TIDMMTL
RNS Number : 5280L
Metals Exploration PLC
16 May 2022
16 May 2022
METALS EXPLORATION PLC
Final Results for the Year Ended 31 December 2021
Metals Exploration plc (AIM: MTL) (the " Company " or the "
Group "), a gold producer in the Philippines, announces its final
audited results for the year ended 31 December 2021.
The financial information set out in this announcement does not
comprise the Group's statutory accounts for the years ended 31
December 2021 or 31 December 2020. The financial information has
been extracted from the statutory accounts of the Group and the
Company for the years ended 31 December 2021 and 31 December 2020.
The auditors reported on those accounts; the 31 December 2021 and
31 December 2020 reports were unqualified and did not contain a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and did not contain
a statement under either Section 498 (2) or Section 498 (3) of the
Companies Act 2006. The statutory accounts for the year ended 31
December 2020 have been delivered to the Registrar of Companies,
whereas those for the year ended 31 December 2021 will be delivered
to the Registrar of Companies following the Company's annual
general meeting.
To access a full version of the 2021 annual report, please go to
the Company website investor centre webpage.
PRODUCTION AND FINANCIAL HIGHLIGHTS
FY2021 FY2020 % CHANGE
GOLD PRODUCTION (ounces)
73,206 ozs 67,552 ozs Up 8.4%
------------------------------- --------------------------
AVERAGE GOLD RECOVERY (%
of head grade)
------------------------------- --------------------------
84.5% 72.2% Up 17.0%
------------------------------- --------------------------
LOST TIME INJURIES
------------------------------- --------------------------
NIL NIL Nil - no lost
time injuries
------------------------------- --------------------------
SALES REVENUE (US$ MILLIONS)
------------------------------- --------------------------
$129.8 $122.1 Up 6.3%
------------------------------- --------------------------
OPERATING PROFIT (US$ MILLIONS)
------------------------------- --------------------------
$29.4 $30.5 Down 3.6%
------------------------------- --------------------------
PROFIT BEFORE TAX (US$ MILLIONS)
------------------------------- --------------------------
$11.3 $9.4 (as restated)* Up 19.8%
------------------------------- --------------------------
FREE CASH GENERATED FROM
OPERATIONS (US$ MILLIONS)
------------------------------- --------------------------
$46.5 $28.8 Up 61.5%
------------------------------- --------------------------
NET DEBT (US$ MILLIONS)
------------------------------- --------------------------
$98.9 $120.4 Down 17.9%
------------------------------- --------------------------
TOTAL DEBT REPAYMENTS (US$
MILLIONS)
------------------------------- --------------------------
$39.7 $12.0 Up 230.8%
------------------------------- --------------------------
TOTAL GOVERNMENT TAXES &
FEES (US$ MILLIONS)
------------------------------- --------------------------
$12.3 $10.5 Up 17.1%
------------------------------- --------------------------
TOTAL COMMUNITY PROGRAM
EXPITURE (US$ MILLIONS)
------------------------------- --------------------------
$1.9 $1.1 Up 72.7%
------------------------------- --------------------------
* Refer note 1 Accounting policies - Prior period adjustment
CHAIRMAN'S STATEMENT
Dear Shareholder,
I am delighted to present my Chairman's statement to
shareholders, on behalf of the board of directors of the Company
(the "Board"), for a year that has seen Metals Exploration continue
to make excellent progress and deliver record numbers in terms of
annual gold recovery, sale proceeds and gold poured for the year
ended 31 December 2021.
Safety, as always, remains the utmost priority to the Company,
and our record to date is an achievement that everyone at the
Company is very proud of. As at the date of this report, we have
recorded over 16 million hours worked without a reportable injury.
This really is an outstanding accomplishment and something that we
are not only delighted with but will continue to focus on. The
safety of our staff is not just limited to mining operations. Our
team and the communities they live in are at the heart of our
Company, and ensuring their wellbeing is vital for the continued
operations of the business. With this in mind, a key focus of our
safety and health operations has been the staff and contractor
COVID-19 vaccination programme. Again, we are incredibly proud
that, at present, over 93% of all staff and contractors have
received at least two vaccination doses.
Operationally, the period under review has seen continued
excellent progress with the changes implemented by the management
team bearing fruit, as can be seen by the record results delivered
for the year ended 31 December 2021. The Company made record gold
sales of 72,447 oz, equating to record gold sales proceeds of
US$130 million. This was achieved through record average gold
recovery rates of approximately 85% for the year, a steady increase
from the 2018 average of 58%. Additionally, a significant amount of
work was done to review and complete a detailed new mine design,
whilst at the plant, gold recovery is now consistently achieving
more than 80%, a testament to all the critical actions taken by the
team.
The accelerated repayment of the Company's debt has remained a
key focus. The Company has made significant progress in this area,
reducing our total debt by US$21.5 million during the period. As a
result, the Company expects its Senior Debt facility to be repaid
in full during Q4 2022. At such time, the Company's mezzanine debt
facility will revert to an interest rate of 7% per annum, down from
15% per annum. This will be a very considerable achievement, having
very significant positive ramifications for the future development
of the business, enabling the Company to utilise funds that would
have been earmarked for debt repayments for exploration and
appropriate M&A activities.
ESG (environment, social and governance) remains at the
forefront of what we do at Metals Exploration. We have a long track
record of operating in the Philippines, with over 98% of our
workforce being Filipino. Working with the local communities where
we operate, as mentioned above, remains a core part of our business
and strategy. We continue to prioritise the development of our
local community and have strong partnerships with the various
national agencies and local governments from Barangay to the
Provincial level. Our community programme remains focused on
health, education and infrastructure building, amongst others, and
we have adapted our programmes with further community support to
provide food and relief supplies to local communities/families
during the COVID-19 pandemic.
From an environmental standpoint, we continue to ensure that we
operate to the highest standards. We remain active in promoting
responsible mining practices to actively reduce the potential
environmental impacts of our operations and enhance the
environmental performance in mined-out and disturbed areas. We are
also responsible for planting over two million endemic and cash
crop trees and have received multiple Best Forestry Management
Program awards from the Philippine Government. As a Company and a
business, the continued driving thrust will always remain towards
the goal of sustainable development and reducing potential
significant impacts of the Runruno operations upon the
environment.
The Company remains well positioned and very focused on its
strategy, focusing on near term mine growth and exploration to
increase Runruno's life of mine beyond 2027. Why is this the focus?
This will enable the Company to generate greater cash flow and
provide a longer timeline to build the business.
On the exploration side, the Board believes there is exploration
upside at Runruno, both in and out of pit, to extend current mine
life. The Company to date has had very limited resources to
allocate to further exploration of the areas surrounding Runruno.
However, approvals have now been obtained to allocate funds to
exploration, and it is anticipated that our accelerated exploration
programme for 2022 will be a catalyst of resource growth.
The Company has significant technical expertise of operating in
the Philippines. This combined with our operational and
environmental track record and community relations building
excellent relationships with the appropriate agencies and offices,
leaves us very well positioned to look at appropriate in-country
M&A opportunities. These opportunities, the Board believes,
will create a larger and more structured business with multiple
mines, which will have the ability to deliver significant
shareholder value.
On behalf of the Board, I would like to take this opportunity to
thank our entire workforce for all their efforts this year as well
as all our stakeholders and investors for their continued
support.
The Company is well positioned for the year ahead, with the
accelerated repayment of our debt greatly strengthening our
financial position. We will aim to continue to improve the
operational performance at Runruno and now have an active
exploration programme, which we believe will lead to further
resource growth whilst also evaluating appropriate M&A
opportunities. This strategy and outlook we believe will build a
larger, better structured business which will be better equipped to
deliver further value to all our shareholders. We look forward to
providing further updates as we deliver this strategy.
David Cather
Independent Non-Executive Chairman
13 May 2022
BUSINESS REVIEW
GROUP VISION & MISSION STATEMENT
The Group's vision is to be the most admired gold producer in
the Philippines. Our mission is to enhance the lives of our people
and local communities through the responsible management of our
natural resources, and to deliver resource development and
performance that owners have confidence in and employees are proud
of.
Well-defined values embedded into the business processes and
structures along with consistent leadership actions and behaviors
provide the foundation for corporate culture and its subsequent
success. As a responsible mining company, we ensure that our
Company's core values reverberate across all aspects of our
business and represent the way we do business.
Evidence of adhering to these values is the excellent safety
record that the Group's employees and contractors have achieved. As
at the date of this report the Group has achieved in excess of 16
million man-hours with no lost time incidents occurring since the
last lost time incident in December 2016. This is a remarkable
achievement for an operation of this nature, and all employees and
contractors are to be congratulated on this outstanding record.
COVID-19 IMPACT
As at the date of this report, management has been dealing the
impact of COVID-19 and government imposed quarantine guidelines
upon its Runruno operations for approximately 24 months. During
this period, the Group has managed to limit the impact of COVID-19
on its personnel and operations such that it has continued mining
and processing operations enabling it to continue to sell/export
its gold doré.
The main impacts arising from the COVID-19 pandemic during 2021
have been disruption of on-site workforce activities due to on-site
cases of the virus, increased expenditure on new health and safety
measures and restrictions on the movement of people internationally
in/out of the Philippines.
During 2021, in-line with an increase in infections across the
Philippines, approximately 300 COVID-19 positive cases were
recorded on the Group's mine site. Effective quarantine
arrangements were, and continue to be, in place for positive case
infected personnel and their traced close contacts. Strict mine
site access protocols will continue for as long as necessary, to
ensure our staff's safety and well-being, and the on-going mine
operations. Actual mining and processing operations continued
notwithstanding the need for personnel to be quarantined following
these recorded positive cases. The COVID-19 cases detected and the
Group's responses have been reported to the appropriate government
agencies and the Group continues to be compliant with all relevant
government directives with regards COVID-19.
A vaccination program undertaken by the Group, in conjunction
with the local government health authorities, is continuing with
over 93% of employees and contractors double vaccinated as at the
date of this report. In addition, the Group provided various forms
of health, food, financial and logistical assistance to the local
community to assist them in dealing with the pandemic.
Social distancing measures and strict site access protocols will
continue in place at the Runruno mine to minimise the risk of
further COVID-19 outbreaks amongst the on-site personnel.
Notwithstanding the above, an increase in the number of COVID-19
cases amongst on-site personnel could put the continuity of future
mine operations at risk, at least for a temporary period.
Although the impacts of the COVID-19 pandemic continue, the
results of the Group's efforts over the last 12 months in
maintaining positive cash flow operations gives the Group reason to
believe that COVID-19 will not have a material negative impact on
the medium to long term future of the Group.
FINANCIAL YEAR 2021 ("FY2021") OVERVIEW
Notwithstanding ongoing COVID-19 pandemic impacts, for the third
successive year the project produced an operational profit.
Operational profit was US$29.4 million (2020: US$30.5 million) as
the Runruno mine's operational performance in FY2021 consolidated
upon positive improvements that first emerged during FY2019. Gold
production for FY2021 was 73,206 ounces (2020: 67,552 ounces) which
exceeded the Group's FY2021 production guidance of between 64,000
to 67,000 ounces. The increased gold production was achieved with
average gold recovery improving by 17% from 72.2% in FY2020 to
84.5% in FY2021. The All-In-Sustaining-Cost (AISC) for FY2021 was
US$1,281 per ounce (2020: US$1,259 per ounce), which was in line
with the FY2021 AISC guidance of approximately US1,275 per
ounce.
During FY2021 the gold price remained strong resulting in an
average sales price of US$1,792 per ounce (2020: US$1,782 per
ounce). Total sales for FY2021 were US$129.8 million, a 6.3%
increase over the FY2020 sales proceeds.
Management's operational focus during FY2021 (when not COVID-19
restrained) was on improving plant performance and operational
reliability. Mill throughput was maintained above nameplate design
levels, while numerous modifications to the BIOX(R) circuit
improved oxidation levels and the general performance of the
BIOX(R) circuit.
During FY2021 the cash generated from operations was US46.5
million (FY2020: US$28.8 million). This enabled the Group to
accelerate its senior loan repayments in accordance with the
October 2020 restructured debt repayment arrangements. The
restructured debt provides the Group with significant flexibility
in repaying its borrowings while providing certainty of its ongoing
financial stability.
Under the debt restructuring the Group no longer has an
obligation to meet any fixed principal and interest repayment
schedule. The Group's repayment obligation is now limited to making
a quarterly repayment of that amount which equals the available
working capital over and above a minimum US$5 million net working
capital buffer.
As at year end, the Group had total debt, including unpaid
interest, of US$103.6 million (2020: US$127.4 million). During
FY2021 repayments of senior debt interest/principal totaled US$39.7
million (2020: US$12 million); while a further US$12.0 million in
senior debt interest/principal repayments have been made since year
end to date.
Refer to note 23 of the financial statements for full details of
the Group's debt.
MINING OPERATIONS
Total material moved during FY2021 was slightly down on FY2020
at 10.8Mt (million tonnes) compared with 11.4Mt. Mining activity
was negatively impacted by reliability issues with the Company's
equipment fleet, longer than normal delays in sourcing certain
essential replacement parts and a Philippine government ban on the
usage and movement of explosives in Q1 2021.
Notwithstanding the continuing difficulties in accessing spare
parts, the purchase of three 100 tonne Komatsu 785 dump trucks
during 2020 resulted in lower mining equipment rental charges for
FY2021.
Mining operations during FY2021 were concentrated in Stages 1
and 2 with mining of Stage 1 completed in Q4 2021, allowing in-pit
backfilling to commence. Development of Stage 3 commenced during
FY2021 with a secondary access constructed to the out of pit dump,
optimizing the haul route for Stage 3 development material.
A major undertaking actioned during FY2021 was the peaceful
removal of the majority of illegal miners from the Stages 3 and 4
mine plan areas. This programme was largely completed by the
year-end however the responsibility for, and process of, removing
the remaining small number of illegal miners now rests with the
relevant government authorities.
Unfortunately, the Group's access to Stages 3 and 4 did not
occur as early as planned due to delays in removing the illegal
miners from these areas. Delays in accessing key areas of Stage 3
continued until access was achieved in early May 2022. These delays
in having suitable access to Stage 3 has affected the 2021 mining
schedule resulting in a reduction to the scheduled 2021 head grade,
with higher grade material from Stage 3 being pushed into the Q4
2022 section of the mining schedule.
Notwithstanding the above noted access issues, the Group has
commenced mining operations in, and continued its resource drilling
programme in, Stages 3 and 4. In addition a small exploration drill
programme in this area is underway to test for economic resources
outside of the current mine plan pit-shell.
A planned cut-back to the east pit wall was completed during
FY2021.
All relevant permits for operations remain in place for the
Runruno mine.
GOLD RESERVE STATEMENT
In February 2022 the Company issued a new gold reserve statement
as follows:
Table 1 - 2021 Ore Reserve estimate
Reserve Ore Gold
Category Mt g/t M Oz
------- ------- ------
Proved - - -
------- ------- ------
Probable 9.94 1.35 0.43
------- ------- ------
Total 9.94 1.35 0.43
------- ------- ------
Inferred resources included in LOM model pit
Inferred material 0.69 1.11 0.01
------- ------- ------
The 2021 Ore Reserve Statement is in line with a reconciled
depletion reserve based on the previously issued 2020 Ore Reserve
Statement, however with a slightly reduced overall gold grade. An
infill drilling campaign provided data from 49 new drill-holes.
Unfortunately drilling generally intercepted lower grades on the
Western extensions of the ore body, in line with actual mining
outcomes. This ongoing resource definition drill programme has
moved into Stages 3-5 in an effort to improve the Group's certainty
of gold resources and to improve its mine schedule planning.
PROCESS PLANT
Plant performance in FY2021 continued to show improvement in
gold recovery from both the flotation and BIOX(R) circuits. During
FY2021, the Group achieved an overall gold recovery from processing
operations of 84.5%, a significant improvement upon FY2020 which
was 72.2%. This represents a significant 46% improvement from the
FY2018 levels of gold recovery of only 57.9%. Importantly, the
average gold recovery for Q4 2021 was 89%, with average gold
recovery levels continuing above 80% into FY2022. Total gold
produced in FY2021 was 73,206 ounces compared to 67,552 ounces in
FY2020.
Unplanned process plant downtime impacting on production during
FY2021 included: tails line failures, SAG mill variable speed drive
failure, and repairs to BIOX(R) agitator gearboxes, conveyor belts,
crusher, return water lines and pumps .
Notwithstanding the above, the process plant crushed ore
operations were above design throughput with the following points
of note:
-- The crushing and grinding circuit operated above design
throughput, achieving an availability rate of 89.5% (2020: 90.6%)
and processing 2.14Mt of ore (2020: 2.06Mt);
-- The milling circuit operated adequately during FY2021 with
incremental throughput being achieved whilst maintaining production
at approximately 273t/hr (2020: 260t/hr). Unfortunately, a further
attempt to commission a SAG mill variable speed drive was
unsuccessful. No further attempts to install a SAG mill variable
speed drive will be undertaken;
-- The gravity circuit operated at close to design recoveries of 30%;
-- Fine-tuning of the flotation circuit improved its performance
ensuring incremental increases in recovery and improving
concentrate grade for BIOX(R). The circuit operated reliably with
only minor maintenance issues;
-- The CIL circuit achieved an overall CIL recovery of 90.8% (2020: 85.6%);
-- A major upgrade of electrical cable to the mill and BIOX(R)
resulted in a significantly more reliable power feed during the
year, with a large drop in unplanned downtime due to electrical
faults/power supply interruptions;
-- During Q4 2021, the fourth blower to the BIOX(R) circuit
became fully operational, improving the supply of air to (and hence
overall performance of) the BIOX(R) system. Further improvement in
BIOX(R) oxidation levels is anticipated once upgrades to the return
water circuit are completed which will provide greater control of
temperatures in the BIOX(R) system;
-- The ancillary systems including counter current decantation,
neutralisation , reagents, cyanide destruction and residue disposal
circuits are all operating adequately; and
-- The improved cash flows have enabled the Group to expand its
inventory of critical spares reducing the risk of lost production
from unplanned downtime.
RESIDUAL STORAGE IMPOUNDMENT (RSI)
The Group's tailings products are delivered to a residual
storage impoundment (RSI) structure. This structure has been
designed and is being constructed to international standards that
relate to water storage dams. The standard to which the RSI is
being constructed far exceeds international standards that apply to
traditional mining tailings dam structures.
Although the RSI construction was at a rate slightly slower than
budgeted, the RSI remains in compliance with local guidelines and
local development requirements, although it has not reached the
final design stage of being capable of successfully coping with a
'Probable Maximum Flood' event. Studies have determined the final
in-rock spillway location and design of this is well developed.
Construction of the final in-rock spillway is expected to commence
in Q1 2023. This final in-rock spillway will ensure the RSI has the
capacity to cope with a 'Probable Maximum Flood' event.
The performance of the RSI is continuously monitored by an
independent international consulting group. In addition, an
independent audit of the RSI design and its construction to date
has recently been completed. This report has listed certain
recommendations to improve the RSI compliance with relevant
international standards which the Group will consider and adopt
where appropriate.
COMMUNITY AND SOCIAL DEVELOPMENT
The Community Relations Department, the community interface arm
of the Group, maintains strong partnerships with various national
agencies and local governments from Barangay to Provincial level.
They are primarily engaged in managing the implementation of
identified and prioritised projects within the mandated Social
Development and Management Program and other programmes under them
as a component of the Group's commitment to its Corporate Social
Responsibility (CSR).
It is the Group's objective to benefit its host communities by
undertaking sustainable development within the community with
programmes focused in the following key areas:
-- Health;
-- Education;
-- Capacity building;
-- Community development and empowerment;
-- Enterprise development, improvement and networking;
-- Infrastructure development; and
-- Preservation and respect of socio-cultural values.
Total community programme expenditure for FY2021 was US$1.9
million, up from US$1.1 million in FY2020. The reach of the
programmes extends to assist the residents of the Barangay of
Runruno and surrounding Barangays, the Municipality of Quezon and
the Province of Nueva Vizcaya.
During the COVID-19 crisis these programs have been adapted,
with community support, to provide relief foods supplies, and other
general assistance, to local communities/families particularly
affected by the COVID-19 quarantine work restrictions.
Approximately US$180,000 in COVID-19 related donations were made by
the Group during the pandemic in FY2020 to neighbouring
communities.
The relocation of illegal miners operating on the back of the
existing operations in Stages 3 and 4 of the mine plan was a major
issue to be tackled for which the Group had significant community
support. As noted above, the Group continues to work closely with
the local government to ensure the smooth relocation of the small
number of people remaining in the mining areas. Agreed compensation
packages were paid to those families that relocated and to date
this undertaking has proceeded without incident.
SAFETY AND HEALTH
The COVID-19 pandemic during FY2021 provided many unique and new
challenges for the Group to manage. Following outbreak of the
pandemic, the Group invested heavily in implementing adequate
site-wide social distancing and site access protocols that were
successful in keeping the project site COVID-19 free until April
2021. Positive cases recorded from April 2021 had a limited impact
on operations and were dealt with in accordance with Philippine
Government regulations.
Otherwise, there were no material safety and health incidents
throughout the project site. A safe working culture is actively
promoted by a dedicated occupational health and safety department
and is embraced across the Runruno site and in all departments,
with all staff recognising their individual responsibilities for
their own safety and the safety of others. As noted above the
operation has achieved in excess of 16 million man-hours with no
lost time incidents.
ENVIRONMENT
The Group is active in promoting and implementing "responsible
mining" practices. It is a leader in the Philippine mining industry
in its environmental and environmental rehabilitation practices.
The Group recognises good environmental management as a key
parameter in its CSR charter. The Group maintains and promotes its
commitment to the effective stewardship, protection and enhancement
of the environment in and around the areas where it operates,
including the conduct of its business in an environmentally sound
manner. This is the driving thrust towards the goal of sustainable
development and reducing potential significant impacts of the
Runruno operations upon the environment.
REFORESTATION AND REHABILITATION
The Group has continued to actively reduce the potential
environmental impacts of its operations. It undertakes this
obligation through immediate and continuous rehabilitation
activities and by the re-greening of disturbed areas, establishment
of protection forests and the provision of habitat for wildlife
within the FTAA area. These programmes demonstrably improve the
environment within and surrounding the Group's operations and are
designed for beautification, stabilisation , to off-set green-house
gas emissions and the impacts of the Group's operations. Through
its various programmes, the Group has been responsible for planting
over 2 million endemic and cash crop trees.
A total of 8.81 hectares were rehabilitated during FY2021 (2020:
7.17 hectares) bring the total area rehabilitated since
commencement of mining to 35.62 hectares.
As a manifestation of our unwavering and exemplary commitment,
the Group has received awards from the Philippine government Best
Mining Forest Contest for five consecutive years (2017-2021).
GREENHOUSE GAS EMISSIONS DISCLOSURE
The Group recognises its social responsibility to minimise its
greenhouse gas emissions (GHG) as far as economically
practicable.
Regulations made under the UK Companies Act 2006 requires the
Group, to the extent practicable, to obtain relevant information on
the Group's annual quantity of GHG emissions, which is reported in
tonnes of carbon dioxide equivalent, and the Group's energy
consumption.
Scope 1 refers to direct GHG emissions from operations that are
owned or controlled by the Group, primarily emissions from fuel
consumed by haul trucks, other vehicles and stationary plant at the
Runruno project. These GHG emissions are regularly reported to the
Philippines mines department.
The calculation of GHG emissions is based on activity data, i.e.
monitoring of fuel consumption rates, fuel composition, etc
multiplied by industry produced conversion factors.
Scope 2 GHG emissions are indirect emissions from the generation
of purchased electricity consumed by operations that are owned or
controlled by the Group. Group Scope 2 emissions have been
calculated using the market-based method using Philippine
government recorded supplier-specific emission factors.
The Group's total carbon footprint (generated outside of the UK)
for the last two financial years were measured as follows:
2021 2020
CO(2) e Tonnes CO(2) e Tonnes
------------------- -----------------------
Scope 1 GHG emissions 24,823 36,353
Scope 2 GHG emissions 72,291 69,263
------------------- -----------------------
Operational GHG emissions Total 97,114 105,616
------------------- -----------------------
Total CO(2) e Total CO(2) e Tonnes
Tonnes per per
ounces gold sold ounces gold sold
------------------- -----------------------
Operational GHG Emissions Intensity 1.33 1.54
------------------- -----------------------
ENVIRONMENTAL MONITORING
The Group maintains very high compliance standards and employs
industry leading initiatives to ensure the highest environmental
performance. It regularly conducts its own internal comprehensive
environmental monitoring program to ensure compliance with its
licence provisions, Philippine Regulations and any appropriate
contemporary Standards. These programmes extend to reference sites
outside the immediate operational area and are used to provide
reference and base-line data for future use. The Government
programmes quarterly monitoring by an independent, community based
Multipartite Monitoring Team. The Group also engages an independent
third party consultant group specialising in environment monitoring
services to conduct independent monitoring of its environmental
performance.
LEGAL COMPLIANCE
High compliance standards are practiced across the Group. A
large site based team is dedicated to managing the high levels of
compliance mandated within the Philippines. The site is regularly
audited with upwards of sixty (60) audits, verifications or reviews
of its operations undertaken annually by the various regulators.
The wide range of permits to operate in the Philippines are secured
from more than a dozen Government agencies and regulators.
OUTLOOK
Notwithstanding potential impacts from the continuing COVID-19
pandemic, FY2022 operations should maintain the efficiencies that
have been developed over the past three years such that free cash
flow is maintained from a stable consistent level of mining and
gold production. However, gold production may be impacted in the
short term due to changes in the mine plan to cater for the land
access issues detailed above.
Efforts will continue in both in-pit shell and out-pit shell
drilling in an endeavor to add further resources to the Group's
gold inventory. The Group's positive operational cash-flows will,
in the main, continue to be utilised to reduce the Group's senior
loan facility as quickly as possible. It is expected that this
facility will be fully repaid during Q4 2022.
Further, the operational stability and positive cash flows will
allow the Group to investigate other mining opportunities with an
initial focus on Philippine projects.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group are
listed in the Directors' Report included within the full annual
report and accounts.
BOARD ENGAGEMENT WITH STAKEHOLDERS - SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires a Director of a
company to act in the way he or she considers, in good faith, and
would be most likely to promote the success of the company for the
benefit of its members as a whole. In doing this, section 172
requires a Director to have regard, among other matters, to: the
likely consequences of any decision in the long term; the interests
of the company's employees; the need to foster the company's
business relationships with suppliers, customers and others; the
impact of the company's operations on the community and the
environment; the desirability of the company maintaining a
reputation for high standards of business conduct; and the need to
act fairly with members of the company.
The Directors uses its Board meetings as a mechanism for giving
careful consideration to the factors set out above in discharging
their duties under section 172.
Stakeholder engagement
Key stakeholder groups we engage with are listed below, together
with an explanation of why we focus on them and how we engage
them.
Employees
The success of the Group is dependent upon the hard work and
dedication of all our employees. The Board ensures a continuing
investment in existing employees who are supported through
professional, technical and on-the-job training relevant to their
functional areas. The Board directs executives and senior managers
to keep staff informed of the progress and development of the Group
on a regular basis through formal and informal meetings and regular
communications. In addition, the Board ensures funds are provided
for regular events to encourage employee participation in local
community initiatives. The Board is conscious of its social
obligation to impart skills and knowledge onto local Philippine
employees. Accordingly over 98% of the Group's workforce is
Philippine. Workforce gender diversity policies are actively
followed with approximately 36% of the workforce being female.
Government Agencies & Local Communities
The Group operates in the highly regulated mining business in
the Philippines. The Board ensures the Company adopts a positive
focus on maintaining productive relations with local communities
and all levels of government. As a result the Chief Executive
Officer and senior managers regularly conduct consultations with
multi-levels of government agencies to ensure that all regulatory
approvals and permits remain in good order. Development of local
community improvement programmes are undertaken with consultation
of local government and community representatives.
Contractors & Suppliers
Our contractors and suppliers are key business partners, and the
quality of goods and services we receive are essential to
supporting operations and to provide the Group with the opportunity
to produce positive cash flows.
Improved relationships with our key contractors and suppliers
were evidenced during the early stages of the COVID-19 pandemic.
The support generated from key contractors and suppliers was
crucial in enabling the Group to continue to operate. As directed
by the Board, management collaborates and continually works with
our contractors and the full supply chain, sharing best practice
and seeking out synergies to improve performance.
Lenders
For the entire reporting period, the CEO and the CFO , on behalf
of the Board, were in regular contact with its lenders regarding
the Group's performance and to ensure expectations are properly
managed.
Customers
The Group's business in mining and selling gold doré means it
only deals with a small number of end customers, being refiners of
doré and/or gold concentrate . The Board ensures a close
relationship is maintained with senior personnel at each customer
group.
Investors
Investors are considered key stakeholders, and consequently
investor relations are a focus area for Directors. Where possible
the Board engages investors on Group performance following trading
updates and results announcements with face to face meetings and
scheduled calls.
Approved by the Board of Directors and signed on behalf of the
Board.
Darren Bowden, Chief Executive Officer
13 May 2022
Competent Persons' Statement
The information contained in this report that relates to the
2021 Gold Reserves Estimate was compiled by Paola Tuyor of Metals
Exploration and reviewed and verified by Grant Walker of Xenith
Consulting. Mr Walker is a Member of The Australasian Institute of
Mining and Metallurgy and is a Competent Person as defined by the
JORC Code, 2012 Edition, having five years' experience that is
relevant to the style of mineralisation and type of deposit
described in the Report.
Mr Darren Bowden, a director of the Company, a Member of the
Australasian Institute of Mining and Metallurgy and who has been
involved in the mining industry for more than 25 years, has
compiled, read and approved the technical disclosure in this
regulatory announcement in accordance with the AIM Rules - Note for
Mining and Oil & Gas Companies.
Forward Looking Statements
Certain statements relating to the estimated or expected future
production, operating results, cash flows and costs and financial
condition of Metals Exploration plc and the Group, planned work at
the Company's projects and the expected results of such work
contained herein are forward-looking statements which are based on
current expectations, estimates and projections about the potential
returns of the Group, industry and markets in which the Group
operates in, the Directors' beliefs and assumptions made by the
Directors . Forward-looking statements are statements that are not
historical facts and are generally, but not always, identified by
words such as the following: "expects", "plans", "anticipates",
"forecasts", "believes", "intends", "estimates", "projects",
"assumes", "potential" or variations of such words and similar
expressions. Forward-looking statements also include reference to
events or conditions that will, would, may, could or should occur.
Information concerning exploration results and mineral reserve and
resource estimates may also be deemed to be forward-looking
statements, as it constitutes a prediction of what might be found
to be present when a project is actually developed.
These statements are not guarantees of future performance or the
ability to identify and consummate investments and involve certain
risks, uncertainties and assumptions that are difficult to predict,
qualify or quantify. Among the factors that could cause actual
results or projections to differ materially include, without
limitation: uncertainties related to raising sufficient financing
to fund the planned work in a timely manner and on acceptable
terms; changes in planned work resulting from logistical, technical
or other factors; the possibility that results of work will not
fulfil projections/expectations and realise the perceived potential
of the Company's projects; uncertainties involved in the
interpretation of drilling results and other tests and the
estimation of gold reserves and resources; risk of accidents,
equipment breakdowns and labour disputes or other unanticipated
difficulties or interruptions; the possibility of environmental
issues at the Company's projects; the possibility of cost overruns
or unanticipated expenses in work programs; the need to obtain
permits and comply with environmental laws and regulations and
other government requirements; fluctuations in the price of gold
and other risks and uncertainties.
The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward looking
statements contained herein to reflect any change in the Group's
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are based
unless required to do so by applicable law or the AIM Rules
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2021
2021 Restated 2020
Notes US$ US$
Continuing Operations
Revenue 3 129,843,489 122,098,677
Cost of sales (91,977,555) (83,258,806)
------------- --------------
Gross profit 37,865,934 38,839,871
Administrative expenses (8,475,303) (8,377,651)
------------- --------------
Operating profit 4 29,390,631 30,462,220
------------- --------------
Impairment loss 8/13 (1,450,078) (2,328,414)
Loss on sale of assets (78,206) -
Net finance and other costs 8 (16,232,196) (18,703,012)
Provision for loss on derivatives 20 (332,996) -
Share based payment expense 26 (10,982) -
Share of profit of associates 15 18,232 2,625
Profit before tax 11,304,405 9,433,419
Tax expense 9/10 (11,769) (19,749)
------------- --------------
Profit for the period attributable to equity holders of the parent 11,292,636 9,413,670
============= ==============
Other comprehensive income :
Items that may be re-classified subsequently to profit or loss:
Exchange differences on translating foreign operations (791,929) 3,281,701
Items that will not be re-classified subsequently to profit or loss:
Re-measurement of pension liabilities 123,855 (28,655)
------------- --------------
Total comprehensive profit for the period attributable to equity holders
of the parent 10,624,562 12,666,716
============= ==============
Earnings per share:
Basic cents per share 11 0.55 0.45
Diluted cents per share 11 0.52 0.43
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2021
2021 Restated 2020 Restated 2019
Notes US$ US$ US$
Non-current assets
Property, plant and equipment 12 95,941,405 103,159,132 106,978,695
Other intangible assets 13 70,115 52,030 49,567
Investment in associate companies 15 182,265 164,033 161,408
Trade and other receivables 16 5,529,628 5,500,577 4,222,863
-------------- -------------- ---------------
101,723,413 108,875,772 111,412,533
-------------- -------------- ---------------
Current assets
Inventories 17 17,217,885 14,620,743 9,478,457
Trade and other receivables 19 5,968,568 11,807,274 3,609,595
Cash and cash equivalents 18 4,736,970 8,931,792 4,818,981
-------------- -------------- ---------------
27,923,423 35,359,809 17,907,033
-------------- -------------- ---------------
Non-current liabilities
Loans 23 (78,856,268) (98,150,386) (11,282,574)
Retirement benefits obligations 21 (1,950,535) (1,799,862) (973,000)
Deferred tax liabilities 10 (805,680) (808,757) (812,481)
Provision for mine rehabilitation 24 (4,015,050) (3,291,388) (2,880,092)
-------------- -------------- ---------------
(85,627,533) (104,050,393) (15,948,147)
-------------- -------------- ---------------
Current liabilities
Trade and other payables 22 (10,328,000) (12,032,486) (14,355,288)
Loans - current portion 23 (23,834,279) (29,264,218) (112,794,363)
Derivative liabilities 20 (332,996) - -
(34,495,275) (41,296,704) (127,149,651)
-------------- -------------- ---------------
Net assets/(liabilities) 9,524,028 (1,111,516) (13,778,232)
============== ============== ===============
Equity
Share capital 25 27,950,217 27,950,217 27,950,217
Share premium account 195,855,125 195,855,125 195,855,125
Acquisition of non-controlling interest reserve (5,107,515) (5,107,515) (5,107,515)
Translation reserve 14,668,476 15,460,405 12,178,704
Re-measurement reserve 162,003 38,148 66,803
Other reserves 26/27 1,537,919 1,526,937 1,526,937
Profit and loss account (225,542,197) (236,834,833) (246,248,503)
Equity attributable to equity holders of the
parent 9,524,028 (1,111,516) (13,778,232)
============== ============== ===============
The financial statements were approved by the Board of Directors
on 13 May 2022 and were signed on its behalf by:
Darren Bowden, Chief Executive Officer
13 May 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2021
Acquisition
of
Share non-controlling Profit
Share premium interest Translation Re-measurement Other and loss Total
capital account reserve reserve reserve reserves account equity
US$ US$ US$ US$ US$ US$ US$ US$
Restated
balance at 1
January 2021 27,950,217 195,855,125 (5,107,515) 15,460,405 38,148 1,526,937 (236,834,833) (1,111,516)
----------- ------------ ---------------- ------------ --------------- ------------ -------------- ------------
Exchange
differences on
translating
foreign
operations - - - (791,929) - - - (791,929)
Change in
pension
liability - - - - 123,855 - - 123,855
Profit for the
year - - - - - - 11,292,636 11,292,636
Share-based
payment - - - - - 10,982 - 10,982
----------- ------------ ---------------- ------------ --------------- ------------ -------------- ------------
Total
comprehensive
income/(loss)
for the year - - - (791,929) 123,855 10,982 11,292,636 10,635,544
Balance at 31
December
2021 27,950,217 195,855,125 (5,107,515) 14,668,476 162,003 1,537,919 (225,542,197) 9,524,028
----------- ------------ ---------------- ------------ --------------- ------------ -------------- ------------
Equity is the aggregate of the following:
-- Share capital; being the nominal value of shares issued
-- Share premium account; being the excess received over the
nominal value of shares issued less direct issue costs
-- Acquisition of non-controlling interest reserve; being the
amounts recognised on acquiring additional equity in a controlled
subsidiary
-- Translation reserve; being the foreign exchange differences
on the translation of foreign subsidiaries
-- Re-measurement reserve: being the cumulative actuarial gains
and losses, return on plan assets and changes in the effect of the
asset ceiling (excluding net interest on defined benefit liability)
recognised in other comprehensive income
-- Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities and share-based
payments expense
-- Profit and loss account; being the cumulative loss attributable to equity shareholders
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2020
Acquisition
of
Share non-controlling Profit
Share premium interest Translation Re-measurement Other and loss Total
capital account reserve reserve reserve reserves account equity
US$ US$ US$ US$ US$ US$ US$ US$
Restated
balance at 1
January 2020 27,950,217 195,855,125 (5,107,515) 12,178,704 66,803 1,526,937 (246,248,503) (13,778,232)
----------- ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Exchange
differences on
translating
foreign
operations - - - 3,281,701 - - - 3,281,701
Change in
pension
liability - - - - (28,655) - - (28,655)
Profit for the
year - - - - - - 9,413,670 9,413,670
----------- ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Total
comprehensive
income/(loss)
for the year - - - 3,281,701 (28,655) - 9,413,670 12,666,716
Restated
balance at 31
December 2020 27,950,217 195,855,125 (5,107,515) 15,460,405 38,148 1,526,937 (236,834,833) (1,111,516)
----------- ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Equity is the aggregate of the following:
-- Share capital; being the nominal value of shares issued
-- Share premium account; being the excess received over the
nominal value of shares issued less direct issue costs
-- Acquisition of non-controlling interest reserve; being the
amounts recognised on acquiring additional equity in a controlled
subsidiary
-- Translation reserve; being the foreign exchange differences
on the translation of foreign subsidiaries
-- Re-measurement reserve: being the cumulative actuarial gains
and losses, return on plan assets and changes in the effect of the
asset ceiling (excluding net interest on defined benefit liability)
recognised in other comprehensive income
-- Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities
-- Profit and loss account; being the cumulative loss attributable to equity shareholders
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2021
2021 Restated 2020
Notes US$ US$
Net cash generated from operating activities 28 46,515,768 28,809,449
------------- --------------
Investing activities
Exploration expenses incurred (338,203) (17,523)
Purchase of property, plant and equipment (11,542,751) (12,731,516)
Purchase of intangible assets (45,993) (58,920)
Proceeds from sale of plant and equipment 60,000 250,000
Net cash (used in) investing activities (11,866,947) (12,557,959)
------------- --------------
Financing activities
Repayment of borrowings 29 (39,675,000) (12,000,000)
Net cash (used in) financing activities (39,675,000) (12,000,000)
------------- --------------
Net (decrease)/increase in cash and cash equivalents (5,026,179) 4,251,490
Cash and cash equivalents at beginning of year 8,931,792 4,818,981
Foreign exchange difference 831,357 (138,679)
Cash and cash equivalents at end of year 4,736,970 8,931,792
============= ==============
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2021
2021 2020
Notes US$ US$
Non-current assets
Investment in subsidiaries 14 - -
-------------- --------------
Current assets
Trade and other receivables 19 88,729,224 65,045,652
Cash and cash equivalents 18 199,978 569,732
-------------- --------------
88,929,202 65,615,384
-------------- --------------
Non-current liabilities
Loans 23 (78,856,268) (67,596,759)
Trade and other payables (78,895) -
-------------- --------------
(78,935,163) (67,596,759)
-------------- --------------
Current liabilities
Loans 23 - -
Trade and other payables 22 (389,327) (362,682)
Derivative liabilities 20 (332,996) -
-------------- --------------
(722,323) (362,682)
Net assets/(liabilities) 9,271,716 (2,344,057)
============== ==============
Equity
Share capital 25 27,950,217 27,950,217
Share premium account 195,855,125 195,855,125
Translation reserve 971,346 1,305,125
Other reserves 26/27 1,537,919 1,526,937
Profit and loss account (217,042,891) (228,981,461)
-------------- --------------
Equity attributable to equity holders of the parent 9,271,716 (2,344,057)
============== ==============
The Company has taken advantage of the exemption provided under
section 408 of Companies Act 2006 not to publish an income
statement or a statement of total comprehensive income. The total
comprehensive income for the year ended 31 December 2021 dealt with
in the financial statements of the Company was US$11,938,570 (2020:
US$11,297,765).
The financial statements were approved by the Board of Directors
on 13 May 2022 and were signed on its behalf by:
Darren Bowden; Chief Executive Officer
13 May 2022
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARSED 31 DECEMBER 2021 & 31 DECEMBER 2020
Share capital Share premium Profit and Total equity
account Translation Other loss account
reserve reserves
US$ US$ US$ US$ US$ US$
Balance at1
January 2020 27,950,217 195,855,125 (940,976) 1,526,937 (240,279,226) (15,887,923)
Exchange
differences on
translating
foreign
currencies - - 2,246,101 - - 2,246,101
Profit for the
year - - - - 11,297,765 11,297,765
-------------- --------------- --------------- --------------- --------------- -------------
Total
comprehensive
income for the
year - - 2,246,101 - 11,297,765 13,543,866
-------------- --------------- --------------- --------------- --------------- -------------
Balance at 31
December 2020 27,950,217 195,855,125 1,305,125 1,526,937 (228,981,461) (2,344,057)
Exchange
differences on
translating
foreign
currencies - - (333,779) - - (333,779)
Profit for the
year - - - - 11,938,570 11,938,570
Share-based
payment - - - 10,982 - 10,982
-------------- --------------- --------------- --------------- --------------- -------------
Total
comprehensive
income for the
year - - (333,779) 10,982 11,938,570 11,615,773
-------------- --------------- --------------- --------------- --------------- -------------
Balance at 31
December 2021 27,950,217 195,855,125 971,346 1,537,919 (217,042,891) 9,271,716
============== =============== =============== =============== =============== =============
Equity is the aggregate of the following:
-- Share capital; being the nominal value of shares issued
-- Share premium account; being the excess received over the
nominal value of shares issued less direct issue costs
-- Translation reserve; being the foreign exchange differences
arising on the change of presentational currency and upon on the
translation of foreign currencies
-- Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities and the
share-based payments expense
-- Profit and loss account; being the cumulative loss attributable to equity shareholders
COMPANY CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2021
2021 2020
Notes US$ US$
Net cash (used in)/provided by operating activities 28 (364,719) 83,999
---------- ---------
Cash and cash equivalents at beginning of year 569,732 565,166
Foreign exchange difference (5,035) (79,433)
Cash and cash equivalents at end of year 199,978 569,732
========== =========
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2021
1. Accounting policies
The principal accounting policies are summarised below. Except
as elsewhere disclosed, the accounting policies have all been
applied consistently throughout the period covered by these
financial statements.
Basis of preparation
The financial information has been prepared on a historical cost
basis, except for derivative financial instruments, which are
measured at fair value, and i n accordance with UK-adopted
international accounting standards .
For the Group and its subsidiaries US Dollars is both the
functional and presentational currency. Although the Company's
functional currency is pounds sterling, it uses US Dollars as its
presentational currency, to better reflect the underlying
performance of that entity.
Restatement of effects of foreign exchange movements
The prior period consolidated statement of profit and loss,
consolidated financial position, consolidated statement of changes
in equity and related notes have been restated to correct past
treatment of foreign exchange movements in inter-group loans.
A review of the prior year treatment of the effect of foreign
currency movements upon inter-group loans determined that the Group
had been inconsistent in the application of its judgements as to
whether inter-group loans were to be treated as 'monetary assets'
or a 'net investment in subsidiaries'. In addition inconsistencies
were noted in the foreign exchange rates applied throughout the
consolidation process.
As a result, it was determined that the prior period allocation
of foreign exchange movements on inter-group loans between the
profit and loss and translation reserve required recasting as shown
below.
Consolidated statement of comprehensive income
As previously stated Restatement adjustment Restated balance
US$ US$ US$
Impairment loss (1,292,814) (1,035,600) (2,328,414)
Net finance and other costs (19,403,985) 700,973 (18,703,012)
--------------------- ----------------------- -----------------
Profit for the year 9,768,046 (334,627) 9,413,670
--------------------- ----------------------- -----------------
Other comprehensive income
Exchange differences on translating foreign
operations 2,947,074 334,627 3,281,701
Total comprehensive profit for the period
attributable to equity holders of the parent 12,666,716 - 12,666,716
===================== ======================= =================
Earnings per share - Basic cents per share 0.47 0.45
- Diluted cents
per share 0.46 0.43
Impact on statement of financial position
Translation Profit and loss
reserve account
US$ US$
Balance as originally stated at 1 January 2020 14,744,085 (248,813,884)
Restatement adjustment (2,565,381) 2,565,381
------------ ----------------
Balance as restated at 1 January 2020 12,178,704 (246,248,503)
Movements as originally stated 2,947,074 9,748,297
Restatement adjustment 334,627 (334,627)
------------ ----------------
Balance as restated at 31 December 2020 15,460,405 (236,834,833)
------------ ----------------
Going concern
The consolidated financial statements of the Group have been
prepared on a going concern basis, which contemplates the
continuity of business activities and the realisation of assets and
the settlement of liabilities in the normal course of business.
To date the Group has managed to limit the negative impact of
COVID-19 on its operations despite recording approximately 300
on-site positive cases of COVID-19 during FY2021 . The main impacts
to have arisen during 2021 from the COVID-19 crises were
maintaining on-site rosters while affected personnel were isolating
and the difficulty in moving personnel in/out of the Philippines.
Although the pandemic continues, COVID-19 related pressures are
being well managed. Indeed the Group's ability to keep the project
in a positive cash flow position since the commencement of the
pandemic gives reason to believe the impact of COVID-19 will not
affect the future going concern status of the Group.
Indeed, operational performance during 2021 consolidated on the
production improvements that first became evident during 2019 and,
notwithstanding COVID-19 impacts, produced a consolidated operating
profit of US$29.4 million. Since year end normal operations have
continued and positive free cash flows are expected to
continue.
Although the Group's current liabilities continue to exceed its
current assets, primarily due to the estimated external borrowings
the Group expects to repay within the next 12 months, there is no
obligation to adhere to a set loan principal or interest repayment
schedule. The Group's October 2020 debt restructure removed any set
principal or interest repayment schedule. Excess free cashflow is
only required to be paid to lenders on a minimum quarterly basis
when net working capital is in excess of US$5million. In addition,
the Group is not in default if it is unable to make a lender
quarterly repayment.
As a result of this debt restructure, and the ongoing existence
of a US$5million positive net working capital balance, together
with the sustained positive cash flows currently being produced
(and expected to be produced in the future) by the Runruno Project,
the Directors believe there is no material uncertainty over the
Group's going concern.
The Board believes that the Runruno Project will continue to
operate successfully and produce positive cash flows ensuring the
continuing viability of the Group, and the Company, and their
ability to operate as a going concern, meeting their commitments as
and when they fall due.
As a result the Board considers it appropriate that the
financial statements should be prepared on a going concern
basis.
Changes in accounting policies and disclosures
The accounting policies and disclosures applied in the
preparation of these financial statements are consistent with the
accounting policies and disclosures applied in the preparation of
the prior period financial statements.
New standards and interpretations
The financial statements have been drawn up on the basis of
accounting standards, interpretations and amendments effective from
the beginning of the accounting period on 1 January 2021. The new
standards, interpretations and amendments effective from 1 January
2021 had no significant impact on the Group.
There are a number of international accounting standards,
amendments to standards, and interpretations which have been issued
that are effective in future accounting periods and which have not
been adopted early. None of these standards, amendments to
standards or interpretations are expected to have a significant
effect on the Group.
Basis of consolidation
The Group financial statements incorporate the financial
statements of the Company and its subsidiary undertakings for the
year ended 31 December 2021. A subsidiary is an entity controlled,
directly or indirectly, by the Group. Control exists when the Group
is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee.
The financial statements of the subsidiary companies have been
included in the Group's financial statements from the date of
acquisition when control was passed to the Group using the
acquisition method of accounting. The Group financial statements
include the results of the Company and its subsidiaries as if they
were a single reporting entity. On consolidation, intra-Group
transactions and balances are eliminated.
Foreign currency
Transactions in currencies different to the company's functional
currency are recorded at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date, monetary
assets and liabilities that are denominated in foreign currencies
are retranslated at the rates prevailing on the balance sheet date.
Exchange gains and losses on the settlement of monetary items are
recognised in the statement of total comprehensive income .
On consolidation, the assets and liabilities are translated to
US Dollars at the rates prevailing at the balance sheet date.
Income and expenses are translated at the average exchange rates
for the period. Exchange differences are recognised within other
comprehensive income in the consolidated statement of total
comprehensive income .
Taxation and deferred tax
Current tax is based on the taxable profit for the period.
Taxable profit differs from net profit as reported in the statement
of total comprehensive income because it excludes items of income
or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates
that have been substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax base used in the computation of taxable
profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised only to the extent it is probable that future taxable
profits will be available against which deductible temporary
differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised. Deferred tax is charged or credited, as applicable, as a
taxation debit/credit to the statement of total comprehensive
income, except when it relates to items charged or credited
directly to other comprehensive income in which case, the deferred
tax is recognised in the other comprehensive income section within
the statement of total comprehensive income.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority, on either the same taxable
Group Company or different Group entities, which intend to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
Share based payments
The Company may enter into equity-settled share-based
transactions with its Directors, employees of its subsidiaries, its
contractors or its lenders in which the counterparty provides
services/goods to the Company in exchange for remuneration in the
form of certain equity instruments of the Company. The equity
instruments can comprise of shares, warrants and share options.
The services/goods received by the Company in these share-based
transactions are measured by reference to the fair value of the
equity instruments at the date of grant and are recognised as an
expense in the statement of total comprehensive income with a
corresponding increase other reserves in equity.
Inventories
Inventories of finished goods (bullion), gold in circuit and
stockpiles of processed ore are brought to account and stated at
the lower of costs and estimated net realisable value. Cost
comprises direct materials, direct labour and an appropriate
proportion of variable and fixed overhead expenditure, the latter
being allocated based on normal operating capacity. Costs are
assigned to ore stockpiles and gold in circuit items of inventory
based on weighted average costs. Net realisable value is the
estimated selling price in the ordinary course of business
(excluding derivatives) less the estimated costs of completion and
the estimated costs necessary to make the sale.
Consumables have been valued at cost less an appropriate
provision for obsolescence. Cost is determined on a
first-in-first-out basis.
Intangible assets
Exploration costs
Costs relating to the exploration of precious and base metal
properties are capitalised as intangible assets in the balance
sheet once the Group has obtained the legal right to explore an
area.
Capitalised exploration costs are reclassified to tangible
assets once technical feasibility and commercial viability of
extracting a mineral resource are demonstrable. The capitalised
exploration costs are tested for impairment annually.
Where exploration costs have been incurred and capitalised for a
specific tenement and the commercial and technical requirements to
demonstrate positive economic returns using approved mining
techniques has not been established, the Company recognises these
costs as an intangible asset and tests these costs annually for
impairment. These costs are considered fully impaired unless the
results of exploration indicate the presence of mineral resources
that have the potential to be defined as an inferred resource in
accordance with industry standards.
Other intangible assets
Intangible assets acquired separately are initially recognised
at cost. Intangible assets acquired as part of a business
combination are measured at their fair value at the date of
acquisition. Subsequently, intangible assets are carried at cost
less any accumulated amortisation and impairment losses.
Amortisation charges are recognised in cost of sales. Computer
software is amortised over its expected useful life of 3 years
using the straight-line method. Licences acquired to support mining
operations will be amortised over the expected useful life of the
mining operation (or the term of the licence if shorter) when
development is complete and mining commences. Intangible assets are
tested annually for impairment.
Property, plant and equipment
Property, plant and equipment are initially recognised at cost
plus directly attributable expenses and are subsequently carried at
cost less accumulated depreciation and impairment losses. Property,
plant and equipment are depreciated over their expected useful
lives, using the straight-line method.
The classes of depreciable assets, their expected useful lives
and their depreciation methods are:
Buildings & leasehold improvements 10 years Straight-line
Drilling equipment 5 years Straight-line
Motor vehicles 3-5 years Straight-line
Fixtures, fittings and equipment 3 years Straight-line
Process plant applying the units of production over the useful
life of the mine.
Residual Storage Impoundment applying the units of production
over the useful life of the mine.
Mining properties applying the units of production over the
useful life of the mine.
Mining properties costs have arisen entirely because of a
reclassification of the intangible assets deferred exploration
costs, advances to surface occupants, and mining licenses. As of 20
October 2011, the extraction of gold from the Runruno site was
assessed as being both technically feasible and commercially
viable. Further costs since this date have been capitalised
directly to mining properties.
Construction in progress tangible assets have been incurred
after 1 December 2011, the date the board of Directors announced
that the Group had moved into the capital construction phase of its
development. The costs were substantially incurred throughout 2012
to 2017.
Construction in progress costs are allocated to a property,
plant and equipment tangible asset category, once the relevant
asset has been assessed as being available for use as intended by
management. The costs will be treated as being reclassified and
will be depreciated according to the adopted method of the
appropriate asset category.
The right-of-use assets are recognised for all leases, except
for low value assets and/or short duration leases. These assets are
measured at cost, which is made up of the initial measurement of
the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the asset
at the end of the lease, and any lease payments made in advance of
the lease commencement date. The Group will depreciate the
right-of-use assets on a straight-line basis from the lease
commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term.
Investments
Investments in subsidiaries are recognised at cost less any
impairment losses in the Company accounts.
Equity accounting is applied to investments in associates on a
Group basis. Investments in associates are recognised at the cost
of investment as adjusted for post-acquisition changes in the
Group's share of net assets of the associate. Losses of an
associate in excess of the Group's interest in that associate are
recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the
associate.
Provision for mine rehabilitation and decommissioning
Provision is made for close down, restoration and environmental
rehabilitation costs (which include the dismantling and demolition
of infrastructure, removal of residual materials and remediation of
disturbed areas) at the end of the reporting period when the
related environmental disturbance occurs, based on the estimated
future costs using information available at the end of the
reporting period. The provision is discounted using a current
market-based pre-tax discount rate and the unwinding of the
discount is classified as net finance and other costs in the
statement of total comprehensive income. At the time of
establishing the provision, a corresponding asset is capitalised
and depreciated over future production from the operations to which
it relates.
The provision is reviewed on an annual basis for changes to
obligations or legislation or discount rates that affect change in
cost estimates or life of operations. The cost of the related asset
is adjusted for changes in the provision resulting from changes in
the estimated cash flows or discount rate, and the adjusted cost of
the asset is depreciated prospectively.
Where rehabilitation is conducted systematically over the life
of the operation, rather than at the time of closure, provision is
made for the estimated outstanding continuous rehabilitation work
at each end of the reporting period and the cost is charged to the
statement of total comprehensive income.
Revenue recognition
Gold sales
The Group is principally engaged in the business of producing
gold. Revenue is recognised when the Group transfers control of its
gold to a customer at the amount at which payment is expected.
Sales revenue represents the gross proceeds receivable from the
customer.
For gold sales, the enforceable contract is each purchase order,
which is an individual, short-term contract, while the performance
obligation is the delivery of the metals.
Recognition of sales revenue for the gold is based on determined
metal in concentrate and the London Bullion Market Association
(LBMA) quoted prices, net of smelting and related charges.
Revenue is recognized when control passes to the customer, which
occurs at a point in time when the metal concentrate is credited to
the buyer's account and provisionally paid by the buyer. Under the
terms of offtake agreements with the customer, the Company issues a
provisional invoice for the entire volume of concentrate loaded to
the customer's vessel. Final invoice is made thereafter upon
customer's outturn of concentrates delivered and submission of
their final assay report. Adjustment is accordingly made against
the final invoice with respect to provisional collections received
by the Company within two days to determine amounts still owing
from/to customers.
As the enforceable contract for the arrangements is the purchase
order, the transaction price is determined at the date of each sale
(i.e., for each separate contract) and, therefore, there is minimal
future variability within scope of IFRS 15 and no further remaining
performance obligations under those contracts.
Revenue from the sale of by-products such as silver is accounted
for as a credit to the cost of sales.
Financial instruments
Financial Assets
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value through other
comprehensive income and fair value through profit or loss.
Financial assets at amortized cost (debt instruments)
The Company measures financial assets at amortized cost if both
of the following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely for payments of
principal and interest on the principal amount outstanding.
Financial assets at amortized cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognized in the statement of
comprehensive income when the asset is derecognized, modified or
impaired.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as economic,
as appropriate.
All financial liabilities are recognized initially at fair value
and, in the case of loans and borrowings and other financial
liabilities, net of directly attributable transaction costs. The
Company's financial liabilities include payables, loans and
borrowings and derivative forward contracts.
Subsequent measurement
Payables
This category pertains to financial liabilities that are not
held for trading or not designated as at fair value through profit
or loss upon the inception of the liability. These include
liabilities arising from operations (e.g., accounts payable and
accrued liabilities).
Payables are recognised initially at fair value and are
subsequently carried at amortized cost, taking into account the
impact of applying the EIR method of amortization (or accretion)
for any related premium, discount and any directly attributable
transaction cost.
As at December 31, 2021 and 2020, the Company's payables include
trade and other payables.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortized cost using the EIR method.
Gains and losses are recognized in the profit or loss when the
liabilities are derecognized as well as through the EIR
amortization process.
Amortized cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortization is included as finance costs
in the statements of total comprehensive income.
Derecognition
A financial liability is derecognized when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the de-recognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognized in the statements of
total comprehensive income.
Derivative assets and liabilities
Derivative financial instruments (e.g. commodity derivatives
such as forwards and options to economically hedge exposure to
fluctuations in gold prices and foreign exchange rates) are
initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are carried as assets when
the fair value is positive and as liabilities when the fair value
is negative.
Derivatives are accounted for at fair value through profit or
loss, where any gains or losses arising from changes in fair value
on derivatives are taken directly to profit or loss for the year.
As at 31 December 2021, the derivative instruments held by the
Group were gold price put/call option contracts and USD:PHP
exchange rate forward contracts.
Both the Group and the Company have recognised derivative assets
and liabilities arising from the forward put/call option contracts
for gold sales and exchange rate forward contracts as at 31
December 2021.
Compound financial instruments
Compound financial instruments comprise both liability and
equity components. At issue date, the fair value of the liability
component is estimated by discounting its future cash flows at an
interest rate that would have been payable on a similar debt
instrument without any equity conversion option. The liability
component is accounted for as a financial liability. The difference
between the net issue proceeds and the liability component is the
equity component, and is accounted for as equity.
Any transaction costs associated with the issue of a compound
financial instrument are allocated in proportion to the equity and
liability components.
The interest expense on the liability component is calculated by
applying the effective interest rate for the liability component of
the instrument. The difference between the interest expense and the
interest payments made are included in the carrying amount of the
liability.
2. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with
generally accepted accounting practice requires management to make
estimates, assumptions and judgements that affect the application
of policies, and reported amounts of assets and liabilities as well
as the disclosure of contingent assets and liabilities at the
balance sheet date.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Actual results may differ from reported amounts in
the financial statements.
The key sources of estimation uncertainty and judgements which
have a significant risk of causing material adjustment to the
carrying amounts of assets and liabilities are:
Judgements
Impairment and impairment reversals of assets
The Group assesses at each reporting date whether there are any
indicators that its assets and cash generating units (CGUs) may be
impaired or require previous impairment provisions to be reversed.
Operating and economic assumptions which could affect the valuation
of assets using discounted cash flow models are regularly reviewed
and updated as part of the Group's monitoring of operational and
financial performance and forecasting processes. Judgement is
required in determining the level at which these assessments are
made, be that at the asset or cash generating unit level. Further
judgment of whether operating and economic changes are significant
and impact the performance potential of an asset or CGU is
required. These judgements determine whether there is an indication
of impairment or an impairment reversal required. Assets that have
previously been impaired must be assessed for indicators of both
further impairment and impairment reversal. Such assets are
recorded in the consolidated balance sheet at their recoverable
amount at the date of the last impairment assessment (less annual
depreciation/amortisation); therefore a change in operational
plans, assumptions or economic conditions could result in further
impairment or an impairment reversal if an indicator is
identified.
Treatment of foreign currency movement on inter-company debt
The Group accounting policy in relation to foreign currency is
consistent with, and governed by, the International Accounting
Standard IAS21 - The Effects of Changes in Foreign Exchange
Rates.
This standard considers treatment of currency movements on
inter-group loans and whether inter-group loans are to be
classified as a 'monetary asset' (with currency movements treated
within profit and loss), or as a part of the Company's net
investment in subsidiaries (with currency movements taken directly
to the foreign translation reserve). Under the standard, an
inter-group loan for which settlement is neither planned nor likely
to occur in the foreseeable future is, in substance a part of the
entity's net investment in subsidiaries.
The Group parent company has made significant advances to its
subsidiaries over an extended number of years; which for many years
there was no current/planned settlement expectation. These advances
are currently at call interest free loans. These balances have
historically been treated as investment in foreign operations (up
to an including within the current period), however, expectations
over the repayment of portions of the loans has changed (refer note
8(b)) and as such where loan repayments are to be expected in the
short term these portions will be moved out of the Net investment
in foreign operations allocation for the purposes of consolidation
accounting.
Judgement is therefore required to determine whether the
inter-company loans are treated as monetary assets, with currency
movements taken to profit and loss, or whether they are treated as
a portion of the Company's net investment in subsidiaries, with
currency movements taken directly to foreign translation reserve.
This judgement may change in from period to period for some, or
all, of the inter-company loan amounts.
Estimates
Current v Non-current borrowings
Under the Group's restructured debt arrangements there is no
fixed schedule of interest and principal repayments. Rather the
Group's repayment obligation is now limited to making a minimum
quarterly repayment of that amount which equals the available net
working capital (NWC) over and above a US$5 million NWC buffer. If
at the end of any quarter the NWC is less than US$5 million there
is no debt repayment obligation and there is no resultant event of
default if no repayment is made.
As a result the amount of debt principal that will be repaid
within 12 months from balance sheet date is not known with
certainty. Thus the amount of debt principal that is classified as
either a current liability (payable within 12 months), or a
non-current liability (payable after 12 months) needs to be
estimated.
In order to estimate the amount of debt principal that will be
repaid within the next 12 months the Group has taken into
consideration the following:
-- The level of debt repayments made during 2021; and
-- Forecast minimum debt repayment obligations based upon
predicted cash flows for the 2022 year after taking into
consideration:
Ø Current gold prices and industry consensus forecast gold
prices for the remainder of 2022;
Ø Current and forecast levels of gold recovery and gold
production; and
Ø Current and forecast operational and CAPEX costs (AISC).
The outcome of these considerations was to estimate that US$36
million in principal and interest payments will be made in FY2022
(2021: US39.7 million); of which it is estimated that US$24.57
million of Group debt principal owing as at 31 December 2021 is to
be settled (US$nil of Company debt principal owing as at 31
December 2021). Thus it was estimated that US24.57 million of Group
debt principal and no Company debt principal is considered a
current liability.
Impairment and impairment reversals of assets
An annual review is made of the carrying amount of an asset
which may not be recoverable, or has previously been subject to an
impairment charge. An asset's carrying value is written down, or
conversely written up, to its estimated recoverable amount (being
the higher of the fair value less costs to sell and value in use).
To determine value in use the Group reviews future operations using
the latest life of mine (LOM) model detailing future cash flows
that the Runruno operation is expected to produce. The key
assumptions for these value-in-use calculations are those regarding
risk discount rates, the price of gold, gold recovery levels, plant
availability levels, changes in the resource statements and
forecast changes in operational and CAPEX costs, the availability
of economic funding and the ability to renew its mining
permit(s).
The net present value of these expected future cash flows is
used to determine if an impairment, or impairment reversal, is
required.
The year ended 31 December 2021 review of the net present value
of expected future cash flows did not result in either an
impairment charge or an impairment charge reversal being raised
against its mining properties, plant and equipment.
Recovery of intercompany receivable accounts
Receivables due from group companies are assessed under the
expected credit losses model. In each case, the most appropriate
assessment is for the Company to consider the output from the
impairment tests and value-in-use calculations carried out in
respect of the Group's mining properties, plant and equipment
assets.
In both the years ended 31 December 2020 and 2021 the Company
booked a partial reversal of a 2018 year impairment made against
its loans receivable from its subsidiaries. These impairment
reversals recognise the improved trading outcomes of operating
subsidiaries such that it is estimated that the Company will
receive a larger than previously estimated recovery of loans made
to subsidiaries.
Refer to note 8 for detail on the impairment
reversal/charges.
Determination of mineral resources and ore reserves
The determination of mineral resources and ore reserves impacts
the accounting for asset carrying values, depreciation and
amortisation rates, deferred stripping costs and provisions for
pensions and for decommissioning and restoration.
There are numerous uncertainties inherent in estimating mineral
resources and ore reserves and assumptions that are valid at the
time of estimation may change significantly when new information
becomes available.
Changes in the forecast prices of commodities, exchange rates,
production costs or recovery rates may change the economic status
of reserves and may, ultimately, result in the reserves being
restated which may impact asset carrying values, depreciation and
amortisation rates, deferred stripping costs and relevant
provisions.
An updated estimation of mineral resources and ore reserves was
calculated and publicised in February 2022. This new statement of
mineral resources and ore reserves has been calculated and reported
in accordance with the Aus.IMM "Australian Code for reporting of
Identified Mineral Resources and Ore Reserves"; and was verified by
Xenith Consulting, who are competent persons as identified by the
Code.
Estimating gold-in-circuit and gold stockpile inventories
Gold-in-circuit is measured by the Company's metallurgists based
on the gold grade/recovery across different structures of the
process plant. Stockpiles are measured by estimating the number of
tonnes added and removed from the stockpile, the number of
contained concentrates in dry metric tonnes is based on assay data,
and the estimated recovery percentage is based on the expected
processing outcomes. Stockpile tonnages are verified by periodic
surveys. Refer to note 17.
Although regular assay data is collected and production
recoveries closely monitored these estimates that are valid at the
time of estimation may be significantly different to the final gold
recovered once processing of the inventories is completed.
Recovery of VAT and other duties
Non-current receivables include amounts the Group believe it is
entitled to recover from the Philippine government in respect of
past paid VAT, stamp duty and import duties. The Company's
Philippine operating subsidiary, FCF Minerals Corporation ("FCF"),
operates the Runruno mine in accordance with the terms of a
Financial and Technical Assistance Agreement ("FTAA") with the
Philippine government. Under the terms of the FTAA, FCF is exempt
from numerous taxes including corporate income tax, VAT, stamp duty
and import duty until July 2022. After July 2022 FCF is obligated
to pay the above taxes plus a government 'profit-share tax' such
that all government and business taxes equal at least 50% of the
net cash surplus (as defined in the FTAA) generated by the Runruno
mine.
Although the Group has been exempt from paying the above listed
taxes since entering into the FTAA, it has nonetheless for
operational reasons needed to outlay significant amounts in paying
these various taxes. FCF is pursuing reimbursement of these
payments through numerous court actions. Notwithstanding the terms
of the FTAA, FCF has yet to successfully recover any of these
amounts from the Philippine government.
In each year from 2018 to 2021 the Group has estimated that an
impairment charge should be raised against this non-current
receivable. Refer to note 16 for detail on the impairment
charges.
Provision for environmental rehabilitation and decommissioning
costs
The amount recognised as a provision represents management's
best estimate of the consideration required to complete the
necessary restoration and rehabilitation activity at the end of the
LOM. These estimates are inherently uncertain and could materially
change over time. There is judgement in the input assumptions used
in determining the estimated rehabilitation and decommissioning
provision. Inputs used that require estimating include:
-- closure costs, which are determined in accordance with regulatory requirements,
-- inflation rate, which has been adjusted for a long-term view,
-- risk-free rate, which is compounded annually and linked to the life-of-mine,
-- the rate at which the progressive back-fill rehabilitation is undertaken,
-- whether the final construction of the RSI facility is
completed during normal operations, and
-- life-of-mine and related Mineral Resources and Mineral Reserves.
Provision for Pensions
The Group makes provision for an unfunded, non-contributory
defined benefit retirement plan covering substantially all regular
employees who have rendered at least six months of continuous
service. Benefits are dependent on the years of service and the
respective employee's compensation. The valuation of the retirement
plan obligation is estimated using the projected unit credit
actuarial cost method, and calculated by an independent qualified
consulting group. The principal estimates used in determining the
defined benefit retirement plan obligations are listed in note
21.
3. Revenue
2021 2020
US$ US$
Sale of gold doré 129,171,321 120,098,576
Sale of gold concentrate 672,168 2,000,101
------------ ------------
129,843,489 122,098,677
------------ ------------
All gold doré sales are made to a single refinery customer with
95% of sales proceeds received within 3-5 days of the gold doré
having been shipped from the Runruno operation. The Group also
sells small amounts of gold concentrate to a second refiner, with
50% of sales proceeds received upon export, with the balance
received following further assaying and final processing.
4. Operating profit for the year is stated after charging:
2021 Restated 2020
US$ US$
Depreciation of property, plant and equipment (note 12) 19,341,675 16,925,778
Amortisation (note 13) 27,908 56,457
Foreign exchange losses 865,236 1,455,886
Staff costs (note 7) 10,692,885 11,561,960
Auditors remuneration (note 5) 196,523 216,751
=========== ==============
5. Auditor's remuneration
2021 2020
US$ US$
Fees payable to the Group and Company's auditor for the audit of the Group and Company's
accounts 134,573 156,871
Fees payable to the Company's auditor for other
services 6,876 6,432
Fees payable to the Company's auditor for taxation compliance services 55,074 53,448
--------
196,523 216,751
======== ========
6. Segmental analysis
Operating segments have been identified based on the Group's
internal reporting to the Chief Operating Decision Maker ('CODM')
and in particular the components of the Group which are regularly
reviewed by the CODM. The operating segments included in internal
reports are determined on the basis of their significance to the
Group. The CODM has been determined to be the Board of Directors as
it is primarily responsible for the allocation of resources to
segments and the assessment of performance of the segments. The
primary segments have been identified into three geographic areas
of the UK, Philippines and Singapore. The CODM uses 'profit/(loss)
before tax', 'cash & cash equivalents' and 'total liabilities'
as the key measures of the segments' results and these measures
reflect the segments' underlying performance for the period under
evaluation.
The segment results for the year ended 31 December 2021 and 2020
and the reconciliation of the segment measures to the respective
statutory items in the consolidated financial information are as
follows:
6. Segmental analysis (continued)
Year ended 31 December 2021 UK Philippines Singapore Total
US$ US$ US$ US$
Segment results
Sales revenue - 129,843,489 - 129,843,489
------------- ------------ ---------- -------------
Group operating (loss)/profit (4,742,240) 34,149,063 (16,192) 29,390,631
Other income & charges - (1,794,056) - (1,794,056)
Finance costs (12,321,582) (3,910,614) - (16,232,196)
Loss on sale of assets - (78,206) - (78,206)
Share of profits of associates - 18,232 - 18,232
(Loss)/profit before tax (17,063,822) 28,384,419 (16,192) 11,304,405
============= ============ ========== =============
Segment assets
Segment tangibles & intangibles - 96,011,520 - 96,011,520
Segment receivables & inventories 232,616 28,479,954 3,511 28,716,081
Segment cash 199,978 4,523,224 13,768 4,736,970
Equity-accounted investees - 182,265 - 182,265
Total segment assets 432,594 129,196,963 17,279 129,646,836
------------- ------------- --------- --------------
Segment liabilities
Segment loans (78,856,268) (23,834,279) - (102,690,547)
Segment trade & other payables (468,222) (11,797,471) (12,842) (12,278,535)
Segment provisions and retirement benefits obligations - (4,015,050) - (4,015,050)
Segment derivative liabilities (332,996) - - (332,996)
Segment deferred tax - (805,680) - (805,680)
Total segment liabilities (79,657,486) (40,452,480) (12,842) (120,122,808)
Total segment net (liabilities)/assets (79,224,892) 88,744,483 4,437 9,524,028
============= ============= ========= ==============
Segment other information
Amortisation of intangible
assets - (27,908) - (27,908)
Depreciation of property,
plant and equipment - (19,341,675) - (19,341,675)
Additions to property,
plant and equipment - 11,542,751 - 11,542,751
--- ------------- -------------
Segment net assets are analysed net of intercompany
transactions.
The results of each segment have been prepared using accounting
policies consistent with those of the Group as a whole.
6. Segmental analysis (continued)
Restated Year ended 31 December 2020 UK Philippines Singapore Total
US$ US$ US$ US$
Segment results
Sales revenue - 122,098,677 - 122,098,677
------------- ------------ ---------- -------------
Group operating (loss)/profit (4,944,095) 35,407,951 (1,636) 30,462,220
Other income & charges - (2,328,414) - (2,328,414)
Finance costs (11,721,801) (6,981,211) - (18,703,012)
Share of profits of associates - 2,625 - 2,625
(Loss)/profit before tax (16,665,896) 26,100,951 (1,636) 9,433,419
============= ============ ========== =============
Segment assets
Segment tangibles & intangibles - 103,211,162 - 103,211,162
Segment receivables & inventories 49,973 31,875,110 3,511 31,928,594
Segment cash 569,732 8,360,611 1,449 8,931,792
Equity-accounted investees - 164,033 - 164,033
Total segment assets 619,705 143,610,916 4,960 144,235,581
------------- ------------- -------- --------------
Segment liabilities
Segment loans (67,596,759) (59,817,845) - (127,414,604)
Segment trade & other payables (362,682) (11,175,565) (6,500) (11,544,747)
Segment provisions and retirement benefits obligations - (5,578,989) - (5,578,989)
Segment deferred tax - (808,757) - (808,757)
Total segment liabilities (67,959,441) (77,381,156) (6,500) (145,347,097)
Total segment net (liabilities)/assets (67,339,736) 66,229,760 (1,540) (1,111,516)
============= ============= ======== ==============
Segment other information
Amortisation of intangible
assets - (56,457) - (56,457)
Depreciation of property,
plant and equipment - (16,925,778) - (16,925,778)
Additions to property,
plant and equipment - 13,106,215 - 13,106,215
--- ------------- -------------
7. Staff numbers and costs - Group
2021 2020
The average number of persons, including Directors, was: Number Number
Administration 20 19
Development & operations 794 700
814 719
----------- -----------
2021 2020
Staff costs of the above persons were: US$ US$
Wages and salaries 9,940,820 9,641,894
Social security costs 425,658 356,549
Retirement and pension costs 326,407 1,563,517
10,692,885 11,561,960
=========== ===========
Directors' emoluments: 2021 Restated 2020
US$ US$
Directors
D Bowden(1) 1,377,773 1,320,000(2)
D Cather(1) 95,634 -
A Chubb 51,222 -
S Smith(3) 23,036 -
A Stancliffe(3) 45,729 30,873
G Walker(4) 123,980 98,406
J Wrathall 51,223 -
1,768,597 1,449,279
========== ==============
The Directors are considered to be the only members of key
management personnel. The Directors' Report - Directors'
remuneration section on page 21 includes details of the components
of Directors' emoluments and forms part of these financial
statements .
Relationship Agreements dated 23 October 2020 with MTL
Luxembourg Sarl and Runruno Holdings Limited detail the terms of
remuneration that each of these companies, and/or the respective
Director, receives for the supply of their representative
Directors.
(1) Includes consulting fees paid to private consulting
companies.
(2) Restated 2020 disclosure to include omitted the year-end
accrual of an unpaid bonus of US$360,000.
(3) Fees in relation to S Smith and A Stancliffe were paid to
their appointee, MTL Luxembourg Sarl.
(4) Fees in relation to G Walker were paid to his appointee,
Runruno Holdings Limited until 25 October 2021, however, as from 25
October 2021, director fees have been paid directly to G
Walker.
Share options held by Directors:
As at 31 December 2021, the following share options were
outstanding (2020: none):
7. Staff numbers and costs - Group (continued)
Date of grant Exercise price Expiry date Number of Options Number of Options
31 December 31 December
2021 2020
28 October GBP0.01* 28 October 19,800,000 -
2021 2024
--------------- ------------ ------------------ ------------------
*The exercise price of these options is defined as the nominal
value of the Company's ordinary shares. At the forthcoming June
2022 AGM, i t is proposed that the Company undertake a capital
reorganisation that includes a change in the nominal value of the
Company's ordinary shares from GBP0.01 to GBP0.0001. Should this
proposal be approved the exercise price of these options will
change from GBP0.01 to GBP0.0001. It is not proposed that the
change in nominal share value impacts the number of options on
issue or the option expiry date.
8. Other charges and income applied against profit and loss
8(a). Impairment charge and impairment reversal - Group
Property, plant and equipment (PPE)
Under IAS 36 - Impairment of Assets, each asset that forms a
cash generating unit (CGU) should be tested annually for
impairment. The Group considers that the entire Runruno project
(encompassing capitalised property, plant and equipment, mining
licence costs and deferred exploration expenditure) comprises a
single cash generating unit as all stages of the project are
interdependent in terms of generating cash flow and do not have the
capacity to generate separate and distinct cash flow streams.
Accordingly, the annual recoverable value assessment made in
accordance with IAS 36 is made on a whole of project basis.
The Group assesses the recoverable amount of the Runruno project
CGU based on the value in use of the Runruno operations using cash
flow projections over the remaining expected LOM and at appropriate
discount rates. Based on assumptions current as at 31 December 2021
the Group reviewed its recent operational performance and its
future expectations based on the current planned mining schedule to
estimate the recoverable amount the Runruno project could
deliver.
The recoverable amount estimates were based on the following key
assumptions and source information:
-- gold resources to be mined based on current estimated
reserves and resources and new remaining LOM mining schedule,
adjusted for forecast mine and grade dilution;
-- estimated average gold recoveries forecast to be achieved
over the remaining LOM based on average gold recoveries achieved to
date;
-- estimated ongoing capital expenditure required for the remaining LOM;
-- estimated operating and administration costs for the
remaining LOM including an inflation factor;
-- future gold revenues based upon industry consensus gold price
predictions as at December 2021;
-- future gold revenues calculated for the remaining LOM of 6 years; and
-- risk discount rates of 15.5% (2020: 15.5%).
For both the years ended December 2020 and 2021 the estimated
recoverable value of the Runruno project calculated in accordance
with IAS 36 approximated the current book value of the Group's
property, plant and equipment (PPE). Accordingly, there has been no
requirement to book either an impairment charge or an impairment
reversal in relation to the Group's PPE book values for either the
year ended December 2020 or 2021.
8(a). Impairment charge and impairment reversal - Group (continued)
Receivables due
Impairment charges have been raised against trade and other
receivables due, both within and after one year, in relation to
stamp duties, and VAT on importations and other goods and services.
Under the fiscal terms incorporated into the FTAA these taxes and
duties are recoverable, however, given the Group continues to have
little success in securing appropriate refunds of these taxes it
has paid annual impairment charges have been raised. (Refer note 16
- trade and other receivables due after one year; note 19 - trade
and other receivables due within one year). In addition an
impairment charge has been raised against advances made to
associates.
The total impairment charges raised against all receivables was
US1.5 million (2020: US$1.3 million).
8(b). Impairment charge and impairment reversal - Company
Receivables due
To a large extent the Runruno project has been funded by loans
from the parent Company and these together with the Company's
investment in its subsidiaries and associates is represented by the
value of the Runruno project cash generating unit. The 2018
estimate of the value of the Runruno project cash generating unit
resulted in these loans and investments being fully written
off.
Repayment of these loans and recovery of the investments is
dependent upon the Runruno project producing sufficient cash
surpluses. Subsequent reviews of what the future estimated cash
flows that the Runruno project may produce have estimated that the
Company's subsidiaries should produce positive cash flows over the
remaining life of the project, enabling it to partially repay past
parent company advances. Thus the Company estimates the expected
parent company loan repayments to be at least the year-end
subsidiary net asset balance. From a review of the subsidiaries net
assets as at 31 December 2021 it was estimated that at least US$88
million of these parent company advances could be repaid. As a
result, the Company has booked an impairment reversal of US$24
million in 2021 (2020: US$23 million) of receivables due from
subsidiaries (note 19 - trade and other receivables due within one
year).
8(c). Net finance costs and other income
2021 Restated 2020
US$ US$
Exchange gain/(loss) (897,870) (925,354)
Loan interest and fees (15,034,790) (17,033,574)
Warrant amortisation expense (299,536) (744,890)
Other bank interest/fees - 806
Finance costs and other income (16,232,196) (18,703,012)
============= ==============
9. Taxation
The taxation (benefit)/expense comprises
the following
2021 2020
US$ US$
Current year corporation tax expense 14,812 11,222
Current year deferred tax (benefit)/expense (3,043) 8,527
Total tax expense for the year 11,769 19,749
=========== ==========
The total tax expense for the year can be reconciled
to profit for the year as follows:
Restated
2021 2020
US$ US$
Profit before tax 11,304,405 9,433,419
----------- ----------
Tax on profit at UK corporation tax
rate of 19% (2020: 19%) 2,147,837 1,792,350
Effects of:
Income not taxable (1,442,986) (3,012,203)
Differing tax rates in different jurisdictions 1,558,992 2,182,370
Deferred tax asset not recognised 556,933 1,423,484
Non-taxable and non-allowable items (2,808,835) (2,365,825)
Short-term timing differences (172) (427)
Total taxation (benefit)/expense for
the year 11,769 19,749
============ ============
10. Deferred tax liability and asset
Tax Liability Tax Asset
2021 2020 2021 2020
US$ US$ US$ US$
Undepleted asset retirement obligation 583,572 579,457 - -
Capitalised expenses 131,638 157,964 - -
Other short term timing differences 90,470 71,336 - -
-------- -------- ----- -----
805,680 808,757 - -
-------- -------- ----- -----
The differences between the deferred tax expense through the
Consolidated Statement of Total Comprehensive Income and the
deferred tax liability on the Consolidated Balance Sheet has
occurred from translation differences arising on consolidation.
Liabilities are translated using the closing foreign exchange rate
prevailing at 31December 2021 whereas the foreign currency
composition of the statement of total comprehensive income is
translated using the average rate for the whole of the year.
Deferred tax asset
For the year ended 31 December 2021 the Group has net unused tax
losses of US$ 92.2 million (2020: US$80.6 million) available for
offset against future profits. However, due to the Group's on-going
tax loss situation, the current FTAA tax holiday and the profit
sharing terms of the FTAA, the deferred asset has not been
recognised on the Consolidated Balance Sheet due to uncertainty
over its future reversal.
10. Deferred tax credit, liability and asset (continued)
For the year ended 31 December 2021 the Group has net unused tax
losses available for offset against future profits as follows:
2021 Restated 2020
US$ US$
UK 59,762,889 48,206,449*
Philippines** 32,406,481 32,406,481**
Group unused tax losses available 92,169,370 80,612,930
=========== ==============
* The 2020 figure has been restated to match the losses carried
forward as per the Company's 2020 corporate income tax return.
** The 2020 figure incorrectly disclosed the income tax benefit
of Philippino carried forward tax losses. This figure has been
corrected to show actual tax losses available in the Philippines.
Further, these income tax losses expire in December 2023 and are
available to be offset against future Philippines sourced profits,
however, the Group may not benefit from them due to operation of
the government profit sharing provisions of the FTAA. Under the
terms of the FTAA, FCF is exempt from numerous taxes including
corporate income tax until July 2022. After July 2022 FCF is
obligated to pay corporate income tax (and other indirect taxes)
plus a government 'profit-share tax' such that all government and
business taxes equal at least 50% of the net cash surplus (as
defined in the FTAA) generated by the Runruno mine.
11. Earnings per share
2021 Restated 2020
US$ US$
Earnings
Net profit attributable to equity shareholders for the purpose of basic and diluted
earnings
per share 11.292,636 9,413,670
-------------- --------------
Number of shares
Weighted average number of ordinary shares for the purpose of
basic earnings per share 2,071,334,586 2,071,334,586
-------------- --------------
Number of dilutive shares under warrant/option 115,983,670 96,285,358
-------------- --------------
Weighted average number of ordinary shares for the purpose of
diluted earnings per share 2,187,318,256 2,167,619,944
-------------- --------------
Earnings per share
Basic earnings per share 0.55 0.45
-------------- --------------
Diluted earnings per share 0.52 0.43
-------------- --------------
The earnings per share was calculated on the basis of net profit
attributable to equity shareholders divided by the weighted average
number of ordinary shares.
12. Property, plant and equipment - Group
Office Drilling, Residual
furniture Buildings & mining & Construction Storage
Motor & leasehold milling in progress Process Impoundment Mining
vehicles equipment improvements equipment (CIP) plant (RSI) properties Total
US$ US$ US$ US$ US$ US$ US$ US$ US$
Cost
As at 1 January
2020 940,838 1,528,393 3,830,312 22,782,230 3,332,860 113,239,090 25,576,770 130,095,642 301,326,135
Additions 152,208 50,240 41,966 3,170,094 3,312,978 538,011 - 5,840,718 13,106,215
As at 31 December
2020 1,093,046 1,578,633 3,872,278 25,952,324 6,645,838 113,777,101 25,576,770 135,936,360 314,432,350
Additions 237,764 18,327 17,528 1,959,722 3,902,630 2,316,445 - 3,090,335 11,542,751
Change in mine
closure
obligation
estimate - - - - - - - 719,402 719,402
Re-classification - - 268,049 - (7,177,968) - 6,909,919 - -
Disposals - - - (251,673) - - - - (251,673)
As at 31 December
2021 1,330,810 1,596,960 4,157,855 27,660,373 3,370,500 116,093,546 32,486,689 139,746,097 326,442,830
---------- ---------- ------------- ----------- ------------- ------------- ------------ -------------- --------------
Impairment
As at 1 January
2020 - - - - - (34,738,122) - (115,261,878) (150,000,000)
Reversal (refer
note 8(a)) - - - - - - - - -
---------- ---------- ------------- ----------- ------------- ------------- ------------ -------------- --------------
31 December 2020 - - - - - (34,738,122) - (115,261,878) (150,000,000)
Reversal (refer
note 8(a)) - - - - - - - - -
As at 31 December
2021 - - - - - (34,738,122) - (115,261,878) (150,000,000)
---------- ---------- ------------- ----------- ------------- ------------- ------------ -------------- --------------
12. Property, plant and equipment - Group (continued)
Office Drilling, Residual
furniture Buildings & mining & Construction Storage
Motor & leasehold milling in progress Process Impoundment Mining
vehicles equipment improvements equipment (CIP) plant (RSI) properties Total
US$ US$ US$ US$ US$ US$ US$ US$ US$
Depreciation
As at 1
January 2020 (890,644) (1,497,435) (1,619,838) (9,962,341) - (14,989,611) (4,329,436) (11,058,135) (44,347,440)
Charge for
the period (34,566) (27,127) (397,339) (2,391,935) - (9,806,883) (3,268,820) (999,108) (16,925,778)
As at 31
December
2020 (925,210) (1,524,562) (2,017,177) (12,354,276) - (24,796,494) (7,598,256) (12,057,243) (61,273,218)
Charge for
the period (70,042) (34,642) (409,404) (3,314,666) - (9,869,725) (4,074,978) (1,568,219) (19,341,675)
Disposals - - - 113,468 - - - - 113,468
As at 31
December
2021 (995,252) (1,559,204) (2,426,581) (15,555,474) - (34,666,219) (11,673,234) (13,625,462) (80,501,425)
---------- ------------ ------------ ------------- ---------- ------------- ------------- ------------- -------------
Net book
value
As at 31
December
2021 335,358 37,757 1,731,274 12,104,898 3,370,499 46,689,205 20,813,455 10,858,757 95,941,405
========== ============ ============ ============= ========== ============= ============= ============= =============
As at 31
December
2020 167,836 54,071 1,855,101 13,598,048 6,645,838 54,242,485 17,978,514 8,617,239 103,159,132
========== ============ ============ ============= ========== ============= ============= ============= =============
Refer note 8(a) for impairment charge/reversal consideration of
these assets.
The Group's lenders hold fixed and floating security charges
over the Group's property, plant and equipment.
13. Other intangible assets
Group Exploration
expenses Software Total
US$ US$ US$
Cost
As at 1 January 2020 63,078 602,474 665,552
Additions 17,523 58,920 76,443
As at 31 December 2020 80,601 661,394 741,995
Additions 338,203 45,994 384,197
As at 31 December 2021 418,804 707,388 1,126,192
------------ ----------- ------------
Amortisation and impairment
As at 1 January 2020 (63,078) (552,907) (615,985)
Charge for the period - (56,457) (56,457)
Impairment charge for the period (17,523) - (17,523)
------------ ----------- ------------
As at 31 December 2020 (80,601) (609,364) (689,965)
Charge for the period - (27,908) (27,908)
Impairment charge for the period (338,203) - (338,203)
------------ ----------- ------------
As at 31 December 2021 (418,804) (637,272) (1,056,076)
------------ ----------- ------------
Net Book Value
As at 31 December 2021 - 70,115 70,115
============ =========== ============
As at 31 December 2020 - 52,030 52,030
============ =========== ============
Exploration costs incurred during 2020 and 2021 have been fully
impaired as exploration has not progressed to a point where it is
considered probable that an inferred resource can be
determined.
14. Investments in subsidiaries - Company
2021 2020
US$ US$
Cost 8,783,629 8,783,629
Impairment brought forward (8,783,629) (8,783,629)
- -
============ ============
The investments in subsidiaries are as follows:
Company Registered address Percentage holding Nature of business
Metals Exploration Pte 6 Temasek Boulevard, 100% Holding and investment company
#29-00 Suntec Tower Four
Singapore 038986
FCF Minerals Corporation Unit 1407, Pacific Star 100% FTAA licensee, holder of mining
Building rights and gold production
Sen. Gil Puyat Avenue cor.
Makati Avenue
Makati City 1200, Philippines
MTL Philippines Unit 1407, Pacific Star 100% To hold exploration rights
Building
Sen. Gil Puyat Avenue cor.
Makati Avenue Makati City 1227,
Philippines
Metals Exploration Pte Ltd is a direct subsidiary of Metals
Exploration plc, while FCF Minerals Corporation and MTL
Philippines, Inc. are direct subsidiaries of Metals Exploration Pte
Ltd.
Metals Exploration plc ROHQ established in the Philippines, is
an overseas branch of the Company and therefore its results are
reported together with the Company's.
The principal place of business of the subsidiary companies
listed above is the same as their country of registration.
15 Investments in associates - Group
2021 2020
US$ US$
At 1 January 2021 164,033 161,408
Share of profits of associates 18,232 2,625
At 31 December 2021 182,265 164,033
======== ========
Ownership of
P&L reserves ordinary shares
Associate Assets Liabilities at 31 Dec 2021 Sales Gains/(losses) on issue
company Domicile US$ US$ US$ US$ US$ %
Cupati
Holdings
Corporation Philippines 281,094 (52,628) 228,466 101,258 51,392 39.99%
Woggle
Corporation Philippines 102,108 (6,923) 95,185 - (5,811) 39.99%
The investments in associates are held indirectly by the Metals
Exploration Plc company through its investment in Metals
Exploration Pte.
16. Trade and other receivables due after one year - Group
2021 2020
US$ US$
Other receivables 5,529,628 5,500,577
5,529,628 5,500,577
========== ==========
Other receivables include VAT/import duties on importations and
other goods and services and stamp duties. Although until July 2022
the Group operates under an exemption from these paying taxes the
Group continues to have little success in advancing its legal
challenges to recover these past paid government imposts. A total
impairment charge of US$5.08 million has been recognised against
these receivables (2020: US$3.57 million).
17. Inventories - Group
2021 2020
US$ US$
Gold doré on hand 1,248,485 732,394
Gold in circuit 1,476,942 2,162,264
Gold in ore stockpiles 4,035,563 4,972,469
Consumable inventories 10,706,895 7,003,616
Provision for obsolete consumable inventories (250,000) (250,000)
------------- -------------
17,217,885 14,620,743
============= =============
Gold inventories are recorded at the lower of cost and net
realisable value.
During the year ended 31 December 2021, consumable inventories
recognised as an expense in cost of sales was US$24,618,137 (2020:
US$18,172,877).
18. Cash and cash equivalents
Group 2021 2020
US$ US$
Cash on hand 10,953 3,213
Current accounts 4,726,017 8,928,579
4,736,970 8,931,792
========== ==========
Company 2021 2020
US$ US$
Current accounts 199,978 569,732
199,978 569,732
======== ========
The Directors consider that the carrying amount of these assets
is a reasonable approximation of their fair value. The credit risk
on liquid funds is limited because the counter-parties are banks
with a high credit rating.
19. Trade and other receivables due within one year
Group 2021 2020
US$ US$
Receivables from gold sales 3,988,410 7,963,493
Other receivables 1,777,991 3,515,216
Prepayments 202,167 328,565
5,968,568 11,807,274
========== ===========
95% of receivables from gold doré sales are received within 3-5
days of the gold doré having been shipped from the Runruno
operation. The Group's trade receivables are derived through sales
of gold doré to a sole refinery customer whose credit quality is
assessed by considering the customers financial position, past
performance and other factors. During the financial period the
Group also sold small amounts of gold concentrate to a second
refiner. Terms of trade for these sales are 50% upon export with
the balance received following further assaying and final
processing. Within 5 days of year end, the Group had collected 95%
(2020: 95%) of the trade receivables outstanding as at 31 December
2021. The Group believes the credit risk is limited as the
customers pay within a short period of time and no provision for
impairment of receivables has been made (2020: Nil).
Company 2021 2020
US$ US$
Receivables from subsidiaries 88,496,608 64,995,679
Other receivables 120,716 1,749
Prepayments 111,900 48,224
88,729,224 65,045,652
=========== ===========
A provision for impairment of receivables from subsidiaries was
raised in 2018 using an expected credit loss model. The expected
credit loss was estimated on the basis that recovery of amounts
from the subsidiaries is uncertain. Subsequent reviews of the
receivables from subsidiaries resulted in an impairment reversal of
the 2018 impairment in FY2021 of US$24 million (2020: US$23 million
reversal). Refer to note 8(b).
20 Derivative liabilities
Gold option contracts
During FY2021 the Group entered into zero cost gold price collar
contracts over 9,000 ounces of gold production. The zero cost
collar contracts consisted of put options at US$1,600 per ounce, to
protect the Group from a significant drop in the gold price; offset
by sold call options at prices ranging from US$1,893 to US$1,905
per ounce. As at 31 December 2021, the Group had one outstanding
gold put option at US$1,600 offset by a sold call option at
US$1,905 over 3,000 ounces of gold production.
This gold price collar contract settled in January 2022 at no
profit or loss to the Group.
There were no gold option contracts in place as at 31 December
2020.
20. Derivative liabilities (continued)
Philippine Peso forward contracts
During FY2021 the Group entered into contracts totaling US$22
million for the forward purchase of Philippine Peso at an USD
exchange rate of 50PHP.
As at 31 December 2021 the Group has forward contracts to
purchase Philippine Peso at 50PHP totaling US$16 million. The Group
and the Company have recognised a current liability as at 31
December 2021 being the change in the fair value of the forward
contract value based on the same USD:PHP exchange rate.
There were no forward currency contracts in place as at 31
December 2020.
21. Retirement benefits obligations - Group
The Group has an unfunded, non-contributory defined benefit
retirement plan covering substantially all regular employees who
have rendered at least six months of continuous service. Benefits
are dependent on the years of service and the respective employee's
compensation. The valuation of the retirement plan obligation is
determined using the projected unit credit actuarial cost method.
There was no planned termination, curtailment or settlement in
either 2021 or 2020.
The relevant Philippine regulatory framework, RA 7641, known as
the 'Retirement Pay Law', requires a provision for retirement pay
to qualified private sector employees in the absence of any
retirement benefits under any collective bargaining and other
agreements being not less than those provided under the law.
In 2020 the retirement plan was adjusted based upon the
project's estimated remaining life of mine. As a result a
corresponding past service costs was recognised in that year. The
amounts of retirement benefits costs recognised in the statements
of comprehensive income are determined as follows:
2021 2020
US$ US$
Current service costs 329,818 187,225
Past service costs - 656,015
Interest costs 68,456 49,919
398,274 893,159
======== ========
The amounts were distributed as follows:
2021 2020
US$ US$
Cost of sales
Current service costs 201,493 181,608
Past service costs - 636,334
Interest costs 65,409 48,422
266,902 866,364
---------- ----------
Administration expenses
Current service costs 128,325 5,617
Past service costs - 19,681
Interest costs 3,047 1,497
131,372 26,795
---------- ----------
398,274 893,159
========== ==========
21. Retirement benefits obligations - Group (continued)
Changes in the present value of the unfunded retirement benefits
liability are determined as follows:
2021 2020
US$ US$
Balance at beginning of year 1,799,863 973,000
Current service costs 329,818 187,225
Past service costs - 656,015
Interest costs 68,456 49,919
Benefits paid (202,641) (107,233)
Actuarial loss (gain) due to:
Changes in financial assumptions (90,653) 125,838
Experience adjustments (33,202) (122,168)
Changes in demographic assumptions - 37,267
Balance at year end 1,871,641 1,799,863
=========== ==========
The principal assumptions used in determining the defined
benefit retirement plan obligations are as follows:
2021 2020
Discount rate 5.13% 3.94%-4.09%
Salary increase rate 2.00% 2.00%
Expected remaining working lives of
employees 4 years 4-11 years
14% at age 18 decreasing to 0% at 13% at age 18 decreasing to 0% at
Turnover rate age 60 age 60
2017 Philippine Intercompany 2017 Philippine Intercompany
Mortality rate Mortality Table Mortality Table
1952 Disability Study, Period 2, 1952 Disability Study, Period 2,
Disability rate Benefit 5 Benefit 5
The sensitivity analyses below has been determined based on
reasonably possible changes of each significant assumption on the
defined benefits retirement liability as at the end of the
reporting period, assuming all other assumptions were held
constant:
Increase/ 2021 2020
(decrease) US$ US$
Discount rates +1% 1,766,379 1,781,544
-1% 1,913,447 1,959,201
Salary pay increases +1% 1,924,515 1,969,651
---------- ----------
21. Retirement benefits obligations - Group (continued)
Shown below is the maturity analysis of the undiscounted benefit
payments:
2021 2020
US$ US$
Less than one year 67,293 98,896
More than one year to five years 3,675,966 378,213
More than five years to 10 years - 3,727,830
3,743,259 4,204,939
========== ==========
22. Trade and other payables due within one year
Group 2021 2020
US$ US$
Trade payables 4,071,263 5,596,124
Other payables 1,759,573 2,376,044
Other tax and social security payable 173,154 99,079
Accruals 4,324,010 3,961,239
10,328,000 12,032,486
=========== ===========
Company 2021 2020
US$ US$
Trade payables 265,323 138,023
Other tax and social security payable 1,434 50,089
Accruals 122,570 174,570
389,327 362,682
======== ========
Trade payables comprise amounts outstanding for trade purchases
and on-going costs, and together with other payables and accruals
are measured at amortised cost.
23. Loans
Group
In May 2014 the Group entered into a loan with two foreign
international resource banks for US$83,000,000 in project finance
(the "Facility Agreement"). In January 2020 the Facility Agreement
was acquired by companies associated with the Company's Mezzanine
Lenders (the "New Lenders").
In October 2020 the Group completed a debt restructuring with
the New Lenders, whereby the Group no longer has an obligation to
meet any fixed interest and principal repayment schedule (the "New
Senior Debt"). The Group's repayment obligation under the New
Senior Debt is now limited to making a quarterly repayment of that
amount which equals the available net working capital ("NWC") over
and above a minimum US$5 million NWC buffer. NWC is defined as the
Group's available cash on hand plus gold sales proceeds due, and
gold doré on hand or in transit, less all current liabilities
(including budgeted operational, CAPEX and exploration expenses,
taxes, hedging costs and government charges, but excluding all
unpaid debt principal and interest). During FY2021 the Group made
regular monthly repayments to pay down the New Senior Debt faster
than the minimum amount required under the restructured
arrangements.
The principal plus capitalised interest balance owing by the
Group under the Facility Agreement as at 31 December 2021 was
US$24,570,061 (2020: US$61,289,409).
Since 2015 the Company has entered into numerous facility
agreements with two major shareholders, MTL (Luxembourg) Sarl and
Runruno Holdings Limited (the "Mezzanine Lenders"). The purpose of
these unsecured advances was for general corporate and working
capital requirements of the Company and to enable completion of the
Runruno Project.
As at 31 December 2021 the Group's outstanding loan position
was:
2021 2020
US$ US$
Senior Lenders loans due within one year* 24,570,061 30,000,000
Mezzanine Lenders loans due within one year* - -
Less: Capitalised debt restructuring transaction costs** (735,782) (735,782)
----------- -----------
Total loans due within one year 23,834,279 29,264,218
=========== ===========
Senior Lenders loans due after one year* - 31,289,409
Mezzanine Lenders loans due after one year* 79,043,427 68,083,454
Less: Remaining value of warrants issued in conjunction with mezzanine loans (187,159) (486,695)
Less: Capitalised debt restructuring transaction costs** - (735,782)
----------- -----------
Total loans due after one year 78,856,268 98,150,386
=========== ===========
* Given the Group is not subject to a fixed repayment schedule,
in accordance with the new debt facilities, there is no certainty
to what amount of debt will be repaid within one year from balance
date. Thus the determination of what debt is deemed current and
what is deemed non-current is subject to estimation. In making this
calculation the Group has taken into account the Group's estimate
of what principal repayments will be made during the 2022 year.
Refer to Note 2 for further discussion of this estimation.
** Transaction costs incurred during 2020 in relation to the
October 2020 debt restructuring have been capitalised in accordance
with accounting standard IFRS9. The capitalised debt restructuring
transaction costs are being amortised to profit and loss over the
relevant expected debt repayment terms.
23. Loans (continued)
Company
In the period 2015-2018, the Company entered into numerous
facility agreements with its Mezzanine Lenders. The purpose of
these advances was for general corporate and working capital
requirements of the Company and to enable completion of the Runruno
project.
In October 2020 under the debt restructuring the various
original mezzanine facilities were consolidated into two new
facilities (the "New Mezzanine Facilities") and a GBP100,000
revolving credit facility. There is no obligation to make any
repayment of any amounts due under the New Mezzanine Facilities
until the New Senior Debt is fully repaid. The New Mezzanine
Facility interest rate will initially be 15% per annum, reducing to
7% per annum once the New Senior Debt has been fully repaid. This
is expected to occur in Q4 2022.
The principal and accrued interest/fees balance owing by the
Company to the Mezzanine Lenders as at 31 December 2021 was
US$79,043,427 (2020: US$68,083,454).
As at 31 December 2021 the mezzanine loan position was:
2021 2020
US$ US$
Mezzanine Lenders loans due within one year* - -
=========== ===========
Mezzanine Lenders loans due after one year* 79,043,427 68,083,454
Less: Remaining value of warrants issued in conjunction with loans (187,159) (486,695)
Total loans due after one year 78,856,268 67,596,759
=========== ===========
* Under the October 2020 debt structure no mezzanine debt is
payable until the full repayment of the New Senior Debt. Full
repayment of the New Senior Debt is expected to occur in Q4 2022.
Refer to Note 2 for discussion of the Company's estimate of what
principal repayments will be made during the 2022 year.
These Company loan liabilities are included in the Group loans
above.
24. Provision for mine rehabilitation and decommissioning
2021 2020
US$ US$
At 1 January 2021 3,291,388 2,880,092
Unwinding of discount and effect of change in estimate 723,662 411,296
At 31 December 2021 4,015,050 3,291,388
========== ==========
The Group makes provision for the future cost of rehabilitation
of the process plant on a discounted basis. Provision for mine
rehabilitation and decommissioning represents the present value of
future rehabilitation and decommissioning costs. These provisions
have been created based on the Group's internal estimates. These
estimated costs were reviewed in December 2021 and include labour,
equipment hire, consumables and transportation for disposal.
Assumptions, based on the current economic environment, have been
made which management believes are a reasonable basis upon which to
estimate the future liability. However, actual costs will
ultimately depend upon future market prices for the necessary works
required which will reflect market conditions at the relevant time.
Furthermore, the timing of the rehabilitation and expenditure of
other costs is likely to depend on when the mine ceases to produce
at economically viable rates, and the timing that the event for
which the other provisions provided for will occur.
25. Called up share capital
2021 2020
US$ US$
Allotted ordinary shares at 1 January 2021
(2,071,334,586 ordinary shares of GBP0.01 par value) 27,950,217 27,950,217
Allotted ordinary share at 31 December 2021
(2,071,334,586 ordinary shares of GBP0.01 par value) 27,950,217 27,950,217
=========== ===========
Share rights
Ordinary shares confer the right to vote and to participate in
dividends, capital, and other distributions including on winding
up. Ordinary shares are not redeemable.
26. Share-based payments
Share options
During the financial year the Company issued 19,800,000 options,
exercisable at nominal par value on or before 28 October 2024.
There were no share options on issue as at 31 December 2020.
2021
2021
Number of options Average weighted exercise price GBP
Options on issue at 1 January 2020 - -
Options issued 19,800,000 0.01
Options on issue at 31 December 2021 19,800,000 0.01
=================== =====================================
Options that have vested as at 31 December 2021 6,600,000 0.01
=================== =====================================
These options are subject to the following vesting
conditions:
-- Provided the option holder remains a director then, one third
vest upon issue, one third vest on the first anniversary of issue
and one third vest upon the second anniversary of issue; and
-- The options can only be exercised if the Company's 30 day
volume weighted average price of each Company share traded on AIM
exceeds GBP0.0215 during the life of the option.
The share based payment expense, based upon a fair value
measurement of the options, recognised in 2021 was US$10,982(2020:
Nil).
This fair value measurement of the share options issued in
October 2021 was GBP0.007 per option , based upon the
following:
-- A Black-Scholes option valuation model was adopted,
-- A share price at the date of option issue of GBP0.015,
-- An option exercise price of GBP0.01,
-- An estimated share volatility of 50%,
-- An option life of 3 years,
-- Nil dividends during the life of the options,
-- A risk free interest rate of 2%,
27. Compound financial instruments
Warrants
During the year ended 31 December 2017, two tranches of warrants
were issued by the Company in conjunction with securing a past
mezzanine funding package.
Tranche 1 Tranche 2
Exercise Price* GBP0.055 GBP0.070
================= =================
Expiry Date 31 December 2023 31 December 2023
================= =================
Number of warrants* 75,000,000 25,000,000
================= =================
The fair value of these warrants as at the date of issue was
independently calculated to be US$1,526,937 and has been brought to
account as an equity reserve. The unwinding of the fair value of
these warrants is charged through the statement of comprehensive
income. There were no warrants issued in 2021 or 2020.
* At the forthcoming AGM, it is proposed that the Company
undertake a capital reorganisation that includes a sub-division of
ordinary shares and a change in the nominal value of the Company's
ordinary shares from GBP0.01 to GBP0.0001. If approved, this
proposed capital reorganisation will have no impact upon the number
of warrants on issue, the warrant exercise prices or the warrant
expiry dates.
28. Net cash provided by/(used in) operating activities
Group 2021 Restated 2020
US$ US$
Profit before tax 11,304,405 9,433,419
Depreciation and amortisation 19,369,583 16,982,235
Provisions 735,529 929,756
Impairment charge 1,450,078 2,328,414
Share of profits of associates (18,232) (2,625)
Share based payment expense 10,982 -
Loss on disposal of asset 78,206 -
Interest paid classified as financing activity 2,422,070 667,926
Foreign exchange (gain)/loss (1,498,514) 1,465,886
(Increase)/decrease in receivables 4,286,820 (10,383,175)
(Increase) in inventories (2,597,142) (5,142,286)
Increase in payables 10,971,983 12,529,899
Net cash provided by operating activities 46,515,768 28,809,449
============ ==============
Company 2021 2020
US$ US$
Profit before tax 11,953,382 11,308,987
Impairment (reversal) (23,853,800) (22,987,091)
Provisions 332,996 -
Share based expense 10,982 -
Foreign exchange (gain) (16,001) (46,850)
(Increase)/decrease in receivables (97,371) 294,481
Increase in payables 11,305,093 11,514,472
Net cash used in operating activities (364,719) 83,999
============= =============
29. Reconciliation of liabilities from financing activities
1 January 2021 Non-cash movements 31 December 2021
Group Cash flow
US$ US$ US$ US$
Loans (current) 30,000,000 (39,675,000) 34,245,061 24,570,061
Loans (non-current) 99,372,863 - (20,329,436) 79,043,427
Non-cash deferred borrowing costs and warrant
discount (1,958,259) - 1,035,318 (922,941)
--------------- ------------- ------------------- -----------------
127,414,604 (39,675,000) 14,950,943 102,690,547
=============== ============= =================== =================
1 January 2021 Non-cash movements 31 December 2021
Company Cash flow
US$ US$ US$ US$
Loans (current) - - - -
Loans (non-current) 68,083,454 - 10,959,973 79,043,427
Non-cash deferred warrant discount (487,695) - 300,536 (187,159)
--------------- ------------ ------------------- -----------------
67,595,759 - 11,260,509 78,856,268
=============== ============ =================== =================
30. Capital commitments
As at 31 December 2021 the Group had US$nil outstanding capital
commitments (2020: US$nil).
31. Related party transactions
Only members of the Board of Directors of Metals Exploration plc
are deemed to be key management personnel. The Board has
responsibility for planning, controlling and directing the
activities of the Group. Key management compensation is disclosed
in note 7, Directors' emoluments section and note 26, Share-based
payments. At period end the following amounts were due in relation
to Directors' emoluments:
Amounts owing to Directors 2021 Restated 2020
US$ US$
D Bowden(1) 573,479 366,000(2)
D Cather(3) 2,811 -
G Walker 11,243 -
-------- --------------
Amounts owing to related parties
Runruno Holdings Limited(4) - 8,487
-------- --------------
- 8,487
-------- --------------
(1) Includes consulting fees due to private consulting company
and year-end performance bonus accruals.
(2) 2020 disclosure omitted the year-end accrual of an unpaid
bonus of US$360,000.
(3) Includes consulting fees due to private consulting
company.
(4) Excluding loan amounts disclosed in note 23.
Fees in relation to corporate broking and research services were
paid to Hannam & Partners, of which Non-Executive Director Mr A
Chubb is a partner. In the FY2021, the total fees paid to Hannam
& Partners, while Mr Chubb was a director, was US$35,000.
31. Related party transactions (continued)
During the year, the Company received funds from a subsidiary to
fund operations. At the year end, the Company had loans due by its
subsidiaries totaling US$253 million (2020: US$272 million). As at
31 December 2021 these loan amounts owed by subsidiaries were
impaired to a net recoverable amount of US$88 million (2020:
US$65million). (Refer note 8(b)).
At the year end, the Group owed US$78,895 (2020: US$92,500) to
its associates and the Group was owed US$2.29 million (2020:
US$3.07 million) from its associates.
32. Financial instruments
The Group's financial instruments comprise cash and cash
equivalents, borrowings, derivative gold price and currency
contracts, and items such as trade payables and trade receivables
which arise directly from its operations. The main purpose of these
financial instruments is to provide finance for the Group's
operations.
The carrying values of financial assets at the year-end are as
follows:
Trade and other receivables
Group Cash and cash equivalents
Total
US$ US$ US$
As at 31 December 2021 4,736,970 6,773,794 11,510,764
As at 31 December 2020 8,931,792 13,180,824 22,112,616
Company
As at 31 December 2021 199,978 88,608,508 88,808,486
As at 31 December 2020 569,732 65,054,691 65,624,423
Cash and cash equivalents and trade and other receivables are
held at amortised cost.
The carrying values of financial liabilities at the year-end are
as follows:
Accruals and other
Group Trade payables payables Derivative
liabilities Loans Total
US$ US$ US$ US$ US$
As at 31 December 2021 4,071,263 6,083,583 332,996 102,690,547 113,178,389
As at 31 December 2020 5,596,514 5,849,545 - 127,414,604 138,860,273
Company
As at 31 December 2021 265,323 122,570 332,996 78,856,268 79,577,157
As at 31 December 2020 138,023 174,570 - 67,596,759 67,909,352
Trade payables, accruals and other payables and loans are held
at amortised cost.
The Group's operations expose it to a variety of financial risks
including liquidity risk, foreign currency exchange rate risk,
commodity price risk and credit risk. The policies set by the Board
of Directors are implemented by the Group's finance departments and
senior management.
32. Financial instruments (continued)
Liquidity risk
The Group actively monitors its cash resources to ensure it has
sufficient available funds for operations and planned expansions.
The Group has been cash flow positive in both 2020 and 2021 and
surplus funds are being applied, in the main, to reduce the Group's
borrowings. The October 2020 debt restructuring provides the Group
with a greater degree of liquidity certainty due to the ability to
hold a minimum of US$5 million in net working capital without risk
of default under the Group lending facilities.
The contractual maturities of the financial liabilities at the
year-end are as follows:
Group Trade and other payables Derivative liabilities Loans* Total*
US$ US$ US$ US$
As at 31 December 2021
1 - 6 months 10,154,846 332,996 16,000,000 26,487,842
6 - 12 months - - 8,570,061 8,570,061
1 - 2 years - - 27,625,000 27,625,000
2 - 5 years - - 51,418,427 51,418,427
Total contractual cash flows 10,154,846 332,996 103,613,488 114,101,330
--------------------------- ------------------------- ------------ ------------
As at 31 December
2020 US$ US$ US$ US$
1 - 6 months 11,446,059 - 15,632,109 27,078,168
6 - 12 months - - 13,632,109 13,632,109
1 - 2 years - - 30,553,627 30,553,627
2 - 5 years - - 67,596,759 67,596,759
--------------------- --------------------- ------------------------- ------------
Total contractual
cash flows 11,446,059 - 127,414,604 138,860,663
--------------------- --------------------- ------------------------- ------------
Trade and other Derivative
Company payables liabilities Loans* Total*
US$ US$ US$ US$
As at 31 December
2021
1 - 6 months 387,893 332,996 - 720,889
6 - 12 months - - - -
1 - 2 years - - 27,625,000 27,625,000
2 - 5 years - - 51,418,427 51,418,427
--------------------- --------------------- ----------- ------------
Total contractual
cash flows 387,893 332,996 79,043,427 79,764,316
--------------------- --------------------- ----------- ------------ ------------
As at 31 December
2020
1 - 6 months 312,593 - - 312,593
6 - 12 months - - - -
1 - 2 years - - - -
2 - 5 years - - 67,596,759 67,596,759
--------------------- --------------------- ----------- ------------
Total contractual
cash flows 312,593 - 67,596,759 67,909,352
--------------------- --------------------- ----------- ------------
* The Group and Company's contractual future loan interest is
presently not capable of being calculated given the flexible debt
repayment arrangements. In addition the timing of future loan
principal repayments can only be estimated (Refer note 2 -
Accounting estimates).
32. Financial instruments (continued)
As at 31 December 2021, the average interest rate applicable to
the Group's outstanding loans was 13.1% (2020: 11.0%) and 15.0%
(2020: 15.0%) on the Company's outstanding loans.
Credit risk
Credit risk is the risk of financial loss to the Group or
Company if counterparty to a financial instrument fails to meet its
contractual obligations. The Group and Company are exposed to
credit risk attributable to its cash balances; however, this risk
is limited because the counterparties are large international
banks.
The Group is exposed to credit risk for trade receivables due
from third parties. This risk is limited because the counterparties
to the gold sales are internationally recognised substantial
organisations. Further, the Group receives significant payment for
the gold upon the presentation of transportation documents. B ased
on the above the Group considers the expected credit loss to be
immaterial and no provision for expected credit loss has been
required (2020: US$nil)
Other receivables include VAT on importations and other goods
and services paid by the Group, notwithstanding the Group is
exempt, under the terms of its FTAA, from these imposts until July
2022. An impairment charge has been raised on the basis that the
Group continues to have little success in advancing its legal
challenges to recover these receivables. As at 31 December 2021 an
impairment charge of $5.08 million has been recognised. All VAT
paid for the period up to 31 December 2019 has been impaired as at
31 December 2021 (2020: All VAT paid for the period up to 31
December 2018).
The Company is exposed to credit risk to the extent that amounts
owed by its subsidiaries and associates may not be recoverable in
the future. An impairment reversal has been raised in relation
amounts owed by its subsidiaries to partly reverse a 2018 expected
credit loss.
The maximum exposure to credit risk at the year-end is best
represented by the carrying amounts of trade and other receivables,
and cash and cash equivalents.
32. Financial instruments (continued)
Market risk and sensitivity analysis
Commodity price risk
The market price of gold is one of the most significant factors
in determining the profitability of the Group's operations. The
price of gold is subject to volatile price movements over short
periods of time and is affected by numerous industry and
macro-economic factors that are beyond the Group's control. In 2021
the gold price ranged from US$1,712 to US$2,007 per ounce, and the
Group received an average gold selling price of US$1,792 per ounce
(2020: US$1,782 per ounce).
The Group has adopted a policy to implement a gold price hedge
strategy over no more than 40% of annual production by entering
into zero cost gold price collars. Refer to note 20 for the Group's
December 2021 financial instruments with exposure to gold
prices.
The impact of a 10% increase/decrease in the Group's average
gold sale price achieved during the financial year would have
resulted in the Group's profit before tax being decreased/increased
by US$12,985,000 (2020: US$12,210,000). The impact is expressed on
the assumption that the market price changes by 10% with all other
variables held constant.
Interest rate risk
The Group has interest bearing assets comprising cash and cash
equivalents which earn interest at a variable rate. Interest income
is not material to the Group.
The Group has fixed interest bearing liabilities and the impact
on the reported profit for the year is an interest expense of
US$13,937,521 (2020: US$14,914,952).
Foreign currency exchange rate risk
The Group and Company are exposed to foreign currency exchange
rate risk having cashflows predominantly in US Dollars, Philippine
Pesos and Pounds Sterling. The Group monitors exchange rates
actively and converts funds raised to other currencies when deemed
appropriate in order to meet expected future foreign currency
commitments.
The Group's major currency risk is the USD:PHP exchange rate.
During 2021 the Group converted US$74.0 million into Philippine
Peso (2020: US$72.6 million). A 10% increase/decrease in the US
Dollar during the year, with all other variables held constant,
would have resulted in the profit before tax profit being US$6.7
million higher or US$8.2 million lower (2020: US$6.6 million higher
or US$8.1 million lower). Refer to note 20 for details of the
Group's hedging instruments to protect against currency risk.
As at 31 December 2021 the Group had Philippine Pesos
denominated assets and liabilities including cash of $584,000 and
current liabilities of $7,726,000 (2020: cash of US$1,485,000 and
current liabilities of US$9,843,000). The currency risk exposure
from these assets and liabilities is covered by the Philippine
currency forward contracts in place as at 31 December 2021 . Refer
to note 20 for details of the Group's hedging instruments to
protect against currency risk. There was no currency risk cover in
place as at 31 December 2020.
33. Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern to provide
returns for shareholders and maintain an optimal capital structure
to reduce the cost of capital.
The capital structure of the Group consists of net debt, which
includes borrowings (note 23), cash and cash equivalents (note 18)
and equity (note 25).
The Group is not subject to any externally imposed capital
requirements.
34. Contingent liabilities
The Group has no contingent liabilities identified as at 31
December 2021 (2020: US$nil).
35. Post balance sheet events
There has not been any matter or circumstance that has arisen
after balance date that has significantly affected, or may
significantly affect, the operations of the Group, the results of
those operations, or the state of affairs of the Group in future
financial periods, other than:
-- the Group has made interest and principal debt repayments of US$12.0 million.
36. Ultimate controlling parties
As part of the October 2020 debt restructuring, the Company
entered into a Revolving Credit Facility (RCF) under which the
Company is obligated to seek prior approval from both the mezzanine
lenders, MTL Luxemburg SARL (MTLL) and Runruno Holdings Limited
(RHL), for a number of operational matters. If these prior
approvals are not properly sought the RCF deems an 'event of
default' to have occurred. In this situation all outstanding debt
becomes due and payable, and MTLL and RHL become entitled to a
penalty/termination payment of GBP2 million each. The RCF operates
for 10 years after the full repayment of the existing Group debt
unless otherwise terminated by the Company by payment of the GBP2
million termination penalty to both MTLL and RHL. In March 2021,
RHL assigned its interests in both the senior facility and the
major mezzanine facility to D & A Holdings Limited (an
associated company controlled by the same entity).
Although the Company has no ultimate controlling party, as a
result of the above both MTLL and RHL are considered parties
holding significant influence. MTLL owns 46.8% of the Company,
while RHL holds 19.0% of the Company.
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FR ZZGMKZKLGZZM
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May 16, 2022 02:01 ET (06:01 GMT)
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