TIDMMTL
RNS Number : 3609Z
Metals Exploration PLC
21 May 2021
METALS EXPLORATION PLC
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2020
Metals Exploration plc (AIM: MTL) (the "Company" or the
"Group"), a Philippine gold producer, announces its final audited
results for the year ended 31 December 2020.
The financial information set out in this announcement does not
comprise the Group's statutory accounts for the year ended 31
December 2020 or 31 December 2019. The financial information has
been extracted from the statutory accounts of the Group and the
Company for the year ended 31 December 2020 and 31 December 2019.
The auditors reported on those accounts; the 31 December 2020
report was unqualified and did not contain a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report and did not contain a statement
under either Section 498 (2) or Section 498 (3) of the Companies
Act 2006; the 31 December 2019 report was unqualified but drew
attention to the reader of a material uncertainty without
qualifying their report and did not contain a statement under
either Section 498 (2) or Section 498 (3) of the Companies Act
2006. The statutory accounts for the year ended 31 December 2019
have been delivered to the Registrar of Companies, whereas those
for the year ended 31 December 2020 will be delivered to the
Registrar of Companies following the Company's annual general
meeting.
To access a full version of the 2020 annual report please go to
the Company website investor centre web-page.
CHAIRMAN'S STATEMENT
Dear Shareholder,
It is with great pleasure that I present my first Chairman's
Statement to shareholders, on behalf of the full board of directors
of the Company (the "Board"), having recently been appointed as
Chairman of the Company.
The period under review has seen the world face very challenging
circumstances due to the ongoing COVID-19 pandemic. No countries or
companies have remained immune to the impact of the associated
lock-down measures. However, what is particularly pleasing to note,
and is a testament to the team we have in place, is that despite
in-country and global travel restrictions and supply constraints,
we have remained operational. At times during FY2020 this has been
at reduced mining and gold recovery rates, however, conversely it
is pleasing to note the last quarter of the year saw the Company
register a record quarter, achieving record levels of gold sales
and gold recoveries, that is a reflection of the foundations put in
place by the Company's new management team.
Our employees and stakeholders' health and safety remain an
utmost priority to the Company, something which has been
highlighted even more so over the past year. Runruno continues to
record an outstanding safety record with currently over 13 million
person-hours without a reportable injury. This exceptional record
has also been acknowledged by the Filipino Mines and Geoscience
Bureau who have recently awarded Runruno as the nation's Safest
Surface Mining Operation, the overall Safest Mining Operation, and
Best Mine Supervisor, Engr. Lester Magliwan of the Company's wholly
owned subsidiary, FCF Minerals Corporation ("FCF").
In the last year, safety and health have not been limited to our
operations, as we have implemented numerous protocols and measures
to combat COVID-19 and to help prevent its spread. Until the end of
March 2021 we had been successful in that only one COVID-19 case
was reported at the mine site, again an excellent achievement given
the circumstances. Since 31 March 2021 however, in line with the
new wave of infections surging across the Philippines, we have
recorded approximately 30 positive COVID-19 cases on the mine site.
Effective quarantine arrangements have been put in place for
positive case personnel and their traced close contacts. Initially
these cases have been concentrated within the administrative and
other supporting non-operational departments, and to date there has
been no flow-on interruption to mining/processing operations.
We will continue to apply the most rigorous measures possible at
the mine gate, for as long as necessary, to protect our staff's
safety and well-being, and the on-going mine operations. At the
date of this report there are no positive COVID-19 employees in
isolation on the mine site.
Given this backdrop, it is extremely pleasing to note the
progress your Company has made both operationally and corporately
during the year.
One of the key aspects of the year was completing the Company's
debt restructuring providing Metals Exploration with a stable and
sustainable debt profile to enable the management team to focus its
efforts on further improving operational performance and
considering future growth options. This was a major achievement
after extensive negotiations with our lenders, leaving the Company
with much more flexible and commercially attractive debt terms.
This ensures that our debt does not jeopardise the future of Metals
Exploration and also ensures that both the Company and its lenders
share the upside and downside risks associated with our operational
performance and gold price fluctuations.
Completion of the debt restructuring enabled the Company to seek
new independent directors to the Board. The Company undertook an
extensive search and interview process which culminated in my
appointment as independent Non-Executive Chairman of the Company in
April 2021. We were also extremely pleased to appoint Andrew Chubb
and Jeremy Wrathall as Non-Executive Directors. It is anticipated
that the new Board members will provide a good mix of mining and
corporate industry experience, augmenting the established
directors' skill set, to assist the Company's future aspirations;
as well as providing greater compliance with corporate governance
expectations.
During the year, we were also delighted to announce that Hannam
& Partners joined our team of advisers as Corporate Broker. We
look forward to working further with them.
Operationally, FY2020 saw the Company continue to consolidate on
the progress and improvements that were made at Runruno during
2019. Despite the restrictions and implications of COVID-19 the
focus remained upon improving cash flow generated by the Runruno
operation with a continued focus on plant maintenance and
reliability. Given this, as mentioned above, it was particularly
pleasing to be able to report record gold sales of 20,295 ounces in
Q4 2020, with total sales for FY2020 of approximately US$122
million, a 30% increase over the previous year. We are confident
about the year ahead, and there are currently a number of projects
underway to optimise operations at Runruno further. We also believe
that considerable exploration upside remains with the potential to
extend the current projected mine life.
ESG (environment, social and governance) issues remain at the
forefront of what we do at Metals Exploration. We have a long track
record of operating in the Philippines, with over 98% of our
workforce being Filipino. We continue to prioritise the development
of our local community and have strong partnerships with the
various national agencies and local governments from Barangay to
the Provincial level. We continue to focus on health, education and
infrastructure building amongst others in our local communities. We
have adapted our programmes with further community support to
provide food and relief supplies to local communities/families,
particularly affected by the COVID-19 quarantine work restrictions,
and the extreme weather events affecting the area during November
2020.
Combined with this, the Company continues to actively promote
and implement "responsible mining" practices, actively reducing our
operations' potential environmental impacts and enhancing our
environmental performance in mined-out and disturbed areas.
On behalf of the Board, I would like to take this opportunity to
thank our entire workforce for all their efforts in what has been,
without a doubt, a challenging period. I look forward to when I,
together with the rest of the Board, can travel to the mine site
and meet with our dedicated staff and view the operations first
hand.
Through our staff's endeavours, our continued focus on
maintaining our exceptional safety record and implementing the
appropriate protocols, we believe that we are well positioned to
continue to improve the operational performance at Runruno for 2021
and beyond.
I, and the other two new directors, are extremely excited by the
opportunity and challenge of being involved with your Company and
anticipate continued positive news flow from all our
endeavours.
David Cather
Independent Non-Executive Chairman
20 May 2021
BUSINESS REVIEW
GROUP VISION & MISSION STATEMENT
The Group's vision is to be the most admired gold producer in
the Philippines. Our mission is to enhance the lives of our people
and local communities through the responsible management of our
natural resources, and to deliver resource development and
performance that owners have confidence in and employees are proud
of.
Evidence of adhering to these values is the incredible safety
record that the Group's employees and contractors have achieved. As
at the date of this report the Group has achieved in excess of 13
million man-hours with no lost time incidents occurring since the
last lost time incident in December 2016. This is a remarkable
achievement for an operation of this nature, and all employees and
contractors are to be congratulated on this outstanding record.
This safety record has been recognised with the Group recently
receiving the Philippine government's 2020 award for both the
Safest Surface Mining Operation and the Safest Overall Mining
Operation.
COVID-19 IMPACT
As at the date of this report management has been dealing with
the impact of COVID-19 government quarantine guidelines upon its
Runruno operations for over 12 months. During this period,
notwithstanding the pandemic impacting on the movement of goods and
people, the Group has managed to continue its mining and processing
operations, enabling it to continue to sell/export its gold
doré.
The main impacts of the pandemic have been interruptions to the
supply of various consumables/spares, the temporary need to export
doré to a different refining group, increased expenditure on new
health and safety measures and restrictions on the movement of
people, both internally in the Philippines and internationally
in/out of the Philippines. As of 31 March 2021 there was only one
known case of a COVID-19 positive person having accessed the mine
site.
Since late March 2021, however the Philippines has experienced a
surge in COVID-19 cases. This has been particularly prevalent in
areas near the Runruno mine in the Province of Vizcaya, especially
in the Municipality of Quezon. Unfortunately, notwithstanding the
various on-site/mine entry procedures to test for and quarantine
potential COVID-19 cases, numerous on-site cases of COVID-19 have,
since 1 April 2021, been detected. Initially these cases have been
concentrated within the administrative and other supporting
non-operational departments, and to date there has been no flow-on
interruption to mining/processing operations.
As a result of the increased level of infection across the
Philippines, the Group has introduced even more stringent on-site
testing and mine site access procedures. Effective quarantine
arrangements are in place for positive case personnel and their
traced close contacts. The COVID-19 cases detected and the Group's
responses have been reported to the appropriate government agencies
and the Group continues to be compliant with all relevant
government directives with regards COVID-19.
Social distancing measures and increased strict site access
protocols will continue in place at the Runruno mine to minimise
the risk of further COVID-19 outbreaks amongst the on-site
personnel. As part of this endeavour, the Group is currently
limiting the number of non-operational support staff on-site.
Notwithstanding the above, an increase in the number of COVID-19
cases amongst on-site personnel could put the continuity of future
mine operations at risk, at least for a temporary period.
In addition to the recent mine site detected COVID-19 cases, the
difficulty in satisfying international travel
restrictions/quarantine requirements to enable senior personnel to
travel to the mine site continues to impact on the efficiency of
the Group's operations.
Although the impacts of the COVID-19 pandemic continue, the
results of the Group's efforts over the last 12 months in
maintaining positive cash flow operations gives the Group reason to
believe that COVID-19 will not have a material negative impact on
the medium to long term future of the Group.
FINANCIAL YEAR 2020 ("FY2020") OVERVIEW
The Runruno operation's performance in FY2020 consolidated upon
positive improvements that first emerged during FY2019.
Notwithstanding FY2020 production being hampered by the impact of
the COVID-19 pandemic, for the second year running the project
produced an operational profit. Operational profit increased 3.4
times from US$8.9million in FY2019 to US$30.5 million for FY2020.
The All-In-Sustaining-Cost for FY2020 was US$1,259 per ounce (2019:
US$1,281 per ounce).
Gold production during FY2020 was negatively impacted by
numerous interruptions to project power supply which reduced the
efficiency and stability of the process operation, and in
particular the BIOX(R) circuit. Notwithstanding these issues, gold
production for FY2020 was 67,552 ounces compared to 68,983 ounces
in FY2019.
The sustained gold price increase resulted in an average sales
price of US$1,782 per ounce in FY2020 compared to US$1,400 per
ounce in FY2019. Total sales for FY2020 were US$122 million, a 30%
increase over the FY2019 sales proceeds.
Management's operational focus during FY2020 (when not COVID-19
restrained) was on improving plant performance and operational
reliability. Mill throughput was increased to above nameplate
design levels, while numerous studies were conducted into improving
the oxidation rate through BIOX(R). At the date of this report
several designed changes have been implemented in BIOX(R) and
management is confident it has developed new protocols that will
deliver consistently higher BIOX(R) oxidation rates (and hence
better gold recoveries) over the medium to long term.
During FY2020 management also concentrated on achieving a debt
restructuring that would put the Group on a stable financial
footing. In October 2020 the debt restructuring was completed. The
restructured debt provides the Group with much greater flexibility
in repaying its borrowings while providing certainty of its ongoing
financial stability.
DEBT RESTRUCTURING
In early 2019, the Group approached its lenders on the basis
that its current debt structure was unsustainable. The Group
sought, and was granted, a Standstill Agreement with both its
senior bank lenders and the mezzanine lenders during which the
Group was relieved of making any principal or interest payments.
The purpose of the standstill was to provide the Group and its
external lenders time to negotiate a restructuring of the debt that
would provide the Group with a sustainable debt position.
In January 2020, Runruno Holdings Ltd and MTL (Guernsey) Ltd,
(an associated company of MTL Luxembourg SARL), the Company's two
largest shareholders and mezzanine lenders, completed a sale
agreement with HSBC and BNP Paribas to purchase all the rights and
obligations under Runruno Facility Agreement (the "Senior
Facility"). Subsequently in March 2020, the parties were unable to
reach agreement on the continuation of the Standstill Agreement in
respect of the Senior Facility resulting in an event of default on
the debt. Due to the material uncertainty as to the Company's
financial condition, its shares were suspended from trading on the
AIM market of the London Stock Exchange.
In October 2020, the Group successfully restructured all its
debt facilities. Importantly under the debt restructuring the Group
no longer has an obligation to meet any fixed principal and
interest repayment schedule. The Group's repayment obligation is
now limited to making a quarterly repayment of that amount which
equals the available working capital over and above a minimum US$5
million net working capital buffer.
As at year end the Group had total debt, including unpaid
interest, of US$127.5 million (2019: US$124.1 million). During
FY2020 repayments of senior debt interest/principal totaled US$12
million; while a further US$18.6 million in senior debt
interest/principal repayments have been made since year end.
Refer to Note 22 for full details of the debt restructuring.
An important outcome of the debt restructuring was the
termination of the 2011 Shareholders Agreement which was replaced
by new relationship agreements between the Company and its two
largest shareholders. These new relationship agreements provide the
basis for improved corporate governance practices such that the
Company can be in far greater compliance with the QCA Code.
The suspension of the Company's shares to trading on the AIM
market was lifted on the completion of the debt restructuring on 26
October 2020.
MINING OPERATIONS
Total material moved during FY2020 was slightly down on FY2019
at 11.4mT (million tonnes) compared with 11.8mT.
Mining operations were restricted in March 2020 as the initial
impacts of the COVID-19 pandemic unfolded, and the ability of the
Group to continue operating the mine was under threat. Full mining
operations had resumed by the end of Q2 2020 once the Group had
resolved the immediate difficulties of operating in accordance with
the government restrictions imposed in response to the
pandemic.
Mining activities during FY2020 were aided by the commissioning
of three 100 tonne Komatsu 785 dump trucks to bolster the Group's
own fleet, while the overdue long term truck and shovel fleet
rebuilds were also completed during FY2020.
A major undertaking actioned during the year was the peaceful
removal of the majority of illegal miners from the Stages 3 and 4
mine plan areas. This programme was largely completed by the
year-end however the responsibility for, and process of, removing
the remaining small number of illegal miners now rests with the
relevant government authorities.
Unfortunately, the Group's access to Stages 3 and 4 did not
occur as early as planned due to delays in removing the illegal
miners from these areas. As a result the Group was forced to alter
its mine plan and develop a new access road into Stages 3 and 4.
This new access road runs from the Company's waste area behind the
east pit wall across into Stage 3. The Company completed this
access road in early Q2 2021. These delays in having suitable
access to Stage 3 has affected the 2021 mining schedule resulting
in a reduction to the scheduled 2021 head grade, with higher grade
material from Stage 3 being pushed into the 2022 mining
schedule.
Mining was negatively impacted by the excessive rainfall
experienced in Q4 2020, largely a result of four Typhoons that
passed over the Philippines during that quarter. The wetter than
normal wet-season caused some pit-wall slippages in the Stages 2
and 3 mining areas. These slippages have required clean-up and
re-buttressing. In addition, studies have determined that a further
cut-back to the upper levels of the east wall is required for
future stability. A 60 metre pit-wall step-out has been designed
and is being developed.
All relevant permits for operations remain in place for the
Runruno mine.
RESERVE STATEMENT
In April 2020 the Company issued a new gold reserve statement as
follows:
Table 1 - 2020 Ore Reserve estimate
Reserve Ore Gold
Category Mt g/t M Oz
------- ------- ------
Proved Nil Nil nil
------- ------- ------
Probable 11.7 1.38 0.50
------- ------- ------
Total 11.7 1.38 0.50
------- ------- ------
Inferred resources included in LOM model pit
Inferred material 2.7 1.21 0.10
------- ------- ------
The 2020 Ore Reserve Statement is in line with a reconciled
depletion reserve based on the previously issued reserve statement.
An infill drilling campaign that commenced in August 2019 has
continued through FY2020 and into FY2021. This ongoing drill
programme has moved into Stages 3 and 4 in an effort to improve the
Group's certainty of gold resources and to improve its mine
schedule planning. In addition, investigative drilling of deeper
areas of Stage 2 is underway in an effort to outline additional
economic resources in Stage 2 prior to the commencement of the
planned back-fill of the mine pit at Stage 2.
The Company is planning to publish a new gold reserve statement
by the end of FY2021.
PROCESS PLANT
During FY2020 the Group achieved an overall gold recovery from
processing operations of 72.2%, a modest but significant
improvement upon FY2019 which was 70.8%. Importantly the average
gold recovery for Q4 2020 was 79.8%, with these levels of gold
recovery continuing into FY2021. This represents a significant 25%
improvement from the FY2018 levels of gold recovery of only 57.9%.
Total gold poured in FY2020 was 67,552 ounces compared to 68,983
ounces in FY2019.
Plant performance in FY2020 continued to show improvement in
gold recovery from both the flotation and BIOX(R) circuits. During
Q4 2020 the results of numerous studies demonstrated a need for
further design modifications to the BIOX(R) circuit to achieve an
improvement to BIOX(R) circuit oxidation rates. All modifications
identified are expected to be completed by the end of Q2 2021.
Further, as FY2020 progressed issues with power interruptions were
overcome, and during Q4 2020 the entire processing plant operated
at a higher degree of stability, resulting in improved overall gold
recoveries.
During Q2 2020 and early Q3 2020 the performance of the
processing plant was negatively impacted due to the project site
suffering from significant and repeated power outages, including
back up power system failures due to the unreliability of circuit
and transmission power. These events resulted in extended periods
of loss of air to BIOX(R). Unfortunately, a lack of air delivered
to BIOX(R) leads to a collapse of the BIOX(R) bacteria culture and
negatively impacts the BIOX(R) oxidation process. In this scenario
the reactivation of the BIOX(R) circuit takes several weeks during
which gold recoveries are impacted. T hese events caused
instability in the BIOX (R) process for an extended period
impacting upon gold recoveries during Q2 and Q3 2020.
Other unplanned process plant downtime impacting on production
during FY2020 included: further power outages, compressor trips,
blocked SAG mill discharge gates, tails line failures and BIOX(R)
agitator gearbox failure/repair and conveyor belt repairs.
Notwithstanding the above, the process plant crushed ore
operations were above design throughput with the following points
of note:
-- The crushing and grinding circuit operated above design
throughput, achieving an availability rate of 90.6% (2019: 87.2%)
and processing 2.06mT of ore (2019: 1.95mT);
-- The milling circuit operated adequately during FY2020 with
incremental throughput being achieved maintaining production at
approximately 260t/hr. Unfortunately, the planned commissioning of
a mill variable speed drive was unsuccessful due to inconsistent
power supply quality. This issue is being further investigated as
the installation of the variable speed drive should assist with
maintaining throughput and providing a more consistent size faction
to flotation. Upon completion of this detailed review, another
attempt at the commissioning of the variable speed drive is
expected to be undertaken Q2 2021;
-- The gravity circuit operated at close to design recoveries of 30%;
-- Fine-tuning of the flotation circuit improved its performance
ensuring incremental increases in recovery and improving
concentrate grade for BIOX(R). The circuit operated reliably with
only minor maintenance issues;
-- The CIL circuit achieved an overall CIL recovery of 85.6% (2019: 84%);
-- Further improvement in BIOX(R) oxidation levels is
anticipated once a fourth blower is installed and design
modifications are finalised. This fourth blower was originally due
to be installed in Q4 2020 but is now expected to be installed
during Q2 2021;
-- The ancillary systems including counter current decantation,
neutralisation , reagents, cyanide destruction and residue disposal
circuits are all operating adequately and have benefited from
regular maintenance programmes; and
-- The improved cash-flows have enabled the Group to expand its
inventory of critical spares reducing the risk of lost production
from unplanned downtime.
RESIDUAL STORAGE IMPOUNDMENT (RSI)
The Group's tailings products are delivered to a residual
storage impoundment (RSI) structure. This structure has been
designed and is being constructed to international standards that
relate to water storage dams. The standard to which the RSI is
being constructed far exceeds international standards that apply to
traditional mining tailings dam structures.
During Q4 2020, the project site was impacted by extreme
rainfall from numerous typhoons and low-pressure rain-bearing
systems that passed through the region. The RSI slipway operated as
per design in safely releasing water overflow from the RSI during
one such event. Additional pumping capacity was installed to
improve the Group's ability to control rain-water runoff and to
return the d am water freeboard level to design levels.
Although the RSI construction has continued at a rate slower
than budgeted, the RSI remains in compliance with local guidelines
and the development requirements. Studies have commenced into two
alternate final in-rock spillway structures. Geotechnical drilling
of the two possible alternatives has commenced. It is anticipated
that a design decision for the final in-rock spillway will be made
by the end of 2021 with construction of the same commencing in Q1
2022.
The performance of the RSI is continuously monitored by an
independent international consulting group.
COMMUNITY AND SOCIAL DEVELOPMENT
The Community Relations Department, the community interface arm
of the Group, maintains strong partnerships with various national
agencies and local governments from Barangay to Provincial level.
They are primarily engaged in managing the implementation of
identified and prioritised projects within the mandated Social
Development and Management Program and other programmes under them
as a component of the Group's commitment to its Corporate Social
Responsibility ('CSR').
It is the Group's objective to benefit its host communities by
undertaking sustainable development within the community with
programmes focused in the following key areas:
-- Health;
-- Education;
-- Capacity building;
-- Community development and empowerment;
-- Enterprise development, improvement and networking;
-- Infrastructure development; and
-- Preservation and respect of socio-cultural values.
The reach of the programmes extends to assist the residents of
the Barangay of Runruno and surrounding Barangays, the Municipality
of Quezon and the Province of Nueva Vizcaya.
During the COVID-19 crisis these programs have been adapted,
with community support, to provide relief foods supplies to local
communities/families particularly affected by the COVID-19
quarantine work restrictions. When available to commercial
organisations, the Group plans to source COVID-19 vaccinations for
the local communities as part of its community/social
programmes.
Further, during November 2020 the Group provided significant
heavy equipment assistance to clean-up/repair community/residential
infrastructure and emergency shelter/supplies to local residents
impacted by the various typhoons that passed through the project
area.
The relocation of illegal miners operating on the back of the
existing operations in Stages 3 and 4 of the mine plan was a major
issue to be tackled for which the Group had significant community
support. As noted above the Group continues to work closely with
the local government to ensure the smooth relocation of these
itinerant people outside of the mining areas. Agreed compensation
packages have been paid to those families that have chosen to
relocate and to date this undertaking has proceeded without
incident.
SAFETY AND HEALTH
The FY2020 COVID-19 pandemic provided many unique and new
challenges for the Group to manage. At the pandemic outbreak the
Group invested heavily in implementing adequate site-wide social
distancing and site access protocols that were successful in
keeping the project site COVID-19 free until April 2021. Refer
above for commentary upon post March 2021 on-site COVID-19
infections.
Otherwise there were no material safety and health incidents
throughout the project site. A safe working culture is actively
promoted by a dedicated occupational health and safety department
and is embraced across the Runruno site and in all departments,
with all staff recognizing their individual responsibilities for
their own safety and the safety of others. As noted above the
operation has achieved in excess of 13 million man-hours with no
lost time incidents, which has been recognised by the government
whereby the project was recently awarded both the Safest Surface
Mining Operation and the Safest Overall Mining Operation in the
Philippines.
ENVIRONMENT
The Group is active in promoting and implementing "responsible
mining" practices. It is a leader in the Philippine mining industry
in its environmental and environmental rehabilitation practices.
The Group recognises good environmental management as a key
parameter in its CSR charter. The Group maintains and promotes its
commitment to the effective stewardship, protection and enhancement
of the environment in and around the areas where it operates,
including the conduct of its business in an environmentally sound
manner. This is the driving thrust towards the goal of sustainable
development and reducing potential significant impacts of the
Runruno operations upon the environment.
REFORESTATION AND REHABILITATION
The Group has continued to actively reduce the potential
environmental impacts of its operations and enhance its
environmental performance in mined-out and disturbed areas. It
undertakes this obligation through immediate and continuous
rehabilitation activities and by the re-greening of disturbed
areas, establishment of protection forests and the provision of
habitat for wildlife within the FTAA area. These programmes
demonstrably improve the environment within and surrounding the
Group's operations and are designed for beautification,
stabilisation , to off-set green-house gas emissions and the
impacts of the Group's operations. Through its various programmes,
the Group has been responsible for planting over 2 million endemic
and cash crop trees.
GREENHOUSE GAS EMISSIONS DISCLOSURE
The Group recognises its social responsibility to minimise its
greenhouse gas emissions (GHG) as far as economically
practicable.
Regulations made under the UK Companies Act 2006 requires the
Group, to the extent practicable, to obtain relevant information on
the Group's annual quantity of GHG emissions, which is reported in
tonnes of carbon dioxide equivalent, and the Group's energy
consumption.
Scope 1 refers to direct GHG emissions from operations that are
owned or controlled by the Group, primarily emissions from fuel
consumed by haul trucks, other vehicles and stationary plant at the
Runruno project. These GHG emissions are regularly reported to the
Philippines mines department.
The calculation of GHG emissions is based on activity data, i.e.
monitoring of fuel consumption rates, fuel composition, etc
multiplied by industry produced conversion factors.
Scope 2 GHG emissions are indirect emissions from the generation
of purchased electricity consumed by operations that are owned or
controlled by the Group. Group Scope 2 emissions have been
calculated using the market-based method using Philippine
government recorded supplier-specific emission factors.
The Group's total carbon footprint (generated outside of the UK)
is measured as follows:
2020
CO(2) e Tons
---------------------
Scope 1 GHG emissions 36,353
Scope 2 GHG emissions 69,263
---------------------
Operational GHG emissions Total 105,616
---------------------
Total CO(2) e Tons
per
ounces gold sold
---------------------
Operational GHG Emissions Intensity 1.54
---------------------
ENVIRONMENTAL MONITORING
The Group maintains very high compliance standards and employs a
number of industry leading initiatives to ensure the highest
environmental performance. It regularly conducts its own internal
comprehensive environmental monitoring program to ensure compliance
with its licence provisions, Philippine Regulations and any
appropriate contemporary Standards. These programmes extend to
reference sites outside the immediate operational area and are used
to provide reference and base-line data for future use. The
Government programmes quarterly monitoring by an independent,
community based Multipartite Monitoring Team. The Group also
engages an independent third party consultant group specialising in
environment monitoring services to conduct independent monitoring
of its environmental performance.
LEGAL COMPLIANCE
High compliance standards are practiced across the Group in the
maintenance of its operations. A large site based team is dedicated
to managing the high levels of compliance mandated within the
Philippines. The site is regularly audited with upwards of sixty
audits, verifications or reviews of its operations undertaken
annually by the various regulators. The wide range of permits to
operate in the Philippines are secured from a number of Government
agencies and regulators including the Department of Environment
& Natural Resources, Mines & Geosciences Bureau,
Environmental Management Bureau, Forest Management Bureau, Bureau
of Internal Revenue, Bureau of Customs, Bureau of Investment,
Provincial Government, Municipality, Philippines National Police,
National Telecommunications Commission, Water Management Bureau,
and the Local Government Units.
OUTLOOK
Notwithstanding potential impacts from the COVID-19 pandemic,
FY2021 is planned to be a year of consolidation with a focus
streamlining procedures to capture meaningful cost savings and on
additional improvements to gold recoveries through increased plant
reliability and incremental process gains.
Efforts will be made from both in-pit shell and out-pit shell
drilling to add further resources to the Group's gold inventory.
Further, the Group's positive operational cash-flows will, in the
main, be utilised to reduce the Group's senior loan facility as
quickly as possible.
BOARD ENGAGEMENT WITH STAKEHOLDERS
This section serves as our section 172 statement and should be
read in conjunction with the rest of the Strategic Report and the
Company's Corporate Governance Statement.
Section 172 of the Companies Act 2006 requires a Director of a
company to act in the way he or she considers, in good faith, and
would be most likely to promote the success of the company for the
benefit of its members as a whole. In doing this, section 172
requires a Director to have regard, among other matters, to: the
likely consequences of any decision in the long term; the interests
of the company's employees; the need to foster the company's
business relationships with suppliers, customers and others; the
impact of the company's operations on the community and the
environment; the desirability of the company maintaining a
reputation for high standards of business conduct; and the need to
act fairly with members of the company.
The Directors uses its Board meetings as a mechanism for giving
careful consideration to the factors set out above in discharging
their duties under section 172.
Stakeholder engagement
Key stakeholder groups we engage with are listed below, together
with an explanation of why we focus on them and how we engage
them.
Employees
The success of the Group is dependent upon the hard work and
dedication of all our employees. The Board ensures a continuing
investment in existing employees who are supported through
professional, technical and on-the-job training relevant to their
functional areas, as well as other relevant role-specific training.
The Board directs executives and senior managers to keep staff
informed of the progress and development of the Group on a regular
basis through formal and informal meetings and regular
communications. In addition, the Board ensures funds are provided
for regular events to encourage employee participation in local
community initiatives. The Board is conscious of its social
obligation to impart skills and knowledge onto local Philippine
employees. Accordingly over 98% of the Group's workforce is
Philippine. Gender diversity of our workforce is encouraged with
over 27% of the workforce being female.
Government Agencies & Local Communities
The Group operates in the highly regulated mining business in
the Philippines. The Board ensures the Company adopts a positive
focus on maintaining productive relations with local communities
and all levels of government. As a result the Chief Executive
Officer and senior managers regularly conduct consultations with
multi-levels of government agencies to ensure that all regulatory
approvals and permits remain in good order. Development of local
community improvement programmes are undertaken with consultation
of local government and community representatives.
Contractors & Suppliers
Our contractors and suppliers are key business partners, and the
quality of goods and services we receive are essential to
supporting operations and to provide the Group with the opportunity
to produce positive cash flows.
Improved relationships with our key contractors and suppliers
were evidenced during the early stages of the COVID-19 pandemic.
The support generated from key contractors and suppliers was
crucial in enabling the Group to continue to operate. As directed
by the Board, management collaborates and continually works with
our contractors and the full supply chain, sharing best practice
and seeking out synergies to improve performance. The reduction in
the aging of key suppliers/contractors creditor balances over the
last two years has played an important part in cementing these
relationships.
Lenders
For the entire reporting period, the CEO and the CFO , on behalf
of the Board, were in regular contact with its lenders culminating
in the October 2020 debt restructuring. Notwithstanding the
completion of the debt restructuring regular contact is maintained
with the lenders regarding the Group's performance and to ensure
expectations are properly managed.
Customers
The Group's business in mining and selling gold doré means it
only deals with a small number of end customers, being refiners of
doré and/or gold concentrate . The Board ensures a close
relationship is maintained with senior personnel at each customer
group.
Investors
Investors are considered key stakeholders, and consequently
investor relations are a focus area for Directors. Where possible
the Board engages investors on Group performance following trading
updates and results announcements with face to face meetings and
scheduled calls. Over the past year however, these consultations
have been severely impacted by the legal and regulatory
restrictions placed upon Directors given the debt restructuring
negotiations that were ongoing for the majority of this period.
Approved by the Board of Directors and signed on behalf of the
Board.
Darren Bowden, Chief Executive Officer
20 May 2021
Competent Persons' Statement
The information contained in this report that relates to the
2020 gold Reserves Estimate is based on information compiled by Mr
Iain Ross, who is a Member of The Australasian Institute of Mining
and Metallurgy and the Australian Institute of Geoscientists. Mr
Ross is a full-time employee of Xenith Consulting. Mr Ross has
sufficient experience that is relevant to the style of
mineralisation and type of deposit described in the release to
qualify as a Competent Person as defined by the JORC Code, 2012
Edition. Mr Ross consents to the inclusion of this information in
the form and context in which it appears in this report.
Mr Darren Bowden, a director of the Company, a Member of the
Australasian Institute of Mining and Metallurgy and who has been
involved in the mining industry for more than 25 years, has
compiled, read and approved the technical disclosure in this
regulatory announcement in accordance with the AIM Rules - Note for
Mining and Oil & Gas Companies.
Forward Looking Statements
Certain statements relating to the estimated or expected future
production, operating results, cash flows and costs and financial
condition of Metals Exploration plc and the Group, planned work at
the Company's projects and the expected results of such work
contained herein are forward-looking statements which are based on
current expectations, estimates and projections about the potential
returns of the Group, industry and markets in which the Group
operates in, the Directors' beliefs and assumptions made by the
Directors . Forward-looking statements are statements that are not
historical facts and are generally, but not always, identified by
words such as the following: "expects", "plans", "anticipates",
"forecasts", "believes", "intends", "estimates", "projects",
"assumes", "potential" or variations of such words and similar
expressions. Forward-looking statements also include reference to
events or conditions that will, would, may, could or should occur.
Information concerning exploration results and mineral reserve and
resource estimates may also be deemed to be forward-looking
statements, as it constitutes a prediction of what might be found
to be present when and if a project is actually developed.
These statements are not guarantees of future performance or the
ability to identify and consummate investments and involve certain
risks, uncertainties and assumptions that are difficult to predict,
qualify or quantify. Among the factors that could cause actual
results or projections to differ materially include, without
limitation: uncertainties related to raising sufficient financing
to fund the planned work in a timely manner and on acceptable
terms; changes in planned work resulting from logistical, technical
or other factors; the possibility that results of work will not
fulfil projections/expectations and realize the perceived potential
of the Company's projects; uncertainties involved in the
interpretation of drilling results and other tests and the
estimation of gold reserves and resources; risk of accidents,
equipment breakdowns and labour disputes or other unanticipated
difficulties or interruptions; the possibility of environmental
issues at the Company's projects; the possibility of cost overruns
or unanticipated expenses in work programs; the need to obtain
permits and comply with environmental laws and regulations and
other government requirements; fluctuations in the price of gold
and other risks and uncertainties.
The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward looking
statements contained herein to reflect any change in the Group's
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are based
unless required to do so by applicable law or the AIM Rules
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Notes US$ US$
Continuing Operations
Revenue 3 122,098,677 94,280,289
Cost of sales (83,258,806) (75,819,654)
------------- -------------
Gross profit 38,839,871 18,460,635
Administrative expenses (8,377,651) (9,496,897)
------------- -------------
Operating profit 4 30,462,220 8,963,738
------------- -------------
Impairment (loss)/reversal 8 (1,292,814) 23,213,749
Loss on sale of assets - (569,434)
Net finance and other costs 8 (19,403,985) (17,778,610)
Share of profit of associates 15 2,625 22,829
Profit before tax 9,768,046 13,852,272
Taxation 9/10 (19,749) (140,072)
------------- -------------
Profit for the period attributable to equity holders of the parent 9,748,297 13,712,200
============= =============
Other comprehensive income :
Items that may be re-classified subsequently to profit or loss:
Exchange differences on translating foreign operations 2,947,074 1,566,525
Items that will not be re-classified subsequently to profit or loss:
Re-measurement of pension liabilities (28,655) (118,035)
------------- -------------
Total comprehensive profit for the period attributable to equity holders
of the parent 12,666,716 15,160,690
============= =============
Earnings per share:
Basic cents per share 11 0.47 0.66
Diluted cents per share 11 0.46 0.65
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2020
2020 2019
Notes US$ US$
Non-current assets
Property, plant and equipment 12 103,159,132 106,978,695
Other intangible assets 13 52,030 49,567
Investment in associate companies 15 164,033 161,408
Trade and other receivables 16 5,500,577 4,222,863
-------------- ---------------
108,875,772 111,412,533
-------------- ---------------
Current assets
Inventories 17 14,620,743 9,478,457
Trade and other receivables 19 11,807,274 3,609,595
Cash and cash equivalents 18 8,931,792 4,818,981
-------------- ---------------
35,359,809 17,907,033
-------------- ---------------
Non-current liabilities
Loans 22 (98,150,386) (11,282,574)
Retirement benefits obligations 20 (1,799,862) (973,000)
Deferred tax liabilities 10 (808,757) (812,481)
Provision for mine rehabilitation 23 (3,291,388) (2,880,092)
-------------- ---------------
(104,050,393) (15,948,147)
-------------- ---------------
Current liabilities
Trade and other payables 21 (12,032,4876) (14,355,288)
Loans - current portion 22 (29,264,218) (112,794,363)
(41,296,704) (127,149,651)
-------------- ---------------
Net liabilities (1,111,516) (13,778,232)
============== ===============
Equity
Share capital 24 27,950,217 27,950,217
Share premium account 195,855,125 195,855,125
Acquisition of non-controlling interest reserve (5,107,515) (5,107,515)
Translation reserve 17,691,159 14,744,085
Re-measurement reserve 38,148 66,803
Other reserves 25 1,526,937 1,526,937
Profit and loss account (239,065,587) (248,813,884)
Equity attributable to equity holders of the parent (1,111,516) (13,778,232)
============== ===============
The financial statements were approved by the Board of Directors
on 20 May 2021 and were signed on its behalf by:
Darren Bowden, Chief Executive Officer
20 May 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2020
Acquisition
of
Share non-controlling Profit
Share premium interest Translation Re-measurement Other and loss Total
capital account reserve reserve reserve reserve account equity
US$ US$ US$ US$ US$ US$ US$ US$
Balance at 1
January 2020 27,950,217 195,855,125 (5,107,515) 14,744,085 66,803 1,526,937 (248,813,884) (13,778,232)
----------- ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Exchange
differences on
translating
foreign
operations - - - 2,947,074 - - - 2,947,074
Change in
pension
liability - - - - (28,655) - - (28,655)
Profit for the
year - - - - - - 9,748,297 9,748,297
----------- ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Total
comprehensive
income/(loss)
for the year - - - 2,947,074 (28,655) - 9,748,297 12,666,716
Balance at 31
December
2020 27,950,217 195,855,125 (5,107,515) 17,691,159 38,148 1,526,937 (239,065,587) (1,111,516)
----------- ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Equity is the aggregate of the following:
-- Share capital; being the nominal value of shares issued
-- Share premium account; being the excess received over the
nominal value of shares issued less direct issue costs
-- Acquisition of non-controlling interest reserve; being the
goodwill arising on acquiring additional equity in a controlled
subsidiary
-- Translation reserve; being the foreign exchange differences
on the translation of foreign subsidiaries
-- Re-measurement reserve: being the cumulative actuarial gains
and losses, return on plan assets and changes in the effect of the
asset ceiling (excluding net interest on defined benefit liability)
recognised in other comprehensive income
-- Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities
-- Profit and loss account; being the cumulative loss attributable to equity shareholders
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
Acquisition
Shares of
Share to be non-controlling Profit
Share premium issued interest Translation Re-measurement Other and loss Total
capital account reserve reserve reserve reserve reserve account equity
US$ US$ US$ US$ US$ US$ US$ US$ US$
Balance at 1
January 2019 27,950,217 195,855,125 4,928,152 (5,107,515) 13,177,560 184,838 - (267,454,236) (30,465,859)
----------- ------------ ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Exchange
differences
on
translating
foreign
operations - - - - 1,566,525 - - - 1,566,525
Change in
pension
liability - - - - - (118,035) - - (118,035)
Profit for the
year - - - - - - - 13,712,200 13,712,200
----------- ------------ ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Total
comprehensive
income/(loss)
for the year - - - - 1,566,525 (118,035) - 13,712,200 15,160,690
Fair value of
warrants - - - - - - 1,526,937 - 1,526,937
Transfer to
profit and
loss - - (4,928,152) - - - - 4,928,152 -
Balance at 31
December
2019 27,950,217 195,855,125 - (5,107,515) 14,744,085 66,803 1,526,937 (248,813,884) (13,778,232)
----------- ------------ ------------ ---------------- ------------ --------------- ------------ -------------- -------------
Equity is the aggregate of the following:
-- Share capital; being the nominal value of shares issued
-- Share premium account; being the excess received over the
nominal value of shares issued less direct issue costs
-- Shares to be issued reserve; being the credit side of the
entry relating to the expense recognised in the statement of total
comprehensive income for share based remuneration. As all share
options have expired with no shares issued this reserve has been
transferred to profit and loss.
-- Acquisition of non-controlling interest reserve; being the
goodwill arising on acquiring additional equity in a controlled
subsidiary
-- Translation reserve; being the foreign exchange differences
on the translation of foreign subsidiaries
-- Re-measurement reserve: being the cumulative actuarial gains
and losses, return on plan assets and changes in the effect of the
asset ceiling (excluding net interest on defined benefit liability)
recognised in other comprehensive income
-- Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities
-- Profit and loss account; being the cumulative loss attributable to equity shareholders
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Notes US$ US$
Net cash generated from operating activities 26 28,131,523 13,691,659
------------- -------------
Investing activities
Purchase of property, plant and equipment (12,731,516) (11,335,992)
Purchase of intangible assets (76,443) (63,078)
Proceeds from sale of plant and equipment 250,000 250,000
Net cash (used in) investing activities (12,557,959) (11,149,070)
------------- -------------
Financing activities
Repayment of borrowings 22 (11,332,074) -
Proceeds from borrowings 22 - 899,257
Net cash (used in)/arising from financing activities (11,332,074) 899,257
------------- -------------
Net increase in cash and cash equivalents 4,251,490 3,441,846
Cash and cash equivalents at beginning of year 4,818,981 1,497,431
Foreign exchange difference (138,679) (120,296)
Cash and cash equivalents at end of year 8,931,792 4,818,981
============= =============
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2020
2020 2019
Notes US$ US$
Non-current assets
Investment in subsidiaries 14 - -
-------------- --------------
- -
Current assets
Trade and other receivables 19 65,045,652 39,977,668
Cash and cash equivalents 18 569,732 565,166
-------------- --------------
65,615,384 40,542,834
-------------- --------------
Non-current liabilities
Loans 22 (67,596,759) (11,282,574)
-------------- --------------
(67,596,759) (11,282,574)
-------------- --------------
Current liabilities
Loans 22 - (44,705,987)
Trade and other payables 21 (362,682) (442,196)
-------------- --------------
(362,682) (45,148,183)
Net liabilities (2,344,057) (15,887,923)
============== ==============
Equity
Share capital 24 27,950,217 27,950,217
Share premium account 195,855,125 195,855,125
Translation reserve 1,305,125 (940,976)
Other reserves 25 1,526,937 1,526,937
Profit and loss account (228,981,461) (240,279,226)
-------------- --------------
Equity attributable to equity holders of the parent (2,344,057) (15,887,923)
============== ==============
The Company has taken advantage of the exemption provided under
section 408 of Companies Act 2006 not to publish an income
statement or a statement of total comprehensive income. The total
comprehensive income for the year ended 31 December 2020 dealt with
in the financial statements of the Company was $11,297,765 (2019:
$28,662,780).
The financial statements were approved by the Board of Directors
on 20 May 2021 and were signed on its behalf by:
Darren Bowden; Chief Executive Officer
20 May 2021
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARSED 31 DECEMBER 2020 & 31 DECEMBER 2019
Share Share Shares to Profit and Total equity
capital premium be issued Translation Other loss account
account reserve reserve reserves
US$ US$ US$ US$ US$ US$ US$
Balance at1
January 2019 27,950,217 195,855,125 4,928,152 (830,624) - (273,870,158) (45,967,288)
Exchange
differences
on
translating
foreign
currencies - - - (110,352) - - (110,352)
Profit for
the year - - - - - 28,662,780 28,662,780
----------- ------------ ------------ ------------- ---------- -------------- -------------
Total
comprehensive
income/(loss)
for the year - - - (110,352) - 28,662,780 28,552,428
----------- ------------ ------------ ------------- ---------- -------------- -------------
Fair value
of warrants - - - - 1,526,937 - 1,526,937
Transfer to
profit and
loss - - (4,928,152) - - 4,928,152 -
----------- ------------ ------------ ------------- ---------- -------------- -------------
Balance at
31 December
2019 27,950,217 195,855,125 - (940,976) 1,526,937 (240,279,226) (15,887,923)
Exchange
differences
on
translating
foreign
currencies - - - 2,246,101 - - 2,246,101
Profit for
the year - - - - - 11,297,765 11,297,765
----------- ------------ ------------ ------------- ---------- -------------- -------------
Total
comprehensive
income for
the year - - - 2,246,101 - 11,297,765 13,543,866
----------- ------------ ------------ ------------- ---------- -------------- -------------
-
----------- ------------ ------------ ------------- ---------- -------------- -------------
Balance at
31 December
2020 27,950,217 195,855,125 - 1,305,125 1,526,937 (228,981,461) (2,344,057)
=========== ============ ============ ============= ========== ============== =============
Equity is the aggregate of the following:
-- Share capital; being the nominal value of shares issued
-- Share premium account; being the excess received over the
nominal value of shares issued less direct issue costs
-- Shares to be issued reserve; being the credit side of the
entry relating to the expense recognised in the income statement
for share based remuneration. As all share options have expired
with no shares issued this reserve has been transferred to profit
and loss.
-- Translation reserve; being the foreign exchange differences
arising on the change of presentational currency and upon on the
translation of foreign currencies
-- Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities.
-- Profit and loss account; being the cumulative loss attributable to equity shareholders
COMPANY CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Notes US$ US$
Net cash used in operating activities 26 (2,524,693) (2,069,014)
------------ ------------
Financing activities
Proceeds from borrowings 22 - 899,257
Advances from subsidiary 2,608,692 1,100,000
------------ ------------
Net cash from financing activities 2,608,692 1,999,257
------------ ------------
Net Increase/(decrease) in cash and cash equivalents 83,999 (69,757)
Cash and cash equivalents at beginning of year 565,166 664,642
Foreign exchange difference (79,433) (29,719)
Cash and cash equivalents at end of year 569,732 565,166
============ ============
NOTES TO THE FINANCIAL INFORMATION
FOR THE YEARED 31 DECEMBER 2020
1. Accounting policies
The principal accounting policies are summarised below. Except
as elsewhere disclosed, the accounting policies have all been
applied consistently throughout the period covered by this
financial information .
Basis of preparation
The financial information has been prepared on a historical cost
basis and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
For the Group and its subsidiaries US Dollars is both the
functional and presentational currency. Although the Company's
functional currency is pounds sterling, it also uses US Dollars as
its presentational currency, to better reflect the underlying
performance of that entity.
Going concern
The consolidated financial statements of the Group have been
prepared on a going concern basis, which contemplates the
continuity of business activities and the realisation of assets and
the settlement of liabilities in the normal course of business.
To date the Group has managed to limit the impact of COVID-19 on
its operations. The main impacts that have arisen during the
COVID-19 crises are the limitation on movement of personnel to/from
the project site and in/out of the Philippines, supply chain
interruptions affecting delivery of spares and consumables and the
necessary introduction of on-site social distancing and site access
protocols. These COVID-19 pressures have been well managed, with
gold production continuing to produce positive cash flows. As a
result the Group currently believes the impact of COVID-19 will not
affect the going concern status of the Group.
In October 2020 the Group successfully restructured its external
debt facilities on a basis that provides a sustainable financial
structure to continue to operate the project to produce sustainable
cashflows. The Group no longer has an obligation to meet any fixed
interest and principal repayment schedule, which has removed the
risk that the Group will default on its debt facilities due to not
meeting a fixed principal and interest repayment schedule. In
addition, the Group has the right to hold a US$5 million working
capital buffer in excess of current liabilities thus ensuring
external creditors can be paid from Group cash flows before debt
payments are made. Further there is no obligation to make any
repayment of mezzanine debt principal and interest until the senior
debt is fully repaid.
Although the consolidated balance sheet continues to show net
liabilities of US$1.11 million (2019: US$13.78 million) and net
current liabilities of US$5.45 million (2019: US$109.24 million),
ope rational performance during 2020 built upon the production
improvements that first became evident during 2019. Notwithstanding
COVID-19 impacts, the Group produced a consolidated operating
profit of US$30.5 million. Since year end the operation has
maintained these operational improvements and positive free cash
flows are expected to continue.
However, over the next financial period, the continuing
viability of the Group and its ability to operate as a going
concern, and to meet its commitments as and when they fall due is
dependent upon the ability of the Group to operate the Runruno
project successfully; so as to generate sufficient cash flows from
the project to enable the Group to settle its liabilities as they
fall due.
After making enquiries and considering the matters described
above, the Group's directors believe that there are reasonable
grounds to believe that the use of the going concern basis remains
appropriate as:
-- The Group's agreement with its lenders removes the obligation
for the Group to meet fixed interest and principal repayment
schedules. Its repayment obligation is now limited to a quarterly
payment of interest and principal of that amount which equals the
available working capital over and above a US$5million working
capital buffer;
-- The Group's agreement with its lenders removes the risk that
the Company will default on its debt facilities due to not meeting
fixed principal and interest repayment schedules. As a result the
Group is not at risk of the lenders enforcing security they hold
against the Group, or its assets, in the event there is no
quarterly payment of either interest or principal to lenders;
-- The Group's agreement with its lenders provides the Company
with the ability to hold a working capital buffer in excess of
current liabilities thus ensuring external creditors can be paid in
priority to debt repayments; and
-- The Group currently believes, irrespective of ongoing
COVID-19 pandemic issues, its operations will produce sufficient
positive cash flow to enable the Group to pay its debts as and when
they fall due.
Changes in accounting policies and disclosures
The accounting policies and disclosures applied in the
preparation of this financial information are consistent with the
accounting policies and disclosures applied in the preparation of
the prior period financial information.
New standards and interpretations
The financial information has been drawn up on the basis of
accounting standards, interpretations and amendments effective from
the beginning of the accounting period on 1 January 2020. The new
standards, interpretations and amendments effective from 1 January
2020 had no significant impact on the Group.
There are a number of international accounting standards,
amendments to standards, and interpretations which have been issued
that are effective in future accounting periods and which have not
been adopted early. None of these standards, amendments to
standards or interpretations are expected to have a significant
effect on the Group.
Basis of consolidation
The Group financial information incorporate the financial
information of the Company and its subsidiary undertakings for the
year ended 31 December 2020. A subsidiary is an entity controlled,
directly or indirectly, by the Group. Control is achieved where the
Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its
activities.
The financial statements of the subsidiary companies have been
included in the Group's financial statements from the date of
acquisition when control was passed to the Group using the
acquisition method of accounting. The Group financial statements
include the results of the Company and its subsidiaries as if they
were a single reporting entity. On consolidation, intra-Group
transactions and balances are eliminated.
Foreign currency
Transactions in currencies different to the company's functional
currency are recorded at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date, monetary
assets and liabilities that are denominated in foreign currencies
are retranslated at the rates prevailing on the balance sheet date.
Exchange gains and losses on the settlement of monetary items are
recognised in the statement of total comprehensive income .
On consolidation, the assets and liabilities are translated to
US Dollars at the rates prevailing at the balance sheet date.
Income and expenses are translated at the average exchange rates
for the period. Exchange differences are recognised within other
comprehensive income in the consolidated statement of total
comprehensive income .
Taxation and deferred tax
Current tax is based on the taxable profit for the period.
Taxable profit differs from net profit as reported in the statement
of total comprehensive income because it excludes items of income
or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates
that have been substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax base used in the computation of taxable
profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised only to the extent it is probable that future taxable
profits will be available against which deductible temporary
differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised. Deferred tax is charged or credited, as applicable, as a
taxation debit/credit to the statement of total comprehensive
income, except when it relates to items charged or credited
directly to other comprehensive income in which case, the deferred
tax is recognised in the other comprehensive income section within
the statement of total comprehensive income.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority, on either the same taxable
Group Company or different Group entities, which intend to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
Share based payments
The Company may enter into equity-settled share-based
transactions with its Directors, employees of its subsidiaries, its
contractors or its lenders in which the counterparty provides
services/goods to the Company in exchange for remuneration in the
form of certain equity instruments of the Company. The equity
instruments comprise warrants and share options.
The services/goods received by the Company in these share-based
transactions are measured by reference to the fair value of the
equity instruments at the date of grant and are recognised as an
expense in the statement of total comprehensive income with a
corresponding increase in equity, via a shares to be issued reserve
for share options or in other reserves for warrants.
There have been no share based payments made during either of
the last two financial years.
Inventories
Inventories of finished goods (bullion), gold in circuit and
stockpiles of processed ore are brought to account and stated at
the lower of costs and estimated net realisable value. Cost
comprises direct materials, direct labour and an appropriate
proportion of variable and fixed overhead expenditure, the latter
being allocated based on normal operating capacity. Costs are
assigned to ore stockpiles and gold in circuit items of inventory
based on weighted average costs. Net realisable value is the
estimated selling price in the ordinary course of business
(excluding derivatives) less the estimated costs of completion and
the estimated costs necessary to make the sale.
Consumables have been valued at cost less an appropriate
provision for obsolescence. Cost is determined on a
first-in-first-out basis.
Intangible assets
Exploration costs
Costs relating to the exploration of precious and base metal
properties are capitalised as intangible assets in the balance
sheet once the Group has obtained the legal right to explore an
area.
Capitalised exploration costs are reclassified to tangible
assets once technical feasibility and commercial viability of
extracting a mineral resource are demonstrable. The capitalised
exploration costs are tested for impairment annually.
Where exploration costs have been incurred and capitalised for a
specific tenement and the commercial and technical requirements to
demonstrate positive economic returns using approved mining
techniques has not been established, the Company recognises these
costs as an intangible asset and tests these costs annually for
impairment. These costs are considered fully impaired unless the
results of exploration indicate the presence of mineral resources
that have the potential to be defined as an inferred resource in
accordance with industry standards.
Other intangible assets
Intangible assets acquired separately are initially recognised
at cost. Intangible assets acquired as part of a business
combination are measured at their fair value at the date of
acquisition. Subsequently, intangible assets are carried at cost
less any accumulated amortisation and impairment losses.
Amortisation charges are recognised in cost of sales. Computer
software is amortised over its expected useful life of 3 years
using the straight-line method. Licences acquired to support mining
operations will be amortised over the expected useful life of the
mining operation (or the term of the licence if shorter) when
development is complete and mining commences. Intangible assets are
tested annually for impairment.
Property, plant and equipment
Property, plant and equipment are initially recognised at cost
plus directly attributable costs and are subsequently carried at
cost less accumulated depreciation and impairment losses. Property,
plant and equipment are depreciated over their expected useful
lives, using the straight-line method.
The classes of depreciable assets, their expected useful lives
and their depreciation methods are:
Buildings & leasehold improvements 10 years Straight-line
Drilling equipment 5 years Straight-line
Motor vehicles 3-5 years Straight-line
Fixtures, fittings and equipment 3 years Straight-line
Process plant applying the units of production over the useful
life of the mine.
Residual Storage Impoundment applying the units of production
over the useful life of the mine.
Mining properties applying the units of production over the
useful life of the mine.
Mining properties costs have arisen entirely because of a
reclassification of the intangible assets deferred exploration
costs, advances to surface occupants, and mining licenses. As of 20
October 2011, the extraction of gold from the Runruno site was
assessed as being both technically feasible and commercially
viable. Further costs since this date have been capitalised
directly to mining properties.
Construction in progress tangible assets have been incurred
after 1 December 2011, the date the board of Directors announced
that the Group had moved into the capital construction phase of its
development. The costs were substantially incurred throughout 2012
to 2017.
Construction in progress costs are allocated to a property,
plant and equipment tangible asset category, once the relevant
asset has been assessed as being available for use as intended by
management. The costs will be treated as being reclassified and
will be depreciated according to the adopted method of the
appropriate asset category.
The right-of-use assets are recognised for all leases, except
for low value assets and/or short duration leases. These assets are
measured at cost, which is made up of the initial measurement of
the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the asset
at the end of the lease, and any lease payments made in advance of
the lease commencement date. The Group will depreciate the
right-of-use assets on a straight-line basis from the lease
commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term.
Investments
Investments in subsidiaries and investment in associates are
recognised at cost less any impairment losses in the Company
accounts.
Equity accounting is applied to investments in associates on a
Group basis. Investments in associates are recognised at the cost
of investment as adjusted for post-acquisition changes in the
Group's share of net assets of the associate. Losses of an
associate in excess of the Group's interest in that associate are
recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the
associate.
Provision for mine rehabilitation and decommissioning
Provision is made for close down, restoration and environmental
rehabilitation costs (which include the dismantling and demolition
of infrastructure, removal of residual materials and remediation of
disturbed areas) at the end of the reporting period when the
related environmental disturbance occurs, based on the estimated
future costs using information available at the end of the
reporting period. The provision is discounted using a current
market-based pre-tax discount rate and the unwinding of the
discount is classified as interest accretion in the statement of
total comprehensive income. At the time of establishing the
provision, a corresponding asset is capitalised and depreciated
over future production from the operations to which it relates.
The provision is reviewed on an annual basis for changes to
obligations or legislation or discount rates that affect change in
cost estimates or life of operations. The cost of the related asset
is adjusted for changes in the provision resulting from changes in
the estimated cash flows or discount rate, and the adjusted cost of
the asset is depreciated prospectively.
Where rehabilitation is conducted systematically over the life
of the operation, rather than at the time of closure, provision is
made for the estimated outstanding continuous rehabilitation work
at each end of the reporting period and the cost is charged to the
statement of total comprehensive income.
Revenue recognition
Gold sales
The Group is principally engaged in the business of producing
gold. Revenue is recognised when the Group transfers control of its
gold to a customer at the amount at which payment is expected.
Sales revenue represents the gross proceeds receivable from the
customer.
For gold sales, the enforceable contract is each purchase order,
which is an individual, short-term contract, while the performance
obligation is the delivery of the metals.
Recognition of sales revenue for the gold is based on determined
metal in concentrate and the London Bullion Market Association
(LBMA) quoted prices, net of smelting and related charges.
Revenue is recognized when control passes to the customer, which
occurs at a point in time when the metal concentrate is credited to
the buyer's account and provisionally paid by the buyer. Under the
terms of offtake agreements with the customer, the Company issues a
provisional invoice for the entire volume of concentrate loaded to
customer's vessel. Final invoice is made thereafter upon customer's
outturn of concentrates delivered and submission of their final
assay report. Adjustment is accordingly made against the final
invoice with respect to provisional collections received by the
Company within two days to determine amounts still owing from/to
customers.
As the enforceable contract for the arrangements is the purchase
order, the transaction price is determined at the date of each sale
(i.e., for each separate contract) and, therefore, there is minimal
future variability within scope of IFRS 15 and no further remaining
performance obligations under those contracts.
Revenue from the sale of by-products such as silver is accounted
for as a credit to the cost of sales.
Interest
Revenue is recognised as interest accrues using the effective
interest method.
Production Fee
Production fees, incurred pursuant to the previous Mezzanine
Debt facilities, are recognised in profit or loss in the period in
which they are incurred. Since the October 2020 debt restructuring
there are no production fee expenses.
Financial instruments
Financial Assets
Financial assets are classified, at initial recognition, as
subsequently measured at amortized cost, fair value through other
comprehensive income and fair value through profit or loss.
Financial assets at amortized cost (debt instruments)
This category is the most relevant to the Company. The Company
measures financial assets at amortized cost if both of the
following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely for payments of
principal and interest on the principal amount outstanding.
Financial assets at amortized cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognized in the statement of
comprehensive income when the asset is derecognized, modified or
impaired.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value
and, in the case of loans and borrowings and other financial
liabilities, net of directly attributable transaction costs. The
Company's financial liabilities include payables and loans and
borrowings.
Subsequent measurement
Payables
This category pertains to financial liabilities that are not
held for trading or not designated as at fair value through profit
or loss upon the inception of the liability. These include
liabilities arising from operations (e.g., accounts payable and
accrued liabilities).
Payables are recognised initially at fair value and are
subsequently carried at amortized cost, taking into account the
impact of applying the EIR method of amortization (or accretion)
for any related premium, discount and any directly attributable
transaction cost.
As at December 31, 2020 and 2019, the Company's payables include
trade and other payables.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortized cost using the EIR method.
Gains and losses are recognized in the profit or loss when the
liabilities are derecognized as well as through the EIR
amortization process.
Amortized cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortization is included as finance costs
in the statements of total comprehensive income.
Derecognition
A financial liability is derecognized when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the de-recognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognized in the statements of
total comprehensive income.
Compound financial instruments
Compound financial instruments comprise both liability and
equity components. At issue date, the fair value of the liability
component is estimated by discounting its future cash flows at an
interest rate that would have been payable on a similar debt
instrument without any equity conversion option. The liability
component is accounted for as a financial liability. The difference
between the net issue proceeds and the liability component is the
equity component, and is accounted for as equity.
Any transaction costs associated with the issue of a compound
financial instrument are allocated in proportion to the equity and
liability components.
The interest expense on the liability component is calculated by
applying the effective interest rate for the liability component of
the instrument. The difference between the interest expense and the
interest payments made are included in the carrying amount of the
liability.
2. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with
generally accepted accounting practice requires management to make
estimates, assumptions and judgements that affect the application
of policies, and reported amounts of assets and liabilities as well
as the disclosure of contingent assets and liabilities at the
balance sheet date.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Actual results may differ from reported amounts in
the financial statements.
The estimates, assumptions and judgements which have a
significant risk of causing material adjustment to the carrying
amounts of assets and liabilities are:
Judgements
Impairment and impairment reversals of assets
The Group assesses at each reporting date whether there are any
indicators that its assets and cash generating units (CGUs) may be
impaired or require previous impairment provisions to be reversed.
Operating and economic assumptions which could affect the valuation
of assets using discounted cash flow models are regularly reviewed
and updated as part of the Group's monitoring of operational and
financial performance and forecasting processes. Judgement is
required in determining if operating and economic changes are
significant and impact the performance potential of an asset or
CGU, and therefore an indication of impairment or an impairment
reversal. Assets that have previously been impaired must be
assessed for indicators of both impairment and impairment reversal.
Such assets are recorded in the consolidated balance sheet at their
recoverable amount at the date of the last impairment assessment
(less annual depreciation/amortisation); therefore a change in
operational plans, assumptions or economic conditions could result
in further impairment or an impairment reversal if an indicator is
identified.
Estimates
Current v Non-current borrowings
Under the Group's restructured debt arrangements there is no
fixed schedule of interest and principal repayments. Rather the
Group's repayment obligation is now limited to making a quarterly
repayment of that amount which equals the available net working
capital (NWC) over and above a minimum US$5 million NWC buffer. If
at the end of any quarter the NWC is less than US$5 million there
is no debt repayment obligation and there is no resultant event of
default.
As a result the amount of debt principal that will be repaid
within 12 months from balance sheet date is not known with
certainty. Thus the amount of debt principal that is classified as
either a current liability (payable within 12 months), or a
non-current liability (payable after 12 months) needs to be
estimated.
In order to estimate the amount of debt principal that will be
repaid within the next 12 months the Group has taken into
consideration the following:
-- Forecast minimum debt repayment obligations based upon
predicted cash flows for the 2021 year after taking into
consideration:
-- Current gold prices and Bloomberg consensus forecasts gold prices for the remainder of 2021;
-- Current and forecast levels of gold recovery and gold production; and
-- Current and forecast operational and CAPEX costs (AISC).
The outcome of these considerations was to determine that US$30
million of debt principal is considered a current liability. As at
the date of this report the Group has repaid US$18.6 million in
debt interest and principal during 2021 (US$17.5 million principal;
US$1.1 million interest) .
Impairment and impairment reversals of assets
An annual review is made of the carrying amount of an asset
which may not be recoverable, or has previously been subject to an
impairment charge. An asset's carrying value is written down, or
conversely written up, to its estimated recoverable amount (being
the higher of the fair value less costs to sell and value in use).
To determine value in use the Group reviews future operations using
the latest life of mine (LOM) model detailing future cash flows
that the Runruno operation is expected to produce. The key
assumptions for these value-in-use calculations are those regarding
risk discount rates, the price of gold, gold recovery levels, plant
availability levels, changes in the resource statements and
forecast changes in direct costs, the availability of economic
funding and the ability to renew its mining permit(s).
The net present value of these expected future cash flows is
used to determine if an impairment, or impairment reversal, is
required.
For the year ended 31 December 2020 review the net present value
of expected future cash flows was considered to be approximately
equivalent to the carrying cost of the relevant assets. As a result
in the year ended 31 December 2020 there was neither an impairment
charge nor an impairment charge reversal raised against its mining
properties, plant and equipment.
In the year ended 31 December 2019 however the review concluded
the net present value of expected future cash flows to be greater
than the carrying cost of the relevant assets. As a result, in the
year ended 31 December 2019 the Group booked a US$25 million
reversal of a portion of an impairment charge against its mining
properties, plant and equipment that was originally made in
2018.
Recovery of intercompany receivable accounts
Receivables due from group companies, which are interest free,
are assessed under the expected credit losses model. In each case,
the most appropriate assessment is for the Company to consider the
output from the impairment tests and value-in-use calculations
carried out in respect of the Group's mining properties, plant and
equipment assets.
In both the years ended 31 December 2019 and 2020 the Company
booked a partial reversal of a 2018 year impairment made against
its loans receivable from its subsidiaries. These impairment
reversals recognise the improved trading outcomes of the
subsidiaries such that it is estimated that the Company will
receive a larger than previously estimated recovery of loans made
to subsidiaries.
Refer to note 8 for detail on the impairment
reversal/charges.
Determination of mineral resources and ore reserves
The determination of mineral resources and ore reserves impacts
the accounting for asset carrying values, depreciation and
amortisation rates, deferred stripping costs and provisions for
pensions and for decommissioning and restoration.
There are numerous uncertainties inherent in estimating mineral
resources and ore reserves and assumptions that are valid at the
time of estimation may change significantly when new information
becomes available.
Changes in the forecast prices of commodities, exchange rates,
production costs or recovery rates may change the economic status
of reserves and may, ultimately, result in the reserves being
restated which may impact asset carrying values, depreciation and
amortisation rates, deferred stripping costs and relevant
provisions.
An updated estimation of mineral resources and ore reserves was
calculated and publicised in April 2020. This new statement of
mineral resources and ore reserves has been calculated and reported
in accordance with the Aus.IMM "Australian Code for reporting of
Identified Mineral Resources and Ore Reserves"; and was prepared by
Xenith Consulting, who are competent persons as identified by the
Code.
Estimating gold-in-circuit and gold stockpile inventories
Gold-in-circuit is measured by the Company's metallurgists based
on the gold grade/recovery across different structures of the
process plant. Stockpiles are measured by estimating the number of
tonnes added and removed from the stockpile, the number of
contained concentrates in dry metric tonnes is based on assay data,
and the estimated recovery percentage is based on the expected
processing outcomes. Stockpile tonnages are verified by periodic
surveys. Refer to note 17.
Although regular assay data is collected and production
recoveries closely monitored these estimates that are valid at the
time of estimation may be significantly different to the final gold
recovered once processing of the inventories is completed.
Provision for Pensions
The Group makes provision for an unfunded, non-contributory
defined benefit retirement plan covering substantially all regular
employees who have rendered at least six months of continuous
service. Benefits are dependent on the years of service and the
respective employee's compensation. The valuation of the retirement
plan obligation is estimated using the projected unit credit
actuarial cost method. The principal estimates used in determining
the defined benefit retirement plan obligations are listed in Note
20.
Provision for environmental rehabilitation and decommissioning
costs
The amount recognised as a provision represents management's
best estimate of the consideration required to complete the
necessary restoration and rehabilitation activity at the end of the
LOM. These estimates are inherently uncertain and could materially
change over time. There is judgement in the input assumptions used
in determining the estimated rehabilitation and decommissioning
provision. Inputs used that require estimating include:
-- closure costs, which are determined in accordance with regulatory requirements,
-- inflation rate, which has been adjusted for a long-term view,
-- risk-free rate, which is compounded annually and linked to the life-of-mine,
-- the rate at which the progressive back-fill rehabilitation is undertaken,
-- whether the final construction of the RSI facility is
completed during normal operations, and
-- life-of-mine and related Mineral Resources and Mineral Reserves.
Recovery of VAT and other duties
Non-current receivables include amounts the Group believe it is
entitled to recover from the Philippine government in respect of
past paid VAT, stamp duty and import duties. The Company's
Philippine operating subsidiary, FCF Minerals Corporation ("FCF"),
operates the Runruno mine in accordance with the terms of a
Financial and Technical Assistance Agreement ("FTAA") with the
Philippine government. Under the terms of the FTAA, FCF is exempt
from numerous taxes including corporate income tax, VAT, stamp duty
and import duty until July 2022. After July 2022 FCF is obligated
to pay the above taxes plus a government 'profit-share tax' such
that all government and business taxes equal at least 50% of the
net cash surplus (as defined in the FTAA) generated by the Runruno
mine.
Although the Group has been exempt from paying the above listed
taxes since entering into the FTAA, it has nonetheless for
operational reasons needed to outlay significant amounts in paying
these various taxes. FCF is pursuing reimbursement of these
payments through numerous court actions. Notwithstanding the terms
of the FTAA, FCF has yet to successfully recover any amounts from
the Philippine government.
In each year from 2018 to 2020 the Group has estimated that an
impairment charge should be raised against this non-current
receivable. Refer to note 16 for detail on the impairment
charges.
3. Revenue
2020 2019
US$ US$
Revenue from sale of gold 122,098,677 94,280,289
------------ -----------
4. Operating profit for the year is stated after charging:
2020 2019
US$ US$
Depreciation of property, plant and equipment (see note 12) 16,925,778 9,290,373
Amortisation (see note 13) 56,457 48,966
Foreign exchange losses 2,156,859 1,480,638
Staff costs (see note 7) 11,561,960 10,155,565
Auditors remuneration (see note 5) 216,751 217,158
=========== ===========
5. Auditor's remuneration
2020 2019
US$ US$
Fees payable to the Group and Company's auditor for the audit of the Group and Company's
accounts 156,871 147,379
Fees payable to the Company's auditor and its associates for other
services 6,432 21,550
Taxation compliance services 53,448 48,229
--------
216,751 217,158
======== ========
6. Segmental analysis
Operating segments have been identified based on the Group's
internal reporting to the Chief Operating Decision Maker ('CODM')
and in particular the components of the Group which are regularly
reviewed by the CODM. The operating segments included in internal
reports are determined on the basis of their significance to the
Group. The CODM has been determined to be the Board of Directors as
it is primarily responsible for the allocation of resources to
segments and the assessment of performance of the segments. The
primary segments have been identified into three geographic areas
of the UK, Philippines and Singapore. The CODM uses 'profit/(loss)
before tax', 'cash & cash equivalents' and 'total liabilities'
as the key measures of the segments' results and these measures
reflect the segments' underlying performance for the period under
evaluation.
The segment results for the year ended 31 December 2020 and 2019
and the reconciliation of the segment measures to the respective
statutory items in the consolidated financial information are as
follows:
Year ended 31 December 2020 UK Philippines Singapore Total
US$ US$ US$ US$
Segment results
Sales revenue - 122,098,677 - 122,098,677
------------- ------------ ---------- -------------
Group operating (loss)/profit (4,944,095) 35,407,951 (1,636) 30,462,220
Other income & charges - (1,292,814) - (1,292,814)
Finance costs (12,422,774) (6,981,211) - (19,403,985)
Share of profits of associates - 2,625 - 2,625
(Loss)/profit before tax (17,366,869) 27,136,551 (1,636) 9,768,046
============= ============ ========== =============
Segment assets
Segment tangibles & intangibles - 103,211,162 - 103,211,162
Segment receivables & inventories 49,973 31,875,110 3,511 31,928,594
Segment cash 569,732 8,360,611 1,449 8,931,792
Equity-accounted investees - 164,033 - 164,033
Total segment assets 619,705 143,610,916 4,960 144,235,581
------------- ------------- -------- --------------
Segment liabilities
Segment loans (67,596,759) (59,817,845) - (127,414,604)
Segment trade & other payables (362,682) (11,175,565) (6,500) (11,544,747)
Segment provisions and retirement benefits obligations - (5,578,989) - (5,578,989)
Segment deferred tax - (808,757) - (808,757)
Total segment liabilities (67,959,441) (77,381,156) (6,500) (145,347,097)
Total segment net (liabilities)/assets (67,339,736) 66,229,760 (1,540) (1,111,516)
============= ============= ======== ==============
Segment other information
Amortisation of intangible
assets - (56,457) - (56,457)
Depreciation of property,
plant and equipment - (16,925,778) - (16,925,778
Additions to property,
plant and equipment - 13,106,215 - 13,106,215
--- ------------- ------------
Segment net assets are analysed net of intercompany
transactions.
The results of each segment have been prepared using accounting
policies consistent with those of the Group as a whole.
Year ended 31 December 2019 UK Philippines Singapore Total
US$ US$ US$ US$
Segment results
Sales revenue - 94,280,289 - 94,280,289
------------- ------------ ---------- -------------
Group operating (loss)/profit (5,672,880) 14,637,465 (847) 8,963,738
Other income & charges - 23,213,749 - 23,213,749
Finance costs (10,669,507) (7,109,103) - (17,778,610)
Share of profits of associates - 22,829 - 22,829
Loss on sale of assets - (569,434) - (569,434)
(Loss)/profit before tax (16,342,387) 30,195,506 (847) 13,852,272
============= ============ ========== =============
Segment assets
Segment tangibles & intangibles - 107,028,262 - 107,028,262
Segment receivables & inventories 68,669 17,238,934 3,312 17,310,915
Segment cash 565,166 4,252,366 1,449 4,818,981
Equity-accounted investees - 161,408 - 161,408
Total segment assets 633,835 128,680,970 4,761 129,319,566
------------- ------------- --------- --------------
Segment liabilities
Segment loans (55,988,561) (68,088,376) - (124,076,937)
Segment trade & other payables (442,196) (13,898,989) (14,103) (14,355,288)
Segment provisions and retirement benefits obligations - (3,853,092) - (3,853,092)
Segment deferred tax - (812,481) - (812,481)
Total segment liabilities (56,430,757) (86,652,938) (14,103) (143,097,798)
Total segment net (liabilities)/assets (55,796,922) 42,028,032 (9,342) (13,778,232)
============= ============= ========= ==============
Segment other information
Amortisation of intangible
assets - (48,966) - (48,966)
Depreciation of property,
plant and equipment - (9,290,373) - (9,290,373)
Additions to property,
plant and equipment - 6,627,567 - 6,627,567
--- ------------ ------------
7. Staff numbers and costs - Group
2020 2019
The average number of persons, including Directors, was: Number Number
Administration 19 38
Development & operations 700 658
719 696
----------- -----------
2020 2019
Staff costs of the above persons were: US$ US$
Wages and salaries 9,641,894 9,805,664
Social security costs 356,549 313,921
Retirement and pension costs 1,563,517 229,063
11,561,960 10,348,648
=========== ===========
Directors' emoluments: 2020 2019
US$ US$
Directors
D Bowden 960,000 720,000
I Holzberger - 15,145
Sums paid to third parties in respect of Directors of the parent Company*
MTL Luxembourg Sarl appointee - A Stancliffe 30,873 28,070
Runruno Holdings Limited appointee - G Walker 98,406 128,547
---------- --------
1,089,279 891,762
========== ========
The Directors are considered to be the only members of key
management personnel. All emoluments represent Directors' fees.
* Relationship Agreements dated 23 October 2020 with MTL
Luxembourg Sarl and Runruno Holdings Limited detail the terms of
remuneration that each of these companies receives for the supply
of their representative Directors.
Share options held by Directors:
As at 31 December 2020, there were no share options outstanding
(2019: none).
Further details relating to key management are given in note 29
to the financial statements.
8. Other charges and income applied against profit and loss
8(a). Impairment charge and impairment reversal - Group
Property, plant and equipment (PPE)
Under IAS 36 - Impairment of Assets, each asset that forms a
cash generating unit (CGU) should be tested annually for
impairment. The Group considers that the entire Runruno project
(encompassing capitalised property, plant and equipment, mining
licence costs and deferred exploration expenditure) comprises a
single cash generating unit as all stages of the project are
interdependent in terms of generating cash flow and do not have the
capacity to generate separate and distinct cash flow streams.
Accordingly, the annual recoverable value assessment made in
accordance with IAS 36 is made on a whole of project basis.
The Group assesses the recoverable amount of the Runruno project
CGU based on the value in use of the Runruno operations using cash
flow projections over the remaining expected LOM and at appropriate
discount rates. Based on assumptions current as at 31 December 2020
the Group reviewed its recent operational performance and its
future expectations based on a review of the planned mining
schedule to determine the recoverable amount the Runruno project
could deliver.
The recoverable amount estimates were based on the following key
assumptions and source information:
-- gold resources to be mined based on current estimated
reserves and resources and new remaining LOM mining schedule;
adjusted for forecast mine and grade dilution;
-- estimated gold recoveries forecast to be achieved over the
remaining LOM based on gold recoveries achieved to date;
-- estimated ongoing capital expenditure required for the remaining LOM;
-- estimated operating and administration costs for the
remaining LOM including an inflation factor;
-- future gold revenues based upon Bloomberg consensus gold price futures;
-- future gold revenues calculated for the remaining LOM of 6 years; and
-- risk discount rates of 15.5% (2019: 16.0%).
The December 2020 the estimated recoverable value of the Runruno
project calculated in accordance with IAS 36 approximated the
current book value of the Group's property, plant and equipment
(PPE). Accordingly, at 31 December 2020 there was no requirement to
book either an impairment charge or an impairment reversal in
relation to the Group's PPE book values.
As at 31 December 2019 the Group formed the view that the
estimated December 2019 recoverable value of the Runruno project
was significantly higher than book value. As a result a US$25
million impairment charge reversal was recorded as income for the
2019 financial year (refer note 12 - property, plant and
equipment).
Receivables due
Impairment charges have been raised against trade and other
receivables due, both within and after one year, in relation to
stamp duties, withholding tax paid on intra-group management fees
and VAT on importations and other goods and services. Under the
FTAA these taxes and duties are recoverable, however given the
Group continues to have little success in securing appropriate
refunds of these taxes paid impairment charges have been raised.
(refer note 16 - trade and other receivables due after one year;
note 19 - trade and other receivables due within one year). In
addition an impairment charge has been raised against advances made
to associates.
The total impairment charges against all receivables was US1.3
million (2019: US$1.8 million).
8(b). Impairment charge and impairment reversal - Company
Receivables due
To a large extent the Runruno project has been funded by loans
from the parent Company and these together with the Company's
investment in its subsidiaries is represented by the value of the
Runruno project cash generating unit. The 2018 estimate of the
value of the Runruno project cash generating unit resulted in these
loans and investments being fully written off.
Repayment of these loans and recovery of the investments is
dependent upon the Runruno project producing sufficient cash
surpluses. Both the December 2019 and December 2020 reviews of what
the future estimated cash flows that the Runruno project may
produce estimated that the Company's subsidiaries should produce
positive cash flows over the remaining life of the project,
enabling it to partially repay past parent company advances. From a
review of the subsidiaries net assets it was estimated that US$65
million of these parent company advances could be repaid. As a
result, the Company has booked an impairment reversal US$23 million
in 2020 (2019: US$40 million) of receivables due from subsidiaries
(note 19 - trade and other receivables due within one year).
8(c). Finance costs and other income
2020 2019
US$ US$
Exchange loss (1,626,327) (1,280,545)
Loan interest and fees (17,033,574) (16,202,713)
Warrant fair value expense (744,890) (295,352)
Other bank interest/fees 806 -
Finance costs and other income (19,403,985) (17,778,610)
============= =============
9. Taxation
The taxation expense comprises the
following
2020 2019
US$ US$
Current year corporation tax expense 11,222 -
Current year deferred tax expense 8,527 140,072
Total tax expense for the year 19,749 140,072
=========== ===========
The total tax expense for the year can be reconciled
to profit for the year as follows:
2020 2019
US$ US$
Profit before tax 9,768,046 13,852,272
----------- -----------
Tax on profit at UK corporation tax
rate of 19% (2019: 19%) 1,852,176 2,631,932
Effects of:
Income not taxable (3,072,029) (46,316)
Differing tax rates in different jurisdictions 2,182,370 2,768,484
Deferred tax asset not recognised 1,423,484 1,680,675
Non-taxable and non-allowable items (2,365,825) (6,894,643)
Short-term timing differences (427) (60)
Total taxation expense for the year 19,749 140,072
============ ============
10. Deferred tax credit, liability and asset
Deferred tax credit
Tax Expense Tax Liability Tax Asset
2020 2019 2020 2019 2020 2019
US$ US$ US$ US$ US$ US$
------ -------- -------- -------- ----- -----
Undepleted asset retirement obligation 8,527 140,072 579,457 570,930 - -
Unrealised foreign exchange gain - - 157,964 158,500 - -
Other short term timing differences - - 70,770 83,051 - -
8,527 140,072 808,191 812,481 - -
------ -------- -------- -------- ----- -----
The differences between the deferred tax credit through the
Consolidated Statement of Total Comprehensive Income and the
deferred tax liability on the Consolidated Balance Sheet has
occurred from translation differences arising on consolidation.
Liabilities are translated using the closing foreign exchange rate
prevailing at 31December 2020 whereas the foreign currency
composition of the statement of total comprehensive income is
translated using the average rate for the whole of the year.
Deferred tax asset
For the year ended 31 December 2020 the Group has net unused tax
losses of US$61.7 million (2019: US$50.0 million) available for
offset against future profits. However, due to the Group's on-going
tax losses situation, the deferred asset has not been recognised on
the Consolidated Balance Sheet due to uncertainty over its future
reversal.
For the year ended 31 December 2020 the Group has net unused tax
losses available for offset against future profits as follows:
2020 2019
US$ US$
UK 51,984,989 40,307,118
Philippines* 9,721,944 9,721,944
Group unused tax losses available 61,706,933 50,029,062
=========== ===========
* Although these tax losses are available to be offset against
future Philippines sourced profits the Group may not benefit from
them due to operation of the government profit sharing provisions
of the FTAA. Under the terms of the FTAA, FCF is exempt from
numerous taxes including corporate income tax until July 2022.
After July 2022 FCF is obligated to pay corporate income tax (and
other indirect taxes) plus a government 'profit-share tax' such
that all government and business taxes equal at least 50% of the
net cash surplus (as defined in the FTAA) generated by the Runruno
mine.
11. Earnings per share
2020 2019
US$ US$
Earnings
Net profit attributable to equity shareholders for the purpose of basic and diluted
earnings
per share 9,748,297 13,712,200
-------------- --------------
Number of shares
Weighted average number of ordinary shares for the purpose of
basic earnings per share 2,071,334,586 2,071,334,586
-------------- --------------
Number of dilutive shares under warrant 30,950,049 30,950,049
-------------- --------------
Weighted average number of ordinary shares for the purpose of
diluted earnings per share 2,102,284,635 2,102,284,635
-------------- --------------
Earnings per share
Basic earnings per share 0.47 0.66
-------------- --------------
Diluted earnings per share 0.46 0.65
-------------- --------------
The earnings per share was calculated on the basis of net profit
attributable to equity shareholders divided by the weighted average
number of ordinary shares.
12. Property, plant and equipment - Group
Office Drilling, Residual
furniture Buildings & mining & Construction Storage
Motor & leasehold milling in progress Process Impoundment Mining
vehicles equipment improvements equipment (CIP) plant (RSI) properties Total
US$ US$ US$ US$ US$ US$ US$ US$ US$
Cost
As at 1 January
2019 891,425 1,493,097 3,830,312 19,029,613 6,173,774 114,494,415 20,087,023 125,770,274 291,769,933
Re-allocation - - - - - (1,662,591) - 1,662,591 -
Additions 49,413 35,296 - 6,118,289 3,242,606 407,266 1,210,195 858,809 11,921,874
Reclassification
of CIP - - - - (6,083,520) - 4,279,552 1,803,968 -
Disposals - - - (2,365,672) - - - - (2,365,672)
As at 31 December
2019 940,838 1,528,393 3,830,312 22,782,230 3,332,860 113,239,090 25,576,770 130,095,642 301,326,135
Additions 152,208 50,240 41,966 3,170,094 3,312,978 538,011 - 5,840,718 13,106,215
As at 31 December
2020 1,093,046 1,578,633 3,872,278 25,952,324 6,645,838 113,777,101 25,576,770 135,936,360 314,432,350
---------- ---------- ------------- ------------ ------------- ------------- ------------- -------------- --------------
Impairment
As at 1 January
2019 - - - (1,286,883) - (40,200,756) (18,250,483) (115,261,878) (175,000,000)
Reversal (refer
note 8(a)) - - - 1,286,883 - 5,462,634 18,250,483 - 25,000,000
---------- ---------- ------------- ------------ ------------- ------------- ------------- -------------- --------------
31 December 2019 - - - - - (34,738,122) - (115,261,878) (150,000,000)
As at 31 December
2020 - - - - - (34,738,122) - (115,261,878) (150,000,000)
---------- ---------- ------------- ------------ ------------- ------------- ------------- -------------- --------------
Office Drilling, Residual
furniture Buildings & mining & Construction Storage
Motor & leasehold milling in progress Process Impoundment Mining
vehicles equipment improvements equipment (CIP) plant (RSI) properties Total
US$ US$ US$ US$ US$ US$ US$ US$ US$
Depreciation
As at 1
January 2019 (881,420) (1,488,758) (1,278,280) (9,856,591) - (10,503,323) (1,836,540) (10,508,396) (36,353,308)
Reallocation - - - - - 138,291 - (138,291) -
Charge for
the period (9,224) (8,677) (341,558) (1,401,991) - (4,624,579) (2,492,896) (411,448) (9,290,373)
Disposals - - - 1,296,241 - - - - 1,296,241
---------- ------------ ------------ ------------- ---------- ------------- ------------ ------------- -------------
As at 31
December
2019 (890,644) (1,497,435) (1,619,838) (9,962,341) - (14,989,611) (4,329,436) (11,058,135) (44,347,440)
Charge for
the period (34,566) (27,127) (397,339) (2,391,935) - (9,806,883) (3,268,820) (999,108) (16,925,778)
As at 31
December
2020 (925,210) (1,524,562) (2,017,177) (12,354,276) - (24,796,494) (7,598,256) (12,057,243) (61,273,218)
---------- ------------ ------------ ------------- ---------- ------------- ------------ ------------- -------------
Net book
value
As at 31
December
2020 167,836 54,071 1,855,101 13,598,048 6,645,838 54,242,485 17,978,514 8,617,239 103,159,132
========== ============ ============ ============= ========== ============= ============ ============= =============
As at 31
December
2019 50,194 30,958 2,210,474 12,819,889 3,332,860 63,511,357 21,247,334 3,775,629 106,978,695
========== ============ ============ ============= ========== ============= ============ ============= =============
Refer note 8(a) for details of the impairment charge reversal
recognised against these assets.
The Group's lenders hold fixed and floating security charges
over the Group's property, plant and equipment.
13. Other intangible assets
Group Exploration
expenses Software Total
US$ US$ US$
Cost
As at 1 January 2019 - 602,474 602,474
Additions 63,078 - 63,078
As at 31 December 2019 63,078 602,474 665,552
Additions 17,523 58,920 76,443
As at 31 December 2020 80,601 661,394 741,995
------------ ----------- ----------
Amortisation and impairment
As at 1 January 2019 - (503,941) (503,941)
Charge for the period - (48,966) (48,966)
Impairment charge for the period (63,078) - (63,078)
------------ ----------- ----------
As at 31 December 2019 (63,078) (552,907) (615,985)
Charge for the period - (56,457) (56,457)
Impairment charge for the period (17,523) - (17,523)
------------ ----------- ----------
As at 31 December 2020 80,601 609,364 689,965
------------ ----------- ----------
Net Book Value
As at 31 December 2020 - 52,030 52,030
============ =========== ==========
As at 31 December 2019 - 49,567 49,567
============ =========== ==========
Exploration costs incurred during 2019 and 2020 have been fully
impaired as exploration has not progressed to a point where it is
considered possible that an inferred resource can be
determined.
14. Investments in subsidiaries - Company
2020 2019
US$ US$
Cost 8,783,629 8,783,629
Impairment brought forward (8,783,629) (8,783,629)
- -
============ ============
The investments in subsidiaries are as follows:
Company Registered address Percentage holding Nature of business
Metals Exploration 6 Temasek Boulevard, 100% Holding and investment company
Pte #29-00 Suntec Tower
Four
Singapore 038986
FCF Minerals Unit 1407, Pacific 100% FTAA licensee, holder of mining rights and gold
Corporation Star Building production
Sen. Gil Puyat
Avenue cor. Makati
Avenue
Makati City 1200,
Philippines
MTL Philippines Unit 1407, Pacific 100% Holder of exploration rights
Star Building
Sen. Gil Puyat
Avenue cor. Makati
Avenue Makati City
1227, Philippines
Metals Exploration Pte Ltd is a direct subsidiary of Metals
Exploration plc, while FCF Minerals Corporation and MTL
Philippines, Inc. are direct subsidiaries of Metals Exploration Pte
Ltd.
Metals Exploration plc ROHQ established in the Philippines, is
an overseas branch of the Company and therefore its results are
reported together with the Company's.
The principal place of business of the subsidiary companies
listed above is the same as their country of registration.
15 Investments in associates - Group
2020 2019
US$ US$
At 1 January 2020 161,408 138,579
Share of profits of associates 2,625 22,829
At 31 December 2020 164,033 161,408
======== ========
Ownership of
P&L reserves ordinary shares
Associate Assets Liabilities at 31 Dec 20 Sales Gains/(losses) on issue
company Domicile US$ US$ US$ US$ US$ %
Cupati
Holdings
Corporation Philippines 3,024,612 2,834,320 190,292 101,309 15,755 39.99%
Woggle
Corporation Philippines 345,528 238,248 107,281 - (9,191) 39.99%
16. Trade and other receivables due after one year - Group
2020 2019
US$ US$
Other receivables 5,500,577 4,222,863
5,500,577 4,222,863
========== ==========
Other receivables include VAT/Import duties on importations and
other goods and services and stamp duties. Although until July 2022
the Group operates under an exemption from these paying taxes the
Group continues to have little success in advancing its legal
challenges to recover these past paid government imposts. An
impairment charge of US$3.57 million against these receivables has
been recognised (2019: US$2.98 million).
17. Inventories - Group
2020 2019
US$ US$
Gold doré on hand 732,394 2,588,338
Gold in circuit 2,162,264 2,009,508
Gold in ore stockpiles 4,972,469 1,496,238
Consumable inventories 7,003,616 3,634,373
Provision for obsolete consumable inventories (250,000) (250,000)
------------- ------------
14,620,743 9,478,457
============= ============
Gold inventories are recorded at the lower of cost and net
realisable value.
During the year ended 31 December 2020 inventories recognised as
an expense in cost of sales was US$18,172,877 (2019:
US$19,153,185).
18. Cash and cash equivalents
Group 2020 2019
US$ US$
Cash on hand 3,213 7,107
Current accounts 8,928,579 4,811,874
8,931,792 4,818,981
========== ==========
Company 2020 2019
US$ US$
Current accounts 569,732 565,166
569,732 565,166
======== ========
The Directors consider that the carrying amount of these assets
is a reasonable approximation of their fair value. The credit risk
on liquid funds is limited because the counter-parties are banks
with a high credit rating.
19. Trade and other receivables due within one year
Group 2020 2019
US$ US$
Receivables from gold sales 7,963,493 175,198
Other receivables 3,515,216 2,988,828
Prepayments 328,565 445,569
11,807,274 3,609,595
=========== ==========
Except for a short period, due to impacts arising from the
COVID-19 pandemic, receivables from gold doré sales are mostly
received within 3 days of the gold doré having been shipped from
the Runruno operation. The Group's trade receivables are derived
through gold sales to customers whose credit quality is assessed by
considering the customers financial position, past performance and
other factors. During the financial period the Group commenced
selling small amounts of gold concentrate. Terms of trade for these
sales are 50% upon export with the balance receivable following
further assaying and final processing. Within 5 days of year end,
the Group had collected 95% (2019: 100%) of the trade receivables
outstanding as at 31 December 2020. The Group believes the credit
risk is limited as the customers pay within a short period of time
and no provision for impairment of receivables has been made (2019:
Nil).
Company 2020 2019
US$ US$
Receivables from subsidiaries 64,995,679 39,908,999
Other receivables 1,749 10,882
Prepayments 48,224 57,787
65,045,652 39,977,668
=========== ===========
A provision for impairment of receivables from subsidiaries was
raised in 2018 using an expected credit loss model. The expected
credit loss was estimated on the basis that recovery of amounts
from the subsidiaries is uncertain. Subsequent reviews of the
receivables from subsidiaries resulted in a US$23 million
impairment reversal of the 2018 impairment (2019: US$40 million
reversal). Refer to note 8(b).
20. Retirement benefits obligations - Group
The Group has an unfunded, non-contributory defined benefit
retirement plan covering substantially all regular employees who
have rendered at least six months of continuous service. Benefits
are dependent on the years of service and the respective employee's
compensation. The valuation of the retirement plan obligation is
determined using the projected unit credit actuarial cost method.
There was no planned termination, curtailment or settlement in
either 2020 or 2019.
The relevant Philippine regulatory framework, RA 7641, known as
the 'Retirement Pay Law', requires a provision for retirement pay
to qualified private sector employees in the absence of any
retirement benefits under any collective bargaining and other
agreements which shall not be less than those provided under the
law.
During the reporting period the retirement plan was adjusted
based upon the assumption no new resources are found to extend the
project's current remaining life of mine. As a result a
corresponding past service costs was recognised in this year's
statement of comprehensive income.
The amounts of retirement benefits costs recognised in the
statements of comprehensive income are determined as follows:
2020 2019
US$ US$
Current service costs 187,225 115,098
Past service costs 656,015 -
Interest costs 49,919 46,313
893,159 161,411
======== ========
The amounts were distributed as follows:
2020 2019
US$ US$
Cost of sales
Current service costs 181,608 111,645
Past service costs 636,334 -
Interest costs 48,422 44,924
866,364 156,569
---------- ----------
Administration expenses
Current service costs 5,617 3,453
Past service costs 19,681 -
Interest costs 1,497 1,389
26,795 4,842
---------- ----------
893,159 161,411
========== ==========
Changes in the present value of the unfunded retirement benefits
liability are determined as follows:
2020 2019
US$ US$
Balance at beginning of year 973,000 673,819
Current service costs 187,225 115,098
Past service costs 656,015 -
Interest costs 49,919 46,313
Benefits paid (107,233) (30,851)
Actuarial loss (gain) due to:
Changes in financial assumptions 125,838 199,752
Experience adjustments (122,168) (27,935)
Changes in demographic assumptions 37,267 (3,196)
Balance at year end 1,799,863 973,000
========== ==========
The principal assumptions used in determining the defined
benefit retirement plan obligations are as follows:
2020 2019
Discount rate 3.94%-4.09% 4.93%
Salary increase rate 2.00% 2.00%
Expected remaining working lives of
employees 4-11 years 10 years
13% at age 18 decreasing to 0% at 13% at age 18 decreasing to 0% at
Turnover rate age 60 age 60
2017 Philippine Intercompany 2017 Philippine Intercompany
Mortality rate Mortality Table Mortality Table
1952 Disability Study, Period 2, 1952 Disability Study, Period 2,
Disability rate Benefit 5 Benefit 5
The sensitivity analyses below has been determined based on
reasonably possible changes of each significant assumption on the
defined benefits retirement liability as at the end of the
reporting period, assuming all other assumptions were held
constant:
Increase/ 2020 2019
(decrease) US$ US$
Discount rates +1% 1,781,544 866,822
-1% (1,959,201) (1,068,527)
Salary pay increases +1% 1,969,651 1,075,503
------------ ------------
Shown below is the maturity analysis of the undiscounted benefit
payments:
2020 2019
US$ US$
Less than one year 98,896 40,758
More than one year to five years 378,213 406,056
More than five years to 10 years 3,727,830 648,879
More than 10 years to 15 years - 1,074,992
More than 15 years to 20 years - 1,171,090
More than 20 years - 2,926,388
---------- ----------
4,204,939 6,268,163
========== ==========
21. Trade and other payables due within one year
Group 2020 2019
US$ US$
Trade payables 5,596,124 10,087,062
Other payables 2,376,044 495,084
Other tax and social security payable 99,079 158,725
Accruals 3,961,239 3,614,417
12,032,486 14,355,288
=========== ===========
Company 2020 2019
US$ US$
Trade payables 138,023 252,511
Other tax and social security payable 50,089 76,128
Accruals 174,570 113,557
362,682 442,196
======== ========
Trade payables comprise amounts outstanding for trade purchases
and on-going costs, and together with other payables and accruals
are measured at amortised cost.
22. Loans
Group
On 28 May 2015, the Group entered into the Runruno Facility
Agreement loan (the "Senior Facility") with two foreign
international resource banks (the "Senior Lenders"). The original
Senior Facility provided US$83,000,000 in project finance. The
Senior Facility was subsequently amended on a number of occasions
as the Group was granted waivers from repayment of due
principal.
No loan principal or interest payments were made during the 2019
year as the Group secured a standstill agreement whereby the Group
was relieved of making any principal or interest payments (the
"Standstill Agreement"). This Standstill Agreement was initially
agreed by the Senior Lenders on 31 March 2019 and was extended a
number of times.
The purpose of the Standstill Agreement was to provide the Group
and the Senior Lenders (together with the Mezzanine Lenders as
noted below) time to negotiate a restructuring of the debt aimed to
provide the Group with a sustainable debt position.
On 30 January 2020, Runruno Holdings Ltd and MTL (Guernsey) Ltd,
(an associated company of MTL Luxembourg SARL), the Company's two
major shareholders and mezzanine lenders, (together the "New
Lenders") completed a sale agreement with the Senior Lenders to
purchase all the rights and obligations under the Senior
Facility.
On 9 March 2020, agreement on the continuation of the Standstill
Agreement in respect of the Senior Facility could not be reached
and the Group went into default in relation to the Senior
Facility.
On 23 October 2020 the Group completed a debt restructuring with
New Lenders, the material terms of which were:
-- The Group no longer has an obligation to meet any fixed
interest and principal repayment schedule. The Group's repayment
obligation is now limited to making a quarterly repayment of that
amount which equals the available net working capital ("NWC") over
and above a minimum US$5 million NWC buffer . NWC is defined as the
Group's available cash on hand plus gold sales proceeds due, and
gold doré on hand or in transit, less all current liabilities
(including budgeted operational, CAPEX and exploration expenses,
taxes, hedging costs and government charges, but excluding all
unpaid debt principal and interest);
-- The risk that the Group will default on its debt facilities
due to not meeting a fixed principal and interest repayment
schedule has been removed. As a result, the Group is not at risk of
the New Lenders enforcing security they hold against the Group, or
its assets, in the event there is no quarterly payment of either
interest or principal to the New Lenders . However, other events of
default common to debt agreements of this nature still apply;
-- The Group has the right to hold a US$5 million working
capital buffer in excess of current liabilities thus ensuring
external creditors can be paid from Group cash flows before debt
payments are made;
-- The Quarterly Payments will be applied in the following
order: (i) to pay any applicable fees or costs of the Lenders under
the facilities; (ii) interest on the New Senior Facility; (iii) New
Senior Facility principal; (iv) interest on the New Mezzanine
Facilities; and (v) New Mezzanine Facilities principal;
-- The New Senior Facility interest rate is 7% pa accruing daily and compounding quarterly;
-- The New Mezzanine Facilities interest rate will initially be
15% pa accruing daily and compounding quarterly;
-- There is no obligation to make any repayment of mezzanine
debt until the New Senior Debt is fully repaid.
-- The Group is no longer required to pay a 1.3% gross
production fee upon gold production (which was a requirement under
the previous mezzanine debt facilities in respect of the period up
to 30 September 2022);
-- In circumstances where the Group is in default an additional
penalty interest of 5% pa will apply; and
-- The Group was required to pay the reasonable costs and
expenses incurred by the Lenders in implementing the debt
restructuring.
In the year ended 31 December 2020 the Group made repayments of
interest and principal totalling US$12 million.
As at 31 December 2020 the Group's outstanding loan position
was:
2020 2019
US$ US$
Senior Lenders loans due within one year* 30,000,000 68,088,376
Mezzanine Lenders loans due within one year - 44,705,987
Less: Capitalised debt restructuring transaction costs** (735,782) -
----------- ------------
Total loans due within one year 29,264,218 112,794,363
=========== ============
Senior Lenders loans due after one year* 31,289,409 -
Mezzanine Lenders loans due after one year 68,083,454 12,514,159
Less: Fair value of warrants issued in conjunction with mezzanine loans (486,695) (1,231,585)
Less: Capitalised debt restructuring transaction costs** (735,782) -
----------- ------------
Total loans due after one year 98,150,386 11,282,574
=========== ============
* Given the Group is not subject to a fixed repayment schedule
then, in accordance with the new debt facilities, there is no
certainty to what amount of debt will be repaid within one year
from balance date. Thus the determination of what debt is deemed
current and what is deemed non-current is subject to
estimation.
In making this calculation the Group has taken into account the
Group's estimate of what principal repayments will be made during
the 2021 year. Refer to Note 2 for further discussion of this
estimation. As at the date of this report, repayments of senior
debt principal and interest since 31 December 2020 have totaled
US$18.6 million (US$17.5 million principal; US$1.1 million
interest).
** Transaction costs incurred during 2020 in relation to the
October 2020 debt restructuring have been capitalised in accordance
with accounting standard IFRS9. The capitalised debt restructuring
transaction costs will be amortised to profit and loss over the
relevant expected debt repayment terms.
Company
In the period 2015-2018, the Company entered into numerous
facility agreements with its two major shareholders, MTL
(Luxembourg) Sarl ("MTLL") and Runruno Holdings Limited ("RHL")
(together the "Mezzanine Lenders"). The purpose of these advances
was for general corporate and working capital requirements of the
Company and to enable completion of the Runruno project.
As at 31 December 2019, the total owing under the mezzanine
facilities was US$55,988,561 attracting various interest rates as
high as 20% pa (plus penalty interest of up to 10% pa where
applicable).
During 2019 and 2020, in accordance with the Standstill
Agreement (refer above), no payments of principal, interest or
production fees on any mezzanine debt facility were made. As noted
above the Standstill Agreement was not continued beyond 9 March
2020; however a debt restructuring was completed in October 2020.
Notwithstanding the Standstill Agreement penalty interest charges
accrued until the completion of the debt restructuring.
Under the October 2020 debt restructuring the various original
mezzanine facilities were consolidated into two New Mezzanine
Facilities and a GBP100,000 Revolving Credit Facility ("RCF") the
key terms of which were:
-- There is no obligation to make any repayment of New Mezzanine
Debt until the New Senior Debt is fully repaid;
-- The New Mezzanine Facility interest rate will initially be
15% pa accruing daily and compounding quarterly;
-- Upon full repayment of the New Senior Facility, the New
Senior Facility will be amended and restated so that all amounts
then due under the New Mezzanine Facilities as at such date will
instead become due under the New Senior Facility without any other
amendment to the terms of the New Senior Facility. This would
result in the outstanding amount becoming secured as per the New
Senior Facility, in exchange for the interest rate being reduced to
7% pa;
-- The Group is no longer required to pay a 1.3% gross
production fee upon gold production (which was a requirement under
the previous mezzanine debt facilities in respect of the period up
to 30 September 2022);
-- The 2011 Shareholder Agreement was replaced by new
relationship agreements with RHL and MTLL, respectively, consistent
with current corporate governance guidance;
-- The RCF facility has a term of 10 years from the date the
Company repays in full all amounts owed under the New Senior
Facility and the New Mezzanine Facilities, unless terminated
earlier by the New Lenders or by the Company repaying all amounts
under all debt facilities and the RCF, together with a redemption
premium of GBP2 million to each of RHL and MTLL;
-- The Company undertakes not to implement certain operational
decisions without prior approval of the Mezzanine Lenders.
As at 31 December 2020 the mezzanine loan position was:
2020 2019
US$ US$
Mezzanine Lenders loans due within one year* - 44,705,987
=========== ============
Mezzanine Lenders loans due after one year* 68,083,454 12,514,159
Less: Fair value of warrants issued in conjunction with loans (486,695) (1,231,585)
Total loans due after one year 67,596,759 11,282,574
=========== ============
* Under the new debt structure no mezzanine debt is payable
until the full repayment of the New Senior Debt. This is not
expected to occur within the next 12 months.
These Company loan liabilities are included in the Group loans
above.
2020 2019
US$ US$
At 1 January 2020 2,880,092 2,150,633
Unwinding of discount 411,296 729,459
At 31 December 2020 3,291,388 2,880,092
========== ==========
The Company makes provision for the future cost of
rehabilitation of the process plant on a discounted basis.
Provision for mine rehabilitation and decommissioning represents
the present value of future rehabilitation and decommissioning
costs. These provisions have been created based on the Company's
internal estimates. Estimated costs include labour, equipment hire,
consumables and transportation for disposal. Assumptions, based on
the current economic environment, have been made which management
believes are a reasonable basis upon which to estimate the future
liability. These estimates are reviewed regularly to take into
account any material changes to the assumptions. However, actual
costs will ultimately depend upon future market prices for the
necessary works required which will reflect market conditions at
the relevant time. Furthermore, the timing of the rehabilitation
and expenditure of other costs is likely to depend on when the mine
ceases to produce at economically viable rates, and the timing that
the event for which the other provisions provided for will
occur.
24. Called up share capital
2020 2019
US$ US$
Allotted ordinary shares at 1 January 2020
(2,071,334,586 ordinary shares of GBP0.01 par value) 27,950,217 27,950,217
Allotted ordinary share at 31 December 2020
(2,071,334,586 ordinary shares of GBP0.01 par value) 27,950,217 27,950,217
=========== ===========
Share rights
Ordinary shares confer the right to vote and to participate in
dividends, capital, and other distributions including on winding
up. Ordinary shares are not redeemable.
25. Compound financial instruments
Warrants
There were no warrants issued during 2020 or 2019.
During the year ended 31 December 2017, two tranches of warrants
were issued by the Company in conjunction with securing a mezzanine
funding package.
Tranche 1 Tranche 2
Exercise Price GBP0.055 GBP0.070
================= =================
Expiry Date 31 December 2023 31 December 2023
================= =================
Number of warrants 75,000,000 25,000,000
================= =================
The fair value of these warrants as at the date of issue was
independently calculated to be US$1,526,937. The fair value of
these warrants was brought to account as an equity reserve in the
year ended 31 December 2019. The unwinding of the fair value of
these warrants is charged through the statement of comprehensive
income and loss.
26. Net cash provided by/(used in) operating activities
Group 2020 2019
US$ US$
Profit before tax 9,768,046 13,852,272
Depreciation 16,925,778 9,290,373
Provisions 929,756 130,578
Impairment charge/(reversal) 1,292,814 (22,963,749)
Amortisation 56,457 48,966
Share of profits of associates (2,625) (22,829)
Loss on disposal of asset - 569,434
Foreign exchange loss/(gain) 2,156,859 1,480,638
(Increase)/decrease in receivables (10,383,175) 293,672
(Increase) in inventories (5,142,286) (2,505,219)
Increase in payables 12,529,899 13,517,523
Net cash provided by operating activities 28,131,523 13,691,659
============= =============
Company 2020 2019
US$ US$
Profit before tax 11,308,987 28,662,780
Impairment (reversal) (22,987,091) (38,778,397)
Foreign exchange (gain)/loss (46,850) 147,956
(Increase) in receivables (2,314,211) (2,040,734)
Increase in payables 11,514,472 9,939,381
Net cash used in operating activities (2,524,693) (2,069,014)
============= =============
27. Reconciliation of liabilities from financing activities
1 January 2020 Non-cash movements 31 December 2020
Group Cash flow
US$ US$ US$ US$
Loans (current) 112,794,363 (7,322,074) (76,208,071) 29,264,218
Loans (non-current) 11,282,574 - 86,867,812 98,150,386
--------------- ------------ ------------------- -----------------
124,076,937 (7,322,074) 10,659,741 127,414,604
=============== ============ =================== =================
1 January 2020 Non-cash movements 31 December 2020
Company Cash flow
US$ US$ US$ US$
Loans (current) 44,705,987 - (44,705,987) -
Loans (non-current) 11,282,574 - 56,314,185 67,596,759
--------------- ------------ ------------------- -----------------
55,988,561 - 11,608,198 67,596,759
=============== ============ =================== =================
28. Capital commitments
As at 31 December 2019, the Group noted that it had commenced a
review of its RSI closure obligation which may have a potential
impact on the provision for mine closure costs as per note 23. The
Group is in the process of determining a reliable estimate of the
cost of complying with its RSI closure obligations.
These studies, including geotechnical drilling continue,
however, the Group has determined that it will undertake these
works commencing Q1 2022 as part of its sustaining CAPEX program.
The Group expects that it will complete its in-rock closure
spillway well before the scheduled mine closure. Hence, the Group
expects that it will have no additional mine closure costs in
relation to this matter and no further adjustment to the provision
in note 23 is required.
Other than as noted above, as at 31 December 2020 the Group had
US$nil outstanding capital commitments (2019: US$nil).
29. Related party transactions
Only members of the Board of Directors of Metals Exploration plc
are deemed to be key management personnel. The Board has
responsibility for planning, controlling and directing the
activities of the Group. Key management compensation is disclosed
in Note 7, Directors' emoluments section. At period end the
following amounts were due in relation to Directors'
emoluments:
Amounts owing to Directors 2020 2019
US$ US$
D Bowden 6,000 6,000
------ -------
Amounts owing to related parties
MTL Luxemburg - 7,862
Runruno Holdings Limited 8,487 83,299
------ -------
8,487 91,161
------ -------
During the year, the Company received funds from its
subsidiaries to fund operations. At the year end, the Company had
loans due by its subsidiaries totaling US$272 million (2019: US$247
million). As at 31 December 2020 these loan amounts owed by
subsidiaries were impaired to a net recoverable amount of US$57
million (2019: US$40 million). (Refer Note 8(b)).
At the year end, the Company owed US$92,500 (2019: US$78,000) to
its associates and the Group was owed US$3.07 million (2019:
US$2.84 million) from its associates.
30. Financial instruments
The Group's financial instruments comprise cash and cash
equivalents, borrowings and items such as trade payables and trade
receivables which arise directly from its operations. The main
purpose of these financial instruments is to provide finance for
the Group's operations. The Group holds no gold price or interest
rate hedging financial instruments.
The carrying values of financial assets at the year-end are as
follows:
Trade and other receivables
Group Cash and cash equivalents
Total
US$ US$ US$
As at 31 December 2020 8,931,792 17,307,851 26,239,643
As at 31 December 2019 4,818,981 7,832,458 12,651,439
Company
As at 31 December 2020 569,732 65,045,652 65,615,384
As at 31 December 2019 565,166 39,977,668 40,542,834
Cash and cash equivalents and trade and other receivables are
held at amortised cost.
The carrying values of financial liabilities at the year-end are
as follows:
Accruals and other payables
Group Trade payables
Loans Total
US$ US$ US$ US$
As at 31 December 2020 5,596,514 5,948,623 127,414,604 138,959,741
As at 31 December 2019 10,087,062 4,268,226 124,076,937 138,432,225
Company
As at 31 December 2020 138,023 224,659 67,596,759 67,959,441
As at 31 December 2019 252,511 189,685 55,998,561 56,440,757
Trade payables, accruals and other payables and loans are held
at amortised cost.
The Group's operations expose it to a variety of financial risks
including liquidity risk, foreign currency exchange rate risk,
commodity price risk, credit risk and interest rate risk. The
policies set by the Board of Directors are implemented by the
Group's finance departments and senior management.
Liquidity risk
The Group actively monitors its cash resources to ensure it has
sufficient available funds for operations and planned expansions.
The Group has been cash flow positive in both 2019 and 2020 and
surplus funds are being applied to reduce the Group's borrowings.
The October 2020 debt restructuring provides the Group with a
greater degree of liquidity certainty due to the ability to hold a
minimum of US$5 million in net working capital without risk of
default under the Group lending facilities.
The contractual maturities of the financial liabilities at the
year-end are as follows:
Group Trade and other payables Loans* Total*
US$ US$ US$
As at 31 December 2020
1 - 6 months 11,544,747 15,632,109 27,176,856
6 - 12 months - 13,632,109 13,632,109
1 - 2 years - 30,553,627 30,553,627
2 - 5 years - 67,596,759 67,596,759
Total contractual cash flows 11,544,747 127,414,604 138.959,351
--------------------------- ------------ ------------
As at 31 December 2019 US$ US$ US$
1 - 6 months 14,196,563 104,218,889 118,415,452
6 - 12 months - 8,575,474 8,575,474
1 - 2 years - 7,150,948 7,150,948
2 - 5 years - 4,131,626 4,131,626
----------- ------------ ------------
Total contractual cash flows 14,196,563 124,076,937 138,273,500
----------- ------------ ------------
Company Trade and other payables Loans* Total*
US$ US$ US$
As at 31 December 2020
1 - 6 months 362,682 - 362,682
6 - 12 months - - -
1 - 2 years - - -
2 - 5 years - 67,596,759 67,596,759
------------------------- ----------- -----------
Total contractual cash flows 362,682 67,596,759 67,959,441
------------------------- ----------- -----------
As at 31 December 2019
1 - 6 months 366,068 36,130,513 36,496,581
6 - 12 months - 8,575,474 8,575,474
1 - 2 years - 7,150,948 7,150,948
2 - 5 years - 4,131,626 4,131,626
------------------------- ----------- -----------
Total contractual cash flows 366,068 55,988,561 56,354,629
------------------------- ----------- -----------
* The Group and Company's contractual future loan interest is
presently not capable of being calculated. In addition the timing
of future loan principal repayments can only be estimated (Refer
note 2 - Accounting estimates).
As at 31 December 2020, the average interest rate applicable to
the Group's outstanding loans was 10.96% (2019: 11.53%). The
average interest rate applicable to the Company's outstanding loans
was 15% (2019: 16.90%). Note that as part of the Company's
mezzanine loan facilities a further production fee of 1.3% of gross
gold sales (subject to a quarter minimum fee of US$250,000 and a
maximum quarter fee of US$500,000) was eliminated upon the
completion of the October 2020 debt restructuring (Refer note
22).
Credit risk
Credit risk is the risk of financial loss to the Group or
Company if counterparty to a financial instrument fails to meet its
contractual obligations.
The Group and Company are exposed to credit risk attributable to
its cash balances; however, this risk is limited because the
counterparties are large international banks.
The Group is exposed to credit risk for other receivables due
from third parties. This risk is limited because the counterparties
to the gold sales are internationally recognised. Further, the
Group receives significant payment for the gold upon the
presentation of transportation documents.
Other receivables include VAT on importations and other goods
and services. An impairment charge has been raised on the basis
that the Group continues to have little success in advancing its
legal challenges to recover VAT receivables.
The Company is exposed to credit risk to the extent that amounts
owed by its subsidiaries and associates may not be recoverable in
the future. An impairment reversal has been raised in relation
amounts owed by its subsidiaries and associates to partly reverse a
2018 expected credit loss.
The maximum exposure to credit risk at the year-end is best
represented by the carrying amounts of trade and other receivables,
cash and cash equivalents.
Market risk and sensitivity analysis
Commodity price risk
The market price of gold is one of the most significant factors
in determining the profitability of the Group's operations. The
price of gold is subject to volatile price movements over short
periods of time and is affected by numerous industry and
macro-economic factors that are beyond the Group's control. In 2020
the gold price ranged from US$1,471 to US$2,063 per ounce, and the
Group received an average gold selling of US$1,782 per ounce (2019:
US$1,400 per ounce). The Group's policy is to sell gold at
prevailing market prices. As at 31 December 2020 none of the
Group's financial instruments have exposure to gold prices.
The impact of a 10% increase/decrease in the Group's average
gold sale price achieved during the financial year would have
resulted in the Group's profit before tax being decreased/increased
by US$12,210,000. The impact is expressed on the assumption that
the market price changes by 10% with all other variables held
constant.
Interest rate risk
The Group has interest bearing assets comprising cash and cash
equivalents which earn interest at a variable rate. Interest income
is not material to the Group.
The Group has interest bearing liabilities and the impact on the
reported profit for the year is an interest expense of
US$14,914,952 (2019: US$13,562,259).
The Group no longer has interest-bearing borrowings that are
exposed to changes in the 3 month US$ LIBOR rate as all the Group's
borrowings bear interest at a fixed rate.
Foreign currency exchange rate risk
The Group and Company are exposed to foreign currency exchange
rate risk having cashflows predominantly in US Dollars, Pounds
Sterling and Philippine Pesos. The Group monitors exchange rates
actively and converts funds raised to other currencies when deemed
appropriate in order to meet expected future foreign currency
commitments. The Group does not use hedging instruments to protect
against currency risk.
The Group's exposure to foreign currency translation risk due to
accounts being in different currencies to the Group's
presentational currency is limited to movements in Pounds Sterling.
Exposures to movements in other currencies are not material.
As at 31 December 2020, if the Pound Sterling exchange had
weakened/strengthened by 10% against US Dollars, with all other
variables held constant, the profit before tax profit would have
been US$14,000 higher/lower.
31. Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern to provide
returns for shareholders and maintain an optimal capital structure
to reduce the cost of capital.
The Group defines capital as being share capital plus reserves.
The Board of Directors monitors the level of capital as compared to
the Group's long-term debt commitments.
The Group is not subject to any externally imposed capital
requirements.
32. Contingent liabilities
The Group has no contingent liabilities identified as at 31
December 2020 (2019: US$nil).
33. Post balance sheet events
There has not been any matter or circumstance that has arisen
after balance date that has significantly affected, or may
significantly affect, the operations of the Group, the results of
those operations, or the state of affairs of the Group in future
financial periods, other than:
-- the Group has made interest and principal debt repayments of US$18.6 million.
34. Ultimate controlling parties
As part of the October 2020 debt restructuring, the Company
entered into a Revolving Credit Facility (RCF) under which the
Company is obligated to seek prior approval from both the mezzanine
lenders, MTL Luxemburg SARL (MTLL) and Runruno Holdings Limited
(RHL), for a number of operational matters. If these prior
approvals are not properly sought the RCF deems an 'event of
default' to have occurred. In this situation all outstanding debt
becomes due and payable, and MTLL and RHL become entitled to a
penalty/termination payment of GBP2 million each. The RCF operates
for 10 years after the full repayment of the existing Group debt
unless otherwise terminated by the Company by payment of the GBP2
million termination penalty to both MTLL and RHL. In March 2021,
RHL assigned its interests in both the senior facility and the
major mezzanine facility to D & A Holdings Limited (an
associated company controlled by the same entity).
Although the Company has no ultimate controlling party, as a
result of the above both MTLL and RHL are considered parties
holding significant influence. MTLL owns 46.8% of the Company,
while RHL holds 19.0% of the Company.
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