TIDMCMET
RNS Number : 6432N
Capital Metals PLC
30 September 2021
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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014 ("MAR"). UPON PUBLICATION OF
THIS ANNOUNCEMENT, THIS INFORMATION IS NOW CONSIDERED TO BE IN THE
PUBLIC DOMAIN.
30 September 2021
Capital Metals plc
("CMET" or the "Company")
Audited Results for the year ended 31 March 2021
Capital Metals plc (AIM:CMET), a natural resources company
focused on the development of the Eastern Minerals Project in Sri
Lanka ("the Project"), one of the highest-grade mineral sands'
projects globally, is pleased to announce its audited results for
the year ended 31 March 2021.
The Company's Annual Report and Notice of Annual General Meeting
will shortly be posted to shareholders and made available on the
Company's website at www.capitalmetals.com .
For further information, please visit www.capitalmetals.com or
contact:
Capital Metals plc
Michael Frayne (CEO) +44 (0) 20 7317 6800
SPARK Advisory Partners (Nominated
Adviser)
Neil Baldwin / James Keeshan +44 (0) 20 3368 3554
WH Ireland Limited (Joint Broker)
Harry Ansell / Katy Mitchell +44 (0) 20 7220 1666
Brandon Hill Capital Limited
(Broker)
Jonathan Evans/Oliver Stansfield +44 (0) 20 3463 5000
CAPITAL METALS PLC
Chairman's Statement
Welcome to the 2021 Annual Report for Capital Metals plc ("the
Company" or "CMET"), the first since our reverse takeover ("RTO")
and re-admission to the AIM market of the London Stock Exchange in
January 2021.
The Group is focused on the development of the Eastern Minerals
Project in Sri Lanka ("the Project" or "EMP"), one of the
highest-grade mineral sands' projects globally. Since listing, our
team has been very focused on obtaining our Environmental Impact
Assessment ("EIA") approval and the final permitting steps towards
the grant of an Industrial Mining Licence ("IML") to enable the
targeted commencement of production in 2022.
The public consultation process concluded on 12 March 2021 with
the subsequent Technical Evaluation Committee meeting to consider
the EIA occurring in July 2021. This has taken place amidst
extremely challenging times in Sri Lanka with the COVID-19 virus
extending widely across the country and strict lockdowns and travel
restrictions making meetings with and between government officials
very difficult. We are pleased to advise that the Sri Lankan
authorities have been very cooperative and have made great efforts
to hold a number of virtual meetings to continue the approval
process and we are confident that we should receive the necessary
approvals in the near future in order to adhere to our targeted
production start in 2022. I would like to thank our team in Sri
Lanka for the dedication and focus during these very difficult
circumstances.
There is growing awareness in Sri Lanka of the positive economic
and social benefits our mineral commodities export project can
bring to the local communities and Sri Lanka as a whole.
Whilst we work towards development and first production, we are
encouraged by the strengthening in the global metals market and
specifically the ilmenite, rutile and zircon markets which are the
main minerals in our deposit. Zircon has risen 14% to US$1,630/t
since end March 2021, rutile prices have risen 40% to US$1,753/t
since October 2020. Reports indicate prices for ilmenite are
trading around US$340-400/t up some 45% from December 2020.
There has been major supply disruption to global markets, with
large decreases in production from the major minerals sands
operations of Richards Bay Minerals in South Africa and Sierra
Rutile in Sierra Leone. At the same time there has been increased
demand due to GDP growth, stimulus programs and inventory
restocking. This has created a longer-term structural deficit as
new mines have not been brought into production to replace supply
losses and meet increased demand. As a result, there is strong
interest from mineral sands consumers, to secure new and alternate
sources of supply.
The team has also been active in developing exploration
programmes to extend the high-grade resource, with several
identified potential areas that could be drilled to increase the
total resource. The Project currently has a JORC Resource of 17.2
Mt with an average grade of 17.6% Total Heavy Minerals ("THM"),
which is based on auger drilling that has not penetrated more than
three metres deep. Limited sonic drilling so far undertaken offers
compelling indication of deeper mineralisation, including assays of
26.3% and 26.6% THM at respective depths of 14 and 8 metres. The
Project's THM grades are some of the highest in the global peer
group.
Less than 10% of the total Project area has been drilled to
date. Initial exploration suggests potential for significant
mineralisation further inland. Additional drilling is planned for
H2 2021 for infill and step out drilling. We remain extremely
excited about the potential to expand our resource and we look
forward to updating you on further exploration activities over the
coming year.
On 16 August 2021 (after the reporting period) we announced the
appointment of Richard Stockwell as Technical Manager. Richard
Stockwell is a seasoned technical mining expert having worked in
the minerals sands industry for over 20 years. His expertise covers
mineral exploration, resource development and mine planning.
Richard will be a key part of the Group's senior management team
and his initial duties include overseeing the following:
i) Development Study which will provide an updated understanding
of the technical scope and economics of the Project prior to its
full commercial development.
ii) Project Exploration Strategy with the aim to increase the
overall resource and target high value areas.
Richard spent over 13 years with ASX-listed Iluka Resources
Limited, one of the world's largest mineral sands companies, based
in Perth, Western Australia. At Iluka, Richard held a variety of
roles and was a responsible Competent Person (CP) under the JORC
reporting guidelines, for reporting of mineral resources for much
of this time. Prior to commencement as an independent consultant,
Richard's role at Iluka was Manager Exploration, Western Australia.
The role included a number of technical and innovative exploration
studies of particular relevance to the Company's longer-term
strategy.
The Group has been closely involved in the community and social
development in the Ampara District of the Eastern Province since it
first started working there. To this end, the Company has set about
funding a number of community projects including beach clean ups,
pre-school projects, water projects and a collegiate response to
local management of impacts from the COVID-19 pandemic. The Company
is entirely committed to community programmes in the areas in which
we operate, not only to ensure that local communities share in the
benefits of any future mining activity, but also as part of the
Company's long-term social license to operate.
On behalf of the Board, we would like to thank our whole team
for their persistent efforts and commitment over a very challenging
period. Whilst the external environment remains uncertain on many
fronts, the Group is in good shape as we believe we have taken the
appropriate steps to position ourselves for our target of first
production in 2022. We would also like to thank our shareholders
for their continuing support as we remain focused on our objective
of delivering sustainable value.
Gregory Martyr
Chairman
30 September 2021
Strategic Report
The Company was readmitted to trading on AIM on 13 January 2021,
following the successful acquisition of 100% of Capital Metals
Limited ("CML") in conjunction with a placing of new ordinary
shares in the Company to raise GBP2.08 million before costs, to
advance the Project, including permitting approvals, drilling
programme and complete an updated scoping and development study
(Development Study).
Eastern Minerals Sands Project Overview
In April 2016, CML (via its subsidiaries) acquired 100 per cent.
of Damsila Exports (Pvt) Limited ("DEL") and Eastern Minerals (Pvt)
Limited ("EML"), the entities which own the exploration licenses
that comprise the Eastern Minerals Project ("EMP" or "Project").
Further details of the transaction and related acquisition terms
are outlined in the Admission Document dated 23 December 2020 on
the Company's website.
The EMP is located in the Ampara District of the Eastern
Province of Sri Lanka, approximately 360 km east of Colombo. The
EMP comprises the Project Licenses which cover 84 km(2) . An
additional nine applications have also been made in respect of new
exploration licenses covering a further 623 km(2) . The EMP is
divided into two sub-project areas:
-- the northern area (Eastern North), was held by DEL through
exploration license EL168/R/4 which expired on 31 October 2020 (the
"DEL License") and which is now subject to the Industrial Mining
License ("IML") Applications; and
-- the southern area (Eastern South) (which was recently
renewed) held by EML through exploration license EL199/R/4 (the
"EML License").
The DEL License is now subject to its first formal application
for an IML over 111.5 hectares located within the DEL License area
("First IML Application"), the approval of which is currently a key
focus of the Company.
In connection with this application, an EIA report was submitted
to the Coast Conservation & Coastal Resources Management
Department ("CCD") on 26 September 2019 and the EIA is close to
final approval with all of the regulatory authorities' requests for
reports and responses to questions having been completed. The EIA
review and approval process was delayed earlier this year due to
COVID-19 causing greatly reduced Government activity. However, the
Company announced on 19 July 2021 that the Company was able to
attend several, previously delayed, meetings with the relevant
government authorities and reported that good progress is being
made with the environmental approval.
On 3 February 2021, the Company announced that the Group had
been granted a further 2-year extension of its exploration licence
EL-199 which covers the southern portion of the Project. This
ensures continuity of tenure over the entire Project in the medium
term and enables the Company to move ahead with the exploration
programmes in the licence area.
In September 2016, DEL and EML made nine additional exploration
license applications, covering an area of 623 km(2) , surrounding
EL 168 and EL 199 both onshore (over 272km(2) ) and offshore (over
351km(2) ). The Group will look to recommence the approval process
of these applications as soon as the Sri Lankan government
departments return to normal activity levels.
The Group has been initiating an updated independent Development
Study and economic analysis which is due to be completed by the end
of H2 2021. The study will be based on all technical work completed
to date. The base case plan is for an estimated 1.65 million tonne
per annum mining operation with relevant operational parameters,
including capital and operating costs, to be provided as part of
the study.
The Project's 84 km(2) licence area on Sri Lanka's eastern
seaboard has a JORC Resource of 17.2 Mt with an average grade of
17.6% Total Heavy Minerals, an estimate making it one of the
highest-grade mineral sands' deposits in the world, with nearly
three times the average grade of comparable projects. 85% of the
Resource estimate is classified in the JORC code's higher level
Measured and Indicated categories.
Source: Capital Metals plc JORC 2012 Resource Report
Opportunities to Upgrade the Resource
Although the current estimate, based on 1,643 shallow auger
drill holes totalling 2,621 metres of drilling, is sufficient to
economically commence construction and mining operations, the
Company believes compelling opportunities exist to significantly
upgrade the Resource.
The inherent physical limitations of auger drilling mean the
Project area has so far only been drilled to an average depth of
three metres. Exploratory sonic drilling undertaken in 2018
indicated that mineralisation continues at deeper levels across
much of the Resource, including holes recording 26.3% THM at a
depth of 14 metres and 26.6% at 8 metres.
Further potential exists beyond the narrow coastal strip that
has been the primary focus of drilling to date, comprising a 100 to
300 metre wide north-south corridor running alongside the sea that
accounts for less than 10% of the total Project area. The Project's
perimeter extends up to two to three kilometres inland, covering
terrain that may encompass marine sediments.
The limited drilling further inland undertaken to date suggests
significant mineralisation. This territory is readily accessible to
environmentally sensitive drilling, with minimal need to disturb
vegetation prior to mining.
The Group has engaged the GSMB in Sri Lanka to undertake a
drilling program on its southern exploration licence EL199. The
proposed drilling program is a combination of infill and resource
extensions and aims to confirm previous drill work and test with
extension and step out drilling. This will assist the Company to
delineate the key areas for any mining licence applications over
EL199. It is anticipated that this drilling campaign will commence
in Q3 2021.
The Project benefits from robust infrastructure already in
place, connecting the Project through a network of sealed roads to
a commercial port at Oluvil, just 30 kilometres north of the
licence area. The Oluvil Port was opened in 2013 as part of the Sri
Lankan government's ongoing programme to upgrade the country's
infrastructure. The port, which is currently being used by the
regional fishing industry, offers facilities and shipping capacity
of 8,000 to 10,000 tonnes and is approximately 11 metres deep,
easily meeting the Project's requirements. The port has all the
essential infrastructure to serve as a commercial harbour, being
equipped with grid power, scheme water, offices, workshops, storage
facilities, residential quarters, and secure perimeter walls and
fencing.
The Group is in discussions with the Sri Lankan Port Authority
("SLPA") to use the port for its operations, where it intends to
construct a dry mineral separation plant to separate the HMC into
value added minerals before shipping. The Group has offered to
assist SLPA with any required dredging of accumulated sands
resulting from longshore drift for the benefit of all users of the
port, including commercial shipping and the local fishing
industry.
Mineral Sands Markets
The mineral sands products that the Project will produce include
ilmenite & rutile (together titanium dioxide minerals), zircon
and garnet, which are an integral part of everyday life. The key
end products in the mineral sands market are:
-- Paint: which contains titanium dioxide (TiO(2) ) found in ilmenite and rutile.
-- Ceramics: including materials required for housing and
construction (bathrooms, tiling, kitchens) require zircon.
-- Abrasives: garnet has a range of industrial applications in
the abrasives markets, such as sand paper, sand blasting and
cutting steel with water jets and significantly increasing use in
metal fabrication.
These minerals are also used in many other areas, including high
end titanium metal, industrial chemical applications and chemical
industries. However, the paint (TiO(2) ) and ceramic (zircon)
industries are the main end users. It is anticipated that both of
these industries will be well supported during all the global
stimulus initiatives that are underway.
The global paints and coatings market size was valued at USD
146.2 billion in 2019 and is expected to grow at a compound annual
growth rate ("CAGR") of 4.3% from 2020 to 2027. The market is
expected to be driven by the increasing product consumption in the
construction, automotive, and general industries application
sectors. Rapid urbanization and industrialization in the emerging
countries, such as India, China, and Southeast Asia, are
anticipated to fuel the product demand in various applications.
The global ceramics market was valued at USD 229.1 billion in
2018 and is projected to grow at lucrative CAGR of 8.6% from 2019
to 2025. Increasing government spending on infrastructure and
rising construction activities around the world are the key drivers
for the market.
The global abrasives market size is projected to grow from USD
46.4 billion in 2020 to USD 58.0 billion by 2025, at a CAGR of 4.5%
from 2020 to 2025. The growth of this market is attributed to the
growing automotive, metal fabrication, machinery, electronics,
electrical, medical, and construction industries.
The global market for mineral sands has been growing steadily
with solid price increases over the last 5 years. The industry
growth and pricing did pause in 2020 due to COVID-19, however, the
medium-term growth outlook is positive due to economic stimulus
activity as well as decreasing supply from existing mines which may
not be fully replaced by future projects.
This supply issue is important as opening up new mines is not
something that happens overnight. Years of time and effort,
including drilling, test work, technical and ESG studies must be
undertaken before a mining project can move into production.
The Group has an excellent mix of different products in its
Resource. Over 50% of its basket of goods is ilmenite and a further
35% is the higher value items of zircon and rutile. Set out below
is the summary of the different products that make up its'
Resource.
Ilmenite 47.1 8.3 250 51
Zircon 5.1 0.9 1,350 20
Rutile 3.4 0.6 1,150 14
Garnet 22.7 4.0 200 15
========== ==== === =====
Given the continued strength in mineral sands prices, the Group
has commenced offtake discussions following several approaches from
strategic and industrial groups. The COVID-19 pandemic-fuelled
surge in homebuilding and home improvements has contributed to
healthy demand for mineral sands products such that mineral sands
consumers are seeking additional security of supply.
Environmental, Social and Governance
The Project has the potential to open significant new economic
opportunities in eastern Sri Lanka, and the Group's work with local
communities and commitment to ecologically sensitive production
procedures that ensures all mining areas are fully rehabilitated.
Some benefits to the local community from development of the
Project include:
-- New high-quality construction, mining and processing work for
local workers as well as demand for local contracting services. The
Group's construction, mining and processing work will employ local
workers, who will be trained and supported by local and foreign
mining experts. Demand for contractor services is expected to
create a multiplier effect benefiting the wider economy and
skills/knowledge transfer to the local work force.
-- Community initiatives include waste disposal programmes,
ongoing financial and logistical support for a new pre-school, new
drinking water infrastructure, sponsorship of female
entrepreneurship, and COVID-19 support.
-- Full consultation with the local community on any potential
environmental impact from the Project, and commitment to
state-of-the-art mineral sands processing integrating land
rehabilitation into the mining process.
-- Potential to free up the port for the local fishing industry
and commercial shipping by removing the significant volume of sand
that has filled the port area due to the coastal currents
depositing sand in the harbour.
-- Taxes and royalties flowing from the Group's operations will
generate government revenues for reinvestment in Sri Lanka's
continued economic development.
-- The Country will also benefit from foreign direct investment
to bring the mine into production and export earnings from the sale
of the products into the international market.
The economic activity stimulated by the Project will be
complemented by the Group's ongoing engagement with the Eastern
Province's local community. The Company has already demonstrated
its commitment to the coastal environment in which it will operate
by organising beach cleaning programmes with community leaders,
including the Sivan temple at Thambiluvil, with the collected
plastic waste transported to the local council refuse centre for
ecological disposal.
For the past three years, the Group has sponsored a new
pre-school in the village of Umiri, currently supporting 15
students and two teachers, where residents have struggled for years
for the resources to secure a good education for their children.
The Group has worked in partnership with the local authority and
village council to furnish a village hall with new furniture,
stationery and equipment, and provides ongoing support through
building maintenance, payment of school staff salaries,
replenishment of school stationery, transportation, and the supply
of safe drinking water through drier months. The Group is currently
working with the village to provide long term drinking water
facilities.
The Group is working closely with local communities in the
Project area, to empower female entrepreneurs supplying furniture,
chairs, and other essentials for the Women's Rural Development
Society. Another initiative helps members of the Society and other
local women embrace sustainable agricultural practices through home
gardening and small-scale farming projects.
The Group is also contributing to local efforts to manage the
impact of COVID-19. Many families have needed financial support to
continue to pursue their livelihoods. The Group has worked with
community leaders to source and distribute dry ration packages to
more than 250 families since the lockdown commenced, ensuring the
operation adheres to guidelines set by local health authorities. At
all times the Group's work is designed to complement the wider
programmes run by local and national governments and international
development agencies.
Environmentally sensitive mining
The Group is committed to pursuing a state-of-the-art mineral
sands mining process that will respect the coastline along which
the Project will operate.
The Project's commercial mineral sands will be extracted using
proven non-chemical processing methods. The proposed mining method
is staged mining of small 150m x 50m cells, with each cell
continuously rehabilitated after mining and then fully available
for alternative uses such as agriculture and tourism, or to remain
as a wilderness.
Well-regulated mineral sands programmes integrate land
rehabilitation into the mining process. The shallow depth of
mineral sands deposits allow them to be mined using conventional
surface mining methods including bulldozers, excavators and trucks.
Topsoil, subsoil and clay is removed and stockpiled separately to
allow it to be progressively returned after the mining process. The
mineral sand deposit is then removed from the ground and then
pumped as a slurry to a processing plant where the valuable heavy
minerals are separated from the sand. The waste sand (mostly
silica) is pumped back to the mining cell, where it is returned to
the ground. Subsoil and topsoil are then replaced and the land
rehabilitated back to its original use.
Directors' statement under section 172 (1) of the Companies Act
2006
The Companies (Miscellaneous Reporting) Regulations 2018 require
Directors to explain how they considered the interests of key
stakeholders and the broader matters set out in section 172(1) (a)
to (f) of the Companies Act 2006 ("S172") when performing their
duty to promote the success of the Company under S172. This
includes considering the interest of other stakeholders which will
have an impact on the long-term success of the company.
This S172 statement explains how the Directors have regard
to:
(a) the likely consequences of any decision in the long term,
(b) the interests of the Company's employees,
(c) the need to foster the Company's business relationship with
suppliers, customers and others,
(d) the impact of the Company's operations on the community and environment,
(e) the desirability of the Company maintaining a reputation for
high standards of business conduct, and
(f) the need to act fairly as between members of the Company.
The S172 statement focuses on matters of strategic importance to
the Company and the Group, and the level of information disclosed
is consistent with the size and the complexity of the business.
General confirmation of Directors' duties
The Board has a clear framework for determining the matters
within its remit and has approved Terms of Reference for the
matters delegated to its Committees. Certain financial and
strategic thresholds have been determined to identify matters
requiring Board consideration and approval. When making decisions,
each Director ensures that they act in good faith in the way most
likely to promote the Company's success for the benefit of its
members as a whole.
S172(1) (a) "The likely consequences of any decision in the long
term"
The application of the Section 172 (1) requirements can be
demonstrated in relation to some of the key decisions made during
the reporting period, including
-- completion of reverse takeover, raising of new capital and readmission to AIM
-- completion of EIA report and submissions towards obtaining
EIA approval and final permitting towards grant of Industrial
Mining Licence for the Project
-- commitment to an updated scoping and development study for the Project
-- commitment to developing an exploration strategy for the
Project towards increasing the overall resource and target of high
value areas of the Project
-- continued assessment of corporate overheads and expenditure
The Group is focused on the development of the Eastern Minerals
Project in Sri Lanka. The RTO, raising of new capital and
readmission to AIM, advances the Company's objective, facilitating
access to a significant and globally respected financial market to
raise funds from London's deep pool of institutional and private
investors, towards the development of the Project, whilst providing
important liquidity to shareholders. The Group consulted with its
shareholders, stakeholders and investors on the RTO, providing a
detailed Admission Document and received overwhelming support and
approval for the successful completion of the RTO and fund
raising.
The completion and submission of the EIA report and responses to
the regulatory authorities requests, is required to obtain EIA
approval and final permitting towards grant of an IML, which is a
key milestone towards the development of the Project and driving
significant further shareholder value.
The undertaking of an updated scoping and development study will
enhance the technical and economic understanding of the Project
towards progressing its commercial development and the significant
economic and social benefit to stakeholders.
Although the current resource is of sufficient size for
commercial mining operations, the Group is to develop an
exploration strategy towards increasing the size of the resource
and target of high value areas, enhance the economics of the
Project and drive further value to shareholders, as well as further
socio-economic benefits to stakeholders through increased
production. The undertaking of further significant drilling will be
subject to procuring sufficient further funding.
Management assesses overheads and expenditure on an ongoing
basis towards the most effective utilisation of funds to meet Group
business and strategic objectives to the benefit of
shareholders.
S172(1) (b) "The interests of the company's employees"
The Company during the reporting period and to date, had 7
employees, in addition to the Directors. The Board recognises that
the Company's employees, are fundamental and core to our business
and delivery of our strategic ambitions. The success of our
business depends on attracting, retaining and motivating employees.
From ensuring that we remain a responsible employer, from pay and
benefits to our health, safety and workplace environment, the
Directors factor the implications of decisions on employees and the
wider workforce, where relevant and feasible.
S172(1) (c) "The need to foster the company's business
relationships with suppliers, customers and others"
Delivering on our strategy to develop the Project requires
strong mutually beneficial relationships with suppliers, customers,
governments, and local partners. We aim to have a positive and
enduring impact on the communities in which we operate, including
engagement with local suppliers, and through payments to
governments in taxes and other fees. The Group values all of its
suppliers and aims to build strong positive relationships through
open communication and adherence to trade terms. The Group is
committed to being a responsible entity and doing the right thing
for its customers, suppliers and business partners.
S172(1) (d) "The impact of the company's operations on the
community and the environment"
As a mineral sands Group operating in Sri Lanka, the Board takes
seriously its ethical responsibilities to the communities and
environment in which it works. We abide by the local and relevant
UK laws on anti-corruption and bribery. The Group is committed to
following international best practice on environmental aspects of
our work and the development of the Project. We actively engage
with the local communities in order to ensure we maintain our
social licence to operate and develop the Project. Management and
employees conduct site visits and hold external stakeholder
engagements. Wherever possible, local communities are engaged in
the Group's activities and the development of the Project will
provide much needed employment and wider socio-economic benefits to
the local communities.
More information on this can be found within our Environmental,
Social and Governance (ESG) Statement.
S172(1) (e) "The desirability of the company maintaining a
reputation for high standards of business conduct"
The Group aims to achieve the development of the Project in ways
which are economically, environmentally and socially responsible.
The Board periodically reviews and approves clear frameworks, such
as the Company's Code of Business Ethics, to ensure that its high
standards are maintained both within the Group and the business
relationships we maintain. This, complemented by the various ways
the Board is informed and monitors compliance with relevant
governance standards, help ensure its decisions are taken and that
the Group acts in ways that promote high standards of business
conduct.
S172(1) (f) "The need to act fairly as between members of the
company"
After weighing up all relevant factors, the Directors consider
which course of action best enables delivery of our strategy over
the long-term, taking into consideration the impact on
stakeholders. The Directors believe they have acted in the way they
consider most likely to promote the success of the Company for the
benefit of its members as a whole.
The Board is committed to maintaining good communication and
having constructive dialogue with its shareholders. The Company has
close ongoing relationships with key private shareholder, analysts
and brokers, providing the opportunity to discuss issues and
provide feedback at meetings with the Company. All shareholders are
encouraged to attend the Company's Annual General Meeting and any
general meetings held by the Company, subject to any COVID-19
restrictions.
Key performance indicators
Given the straightforward nature of the Group's activities, the
Company's directors are of the opinion that analysis using key
performance indicators is not necessary for an understanding of the
development, performance or position of the business at the present
time.
Principal risks and uncertainties
The management of the business and the execution of the Group's
strategy are subject to a number of risks. The key business risks
affecting the Group are outlined below.
The Company continuously monitors its risk exposures and reports
to the Board on a regular basis. Risks are reviewed by management
and the Board, and appropriate processes are put in place to
monitor and mitigate them. If more than one event occurs, it is
possible that the overall effect of such events would compound the
possible adverse effects on the Group.
i) Conversion into mining rights and receipt of other permits
The DEL Exploration License was first issued to DEL on 5 June
2010 and had previously been renewed on 6 July 2012, 17 September
2014, 1 November 2016 and 31 October 2018. The DEL Exploration
License expired on 31 October 2020. The forms of application that
are included in the regulations issued under the laws of Sri Lanka
have been formulated to indicate that the fourth renewal of an
exploration license is the final application that may be made for
renewal of an Exploration License.
The Geological Survey and Mines Bureau ("GSMB") has represented
to DEL that, following the expiry of an exploration license, the
GSMB in practice, allows the former exploration license holder for
a period of two years from the date of expiry:
-- Exclusive right over the former exploration license area to
submit further IMLs should the former license holder wish to do so
(in this case DEL, in respect of the DEL License area); and
-- Exclusivity over the former exploration license area by
refraining from accepting applications for any new exploration
licenses from third parties.
DEL has submitted a formal application for an Industrial Mining
License and such application is currently pending. In connection
with this application, DEL has submitted an environmental impact
assessment ("EIA") report, prepared by an independent and
multi-disciplinary team of consultants. An approved EIA is required
for the grant of an Industrial Mining Licence for the Project and
the Group is in the final stages of the EIA process.
Notwithstanding the representations given by the GSMB, upon
expiry of the DEL License, DEL will not hold any exploration rights
in respect of the area covered by the DEL License until such time
as an IML is granted.
Before the EMP can be brought into production, the IML
Applications will need to be approved by the GSMB and further IML
applications will need to be made by EML. In addition, the Group
will require additional permits to extract and sell its
production.
Accordingly, there is a risk that should the Group fail to
obtain IMLs or attain any of the additional permits required to
extract and sell its production, there is a risk that the Group
would not achieve its key objective of developing the Project into
commercial production. The Group is mitigating this risk by active
engagement with the government and input from its
multi-disciplinary team of consultants.
ii) Exploration, evaluation and development risk
Mineral resources are estimates and no assurance can be given
that any particular grade or tonnage will be realised or that they
will be converted into reserves or result in a commercially
mineable deposit which can be legally and economically exploited.
As a result of these uncertainties, there can be no assurance that
mineral resources defined by the Group's exploration and evaluation
programmes will result in profitable commercial mining
operations.
The commercial viability of mineral deposits of the kind located
and believed to be located at the EMP area is dependent upon a
number of factors, including, but not limited to, the market price
of the component heavy minerals, the quality, size, grade and other
attributes of the deposits and the proximity to, and availability
of, infrastructure necessary to develop, exploit and transport
minerals on a commercial scale.
The EMP benefits from close proximity to the Oluvil port, which
the Group has determined will be the optimal route for production
to be transported from the EMP to global customers. For the Group
to use this port, it will require dredging and the receipt of
necessary permits and authorisation, which cannot be guaranteed as
forthcoming.
Whilst an IML would grant the Group the right to enter and
possess any area of land covered by that IML, where lands are owned
privately or by a state organisation, rights to access those lands
will need to be obtained from such landowners. DEL has previously
entered into exploration agreements with private landowners
regarding its exploration activities and is therefore hopeful of
reaching access agreements with such landowners in the future.
However, any issues in obtaining the land access agreements could
materially and adversely affect the Group's operations and
objective of developing the Project into commercial production.
The Directors are confident that they in place the team of
management, consultants and advisors to assess and mitigate the
above risks and issues, as they arise.
iii) Environmental risk
There may be unforeseen environmental liabilities resulting from
both future or historic exploration or mining activities, which may
be costly to remedy. In addition, potential environmental
liabilities as a result of unfulfilled environmental obligations by
the previous owners may impact the Group. If the Group is unable to
fully remedy an environmental problem, it may be required to stop
or suspend operations or enter into interim compliance measures
pending completion of the required remedy.
Environmental management systems are in place to mitigate
environmental risks, including the engagement of an independent and
multi-disciplinary team of consultants.
iv) Government regulation, political and country risks
The EMP is located in Sri Lanka, where the Group's activities
may be affected in varying degrees by political stability,
governmental regulations and economic stability. Any changes in
regulations or shifts in political attitudes in these countries or
any other countries in which the Group may operate are beyond the
control of the Group and may adversely affect its operations.
The Group actively monitors political and regulatory
developments through its team of management, local partners,
consultants and advisors.
v) Liquidity and market risks
The Group will need to raise additional capital in the future to
fund the development of the EMP to the point at which it becomes
operational, and future heavy mineral prices, revenues, taxes,
capital expenditures and operating expenses and geological success
will all be factors which will have an impact on the amount of
additional capital required.
If the Group is unable to obtain additional financing as and
when needed, it could result in a delay or indefinite postponement
of exploration, evaluation and development activities which may
result in loss of the EML License or any IML granted if the minimum
work programmes under such permit cannot be met.
The Group actively monitors its liquidity position. The Board
regularly reviews the Group's cash flow forecasts and the
availability or adequacy of its current cash resources to meet the
Group's business objectives and cash flow requirements.
The Company through its listing on AIM, has access to a
significant and globally respected financial market to raise funds
from London's deep pool of institutional and private investors. The
Company maintains positive and close relations with its brokers
towards positively positioning the Company for future fund
raisings.
vi) COVID-19
The COVID-19 pandemic has had a dramatic global impact and
significant impact on the activities of the Group. The Group's EIA
review and approval process has been significantly delayed due to
COVID-19 causing greatly reduced Sri Lanka Government activity
during the reporting period. At the date of this report, Sri Lanka
was still subject to COVID-19 lockdowns and travel restrictions
making meetings with, and between government officials, very
difficult. Whilst Sri Lankan authorities have been very cooperative
and have made great efforts to hold a number of virtual meetings to
continue the approval process, however, COVID-19 continues to
present a risk to the Group's activities and timelines for
obtaining the EIA and IML approvals and the development of the
Project. Towards mitigating this risk, management is actively
engaged with the various government departments, including holding
virtual meetings to further the process during lockdowns.
Financial review
The Group loss for the period ended 31 March 2021 was $7,886,000
(2020(1) : loss of $1,024,000), including a deemed reverse
acquisition expense of $5,454,000 (refer Note 5) reflecting the
difference between the deemed fair value of the shares issued by
Capital Metals Limited to acquire Capital Metals Plc and the fair
value of the net assets of Capital Metals Plc. It is noted that
under the reverse acquisition accounting, Capital Metals Limited is
treated in consolidation as the accounting acquirer and the parent
company, Capital Metals Plc, is treated as the accounting
subsidiary.
Total administration costs increased from $1,030,000 in the year
ended 31 March 2020 (1) to $1,432,000 for the reporting period,
primarily driven by costs associated with the reverse acquisition
and readmission to AIM, as well as increased director remuneration.
Share based payments expense for the reporting period of $1,111,000
(2020 (1) : Nil) are in respect of the issue of 11,750,000 options
to Directors, management and consultants (refer to Note 19) and the
issue of certain warrants in respect of the RTO.
The Group net cash outflow from operating activities increased
from $567,000 in the year ended 31 March 2020(1) to $1,596,000
during the reporting period, primarily reflecting increased
administration costs and costs of the RTO. The net cash inflow from
investing activities of $133,000 (2020(1) : $194,000 outflow)
reflects the cash acquired in the reverse acquisition during the
reporting period and E&E expenditure of $133,000. The Group
raised $3,059,000 during the reporting period from share placements
(2020(1) : $351,000) net of costs. During the year ended 31 March
2020(1) , the Group received proceeds from borrowings of $428,000,
with repayments of borrowings during the reporting period of
$453,000. Cash and cash equivalents as at 31 March 2021 was
$1,797,000 (2020(1) : $114,000).
The Group total net assets and net current assets as at 31 March
2021 were $6,831,000 (2020(1) : $4,596,000) and $1,205,000 (2020(1)
: net current liabilities of $218,000) respectively.
(1) Restated, refer to Note 4.
Our people
Our people are a key element in our success and the Company aims
to attract, develop and retain talented people and to create a
diverse and inclusive working environment, where everyone is
accepted, valued and treated equally without discrimination, taking
into account the current size of the Company.
Currently the Company comprises six directors, one key manger
and 6 employees, with the workforce by gender summarised below:
As at 31 March 2021 Male Female Female
%
------------------------- ----- ------- -------
Executive Directors 2 - -%
Non-Executive Directors 4 - -%
Key management 1 - -%
Employees 3 3 50%
------------------------- ----- ------- -------
All employees 10 3 23%
------------------------- ----- ------- -------
COVID-19
During the reporting period and subsequently, the COVID-19
pandemic has had a dramatic global impact and significant impact on
the activities of the Group. The situation is continually
developing and will need constant attention as it continues to
evolve over time.
The Group's EIA review and approval process was significantly
delayed due to COVID-19 causing greatly reduced Sri Lanka
Government activity during the reporting period. These have been
extremely challenging times in Sri Lanka with COVID-19 extending
widely across the country and strict lockdowns and travel
restrictions making meetings with, and between government
officials, very difficult. However, as announced by the Company on
19 July 2021 that the Company, we were able to attend several,
previously delayed, meetings with the relevant government
authorities and reported that good progress is being made with the
environmental approval.
Although Sri Lanka at the date of this report was still subject
to COVID-19 lockdowns, the economic recovery from the COVID-19
pandemic is underway in key economic regions, on the back of strong
fiscal stimulus, highly accommodative monetary policy, and the
vaccine rollout, which has had a positive impact on commodity
prices. We are pleased to note that the Sri Lankan authorities have
been very cooperative and have made great efforts to hold a number
of virtual meetings to continue the approval process, however,
COVID-19 continues to present a risk to the Group's activities and
timelines for obtaining the EIA and IML approvals.
Outlook
Whilst the reporting period saw the significant impacts of
COVID-19, we have made positive progress towards the major
milestones of the approval of the EIA and IML, which we anticipate
being completed in Q4 2021.
As stated in the Company's Admission document, and in common
with many exploration and evaluation entities, the Group will need
to raise further funds within the next 12 months, in order to meet
its expected expenditures, and progress the Group into the next
phase of definitive feasibility, and then into construction and
finally into production. The success of the Company's readmission
to the AIM market of the London Stock Exchange in January 2021,
provides access to major financial markets to take the Project
forward to production.
We look forward to reporting further on the EIA and IML and
towards the next phase of the Project, including the potential
expansion of the Resource, as well as further technical,
engineering and economic studies towards construction and bringing
the Project into production.
Michael Frayne
Chief Executive Officer
30 September 2021
CAPITAL METALS PLC
Board of Directors
Gregory Martyr - Non-Executive Chairman
Greg is an experienced resource industry banker, advisor and
corporate executive. He has over 30 years' experience in resources
investment banking and corporate finance, as well as the management
of international mining companies. He is also on the board of Euro
Manganese Inc. From 2011 to 2016, Greg was a Managing Director with
Standard Chartered Bank ultimately as the Global Head of Advisory,
Mining and Metals. From 2005 until its 2011 acquisition by Standard
Chartered Bank, he was a partner with Gryphon Partners, a boutique
resource advisory firm and from 1994 to 2003, he was employed in
several executive roles by Normandy Mining Ltd., including
President Americas. Prior to that he held positions with Deutsche
Bank and Morgan Grenfell. Greg obtained a Bachelor of Economics and
a Bachelor of Laws from the University of Sydney, Australia.
Michael Frayne - Chief Executive Officer
Michael holds a Bachelor of Commerce Degree majoring in
accounting and finance, a Bachelor of Science Degree majoring in
Geology and a Postgraduate Diploma in Applied Finance and
Investment from the Securities Institute of Australia. He is a
Chartered Accountant and a member of the Australian Institute of
Mining and Metallurgy. Michael previously worked for Ernst &
Young and consulted to a number of resource and commodity
companies. Following this, he worked directly in the resource
industry and spent time at Great Central Mines Ltd (now part of
Newmont Ltd) and in the corporate team at Minara Resources Ltd
(formerly Anaconda Nickel Ltd). Since 2002, Michael has provided
corporate management and advice to resource, commodity and energy
companies some of which are listed on AIM and the Australian Stock
Exchange, with projects in Australia, Africa, Asia, North and South
America.
Anthony Samaha - Finance Director
Anthony Samaha is a Chartered Accountant who has over 30 years'
experience in accounting and corporate finance, including resources
development. Anthony worked for over 10 years with international
accounting firms, including Ernst & Young, principally in
corporate finance, gaining significant experience in valuations,
IPOs, independent expert reports, and mergers and acquisitions. He
has extensive experience in the listing and management of AIM
quoted companies, including fund raisings, project development and
mergers and acquisitions. Anthony has been involved in acquisitions
and resource projects in diverse regions of the world. He holds
Bachelor of Commerce and Bachelor of Economics degrees from the
University of Western Australia and is a Fellow of the Chartered
Accountants Australia and New Zealand and an Associate of the
Financial Services Institute of Australasia.
Geoffrey Brown - Non-Executive Director
Geoffrey Brown has over 55 years' experience in the plantation
sector. He joined Harrisons & Crosfield plc in Malaysia in 1962
where he was employed on various estates growing oil palm and
rubber. He moved to Indonesia in 1976 and was made responsible for
Harrisons & Crosfield's interests in that country. He was
appointed Executive Chairman of London Sumatra Indonesia in 1982
and remained Managing Director of this large Indonesian plantation
company until 1998. In 1990, he was appointed an Executive Director
of Harrisons & Crosfield Plc, responsible for the plantation
division. Harrisons & Crosfield Plc owned and managed
plantations of rubber, oil palms, cocoa, coffee and tea in
Indonesia, and oil palm and coffee in Papua New Guinea. He remained
an Executive Director of Harrisons & Crosfield Plc until the
company divested itself of its plantation interests in 1994. In
1999 and 2000, he co-ordinated the expansion of oil palm
plantations belonging to the Musim Mas Group in Indonesia and then
became a consultant specialising in plantation management. In 2006
he joined the Equatorial Palm Oil group of companies and was an
Executive Director of the Company from 2008 until 2019 at which
time he became a non-executive director.
James Leahy - Non-Executive Director
Beginning his career at the London Metal Exchange ('LME'), Mr
Leahy has spent the subsequent 34 years involved in stockbroking
and commodities in a variety of roles, including research analyst,
equity salesman and specialist corporate broker, which covered
mining finance, origination and distribution. He has worked on a
wide range of projects worldwide, ranging from industrial
minerals,
coal, iron ore, precious metals, copper, diamonds, lithium,
uranium, plantations, forestry and palm oil. Lately, he has
employed his corporate governance skills, having gained substantial
experience as an independent director on the boards of several
quoted and unquoted companies. In addition, Mr Leahy has direct
experience in capital markets, having worked at James Capel, Credit
Lyonnais, Nedbank, Canaccord and Mirabaud, where he gained
invaluable experience with international institutional fund
managers, hedge funds, private equity and sector specialist
investors. Additionally, Mr Leahy has been involved in many IPOs,
as well as primary and secondary placings, and the development of
junior mining companies through to production. He is currently a
director of the listed fund Geiger Counter Ltd, AIM-quoted Savannah
Resources Plc and AEG Plc.
Teh Kwan Wey - Non-Executive Director
Mr Teh Kwan Wey was appointed as a Non-Executive Director of the
Company in September 2020. He is General Manager (Corporate) for
Kuala Lumpur Kepong Berhad, a leading plantation company listed on
the Malaysian stock exchange, where he leads the corporate finance
and corporate treasury functions. Prior to this, Mr Teh spent three
years at Lazard in the London Financial Advisory team where he
worked on a number of equity capital, M&A and LBO transactions
for clients across Europe, North America, the Middle East and Asia.
Mr Teh holds a Master of Engineering degree from Imperial College
London. Mr Teh has also completed the Accelerated Development
Program from the University of Chicago Booth School of
Business.
CAPITAL METALS PLC
Directors' report for the year ended 31 March 2021
The Directors submit their report and the audited financial
statements of the Group for the period ended 31 March 2021.
Principal activities
The principal activity of the Group is the development of the
Eastern Minerals Project located in the Ampara District of the
Eastern Province of Sri Lanka .
Results and dividends
The results of the Group are shown on page 28. No dividends were
declared or paid in the year (2020: GBPNil). The Directors do not
recommend the payment of a final dividend. The Directors are
satisfied with the performance of the Company in the year.
Post balance sheet events
Details of post reporting date events are disclosed in Note 23
of the financial statements.
Financial Risk Management
The Group's activities expose it to foreign currency, credit and
liquidity risks. The size of the Company means that it is
unnecessary and impractical for the Directors to delegate the
responsibility of monitoring financial risk management to a
sub-committee of the Board. Refer to Note 21 of the financial
statements, for further details.
Directors and their interests
The names of the Directors who held office during the year and
their total beneficial and related party shareholdings are shown
below.
Director At 31 March
2021
Gregory Martyr 4,582,746
Michael Frayne 13,056,672
Anthony Samaha 347,881
Geoffrey Brown 26,447
James Leahy 55,000
Teh Kwan Wey -
The total options held by Directors, or in which they had
beneficial interests, as at 31 March 2021 was 8,500,000 (2020:
3,250,000). Michael Frayne held 3,000,000 options (2020:
3,250,000), Anthony Samaha, Gregory Martyr and James Leahy each
held 1,500,000 options (2020: Nil) and Geoffrey Brown and Teh Kwan
Wey each held 500,000 options (2020: Nil). Further details in
respect of the options is set out in Note 19.
Directors' indemnity
The Company maintains a directors' and officers' liability
policy on normal commercial terms which includes third party
indemnity provisions.
Going concern
These financial statements have been prepared on the going
concern basis, as set out in Note 2.3.
The Directors have prepared cash flow forecasts for the period
ending 31 December 2022, which take account of the cost and
operational structure of the Group, planned exploration and
evaluation expenditure, licence commitments and working capital
requirements. These forecasts indicate that the Group's cash
resources are not sufficient to cover the projected expenditure for
the period for a period of 12 months from the date of approval of
these financial statements. These forecasts indicate that the
Group, in order to meet its operational objectives, and meets its
expected liabilities as they fall due, will be required to raise
additional funds within the next 12 months.
The Directors are confident in the Company's ability to raise
additional funds as required, from existing and/or new investors,
within the next 12 months. Thus, they continue to adopt the going
concern basis of accounting preparing these financial statements.
Whilst the Directors are confident that they will be able to secure
the necessary funding, the current conditions do indicate the
existence of a material uncertainty that may cast doubt regarding
the applicability of the going concern assumption and the auditors
have made reference to this in their audit report.
Outlook and future developments
Future developments are outlined in the Chairman's statement and
Strategic report.
Political and charitable contributions
The Company made no contributions to charitable or political
bodies during the year (2020: GBPNil).
Significant shareholders
As at 31 March 2021 and 30 September 2021, the significant
shareholders in the Company were:
Holder No. of shares %
Brent Holdings Limited 24,793,095 14.40%
Roman Resources Management Pty Ltd 14,423,869 8.38%
Stanton Investments Ltd 12,676,670 7.36%
KL Kepong International Limited 11,197,984 6.50%
Chulu Holding Pty Ltd 8,734,798 5.10%
Bart Properties Pty ltd ATF the Scott Flynn
family Trust 5,496,409 3.19%
Corporate governance
The Board is committed to ensuring good standards of corporate
governance in so far as practicable for a company of this size. The
London Stock Exchange has required all AIM companies to apply a
recognised corporate governance code. In connection with these
requirements, the Quoted Companies Alliance has published a new
Corporate Governance Code which the Company has adopted. The
Company has adopted and operates a share dealing code for Directors
and senior employees on substantially the same terms as the Model
Code appended to the Listing Rules of the UK Listing Authority.
Information in relation to the Corporate Governance of the Group is
contained within the Corporate Governance Report.
Employment policies and remuneration
The Company is committed to promoting policies which ensure that
high calibre employees are attracted, retained and motivated, to
ensure ongoing success for the business. Employees and those who
seek to work with the Company are to be treated equally regardless
of sex, marital status, creed, age, colour, race or ethnic
origin.
Director remuneration
The Group remunerates the Directors at a level commensurate with
the size of the Group and the experience of its Directors. The
Board has reviewed the Directors' remuneration and believes it
upholds the objectives of the Company and the Group with regard to
this issue..
The total Group remuneration of Directors during the reporting
period, was as follows:
Salary & fees Share based Pension 2021 2020
Payments contribution Total Total
Directors $'000 $'000 $'000 $'000 $'000
Michael Frayne(1)(3)(6) 191 188 - 380 152
Gregory Martyr(1)(3(7) 95 94 - 189 49
Anthony Samaha(1)(3)(8) 62 94 - 156 5
James Leahy(2) 8 94 - 102 -
Teh Kwan Wey(2) 5 31 - 36 -
Geoffrey Brown(2) 4 31 - 35 -
Yap Miow Kien(4) - - - - -
Patrick Kee Chuan Peng(4) - - - - -
Lee Oi Hian(5) - - - - -
Lee Guo Zhang(5) - - - - -
------------- ----------- ------------- ------ ------
366 533 - 899 206
------------- ----------- ------------- ------ ------
(1) Remuneration from CMET for the period 13-Jan-21 to 31-Mar-21
and CML for the year ended 31-Mar-21.
(2) Remuneration from CMET for the period 13-Jan-21 to
31-Mar-21.
(3) Remuneration from CML for the year ended 31-Mar-20 (2020
comparative).
(4) Resigned as a director of CMET on 3-Sep-20.
(5) Resigned as a director of CMET on 18-Jun-20.
(6) Includes payments made to Limerston Pty Ltd, an entity
associated with Michael Frayne.
(7) Includes payments made to Hogan's Bluff Capital Pty Ltd, an
entity associated with Gregory Martyr.
(8) Includes payments made to Santannos Ltd, an entity
associated with Anthony Samaha.
It is noted that the above table includes the remuneration of
the Directors of the Company from the completion of the reverse
acquisition on 13 January 2021 to 31 March 2021, and the
remuneration of the Directors of CML for the whole year ended 31
March 2021 and 31 March 2020. The remuneration of Directors of the
Company for the period 1 October 2020 to 13 January 2021, is not
included in the Group result for the year ended 31 March 2021 under
reverse acquisition accounting. The remuneration of Directors of
the Company for the period 1 October 2020 to 13 January 2021, and
the comparative year ended 30 September 2020, was as follows:
Salary & fees Share based Pension 2021 2020
Payments contribution Total Total
Directors $'000 $'000 $'000 $'000 $'000
Michael Frayne(9) 22 - 1 23 64
Gregory Martyr (11) - - - - -
Anthony Samaha (11) - - - - -
James Leahy (11) - - - - -
Teh Kwan Wey(10) (12) - - - - -
Geoffrey Brown(9) 4 - - 4 67
Yap Miow Kien(4) (12) - - - - -
Patrick Kee Chuan Peng(4)(12) - - - - -
Lee Oi Hian(5)(12) - - - - -
Lee Guo Zhang(5) (12) - - - - -
------------- ----------- ------------- ------ ------
26 - 1 27 131
------------- ----------- ------------- ------ ------
(4) Resigned as a director of CMET on 3-Sep-20.
(5) Resigned as a director of CMET on 18-Jun-20.
(9) For the period 1-Oct-20 to 13-Jan-21 and for the year ended
30-Sep-20.
(10) Appointed a director of CMET on 3-Sep-20
(11) Appointed a director of CMET on 13-Jan-21
(12) Representatives of Kuala Lumpur Kepong Berhad ("KLK") were
not remunerated during the period KLK was the controlling
shareholder of the Company.
As at 31 March 2021, there were no directors receiving defined
contribution pension schemes benefits (2020: One).
Refer to Note 19 for details of options held by directors.
Environmental policies
The Group's operations are, and will be, subject to
environmental regulation (with regular environmental impact
assessments and evaluation of operations required before any
permits are granted to the Group) in the jurisdiction in which it
operates. Although the Group intends to be in compliance with all
applicable environmental laws and regulations, there are certain
risks inherent to its activities, such as accidental spills,
leakages or other circumstances, which could subject the Group to
extensive liability. Further, the Group may fail to obtain the
required approval from the relevant authorities necessary for it to
undertake activities which are likely to impact the environment.
The Group is unable to predict the effect of additional
environmental laws and regulations which may be adopted in the
future, including whether any such laws or regulations would
materially increase the Group's cost of doing business or affect
its operations in any area. No environmental breaches have been
notified by any governmental agency as at the date of this
report.
Energy and carbon report
The Group is not required to report energy and emissions
information under The Companies (Directors' Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018,
given its size. The Group will review providing voluntary
disclosures in future reporting periods, where it continues to be
below the reporting thresholds.
Board of Directors
The Board meets regularly to determine the policy and business
strategy of the Company and has adopted a schedule of those matters
that are reserved as the responsibility of the Board. The Directors
who held office during the year and up to the date of this report
are given below:
Gregory Martyr (Non-Executive Chairman)
Michael Frayne (CEO)
Anthony Samaha (Finance Director)
Geoffrey Brown (Non-Executive Director)
James Leahy (Non-Executive Director)
The Kwan Wey (Non-Executive Director)
Board committees
The Board has an Audit Committee, a Remuneration Committee and a
Nominations Committee. The Audit Committee comprises Gregory Martyr
(Chair) and Teh Kwan Wey. The Remuneration Committee comprises
James Leahy (Chair) and Gregory Martyr. The Nominations Committee
comprises Geoffrey Brown (Chair) and James Leahy.
Corporate and social responsibility
The Company maintains high, ethical standards in its business
activities. We act responsibly, promoting accountability as
individuals and as a company. We operate with ethics and fairness
and comply with all required rules and regulations.
The Company requires that in respect to all of it operations
there runs alongside this a comprehensive community engagement
plan. It is vital that we engage, listen and communicate
effectively with local communities, particularly when they begin
the process of planning new developments. Whilst the Company is
cognisant of its corporate social responsibilities, the Company
considers that it is not of the size to warrant a formal
policy.
Controlling party
In the opinion of the Directors there is no controlling
party.
Statement of disclosure to auditor
So far as the Directors are aware, there is no relevant audit
information of which the Company's auditor is unaware, and they
have taken all the steps that they ought to have taken as Directors
in order to make themselves aware of any relevant audit information
and to establish that the Company's auditor is aware of that
information.
Bribery Act
The Company is cognisant of its responsibilities under the
Bribery Act and has implemented an Anti-Bribery policy.
UK City Code on Takeovers and Mergers
The Company is subject to the UK City Code on Takeovers and
Mergers.
Market Abuse Regime
The Company has adopted and operates a share dealing code for
Directors and senior employees on substantially the same terms as
the Model Code and MAR appended to the Listing Rules of the
UKLA.
Auditor
The auditor, BDO LLP, will be proposed for reappointment in
accordance with Section 485 of the Companies Act 2006. BDO LLP has
signified its willingness to continue in office as auditor.
Annual General Meeting
Notice of the forthcoming Annual General Meeting will be
enclosed separately.
By order of the Board, 30 September 2021
Michael Frayne
Chief Executive Office
CAPITAL METALS PLC
Corporate governance report
The Company continues to be guided by the Quoted Companies
Alliance Corporate Governance Code. Throughout the past year, the
Company has complied with all aspects of the QCA Code and completed
periodic reviews of its charter in order to maintain the robustness
of its governance systems. No material issues were identified over
the past twelve months.
The Company is committed to maintaining the highest standards in
corporate governance throughout its operations and to ensure all of
its practices are conducted transparently, ethically and
efficiently. The Company believes scrutinising all aspects of its
business and reflecting, analysing and improving its procedures
will result in the continued success of the Company and deliver
value to shareholders. Therefore, and in accordance with the AIM
Rules for Companies (the "AIM Rules"), the Company has chosen to
formalise its governance policies by complying with the UK's Quoted
Companies Alliance Corporate Governance Code 2018 (the "QCA
Code").
The Board currently consists of six Directors: a Chief Executive
Officer, Non-Executive Chairman, Finance Director and three
Non-Executive Directors ("NED"s). The Board considers that
appropriate oversight of the Company is provided by the currently
constituted Board.
QCA Code
The 10 principles set out in the QCA Code are listed below, with
an explanation of how the Company applies each of the principles
and the reason for any aspect of non-compliance.
Principle 1 - Establish a strategy and business model which
promote long-term value for shareholders
The business objective of the Group is to successfully evaluate,
permit, finance and develop the Eastern Minerals Project in Sri
Lanka into a profitable mining operation in a socially and
environmentally responsible way. The Company's business model and
strategy are outlined in the strategic report commencing on page
5.
Principle 2 - Seek to understand and meet shareholder needs and
expectations
The Board is committed to maintaining good communications and
having constructive dialogue with its shareholders. Institutional
shareholders and analysts have the opportunity to discuss issues
and provide feedback at meetings with the Company. In addition, all
shareholders are encouraged to attend the Company's Annual General
Meeting and any other General Meetings that are held throughout the
year.
Investors also have access to current information on the Company
through its website www.capitalmetails.com and its Chief Executive
Officer, who is available to answer investor relations enquiries
at: info@capitalmetals.com . The Company provides regulatory,
financial and business news updates through the Regulatory News
Service in accordance with the AIM Rules for Companies.
Principle 3 - Take into account wider stakeholder and social
responsibilities and their implications for long term success
The Board recognises that the long term success of the Group is
reliant upon the collective efforts of management, employees,
consultants, suppliers, regulators and other stakeholders. The
Board has put in place a range of processes and systems to ensure
that there is close oversight and contact with its key resources
and relationships, including ongoing two-way communication, control
and feedback processes to enable appropriate and timely
response.
As part of the Mining Licence application by the Group for the
Project in Sri Lanka, a detailed social impact assessment study was
undertaken, as well as a public stakeholder consultation process.
The results of this public consultation and engagement process have
been overall positive, with the Project receiving overall support
from relevant stakeholders
Principle 4 - Embed effective risk management, considering both
opportunities and threats, throughout the organisation
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 whilst recognising
that its business opportunities carry an inherently high level of
risk. The principal risks and uncertainties facing the Group at
this stage and in the foreseeable future are detailed in the Risk
Factors report of the Company's AIM Admission Document and updated
in the annual report and accounts, which are available on the
Company's website www.capitalmetals.com .
Principle 5 - Maintain the Board as a well-functioning, balanced
team led by the Non-Executive Chairman
The Board's role is to agree the Company's long-term direction
and strategy and monitor achievement of key milestones against its
business objectives. The Board meets formally at least six times a
year for these purposes and holds additional meetings when
necessary to transact other business. The Board receives reports
for consideration on all significant strategic, operational and
financial matters.
The Board is comprised of a Chief Executive Officer (Michael
Frayne); a Non-Executive Chairman (Gregory Martyr); a Finance
Director (Anthony Samaha) and three NEDs (Geoffrey Brown, James
Leahy and Teh Kwan Wey). Each Director serves on the Board until
the Annual General Meeting following his election or appointment.
The Chief Executive Officer works full time for the Company. Each
member of the Board is committed to spending sufficient time to
enable them to carry out their duties as a Director. The Board
meets regularly throughout the year as deemed appropriate formally
and informally, in person and by telephone.
The Company constantly keeps under review the constitution of
the Board and may seek to add more members as required as the
Company grows and develops.
The Board as a whole considers the NEDs to be independent of
management and free from any business or other relationship which
could materially interfere with the exercise of their independent
judgement.
The Board has implemented an effective committee structure to
assist in the discharge of its responsibilities. All committees of
the Board have written terms of reference dealing with their
authority and duties. Membership of the Audit, Remuneration and
Nominations Committees is comprised exclusively of Non-Executive
Directors. The Company Secretary acts as secretary to each of these
committees.
Attendance at Board and Committee Meetings
In order to be efficient, the Board meets formally and
informally both in person and by telephone. To date there have been
at least bimonthly meetings of the Board, and the volume and
frequency of such meetings is expected to continue at least at this
rate. The Company had 6 Board meetings during the period from 1
October 2020 to 31 March 2021 and set out below, the number of
Board and committee meetings attended by Directors.
Board Audit Committee Nominations Remuneration
Committee Committee
(out of (out of (out of (out of
total possible) total possible) total possible) total possible)
--------------------------- ----------------- ----------------- ----------------- -----------------
Gregory Martyr (appointed
13 January 2021) 2 / 2 1 / 1 - / -
--------------------------- ----------------- ----------------- ----------------- -----------------
Michael Frayne 6 / 6
--------------------------- ----------------- ----------------- ----------------- -----------------
Anthony Samaha (appointed
13 January 2021) 2 / 2
--------------------------- ----------------- ----------------- ----------------- -----------------
Geoffrey Brown 6 / 6 - / -
--------------------------- ----------------- ----------------- ----------------- -----------------
Teh Kwan Wey 6 / 6 1 / 1
--------------------------- ----------------- ----------------- ----------------- -----------------
James Leahy (appointed 13 2 / 2 - / - - / -
January 2021)
--------------------------- ----------------- ----------------- ----------------- -----------------
It is noted that in the short period between completion of the
RTO on 13 January 2021 and the year end of 31 March 2021, there
were no meetings of the Nominations and Remuneration committees, as
there were no matters requiring consideration during the
period.
The Audit Committee met once during the period, to discuss and
confirm the continued appointment of BDO LLP as the Company's
auditors.
Principle 6 - Ensure that between them the Directors have the
necessary up-to-date experience, skills and capabilities
The Board considers the current balance of sector, financial and
public market skills and experience which it embodies is
appropriate for the size and stage of development of the Company
and that the Board has the skills and requisite experience
necessary to execute the Company's strategy and business plan
whilst also enabling each Director to discharge their fiduciary
duties effectively. Biographies for each member of the Board is
provided on page 14 of this annual report and accounts, as well as
on the Company's website www.capitalmetals.com .
All Directors, through their involvement in other listed
companies as well as the Company, including attendance at seminars,
forums and industry events and through their memberships of various
professional bodies, keep their skill sets up to date.
The Board reviews annually, and when required, the
appropriateness of its mix of skills and experience to ensure that
it meets the changing needs of the Company.
The Company has a professional Company Secretary in the UK who
assists the Chief Executive Officer in preparing for and running
effective Board meetings, including the timely dissemination of
appropriate information. The Company Secretary provides advice and
guidance to the extent required by the Board on the legal and
regulatory environment.
Principle 7 - Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
Review of the Group's progress against the long-term strategy
and aims of the business provides a means to measure the
effectiveness of the Board. This progress is reviewed in Board
meetings held at least six times a year. The Chief Executive
Officer's performance is reviewed once a year by the Board and
measured against a definitive list of strategic targets set by the
Board.
The Company conducts periodic reviews of its Board succession
planning protocols which includes an assessment of the number of
Board members and relative experience of each Board member
vis-a-vis the Company's requirements given its stage of
development, with the goal of having in place an adequate and
sufficiently experienced Board at all times.
Principle 8 - Promote a corporate culture that is based on
ethical values and behaviours
The corporate culture of the Company is promoted throughout its
employees and consultants and is underpinned by compliance with
local regulations and the implementation and regular review and
enforcement of various policies including a Share Dealing Policy
and Code, Anti-Corruption and Anti-Bribery Policy, Matters Reserved
for the Board, Code of Business Ethics, Whistle Blowing Policy, and
Media and Communications Policy, so that all aspects of the Company
are run in a robust and responsible way.
The Board is aware that the culture set by the Board will impact
all aspects of the Group and the way that employees and consultants
behave. The exploration, evaluation and development of mineral
resources can have a significant impact and it is important that
the communities view the Group's activities positively. Therefore,
the importance of sound ethical values and behaviours is crucial to
the ability of the Group to successfully achieve its corporate
objectives.
Principle 9 - Maintain governance structures and processes that
are fit for purpose and support good decision-making by the
Board
The Board is responsible for setting the vision and strategy for
the Company to deliver value to the Company's shareholders by
effectively putting in place its business model.
The roles and responsibility of the Chief Executive Officer,
Finance Director, Non-Executive Chairman and other Directors are
laid out below:
-- The Chief Executive Officer's primary responsibilities are
to: implement the Company's strategy in consultation with the
Board; take responsibility for the Company's projects in Sri Lanka;
run the Company on a day-by-day basis; implement the decisions of
the Board; monitor, review and manage key risks; act as the
Company's primary spokesman; communicate with external audiences
such as investors, analysts and media; and be responsible for the
administration of all aspects of the Company.
-- The Finance Director's primary responsibilities are to:
oversee the accounting function of all group companies and deal
with all matters relating to the independent audit.
-- The Non-Executive Chairman's primary responsibilities are to:
lead the Board and to ensure the effective working of the Board; in
consultation with the Board, ensure good corporate governance and
set clear expectations with regards to the Company culture, values
and behaviour; set the Board's agenda and ensures that all
Directors are encouraged to participate fully in the
decision-making process of the Board and take responsibility for
relationships with the Company's professional advisers and major
shareholders.
-- The Company's NEDs participate in all Board level decisions
and play a particular role in the determination and articulation of
strategy. The Company's NEDs provide oversight and scrutiny of the
performance of the Executive Directors, whilst both constructively
challenging and inspiring them, thereby ensuring the business
develops, communicate and execute the agreed strategy and operate
within the risk management framework.
-- The Company Secretary is responsible for ensuring that Board
procedures are followed and applicable rules and regulations are
complied with.
The Board is supported by the audit, remuneration and
nominations committees as described below.
Audit Committee
The Audit Committee comprises Gregory Martyr (Chair) and Teh
Kwan Wey.
The Audit Committee reviews reports from management and from
BDO, the Company's auditor, relating to the interim and annual
accounts and to the system of internal financial control.
The Audit Committee is responsible for assisting the Board's
oversight of the integrity of the financial statements and other
financial reporting, the independence and performance of BDO, the
regulation and risk profile of the Company and the review and
approval of any related party transactions. The Audit Committee may
hold private sessions with BDO without management present. Further,
the Audit Committee is responsible for making recommendations to
the Board on the appointment of BDO and the audit fee and reviews
reports from management and BDO on the financial accounts and
internal control systems used throughout the Company.
The Audit Committee meets at least two times a year and is
responsible for ensuring that the Company's financial performance
is properly monitored, controlled and reported. The Audit Committee
is responsible for the scope and effectiveness of the external
audit and compliance by the Company with statutory and other
regulatory requirements.
The Audit Committee:
-- monitors in discussion with BDO the integrity of the
financial statements of the Company, any formal announcements
relating to the Company's financial performance and reviews
significant financial reporting judgments contained in them;
-- reviews the Company's internal financial controls and reviews
the Company's internal control and risk management systems;
-- considers annually whether there is a need for an internal audit function and makes a recommendation to the Board;
-- makes recommendations to the Board for it to put to the
shareholders for their approval in the general meeting, in relation
to the appointment, re-appointment and removal of BDO and to
approve the remuneration and terms of engagement of BDO;
-- reviews and monitors BDO's independence and objectivity and
the effectiveness of the audit process, taking into consideration
relevant professional and regulatory requirements;
-- develops and implements policy on the engagement of BDO to
supply non-audit services, taking into account relevant external
guidance regarding the provision of non-audit services by BDO;
and
-- reports to the Board, identifying any matters in respect of
which it considers that action or improvement is needed and making
recommendations as to the steps to be taken.
The Audit Committee also reviews arrangements by which the staff
of the Company and the Company may, in confidence, raise concerns
about possible improprieties in matters of financial reporting or
other matters and ensure that arrangements are in place for the
proportionate and independent investigation of such matters with
appropriate follow-up action.
Remuneration Committee
The Remuneration Committee comprises James Leahy (Chair) and
Gregory Martyr.
The Remuneration Committee is responsible for considering all
material elements of remuneration policy, the remuneration and
incentivisation of Executive Directors and senior management (as
appropriate) and to make recommendations to the Board on the
framework for executive remuneration and its cost. The role of the
Remuneration Committee is to keep under review the Company's
remuneration policies to ensure that the Company attracts, retains
and motivates the most qualified talent who will contribute to the
long-term success of the Company. The Remuneration Committee also
reviews the performance of the Chief Executive Officer and sets the
scale and structure of his remuneration, including the
implementation of any bonus arrangements, with due regard to the
interests of shareholders.
The Remuneration Committee is also responsible for reviewing the
terms of granting options by the Company, in particular, the price
per share and the application of the performance standards which
may apply to any grant, ensuring in determining such remuneration
packages and arrangements, due regard is given to any relevant
legal requirements, the provisions and recommendations in the AIM
Rules and The QCA Code.
The Remuneration Committee:
-- determines and agrees with the Board the framework or broad
policy for the remuneration of the Chief Executive Officer and
Finance Director;
-- determines targets for any performance-related pay schemes operated by the Company;
-- ensures that contractual terms on termination and any
payments made are fair to the individual, the Company, that failure
is not rewarded and that the duty to mitigate loss is fully
recognised;
-- determines the total individual remuneration package of the
Chief Executive Officer and Finance Director, including bonuses,
incentive payments and share options;
-- is aware of and advises on any major changes in employees'
benefit structures throughout the Company;
-- ensures that provisions regarding disclosure, including
pensions, as set out in the (Directors' Remuneration Policy and
Directors' Remuneration Report) Regulations 2019, are fulfilled;
and
-- is exclusively responsible for establishing the selection
criteria, selecting, appointing and setting the terms of reference
for any remuneration consultants who advise the Remuneration
Committee.
Nominations Committee
The Nominations Committee comprises Geoffrey Brown (Chair) and
James Leahy.
The Nominations Committee shall be responsible for considering
all criteria for new Executive and Non-Executive Director
appointments, including experience of the industry in which the
Company operates and professional background. Specifically, the
Nominations Committee:
-- is responsible for identifying and nominating for the
approval of the Board, candidates to fill Board vacancies as and
when they arise;
-- evaluates the balance of skills, knowledge, experience and
diversity of the Board and, in the light of this evaluation,
prepares a description of the role and capabilities required for a
particular appointment;
-- reviews annually the time required from the Non-Executive
Directors and assess whether each Non-Executive Director is
spending enough time to fulfil their duties;
-- considers candidates from a wide range of backgrounds;
-- gives full consideration to succession planning in the course
of its work, taking into account the challenges and opportunities
facing the Company, and the skills and expertise therefore needed
on the Board, reporting to the Board regularly;
-- regularly reviews the structure, size and composition
(including the skills, knowledge and experience) of the Board and
make recommendations to the Board with regard to changes;
-- keeps under review the leadership needs of the Company, both
executive and non-executive, with a view to ensuring the continued
ability of the Company to compete effectively in the
marketplace;
-- makes a statement in the annual report about its activities,
the process used for appointments and explains if external advice
or open advertising has not been used, the membership of the
Nominations Committee, number of Nominations Committee meetings and
attendance over the course of the year;
-- ensures that on appointment to the Executive and
Non-Executive Directors receive formal letters of appointment
setting out clearly what is expected of them in terms of time
commitment, committee service and involvement outside Board
meetings;
-- considers and makes recommendations to the Board about the
re-appointment of any Non-Executive Director at the conclusion of
their specified term of office or retiring in accordance with the
Company's Articles of Association; and
-- considers and make recommendations to the Board on any matter
relating to the continuation in office of any Director at any
time.
Principle 10 - Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders and other
relevant stakeholders
The Board is committed to maintaining good communication and
having constructive dialogue with its shareholders. The Company has
close ongoing relationships with key private shareholder, analysts
and brokers, providing the opportunity to discuss issues and
provide feedback at meetings with the Company.
The Company also provides regular updates on the progress of the
Company, detailing recent business and strategy developments, in
news releases which is available on the Company's website
www.capitalmetals.com . The Company's financial reports can also be
found on its website.
All shareholders are encouraged to attend the Company's Annual
General Meeting and any general meetings held by the Company,
subject to any COVID-19 restrictions. The Company has elected to
host its AGMs in London. The Directors believe hosting the AGM in
London will enhance engagement with the Company's shareholders by
making the meeting more accessible. The Board is always open to
receiving feedback from shareholders. Communications should be
directed to info@capitalmetals.com . The Chief Executive Officer
has been appointed to manage the relationship between the Company
and its shareholders and will review and report to the Board on any
communications received.
The Company also participates in various investor events
including conferences and presentation evenings, at which
shareholders can meet with management in person to answer queries,
provide information on current developments and to take into
consideration shareholder views and suggestions.
Gregory Martyr
Chairman
30 September 2021
CAPITAL METALS PLC
Statement of Directors' responsibilities
The Directors are responsible for preparing the Strategic
report, the Directors' report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the
Group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London
Stock Exchange for companies trading securities on AIM.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether the financial statements comply with
international accounting standards in conformity with the
requirements of the Companies Act 2006; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
CAPITAL METALS PLC
Independent auditor's report to the members of Capital Metals
Plc
Opinion on the financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
March 2021 and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
-- the Parent Company financial statements have been properly
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and as
applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Capital Metals Plc
(the 'Parent Company') and its subsidiaries (the 'Group') for the
year ended 31 March 2021 which comprise the Group statement of
comprehensive income, Group statement of financial position, Group
statement of cash flows, Group statement of changes in equity and
notes to the financial statements, including a summary of
significant accounting policies. We have audited the financial
statements of Capital Metals Plc for the six month period ended 31
March 2021 which comprise the Company statement of financial
position, Company statement of cash flows, Company statement of
changes in equity and notes to the Company financial statements,
including a summary of significant accounting policies. The
financial reporting framework that has been applied in their
preparation is applicable law and international accounting
standards in conformity with the requirements of the Companies Act
2006 and, as regards the Parent Company financial statements, as
applied in accordance with the provisions of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs) (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's
Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Material uncertainty related to going concern
We draw attention to note 1 to the financial statements, which
indicates that the Group and Parent Company will need to raise
additional funding within twelve months from the date of approval
of the financial statements. As stated in note 1, these events or
conditions, along with other matters as set out in note 1, indicate
that a material uncertainty exists that may cast significant doubt
on the Group and Parent Company's ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
We identified going concern as a key audit matter based on our
assessment of the significance of the risk and the effect on our
audit strategy.
Our evaluation of the Directors' assessment of the Group and the
Parent Company's ability to continue to adopt the going concern
basis of accounting and our audit procedures in response to this
key audit matter included the following:
-- We discussed with management, including their assessment of
potential risks and uncertainties associated with areas such as the
Group's operations, ability to secure funding that are relevant to
the Group's business model and operations. We formed our own
assessment of risks and uncertainties based on our understanding of
the business and mineral sands sector.
-- We obtained management's sensitivity analysis to determine
the point at which liquidity breaks and considered whether such
scenarios were reasonably possible.
-- We critically assessed management's base case cash flow
forecasts and the underlying key assumptions which have been
approved by the Board. In doing so, we considered factors such as
historical operating expenditure. We evaluated commitments under
the exploration licences, reviewed board minutes and market
announcements for indications of additional cash requirements.
-- We discussed with management and the Board the Group's
strategy to access capital to fund its development plans. We
considered management's judgement that they had reasonable
expectation of securing necessary funding and the timing of such
funding requirement.
-- We reviewed and considered the adequacy of the disclosure
within the financial statements relating to the Directors'
assessment of the going concern basis of preparation.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
99% of Group profit before tax
Coverage 99% of Group total assets
2020
Going Concern
Carrying value of exploration
assets
Key audit matters Accounting for the reverse
acquisition
---------------------------------------
Group financial statements as a whole
Materiality
US$ 122,000 based on 1.5% of total
assets.
---------------------------------------
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
In assessing the risk of material misstatement to the Group
financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, our
Group audit scope focused on the Group's principal operating
locations being Sri Lanka (Eastern Minerals (Pvt) Limited "and
Damsila Exports (Pvt) Limited and the United Kingdom (Capital
Metals Plc ).
These were regarded as being significant components of the Group
and were subject to full scope audits based on their size and risk
characteristics.
The remaining components of the Group were considered
non-significant and these components were principally subject to
analytical review procedures.
The audits of each components were performed in the United
Kingdom and were conducted by the Group engagement team.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty in
relation to going concern above, we have determined the matters
described below to be Key Audit Matters.
Key audit matter How the scope of our audit
addressed the key audit matter
Carrying As detailed in note Our procedures in relation
value of 13, the carrying value to management's assessment
exploration of Exploration and of the Carrying value of
assets Evaluation Assets E&E assets included:
("E&E assets") amounted
to US$6.2 million * We reviewed management's impairment assessment and
at 31 March 2021. performed our own assessment of impairment indicators
in accordance with IFRS 6 in order to determine
Management are required whether their assessment was complete and in
to assess each year accordance with the requirements of the accounting
whether there are standard.
any potential impairment
triggers under IFRS
6 Exploration for * We evaluated management's assessment of the Group's
and Evaluation of right to tenure over the Eastern Minerals Project
Mineral Resources licence area by reviewing licence agreements.
which would indicate
that the carrying
value of E&E assets * We challenged management to provide evidence to
may not be recoverable. support their expectation that the industrial mining
licence application ("IML") over the DEL licence
As disclosed in notes which expired during the year, will be obtained. In
2 and 13, the impairment doing so, we reviewed the industrial mining licence
review of the carrying application, and challenged the Group's Sri Lankan
value of E&E assets external solicitor in order to corroborate
requires significant management's view that the DEL IML is likely to be
judgment to be made obtained. We assessed the solicitor's competence and
by management. independence.
Given the materiality
of the assets in the * We discussed with management and reviewed board
context of the Group's minutes and press releases to assess the exploration
statement of financial activity undertaken in the year, the results of
position and the judgement exploration activity and the future plans for the
involved in making licence area.
this assessment we
consider this to be
a key audit matter. * We reviewed the planned works programme to determine
if substantive expenditure is planned in each licence
area to identify whether there were circumstances
whereby no further substantive expenditure was
planned, which would be an indicator of impairment.
* We evaluated the adequacy of the Group's disclosures
in respect of the impairment assessments.
Key observations:
Based on the work performed
we found management's assessment
of the carrying value of
exploration assets to be
reasonable.
We found the disclosures
in the financial statements
to be appropriate .
----------------------------- -------------------------------------------------------------------
Key audit matter How the scope of our audit
addressed the key audit matter
Accounting As detailed in note Our procedures in relation
for the 5, during the year to management's assessment
reverse the Company acquired included:
acquisition through a share-for-share
exchange the entire * We reviewed the completeness of management's
issued share capital assessment by considering whether it was in
of Capital Metals accordance with the requirements of the accounting
Limited. standards and in line with industry practice.
In substance, the
shareholders of Capital * We reviewed the appropriateness of management's
Metals Limited acquired assessment, the methodology and its consistency with
a controlling interest the requirements of IFRSIn respect of the deemed cost
in the Company and of acquiring a listing we, agreed the consideration
the transaction has shares to the acquisition agreement and the
therefore been accounted acquisition date share price to the LSE website.
for as a reverse
acquisition.
* We reviewed and assessed the appropriateness and
Management judgement adequacy of disclosures provided within the financial
is required in accounting statements.
for this transaction
and the accounting
conclusion has a
fundamental Key observations:
impact on the presentation Based on the procedures performed
of the current and we found management's assessment
comparative financial and disclosures in the financial
statements of the statement to be appropriate.
Group.
Given the level of
judgement involved
in making this assessment
we consider this to
be a key audit matter.
---------------------------- ------------------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements Parent company financial
statements
2021 2021
------------------------------- -----------------------------------
Materiality US$ 122,000 US$ 72,000
------------------------------- -----------------------------------
Basis for determining 1.5% of Total Assets 0.2% of Total Assets
materiality
------------------------------- -----------------------------------
Rationale for We consider total assets The Company is a holding
the benchmark to be the most significant company which performs
applied determinant of the fund raising activities
Group's financial performance and incurs other administrative
used by members. expenditure. As the strategic
focus of the Company
The Group has invested is monetising its asset
significant sums on base we have determined
its Exploration assets that an asset based materiality
and these are considered is the appropriate basis
to be the key value of materiality.
driver for the Group
as its assets are an
indicator of future
value to shareholders.
------------------------------- -----------------------------------
Performance US$ 78,000 US$ 46,000
materiality
------------------------------- -----------------------------------
Basis for determining 65% of materiality 65% of materiality based
performance based on our assessment on our assessment of
materiality of a number of factors a number of factors including
including the expected the expected total value
total value of known of known and likely misstatements
and likely misstatements (based on past experience),
(based on past experience), our knowledge of the
our knowledge of the group's internal controls
group's internal controls and management's attitude
and management's attitude towards proposed adjustments.
towards proposed adjustments.
------------------------------- -----------------------------------
Component materiality
We set materiality for each component of the Group based on a
percentage of Group materiality dependent on the size and our
assessment of the risk of material misstatement of that component.
Component materiality ranged from US$60,000 to US$84,000. In the
audit of each component, we further applied performance materiality
levels of 65% of the component materiality to our testing to ensure
that the risk of errors exceeding component materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of US$2,000. We also
agreed to report differences below this threshold that, in our
view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the Annual
Report and Financial Statements other than the financial statements
and our auditor's report thereon. Our opinion on the financial
statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon. Our responsibility is to
read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic In our opinion, based on the work undertaken
report and in the course of the audit:
Directors' * the information given in the Strategic report and the
report Directors' report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
* the Strategic report and the Directors' report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding
of the Group and Parent Company and its environment
obtained in the course of the audit, we have
not identified material misstatements in the
Strategic report or the Directors' report.
Matters on We have nothing to report in respect of the following
which we matters in relation to which the Companies Act
are required 2006 requires us to report to you if, in our
to report opinion:
by exception
* adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
* the Parent Company financial statements are not in
agreement with the accounting records and returns; or
* certain disclosures of Directors' remuneration
specified by law are not made; or
* we have not received all the information and
explanations we require for our audit.
------------------------------------------------------------------------
Responsibilities of Directors
As explained more fully in the statement of Directors'
responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- Holding discussions with management and considering any known
or suspected instances of non-compliance with laws and regulations
or fraud;
-- Gaining an understanding of the laws and regulations relevant
to the Group and the industry in which it operates, through
discussion with management and our knowledge of the industry. These
included the listing rules, financial reporting framework, UK
Companies Law, tax legislation and environmental regulations in the
UK and Sri Lanka;
-- Communicating relevant identified laws and regulations and
potential fraud risks to all engagement team members and remaining
alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit;
-- Assessing the susceptibility of the Group's financial
statements to material misstatement, including how fraud might
occur. In response our procedures included, but were not limited
to;
- Agreeing the financial statement disclosures to underlying supporting documentation;
- Addressing the risk of management override of internal
controls, including testing journals and evaluating whether there
was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud;
- Assessing areas of the Financial Statements which include
judgement and estimates, as set out in note 2 to the financial
statements and in our Key audit matters section above and evaluated
whether there was evidence of bias by the Directors;
- Made of enquiries of management as to whether there was any
correspondence from regulators in so far as the correspondence
related to the Financial Statements;
- Reviewing minutes from board meetings of those charges with
governance to identify any instances of non-compliance with laws
and regulations
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms
part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
30 September 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CAPITAL METALS PLC
Group statement of comprehensive income for the year ended 31
March 2021
Restated
(1)
Notes 2021 2020
$'000 $'000
Administration expenses (1,432) (1,030)
Share based payments expense:
* Cost of acquiring listing 5 (5,454) -
* Share based payments charge 19 (1,111) -
Loss on ordinary activities (7,997) (1,030)
Finance income 111 6
------- --------
Loss before tax for the period (7,886) (1,024)
Taxation 9 - -
------- --------
Loss for the financial year (7,886) (1,024)
------- --------
Other comprehensive loss
Foreign exchange loss on translation of foreign
subsidiaries 167 (173)
------- --------
Other comprehensive loss 167 (173)
Total comprehensive loss for the financial
year (7,719) (1,197)
======= ========
Attributable to:
Equity holders (7,719) (1,197)
------- --------
(7,719) (1,197)
------- --------
Loss per share
Basic and fully diluted loss per share (cents) 10 (5.61) (0.78)
All amounts relate to continuing operations.
The notes on pages 39 to 66 form part of these financial
statements.
(1) Refer to Note 4.
CAPITAL METALS PLC
Group statement of financial position as at 31 March 2021
Restated Restated
(1) (1)
Notes 2021 2020 2019
$'000 $'000 $'000
ASSETS
Non-current assets
Exploration & evaluation assets 13 6,178 6,389 6,612
Property, plant & equipment 14 48 72 117
6,226 6,461 6,729
-------- -------- --------
Current assets
Trade and other receivables 15 115 5 111
Cash and cash equivalents 1,797 114 85
-------- -------- --------
1,912 119 196
-------- -------- --------
Total assets 8,138 6,580 6,925
======== ======== ========
EQUITY
Capital and reserves
Share capital 18 6,019 5,611 5,611
Share premium account 18 47,470 47,267 47,267
Capital contribution reserve 1,250 1,250 1,250
Deferred share reserve 20 1,969 1,969 1,969
Reverse acquisition reserve 5 (75,474) (45,859) (46,218)
Merger reserve 5 35,633 - -
Share warrants and options reserve 19 3,437 281 325
Foreign currency translation reserve (956) (1,155) (982)
Retained earnings (12,517) (4,767) (3,787)
--------
Total shareholders' funds 6,831 4,596 5,434
======== ======== ========
LIABILITIES
Current liabilities
Trade and other payables 16 707 337 297
707 337 297
-------- -------- --------
Non-Current liabilities
Trade and other payables 16 600 1,194 1,194
Borrowings 17 - 453 -
600 1,647 1,194
-------- -------- --------
Total equity and liabilities 8,138 6,580 6,925
======== ======== ========
Approved by the Board of Directors on 30 September 2021
Signed on behalf of the Board of Directors:
Michael Frayne
Director
The notes on pages 39 to 66 form part of these financial
statements.
(1) Refer to Note 4.
Company statement of financial position as at 31 March 2021 and
30 September 2020
Notes 31/03/21 30/09/20
$'000 $'000
ASSETS
Non-current assets
Investment in subsidiaries 11 36,800 -
Property, plant & equipment - 2
-------- --------
36,800 2
-------- --------
Current assets
Loan to subsidiaries 12 1,195 -
Trade and other receivables 15 112 67
Cash and cash equivalents 1,706 1,172
-------- --------
3,013 1,239
-------- --------
Total assets 39,813 1,241
======== ========
EQUITY
Capital and reserves
Share capital 18 6,019 5,611
Share premium account 18 47,470 47,242
Merger reserve 5 35,634 -
Share warrants and options reserve 19 3,462 25
Foreign currency translation reserve (575) (1,086)
Retained earnings (52,292) (50,658)
Total shareholders' funds 39,718 1,134
======== ========
LIABILITIES
Current liabilities
Trade and other payables 16 95 107
95 107
-------- --------
Total equity and liabilities 39,813 1,241
======== ========
Approved by the Board of Directors on 30 September 2021
Signed on behalf of the Board of Directors:
Michael Frayne
Director
The notes on pages 39 to 66 form part of these financial
statements.
As permitted by section 408 of the Companies Act 2006, the
profit and loss account of the parent company has not been
separately presented in these accounts. The parent company total
comprehensive loss for the six month period ended 31 March 2021 was
$1,634,000 (twelve months ended 30 September 2020: loss
$6,367,000).
(1) Refer to Note 4.
Group statement of cash flows for the year ended 31 March
2021
Notes 2021 2020 (1)
$'000 $'000
Cash flows from operating activities
Loss for the financial year (7,886) (1,024)
Adjustments:
Deemed reverse acquisition expense 5 5,454 -
Profit on sale of property, plant and equipment - (4)
Depreciation 14 19 18
Foreign exchange 166 275
Interest received (1) (1)
Interest expense 17 45 15
Waiver of loans owed (110) -
Share based payments 19 1,111 -
------- --------
Operating cash flows before movement in
working capital (1,202) (721)
Decrease/(increase) in receivables 48 106
Increase/(decrease) in payables (442) 48
------- --------
Cash used in operating activities (1,596) (567)
------- --------
Cash flows from investing activities
Interest received 1 1
Disposals of property, plant and equipment - 20
Cash expenditure on exploration and evaluation
activity 13 (134) (215)
Net cash from/(used in) investing activities (133) (194)
------- --------
Cash flows from financing activities
Share placement proceeds 18 2,842 363
Costs of issue 18 (299) (12)
Interest expense paid 17 (26) -
Cash acquired in reverse acquisition 5 938 -
Proceeds from borrowings 17 33 428
Repayments of borrowings 17 (204) -
------- --------
Net cash generated from financing activities 3,284 779
------- --------
Net increase/(decrease) in cash and cash
equivalents 1,555 17
Net foreign exchange differences 128 11
Cash and cash equivalents at the beginning
of the period 114 86
------- --------
Cash and cash equivalents at the end of
the period 1,797 114
======= ========
The notes on pages 39 to 66 form part of these financial
statements.
(1) Refer to Note 4.
Company statement of cash flows for the period ended 31 March
2021
and year ended 30 September 2020
Notes 31/03/21 30/09/20
$'000 $'000
Cash flows from operating activities
Loss for the financial year (1,634) (6,367)
Adjustments:
Depreciation 14 2 1
Interest income - (358)
Share based payments 19 768 -
Loss on disposal of associate - 5,808
-------- --------
Operating cash flows before movement in
working capital (864) (916)
Decrease/(increase) in receivables (45) 117
Increase/(decrease) in payables (12) 67
Net cash used in operating activities (921) (732)
-------- --------
Cash flows from investing activities
Proceeds from disposal of associate - 373
Loan to subsidiaries 12 (1,195) 334
Interest income received - 254
Net cash from/(used in) investing activities (1,195) 751
-------- --------
Cash flows from financing activities
Share placement proceeds 18 2,842 514
Costs of issue 18 (299) (25)
-------- --------
Net cash generated from financing activities 2,543 489
-------- --------
Net increase/(decrease) in cash and cash
equivalents 427 508
Net foreign exchange differences 107 13
Cash and cash equivalents at the beginning
of the period 1,172 651
-------- --------
Cash and cash equivalents at the end of
the period 1,706 1,172
======== ========
The notes on pages 39 to 66 form part of these financial
statements.
CAPITAL METALS PLC
Group statement of changes in equity for the year ended 31 March
2021
_____________________________________________________________________________________
Share Share Capital Deferred Reverse Merger Share Foreign Retained Total
capital premium contribution share acquisition reserve warrants currency earnings
account reserve reserve reserve & translation
options reserve
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Restated
Balance
as at 31
March
2019 (1) 5,611 47,267 1,250 1,969 (46,218) - 325 (982) (3,787) 5,434
------- ------- ------------ -------- ----------- ------- -------- ----------- -------- -------
Loss for the
year - - - - - - - - (1,024) (1,024)
Other
comprehensive
income - - - - - - - (173) - (173)
------- ------- ------------ -------- ----------- ------- -------- ----------- -------- -------
Total
comprehensive
loss for the
year - - - - - - - (173) (1,024) (1,197)
Changes in
equity
for the year
ended 31 March
2020
Issue of share
capital - - - - 359 - - - - 359
Expiry of
options
during the
year - - - - - - (44) - 44 -
Restated
Balance
as at 31
March
2020 (1) 5,611 47,267 1,250 1,969 (45,859) - 281 (1,155) (4,767) 4,596
------- ------- ------------ -------- ----------- ------- -------- ----------- -------- -------
Loss for the
year - - - - - - - - (7,886) (7,886)
Other
comprehensive
income - - - - - - - 167 - 167
------- ------- ------------ -------- ----------- ------- -------- ----------- -------- -------
Total
comprehensive
loss for the
year - - - - - - - 167 (7,886) (7,719)
Changes in
equity
for the year
ended 31 March
2021
Cancellation
of options - - - - 146 - (281) - 135 -
Reverse
acquisition 360 - - - (29,728) 35,633 (25) - - 6,241
Issue of share
capital for
cash 47 2,795 - - - - - - - 2,842
Costs of issue
of share
capital - (299) - - - - - - - (299)
Issue of share
warrants - (2,320) - - - - 2,694 - - 374
Issue of
options - - - - - - 768 - - 768
Issue of share
capital to
settle
CML
convertible
bond interest 1 27 - - - - - - - 28
Balance as at
31 March 2021 6,019 47,470 1,250 1,969 (75,441) 35,633 3,437 (989) (12,517) 6,831
======= ======= ============ ======== =========== ======= ======== =========== ======== =======
The notes on pages 39 to 66 form part of these financial
statements.
(1) Refer to Note 4.
Company statement of changes in equity for the period ended 31
March 2021 and year ended 30 September 2020
Share Share Merger Share warrants Foreign Retained Total
capital premium reserve and options currency earnings
account reserve translation
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance as at 30 September
2019 5,598 46,791 - - (1,085) (44,291) 7,013
-------- -------- -------- -------------- ------------ --------- -------
Loss for the year - - - - - (6,367) (6,367)
Other comprehensive
income - - - - (1) - (1)
-------- -------- -------- -------------- ------------ --------- -------
Total comprehensive
loss for the year - - - - (1) (6,367) (6,368)
Changes in equity
for the year ended
30 September 2020
Issue of share capital
for cash 13 476 - - - - 489
Transaction costs
on issue of share
capital - (25) - 25 - - -
Balance as at 30 September
2020 5,611 47,242 - 25 (1,086) (50,658) 1,134
-------- -------- -------- -------------- ------------ --------- -------
Loss for the period - - - - (1,634) (1,634)
Other comprehensive
income - - - - 511 - 511
-------- -------- -------- -------------- ------------ --------- -------
Total comprehensive
loss for the period - - - - 511 (1,634) (1,123)
Changes in equity
for the period ended
31 March 2021
Issue of shares to
acquire CML 360 - 35,634 - - - 35,994
Issue of share capital
for cash 47 2,795 - - - - 2,842
Transaction costs
on issue of share
capital - (299) - (299)
Issue of share warrants - (2,295) - 2,669 - - 374
Issue of share options - - - 768 - - 768
Issue of share capital
to settle CML convertible
bond loan interest 1 27 - - - - 28
Balance as at 31 March
2021 6,019 47,470 35,634 3,462 (575) (52,292) 39,718
======== ======== ======== ============== ============ ========= =======
The notes on pages 39 to 66 form part of these financial
statements.
CAPITAL METALS PLC
Notes to the financial statements
1. Reporting entity
Capital Metals Plc is a public limited company registered in
England and Wales under the Companies Act, with registered number
05555087, and limited by shares. Following the completion of the
reverse acquisition of Capital Metals Limited on 13 January 2021,
the Company changed its name from Equatorial Palm Oil Plc to
Capital Metals Plc, and changed its account reference date to 31
March. The Company's registered office is at Office 3.05, 1 King
Street, London EC2V 8AU.
These consolidated financial statements comprise the Company and
its subsidiaries (together referred to as the "Group" and
individually as "Group entities"). The nature of the Group's
operations and its principal activities are set out in the
Directors' report on pages 15 to 18.
2. Summary of principal accounting policies
2.1. Basis of preparation
These financial statements of the Group for the year ended 31
March 2021, and for the Company for the six months ended 31 March
2021, have been prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006. The financial statements were authorised for
issue by the Board of Directors on 30 September 2021.
Reverse acquisition & comparative information
On 13 January 2021, the Company completed a reverse acquisition
of Capital Metals Limited, a company registered in the British
Virgin Islands. Further information about this transaction is
disclosed in note 5.
Although the transaction resulted in Capital Metals Limited
becoming a wholly owned subsidiary of the Company, the transaction
constitutes a reverse takeover in accordance with Rule 14 of the
AIM Rules for Companies as the previous shareholders of Capital
Metals Limited own a substantial majority of the Ordinary Shares of
the Company and the executive management of Capital Metals Limited
became the executive management of Capital Metals Plc, previously
Equatorial Palm Oil Plc.
Being a reverse takeover, the legal subsidiary, Capital Metals
Limited was treated in consolidation as the accounting acquirer and
the legal parent company, Capital Metals Plc, was treated as the
accounting subsidiary.
The comparative period for the Group is the year ended 31 March
2020 and includes the results of Capital Metals Limited and its
subsidiaries only.
The comparative period for the Company is the year ending 30
September 2020, with the current period results being for the 6
month period 31 March 2021.
Measurement
These consolidated financial statements have been prepared on a
historical cost basis, except for the following financial
liabilities (refer Note 2.12):
-- Deferred consideration - fair value through profit or loss
-- Convertible bonds - fair value through profit or loss
2.2. Basis of consolidation
These consolidated financial statements comprise the financial
statements of Capital Metals Plc and its subsidiaries as at 31
March 2021. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out of
the Group. Control exists where the company has the power to govern
the financial and operating policies of an entity so as to obtain
benefits from its activities. Where subsidiaries follow differing
accounting policies from those of the Group, those accounting
policies have been adjusted to align with those of the Group.
Inter-company balances and transactions between Group companies are
eliminated on consolidation, though foreign exchange differences
arising on inter-company balances between subsidiaries with
differing functional currencies is recognised in profit or
loss.
2.3. Going concern
These financial statements have been prepared on the going
concern basis. The Group'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 the Strategic
Report.
As at 31 March 2021 and the date of sign-off of these financial
statements, the Group had cash and cash equivalents of $1,797,000
and $1,236,000 respectively. The Directors have prepared cash flow
forecasts for the period ending 31 December 2022, which take
account of the cost and operational structure of the Group, planned
exploration and evaluation expenditure, licence commitments and
working capital requirements. These forecasts indicate that the
Group's cash resources are not sufficient to cover the projected
expenditure for the period for a period of 12 months from the date
of approval of these financial statements. These forecasts indicate
that the Group, in order to meet its operational objectives, and
meets its expected liabilities as they fall due, will be required
to raise additional funds within the next 12 months.
In common with many exploration and evaluation entities, the
Group will need to raise further funds within the next 12 months in
order to meet its expected liabilities as they fall due, and
progress the Group into definitive feasibility and then into
construction and eventual production of revenues. The Directors are
confident in the Company's ability to raise additional funds as
required, from existing and/or new investors, within the next 12
months. The Group has demonstrated its access to financial
resources, as evidenced by the completion of the Company's
readmission to the AIM market of the London Stock Exchange in
January 2021, in conjunction with an equity raising of GBP2,085,000
($2,842,000), before costs.
The operations of the Group are currently financed from equity
funds which the Group has raised from shareholders. The Group has
not yet earned revenues and is still in the exploration and
evaluation phase of its business.
The ongoing effect of COVID-19 is actively being assessed by the
Directors, the future impact of which remains unknown. The
Directors are of the opinion that there is no reason to believe
there will be any effect in respect of the Group's going concern
status for the foreseeable future. Further information on the
impact of COVID-19 is included in the Strategic Report.
Given the Group's current cash position and its demonstrated
ability to raise capital, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting preparing
these financial statements. Whilst the Directors are confident that
they will be able to secure the necessary funding, the current
conditions do indicate the existence of a material uncertainty that
may cast doubt regarding the applicability of the going concern
assumption and the auditors have made reference to this in their
audit report.
2.4. Functional and presentation currency
These consolidated financial statements are presented in US
Dollars. All amounts have been rounded to the nearest thousands of
US Dollars ($'000), unless otherwise indicated. The functional
currency of the RTO accounting acquirer, CML, is US Dollars. The
functional currency of the Company is pounds sterling.
Each Group entity determines its own functional currency and
items included in the financial statements of each entity are
measured using that functional currency. The functional currency of
the Group's subsidiaries incorporated in the British Virgin Islands
and Sri Lanka is US Dollars and Sri Lankan Rupee respectively.
Transactions denominated in a foreign currency are translated
into the functional currency at the exchange rate at the date of
the transaction. Assets and liabilities in foreign currencies are
translated to the functional currency at rates of exchange ruling
at the reporting date. Gains or losses arising from settlement of
transactions and from translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in the statement of comprehensive income for the
period.
The results and financial position of all the Group entities
that have a functional currency different from the presentation
currency were translated into the presentation currency as
follows:
- assets and liabilities for each statement of financial
position presented were translated at the closing rate at the date
of the statement of financial position;
- income and expenses for each statement of comprehensive income
were translated at the average exchange rate; and
- all resulting exchange differences were recognised as a separate component of equity.
On consolidation, exchange differences arising from the
translation of intercompany balances are taken to statement of
comprehensive income for the period.
2.5. Segment reporting
An operating segment is a group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other business
segments.
The Directors are of the opinion that the Group comprises a
single activity being the exploration and evaluation of mineral
sand resources in one geographical area in Sri Lanka. As such the
financial information of the segment is the same as that set out in
the primary statements.
2.6. Asset acquisition
Where an acquisition transaction constitutes the acquisition of
an asset and not a business, the consideration paid is allocated to
assets and liabilities acquired based on their relative fair
values, with transaction costs capitalised. No gain or loss is
recognised.
Consideration paid in the form of equity instruments is measured
by reference to the fair value of the asset acquired. The fair
value of the assets acquired would be measured at the point control
is obtained.
The Group recognises the fair value of contingent consideration
in respect to an asset acquisition, where it is probable that a
liability has been incurred, and the amount of that liability can
be reasonably estimated. Such contingent consideration is
recognized at the time control of the underlying asset is obtained,
and such an amount is included in the initial measurement of the
cost of the acquired assets.
The Group recognises contingent consideration in the form of
cash, and contingent consideration in the form of equity
instruments. Contingent consideration in the form of cash is
recognised as a liability, and contingent consideration in the form
of equity instruments is recognised in the contingent share
reserve.
For contingent cash consideration milestones, the Group
estimates a probability for the likelihood of completion to
estimate the total liability for the expected variable payments.
The probability estimated for the likelihood of completion is
considered at each reporting period. Movements in the fair value of
contingent cash consideration payable is capitalised as part of the
asset.
For contingent share consideration milestones, the Group
estimates a probability for the likelihood of completion to
estimate the total contingent share consideration payable. The
probability estimated for the likelihood of completion is not
reassessed in subsequent reporting periods.
Deferred tax is not recognised upon an asset acquisition.
2.7. Exploration and evaluation assets
Exploration and evaluation assets include the cost of
acquisition, exploration, determination of resources and
recoverable reserves, technical studies, economic feasibility
studies and all technical and administrative overheads directly
associated with these assets, where a mineral deposit has
development potential.
Exploration and evaluation assets which are acquired are
recognised at fair value. Capitalised exploration and evaluation
expenditure is recorded and held at cost.
The Group performs an impairment test on the exploration and
evaluation assets when specific facts and circumstances indicate an
impairment test is required, including:
i) the Group's right to explore in an area has expired, or will
expire in the near future without renewal;
ii) no further exploration or evaluation is planned or budgeted for;
iii) a decision has been taken by the Board to discontinue
exploration and evaluation in an area due to the absence of a
commercial level of reserves; and
iv) sufficient data exists to indicate that the book value will
not be fully recovered from future development and production.
If any such facts or circumstances are noted, the Group, as a
next step, perform an impairment test in accordance with the
provisions of IAS 36 "Impairment of Assets". In such circumstances,
the aggregate carrying value of the exploration and assets is
compared against the expected recoverable amount of the
cash-generating unit. The recoverable amount is the higher of value
in use and the fair value less costs to sell. Management considers
all licences relating to the project to represent one asset when
undertaking their impairment assessment.
2.8. Investments in subsidiaries
Investments in Group undertakings are stated at cost, which is
the fair value of the consideration paid, less any impairment
provision.
2.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment losses.
Depreciation is provided on all property, plant and equipment to
write off the cost less estimated residual value of each asset
over its expected useful economic life on a straight line basis
at the following annual rates:
Computer & office equipment: 3 years
Motor vehicles: 4 years
Field equipment: 4 years
Furniture & fittings: 5 years
Residual value is calculated on prices prevailing at the date of
acquisition or revaluation. Useful lives and residual values are
reviewed at the end of every reporting period.
2.10. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
2.11. Financial assets
(a) Recognition and measurement
Management determines the classification of its financial assets
at initial recognition, the classification of which depends on the
purpose for which the financial assets were acquired.
Financial assets are classified in four categories:
i) amortised cost;
ii) fair value through other comprehensive income ("FVOCI") with
gains or losses recycled to profit or loss on derecognition;
iii) FVOCI with no recycling of gains or losses to profit or loss on derecognition; and
iv) fair value through profit or loss ("FVTPL").
Financial assets are classified as at amortised cost only if
both of the following criteria are met:
-- the asset is held within a business model whose objective is
to collect contractual cash flows; and
-- the contractual terms give rise to cash flows that are solely
payments of principal and interest
The Group's financial assets comprise cash and receivables which
are classified as financial assets at amortised cost. The Company's
financial assets comprise cash and loans to subsidiaries, which are
classified as financial assets at amortised cost.
The Company accounts for loan receivables at amortised cost as
the objective is to hold these assets in order to collect
contractual cash flows and the contractual cash flows are solely
payments of principal and interest. After classification as
amortised cost, the financial assets are initially measured at fair
value plus directly attributable transaction costs, and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Financial assets are derecognized when the rights to receive
cash flows from the assets have expired or have been transferred,
and the Group has transferred substantially all of the risks and
rewards of ownership.
(b) Impairment
Impairment provisions for loans to subsidiaries are recognised
based on a forward-looking expected credit loss model. The
methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk
since initial recognition of the financial asset.
For those where the credit risk has not increased significantly
since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be
credit impaired, lifetime expected credit losses along with
interest income on a net basis are recognised.
2.12. Financial liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group becomes a party
to the contractual provisions of the instrument.
All financial liabilities are initially recognised at fair value
and subsequently measured either as:
-- amortised cost using the effective interest method, with
interest-related charges recognised as an expense in the income
statement; or
-- financial liabilities measured at FVTPL, re-measured at
subsequent reporting dates to fair value through the income
statement.
During the reporting period, the Group's financial liabilities
comprised trade and other payables, deferred consideration payable,
loans and convertible bonds. The trade and other payables, and
loans, are classified at amortised cost.
The deferred consideration payable in respect of the acquisition
of the Project is treated as a financial liability measured at
FVTPL.
The convertible bonds were assessed to contain an embedded
derivative conversion feature and the Group elected to treat the
entire instrument as a financial liability measured at FVTPL.
A financial liability is derecognised only when the obligation
is extinguished, that is, when the obligation is discharged or
cancelled or expires.
2.13. Measurement of fair values
A number of the Group's accounting policies and disclosures
require the measurement of fair values, for both financial and
non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the
group uses observable market data as far as possible. Fair values
are
categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a
liability might be categorised in different levels of the fair
value hierarchy,
then the fair value measurement is categorised in its entirety
in the same level of the fair value hierarchy as the lowest level
input
that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value
hierarchy at the end of the reporting period during which the
change has occurred.
2.14. Share capital and reserves
(i) Share capital - represents the nominal value of share capital .
(ii) Share premium - represents the excess over nominal value of
the fair value of consideration received for equity shares, net of
expenses of the share issue.
(iii) Capital contribution reserve - represents capital
contributed by one or more of the members without taking shares in
return or creating a debt.
(iv) Deferred share reserve - represents shares to be issued
upon certain conditions being met.
(v) Reverse acquisition reserve - represents a residual balance
as part of reverse acquisition resulted from the capital presented
that of the legal parent (accounting acquiree), including the
equity instruments issued by the legal parent to effect the
acquisition and other equity balances those of legal subsidiary
(accounting acquirer).
(vi) Merger reserve - represents an amount in excess of nominal
value on the issue of the equity shares as consideration for
acquisition of subsidiary. Whereby the excess of the fair value of
the issued ordinary share capital issued over the nominal value of
these shares is transferred to this reserve, in accordance with
section 612 of the Companies Act 2006.
(vii) Share warrants and options reserve - represents the
cumulative charge recognised under IFRS 2 in respect of share-based
payment awards.
(viii) Foreign currency translation reserve - represents the
exchange differences arising on translating the closing net assets
of the Company at the closing rate at the balance sheet date, and
the results of Company's operations at average exchange rate for
the year in to the Group into the reporting currency.
(ix) Retained losses - the cumulative net gains and losses
recognised in the financial statements. As a result of the reverse
takeover, the consolidated figures include the retained losses of
the Group only from the date of the reverse takeover together with
the brought forward losses of Capital Metals Limited and its
subsidiaries.
2.15. Share based payments
The Group has granted options over its unissued share capital to
certain Directors, management, employees and consultants as part of
their remuneration. The fair value of options granted in respect of
services provided, is measured at the grant date and recognised as
an expense over the vesting period, with a corresponding increase
in the Share warrants and options reserve.
The fair value of options is valued using the Black-Scholes
model or Monte Carlo analysis, as appropriate, taking into account
the terms and conditions upon which the warrants or options were
issued or granted.
Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the statement of comprehensive income over the remaining vesting
period.
At the end of each reporting period, the entity revises its
estimates of the number of options that are expected to vest based
on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the Income
Statement, with a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares,
with the net proceeds received credited to share capital (nominal
value) and share premium.
On cancellation of share options, the proportion of the share
based payment reserve relevant to those options is transferred to
Retained Losses.
2.16. Taxation
Current tax payable is based on taxable profits for the year.
Taxable profits differ from net profits as reported in the income
statement because it excludes items that are taxable or deductible
in other years and items that are not taxable or deductible. The
Company's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted at the balance
sheet date.
The tax expense represents the sum of the tax currently payable
and deferred tax. The tax currently payable is based on taxable
profit for the period. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively
enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised.
2.17. Leases
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- Fixed payments, less any lease incentives receivable;
-- Variable lease payment that are based on an index or a rate,
initially measured using the index or the rate as at the
commencement date;
-- The exercise price of a purchase option; and
-- Payment of penalties for terminating the lease.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability. The
lease payments are discounted using the interest rate implicit in
the lease. If that rate cannot be readily determined, the lessee's
incremental borrowing rate is used, being the rate that the lessee
would have to pay to borrow the funds necessary to obtain an asset
of similar value to the right-of use asset in a similar economic
environment with similar terms, security and conditions. Lease
payments are allocated between principal and finance cost. The
finance cost is charged to profit or loss over the lease period so
as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
The Group has no lease arrangements within the scope of
IFRS16.
Rent payable under operating leases on which the short term
exemption has been taken, less any lease incentives received, is
charged to the income statement on a straight-line basis over the
term of the relevant lease except where another more systematic
basis is more representative of the time pattern in which economic
benefits from the lease asset are consumed.
2.18. New and amended International Financial Reporting Standards
During the financial year ended 31 March 2021, the Group adopted
the following mentioned amendments, which have not had a material
impact on the Group's and the Company's financial statements:
-- Amendments to IAS 1 and IAS 8: Definition of Material
-- Amendments to IFRS 3: Business Combinations
-- Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform
At the date on which these financial statements were approved,
there were no IASB and IFRS Interpretations Committee standards,
interpretations and amendments which had been issued, but were not
effective for the year ended 31 March 2021, that are considered to
have a potentially material impact on the Group's financial
statements going forward.
3. Use of estimates and judgments
The preparation of the Financial Statements in conformity with
IFRS requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of expenses during the
period. Actual results may vary from the estimates used to produce
these financial statements. Estimates and judgements are regularly
evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances.
(a) Judgements
Items subject to such judgements, that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are included in the
following notes:
-- Note 13 - Exploration and evaluation assets. Management make
the judgement as to which costs are directly associated with the
exploration and evaluation ("E&E") assets and are to be
capitalised, including the allocation of applicable salary and
overhead costs.
Management make the judgement as to whether there are any
indicators of impairment, including an assessment of:
- the Group's right to explore in an area has expired, or will
expire in the near future without renewal;
- no further exploration or evaluation is planned or budgeted for;
- a decision has been taken by the Board to discontinue
exploration and evaluation in an area due to the absence of a
commercial level of reserves; and
- sufficient data exists to indicate that the book value will
not be fully recovered from future development and production.
DEL Licence (EL168/R/4) expired on 31 October 2020, but is
subject to the Group's First IML Application, which has not been
granted at the reporting date. Management are of the judgement that
there is a reasonable expectation of the First IML Application
being granted and no impairment test was required to be performed.
Should the Group not be successful with the First IML Application,
then Directors would expect to impair the E&E assets.
(b) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that
have a significant risk of resulting in a material adjustment to
the
carrying amounts of assets and liabilities within the next
financial year are included in the following notes:
-- Note 5 - Reverse acquisition. Management measured the cost of
these equity-settled transactions by reference to the fair value of
the equity instruments at the measurement date, being the date of
completion of the reverse acquisition. The placing price was 12
pence per share and the closing price on re-admission of the
Company on 13 January 2021 was 20 pence per share. It was
Management's judgement that the closing price of 20 pence per share
was considered to be the most appropriate value and therefore it
was applied in valuing the investment in Capital Metals Limited at
GBP26,400,000 ($35,994,000), and in the reverse acquisition
accounting for the fair value of the shares deemed to have been
issued by Capital Metals Limited of GBP4,563,000 ($6,221,000),
which resulted in $5,454,000 being expensed as the deemed cost of
acquiring the listing.
-- Note 19 - Share based payments. Management measured the cost
of equity-settled transactions by reference to the fair value of
the equity instruments at the date at which they are granted. The
fair value of shares was determined by the share price at the date
of grant. The fair value of options and warrants was determined
using Monte Carlo simulations and the Black-Scholes model
respectively. Management estimated the number of options that are
expected to vest based on the non-market vesting conditions. The
valuation of these options and warrants involved making a number of
critical estimates relating to price volatility, future dividend
yields, expected life of the options and forfeiture rates. These
assumptions are described in more detail in Note 19. The share
based payments reserve as at 31 March 2021 was $3,437,000.
4. Prior year adjustments
The prior year comparatives for the Group have been restated
from those previously reported by Capital Metals Limited, as shown
below:
Previous Adjust. Adjust. Adjust. Adjust. Adjust. Restated
2 3 4 5
2019 1 2019
$'000 $'000 $'000 $'000 $'000 $'000 $'000
ASSETS
Non-current assets
Exploration & evaluation
assets 4,894 (441) 3,219 - (792) (268) 6,612
Property, plant &
equipment 117 - - - - - 117
-------- ------- ------- ------- ------- -------
5,011 (441) 3,219 - (792) (268) 6,729
-------- ------- ------- ------- ------- ------- --------
Current assets
Trade and other receivables 111 - - - - - 111
Cash and cash equivalents 85 - - - - - 85
-------- ------- ------- ------- ------- ------- --------
196 - - - - - 196
-------- ------- ------- ------- ------- ------- --------
Total assets 5,207 (441) 3,219 - (792) (268) 6,925
======== ======= ======= ======= ======= ======= ========
EQUITY
Capital and reserves
Share capital 5,611 - - - - - 5,611
Share premium account 47,267 - - - - - 47,267
Capital contribution
reserve - - - 1,250 - - 1,250
Deferred share reserve - - - 1,969 - - 1,969
Reverse acquisition
reserve (46,218) - - - - - (46,218)
Share warrants and
options reserve 325 - - - - - 325
Foreign currency translation
reserve 77 - - - (792) (268) (982)
Retained earnings (5,755) - 3,219 (1,250) - - (3,787)
-------- ------- ------- ------- ------- ------- --------
Total shareholders'
funds 1,306 - 3,219 1,969 (792) (268) 5,434
-------- ------- ------- ------- ------- ------- --------
LIABILITIES
Current liabilities
Trade and other payables 297 - - - - - 297
--------
297 - - - - - 297
-------- ------- ------- ------- ------- ------- --------
Non-Current liabilities
Trade and other payables 3,163 - - (1,969) - - 1,194
Deferred tax 441 (441) - - - - -
Borrowings - - - - - - -
3,604 (441) - (1,969) - - 1,194
-------- ------- ------- ------- ------- ------- --------
Total equity and liabilities 5,207 (441) 3,219 - (792) (268) 6,925
======== ======= ======= ======= ======= ======= ========
Previous Restated
2020 Adjust Adjust. Adjust. Adjust. Adjust. Adjust. 2020
1 2 3 4 5 6
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
ASSETS
Non-current
assets
Exploration &
evaluation
assets 5,053 (441) 3,219 - ( 792) (268) (382) 6,389
Property,
plant
& equipment 72 - - - - - - 72
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
5,125 (441) 3,219 - (792) (268) (382) 6,461
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Current assets
Trade and
other
receivables 5 - - - - - - 5
Cash and cash
equivalents 114 - - - - - - 114
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
119 - - - - - - 119
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total assets 5,244 (441) 3,219 - (792) (268) (382) 6,580
================== ================== ================== ================== ================== ================== ================== ==================
EQUITY
Capital and
reserves
Share capital 5,611 - - - - - - 5,611
Share premium
account 47,267 - - - - - - 47,267
Capital
contribution
reserve - - - 1,250 - - - 1,250
Deferred share
reserve - - - 1,969 - - - 1,969
Reverse
acquisition
reserve (45,859) - - - - - - (45,859)
Share warrants
and options
reserve 281 - - - - - - 281
Foreign
currency
translation
reserve 286 - - - (792) (268) (382) (1,155)
Retained
earnings (6,735) - 3,219 (1,250) - - - (4,767)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total
shareholders'
funds 850 - 3,219 1,969 (792) (268) (382) 4,596
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
LIABILITIES
Current
liabilities
Trade and
other
payables 337 - - - - - - 337
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
337 - - - - - - 337
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Non-Current
liabilities
Trade and
other
payables 3,163 - - (1,969) - - - 1,194
Deferred tax 441 (441) - - - - - -
Borrowings 453 - - - - - - 453
4,057 (441) - (1,969) - - - 1,647
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total equity
and
liabilities 5,244 (441) 3,219 - (792) (268) (382) 6,580
================== ================== ================== ================== ================== ================== ================== ==================
The restatement has arisen from the following adjustments:
1) The acquisitions of Damsila Exports (Pvt) Limited and Eastern
Minerals (Pvt) Limited have previously been accounted for as
business combinations in accordance with IFRS 3. The Directors have
subsequently concluded that, as these entities were involved solely
in exploration and evaluation activities, they did not meet the
definition of a business and according should have been accounted
for as asset acquisition. As at 31 March 2020, this has resulted in
deferred tax liabilities of $440,784 being eliminated and an equal
reduction in the assessed fair value of the E&E assets
acquired.
2) The acquisitions of Damsila Exports (Pvt) Limited and Eastern
Minerals (Pvt) Limited involved the payment to introducers of deal
commission fees totalling $3,218,750, to be settled by way of the
issue of shares, conditional upon meeting certain milestones. These
costs were previously expensed through profit and loss. The
Directors have subsequently concluded that such costs should be
capitalised as part of the costs of acquisition. As at 31 March
2020, this has resulted in an increase in the assessed fair value
of the E&E assets acquired of $3,218,750. The value of the
shares to be issued to the introducer was originally recognised as
a non-current liability. The Directors have subsequently concluded
that, rather than a liability, this should have been recognised
within a deferred share reserve.
3) The value of the shares to be issued to the introducer was
originally recognised as a non-current liability. The Directors
have subsequently concluded that, rather than a liability, this
should have been recognised within a deferred share reserve. The
first tranche of shares issued to the introducer, valued at
$1,250,000, were settled by way of a transfer from existing
shareholders. The Directors have now assessed that this transfer
should have been recognised as a capital contribution from
shareholders. As at 31 March 2020, the net impact is a reduction in
non-current liabilities of $1,968,750, the recognition of a
deferred share reserve of $1,968,750, the recognition of a capital
contribution reserve of $1,250,000 and a reduction of retained
losses of $1,968,750.
4) Following the adjustments noted above, the total increase in
the assessed fair value of E&E assets upon acquisition of
Damsila Exports (Pvt) Limited and Eastern Minerals (Pvt) Limited
above the values recognised in the records of the individual
entities was $4,351,396. The Directors have concluded that the
uplift in value should have been recognised in the functional
currency of the subsidiaries rather than the presentation currency
of the Group. As a result, period end adjustments should have been
recognised in respect of movements in foreign exchange. As at 31
March 2019, the net impact of this is a reduction in the
consolidated net book value of E&E assets of $792,252, with the
reduction being reflected through other comprehensive income.
5) Since the acquisitions of Damsila Exports (Pvt) Limited and
Eastern Minerals (Pvt) Limited, Capital Metals Limited has incurred
certain costs in respect of the Group's E&E activity. These
costs have previously been recognised in the functional and
presentation currency of Capital Metals Limited, which is the same
as the presentation currency of the Group. Subsequently, the
Directors have concluded that these costs should have been
recognised in the functional currency of the subsidiaries. As a
result, period end adjustments should have been recognised in
respect of movements in foreign exchange. As at 31 March 2019, the
net impact of this is a reduction in the consolidated net book
value of E&E assets of $267,982, with the reduction being
reflected through other comprehensive income.
6) The net foreign exchange movements that arose from the
adjustments at points 4 and 5 above during the year ended 31 March
2020 amounted to a further reduction in the consolidated net book
value of E&E assets of $382,149, with the reduction being
reflected through other comprehensive income.
7) The convertible bonds issued in the prior year were
recognised as financial liabilities at amortised cost in the prior
year financial statements. The instruments contain an embedded
derivative conversion feature and therefore the entire instrument
should have been classified as a financial liability measured at
FVTPL in accordance with the Groups accounting policy. Accordingly,
the liability outstanding as at 31 March 2020 has been reclassified
from a financial liability at amortised cost to a financial
liability at FVTPL within borrowings in the statement of financial
position - refer note 17.
5. Reverse acquisition
On 13 January 2021 the Company acquired through a
share-for-share exchange the entire issued share capital of Capital
Metals Limited. The principal activity of Capital Metals Limited
and its subsidiaries is that of exploration, evaluation and
development of mineral sands resources in Sri Lanka. Capital Metals
Limited is incorporated in the British Virgin Islands.
In substance, the shareholders of Capital Metals Limited
acquired a controlling interest in the Company and the transaction
has therefore been accounted for as a reverse acquisition. As the
Company's activities prior to the transaction were purely the
maintenance of the AIM Listing, acquiring Capital Metals Limited
and raising additional equity finance to provide the necessary
funding for the operations of Capital Metals Limited, it did not
meet the definition of a business in accordance with IFRS 3 for the
purposes of these consolidated financial statements of the
Group.
Accordingly, in theses consolidated financial statements, the
reverse acquisition did not constitute a business combination and
was accounted for in accordance with IFRS 2 "Share-based Payments".
Although the reverse acquisition is not a business combination, the
Company has become a legal parent and is required to apply IFRS 10
and prepare consolidated financial statements. The Directors have
prepared these consolidated financial statements using the reverse
acquisition methodology. The difference between the equity value
given up by the shareholders of Capital Metals Limited and the
share of the fair value of net assets gained is charged to the
statement of comprehensive income as a share-based payment on
reverse acquisition and represents in substance the cost of
acquiring an AIM listing.
In accordance with reverse acquisition accounting principles,
these consolidated financial statements represent a continuation of
the consolidated statements of Capital Metals Limited and
include:
-- The assets and liabilities of Capital Metals Limited (and its subsidiaries) at their pre-acquisition carrying value amounts and the results for both current and comparative years.
-- The retained earnings and other equity balances of the legal
subsidiary (accounting acquirer) before the business
combination.
-- The assets and liabilities of the Company as at 31 March 2021
and its results from 13 January to 31 March 202.
-- the amount recognised as issued equity interests in the
consolidated financial statements determined by adding the issued
equity interest of the legal subsidiary (the accounting acquirer)
outstanding immediately before the business combination to the fair
value of the legal parent (accounting acquiree). However, the
equity structure (ie the number and type of equity interests
issued) reflects the equity structure of the legal parent (the
accounting acquiree), including the equity interests the legal
parent issued to effect the combination. Accordingly, the equity
structure of the legal subsidiary (the accounting acquirer) is
restated using the exchange ratio established in the acquisition
agreement to reflect the number of shares of the legal parent (the
accounting acquiree) issued in the reverse acquisition
-- Comparative information presented in those consolidated
financial statements also is retroactively adjusted to reflect the
legal capital of the legal parent (accounting acquiree).
On 13 January 2021 the Company issued 132,000,000 Ordinary
Shares to acquire the whole of the issued share capital of Capital
Metals Limited. The closing share price on re-admission on 13
January 2021 was 20 pence per share. Accordingly, the investment in
Capital Metals Limited was valued at GBP26,400,000 ($35,994,000).
As the Company is a UK registered company, section 612 of the
Companies Act 2006 (which deals with merger relief) applies, there
will be no legal share premium on the shares issued to effect the
combination, but the "premium" on the shares (that is, the
difference between the fair value of the consideration and the
nominal value of the shares) will be recorded as a "merger
reserve".
The fair value of the shares deemed to have been issued by
Capital Metals Limited (accounting acquirer) for Capital Metals Plc
(accounting subsidiary) was deemed to be GBP4,563,000 ($6,221,000)
being the entire issued Ordinary Shares of Capital Metals Plc of
22,813,876 at a price of 20 pence per share.
The fair value of the net assets of Capital Metals Plc at
acquisition was as follows:
$'000
Cash and cash equivalents 938
Receivables 157
Payables (328)
------
Total net assets 767
------
The difference between the deemed cost of $6,221,000 and the
fair value of the net assets acquired per above of $767,000
resulted in $5,454,000 being expensed within "deemed reverse
acquisition expenses" in accordance with IFRS 2, reflecting the
economic cost to Capital Metals Limited shareholders of acquiring a
listing.
The reverse acquisition reserve which arose from the reverse
takeover is made up as follows:
$'000
Pre-acquisition equity of Capital
Metals Plc (52,574)
Equity at acquisition of Capital
Metals Limited 7,672
Value of shares issued to acquire
Capital Metals Limited (35,993)
Deemed reverse acquisition expense 5,454
---------
(75,441)
---------
6. Segment information
The Directors are of the opinion that the Group comprises a
single activity being the exploration and evaluation of mineral
sand resources in one geographical area in Sri Lanka. As such the
financial information of the segment is the same as that set out in
the primary statements.
7. Loss on ordinary activities before taxation
2021 2020
The loss on ordinary activities before taxation Note $'000 $'000
has been arrived at after charging/(crediting):
Auditor's remuneration - audit services 66 28
Foreign exchange loss / (gain) 166 294
Share based payments 19 1,111 -
Directors' fees 366 245
8. Key management compensation
The compensation of the Directors and the one other key
management personnel (2019: one) (as defined within IAS 24 Related
Party Disclosures) was as follows:
2021 2020
$'000 $'000
Salary & fees 410 245
Share based payments 627 -
Compensation for loss of office 21 100
Pension contributions - -
------ ------
1,058 345
------ ------
The key management costs include an accrual for unpaid director
fees at year end in the amount of GBPnil (2020: $206,000).
Refer to Note 19 for details of options held by key
management.
9. Taxation
2021 2020
$'000 $'000
Loss before tax (7,886) (1,024)
------- -------
Loss multiplied by standard rate of corporation
tax in the UK
(1,498) (195)
Effects of:
Expenses not deductible for tax purposes 1,309 -
Deferred tax asset not recognised 189 195
Total tax for the year - -
------- -------
No deferred tax assets have been recognised in the year (2020:
nil).
The UK corporation tax rate throughout 2021 and 2020 was 19 per
cent.
The Company has total carried forward losses of $9,300,000
(2020: $7,731,000). The taxed value of the unrecognised deferred
tax asset is $1,767,000 (2020: $1,451,000). The pre-1 April 2017
proportion of the carried forward losses is $8,254,000, may not be
available for relief against any taxable profits in the future for
the Company or Group. The post 1 April 2017 proportion of carried
forward losses of $1,046,000 should be available for relief against
any taxable profits in the future for the Company or Group.
No deferred tax assets have been recognised (2020: nil) on
accumulated tax losses due to uncertainty as to when the operations
will generate sufficient profits against which to offset such
assets.
10. Loss per share
The calculations of the basic and diluted earnings
per share are based on the following data: 2021 2020
$'000 $'000
Loss for the year (7,886) (1,024)
------------------ -------------
Loss for the purpose of basic earnings per share (7,886) (1,024)
------------------ -------------
Number Number
Number of shares:
Weighted average number of ordinary shares in issue
during the year 140,667,918 131,710,742
Loss per share:
Basic and diluted loss per
share (cents) (5.61) (0.78)
----------------- -----------
The weighted average number of ordinary shares outstanding
during the period is the number of ordinary shares outstanding at
the beginning of the period, adjusted by the number of ordinary
shares bought back or issued during the period multiplied by a
time--weighting factor. The time--weighting factor is the number of
days that the shares are outstanding as a proportion of the total
number of days in the period.
In accordance with IAS 33, the weighted average number of shares
for the current and comparative periods have been retrospectively
adjusted to reflect the reverse acquisition on 13 January 2021.
This has been achieved by applying the reverse acquisition ratio of
1.235 shares in the Company to the existing share capital of
Capital Metals Limited. Immediately prior to the reverse
acquisition Capital Metals Limited had 106,912,451 ordinary shares
in issue.
As the Group is reporting a loss in each period in accordance
with IAS 33, the share options and warrants are not considered
dilutive because the exercise of the share options and warrants
would have the effect of reducing the loss per share.
11. Subsidiaries
The table below presents the Company's subsidiaries:
Country Company Parent company Share
of incorporation Number capital Principal
Name of subsidiary held activities
--------------------- ------------------- -------- ---------------- --------- --------------
Capital Metals British Capital Metals Holding
Limited Virgin Islands 1890161 Plc 100% company
--------------------- ------------------- -------- ---------------- --------- --------------
Equatorial Biofuels Dormant,
(Guernsey) Capital Metals in voluntary
Limited Guernsey 46120 Plc 100% liquidation
--------------------- ------------------- -------- ---------------- --------- --------------
Brighton Metals British Capital Metals Holding
Limited Virgin Islands 1893384 Limited 100% company
--------------------- ------------------- -------- ---------------- --------- --------------
Redgate Lanka Brighton Metals Holding
(Pvt) Limited Sri Lanka 119784 Limited 100% / Investment
--------------------- ------------------- -------- ---------------- --------- --------------
Damsila Exports Sri Lanka PV8591 Brighton Metals 4% Exploration
(Pvt) Limited Limited
Sri Lanka PV8591 Redgate Lanka 96% Exploration
(Pvt) Limited
--------------------- ------------------- -------- ---------------- --------- --------------
Eastern Minerals Sri Lanka PV81273 Brighton Metals 1% Exploration
(Pvt) Limited Limited
Sri Lanka PV81273 Redgate Lanka 99% Exploration
(Pvt) Limited
--------------------- ------------------- -------- ---------------- --------- --------------
Keynes Investment Brighton Metals
(Pvt) Limited Sri Lanka 119760 Limited 100% Dormant
--------------------- ------------------- -------- ---------------- --------- --------------
The Company's investment in subsidiaries is as follows:
Company Company
31/03/21 31/09/20
$'000 $'000
Investment at beginning of period - -
Additions 36,368 -
Impairment - -
Foreign exchange differences 432 -
Investment at end of period 36,800 -
-------- --------
As at 31 March 2021 the Company's cost of investments were
recorded at $36,800,000 arising solely from the reverse acquisition
of Capital Metals Limited on 13 January 2021.
12. Loans to subsidiaries
Company Company
31/03/21 31/09/20
$'000 $'000
Loans at beginning of period - -
Additions 1,195 -
Impairment - -
Foreign exchange differences - -
Loans at end of period 1,195 -
-------- --------
The loans to the subsidiaries are interest free and repayable on
demand, subject to the Directors' assessment of the Group's
requirements and availability of appropriate liquid resources. In
accordance with IFRS9 the loans are deemed to be in stage 3 and
thus lifetime expected credit losses model was applied. The
Directors have assessed that there is no expected credit losses to
recognise in respect of the loans to subsidiaries as at the balance
date, based on their assessment of the recovery strategies, which
indicate that the Company would fully recover the outstanding
balance of the loans, and given the effective interest rate is
Nil%.
Management anticipates the grant of an Industrial Mining Licence
by Q4 2021 to enable the targeted commencement of production in
2022 and the generation of cash flows going forward to enable the
subsidiaries to repay the loans. The macro-economic outlook for
minerals sands is positive, with strengthening market demand and
price increases, with significant supply disruptions, resulting in
strong interest from mineral sands consumers to secure new and
alternate sources of supply. The outlook is particularly
encouraging for the market for ilmenite, rutile and zircon markets,
which are the main minerals in the Project. Given the strength in
mineral sands prices, the Group has commenced offtake discussions
following several approaches from strategic and industrial groups.
The results of the Group's technical and financial studies support
robust Project economics and projected cash flows towards the
subsidiaries potential to repay the loans following commencement of
production.
13. Exploration and evaluation assets
The movement on the exploration and evaluation assets account
was as follows:
Group
$'000
At 1 April 2019 6,612
Additions 215
Foreign exchange differences (438)
At 31 March 2020 6,389
Additions 133
Foreign exchange differences (343)
At 31 March 2021 6,179
-----
All exploration and evaluation assets relate to Group
subsidiaries and the Eastern Minerals Project in Sri Lanka.
The Directors undertook an impairment indicators review and none
were identified. In performing their review, the Directors noted
the following:
-- The EML Licence (EL199/R/4) was renewed from 25 January 2021
for a period of 24 months until 23 January 2023.
-- Whilst the DEL Licence (EL168/R/4) expired on 31 October
2020, it is subject to the Group's First IML Application and the
GSMB has represented to the Group that, following the expiry of an
exploration license, the GSMB in practice, allows the former
exploration license holder for a period of two years from the date
of expiry:
- Exclusive right over the former exploration license area to
submit further IMLs should the former license holder wish to do so
(in this case DEL, in respect of the DEL License area); and
- Exclusivity over the former exploration license area by
refraining from accepting applications for any new exploration
licenses from third parties.
- The Group is in the final stages of the EIA process for the
First IML Application and the Company has completed all the
necessary workstreams. The Group anticipates the CCD approving the
EIA in Q4 2021. An approved EIA is required by the GSMB in order to
approve the First IML Application for the Project, which the
Directors expect to receive by the end of Q4 2021.
-- Significant further exploration and evaluation activity is
planned, including an updated Development Study, and a drilling
program on EL199.
-- Mineral sands prices remain strong and the Group has
commenced off-take discussions following a number of approaches
from strategic and industrial groups.
The prior year comparatives have been re-stated from those
published in the financial statements of Capital Metals Limited for
the year ended 31 March 2020. Further explanations of the
re-statement are provided at Note 4.
14. Plant and equipment
The movement on the property, plant and equipment assets account
was as follows:
Group
$'000
Costs:
At 1 April 2019 167
Additions -
Disposals (32)
Foreign exchange differences (9)
-----
At 31 March 2020 126
Additions 1
Disposals (5)
Foreign exchange differences (6)
-----
At 31 March 2021 116
-----
Depreciation:
At 1 April 2019 50
Charge in the year 4
At 31 March 2020 54
Charge in the year 19
Disposals (2)
Foreign exchange differences (3)
---
At 31 March 2021 68
---
Net book value as at 31 March 2021 48
---
Net book value as at 31 March 2020 72
---
Company
$'000
Costs:
At 30 September 2020 7
Depreciation:
At 30 September 2020 5
Charge in the period 2
At 31 March 2021 7
-------
Net book value as at 31 March 2021 -
-------
Net book value as at 30 September 2020 2
-------
15. Trade and other receivables
Group Group Company Company
2021 2020 31/03/21 30/09/20
$'000 $'000 $'000 $'000
Trade receivables 16 - 16 -
Prepayments 2 2 - -
Other receivables 1 3 - 24
Amounts owed by Group undertakings - - 1,195 -
VAT receivable 96 - 96 43
Total 115 5 1,307 67
------ ------ --------- ---------
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value. All receivables
are due within one year.
16. Trade and other payables
Group Group Company Company
2021 2020 31/03/21 30/09/20
$'000 $'000 $'000 $'000
Current
Trade payables 47 83 33 107
Accruals 63 152 62 -
Other payables 2 102 - -
Social security and other taxation 1 - - -
Deferred consideration 594 - - -
------ ------ --------- ---------
Total 707 337 95 107
------ ------ --------- -----------
Non-current
Deferred consideration 600 1,194 - -
------ ------ --------- -----------
600 1,194 - -
------ ------ --------- -----------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
Deferred consideration represents amounts payable in respect of
the acquisitions of Damsila Exports (Pvt) Limited and Eastern
Minerals (Pvt) Limited. The amounts fall due and payable upon
completion of certain milestones within the Group, being for each
of Damsila Exports (Pvt) Limited and Eastern Minerals (Pvt)
Limited: $625,000 in cash (recognised at 95% of face value) upon
completion of feasibility studies on the relevant project and
$750,000 in cash (recognised at 80% of face value) upon
commencement of first commercial production from the relevant
project. Management anticipates the completion of the feasibility
study to take place within 12 months of the balance date, and
accordingly the deferred consideration in respect of this milestone
is classified as a current liability.
At the reporting period end, the probability estimated for the
likelihood of completion of Tranche 2 and 3 was considered, and
management continue to estimate 95% probability for Tranche 2 and
80% probability for Tranche 3. If these estimates prove incorrect
then the amounts payable in respect of the acquisition may be
different to those stated within the financial statements. The
total deferred consideration payable if all milestones are achieved
would be $1,375,000 The value of deferred consideration payable as
at 31 March 2021 was $1,194,000.
17. Borrowings
Restated
Group Group
2021 2020
$'000 $'000
Loans - 85
Convertible bonds(1) - 368
Total - 453
----- --------
(1) The convertible bonds issued in the prior year were
recognised as financial liabilities at amortised cost in the prior
year financial statements. The instruments contain an embedded
derivative conversion feature and therefore the entire instrument
should have been classified as a financial liability measured at
FVTPL in accordance with the Groups accounting policy. Accordingly,
the liability outstanding as at 31 March 2020 has been reclassified
from a financial liability at amortised cost to a financial
liability at FVTPL within borrowings in the statement of financial
position.
Loans
In the year ended 31 March 2020, Capital Metals Limited entered
into a loan agreement with Michael Frayne, a director of the
Company for an amount of AUD$120,000 ($80,000), with interest of 1%
per month, compounding monthly and repayable upon the Company
raising a minimum of $1,000,000. Interest accrued on the loans as
at 31 March 2020 was $5,000. In the year ended 31 March 2021,
Michael Frayne loaned a further AUD$46,000 ($33,000) pursuant to
this loan agreement. During the reporting period, the principal of
the loan in the amount of AUD$166,000 ($129,000) was repaid in
full, together with accrued interest of AUD$21,000 ($15,000). The
balance of the loan as at year end was $Nil (2020: $85,000).
2021 2020
$'000
$'000
At 1 April 85 -
Loan principal addition 33 80
Accrued interest addition 11 5
Repayment of principal (post-RTO) (129)
Repayment of interest (post-RTO) (15)
Net foreign exchange differences 15
------- -------
As at 31 March - 85
------- -------
Convertible bonds
In the year ended 31 March 2020, Capital Metals Limited issued
convertible bonds to a value of $358,000, including $75,000 issued
to Michael Frayne, a director of the Company and CML. The key terms
of the convertible bonds include:
Interest: 12% per annum which accrues quarterly and remains
outstanding until such time as the Bonds are redeemed
or converted into shares.
Repayment: CML may redeem the Bonds in full or in part at any
time prior to the date falling 24 months after the
date of the Bond Instrument (the "Maturity Date) at
an amount equal to 115% of the principal amount of
the Bonds together with all accrued but outstanding
Interest.
In the event of a sale of CML, the Bondholders shall
be entitled to have their Bonds redeemed at an amount
equal to 115% of Bonds held by them together with
all accrued interest. A reverse takeover of CML does
not trigger this provision.
Conversion: CML may convert into ordinary shares of CML on or
immediately prior to the CML's contemplated IPO at
a price valued at the lower of $0.175 per ordinary
share or a 20% discount to the IPO price.
If an IPO or other event has not occurred by the end
of the term, the convertible bonds will be converted
at the lower of $0.175 per ordinary share or a 25%
discount to the last fundraising price.
The bond holder can elect to have the interest settled
in cash post IPO proceeds received, or convert at
the lower of $0.0175 per Ordinary Share or 25% discount
to the IPO placing price.
Warrant: The bond holder will receive a 3 year warrant at the
time of conversion at IPO, with an exercise price
at 30% premium to the IPO placing price.
2021 2020
$'000
$'000
At 1 April 369 -
Issue of convertible bonds - 358
Total accrued interest 35 11
Conversion of principal (pre-RTO) (283) -
Conversion of interest (pre-RTO) (8)
Conversion of interest (post-RTO) (28)
Repayment of principal (post-RTO) (75)
Repayment of interest (post-RTO) (10)
As at 31 March - 369
------- -------
Total interest accrued on the convertible bonds during the year
ended 31 March 2021 was $35,000 (2020: $11,000).
On the 21 November 2020, CML convertible bond holders totalling
$283,000 (principal) converted pre-RTO into 1,906,708 shares in CML
at a conversion price equivalent to $0.12, based on the RTO price
of GBP0.12 less discount of 20%. In addition at that time, one of
the bond holders chose to convert their accumulated interest of
$8,000 into 55,540 shares in CML at a conversion price equivalent
to $0.1125 based on the RTO price of GBP0.12 less discount of 25%.
The total of 1,962,248 CML shares issued to the convertible bond
holders on 21 November 2020, would convert into 2,423,848 CMET
shares on completion of the RTO (based on the consideration ratio
of 1.2352 CMET shares for every 1 CML share).
The accrued interest that was not converted on 21 November 2020,
continued to accrue as if the principal was converted on the RTO,
equating to $27,888 on the completion of the RTO on 13 January
2021. Following the completion of the RTO, the Company issued
247,891 new ordinary share on 2 February 2021 in settlement of
their accrued interest of $28,000 at price per CMET share of
$0.1125/GBP0.09 per share. In addition, the Company issued these
bond holders with 247,891 warrants in CMET at an exercise price of
15.6p and exercise period of 3 years.
The balance of the convertible bonds principal in the amount of
$75,000 issued to Michael Frayne was repaid in full, together with
accrued interest of $10,000 during the reporting period.
As noted above, the convertible bonds were recognised at FVTPL
with the prior year classification being restated. Given CML have
the option to settle the principal of the debt at a premium of 15%,
management assessed the fair value of the conversion feature to be
15% of the face value. Management determined the total fair value
of the convertible bond prior to conversion to be 115% of the face
value.
18. Share capital and share premium
(a) Capital Metals Plc
Number Nominal Total Total
of Value Value Value
ordinary GBP GBP'000 $'000
shares
Issued at 31 March 2019 and 31 March
2020 356,277,502 GBP0.0100 3,563 5,598
On 8 September 2020, sub-division of
each ordinary share of GBP0.01 per
share to 1 ordinary share of GBP0.0001
per share and 1 deferred share of GBP0.0099
per share - (GBP0.0099) (3,527) (5,552)
On 10 September 2020, cash issue of
shares at GBP0.004 per share 100,000,000 GBP0.0001 10 13
On 11 January 2021, cash issue of shares 18 GBP0.0001 - -
at GBP0.0001 per share
On 13 January 2021, consolidation of (456,277,520) GBP0.0001 - -
1 ordinary share of GBP0.002 for every
20 ordinary shares of GBP0.0001
22,813,876 GBP0.0020 - -
On 13 January 2021, cash issue of shares
at GBP0.12 per share 17,374,999 GBP0.0020 35 47
On 13 January 2021, acquisition of
Capital Metals Limited for shares at
GBP0.20 per share 132,000,000 GBP0.0020 264 360
On 2 February 2021, issue in settlement
of bond interest payable at GBP0.12
per share 247,891 GBP0.0020 - 1
-------------- ------------ --------- --------
Issued at 31 March 2021 172,436,766 GBP0.0020 345 467
-------------- ------------ --------- --------
All ordinary shares issued at 31 March 2021 and 31 March 2020
were fully paid-up.
Number Nominal Total Total
of Value Value Value
deferred GBP GBP'000 $'000
shares
Issued at 31 March 2019 and 31 March - GBP0.0099 - -
2020
On 8 September 2020, sub-division of
each ordinary share of GBP0.01 per
share to 1 ordinary share of GBP0.0001
per share and 1 deferred share of GBP0.0099
per share 356,277,502 GBP0.0099 3,527 5,552
-------------- ------------ --------- --------
Issued at 31 March 2021 356,277,502 GBP0.0099 3,527 5,552
-------------- ------------ --------- --------
All deferred shares issued at 31 March 2021 were fully
paid-up.
Total ordinary and deferred shares
The issued share capital as at 31 March 2021 and 31 March 2020,
is as follows:
Number Nominal Total Total
of Value Value Value
ordinary GBP GBP'000 $'000
shares
Ordinary shares 356,277,502 GBP0.0100 3,563 5,598
Issued at 31 March 2020 3,563 5,598
--------- -------
Ordinary shares 172,436,766 GBP0.0020 345 467
Deferred shares 356,277,502 GBP0.0099 3,527 5,552
--------- -------
Issued at 31 March 2021 3,872 6,019
--------- -------
The holders of ordinary shares are entitled to one vote per
share at the meetings of the Company, to receive dividends as
declared in proportion to the amounts paid up on the ordinary
shares and to participate in a capital distribution of the company
(including upon winding up) in proportion to the amount paid up on
the ordinary shares. The ordinary shares of the Company are not
currently redeemable or liable to be redeemable at the option of
the holder or the Company.
The holders of deferred shares do not have any right to receive
written notice of or attend, speak or vote at any general meeting
of the Company. As regards income, on any dividend or other
distribution of the Company, the holders of deferred shares shall
be entitled to payment in priority to any dividend or distribution
to the holders of any other class of shares in the Company, GBP1 in
aggregate. Upon any capital distribution of the Company (including
upon winding up), the holders of the deferred shares shall be
entitled to payment in priority to any distribution to the holders
of any other class of shares in the Company, GBP1 in aggregate. The
deferred shares may be cancelled by the Company at any time at its
determination for no payment and without obtaining sanction of such
holders.
Total Total
Value Value
Share premium GBP'000 $'000
At 31 March 2019 and 31 March 2020 31,095 46,791
On 10 September 2020, cash issue of shares
less transaction costs 370 476
On 10 September 2020, issue of share warrants (20) (25)
On 13 January 2021, cash issue of placing shares
less transaction costs 1,831 2,496
On 13 January 2021, issue of share warrants
in respect to the placing (1,683) (2,295)
On 5 February 2021, issue of shares to settle
CML convertible bond interest 20 27
As at 31 March 2021 31,613 47,470
--------- --------
19. Share based payments
(a) Options - Capital Metals Plc
During the year, the Company granted 11,750,000 options (2020:
nil), details of which are as follows:
Lapsed
/
At 1 Issued Exercised At 31
April during during March Exercise Exercise
2020 the year the year 2021 Price Price Vesting Expiry
Option Holder No. No. No. No. Pence Hurdle Date Date
Michael Frayne - 1,000,000 - 1,000,000 12.0p 18.0p 13/01/2021 13/01/2026
Michael Frayne - 1,000,000 - 1,000,000 12.0p 18.0p 13/07/2021 13/01/2026
Michael Frayne - 1,000,000 - 1,000,000 12.0p 24.0p 13/01/2022 13/01/2026
Gregory Martyr - 500,000 - 500,000 12.0p 18.0p 13/01/2021 13/01/2026
Gregory Martyr - 500,000 - 500,000 12.0p 18.0p 13/07/2021 13/01/2026
Gregory Martyr - 500,000 - 500,000 12.0p 24.0p 13/01/2022 13/01/2026
Anthony Samaha - 500,000 - 500,000 12.0p 18.0p 13/01/2021 13/01/2026
Anthony Samaha - 500,000 - 500,000 12.0p 18.0p 13/07/2021 13/01/2026
Anthony Samaha - 500,000 - 500,000 12.0p 24.0p 13/01/2022 13/01/2026
James Leahy - 500,000 - 500,000 12.0p 18.0p 13/01/2021 13/01/2026
James Leahy - 500,000 - 500,000 12.0p 18.0p 13/07/2021 13/01/2026
James Leahy - 500,000 - 500,000 12.0p 24.0p 13/01/2022 13/01/2026
Teh Kwan Wey - 166,667 - 166,667 12.0p 18.0p 13/01/2021 13/01/2026
Teh Kwan Wey - 166,667 - 166,667 12.0p 18.0p 13/07/2021 13/01/2026
Teh Kwan Wey - 166,667 - 166,667 12.0p 24.0p 13/01/2022 13/01/2026
Geoffrey Brown - 166,667 - 166,667 12.0p 18.0p 13/01/2021 13/01/2026
Geoffrey Brown - 166,667 - 166,667 12.0p 18.0p 13/07/2021 13/01/2026
Geoffrey Brown - 166,667 - 166,667 12.0p 24.0p 13/01/2022 13/01/2026
Key management - 500,000 - 500,000 12.0p 18.0p 13/01/2021 13/01/2026
Key management - 500,000 - 500,000 12.0p 18.0p 13/07/2021 13/01/2026
Key management - 500,000 - 500,000 12.0p 24.0p 13/01/2022 13/01/2026
Employees/consultants - 583,333 - 583,333 12.0p 18.0p 13/01/2021 13/01/2026
Employees/consultants - 583,333 - 583,333 12.0p 18.0p 13/07/2021 13/01/2026
Employees/consultants - 583,333 - 583,333 12.0p 24.0p 13/01/2022 13/01/2026
------- ----------- ---------- -----------
- 11,750,000 - 11,750,000
------------------------------- ----------- ---------- -----------
At 31 March 2021 there were 11,750,000 share options outstanding
(2020: Nil).
Exercise Grant Date Vesting Date Expiry Date Options in Options in
Price Issue Issue
31 March 31 March
2021 2020
13 January 13 January 13 January
12.0p 2021 2021 2026 3,916,667 -
13 January 13 January
12.0p 2021 13 July 2021 2026 3,916,667 -
13 January 13 January 13 January
12.0p 2021 2022 2026 3,916,666 -
11,750,000 -
----------- -----------
The number and weighted average exercise prices of share options
are as follows:
2021 2021 2020 2020
Weighted Weighted
average average
exercise Number of exercise Number of
price options price options
Outstanding at 1 April - - - -
Granted during the year 12.0p 11,750,000 - -
Forfeited during the year - - - -
Exercised during the year - - - -
Outstanding at 31 March 12.0p 11,750,000 - -
Exercisable at 31 March 12.0p 3,916,667 - -
---------- ----------- ---------- ----------
The options outstanding at 31 March 2021 have a weighted average
contractual life of 4.8 years (2020: Nil).
The options issued during the reporting period were all granted
on 13 January 2021 and vest in three tranches of one-third on 13
January 2021 ("Tranche 1"), one-third on 13 July 2021 ("Tranche 2")
and one-third on 13 January 2022 ("Tranche 3"). Tranche 1 and
Tranche 2 have a market based vesting condition (i.e. the Company's
shares having traded any time following Admission at a 50% premium
to the exercise price). Tranche 3 has a market based vesting
condition o(i.e. the Company's shares having traded any time
following Admission at a 100% premium to the exercise price).
For the options granted, the fair values were calculated using a
Monte Carlo simulation due to the multiple market based vesting
conditions, with the key inputs into the model as follows:
Risk free Volatility Expected 5-day VWAP*
rate life at grant
Granted 13 January 2021 1.05% 120% 5 years 19.05p
* volume weighted average
share price
In determining the expected volatility, consideration is usually
given to the historical company volatility. However, given prior to
13 January 2021 the Company was operating as an investment vehicle,
as opposed to a mineral sands company, as such the future share
price volatility pattern of the Company, will be materially
different from the historic volatility. It has been deemed
appropriate to use the median 5-year monthly volatility of a basket
of listed comparable companies with exposure to mineral sands.
The fair value of the share options expensed during the year was
$768,000 (2020: Nil).
(b) Warrants - Capital Metals Plc
As at 31 March 2021, there were 17,442,571 warrants outstanding
by the Company (2020: 250,000(1) ).
Exercise Grant Date Expiry Date Warrants Warrants
Price in Issue in Issue
31 March 30 September
2021 2020
8 September 8 September
GBP0.080(1) 2020 2023 250,000(1) 250,000(1)
GBP0.080 13 January 13 January 5,000,000(2) -
2021 2024
GBP0.120 13 January 13 January 833,333(2) -
2021 2024
GBP0.156 13 January 13 January 8,687,499(2) -
2021 2024
GBP0.156 13 January 13 January 2,423,848(3) -
2021 2024
GBP0.156 5 February 13 January 247,891(4) -
2021 2024
17,442,571 250,000
------------- --------------
(1) Issue of 250,000 warrants (adjusted for the 20:1
consolidation on 11 January 2021) in respect to the August 2020
placing.
(2) Issue of 14,520,832 warrants in respect to the January 2021
placing.
(3) Issue of 2,423,848 warrants to the former holders of CML
convertible bonds.
(4) Issue of 247,891 warrants to the former holders of CML
convertible bonds.
The estimated fair value of the 250,000(1) warrants granted on 8
September 2020, was calculated using the Black-Scholes model, and
assessed as $25,000, which was changed to the share premium account
to recognise the cost of issuing the warrants. The key inputs to
the model were as follows:
Risk free Volatility Expected Price at
rate life grant
Granted 8 September 2020 0.20% 75% 3 years 13.2p(1)
The expected volatility was determined by reference to the
historical volatility of the Company's share price.
The estimated fair value of the 14,520,832 warrants granted on
13 January 2021 to placing subscribers and advisers, was calculated
using the Black-Scholes model, and assessed as $2,295,000, which
was charged to the share premium account to recognise the cost of
issuing the warrants.
The estimated fair value of the 2,423,848 warrants granted on 13
January 2021, and the 247,891 warrants granted on 5 February 2021,
to the former holders of CML convertible bonds, was also calculated
using the Black-Scholes model, and assessed as $342,000 and $32,000
respectively. The assessed fair value of these warrants was
capitalised to the investment in CML within the Company's accounts,
and recognised as a share based payments expense within the
consolidated financial statements.
The key inputs to the Black-Scholes model in respect of the
warrants issued on 13 January 2021 and 5 February 2021, were as
follows:
Risk free Volatility Expected Price at
rate life grant
Granted 13 January 2021 0.46% 68.03% 3 years 20.0p
Granted 5 February 2021 0.45% 72.53% 3 years 18.5p
In determining the expected volatility, consideration is usually
given to the historical company volatility. However, given prior to
13 January 2021 the Company was operating as an investment vehicle,
as opposed to a mineral sands company, as such the future share
price volatility pattern of the Company, will be materially
different from the historic volatility. It has been deemed
appropriate to use the median 5-year monthly volatility of a basket
of listed comparable companies with exposure to mineral sands
(c) Options - Capital Metals Limited
At 31 March 2021 there were nil share options outstanding (2020:
10,000,000).
Exercise Grant Date Vesting Date Expiry Date Options in Options in
Price Issue Issue
31 March 31 March
2021 2020
3 August 3 August
$0.15 2016 Vested 2021 - 10,000,000
- 10,000,000
----------- -----------
The number and weighted average exercise prices of share options
are as follows:
2021 2021 2020 2020
Weighted Weighted
average average
exercise Number of exercise Number of
price options price options
Outstanding at 1 April $0.15 10,000,000 $0.15 10,000,000
Granted during the year - - - -
Cancelled during the year $0.15 10,000,000 - -
Exercised during the year - - - -
Outstanding at 31 March - - $0.15 10,000,000
Exercisable at 31 March - - $0.15 10,000,000
---------- ----------- ---------- -----------
975,000 shares were transferred from treasury in consideration
for the cancellation of 10,000,000 options in CML, resulting in the
elimination of the options reserve in the amount of $281,000, and a
credit to CML's share premium of $146,000 and a reduction of CML's
retained losses in the amount of $135,000.
20. Deferred share reserve
The deferred share reserve represents amounts payable in respect
of the deferred introduction fees payable in shares in respect to
the acquisitions of Damsila Exports (Pvt) Limited and Eastern
Minerals (Pvt) Limited. The amounts fall due and payable upon
completion of certain milestones within the Group, being for each
of Damsila Exports (Pvt) Limited and Eastern Minerals (Pvt)
Limited: $1,125,000 in shares (recognised at 95% of face value)
upon completion of feasibility studies on the relevant project and
$1,125,000 in shares (recognised at 80% of face value) upon
commencement of first commercial production from the relevant
project.
At the reporting period end, the probability estimated for the
likelihood of completion of Tranche 2 and 3 was considered, and
management continue to estimate 95% probability for Tranche 2 and
80% probability for Tranche 3. If these estimates prove incorrect
then the amount of deferred introduction fees in respect of the
acquisition may be different to those stated within the financial
statements. The value of the deferred share reserve as at 31 March
2021 was $1,969,000.
21. Financial risk management and financial instruments
Overview
The Group has exposure to the following risks from its financial
instruments:
-- credit risk
-- liquidity risk
-- market risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital. Further quantitative disclosures are
included throughout these financial statements.
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework. Given the size of the Company, the Directors have not
delegated the responsibility of monitoring financial risk
management to a sub-committee of the Board.
The Group's risk management policies are established to identify
and analyse risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's
activities.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a
counterparty to a financial instrument fails to meet its
contractual obligations.
Credit risk relating to the Group's financial assets which
comprise principally cash and cash equivalents, arises from the
potential default of counterparties. The credit risk on liquid
funds is limited because the counterparties are reputable banks
with high credit ratings assigned by international credit-rating
agencies.
The carrying amount of financial assets represents the maximum
credit exposure, which at the reporting date was:
Group Group Company Company
Notes 2021 2020 31/03/21 30/09/20
$'000 $'000 $'000 $'000
Cash and bank balances 1,797 114 1,706 1,172
Trade and other receivables 20 5 17 67
Loan to subsidiaries 12 - - 1,195 -
----- ----- -------- --------
1,817 119 2,918 1,239
----- ----- -------- --------
The expected credit risk for both the Group and the Company was
assessed as not material.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the
Group's reputation.
The following are the contractual maturities of financial
liabilities:
Group Group Group Group
Notes Carrying Contractual 6 months More than
amount cash flows or less 6 months
Financial liabilities at $'000 $'000 $'000 $'000
amortised cost
31 March 2021
Trade and other payables 16 113 113 113 -
Loans 17 - - - -
113 113 113 -
--------- ------------ --------- ----------
31 March 2020 16
Trade and other payables 16 337 337 337 -
Loans 17 85 85 - 85
422 422 337 85
--------- ------------ --------- ----------
Company Company Company Company
Notes Carrying Contractual 6 months More than
amount cash flows or less 6 months
Financial liabilities at $'000 $'000 $'000 $'000
amortised cost
31 March 2021
Trade and other payables 16 95 95 95 -
95 95 95 -
--------- ------------ --------- ----------
30 September 2020
Trade and other payables 16 107 107 107 -
107 107 107 -
--------- ------------ --------- ----------
Group Group Group Group
Notes Carrying Contractual 6 months More than
amount cash flows or less 6 months
Financial liabilities at $'000 $'000 $'000 $'000
FVTPL
31 March 2021
Deferred consideration 16 1,194 1,194 - 1,194
Convertible bonds 17 - - - -
--------- ------------ --------- ----------
1,194 1,194 - 1,194
--------- ------------ --------- ----------
31 March 2020
Deferred consideration 1,194 1,194 - 1,194
Convertible bonds 17 368 368 - 368
--------- ------------ --------- ----------
1,562 1,562 - 1,562
--------- ------------ --------- ----------
It is not expected that the cash flows in the maturity analysis
could occur significantly earlier, or at significantly different
amounts.
(c) 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.
The Group manages market risks by monitoring market developments
and discussing issues regularly, and mitigating actions taken where
necessary.
Foreign currency risk
The Group operates in a global market with income and costs
possibly arising in a number of currencies and is exposed to
foreign currency risk arising from commercial transactions,
translation of assets and liabilities and net investment in foreign
subsidiaries. Exposure to commercial transactions arise from sales
or purchases by operating companies in currencies other than the
Companies' functional currency. Currency exposures are reviewed
regularly.
As at 31 March 2021, the exposure of the Group to foreign
exchange rates is summarised as follows:
Group Group Company Company
2021 2020 31/03/21 30/09/20
Cash and cash equivalents $'000 $'000 $'000 $'000
US Dollar 131 70 119 500
Sri Lankan Rupee 79 44 - -
Pound Sterling 1,587 - 1,587 672
----- ----- -------- --------
1,797 114 1,706 1,172
Other receivables
US Dollar - - 424 -
Sri Lankan Rupee 3 5 - -
Pound Sterling 17 - 788 67
----- ----- -------- --------
20 5 1,212 67
----- ----- -------- --------
1,817 119 2,918 1,239
----- ----- -------- --------
As at 31 March 2021, if Sterling had gained or lost 10 per cent.
against the USD, the impact on comprehensive loss would have been
as follows:
Group Group Company Company
2021 2020 31/03/21 30/09/20
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% GBP/USD 160 - 237 74
-10% GBP/USD (160) - (237) (74)
----- ----- -------- --------
As at 31 March 2021, if the Sri Lankan Rupee had gained or lost
10 per cent. against the USD, the impact on comprehensive loss
would have been as follows:
Group Group Company Company
2021 2020 31/03/21 30/09/20
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% LKR/USD 8 5 - -
-10% LKR/USD (8) (5) - -
----- ----- -------- --------
Interest rate risk
The Group's exposure to changes in interest rate risk relates
primarily to interest-earning financial assets and interest-bearing
financial liabilities. Interest rate risk is managed by the Group
on an ongoing basis with the primary objective of limiting the
extent to which net interest expense could be affected by an
adverse movement in interest rates.
Capital risk management
The Directors consider the Group's capital to comprise of share
capital and reserves stated on the statement of financial position.
The Group manages its capital to ensure the Group will be able to
continue on a going concern on a long term basis while ensuring the
optimal return to shareholders and other stakeholders through an
effective debt and equity balance. No changes were made in the
objectives, policies and processes during the current or previous
year.
The share capital, including share premium, and reserves
totalling $6,831,000 (2020: $4,596,000) provides the majority of
the working capital required by the Group. Management reviews the
capital structure and makes adjustment to it in the light of
changes in economic conditions.
Other financial assets and liabilities
The notional amounts of financial assets and liabilities with a
maturity of less than one year (including trade and other
receivables, cash and cash equivalents and trade and other
payables) are assumed to approximate their fair value.
Categories of financial instruments
Group Group Company Company
IFRS 9 classification 2021 2020 31/03/21 30/09/20
&
Measurement $'000 $'000 $'000 $'000
---------------------------- ---------------------- ----- ----- -------- --------
Financial assets:
Cash and cash equivalents Amortised cost 1,797 114 1,706 1,172
Receivables Amortised cost 20 5 17 67
Loan to subsidiaries Amortised cost - - 1,195 -
Total financial assets 1,817 119 2,918 1,239
----- ----- -------- --------
Financial liabilities:
Other financial liabilities Amortised cost 113 337 95 107
Deferred consideration FVTPL 1,194 1,194 - -
Loans Amortised cost - 85 - -
Convertible bonds FVTPL - 368 - -
Total financial liabilities 1,307 1,984 95 107
----- ----- -------- --------
22. Related party transactions
In addition to the related party transactions disclosed
elsewhere, the Group entered into the following related party
transactions in the normal course of operations during the
reporting period:
-- The Company provided loan funding to Capital Metals Limited
in the amount of $955,000 (2020: $Nil), with the balance
outstanding as at year-end of $955,000 (2020: $Nil).
-- The Company provided loan funding to Brighton Metals Limited
in the amount of $240,000 (2020: Nil), the balance outstanding at
year-end of $240,000. These funds were primarily applied to fund
the activities of the Sri Lankan subsidiaries.
-- Michael Frayne lent Capital Metals Limited a further
AUD$46,000 ($33,000) (2020: $80,000). During the reporting period,
the principal of the loan in the amount of AUD$166,000 ($129,000)
was repaid in full, together with accrued interest of AUD$21,000
($15,000). The balance of the loan as at year-end was $Nil (2020:
$85,000). Refer to Note 17 for further details.
-- The convertible bond issued by Capital Metals Limited to
Michael Frayne in the prior year with a principal of $75,000 was
repaid in full, together with accrued interest of $10,000. Refer to
Note 17 for further details.
-- The Group paid $49,000 (2020: $Nil) of Anthony Samaha's total
Director remuneration to his associated entity, Santannos Limited.
This amount is included in the total Director remuneration for
Anthony Samaha disclosed in the Directors' Report. The amount
outstanding at year-end payable to Santannos Limited is $Nil (2020:
$Nil).
-- The Group paid $44,000 (2020: $Nil) of Michael Frayne's total
Director remuneration to his associated entity, Limerston Pty Ltd.
This amount is included in the total Director remuneration for
Michael Frayne disclosed in the Directors' Report. The amount
outstanding at year-end payable to Limerston Pty Ltd is $Nil (2020:
$Nil).
-- The Group incurred $95,000 (2020: $49,000) of Greg Martyr's
total Director remuneration to his associated entity, Hogan's Bluff
Capital Pty Ltd. This amount is included in the total Director
remuneration for Greg Martyr disclosed in the Directors' Report.
The amount outstanding at year-end payable to Hogan's Bluff Capital
Pty Ltd is $Nil (2020: $49,000).
The Directors and one other employee are the key management of
the Company (refer to Note 8).
The key management costs include an accrual for unpaid director
fees at year end in the amount of $Nil (2020: $206,000).
23. Post balance sheet events
On 16 August 2021, the Company announced the appointment of
Richard Stockwell as Technical Manager. The appointment was made
via an engagement with Placer Consulting Pty Ltd ("Placer"). Under
the terms of the engagement Placer will be granted 1,500,000
options exercisable at 12 pence, valid for 4 years and subject to
the following vesting conditions: 500,000 after 3 months'
engagement, 500,000 after 25% tonnage increase of current resource
and 500,000 after first production.
24. Ultimate controlling party
In the opinion of the Directors there is no controlling
party.
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END
FR EAXNEDDSFEFA
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