TIDMKAV
RNS Number : 6060X
Kavango Resources PLC
30 April 2019
PRESS RELEASE
30 April 2019
KAVANGO RESOURCES PLC ("KAVANGO" OR "THE COMPANY")
Results for year ended 31 December 2018
Kavango Resources plc (LSE: KAV), the exploration group listed
on the Standard List segment of the main market of the London Stock
Exchange and targeting the discovery of world class mineral
deposits in Botswana, is pleased to present its audited financial
statements for the year ended 31 December 2018. The full report is
available on the Company's website at www.kavangoresources.com.
KEY HIGHLIGHTS
-- Total assets - US$3.4M (2017 US$ 2.9M).
-- (Loss) Income - (US$755,307) (2017 - US$126,955).
-- The Group reports its results in US Dollars (USD). Its
primary assets are in Botswana and are accounted for in Botswana
Pula (BWP). Kavango Resources plc accounts for fundraisings in
Pounds Sterling (GBP). In 2018 the BWP and GBP depreciated
approximately 8% and 6% respectively against the USD which produced
a net foreign exchange loss of US$221,065.
-- The entire issued ordinary share capital of the Company was
admitted to the Standard List segment of the Official List of the
UK Listing Authority and to trading on the Main Market for listed
securities of the London Stock Exchange ("Admission") on 31 July
2018 under the TIDM (Stock Code): KAV.
-- On Admission, completion of a placement of 60,000,000
ordinary shares at 2.5p/share to raise GBP1,500,000 (before
expenses); on 12 March 2019 a further placement of 26,785,713
ordinary shares at 2.8p/share to raise GBP750,000 (before expenses)
was completed.
-- Over 4,000 line-kms of airborne electromagnetic surveys have
been concluded over the Company's prospecting licences, which cover
an area of approximately 9,000km(2) in south west Botswana.
-- Approximately 1,000m of drilling has now been concluded at
the Ditau prospect where indications of high cobalt and elevated
copper, nickel and zinc values have been identified; assays are
eagerly awaited.
Michael Foster, Chief Executive Officer of Kavango Resources,
commented:
"We are pleased to announce our audited financial statements for
the year ended 31 December 2018, our first since listing on the
London Stock Exchange (Standard List segment) on 31 July 2018. Our
mineral exploration activities in Botswana are on target having
already achieved several significant milestones in this short
period. They include completion of the airborne electromagnetic
survey over a large part of our Kalahari Suture Zone (KSZ) Project,
an area of 9,231km(2) of prospecting licences in the southwest of
the country, and completion of 1,000m of drilling over some
exciting base metal anomalies at the Ditau prospect, which is part
of the KSZ Project. Results are eagerly awaited and will be
announced as they become available. We look forward to an exciting
programme of exploration in 2019."
The Chairman's Statement and Results are set out in the
following pages.
Contacts
Kavango Resources plc
Michael Foster +44 20 3651 5705
mfoster@kavangoresources.com
City & Westminster Corporate Finance LLP +44 20 7917 6824
Nicola Baldwin
SI Capital Limited (Broker) +44 1483 413500
Nick Emerson / Alan Gunn
Forward looking statement
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identified by their use of terms and phrases such as "believe",
"could", "should" "envisage", "estimate", "intend", "may", "plan",
"will" or the negative of those, variations or comparable
expressions, including references to assumptions. These
forward-looking statements are not based on historical facts but
rather on the Directors' current expectations and assumptions
regarding the Company's future growth, results of operations,
performance, future capital and other expenditures (including the
amount, nature and sources of funding thereof), competitive
advantages, business prospects and opportunities.
Such forward looking statements reflect the Directors' current
beliefs and assumptions and are based on information currently
available to the Directors. A number of factors could cause actual
results to differ materially from the results discussed in the
forward-looking statements including risks associated with
vulnerability to general economic and business conditions,
competition, environmental and other regulatory changes, actions by
governmental authorities, the availability of capital markets,
reliance on key personnel, uninsured and underinsured losses and
other factors, many of which are beyond the control of the Company.
Although any forward-looking statements contained in this
announcement are based upon what the Directors believe to be
reasonable assumptions, the Company cannot assure investors that
actual results will be consistent with such forward looking
statements.
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
Chairman's Statement
It gives me great pleasure as Chairman of Kavango Resources plc,
a mining group targeting the discovery of world class mineral
deposits in Botswana, to report to all our shareholders the first
set of final results as a listed company.
For the period from 1 January - 31 December 2018 the Group
incurred a loss of US$755,307 (US$ 0.008 per ordinary share)
Kavango was admitted to the Standard List segment of the
Official List of the UK Listing Authority and to trading on the
Main Market for listed securities of the London Stock Exchange
("Admission") on 31 July 2018 under the TIDM (Stock Code): KAV and
in the process raised GBP1.5m (before expenses). Subsequently a
further GBP750,000 (before expenses) was raised during the first
quarter of 2019 to accelerate the Company's exploration plans.
Phase 1 of the airborne electromagnetic ("AEM") geophysical
survey at the Company's Kalahari Suture Zone Project ("KSZ") in
southwest Botswana was completed both on time and on budget.
Following completion of the survey, the Company's 100% owned
subsidiary in Botswana has now been granted three additional PL's,
extending the group's ground holding along the KSZ by a further
2,300km(2) . Two of the three new PL's are contiguous and
immediately adjoin the northern area covered by Phase 1 of the AEM
survey. The Company now holds 15 PL's that cover approximately 80%
of the KSZ, a 450 km long magnetic anomaly and where Kavango is
exploring for Ni-Cu-PGE rich sulphide orebodies. The Company's 15
PL's on the KSZ Project now cover a total of 9,231 km(2) .
Phase 2 of the AEM survey over the KSZ prospecting licences has
been carried out by SkyTEM, a leading airborne geophysical survey
company offering the acquisition and advanced processing of the
highest quality helicopter-borne electromagnetic data. The AEM
survey covered up to 2,062 line-kilometres in the Hukuntsi area of
Botswana. Preliminary results indicate that SkyTEM's innovative new
generation 312 HP (High Power) technology has achieved exceptional
depth of investigation beneath the Kalahari sand cover and Karoo
sediments due to the high moment (HM) mode with high current and
low base frequency of 12.5 Hz. This system has been on the market
since 2017 and therefore represents a major advance in AEM systems.
The SkyTEM AEM data is currently being interpreted and modelled by
our duly appointed external Consultants, Aarhus Geophysics in
Denmark, in conjunction with SkyTEM with the results of the
interpretation, expected to give priority targets for both ground
follow-up and drilling.
Moving on to drilling at the Company's Ditau Prospect, which
forms part of the KSZ, the first hole (DitDDH1) confirmed the
intersection by diamond drilling of over 200 metres of intense
alteration with significant anomalous base metal values. The hole
encountered a 200 metre zone of intensely altered rock above the
conductive drill target and exhibits significant sulphide
alteration together with indicative cobalt values of up to 0.9% and
a weighted average of 0.2% cobalt over 70 metres as well as
elevated copper, zinc, lead and nickel values as per the RNS dated
25(th) March 2019.
The core from DitDDH1 is to be sent to an accredited
international laboratory for geochemical analysis and assaying. The
results are eagerly awaited. DitDDH2 is now in progress and sited
on a second conductive body (supported by surface soil
geochemistry) situated 1.8km east of DitDDH1, within the Ditau
intrusion. A water well has been successfully drilled at Ditau
which will now alleviate the need to cart water over long distances
and facilitate drilling.
The Company is also reviewing other highly selective but
potentially very interesting natural resource opportunities in
Botswana.
The period in question has been a very busy time for the Company
with the expectation that the next 12 months will potentially be
even busier especially on the drilling front.
Further information in respect of the Company and its business
interests is provided on the Company's website at
www.kavangoresources.com and on social media including Twitter
#KAV.
On a final note, I would like to take this opportunity to thank
my fellow directors and senior management who over recent months
have worked tirelessly on progressing the Company against our
stated objectives with special mention going to Hillary Gumbo our
exploration manager and his team in Botswana.
DJ Wright
Chairman
30 April 2019
Chief Executive Officer's Report
Kavango Resources plc ("Kavango" or "the Company") acquired 100%
of Navassa Resources Ltd ("Navassa"), a Mauritius holding company,
in November 2017. Navassa owns 100% of Kavango Minerals (Propriety)
Limited, a Botswana registered exploration company.
The Company is currently exploring the potential of gabbro
intrusives associated with the Kalahari Suture Zone (KSZ) to host
significant concentrations of nickel, cobalt, copper and other base
metals. The KSZ is a 450km long north-south trending magnetic
structure of continental proportions.
Kavango holds 15 Prospecting Licences (PL's) along the KSZ,
covering an area of over 9,000km(2) .
It is believed that most of the gabbros associated with the KSZ
are of Karoo age and almost certainly are the feeder sills/dykes to
the basalt lava flows, which at one time covered most of the Karoo
sediments in southern Africa.
These gabbros are of a similar age, genesis and composition as
the gabbros hosting the giant Norilsk Cu/Ni/PGE deposits in
Siberia.
Some of the gabbros are close to surface and even outcrop.
Others are buried under Kalahari sand and Karoo sediments. Previous
researchers have drilled these intrusives in the 1980's and the
cores of some of these holes have been re-logged and sampled by
Kavango. Those sampled have been analysed for whole rock
geochemistry. The results together with thin sections have been
examined by Dr Martin Prendergast, consulting to the Company, who
specialises in magmatic Cu/Ni/PGE deposits in southern Africa.
Dr Prendergast's observations suggest that the gabbro samples
show a loss of Cu, Ni and especially PGEs together with sulphur at
some stage before complete crystalisation of the intrusive magma.
The implication is that the metal rich sulphides have been
concentrated and deposited at some location within the magma
chamber (gabbro) or within the surrounding rock formations.
Navassa initiated an exploration program four years ago by
identifying the location of magmatic intrusive rocks from an
analysis of the regional magnetic surveys published by the Botswana
Government.
As part of the current exploration programme the Company has
followed up the work of Navassa with two phases of an airborne
electro-magnetic survey (AEM) covering approximately 4,000
line-kms, in the northern half of the KSZ licence area.
By using the latest generation of low frequency helicopter-borne
EM, conductors lying up to 500m below the Kalahari/Karoo cover have
been identified and these are now being followed up on the ground
for further investigation.
The Company has started testing some of these conductors on
surface with very high sensitivity soil sampling. This can detect
metal ions transported from buried metal rich sulphide deposits
associated with the emplacement of magmatic intrusive rocks.
Kavango geologists have pioneered a high resolution soil sampling
technique to detect ultra-fine metal particles which have been
transported in solution from considerable depths of burial to the
surface by capillary action and transpiration. Evaporation leaves
the metal ions as accumulations within a surface "duricrust" which
is then sampled and analysed. Zinc, which is the most mobile of the
base metal elements (i.e. goes into solution easily) acts as a
pathfinder to mineralization at depth.
Kavango is also using a ground based geophysical technique known
as Controlled Source Audio frequency Magneto Tellurics (CSAMT) to
identify the exact location of the conductors. Massive sulphide
(base metal) deposits can be detected by CSAMT deep beneath the
surface because they conduct electricity easily. The shape,
orientation and depth of the conductors determines if the conductor
should be drilled, particularly if the conductor coincides with
zinc-in-soil (surface) anomalies.
KSZ Project: Ditau Prospect - drilling results
The Ditau prospecting licence (PL169) covers 469km(2) and is the
most advanced of the Company's prospects. The Ditau Prospect is a
7km x 5km magnetic and gravity anomaly with significant
zinc-in-soils anomalies. Geochemical soil sampling and geophysics
(magnetic and gravity surveys as well as CSAMT) have identified a
number of large conductive anomalies at depth (see below).
At the time of writing two diamond core drill holes have been
completed to depths in excess of 300m.
Both holes encountered very intense alteration and deformation
of the Karoo age rocks, which lie above a mafic intrusive (gabbro),
which is almost certainly the source of the magnetic and gravity
anomaly.
The alteration in the Karoo sediments appears to be in excess of
300m thick, whilst the alteration penetrates into the gabbro for at
least another 75m. Iron and copper sulphide mineralisation is
present throughout the altered Karoo sediments and the gabbro.
Indicative cobalt mineralisation has been identified in both holes
(portable XRF analyses).
The core from both holes has been cut and sampled in Botswana
and has now been sent for assay and analysis at a laboratory in
Australia.
KSZ Project: Airborne EM (AEM) Surveys
In August 2018 Kavango contracted Geotech Ltd to carry out Phase
1 of an AEM survey designed to identify conductive bodies over
nearly 4,000km(2) of Kavango's licences on the KSZ. The VTEM survey
started in September and the 2,000 line kilometres were completed
before the end of the month. A total of 26 conductors were
identified, 15 of which have now been followed up with ground
surveys, high resolution soil sampling and CSAMT. Follow up
investigations showed that several of the conductors extended into
the Karoo sediments and these have been prioritised for possible
drilling.
Although the VTEM survey was able to identify some of the
conductors, the highly conductive overburden (Kalahari and Karoo
sediments) restricted depth penetration such that some of the
conductors may have been missed. For the Phase 2 AEM survey,
Kavango contracted SkyTEM Surveys Ltd, who had recently brought out
a low frequency (12.5Hz) system that promised far greater depth
penetration. The Phase 2 survey which covered the northern part of
the project area was begun on 4(th) February and was completed in
28 days. SkyTEM's 12.5Hz system showed a significant improvement in
average depth penetration.
Proposed work programme for 2019
During the first half of 2019, the Company will focus on
modelling and interpretation of the extensive geological,
geochemical and geophysical information now available for the
exciting Ditau prospect. An assessment of the Ditau's potential
will be made ahead of further work.
At the same time, the Company is expecting imminent results from
the AEM survey on the northern part of the KSZ. The targets will be
followed up on the ground with CSAMT surveys and/or geochemistry to
delineate in more detail locations of conductors ahead of
drilling.
Michael Foster
Chief Executive
30 April 2019
Consolidated Statement of Total Comprehensive Income
FOR THE YEARED 31 DECEMBER 2018
2018 2017
Notes US$ US$
Continuing operations
Administrative expenses 6 (534,242) (44,055)
Other income - 50,000
Profit/(Loss) before taxation (534,242) 5,945
Taxation 8 - -
Profit/(Loss) for the year
attributable to owners of
the parent (534,242) 5,945
================= =========
Other comprehensive income:
Items that may be subsequently
reclassified to profit or
loss
Currency translation difference (221,065) 207,258
Total comprehensive income
for the year attributable
to owners of the parent (755,307) 213,203
================= =========
Earnings per share from continuing
operations attributable to
owners of the parent
Basic and diluted (cents) 9 (0.76) 0.01
================= =========
Consolidated Statement of Financial Position
AS AT YEARED 31 DECEMBER 2018
31 Dec 31 Dec
2018 2017
Notes US$ US$
Non-current assets
Property, plant and equipment 10A 22,751 1,610
Intangible assets 10 2,287,993 2,359,425
Total non-current assets 2,310,744 2,361,035
Current assets
Trade and other receivables 12 114,825 142,256
Cash and cash equivalents 13 954,372 386,417
----------------- --------------
Total current assets 1,069,197 528,673
Total assets 3,379,941 2,889,708
----------------- --------------
Current liabilities
Trade and other payables 13 70,782 146,241
18 ,
Amounts due to shareholders 20 - 160,391
----------------- --------------
Total liabilities 70,782 306,632
----------------- --------------
Net current assets/(liabilities) 998,415 222,041
----------------- --------------
Net assets 3,309,159 2,583,076
================= ==============
Equity attributable to owners
of the parent
Called up share capital 15 171,025 100,063
Share premium 15 4,981,362 3,760,890
Share option reserve 16 189,956 -
Foreign Currency Exchange Reserve (31,543) 189,522
Reorganisation reserve 11 (1,590,777) (1,590,777)
Retained earnings (410,864) 123,378
Total equity attributable to
owners of the parent 3,309,159 2,583,076
================= ==============
This report was approved by the board and authorised for issue
on 30 April 2019 and signed on its behalf by:
........................
Michael Foster
Director
Company Statement of Financial Position
FOR THE YEARED 31 DECEMBER 2018
Company registration number: 10796849 (England and Wales)
31 Dec 31 Dec
2018 2017
Notes US$ US$
Non-current assets
Investment in subsidiaries 11 3,500,000 3,500,000
Total non-current assets 3,500,000 3,500,000
Current assets
Trade and other receivables 12 596,806 135,505
Cash and cash equivalents 13 937,124 348,653
----------------- ----------
Total current assets 1,533,930 484,158
Total assets 5,033,930 3,984,158
----------------- ----------
Current liabilities
Trade and other payables 14 62,967 133,603
18,
Amounts due to shareholders 20 - 23,143
----------
Total liabilities 62,967 156,746
----------------- ----------
Net current assets 1,470,963 327,412
----------------- ----------
Net assets 4,970,963 3,827,412
================= ==========
Equity
Called up share capital 15 171,025 100,063
Share premium 15 4,981,362 3,760,890
Share option reserve 16 189,956 -
Foreign exchange reserve 187,789 -
Retained earnings (559,169) (33,541)
----------------- ----------
Total equity 4,970,963 3,827,412
================= ==========
Kavango Resources Plc has used the exemption grated under s408
of the Companies Act 2006 that allows for the non-disclosure of the
Income Statement of the parent company. The after-tax loss
attributable to Kavango Resources Plc for the period ended 31
December 2018 was US$337,839 (2017: US$33,541).
This report was approved by the board and authorised for issue
on 30 April 2019 and signed on its behalf by:
........................
Michael Foster
Director
Consolidated Statement of Changes in Equity
FOR THE YEARED 31 DECEMBER 2018
Foreign
Reverse Exchange Share
Acquisition Reserve Retained Options
Share Capital Share Premium Reserve (restated) Earnings Total
US$ US$ US$ US$ US$ US$ US$
-------------- -------------- ------------- ------------ ---------- ---------- ----------
As at 1 January 2017 1,200,000 - - (17,736) 117,433 1,299,697
-------------- -------------- ------------- ------------ ---------- ---------- ----------
Profit for the year - - - - 5,945 5,945
Other Comprehensive
Income
for the year -
foreign currency
exchange difference - - - 207,258 - 121,010
Total comprehensive
income
for the year - - - 207,258 5,945 126,955
Shares issued net of
costs 709,223 - - - - 709,223
Group reorganisation (1,815,423) 3,440,545 (1,590,777) - - 34,345
Issue of shares net
of issue
costs 6,263 320,345 - - - 326,608
Total transactions
with owners
recognised directly
in equity (1,099,937) 3,760,890 (1,590,777) - - 1,070,176
-------------- -------------- ------------- ------------ ---------- ---------- ----------
As at 31 December
2017 100,063 3,760,890 (1,590,777) 189,522 123,378 - 2,583,076
-------------- -------------- ------------- ------------ ---------- ---------- ----------
Loss for the year (534,242) (534,242)
Other Comprehensive
Income(loss)
for the year -
foreign currency
exchange difference (221,065) (218,956)
-------------- -------------- ------------- ------------ ---------- ---------- ----------
Total comprehensive
income
for the year (221,065) (534,242) - (755,307)
Shares issued net of
costs 70,962 1,220,472 - - - - 1,291,434
Group reorganisation - -
Share options
granted 189,956 189,956
-------------- -------------- ------------- ------------ ---------- ---------- ----------
Total transactions
with owners
recognised directly
in equity 70,962 1,220,472 - - - 189,956 1,481,390
-------------- -------------- ------------- ------------ ---------- ---------- ----------
As at 31 December
2018 171,025 4,981,362 (1,590,777) (31,543) (410,864) 189,956 3,309,159
============== ============== ============= ============ ========== ========== ==========
Company Statement of Changes In Equity
FOR THE YEARED 31 DECEMBER 2018
Share Capital Share Premium Foreign Share Options Retained Total
Exchange Earnings
Reserve
(restated)
US$ US$ US$ US$ US$ US$
--------------------- --------------------- ----------- ------------------- ----------- -----------------
Balance at 1 - - - - - -
January 2017
--------------------- --------------------- ----------- ------------------- ----------- -----------------
Loss for the
year - (33,541)
Total - - - - (33,541) -
comprehensive
loss for
the year
Issue of
shares net of
costs 30,344 - - - - 30,344
Shares issued
as a
consideration
in the
reverse
merger, net
of costs
(Note 11) 59,456 3,440,544 - - - 3,500,000
Issue of
shares net of
costs 6,263 320,345 - - - 326,608
--------------------- --------------------- ----------- ------------------- ----------- -----------------
Total
transactions
with owners
recognised
directly in
equity 79,963 3,760,890 - - - 3,840,853
--------------------- --------------------- ----------- ------------------- ----------- -----------------
Balance at 31
December 2017 100,063 3,760,890 - - (33,541) 3,827,412
Loss for the
year - - - - (525,628) (525,628)
--------------------- --------------------- ----------- ------------------- ----------- -----------------
Foreign
currency
exchange
difference 187,789 187,789
Total
comprehensive
loss for
the year - - 187,789 - (525,628) (337,839)
Issue of
shares net of
costs 70,962 1,220,472 - - 1,291,434
Share options
granted 189,956 189,956
Total
transactions
with owners
recognised
directly in
equity 70,962 1,220,472 - 189,956 1,481,390
Balance at 31
December 2018 171,025 4,981,362 187,879 189,956 (559,169) 4,970,963
--------------------- --------------------- ----------- ------------------- ----------- -----------------
Amount subscribed for share capital
Share Capital: at nominal value
Amount subscribed for share capital in excess
Share Premium: of nominal value
Reserve created on issue of shares on acquisition
Merger Reserve: of subsidiaries
Foreign Exchange differences: Cumulative translation differences
Retained Earnings: Cumulative net gains and losses recognised in the consolidated
statement of comprehensive income
Share option reserve: Amount reserved for share capital issued on exercise of share
options
Consolidated Statement of Cash Flow
FOR THE YEARED 31 DECEMBER 2018
2018 2017
Notes US$ US$
Cash flows from operating activities
(Loss)/Profit before taxation (534,242) 5,945
Share option expense 189,965 -
Depreciation 7,068 -
Foreign exchange - 122,872
Net cash flows generated from operating
activities before changes in working
capital (337,218) 128,817
------------------- ----------
(Increase) decrease in trade and other
receivables 27,431 (66,226)
Increase(decrease) in current liabilities (75,459) 59,677
------------------- ----------
Net cash outflow from operating activities (385,246) (790)
------------------- ----------
Investing activities
Purchase of intangible assets, net 10 (272,581) (125,130)
Purchase of fixed assets (28,338) -
Net cash used in investing activities (300,919) (125,130)
------------------- ----------
Financing activities
Loans 18 (43,921) 43,921
Proceeds from issue of shares net
of issue costs 15 1,291,434 326,609
------------------- ----------
Net cash generated from financing
activities 1,247,513 370,530
------------------- ----------
Net increase/(decrease) in cash and
cash equivalents 561,348 367,669
Cash and cash equivalents at beginning
of year 386,417 18,748
Forex translation difference 6,552
----------
Cash and cash equivalents at end of
year 13 954,317 386,417
=================== ==========
Company Statement of Cash Flow
FOR THE YEARED 31 DECEMBER 2018
2018 2017
Notes US$ US$
Cash flows from operating
activities
Loss before taxation (525,628) (33,541)
Share option expense 189,956 -
Foreign exchange - (187)
Net cash flows generated from
operating activities before
changes in working capital (335,652) (33,728)
---------- ----------
(Increase) decrease in trade
and other receivables 198,206 (100,974)
Increase(decrease) in trade
and other payables (70,635) 133,603
---------- ----------
Net cash outflow from operating
activities (208,081) (1,099)
---------- ----------
Investing activities
Loans to group companies 12 (491,473) -
---------- ----------
Net cash used in investing (491,473) -
activities
---------- ----------
Financing activities
Loans 17 (23,143) 23,143
Proceeds from issue of shares
net of issue costs 15 1,291,434 326,609
---------- ----------
Net cash generated from financing
activities 1,268,291 349,752
---------- ----------
Net increase in cash and cash
equivalents 568,737 348,653
Cash and cash equivalents 348,653 -
at beginning of year
Forex translation difference 19,734
----------
Cash and cash equivalents
at end of year 13 937,124 348,653
========== ==========
Notes to the Financial Statements
FOR THE YEARED 31 DECEMBER 2018
1. Corporate information
Kavango Resources PLC ("the Company") was incorporated on 21 May
2017. It is domiciled in the United Kingdom at 46 New Broad Street
London United Kingdom EC2M 1JH.
The Company is a holding company of Navassa Resources Ltd
("Navassa") which has a wholly-owned subsidiary Kavango Minerals
(Pty) Ltd. Navassa is registered and domiciled in Mauritius while
Kavango Minerals (Pty) Ltd is registered and domiciled in
Botswana.
The principal activity of the Company and its subsidiaries (the
"Group") is the exploration for base metals in Botswana.
2. Significant Accounting policies
Statement of compliance
The Group and Company Financial Statements have been prepared in
accordance with International Financial Reporting Standards
('IFRS') and IFRS Interpretations Committee ('IFRS IC') as adopted
by the European Union, the Companies Act 2006 that applies to
companies reporting under IFRS and IFRS IC interpretations. The
Group and Company Financial Statements have also been prepared
under the historical cost convention,
The financial information is presented in UD Dollars ("US$"),
which is the Group's presentational currency rounded to the nearest
dollar.
The preparation of Financial Statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Accounting Policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and
estimates are significant to the Group and Company Financial
Statements are disclosed in Note 3.
Changes in accounting policies and disclosures
i) New and amended standards adopted by the Group and Company
As of 1 January 2018, the Group and Company adopted IFRS 9,
Financial Instruments ('IFRS 9'), which replaced IAS 39, Financial
Instruments: Recognition and Measurement. IFRS 9 addresses the
classification, measurement and recognition of financial assets and
liabilities. IFRS 9 retains but simplifies the mixed measurement
model and establishes three primary measurement categories for
financial assets: amortised cost, fair value through other
comprehensive income ('FVOCI'), and fair value through the profit
and loss statement ('FVTPL'). The basis of classification depends
on the entity's business model and the contractual cash flow
characteristics of the entity's business model and of the financial
asset.
Investments in equity instruments are required to be measured at
FVTPL with the irrevocable option at inception to present changes
in fair value in other comprehensive income.
There is now a new expected credit losses model that replaces
the incurred loss impairment model previously used in IAS 39. The
Company has no other financial assets (except those at amortised
cost) and as a result there is no impact of the new impairment
requirements to the Financial Information.
From 1 January 2018, the Group and Company classifies its
financial assets in the following measurement categories:
-- Those to be measured subsequently at fair value (either
through other comprehensive income, or through profit or loss),
and
-- Those to be measured at amortised cost.
At initial recognition, the Group and Company measures a
financial asset at its fair value plus, in the case of a financial
asset not at FVTPL, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction
costs of financial assets are expensed and carried at FVTPL.
Financial Liabilities
The Group and Company reviewed the financial liabilities
reported on its Statement of Financial Position and completed an
assessment between IAS 39 and IFRS 9 to identify any accounting
changes. The financial liabilities subject to this review were the
trade and other payables. Based on this assessment of the
classification and measurement model, impairment, and interest
expense, the accounting impact on financial liabilities was
determined not to be material.
For financial liabilities there were no changes to
classification and measurement.
The Company has applied IFRS 9 but there have been no
adjustments required following adoption other than changes in
terminology.
Of the other IFRSs and IFRICs adopted, none have a material
effect on the Group or Company Financial Statements.
ii) New standards, amendments and interpretations in issue but
not yet effective or not yet endorsed and not early adopted
Standards, amendments and interpretations that are not yet
effective and have not been early adopted are as follows:
Standard Impact on initial application Effective date
-------------------- ---------------------------------- -------------------
IFRS 16 Leases 1 January 2019
---------------------------------- -------------------
IFRS 9 (Amendments) Prepayment features with negative 1 January 2019
Compensation
---------------------------------- -------------------
IAS 28 (Amendments) Long term interests in associates 1 January 2019
and joint ventures
---------------------------------- -------------------
2015-2017 Cycle Annual improvements to IFRS 1 January 2019
Standards
---------------------------------- -------------------
IFRS 3 (Amendments) Business combinations Not yet determined
---------------------------------- -------------------
Of the other IFRSs and IFRICs, none are expected to have a
material effect on the Group or Company Financial Statements.
--
2. Significant Accounting policies (continued)
Basis of consolidation
The Group Financial Statements consolidate the Financial
Statements of the Company and its subsidiaries made up to 31
December. Subsidiaries are entities over which the Group has
control. Control is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee;
-- Rights arising from other contractual arrangements; and
-- The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control ceases.
Assets, liabilities, income and expenses of a subsidiary acquired
or disposed of during the period are included in the Group
Financial Statements from the date the Group gains control until
the date the Group ceases to control the subsidiary.
Investments in subsidiaries are accounted for at cost less
impairment within the Company Financial Statements. Where
necessary, adjustments are made to the Financial Statements of
subsidiaries to bring the accounting policies used in line with
those used by other members of the Group. All significant
intercompany transactions and balances between Group enterprises
are eliminated on consolidation.
Business Combination
Acquisition of Navassa Resources Limited
The company was incorporated on 31 May 2017 and entered into an
agreement to acquire the entire issued share capital of Navassa
Resources Limited on 7 December 2017. The acquisition was effected
by way of issue of shares. Due to the relative size of the
companies, Navassa Resources Limited's shareholders became the
majority shareholders in the enlarged capital of the Company. The
transaction fell outside of IFRS 3 ("Business Combinations") and as
such has been treated as a group reconstruction.
2. Significant Accounting policies (continued)
Business Combination (continued)
Therefore, although the Group reconstruction did not become
unconditional until 7 December 2017, these consolidated financial
statements are presented as if the Group structure has always been
in place, including the activity from incorporation of the Group's
subsidiaries.
Furthermore, as Kavango Resources Plc was incorporated on 31 May
2017, while the enlarged group began trading on 7 December 2017,
the Statement of Comprehensive Income and consolidated Statement of
Changes in Equity and consolidated Cash Flow Statements are
presented as though the Group was in existence for the whole year.
On this basis, the Directors have decided that it is appropriate
the reflect the combination using merger accounting principles as a
group reconstruction under FRS 6 - Acquisitions and mergers in
order to give a true and fair view. No fair value adjustments have
been made as a result of the combination.
The comparative information presented for the Group is that of
Navassa Resources Limited and its subsidiary.
Going concern
The Group and Company Financial Statements have been prepared on
a going concern basis. Although the Group's assets are not
generating revenues and an operating loss has been reported, the
Directors are of the view that, whilst the Group has funds to meet
its immediate working capital needs, the Group will need to raise
funds later in the year to meets its planned exploration expenses
that they wish to undertake over the next 12 months from the date
these Financial Statements.
The Group has financial resources which the Directors consider
is insufficient to fund the Group's committed expenditure both
operationally and on some various exploration projects in the short
term and thus acknowledge that additional funding will be required.
The amount of funding the Group will be required to raise will be
either via an issue of equity or through the issuance of debt. The
Directors are reasonably confident that funds will be forthcoming
and are actively talking to investors. Should additional funding
not be forthcoming the Directors have agreed, if circumstances
require, to defer payment of their fees until such time as adequate
funding is received and if necessary scale back exploration
activity.
The Directors have a reasonable expectation that the Group and
Company will be able to raise the required funds and thus
anticipate that adequate resources will be available to continue in
operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in
preparing the Group and Company Financial Statements.
These financial statements do not include adjustments relating
to the recoverability and classification of recorded asset amounts
nor to the amounts and classification of liabilities that might be
necessary should the group not continue as a going concern. The
auditors have made reference to going concern by way of a material
uncertainty in their audit opinion.
2. Significant Accounting policies (continued)
Intangible Assets
Exploration and evaluation costs
The Group capitalises expenditure in relation to exploration and
evaluation of mineral assets when the legal rights are obtained.
Expenditure included in the initial measurement of exploration and
evaluation assets and which are classified as intangible assets
relate to the acquisition of rights to explore, topographical,
geological, geochemical and geophysical studies, exploratory
drilling, trenching, sampling and activities to evaluate the
technical feasibility and commercial viability of extracting a
mineral resource.
Exploration and evaluation assets are assessed for impairment
when facts and circumstances suggest that the carrying amount of an
asset may exceed its recoverable amount. The assessment is carried
out by allocating exploration and evaluation assets to cash
generating units, which are based on specific projects or
geographical areas. Whenever the exploration for and evaluation of
mineral resources does not lead to the discovery of commercially
viable quantities of mineral resources or the Group has decided to
discontinue such activities of that unit, the associated
expenditures are written off to profit or loss.
Taxation and deferred tax
Income tax expense represents the sum of the current tax and
deferred tax charge for the year.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial information and
the corresponding tax bases, and is accounted for using the balance
sheet liability method.
Deferred tax is calculated at the tax rates that have been
enacted or substantively enacted and are expected to apply in the
period when the liability is settled or the asset realised.
Deferred tax is charged or credited to the statement of
comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Judgement is applied in making assumptions about future taxable
income, including nickel prices, production, rehabilitation costs
and expenditure to determine the extent to which the Group
recognises deferred tax assets, as well as the anticipated timing
of the utilisation of the losses.
Foreign currencies
The functional currency for the Company, being the currency of
the primary economic environment in which the Company operates, is
the US$. The individual financial statements of each of the
Company's wholly owned subsidiaries are prepared in the currency of
the primary economic environment in which it operates (its
functional currency).
The financial statements of the subsidiaries have been
translated in to US$ in accordance with IAS 21 The Effects of
Changes in Foreign Exchange Rates. This standard requires that
assets and liabilities be translated using the exchange rate at
period end, and income, expenses and cash flow items are translated
using the rate that approximates the exchange rates at the dates of
the transactions (i.e. the average rate for the period). The
foreign exchange differences on translation of subsidiaries are
recognized in other comprehensive income (loss).
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing on the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit and
loss.
Other income
Other income represents monies received in respect of an option
agreement. Amounts are recognised when the right to receive the
payment is established.
2. Significant Accounting policies (continued)
Borrowings
Borrowings are recorded initially at fair value, net of
attributable transaction costs. Borrowings are subsequently carried
at their amortised cost and finance charges, including any premium
payable on settlement or redemption, are recognised in the profit
or loss over the term of the instrument using the effective rate of
interest.
Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
(CODM). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as the Board of Directors that makes strategic
decisions.
Segment results include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis.
Investment in subsidiaries
Investments in Group undertakings are stated at cost, which is
the fair value of the consideration paid, less any impairment
provision.
Property, plant and equipment
Property, Plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is
provided on all property, plant and equipment to write off the cost
less estimated residual value of each asset over its expected
useful economic life on a straight line basis at the following
annual rates:
Geological and Field Equipment including Vehicles
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the Statement of
Comprehensive Income during the financial period in which they are
incurred.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and
subsequently measured at amortised cost, fair value through OCI, or
fair value through profit or loss.
The classification of financial assets at initial recognition
that are debt instruments depends on the financial asset's
contractual cash flow characteristics and the Group's business
model for managing them. The Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, it needs to give rise to
cash flows that are 'solely payments of principal and interest
(SPPI)' on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument
level.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are
classified in four categories:
-- Financial assets at amortised cost (debt instruments)
-- Financial assets at fair value through OCI with recycling of
cumulative gains and losses (debt instruments)
-- Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses upon derecognition (equity
instruments)
-- Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group and Company. The
Group and Company measures financial assets at amortised cost if
both of the following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured
using the effective interest rate (EIR) method and are subject to
impairment. Interest received is recognised as part of finance
income in the statement of profit or loss and other comprehensive
income. Gains and losses are recognised in profit or loss when the
asset is derecognised, modified or impaired. The Group's financial
assets at amortised cost include trade receivables (not subject to
provisional pricing) and other receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised when:
-- The rights to receive cash flows from the asset have expired; or
-- The Group and Company has transferred its rights to receive
cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party
under a 'pass-through' arrangement; and either (a) the Group and
Company has transferred substantially all the risks and rewards of
the asset, or (b) the Group and Company has neither transferred nor
retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original EIR. The expected cash flows will
include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
The Group recognises an allowance for ECLs for all debt
instruments not held at fair value through profit or loss. ECLs are
based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the Group
expects to receive, discounted at an approximation of the original
EIR. The expected cash flows will include cash flows from the sale
of collateral held or other credit enhancements that are integral
to the contractual terms. IFRS 9.5.5.1 ECLs are recognised in two
stages. For credit exposures for which there has not been a
significant increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from default events that
are possible within the next 12-months (a 12-month ECL). For those
credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required
for credit losses expected over the remaining life of the exposure,
irrespective of the timing of the default (a lifetime ECL).
For trade receivables (not subject to provisional pricing) and
other receivables due in less than 12 months, the Group applies the
simplified approach in calculating ECLs, as permitted by IFRS 9.
Therefore, the Group does not track changes in credit risk, but
instead, recognises a loss allowance based on the financial asset's
lifetime ECL at each reporting date.
The Group considers a financial asset in default when
contractual payments are 90 days past due. However, in certain
cases, the Group may also consider a financial asset to be in
default when internal or external information indicates that the
Group is unlikely to receive the outstanding contractual amounts in
full before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows and usually
occurs when past due for more than one year and not subject to
enforcement activity.
At each reporting date, the Group assesses whether financial
assets carried at amortised cost are credit impaired. A financial
asset is credit-impaired when one or more events that have a
detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Financial liabilities
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. All financial
liabilities are recognised initially at fair value and, in the case
of loans and borrowings and payables, net of directly attributable
transaction costs. The Group's financial liabilities include trade
and other payables and loans.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss. IFRS 9.4.2.1(a) Financial liabilities are
classified as held for trading if they are incurred for the purpose
of repurchasing in the near term. This category also includes
derivative financial instruments entered into by the Group that are
not designated as hedging instruments in hedge relationships as
defined by IFRS 9. Separated embedded derivatives are also
classified as held for trading unless they are designated as
effective hedging instruments. Gains or losses on liabilities held
for trading are recognised in the statement of profit or loss and
other comprehensive income.
Loans and borrowings and trade and other payables
After initial recognition, interest-bearing loans and borrowings
and trade and other payables are subsequently measured at amortised
cost using the EIR method. Gains and losses are recognised in the
statement of profit or loss and other comprehensive income when the
liabilities are derecognised, as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss and other comprehensive
income.
This category generally applies to trade and other payables.
Derecognition
A financial liability is derecognised when the associated
obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or loss and
other comprehensive income.
Liabilities within the scope of IFRS 9 are classified as
financial liabilities at fair value through profit and loss or
other liabilities, as appropriate.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires.
Financial liabilities included in trade and other payables are
recognised initially at fair value and subsequently at amortised
cost.
2. Significant Accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of a company after deducting all of its
liabilities. Equity instruments issued are recorded at the proceeds
received net of direct issue costs.
Share capital represents the amount subscribed for shares at
nominal value.
Retained earnings include all current and prior period results
as disclosed in the statement of comprehensive income, less
dividends paid to the owners of the parent.
Share based payments
The Group operates a number of equity-settled, share-based
schemes, under which the Group receives services from employees or
third party suppliers as consideration for equity instruments
(options and warrants) of the Group. The fair value of the third
party suppliers' services received in exchange for the grant of the
options is recognised as an expense in the Statement of
Comprehensive Income or charged to equity depending on the nature
of the service provided. The value of the employee services
received is expensed in the Statement of Comprehensive Income and
its value is determined by reference to the fair value of the
options granted:
-- including any market performance conditions;
-- excluding the impact of any service and non-market
performance vesting conditions (for example, profitability or sales
growth targets, or remaining an employee of the entity over a
specified time period); and
-- including the impact of any non-vesting conditions (for
example, the requirement for employees to save).
The fair value of the share options and warrants are determined
using the Black Scholes valuation model.
Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total expense
or charge is recognised over the vesting period, which is the
period over which all of the specified vesting conditions are to be
satisfied. At the end of each reporting period, the entity revises
its estimates of the number of options that are expected to vest
based on the non-market vesting conditions. It recognises the
impact of the revision to original estimates, if any, in the
Statement of Comprehensive Income or equity as appropriate, with a
corresponding adjustment to a separate reserve in equity.
When the options are exercised, the Group issues new shares. The
proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share
premium when the options are exercised.
Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (foreign currency risk, price risk and interest
rate risk), credit risk and liquidity risk. The Group's overall
risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Group's financial performance. None of these risks are
hedged.
Risk management is carried out by the London based management
team under policies approved by the Board of Directors.
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, to enable the
Group to continue its exploration and evaluation activities, and to
maintain an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust the capital structure, the
Group may adjust the issue of shares or sell assets to reduce
debts.
At 31 December 2018 the Group had borrowings of nil (2017: nil)
and defines capital based on the total equity of the Group. The
Group monitors its level of cash resources available against future
planned exploration and evaluation activities and may issue new
shares in order to raise further funds from time to time.
Given the Group's level of debt versus its cash at bank and cash
equivalents, the gearing ratio is immaterial.
3. Critical accounting estimates and judgements in applying accounting policies
In the application of accounting policies the directors are
required to make judgements, estimates and assumptions which affect
reported income, expenses, assets, liabilities and disclosure of
contingent assets and liabilities. The estimates and associated
assumptions are based on historical experience, expectations of
future events and other factors that are believed to be reasonable
under the circumstances. Actual results in the future could differ
from such estimates. The estimates and underlying assumptions are
reviewed on an on-going basis. Revisions to accounting estimates
are recognised in the period.
a) Valuation of exploration, evaluation and development expenditure
Exploration and evaluation costs have a carrying value at 31
December 2018 of $2,287,993(2017: $2,359,425). Such assets have an
indefinite useful life as the Group has a right to renew
exploration licences and the asset is only amortised once
extraction of the resource commences. The value of the Group's
exploration, evaluation and development expenditure will be
dependent upon the success of the Group in discovering economic and
recoverable mineral resources, especially in the countries of
operation where political, economic, legal, regulatory and social
uncertainties are potential risk factors. The future revenue flows
relating to these assets is uncertain and will also be affected by
competition, relative exchange rates and potential new legislation
and related environmental requirements. The Group's ability to
continue its exploration programs and develop its projects is
dependent on future fundraisings the outcome of which is uncertain.
The ability of the Group to continue operating within Botswana is
dependent on a stable political environment which is uncertain
based on the history of the country. This may also impact the
Group's legal title to assets held which would affect the valuation
of such assets. There have been no changes made to any past
assumptions.
b) Share-based payments
In accounting for the fair value of options and warrants, the
Company makes assumptions regarding share price volatility, risk
free rate, and expected life in order to determine the amount of
associated expense to recognise.
4. Segmental disclosures
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision--maker.
The chief operating decision--maker, who is responsible for
allocating resources and assessing performance of the operating
segment and that make strategic decisions, has been identified as
the Board of Directors. No revenue was generated during the
period.
The Group has two reportable segments, exploration and
corporate, which are the Group's strategic divisions, for each of
the strategic divisions, the Board reviews internal management
reports on a regular basis. The Group's reportable segments
are:
Exploration: the exploration operating segment is presented as
an aggregate of all Botswana licences held. Expenditure on
exploration activities for each licence is used to measure agreed
upon expenditure targets for each licence to ensure the licence
clauses are met.
Corporate: the corporate segment includes the holding and
intermediate holding companies costs in respect of managing the
Group.
Segment result
31-Dec 31-Dec
2018 2017
Continuing operations US$ US$
Exploration (Botswana) - 50000
Corporate ((London and Mauritius) (534,242) (44.055)
Profit/(loss) before tax (534,242) 5,945
Income tax - -
---------- ---------
Profit/(loss) after tax (534,242) 5,945
---------- ---------
No profit and loss items were incurred in respect of the
exploration activities as all relevant costs, in accordance with
IFRS 6 (Exploration for and Evaluation of Mineral Resources), were
capitalised to Intangible Assets for all of the periods
presented.
Segment assets and liabilities
Non-Current Assets Non-Current Liabilities
31-Dec 31-Dec 31-Dec 31-Dec
2018 2017 2018 2017
US$ US$ US$ US$
Intangible assets and equipment
(Botswana) 2,310,744 2,361,035 - -
Corporate (London and Mauritius) - - - -
---------- ---------- ------------ ------------
Total of all segments 2,310,744 2,361,035 - -
---------- ---------- ------------ ------------
Total Assets Total Liabilities
31-Dec 31-Dec 31-Dec 31-Dec
2018 2017 2018 2017
US$ US$ US$ US$
Exploration (Botswana) 2,313,179 2,369,035 1,119 10,088
Corporate (London and Mauritius) 1,066,761 520,673 69,663 296,544
-------------- ------------------------ ---------------- --------
Total of all segments 3,379,940 2,889,708 70,782 306,632
-------------- ------------------------ ---------------- --------
5. Other income
Other income relates to the payment received by the Group under
an earn in agreement which was terminated in 2018. There was no
income during 2018 from this agreement.
6. Expenses by nature
Expenses by nature
Group
---------------------------------
31 December 31 December
2018 2017
US$ US$
------------------------------------------------- --------------- ----------------
Directors' fees 42,988 -
Stock exchange related costs (including public 42,567 -
relations)
Auditor remuneration 42,563 33,541
Investor Relations 51,858 -
Travel & subsistence 23,016 -
Professional & consultancy fees including Legal 36,649 10,514
Insurance 9,029 -
Corporate advisory and Broker Fee 69,219 -
Share Option expense 189,956 -
Office and Other expenses 26,397 -
------------------------------------------------- --------------- ----------------
Total administrative expenses 534,242 44,055
------------------------------------------------- --------------- ----------------
Services provided by the Company's auditor and its
associates
During the period, the Group (including overseas subsidiaries)
obtained the following services from the Company's auditors and its
associates:
Group
--------------------------
31 December 31 December
2018 2017
GBP GBP
---------------------------------------------------- ------------ ------------
Fees payable to the Company's auditor and its
associates for the audit of the Company and Group
Financial Statements 42,563 33,541
---------------------------------------------------- ------------ ------------
7. Employees
Employment costs consist of:
Group 2018 2017
US$ US$
Wages and salaries including any Social security
costs 59,679 8,660
59,679 8,660
------- ------
The amounts detailed above were paid by Kavango Minerals (Pty)
Ltd and capitalised in intangible assets.
Company
Directors during the year were paid USD2 42,988 which is
included in Directors Fees in Note 6 and the Company Secretary was
paid USD 19,347 which is included in Professional fees in Note
6.
Further details are provided in Directors Remuneration Report on
Page 12
The average monthly number of employees during the period
was:
Group 2018 2017
Directors 3 2
Employees 5 7
8 9
----- -----
Company 2018 2017
Directors 3 2
Employees 1 -
4 2
------ ------
8. Taxation
2018 2017
US$ US$
Current taxation - -
Deferred taxation - -
-------------------- --------
- -
-------------------- --------
Profit / (loss) before tax (534,242) 5,945
Tax at the applicable rate of 19.8% (2017:19.2%) (105,780) 1,142
Effect of different tax rates in other jurisdictions 1,706 (1,660)
Tax losses carried forward 104,074 518
-------------------- --------
Current tax - -
-------------------- --------
The weighted average applicable tax rate of 19.8% (2017: 19.20%)
used is a combination of the 19% standard rate of corporation tax
in the UK, 22% Botswana corporation tax and exempt from Mauritius
corporation tax
Deferred tax has not been recognised in accordance with IAS 12
due to uncertainty as to when profits will be recognised against
which the losses can be relieved. The Group has approximately
US$2,165,667 (2017: US$2,700) of tax losses available to carry
forward against future taxable profits. A deferred tax asset has
not been recognised because of uncertainty over future taxable
profits against which the lowers may be used.
9. Earnings per share
31-Dec 31-Dec
2018 2017
Earnings/(losses) per Share (basic) - cents (0.76) 0.01
The basic loss per share is derived by dividing the loss for the
period attributable to ordinary shareholders by the weighted
average number of shares in issue. The weighted average number of
shares is adjusted for the impact of the reverse acquisition as
follows:
- Prior to the reverse acquisition, the number of shares is
based on Navassa Resources Ltd, adjusted using the share exchange
ratio arising on the reverse acquisition; and
- From the date of the reverse acquisition, the number of share is based on the Company.
31-Dec 31-Dec
2018 2017
Profit/(Loss) for the year from continuing
operations (used in calculation of basic EPS
from continuing operations) (US$) (534,242) 5,945
Weighted average number of Ordinary shares
in issue 99,169,996 39,905,457
In accordance with IAS 33, basic and diluted earnings per share
are identical for the Group as the effect of the exercise of share
options would be to decrease the earnings per share. Details of
share options that could potentially dilute earnings per share in
future periods are set out in Note 16.
10. Intangible assets
Group 31-Dec 31-Dec
Evaluation and Exploration Assets - Cost and 2018 2017
net book value
US$ US$
---------- ----------
At period start (1 January) 2,359,425 2,005,953
---------- ----------
Additions, net 272,581 204,868
Translation difference (344,013) 148,604
At period end (31 December) 2,287,993 2,359,425
---------- ----------
The Group's intangible assets comprise wholly of Evaluation and
Exploration assets in respect of the licences in Botswana.
Exploration projects in Botswana are at an early stage of
development and there are no JORC (Joint Ore Reserves Committee) or
non-JORC compliant resource estimates available to enable value in
use calculations to be prepared.
The Directors have undertaken a review to assess whether
circumstances exist which could indicate the existence of
impairment as follows:
-- The Group no longer has title to mineral leases.
-- A decision has been taken by the Board to discontinue
exploration due to the absence of a commercial level of
reserves.
-- Sufficient data exists to indicate that the costs incurred
will not be fully recovered from future development and
participation.
Following their assessment, the Directors recognised that no
impairment charge is necessary.
10A Exploration Field Equipment
Group 31-Dec 31-Dec
Exploration Field Equipment 2018 2017
US$ US$
--------- ---------------
Net Book Value at period start (1 January) 1,610 1,610
--------- ---------------
Additions (28,338) -
Depreciation (7,068) -
Translation difference (129) -
Net Book Value at period end (31 December) 22,751 1,610
--------- ---------------
The Group's Exploration Field Equipment includes all fixed
assets in Botswana, including vehicles used in field activities by
geology staff. Depreciation of $ 7,068 was capitalised in
Intangible assets.
11. Investments in subsidiaries
Company 2018 2017
US$ US$
At incorporation 3,500,000 -
Additions - 3,500,000
---------------- ----------------
At period end (31 December) 3,500,000 3,500,000
---------------- ----------------
Investments in subsidiaries are recorded at cost, which is the
fair value of the consideration paid.
On 7 December 2017 the Company acquired all of the issued
capital of Navassa Resources Limited for a consideration of
US$3,500,000 which was settled by issuing 4,370,000 Ordinary Shares
in the Company.
Principal subsidiaries
Country of Proportion of equity
incorporation Nature of shares held by
Name and residence business Company
Navassa Resources
Ltd
Level 3, 35 Cybercity
Ebene
Mauritius Mauritius Holding 100%
Botswana Base Metals 100%
Kavango Resources Exploration via Navassa
(Pty) Ltd
Plot 1306 Government
Camp Francistown
Botswana
These subsidiary undertakings are included in the consolidation.
The proportion of the voting rights in the subsidiary undertaking
held directly by the Parent Company does not differ from the
proportion of ordinary shares held.
12. Trade and other receivables
Group Company
31-Dec 31-Dec 31-Dec 31-Dec
2018 2017 2018 2017
US$ US$ US$ US$
Other receivables and prepayments 114,825 142,256 596,806 135,505
114,825 142,256 596,806 135,505
-------- -------- -------- --------
Group Trade and other receivables are all due within one year.
The fair value of all receivables is the same as their carrying
values stated above.
Included in other receivables are amounts owed by subsidiaries
of $491,473 (2017- $nil). This amount is interest free and
repayable on demand.
13. Cash and cash equivalents
Group Company
31-Dec 31-Dec 31-Dec 31-Dec
2018 2017 2018 2017
US$ US$ US$ US$
Cash and cash equivalents 954,371 386,417 937,124 348,653
954,371 386,417 937,124 348,653
-------- -------- -------- --------
Cash and cash equivalents consist of balances in bank accounts
used for normal operational activities.
14. Trade and other payables
Group Company
31-Dec 31-Dec 31-Dec 31-Dec
2018 2017 2018 2017
US$ US$ US$ US$
Other payables 70,782 146,241 62,967 133,603
70,782 146,241 62,967 133,603
------- -------- --------
Carrying amounts of trade and other payables approximate their
fair value.
15. Share capital
Number of Share capital Share premium Total
shares
Issued and fully paid US$ US$ US$
As at 1 January 2016 1,000,000 1,000,000 - 1,000,000
Issue of shares at par 200,000 200,000 - 200,000
------------ -------------- -------------- ------------
As at 31 December 2016/
1 January 2017 1,200,000 1,200,000 - 1,200,000
Issue of shares at par 709,223 709,223 - 709,223
Group reorganisation 23,720,777 (1,874,879) - (1,874,879)
Shares issued as consideration
for reverse merger 44,370,000 59,456 3,440,544 3,500,000
Issue of shares at US$0.06 4,169,996 6,263 330,942 337,205
Issue costs - - (10,596) (10,596)
------------ -------------- -------------- ------------
As at 31 December 2017/
1 January 2018 74,169,996 100,063 3,760,890 3,860,953
Issue of shares at US$0.0328 60,000,000 78,720 1,889,280 1,968,000
Issue costs - - (83,508) (83,508)
IPO costs - - (345,048) (345,048)
Foreign Exchange Loss
(Gain) - (7,758) (240,252) (248,010)
As at 31 December 2018 134,169,996 171,025 4,981,362 5,152,387
On 7 December 2017 the Company acquired Navassa Resources Ltd
for a purchase price of US$3.5 million (GBP2.6 million) through the
issue 44,370,000 new ordinary shares of GBP0.001 and became the
legal parent of the Group.
Due to the facts stated in note 2b) the Group is considered to
have always existed. For 2016 the figures represent those of
Navassa Limited and subsequent to 2016 those of Kavango Resources
Plc.
Navassa Resources Limited shares are US$1.
Kavango Resources Plc shares are GBP 0.001.
In 2016 US$50,000 of intangible assets additions were settled
through the issuing of 50,000 shares.
On 21 December 2017 4,169,996 shares were allotted and issued at
a price of GBP 0.06(US$0.08) per Ordinary Share.
On 31 July 2018 60,000,000 shares were allotted and issued at a
price of GBP 0.025(US$ 0.0328) per Ordinary Share.
16. Share based payments
Warrants
(i)During the share placement that completed on 21 December 2017
the Company issued 4,169,996 warrants to each of the subscribers.
Each warrant entitles the warrant holder to subscribe for one
ordinary share at a price of 12p (US$0.16) with a further warrant
attached for each two ordinary shares subscribed for under those
warrants, the new warrants entitling the warrant holder to
subscribe for one further ordinary share for each such new warrant
at a price of 24p (US$0.32). These warrants have not been
recognised in the financial statements as their fair value is not
material.
The fair value of the 4,169,996 Subscriber Warrants granted in
2017 was calculated using the Black-Scholes pricing model. The
inputs in the model are as follows:
12p warrants
Fair value of 1 warrant (US cents) 0.12s
Share price at the date of grant (US$) 0.081
Exercise price (US$) 0.16
Dividend yield 0%
Expected life, years 2.5
Annual risk-free interest rate 0.47%
Volatility 31%
The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for
lack of marketability. Should volatility be higher by 10%, fair
value of the warrants would increase by US$14,000.
(ii)During the IPO share placement that was completed on 31 July
2018 the Company issued 60,000,000 warrants to each of the
subscribers and 2,146,000 broker warrants. Each subscriber warrant
entitles the warrant holder to subscribe for one ordinary share at
a price of 12p (US$0.16) with a further warrant attached for each
two ordinary shares subscribed for under those warrants, the new
warrants entitling the warrant holder to subscribe for one further
ordinary share for each such new warrant at a price of 24p
(US$0.31). Each broker warrant entitles the warrant holder to
subscribe for one ordinary share at a price of 2.5p (US$0.033).
These warrants have not been recognised in the financial statements
as their fair value is not material.
(ii)(a)The fair value of US$ 514 for the 60,000,000 Subscriber
Warrants granted in 2018 was calculated using the Black-Scholes
pricing model. The inputs in the model are as follows:
12p warrants
Fair value of 1 warrant (US cents) Nominal
Share price at the date of grant (US$) 0.033
Exercise price (US$) 0.16
Dividend yield 0%
Expected life, years 2.0
Annual risk-free interest rate 0.77%
Volatility 35%
The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for
lack of marketability. Should volatility be higher by 10%, fair
value of the warrants would increase by US$ 6,516.
(ii)(b)The fair value of US$ 14,271 for the 2,146,000 Broker
Warrants granted in 2018 was calculated using the Black-Scholes
pricing model. The inputs in the model are as follows:
12p warrants
Fair value of 1 warrant (US cents) 0.67s
Share price at the date of grant (US$) 0.033
Exercise price (US$) 0.033
Dividend yield 0%
Expected life, years 2.0
Annual risk-free interest rate 0.77%
Volatility 35%
The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for
lack of marketability. Should volatility be higher by 10%, fair
value of the warrants would increase by US$ 18,415.
The warrants outstanding at the year end are:
Average remaining
contractual Weighted average
Exercise price Number outstanding life exercise price
US$ Years US$
0.16 4,169,996 2.0
0.16 60,000,000 2.0
0.33 2,146,000 2.0
---------------------------- ------------------- ------------------ -----------------
66,315,996 2.0 (0.156)
Share Options
In 2018 the Company granted 13,500,000 share options to
directors and management exerciseable at 2.5 pence for a period of
10 years from date of grant.
The fair value of the 2018 share options was calculated using
the Black-Scholes pricing model. The inputs in the model are as
follows:
2.5p share
options
Fair value of 1 share option (US cents) 1.42
Share price at the date of grant (US$) 0.033
Exercise price (US$) 0.033
Dividend yield 0%
Expected life, years 10.0
Annual risk-free interest rate 0.77%
Volatility 35%
The amount of US$ 189,956 calculated using the Black-Scholes
model has been expensed.
The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for
lack of marketability. Should volatility be higher by 10%, fair
value of the warrants would increase by US$ 232,250.
17. Financial instruments
The Board of Directors determine, as required, the degree to
which it is appropriate to use financial instruments or other
hedging contracts or techniques to mitigate risk. The main risk
affecting such instruments is foreign currency risk which is
discussed below.
There is no material difference between the book value and fair
value of the Group cash balances, and the short-term receivables
and payables because of their short maturities.
Credit risk
Credit risk is the risk that a customer may default or not meet
its obligations to the Group on a timely basis, leading to
financial losses to the Group. Credit risk arises from cash and
deposits kept with banks, advances paid and other receivables.
Financial assets which potentially subject the holder to
concentrations of credit risk consist principally of cash balances.
These balances are all held at a recognised financial institution.
The maximum exposure to credit risk is US$954,371 (2017:
US$386,417). The Company and Group does not hold any collateral as
security.
Market risk
Interest rate risk
Interest rate risk is the risk that future cash flows of a
financial instrument will fluctuate because of changes in interest
rates. The exposure to this risk is not considered, for the time
being, to be material and as such no arrangements have been put in
place to mitigate this risk.
Currency risk
Currency risk is the risk that the financial results of the
Group will be adversely affected by changes in exchange rates to
which the Group is exposed. The Group undertakes certain
transactions denominated in foreign currencies. The majority of the
Company's expenditures are denominated in Pound Sterling, while its
exploration expenses are incurred in Botswana Pula, accordingly,
the result for the year are adversely impacted by appreciation of
the Pound Sterling against the US$ while the Group's assets are
positively impacted by appreciation of the Botswana Pula against
the US$. Currency risk is monitored on a regular basis by
performing a sensitivity analysis of foreign currency positions in
order to verify that potential losses are at an acceptable
level.
The carrying amounts of monetary assets and liabilities
denominated in Botswana Pula was not material ; the carrying
amounts of monetary assets carried in GBP were as follows:
Group and Company
31-Dec 31-Dec
2018 2017
US$ US$
Assets
GBP 937,124 484,157
Liabilities
GBP 62,239 133,615
--------- ---------
Net exposure 874,885 350,542
--------- ---------
A 10% increase / decrease in the USD:GBP exchange rate would
result in a loss / profit of US$ 87,489 (2017 - US$35,054.)
Liquidity risk
Liquidity risk arises from the possibility that the Group and
its subsidiaries might encounter difficulty in settling its debts
or otherwise meeting its obligations related to financial
liabilities. In addition to equity funding, additional borrowings
have been secured to finance operations. The Company manages this
risk by monitoring its financial resources and carefully planning
its expenditure programmes.
17. Financial instruments (continued)
Capital
The Group considers its capital to comprise its ordinary share
capital and retained deficit. In managing its capital, the
director's primary objective is to maintain a sufficient funding
base to enable the Group to meet its working capital and strategic
investment needs. In making decisions to adjust its capital
structure to achieve these aims, through new share issues, the
Group considers not only their short-term position but also their
long term operational and strategic objectives.
18. Change in liabilities arising from financing activities
Non cash movements
----------------------------------------
Foreign Capitalised
Cash exchange Converted exploration
Group 1 January flows gain into shares costs 31 December
US$ US$ US$ US$ US$ US$
2017
Amounts due
to shareholders 763,343 43,921 (16,777) (709,223) 79,127 160,391
---------- --------- ---------- ------------- ------------- ------------
2018
Amounts due
to shareholders 160,391 (49,273) - - (111,118) -
---------- --------- ---------- ------------- ------------- ------------
Cash
Company 1 January flows 31 December
US$ US$ US$
2017
Amounts due to shareholders - 23,143 23,143
---------- --------- ------------
2018
Amounts due to shareholders 23,143 (23,143) -
---------- --------- ------------
19. Commitments
The Group's license expenditure commitments are:
Group
31-Dec 31-Dec
2018 2017
US$ US$
Within 12 months 1,278,000 874,000
At December 31, 2018 the Group had a contractual commitment of
$269,000 to complete an aerial survey
20. Related party transactions
Prior to the acquisition by Kavango Resources plc in December
2017 , Navassa Resources Limited and its subsidiary Kavango
Minerals (Pty) Ltd were financed as a private group by its four
founders and managed by Charles M Moles and Hillary Gumbo. Since
the acquisition and subsequent IPO the volume of related party
transactions has been greatly reduced.
Related Party Transactions during 2018 and 2017 include:
-- Rent, utilities and other administrative costs incurred by
Kavango Minerals (Pty) Ltd paid to 3D Exploration Limited, a
technical services company majority-owned by Hillary Gumbo, a
Director of Kavango Minerals (Pty) Ltd;
-- Directors Fees for all Group companies and fees paid to the Corporate Secretary.
-- Technical and consulting services provided by 3D Exploration
Limited to Kavango Minerals (Pty) Ltd ;
-- Advance made to Group companies by Charles Michael Moles, a Director
The following table summarises related party transactions by
year:
Group Currency 2018 2017
US$ US$
Included in capitalised exploration
costs:
Costs billed by 3D Exploration
(Hillary Gumbo) USD 36,426 58,715
Directors fees billed by Hillary
Gumbo GBP 15,000
Consulting fees billed by Hillary
Gumbo USD - 168,377
------- --------
55,626 227,092
------- --------
Balances with the related parties are:
Group and
Company Group Company
2018 2017 2017
US$ US$ US$
Included in other payables:
Other related parties - - 52,129
------------ ----------- ------------
- - 52,129
---------------------------------------------- ----------- ------------
Net amounts receivable from
(due to) related parties:
Charles Moles - (22,943) -
Douglas Wright -
Hillary Gumbo - (175) -
3D Exploration Note1 (98,375) -
Michael Foster - (8,849) (8,849)
John Forrest - (3,231) (3,231)
------------ ----------- ------------
- (133,573) (12,080)
---------------------------------------------- ----------- ------------
Note1: During 2018 $36,426
was billed by 3D Exploration
and capitalised in Intangible
assets
20. Related party transactions (continued)
Directors fees
Michael Foster was paid a Directors Fee of GBP 16,665 in 2018
(2017-Nil), Hillary Gumbo was paid a fee of GBP 15,000( 2017-USD
168,377) for acting as General Manager and Director of Kavango
Minerals (Pty) Ltd and John Forrest was paid a fee of GBP 15,000
(2017-Nil) as Corporate Secretary. Douglas Wright was paid an
advisory fee of GBP 40,000 (2017-Nil) for the 12 months beginning 1
August 2018
21. Events after the reporting date
In February 2019 the Group signed a contract with a local
drilling contractor for an expenditure commitment of Botswana Pula
1,644,000 (approximately USD 150,000)
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR IMMJTMBJJBFL
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