TIDMKRS
RNS Number : 7257Q
Keras Resources PLC
30 June 2022
30 June 2022
Keras Resources plc ('Keras' or the 'Company')
Final Results
Keras Resources plc (AIM: KRS) announces its final results for
the 15 months ending 31 December 2021.
Highlights
Utah - Diamond Creek Phosphate Mine ("Diamond Creek") - one of
the highest-grade organic phosphate mines in the US, a fully
integrated mine to market asset
-- Spanish Fork milling plant commissioned during June 2021 to
increase installed capacity and enable flexibility to produce a
variety of sized organic rock phosphate products
-- 8,520 tonnes of phosphate mined at Diamond Creek during the summer of 2021
-- Total sales of 4,657 tons from June 2020 through to May 2022
-- Increased ownership of Diamond Creek in March 2022 from 51%
to 100% for a total consideration of US$3.2m
-- 2022 summer mining season currently underway at Diamond Creek
to produce milled product for the spring 2023 season
-- Construction of a downstream granulator plant is planned for
2022 to further expand range of phosphate products to attract a
price premium in markets not currently supplied
-- Marketing and sales being strengthened and new offtake
agreements with repeat customers negotiated
-- Focus for 2022 and beyond is developing market share in US
organic fertiliser industry and building Diamond Creek into the
premier organic phosphate producer in the US
Corporate
-- GBP550,000 and GBP1,000,000 fundraising completed December 2020 and January 2021
-- Further GBP1,950,000 (before costs) raised at a premium and
supported by a new cornerstone investor, First Uranium Resources
Ltd, a Canadian public company active in the North American
phosphate market, to facilitate growing a portfolio of North
American phosphate projects
-- Board Changes
o Graham Stacey appointed to the Board in November 2021 and
assumed responsibility for the Diamond Creek mine in March 2022 -
assumed the role as CEO on 1 June 2022
o Russell Lamming has stepped down as CEO and assumed the role
as Non-Executive Director as of 1 June 2022, and will become
Non-Executive Chairman as of 1 September 2022
o Brian Moritz stepping down as Non-Executive Chairman as of 1
September 2022, will assume the role as Non-Executive Director and
remain as Company Secretary
Graham Stacey, Keras Resources Chief Executive Officer,
commented, "2021 was not without its challenges, however, we were
very pleased to have announced the acquisition of full ownership
and to have assumed full operational and marketing control of
Diamond Creek in March 2022. The completion of a GBP1.95m capital
raise which saw First Uranium Resources Ltd come in as a
cornerstone investor, and the acquisition of an additional 7% in
the market by First Uranium associate AxCap Ventures was
particularly encouraging .
"We will now focus on delivering on the current summer mining
season at Diamond Creek to September 2022, continue to negotiate
new offtake agreements with repeat customers and more importantly
identify new outlets for our existing product mix. Near-term growth
plans also include installing a downstream granulator plant which
will allow us to further broaden our current product offering,
attracting premium prices in the markets that those products
bring.
"We believe the Company is excellently positioned to deliver
into the growing organic agricultural sector underpinned by the
macro-economic tailwinds of the global fertiliser markets.
Ultimately our mission is to penetrate and increase our market
share in the US organic fertiliser industry and to build Diamond
Creek into the premier organic phosphate producer in the US .
"I look forward to working closely with our new cornerstone
investor(s) to lever off synergies that their investment will bring
and continuing to build production and sales at Diamond Creek, as
we move forward in this exciting chapter in the Company's evolution
and growth."
Posting of Annual Report and Notice of AGM and General
Meeting
Copies of the Company's full Annual Report and Financial
Statements (the "Annual Report") will be made available to download
from the Company's w ebsite shortly at
https://www.kerasplc.com/constitutional-documents/ and will also be
posted to shareholders today along with the notice of its Annual
General Meeting ("AGM") and General Meeting which are to be held at
11am and 11.15am respectively on the 25(th) July 2022.
Chairman's Statement
I am pleased to provide an update on our progress since my last
report and set out our outlook for the business going forward.
The main activity of Keras is now in developing the Diamond
Creek organic phosphate mine in Utah, USA, and we announced on 30
March 2022 that Keras had increased its ownership from 51% to 100%.
Subsequently, Keras concluded a GBP1.95m (before costs) fund
raising, underpinned by a new cornerstone investor who is focussed
on growing a portfolio of North American phosphate projects.
The Diamond Creek phosphate mine
Despite facing challenges throughout the reporting period, we
continued to make significant progress with our fully integrated
mine to market operation at Diamond Creek in Utah which is believed
to be one of the highest grade organic rock phosphate deposits in
the US.
The Diamond Creek phosphate mine, which is situated on an 840
acre Federal Lease, and the Spanish Fork Processing Facility, are
owned and operated by Falcon Isle Resources LLC and Falcon Isle
Holdings LLC (collectively 'Falcon Isle'). Keras initially acquired
a 51% equity interest in Falcon Isle in July 2020 for nominal
consideration by agreeing to loan a total of $2.5m to Falcon Isle
in tranches. The last tranche of the loan was advanced at the end
of December 2020, so that Falcon Isle has been accounted for as a
subsidiary of Keras for 2021. Post-period end, in March 2022, we
were pleased to announce that Keras had agreed to acquire our
partner's 49% equity interest in Falcon Isle, increasing our
holding from 51% to 100%, for a total consideration of US$3.2m,
which includes loans repaid to the vendor totalling US $1,816,527.
This agreement made Falcon Isle a wholly owned subsidiary of Keras,
allowing Graham Stacey, previously COO of Keras, to take over full
management control of the operation, and become CEO of the Group.
Importantly, the agreement avoided a lengthy and costly litigation
process, operations recommenced immediately, and we continue to
meet customers' demand for our phosphate product.
Located approximately 80km south-east of Salt Lake City, Diamond
Creek is one of the highest-grade organic phosphate deposits in the
US, and our mission going forward is to build the operation into
the premier organic phosphate producer in the US. Our focus and
market segment is in supporting sustainable agriculture and we are
strong advocates for the benefits of enhancing soil health. Our
organic phosphate fertiliser products can help farmers realise
better crop growth and yields while reducing the soil degradation
seen when farmers use chemically manufactured fertilisers.
The mine is fully permitted, and the Spanish Fork processing
plant is close to infrastructure and ideally located to take
advantage of Salt Lake City's resources including labour, supplies,
industrial engineering and financial services. The integrated
mining and processing operation has compelling economics with a low
capex, simple low-intensity seasonal mining operation and our
in-house processing plant has flexibility to beneficiate a variety
of organic rock phosphate products throughout the period. The mined
material only requires crushing, milling and bagging before being
sold as high-grade organic rock phosphate fertiliser - a 23% total
phosphorus pentoxide ('P(2) 0(5) ') premium product and importantly
with minimum 12% available P(2) 0(5) which is significantly higher
than our competitors.
The project has a pre-stripped area with production drilling
information delineating approximately 2 years of planned production
still in-situ. However, we believe there is significant scope to
increase the current life of mine at Diamond Creek with historic
"surface mineable resources" representing in excess of 60 years of
production. Part of the funds raised recently will be used to
establish a NI 43-101 compliant mineral resource at Diamond
Creek.
Immediately post Keras' injection of funding into Falcon Isle,
beneficiation was undertaken on a toll basis with a key contractor.
The Company subsequently took the decision to move processing
in-house and construct a new plant at Spanish Fork, 30km from
Diamond Creek. This was to both increase the installed capacity and
enable flexibility to beneficiate a variety or organic phosphate
products to offer across our marketing campaign. The plant was
fabricated and shipped from Shanghai, with construction commencing
on site in Spanish Fork in February 2021 and commissioning was
successfully completed at the end of June, 2021.
In November 2021 the Company announced it was in dispute with
its 49% partner in Falcon Isle due to a capital shortfall resulting
in all operations at Diamond Creek being temporarily halted and
Keras engaging local US legal representatives to enforce its rights
under the terms of the initial transaction. The 2021 mining season
had already been completed prior to operations being suspended and
sales continued to be made from processed material in stock over
the winter period.
In 2021, 8,520 tons of phosphate were mined and delivered to the
laydown area at Diamond Creek. Sales totalled 4,657 tons of
phosphate from June 2020 through to May 2022. Since Keras took
control of the marketing function and with both the mining and
processing facilities now operating as planned developing market
share will be our primary focus for the next two years. Production
rhythm is key to the supply of both consistent quantity and quality
products which Keras' operational control and our recent fund-raise
has now enabled.
A key component of our marketing effort will be growth tests
across a range of crops and soil types. This process is planned to
run for the balance of 2022 and will provide focussed market
feedback to support of our product use across crop types, regions
and planting seasons.
We are now looking forward to commencing our mining season at
Diamond Creek which takes place during the summer season from July
to September, while the mine site is free of snow.
Nayéga manganese mine / Togo
On the 18 October 2019 the Council of Ministers of the Republic
of Togo published a decree granting the right for large-scale
exploitation of the manganese deposit at Nayéga to the Company's
subsidiary, Société Générale des Mines ("SGM"). Since that date the
Company has concentrated its efforts on obtaining the required
Exploitation Permit. The terms of the permit and associated
protocols have been agreed, and SGM has been converted from a
private to a public company, as required by law and in compliance
with the draft Mining Convention. However, the exploitation permit
approval has not been forthcoming.
Financial review
The Consolidated Statement of Comprehensive Income for the
15-month period shows a loss of GBP1,948,000 (2020 - loss
GBP1,257,000). The results of the two periods are not strictly
comparable due to the different lengths of the periods reported on
as a result of the change in year-end to 31 December. The loss for
the period under review has suffered from delays in realising the
value of the Diamond Creek mine which are referred to above.
Also included is a technical loss amounting to GBP398,000 due to
the IFRS requirement to treat the previous minority interest in
Falcon Isle as having been disposed of and the 51% majority
acquired as a separate transaction.
During the period Keras undertook two fund raisings, in December
2020 and January 2021, raising GBP550,000 and GBP1,000,000
respectively (before costs), primarily to facilitate finance for
the Diamond Creek mine, and also for working capital generally.
In May 2022 Keras raised a further GBP1,950,000 (before costs)
at a premium to the previous share price, of which GBP960,000 was
subscribed by a new cornerstone investor, First Uranium Resources
Ltd, a Canadian public company active in the North American
phosphate market. These funds will be used for the first tranche of
US$800,000 of the cost of acquiring the former minority interest in
Falcon Isle, the establishment of a NI 43-101 compliant Mineral
Resource at Diamond Creek, expansion of the Falcon Isle business
into other fields of activity and general working capital.
First Uranium initially acquired a 10.03% interest in the
Company by participating in the above Capital raise and, subsequent
to this, AxCap Ventures, an associated company of First Uranium,
accumulated a further 7.04% interest in Keras through on-market
trades. First Uranium's support for the Company is part of their
focus on developing a portfolio of assets in the North American
phosphate market as it sees this as a key growth commodity within
the resource sector.
Directors and Management
Graham Stacey, who has been COO since 2020, was appointed to the
Board in November 2021 and assumed responsibility for the Diamond
Creek mine in March 2022. He is in the process of relocating from
Johannesburg to Utah. On 1 June 2022 Graham took over the role of
Chief Executive Officer from Russell Lamming, who has become a
Non-Executive Director. I would like to welcome Graham to the Board
and thank Russell for his untiring work during his tenure as
CEO.
Later in the year, on 1 September 2022, Russell will take over
from me as Non-Executive Chairman. I will remain a Non-Executive
Director and Company Secretary, and I will continue to provide
oversight of the Company's finances.
Outlook
With the closing of the GBP1.95m capital raise and securing 100%
of our high-grade organic phosphate Diamond Creek mine, we believe
the Company is excellently positioned to deliver into the growing
organic agricultural sector. This sector is underpinned by the
macro-economic tailwinds of the global fertiliser markets, and we
remain bullish on our premium phosphate product and our position as
we continue to build market share.
Plans for expansion to broaden our product mix are under way and
we continue to negotiate new offtake agreements with our repeat
customers. The construction of a downstream granulator plant is
planned for 2022 to allow us to further expand the range of our
products from five sized dry products to include two sized
granulated products which will attract a price premium in markets
that we are not currently supplying. Now that we are fully in
charge of operations the Directors are confident that Falcon Isle
will be a profitable and valuable asset for the Group, and we look
forward to updating our shareholders on our progress as we continue
to ramp up the production profile and build our position and market
share of the fast-growing US organic phosphate market.
Finally, I would like to take this opportunity to thank my
colleagues on the Board and our management team for their hard
work, and shareholders for their continuing support.
Brian Moritz
Chairman
29 June 2022
Strategic Report
Having acquired 100% control of the Diamond Creek asset, the
Group's strategy is to progressively enhance shareholder value
through building market share for its products within the North
American organic fertiliser market. At the same time ongoing value
engineering initiatives will continue to streamline operations and
rationalise costs to ensure consistent product quality and volumes,
all aimed at increasing margins. In the longer-term, enhancing
value of that asset will involve both organic expansion as well as
identifying value-accretive projects/businesses with natural
synergies to increase scale and to add value to the Company.
Diamond Creek is one of the highest-grade organic phosphate
mines in the US, and the Company's purpose is to build the
operation into the premier organic phosphate producer in the US.
Keras supports sustainable, regenerative agriculture and is an
advocate for the benefits of enhancing soil health. Diamond Creek's
organic phosphate fertiliser products can help farmers realise
better crop growth and yields, reduce soil degradation, build and
maintain soil organic matter to improve overall soil health, and
ultimately reduce CO(2) levels in the atmosphere through carbon
sequestration.
Organic fertilisers' significantly lower carbon footprint
relative to traditional synthetic/chemical fertilisers and will
continue to support demand and pricing for organic replacements
including rock phosphate. Keras is therefore also looking at
developing opportunities around carbon sequestration and the
associated carbon credits to further augment its business and
enhance shareholder value. Diamond Creek's organic phosphate
products have the potential to tap directly into this rapidly
growing market and the Company is looking at developing and
enhancing the value of this aspect of its portfolio and in-turn
generate greater returns for shareholders.
The Group's business model has established the Company as an
efficient, high-quality and low-cost producer direct into the North
American fertiliser market.
During the reporting period the Group was focussed largely on
developing operations at Diamond Creek to maximise operational
efficiencies, build market share and generate cashflow. The mine is
owned by Falcon Isle, in which the Company held a 51% equity
interest during the reporting period, subsequently increasing this
to 100% in March 2022.
The Company is aware of a national geophysical survey being
undertaken by the Togolese Ministry of Mines and Energy and we do
not expect the permitting process at our Nayéga manganese project
to be concluded prior to the survey being completed.
In exploring and developing mines to exploit mineral deposits,
the Group accepts that not all its exploration will be successful
but also that the rewards for success can be high. It therefore
expects that its shareholders will be invested for potential
capital growth, taking a long-term view of management's good track
record in mineral discovery and development. The Directors have
continued to invest in the Company and currently hold approximately
21.3% of the issued shares in Keras, after allowing for the
substantial fund raisings since the period end. We believe this
stake provides further evidence of the Board's belief in and
commitment to its strategy.
To date, the Group has financed its activities through equity
raisings. As the Group's projects become more advanced, the Board
will seek mining and/or offtake finance and may also investigate
strategic opportunities to obtain funding for projects from future
customers via pre-payments, royalties, and other marketing
arrangements.
Financial and Performance Review
Turnover in the period under review comprised sales of phosphate
fertilisers by Falcon Isle. Turnover of GBP452,000 was constrained
by construction of the processing plant, which was only operational
for the final six months of the period, as well as the problems
with working capital referred to previously.
The results of the Group are set out in detail in the financial
statements. The Group reports a loss for the period of GBP1,948,000
(2020: loss GBP1,257,000).
Fixed assets total GBP5,375,000 (2020: GBP1,332,000), which
includes the bulk sample plant and associated infrastructure at the
Nayéga project, and the Falcon Isle processing plant totalling
GBP544,000 (2020: GBP262,000).
The Directors have assessed the carrying values of Falcon Isle
and SGM and no impairment has been deemed necessary.
Key Performance Indicators (KPIs)
During the period the Board monitored the following KPIs:
-- Cash flow and working capital:
o Short (<3 months) and long-term cashflow models are
prepared to monitor and forecast the Group's funding needs;
o Management accounts prepared on a monthly basis for the
Group's key subsidiaries and quarterly on a consolidated basis.
Mining projects
North America
Keras acquired an interest in Falcon Isle, holder of the Diamond
Creek phosphate mine, in July 2020, and increased its interest to
51% in December 2020. Keras acquired the outstanding 49% post the
reporting period in March 2022. The mine is situated approximately
80km SSE of Salt Lake City, Utah. Diamond Creek is a fully
permitted, high-grade direct shipping ore ("DSO"), low capex
organic phosphate mine, which has significant historical estimated
in-situ tonnage (mineral resources have not been classified
according to modern International Reporting Standards) with
sufficient phosphate ore exposed in-situ to provide for the 2022
and 2023 mining seasons before any overburden stripping is
required. The phosphate mineralisation is concentrated in the shale
beds of the Meade Peak Member of the Phosphoria Formation. The
mineralised zone is c.3m thick at the base of the Meade Peake
Member and averages 23% total P(2) O(5) with guaranteed available
P(2) O(5) of 12%. Historic reports vary with "surface mineable
resources" ranging from 3.10Mt to 4.60Mt. At an internally
estimated peak production rate of 23.5ktpa, the opencast resources
alone represent a significant mine life.
The 2021 mining campaign was completed in October 2021 with a
total of 8,520 ore tons extracted from the mine. Beneficiation
during the reporting period was undertaken through a combination of
contractor toll-milling (producing 10mesh and -50mesh products) and
Falcon Isle owned milling infrastructure. A new high-pressure rolls
milling plant was successfully commissioned during June 2021 which
has the capacity to produce steady-state product of 23,500 tons per
month. The plant comprises front-end feed, primary crush, milling,
dust extraction, 50lb and 1ton bagging circuits to produce a range
of products including -50 mesh, -100 mesh and -350 mesh powders in
either 50lb bags or 1ton bags (totes). A granulation plant was
procured and delivered to our Spanish Fork site during September
2021 with construction and commissioning planned for the second
half of 2022 which will further broaden our product range to
include high margin granulated organic phosphate.
The product has received Organic Certification by all three key
certification agencies in the USA - California (CDFA), Washington
State (WSDA) and the federal Organic Materials Review Institute
(OMRI). As a Direct Shipping Ore (DSO) it requires no
chemical/synthetic upgrade processes. Our rock contains low heavy
metal impurities, significantly higher available P(2) O(5) than any
other organic rock phosphate in North America, and a calcium
content of >25%.
Africa
Keras currently holds an 85% interest in the Nayéga manganese
project in Togo, which covers 19,903 hectares in northern Togo,
held through Société Générale des Mines SA (SGM). As set out in the
Chairman's Statement, SGM is still waiting for the issue of the
exploitation permit.
Sustainability
Keras is committed to responsible mining and upholding ESG best
practice across our business. We care about all our stakeholders
and are focused on looking to create value and benefits for all
whilst seeking to manage and mitigate the potential impacts that
our operations may have. We are focussed on mining an essential
resource that can contribute to a more sustainable future and
importantly sustainable and regenerative agriculture. With the
Diamond Creek mine we are running a simple operation with only
crushing & milling requirements and will look to maintain our
low carbon footprint. We are focused on meeting our commitments
across the ESG space and will continue to be proactive in this area
as we look to develop and sustain a positive legacy.
Risk Management
The Board regularly reviews the risks to which the Group is
exposed and ensures through its meetings and regular reporting that
these risks are minimised as far as possible.
The principal risks and uncertainties facing the Group at this
stage in its development are:
Market Risk
Unlike marketing globally traded, indexed commodities into
international markets, growing market share within the niche
organic fertiliser market within North America presents risk in
terms of pricing and volume.
The Group has employed a head of marketing to develop and
implement a marketing strategy which will be a key focus area to
build market share. The business has a range of existing customers,
three of which are anchor clients having provided commitments to
purchase a pleasing base load of our planned annual production. Our
marketing strategy rollout will include presence at industry trade
exhibitions and conferences, as well as regular regional direct
contact visits with a comprehensive schedule of contacts within the
wholesale and distribution segments of the organic fertiliser
market. Our business model will largely be driven by uptake from
co-operative type clients with wide distribution networks, rather
than selling directly to farmers themselves.
Exploration Risk
The Group's business has been primarily mineral exploration and
evaluation which are speculative activities and whilst the
Directors are satisfied that good progress is being made, there is
no certainty that the Group will be successful in the definition of
economic mineral deposits, or that it will proceed to the
development of any of its projects or otherwise realise their
value.
The Group aims to mitigate this risk when evaluating new
business opportunities by targeting areas of potential where there
is at least some historical drilling or geological data
available.
Resource Risk
All mineral projects have risk associated with defined grade and
continuity. Mineral reserves and resources are calculated by the
Group in accordance with accepted industry standards and codes but
are always subject to uncertainties in the underlying assumptions
which include geological projection and commodity price
assumptions.
The Group reports mineral resources and ore reserves in
accordance with internationally approved codes where our
operations/projects are located, which set minimum standards for
public reporting of mineral exploration results, mineral resources
and ore reserves.
Development Risk
Delays in permitting, financing and commissioning a project may
result in delays to the Group meeting development and/or production
targets. Changes in commodity prices can affect the economic
viability of mining projects and affect decisions on continuing
exploration activity.
Mining and Processing Technical Risk
Notwithstanding the completion of metallurgical testwork, trial
mining and pilot studies indicating the technical viability of a
mining operation, variations in mineralogy, mineral continuity,
ground stability, ground water conditions and other geological
conditions may still render a mining and processing operation
economically or technically non-viable.
The Group has a small team of mining professionals experienced
in geological evaluation, exploration, financing and development of
mining projects. To mitigate development risk, the Group
supplements this from time to time with engagement of external
expert consultants and contractors.
Environmental Risk
Exploration and development of a project can be adversely
affected by environmental legislation and the unforeseen results of
environmental studies carried out during evaluation of a project.
Once a project is in production unforeseen events can give rise to
environmental liabilities.
As Keras undertakes mining operations, any disturbance to the
environment during this phase is required to be rehabilitated in
accordance with the prevailing regulations of the countries in
which we operate as well as to international best-practice.
Given the Group's size and scale it is not considered practical
or cost effective to collect and report data on carbon
emissions.
Financing & Liquidity Risk
The Group has had an ongoing requirement to fund its activities
through the equity markets and may in future need obtain finance
for further project development. There is no certainty such funds
will be available when needed. To date, Keras has managed to raise
funds primarily through equity placements despite the very
difficult markets that currently exist for raising funding in the
junior mining industry.
Political Risk
All countries carry political risk that can lead to interruption
of activity. Politically stable countries can have enhanced
environmental and social permitting risks, risks of strikes and
changes to taxation whereas less developed countries can have, in
addition, risks associated with changes to the legal framework,
civil unrest and government expropriation of assets.
Partner Risk
Whilst there has been no past evidence of this, the Group can be
adversely affected if joint venture or equity partners are unable
or unwilling to perform their obligations or fund their share of
future developments. Keras no longer operates with either equity or
joint venture partners having secured 100% of the Diamond Creek
project.
Bribery Risk
The Group has adopted an anti-corruption and bribery policy and
whistle blowing policy under the Bribery Act 2010. Notwithstanding
this, the Group may be held liable for offences under that Act
committed by its employees or subcontractors, whether or not the
Group or the Directors had knowledge of the commission of such
offences.
Financial Instruments
Details of risks associated with the Group's financial
instruments are given in Note 26 to the financial statements. Keras
does not utilise any complex or derivative financial
instruments.
COVID-19
Travel and shipping restrictions in place globally during 2021
had a direct impact on timing and cost of delivery of plant and
equipment to the USA. However, given recent developments the
Directors do not believe that Covid 19 will have a material effect
on the Company or its operations going forward.
Insurance Coverage
The Group maintains a suite of insurance coverage that is
appropriate for the Group and Company. This is arranged via a
specialist mining insurance broker and coverage includes public and
products liability, travel, property and medical coverage and
assistance while Group employees and consultants are travelling on
Group business. This is reviewed at least annually and adapted as
the Group's scale and nature of activities changes. Keras also has
Directors and Officers insurance in place.
Internal Controls and Risk Management
The Directors are responsible for the Group's system of internal
financial control. Although no system of internal financial control
can provide absolute assurance against material misstatement or
loss, the Group's system is designed to provide reasonable
assurance that problems are identified on a timely basis and dealt
with appropriately.
In carrying out their responsibilities, the Directors have put
in place a framework of controls to ensure as far as possible that
ongoing financial performance is monitored in a timely manner, that
corrective action is taken and that risk is identified as early as
practically possible. The Directors review the effectiveness of
internal financial control at least annually.
The Board, subject to delegated authority, reviews capital
investment, property sales and purchases, additional borrowing
facilities, guarantees and insurance arrangements.
The Board takes account of the significance of social,
environmental and ethical matters affecting the business of the
Group. At this stage in the Group's development the Board has not
adopted a specific policy on Corporate Social Responsibility as it
has a limited pool of stakeholders other than its shareholders.
Rather, the Board seeks to protect the interests of Keras'
stakeholders through individual policies and through ethical and
transparent actions.
The Group has adopted an anti-corruption and bribery policy and
a whistle blowing policy as stated previously.
Shareholders
The Directors are always prepared, where practicable and subject
to confidentiality under the AIM Rules, to enter into dialogue with
shareholders to promote a mutual understanding of objectives. The
Annual General Meeting provides the Board with an opportunity to
informally meet and communicate directly with investors.
Employees
The Group operates primarily through contractors.
Notwithstanding this, the Group engages its employees to understand
all aspects of the Group's business and seeks to remunerate its
employees fairly, being flexible where practicable. The Group gives
full and fair consideration to applications for employment received
regardless of age, gender, colour, ethnicity, disability,
nationality, religious beliefs, transgender status or sexual
orientation. The Group takes account of employees' interests when
making decisions and welcomes suggestions from employees aimed at
improving the Group's performance.
The Group currently operates in the USA and Togo. It recruits
locally as many of its employees and contractors as
practicable.
The Company has four directors, all are male.
Suppliers and Contractors
The Group recognises that the goodwill of its contractors,
consultants and suppliers is important to its business success and
seeks to build and maintain this goodwill through fair dealings.
The Group has a prompt payment policy and seeks to settle all
agreed liabilities within the terms agreed with suppliers.
Contractors are appointed based on a detailed assessment of their
capabilities, capacity and track record.
Health and Safety
The Board recognises that it has a responsibility to provide
strategic leadership and direction in the development of the
Group's health and safety strategy in order to protect all of its
stakeholders. The Group does not have a formal health and safety
policy at this time. This is re-evaluated as and when the Group's
nature and scale of activities expand.
Section 172 statement
The Directors believe they have acted in the way most likely to
promote the success of the Company for the benefit of its members
as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
-- Consider the likely consequences of any decision in the long-term;
-- Act fairly between the members of the Company;
-- Maintain a reputation for high standards of business conduct;
-- Consider the interests of the Company's employees;
-- Foster the Company's relationships with suppliers, customers and others; and
-- Consider the impact of the Company's operations on the community and the environment.
The Company's operations and strategic aims are set out
throughout the Strategic Report and in the Chairman's Statement,
and relationships with stakeholders are also dealt with in the
Corporate Governance Statement.
Graham Stacey
Director
This Strategic Report was approved by the Board of Directors on
29 June 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 15 MONTHSED 31 DECEMBER 2021
15 months Year ended
ended 31 30 September
Notes December 2020
2021 GBP'000
GBP'000
Continuing operations
Revenue 452 -
Cost of sales (496) -
------------- -------------
Gross profit (44) -
Administrative and exploration expenses (1,448) (1,235)
Loss from operating activities (1492) (1,235)
------------- -------------
Finance costs 11 (43) (3)
Net finance costs (43) (3)
------------- -------------
Share of net loss of associates accounted for using the (116) (4)
equity method
Loss on change of ownership 15 (363) -
------------- -------------
Loss before taxation (2,014) (1,242)
Tax 12 - -
------------- -------------
Loss for the period/year (2,014) (1,242)
Other comprehensive income - items that may be
subsequently reclassified to profit or loss
Exchange translation on foreign operations 66 (15)
Total comprehensive loss for the period/year (1,948) (1,257)
============= =============
Loss attributable to:
Owners of the Company (1,729) (1,181)
Non-controlling interests (285) (61)
-------- --------
Loss for the period/year (2,014) (1,242)
======== ========
Total comprehensive loss attributable to:
Owners of the Company (1,670) (1,194)
Non-controlling interests (278) (63)
-------- --------
Total comprehensive loss for the period/year (1,948) (1,257)
======== ========
Earnings per share
Basic and diluted loss per share (pence) 22 (0.033) (0.040)
======== ========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
31 December 2021 30 September 2020
GBP'000 GBP'000
Notes
Assets
Property, plant and equipment 13 554 263
Intangible assets 14 4,606 1,069
Right of use asset 16 215 -
Investments accounted for using
the equity method 15 - 1,622
Non-current assets 5,375 2,954
----------------- ------------------
Inventory 18 273
Other investments 16 - -
Trade and other receivables 19 94 83
Cash and cash equivalents 20 166 438
----------------- ------------------
Current assets 533 521
----------------- ------------------
Total assets 5,908 3,475
================= ==================
Equity
Share capital 21 630 487
Share premium 4,033 2,637
Other reserves 111 16
Retained (deficit)/earnings (1,721) 8
----------------- ------------------
Equity attributable to owners of the
Company 3,053 3,148
Non-controlling interests 229 (140)
----------------- ------------------
Total equity 3,282 3,008
----------------- ------------------
Liabilities
Trade and other payables 24 1,658 467
Lease liabilities - current 16 107 -
----------------- ------------------
Current liabilities 1,765 467
----------------- ------------------
Trade and other payables 24 749 -
Lease liabilities - non-current 16 112 -
----------------- ------------------
Non-current liabilities 861 -
----------------- ------------------
Total liabilities 2,626 467
----------------- ------------------
Total equity and liabilities 5,908 3,475
================= ==================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 15 MONTHSED 31 DECEMBER 2021
Attributable to owners of the Company
Share Share Share Exchange Financial Retained Total Non-controlling Total
capital premium option reserve assets at earnings/(deficit) interests equity
/warrant FVOCI
reserve GBP'000 GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 October
2020 487 2,637 63 (47) - 8 3,148 (140) 3,008
Loss for the period - - - - - (1,729) (1,729) (285) (2,014)
Other comprehensive income - - - 58 - - 58 8 66
----------
Total comprehensive loss for the
period - - - 58 - (1,729) (1,671) (277) (1,948)
-------- -------- --------- --------- ---------- ------------------- -------- --------------- ----------
Issue of ordinary
shares 143 1,469 - - - - 1,612 - 1,612
Costs of share issue - (73) - - - - (73) - (73)
Share-based payment transactions - - 37 - - - 37 - 37
Non-controlling interest on
acquisition of subsidiary - - - - - - - 646 646
Transactions with owners,
recognised directly in equity 143 1,396 37 - - - 1,576 646 2,222
-------- --------- --------- ---------- ------------------- -------- --------------- ----------
Balance at 31 December 2021 630 4,033 100 11 - (1,721) 3,053 229 3,382
======== ======== ========= ========= ========== =================== ======== =============== ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 SEPTEMBER 2020
Attributable to owners of the Company
Share Share Share Exchange Financial Retained Total Non-controlling Total
capital premium option reserve assets at (deficit)/earnings interests equity
reserve FVOCI GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 October 2019 7,266 10,938 - (33) 3,459 (10,310) 11,320 (76) 11,244
Loss for the year - - - - - (1,181) (1,181) (61) (1,242)
Other comprehensive income - - - (16) - 4 (12) (3) (15)
-------- --------- ------- --------- ---------- ------------------- -------- ----------- --------
Total comprehensive loss for the year - - - (16) - (1,177) (1,193) (64) (1,257)
-------- --------- ------- --------- ---------- ------------------- -------- ----------- --------
Capital reduction (7,023) (10,938) - - - 17,961 - - -
Demerger and recycling of
OCI reserve - - - - (3,459) (6,464) (9,923) - (9,923)
Issue of ordinary shares 244 2,718 - - - - 2,962 - 2,962
Costs of share issue - (81) - - - - (81) - (81)
Share-based payment transactions - - 63 - - - 63 - 63
Transfer - - - 2 - (2) - - -
Total transactions with owners,
recognised directly in equity (6,779) (8,301) 63 2 (3,459) 11,495 (6,979) - (6,979)
--------- ------- --------- ---------- ------------------- -------- ----------- --------
Balance at 30 September 2020 487 2,637 63 (47) - 8 3,148 (140) 3,008
======== ========= ======= ========= ========== =================== ======== =========== ========
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 15 MONTHSED 31 DECEMBER 2021
15 months Year ended
ended 31 30 September
December 2020
2021 GBP'000
GBP'000
Cash flows from operating
activities
Loss from operating activities (2,014) (1,242)
Adjustments for:
Depreciation and amortisation 172 76
Share of loss of equity accounted associate 116 4
Compensation on cancellation of SARS scheme - 120
Equity-settled share-based payments 37 63
Foreign exchange differences 73 (39)
(1,616) (1,018)
Changes in:
- inventory (216) -
- trade and other receivables 111 2
- trade and other payables 540 278
Cash generated by/(used in) operating
activities (1,181) (738)
Finance costs - -
Taxes paid - -
Net cash generated by/(used in) operating
activities (1,181) (738)
---------- ----------------
Cash flows from investing
activities
Cash acquired on acquisition (note
15) 158
Acquisition of property, plant and (188) -
equipment
Exploration and licence expenditure (538) (1)
Investment in associate - (938)
Net cash used in investing
activities (568) (939)
---------- ----------------
Cash flows from financing
activities
Net proceeds from issue of share
capital 1,477 1,931
Net cash flows from financing
activities 1,477 1,931
---------- ----------------
Net (decrease)/increase in cash and cash
equivalents (272) 254
Cash and cash equivalents at beginning
of period/year 438 184
Cash and cash equivalents at 31 December/30
September 166 438
========== ================
The following significant non-cash transactions took place in
the period ended 31 December 2021:
-- Shares were issued to settle a total of GBP55,000 due to creditors.
-- The investment in Falcon Isle became a subsidiary as detailed
in note 15 and the assets and liabilities were acquired.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
31 December 30 September
2021 2020
Notes GBP'000 GBP'000
Assets
Property, plant and equipment 13 2 -
Investments 15 1,959 1,622
Non-current assets 1,961 1,622
------------ -------------
Other investments 16 - -
Loans 17 2,081 1,534
Trade and other receivables 19 20 70
Cash and cash equivalents 20 122 428
------------ -------------
Current assets 2,223 2,032
------------ -------------
Total assets 4,184 3,654
============ =============
Equity
Share capital 21 630 487
Share premium 4,033 2,637
Other reserves 100 63
Retained earnings/(deficit) (729) 285
------------ -------------
Total equity attributable to owners
of the Company 4,034 3,472
Liabilities
Trade and other payables 24 150 182
------------ -------------
Current liabilities 150 182
------------ -------------
Total liabilities 150 182
------------ -------------
Total equity and liabilities 4,184 3,654
============ =============
The Company has elected to take the exemption under Section 408
of the Companies Act 2006 from presenting the Parent Company profit
and loss account. The Parent Company loss for the period was
GBP1,014,000 (year to 30 September 2020: loss of GBP811,000).
The financial statements of Keras Resources PLC, company number
07353748, were approved by the Board of Directors and authorised
for issue on 29 June 2022. They were signed on its behalf by:
Brian Moritz, Director
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 31 DECEMBER 2021
Share Share premium Share option Financial Retained Total
capital /warrant assets at earnings/ equity
GBP'000 reserve FVOCI (deficit)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
October 2019 7,266 10,938 - 3,459 (10,401) 11,262
Loss for the
year - - - - (811) (811)
Other - - - - - -
comprehensive
income
----------- ----------------
Total
comprehensive
loss for the
year - - - - (811) (811)
--------- -------------- ---------------- ----------- ---------------- ---------
Capital
reduction (7,023) (10,938) - - 17,961 -
Demerger and
recycling of
OCI reserve - - - (3,459) (6,464) (9,923)
Issue of
ordinary shares 244 2,718 - - - 2,962
Costs of share
issue - (81) - - - (81)
Share-based
payment
transactions - - 63 - - 63
Transactions
with owners,
recognised
directly in
equity (6,779) (8,301) 63 (3,459) 11,497 (6,979)
--------- -------------- ---------------- ----------- ---------------- ---------
Balance at 30
September 2020 487 2,637 63 - 285 3,472
========= ============== ================ =========== ================ =========
Balance at 1 October 2020 487 2,637 63 - 285 3,472
Loss for the period - - - - (1,014) (1,014)
Other comprehensive income - - - - - -
---- ----------
Total comprehensive loss for the period - - - - (1,014) (1,014)
---- ------ ---- ---- ---------- ----------
Issue of ordinary shares 143 1,469 - - - 1,612
Costs of share issue - (73) - - - (73)
Share-based payment transactions - - 37 - - 37
Transactions with owners, recognised directly in
equity 143 1,396 37 - - 1,576
---- ------ ---- ---- ---------- ----------
Balance at 31 December 2021 630 4,033 100 - (729) 4,034
==== ====== ==== ==== ========== ==========
COMPANY STATEMENT OF CASH FLOWS
FOR THE PERIODED 31 DECEMBER 2021
15 months Year ended
ended 31 30 September
December 2020
2021 GBP'000
GBP'000
Cash flows from operating
activities
Loss from operating activities (1,014) (811)
Adjustments for:
Depreciation 1 -
Share of loss of associate 116 4
Impairment/write off of
loan - 4
Compensation on cancellation of SARS
scheme - 120
Equity-settled share-based
payments 37 63
Changes in:
- trade and other receivables 50 14
- trade and other payables 23 25
Cash generated by/(used in) operating
activities (787) (581)
Finance costs - -
Net cash generated by (used in)
operating activities (787) (581)
------------------------ --------------
Cash flows from investing
activities
Acquisition of property, (3) -
plant and equipment
Investment in associate/subsidiary (446) (938)
------------------------ --------------
Net cash used in investing
activities (449) (938)
------------------------ --------------
Cash flows from financing
activities
Net proceeds from issue of
share capital 1,477 1,931
Loans (to)/repaid by subsidiaries (547) (159)
Net cash flows from financing activities 930 1,772
------------------------ --------------
Net increase/(decrease) in cash and
cash equivalents (306) 253
Cash and cash equivalents at beginning
of period/year 428 175
Cash and cash equivalents at 31 December/30
September 122 428
======================== ==============
The following significant non-cash transactions took place in
the period ended 31 December 2021:
-- Shares were issued to settle a total of GBP55,000 due to creditors.
1. Reporting entity
Keras Resources PLC is a company domiciled in England and Wales.
The address of the Company's registered office is Coveham House,
Downside Bridge Road, Cobham KT11 3EP. The Group currently operates
as a miner of and explorer for mineral resources. The accounting
reference date has changed to 31 December to be coterminous with
the main trading subsidiaries.
2. Going concern
The Directors have adopted the going concern basis in preparing
the Group and Company financial statements. The Group's and
Company's business activities together with the factors likely to
affect its future development, performance and position are set out
in the Chairman's Statement and Strategic Report. In addition, note
25 to the Financial Statements includes the Group's policies and
processes for managing its financial risk management
objectives.
Since the end of the period, the Company has agreed to acquire
the minority 49% interest in Falcon Isle, and to repay loans made
by the vendor to Falcon Isle, for a total consideration of $3.2
million. This amount is payable in four annual instalments of
$800,000 commencing on 1 July 2022.
Also since the end of the period, the Company has raised a
further GBP1.95 million, before costs, by the issue of New Ordinary
Shares. Part of this will be used to pay the first instalment of
$800,000 to the vendor of Falcon Isle.
The Nayéga mine in Togo is in a position to commence operations
when the exploitation licence is granted. Capital expenditure to
expand production and working capital will be primarily provided in
the short term by a loan in association with an offtake agreement
which has been agreed in principle. Should the Company divest its
interest in the Nayéga mine, this is expected to be a cash flow
positive transaction.
The Directors do not believe that Covid 19 has had a material
effect on the Company or its operations other than travel
restrictions which have restricted the ability of management to
visit operations. This has been mitigated by increased home working
and use of electronic communications. Such travel restrictions have
now been removed in most instances.
On this basis, the Directors have a reasonable expectation that
the Group and Company have adequate resources to continue in
operational existence for the foreseeable future. As such, the
Directors continue to adopt the going concern basis of
accounting.
3. Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in
accordance with international accounting standards in conformity
with the Companies Act 2006("IFRSs"), and the Companies Act 2006 as
applicable to entities reporting in accordance with IFRS.
(b) Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis unless otherwise stated.
(c) Functional and presentation currency
These consolidated financial statements are presented in Pounds
Sterling ('GBP' or 'GBP'), which is the Group's functional currency
and is considered by the Directors to be the most appropriate
presentation currency to assist the users of the financial
statements. All financial information presented in GBP has been
rounded to the nearest thousand, except when otherwise
indicated.
(d) Use of estimates and judgements
The preparation of the consolidated financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised if the revision affects
only that period, or in the period of revision and future periods
of the revision if it affects both current and future periods.
Critical estimates and assumptions that have the most
significant effect on the amounts recognised in the consolidated
financial statements and/or have a significant risk of resulting in
a material adjustment within the next financial year are as
follows:
-- Carrying value of intangible assets - Notes 4(e)(i) and
14
-- Intercompany receivables (Company only) - Note 19
-- Carrying value of investment in associate - Note 15
-- Fair value of share options and warrants - Note 21
4. Significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by Group
entities.
(a) Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group. The
consideration transferred in the acquisition is generally measured
at fair value, as are identifiable net assets acquired. Any
goodwill that arises is tested annually for impairment. Any gain on
a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to
the issue of debt or equity securities. The consideration
transferred does not include amounts related to the settlement of
pre-existing relationships. Such amounts generally are recognised
in profit or loss.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases. On disposal of
subsidiaries, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as
if the Group had directly disposed of the related assets or
liabilities. This might mean that amounts previously recognised in
other comprehensive income are reclassified to profit or loss.
(iii) Associates
Investments in associates are accounted for using the equity
method of accounting after initially being recognised at cost.
Loans to associates denominated in US$ are recognised in sterling
in the financial statements at the period end exchange rate.
(iv) Loss of control
When the Group loses control over a subsidiary, it derecognises
the assets and liabilities of the subsidiary, and any related
non-controlling interests and other components of equity. Any
resulting gain or loss is recognised in profit or loss. Any
interest retained in the former subsidiary is measured at fair
value when control is lost.
(v) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements.
(b) Foreign currency
Transactions in foreign currencies are translated into the
respective functional currencies of Group entities at exchange
rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies are translated into
the functional currency at the reporting date.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value in a foreign currency
are translated to the functional currency at the exchange rate when
the fair value was determined. Non-monetary items that are measured
based on historical cost in a foreign currency are translated at
the exchange rate at the date of the transaction.
(i) Foreign operations
The assets and liabilities of foreign operations, including
goodwill and the fair value adjustments arising on acquisition, are
translated to GBP at exchange rates at the reporting date. The
income and expenses of foreign operations are translated to GBP at
exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other
comprehensive income and accumulated in the translation reserve
except to the extent that the translation difference is allocated
to non-controlling interests. When a foreign operation is disposed
of in its entirety or partially such that control, significant
influence or joint control is lost, the cumulative amount in the
translation reserve related to that foreign operation is
reclassified to profit or loss as part of the gain or loss on
disposal. If the Group disposes of part of its interest in a
subsidiary but retains control, then the relevant proportion of the
cumulative amount is reattributed to non-controlling interests.
When the Group disposes of only part of an associate or joint
venture while retaining significant influence or joint control, the
relevant proportion of the cumulative amount is reclassified to
profit or loss.
(c) Financial instruments
(i) Financial assets
The Group's financial assets measured at amortised cost comprise
trade and other receivables, cash and cash equivalents and
financial assets at fair value through other comprehensive income
in the consolidated statement of financial position.
Trade receivables and intra group balances are initially
recognised at fair value. New impairment requirements use an
expected credit loss model to recognise an allowance. For
receivables a simplified approach to measure expected credit losses
during a lifetime expected loss allowance is available and has been
adopted by the Group. During this process the probability of
non-payment of the receivables is assessed. This probability is
then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the
loss being reported within the consolidated statement of
comprehensive income. On confirmation that the trade and intra
group receivable will not be collectable, the gross carrying value
of the asset is written off against the provision.
Financial assets at fair value through other comprehensive
income
These assets are initially measured at fair value. Subsequent to
initial recognition, they are measured at fair value and changes
therein, other than impairment losses and interest income, are
recognised in OCI and accumulated in the fair value reserve. When
these assets are derecognised, any related balance within the FVOCI
reserve is reclassified to retained earnings.
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued and
subordinated liabilities on the date that they are originated. All
other financial liabilities are recognised initially on the trade
date, which is the date that the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities into
the other financial liabilities category. Such financial
liabilities are recognised initially at fair value less any
directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised
cost using the effective interest method.
Other financial liabilities comprise trade and other
payables.
(iii) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
(d) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less
accumulated depreciation and any accumulated impairment losses.
Cost includes expenditure that is directly attributable to the
acquisition of the asset.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and
equipment (calculated as the difference between the net proceeds
from disposal and the carrying amount of the item) is recognised in
profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it is probable
that the future economic benefits associated with the expenditure
will flow to the Group. Ongoing repairs and maintenance is expensed
as incurred.
(iii) Depreciation
Items of property, plant and equipment are depreciated on a
straight-line basis in the statement of comprehensive income over
the estimated useful lives of each component.
Items of property, plant and equipment are depreciated from the
date that they are installed and are ready for use, or in respect
of internally constructed assets, from the date that the asset is
completed and ready for use.
The estimated useful lives of significant items of property,
plant and equipment are as follows:
-- plant and equipment 10 years
-- office equipment 2 years
-- computer equipment 2 years
-- motor vehicles 5 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
(e) Intangible assets
(i) Prospecting and exploration rights
Rights acquired with subsidiaries are recognised at fair value
at the date of acquisition. Other rights acquired and evaluation
expenditure are recognised at cost.
(ii) Other intangible assets
Other intangible assets that are acquired by the Group and have
finite useful lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in profit or loss as
incurred.
(iv) Amortisation
Intangible assets are amortised in profit or loss over their
estimated useful lives, from the date that they are available for
use.
The estimated useful lives are as follows:
-- Prospecting and exploration rights - Life of mine based on units of production
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
Amortisation is included within administrative expenses in the
statement of comprehensive income.
(f) Impairment
(i) Non-derivative financial assets
A financial asset not classified as at fair value through profit
or loss is assessed at each reporting date to determine whether
there is objective evidence that it is impaired. A financial asset
is impaired if there is objective evidence of impairment as a
result of one or more events that occurred after the initial
recognition of the asset, and had an impact on the estimated future
cash flows from that asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes
default or delinquency by a debtor, restructuring of an amount due
to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, adverse
changes in the payment status of borrowers or issuers, economic
conditions that correlate with defaults or the disappearance of an
active market for a security. In addition, for an investment in an
equity security, a significant or prolonged decline in its fair
value below its cost is objective evidence of impairment.
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial assets
measured at amortised cost (loans and receivables) at both a
specific asset and collective level. All individually significant
assets are assessed for specific impairment. Those found not to be
specifically impaired are then collectively assessed for any
impairment that has been incurred but not yet identified. Assets
that are not individually significant are collectively assessed for
impairment by grouping together assets with similar risk
characteristics.
In assessing collective impairment, the Group uses historical
trends of the probability of default, the timing of recoveries and
the amount of loss incurred, adjusted for management's judgement as
to whether current economic and credit conditions are such that the
actual losses are likely to be greater or less than suggested by
historical trends.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the asset's original effective interest rate. Losses
are recognised in profit or loss and reflected in an allowance
against loans and receivables. Interest on the impaired asset
continues to be recognised. When an event occurring after the
impairment was recognised causes the amount of impairment loss to
decrease, the decrease in impairment loss is reversed through
profit or loss.
Financial assets at fair value through other comprehensive
income
Impairment losses on financial assets at FVOCI are recognised by
reclassifying the losses accumulated in the fair value reserve to
profit or loss. The amount reclassified is the difference between
the acquisition cost (net of any principal repayment and
amortisation) and the current fair value, less any impairment
previously recognised in profit or loss. Impairment losses
recognised in profit or loss for an investment in an equity
instrument classified as FVOCI are not reversed through profit or
loss.
(ii) Non-financial assets
The carrying amounts of the Group's non-financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the
asset's recoverable amount is estimated. Indefinite-lived
intangible assets are tested annually for impairment or when there
is an indication of impairment. An impairment loss is recognised if
the carrying amount of an asset or Cash Generating Unit ('CGU')
exceeds its recoverable amount.
The recoverable amount of an asset of CGU is the greater of its
value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset or CGU. For the purpose of impairment
testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or CGUs.
Subject to an operating segment ceiling test, CGUs to which
goodwill has been allocated are aggregated so that the level at
which impairment testing is performed reflects the lowest level at
which goodwill is monitored for internal reporting purposes.
Goodwill acquired in a business combination is allocated to groups
of CGUs that are expected to benefit from the synergies of the
combination.
Impairment losses are recognised in profit or loss. Impairment
losses recognised in respect of CGUs are allocated first to reduce
the carrying amount of any goodwill allocated to the CGU (group of
CGUs), and then to reduce the carrying amounts of the other assets
in the CGU (group of CGUs) on a pro rata basis.
An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
(g) Employee benefits
Share-based payments
The grant-date fair value of share-based payment awards granted
to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. The amount
recognised as an expense is adjusted to reflect the number of
awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately
recognised as an expense is based on the number of awards that meet
the related service and non-market performance conditions at the
vesting date. For share-based payment awards with non-vesting
conditions, the grant-date fair value of the share-based payment is
measured to reflect such conditions and there is no adjustment for
differences between expected and actual outcomes.
(i) Revenue
Revenue from the sale of processed products is recognised when
ownership of the product passes to the purchaser in accordance with
the relevant sales contract. Ownership passes either upon delivery
or once the product is collected where customers arrange
delivery.
(j) Finance income and finance costs
Finance income comprises interest income on bank funds. Interest
income is recognised as it accrues in profit or loss, using the
effective interest method.
Finance costs comprise interest expense on borrowings. Borrowing
costs are recognised in profit or loss in the period in which they
are incurred.
(k) Taxation
Tax expense comprises current and deferred tax. Current and
deferred tax is recognised in profit or loss except to the extent
that it relates to a business combination, or items recognised
directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustment to
tax payable in respect of previous years. Current tax payable also
includes any tax liability arising from the declaration of
dividends.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries
and jointly controlled entities to the extent that it is probable
that they will not reverse in the foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to taxes levied by the same tax authority
on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis
or their tax assets and liabilities will be realised
simultaneously.
Deferred tax assets are recognised for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised; such
reductions are reversed when the probability of future taxable
profits improves.
(l) Leases
The Group leases certain property, plant and equipment. Leases
of plant and equipment where the Group has substantially all the
risks and rewards of ownership are classified as finance leases
under IFRS 16. Finance leases are capitalised on the lease's
commencement at the lower of the fair value of the leased assets
and the present value of the minimum lease payments. Other leases
are either small in value or cover a period of less than 12
months.
The lease liability is initially measured at the present value
of the lease payments that are not paid. Lease payments generally
include fixed payments less any lease incentives receivable. The
lease liability is discounted using the interest rate implicit in
the lease or, if that rate cannot be readily determined, the
Group's incremental borrowing rate. The Group estimates the
incremental borrowing rate based on the lease term, collateral
assumptions, and the economic environment in which the lease is
denominated. The lease liability is subsequently measured at
amortized cost using the effective interest method. The lease
liability is remeasured when the expected lease payments change as
a result of new assessments of contractual options and residual
value guarantees.
The right-of-use asset is recognised at the present value of the
liability at the commencement date of the lease less any incentives
received from the lessor. Added to the right-of-use asset are
initial direct costs, payments made before the commencement date,
and estimated restoration costs. The right-of-use asset is
subsequently depreciated on a straight-line basis from the
commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term. The
right-of-use asset is periodically reduced by impairment losses, if
any, and adjusted for certain remeasurements of the lease
liability.
Each lease payment is allocated between the liability and
finance charges. The corresponding rental obligations, net of
finance charges, are included in lease liabilities, split between
current and non-current depending on when the liabilities are due.
The interest element of the finance cost is charged to the
Statement of Profit and Loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. Assets obtained under finance leases
are depreciated over their useful lives. The lease liabilities are
shown in Note 6
(m) Inventories
Inventories for processed material and ore stockpiles are valued
at the lower of cost and net realisable value. Costs allocated to
processed material are based on average costs and include all costs
of purchase, conversion and other costs in bringing these
inventories to their existing location and condition. Costs
allocated to ore stockpiles are based on average costs, which
include an appropriate share of direct mining costs, direct labour
and material costs, mine site overhead, depreciation and
amortisation. If carrying value exceeds net realisable amount, a
write down is recognised. The write down may be reversed in a
subsequent period if the circumstances which caused it no longer
exist.
(n) Segment reporting
Segment results that are reported to management include items
directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
(o) Equity reserves
Share premium includes any premiums received on issue of share
capital. Any transaction costs associated with the issue of shares
are deducted from share premium.
The share option/warrant reserve is used to recognise the fair
value of equity-settled share based payment transactions.
The exchange reserve is used to record exchange differences
arising from the translation of foreign subsidiaries into the
presentation currency.
The financial assets at FVOCI reserve is used to record
unrealised accumulated changes in fair value on financial
assets.
5. New standards and interpretations
There are no amendments to International Financial Reporting
Standards (IFRS) and International Accounting Standards (IAS) that
have been implemented by the Group in the period ended 31 December
2021 and have changed the Group's accounting policies.
Standards, Amendments to published Standards and Interpretations
issued but not yet effective
Other new and amended standards and Interpretations issued by
the IASB that will apply for the first time in the next annual
financial statements are not expected to impact the Group as they
are either not relevant to the Group's activities or require
accounting which is consistent with the Group's current accounting
policies.
6. Determination of fair values
A number of the Group's accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and/or disclosure purposes based on the
following methods. When applicable further information about the
assumptions made in determining fair values is disclosed in the
notes specific to that asset or liability.
(i) Property, plant and equipment
The fair value of property, plant and equipment recognised as a
result of a business combination is the estimated amount for which
a property could be exchanged on the date of acquisition between a
willing buyer and a willing seller in an arm's length transaction
after proper marketing wherein the parties had each acted
knowledgeably. The fair value of items of plant and equipment is
based on the market approach and cost approaches using quoted
market prices for similar items when available and depreciated
replacement cost when appropriate. Depreciated replacement cost
reflects adjustments for physical deterioration as well as
functional and economic obsolescence.
(ii) Intangible assets
The fair value of other intangible assets is based on the
discounted cash flows expected to be derived from the use and
eventual sale of the assets.
(iii) Trade and other receivables
The fair value of trade and other receivables is estimated at
the present value of future cash flows, discounted at the market
rate of interest at the reporting date. This fair value is
determined for disclosure purposes or when such assets are acquired
in a business combination.
(iv) Share-based payments
The fair value of the employee share options is measured using
the Black-Scholes formula. Measurement inputs include the share
price on the measurement date, the exercise price of the
instrument, expected volatility (based on an evaluation of the
Company's historic volatility, particularly over the historic
period commensurate with the expected term), expected term of the
instruments (based on historical experience and general option
holder behaviour), expected dividends, and the risk-free interest
rate (based on government bonds). Service and non-market
performance conditions attached to the transactions are not
taken into account in determining fair value.
(v) Investments - other
When one is available, the Group measures the fair value of an
instrument using the quoted price in an active market for that
instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume
to provide pricing information on an ongoing basis. A discount is
applied to the value of any Performance shares to reflect the
possibility that the milestones for conversion into ordinary shares
may not be met.
7. Operating segments
The Group considers that it operated during the period in two
distinct business areas, being that of manganese production and
exploration in West Africa and phosphate mining in Utah, USA. These
business areas form the basis of the Group's operating segments.
For each segment, the Group's Managing Director (the chief
operating decision maker) reviews internal management reports on at
least a quarterly basis.
Other operations relate to the Group's administrative functions
conducted at its head office and by its intermediate holding
company together with consolidation adjustments.
Information regarding the results of each reportable segment is
included below. Performance is measured based on segment result
before tax, as included in the internal management reports that are
reviewed by the Group's Managing Director. Segment results are used
to measure performance as management believes that such information
is the most relevant in evaluating the performance of certain
segments relative to other entities that operate within the
exploration industry.
Information about reportable segments
15 months ended 31 December 2021
Other
Manganese Phosphate operations Total
GBP'000 GBP'000 GBP'000 GBP'000
External revenue - 451 - 451
Cost of sales - 495 495
Interest expense - - - -
Depreciation, amortisation
and impairment 43 143 1 187
Share of associate
loss to date of
becoming
subsidiary - 116 - 116
(Loss)/profit before
tax (60) (569) (1,385) (2,014)
Assets 1,535 4,229 144 5,908
Exploration and
capital expenditure 1,332 3,274 - 4,606
Liabilities 360 2,113 155 2,628
Year ended 30 September 2020
Other
Manganese Phosphate operations Total
GBP'000 GBP'000 GBP'000 GBP'000
External revenue - - - -
Interest expense - - - -
Depreciation, amortisation
and impairment 76 - - 76
Share of associate loss - (4) (4)
(Loss)/profit before tax (405) (4) (833) (1,242)
Assets 1,011 1,622 842 3,475
Exploration and capital
expenditure 1 - - 1
Liabilities 285 - 182 467
Information about geographical segments
15 months ended 31 December 2021
West Africa US Other Total
GBP'000 GBP'000 GBP'000 GBP'000
External revenue - 451 - 451
Cost of sales - 496 - 496
Interest expense - - - -
Depreciation, amortisation
and impairment 43 143 1 187
Share of associate
loss to date of becoming
subsidiary - (116) - (116)
(Loss)/profit before
tax (44) (569) (1,385) (2,014)
Assets 1,541 4,229 138 5,908
Exploration and capital
expenditure 1,332 3,274 - 4,606
Liabilities 360 2,113 155 2,628
Year ended 30 September 2020
West
Africa US Other Total
GBP'000 GBP'000 GBP'000 GBP'000
External revenue - - - -
Interest expense - - - -
Depreciation, amortisation
and impairment 76 - - 76
Share of associate
loss - (4) - (4)
(Loss)/profit before
tax (405) (4) (833) (1,242)
Assets 1,011 1,622 842 3,475
Exploration and capital
expenditure 1 - - 1
Liabilities 285 - 182 467
8. Expenses
15 months Year ended
Expenses include: ended 31 December 30 September
2021 2020
GBP'000 GBP'000
Depreciation and amortisation expense 44 76
Auditor's remuneration
- Audit fee 33 23
Foreign exchange differences 12 4
=================== ==============
Auditor's remuneration for the period in respect of the Company
amounted to GBP11,000 (year ended 30 September 2020:
GBP10,000).
9. Personnel expenses
15 months Year ended
ended 31 30
December September
2021 2020
GBP'000 GBP'000
Wages and salaries 672 446
Fees 100 158
Equity-settled share-based payments (see note
23) 37 183
809 787
========== ===========
Fees in respect of the services of D Reeves are payable to a
third party, Wilgus Investments (Pty) Limited.
Fees in respect of the services of R Lamming are payable to a
third party, Parallel Resources Limited for part of the previous
period.
The average number of employees (including directors) during the
period was:
15 months Year ended
ended 31 30
December September
2021 2020
Directors 4 3
Key management personnel - 1
Other 3 3
7 7
====== ======
10. Directors' emoluments
15 months ended 31 December 2021
Executive Non-executive
directors directors Total
GBP'000
GBP'000 GBP'000
Wages and salaries (incl. fees) 234 82 316
234 82 316
============== ============= ========
Year ended 30 September 2020
Executive Non-executive
directors directors Total
GBP'000
GBP'000 GBP'000
Wages and salaries (incl. fees) 152 66 218
Compensation payment resulting
from SARS cancellation 120 - 120
272 66 338
================ ============ ============
These amounts are disclosed by director in the Directors' report
on page 15.
Emoluments disclosed above include the following amounts payable
to the highest paid director:
15 months Year ended
ended 31 30
December September
2021 2020
GBP'000 GBP'000
Emoluments for qualifying services 219 272
========= =========
Key management personnel
Included in note 10 are emoluments paid to key management
personnel in the period which amounted to GBP70,000 (year ended 30
September 2020: GBP71,000).
11. Finance costs
Recognised in loss for period
15 months ended Year ended
31 December 30 September
2021 2020
GBP'000 GBP'000
Other 43 3
---
43 3
===
12. Taxation
Current tax
15 months Year ended
ended 31 30 September
December 2020
2021 GBP'000
GBP'000
Tax recognised in profit or loss
Current tax
Current period - -
========== ==============
Deferred tax
Origination and reversal of temporary - -
differences
========== ==============
Total tax - -
========== ==============
Reconciliation of effective tax rate
15 months Year ended
ended 31 30 September
December 2020
2021 GBP'000
GBP'000
Loss before tax (continuing operations) (2,014) (1,242)
========== ==============
Tax using the Company's domestic tax rate of
19.0% (2020: 19.0%) (383) (236)
Effects of:
Expenses not deductible for tax purposes 2 3
Overseas (profits)/losses 116 93
Equity-settled share-based payments 7 12
Tax losses carried forward not recognised as
a deferred tax asset 258 128
- -
========== ==============
None of the components of other comprehensive income have a tax
impact.
Factors that may affect future tax charges
At the period end, the Group had unused tax losses available for
offset against suitable future profits of approximately
GBP7,128,000 (year ended 30 September 2020: GBP5,771,000). A
deferred tax asset has not been recognised in respect of such
losses due to uncertainty of future profit streams.
13. Property, plant and equipment
Group
Plant and Office Motor vehicles
equipment and computer Total
equipment GBP'000
GBP'000 GBP'000 GBP'000
Cost
Balance at 1 October 2019 360 31 19 410
Additions - - - -
Disposals (39) (6) (19) (64)
Effect of movements in exchange
rates 8 - - 8
----------- -------------- --------------- ----------
Balance at 30 September 2020 329 25 - 354
----------- -------------- --------------- ----------
Balance at 1 October 2020 329 25 - 354
Acquisition of Falcon
Isle 172 172
Additions 185 3 - 188
Disposals - - - -
Effect of movements in exchange
rates (25) - - (25)
----------- -------------- --------------- ----------
Balance at 31 December 2021 661 28 - 689
----------- -------------- --------------- ----------
Depreciation and impairment
provisions
Balance at 1 October 2019 29 30 19 78
Depreciation for the year 76 - - 76
Depreciation on disposals (39) (6) (19) (64)
Effect of movements in exchange
rates 1 - - 1
Balance at 30 September 2020 67 24 - 91
----------- -------------- --------------- ----------
Balance at 1 October 2020 67 24 - 91
Depreciation for the period 34 2 - 36
Depreciation on disposals - - - -
Effect of movements in exchange
rates 8 - - 8
----------- -------------- --------------- ----------
Balance at 31 December 2021 109 26 - 135
----------- -------------- --------------- ----------
Carrying amounts
At 30 September 2019 331 1 - 332
=========== ============== =============== ==========
At 30 September 2020 262 1 - 263
=========== ============== =============== ==========
At 31 December 2021 552 2 - 554
=========== ============== =============== ==========
Company
Plant and Computer
equipment equipment Total
GBP'000 GBP'000 GBP'000
Cost
Balance at 1 October 2019 - 5 5
Transfers - - -
---------- --------- ----------
Balance at 30 September 2020 - 5 5
---------------
Balance at 1 October 2020 - 5 5
Additions - 3 3
---------------
Balance at 31 December 2021 - 8 8
--------------- --------- ----------
Depreciation and impairment provisions
Balance at 1 October 2019 - 5 5
Depreciation for the year - - -
---------- --------- ----------
Balance at 30 September 2020 - 5 5
---------------
Balance at 1 October 2020 - 5 5
Depreciation for the period - 1 1
---------------
Balance at 31 December 2021 - 6 6
--------------- --------- ----------
Carrying amounts
At 30 September 2019 - - -
========== ========= ==========
At 30 September 2020 - - -
========== ========= ==========
At 31 December 2021 - 2 2
=============== ========= ==========
14. Intangible assets - Group
Prospecting
and exploration
rights
GBP'000
Cost
Balance at 1 October 2019 1,206
Additions 1
Disposals -
Effect of movement in exchange
rates 20
Balance at 30 September 2020 1,227
-----------------
Balance at 1 October 2020 1,227
Acquisition of Falcon Isle (note
15) 3,046
Additions 538
Disposals (158)
Effect of movements in exchange
rates (10)
Balance at 31 December 2021 4,643
------
Amortisation and impairment losses
Balance at 1 October 2019 155
Impairment -
Amortisation -
Disposals -
Effect of movements in exchange rates 3
----
Balance at 30 September 2020 158
----
Balance at 1 October 2020 158
Impairment -
Amortisation 37
Disposals (158)
Effect of movements in exchange -
rates
------
Balance at 31 December 2021 37
------
Carrying amounts
Balance at 30 September 2019 1,051
======
Balance at 30 September 2020 1,069
======
Balance at 31 December 2021 4,606
======
The carrying value of the prospecting and exploration rights is
supported by the estimated resource and current market values.
15. Investments in subsidiaries and associates
Company - subsidiaries
2021 2020
GBP'000 GBP'000
Equity investments
Balance at beginning of period - -
Additions - from associates 1,959 -
Disposals - -
Balance at 31 December/30 September 1,959 -
======== ========
Country Ownership interest
of
Activity incorporation 2021 2020
Directly
Southern Iron Limited Investment Guernsey 100% 100%
Falcon Isle Resources
LLC Mining USA 51% 40%
Indirectly
Société Générale
des Mines SA Exploration Togo 85% 85%
Registered offices of subsidiary companies are:
Southern Iron Limited, 1st Floor, Elizabeth House, Les Ruettes
Brayes, St Peter Port, Guernsey
Société Générale des Mines, Quartier Adidogome Apedokoe 02, BP
20022, Lome, Togo
Falcon Isle Resources LLC, 8 The Green, Suite B8, Dover, Kent,
Delaware 19901, USA
Group and Company - associates
2021 2020
GBP'000 GBP'000
Accounted for using the equity method
At 1 October 1,622 -
Additions - including acquisition costs 453 1,626
Share of loss for the period (116) (4)
Transfer to investment in subsidiary (1,959) -
At 31 December/30 September - 1,622
========= =========
The interest in Falcon Isle was acquired for nominal
consideration under a binding heads of terms dated 28 July 2020.
Under this agreement the Company agreed to provide US$2.5m in loans
to Falcon Isle payable in agreed tranches. Falcon Isle is the 100%
owner of the Diamond Creek phosphate mine located in in Utah (USA)
which is a fully permitted, high grade direct shipping ore organic
phosphate operating mine.
At 30 September 2020 the Company had advanced US$ 1.9m to Falcon
Isle, resulting in an equity interest of 40% and bringing the cost
of the investment in the associate to GBP1,626,000.
On 31 December 2020 the Company advanced the balance of $0.6m
and its equity interest has increased to a controlling interest of
51%.
The initial acquisitions were accounted for under the equity
method of accounting but upon achieving control on 31 December
2020, the acquisition method of accounting has been applied.
Since 31 December 2021, on 29 March 2022, the Company agreed to
acquire the outstanding 49% equity interest in Falcon Isle and
loans totalling $1,816,527 made by the vendor to Falcon Isle, for
total consideration of $3.2 million, payable in four annual
tranches commencing on 1 July 2022.
From the date of the acquisition on 31 December 2020 to 31
December 2021, Falcon Isle Resources recognized revenue of
GBP452,000 and incurred a loss of GBP569,000. If the acquisition
had occurred on 1 October 2020 the Group's revenue and loss for the
15-month period ended 31 December 2021 would have been GBP548,000
and GBP2,261,000 respectively.
The fair value of assets and liabilities acquired on
acquisitions are as follows:
Fair value
GBP'000
Intangibles 3,046
Fixed assets 172
Inventory 57
Receivables 122
Bank balances and cash 158
Trade and other payables (17)
Loans (1,330)
2,208
The investment in associate was revalued prior to acquisition to
fair value based on the price paid to acquire the additional 11%
shareholding. Under IFRS 3, on acquisition of the controlling
stake, the Group remeasured its original 40% investment in Falcon
Isle. This led to a loss on change of ownership of GBP363,000 being
recognised in the Consolidated Statement of Comprehensive
Income.
On acquisition the non-controlling interest, valued based upon
net assets at acquisition, was valued at GBP645,000. No goodwill
has arisen from the acquisition.
16. Leases
The following lease liabilities arose in respect of the
recognition of right of use assets with a net book value of
GBP219,000. The Group holds one lease that it accounts for under
IFRS 16.
The right of use assets are as follows:
GBP000
------------------------------- ------- ------ -------------
Balance at 30 September 2020 -
Additions 314
Depreciation (99)
------------------------------- -------------- -------------
Balance at 31 December 2021 215
------------------------------- -------------- -------------
The lease liability is as follows:
GBP000
------------------------------------------------ --------
Balance at 30 September 2020 -
------------------------------------------------ --------
Addition 314
------------------------------------------------ --------
Principal reduction (105)
------------------------------------------------ --------
Finance cost 10
------------------------------------------------ --------
Balance at 31 December 2021 219
------------------------------------------------ --------
Less: Current portion (107)
------------------------------------------------ --------
Non-current portion 112
------------------------------------------------ --------
A maturity analysis of the undiscounted minimum lease payments
due are as follows:
GBP000
------------------------------------------- ------
Lease liabilities - minimum lease payments
No later than one year 116
Later than one year and no later than five
years 116
Later than five years -
Total 232
------------------------------------------- ------
17. Loans
Company - current
2021 2020
GBP'000 GBP'000
Balance at beginning of period 1,534 1,379
Funds advanced to subsidiaries 547 159
Repaid/impaired - (4)
Balance at 31 December/30 September 2,081 1,534
========= =========
All loans to subsidiaries are currently unsecured and interest
free and repayable on demand. All loans are denominated in GBP.
18. Inventories
2021 2020
GBP'000 GBP'000
Phosphate, including processed 273 -
material held for sale
273 -
========= =========
19. Trade and other receivables
Group
2021 2020
GBP'000 GBP'000
Trade receivables 7 -
Other receivables 87 71
Prepayments - 12
--------- ---------
94 83
========= =========
Company
2021 2020
GBP'000 GBP'000
Other receivables 20 58
Prepayments - 12
20 70
========= =========
Other receivables are stated at their nominal value less
allowances for non-recoverability.
The Group and Company's exposure to credit and currency risk is
disclosed in note 24 and 25. Trade receivables are net of a
provision for bad debts of GBPnil (2020: GBPnil)
20. Cash and cash equivalents
Group
2021 2020
GBP'000 GBP'000
Bank balances 166 438
Cash and cash equivalents 166 438
========= =========
Company
2021 2020
GBP'000 GBP'000
Bank balances 122 428
Cash and cash equivalents 122 428
========= =========
There is no material difference between the fair value of cash
and cash equivalents and their book value.
21. Capital and reserves
Share capital
Number of old ordinary shares GBP0.001 each
31 December 2021 30 September 2020
In issue at beginning of year - 2,491,358,439
Issued for cash - 7,000,000
Issued in settlement of debt - -
Cancelled under capital reduction - (2,498,358,439)
In issue at 31 December/30 September - fully paid - -
Number of new ordinary shares GBP0.0001 each
31 December 2021 30 September 2020
4,866,007,851
In issue at beginning of period - -
Resulting from capital reduction 1,369,565,217 2,498,358,439
Issued for cash 1,646,678,326
Issued in settlement of debt 60,500,000 720,971,086
In issue at 31 December/30 September - fully paid 6,296,073,068 4,866,007,851
Number of deferred shares
of GBP0.004 each
31 December 2021 30 September 2020
In issue at beginning of year - 1,193,794,390
Cancelled under capital reduction - (1,193,794,390)
------------------ ------------------
In issue at 31 December/30 September - fully paid - -
================== ==================
Ordinary and deferred share capital
31 December 2021 30 September 2020
GBP'000 GBP'000
Balance at beginning of year 487 7,266
Share issues 143 244
Deferred shares cancelled - (4,775)
Capital reduction - (2,248)
Balance at 31 December/30 September 630 487
================== ===================
All ordinary shares rank equally with regard to the Company's
residual assets. The holders of ordinary shares are entitled to
receive dividends as declared from time to time, and are entitled
to one vote per share at general meetings of the Company.
Issues of ordinary shares
On 18 December 2020, 400,000,000 ordinary shares were issued for
cash at GBP0.0011 per share.
On 18 December 2020 B Moritz and D Reeves, conditionally agreed
to subscribe for 36,363,636 and 63,636,364 shares each at GBP0.0011
per share, these were issued on 18 January 2021 following a General
Meeting to grant increased authority to issue shares.
On 18 January 2021, 869,565,217 ordinary shares were agreed to
be issued at GBP0.00115 per share, of these, B Moritz conditionally
agreed to subscribe for 17,391,304 shares and R Lamming
conditionally agreed to subscribe for 26,086,957 shares in lieu of
part of his salary. Of these shares, 600,000,000 were issued on 18
January 2021 and the balance of 269,565,217 were issued on 15
February 2021 following a General Meeting to grant increased
authority to issue shares.
On 18 January 2021, the company conditionally agreed to issue
48,000,000 ordinary shares at GBP0.00115 per share in settlement of
amounts owing to advisors. These were issued on 15 February 2021
following a General Meeting to grant increased authority to issue
shares.
On 8 November 2021 G Stacey agreed to convert GBP7,500 of his
outstanding fees into 12,500,000 new ordinary shares of 0.01pence
each at a price of 0.06p per share.
Warrants
31 December 2021 30 September 2020
Average Number Average Number
exercise exercise
price price
In issue at beginning of period 0.24p 984,357,334 0.36p 7,000,000
Lapsed 0.24p (984,357,334) - -
Issued in period 0.22p 250,000,000 0.24p 984,357,334
Lapsed 0.22p (250,000,000) - -
Issued in period 0.18p 434,785,608 - -
Exercised in period - - 0.36p (7,000,000)
In issue at 31 December/30
September 0.18p 434,785,608 0.24p 984,357,334
============== ============
On 18 December 2020 250,000,000 warrants were agreed to be
issued to subscribers for the New Ordinary Shares agreed to be
issued for cash on 18 December 2020 on the basis of 1 warrant for
every 2 shares subscribed. The warrants are exercisable at price of
0.22p at any time up to 31 December 2021.
On 18 January 2021 434,785,608 warrants were agreed to be issued
to subscribers for the New Ordinary Shares agreed to be issued for
cash on 18 January 2021 on the basis of 1 warrant for every 2
shares subscribed. The warrants are exercisable at price of 0.18p
at any time up to 28 February 2022.
The weighted average remaining contractual life of the warrants
outstanding is 59 days.
Other reserves
Share option/warrant reserve
The share option/warrant reserve comprises the cumulative
entries made to the consolidated statement of comprehensive income
in respect of equity-settled share-based payments as adjusted for
share options cancelled.
Exchange reserve
The exchange reserve comprises all foreign currency differences
arising from the translation of the financial statements of foreign
operations.
Fair value reserve
The fair value reserve comprised the cumulative net change in
the fair value of available-for-sale financial assets until the
assets were derecognised or impaired.
22. Earnings per share
Basic and diluted earnings/(loss) per share
The calculation of basic earnings/(loss) per share at 31
December 2021 is based on the following (loss)/profit attributable
to ordinary shareholders and a weighted average number of ordinary
shares in issue.
Loss attributable to ordinary shareholders (GBP)
15 months
ended 31 Year ended
December 30 September
2021 2020
Continuing operations (1,948,000) (1,181,000)
Loss attributable to ordinary shareholders (1,948,000) (1,181,000)
============ ===============
Weighted average number of ordinary shares
15 months
ended 31 Year ended
December 30 September
2021 2020
Issued ordinary shares at beginning
of year 4,866,007,851 2,491,358,439
Effect of shares issued 1,085,483,160 444,668,141
Weighted average number of ordinary shares 5,951,491,011 2,936,026,580
============== ===============
The warrants in issue are considered to be antidilutive and as a
result, basic and diluted loss per share are the same.
23. Share-based payments
The Company established an Enterprise Management Incentive
Scheme to incentivise Directors and senior executives. On 17
January 2020, 120,000,000 options were granted at GBP0.001639 with
10,000,000 vesting immediately, 30,000,000 vesting on 9 March 2020,
30,000,000 vesting on 17 January 2021,
30,000,000 vesting on 17 January 2022 and 20,000,000 vesting on
17 January 2023. The options lapse if not exercised within 5 years.
Of the total, 90,000,000 options were granted to R Lamming, a
Director.
The Black Scholes pricing model was used to calculate the share
based payment charge incorporating an annual volatility rate of
55%, expected life of between 2 and 5 years and risk free
investment rate of between 0.23% and 0.39%. The charge for the year
ended 30 September 2020 for these rights which was included in
administrative and exploration expenses amounted to GBP63,000.
On 7 April 2021, 10,000,000 options were granted at GBP0.001183
with 3,333,333 vesting on 1 April 2022, 3,333,333 vesting on 1
April 2023 and 3,333,334 vesting on 1 April 2024. The options lapse
if not exercised within 5 years.
The Black Scholes pricing model was used to calculate the share
based payment charge incorporating an annual volatility rate of
57%, expected life of between 4 and 6 years and risk free
investment rate of between 0.6% and 0.93%. The charge for the
period ended 31 December 2021 for these rights which was included
in administrative and exploration expenses amounted to
GBP5,000.
On 27 May 2021, 15,000,000 options were granted at GBP0.001121
with 5,000,000 vesting on 17 May 2022, 5,000,000 vesting on 17 May
2023 and 5,000,000 vesting on 17 May 2024. The options lapse if not
exercised within 3 years of the vesting dates.
The Black Scholes pricing model was used to calculate the share
based payment charge incorporating an annual volatility rate of
57%, expected life of between 4 and 6 years and risk free
investment rate of between 0.6% and 0.93%. The charge for the
period ended 31 December 2021 for these rights which was included
in administrative and exploration expenses amounted to
GBP7,000.
24. Trade and other payables
Group - Current
2021 2020
GBP'000 GBP'000
Trade payables 962 104
Accrued expenses 93 228
Amounts due to Falcon Isle Resources' 593 -
minority interest
Other payables 11 135
1,658 467
========= =========
Group - Non-Current 2021 2020
GBP'000 GBP'000
Amounts due to Falcon Isle Resources' 749 -
minority interest
749 -
========= =========
Company - Current
2021 2020
GBP'000 GBP'000
Trade payables 46 21
Accrued expenses 91 97
Other payables 13 64
150 182
========= =========
There is no material difference between the fair value of trade
and other payables and accruals and their book value. The Group's
and Company's exposure to currency and liquidity risk related to
trade and other payables is disclosed in note 25.
25. Financial instruments
Financial risk management
The Group's operations expose it to a variety of financial risks
that include liquidity risk. The Group has in place a risk
management programme that seeks to limit the adverse effect of such
risks on its financial performance.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at the
reporting date was as follows.
Group
Financial assets at
amortised cost
Carrying amount
2021 2020
GBP'000 GBP'000
Trade and other receivables 94 67
Cash and cash equivalents 166 438
260 505
========== ==========
Company
Financial assets at
amortised cost
Carrying amount
2021 2020
GBP'000 GBP'000
Loans 2,081 1,534
Trade and other receivables 20 56
Cash and cash equivalents 122 428
2,223 2,018
========== ==========
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Group reviews its facilities regularly to ensure it has
adequate funds for operations and expansion plans.
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the impact of netting agreements.
Group
2021
Carrying Contractual 2 months 2-12
amount cash flows or less months
GBP'000 GBP'000 GBP'000 GBP'000
Non-derivative financial
liabilities
Trade and other payables 1,658 (1,658) (168) (1,490)
Lease liabilities 107 (107) (19) (88)
--------- ------------
1,765 (1,765) (187) (1,578)
========= ============ ========= =========
Group
2020
Carrying Contractual 2 months 2-12
amount cash flows or less months
GBP'000 GBP'000 GBP'000 GBP'000
Non-derivative financial
liabilities
Trade and other payables 467 (467) (78) (389)
--------- ------------
467 (467) (78) (389)
========= ============ ========= =========
Company
2021
Carrying Contractual 2 months 2-12
amount cash flows or less months
GBP'000 GBP'000 GBP'000 GBP'000
Non-derivative financial
liabilities
Trade and other payables 150 (150) (25) (125)
--------- ------------
150 (150) (25) (125)
========= ============ ========= =========
Company
2020
Carrying Contractual 2 months 2-12
amount cash flows or less months
GBP'000 GBP'000 GBP'000 GBP'000
Non-derivative financial
liabilities
Trade and other payables 182 (182) (30) (152)
--------- ------------
182 (182) (30) (152)
========= ============ ========= =========
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the return.
Currency risk
The Group is exposed to foreign currency risk on purchases that
are denominated in currencies other than GBP. The currencies giving
rise to this risk are primarily the CFA Franc and the US
dollar.
Fair values
The fair values of financial instruments such as trade and other
receivables/payables are substantially equivalent to carrying
amounts reflected in the balance sheet.
Capital management
The Group's objective when managing capital is to safeguard its
accumulated capital in order to provide an adequate return to
shareholders by maintaining a sufficient level of funds, in order
to support continued operations.
The Group considers its capital to be total shareholders' equity
which at 31 December 2021 for the Group totalled GBP3,053,000 (30
September 2020: GBP3,148,000) and for the Company totalled
GBP4,034,000 (30 September 2020: GBP3,472,000).
26. Related parties
The Group's related parties include its key management personnel
and others as described below.
No guarantees have been given or received and all outstanding
balances are usually settled in cash.
Of the remuneration payable to D Reeves, GBP25,000 remains
unpaid as at 31 December 2021(30 September 2020 - GBP31,000).
Other related party transactions
Transactions with Group companies
The Company had the following related party balances from
financing activities:
2021 2020
GBP'000 GBP'000
Southern Iron Limited
- Loans and receivables (interest free) 1,622 1,534
Falcon Isle Resources LLC
- Loans and receivables (interest free) 459 -
Southern Iron Limited had the following related party balances
from financing activities:
Société Générale des
Mines SA
- Loans and receivables (interest free) 1,777 1,694
27. Subsequent events
Issues of New Ordinary Shares
On 26 April 2022 the Company announced the raising of a total of
GBP1,950,000 (before expenses) by the issue of up to 1,625,000,000
new Ordinary Shares at a price of 0.12p per share. 1,000,000,000
new Ordinary Shares were placed for cash consideration to raise
GBP1,200,000 and the balance of 625,000,000 new Ordinary Shares
were issued through a Broker Option following approval at a General
Meeting of the company held on 16 May 2022.
Each new Ordinary Share subscribed received a warrant to
subscribe for 1 new Ordinary Share at any time up to 31 May 2024,
at an exercise price of 0.18p per share.
Falcon Isle
On 29 March 2022, the Company agreed to acquire the outstanding
49% equity interest in Falcon Isle and loans totalling $1,816,527
made by the vendor to Falcon Isle, for total consideration of $3.2
million, payable in four annual tranches of $800,000 commencing on
1 July 2022.
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END
FR BKCBDKBKBPAB
(END) Dow Jones Newswires
June 30, 2022 02:00 ET (06:00 GMT)
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