TIDMACP
Armadale Capital Plc / Index: AIM / Epic: ACP / Sector:
Investment Company
2 June 2017
Armadale Capital Plc ('Armadale' or 'the Company')
Final Results and Notice of AGM
Armadale, the AIM quoted investment company focused on natural
resource projects in Africa, is pleased to announce its final
results for the year ended 31 December 2016. The Company also
announces that its Annual General Meeting ('AGM') will be held at
55 Gower Street, London, WC1E 6HQ on 26 June 2017 at 11.00 am. A
notice of AGM, together with printed copies of the Company's Annual
Report for the year ended 31 December 2016 will be posted to
shareholders today. Copies will also be available to view on the
Company's website: www.armadalecapitalplc.com.
STRATEGIC REPORT
To view a version of the strategic report with maps and figures,
please go to the Company's website at
www.armadalecapitalplc.com.
FINANCIAL RESULTS
During the year under review Armadale has continued to operate
as a diversified investing company focused on natural resource
projects in Africa.
The Company's investment portfolio is divided into two
groups:
-- Actively managed investments: where the Company has majority ownership
of the investment
-- Passively managed investments: where the Company has a minority
investment, typically in a quoted company, and does not have
management control.
ACTIVELY MANAGED INVESTMENTS:
Mpokoto Gold Project, DRC ("MPOKOTO")
The Company obtained its initial interest in Mpokoto through the
acquisition of Netcom Global Inc in November 2013.
In September 2016, the Company entered into a binding Heads of
Agreement ('HOA') with African Mining Services Pty Ltd ('AMS') to
form a joint venture to develop and operate Mpokoto. The key items
to this agreement are:
-- An exclusive due diligence period of up to 90-days, during which AMS
has management input and is generally responsible for all
project-related expenses.
-- An initial 'earn-in' phase ('Phase 1') pursuant to which AMS can earn
a 25% interest in Kisenge, by providing funding and
project-related
services to the value of US$1.25m.
-- A second 'earn-in' phase ('Phase 2') to apply, if AMS wishes to
proceed, and Armadale does not source third-party funding for
Mpokoto,
pursuant to which AMS could earn a further 60% interest in
Kisenge
(total aggregate interest 85%) by funding the project through
to
commercial production. The definitive feasibility study
(DFS)
estimated this cost at US$25m to include all associated
expenditure
and managing the conduct of activities to reach the production
stage.
-- Phase 1 will focus on optimising the DFS, with a focus on reducing
capital costs, accelerating the timeline to production and
expanding
the existing JORC resource.
-- Phase 2 will focus on the construction and bringing Mpokoto into
commercial production.
AMS was later renamed Kisenge Mining Pty Ltd (KMP). In December
2016, KMP completed due diligence and elected to exercise its
option to proceed with the formation of a joint venture. This
allowed the Company to concentrate its efforts in the newly
acquired Mahenge Liandu graphite project.
Since opting to proceed with Phase 1 of the acquisition as set
out in the announcement of 5 December 2016, KMP has completed a gap
analysis of the project data to determine the required steps to
bring Mpokoto into production as soon as possible. In addition, KMP
has reassessed the mine plan and capital cost estimates with a view
to significantly reducing the capex and preliminary results have
indicated that this may be possible. Given the challenging funding
environment for projects in the current market climate, KMP is also
evaluating a staged production profile to minimise upfront capital
costs further. KMP has also conducted an Independent review of the
Resource estimate of the deposit which confirmed the existing
Resource statement produced by CSA.
Mahenge Liandu Graphite Project, Tanzania "MAHENGE LIANDU"
The Company acquired Mahenge Liandu in south-east Tanzania
('Liandu Project') in July 2016. This project provides the Company
with opportunities in the graphite market that will capitalise on
the strong outlook for graphite from the burgeoning battery and
other markets.
The acquisition was attractive owing to the following:
-- Provided the Company with access to the highly prospective graphite
market - global demand for commercial graphite is expected to
double
within the next eight years
-- Growth fuelled by developments in the energy storage industry -
graphite is an essential component of the modern lithium-ion
battery,
making it a key material in smart phones, tablets, laptops
and
electric cars
-- Mahenge Liandu is located in an area of proven coarse flake, high
grade graphite resources - ASX listed Kibaran Resources Ltd
(ASX:KNL)
and Black Rock Mining Limited (ASX:BKT) have both identified and
are
developing significant proven and valuable graphite projects
immediately adjacent to Mahenge Liandu
-- Results from previous sampling highlighted high grade mineralisation
with results from seven previous samples ranging from 12.8% -
24.0%
Total Graphite Content ('TGC').
-- Exploration drilling completed in December 2015 by the vendor had
results that underpinned the licence prospectivity: 10m at 6.54%
TGC,
24m at 12.9% TGC and 5m at 21.5% TGC.
-- Mineralised trend about 1.6 km in strike length and up to 500m wide
identified, which remains open at depth
Resources and Reserves - JORC resource statement
The Company commenced exploration work at Mahenge Liandu in July
2016 and drilling work began in September 2016. In December 2016,
the Company announced an exciting graphite discovery with a maiden
JORC compliant inferred mineral resource estimate of 40.9Mt @ 9.41%
TGC. The results indicated:
-- The Mahenge Liandu discovery has outstanding thick interceptions of
high-grade coarse flake graphite identified across the entire
2.5km
mineralised strike area
-- Strike remains open on three aspects - length, width and depth
highlighting significant potential upside to current
resource
Laboratory test work conducted on graphite samples from Mahenge
Liandu between January 2017 and April 2017 returned exceptional
results on flake distribution, grade, purity and expandability.
This is shown in tables 1 and 2 below:
Table 1- Flake size and grade distribution for Mahenge Liandu
Graphite sample
Size (µm) Weight (%) TGC (%)
500 3.7 98.4
300 24.4 98.5
180 32.9 99.1
150 11.7 98.9
106 11.9 98.9
75 7.5 98.7
25 6.2 97.9
<25 1.7 88.4
The flake size distribution indicates 28.1% of Mahenge Liandu
graphite in the jumbo and super jumbo categories and all size
fractions above 25 microns returns +97% TGC with a weighted average
TGC grade across all size fractions of 98.5% TGC.
Table 2- Graphite Purity and Expandability Results
Flake Size (µm) Purity Expansion Volume at 800 °C Expansion Volume
at 1000 °C
> 500 µm 99.93 440 cm³/g 480 cm³/g
> 300 µm 99.99 370 cm³/g 420 cm³/g
> 180 µm 99.98 300 cm³/g 380 cm³/g
> 106 µm 99.96 210 cm³/g 230 cm³/g
> 75 µm 99.94 165 cm³/g 170 cm³/g
< 75 µm 99.65 115 cm³/g
The achievements of 99.99% purity and expandability to 480 cm³/g
show that the graphite from the Company's Mahenge Liandu Project
graphite should be suitable for a number of commercial applications
including batteries and expandable graphite.
Exploration Licences
The Company holds following exploration tenements for Mahenge
Liandu:
-- PL10846/2016 granted on 21/9/2016 expires 20/9/2020 area 7.34 square
kilometres
-- PL10840/2016 granted 21/9/2016 expires 20/9/2020 area 21.89 square
kilometres
Exploration and Development Programme
During Q2 and Q3 2017, it is planned to infill drill the
existing Inferred JORC Resource to upgrade the resource category to
Indicated. In addition, some of the drilling will be used to extend
the size of the deposit by drilling down dip of the existing areas
of known mineralisation. Once completed, six diamond drill holes
will be completed to obtain samples for metallurgical test work and
to produce representative concentrate samples for potential
customers.
A total of 2500 metres of RC drilling is planned, followed by a
total of 300 metres of diamond drilling once RC drilling programme
has been completed. Final diamond hole location will be determined
using the results of the RC drilling.
After completing this programme, the Company will be in a
position to both increase the size of the resource and move a
substantial proportion of the resource into the Indicated Resource
category. Further work programmes to conduct Reserve estimates and
more a detailed metallurgical test work programme will be required
later in 2017 in order to effectively progress the project.
PASSIVELY MANAGED INVESTMENTS:
Mine Restoration Investments Limited ("MRI"), South Africa
During the year, the Company pursued its policy of disposing of
MRI shares whenever an opportunity arose, but there was little
demand for the shares and only some GBP16,500 was realised. By the
end of the year, the shares had been suspended from trading on the
Johannesburg Stock Exchange and MRI had become inactive. The
directors have concluded that the shares have a nil market value
and have accordingly provided full impairment for the remainder of
the carrying value, resulting in a further impairment charge of
GBP0.3 million.
Quoted portfolio
The Company has a small portfolio of quoted investments,
principally in gold production companies where the directors
believe there are opportunities for capital gain. During the year
the Company has sold certain investments and continues to keep its
portfolio under review.
Some of the mitigation strategies the Group applies in its
present stage of development include, among others:
-- Proactive management to reducing fixed costs.
-- Rationalisation of all capital expenditures.
-- Maintaining strong relationships with government (employing local
staff and partial government ownership), which improves the
Group's
position as a preferred small mining partner.
-- Alternative and continued funding activities with a number of options
to secure future funding to continue as a going concern.
The Directors regularly monitor such risks and will take actions
as appropriate to mitigate them. The Group manages its risks by
seeking to ensure that it complies with the terms of its
agreements, and through the application of appropriate policies and
procedures, and via the recruitment and retention of a team of
skilled and experienced professionals.
Key performance indicators
The Group's current key performance indicators (KPIs) are the
performance of its underlying investments, measured in terms of the
development of the specific projects they relate to, the increase
in capital value since investment and the earnings generated for
the Group from the investment. The Directors consider that it is
still too early in the investment cycle of any of the investments
held, for meaningful KPIs to be given.
Success is also measured through the identification and
investment in suitable additional opportunities that fit the
Group's investment objectives. The acquisition of Mahenge Liandu
graphite project is such success.
Outlook
Looking to the future, the positive early exploration results at
Mahenge Liandu are very encouraging and the Directors consider that
the outlook for the project, and hence for the Group is positive.
Equally, we are pleased that the Mpokoto project continues to
attract interest and investment from strong local partners.
Financial results
For the year ended 31 December 2016 the Group did not earn any
revenues as its business related solely to the making of
investments in non revenue producing resource projects and
companies.
The Group made a loss after tax of GBP0.922 million (2015:
GBP0.992 million) for the year ended 31 December 2016. The
administrative expenses relate principally to fundraising and to
the costs of operating a public company.
The year's most significant event was the acquisition of the
Mahenge Liandu graphite project, which was financed entirely by the
issue of shares and loan notes. Other share issues during the year
were in respect of loan note conversions, the settlement of
creditors and to raise cash of GBP0.97 million. Since the year end,
a further GBP0.651 million has been raised by a placement of
shares.
As discussed above, trading in the shares of MRI has been
suspended and the company has become inactive. In these
circumstances the board has concluded that the market value of its
holding is nil and a further impairment charge of some GBP0.3
million has been made. This is partially offset by gains on
disposal and impairment releases in respect of other listed
investments.
At 31 December 2016, the Group had total assets of GBP9.1million
(2015: GBP5.8 million), cash of GBP0.116 million (2015: GBP0.161
million) and debt of GBP0.45 million, being the convertible loan
notes issued during the year due in July 2017. Based on
correspondence with the loan note holders, the Company expects to
be able to extend 58.5% of the notes for a further period of 12
months on the same terms. The remaining notes are expected to be
converted into Ordinary Shares under the terms of the governing
deed subject to the condition that conversion does not cause the
note holder's shareholding to exceed 29.9%, which at present it is
not expected to exceed. As further discussed in Note 2.2 to these
Financial Statements, the Company currently has approximately
GBP300,000 in cash which is sufficient for the next 10 months of
operations in the ordinary course. Nevertheless, the Company has a
proven ability to raise funds and is confident that it will
continue as a going concern.
Emmanuel S Mahede
Director
31 May 2017
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Note 2016 2015
GBP GBP
Other administrative expenses (690,710) (616,062)
Impairment of investments 13 (301,047) (316,213)
Profit on disposal of investments 13 82,064 -
Operating loss (909,693) (932,275)
Finance costs (11,982) (59,237)
Loss before taxation 6 (921,675) (991,512)
Taxation 9 - -
Loss for the year from continuing (921,675) (991,512)
operations attributable
to the equity holders
of the parent company
Loss after taxation (921,675) (991,512)
Other comprehensive income
Items that may be reclassified
to profit or loss:
Exchange differences on translating 1,016,566 93,278
foreign entities
Total comprehensive income/( 94,891 (898,234)
loss) attributable
to the equity holders
of the parent company
Loss per share attributable to the equity Pence Pence
holders of the parent company
Basic and fully diluted 10 (0.62) (1.91)
The notes below form part of the financial statements.
Consolidated Statement of Financial Position
At 31 December 2016
Note 2016 2015
GBP GBP
Assets
Non-current assets
Exploration and evaluation assets 11 8,778,645 4,923,190
Property, plant and equipment 12 16,437 23,694
Investments 13 6,705 56,605
8,801,787 5,003,489
Current assets
Investment 13 - 322,708
Trade and other receivables 14 160,279 317,230
Cash and cash equivalents 115,861 160,938
276,140 800,876
Total assets 9,077,927 5,804,365
Equity and liabilities
Equity
Share capital 18 2,946,587 2,823,582
Share premium 20 19,009,592 16,585,413
Shares to be issued 20 286,000 286,000
Share option reserve 20 85,850 182,000
Loan note reserve 20 37,500 -
Foreign exchange reserve 20 1,109,834 93,278
Retained earnings 20 (15,342,406) (14,550,731)
Total equity 8,132,957 5,419,542
Current liabilities
Trade and other payables 15 494,733 339,486
Loan notes 16 450,237 45,337
944,970 384,823
Total equity and liabilities 9,077,927 5,804,365
The notes below form part of the financial statements.
Approved by the Board and authorised for issue on 31 May
2017
Signed on behalf of the Board
ES Mahede N Johansen
Director Director
Company Statement of Financial Position
At 31 December 2016
Note 2016 2015
GBP GBP
Assets
Non-current assets
Investments 13 4,451,914 2,901,814
Other receivables 14 3,358,091 2,159,250
7,810,005 5,061,064
Current assets
Investment 13 - 322,708
Trade and other receivables 14 6,856 153,495
Cash and cash equivalents 100,879 125,811
107,735 602,014
Total assets 7,917,740 5,663,078
Equity and liabilities
Equity
Share capital 18 2,946,587 2,823,582
Share premium 20 19,009,592 16,585,413
Shares to be issued 20 286,000 286,000
Share option reserve 20 85,850 182,000
Loan note reserve 20 37,500 -
Retained earnings 20 (14,984,733) (14,345,365)
Total equity 7,380,796 5,531,630
Current liabilities
Trade and other payables 15 86,707 86,111
Loan notes 16 450,237 45,337
536,944 131,448
Total equity and liabilities 7,917,740 5,663,078
The Company has taken advantage of the exemption conferred by
section 408 of Companies Act 2006 from presenting its own statement
of comprehensive income. A loss after taxation of GBP769,368 (2015:
GBP777,170) has been included in the financial statements of the
parent company.
The notes below form part of the financial statements.
Approved by the Board and authorised for issue on 31 May
2017
Signed on behalf of the Board
ES Mahede N Johansen
Director Director Company Registration No. 5541602
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
ShareCapital SharePremium Sharesto beissued ShareOptionReserve LoanNoteReserve ForeignExchangeReserve RetainedEarnings Total
GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January 2015 2,562,914 14,807,570 286,000 1,610,361 - - (14,987,580) 4,279,265
Loss for the year - - - - - - (991,512) (991,512)
Other comprehensive - - - - - 93,278 - 93,278
income
Total comprehensive 93,278 (991,512) (898,234)
loss for the year
Issue of shares 260,668 1,911,395 - - - - - 2,172,063
Expenses of issue - (133,552) - - - - - (133,552)
Transfer on expiry - - - (1,428,361) - - 1,428,361 -
of options
Total other movements 260,668 1,777,843 - (1,428,361) - - 1,428,361 2,038,511
At 31 December 2015 2,823,582 16,585,413 286,000 182,000 - 93,278 (14,550,731) 5,419,542
Loss for the year - - - - - - (921,675) (921,675)
Other comprehensive - - - - - 1,016,566 - 1,016,566
income
Total comprehensive - - - - - 1,016,566 (921,675) 94,891
income
for the year
Issue of shares 123,005 2,540,790 - - - - - 2,663,795
Expenses of issue - (116,611) - - - - - (116,611)
Share based payment - - - 33,850 - - - 33,850
charges
Transfer on expiry - - - (130,000) - - 130,000 -
of options
Equity element - - - - 37,500 - - 37,500
of convertible
loan notes issued
Total other movements 123,005 2,424,179 - (96,150) 37,500 - 130,000 2,618,534
At 31 December 2016 2,946,587 19,009,592 286,000 85,850 37,500 1,109,844 (15,342,406) 8,132,957
The notes below form part of the financial statements.
The following describes the nature and purpose of each reserve
within owners' equity:
Reserve Description and purpose
Share capital amount subscribed for share
capital at nominal value
Share premium amount subscribed for share
capital in excess of
nominal value, net of allowable expenses
Shares to be issued value of share capital to
be issued in connection
with the acquisition of Netcom
Share option reserve cumulative charge recognised under IFRS 2 in
respect of share-based payment awards
Loan note reserve equity element of convertible loan notes
Foreign exchange reserve gains/losses arising on re-translating the net
assets of overseas operations into sterling
Retained earnings cumulative net gains and losses recognised
in the statement of comprehensive income
Company Statement of Changes in Equity
For the year ended 31 December 2016
ShareCapital SharePremium Shares tobe ShareOptionReserve LoanNoteReserve RetainedEarnings Total
issued
GBP GBP GBP GBP GBP GBP
At 1 January 2,562,914 14,807,570 286,000 1,610,361 - (14,996,556) 4,270,289
2015
Loss for - - - - - (777,170) (777,170)
the year
Total - - - - - (777,170) (777,170)
comprehensive
loss for
the year
Issue of shares 260,668 1,911,395 - - - - 2,172,063
Expenses - (133,552) - - - - (133,552)
of issue
Transfer on - - - (1,428,361) - 1,428,361 -
expiry
of options
Total other 260,668 1,777,843 - (1,428,361) - 1,428,361 2,038,511
movements
At 31 December 2,823,582 16,585,413 286,000 182,000 - (14,345,365) 5,531,630
2015
Loss for - - - - - (769,368) (769,368)
the year
Total - - - - - (769,368) (769,368)
comprehensive
loss for
the year
Issue of shares 123,005 2,540,790 - - - - 2,663,795
Expenses - (116,611) - - - - (116,611)
of issue
Share based - - - 33,850 - - 33,850
payment
charges
Transfer on - - - (130,000) - 130,000 -
expiry
of options
Equity element - - - - 37,500 - 37,500
of convertible
loan notes
issued
Total other 123,005 2,424,179 - (96,150) 37,500 130,000 2,618,534
movements
At 31 December 2,946,587 19,009,592 286,000 85,850 37,500 (14,984,733) 7,380,796
2016
The notes below form part of the financial statements.
The following describes the nature and purpose of each reserve
within owners' equity:
Reserve Description and purpose
Share capital amount subscribed for share
capital at nominal value
Share premium amount subscribed for share
capital in excess of
nominal value, net of allowable expenses
Shares to be issued value of share capital to
be issued in connection
with the acquisition of Netcom
Share option reserve cumulative charge recognised under IFRS 2 in
respect of share-based payment awards
Loan note reserve equity element of convertible loan notes
Retained earnings cumulative net gains and losses recognised
in the statement of comprehensive income
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
2016 2015
GBP GBP
Cash flows from operating activities
Loss before taxation (921,675) (991,512)
Adjustment for:
Depreciation 11,929 12,545
Unrealised foreign exchange differences - 48,549
Loan note accretion 5,471 34,490
(Profit)/loss on sale of investments (82,064) 24,335
Impairment of investment 301,047 316,213
Interest income - (49)
Share based payment charge 33,850 -
Shares issued in settlement of liabilities 327,050 165,250
Accrued interest payable 6,511 1,714
(317,881) (364,130)
Changes in working capital 21,951 415
Receivables
Payables 155,247 60,412
Net cash generated from/used (140,683) (303,303)
in operating activities
Cash flows from investing activities
Expenditure on exploration (1,046,408) (1,158,019)
and evaluation assets
Purchase of listed investments - (7,986)
Sale of listed investments 153,625 7,860
Interest received - 49
Net cash used in investing activities (892,783) (1,158,096)
Cash flows from financing activities
Proceeds from share placement 1,105,000 1,502,994
Issue costs (116,611) (133,552)
Proceeds from issue of loan notes - 120,000
Repayment of loan notes - (80,619)
Net cash from financing activities 988,389 1,408,823
Net decrease in cash and cash equivalents (45,077) (76,911)
Cash and cash equivalents at 1 January 2016 160,938 237,849
Cash and cash equivalents at 31 December 2016 115,861 160,938
The notes below form part of the financial statements.
Company Statement of Cash Flows
For the year ended 31 December 2016
2016 2015
GBP GBP
Cash flows from operating activities
Loss before taxation (769,368) (777,170)
Adjustment for:
Interest income - (49)
Share based payment charge 33,850 -
Loan note accretion 5,471 34,490
(Profit)/loss on sale of investments (82,064) 24,335
Impairment of investment 301,047 316,213
Shares issued in settlement of liabilities 327,050 165,250
Accrued interest payable 6,511 1,714
(177,503) (235,217)
Changes in working capital
Receivables 38,300 120,194
Payables 596 13,777
Net cash used in operating activities 138,607 (102,246)
Cash flows from investing activities
Acquisition of investments and (1,028,339) (1,415,353)
advances to subsidiaries
Purchase of listed investments - (7,986)
Sale of listed investments 153,625 7,860
Interest received - 49
Net cash used in investing activities (874,714) (1,415,430)
Cash flows from financing activities
Proceeds from share placement 1,105,000 1,502,994
Issue costs (116,611) (133,552)
Proceeds from issue of loan notes - 120,000
Repayment of loan notes - (80,619)
Net cash from financing activities 988,389 1,408,823
Net decrease in cash and cash equivalents (24,932) (107,930)
Cash and cash equivalents at 1 January 2016 125,811 233,741
Cash and cash equivalents at 31 December 2016 100,879 125,811
The notes below form part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
1.Incorporation and principal activities
Country of incorporation
The Company was incorporated in the United Kingdom as Watermark
Global Plc, a Public Limited Company, on 19 August 2005. The name
of the Company was changed to Armadale Capital Plc on 2 July 2013.
Its registered office is 55 Gower Street, London WC1E 6HQ. The
Company is domiciled in the UK.
2.Accounting policies
2.1. Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
The principal accounting policies are set out below.
2.2. Going Concern
The financial statements have been prepared on the going concern
basis as, in the opinion of the directors, there is a reasonable
expectation that the Group and Company will continue in operational
existence for the foreseeable future.
The Group had net current liabilities at 31 December 2016 of
GBP668,830 including GBP450,000 of convertible loan notes due July
2017. Based on correspondence with the loan note holders, the
Company expects to be able to extend 58.5% of the notes for a
further period of 12 months on the same terms. The remaining notes
are expected to be converted into Ordinary Shares under the terms
of the governing deed subject to the condition that conversion does
not cause the note holder's shareholding to exceed 29.9%, which at
present it is not expected to exceed.
Since the end of the year, the Company has continued its
appraisal operations at its Mahenge Liandu graphite project. In
order to fund this exploration and evaluation expenditure and to
cover the net current asset deficit, the Company raised GBP650,750
through the issue of 26,030,000 Ordinary Shares at 2.5p per
share.
At 23 May 2017, the Company had cash of approximately
GBP300,000. The directors have prepared a cashflow forecast for the
next twelve months which shows that the cash in hand is sufficient
to meet current commitments in respect of exploration expenditure
and corporate overheads for a period of approximately 10
months.
The Company's ability to continue as a going concern and to
achieve its long term strategy of developing its exploration
projects is dependent on the extension and/or conversion of the
loan notes and further fundraising. As described above, the
Directors expect to be able to convert or extend the existing loan
notes, and against the background of the encouraging initial
results from the Mahenge Liandu graphite project and the Company's
history of raising funds through the issue of equity, the directors
also consider that the Company is likely to be able to raise the
required capital. However, there are currently no binding
agreements in place. Should the Directors be unable to raise
sufficient funds and extend or convert the loan notes, the Company
may be unable to realise its assets and discharge its liabilities
in the normal course of business.
These factors indicate the existence of a material uncertainty
which may cast significant doubt over the Group's and Company's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the Group or
Company were unable to continue as a going concern.
2.3. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the Consolidated Statement of Comprehensive
Income from the effective date of acquisition and up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by the Group.
All intra-Group transactions, balances, income and expenses are
eliminated in full on consolidation.
2.4. Acquisitions of exploration licences
The acquisition of Netcom, Kisenge and Graphite Advancement,
were principally the acquisition of mining licences effected
through non-operating corporate structures. As the structure does
not represent a business, it is considered that the transactions do
not meet the definition of a business combination. Accordingly each
transaction is accounted for as the acquisition of an asset. Future
consideration for shares is contingent and is recognised as an
asset or liability based on the valuation of the shares as at the
date of acquisition. Contingent future consideration for shares is
not subsequently revalued.
2.5. Foreign currencies
The individual financial statements of each Group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each Group entity are expressed in pounds
sterling, which is the functional currency of the Company and the
presentation currency for the consolidated financial
statements.
Transactions in currencies other than the entity's functional
currency (foreign currencies) are recognised at the rates of
exchange prevailing at the dates of the transactions. At the end of
each reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign currency are
not retranslated. Exchange differences are recognised in profit or
loss in the period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
expressed in Pounds using exchange rates prevailing at the end of
the reporting period. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive
income.
2.6. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand,
with a maturity date of less than three months from inception.
2.7. Share-based payments
IFRS 2 'Share-based Payment' requires the recognition of
equity-settled share-based payments at fair value at the date of
grant and the recognition of liabilities for cash-settled share
based payments at the current fair value at each reporting
date.
The Group provides benefits to employees and service providers
(including senior executives) of the Group in the form of share
based payments, whereby employees render services in exchange for
shares or rights over shares (equity-settled transactions).
Where the equity-settled transactions are share options their
cost is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value
is determined by using a Black-Scholes model.
In valuing equity-settled transactions, no account is taken of
any performance conditions, other than market conditions linked to
the price of the shares of the Company, if applicable.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or other service conditions are fulfilled,
ending on the date on which the relevant employees become fully
entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled
transactions at each reporting date until vesting date reflects (i)
the extent to which the vesting period has expired and (ii) the
Group's best estimate of the number of equity instruments that will
ultimately vest. No adjustment is made for the likelihood of market
performance conditions being met as the effect of these conditions
is included in the determination of fair value at grant date. The
profit and loss account charge or credit for a period represents
the movements in cumulative expense recognised as at the beginning
and end of that period.
If an equity-settled award is cancelled, it is treated as if it
had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award and designated as
a replacement award on the date that it is granted, the cancelled
and new award are treated as if they were a modification of the
original award. The dilutive effect, if any, of outstanding options
is reflected as additional share dilution in the computation of
earnings per share.
Share based payments in respect of third party services are
measured by reference to the value of services provided and share
price at the relevant date.
2.8. Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current Tax
The tax currently payable is based on taxable profit for the
year. The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax
assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by the
end of the reporting period. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of
the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax and current tax assets and liabilities are offset
when there is a legally enforceable right to set off when they
relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities
on a net basis.
Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income
in profit or loss, except when they relate to items that are
recognised outside profit or loss (whether in other comprehensive
income or directly in equity), in which case the tax is also
recognised outside profit or loss, or where they arise from the
initial accounting for a business combination. In the case of a
business combination, the tax effect is included in the accounting
for the business combination.
2.9. Exploration and evaluation costs
Once an exploration licence or an option to acquire an
exploration licence has been obtained, all costs associated with
exploration and evaluation are capitalised on a project-by-project
basis pending determination of the feasibility of the project.
Costs incurred include appropriate technical and administrative
expenses and a pro-rata share of the Group's finance costs but not
general overheads. If a mining property development project is
successful, the related expenditures will be amortised over the
estimated life of the commercial ore reserves on a unit of
production basis. Where a licence is relinquished, a project is
abandoned, or is considered to be of no further commercial value to
the Company, the related costs will be written off to the statement
of comprehensive income in the period the impairment is identified.
Unevaluated mineral properties are assessed at reporting date for
impairment in accordance with the policy set out below. If
commercial reserves are developed, the related deferred development
and exploration costs are then reclassified as development and
production assets within property, plant and equipment.
2.10. Investments
Investments in the individual company accounts, including those
in subsidiary companies, are stated at cost less any provision for
impairment, which is recognised as an expense in the statement of
comprehensive income in the period the impairment is
identified.
In the Group accounts, equity investments are included on the
balance sheet as assets available for sale at fair value with value
changes being recognised in other comprehensive income unless an
impairment is considered to be permanent in which case it is
recognised in the statement of comprehensive income. Associates in
the Group accounts are recognised at cost less the Group's share of
profits or losses of the associate.
2.11. Joint Arrangements
The group is a party to a joint arrangement when there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The group classifies its interests in joint arrangements as
either: (a) Joint ventures: where the group has rights to only the
net assets of the joint arrangement; (b) Joint operations: where
the group has both the rights to assets and obligations for the
liabilities of the joint arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers: (a) The structure of the joint
arrangement; (b) The legal form of joint arrangements structured
through a separate vehicle; (c) The contractual terms of the joint
arrangement agreement; and (d) Any other facts and circumstances
(including any other contractual arrangements).
The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, revenues and expenses
in accordance with its contractually conferred rights and
obligations.
2.12. Plant, equipment and vehicles
Fixtures and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses.
Depreciation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives, using the straight-line method. The estimated useful lives
and residual values are reviewed at each year end, with the effect
of any changes in estimate accounted for on a prospective
basis.
Plant, equipment and vehicles 3-10 years on a straight line basis
The depreciation cost relating to assets used in the development
of mineral deposits is capitalised until the deposit is bought into
production.
2.13. Impairment of assets
At the end of each reporting period, the Directors review the
carrying amounts of assets to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss
(if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
the statement of comprehensive income, unless the relevant asset is
carried at a revalued amount, whereby impairment is first allocated
to the revaluation reserve, to the extent that it has been
previously revalued, with any excess taken to the statement of
comprehensive income.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in other
comprehensive income, unless the relevant asset is carried at a
re-valued amount, in which case the reversal of the impairment loss
is treated as a revaluation increase.
2.14. Financial assets
Loans and receivables are recognised when the Company and Group
become party to the contractual provisions of the financial
instrument.
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as 'loans and receivables'. Loans and receivables
are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
2.15. Financial liabilities and equity instruments issued by the
Group
Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs.
Financial assets
Financial assets comprise debtors and other investments.
Financial liabilities
Financial liabilities are recognised when the Company and Group
become party to a loan.
Financial liabilities represent trade payables and
borrowings.
Convertible loan notes
The loan notes may be converted into the Company's shares and
are therefore classified as a compound financial instrument in
accordance with the requirements of IAS 32. The debt element is
calculated as the present value of future cash flows assuming the
loan notes are redeemed at the redemption date, discounted at the
market rate for an equivalent debt instrument with no option to
convert to equity. The difference between the cash payable on
maturity and the present value of the debt element is recognised in
equity. The discount is charged over the life of the loan notes to
the statement of comprehensive income and included within finance
expenses.
2.16. Standards issued but not in force
New interpretations and revised standards effective for the year
ended 31 December 2016
There were no new standards issued in respect of the year ended
31 December 2016 that were relevant for adoption by the Group.
Standards and interpretations in issue but not yet effective
A number of new standards and amendments to existing standards
have been published which are mandatory, but are not effective for
the year ended 31 December 2016:
-- IFRS 9 Financial instruments (effective 1 Jan 18);
-- IFRS 15 Revenue from contracts with customers (effective 1 Jan 18);
-- IFRS 16 Leases (effective 1 Jan 2019);
-- IAS 12 (amended) Recognition of deferred tax asset for unrealised
losses (effective 1 Jan 17);
-- IAS 7 Disclosure initiative (effective 1 Jan 17); and
-- IFRS 2 (amended) Classification and measurement of share based payment
transactions (effective 1 Jan 18).
The Group considers that the only Standard that may have any
impact is IFRS 9. The new Standard will replace existing accounting
Standards in relation to Financial Instruments. It is applicable to
financial assets and liabilities and will introduce changes to
existing accounting concerning classification, measurement and
impairment (introducing an expected loss method). The Group is
currently assessing the impact of IFRS 9.
The Group is not revenue generating thus there is no impact of
IFRS 15 as there are no revenue contracts in place at this
time.
The Group will adopt the above Standards at the time stipulated
by that Standard. The Group does not at this time anticipate
voluntary early adoption of any of the Standards.
3.Significant judgements and sources of estimation
uncertainty
In preparing the annual financial statements of the Group,
management is required to make estimates and assumptions that
affect the amounts represented in the annual financial statements
and related disclosures. Use of available information and the
application of judgement are inherent in the formation of
estimates. Actual results in the future could differ from these
estimates which may be material to the annual financial statements.
The directors consider that the only significant source of
estimation uncertainty relates to the number of shares to be issued
in respect of milestone achievements on the Mpokoto project (note
12).
The principal significant judgements are:
Going concern
The financial statements have been prepared on the going concern
basis as, in the opinion of the directors, there is a reasonable
expectation that the Group will continue in operational existence
for the foreseeable future, as explained more fully in note
2.2.
Investment and debtors
At 31 December 2016 the Company held approximately 26% of the
issued share capital of MRI, a South African listed company. In the
judgement of the Directors, the Company does not have significant
influence over MRI as it does not have any representation on the
Board, nor does it have the power to appoint anyone to the Board.
MRI is therefore held as an investment.
Trading in the shares of MRI has been suspended and the company
is not trading. Accordingly, in the opinion of the directors, the
market value of the shares is nil and full provision for impairment
has been made.
Exploration and evaluation assets
These represent the accumulated costs, including capitalised
finance costs, to the Group of its mineral projects. Their
commercial realisation is dependent upon the successful economic
development of the gold and graphite deposits and should the
development not be achieved, an impairment of these assets would
arise. As at the year end the directors were of the opinion that
there were no indicators of impairment.
In addition, at the Company level:
Impairment of investment in subsidiaries
Investments in subsidiaries represent the accumulated costs that
the parent Company has invested in its subsidiaries to fund the
mineral projects. The recovery of these investments is dependent
upon the successful economic development of the gold and graphite
deposits and should the development not be achieved, an impairment
of these investments would arise. At the year end the directors
were of the opinion that there were no indicators of
impairment.
4.Financial Risk Management Policy
The Group and Company regularly monitor the cash position to
ensure liabilities can be met.
Financial risk factors
The risk in relation to financial assets is considered to be
minimal and is managed on a day-to-day basis.
The Group and Company is exposed to liquidity risk, currency
risk and capital risk management arising from the financial
instruments it holds. The Company has receivables from its
subsidiaries as disclosed in note 14. The recovery of these
receivables is dependent on whether the mining projects are
successful and they are not expected to be recovered in the short
term. The risk management policies employed by the Group and
Company to manage these risks are discussed below:
Liquidity Risk
Liquidity risk is the risk that arises when the maturity of
assets and liabilities does not match. The Group and Company
manages liquidity risk by maintaining adequate reserves and banking
facilities, by monitoring cash flows and managing the maturity
profiles of financial assets and liabilities within the bounds of
contractual obligations.
Currency Risk
Currency risk is the risk that the value of financial
instruments will fluctuate due to changes in foreign exchange
rates. Currency risk arises when future commercial transactions and
recognised assets and liabilities are denominated in a foreign
currency that is not the Group's functional currency. The Group is
exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the South African Rand and the
US Dollar. The Group's management monitors the exchange rate
fluctuations on a continuous basis. The Group's convertible loan is
denominated in GBP as disclosed in note 17.
Capital Risk Management
The Group and Company manages its capital to ensure that it will
be able to continue as a going concern while maximising the return
to shareholders through the optimisation of the debt and equity
balance. This is done through the monitoring of cash flows.
The capital structure of the Group and Company consists of cash
and cash equivalents, equity attributable to equity holders of the
parent, (comprising issued capital and reserves less accumulated
losses) and loan notes.
Commodity risk
The value of the Group's exploration and evaluation assets is
principally exposed to two commodities, gold and graphite. The
value of the projects is vulnerable to fluctuations in the
prevailing market price of these commodities.
Fair value estimation
The fair values of the Group's and Company's financial assets
and liabilities approximate to their carrying amounts at the
reporting date.
Non-current asset investments (excluding investments in
subsidiaries at the Company level) are measured at fair value. The
fair value is based upon observable inputs and the level of the
fair value hierarchy within the measurement is categorised as Level
1. Current asset investments are measured at fair value and are
categorised as Level 2. There were no transfers between Level 1 and
Level 2 for the year.
5.Segmental Information
Costs incurred in developing the Group's exploration projects
are capitalised in full, accordingly, the expenses reported in the
Consolidated Statement of Comprehensive Income solely represent
central Group overheads.
In terms of assets and liabilities, the only material items are
the exploration and evaluation asset relating to the Group's
projects in the Democratic Republic of Congo ("DRC") and Tanzania.
The analysis of this asset is as follows
2016 2015
GBP GBP
DRC 5,820,128 4,923,190
Tanzania 1,998,838 -
7,818,966 4,923,190
6.Loss before tax
This is stated after charging:
2016 2015
GBP GBP
Directors' emoluments - fees 150,000 99,087
Directors' emoluments - compensation for loss of office 123,000 -
Depreciation 11,929 12,545
Auditors' remuneration:
Fees payable to the Company's auditors for the audit 30,000 30,000
of the Group and Company financial statements
Fees payable to the Company's auditors 2,450 5,197
for taxation compliance services
Gain on disposal of investments (82,064) -
Share based payment charge 33,850 -
Impairment of investments 301,047 316,213
7.Employees
2016 2015
The average monthly number of persons
(including Directors)
employed by the Group during the year was:
Group - management 3 3
Group - staff 9 12
12 15
Company-management 3 3
Employment costs GBP GBP
Group
Wages and salaries (including directors) 301,224 297,915
Payments in lieu of notice 123,000 -
Social security costs 22,511 11,914
446,735 309,829
Company
Wages and salaries (including directors) 150,000 99,087
Payments in lieu of notice 123,000 -
273,000 99,087
8.Remuneration of Directors of the Company
Aggregate emoluments 273,000 99,087
Emoluments of the Highest Paid Director 96,000 49,999
All Directors of the Group and Company are considered to be the
key management personnel.
Of the total employment costs, a value of GBP273,735 has been
capitalised within E&E asset additions in the year ended 31
December 2016 (GBP210,742) for the year ended 31 December
2015).
9.Taxation
2016 2015
GBP GBP
Continuing operations
Current Tax
Current tax on loss for the year - -
2016 2015
GBP GBP
Continuing operations
Factors affecting the tax charge for the year
Loss on ordinary activities before taxation (921,675) (991,512)
Loss on ordinary activities before (184,335) (200,781)
taxation multipliedby
standard rate of UK corporation
tax of 20% (2015:20.25%)
Effects of:
Losses carried forward not recognised 177,565 200,781
as a deferred tax asset
Expenses disallowed 6,770 -
UK Corporation tax - -
A deferred tax asset of approximately GBP1,334,000 (2015:
GBP1,179,000) has not been recognised owing to the uncertainty over
the timing of future recoverability.
10.Loss per share
The calculation of loss per share is based on a loss of
GBP921,675 (2015, GBP991,512), and on 148,922,833 ordinary shares
(2015, 51,875,616 ), being the weighted average number of shares in
issue during the year.
There is no difference between basic loss per share and diluted
loss per share as the potential ordinary shares are
anti-dilutive.
The company has issued options over ordinary shares which could
potentially dilute basic earnings per share in the future.
11.Exploration and evaluation assets
Group 2016 2015
GBP GBP
Cost
At 1 January 4,923,190 3,515,769
Exchange movements 959,679 42,817
Acquisition of licence in Tanzania (note 13) 1,607,736 -
Additions 1,288,040 1,364,604
At 31 December 8,778,645 4,923,190
Included in additions are capitalised finance costs of GBP25,542
(2015, GBP131,958).
As production has not commenced, no amortisation was charged
during the year, in accordance with the Group's accounting
policy.
12.Property, plant and equipment
Group
Plant Equipment Vehicles Total
Cost GBP GBP GBP GBP
At 1 January 2015 11,902 9,983 15,300 37,185
Exchange Movements 663 556 853 2,072
At 31 December 2015 12,565 10,539 16,153 39,257
Exchange movements 2,477 2,078 3,184 7,739
At 31 December 2016 15,042 12,617 19,337 46,996
Depreciation
At 1 January 2015 71 1,157 1,630 2,858
Exchange Movements 4 65 91 160
Charge for the year 298 4,796 7,451 12,545
At 31 December 2015 373 6,018 9,172 15,563
Exchange Movements 73 1,186 1,808 3,067
Charge for the year - 5,387 6,542 11,929
At December 2016 446 12,591 17,522 30,559
Net book value
At 31 December 2016 14,596 26 1,815 16,437
At 31 December 2015 12,192 4,521 6,981 23,694
13.Investments
Non-current asset investments - Group
Listedinvestments
Cost GBP
At 1 January 2015 76,619
Additions 7,986
At 31 December 2015 84,605
Disposals (77,900)
At 31 December 2016 6,705
Impairment
At 1 January 2015 46,500
Impairment (release) (18,500)
At 31 December 2015 28,000
Impairment (release) (28,000)
At 31 December 2016 -
Net book value
At 31 December 2016 6,705
At 31 December 2015 56,605
Non-current asset investments - Company
In addition to the above investments, included within
non-current asset investments in the Company's statement of
financial position, is GBP4,445,209 (2015: GBP2,845,209) in
relation to investments in its subsidiaries. Additions in the year
were GBP1,600,000 (2015: GBPnil). There were no disposals or
impairment charges in the current or prior year.
2016 2015
Current asset investments - Group and Company GBP GBP
At 1 January 2016 322,708 689,616
Disposals (21,661) (32,195)
Impairment charge for year (301,047) (334,713)
Valuation at 31 December 2016 - 322,708
The Group has an interest of approximately 26% in MRI, a company
involved in the processing of coal fines.
As there is an intention to sell the investment in MRI, it has
been classified as a current asset investment. Trading in MRI's
shares has been suspended and the company has become inactive. In
the opinion of the directors, the market value of the shares is nil
and accordingly a further charge has been recorded in the year to
reduce the value of the investment to nil.
The subsidiary companies are:
Name and nature Registered Office Class ofshares %held
of business
Netcom Global Inc. 555 Hunkins Waterfront Ordinary 100
(intermediate holding Plaza, Charleston, Nevis
company)
Kisenge Limited 171 Main Street, Road Town, Ordinary 100
(intermediate holding British Virgin Islands
company)
Cluff Mining 34 Avenue de la Liberte, Ordinary 100
Congo, SARL* Lubumbashi
(mining project Democratic Republic
operator) of Congo
Mines D'Or de Kisenge, 34 Avenue de la Liberte, Ordinary 80
SARL* Lubumbashi,
(mining licence Democratic Republic
holder) of Congo
Graphite Advancements 3 Queens Grove, Mount Ordinary 100
Pty Ltd Claremont,
Western Australia 40010
Graphite Advancements PO Box 105589, Ordinary 100
(Tanzania) Dar es Salaam,
Limited? Tanzania
Water Utilities 171 Main Street, Road Town, Ordinary 100
Limited British Virgin Islands
(in process of
dissolution)
* Held through Kisenge Limited
? Held through Graphite Advancements Pty Ltd
The interest of 20% in Mines d'Or de Kisenge, SARL not held by
the Group is held by Entreprise Miniere de Kisenge- Manganese SARL
("KMC") a Congolese Government entity. KMC is entitled to
participate in future revenues from the project. As KMC was not
required to contribute to its share of exploration and evaluation
costs and no revenues have yet been generated, there is no
non-controlling interest to report in these financial
statements.
In July 2016, the Company completed the acquisition of 100% of
Graphite Advancements Pty Ltd ("GA") which through its subsidiary,
Graphite Advancements (Tanzania) Limited, holds the exploration
rights to the Mahenge Liandu graphite project in Tanzania.
Consideration for the acquisition was GBP1,600,000, satisfied by
the issue of 57.5 million ordinary shares of 0.1p in the company
and of GBP450,000 unsecured loan notes. As disclosed in the
accounting policies the acquisition of GA was accounted for as an
asset acquisition rather than a business combination and the value
of the consideration paid was recognised by the Group as additions
to exploration and evaluation assets in note 11.
Under the terms of acquisition of Netcom Global Inc, completed
on 15 November 2013, further ordinary shares in the company were
potentially to be issued to the vendors as follows:
i. 350 million (now 2.333 million) Ordinary Shares issued upon
the grant of Exploration Licences for the Mpokoto Project to the
Company (the "Further Consideration Shares"). The Further
Consideration Shares, valued at 0.26p per share, were included as
part of the cost of the investment in Netcom.
ii. up to 220 million (now 1.467 million) Ordinary Shares were
to be issued upon the completion of three key milestones (the
"Milestone Shares"):
-- 60 million (now 0.4 million) Ordinary Shares upon completion of a
pre-feasibility study;
-- 60 million (now 0.4 million) Ordinary Shares upon the delineation of a
JORC reserve of at least 120,000 ounces of gold; and
-- 100 million (now 0.667 million) Ordinary Shares upon the production of
the first 5,000 ounces of gold from the project.
The directors assessed a 100% likelihood of the first two
milestones being achieved and a 50% likelihood of the third
milestone being achieved.
The value of the milestone shares was included as part of the
cost of the investment in Netcom, valued at 0.26p per share.
During 2014, the conditions applying to the Further
Consideration Shares and the first tranche of Milestone Shares were
fulfilled and accordingly 410 million (now 2.733 million) Ordinary
Shares in the Company were issued to the vendors.
The conditions applying to the second and third tranche of
Milestone Shares have not yet been fulfilled.
14.Trade and other receivables
Group 2016 2015
GBP GBP
Unpaid proceeds of share placing - 135,000
Other debtors and prepayments 160,279 182,230
Total current receivables 160,279 317,230
Company
Amounts owed by group undertakings 3,358,091 2,159,250
Total non-current receivables 3,358,091 2,159,250
Unpaid proceeds of share placing - 135,000
Other receivables 6,856 18,495
Total current receivables 6,856 153,495
The company is also owed a debt of GBP998,000 secured on shares
in MRI. In the opinion of the directors, the ability of the debtor
to repay the debt is seriously in doubt and accordingly the amount
has been provided against in full.
15.Trade and other payables
Group 2016 2015
GBP GBP
Trade payables 144,366 178,599
Other creditors and accruals 350,367 160,887
494,733 339,486
Company
Trade payables 27,795 30,361
Other creditors and accruals 58,912 55,750
86,707 86,111
All trade and other payables are due within three months.
16.Loan notes
Group and Company 2016 2016 2015
10% Notes 12% Notes 12% Notes
GBP GBP GBP
Balance 1 January - 45,337 200,000
Issued 450,000 - -
Transfer to loan note reserve (37,500) - -
Accrued interest 20,096 906 5,530
Accretion of liability 17,641 - -
Repaid - - (160,193)
Converted - (46,243) -
Balance 31 December 450,237 - 45,337
The 10% Loan Notes were issued on 11 July 2016 as part of the
consideration for the acquisition of Graphite Advancements Pty Ltd
(see note 13). The Loan Notes are unsecured, pay interest at 10%
per annum, and are convertible into Ordinary Shares at 2p per
Ordinary Share, together with any interest owing. The Loan Notes
convert 12 months from issue, or earlier at the option of the
Company, provided such conversion does not result in the holders
owning more than 29.9% of the issue share capital of the Company.
The liability component of the loan notes was valued in accordance
with the accounting policy set out in note 1 using an interest rate
of 20%.
The 12% loan notes were issued on 8 June 2015 to fund the
repayment of the convertible loan notes (see note 17). The notes
accrued interest at 12 per cent per annum and were repayable six
months from the date of issue. The remaining notes together with
accrued interest were repaid in full on 29 February 2016 by
conversion into Ordinary Shares in the Company (see note 18).
17.Convertible loan notes (non-current)
2016 2015
Group and Company GBP GBP
At 1 January - 216,570
Issued in year - -
Converted - (208,626)
Transfer from /(to) derivative liability - 41,416
Accretion on loan notes - 111,259
Repaid - (160,619)
- -
18.Share capital
Ordinary Sharesof 0.01p/0.1p each* Deferred Sharesof 0.14p each Deferred Sharesof 1.4p each
Number GBP Number GBP Number GBP
At 1 January 4,189,901,168 418,991 1,531,374,350 2,143,923 - -
2015
Issue of shares 2,149,178,829 214,918 - - - -
Consolidation (6,296,819,464) (591,648) - - 42,260,533 591,648
and
reorganisation
Issue of shares 45,750,000 45,750,000 - - - -
At 31 December 88,010,533 88,011 1,531,374,350 2,143,923 42,260,533 591,648
2015
Issue of shares
For cash 45,000,000 45,000 - - - -
In 57,500,000 57,500 - - - -
part consideration
of acquisition
of subsidiary
On conversion of 1,541,434 1,541 - - - -
loan notes
To 18,964,343 18,964 - - - -
settle liabilities
At 31 December 211,016,310 211,016 1,531,374,350 2,143,923 42,260,533 591,648
2016
* The nominal value of each Ordinary Share was 0.01p until the
consolidation and reorganisation of the share capital on 22 June
2015 and 0.1p thereafter
19.Share based payment arrangements
3,000,000 options over Ordinary Shares in the Company were
granted during the year (2015, nil).
A summary of outstanding options is as follows:
Exerciseprice Held Expired Held Granted Expired Held
at at at
1January2015 1January2016 31December2016
Directors
PA Marks
Granted 15p 333,333 - 333,333 - (333,333) -
01.10.13
Granted 15p 333,333 - 333,333 - (333,333) -
19.11.14
JLG Lewis
Granted 15p 333,333 - 333,333 - (333,333) -
01.10.13
Granted 15p 666,667 - 666,667 - (666,667) -
19.11.14
W Frewen
Granted 2p - - - 1,000,000 - 1,000,000
21.07.16
Granted 4p - - - 1,000,000 1,000,000
21.07.16
ES Mahede
Granted 2p - - - 250,000 - 250,000
10.08.16
Granted 4p - - - 250,000 - 250,000
10.08.16
N Johansen
Granted 2p - - - 250,000 - 250,000
16.10.16
Granted 4p - - - 250,000 - 250,000
16.10.16
Consultants
Granted 100.5p 6,667 (6,667) - - - -
11.02.08
Granted 30p 13,333 (13,333) - - - -
01.07.09
Granted 15p 266,667 - 266,667 - - 266,667
01.10.13
Granted 15p 400,000 - 400,000 - - 400,000
19.11.14
*2,353,333 (20,000) 2,333,333 3,000,000 1,166,166 3,666,667*
The number of options and their exercise prices have been
adjusted for the effects of the share capital sub-division on 28
June 2013 and the share capital consolidation and reorganisation on
22 June 2015
* representing 1.73% of the issued share capital of the
company
All of the outstanding options held at year end were exercisable
at a weighted average exercise price of 5p (2016:15p).
The following information is relevant in the determination of
the fair value of the options granted during the year:
The inputs to the Black-Scholes model were as follows:
2016
Share price 2p to 3.12p
Exercise price 2p to 5p
Expected volatility 71%
Risk free rate of interest 1%
Expected dividend yield 0%
Expected life 4 years
Expected volatility was determined by reference to the
historical volatility of similar listed entities.
20.Reserves
A description of the nature of each Reserve and a summary of
movements are shown in the Statements of Changes in Equity on pages
25 and 26.
21.Related party transactions
During the year payments of GBP30,000 (2015: GBP40,000) and
GBPnil (2015: GBP40,000) were made to Henslow Pty Ltd and Halcyon
Corporate Pty Limited respectively for consultancy services. The
services provided include fundraising and corporate services, as
well as the provision of additional time by Justin Lewis. Justin
Lewis is a director of Henslow Pty Ltd and Halcyon Corporate Pty
Limited, There were no amounts outstanding in respect of these
transactions at 31 December 2016 (2015, nil).
In respect of the Company, amounts due from subsidiary
undertakings were GBP3,358,091 (2015 - GBP2,159,250), the movement
being amounts lent to the subsidiaries.
22.Ultimate controlling party
There was no ultimate controlling party during the year.
23.Subsequent events
On 18 January 2017, the Company placed 26,030,000 Ordinary
Shares of 0.1p at a price of 2.5p to raise GBP650,750 before
expenses. On the same date, the company issued 1,250,000 ordinary
shares to a service provider.
**ENDS**
For further information please visit www.armadalecapitalplc.com
or contact:
Enquiries:
Armadale Capital Plc +44 20 7236 1177
Nick Johansen
Nomad and broker: finnCap Ltd +44 20 7220 0500
Christopher Raggett / Simon Hicks
Joint Broker: Beaufort Securities Limited +44 20 7382 8300
Jon Belliss
Press Relations: St Brides Partners Ltd +44 20 7236 1177
Susie Geliher / Charlotte Page
Notes
Armadale Capital Plc is focused on investing in and developing a
portfolio of investments, targeting the natural resources and/or
infrastructure sectors in Africa. The Company, led by a team with
operational experience and a strong track record in Africa, has a
strategy of identifying high growth businesses where it can take an
active role in their advancement.
The Company owns the Mahenge Liandu graphite project in
south-east Tanzania, which is now its main focus. The Project is
located in a highly prospective region with a high-grade JORC
compliant inferred mineral resource estimate of 40.9Mt @ 9.41% TGC.
At least 32Mt of this resource has an average grade of 10.47% TGC,
one of the largest high-grade resources in Tanzania, and work to
date has demonstrated Mahenge Liandu's potential as a commercially
viable deposit with significant tonnage, high-grade coarse flake
and near surface mineralisation (implying a low strip ratio)
contained within one contiguous ore body.
Other assets Armadale has an interest in include the Mpokoto
Gold project in the Democratic Republic of Congo and a portfolio of
quoted investments.
View source version on businesswire.com:
http://www.businesswire.com/news/home/20170601006741/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
June 02, 2017 02:00 ET (06:00 GMT)
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