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inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
Armadale Capital Plc / Index: AIM / Epic: ACP / Sector:
Investment Company
23 May 2018
Armadale Capital Plc ('Armadale' or 'the Company')
Final Results and Notice of AGM
Armadale, the AIM quoted investment company focused on natural
resource projects in Africa, is pleased to announce its final
results for the year ended 31 December 2017.
HIGHLIGHTS
-- Rapid advancement of the high grade Mahenge Liandu Graphite Project in
Tanzania ('Mahenge Liandu') during 2017 ahead of an
anticipated
decision to mine in early 2019:
High concentrate grades of up to 99.1% TGC produced using
low-cost
processing methods
Excellent flake size distribution and graphite expandability
highlights Mahenge Liandu's amenability to a range of
applications, including the high growth battery market
25% increase in total resource to 51.1Mt at 9.3% Total
Graphitic
Carbon ('TGC'), including 38.7Mt Indicted at 9.3% and 12.4Mt
at
9.1% TGC (post period end)
Scoping Study delivered post period end which highlighted a
pre-tax IRR of 122%, NPV of US$349m with a low development
capex
of US$35m and low operating costs of US$408/t
Feasibility Study based on parameters of 400,000tpa over a
32-year
mine life commenced in May 2018
-- Additional upside through royalty payments available from the Mpokoto
Gold Project in the DRC - sale agreement with potential
buyer
anticipated to be finalised by end of Q2 2018
-- Active growth strategy - committed to identifying and investing in
African resource projects, which offer prospective upside
opportunity
Nick Johansen, Director of Armadale said: "2017 saw Armadale
accelerate work at Mahenge Liandu as we approach our target of
making a decision to mine early next year. Exploration and
definition drill programmes, metallurgical testwork, feasibility
studies, permitting activities and commercial marketing are all
being conducted concurrently to ensure we meet this ambitious
target and start delivering returns for our shareholders.
"We are confident that these returns for shareholders will be
considerable. The recently released Scoping Study for Mahenge
Liandu supported a pre-tax IRR of 122%, NPV of US$349m with a low
development capex of US$35m and low operating costs of US$408/t,
highlighting how attractive this project is from an economic
standpoint. Coupled then with the exceptional quality, with
concentrate purity of up to 99.1% TGC produced using low-cost
processing methods, and desirable flake size distribution and
graphite expandability attributed to the material from Mahenge
Liandu, we are enthusiastic about beginning the formal marketing
process of our product within markets including the high growth
battery industry.
"Shareholders should also note that we are now well funded as we
advance our Feasibility Study following the raising of GBP963,500
post period end, and we also expect to receive additional funds in
respect of the sale of our non-core gold interests in the DRC over
the coming months. It is with this in mind, together with a project
which has consistently demonstrated its considerable economic and
strategic value, that I look forward to providing investors with
additional news over the coming months as we gear up to making a
formal decision to mine in Q1 2019."
NOTICE OF AGM & POSTING OF ANNUAL REPORT
The Company announces that its Annual General Meeting ('AGM')
will be held at 3 St Michael's Alley, London, EC3V 9DS on 21 June
2018 at 3.00 p.m. A notice of AGM, together with printed copies of
the Company's Annual Report for the year ended 31 December 2017
will be posted to shareholders today. Copies will also be available
to view on the Company's website: www.armadalecapitalplc.com.
STRATEGIC REPORT
To view a version of the strategic report with maps and figures,
please go to the Company's website at
www.armadalecapitalplc.com.
During the year under review, Armadale has continued to operate
as a diversified investing company focused on natural resource
projects in Africa.
The Company's investment portfolio is divided into two
groups:
-- Actively managed investments: where the Company has majority ownership
of the investment
-- Passively managed investments: where the Company has a minority
investment, typically in a quoted company, and does not have
management control.
Actively Managed Investments:
Mpokoto Gold Project, DRC ("MPOKOTO")
The Mpokoto project was the subject of a joint venture agreement
with Kisenge Mining Pty Ltd ('Kisenge Mining') throughout the year
under review and, as such, is considered a non-core investment
asset of Armadale.
During the year under review, our joint venture partners Kisenge
Mining carried out work in following areas:
-- Review of the DFS study focusing on reducing capital costs and phased
mining program starting with oxides.
-- Streamlining of ongoing costs in DRC
In the period after the year under review Armadale commenced
negotiations towards a contract for divestment of its investment in
Mpokoto with a potential buyer under following basic terms:
-- US$75,000 on contract signature
-- US$187,500 within 12 months of signing
-- US$300,000 on commencement of production
-- Gold production royalty of 1.5%
Kisenge Mining has agreed that it would withdraw from the joint
venture agreement in order to allow the sale of Mpokoto to proceed
once a contract for divestment of Mpokoto is finalised.
Negotiations are continuing with a potential buyer with
expectations for finalisation in May/June 2018. This will provide
the Company with additional funds to accelerate the development of
the Mahenge Liandu graphite project.
Mahenge Liandu Graphite Project, Tanzania 'MAHENGE LIANDU'
The Company continued to deliver exceptional results at its 100%
owned Mahenge Liandu Graphite project during 2017. The Project is
located in a highly prospective region with a high-grade JORC
compliant indicated and inferred mineral resource estimate of
51.1Mt @ 9.3% TGC, making it one of the largest high-grade
resources in Tanzania, and work to date has demonstrated Mahenge
Liandu's potential as a commercially viable deposit with
significant tonnage, high-grade coarse flake and near surface
mineralisation (implying a low strip ratio) contained within one
contiguous ore body.
The main focus of activities was the completion of a Scoping
Study which was managed by Battery Limits, an Australian based
engineering company. The study was based on a throughput of
400,000pta over a 32 year mine life. The results of the study
showed the project has robust economics and warrants further
development. The Company believes the timing of the planned mine
development will coincide with growing opportunities in the
graphite market with strong outlook for increased graphite demand
from the burgeoning lithium ion battery, expandable graphite, as
well as traditional graphite, markets.
Project Location
The Mahenge Project is located in the Morogoro region, Ulanga
district, Tanzania close to existing transport infrastructure. It
is 10 km south of the Mahenge township and about 76 km via a
well-maintained dirt road to Ifakara after which it is 400 km by
sealed road from Dar-es-Salaam port.
Project Geology
The prospect is situated within the pan African Mozambique belt,
which is the orogenic belt resulting from activities taking place
in the Neoproterozoic time. The belt extends along the eastern
border of Africa from Ethiopia through Kenya and Tanzania. The
orogenic event resulted in a complex series of geological events
including the rifting system. The belt consists of high-grade
mid-crustal rocks with a Neoproterozoic metamorphic overprint. It
is divided into the Western Granulite and Eastern Granulite. The
deposit is situated in the Eastern Granulites. The belt has
undergone retrograde metamorphism which resulted in the present
upper amphibolite metamorphic facies in the project area.
Systematic drilling indicated the existence of broad, shallow to
steep dipping schists overlaying granitic gneisses/gneiss. The
gneisses are underlaid by marble units. The graphitic schists form
alternating compositional layering, with quartz being the content
that differentiates these units. High grade graphite schists
(graphite schist) have a lower composition of quartz. Medium to low
grade graphite schists (quartz graphite schist) have a higher
visual quartz percentage. The marble unit likely forms the base of
the sequence (there has not been drilling done beyond the marble
unit).
The drilling results have been very consistent with the
structural measurements taken during the mapping program which
suggested gentle to steep dipping to the south and south-southwest.
The mineralization remains open in all directions.
Drilling Completed
Drilling in 2015-2016 comprised 21 RC holes. More drilling was
completed in 2017, which increased the total to 49 RC holes for
2,419m of drilling. The 2015-2016 drilling aimed to define the
mineralisation units and calculate the initial JORC compliant
resource. The 2017 drilling aimed at infill drilling the existing
pattern to upgrade the resource classification, extend the
available resources and better define the mineralised units
laterally within the deposit. The drilling targeted a higher-grade
zone within the deposit and drilling was concentrated in the
northern part of the tenement. A map of all of the drilling
completed to date is shown below.
Resource Update
In December 2016, Armadale announced an upgraded estimated
Inferred Resource for Mahenge of 40.9 Mt @ 9.4% Total Graphitic
Carbon (TGC). Additional resource drilling was undertaken in 2017
and returned extensive high-grade intersections of graphite that
show coarse graphite through visual inspection. Following this
drilling program, a new Mineral Resource Estimate was announced in
Feb 2018 comprising 51.1 Mt @ 9.3% TGC including Indicated Resource
of 12.4 Mt @ 9.1% TGC and Inferred Resource of 38.7 Mt @ 9.3%
TGC.
Tonnage (Mt) Cutoff TGC (%) Average TGC (%)
Inferred 12.4 3.3 9.1
Indicated 38.7 3.5 9.3
Total 51.1 3.5 9.3
Table 1. Mahenge Liandu Resource Statement
Metallurgical Testwork
During the year a metallurgical test work program was completed
on bulk surface samples which was used as a basis for initial
process design information as well as graphite flake size,
concentrate grades and recoveries. The results of the program
showed the deposit is capable of producing high purity coarse flake
graphite.
Combined cleaner concentrate grade and size distribution from
the bulk test
Flake Size Microns 4088-09
Mass (%) TGC Grade (%)
Super Jumbo > 500 3.67 97.9
Jumbo 300 - 500 20.8 97.9
Large 180 - 300 23.6 97.9
Medium 150 - 180 18.4 98.1
Small 75 --150 21.8 98.3
Fine < 75 11.8 97.1
Process Description
The Scoping Study was based on a processing plant designed to
treat 400 ktpa of ore. The ore will be two-stage crushed, followed
by grinding in a rod mill, with graphite recovered by flotation.
The process includes separation of graphite into coarse and fine
concentrates at an intermediate stage, followed by inter-stage
re-grind milling and flotation to improve liberation and product
purity. The flotation concentrate will then be then dewatered by
filtration, dried, and bagged.
Results of the Scoping Study
During 2017 a Scoping Study was progressed at the Mahenge Liandu
project which included the completion of a mine optimisation study,
infill drilling and the resource upgrade. The results of the
Scoping Study were announced in March 2018. The Scoping Study
confirmed the combination of high graphite feed grade and coarse
flake high purity graphite product and provided highly robust and
compelling economics for the Mahenge Liandu project. The Scoping
Study, based on a 400,000 tpa throughput, had following key
economics:
-- Producing an average of 49,000tpa of high quality graphite products
for a 32 year mine life.
-- The near surface nature of the deposit produced a low strip ratio of
approximately 1:1 for the life of the mine.
-- The Project has a low operating cost of US$408/t and is based on an
average life of mine grade of 12.5% Total Graphitic Carbon
('TGC')
-- The project has a pre-tax IRR of 122% and NPV of US$349m with a low
development capex of US$35m
-- The maximum drawdown during the construction of the Project is
US$34.9m and the after-tax payback period is 1.2 years
-- There remains significant scope to further improve returns, with
staged expansions as the current mine plan is based on
approximately
25% of the total resource.
Summary of project financial performance
Financial Performance Summary Units LOM
Project Life (years) 31.8
Total LOM Net Revenue (US$ M, real) 1,977.7
Total LOM EBITDA (US$ M, real) 1,196.0
Total LOM Net Cash Flows Before Tax (US$ M, real) 1,134.7
Total LOM Net Cash Flows After Tax (US$ M, real) 794.3
NPV @ 10.0% - before tax (US$ M, real) 348.7
NPV @ 10.0% - after tax (US$ M, real) 239.1
IRR - before tax (%, real) 122.5%
IRR - after tax (%, real) 89.3%
Project Capital Expenditure (US$ M, real) 34.9
Payback Period - after tax - from 1st ore (years) 1.2
The Scoping Study results validate the Directors' long held
confidence in the commercial potential and economic value of the
Mahenge project. The results will be used in the upcoming
Definitive Feasibility Study to advance the project to a decision
to mine in 2019.
Based on the Scoping Study results the Company will also
commence negotiations with identified strategic funders and offtake
partners and continue to examine a range of potential markets and
customers.
Exploration Licences
The Company holds following exploration tenements for Mahenge
Liandu:
-- PL10846/2016 granted on 21/9/2016 expires 20/9/2020 area 7.34 square
kilometres
-- PL10840/2016 granted 21/9/2016 expires 20/9/2020 area 21.89 square
kilometres
Exploration and Development Programme
The Definitive Feasibility Study for the Mahenge Liandu project
will commenced in Q2 2018 and expected to be substantially complete
by Q4 2018. The Feasibility Study will focus on defining graphite
product quality with a wide diameter diamond core drilling
programme aimed at generating samples for marketing.
During Q2 and Q3 2018, it is planned to conduct following
activities to support the Feasibility Study:
-- A diamond drilling programme to obtain samples for metallurgical test
work and marketing
-- A geotechnical drilling programme to define the final pit wall design
-- Product marketing towards the goal of achieving binding offtake
agreements
-- The construction of water production bores to determine the flow rates
and ground water conditions in the Project area
-- Environmental and social studies covering the Project area and
completion of a Relocation Action plan (RAP) for the people who
may be
impacted through the development of the Project
-- Progressing towards application of mining permits
-- Calculation of Proved and Probable Reserves
-- Finalisation of production flowsheets and final plant design parameters
Passively Managed Investments:
Mine Restoration Investments Limited ("MRI"), South Africa
The shares in MRI are being carried at Nil market value (2016:
Nil) as MRI shares were suspended from trading on the Johannesburg
Stock Exchange.
Quoted portfolio
The Company has a small portfolio of quoted investments,
principally in gold production companies where the directors
believe there are opportunities for capital gain. The Company
continues to keep its portfolio under review.
Funding Plan
The Company secured a GBP400,000 debt facility in October 2017
with a consortium of a few high net worth investors. Up to April
2018, GBP200,000 of the facility was drawn to support working
capital and development work in completing the scoping study for
Mahenge Liandu.
In addition to the debt facility, the Company raised GBP963,500
in April 2018 through the placement of 58,393,941 new ordinary
shares to existing investors in UK and Australia. The funds raised
will be used for working capital and for the commencement of
Feasibility Study (FS) for Mahenge Liandu.
It is expected that further funding will be required during the
2018 financial year.
Sustainable development
The Company is committed to sustainable development and
conducting its business ethically. Given that the Company invests
in the mining industry, Armadale focuses on health and safety,
being environmentally responsible, and supporting the communities
close to its investments.
Corporate Information
Principal risks and uncertainties
There are numerous risks associated with the mineral industry,
especially in Africa. The Board regularly reviews the risks to
which the Group is exposed and endeavours to minimise them as far
as possible. The following summary, which is not exhaustive,
outlines some of the risks and uncertainties currently facing the
Group:
-- The Group is exposed to two minerals namely gold and graphite. With
gold, the Group is vulnerable to fluctuations in the prevailing
market
price of gold and to variations of the US dollar, in which sales
will
be denominated. Graphite is a relatively new commodity whose
market is
being driven by demand in renewable energy. It is thus
vulnerable to
global energy policies.
-- The impact of BREXIT on companies operating in the UK is still being
monitored. Thus far Brexit has not impacted the Group's ability
to
raise funds.
-- The exploration for and development of mineral resources involves
technical risks, infrastructure risks and logistical challenges,
which
even a combination of careful evaluation and knowledge may
not
eliminate.
-- There can be no assurance that the Group's projects will be fully
developed in accordance with current plans.
-- Future development work and subsequent financial returns arising may
be adversely affected by factors outside the control of the
Group.
-- The availability and access to future funding within the global
economic environment.
-- The Group operates in multiple national jurisdictions and is therefore
vulnerable to changes in government policies which are outside
its
control. The mining regulation changes in Tanzania are still
being
evaluated, however they seem to have minimal impact on
investment in
graphite mining. The Group continues to monitor the
implementation of
the new changes to evaluate and mitigate sovereign risks.
-- The DRC has recently enacted new mining rules. It is not expected that
the changes will have a significant impact on the divestment of
the
Company's Mpokoto project.
Some of the mitigation strategies the Group applies in its
present stage of development include, among others:
-- Proactive management to reducing fixed costs.
-- Rationalisation of all capital expenditures.
-- Maintaining strong relationships with government (employing local
staff and partial government ownership), which improves the
Group's
position as a preferred small mining partner.
-- Engagement with local communities to ensure our activities provide
value to the communities where we operate.
-- Alternative and continued funding activities with a number of options
to secure future funding to continue as a going concern.
The Directors regularly monitor such risks and will take actions
as appropriate to mitigate them. The Group manages its risks by
seeking to ensure that it complies with the terms of its
agreements, and through the application of appropriate policies and
procedures, and via the recruitment and retention of a team of
skilled and experienced professionals.
Key performance indicators
The Group's current key performance indicators (KPIs) are the
performance of its underlying investments, measured in terms of the
development of the specific projects they relate to, the increase
in capital value since investment and the earnings generated for
the Group from the investment. The Directors consider that it is
still too early in the investment cycle of any of the investments
held, for meaningful KPIs to be given.
Success is also measured through the identification and
investment in suitable additional opportunities that fit the
Group's investment objectives. The acquisition of Mahenge Liandu
graphite project is such success.
Outlook
Looking to the future, the positive scoping study results
strengthen the directors view that the Mahenge Liandu project
provides a positive outlook for the progression of the project, and
hence for the Group.
Financial results
For the year ended 31 December 2017 the Group did not earn any
revenues as its business related solely to the making of
investments in non-revenue producing resource projects and
companies.
The Group made a loss after tax of GBP6.177 million (2016:
GBP0.922 million) for the year ended 31 December 2017. The
principal component of this loss was an impairment charge of
GBP5.726 million in respect of the Mpokoto project. The directors
are in the process of negotiating the sale of this project and
determined that it is appropriate to recognise an impairment charge
based on the estimated net sales proceeds that will be received
upon a disposal. Other than this, the loss comprises the
administrative expenses associated with operating a public company
and finance costs.
Funds raised during the year amounted in total to GBP0.85
million of which GBP0.65 million came from a placing of shares and
GBP0.2 million from the initial drawdown of a new loan facility of
GBP0.4 million. Other share issues during the year were in respect
of loan note conversions and the discharge of certain consultants'
invoices. Since the year end, a further GBP0.964 million has been
raised from a placing of shares and the balance of the new loan
facility, GBP0.2 million, remains available for drawdown.
At 31 December 2017, the Group had cash of GBP0.065 million
(2016: GBP0.116 million) and debt of GBP0.634 million (2016:
GBP0.45 million).
Emmanuel S MahedeDirector22 May 2018
FINANCIAL RESULTS
Consolidated Statement of Comprehensive IncomeFor the year ended
31 December 2017
Note 2017 2016
GBP GBP
Other administrative expenses (399,938) (538,763)
Impairment of investments 13 - (301,047)
Profit on disposal of investments 13 - 82,064
Operating loss (399,938) (909,693)
Finance costs (44,478) (11,982)
Loss before taxation 6 (444,416) (921,675)
Taxation 9 - -
Loss for the year from (444,416) (921,675)
continuing operations
Loss from discontinued 15 (5,917,411) (151,947)
operations, net of tax
Loss after taxation (6,177,014) (921,675)
Other comprehensive income
Items that may be reclassified
to profit or loss:
Exchange differences on translating (771,989) 1,016,566
foreign entities
Total comprehensive (loss) (6,949,003) 94,891
/ income attributable
to theequity holders
of the parent company
Loss per share attributable Pence Pence
to the equity
holders of theparent company
Basic and diluted total loss per share 10 (2.58) (0.62)
Basic and diluted loss per share 10 (0.19) (0.52)
from continuing operations
The notes found below form part of the financial statements.
Consolidated Statement of Financial PositionAt 31 December
2017
Note 2017 2016
GBP GBP
Assets
Non-current assets
Exploration and evaluation assets 11 2,384,036 8,778,645
Property, plant and equipment 12 - 16,437
Investments 13 6,705 6,705
2,390,741 8,801,787
Current assets
Trade and other receivables 14 54,563 160,279
Cash and cash equivalents 65,163 115,861
119,726 276,140
Non-current assets classified 15 322,412 -
as held for sale
442,138 276,140
Total assets 2,832,879 9,077,927
Equity and liabilities
Equity
Share capital 19 2,980,211 2,946,587
Share premium 21 19,720,193 19,009,592
Shares to be issued 21 286,000 286,000
Share option reserve 21 94,884 85,850
Loan note reserve 21 - 37,500
Foreign exchange reserve 21 337,845 1,109,834
Retained earnings 21 (21,481,920) (15,342,406)
Total equity 1,937,213 8,132,957
Current liabilities
Trade and other payables 16 133,619 494,733
Loan notes 17 431,406 450,237
565,025 944,970
Liabilities directly associated 15 128,011 -
with non-current
assetsclassified as held for sale
693,036 944,970
Non-current liabilities
Long term borrowings 18 202,630 -
Total Liabilities 895,666 944,970
Total equity and liabilities 2,832,879 9,077,927
The notes found below form part of the financial statements.
Company Statement of Financial PositionAt 31 December 2017
Note 2017 2016
GBP GBP
Assets
Non-current assets
Investments 13 1,606,705 4,451,914
Other receivables 14 972,544 3,358,091
2,579,249 7,810,005
Current assets
Investments held for disposal 13 194,401 -
Trade and other receivables 14 43,750 6,856
Cash and cash equivalents 10,809 100,879
248,960 107,735
Total assets 2,828,209 7,917,740
Equity and liabilities
Equity
Share capital 19 2,980,211 2,946,587
Share premium 21 19,720,193 19,009,592
Shares to be issued 21 286,000 286,000
Share option reserve 21 94,884 85,850
Loan note reserve 21 - 37,500
Retained earnings 21 (20,953,744) (14,984,733)
Total equity 2,127,544 7,380,796
Current liabilities
Trade and other payables 16 66,629 86,707
Loan notes 17 431,406 450,237
498,035 536,944
Non-Current liabilities
Long term borrowings 18 202,630 -
Total liabilities 700,665 536,944
Total equity and liabilities 2,828,209 7,917,740
The Company has taken advantage of the exemption conferred by
section 408 of Companies Act 2006 from presenting its own statement
of comprehensive income. A loss after taxation of GBP6,006,511
(2016: GBP769,368) has been included in the financial statements of
the parent company.
The notes found below form part of the financial statements.
Consolidated Statement of Changes in EquityFor the year ended 31
December 2017
ShareCapital SharePremium Sharesto beissued ShareOptionReserve LoanNoteReserve ForeignExchangeReserve RetainedEarnings Total
GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January 2016 2,823,582 16,585,413 286,000 182,000 - 93,278 (14,550,731) 5,419,542
Loss for the year - - - - - - (921,675) (921,675)
Other - - - - - 1,016,566 - 1,016,566
comprehensive
income
Total - - - - - 1,016,566 (921,675) 94,891
comprehensive
incomefor
the year
Issue of shares 123,005 2,540,790 - - - - - 2,663,795
Expenses of issue - (116,611) - - - - - (116,611)
Share based - 33,850 33,850
payment
charges
Transfer on - (130,000) 130,000 -
expiry
of options
Equity element of - 37,500 - 37,500
convertibleloan
notes issued
Total other 123,005 2,424,179 - (96,150) 37,500 - 130,000 2,618,534
movements
At 31 December 2,946,587 19,009,592 286,000 85,850 37,500 1,109,844 (15,342,406) 8,132,957
2016
Loss for the year - - - - - - (6,177,014) (6,177,014)
Other - - - - - (771,989) - (771,989)
comprehensive
loss
Total - - - - - (771,989) (6,177,014) (6,949,008)
comprehensive
lossfor the year
Issue of shares 33,624 771,501 - - - - - 802,125
Expenses of issue - (60,900) - - - - - (60,900)
Share based - - - 9,034 - - - 9,034
payment
charges
Transfer on - - - - (37,500) - 37,500 -
conversion
of loannotes
Total other 33,624 710,601 - 9,034 (37,500) - 37,500 753,259
movements
At 31 December 2,980,211 19,720,193 286,000 94,884 - 337,845 (21,481,920) 1,937,213
2017
The notes found below form part of the financial statements.
The following describes the nature and purpose of each reserve
within owners' equity:
Reserve Description and purpose
Share capital amount subscribed for share
capital at nominal value
Share premium amount subscribed for share
capital in excess of
nominal value, net of allowable expenses
Shares to be issued share capital to be issued in connection
with the acquisition of Netcom
Share option reserve cumulative charge recognised under IFRS 2 in
respect of share-based payment awards
Loan note reserve equity element of convertible loan notes
Foreign exchange reserve gains/losses arising on re-translating the net
assets of overseas operations into sterling
Retained earnings cumulative net gains and losses recognised
in the statement of comprehensive income
Company Statement of Changes in EquityFor the year ended 31
December 2017
ShareCapital SharePremium Shares tobe ShareOptionReserve LoanNoteReserve RetainedEarnings Total
issued
GBP GBP GBP GBP GBP GBP
At 1 January 2,823,582 16,585,413 286,000 182,000 - (14,345,365) 5,531,630
2016
Loss for - - - - - (769,368) (769,368)
the year
Total - - - - - (769,368) (369,368)
comprehensive
loss forthe
year
Issue of 123,005 2,540,790 - - - - 2,663,795
shares
Expenses - (116,611) - - - - (116,611)
of issue
Share based - 33,850 33,850
payment
charges
Transfer on - - (130,000) - 130,000 -
expiry
of options
Equity element - - - - 37,500 - 37,500
of
convertibleloan
notes issued
Total other 123,005 2,424,179 - (96,150) 37,500 130,000 2,618,534
movements
At 2,946,587 19,009,592 286,000 85,850 37,500 (14,984,733) 7,380,796
31 December
2016
Loss for - - - - - (6,006,511) (6,006,511)
the year
Total - - - - - (6,006,511) (6,006,511)
comprehensive
loss forthe
year
Issue of 33,624 771,601 - - - - 805,125
shares
Expenses - (60,900) - - - - (60,900)
of share
issue
Share based - - - 9,034 - - 9,034
payment
charges
Transfer on - - - - (37,500) 37,500 -
conversion
ofloan notes
Total other 33,624 710,601 - 9,034 (37,500) 37,500 753,259
movements
At 2,980,211 19,720,193 286,000 94,884 - (20,953,744) 2,127,544
31 December
2017
The notes found below form part of the financial statements.
The following describes the nature and purpose of each reserve
within owners' equity:
Reserve Description and purpose
Share capital amount subscribed for share
capital at nominal value
Share premium amount subscribed for share
capital in excess of
nominal value, net of allowable expenses
Shares to be issued share capital to be issued in connection
with the acquisition of Netcom
Share option reserve cumulative charge recognised under IFRS 2 in
respect of share-based payment awards
Loan note reserve equity element of convertible loan notes
Retained earnings cumulative net gains and losses recognised
in the statement of comprehensive income
Consolidated Statement of Cash FlowsFor the year ended 31
December 2017
2017 2016
GBP GBP
Cash flows from operating activities
Loss before taxation (6,177,014) (921,675)
Adjustment for:
Depreciation 1,806 11,929
Profit on sale of investments - (82,064)
Impairment charge 5,726,445 301,047
Share based payment charge 9,034 33,850
Shares issued in settlement of liabilities 67,500 327,050
Finance costs 44,478 11,982
(327,751) (317,881)
Changes in working capital (36,133) 21,951
Receivables
Payables 72,101 155,247
Net cash used in operating activities (287,577) (140,683)
Cash flows from investing activities
Expenditure on exploration (548,766) (1,046,408)
and evaluation assets
Sale of listed investments - 153,625
Net cash used in investing activities (548,766) (892,783)
Cash flows from financing activities
Proceeds from share placement 650,753 1,105,000
Issue costs (60,900) (116,611)
Proceeds from loan (Note 18) 200,000 -
Net cash from financing activities 789,851 988,389
Net decrease in cash and cash equivalents (50,698) (45,077)
Cash and cash equivalents at 1 January 115,861 160,938
Cash and cash equivalents at 31 December 65,163 115,861
The notes found below form part of the financial statements.
Company Statement of Cash FlowsFor the year ended 31 December
2017
2017 2016
GBP GBP
Cash flows from operating activities
Loss before taxation (6,006,511) (769,368)
Adjustment for:
Share based payment charge 9,034 33,850
Profit on sale of investments - (82,064)
Impairment charge 5,730,587 301,047
Shares issued in settlement of liabilities 67,500 327,050
Finance costs 44,478 11,982
(154,912) (177,503)
Changes in working capital
Receivables (36,894) 38,300
Payables (20,078) 596
Net cash used in operating activities (211,884) 138,607
Cash flows from investing activities
Advances to subsidiaries (668,037) (1,028,339)
Sale of listed investments - 153,625
Net cash used in investing activities (668,037) (874,714)
Cash flows from financing activities
Proceeds from share placement 650,751 1,105,000
Issue costs (60,900) (116,611)
Proceeds from loan (Note 18) 200,000 -
Net cash from financing activities 789,851 988,389
Net decrease in cash and cash equivalents (90,070) (24,932)
Cash and cash equivalents at 1 January 100,879 125,811
Cash and cash equivalents at 31 December 10,809 100,879
The notes found below form part of the financial statements.
Notes to the financial statementsFor the year ended 31 December
2017
1.Country of incorporation
The Company was incorporated in the United Kingdom as Watermark
Global Plc, a Public Limited Company, on 19 August 2005. The name
of the Company was changed to Armadale Capital Plc on 2 July 2013.
Its registered office is 1 Arbrook Lane, Esher, Surrey, KT10 9EG.
The Company is domiciled in the UK.
2.Accounting policies
2.1. Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
The principal accounting policies are set out below.
2.2. Going Concern
The financial statements have been prepared on the going concern
basis as, in the opinion of the directors, there is a reasonable
expectation that the Group and the Company will continue in
operational existence for the foreseeable future.
At 31 December 2017, the Group had cash of GBP65,163 and
borrowings of GBP634,036, comprising convertible loan notes of
GBP431,406 due July 2018 and a loan of GBP202,630 due October 2019.
The Noteholders have confirmed their willingness to extend the
Notes for a further period of 12 months on the same terms.
Since the end of the year, the Company has continued its
appraisal operations at its Mahenge Liandu graphite project. In
order to fund this exploration and evaluation expenditure together
with Group overheads, the Company raised GBP963,500 through a share
placing.
At 18 May 2018, the Company had cash of approximately GBP560,000
and an available loan facility of GBP200,000. The directors have
prepared a cash flow forecast for the next twelve months which
shows that the cash in hand is sufficient to meet current
commitments in respect of exploration expenditure and corporate
overheads for a period of approximately seven months.
The Company's ability to continue as a going concern and to
achieve its long term strategy of developing its exploration
projects is dependent on the extension and/or conversion of the
loan notes and further fundraising. As described above, the
Directors expect to be able to convert or extend the existing loan
notes, and against the background of the encouraging initial
results from the Mahenge Liandu graphite project and the Company's
history of raising funds through the issue of equity, the directors
also consider that the Company is likely to be able to raise the
required capital. However, there are currently no binding
agreements in place. Should the
Directors be unable to raise sufficient funds and extend or
convert the loan notes, the Company may be unable to realise its
assets and discharge its liabilities in the normal course of
business.
These factors indicate the existence of a significant material
uncertainty which may cast doubt over the Group's and Company's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the Group or
Company were unable to continue as a going concern.
2.3. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the Consolidated Statement of Comprehensive
Income from the effective date of acquisition and up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by the Group.
All intra-Group transactions, balances, income and expenses are
eliminated in full on consolidation.
2.4 Acquisitions of exploration licences
The acquisition of Netcom, Kisenge and Graphite Advancement,
were principally the acquisition of mining licences effected
through non-operating corporate structures. As the structure does
not represent a business, it is considered that the transactions do
not meet the definition of a business combination. Accordingly each
transaction is accounted for as the acquisition of an asset. Future
consideration for shares is contingent and is recognised as an
asset or liability based on the valuation of the shares as at the
date of acquisition. Contingent future consideration for shares is
not subsequently revalued and is derecognised on disposal of the
asset to which it relates.
2.5 Foreign currencies
The individual financial statements of each Group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each Group entity are expressed in pounds
sterling, which is the functional currency of the Company and the
presentation currency for the consolidated financial
statements.
Transactions in currencies other than the entity's functional
currency (foreign currencies) are recognised at the rates of
exchange prevailing at the dates of the transactions. At the end of
each reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign currency are
not retranslated. Exchange differences are recognised in profit or
loss in the period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
expressed in Pounds using exchange rates prevailing at the end of
the reporting period. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive
income.
2.6. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand,
with a maturity date of less than three months from inception.
2.7. Share-based payments
IFRS 2 'Share-based Payment' requires the recognition of
equity-settled share-based payments at fair value at the date of
grant and the recognition of liabilities for cash-settled share
based payments at the current fair value at each reporting
date.
The Group provides benefits to employees and service providers
(including senior executives) of the Group in the form of share
based payments, whereby employees render services in exchange for
shares or rights over shares (equity-settled transactions).
Where the equity-settled transactions are share options their
cost is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value
is determined by using a Black-Scholes model.
In valuing equity-settled transactions, no account is taken of
any performance conditions, other than market conditions linked to
the price of the shares of the Company, if applicable.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or other service conditions are fulfilled,
ending on the date on which the relevant employees become fully
entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled
transactions at each reporting date until vesting date reflects (i)
the extent to which the vesting period has expired and (ii) the
Group's best estimate of the number of equity instruments that will
ultimately vest. No adjustment is made for the likelihood of market
performance conditions being met as the effect of these conditions
is included in the determination of fair value at grant date. The
profit and loss account charge or credit for a period represents
the movements in cumulative expense recognised as at the beginning
and end of that period.
If an equity-settled award is cancelled, it is treated as if it
had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award and designated as
a replacement award on the date that it is granted, the cancelled
and new award are treated as if they were a modification of the
original award. The dilutive effect, if any, of outstanding options
is reflected as additional share dilution in the computation of
earnings per share.
Share based payments in respect of third party services are
measured by reference to the value of services provided and share
price at the relevant date.
2.8 Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current Tax
The tax currently payable is based on taxable profit for the
year. The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax
Deferred tax is recognised on temporary 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. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax
assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by the
end of the reporting period. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of
the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax and current tax assets and liabilities are offset
when there is a legally enforceable right to set off when they
relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities
on a net basis.
Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income
in profit or loss, except when they relate to items that are
recognised outside profit or loss (whether in other comprehensive
income or directly in equity), in which case the tax is also
recognised outside profit or loss, or where they arise from the
initial accounting for a business combination. In the case of a
business combination, the tax effect is included in the accounting
for the business combination.
2.9. Exploration and evaluation costs
Once an exploration licence or an option to acquire an
exploration licence has been obtained, all costs associated with
exploration and evaluation are capitalised on a project-by-project
basis pending determination of the feasibility of the project.
Costs incurred include appropriate technical and administrative
expenses and a pro-rata share of the Group's finance costs but not
general overheads. If a mining property development project is
successful, the related expenditures will be amortised over the
estimated life of the commercial ore reserves on a unit of
production basis. Where a licence is relinquished, a project is
abandoned, or is considered to be of no further commercial value to
the Company, the related costs will be written off to the statement
of comprehensive income in the period the impairment is identified.
Unevaluated mineral properties are assessed at reporting date for
impairment in accordance with the policy set out below. If
commercial reserves are developed, the related deferred development
and exploration costs are then reclassified as development and
production assets within property, plant and equipment.
2.10. Investments
Investments in the individual company accounts, including those
in subsidiary companies, are stated at cost less any provision for
impairment, which is recognised as an expense in the statement of
comprehensive income in the period the impairment is
identified.
In the Group accounts, equity investments are included on the
balance sheet as assets available for sale at fair value with value
changes being recognised in other comprehensive income unless an
impairment is considered to be permanent in which case it is
recognised in the statement of comprehensive income. Associates in
the Group accounts are recognised at cost less the Group's share of
profits or losses of the associate.
2.11. Joint Arrangements
The group is a party to a joint arrangement when there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The group classifies its interests in joint arrangements as
either: (a) Joint ventures: where the group has rights to only the
net assets of the joint arrangement; (b) Joint operations: where
the group has both the rights to assets and obligations for the
liabilities of the joint arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers: (a) The structure of the joint
arrangement; (b) The legal form of joint arrangements structured
through a separate vehicle; (c) The contractual terms of the joint
arrangement agreement; and (d) Any other facts and circumstances
(including any other contractual arrangements).
The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, revenues and expenses
in accordance with its contractually conferred rights and
obligations.
2.12. Plant, equipment and vehicles
Fixtures and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses.
Depreciation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives, using the straight-line method. The estimated useful lives
and residual values are reviewed at each year end, with the effect
of any changes in estimate accounted for on a prospective
basis.
Plant, equipment and vehicles 3-10 years on a straight line
basis
The depreciation cost relating to assets used in the development
of mineral deposits is capitalised until the deposit is bought into
production.
2.13. Impairment of assets
At the end of each reporting period, the Directors review the
carrying amounts of assets to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss
(if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
the statement of comprehensive income, unless the relevant asset is
carried at a revalued amount, whereby impairment is first allocated
to the revaluation reserve, to the extent that it has been
previously revalued, with any excess taken to the statement of
comprehensive income.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in other
comprehensive income, unless the relevant asset is carried at a
re-valued amount, in which case the reversal of the impairment loss
is treated as a revaluation increase.
2.14. Non-current assets held for sale and disposal groups
Non-current assets and disposal groups are classified as held
for sale when:
-- They are available for immediate sale
-- Management is committed to a plan to sell
-- It is unlikely that significant changes to the plan will be made or
that the plan will be withdrawn
-- An active programme to locate a buyer has been initiated
-- The asset or disposal group is being marketed at a reasonable price in
relation to its fair value, and
-- A sale is expected to complete within 12 months from the date of
classification.
Non-current assets and disposal groups classified as held for
sale are measured at the lower of:
-- Their carrying amount immediately prior to being classified as held
for sale in accordance with the group's accounting policy;
and
-- Fair value less costs of disposal.
Following their classification as held for sale, non-current
assets (including those in a disposal group) are not
depreciated.
The results of operations disposed during the year are included
in the consolidated statement of comprehensive income up to the
date of disposal.
A discontinued operation is a component of the Group's business
that represents a separate major line of business or geographical
area of operations or is a subsidiary acquired exclusively with a
view to resale, that has been disposed of, has been abandoned or
that meets the criteria to be classified as held for sale.
Discontinued operations are presented in the consolidated
statement of comprehensive income as a single line which comprises
the post-tax profit or loss of the discontinued operation along
with the post-tax gain or loss recognised on the re-measurement to
fair value less costs to sell or on disposal of the assets or
disposal groups constituting discontinued operations.
2.15. Financial assets
Loans and receivables are recognised when the Company and Group
become party to the contractual provisions of the financial
instrument.
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as 'loans and receivables'. Loans and receivables
are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
2.16. Financial liabilities and equity instruments issued by the
Group
Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs.
Financial assets
Financial assets comprise debtors and other investments.
Financial liabilities
Financial liabilities are recognised when the Company and Group
become party to a financial liability.
Financial liabilities represent trade payables and
borrowings.
Convertible loan notes
As detailed in note 17, the loan notes are classified as a
compound financial instrument in accordance with the requirements
of IAS 32. The debt element is calculated as the present value of
future cash flows assuming the loan notes are redeemed at the
redemption date, discounted at the market rate for an equivalent
debt instrument with no option to convert to equity. The difference
between the total proceeds and the present value of the debt
element is recognised in equity. The discount is charged over the
life of the loan notes to the statement of comprehensive income and
included within finance expenses. When conversion occurs the
associated equity element is released directly to retained
earnings.
2.17 Changes in accounting standards
The standards which applied for the first time this year have
been adopted and have not had a material impact.
The International Accounting Standards Board (IASB) has issued
the following new and revised standards, amendments and
interpretations to existing standards that are not effective for
the financial year ending 31 December 2017 and have not been
adopted early. The Group is currently assessing the impact of these
standards and based on the Group's current operations do not expect
them to have a material impact on the financial statements.
New Standards Effective Date
IFRS 15 Revenue from Contracts with Customers 01-Jan-18
IFRS 9 Financial Instruments 01-Jan-18
IFRS 16 Leases 01-Jan-19
IFRS 17 Insurance Contracts 01-Jan-21
Amendments to Existing Standards
Classification and Measurement of
Share-based Payment Transactions
(Amendments to IFRS 2) 01-Jan-18
IFRIC 22 Foreign Currency Transactions 01-Jan-18
and Advance Consideration
Annual Improvements to IFRSs (2014-2016 Cycle) 01-Jan-18
IFRIC 23 Uncertainty over Income Tax Treatments* 01-Jan-19
Annual Improvements to IFRSs (2015-2017 Cycle)* 01-Jan-19
* Not yet adopted by European Union
IFRS 9 replaces the incurred loss model of IAS 39 with a model
based on expected credit losses or losses on loans. The standard
requires entities to use an expected credit loss model for
impairment of financial assets. Under the new standard, the loss
allowance for a financial instrument will be calculated at an
amount equal to 12 month expected credit losses or lifetime
expected credit losses if there has been a significant increase in
credit risk of the financial instrument.
The Company has a loan to the 100% owned subsidiary that is the
license holder of the assets. Management are still undertaking a
full assessment but do not expect there to be any material impact
as in line with the work the Company completed to test whether the
intangible assets should be impaired, it has determined that there
currently is no reason to expect a loss from this loan. The Group
is not revenue generating thus there is no impact of IFRS 15 as
there are no revenue contracts in place currently.
There is no impact of IFRS 16 as there are no lease agreements
in place currently.
The Group will adopt the above Standards at the time stipulated
by that Standard. The Group does not currently anticipate voluntary
early adoption of any of the Standards.
3.Significant judgements and sources of estimation
uncertainty
In preparing the annual financial statements of the Group,
management is required to make estimates and assumptions that
affect the amounts represented in the annual financial statements
and related disclosures. Use of available information and the
application of judgement are inherent in the formation of
estimates. Actual results in the future could differ from these
estimates which may be material to the annual financial statements.
The directors consider that the only significant source of
estimation uncertainty relates to the value of the Group's
exploration assets.
The principal significant estimates and judgements are:
Going concern
The financial statements have been prepared on the going concern
basis as, in the opinion of the directors, there is a reasonable
expectation that the Group will continue in operational existence
for the foreseeable future, as explained more fully in note
2.2.
Investment and debtors
At 31 December 2017 the Company held approximately 26% of the
issued share capital of MRI, a South African listed company. In the
judgement of the Directors, the Company does not have significant
influence over MRI as it does not have any representation on the
Board, nor does it have the power to appoint anyone to the Board.
MRI is therefore held as an investment.
Trading in the shares of MRI has been suspended and the company
is not trading. Accordingly, in the opinion of the directors, the
market value of the shares is nil and full provision for impairment
was made in 2016.
Exploration and evaluation assets
These represent the accumulated costs, including capitalised
finance costs, to the Group of its mineral projects. Their
commercial realisation is dependent upon the successful economic
development of the gold and graphite deposits and should the
development not be achieved, an impairment of these assets would
arise. At the year end, the directors were of the opinion that
there was an indicator of impairment in respect of the Mpokoto
project, where sales negotiations are in progress at a price
significantly below the carrying value of the relevant net assets.
In the opinion of the directors, the price under negotiation best
represents the value of the project. In arriving at the sale price
for this purpose, the directors have excluded those elements that
are contingent on production being achieved, which is regarded as
uncertain. See Note 15 for details of the accounting treatment of
the Mpokoto project.
Impairment of investment in subsidiaries
Investments in subsidiaries represent the accumulated costs that
the parent Company has invested in its subsidiaries to fund the
mineral projects. The recovery of these investments is dependent
upon the successful economic development of the gold and graphite
deposits and should the development not be achieved, an impairment
of these investments would arise. At the year end the directors
were of the opinion that there was an impairment to the Mpokoto
gold project E&E asset and the Company's intercompany debtor,
as described above. See Note 15 for details of the accounting
treatment of the Mpokoto project.
4.Financial Risk Management
Policy
The Group and Company regularly monitor the cash position to
ensure liabilities can be met.
Financial risk factors
The risk in relation to financial assets is considered to be
minimal and is managed on a day-to-day basis.
The Group and Company is exposed to liquidity risk, currency
risk and capital risk management arising from the financial
instruments it holds. The Company has receivables from its
subsidiaries as disclosed in note 14. The recovery of these
receivables is dependent on whether the mining projects are
successful and they are not expected to be recovered in the short
term. The risk management policies employed by the Group and
Company to manage these risks are discussed below:
Liquidity Risk
Liquidity risk is the risk that arises when the maturity of
assets and liabilities does not match. The Group and Company
manages liquidity risk by maintaining adequate reserves and banking
facilities, by monitoring cash flows and managing the maturity
profiles of financial assets and liabilities within the bounds of
contractual obligations.
The Group's loan notes as described in note 17, stated at their
gross, contractual and undiscounted amount of GBP431,406 were
issued on 11 July 2016 with a conversion/payment date of 11 July
2017.
The Group's long term debt facility stated at its gross,
contractual and undiscounted amount of GBP202,630 as described in
note 18 is repayable on 11 October 2019.
Currency Risk
Currency risk is the risk that the value of financial
instruments will fluctuate due to changes in foreign exchange
rates. Currency risk arises when future commercial transactions and
recognised assets and liabilities are denominated in a foreign
currency that is not the relevant company's functional currency.
The Group is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the South African
Rand and the US Dollar. The Group's management monitors the
exchange rate fluctuations on a continuous basis. The Group's loans
are denominated in GBP as disclosed in note 17.
The effect of a 10% strengthening of AUD in 2017 would result in
a GBP21k reduction (2016: GBP21k) of the Group's net assets.
Capital Risk Management
The Group and Company manages its capital to ensure that it will
be able to continue as a going concern while maximising the return
to shareholders through the optimisation of the debt and equity
balance. This is done through the monitoring of cash flows.
The capital structure of the Group and Company consists of cash
and cash equivalents, equity attributable to equity holders of the
parent, (comprising issued capital and reserves less accumulated
losses) and loan notes.
Commodity risk
The value of the Group's exploration and evaluation assets is
principally exposed to two commodities, gold and graphite. The
value of the projects is vulnerable to fluctuations in the
prevailing market price of these commodities.
Fair value estimation
The fair values of the Group's and Company's financial assets
and liabilities approximate to their carrying amounts at the
reporting date.
Non-current asset investments (excluding investments in
subsidiaries at the Company level) are measured at fair value. The
fair value is based upon observable inputs and the level of the
fair value hierarchy within the measurement is categorised as Level
1. Current asset investments are measured at fair value and are
categorised as Level 2. There were no transfers between Level 1 and
Level 2 for the year.
Financial Instruments by Category
The Group's financial instruments consist of cash and cash
equivalents, trade and other receivables, borrowings, trade
payables and accruals, loan term borrowings and convertible loan
notes. Financial instruments are initially recognized at fair value
with subsequent measurement depending on classification as
described below. Classification of financial instruments depends on
the purpose for which the financial instruments were acquired or
issued, their characteristics, and the Company's designation of
such instruments.
The Group's and Company's financial instruments are all
subsequently recognised at amortised cost.
5.Segmental Information
Costs incurred in developing the Group's exploration projects
are capitalised in full, accordingly, the expenses reported in the
Consolidated Statement of Comprehensive Income solely represent
central Group overheads and impairments.
In terms of assets and liabilities, the only material items are
the exploration and evaluation assets relating to the Group's
projects in the Democratic Republic of Congo ("DRC") and Tanzania.
Following a review by the directors, it has been determined that
the value of the DRC project has been impaired and accordingly a
provision has been made to reduce its net carrying value to
estimated realisable value. The assets, net of impairment
provision, attributable to each project are as follows:
2017 2016
GBP GBP
DRC (reported as assets held for disposal, Note 15) 322,412 5,820,128
Tanzania (reported as exploration 2,384,036 1,998,838
and evaluations assets)
2,706,448 7,818,966
6.Loss before tax
This is stated after charging:
2017 2016
GBP GBP
Directors' emoluments - fees 67,000 150,000
Directors' emoluments - compensation - 123,000
for loss of office
Depreciation 1,806 11,929
Auditors' remuneration:
Fees payable to the Company's 32,000 30,000
auditors for the audit
of theGroup and Company financial statements
Fees payable to the Company's auditors 2,500 2,450
for taxationcompliance services
Gain on disposal of investments - (82,064)
Share based payment charge 9,034 33,850
Impairment of PPE 13,206 -
Impairment of exploration and evaluation assets 5,713,239 -
Impairment of investments - 301,047
7. Employees
2017 2016
The average monthly number of persons
(including Directors)
employed by the Group during the year was:
Group - management 3 3
Group - staff - 9
3 12
Company-management 3 3
Employment costs GBP GBP
Group
Wages and salaries (including directors) 78,500 301,224
Payments in lieu of notice - 123,000
Social security costs - 22,511
78,500 446,735
Company
Wages and salaries (including directors) 78,500 150,000
Payments in lieu of notice - 123,000
78,500 273,000
The exploration and evaluation work on the Group's projects is
undertaken by third party consultants.
8.Remuneration of Directors of the Company
Aggregate emoluments 67,000 273,000
Emoluments of the Highest Paid Director 30,000 96,000
All Directors of the Group and Company are considered to be the
key management personnel.
9.Taxation
2017 2016
GBP GBP
Continuing operations
Current Tax
Current tax on loss for the year - -
2017 2016
GBP GBP
Continuing operations
Factors affecting the tax charge for the year
Loss on ordinary activities before taxation (6,177,014) (921,675)
Loss on ordinary activities before (1,189,075) (184,335)
taxation multipliedby
standard rate of UK corporation
tax of 19.25%(2016: 20%)
Effects of :
Temporary difference carried forward not 5,811,440 177,565
recognised as a deferred tax asset
Expenses disallowed (4,622,365) 6,770
UK Corporation tax - -
A deferred tax asset of approximately GBP1,419,000 (2016:
GBP1,334,000) has not been recognised owing to the uncertainty over
the timing of future recoverability.
10.Loss per share
The calculation of total loss per share is based on a loss of
GBP6,177,014 (2016: GBP921,675), and on 239,228,310 ordinary shares
(2016: 148,922,833), being the weighted average number of shares in
issue during the year.
The calculation of loss per share from continuing activities is
based on a loss of GBP444,416 (2016: GBP769,728), and on
239,228,310 ordinary shares (2016: 148,922,833), being the weighted
average number of shares in issue during the year.
There is no difference between basic loss per share and diluted
loss per share as the potential ordinary shares are
anti-dilutive.
The company has issued options over ordinary shares which could
potentially dilute basic earnings per share in the future.
11.Exploration and evaluation assets
Group 2017 2016
GBP GBP
Cost
At 1 January 8,778,645 4,923,190
Exchange movements (751,721) 959,679
Acquisition of licence in Tanzania (note 13) - 1,607,736
Additions 695,825 1,288,040
Impairment and transfer to (6,338,713) -
assets held for disposal
At 31 December 2,384,036 8,778,645
Included in additions are capitalised finance costs of GBP13,018
(2016: GBP25,542).
As production has not commenced, no amortisation was charged
during the year, in accordance with the Group's accounting
policy.
12.Property, plant and equipment
Group PPE is solely allocated to the DRC operating segment, see
note 5.
Group
Plant Equipment Vehicles Total
Cost GBP GBP GBP GBP
At 1 January 2016 12,565 10,539 16,153 39,257
Exchange Movements 2,477 2,078 3,184 7,739
At 31 December 2016 15,042 12,617 19,337 46,996
Exchange movements (1,304) (1,094) (1,677) (4,075)
Impairment (note 15) 13,738 11,523 17,660 42,921
At 31 December 2017 - - - -
Depreciation
At 1 January 2016 373 6,018 9,172 15,563
Exchange Movements 73 1,186 1,808 3,067
Charge for the year - 5,387 6,542 11,929
At 31 December 2016 446 12,591 17,522 30,559
Exchange Movements (39) (1,092) (1,519) (2,650)
Charge for the year 125 24 1,657 1,806
Impairment (note 15) (532) (11,523) (17,660) (29,715)
At December 2017 - - - -
Net book value
At 31 December 2017 - - - -
At 31 December 2016 14,596 26 1,815 16,437
An impairment loss of GBP13,206 has been recognised in the
comprehensive statement of income in order to impair the carrying
value of the Groups PPE to GBPNil, as management are of the opinion
that the assets are obsolete.
13.Investments
Non-current asset investments - Group
Listedinvestments
Cost GBP
At 1 January 2016 84,605
Disposals (77,900)
At 31 December 2016 6,705
Additions/(Disposals) -
At 31 December 2017 6,705
Impairment
At 1 January 2016 28,000
Impairment (release) (28,000)
At 31 December 2016 -
Additions/(Disposals) -
At 31 December 2017 -
Net book value
At 31 December 2017 6,705
At 31 December 2016 6,705
Non-current asset
investments
- Company
Subsidiaries ListedInvestments Total
Cost GBP GBP GBP
At 1 January 2016 2,845,209 84,605 2,929,814
Additions 1,600,000 - 1,600,000
Disposals - (77,900) (77,900)
At 31 December 2016 4,445,209 6,705 4,451,914
Impairment (2,650,808) - (2,650,808)
Transfer to investments (194,401) - (194,401)
held for disposal
At 31 December 2017 1,600,000 6,705 1,606,705
An impairment has been recognised for the value of GBP2,650,808.
Comparison of the carrying value of the investment in the Mpokoto
gold project with the potential selling price indicates that an
impairment in the value of the investment has occurred and,
accordingly, an impairment has been recognised by reference to the
potential selling price taking account only of those elements of
the selling price that would be receivable regardless of the future
outcome of the project, on the grounds that the future outcome is
uncertain.
2017 2016
Current asset investments - Group and Company GBP GBP
At 1 January - 322,708
Disposals - (21,661)
Impairment charge for year - (301,047)
Valuation at 31 December - -
The Group has an interest of approximately 26% in MRI, a company
involved in the processing of coal fines.
As there is an intention to sell the investment in MRI, in 2016
it was classified as a current asset investment. Trading in MRI's
shares has been suspended and the company is inactive. In the
opinion of the directors, the market value of the shares is nil and
accordingly an impairment charge has been recorded to reduce the
value of the investment to nil.
Investments held for disposal Company
As explained in note 15, the board has determined that the value
of the Mpokoto gold project has been impaired. Accordingly the
value of the Company's holdings in shares of Netcom Global Inc. and
Kisenge Limited has similarly been impaired. As the intention is to
dispose of these shares, they have been transferred from
non-current to current assets, as follows
2017 2016
GBP GBP
Transferred from non-current investments 2,845,209 -
Impairment (2,650,808) -
Carrying value 194,401 -
The subsidiary companies are:
Name and nature of business Registered Office Class of %
shares held
Netcom Global Inc. 555 Hunkins Waterfront Ordinary 100
(intermediate holding Plaza, Charleston, Nevis
company) 171 Main Street, Ordinary 100
Kisenge Limited Road Town,
(intermediate holding British Virgin Islands
company)
Cluff Mining Congo, SARL* 34 Avenue de la Liberte, Ordinary 100
(mining project operator) Lubumbashi
Democratic Republic
of Congo
Mines D'Or de Kisenge, SARL* 34 Avenue de la Liberte, Ordinary 80
(mining licence holder) Lubumbashi,
Democratic Republic
of Congo
Graphite Advancements 3 Queens Grove, Mount Ordinary 100
Pty Ltd(intermediate Claremont,Western
holding company) Australia 40010
Graphite Advancements PO Box 105589, Ordinary 100
(Tanzania) Dar es Salaam,
Limited? (mining project Tanzania
operator)
Water Utilities Limited 171 Main Street, Ordinary 100
(in process of dissolution) Road Town,
British Virgin Islands
*Held through Kisenge Limited? Held through Graphite
Advancements Pty Ltd
The interest of 20% in Mines d'Or de Kisenge, SARL not held by
the Group is held by Entreprise Miniere de Kisenge- Manganese SARL
("KMC") a Congolese Government entity. KMC is entitled to
participate in future revenues from the project. As KMC was not
required to contribute to its share of exploration and evaluation
costs and no revenues have yet been generated, there is no
non-controlling interest to report in these financial
statements.
Under the terms of acquisition of Netcom Global Inc, completed
on 15 November 2013, further ordinary shares in the company were
potentially to be issued to the vendors as follows:
i. 350 million (now 2.333 million*) Ordinary Shares issued upon
the grant of Exploration Licences for the Mpokoto Project to the
Company (the "Further Consideration Shares"). The Further
Consideration Shares, valued at 0.26p per share, were included as
part of the cost of the investment in Netcom.
ii. up to 220 million (now 1.467 million*) Ordinary Shares were
to be issued upon the completion of three key milestones (the
"Milestone Shares"):
-- 60 million (now 0.4 million*) Ordinary Shares upon completion of a
pre-feasibility study;
-- 60 million (now 0.4 million*) Ordinary Shares upon the delineation of
a JORC reserve of at least 120,000 ounces of gold; and
-- 100 million (now 0.667 million*) Ordinary Shares upon the production
of the first 5,000 ounces of gold from the project.
The directors assessed a 100% likelihood of the first two
milestones being achieved and a 50% likelihood of the third
milestone being achieved.
The value of the milestone shares was included as part of the
cost of the investment in Netcom, valued at 0.26p per share.
During 2014, the conditions applying to the Further
Consideration Shares and the first tranche of Milestone Shares were
fulfilled and accordingly 410 million (now 2.733 million*) Ordinary
Shares in the Company were issued to the vendors.
The conditions applying to the second and third tranche of
Milestone Shares have not yet been fulfilled.
*refer to note 19 for more details on share consolidation and
restructure
14.Trade and other receivables
Group 2017 2016
GBP GBP
Other debtors and prepayments 54,563 160,279
Total current receivables 54,563 160,279
Company
Amounts owed by group undertakings 4,052,323 3,358,091
Provision (3,079,779) -
Total net non-current receivables 972,544 3,358,091
Other receivables 43,750 6,856
Total current receivables 43,750 6,856
The provision is required to provide in full against amounts due
from subsidiaries associated with the Mpokoto gold project. In view
of the impairment in the value of the project (see note 15) these
amounts are considered to be wholly irrecoverable.
The company is also owed a debt of GBP998,000 secured on shares
in MRI. In the opinion of the directors, the ability of the debtor
to repay the debt is seriously in doubt and accordingly the amount
has been provided against in full in previous years, there has been
no movement in the provision in 2017.
15.Disposal group classified as held for sale
On 12 January 2018 the board announced that it had entered into
a heads of agreement ("HOA") with Weghsteen Capital Advice SA
("WCA") to sell its interest in the Mpokoto gold project for total
potential consideration of US$562,500 plus future royalty
provisions.
At the date of approval of these financial statements the
potential sale has not become subject to unconditional agreement,
but the directors have determined that the project should be sold
and that, accordingly, should the sale to WCA not be concluded, an
alternative buyer will be sought.
Comparison of the carrying value of the assets relating to the
Mpokoto gold project with the potential selling price indicates
that an impairment in the value of those assets has occurred and,
accordingly, an impairment has been recognised by reference to the
potential selling price taking account only of those elements of
the selling price that would be receivable regardless of the future
outcome of the project, on the grounds that the future outcome is
uncertain such that the value of the contingent consideration is
estimated at nil.
The resulting assets and liabilities are as follows:
2017 2016
GBP GBP
Assets held for sale
Exploration and evaluation assets 320,902 -
Cash 1,510 -
322,412 -
Liabilities held for sale
Provision 128,011 -
In the statement of comprehensive income the following loss has
been recognised:
2017 2016
GBP GBP
Loss from discontinued operations
Impairment charge (PPE) 12 13,206 -
Impairment charge (E&E asset) 11 5,713,239 -
Other expenses 29,537 151,947
5,917,411 151,947
Basic and diluted loss per share 2.39 0.1
from discontinuingoperations
An impairment loss of GBP13,206 has been recognised in the
comprehensive statement of income in order to impair the carrying
value of the Groups PPE to GBP0, as management are of the opinion
that the assets are obsolete.
Subsequently an impairment loss of GBP5,713,239 on the
measurement of the disposal group to fair value less cost to sell
has been recognised and is included in the statement of
comprehensive income as a discontinued operation, in line with IFRS
5, as the project represents a major line of business and a
geographical area of operation, see below.
The fair value measurement is based on the heads of agreement
and are categorised as a level 3 non-recurring fair value
measurement.
The calculation of loss per share from discontinued activities
is based on a loss of GBP5,917,411 (2016: GBP151,947), and on
239,228,310 ordinary shares (2016: 148,922,833), being the weighted
average number of shares in issue during the year.
The statement of cash flows includes the following amounts
relating to discontinued operations:
2017 2016
GBP GBP
Operating activities (4,347) (140,018)
Financing activities - (896,938)
Investing activities - -
Net cash from discontinued operations (4,347) (1,036,956)
16.Trade and other payables
Group 2017 2016
GBP GBP
Trade payables 54,697 144,366
Other creditors and accruals 78,922 350,367
133,619 494,733
Company
Trade payables 7,581 27,795
Other creditors and accruals 59,048 58,912
66,629 86,707
All trade and other payables are due within three months.
17.Loan notes (current)
Group and Company 2017 2016 2016
10% Notes 10% Notes 12% Notes
GBP GBP GBP
Balance 1 January 450,237 - 45,337
Issued - 450,000 -
Transfer to loan note reserve - (37,500) -
Accrued interest 48,184 20,096 906
Accretion of liability 19,859 17,641 -
Converted (86,874) - (46,243)
Balance 31 December 431,406 450,237 -
The 10% Loan Notes were issued on 11 July 2016 as part of the
consideration for the acquisition of Graphite Advancements Pty Ltd
(see note 13). The Loan Notes are unsecured, pay interest at 10%
per annum, and are convertible at the option of the company into
Ordinary Shares at 2p per Ordinary Share, together with any
interest owing. The Loan Notes convert 12 months from issue, or
earlier at the option of the Company, provided such conversion does
not result in the holders owning more than 29.9% of the issue share
capital of the Company.
On 11July 2017 the 2017 loan notes matured, 4,343,724 shares of
nominal value 0.1p were issued at a share price of 2p. All other
loan notes were extended by the holders for a period of 12
months.
The 12% loan notes were issued on 8 June 2015 to fund the
repayment of the convertible loan notes. The notes accrued interest
at 12 per cent per annum and were repayable six months from the
date of issue. The remaining notes together with accrued interest
were repaid in full on 29 February 2016 by conversion into Ordinary
Shares in the Company (see note 19).
18.Loan (non-current)
2017 2016
Group and Company GBP GBP
At 1 January - -
Advances in year 200,000 -
Accrued interest 2,630 -
202,630 -
The loan was advanced under the terms of a GBP400,000 facility
contracted on 11 October 2017. The loan bears interest at 10% per
annum and is payable by 11 October 2019. The balance of the
facility may be drawn by the company at any time in tranches of not
less than GBP50,000.
19.Share capital
Ordinary Shares Deferred Shares Deferred Shares
of 0.01p/0.1p each* of 0.14p each of 1.4p each
Number GBP Number GBP Number GBP
At 88,010,533 88,011 1,531,374,350 2,143,923 42,260,533 591,648
1 January
2016
Issue of
shares:
For cash 45,000,000 45,000 - - - -
In 57,500,000 57,500 - - - -
part
consideration
ofacquisition
of
subsidiary
On 1,541,434 1,541 - - - -
conversion
of
loan
notes
To 18,964,343 18,964 - - - -
settle
liabilities
At 211,016,310 211,016 1,531,374,350 2,143,923 42,260,533 591,648
31
December
2016
Issue of
shares:
For cash 26,030,000 26,030 - - - -
On 4,343,724 4,344 - - - -
conversion
of
loan
notes
To 3,250,000 3,250 - - - -
settle
liabilities
At 244,640,034 244,640 1,531,374,350 2,143,923 42,260,533 591,648
31
December
2017
*The nominal value of each Ordinary Share was 0.01p until the
consolidation and reorganisation of the share capital on 22 June
2015 and 0.1p thereafter
20.Share based payment arrangements
No options over Ordinary Shares in the Company were granted
during the year (2016, 3,000,000).
A summary of outstanding options is as follows:
Exerciseprice Held Granted Expired Held Expired Held
at at at
1January2016 1January2017 31December2017
Directors
PA Marks
Granted 15p 333,333 - (333,333) - - -
01.10.13
Granted 15p 333,333 - (333,333) - - -
19.11.14
JLG Lewis
Granted 15p 333,333 - (333,333) - - -
01.10.13
Granted 15p 666,667 - (666,667) - - -
19.11.14
W Frewen -
Granted 2p - 1,000,000 - 1,000,000 (1,000,000) -
21.07.16
Granted 4p - 1,000,000 1,000,000 (1,000,000) -
21.07.16
ES Mahede
Granted 2p - 250,000 - 250,000 - 250,000
10.08.16
Granted 4p - 250,000 - 250,000 - 250,000
10.08.16
N Johansen
Granted 2p - 250,000 - 250,000 - 250,000
16.10.16
Granted 4p - 250,000 - 250,000 - 250,000
16.10.16
Consultants
Granted 15p 266,667 - - 266,667 (200,000) 66,667
01.10.13
Granted 15p 400,000 - - 400,000 (100,000) 300,000
19.11.14
2,333,333 3,000,000 (1,666,666) 3,666,667 (2,300,000) 1,366,667*
The number of options and their exercise prices have been
adjusted for the effects of the share capital sub-division on 28
June 2013 and the share capital consolidation and reorganisation on
22 June 2015*representing 0.56% of the issued share capital of the
company
All of the outstanding options held at year end were exercisable
at a weighted average exercise price of 6p (2016:5p).
The Mahede and Johannsen options have a life of four years from
the date of grant. The consultant options have a life of 10 years.
All options are time based with no other conditions. The average
contractual life of options held is 74 months (2016: 87 months)
21.Reserves
A description of the nature of each Reserve and a summary of
movements are shown in the Statements of Changes in Equity on pages
29 and 30.
22.Related party transactions
In respect of the Company, amounts, net of provisions, due from
subsidiary undertakings were GBP972,544 (2016 - GBP3,358,091), the
movement being amounts lent to the subsidiaries.
23.Ultimate controlling party
There was no ultimate controlling party during the year.
24.Subsequent events
On 9 April 2018, the Company placed 58,393,941 Ordinary Shares
of 0.1p at a price of 1.65p to raise GBP963,500 before
expenses.
25.Notes to the group and company statement of cash flows
Long TermBorrowingsGBP
Loan Notes Total
GBP GBP
As at January 1, 2017 450,237 - 450,237
Cash flows from/(used in) - 200,000 200,000
financing activities
Non-cash flows
Interest charged 48,184 2,630 50,814
Unwinding 19,859 - 19,859
Conversion of loan notes (86,874) - (86,874)
As at December 31, 2017 431,406 202,630 634,036
**ENDS**
Enquiries:
Armadale Capital Plc +44 20 7236 1177
Tim Jones, Company Secretary
Nomad and broker: finnCap Ltd +44 20 7220 0500
Christopher Raggett / Simon Hicks
Joint Broker: SVS Securities +44 20 3700 0093
Tom Curran / Ben Tadd
Press Relations: St Brides Partners Ltd +44 20 7236 1177
Susie Geliher / Charlotte Page
View source version on businesswire.com:
https://www.businesswire.com/news/home/20180522006365/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
May 23, 2018 02:00 ET (06:00 GMT)
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