GGP Greatland Gold Plc

Notes to the Consolidated Financial Statements

1.    Corporate information

The half-year consolidated financial statements of Greatland Gold plc (Greatland or the Company) and its subsidiaries (collectively, the Group) for the six months ended 31 December 2023 were authorised for issue in accordance with a resolution of the Directors on 5 March 2024.

Greatland is a company incorporated in England and Wales whose shares are publicly traded on the AIM market (AIM: GGP). The nature of the operations and principal activities of the Company are described in the Directors' Report.

2     Basis of preparation

The consolidated financial statements for the half-year ended 31 December 2023 are general purpose condensed financial statements prepared in accordance with IAS 34 Interim Financial Reporting and UK-adopted international accounting standards and are presented in sterling (£). The financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The information relating to the half-year periods to 31 December 2023 and 31 December 2022 are unaudited. PKF Littlejohn LLP has issued an independent review report on the half-year periods 31 December 2023 and 31 December 2022. The review report for 31 December 2023 can be found on page 18.

The half-year consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 30 June 2023 and considered together with any public announcements made by Greatland during the half-year ended 31 December 2023. The annual report of the Group for the year ended 30 June 2023 is available at http://greatlandgold.com. The report of auditors on those financial statements was unqualified.

The accounting policies adopted are consistent with those applied by the Group in the preparation of the annual consolidated financial statements for the year ended 30 June 2023. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

The amounts contained in this financial report have been rounded to the nearest £1,000 where noted (£000) under the option available to the Company under the Companies Act 2006.

Going Concern

The Group's principal activities include the development of Havieron. At 31 December 2023, the Group had net current assets of £15.6 million, with cash of £12.7 million and advanced Havieron joint venture cash contributions of £6.4 million.

In addition, Greatland has access to a A$50 million (c.£26.8 million) undrawn standby loan facility with Wyloo Consolidated Investments Pty Ltd (Wyloo) and a signed non-legally binding Letter of Support from its banking syndicate comprising of Australian and New Zealand Banking Group Limited, HSBC Bank and ING Bank (Australia) (together, the Banking Syndicate). The Letter of Support provides that the Banking Syndicate are fully supportive and interested in the provision of A$220 million (c.£117.9 million) seven-year syndicated debt and associated hedging facilities subject to completion of the Havieron Feasibility Study.

Management has prepared cash flow forecasts for the next twelve months under various scenarios. These scenarios anticipate the Group will be able to meet its commitments and pay its debts as and when they fall due subject to an equity raise or utilisation of the Wyloo debt facility and completion of the Havieron Feasibility Study allowing access to project financing from the banking syndicate of A$220 million. The Group is confident that it has the ability to raise additional equity or debt, if required, as it has successfully demonstrated in the past.

If required, the Group has a number of options available to manage liquidity including:

§ Significantly reduce expenditure on its own exploration programmes;

§ Significantly reduce corporate costs;

§ Raising additional funding through debt and equity, or a combination of both, which the Company considers it has the ability to do, should it be required and has demonstrated an ability to do so in the past.

Should the Directors not achieve the matters set out above, there is significant uncertainty as to whether the Company will continue as a going concern and therefore whether they will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

Having prepared forecasts based on current resources and assessing methods of obtaining additional finance, the Directors believe the Group has sufficient resources to meet its obligations for a period of twelve months from the date of approval of these financial statements. Taking these matters into consideration, the Directors continue to adopt the going concern basis of accounting in the preparation of the financial statements.

The principal risks and uncertainties for the six month period up to 31 December 2023 remained consistent with trends reported in the 2023 Annual Report.

3     Segmental information

Operating segments are reported in a manner that is consistent with the internal reporting to the Board and the executive management team (the chief operating decision makers). Greatland operates one segment being Exploration and Evaluation of Minerals and Mine Development in Australia.

4     Administrative expenses

5     Share-based payments

The total expense arising from share-based payment transactions recognised during the period was as follows:

 (a) Employee Long Term Incentive Plan (LTIP)

Greatland's Board approved LTIP became effective in February 2022. The LTIP is designed to provide long-term incentives for employees (including executive directors) to deliver long-term shareholder returns. Under the LTIP, participants are granted performance rights or options which vest if certain performance standards are met. Participation in the plan is at the Board's discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.

Set out below are performance rights and options granted under the Company's Employee Equity Incentive Plan over ordinary shares which are granted for nil cash consideration. Management has assessed that non-market and market conditions are more than probable to be achieved by the expiry date and therefore the total value of the performance rights incorporates all performance rights awarded. The expense recorded as share-based payments is recognised to the service period end date on a straight-line basis as the service conditions are inherent in the award.

Each performance right and option converts to one ordinary share in the Company upon satisfaction of the performance conditions linked to the performance rights. The performance rights do not carry any other privileges. The fair value of the non-market condition performance rights granted is determined based on the number of performance rights awarded multiplied by the Company's share price on the date awarded.

The expense for the period of £1.5 million represents the fair value of the instruments expensed over the vesting period.

The Group granted the following on 19 September 2023:

§ FY23 Performance Rights: 13,306,047 performance rights on 27 July 2022 under the Greatland LTIP which were in respect of the 2023 financial year. The amount of performance rights will vest depending on a number of performance targets during a three year performance period from 1 July 2023 to 30 June 2025. The share-based payment expense to be recognised in future periods is £0.7 million.

§ Employee Retention Rights: 31,100,000 nominally priced share options of £0.001 on a once off basis to incentivise retention through a pivotal period of the Group's growth. Subject to satisfaction of service criteria, the holder must be employed by Greatland on 28 February 2026 to exercise. The share-based payment expense to be recognised in future periods is £1.9 million.

§ Employee Co-Investment Options: 302,700,000 grant of premium priced share options of £0.119 to incentivise retention through a pivotal period in the Group's growth and align their interests to pursue value growth for all shareholders. Subject to satisfaction of service criteria, the holder must be employed by Greatland on 28 February 2026 to exercise. The share-based payment expense to be recognised in future periods is £5.3 million.

5          Share-based payments (continued)

The fair value at grant date is independently determined using an adjusted form of the Black-Scholes Model which includes a Monte Carlo simulation model for the TSR rights. The key assumptions were as follows:

b) Directors' Co-Investment Options

The Group issued 235,000,000 co-investment options on 12 September 2022 to four Directors, Mark Barnaba, Elizabeth Gaines, Paul Hallam and Jimmy Wilson. The co-investment option structure has been designed to create strong and immediate alignment with shareholders to deliver substantial share price growth, with the options being set at £0.119, representing a 45% premium to the equity placement in August 2022 of £0.082. There are no future amounts associated with these options to be expensed in future periods. The fair value at grant date was independently determined using a Binomial simulation model. The key assumptions were as follows:

Options

The following table illustrates the number of, and movements in options during the period:

5          Share-based payments (continued)

Performance Rights

The following table illustrates the number of, and movements in performance rights during the period:

6     Mine Development

7     Borrowings

The borrowings presented above relate to a loan agreement with Newmont Corporation (Newmont), through a wholly owned subsidiary, dated 29 November 2020 in respect of Havieron. The loan is fully drawn down. The key terms of the facility with Newmont include:

§  The loan is made up of Facility A and Facility B with values of US$20 million and US$30 million respectively, in addition to capitalised interest;

§  Interest is calculated on SOFR rate plus a margin of 8.26161% annually and is calculated every 90 days;

§  The facility is secured against Greatland's share of the Havieron asset;

§  Repayment of the loan is from 80% of net proceeds from the sale of Havieron products and must be repaid by the earlier of 10 years from the date of the Feasibility Study or 12 years from the date of the Loan Agreement;

§  There are no financial covenants.

Unrealised foreign exchange gain of £1.3 million (31 December 2022: £0.7 million) was incurred on the US$52.4 million loan balance held by the Australian subsidiary. The functional currency of the Australian subsidiary is Australian dollars while the loan is denominated in US dollars. The exchange rate increased during the period from 0.6630 USD/AUD at 30 June 2023 to 0.6840 USD/AUD at 31 December 2023.

Exchange differences arising on the translation of the functional currency of the Australian subsidiary differing from the Group's presentation currency resulted in an increase to borrowings of £0.9 million during the year (31 December 2023: reduction of £0.4 million). The exchange rate increased during the year from 0.5250 GBP/AUD at 30 June 2023 to 0.5366 GBP/AUD at 31 December 2023.

At the end of the period, the Group had A$50 million (c. £26.8 million) undrawn standby loan facility with Wyloo which is available until 1 December 2024 and matures on 31 December 2024.

8     Equity

(a) Contingent deferred acquisition consideration

In July 2022 (prior to the outcome of the Havieron 5% option process), Greatland successfully renegotiated the deferred consideration that was due to be paid in respect of its 2016 acquisition of Havieron. The original terms of the acquisition comprised an initial payment of A$25,000 in cash and 65,490,000 new ordinary shares. A further 145,530,000 new ordinary shares were payable if Greatland's ownership interest in Havieron reduced to 25% or less, or upon a decision to mine at Havieron whichever occurs earlier.

The 145,530,000 deferred share payment was renegotiated as follows:

i)    138,981,150 Greatland shares were issued to the vendor nominee, Five Diggers, during the year. This represented a 4.5% reduction in total shares issued relative to the ordinary agreed quantum

ii)   In respect of the 138,981,150 shares issued, Five Diggers are subject to the following restrictions:

§ A lock up which prohibits any shares from being disposed of for the first 12 months from grant, subject to carveouts (such as recommend takeovers), and

§ Orderly market arrangement, under which the shares may only be traded through Greatland's broker (subject to customary carve outs)

The new ordinary shares were issued in Greatland on 2 August 2022. The fair value of the contingent consideration formed part of the original acquisition in 2016 and as such the equity instruments were issued to share capital for £0.001 as required by the Companies Act 2006, with nil value attributable to share premium in August 2022.

(b) August 2022 equity raise

On 25 August 2022, Greatland raised total gross proceeds of £29.8 million through placing 362,880,180 new ordinary shares at an issue price of £0.082. The raise was facilitated through an incorporated Jersey registered company, Ferdinand (Jersey) Limited. The proceeds of the share issue were held in trust by Greatland on behalf of Ferdinand (Jersey) Limited, which was then acquired by way of share for share exchange in circumstances which qualified for merger relief, therefore no amount was recognised as share premium on the share issue as required under section 612 of the Companies Act.

The amount recognised in the merger reserve reflects the amount by which the fair value of the shares issued exceeded their nominal value and is recorded within the merger reserve on consolidation, rather than in a share premium account.

8     Equity (continued)

(c) Strategic placement to Wyloo

On 12 September 2022, Greatland entered into an agreement for a strategic equity investment with Wyloo, a privately owned minerals investment company. Wyloo subscribed for 430,024,390 shares for A$60 million (£33.5 million), an equivalent at the date of the agreement of £0.082 per share. This placement occurred at the same price as the August 2022 raise which equated to a small premium to the five-day VWAP of 9 September 2022. The transaction was approved by shareholders on 7 October 2022. Settlement occurred on 14 October 2022 at a converted share price of £0.078 per share. On settlement, the A$60 million (£33.5 million) consideration received from Wyloo was allocated to share capital and share premium reflecting the fair value of the ordinary shares at settlement date.

As part of the equity subscription, a further £35 million may be raised from Wyloo in the future through the conversion of 352,620,000 warrants with a strike price of £0.10 per share and expiry date of 6 October 2025. The warrants were recognised in the statement of financial position at nil value on issue.

(d) Farm-in to Rio Tinto Exploration's Paterson South 

In May 2023, Greatland entered into a farm-in and joint venture agreement with Rio Tinto in respect of the Paterson South Project which comprises of nine exploration licences. Under the farm-in and joint venture arrangement, Greatland is required to make an up-front payment to Rio Tinto Exploration Pty Ltd (RTX) of A$350,000 which Greatland has elected to settle in shares. As the farm-in and joint venture agreement was executed during the year, the up-front payment was capitalised as part of the acquisition costs of the tenements and recognised in share-based payment reserves until the shares are issued. These shares to RTX have not been issued at the date of this report.

9     Capital Commitments

As at 31 December 2023, Greatland had contractual commitments to capital expenditure of £4.8 million (30 June 2023: £4.6 million), including from its share in the Havieron Joint Venture.

10         Related party transactions 

Exercise of Options and Director Dealings

On 1 October 2023, Mr Borrelli, Non-Executive Director, exercised his remaining 14,000,000 options over ordinary shares at a price of £0.0028 per share, 2,500,000 options at £0.014 and 2,500,000 options at £0.02 per share for a total consideration of £124,200. Mr Borrelli retained 9,000,000 of the resulting shares and sold 10,000,000 of the resulting shares to fund the associated exercise cost and tax liabilities. Mr Borrelli's shareholding increased to 35,403,372 ordinary shares representing 0.70% of the total voting rights.

In addition, on 24 September 2023, Mr Latcham, Non-Executive Director, exercised 1,500,000 existing options over ordinary shares at a price of £0.025 per share and 1,250,000 at a price of £0.03 per share, for a total consideration of £75,000. Mr Latcham retained 700,000 of the resulting shares and sold 2,050,000 of the resulting shares to fund the associated exercise cost and tax liabilities. Mr Latcham's shareholding increased to 3,850,000 ordinary shares representing 0.08% of the total voting rights.

11    Significant events after the reporting date

There were no reportable events since 31 December 2023.