TIDMZIOC
RNS Number : 9204Q
Zanaga Iron Ore Company Ltd
01 July 2022
1 July 2022
Zanaga Iron Ore Company Audited Results for the Year to 31
December 2021
2021 Highlights and post reporting period end events to June
2022
-- Zanaga Iron Ore Project (the "Project" or the "Zanaga
Project") 30Mtpa staged development project (12Mtpa Stage One
("Stage One"), plus 18Mtpa Stage Two expansion ("Stage Two"))
o Initiative completed to update the cost estimates associated
with Stage One, as outlined in the 2014 Feasibility Study (the "FS
Review"), with results announced in May 2021
o External independent technical expert engineering firms
engaged by Jumelles Limited ("Jumelles"), the joint venture company
between ZIOC and Glencore, to oversee and provide input into the FS
Review
o Successfully ascertained potential capital and operating costs
associated with the construction of Stage One
o FS review indicated that capital and operating cost estimates
for Stage One remained approximately within the guidance levels
outlined in the 2014 Feasibility Study ("2014 FS")
-- Early Production Project ("EPP Project" or "EPP")
o Multiple production scenarios remain under investigation on
processing facilities and suitable logistics solutions, with a
particular focus on an export solution through the Republic of
Congo ("RoC")
o Increased engagement underway with other mining project
developers in RoC to explore potential collaboration opportunities,
especially in relation to logistics solutions and alternatives for
upgrades to existing infrastructure
-- Ore Reserve estimate re-statement
o The Zanaga Project's updated 2.1 billion tonne Ore Reserve
estimate, announced in May 2021, re-stated by SRK and updated based
on market pricing as of 31 December 2020, and remains based on the
30Mtpa Feasibility Study and 6.9 billion tonne Mineral Resource
-- Work programme and budget for 2022, and $1.2m Jumelles Ltd
working capital loan facilty, agreed with Glencore Projects Pty Ltd
("Glencore"), a subsidiary of Glencore plc
Corporate
-- Funding update - Shard Merchant Capital Ltd ("SMC") equity subscription agreement
o In 2021 SMC subscribed for 14 million shares of no par value
in ZIOC, as part of the 21 million ordinary share facility signed
in 2020
o Proceeds of GBP1,141,574.94 received to date, following
18,000,000 shares being placed by SMC, with a further 3,000,000
ordinary shares remaining to be placed
o Proceeds applied to general working capital, including the
provision of further contributions to the Zanaga Project's
operations
-- Cash balance of US$0.4m as at 31 December 2021 and a cash
balance of US$0.3m as at 29 June 2022
-- Outbreak of COVID-19 has not had a material impact upon the
Group although the continuing prevalence of the pandemic constrains
a number of commercial activities
Clifford Elphick, Non-Executive Chairman of ZIOC, commented:
" During 2021 i t was pleasing to conclude an updated costing
exercise, using independent technical experts to evaluate the Stage
One development costs. Furthermore, an update exercise was
undertaken to evaluate the Ore Reserve for the Project. This
resulted in the reconfirmation of the Zanaga Ore Reserve - which
remains one of the largest ore reserves globally.
The Zanaga Project Team have continued to progress key
initiatives at the Project. Significant work is underway to
evaluate options to move the Early Production Project forward in
collaboration with other projects in RoC.
The iron ore market has experienced continued strong demand from
China and is benefitting from sustained strong iron ore prices,
despite a recent pull back from previous highs. The Project Team
have been working for some time to evaluate potential avenues to
bringing the project into production, and continue to make every
effort to work with local stakeholders and partners in assessing
these options. We hope to report soon on the Project Team's
findings "
The Company will post its Annual Report and Accounts for the
year ended 31 December 2021 ("2021 Annual Report and Accounts") to
shareholders on approximately 9 July 2022.
The 2021 Annual Report and Accounts will be available on the
Company's website www.zanagairon.com today .
For further information, please contact:
Zanaga Iron Ore
Corporate Development and Andrew Trahar
Investor Relations Manager +44 20 7399 1105
Liberum Capital Limited
Nominated Adviser, Financial Scott Mathieson, Edward Thomas
Adviser and Corporate Broker +44 20 3100 2000
About us:
Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (AIM
ticker: ZIOC) is the owner of 50% less one share in the Zanaga Iron
Ore Project based in the Republic of Congo (Congo Brazzaville)
through its investment in its associate Jumelles Limited. The
Zanaga Iron Ore Project is one of the largest iron ore deposits in
Africa and has the potential to become a world-class iron ore
producer.
Chairman's Statement
Dear Shareholder,
In these challenging times globally, iron ore prices continue to
hold up and we continue to progress in-country activities of the
Zanaga Project Team ("P roject Team"). The efforts of Jumelles, the
joint venture between the Company and Glencore, have shown much
promise - particularly with regard to investigations of existing
logistics solutions in country and the ability to collaborate with
our neighbours to unlock the potential of Zanaga's vast
resource.
Iron Ore Market
The iron ore market has experienced continued strong demand from
China and is benefitting from sustained strong iron ore prices,
despite a recent pull back from previous highs. Product premiums
remain robust, as we had preiviously forecasted, and look set to
remain in place for high quality products similar to the Zanaga
Project's planned production.
30Mtpa Staged Development Project
Two key activities were completed by the Project Team in 2021 in
relation to the Stage One of the 30Mtpa Project.
1) FS review
The Project Team concluded an FS review process which involved
an updated costing exercise, using independent technical experts to
evaluate the Stage One Project development costs. This resulted in
confirmation that the Project's 2014 FS cost estimates remain
reliable in today's market environment.
2) Ore Reserve Statement Update
The Project Team completed a process to update the Ore Reserve
estimate. The Zanaga Project's 2.1 billion tonne Ore Reserve
estimate was re-stated by SRK and updated based on market pricing
as of 31 December 2020, and announced in May 2021.
EPP Project
The Project Team continue to undertake a process to evaluate the
potential development of an EPP Project that would be quicker to
construct than the larger 30Mtpa staged development project and
would utilise existing road, rail and port infrastructure. After
careful consideration the team have concluded that a solution
contained within the Republic of Congo would be best for the Zanaga
Project and hence have dedicated significant time recently to
developing a clearer cost estimate and optimised engineering
solution on this basis.
Engagement with other mining project developers in RoC has been
increased in order to explore potential collaboration
opportunities, especially in relation to logistics solutions and
alternatives for upgrades to existing infrastructure.
The Project Team continue to advance study work in an effort to
improve their understanding of the viability of the EPP Project.
The Project Team continue to evaluate the potential for the EPP
Project to operate as a standalone project, or as an initial
pathway to production during the construction period of the
flagship 30Mtpa Staged Development Project.
Cash Reserves and Project Funding
At 31 December 2021 the Company had cash reserves of US$0.4m. On
29 June 2022, Glencore and ZIOC have agreed a 2022 Project Work
Programme and Budget for the Project of up to US$1.3m plus US$0.1m
of discretionary spend. ZIOC has agreed to contribute towards this
work programme and budget an amount comprising US$0.09m; the
remaining budget amount will be funded via a loan facility provided
directly to Jumelles Ltd by Glencore thus requiring less funding by
ZIOC over the next 12 months compared to the historical levels
observed. On 29 June 2022, Glencore and the group signed a side
letter to the Jumelles loan facility confirming that there will be
no dilution of the group's holding in Jumelles as a result of this
change in funding structure.
The Company had cash reserves of US$0.3m as at 29 June 2022. In
order to raise additional funding the Company entered a
Subscription Agreement with SMC (as described above - see the
Company's release of 26 June 2020.) The financing structure with
SMC enables the Company to access funding for the costs that the
Company is expected to meet in the near future. Due to the fact
that SMC have 3,000,000 shares still to be placed into the market,
for illustrative purposes only, if the average price at which SMC
places the remaining 3,000,000 shares was 2.05 pence (being ZIOC's
mid-market closing share price on 27 June 2022), the net proceeds
received by ZIOC from such sales would be approximately GBP0.06m.
Based on the current cost base at the Zanaga Project, the direct
loan facility to Jumelles Ltd, the current low corporate overheads
of ZIOC, the agreed cash preservation plan adopted by the Company
(described on page 51 of the 2021 Annual Report ), the Company's
existing cash reserves and (on the basis of cautious assumptions
made by the Company in its funding model) the funds expected to be
obtained from the funding facility established by the Subscription
Agreement with SMC, the board of directors of ZIOC (the "Board")
believes that the Company will be adequately positioned to support
its operations going forward in the near future. As the final cash
amounts to be received for each tranche of issued shares, and the
timing of this receipt, are dependent on SMC successfully
selling
the shares prior to transferring funds to the Company, the Board
is of the view that the going concern basis of accounting is
appropriate. However, the Board acknowledges that there is a
material uncertainty which could give rise to significant doubt
over the Company's ability to continue as a going concern and,
therefore, that the Company may be unable to realise its assets and
discharge its liabilities in the normal course of business.
Nevertheless, based on and taking into account the foregoing
factors, the Board are satisfied the Company will have sufficient
funds to meet its own working capital requirements up to, and
beyond, twelve months from the approval of these accounts.
The Company continues to review the costs of its operational
activities with a view to conserving its cash resources. As part of
such ongoing review, and in order to preserve the cash position of
the Company, it has been agreed with the Directors (since January
2019) and Management (since September 2019) that fees are deferred.
Additionally, the Directors and management have indicated to the
Company that they will assist the cash preservation plan of the
Company. The way in which this could be achieved is being
progressed.
Subscription Agreement with Shard Merchant Capital Ltd
As previously announced, on 26 June 2020 ZIOC announced that the
Company had entered into a Subscription Agreement with SMC, a
financial services provider.
Under the Subscription Agreement, and over the course of 2020
and 2021, the Company issued and SMC subscribed for 21 million
ordinary shares of no par value in the Company ("Subscription
Shares") in three tranches of 7 million shares each (First tranche
in 2020 and the subsequent tranches in 2021).
As a result of such transactions, as at 24 June 2022 18,000,000
ordinary shares in the Company have been placed and the Company has
received the aggregate net sum of GBP1,141,574.94.
As at 24 June 2022, 3,000,000 ordinary shares in the Company
still remain to be placed by SMC. Pursuant to the Subscription
Agreement, SMC has undertaken to use its reasonable endeavours to
place the relevant Subscription Shares that it has subscribed for
and to pay to ZIOC 95% of the gross proceeds of any such sales.
The Subscription Agreement provides a number of attractive
advantages to ZIOC, which are highlighted below:
-- Relatively low level of dilution to ZIOC shareholders
-- ZIOC has the ability to repurchase any unsold Subscription
Shares from SMC, subject to legal requirements - an important
element of flexibility for ZIOC. Any Subscription Shares
re-purchased will be cancelled, limiting dilution further
-- Low cost of capital - SMC will retain only 5% of the gross
proceeds of any sale of Subscription Shares
The proceeds received by the Company from SMC pursuant to the
Subscription Agreement have been and will be applied to general
working capital, including the provision of further contributions
to the Zanaga Project's operations.
ZIOC is pleased that a financing structure is in place which has
given and continues to give the Company access to funding through a
relatively low cost structure which minimises dilution to
shareholders.
Outlook
Despite the significant challenges faced globally, the Project
Team have progressed numerous workstreams which continue to add
value to the options available for the development of the Zanaga
Project.
The investigations of opportunities to unlock existing
infrastructure solutions have been a key focus of the team and we
hope to provide an update on these intitiatives in due course.
Clifford Elphick
Non-Executive Chairman
Business Review
The Zanaga Project remains uniquely positioned as an attractive
tier one asset with multiple potential development options from a
scale perspective. China's strong demand for iron ore, coupled with
a lack of investment in the development of new iron ore mines in
the last few years, has led strong iron ore prices being maintained
in 2021.
The Project Team dedicated significant effort in 2021 to
securing updated development costs associated with the flagship
30Mtpa project. In addition, the EPP Project remains an area of
significant interest for the Project Team and work continues to
explore the potential to utilise existing logistics infrastructure
to enable initial production to take place, particularly through
collaboration and joint infrastructure intiaitives underway
investigation in RoC.
30Mtpa Staged Development Project
The Project Team's ultimate objective remains to develop the
flagship 30Mtpa staged development mining project. As a reminder,
the Stage One project plans to produce 12Mtpa of premium quality
66% Fe content iron ore pellet feed product at bottom quartile
operating costs for more than 30 years on a standalone basis.
The Stage Two expansion of 18Mtpa is nominally scheduled to suit
the project mine development, construction timing and forecast cash
flow generation, and would increase the Project's total production
capacity to 30Mtpa. The product grade would increase to an even
higher premium quality 67.5% Fe content due to the addition of
18Mtpa of 68.5% Fe content iron ore pellet feed production, at an
even lower operating cost. The capital expenditure for the
additional 18Mtpa production, including contingency, could
potentially be financed from the cash flows from the Stage One
phase.
12Mtpa Stage One project cost review
As previously announced, the Zanaga Project Team has continually
taken steps to monitor evolving improvements into its strategy for
assessing the options available for the development of the Zanaga
Project. The Project Team has maintained its view that high quality
products will continue to achieve significant price premiums in the
future and has sought to lock in this additional revenue benefit
into the Project's development plan.
As a result, Jumelles commissioned a report, led by Coffey
Geotechnics Ltd (a Tetra Tech Company ("Tetra Tech")) , to assess
the potential capital and operating costs associated with Stage One
of the 30mtpa staged development project outlined in the 2014
Feasibility Study ("2014 FS") . The review of the 2014 FS cost
estimates, announced in April 2021, indicated that capital and
operating costs associated with the Stage One 12Mtpa project were
broadly in line with the estimates provided in 2014.
The review indicated that the costs of the 12 Mtpa Stage One
Project were estimated to be between 2.5% above and 2.9% below the
estimate provided in the 2014 FS. Operating costs were expected to
be approximately in line with the estimate provided in 2014, with
an estimated variance of + or - 2%.
It was encouraging to see that the costs estimated for the
construction of the Zanaga Project remained in broad alignment with
the costs outlined in the 2014 FS, especially as iron ore prices
had risen substantially beyond the levels seen in 2014, and
continue to remain at elevated levels. It is important to recognise
that these numbers have not yet been re-estimated to a high level
of definition and are only estimates as to the potential costs of
bringing the project into production in the current market. In
order to better define these estimates the Project Team would
require further work to be conducted ahead of considering a full
re-estimate of the 2014 FS. Unfortunately inflation in 2022 of
construction and operating costs is now being experienced due to
the war in Ukraine and disruptions to global supply chains. This
will need to be monitored going forward and the Project Team have
been contiuously evaluation avenues to capitalise on the current
high iron ore prices despite the underlying challenges to costs of
operations globally.
The Project Team will continue to engage in activity to
ascertain opportunities for optimisation and improvement of the
30Mtpa staged development project and will update the market as
these improvements develop.
Reserves & Resource Statement
SRK Consulting (UK) Limited ("SRK") was appointed to provide
consent to the re-statement of Ore Reserves for the Zanaga Project.
The restatement exercise confirmed that the Ore Reserves reported
in April 2021 are reported in accordance with the terms and
definitions of the JORC Code and are restated to be so with an
effective date of 31 December 2020.
In rendering its opinion as expressed herein, SRK concluded:
-- That the 2014 Ore Reserves are reported in accordance with
the terms and definitions of the "The Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves published by the Joint Ore Reserves Committee of the
Australasian Institute of Mining and Metallurgy, Australian
Institute of Geoscientists and Minerals Council of Australia, as
amended (the "JORC Code (2012)"): www.jorc.org) ";
-- That the 2014 Ore Reserves remain valid as of 31 December 2021
EPP Project
The Project Team continue to undertake a process to evaluate the
potential development of an EPP Project that would be quicker to
construct than the larger 30Mtpa staged development project and
would utilise existing road, rail and port infrastructure. After
careful consideration the team have concluded that a solution
contained within the Republic of Congo would be best for the Zanaga
Project and hence have dedicated significant time recently to
developing a clearer cost estimate and optimised engineering
solution on this basis.
Engagement with other mining project developers in RoC has been
increased in order to explore potential collaboration
opportunities, especially in relation to logistics solutions and
alternatives for upgrades to existing infrastructure.
The Project Team continue to advance study work in an effort to
improve their understanding of the viability of the EPP Project.
The Project Team continue to evaluate the potential for the EPP
Project to operate as a standalone project, or as an initial
pathway to production during the construction period of the
flagship 30Mtpa Staged Development Project.
Next Steps
During H2 2022, the Project Team will continue to investigate
potential opportunities for smaller scale production utilising
existing infrastructure while continuing work on progressing the
30Mtpa project.
Financial Review
Results from operations
The financial statements contain the results for the Group's
eleventh full year of operations following its incorporation on 19
November 2009. The Group made a total comprehensive loss in the
year of US$1.9m (2020: total comprehensive loss US$1.8m). The total
comprehensive income for the year comprised:
2021 2020
US$000 US$000
-------------------------------------------------------------------------- ------- -------
General expenses (1,214) (1,074)
Net foreign exchange (loss) (12) (25)
Share of loss of associate (672) (724)
Loss before tax (1,898) (1,823)
Currency translation - 8
Share of other comprehensive (loss)/income of associate -foreign exchange (17) 3
-------------------------------------------------------------------------- ------- -------
Total comprehensive (loss) (1,915) (1,812)
-------------------------------------------------------------------------- ------- -------
General expenses of US$1.2m (2020: US$1.1m) consists of LTIP
US$0.5m (2020 US$0.7m) and US$0.7m (2020: US$0.4m) of other general
operating expenses.
The share of loss of associate reflected above relates to ZIOC's
investment in the Project, through Jumelles, which, generated a
loss of US$1.3m in the year to 31 December 2021 (2020: loss
US$1.3m). During the year Jumelles spent a net US$1.3m (2020
US$1.4m) on exploration, net of a currency translation loss of
US$0.34m (2020: loss US$0.17m).
Financial Position
ZIOC's Net Asset Value ("NAV") of US$37.7m (2020: US$37.6m)
comprises of US$37.3m (2020: US$37.4m) investment in Jumelles,
US$0.4m (2020: US$0.4m) of cash balances and US$0.08m (2020:
US$0.2m) of other net current assets.
2021 2020
US$000 US$000
--------------------------------- ------ ------
Investment in Associate 37,269 37,354
Cash 387 352
Net current assets/(liabilities) 80 (126)
--------------------------------- ------ ------
Net assets 37,736 37,580
--------------------------------- ------ ------
Cost of investment
The Investment in Associate relates to the carrying value of the
investment in Jumelles which as at 31 December 2021 continued to
own 100% of the Project. During 2021, under the existing 2021
Funding Agreement between the Company and Glencore, the Company
contributed a further US$0.6m (2020: US$0.6m). Though a long term
project, in the light of currently forecast market conditions, the
carrying value of the exploration asset continues to be held in
Jumelles at US$80m (2020: US$80m). The Company accounts for 50%
less one share of Jumelles.
As at 31 December 2021, Jumelles had aggregated assets of US$81m
(2020: US$81.4m) and aggregated liabilities of US$0.6m (2020:
US$0.8m). Assets consisted of US$80m (2020: US$80m) of capitalised
exploration assets, US$0.8m (2020: US$1.1m) of other fixed assets,
US$0.2m cash (2020: US$0.3m) and US$nil other assets (2020:
US$nil). Net of a currency translation loss of US$0.34 (2020: gain
US$0.17m) a net total of US$nil (2020: US$nil) of exploration costs
were capitalised during the year.
Subscription Agreement concluded with Shard Merchant Capital
Ltd
As outlined in the Chairman's Statement above, on 25 June 2020
ZIOC entered into a Subscription Agreement with SMC, a financial
services provider. Subsequent to the launch of the SMC transaction,
21 million shares in ZIOC have been issued to SMC. As at 24th June
2022 18,000,000 ordinary shares in the Company have been
subsequently placed by SMC and the Company has received the
aggregate net sum of GBP 1 ,141,574.94 .
As at 24th June 2022, 3,000,000 ordinary shares in the Company
still remain to be placed by SMC. Pursuant to the Subscription
Agreement, SMC has undertaken to use its reasonable endeavours to
place the relevant Subscription Shares that it has subscribed for
and to pay to ZIOC 95% of the gross proceeds of any such sales.
Cash flow
Cash balances increased by US$0.03m during 2021 (2020: decrease
of US$0.4m), net of interest income US$nil (2020: US$nil) and a
foreign exchange gain of US$0.02m (2020: loss of US$0.02m) on bank
balances held in UK Sterling. Additional investment in Jumelles
required under the 2021 Funding Agreement (outline details in Note
1 to the financial statements) utilised US$m (2020: US$0.6m) and
operating activities utilised US$4m (2020: US$0.4m). The Company
raised funds of US$1m from the Shard facility during the year.
Fundraising activities
The fundraising activities carried out in 2021 (2020: US$0.6)
were those relating to the SMC facility which are described earlier
in this announcement.
Reserves & Resource Statement
The Zanaga Project has defined a 6.9bn tonne Mineral Resource
and a 2.1bn tonne Ore Reserve, reported in accordance with the JORC
Code (2012), and defined from only 25km of the 47km strike length
of the orebody so far identified.
Ore Reserve Statement
The Ore Reserve estimate (announced by the Company on 5 May
2021) was prepared by independent consultants, SRK Consulting (UK)
Ltd ("SRK") and is based on the 30Mtpa Feasibility Study and the
6,900Mt Mineral Resource (announced by the Company on 8 May
2014).
As stipulated by the JORC Code, Proven and Probable Ore Reserves
are of sufficient quality to serve as the basis for a decision on
the development of the deposit. Based on the studies performed, the
mine plan as reported in the 2014 FS was reassessed in respect of
the updated sales revenue, operating expenditure and capital
expenditures and confirmed as at 31 December 2020 to be technically
feasible and economically viable.
Ore Reserve Category Tonnes (Mt(Dry) Fe (%) SiO(2) (%) Al(2) O(3) P (%)
) (%)
---------------------- --------------- ------ ---------- ---------- -----
Proved 774 37.3 35.1 4.7 0.04
---------------------- --------------- ------ ---------- ---------- -----
Probable 1, 296 31.8 44.7 2.3 0.05
---------------------- --------------- ------ ---------- ---------- -----
Total 2,070 33.9 41.1 3.2 0.05
---------------------- --------------- ------ ---------- ---------- -----
Notes:
Long term price assumptions are based on a CFR IODEX 65%Fe
forecast of US$90tdry (USc138/dmtu) with adjustments for quality,
deleterious elements, moisture and freight.
Discount Rate 10% applied on an ungeared 100% equity basis
Mining dilution ranging between 5% and 6%
Mining losses ranging between 1% and 5%
Note: The full Ore Reserve Statement is available on the
Company's website (www.zanagairon.com)
Mineral Resource
Classification Tonnes Fe (%) SiO(2) Al(2) P (%) Mn (%) LOI
(Mt) (%) O(3) (%) (%)
---------------- ------- ------- ------- ---------- ------ ------- -----
Measured 2,330 33.7 43.1 3.4 0.05 0.11 1.46
Indicated 2,460 30.4 46.8 3.2 0.05 0.11 0.75
Inferred 2,100 31 46 3 0.1 0.1 0.9
---------------- ------- ------- ------- ---------- ------ ------- -----
Total 6,900 32 45 3 0.05 0.11 1.05
---------------- ------- ------- ------- ---------- ------ ------- -----
Reported at a 0% Fe cut-off grade within an optimised Whittle
shell representing a metal price of 130 USc/dmtu. Mineral Resources
are inclusive of Reserves. A revised Mineral Resource, prepared in
accordance with the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (the JORC Code, 2012
Edition) was announced on 8 May 2014 and is available on the
Company's website (www.zanagairon.com).
Note: The figures shown are rounded; they may not sum to the
subtotals shown due to the rounding used.
The Mineral Resource was estimated as a block model within
constraining wireframes based upon logged geological boundaries.
Tonnages and grades have been rounded to reflect appropriate
confidence levels and for this reason may not sum to totals
stated.
Geological Summary
The Zanaga iron ore deposit is located within a North-South
oriented (metamorphic) Precambrian greenstone belt in the eastern
part of the Chaillu Massif in South Western Congo. From airborne
geophysical survey work, and morphologically, the mineralised trend
constitutes a complex elongation in the North-South direction, of
about 47 km length and 0.5 to 3 km width.
The ferruginous beds are part of a metamorphosed,
volcano-sedimentary Itabirite/banded iron formation ("BIF") and are
inter-bedded with amphibolites and mafic schists. It exhibits
faulted and sheared contacts with the crystalline basement. As a
result of prolonged tropical weathering the BIF has developed a
distinctive supergene iron enrichment profile.
At surface there is sometimes present a high grade ore (+60%
Fe), classified as canga, of apparently limited thickness (<5m)
capping a discontinuous, soft, high grade, iron supergene zone of
structure-less hematite/goethite of limited thickness (<7m). The
base of the high-grade supergene iron zone grades quickly at depth
into a relatively thick, leached, well-weathered to moderately
weathered friable hematite Itabirite with an average thickness of
approximately 25 metres and grading 45-55% Fe.
The base of the friable Itabirite zone appears to correlate with
the moderately weathered/weakly weathered BIF boundary, and fresh
BIF comprises bands of chert and magnetite/grunerite layers.
Competent Persons
The statement in this announcement relating to Ore Reserves is
based on information compiled by Dr Iestyn Humphreys, FIMM, AIME,
PhD who is a Corporate Consultant, and Practice Leader with SRK. He
has sufficient experience relevant to the style of mineralisation
and type of deposit under consideration and to the activity he is
undertaking to qualify as a Competent Person as defined in the JORC
Code (2012). The Competent Person, Dr Iestyn Humphreys, confirms
that the Ore Reserve Estimate is accurately reproduced in this
announcement and has given his consent to the inclusion in the
report of the matters based on his information in the form and
context within which it appears.
The information in this announcement that relates to Mineral
Resources is based on information compiled by Malcolm Titley, BSc
MAusIMM MAIG, of CSA Global (UK) Ltd. Malcolm Titley takes overall
responsibility for the report as Competent Person. He is a Member
of the Australasian Institute of Mining and Metallurgy ("AUSIMM")
and has sufficient experience, which is relevant to the style of
mineralisation and type of deposit under consideration, and to the
activity he is undertaking, to qualify as a Competent Person in
terms of the JORC Code. The Competent Person, Mr Malcolm Titley,
has reviewed this Mineral Resource statement and given his
permission for the publication of this information in the form and
context within which it appears .
Definition of JORC Code
The Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (2012) as published by the Joint
Ore Reserves Committee of the Australasian Institute of Mining and
Metallurgy, Australian Institute of Geoscientists and Minerals
Council of Australia.
Principal Risks & Uncertainties
The principal business of ZIOC currently comprises managing
ZIOC's interest in the Zanaga Project, including the Jumelles
group, and monitoring the development of the Project and engaging
in discussions with potential investors. The principal risks facing
ZIOC are set out below. Risk assessment and evaluation is an
essential part of the Group's planning and an important aspect of
the Group's internal control system. Overall these potential risks
have remained broadly constant over the past year with the
exception of the implications of COVID-19 on the long term outlook
for the iron ore market.
Risks relating to the agreement with Glencore and development of
the Zanaga Project
The Zanaga Project is majority controlled at both a shareholder
and director level by Glencore. The ability of the Company to
control the Zanaga Project and its operations and activities,
including the future development of the Project (including any
variant such as an EPP development) and the future funding
requirements of Jumelles, is therefore limited.
The future development of the mine and related infrastructure
(including any variant such as an EPP development) will be
determined by the Jumelles board. There can be no certainty that
the Jumelles board will approve the construction of the mine and
related infrastructure or any variant thereof such as an EPP
development, including the taking of preparatory steps associated
with the construction of the mine and related infrastructure, such
as front end engineering and design, or the undertaking of work
needed to assess the viability of an EPP development or any
component part of an EPP development. Such risk is reviewed
constantly and any relevant changes considered.
Risks relating to future funding of the Zanaga Project
Under the Joint Venture Agreement between the Company, Glencore
and Jumelles of 3 December 2009, as amended (the "JVA"), there is
no obligation on the Company or Glencore to provide further funding
to Jumelles. The Company and Glencore have reached agreement on a
work programme and funding of the Zanaga Project for 2022. As such
agreement relates to 2022, there is a risk that after 31 December
2022 Jumelles may be subjected to funding constraints and this
could have an adverse impact upon the Project. Moreover,
discretionary amounts are contained in the 2022 work programme and
budget; these require the joint approval of ZIOC and Glencore. It
is possible that as regards certain items, joint approval would not
be forthcoming. Such risk is reviewed constantly and any relevant
changes considered.
Risks relating to iron ore prices, markets and products
The ability to raise finance for the Project is largely
dependent on movements in the price of iron ore. Iron ore prices
have historically been volatile and are primarily affected by the
demand for and price of steel and the level of supply of iron ore.
Such prices are also affected by numerous other factors beyond the
Company's and the Jumelles group's control, including the relative
exchange rate of the U.S. dollar with other major currencies,
global and regional demand, political and economic conditions,
production levels and costs and transportation costs in major iron
ore producing regions.
While it appears to be the case that there has been some degree
of stabilisation of iron ore prices in the global market for iron
ore, the duration of such stabilisation remains uncertain. The
level of iron ore prices in the global market for iron ore
continues to be subject to uncertainty, particularly in light of
the impact of the COVID 19 pandemic. Although the 2014 FS
identifies the product from the Project and the potential demand
for such product within a range of iron ore prices, there are no
assurances that the demand for the Project's product will be
sufficient in quantity or in price to ensure the economic viability
of the Project or to enable finance for the development of the
Project to be raised. Furthermore, the range of iron ore prices in
the 2014 FS will need to be reviewed so as to reflect changed
market conditions and changed expectations relating to the supply
and demand for iron ore. Such risk is reviewed constantly and any
relevant changes considered.
Risks relating to an EPP
For some considerable period, an initiative has been and is
being carried out to investigate the possibility of a low-cost
small scale start-up, using existing infrastructure, focussing on a
standard 62% Fe benchmark iron ore product or a high grade 65% Fe
pellet feed iron ore product that would involve simple 'processing'
applications. In conjunction with this, the possibility of a
low-cost small scale start-up involving the production of a pellet
feed concentrate and conventional pelletisation continues to be
investigated. This initiative also involves the assessment of
methods of providing the necessary power requirements as well as
logistical support to enable the product to be transported to an
available exit port. There will also be the need to put in place
the appropriate contractual and permitting arrangements. There is a
risk that such kind of start-up is found not to be viable or is not
proceeded with for other reasons or is delayed. Such risk is
reviewed constantly and any relevant changes considered.
Risks relating to financing the Zanaga Project
Any decision of the Jumelles board to proceed with construction
of the mine and related infrastructure (or any variant such as a
low capital cost, small scale start-up EPP Project) is itself
dependent upon the ability of Jumelles to raise the necessary debt
and equity to finance such construction and the initial operation
of the mine (or any variant such as a low-cost small scale
start-up). Jumelles may be unable to obtain debt and/or equity
financing in the amounts required, in a timely manner, on
favourable terms or at all and should this occur, it is highly
likely to pose challenges to the proposed development of the Zanaga
Project and the proposed timeline for its development. Moreover,
the global credit environment may pose additional challenges to the
ability of Jumelles to secure debt finance or to secure debt
finance on acceptable terms, including as to rates of interest.
Such risk is reviewed constantly and any relevant changes
considered.
Risks relating to financing of the Company
The Company will not generate any material income until an
operating stage of the Project has been constructed and mining and
export of the iron ore has successfully commenced at commercial
volumes. In the meantime the Company will continue to expend its
cash reserves. Should the Company seek to raise additional finance,
it may be unable to obtain debt and/or equity financing in the
amounts required, in a timely manner, on favourable terms or at
all.
If construction of the mine and related infrastructure proceeds
(including any preparatory steps associated with the construction
of the mine and related infrastructure) or any small scale start-up
proceeds, and ZIOC elects to fund its pro rata equity share of
construction capital expenditure, there is no certainty as to its
ability to raise the required finance or the terms on which such
finance may be available.
If ZIOC raises additional funds (including for the purpose of
funding the construction of the Project or any part of the Project,
including any small-scale start-up) through further issuances of
securities, the holders of ordinary shares could suffer significant
dilution, and any new securities that ZIOC issues could have
rights, preferences and privileges superior to those of the holders
of the ordinary shares.
If the Company fails to generate or obtain sufficient financial
resources to develop and operate its business, this could
materially and adversely affect the Company's business, results of
operations, financial condition and prospects. Such risk is
reviewed constantly and any relevant changes considered.
Risk relating to Ore Reserves estimation
Ore Reserves estimates include diluting materials and allowances
for losses, which may occur when the material is mined. Appropriate
assessments and studies have been carried out and include
consideration of and modification by realistically assumed mining,
metallurgical, economic, marketing, legal, environmental, social
and governmental factors. These assessments demonstrate at the time
of reporting that extraction could reasonably be justified. Ore
Reserve estimates are by their nature imprecise and depend, to a
certain extent, upon statistical inferences and assumptions which
may ultimately prove unreliable. Estimated mineral reserves or
mineral resources may also have to be recalculated based on changes
in iron ore or other commodity prices, further exploration or
assessment or development activity and/or actual production
experience. Such risk is reviewed constantly and any relevant
changes considered.
Host country related risks
The operations of the Zanaga Project are located mainly in the
RoC. These operations will be exposed to various levels of
political, regulatory, economic, taxation, environmental and other
risks and uncertainties. As in many other countries, these
(varying) risks and uncertainties can include, but are not limited
to: political, military or civil unrest; fluctuations in global
economic and market conditions impacting on the economy; terrorism;
hostage taking; extreme fluctuations in currency exchange rates;
high rates of inflation; labour unrest; nationalisation; changes in
taxation; illegal mining; restrictions on foreign exchange and
repatriation. In addition, the RoC is an emerging market and, as a
result, is generally subject to greater risks than in the case of
more developed markets.
HIV/AIDS, malaria and other diseases are prevalent in the RoC
and, accordingly, the workforce of the ZIOC group and of the
Jumelles group will be exposed to the health risks associated with
the country. The operating and financial results of such entities
could be materially adversely affected by the loss of productivity
and increased costs arising from any effect of HIV/AIDS, malaria
and other diseases on such workforce and the population at
large.
Weather conditions in the RoC can fluctuate severely.
Rainstorms, flooding and other adverse weather conditions are
common and can severely disrupt transport in the region where the
Jumelles group operates and other logistics on which the Jumelles
group is dependent.
The host country related risks described above could be relevant
both as regards day-to-day operations and the raising of debt and
equity finance for the Project. The occurrence of such risks could
have a material adverse effect on the business, prospects,
financial condition and results of operations of the Company and/or
the Jumelles group. Such risk is reviewed constantly and any
relevant changes considered.
Risks relating to the Project's licences and the regulatory
regime
The Project's Mining Licence was granted in August 2014 and a
Mining Convention has been entered into. With effect from 20 May
2016, the Zanaga Mining Convention has been promulgated as a law of
the RoC, following ratification by the Parliament of the RoC and
publication in the Official Gazette.
The holder of a mining licence is required to incorporate a
Congolese company to be the operating entity and the Congolese
Government is entitled to a free participatory interest in projects
which are at the production phase. This participation cannot be
less than 10%. Under the terms of the Mining Convention, there is a
contingent statutory 10% free participatory interest in favour of
the Government of the RoC as regards the mine operating company and
a contingent option for the Government of the RoC to buy an
additional 5% stake at market price.
The granting of required approvals, permits and consents may be
withheld for lengthy periods, not given at all, or granted subject
to conditions which the Jumelles group may not be able to meet or
which may be costly to meet. As a result, the Jumelles group may
incur additional costs, losses or lose revenue and its business,
result of operations, financial condition and/or growth prospects
may be materially adversely affected. Failure to obtain, renew,
enforce or comply with one or more required approvals, permits and
consents could have a material adverse effect on the business,
prospects, financial condition and results of operations of the
Company and/or the Jumelles group. Mitigation of such risks is in
part dependent upon the terms of the Mining Convention and
compliance with its terms. Such risk is reviewed constantly and any
relevant changes considered.
Transportation and other infrastructure
The successful development of the Project (including any
low-cost small scale start-up) depends on the existence of adequate
infrastructure and the terms on which the Project can own, use or
access such infrastructure. The region in which the Project is
located is sparsely populated and difficult to access. Central to
the Zanaga Project becoming a commercial mining operation is access
to a transportation system through which it can transport future
iron ore product to a port for onward export by sea. In order to
achieve this it will be necessary to access a port at
Pointe-Indienne, which is still to be constructed, or some other
exit port in the case of a low-cost small scale start-up.
The nature and timing of construction of the proposed new port
are still under discussion with the government of the RoC and other
interested parties. In relation to the pipeline and Project
facilities at the proposed new port and (to the extent needed)
other infrastructure, the necessary permits, authorisations and
access, usage or ownership rights have not yet been obtained.
Failure to construct the proposed pipeline and/or facilities at
the proposed new port and/or other needed infrastructure or a
failure to obtain access to and use of the proposed new port and/or
other needed infrastructure or a failure to do this in an
economically viable manner or in the required timescale could have
a material adverse effect on the Project.
In the case of a low-cost small scale start-up, failure to put
in place the necessary logistical requirements (including trucking,
rail transportation and port facilities) and/or other needed
infrastructure or a failure to obtain access to and use of the
proposed logistical requirements or a failure to do this in an
economically viable manner or in the required timescale could have
a material adverse effect on the Project.
The availability of reliable and continuous delivery of
sufficient quantity of power to the Project at an affordable price
will also be a significant factor on the costs at which iron ore
can be produced and transported to any proposed exit port and will
impact on the economic viability of the Project.
Reliable and adequate infrastructure (including an outlet port,
roads, bridges, power sources and water supplies) are important
determinants which affect capital and operating costs and the
ability of the Jumelles group to develop the Project, including any
low-cost small scale start-up. Failure or delay in putting in place
or accessing infrastructure needed for the development of the
Zanaga Project could have a material adverse effect on the
business, prospects, financial condition and results of operations
of the Company and/or the Jumelles group. Such risk is reviewed
constantly and any relevant changes considered.
Risks associated with access to land
Pursuant to the laws of the RoC, mineral deposits are the
property of the government with the ability to purchase surface
rights. Generally speaking, the RoC has not had a history of native
land claims being made against the state's title to land. There is
no guarantee, however, that such claims will not occur in the
future and, if made, such claims could have a deleterious effect on
the progress of development of the Project and future
production.
The Mining Convention envisages that the RoC will carry out a
process to expropriate the land required by the Zanaga Project and
place such land at the disposal of the holder of the Mining Licence
in order to build the mine and the infrastructure, including the
pipeline, required for the realisation of the Zanaga Project. This
means that the rights of the Jumelles company which holds the
Mining Licence to the relevant land will be subject to negotiation
between the Congolese government and such company. Alternatively,
if the land is not declared DUP (i.e. is expropriated by the State
under its sovereign powers) then the Jumelles group will have to
reach agreement with the local land owners which may be a more time
consuming and costly process. Such risk is reviewed constantly and
any relevant changes considered.
Risks relating to timing
Any delays in (i) obtaining rights over and access to land and
infrastructure; (ii) obtaining the necessary permits and
authorisations; (iii) the construction or commissioning of the
mine, the pipeline or facilities at or offshore an exit port or
power transmission lines or other infrastructure; or (iv)
negotiating the terms of access to the exit port and supply of
power and other infrastructure (including an offshore loading
facility); or (v) raising finance to fund the development of the
mine and associated infrastructure, could prevent altogether or
impede the development of the Zanaga Project, including the ability
of the Zanaga Project to export its future iron ore products
whether on the anticipated timelines or at projected volumes and
costs or otherwise. Such delays or a failure to complete the
proposed infrastructure or the terms of access to infrastructure or
to do this in an economically viable manner, could have a material
adverse effect on the business, results of operations, financial
condition and prospects of the Company and/or the Jumelles group.
Such risk is reviewed constantly and any relevant changes
considered.
Environmental risks
The operations and activities of the Zanaga Project are subject
to potential risks and liabilities associated with the pollution of
the environment and the disposal of waste products that may occur
as a result of its mineral exploration, development and production,
including damage to preservation areas, over-exploitation and
accidental spills and leakages. Such potential liabilities include
not only the obligation to remediate environmental damage and
indemnify affected third parties, but also the imposition of court
judgments, administrative penalties and criminal sanctions against
the relevant entity and its employees and executive officers.
Awareness of the need to comply with and enforcement of
environmental laws and regulations continues to increase.
Notwithstanding precautions taken by entities involved in the
development of the Project, breaches of applicable environmental
laws and regulations (whether inadvertent or not) or environmental
pollution could materially and adversely affect the financial
condition, business, prospects and results of operations of the
Company and/or the Jumelles group. Such risk is reviewed constantly
and any relevant changes considered.
Health and safety risks
The Jumelles group is required to comply with a range of health
and safety laws and regulations in connection with its business
activities (including laws and regulations relating to the COVID-19
pandemic) and will be required to comply with further laws and
regulations if and when construction of the Project commences and
the mine goes into operation. A violation of health and safety laws
relating to the Jumelles group and/or the Project's operations, or
a failure to comply with the instructions of the relevant health
and safety authorities, could lead to, amongst other things, a
temporary shutdown of all or a portion of the business activity of
the Jumelles group and/or the Project's operations or the
imposition of costly compliance measures. Where health and safety
authorities and/or the RoC government require the business activity
of the Jumelles group and/or the Project to shut down or reduce all
or a portion of its activities of operations or to implement costly
compliance measures, whether pursuant to applicable health and
safety laws and regulations, or the more stringent enforcement of
such laws and regulations, such measures could have a material
adverse effect on the financial condition, business, prospects,
reputation and results of operations of the Company and/or the
Jumelles group. Such risk is reviewed constantly and any relevant
changes considered.
COVID-19
The duration of COVID-19 pandemic and its potential or actual
impact upon global markets, countries, populations and businesses
is still uncertain. As a result of the measures taken by the
government and other authorities in the RoC, the business and other
activities of governmental agencies and authorities, of business
enterprises and of individuals has been affected. The impact that
this situation could have upon the business activities of the
Jumelles group and its personnel as well as the risks, is being
monitored. While the Jumelles group would seek to manage such
situation and to minimise the risks, there is the possibility that
the Project and the business activities of the Jumelles group could
be adversely affected by the COVID-19 pandemic and its impact upon
global markets and upon countries. Such adverse effect could
include there being constraints on the movement of people and goods
across borders and within countries. Additionally, these factors
could adversely affect and place constraints on ZIOC and its own
business activities. As noted within note 17 of the financial
statements, the outbreak thus far has had no material impact upon
the business operation or financial situation of the Company. Such
risk is reviewed constantly and any relevant changes
considered.
Risks relating to third party claims
Due to the nature of the operations to be undertaken in respect
of the development of the Zanaga Project, there is a risk that
substantial damage to property or injury to persons could be
sustained during such development. Any such damage or injury could
have a material adverse effect on the financial condition,
business, prospects, reputation and results of operations of the
Company and/or the Jumelles group. Such risk is reviewed constantly
and any relevant changes considered.
Risks relating to outsourcing
The 2014 FS envisages that certain aspects of the Zanaga Project
will be carried out by third parties pursuant to contracts to be
negotiated with such third parties. Any low-cost small scale
start-up is also likely to involve the undertaking of various key
elements of the Project by third parties. There is a risk that
agreement might not be reached with such third parties or that the
terms of any such agreement are more stringent than currently
anticipated; this could adversely impact upon the Project and/or
the proposed timescale for carrying out the Project. Such risk is
reviewed constantly and any relevant changes considered.
Fluctuation in exchange rates
The Jumelles group's functional and reporting currency is the
U.S. dollar, and most of its in country costs are and will be
denominated in CFA francs and Euros. Consequently, the Jumelles
group must translate the CFA franc and Euro denominated assets and
liabilities into U.S. dollars. To do so, non-U.S. dollar
denominated monetary assets and liabilities are translated into
U.S. dollars using the closing exchange rate at the reporting
period end date. Consequently, increases or decreases in the value
of the U.S. dollar versus the Euro (and consequently the CFA franc)
and other foreign currencies may affect the Jumelles group's
financial results, including its assets and liabilities in the
Jumelles group's balance sheets. These factors will affect the
financial results of the Company. In addition, ZIOC holds the
majority of its funds in Pounds Sterling, and incurs the majority
of its corporate costs in Pounds Sterling, but its contributions to
funding the Jumelles group in 2021 and 2022 are calculated in U.S.
dollars. Consequently, any fluctuation in exchange rates between
Pounds Sterling versus the U.S. dollar or the Euro, could also
adversely affect the financial results of the Company. Such risk is
reviewed constantly and any relevant changes considered.
Cash resources
The Company has limited cash resources. Although the Company has
taken steps to conserve and replenish its cash resources, there is
a risk that a shortage of such cash resources will adversely affect
the Company. Such shortage could result in further expenditure cuts
being introduced by the Company, both in its internal and its
external operations. Volatile and uncertain economic global
conditions in means that there can be no certainty as to when the
Zanaga resource is likely to be developed. The challenging economic
conditions as well as difficulties of monetising this resource
given its location impact upon the ability of the Jumelles group to
raise new finance for the Project as well as on the Company's
ability to raise new finance for itself. The Company's existing
cash resources may continue to come under increasing pressure
unless a more predictable investment, travel and trading climate
materialises in the foreseeable future which benefits the Project
and the Company can take steps which result in an improvement of
its financial position. Such risk is reviewed constantly and any
relevant changes considered.
Financial Statements
Consolidated statement of total comprehensive loss
for year ended 31 December 2021
2021 2020
Note US$000 US$000
---------------------------------------------------------------------------------------- ---- ------- -------
Administrative expenses (1,226) (1,099)
Share of loss of associate 6b (672) (724)
---------------------------------------------------------------------------------------- ---- ------- -------
Operating loss (1,898) (1,823)
Loss before tax (1,898) (1,823)
Taxation 5 - -
---------------------------------------------------------------------------------------- ---- ------- -------
Loss for the year (1,898) (1,823)
---------------------------------------------------------------------------------------- ---- ------- -------
Items that will not be reclassified subsequently to profit or loss:
Share of other comprehensive (loss)/income of associate - foreign exchange translation (17) 8
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation - foreign operations 6b - 3
---------------------------------------------------------------------------------------- ---- ------- -------
Other comprehensive (loss) / income (17) 11
---------------------------------------------------------------------------------------- ---- ------- -------
Total comprehensive loss (1,915) (1,812)
---------------------------------------------------------------------------------------- ---- ------- -------
(Loss) per share
Basic (Cents) 12 (0.6) (0.6)
Diluted (Cents) 12 (0.6) (0.6)
Loss and total comprehensive loss for the year is attributable
to the equity holders of the Parent Company and are from continuing
operations.
The notes form an integral part of the financial statements.
Consolidated statement of financial position
for year ended 31 December 2021
2021 2020
Note US$000 US$000
------------------------------------------------------------ ---- --------- ---------
Non-current assets
Property, plant and equipment 6a - -
Investment in Associate 6b 37,269 37,354
------------------------------------------------------------ ---- --------- ---------
37,269 37,354
------------------------------------------------------------ ---- --------- ---------
Current assets
Other receivables 7 233 58
Cash and cash equivalents 8 387 352
------------------------------------------------------------ ---- --------- ---------
620 410
------------------------------------------------------------ ---- --------- ---------
Total Assets 37,889 37,764
------------------------------------------------------------ ---- --------- ---------
Current liabilities
Trade and other payables 9 (153) (184)
------------------------------------------------------------ ---- --------- ---------
Net assets 37,736 37,580
------------------------------------------------------------ ---- --------- ---------
Equity attributable to equity holders of the Parent Company
Share capital 10 270,935 268,864
Accumulated deficit (236,516) (234,617)
Foreign currency translation reserve 3,317 3,333
------------------------------------------------------------ ---- --------- ---------
Total equity 37,736 37,580
------------------------------------------------------------ ---- --------- ---------
The notes form an integral part of the financial statements.
These financial statements were approved by the Board of
Directors on 30 June 2022 and were signed on its behalf by:
Mr Clifford Elphick
Director
Consolidated statement of changes in equity
for year ended 31 December 2021
Foreign
currency
Share Accumulated translation Total
Capital deficit reserve Equity
US$000 US$000 US$000 US$000
--------------------------------------- ------- ----------- ----------- --------
Balance at 1 January 2020 267,592 (232,794) 3,322 38,120
Issued Capital 565
Consideration for share-based payments 707 - - 565
Loss for the year (1,823) - 707
Other comprehensive loss - - - (1,823)
--------------------------------------- ------- ----------- ----------- --------
Total comprehensive loss - (1,823) 11 11
--------------------------------------- ------- ----------- ----------- --------
Balance at 31 December 2020 268,864 (234,617) 3,333 37,580
--------------------------------------- ------- ----------- ----------- --------
Balance at 1 January 2021 268,864 (234,617) 3,333 37,580
Issued Capital 1,525 - - 1,525
Consideration for share-based payments 546 - - 546
Loss for the year - (1,898) - (1,898)
Other comprehensive loss - - (17) (17)
--------------------------------------- ------- ----------- ----------- --------
Total comprehensive loss - (1,898) (17) (1,915)
--------------------------------------- ------- ----------- ----------- --------
Balance at 31 December 2021 270,935 (236,516) 3,317 37,736
--------------------------------------- ------- ----------- ----------- --------
Consolidated cash flow statement
for year ended 31 December 2021
2021 2020
Note US$000 US$000
----------------------------------------------------- ------ ------- -------
Cash flows used in operating activities
Loss for the year (1,898) (1,823)
Adjustments for:
(Increase in other receivables (175) (11)
(Decrease)/increase in trade and other payables (31) 9
Share based payments 547 707
Net exchange loss 12 25
Share of Loss in associate 672 724
Net cash used in operating activities (873) (369)
----------------------------------------------------- ------ ------- -------
Cash flows generated by financing activities -
Proceeds from share issuance 1,524 564
----------------------------------------------------- ------ ------- -------
Net cash flow generated by financing activities 1,524 564
----------------------------------------------------- ------ ------- -------
Cash flows used in investing activities
Interest received - -
Investment in Associate (604) (578)
----------------------------------------------------- ------ ------- -------
Net cash used in investing activities (604) (578)
----------------------------------------------------- ------ ------- -------
Net increase/(decrease) in cash and cash equivalents 47 (383)
Cash and cash equivalents at beginning of year 352 755
Effect of exchange rate difference (12) (20)
----------------------------------------------------- ------ ------- -------
Cash and cash equivalents at end of year 8 387 352
----------------------------------------------------- ------ ------- -------
The notes form an integral part of the financial statements.
Notes to the financial statements
1 Business information and going concern basis of
preparation
Background
Zanaga Iron Ore Company Ltd (the "Company"), was incorporated on
19 November 2009 under the name of Jumelles Holdings Limited. The
Company changed its name on 1 October 2010. The Company is
incorporated in the British Virgin Islands ("BVI") and the address
of its registered office, is situated at 2nd Floor, Coastal
Building, Wickham's Cay II, Road Town, P.O. Box 2221, Tortola,
British Virgin Islands. On 18 November 2010, the Company's share
capital was admitted to trading on the AIM Market ("AIM") of the
London Stock Exchange ("Admission"). The Company's principal place
of business as an investment holding vehicle is situated in
Guernsey, Channel Islands.
At 31 December 2010 the Company held 100% of the share capital
of Jumelles Limited subject to the then Call Option.
On 14 March 2011 the Company incorporated and acquired the
entire share capital of Zanaga UK Services Limited for US$2, a
company registered in England and Wales which provides investor
management and administrative services.
In 2007, Jumelles became the special purpose holding company for
the interests of its then ultimate 50/50 founding shareholders,
Garbet Limited ("Garbet") and Guava Minerals Limited ("Guava"), in
MPD Congo which, owns and operates 100% of the Zanaga Project in
the RoC (subject to a minimum 10% free carried interest in MPD
Congo in favour of the Government of the RoC).
In December 2009 Garbet and Guava contributed their then
respective 50/50 joint shareholding in Jumelles to the Company.
Guava is majority owned by African Resource Holdings Limited
("ARH"), a BVI company that specialises in the investment and
development of early stage natural resource projects in emerging
markets. Guava owns approximately 27.39% of the share capital of
the Company.
At the time that Garbet was a shareholder in the Company, it was
majority owned by Strata Limited ("Strata"), a private investment
holding company based in Guernsey, which specialises in the
investment and development of early stage natural resource projects
in emerging markets, predominately Africa. Until 3 April 2017
Garbet owned approximately 41.49% of the share capital of the
Company. Pursuant to a transaction effected on 2 April 2017 Garbet
ceased to hold any shares in the Company. As part of such
transaction the shares in the Company which were held by Garbet
were transferred directly or indirectly to Garbet's shareholders
and the shareholders of Garbet's holding company, Strata.
Jumelles has three subsidiary companies, namely Jumelles M
Limited, Jumelles Technical Services (UK) Limited and MPD
Congo.
Transactions involving Xstrata and Glencore
-- As a result of transactions entered into on 16 October 2009
and 3 December 2009, Xstrata acquired a majority stake in Jumelles
in return for providing funding towards ongoing exploration of the
Zanaga exploration licence area, the preparation of a
pre-feasibility study (the "PFS") and a feasibility study (the
"FS"). In addition a joint venture agreement which regulated the
respective rights of the Company, Jumelles and Xstrata in relation
to Jumelles was entered into. >Subsequently:
o Xstrata merged with the Glencore group on 2 May 2013 to form
Glencore Xstrata and the holding company of the merged group
subsequently changed its name to Glencore.
o the Feasibility Study was completed in March 2014 and paid
for.
Relationship between Jumelles and its shareholders since
February 2011
The Company, Jumelles and Xstrata Projects agreed to regulate
their respective rights in relation to the Project following
exercise of the Call Option under the terms of the joint venture
agreement ("JVA"). Under the terms of the JVA (as amended), all
significant decisions regarding the conduct of Jumelles' business
(other than certain protective rights which require the agreement
of shareholders holding at least 95% of the voting rights in
Jumelles) are made by the Board of Directors.
Glencore has the right to appoint three directors to the
Jumelles Board while ZIOC has a right to appoint two directors. At
any Jumelles Board meeting, the directors nominated by Glencore
have between them such number of votes as represents Glencore's
voting rights in the general meetings of Jumelles and the directors
nominated by ZIOC have between them such number of votes as
represents ZIOC's voting rights in the general meetings of
Jumelles.
As a consequence of the provisions of the JVA (in its original
version and as subsequently amended), , Glencore controls Jumelles
at both a shareholder and director level and therefore controls
what was the Company's sole mineral asset, the Zanaga Project.
Going forward the Company accounted for this as an Investment in
Associate in respect of the Project with Glencore.
Since the acquisition by Glencore of its majority stake in
Jumelles, the principal business of the Company has been to manage
its 50% less one share interest in the Project and to work with
Glencore and the Zanaga Project team in the promotion of the
development of the Project and the raising of finance.
Future funding requirements and going concern basis of
preparation
The Directors have prepared the accounts on a going concern
basis. At 31 December 2021 the Company had cash reserves of
US$0.4m.
On 29 June 2022, Glencore and ZIOC have agreed a 2022 Project
Work Programme and Budget for the Project of up to US$1.3m plus
US$0.1m of discretionary spend. ZIOC has agreed to contribute
towards this work programme and budget an amount comprising
US$0.09m; the remaining budget amount will be funded via a loan
facility provided directly to Jumelles Ltd by Glencore thus
requiring less funding by ZIOC over the next 12 months compared to
the historical levels observed. On 29 June 2022, Glencore and the
group signed a side letter to the Jumelles loan facility confirming
that there will be no dilution of the group's holding in Jumelles
as a result of this change in funding structure.
The Company had cash reserves of US$0.3m as at 29 June 2022. In
order to raise additional funding the Company entered a
Subscription Agreement with SMC (as described above - see the
Company's release of 26 June 2020.) The financing structure with
SMC enables the Company to access funding for the costs that the
Company is expected to meet in the near future. Due to the fact
that SMC have 3,000,000 shares still to be placed into the market,
for illustrative purposes only, if the average price at which SMC
places the remaining 3,000,000 shares was 2.05 pence (being ZIOC's
mid-market closing share price on 27 June 2022 ), the net proceeds
received by ZIOC from such sales would be approximately GBP0.06m.
Based on the current cost base at the Zanaga Project, the direct
loan facility to Jumelles Ltd, the current low corporate overheads
of ZIOC, the agreed cash preservation plan adopted by the Company
(described below), the Company's existing cash reserves and (on the
basis of cautious assumptions made by the Company in its funding
model) the funds expected to be obtained from the funding facility
established by the Subscription Agreement with SMC, the board of
directors of ZIOC (the "Board") believes that the Company will be
adequately positioned to support its operations going forward in
the near future. As the final cash amounts to be received for each
tranche of issued shares, and the timing of this receipt, are
dependent on SMC successfully selling the shares prior to
transferring funds to the Company, the Board is of the view that
the going concern basis of accounting is appropriate. However, the
Board acknowledges that there is a material uncertainty which could
give rise to significant doubt over the Company's ability to
continue as a going concern and, therefore, that the Company may be
unable to realise its assets and discharge its liabilities in the
normal course of business. Nevertheless, based on and taking into
account the foregoing factors, the Board are satisfied the Company
will have sufficient funds to meet its own working capital
requirements up to, and beyond, twelve months from the approval of
these accounts.
The Company continues to review the costs of its operational
activities with a view to conserving its cash resources. As part of
such ongoing review, and in order to preserve the cash position of
the Company, it has been agreed with the Directors (since January
2019) and Management (since September 2019) that fees are deferred.
Additionally, the Directors and management have indicated to the
Company that they will assist the cash preservation plan of the
Company. The way in which this could be achieved is being
progressed.
In common with many exploration and development companies in the
mining sector, the Company raises funding in phases as its project
develops. As the Zanaga Project is still in the development stage
and the cash resources of the Company are diminishing, the Company
recognises that steps will need to be taken to raise additional
investment either at the corporate level or at the Zanaga Project
level, or a combination of the two. The raising of additional funds
is linked to the progress that is made in relation to the
development of the Zanaga Project. The initiatives that are being
undertaken in relation to the development of the Zanaga Project
have been described earlier in this announcement. There are a range
of options for raising funds which the Company is pursuing. It is
recognised that there is a risk that the Company may be unable to
obtain debt and/or equity financing in the amounts required, in a
timely manner, on favourable terms or at all and should this occur,
it is highly likely to pose challenges for the Company and could
adversely have an impact upon the proposed development of the
Zanaga Project and the proposed timeline for its development.
If construction of the mine and related infrastructure proceeds
(including any preparatory steps associated with the construction
of the mine and related infrastructure), and the Company elects to
fund its pro rata equity share of construction capital expenditure,
it will need to raise further funds. There is no certainty as to
the Company's ability to raise the required finance or the terms on
which such finance may be available.
In addition, any decision of the Jumelles Board to proceed with
construction of the mine and related infrastructure (or any variant
such as a low-cost small scale start-up) is itself dependent upon
the ability of Jumelles to raise the necessary debt and equity to
finance such construction and the initial operation of the mine.
Jumelles itself may be unable to obtain debt and/or equity
financing in the amounts required, in a timely manner, on
favourable terms or at all and should this occur, it is highly
likely to pose challenges to the proposed development of the Zanaga
Project and the proposed timeline for its development.
The Company still believes that once the proposed staged
development of the Zanaga Project occurs, the Project offers high
grade ore at competitive cost, thereby offering an attractive rate
of return, at an acceptable level of risk. However, in order to
carry out such staged development, it is still the case that
substantial capital expenditure will be required both at the
prospective mine site and in respect of transportation and other
associated infrastructure and for working capital. Revenues from
mining are dependent upon such development being financed and
taking place.
At a time when the staged development of the Project takes place
(or, if viable, a small-scale start-up takes place) the Company
will need to obtain additional funding should it decide to elect to
fund its share of any such development of the mine. If such staged
development continues to be deferred due to unfavourable market
conditions, the Company will need at the appropriate time to
explore options to raise additional funding, pending the staged
development (or, if viable, a small-scale start-up) taking
place.
Volatility in currencies
Various factors, including the Brexit process and its aftermath
as well as the impact that COVID-19 has had on global markets has
resulted in increased volatility in currency rates applicable to
Pounds Sterling. Such volatility is likely to continue. As the
Company's cash resources are held in Pounds Sterling, such
volatility could adversely affect the Company's financial position
and results where it is obliged to make payments of sums
denominated in other currencies. This particularly applies to
contributions made by the Company to funding the Jumelles group as
these amounts are calculated in United States dollars.
2 Accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all the periods presented, unless
otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with
the International Financial Reporting Standards as adopted by the
European Union ("Adopted IFRS"). Adopted IFRS comprises standards
and interpretations approved by the International Accounting
Standards Board ("IASB") and the International Financial Reporting
Interpretations Committee ("IFRIC") as adopted by the European
Union.
The financial statements consolidate those of the Company and
its subsidiary Zanaga UK Services Limited (together, the "Group")
and the Company's investment in an associate which is accounted for
using the equity method.
The company's presentation currency and functional currency is
US dollars.
New standards, amendments and interpretations
The following IFRSs standards and amendments are effective from
1 January 2021 :
-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16). These amendments are not
expected to have any material impact upon the finan-cial
statements.
The above listed standards and amendments have been adopted by
the Company. The amendments do not have a material impact on the
Company's business or on the Company's financial statements and as
such there are no presentation or measurement changes within the
financial statements. .
New and revised IFRS Standards in issue but not yet
effective
The following amendments are in issue, adopted by the European
Union but are not effective for the current period:
-- Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)
-- Reference to the Conceptual Framework (Amendments to IFRS 3)
-- Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
-- Annual Improvements to IFRS Standards 2018-2020
No material impact upon the Company's financial statements are
anticipated from these amendments.
Measurement convention
These financial statements have been prepared on the historical
cost basis of accounting.
The preparation of financial statements in conformity with
Adopted IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise judgement in the
process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial
statements are disclosed in Note 3.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial
statements of subsidiaries are included in the financial statements
from the date that control commences until the date that control
ceases.
Associates
Investments in associates are recorded using the equity method
of accounting whereby the investment is initially recognised at
cost and adjusted thereafter for the post-acquisition changes in
the Group's share of the net assets of the associate. The Group
profit or loss and other comprehensive income includes the Group's
share of the associate's profit or loss and other comprehensive
income. The investment is considered for impairment annually.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from the intra-group transactions, are
eliminated in preparing the financial statements.
Foreign currency
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are retranslated to the functional currency at the
foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in equity.
Share-based payments
The Group makes equity-settled share-based payments to certain
employees and similar persons as part of LTIP (a long-term
incentive plan). The fair value of the equity-settled share-based
payments is determined at the date of the grant and expensed, with
a corresponding increase in equity, on a straight line basis over
the vesting period, based on the Group estimate of the awards that
will eventually vest, save for any changes resulting from any
market-performance conditions.
Where awards were granted to employees of the Group's associate
and similar persons, the equity-settled share-based payments were
recognised by the Group as an increase in the cost of the
investment with a corresponding increase in equity over the vesting
period of the awards. In equity accounting for the Group's share of
its associate, the Group has accounted for the cost of equity
settled share-based payments as if it were a subsidiary.
The shares issued under the 2010 LTIP were acquired by an
Employee Benefit Trust which subscribed for the shares at zero
value. These shares are held by the Employee Benefit Trust until
the vesting conditions have been met and the share options are
exercised. During Q4 2017, all the outstanding share options were
exercised and a small number of surplus shares held by the Employee
Benefit Trust were distributed to beneficiaries of the Trusts. The
Employee Benefit Trust has now been discontinued.
Subsequent awards of share options have been structured as
standard share options and did not involve the use of an employee
benefit trust.
Information on the share awards is provided in Note 11 to these
financial statements.
Share-based payments to non-employees
Where the Group received goods or services from a third party in
exchange for its own equity instruments and the amount of equity
instruments is fixed, the equity instruments and related goods or
services are measured at the fair value of the goods or services
received and are recognised as the goods are obtained or the
services rendered. Equity instruments issued under such
arrangements for the receipt of services are only considered to be
vested once provision of services is complete. Such awards are
structured as standard share options.
Non-derivative financial instruments
Financial assets and financial liabilities are recognised in the
Group's consolidated statement of financial position when the Group
becomes a party to the contractual provisions of the instrument in
accordance with IFRS 9.
Financial assets are initially recognised at their fair value,
including, in the case of instruments not recorded at fair value
through profit or loss, directly attributable transaction costs.
Financial assets are subsequently measured at amortised cost, at
fair value through other comprehensive income (FVTOCI) or at fair
value through profit or loss (FVTPL) depending upon the business
model for managing the financial assets and the nature of the
contractual cash flow characteristics of the instrument.
Financial liabilities, other than derivatives, are initially
recognised at fair value of consideration received net of
transaction costs as appropriate and subsequently carried at
amortised cost.
Non-derivative financial instruments in the balance sheet
comprise other receivables, cash and cash equivalents, and trade
and other payables.
(i) Impairment of financial assets
A loss allowance for expected credit losses is determined for
all financial assets, other than those at FVTPL, at the end of each
reporting period. The expected credit loss recognised represents a
probability-weighted estimate of credit losses over the expected
life of the financial instrument.
The expected credit loss allowance is determined on the basis of
twelve month expected credit losses and where there has been a
significant increase in credit risk, lifetime expected credit
losses. Financial assets are credit impaired when there is no
realistic likelihood of recovery.
(ii) Derecognition of financial assets and financial
liabilities
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another party.
The Group derecognises financial liabilities when the Group's
obligations are discharged, cancelled or have expired.
On derecognition of a financial asset/financial liability in its
entirety, the difference between the carrying amount of the
financial asset/financial liability and the sum of the
consideration received and receivable/paid and payable is
recognised in profit and loss.
Other receivables
Other receivables include receivables from related parties.
Where financial assets are included within this line item, these
are managed within a business model to collect the contract
cashflows, which represent solely payments of principal and
interest. Other receivables are subsequently measured at amortised
cost.
Trade and other payables
Trade and other payables are initially recognised at the fair
value of consideration received net of transaction costs as
appropriate and subsequently measured at amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits. These are managed within a business model to collect the
contract cashflows, which represent solely payments of principal
and interest These are subsequently measured at amortised cost and
are determined to have a low credit risk due to being held with
highly credit rated financial institutions. As such, these balances
are not assessed to determine whether there has been a significant
increase in credit risk.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares are
recognised as a deduction from equity.
When share capital recognised as equity is repurchased, the
amount of consideration paid, including directly attributable
costs, is recognised as a change in equity. Repurchased shares are
cancelled.
Impairment of investment in associate
The carrying amounts of the Group's investment in associate are
reviewed at each reporting period end to determine whether there is
any indication of impairment. The investment is considered to be
impaired if objective evidence indicates that one or more events
have had a negative effect on the estimated future cash flows of
that investment. If any such indication exists, the investment's
recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of
the investment or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in the income
statement.
(i) Calculation of recoverable amount
The recoverable amount of the Group's investments carried at
amortised cost is calculated as the present value of estimated
future cash flows, discounted at the original effective interest
rate (i.e. the effective interest rate computed at initial
recognition of these financial assets).
(ii) Reversals of impairment
An impairment loss is reversed when there is an indication that
the impairment loss may no longer exist and there has been a change
in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
Financing income and expenses
Interest income and interest payable is recognised in profit or
loss as it accrues, using the effective interest method.
Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the end of each reporting period, and any adjustment to tax payable
in respect of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the end of each reporting period.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised.
Segmental Reporting
The Group has one operating segment, being its investment in the
Project, held through Jumelles. Financial information regarding
this segment is provided in Note 6b.
Subsequent events
Post year-end events that provide additional information about
the Group's position at the end of each reporting period (adjusting
events) are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes to
financial statements where material. Please see note 17.
3 Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in note 2, the directors are required to make judgements
(other than those involving estimations) that have a significant
impact on the amounts recognised and to make estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Key source of estimation uncertainty - Carrying value of
Investment in Associate
The value of the Group's investment in Jumelles depends very
largely on the value of Jumelles' interest in the Project. Jumelles
assesses at least annually whether or not its exploration projects
may be impaired. This assessment can involve significant estimation
uncertainty as to the likelihood that a project will continue to
show sufficient commercial promise to warrant the continuation of
exploration and evaluation activities. It is reasonably possible,
on the basis of existing knowledge, that changes in assumptions
within the next financial year could require a material adjustment
to the carrying amount of the Investment in Associate.
The long-term iron ore price and discount rate assumptions for
the Zanaga project were $58/tonne (CFR IODEX 62% Fe forecast with
adjustments for quality, deleterious elements, moisture and
freight) and 11.34%, respectively. A 1.5% reduction in the
long-term iron ore price or a 0.4% increase in the discount rate
applied would result in the remaining carrying value being fully
impaired. A movement in the opposite direction of the long-term
iron ore price and discount rate by the same percentages would
result in a reversal of the impairment recorded to the original
carrying value of $100 million. The Group's share of these outcomes
would be limited to 49.99% of the amount recognised at the Jumelles
level. . It should be noted that the current 62% Fe IODEX price is
$123/tonne, signifcantly higher than the price assumptions used in
the estimation.
4 Note to the comprehensive income statement
Operating loss before tax is stated after
charging/(crediting):
2021 2020
US$000 US$000
----------------------------------- ------ ------
Share-based payments (see Note 11) 547 707
Net foreign exchange loss/(gain) (12) (25)
Directors' fees - -
Auditor's remuneration 70 60
----------------------------------- ------ ------
Other than the Company Directors, the Group did not directly
employ any staff in 2021 (2020: nil). The Directors received a
total of US$nil remuneration for their services as Directors of the
Group (2020: US$nil. The amounts paid as Directors' fees are shown
in the Directors' Remuneration Report in the 2021 Annual Report .
The Directors' interests in the share capital of the Group are
shown in the Directors' Remuneration Report in the 2021 Annual
Report .
5 Taxation
The Group is exempt from most forms of taxation in the BVI,
provided the Group does not trade in the BVI and does not have any
employees working in the BVI. All dividends, interest, rents,
royalties and other expense amounts paid by the Company, and
capital gains are realised with respect to any shares, debt
obligations or other securities of the Company, are exempt from
taxation in the BVI.
The effective tax rate for the Group is Nil % (2020: Nil %).
6a Property, Plant and Equipment
Fixtures Total
and fittings
US$000 US$000
--------------------------------- ------------ ------
Cost
Balance at 1 January 2021 and 31
December 2021 43 43
---------------------------------- ------------ ------
Depreciation
Balance at 1 January 2021 43 43
Charge for period - -
--------------------------------- ------------ ------
Balance at 31 December 2021 43 43
---------------------------------- ------------ ------
Net book value
Balance at 31 December 2021 - -
---------------------------------- ------------ ------
Balance at 31 December 2020 - -
---------------------------------- ------------ ------
There are no assets held under lease contracts.
6b Investment in Associate
US$000
------------------------------------------------------- ------
Balance at 1 January 2020 37,492
Additions 578
Share of comprehensive loss (724)
Share of currency translation reserve 8
Balance at 31 December 2020 37,354
------------------------------------------------------- ------
Balance at 1 January 2021 37,354
Additions 604
Share of post-acquisition comprehensive loss (672)
Share of post-acquisition currency translation reserve (17)
Balance at 31 December 2021 37,269
------------------------------------------------------- ------
At 31 December 2021, the investment represents a 50% less one
share shareholding in Jumelles being 2,000,000 shares of the total
share capital of 4,000,001 shares. Originally recorded at cost, the
investment has been adjusted for changes in the Company's share of
the net assets of the associate, less impairment. The investment
has been impaired down to the Company's share of the impaired value
of the Project declared in the accounts of the associate.
The additions to the investment during the year were due to the
additional US$0.60m of investment agreed in accordance with the
2021 Funding Agreement (2020 US$0.58m).
The Company's investment in Jumelles continues to be accounted
for as an associate using the equity method of accounting as
Glencore has control of the business as described in note 1.
As at 31 December 2021, Jumelles had aggregated assets of US$81m
(2020: US$81.4m) and aggregated liabilities of US$0.6m (2020:
US$0.8m). For the year ended 31 December 2021 there was no
impairment charge (2020: US$nil) and Jumelles incurred a loss
before tax of US$1.3m (2020: US$1.4m). There was no tax charge for
2021 (2020: US$nil). Currency translation of the underlying
Congolese asset generated a translation loss of US$nil (2020:
US$nil).
Summarised financial information in respect of the Group's
associate, reflecting 100% of the underlying associate's relevant
figures is set out below.
2021 2020
US$000 US$000
---------------------------------------- --------- ---------
Non-current Assets:
Property, plant and equipment 828 1,054
Exploration and other evaluation assets 80,000 80,000
Total non-current assets 80,828 81,054
---------------------------------------- --------- ---------
Current Assets 202 388
Non-current Liabilities (117) (126)
---------------------------------------- --------- ---------
Current Liabilities (469) (702)
---------------------------------------- --------- ---------
Net current liabilities (384) (440)
---------------------------------------- --------- ---------
Net assets 80,444 80,614
---------------------------------------- --------- ---------
Share capital 293,103 293,103
Translation reserve 41,052 39,845
Translation reserve (4,846) (4,812)
Accumulated deficit (248,865) (247,522)
---------------------------------------- --------- ---------
80,444 80,614
---------------------------------------- --------- ---------
7 Other receivables
2021 2020
US$000 US$000
------------------------------------------- ------ ------
Prepayments and receivables 199 24
Amounts receivable from the Jumelles group 34 34
------------------------------------------- ------ ------
Other receivables 233 58
------------------------------------------- ------ ------
8 Cash and cash equivalents
2021 2020
US$000 US$000
-------------------------- ------ ------
Cash and cash equivalents 387 352
-------------------------- ------ ------
9 Trade and other payables
2021 2020
US$000 US$000
----------------- ------ ------
Accounts payable 153 184
153 184
----------------- ------ ------
No amounts payable are due in more than 12 months (2020: US$nil
due in more than 12 months).
10 Share capital
Ordinary Ordinary
In thousands of shares Shares Shares
2021 2020
In issue at 1 January 293,034 286,304
------------------------ ------------ -----------------
Shares issued 14,000 7,000
In issue at 31 December 307,034 293,034
------------------------ ------------ -----------------
The Company is able to issue an unlimited number of no par value
shares. The holders of ordinary shares are entitled to receive
dividends as declared from time to time and are entitled to one
vote per share at meetings of the Company. No dividends have been
paid or declared in 2021 or in the current year (2020: US$nil).
Share capital changes in 2021
14,000,000 shares were issued in 2021 as part of the SMC
transaction as described in note 1. There were no share
repurchases.
11 Share-based payments
Employees
No awards were issued in 2021.
Awards currently in operation are as follows:
Award 1 (fully vested)
These awards vested on the publication of the results of the
VEE, which was achieved in October 2011.
Award 2 (fully vested)
These awards fully vested in 2012 on the expiry of two years
following Admission.
Award 6 (fully vested)
These awards have fully vested.
Award 8 (fully vested)
These awards vested on the date of grant in July 2014.
Award 9 (fully vested)
These awards have fully vested.
Details of current awards are as follows:
Award 1 (2010) Award 2 (2010) Award 6 (2014) Award 8 (2014) Award 9 (2014) Total
------------ --------------------- ------------------ --------------------- ------------------- ------------------- ---------- ---------
Weighted Weighted Weighted Weighted Weighted Weighted
Average Average Average Average Average Average
Exercise Exercise Exercise Exercise Exercise Exercise
Price Price Price Price Price Price
(GBP) Number (GBP) Number (GBP) Number (GBP) Number (GBP) Number (GBP) Number
At 1 January
2020 * GBP0.02 2,727,345 GBP0.02 995,382 0.01 1,204,619 0.01 1,013,418 0.01 4,000,000 GBP0.01 9,940,764
(US$0.04) (US$0.04) (US$0.04)
Granted N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Forfeited N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Exercised N/A Nil 0.02 Nil 0.01 Nil 0.01 Nil 0.1 Nil N/A Nil
Lapsed N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
------------ ---------- --------- --------- ------- --------- ---------- -------- --------- -------- --------- ---------- ---------
At 31
December
2020 * 0.02 Nil N/A Nil 0.01 1,002,771 N/A Nil 0.01 2,000,000 GBP0.01 3,002,771
At 1 January
2021 * GBP0.02 Nil GBP0.02 Nil 0.01 1,002,771 0.01 Nil 0.01 2,000,000 GBP0.01 3,002,771
(US$0.04) (US$0.04) (US$0.04)
Granted N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Forfeited N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Exercised N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
Lapsed N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil N/A Nil
------------ ---------- --------- --------- ------- --------- ---------- -------- --------- -------- --------- ---------- ---------
At 31
December
2021 * N/A Nil N/A Nil 0.01 Nil N/A Nil 0.01 Nil GBP0.01 Nil
Award 1 Award 8 (2014) Award 9 (2014)
(2010) Award 2 (2010) Award 6 (2014) Total
------------ --------------------- ------------------ --------------------- ------------------- ------------------- ---------------------
GBP0.00-GBP0.02 GBP0.02 GBP0.00-GBP0.01 GBP0.01 GBP0.01 GBP0.00 -
GBP0.02
Range (US$0.00-US$0.04) (US$0.04) (US$0.00-US$0.02) (US$0.02) (US$0.02) (US$0.00-US$0.04)
of exercise
prices
*
Weighted N/A N/A N/A) N/A) N/A N/A
average
fair
value
of share
awards
granted
in the
period
*
Weighted N/A N/A N/A N/A N/A N/A
average
share
price
at date
of exercise
(GBP)
Total
share
awards
vested 2,727,345 995,382 1,137,338 1,013,418 4,000,000 8,337,685
Weighted Nil Nil 39 Nil Nil
average
remaining
contractual N/A
life
(Days)
Expiry 18 May 2021 18 May 2021 29 July 2024** 29 July 2024 29 July 2024 N/A
date
------------ --------------------- ------------------ --------------------- ------------------- ------------------- ---------------------
* Sterling amounts have been converted into US Dollars at the
grant dates exchange rates of: Awards 1,2, US$1.547:GBP1.00,
Subsequent awards US$ 1.6944:GBP1.00.
** Excepting 199,076 share options with expiry date 7 July
2023
The following information is relevant in the determination of
the fair value of options granted during 2010 and 2014 which has
applied option valuation principles during the year under the above
equity-settled schemes:
Award 9
Award 1 (2010) Award 2 (2010) Award 6 (2014) Award 8 (2014) (2014)
------------- ----------------- ----------------- ----------------- ----------------- -------------
Option
pricing
model used Black-Scholes Black-Scholes Black-Scholes Black-Scholes Black-Scholes
GBP1.56 GBP1.56 GBP0.19 GBP0.19 GBP0.19
Weighted
average
share price
at date
of grant (US$2.41) (US$2.41) (US$$0.31) (US$$0.31) (US$$0.31)
Weighted
average
expected
option
life 0.7 years 1.0 years 5.0 years 4.0 years 4.6 years
Expected
volatility 50% for less
(%) 50% than 91% 91% 91%
1 year expected
life,
55% for more
than
1 year expected
life
Dividend
growth
rate (%) Zero Zero Zero Zero Zero
Risk-free
interest
rate (%) 0.51% for 0.69% for 1.75% for 1.75% for 1.75% for
12 month
6 month expected 12 month expected 12 month expected 12 month expected expected
life life life life life
2.25% in
0.69% for 1.12% for 2.25% in excess 2.25% in excess excess
24 month
12 month expected 24 month expected 24 month expected 24 month expected expected
life life life life life
------------- ----------------- ----------------- ----------------- ----------------- -------------
* Sterling amounts have been converted into US Dollars at the
grant dates exchange rates of: Awards 1,2, US$1.547:GBP1.00,
Subsequent awards US$ 1.6944:GBP1.00.
The volatility assumption of awards 1 & 2 were measured by
reference to the historic volatility of comparable companies based
on the expected life of the option. Subsequent awards referenced
the volatility of the Company's own history since the 2010
flotation.
Non-employees
In August 2019 the Group entered into a new incentive plan which
granted share options in the Group to two non employee individuals
and Harris Geoconsult Limited who all provide consulting services
to the Group. On 29 August 2019, 13,633,335 options were granted
under this scheme. The scheme will be settled in equity instruments
of the Group and is therefore treated as an equity-settled
share-based payment arrangement. The options vest in multiple
tranches based on the Group achieving key performance milestone
including:
(a) The approval by Jumelles of the Early Production Project
(EPP), including its potential technical and financial feasibility,
as the basis for advancing the development of the Zanaga
Project;
(b) Raising finance either for the Group or separately for the
development phase of the Zanaga Project; or
(c) The completion of a significant merger or acquisition
involving the Group or any member of the Jumelles Group acquiring a
material interest (as determined by the Group board) in a third
party or a third party acquiring a material interest (as determined
by the Group board) in the Group or a member of the Jumelles
Group.
All unvested options will also vest on the occurrence of certain
events, such as a change of control of the Company. Once vested all
options will also vest on the occurrence of certain events, such as
a change of control of the Company. Once vested all options are
exercisable within seven years of the grant date of award. The
options have a nominal exercise price of 0.01p (one hundredth of
one penny). The number of share options are as follows:
Number of Number
options of options
In number of shares 2021 2020
----------------------------------- ---------------- -----------
Granted during the year - -
Exercised during the year - -
Outstanding at the end of the year 13,633,335 13,633,335
Exercisable at the end of the year - -
----------------------------------- ---------------- -----------
The services to be provided in exchange for the options are
unidentifiable at the date of the grant and therefore the Group has
measured the fair value of the services with reference to the fair
value of the options granted. The fair value is measured using a
Black Scholes model. Measurement inputs and assumptions as
follows:
2021
------------------------------------------------------ ----------------
Fair value at grant date 0.09
Share price at valuation date 0.09
Exercise price Nominal
Expected volatility (weighted average) N/A
Option life (weighted average life in years) 2.4
Expected dividends Nil
Risk-free interest rate (based on national government N/A
bonds)
------------------------------------------------------- ----------------
As the options are effectively nil-cost options the expected
volatility and risk free rate does not impact the fair value under
the Black Scholes model and therefor been excluded from the model
inputs. The share options are granted with a number of non-market
performance conditions relating to achievement of specific
performance milestones for the Group as set out above. In addition,
the option holders must continue to provide consulting services to
the Group as at the vesting date. Such conditions are not taken
into account in the grant date value measurements of services
received. The achievement of the non-market performance conditions
are estimated by management to determine expected vesting period
over which to spread the equity-settled share-based payment charge.
As at year end the expected vesting date of each tranche of options
is between 30 June 2020 and 31 December 2021 resulting in a
weighted average option life of 2.4 years.
The total expenses recognised for the year relating to
equity-settled share-based payments is US$547k.
In addition, there are 1,600,000 options outstanding which were
issued to a consultant in 2014 at 18.5p that have vested but have
not yet been exercised.
12 Loss per share
2021 2020
--------------------------------------------------------- ------- -------
Profit (Loss) (Basic and diluted) (US$,000) (1,898) (1,823)
Weighted average number of shares (thousands)
Basic
Issued shares at beginning of period 293,034 286,034
Effect of shares issued 14,000 7,000
Weighted average number of shares at 31 December - basic 307,034 293,034
--------------------------------------------------------- ------- -------
Loss per share
Basic (Cents) (0.6) (0.6)
Diluted (Cents) (0.6) (0.6)
--------------------------------------------------------- ------- -------
There are potential ordinary shares outstanding, refer to Notes
10 and 11 for details of these potential ordinary shares. The
effects of these potential shares are not considered in the
calculation of diluted loss per share.
13 Financial instruments
Financial Risk Management
The Group's activities expose it to a variety of financial
risks: credit risk, liquidity risk and market risk (comprising
currency risk and interest rate risk). The Group seeks to minimise
potential adverse effects of these risks on the Group's financial
performance. The Board has overall responsibility for managing the
risks and the framework for monitoring and coordinating these
risks. The Group's financial risk management policies are set out
below:
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the Group
receivables related parties. The Group has a credit policy in place
and exposure to credit risk is monitored on an ongoing basis. At 31
December, the Group's maximum exposure to credit risk was as
follows:
2021 2020
US$000 US$000
Cash and cash equivalents 387 352
--------------------------------------- ------ ------
Amounts receivable from Jumelles Group 34 34
--------------------------------------- ------ ------
Significant concentrations of credit risk manifest with the
Group's banking counterparties with which the cash and cash
equivalents are held, and accounts receivable from Jumelles.
(b) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its
payment obligations when due, or that it is unable, on an ongoing
basis, to borrow funds in the market on an unsecured or secured
basis at an acceptable price to fund actual or proposed
commitments. Prudent liquidity risk management implies maintaining
sufficient cash and cash equivalents and availability of adequate
committed funding facilities.
The Group evaluates and follows continuously the amount of
liquid funds needed for business operations, in order to secure the
funding needed for business activities and loan repayments. The
availability and flexibility of the financing is needed to ensure
the Group's financial position, as detailed in Note 1.
The maturity profile of the Group's financial liabilities based
on the contractual terms is as follows:
$'000 Less than 1 month Greater than Total
1 months to 6 months 6 months
--------- ---------- ------------- ------------- ------
2020
Accounts
payable 83 - 70 153
--------- ---------- ------------- ------------- ------
2020
Accounts
payable 84 - 100 184
--------- ---------- ------------- ------------- ------
(c) Market risk
(i) Foreign currency risk
The functional currency of the Group is the US dollar. Currency
risk is the risk of loss from movements in exchange rates related
to transactions and balances in currencies other than the U.S.
dollar. The foreign currency denominated financial assets and
liabilities are not hedged, thus the changes in their value are
charged or credited to profit and loss.
As at 31 December 2021 the foreign currency denominated assets
include cash balances held in Sterling of US$387,322 (2020:
US$351,772), other receivables denominated in Sterling of
US$232,972 (2020: US$58,440), and payables of US$153,283 (2020:
US$184,459) denominated in Sterling.
The following significant exchange rates applied during the
year:
Reporting date Reporting date
Average rate spot rate Average rate spot rate
2021 2021 2020 2020
------------------- ------------ -------------- ------------ --------------
Against US Dollars US$ US$ US$ US$
Pounds Sterling 1.33680 1.3532 1.3037 1. 3672
------------------- ------------ -------------- ------------ --------------
(ii) Sensitivity analysis
A 10% weakening of the following currencies against the US
Dollar at 31 December 2021 would have increased/(decreased) equity
and profit or loss by the amounts shown below. This calculation
assumes that the change occurred at the end of each reporting
period and had been applied to risk exposures existing at that
date. This analysis assumes that all other variables, in particular
other exchange rates and interest rates, remain constant.
Equity Profit or loss Equity Profit or loss
2021 2021 2020 2020
US$000 US$000 US$000 US$000
---------------- ------ -------------- ------ --------------
Pounds Sterling (35) (35) (35) (35)
---------------- ------ -------------- ------ --------------
A 10% strengthening of the above currencies against the US
Dollar at 31 December would have had the equal but opposite effect
on the above currencies to the amounts shown above, on the basis
that all other variables remain constant.
(iii) Capital management
The Board's policy is to maintain a stable capital base so as to
maintain investor and market confidence. Capital consists of share
capital and retained earnings. The Directors do not intend to
declare or pay a dividend in the foreseeable future but, subject to
the availability of sufficient distributable profits, intend to
commence the payment of dividends when it becomes commercially
prudent to do so.
The Company has a share incentive programme which is now
administered by the Board. The share incentive programme is
discretionary and the Board will decide whether to make share
awards under the share incentive programme at any time. In Q4 2017
all then outstanding share options over already issued shares in
the LTIP split interest scheme were exercised, a small number of
surplus shares were distributed to beneficiaries of the Employee
Benefit Trust involved in the scheme and the LTIP split interest
scheme was then discontinued.
14 Commitments for expenditure
The Group had no capital commitments or off-balance sheet
arrangements at 31 December 2021 (31 December 2020: nil).
Subsequently, Glencore and ZIOC have agreed a 2022 Project Work
Programme and Budget for the Project of up to US$1.2m plus US$0. 1m
of discretionary spend . ZIOC has agreed to contribute towards this
work programme and budget an amount comprising US$0. 1m, the
remaining funds will be provided by a Glencore loan facilty into
Jumelles.
15 Related parties
The Group's relationships with Jumelles and Glencore are
described in Note 1.
The following transactions occurred with related parties during
the period:
Closing balance
Transactions for the period (payable)/receivable
----------------------------- -----------------------
2021 2020 2021 2020
US$000 US$000 US$000 US$000
------------------ -------------- ------------- ----------- ----------
Funding:
Due from Jumelles 604 578 34 34
------------------ -------------- ------------- ----------- ----------
16 Transactions with key management personnel
2021 2020
US$000 US$000
--------------- ------ ------
Directors' fees - -
--------------- ------ ------
Total - -
--------------- ------ ------
The Directors have no material interest in any contract of
significance subsisting during the financial year, to which the
Group is a party.
17 Subsequent Events
Jumelles Loan Facility
On 29 June 2022, Glencore and ZIOC agreed a 2022 Project Work
Programme and Budget for the Project of up to US$1.3m plus US$0.1m
of discretionary spend. ZIOC has agreed to contribute towards this
work programme and budget an amount comprising US$0.09m; the
remaining budget amount will be funded via a loan facility provided
directly to Jumelles Ltd by Glencore thus requiring less funding by
ZIOC over the next 12 months compared to the historical levels
observed. On 29 June 2022, Glencore and the group signed a side
letter to the Jumelles loan facility confirming that there will be
no dilution of the group's holding in Jumelles as a result of this
change in funding structure.
*** End of Financial Statements ***
Glossary
AL(2) O(3) Alumina (Aluminium Oxide)
Fe Total Iron
JORC Code The 2004 or 2012 Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore
Reserves as published by the Joint Ore Reserves
Committee of the Australasian Institute of Mining
and Metallurgy, Australian Institute of Geoscientists
and Minerals Council of Australia.
LOI Loss on ignition
LOM Life of mine
Mineral Resource A concentration or occurrence of material of intrinsic
economic interest in or on the Earth's crust in
such form, quality and quantity that there are
reasonable prospects for eventual economic extraction.
The location, quantity, grade, geological characteristics
and continuity of a Mineral Resource are known,
estimated or interpreted from specific geological
evidence and knowledge. Mineral Resources are sub-divided,
in order of increasing geological confidence, into
Inferred, Indicated and Measured categories.
Mn Manganese
Ore Reserve The economically mineable part of a Measured and/or
Indicated Mineral Resource. It includes diluting
materials and allowances for losses, which may
occur when the material is mined. Appropriate assessments
and studies have been carried out, and include
consideration of and modification by realistically
assumed mining, metallurgical, economic, marketing,
legal, environmental, social and governmental factors.
These assessments demonstrate at the time of reporting
that extraction could reasonably be justified.
Ore Reserves are sub-divided in order of increasing
confidence into Probable Ore Reserves and Proved
Ore Reserves. A Probable Ore Reserve has a lower
level of confidence than a Proved Ore Reserve but
is of sufficient quality to serve as the basis
for a decision on the development of the deposit.
P Phosphorus
PFS Pre-feasibility Study
SiO2 Silica
Beneficiation The process of improving (benefiting) the economic
value of the ore by removing the waste minerals,
which results in a higher grade product (concentrate)
Pelletisation The process of compressing or moulding a material
into the shape of a pellet
Mtpa Million Tonnes Per Annum
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END
FR FMMPTMTTJBBT
(END) Dow Jones Newswires
July 01, 2022 02:00 ET (06:00 GMT)
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