test work to improve overall metal recoveries. While
suspending production was a disappointment, the Company is excited
at the prospect of potentially expanding the potential exploration
licence area. The Company's view is to suspend further investment
in production until such time as the new licence at Musasa is
granted and then reassess the situation. The original application
was made in May 2021.
Mining remains suspended until such a time as the wash plant
becomes fully operational. The wash plant was not operational from
July 2022 based on the recommendation of Quiver Ltd to suspend
operations until metallurgical test work is completed to improve
recoveries significantly. Current levels of metal recovery is not
economically sustainable.
On the basis that mining has been suspended and low metal
recovery, management has concluded that the mine assets capitalised
in Eastinco Limited should be fully impaired on the basis they
related specifically to capitalised exploration costs of the Musasa
mine site, which is now essentially halted. Accordingly, an
impairment provision of the full PPE mine site and associated
equipment value of GBP877,000 is necessary.
14. Trade and other receivables
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Amounts owed by
group
undertakings due - - 6 1,703
Other debtors - 128 - 83
Taxes receivable 86 - 54 -
Share subscriptions
receivable 212 - 212 -
Prepayments 21 60 - 60
319 188 272 1,846
---------------------------- ---------------------------- -------- ------------------------
The share subscriptions receivable comprises of monies due from
four shareholders. Subsequent to the year-end GBP200,000 has been
received.
Amounts owed by group undertakings are stated net of a provision
of GBP2,444,000 (2021: GBPNil).
15. Cash and cash equivalents
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in
hand 110 196 41 190
-------- -------- -------- --------
16. Trade and other payables
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 287 75 192 30
Other payables 33 72 27 67
Amounts due by group
undertakings due in
less than one year - - 72 72
Accruals 75 50 75 50
395 197 366 219
-------- ----------------------------- -------- ------------------------
17. Deferred consideration
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Deferred consideration
- Altus 200 - 200 -
200 - 200 -
-------- ------------------------- -------- ---------------------
D eferred consideration is payable to Altus Exploration
Management Ltd in respect of the acquisition of Aterian Resources
Limited as set out in Note 10 above. GBP50,000 was paid on 4
November 2022.
18. Borrowings
Group Company
Non-current liabilities 2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Loan from related
party 151 - 151 -
Convertible loan
notes - 158 - 158
151 158 151 158
============ =================== ======== ================
Loan from a related party
On 17 October 2022, the Company entered into a working capital
facility with the trustees of the C Bray Transfer Trust pursuant to
which the C Bray Transfer Trust agreed to make available to the
Company a Working capital facility of up to GBP500,000.
Up to GBP150,000 can be drawn down under the facility each
quarter starting at Admission (25 October 2022). The facility will
be available for two years. The facility is secured by a fixed and
floating charge over all the property or undertaking of the
Company.
Interest of 2% per annum accrues on undrawn amounts and interest
of 9% per annum will accrue on drawn amounts. interest will roll up
and is repayable with the outstanding principal on the second
anniversary of Admission. An arrangement fee of GBP10,000 was
payable and has been added to the principal outstanding. C Bray, a
director, is a beneficiary of the C Bray Transfer Trust.
Convertible loan notes
Convertible loan notes with a principal sum of GBP850,000 which
were interest-free and due for repayment on 31 December 2024, were
converted into 85,000,000 Ordinary Shares of GBP0.01 each of the
Company on 25 October 2022 as more fully described in Note 20
below.
19. Financial instruments
Categories of financial instruments Group Company
2022 2021 2022 2021
Financial assets measured at GBP'000 GBP'000 GBP'000 GBP'000
amortised cost
Other receivables 319 128 266 183
Cash and cash equivalents 110 196 41 190
-------------------------------------- --------- --------- --------- ---------------
429 324 307 373
-------------------------------------- --------- --------- --------- ---------------
Financial liabilities measured
at amortised cost
Trade and other payables 395 197 366 219
Deferred consideration 200 - 200 -
Borrowings 151 - 151 -
Convertible loan notes - 158 - 158
-------------------------------------- --------- --------- --------- ---------------
746 355 717 377
-------------------------------------- --------- --------- --------- ---------------
Financial risk management objectives and policies
The Group is exposed through its operations to credit risk and
liquidity risk. In common with all other businesses, the Group is
exposed to risks that arise from its use of financial instruments.
This note describes the Group's objectives, policies and processes
for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is
presented throughout this financial information.
General objectives, policies and processes
The Directors have overall responsibility for the determination
of the Group's risk management objectives and policies. Further
details regarding these policies are set out below:
Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The capital structure of the Group consists of issued capital,
reserves and retained earnings. The Directors review the capital
structure on a semi-annual basis. As a part of this review, the
Directors consider the cost of capital, the risks associated with
each class of capital and overall capital structure risk management
through the new share issues and share buy-backs as well as the
issue of new debt or the redemption of existing debt.
The Group is not subject to externally imposed capital
requirements.
Market price risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the return.
The development and success of any project of the Group will be
primarily dependent on the future prices of various minerals being
exploited. Mineral prices are subject to significant fluctuation
and are affected by a number of factors which are beyond the
control of the Company.
Future production from the projects is dependent on mineral
prices that are adequate to make the projects economic. The Group
reviews current and anticipated future mineral prices and adjusts
the allocation of financial resources accordingly.
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's
receivables and cash and cash equivalents.
The Group manages its exposure to credit risk by the application
of monitoring procedures on an ongoing basis. The amount of
expected credit losses is updated at each reporting date to reflect
changes in credit risk since initial recognition of the respective
financial instrument. For other financial assets (including cash
and bank balances), the Group minimises credit risk by dealing
exclusively with high credit rating counterparties.
Liquidity risk
Liquidity risk arises from the Company's management of working
capital. It is the risk that the Company will encounter difficulty
in meeting its financial obligations as they fall due.
The Company's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The principal liabilities of the Group arise in respect
of trade payables which are all payable within 12 months and
borrowings which are repayable between one and two years. At 31
December 2022, total trade payables within one year were GBP507,000
(2021: GBP197,000), which is more than the Group's cash held at the
year-end of GBP110,000. The borrowings are repayable after between
one and two years. The Board monitors cash flow projections on a
regular basis as well as information on cash balances, and manages
such cash flows through short-term borrowings, including a working
capital facility, and the raising of equity to support long-term
expenditure.
Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Rwandan Franc ("RWF").
Foreign exchange risk arises from future commercial
transactions, recognised monetary assets and liabilities and net
investments in foreign operations.
At 31 December 2022, had the exchange rate between the Sterling
and RWF increased or decreased by 10% with all other variables held
constant, the increase or decrease respectively in net assets would
amount to approximately GBP138k/GBP(113k). The Group does not hedge
against foreign exchange movements.
20. Share capital
The Ordinary Shares issued by the Company have a 1p par value.
The Ordinary Shares rank pari passu in all respects, including the
right to attend and vote in general meetings, to receive dividends
and any return of capital.
2022 2021
---------------------------------- ----------------------------------
Share Share Share Share
Number of Capital Premium Number of Capital Premium
shares GBP'000 GBP'000 shares GBP'000 GBP'000
------------ --------- --------- ------------ --------- ---------
Brought forward at 1
January 488,692,170 5,671 2,144 430,068,763 4,301 2,144
Shares issued for acquisition
(a) 241,173,523 2,411 - - - -
Shares issued for sterling
(b) 85,405,000 854 - 25,000,000 250 -
Conversion of 2021 loan
notes (c) 85,000,000 67 33 6,666,667 850 -
Conversion of loan 2019
notes (d) 20,000,000 200 - - - -
Shares issued to EBT
(e) 44,423,400 444 - 26,236,740 263 -
Other share issues - - - 720,000 7 -
As at 31 December 2022 964,694,093 9,647 2,177 488,692,170 5,671 2,144
------------ --------- --------- ------------ --------- ---------
The Company issued the following shares in the year ended 31
December 2022:
a) On the Company's Admission to the Official List and to
trading on the London Stock Exchange's Main Market for listed
securities on 25 October 2022, the Company issued 241,173,523 of
GBP0.01 each in consideration for the acquisition of Aterian
Resources Limited for a total non-cash consideration of
GBP2,411,735.
b) On the same date, the Company completed a Placing of 85,405,000 Ordinary Shares of GBP0.01 for consideration of GBP854,050 (GBP212,000 was outstanding as at 31.12.22 - see note 14).
c) On Admission, outstanding Convertible Loan Notes issued in
2021 totaling GBP850,000 were converted into 85,000,000 Ordinary
Shares at GBP0.01 each.
d) On Admission, the Company issued 20,000,000 Ordinary Shares
at GBP0.01 per Ordinary Share to certain CLN Holders for a total
consideration of GBP200,000.
e) On the same date, the Company issued 44,423,400 EBT Shares at
GBP0.01 per EBT Share for a non-cash consideration of
GBP444,234.
21. Share-based payment arrangements
Options
Equity settled share-option plan
The Company has established a trust for the benefit of the
employees and former employees of the Company's Group and their
dependants. The EBT is managed by a Trustee, who exercises
independent decision making with respect to any voting of shares on
behalf of Summerhill Trust.
The Company issued a total of 44,490,000 EBT options in 2022 as
summarised below.
2022 2021
Number of EBT Number of EBT
Options Options
Outstanding at beginning of
year 51,907,400 13,257,400
Granted during the year 44,490.000 38,650,000
Outstanding at end of the year 96,397,400 51,907,400
-------------- --------------
EBT Options
Options issued in 2022:
A total of 44,490,000 options were issued during the year,
exercisable at GBP0.01 per ordinary share, such awards expiring on
30 December 2030. These include 30,250,000 options which were
issued to Directors of the Company and 14,240,000 options issued to
a former Director. These were granted subject to Admission.
The fair values of the options granted have been calculated
using Black-Scholes model assuming the inputs shown below:
Share price GBP0.0100
Exercise price GBP0.0100
Time to maturity 8.19 years
Risk free rate 3.74%
Volatility 67.0%
Value GBP0.0071
An expense of GBP317,000 has been recognised in the year (2021:
GBP267,330) in respect of a share-based payment charge for the
share options issued during the accounting period under the
Employee Benefit Trust and CSOP.
The weighted average remaining life of the options at the end of
2022 was 6.70 years (2021: 4.38 years).
Warrants
The following warrants were issued as part of share
subscriptions:
2022 2021
Average exercise Average exercise Number of
price per warrant Number of warrants price per warrant warrants
Outstanding at beginning
of year 2.65p 190,156,935 2.7p 58,718,666
First Altus warrants
(ii) 1p 48,234,705 - -
Second Altus warrants
(iii) 2p 48,234,705 - -
Novum warrants (iv) 1.5p 2,500,000 2.5p 139,438,269
Shard warrants (v) 1.5p 405,000
Lapsed in the year - - 2.79p (8,000,000)
Outstanding at end
of the year 1.752.04p 289,531,345 2.65p 190,156,935
------------------- ------------------- ------------------- ------------
The total expense recognised in the Statement of Comprehensive
Income during the year was GBP18,503 (2021: GBPnil). In addition, a
total of GBP491,000 has been recognised as part of the Purchase
Consideration in relation to the First and Second Altus Warrants,
as more fully described in Note 10. The weighted average remaining
life of the warrants at the end of 2022 was 3.31 years (2021: 3.55
years)
During the year, the following changes occurred:
i. A total of 126,666,668 Warrants over Ordinary Shares with an
original exercise price of GBP0.02 pursuant to the 2021 Warrant
Instrument in connection with the issue of Pre-IPO Shares, were
amended to reflect an adjusted exercise price of GBP0.015. These
expire on 30 December 2024.
ii. First Altus Warrant Instrument: On 17 October 2022, the
Company created a warrant instrument pursuant to which the Company
could issue 48,234,705 warrants over Ordinary Shares at an exercise
price equal to the First Exercise Price being the weighted average
of the price of the price of the Pre-IPO Fundraise (being the
fundraising completed by the Company on 22 November 2021 consisting
of the issue of GBP850,000 of CLNs and GBP100,000 of Ordinary
Shares at GBP0.015 per new Existing Ordinary Share raising in
aggregate GBP950,000) and the Issue Price of GBP0.01. The warrants
are exercisable from the date of Admission and until the fifth
anniversary of such date. The exercise of warrants under this
instrument is subject to the shares that are the subject of the
exercise not giving the warrant holder and those persons acting in
concert with them for the purposes of the Takeover Code more than
29.9% of the Company
iii. Second Altus Warrant Instrument: On 17 October 2022, the
Company created a warrant instrument pursuant to which the Company
could issue 48,234,705 warrants over Ordinary Shares at an exercise
price equal to the Second Exercise Price being a 100% Premium to
the First Exercise Price. The warrants are exercisable from the
date of Admission and until the fifth anniversary of such date. The
exercise of warrants under this instrument is subject to the shares
that are the subject of the exercise not giving the warrant holder
and those persons acting in concert with them for the purposes of
the Takeover Code more than 29.9% of the Company share capital at
any time.
iv. Novum Warrant Deed: On 17 October 2022, the Company entered
into a warrant deed pursuant to which the Company agreed to grant
to Novum Corporate Finance subject to Admission 2,500,000 warrants
over Ordinary Shares exercisable at 150% (GBP0.015) of the Issue
Price (the "Novum Warrants"). These warrants are exercisable for a
period of three years from Admission.
v. Shard Warrant Deed: On 17 October 2022, the Company entered
into a warrant deed pursuant to which the Company agreed to grant
to Shard Capital Partners LLP subject to Admission 405,000 warrants
over Ordinary Shares exercisable at 150% of the Issue Price (the
"Shard Warrants"). These warrants are exercisable for a period of
three years from Admission.
Fair value of share awards
The fair values for the Options and warrants granted in 2022
were calculated using the Black Scholes option pricing model. The
inputs in the model were as follows:
First Second Altus
EBT Altus Warrants Novum
Options Warrants Shard warrants Warrants
Share price at
grant GBP0.01 GBP0.01 GBP0.01 GBP0.01 GBP0.01
Average exercise
price GBP0.01 GBP0.01 GBP0.02 GBP0.015 GBP0.015
Expected life
(years) 8.19 5 5 3 3
Risk-free interest
rate 3.74% 3.74% 3.74% 3.74% 3.74%
Expected dividend
yield 0% 0% 0% 0% 0%
Expected volatility 67% 67% 67% 67% 67%
The volatility was determined by reference to the historical
volatility of the Company's share price at the time of grant.
The weighted average remaining life of the options at the end of
2022 was 5.68 years (2021: 3.55 years).
22. Reconciliation of liabilities from financing activities
Company and Opening Cash received Conversion Release Closing
Consolidated balances / (paid) of loan notes of fair balance
financing value discount
cash flows
Year ended 31 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
December 2022
Borrowings 158 151 (200) 42 151
Totals 158 151 (200) 42 151
Consolidated Opening Conversion Issue of Closing
financing balances of loan notes shares to balances
cash flows EBT
Year ended 31
December 2021 GBP'000 GBP'000 GBP'000 GBP'000
Borrowings 219 (61) - 158
Totals 219 (61) - 158
23. Related party transactions
Transactions with subsidiary companies:
Eastinco Ltd is a subsidiary and during the year, received total
funds of GBP720,364 (2021: GBP210,438). Eastinco Ltd owes
GBP2,222,815 (before impairment provisions) to Aterian PLC at the
end of the year (2021: GBP1,502,451).
Eastinco ME Ltd is a subsidiary and is owed GBP17,962 by Aterian
PLC at the end of the year (2021: GBP70,487).
Transactions with Directors
Charles Bray is a Director of the Company and during the year,
Charles Bray received total fees of GBP26,086 (2021: GBPnil).
Charles Bray is owed by the Company GBP20,514 at the end of the
year (2021: GBP2,026 owed to the Company).
The Company has received a loan of GBP150,000 (2021: GBPnil)
from IQ EQ (Jersey) Limited, trustee of Charles Bray Transfer Trust
as more fully described above in Note 18.
Simon Rollason is a Director of the Company and during the year,
Simon Rollason received total fees of GBP23,993 (2021:
GBP200,000).
Edlin Holdings Limited is an Isle of Man company which invests
and operates non-US based investments. The ultimate beneficial
owners of Edlin Holdings Limited are Bray family members.
At the year end, Directors hold interests in Ordinary Shares,
warrants and options as below:
Name No. of Warrants No. of Options No. of Shares
Charles Bray 26,669,999 22,250,000 78,270,000
---------------- --------------- --------------
Edlin Holdings
Limited* 19,333,334 - 36,000,000
---------------- --------------- --------------
Simon Rollason - - 20,000,000
---------------- --------------- --------------
D Marais 6,670,000 4,000,000 14,670,000
---------------- --------------- --------------
Details of Directors' remuneration during the year are given in
Note 3.
24. Ultimate controlling party
The Directors consider that there is no controlling or ultimate
controlling party of the Company.
25. Expenditure commitments
The Company is committed to paying deferred consideration to
Altus Exploration Management Ltd, as more fully described in Note 9
amounting to four quarterly payments of GBP50,000 each to Altus
Exploration Management Ltd, i.e. a total cash commitment of
GBP200,000.
26. Capital commitments
As at 31 December 2022, the were no capital commitments entered
into by the Group (31 December 2021: nil).
27. Contingencies
With the exception of deferred contingent consideration
described in Note 10, as at 31 December 2022, the were no
contingent liabilities (31 December 2021: nil).
As mentioned earlier in the report, the Managing Director of the
local Rwanda subsidiary, Eastinco Limited, charged with the Musasa
wash plant operations, resigned from his role in late 2022.
Regretfully, Daniel Hogan initiated legal proceedings against
Eastinco Limited in Rwanda for i) compensation related to salary
forgone during the senior management cash preservation period that
was actioned during the COVID-19 Pandemic and ii) a related party
payment for his personal vehicles being leased to the company.
Despite Mr Hogan receiving share-based compensation matching that
of the other senior managers over the period and his signing a
waiver of claims upon resignation, and after attempts to resolve
the related party matter amicably, Mr Hogan has chosen to pursue
legal action against Eastinco Limited. We are confident that
Eastinco Limited's position is strong, and we have retained legal
counsel to defend the company. We remain committed to defending the
interests of the company and will take all necessary steps,
including the pursuit of legal action in both Rwanda and the United
Kingdom, to protect our reputation and financial interests.
The Board of Directors determined that a restructuring of the
Rwandan subsidiaries was warranted to mitigate and segregate the
risk arising from exploration activities and operational
activities. More specifically, a new holding company is being
formed to hold the exploration project companies, while another
company is being formed for the purpose of mineral trading
operations. The transfer of the various assets and shares from
Eastinco Limited, the existing sole holding and operating company,
is pending the resolution of the Hogan dispute.
28. Events after the reporting date
There were no events that have occurred subsequent to 31
December 2022 that require disclosure in these financial
statements.
29. Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement
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