TIDMTETH
RNS Number : 2372P
Tethyan Resources PLC
30 August 2017
TETHYAN RESOURCES PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHSED JUNE 30, 2017
AND 2016
On August 17, 2017, Tethyan Resources plc obtained a receipt in
connection with the filing of a non-offering final prospectus in
the province of British Columbia, Canada. As a result, the Company
is now a reporting issuer in the province of British Columbia and
is required to report its financial statements quarterly, which
includes the requirement to prepare a Management's Discussion and
Analysis document ("MD&A").
This MD&A, prepared as of August 25, 2017, should be read in
conjunction with the condensed consolidated interim financial
statements of Tethyan Resources Plc., ("Tethyan" or the "Company")
formerly Aurasian Minerals plc, for the three and six months ended
June 30, 2017, and related notes thereto, which have been prepared
in accordance with International Financial Reporting Standards
("IFRS"). All amounts are stated in Great British Pounds ("GBP" or
"GBP") unless otherwise indicated. Additional information on the
Company's website at www.tethyan-resources.com.
Statements in this MD&A that are not historical facts are
"forward-looking statements" that are subject to risk factors set
out in a cautionary note contained herein. Readers are cautioned
not to put undue reliance on forward-looking statements.
COMPANY OVERVIEW
Tethyan Resources Plc ("Tethyan" or the "Company") is a publicly
listed company listed on AIM under the symbol "TETH" on the London
Stock Exchange. The Company is a junior mineral explorer of
resource properties with a focus on gold and base metals. The
Company initially listed on AIM as Triple Plate Junction Plc, in
January 2004, and focussed on copper and gold projects located in
South East Asia, more specifically Vietnam, Papua New Guinea and
Indonesia. The Company traded under the name Triple Plate Junction
Plc from January 2004 until it changed its name to Aurasian
Minerals Plc on May 13, 2014. Subsequently, the Company changed its
name from Aurasian Minerals Plc to Tethyan Resources Plc on July
20, 2016.
On August 17, 2017, the Company obtained a receipt in connection
with the filing of a non-offering final prospectus in the province
of British Columbia, Canada. As a result, the Company is now a
reporting issuer in the province of British Columbia. In addition,
the TSX Venture Exchange ("TSX-V") has conditionally approved the
Company's application to list its ordinary shares on the TSX-V.
Final approval of listing on the TSX-V is subject to the Company
satisfying certain customary conditions required by the TSX-V.
Currently, Tethyan is an active explorer for gold and base
metals within Eastern Europe, more specifically Serbia and
Bulgaria. The Company has two active exploration projects in
Serbia, the "Suva Ruda" project (a copper and gold porphyry target)
and "Gokcanica" project (an epithermal and porphyry gold
system).
To date, the Company has not generated revenues from operations
and is considered to be in the exploration stage. The Company
conducts its activities through wholly-owned subsidiaries, limited
liability companies, partnerships and joint ventures.
FINANCIAL SNAPSHOT
June 30, December
2017 31, 2016
(GBP,000) (GBP,000)
------------------------- -------------------------
Total assets GBP 1,603 GBP 1,671
Exploration properties 245 -
Total non-current liabilities - -
Working capital 910 1,015
Net loss (1,152) (1,296)
Basic and diluted loss
per share (in pence) (0.79) (1.38)
=============================== ========================= =========================
At the date of this MD&A, Tethyan had approximately
GBP910,000 in working capital. The Company did not generate any
revenues and did not declare any dividends.
RECENT EVENTS
On April 25, 2017, Tethyan Resources announced that it had
commenced drilling at the Rudnitza porphyry prospect, within the
Suva Ruda Project. The drilling was conducted by local contractor
Drillex International d.o.o. On July 3(rd) , 2017, Tethyan
announced the completion of this drilling, having drilled 2,127.6
metres in four drill holes. Assay results from this drill programme
are expected to be announced in early September 2017. Tethyan
Resources is also preparing for a large geophysical survey at
Rudnitza and on the Gokcanica Project. The survey will be carried
out by Canadian company Quantec Geoscience, utilizing their
proprietary TITAN 24 survey method, and is expected to commence in
late-August. In preparation, Tethyan has successfully obtained all
the requisite land access permissions to carry out this geophysical
survey. In addition to the planned field programme, Tethyan is
reviewing all of its previous work and utilizing Simon Meldrum, an
experienced geologist from South America, to assist with its
understanding of the Rudnitza porphyry system and surrounding
area.
On March 28, 2017, Tethyan announced that it had successfully
raised GBP1,000,000 before expenses from the issue of 22,222,223
new ordinary shares of 0.1 pence each in the capital of the Company
("Placing Shares") at a placing price of 4.5 pence per share ("the
Placing"). The Placing was supported by both new and existing
investors, including Southern Arc Minerals Inc. ("Southern Arc")
and a number of the Directors and senior management at Tethyan,
further details of which are set out below. The net proceeds of the
Placing attributable to the Company (being approximately GBP950,000
after fees and expenses) are being used for its planned drilling
programmes at the Company's Suva Ruda project and general working
capital requirements. As at 30 June 2017, the total number of
ordinary shares in issue was 168,182,052. The Company does not hold
any ordinary shares in treasury.
On February 28, 2017, the Company confirmed that it made the
first Milestone Payment of EUR100,000 to Deep Research d.o.o.
("Deep Research", a private Serbian company) in order to retain its
option to purchase 100% of the Suva Ruda Project.
On February 24, 2017, Tethyan Resources d.o.o, a company
incorporated in Serbia, which had been incorporated under the
ownership of Fabian Baker, COO of Tethyan Resources Jersey Ltd,
formally became a wholly owned subsidiary of Tethyan Resources
Jersey Ltd, and therefore part of the Group. The company, along
with Global Mineral Resources d.o.o, had been incorporated to
secure permits within Serbia. Subsequently, Global Mineral
Resources d.o.o also became a wholly-owned subsidiary of Tethyan
Resources Serbia d.o.o as of April 3, 2017.
In January 2017, the Company completed 4 diamond drill holes for
a total of 2,318 meters on the Rudnitza copper-gold porphyry
prospect within the Suva Ruda exploration permit located in
Serbia.
On November 21, 2016, the Company announced that Southern Arc
Minerals Inc. ("Southern Arc"), a TSX-Venture Exchange listed
company, had subscribed for 16,500,000 new ordinary shares in the
Company at a price of CAD$0.036 per share, representing
approximately 15.44% of the enlarged issued share capital of the
Company ("the Southern Arc Subscription"). The Southern Arc
Subscription raised CAD$594,000 (or approximately GBP353,570)
before expenses, for the Company to further advance the Suva Ruda
and Gokcanica projects in the Republic of Serbia. In addition,
Southern Arc purchased 14,653,967 ordinary shares in the Company
from Newmont Ventures Limited ("Newmont Acquisition") as part of
becoming a strategic investor in the Company. The Newmont
Acquisition, taken together with the 16,500,000 new ordinary shares
acquired in the Southern Arc Subscription, represented
approximately 29.15% of the then enlarged issued share capital of
the Company. As part of the Southern Arc Subscription, the Board
resolved to appoint John Proust and Michael Andrews to the Board.
In addition, the Company agreed to:
- grant Southern Arc a first right of refusal on a sufficient
share of any further fundraisings undertaken by the Company for a
period of 2 years to enable it to increase its holdings to, and
maintain its interest at 29.9% of the issued share capital of the
Company; and
- use its commercially reasonable efforts to seek a listing on
the TSX Venture Exchange as soon as reasonable practicable
following completion of the Southern Arc Subscription.
On November 22, 2016, as part of a placing to raise
approximately GBP852,380 for which shareholder approval was sought
and obtained, Southern Arc subscribed for an additional 12,500,000
new ordinary shares of the Company at a price of CAD$0.036 per
share, as a result of which, Southern Arc then held a total of
43,653,967 shares of Tethyan representing approximately 29.9% of
Tethyan's issued ordinary share capital.
On October 6, 2016, the Company announced that it had decided to
pull out of the joint venture with Balkan Mineral Corporations
d.o.o. in relation to the Cadinje polymetallic project located in
Serbia. The Company incurred no penalties in regard to this
decision and will have no further liabilities over the project.
Recent drilling results did not improve on historical assays from
the area and gold assays were low. The Company's technical
personnel were of the opinion that the potential to increase the
known size of the mineralized resource is limited.
PROPERTY REVIEW AND OUTLOOK
Suva Ruda, Serbia
On 27 September 2016, Tethyan announced that it had signed an
option agreement (the "Agreement") with Deep Research, that gives
Tethyan the sole and exclusive right to acquire (the "Option") a
license over the Suva Ruda Project in Serbia (the "License"). The
License is located in Southern Serbia near the town of Raska
(30,000 inhabitants), 170 km directly south of Belgrade and within
the Raska Ore District. The License comprises one exploration
permit with a surface area of 87 km2.
Under the terms of the Agreement Tethyan is entitled to purchase
100% of the License or Deep Research (at Tethyan's discretion) for
a cash payment of EUR6 million, plus a percentage of the eventual
capital cost of building the mine (details set out below), at any
time during the total duration of the License and any future
extensions of the License (a minimum of 7 years from the date of
the Agreement). The decision to exercise the Option during this
period is at the sole discretion of the Company. The percentage of
the capital costs payable by Tethyan in relation to the building of
the mine, which will only become clear once a bankable feasibility
study has been conducted over the License, will only become payable
if Tethyan exercises the Option, secures the necessary financing
and proceeds with the building of the mine. The percentage of these
costs due to Deep Research will be calculated as follows:
-- 4% of CAPEX up to EUR200m;
-- 2% of CAPEX between EUR200 - 500m;
-- 1% of CAPEX in excess of EUR500m.
Pursuant to the terms of the Agreement, and in order to retain
the Option, the Company will arrange to complete, at its sole
discretion, the following work program on the License:
-- a minimum of 2,000m drilling before 28 December 2016 (achieved - see below);
-- a minimum of 5,000m additional drilling before 28 December 2018;
-- complete a preliminary economic assessment before the sixth
anniversary of the date of the Agreement;
-- complete an economic feasibility study before the seventh anniversary of the Agreement.
The Company will also make certain milestone payments, at its
sole discretion, in order to retain the Option:
-- EUR100,000 by 1 March 2017 (paid);
-- EUR100,000 on each anniversary of the signing the Agreement up until the third year.
Suva Ruda Work Programme
In 2016 Tethyan Resources completed first-pass geological
mapping and the collection of 223 soil samples over the Rudnitza
copper-gold porphyry prospect located on its Suva Ruda Project.
Detailed soil sampling was completed on 50 metre sample spacing and
200 meter line spacing over the central portion of Rudnitza. This
sampling defined a coincident copper, gold and molybdenum anomaly
in soils over a 1200 meter by up to 600 meter area, with a maximum
molybdenum sample value of 59 ppm. Molybdenum is a good indicator
for porphyry mineralisation as it is not generally mobile in the
weathering environment. These results combined with geological
mapping defined two compelling target areas, a southern zone of
outcropping quartz stockwork with dimensions of 600 meters by 500
meters which was previously drilled to shallow depths by Phelps
Dodge in 2004, and a northern zone with dimensions of 700 meters by
300 meters which is a significant new target generated by this soil
sampling program that has not been drill tested before.
The copper and molybdenum soil anomaly, hosted in
phyllic-altered andesitic and dacite porphyry stocks, is surrounded
by a broad zinc anomaly greater than 200 ppm which is recognised as
a typical geochemical zonation feature seen in many porphyry
systems worldwide.
The Company completed 4 diamond drill holes for a total of 2,318
meters on the Rudnitza copper-gold porphyry prospect within the
Suva Ruda exploration permit located in Serbia in November December
2016. The drilling program, which was operated by contractor
Drillex International d.o.o., successfully achieved the Company's
objectives through consistent drilling rates and positive local
community support.
In accordance with the requirements of the Option Agreement
between Tethyan and Deep Research d.o.o. over the Suva Ruda
Project, Tethyan successfully met the requirement to drill 2,000
meters prior to the 28th December 2016 in order for the Option
Agreement to remain in effect. Furthermore, it meets the
exploration program requirements set out for the Suva Ruda License
granted by the Serbian Government.
Results from Drilling Suva Ruda
Tethyan's geologists logged all drill core and prepared and sent
the drill core for third party analysis to ALS Global's preparation
laboratory located in Bor, Serbia. Assaying is being completed at
ALS Global's laboratory located in Romania. Additionally, Tethyan
is immediately rehabilitating the drilling sites and access roads
in accordance with the Company's commitment to sustainable
operation.
In its first drill hole RDD-001, Tethyan drilled 567 metres at
0.28% copper and 0.45 g/t gold from surface. Detailed results of
the four drill holes are shown in the table below:
Drillhole Easting Northing Elevation Dip Azimuth Total From To Length Copper Gold
ID (m) Depth (m) (m) (m) Grade Grade
(m) (%) (g/t)
----------- -------- ---------- ---------- ---- -------- ------- ----- ------ ------- ------- -------
RDD-001 473,927 4,787,653 604 -85 140 584.6 0 567 567 0.28 0.45
including 122 158 36 1.22 0.38
---------------------------------------------------------------------- ----- ------ ------- ------- -------
RDD-002 474,022 4,787,637 622 -76 162 461.8 6 74 68 0.11 0.23
including 98 320 222 0.24 0.27
354 440 86 0.16 0.30
----------- -------- ---------- ---------- ---- -------- ------- ----- ------ ------- ------- -------
RDD-003 473,873 4,787,734 581 -63 144 710 42 327 285 0.31 0.33
including 102 118.7 16.7 1.55 0.20
657 695 38 0.14 0.27
----------- -------- ---------- ---------- ---- -------- ------- ----- ------ ------- ------- -------
RDD-004 474,005 4,787,752 592 -60 214 558.6 48 404 356 0.38 0.31
including 102 132 30 1.45 0.39
476 502 26 0.12 0.19
----------- -------- ---------- ---------- ---- -------- ------- ----- ------ ------- ------- -------
These drill holes significantly expanded the footprint of
copper-gold porphyry-style mineralisation at Tethyan's Rudnitza
prospect. All drill holes intersected a thick package of dacitic
volcanic rocks showing strong phyllic and propylitic alteration
with extensive zones of thin (2-20mm)
quartz-pyrite+/-chalcopyrite+/-chalcocite veining and
stockwork.
Supergene enrichment has produced a higher-grade chalcocite rich
copper zone observed in three of the drill holes that is in excess
of 1 % copper. Drill Hole RDD-004 intersected 30 metres at 1.45 %
copper, 0.39 g/t gold from 102 metres. Copper grades are generally
seen to be lower in the leached zone above this supergene zone
however gold mineralisation was encountered from surface. Beneath
the supergene zone gold and copper grades are generally consistent
over large intervals exceeding 200 metres.
Tethyan has completed a ground magnetics survey and is planning
an extensive induced polarization (IP) geophysical survey over this
area to target further drilling.
Gokcanica, Serbia
In May 2016, the Company executed an option agreement with
Rockstone Group LLC ("RSG") to which Tethyan can earn up to 80%
interest in the Gokcanica Project licenses in Southern Serbia ("the
Gokcanica Permits).
The Gokcanica Permits consist of two adjoining permits with a
combined area of 110km(2) located in southern Serbia, 5 km to the
north of the town Josaniska Banja. The area is located within the
500 km(2) Rashka ore field. A Jurassic ophiolite sequence intruded
and overlain by Tertiary andesitic volcanics and intermediate
stocks covers the area. The board of Tethyan believes that good
potential for porphyry and epithermal style mineralisation as well
as deeper-level replacement base metal and gold deposits exists
throughout the license.
Under the option agreement, Tethyan had until July 8, 2016 to
complete a due diligence period, upon conclusion of which the
Company paid RSG EUR10,000 and issued to RSG 333,334 ordinary
shares in the capital of the Company ("Ordinary Shares").
Following payment of the sums above, Tethyan may earn up to an
80% interest in the Gokcanica project by completing the
following:
(a) Stage 1:
In order to earn a 51% interest in the Gokcanica Permits,
Tethyan must commit a minimum expenditure of USD$500,000 on an
exploration program that will include a drilling of a minimum of
1,000m of either reverse circulation and/or diamond drilling within
2 years. This could include, but is not restricted to, mapping,
trenching, rock-chip sampling, soil sampling, remote sensing,
geophysics as well as other relevant items such as logistics and
administration.
(b) Stage 2:
In order to earn a 70% interest in the Gokcanica Permits, in
addition to the drilling commitment outlined above, Tethyan must
complete a Pre-Feasibility Study ("PFS") within 5 years.
(c) Stage 3:
In order to earn an 80% interest in the Gokcanica Permits, in
addition to the drilling commitment and PFS, Tethyan must complete
a Bankable Feasibility Study ("BFS") within the time-frame of the
exploration permits, their renewals or conversion to a mining
permit.
3rd party Finders fee agreement on Gokcanica Project
As a part of this deal a finder's fee was payable to a 3rd
party, a private British Virgin Islands company Pure Nature Limited
("PNL), who previously had an option over the project prior to
Tethyan signing the deal with Rockstone. As consideration for
Tethyan assuming 100% of Pure Nature Limited's rights to the
Gokcanica Project, Tethyan agreed to pay the following:
(a) pay PNL EUR20,000 cash within 60 days of exercising an
agreement with Rockstone.
(b) pay PNL EUR10,000 cash by electronic bank transfer within 15
days of the 6 month anniversary of this MoU.
(c) issue to PNL 833,334 Tethyan Resources shares
Should Tethyan complete earn in of 51 % of the project from
Rockstone then PNL will be entitled to participate in Tethyan's
share of the project as per the following deal. Within 60 days
following Tethyan acquiring a 51% interest in the Permits, Tethyan
will elect to either:
- To Issue 1,666,667 Tethyan Shares to PNL, and
- Tethyan and PNL shall form a new company under the laws of the
Republic of Serbia ("NEWCO") in order to hold the 51% interest in
the Permits and proceed with development of the Permits. The
Ownership/interest in NEWCO will be held 90% by Tethyan and 10% by
PNL.
or,
Transfer 100% of Tethyan's interest in the Permits and all
rights to all existing agreements regarding the Permits to PNL.
Gokcanica Work Program 2016
At Gokcanica, a stream sediment sampling program was completed
and has defined a number of strong gold anomalies which require
further attention with detailed soil sampling and geological
mapping.
All samples were prepared and analysed by ALS Laboratories in
Serbia and Romania. Soil samples were sieved to minus 80 mesh and
assayed by methods ME-MS41 and AuST43. Stream sediment samples were
collected as 5 kg samples, sieved to minus 2 mm then further
reduced to minus 80 mesh by ALS Laboratories before analysis by
methods ME-MS41L and Au-ST44. Tethyan has implemented a QAQC
program for all samples sent to ALS which includes the use of
duplicate samples and known standard samples.
The plan is to define targets which can be drilled in the spring
of 2018.
SUMMARY OF QUARTERLY RESULTS
As at and for the three June 30, March December September
months ended 31, 31, 30,
Aet 2017 2017 2016 2016
(GBP,000) (GBP,000) (GBP,000) (GBP,000)
Total assets GBP 1,603 GBP 1,910 GBP1,671 GBP 1,374
Exploration properties 245 - - -
Total non-current liabilities - - - -
Working capital 910 1,584 1,015 1,335
Net loss (523) (601) (994) (268)
Basic and diluted loss
per share (in pence) (0.38) (0.41) (1.38) (0.29)
==================================== ========== ========== ========== ==========
As at and for the three June 30, March December September
months ended 31, 31, 30,
Aet 2016 2016 2015 2015
(GBP,000) (GBP,000) (GBP,000) (GBP,000)
Total assets GBP 1,457 GBP97 GBP117 GBP 31
Exploration properties - - - -
Total non-current liabilities - - - -
Working capital (deficiency) 910 (92) 10 (31)
Net loss (346) (95) (67) (27)
Basic and diluted loss
per share (in pence) (0.50) (0.14) (0.10) (0.04)
===================================== ========== ========== ========== ==========
The Company did not generate any revenues and did not declare
any dividends.
Summary of operating expenses
Six months Six months
ended June ended June
30, 2017 30, 2016
--------------------------------- ----------- -----------
GBP'000 GBP'000
--------------------------------- ----------- -----------
Operating expenses on continuing
operations:
--------------------------------- ----------- -----------
Director fees 55 20
--------------------------------- ----------- -----------
General exploration 113 2
--------------------------------- ----------- -----------
Consulting 179 29
--------------------------------- ----------- -----------
Filing fees 56 7
--------------------------------- ----------- -----------
Foreign Exchange 4 (4)
--------------------------------- ----------- -----------
Office and administrative 80 17
--------------------------------- ----------- -----------
Professional fees 116 23
--------------------------------- ----------- -----------
Salaries 118 15
--------------------------------- ----------- -----------
Share-based compensation 32 -
--------------------------------- ----------- -----------
Travel 70 15
--------------------------------- ----------- -----------
Total 823 124
--------------------------------- ----------- -----------
Summary of exploration expenditure by project
Suva Ruda Gokcanica
Project Project Other Total
----------------- --------- --------- ------- -------
GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- --------- ------- -------
Opening balance,
December
31, 2016 - - - -
----------------- --------- --------- ------- -------
Geological
work 173 - - 173
----------------- --------- --------- ------- -------
Geological
samples 51 - - 51
----------------- --------- --------- ------- -------
Geological
equipment 1 - - 1
----------------- --------- --------- ------- -------
Geophysics 4 - - 4
----------------- --------- --------- ------- -------
Geological
reports 2 - - 2
----------------- --------- --------- ------- -------
Licenses 12 - 2 14
----------------- --------- --------- ------- -------
Balance,
as at June
30, 2017 243 - 2 245
----------------- --------- --------- ------- -------
During the six month period ended June 30, 2017, the Company
spent GBP8,484 in exploration permits and applications fees in
Kosovo.
RESULTS OF OPERATIONS FOR THE THREE MONTHSED JUNE 30, 2017
During the three-month period ended June 30, 2017, the Company
had a net loss of GBP550,000 compared to a loss of GBP346,000 for
the three-month period ended June 30, 2016. Significant
fluctuations occurred in the following categories:
a) During the three month quarter, the Company recorded general
exploration costs of GBP105,000 compared to GBP2,000 during the
same period ended June 30, 2016. The increase in general
exploration expenses related to costs incurred on the Suva Ruda
project. Increases in professional fees of GBP52,000 (2016 -
GBPNil), salaries and director fees totaling GBP82,000 (2016 -
GBP20,000) and consulting fees of GBP118,000 (2016 - GBP13,000)
were all due to the increase in activity within the Company and its
exploration program in the Suva Ruda region compared to the
previous period.
RESULTS OF OPERATIONS FOR THE SIX MONTHSED JUNE 30, 2017
During the six-month period ended June 30, 2017, the Company had
a net loss of GBP1,152,000 compared to a loss of GBP441,000 for the
six-month period ended June 30, 2016. Significant fluctuations
occurred in the following categories:
a) During the six month period, the Company recorded general
exploration costs of GBP113,000 compared to GBP2,000 during the
same period ended June 30, 2016. The increase in general
exploration expenses related to costs incurred on the Suva Ruda
project. Increases in professional fees of GBP116,000 (2016 -
GBP23,000), salaries and director fees totaling GBP173,000 (2016 -
GBP20,000) and consulting fees of GBP179,000 (2016 - GBP29,000)
were all due to the increase in activity within the Company related
to the process of listing on the TSX-V and its exploration program
in the Suva Ruda region compared to the previous period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at June 30, 2017 was GBP979,000. As
at June 30, 2017, the Company's working capital was GBP910,000
compared to a working capital of GBP1,015,000 as at December 31,
2016.
Net cash used in operating activities for the period ended June
30, 2017, was (GBP691,000) compared to net cash used of
(GBP109,000) during the prior period ended June 30, 2016. The cash
used in operating activities reflects the increased corporate and
exploration activities during the quarter.
Net cash used in investing activities during the period ended
June 30, 2017 included expenditures of GBP245,000 to exploration
properties and GBP41,000 to property, plant and equipment compared
to an investment in a subsidiary of GBP268,000 in the previous
period ended June 30, 2016.
Financing activities during the period ended June 30, 2017
included a proceeds of GBP1,000,000 received from a private
placement completed during the period.
The accompanying consolidated financial statements have been
prepared on the basis of accounting principles applicable to a
"going concern", which assumes that the Company will continue its
operations for the foreseeable future and will be able to realize
its assets and discharge its liabilities in the normal course of
operations. The Company does not currently generate any revenues or
have operations which generate cash flows. The Company's ability to
continue on a going concern basis depends on its ability to
successfully raise financing. Although the Company has been
successful in the past in obtaining financing, there is no
assurance that it will be able to obtain adequate financing in the
future or that such financing will be on terms acceptable to the
Company. These condensed consolidated interim financial statements
do not give effect to adjustments that would be necessary to the
carrying values and classification of assets and liabilities should
the Company be unable to continue as a going concern.
RELATED PARTY TRANSACTIONS
Key management and personnel compensation
Key management personnel include the directors of the Company.
Key management compensation consists of the following:
Six months Six months
ended ended
June June
30, 2017 30, 2016
(GBP'000) (GBP'000)
--------------- ----------- -----------
P Mullens 55 20
C Goss 4 22
F Baker 37 19
S Thacker 32 6
D Fohlen 35 11
G Kantarcigil - 6
--------------- ----------- -----------
163 84
--------------- ----------- -----------
The Directors consider that although the balances are
recoverable in full they are not repayable on demand and so are
regarded as long term in nature (i.e. due in more than one year).
The Company engaged the services of J. Proust & Associates
Inc., a company controlled by John Proust, a director of both the
Company and Southern Arc, its 29.91% shareholder, to provide
finance, accounting and administrative services to the Company for
a total amount estimated at GBP25,000. As at June 30, 2017, a
balance of GBP9,300 remains payable.
The above transactions occurred during the normal course of
operations and are recorded at the consideration established and
agreed to by the related parties.
CURRENT SHARE DATA
As at the date of this MD&A, the Company had 168,182,052
ordinary shares in issue.
On August 10, 2016, the Company granted 7,300,000 share options
to directors, officers, employees and consultants with an exercise
price of 5.00 pence with an expiry period of 1 year. The options
granted do not have any market based vesting conditions and are
vested immediately.
On December 21, 2016, the Company granted 3,400,000 options to
certain directors and officers of the Company with an exercise
price of 2.40 pence with an expiry date of 5 years from the grant
date.
As at August 25, 2017, the Company had share options outstanding
as follows:
Weighted
average
exercise
Exercise Period Number price (pence)
------------------------ ----------- ---------------
Exercisable until 2019 7,700,000 5.00
Exercisable until 2021 3,400,000 2.40
------------------------ ----------- ---------------
11,100,000 4.20
------------------------ ----------- ---------------
As at the date of this MD&A, the Company has 2,447,060 share
purchase warrants outstanding with a weighted average exercise
price of 2.26 pence per share. Details are as follows:
Weighted
average
exercise
price
Exercise period Number (pence)
------------------------------------ --------- --------
Exercisable until October 4, 2018 105,560 3.48
Exercisable until December 12, 2019 2,341,500 2.20
------------------------------------ --------- --------
Exercisable at the period end 2,447,060 2.26
------------------------------------ --------- --------
SUBSEQUENT EVENT
On August 17, 2017, the Company obtained a receipt in connection
with the filing of a non-offering final prospectus in the province
of British Columbia, Canada. As a result, the Company is now a
reporting issuer in the province of British Columbia. In addition,
the TSX Venture Exchange ("TSX-V") has conditionally approved the
Company's application to list its ordinary shares on the TSX-V.
Final approval of listing on the TSX-V is subject to the Company
satisfying certain customary conditions required by the TSX-V.
On August 25, 2017, the Company appointed Fabian Baker, the
Chief Operating Officer, to the board of directors of the Company.
The Company also appointed Sol Thacker, the Chief Financial
Officer, as Corporate Secretary.
RISKS AND UNCERTAINTIES
The nature of the Company's operations exposes the Company to
credit risk, foreign currency risk, liquidity risk, and
geopolitical risk, which may have a material effect on cash flows,
operations and comprehensive income.
The Company's risk management policies are established to
identify and analyze the risks faced by the Company, to set
appropriate risk limits and to monitor market conditions and the
Company's activities. The Board of Directors has overall
responsibility for the establishment and oversight of the Company's
risk management framework and policies.
Credit risk
Credit risk is the risk of loss associated with a counterparty's
inability to fulfill its payment obligations. Financial instruments
that potentially subject the Company to credit risk consist
primarily of cash and accounts receivable. The maximum exposure to
credit risk is equal to the carrying value of the financial assets.
Credit risk is managed by ensuring that surplus funds are deposited
only with well-established financial institutions of high quality
credit standing. The Company assess the collectability and fair
value of this receivable at each reporting period. The Company's
maximum exposure to credit risk is limited to its bank balances and
trade and other receivables.
Foreign exchange risk
Foreign currency risk refers to the risk that the value of a
financial commitment, recognised asset or liability will fluctuate
due to changes in foreign currency rates. The Company reports its
financial results in Sterling and is therefore exposed to foreign
currency risk as a result of financial assets and future
transactions denominated in currencies other than Sterling.
Exchange gains and losses on financial assets or future
transactions are recognised directly in profit or loss. A
proportion of the Company's costs are incurred in US Dollars.
Accordingly, movements in exchange rates could have a detrimental
effect on the Company's results and financial condition.
The cash balances carried within the Company comprise of the
following currency holdings:
June 30, December 31,
2017 2016
GBP'000 GBP'000
=========== ------------
Sterling 979 956
US Dollars - 24
Euro - 5
=========== ======== ============
979 985
=========== ======== ============
The Group operates within the UK and Europe. All transactions
are denominated in Sterling, or US Dollars. As such the Group is
exposed to transactional foreign exchange risk. The mix of
currencies and terms of trade are such that the Directors believe
that the Company's exposure is minimal and consequently they do not
specifically seek to hedge that exposure.
The table below demonstrates the sensitivity of the Group's
consolidated loss before tax to illustrative changes in the value
of the US dollar with respect to Sterling, all other variables held
constant. The sensitivity analysis includes only US dollars because
the effect of other currencies is not significant. The
sensitivities reflect the effect on profit before tax and total
equity respectively of 5% changes in the exchange rates of US
dollars vs. GBP GBP's.
Effect on profit Effect on
before tax total equity
=====
US$ vs. GBP US$ vs.
GBP
=====
GBP'000 GBP'000
===== ================ ================
2017 4 4
===== ================ ================
2016 2 2
===== ================ ================
Liquidity risk
Liquidity risk relates to the ability of the Group to meet
future obligations and financial liabilities. The Group monitors
its risk to a shortage of funds using cash flow models, which
consider existing financial assets, liabilities and projected cash
inflows and outflows from operations.
The table below sets out the maturity profile of financial
liabilities as at June 30, 2017:
June 30, December
2017 31, 2016
GBP'000 GBP'000
-------------------------------------- -------- ---------
Due in less than one month 407 308
Due between one and three months - -
Due between three months and one year - -
-------------------------------------- -------- ---------
407 308
-------------------------------------- -------- ---------
To date, the Company has relied upon shareholder funding of its
activities. Development of mineral properties, the acquisition of
new opportunities, or the recovery of royalty income from third
party assets, may be dependent upon the Company's ability to obtain
further financing through joint ventures, equity or debt financing
or other means. Although the Company has been successful in the
past in obtaining equity financing there can be no assurance that
the Group will be able to obtain adequate financing in the future
or that the terms of such financing will be favorable.
Geopolitical risk
To date, all of the Company's properties and operations have
been located in Eastern Europe. As such, the Company is subject to
political, economic and other uncertainties, including, but not
limited to, changes in policies and regulations or the personnel
administering them, changes with regard to foreign ownership of
property rights, exchange controls and royalty and tax increases,
and other risks arising out of foreign governmental sovereignty
over the areas in which the Company's operations are to be
conducted, as well as risks of loss due to civil strife, acts of
war and insurrections. If a dispute arises regarding the Company's
property interests, the Company cannot rely on western legal
standards in defending or advancing its interests.
Industry
The Company is engaged in the acquisition and exploration of
resource properties, an inherently risky business, and there is no
assurance that an economic mineral deposit will ever be discovered
and subsequently put into production. Most exploration projects do
not result in the discovery of economically mineable deposits. The
focus of the Company is on areas in which the geological setting is
well understood by management.
Gold and metal prices
The price of gold is affected by numerous factors beyond the
control of the Company including central bank sales, producer
hedging activities, the relative exchange rate of the US$ with
other major currencies, demand, political and economic conditions
and production levels. In addition, the price of gold has been
volatile over short periods of time due to speculative activities.
The prices of other metals and mineral products for which the
Company may explore all have the same or similar price risk
factors.
Trends
Continued strength in the US dollar, decreasing oil prices and
the stable gold price increases demand, especially from Asia, and
perception of increased risk in major financial markets has
supported a discernible need for the development of commodity
exploration projects. Junior companies, like Tethyan, are key
participants in identifying properties of merit to explore and
develop.
CRITICAL ACCOUNTING POLICIES
Reference should be made to the Company's significant accounting
policies contained in Note 4 of the Company's audited consolidated
financial statements for the nine months ended December 31, 2016
and year ended March 31, 2016. These accounting policies can have a
significant impact on the financial performance and financial
position of the Company.
Significant accounting judgment and estimates
The preparation of the financial statements requires management
to make certain estimates, judgments and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and reported amounts of expenses during the
reporting period. Actual outcomes could differ from these
estimates. The financial statements include estimates which, by
their nature, are uncertain. The impacts of such estimates are
pervasive throughout the financial statements, and may require
accounting adjustments based on future occurrences. Revisions to
accounting estimates are recognized in the period in which the
estimate is revised and future periods if the revision affects both
current and future periods. These estimates are based on historical
experience, current and future economic conditions and other
factors, including expectations of future events that are believed
to be reasonable under the circumstances.
Critical accounting estimates
Significant assumptions about the future and other sources of
estimation uncertainty that management has made at the end of the
reporting period, that could result in a material adjustment to the
carrying amounts of assets and liabilities, in the event that
actual results differ from assumptions made, relate to, but are not
limited to the following:
i) The calculation of share-based compensation requires
estimates of volatility, forfeiture rates and market prices related
to the issuance of share options. These estimates impact
share-based compensation expense and share-based payment
reserve.
ii) The application of the Company's accounting policy for
exploration expenditure requires estimates in determining whether
it is likely that future economic benefits will flow to the
Company, which may be based on assumptions about future events or
circumstances. Estimates and assumptions made may change if new
information becomes available. If, after an expenditure is
capitalized, information becomes available suggesting that the
recovery of the expenditure is unlikely, the amount capitalized is
written off in profit or loss in the year the new information
becomes available.
Critical accounting judgments
Critical accounting judgements are accounting policies that have
been identified as being complex or involving subjective judgements
or assessments.
i) The Company's assessment of its ability to continue as a
going concern requires judgements about whether sufficient
financing will be obtained in the near term. See "Liquidity and
Capital Resources".
ii) The determination of a subsidiary's functional currency
often requires significant judgement where the primary economic
environment in which they operate may not be clear. This can have a
significant impact on the consolidated results of the Company based
on the foreign currency translation method.
Financial instruments
On initial recognition, all financial assets and financial
liabilities, including derivatives, are recorded at fair value. All
transactions related to financial instruments are recorded on a
trade date basis. The directly attributable transaction costs of
financial assets and liabilities are included in the carrying value
of financial assets and liabilities except transaction costs
related to financial assets and liabilities classified as fair
value through profit or loss which are expensed in the period they
are incurred. Subsequently, derivatives are measured at fair value
and changes in fair value are recognized in profit of loss. For
other financial assets and liabilities, subsequent measurement is
as follows:
Subsequent measurement
Financial assets
The Company classifies its financial assets into one of the
following categories, depending on the purpose for which the asset
was acquired. The Company's accounting policy for each category is
as follows:
Fair value through profit or loss - This category comprises
derivatives, or assets acquired or incurred principally for the
purpose of selling or repurchasing it in the near term. They are
carried in the statement of financial position at fair value with
changes in fair value recognized in profit or loss.
Loans and receivables - These assets are non-derivative
financial assets with fixed or determinable payments that are not
quoted in an active market. They are carried at amortized cost
using the effective interest method less any provision for
impairment. Individually significant receivables are considered for
impairment when they are past due or when other objective evidence
is received that a specific counterparty will default. Cash and
receivable are classified as loans and receivables.
Held-to-maturity investments - These assets are non-derivative
financial assets with fixed or determinable payments and fixed
maturities that the Company's management has the positive intention
and ability to hold to maturity. These assets are measured at
amortized cost using the effective interest method. If there is
objective evidence that the investment is impaired, determined by
reference to external credit ratings and other relevant indicators,
the financial asset is measured at the present value of estimated
future cash flows. Any changes to the carrying amount of the
investment, including impairment losses, are recognized in profit
or loss. The Company has not classified any financial assets as
held-to-maturity.
Available-for-sale - Non-derivative financial assets not
included in the above categories are classified as
available-for-sale. They are carried at fair value with changes in
fair value recognized directly in other comprehensive income
(loss). Where a decline in the fair value of an available-for-sale
financial asset constitutes objective evidence of impairment, the
amount of the loss is removed from equity and recognized in profit
or loss.
All financial assets except for those recognized at fair value
through profit or loss are subject to review for impairment at each
reporting date. Financial assets are impaired when there is any
objective evidence that a financial asset or a group of financial
assets is impaired. Different criteria to determine impairment are
applied for each category of financial assets, which are described
above.
Financial liabilities
The Company classifies its financial liabilities into one of two
categories. The Company's accounting policy for each category is as
follows:
Fair value through profit or loss - This category comprises
derivatives, or liabilities acquired or incurred principally for
the purpose of selling or repurchasing it in the near term. They
are carried in the statement of financial position at fair value
with changes in fair value recognized in profit or loss. The
Company does not have any financial liabilities that are classified
as fair value through profit or loss.
Other financial liabilities - This category includes accounts
payable and accrued liabilities and due to related parties which
are initially recognized at fair value and subsequently are
recognized at amortized cost at the settlement date using the
effective interest method of amortization.
Fair value
International Financial Reporting Standards ("IFRS") require
disclosure about fair market value measurements for financial
instruments and liquidity risk using a three-level hierarchy that
reflects the significance of the inputs used in making the fair
value measurements. The three-level hierarchy is as follows:
Level Unadjusted quoted prices in active
1 - markets for identical assets or liabilities;
Level Inputs other than quoted prices that
2 - are observable for the asset or liability
either directly or indirectly; and
Level Inputs that are not based on observable
3 - market data.
The carrying value of cash, receivable, accounts payable and
accrued liabilities approximate their fair value due to their
short-term nature.
Change in fiscal year end
The Company changed its fiscal year end from March 31 to
December 31, effective December 31, 2016 in order to coincide the
Company's annual reporting as a public company with its peers in
the mining industry.
The timing and ending date of the periods, including the
comparative periods, of each interim financial report and the
annual financial statements to be filed for the Company's
transition year and its new financial year are as follows:
Transition Comparative Interim Periods Comparative
Year Annual Financial for Transition Interim Periods
Statements Year in Transition
to Transition Year
Year
--------------- ------------------ ---------------------- ----------------------
9 months ended 12 month 3 month interim 3 month interim
December 31, audited annual financial statements financial statements
2016 financial for period for period
statements ended ended
for year June 30, 2016 June 30, 2015
ended March
31, 2016
--------------- ------------------ ---------------------- ----------------------
New Financial Comparative Interim Periods Comparative
Year Annual Financial for New Financial Interim Periods
Statements Year to Interim
to New Financial Periods in
Year New Financial
Year
-------------- ------------------ ------------------- -------------------
12 months 9 month audited 3 month interim 3 month interim
ended annual financial financial financial
December 31, statements statements statements
2017 for year ended for period for period
December 31, ended ended
2016 March 31, March 31,
2017 2016
12 month audited
annual financial 3 and 6 month 3 and 6 month
statements interim financial interim financial
for the year statements statements
ended March for period for period
31, 2016 ended ended
June 30, 2017 June 30, 2016
3 and 9 month 3 and 9 month
interim financial interim financial
statements statements
for period for period
ended ended
September September
30, 2017 30, 2016
-------------- ------------------ ------------------- -------------------
New accounting standards and pronouncements
-- IFRS 9 - Financial Instruments introduces new requirements
for the classification and measurement of financial assets. Under
IFRS 9 (2014), financial assets are classified and measured based
on the business model in which they are held and the
characteristics of their contractual cash flows. IFRS 9 (2014) also
introduces additional changes relating to financial liabilities,
amends the impairment model for financial assets and provides a new
general hedge accounting standard. The required adoption date for
the Company of IFRS 9 is January 1, 2018.
-- IFRS 15 - Revenue from Contracts with Customers contains a
single model that applies to contracts with customers and two
approaches to recognizing revenue: at a point in time or over time.
The model features a contract-based five-step analysis of
transactions to determine whether, how much and when revenue is
recognized. New estimates and judgmental thresholds have been
introduced, which may affect the amount and/or timing of revenue
recognized. IFRS 15 will be effective for the Company on January 1,
2018, with early adoption permitted.
-- IFRS 16 - Leases introduces a single lessee accounting model
and requires a lessee to recognize assets and liabilities for all
leases with a term of more than 12 months, unless the underlying
asset is of low value. A lessee is required to recognize a
right-of-use asset representing its right to use the underlying
asset and a lease liability representing its obligation to make
lease payments. IFRS 16 is effective for the Company on January 1,
2019 with early adoption permitted if IFRS 15 has also been
applied.
QUALIFIED PERSON AND QUALITY CONTROL AND ASSURANCE
The technical information in this document has been reviewed by
Peter Mullens, Tethyan's Chief Executive Officer, FAusIMM who has
sufficient experience relevant to the style of mineralization under
consideration and qualifies as a Qualified Person as defined by
National Instrument 43-101.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements made and information contained herein
is "forward-looking information" within the meaning of the British
Columbia Securities Act. These statements relate to future events
or the Company's future performance. All statements, other than
statements of historical fact, may be forward-looking statements.
Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as "anticipates",
"plans", "budget", "scheduled", "continue", "estimates",
"forecasts", "expect", "is expected", "project", "propose",
"potential", "targeting", "intends", "believes" or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "would", "might", or "will be taken",
"occur" or "be achieved" or the negative connotation thereof. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. The Company believes that the expectations reflected in
those forward-looking statements are reasonable, but no assurance
can be given that these expectations will prove to be correct and
such forward-looking statements included in this MD&A should
not be unduly relied upon by readers, as actual results may vary.
These statements speak only as of the date of this MD&A and are
expressly qualified, in their entirety, by this cautionary
statement. In particular, this MD&A contains forward-looking
statements, pertaining to the following: capital expenditure
programs, development of resources, treatment under governmental
and taxation regimes, expectations regarding the Company's ability
to raise capital, expenditures to be made by the Company and its
joint venture partners on its properties and work plans to be
conducted.
With respect to forward-looking statements listed above and
contained in the MD&A, the Company has made assumptions
regarding, among other things:
-- uncertainties relating to receiving mining, exploration and other permits in Serbia;
-- the impact of increasing competition;
-- unpredictable changes to the market prices for gold, copper and other commodities;
-- availability of additional financing and farm-in or joint-venture partners;
-- anticipated results of exploration and development activities;
-- the Company's ability to sell the securities in its investments for a profit, or at all;
-- the Company's ability to obtain additional financing on satisfactory terms or at all.
The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of the
risk factors set forth below and elsewhere in this MD&A:
volatility in the market price for minerals; uncertainties
associated with estimating resources; geological, technical,
drilling and processing problems; liabilities and risks, including
environmental liabilities and risks, inherent in mineral and oil
and gas operations; fluctuations in currencies and interest rates;
incorrect assessments of the value of acquisitions; unanticipated
results of exploration activities; competition for, amongst other
things, capital, undeveloped lands and skilled personnel; lack of
availability of additional financing and farm-in or joint venture
partners and unpredictable weather conditions. Although the Company
has attempted to identify important factors that could cause
results to differ materially from those contained in
forward-looking statements, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can
be no assurance that such statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. Readers are
cautioned that the foregoing lists of factors are not exhaustive.
Forward looking statements are made as of the date hereof and
accordingly are subject to change after such date. The
forward-looking statements contained in this MD&A are expressly
qualified by this cautionary statement. The Company does not
undertake to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except in accordance with applicable securities laws.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCUKAORBNAWUUR
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