TIDMTSG
RNS Number : 0933B
Trans-Siberian Gold PLC
08 June 2021
8 June 2021
Trans-Siberian Gold plc
("TSG", the "Company", or the "Group")
Final Audited Results
Trans-Siberian Gold plc (TSG.LN), a low cost, high grade gold
producer in Kamchatka, Russia, is pleased to announce its audited
financial results for the year ended 31 December 2020.
Financial Highlights:
-- Record-breaking revenues of $81.0 million, up 28.3% (2019: $63.1 million)
-- EBITDA of $42.7 million, up 61.7% (2019: $26.4 million)
-- Profit Before Tax of $28.0 million up 122.6% (2019: $12.6 million)
-- Total dividend pay-out for the year of $9 million (2019: $8.5 million)
Operational Highlights:
-- Record annual production of gold in dore at 45,066 oz. a 3.7% increase YoY (2019: 43,479 oz.)
-- Total cash cost per oz. gold sold of $536 (2019: $513)
-- All-in Sustaining Costs per oz. gold $863 (2019: $941)
-- Cost of sales per oz. of gold at $876 (2019: $878)
A copy of the Company's Annual Report and Financial Statements
is available on the Company's website:
www.trans-siberiangold.com
S
Contacts:
TSG
Stewart Dickson +44 (0) 7799 694195
Canaccord Genuity Limited
(Nominated Adviser & Joint Corporate Broker)
Henry Fitzgerald-O'Connor / James Asensio +44 (0) 20 7523 8000
Panmure Gordon (UK) Limited
(Joint Corporate Broker)
John Prior / Hugh Rich / Ailsa MacMaster +44 (0) 20 7886 2500
Hudson Sandler
(Financial Public Relations)
Charlie Jack / Katerina Parker / Elfie
Kent +44 (0) 207 796 4133
About TSG
TSG is focused on low cost, high grade mining operations and
stable gold production from its 100% owned Asacha Gold Mine in Far
East Russia. The Group also holds the licence for the development
and exploration of the Rodnikova deposit, one of the largest gold
fields in South Kamchatka.
Additional information is available from the Company's website:
www.trans-siberiangold.com
Market Abuse Regulations
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ('MAR'). Upon the
publication of this announcement via Regulatory Information Service
('RIS'), this inside information is now considered to be in the
public domain.
Disclaimer
This announcement contains "forward-looking statements" - that
is, statements related to future, not past, events. In this
context, forward-looking statements often address our expected
future business and financial performance, and often contain words
such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "should" or "will." Forward-looking statements by their
nature address matters that are, to different degrees, uncertain.
For us, uncertainties arise from the behaviour of financial and
metals markets, fluctuations in interest and/or exchange rates and
metal prices; and from numerous other matters of national, regional
and global scale, including those of a political, economic,
business, competitive or regulatory nature. These uncertainties may
cause our actual future results to be materially different that
those expressed in our forward-looking statements.
Trans-Siberian Gold
Annual Report & Financial Statements 2020
Low cost, high grade gold producer
Low cost, high grade mining operations and stable gold
production from the Asacha Gold Mine in Far East Russia.
Financial Highlights
Profit before tax
$28.0m
+122.6%
(2019: $12.6m)
Revenue
$81.0m
+28.3%
(2019: $63.1m)
EBITDA
$42.7m
+61.7%
(2019: $26.4m)
Gold in doré
45,066oz
+3.7%
(2019: 43,479oz)
-- Total dividend payout during FY20 of $9.0 million (2019: $8.5
million).
Operating Highlights
Record year of gold production
-- Gold in doré 45,066 oz. (2019: 43,479 oz.), silver in doré
78,875 oz. (2019: 111,557 oz.).
-- Cost of sales per oz. of gold, net of silver credits, $876
(2019: $878).
-- Total Cash Cost per oz. gold sold $536 (2019: $513)*.
-- AISC per oz. gold sold $863 (2019: $941)*.
* Refer to note 36 Non-GAAP Measures.
Introduction
At a Glance
Trans-Siberian Gold plc ('TSG', the 'Company' or the 'Group') is
a UK-based resources company, established in 2000 and listed on the
AIM market of the London Stock Exchange.
TSG's 100%-owned subsidiary, JSC TSG Asacha ('TSG Asacha)
(having changed its name from AO Trevozhnoye Zarevo on 21 April
2021) holds a 24 square kilometre licence in the southern part of
the Kamchatka peninsula, and is the operator of the Asacha Gold
Mine. In April 2019, AO Trevozhnoye Zarevo was issued a licence for
the development and exploration of the Rodnikova deposit, one of
the largest gold fields in South Kamchatka, for a tenure of 20
years.
Focused on low cost, high grade mining operations and stable
gold production
The 100% owner of the Asacha Gold Mine in Russia
A highly-regarded management team with significant experience in
developing and operating gold mines in Russia
Committed to maintaining our licence to operate through acting
responsibly in relation to our people, the environment and the
communities which we interact with
Key Strengths:
Strong Institutional Shareholders
Low Cost Gold Producer
Attractive Dividend
Financial Robustness
Growth Opportunities
Experienced Board
Favourable Mining Jurisdiction
Asacha Gold Mine
An epithermal gold/silver deposit located on a tertiary volcanic
arc typical of ore systems found along the Pacific Rim. The main
ore zone at Asacha consists of five steeply dipping veins with two
principal veins averaging over two metres in width. Veins are
characterised by low sulphidation quartz-adularia occurring
predominately in dacite domes.
Established gold mine in Far East Russia
High grade underground operation
Gold in doré production: 45,066oz. for FY20
Low Cash Cost operation: $536/oz.
Chairman's Statement
I am pleased to present the Group's Annual Report and Financial
Statements for the year ended 31 December 2020, a significant year
for Trans-Siberian Gold.
Gold in doré
45,066oz
+3.7%
(2019: 43,479oz)
EBITDA
$42.7m
+61.7%
(2019: $26.4m)
Providing sustainable return to shareholders
"A record year of production and financial performance"
I am very proud of the achievements delivered by the Company
this year.
Executing our strategy
2020 was a year of significant achievement for Trans-Siberian
Gold as we continued to enhance and realise value from our
operations in the Far East of Russia.
We continued to improve our operational performance and, in
spite of unprecedented challenges presented by COVID-19, delivered
significant shareholder returns.
COVID-19
Throughout the ongoing COVID-19 pandemic, the Company's first
priority at all times naturally remained the safety and wellbeing
of its employees.
From the outset, we focused on implementing strict measures to
ensure the safety of our employees and our contractors, and
proactive measures remain in place today.
Whilst there was no material impact to TSG's production from the
COVID-19 virus during the period, we introduced thorough risk
mitigation structures, and closely followed all government advice.
TSG remains vigilant to the risks that the pandemic poses and
continues to implement strict measures to ensure the safety of our
employees and contractors and to maintain strong preparedness for
potential further outbreaks of infection.
Operations and Financial Performance
In the ninth full year of our operations at the Asacha mine we
achieved our highest ever revenue of $81.0 million, building on our
successes from 2019 (revenue: $63.1 million). This was assisted by
a very supportive gold price environment as the average realised
price of gold sold in 2020 was $1,808/oz, a 29.2% increase from
$1,399 oz in 2019.
In 2020, Trans-Siberian Gold continued to return capital to
shareholders by paying an interim dividend of $7 million. Due to
the takeover offer described below, the Board is unable to
recommend a final dividend for FY 2020.
At our flagship Asacha Gold Mine, 2020 saw a continuation of the
favourable grades mined in 2019. Consistent good grade performance,
coupled with sustained high recoveries throughout the year,
resulted in 45,066 oz of gold dore produced in 2020, beating our
expectations and exceeding market guidance. Improved gold
production was supported by a very favourable gold price throughout
2020 and as a result I am pleased to report a significant increase
in profitability.
2020 saw a transition from the Main Zone to the East Zone of the
Asacha Gold Mine, as we commenced mining activities at the
high-grade Vein 25. Vein 25 presented increasingly promising grades
over the year, as demonstrated by the highest quarterly gold grade
of 10.3 g/t achieved during Q4 2020.
The Group continued with exploration drilling near-mine and
proximal step-out targets in the vicinity of the Asacha Gold Mine.
Additionally, an aeromagnetic survey was completed over the Asacha
licence area with the objective of identifying new exploration
targets.
In February 2020 we confirmed the quality of the Rodnikova gold
deposit in South Kamchatka with the issuance of a JORC-compliant
mineral resource estimate, and initiated the Scoping Study for the
project, which we were pleased to publish in February 2021,
reporting a resource of 6.3Mt at an average grade of 5.0 g/t, for a
total of 1Moz contained gold. The Company believes that Rodnikova
continues to have additional upside potential which merits
exploration and studies.
On 6 January 2021, the Company regretfully reported a tragic
accident due to a rock fall at Asacha's Vein 25, resulting in two
fatalities. Following the incident, we continue to support the
families affected by the accident, and worked closely with
Rostekhnadzor (the Federal Service for the Supervision of
Environment, Technology and Nuclear Management) in its
investigations, following which we allocated substantial resources
to enhancing ground support both at Vein 25 and at the Main
Zone.
Gold industry trends
Gold was one of the best performing major asset classes of
2020.
Increasing by 25% year on year, the gold price reached an
all-time high of $2,067.15/oz. in early August 2020. Sustained
growth in global gold-backed ETF holdings, which grew by 877.1t
over the year, was largely as a result of market uncertainty over
the COVID-19 pandemic and fiscal reactions and responses from
authorities worldwide.
Takeover Offer
After the 2020 financial year-end, on 18 March 2021, the Company
announced an agreement with Horvik Limited ("Horvik") on the terms
of a recommended pre-conditional mandatory cash offer ("Offer") to
be made by Horvik for the Company's ordinary shares not already
held or agreed to be acquired by Horvik (the Announcement). The
Announcement included the rationale for the Company's Independent
Directors' recommendation of the Offer which, for ease of
reference, I outline below.
-- The Selling Shareholders, which comprise the Company's former
Chairman, Charles Ryan and a former non-executive director, Florian
Fenner, together with connected entities and various funds managed
by UFG Asset Management Limited ("UFG"), who collectively owned
over 50 per cent. of the share capital of TSG (excluding any shares
held in treasury) had agreed to the sale of their entire
shareholdings in TSG at GBP1.18 per share (the "Offer Price").
-- UFG has been a long-term and supportive shareholder of TSG
with certain persons or entities within the group of Selling
Shareholders having been TSG Shareholders since 2006.
-- Whilst UFG has reduced its shareholding over recent years,
which has aided liquidity in the trading of TSG shares, the TSG
Independent Directors understand that the Selling Shareholders have
been looking at opportunities to monetise the value of their entire
holding in TSG for a period of time and have concluded that the
Offer represents the most appealing way of realising value at an
attractive price.
-- The TSG Independent Directors recognise this desire and that
the Selling Shareholders may have moved from the investing stage to
the realisation stage of their investment life-cycle. Alternative
methods of the Selling Shareholders seeking to realise value from
their TSG shareholdings in the near term would likely have a
detrimental impact on the market price of TSG Shares pending and,
in particular, during such monetisation.
-- The TSG Independent Directors believe that, given the Company
has a single production asset and all its operations are based in
the Kamchatka region in Far East Russia, there is a relatively
limited number of potential alternative buyers for the Company that
could provide similar opportunities for a full cash monetisation
for TSG shareholders in the near term. The Offer represents a
liquidity opportunity for all TSG shareholders to realise their
investment in TSG in full, in cash, and on the same terms as the
Selling Shareholders.
-- The outlook for gold is uncertain, with market consensus on
the long-term price of gold being materially below that of the
current spot price. The TSG Independent Directors believe that the
Offer Price represents fair value on the basis of their commercial
assessments of TSG.
-- The TSG Independent Directors believe the long term prospects
of the Asacha Gold mine remain attractive. However, delivery of
TSG's strategy to grow production has execution risk, including
customary permitting requirements, and would require further
material capital expenditures.
-- In this context, the TSG Independent Directors believe that
the Offer Price recognises the prospects and execution risks of
TSG, whilst providing certainty, in cash, to TSG shareholders
now.
In addition, the Announcement also noted that:
-- There can be no guarantee that similar future liquidity
events will materialise;
-- TSG's share price has only traded higher than the Offer Price
for 32 trading days in the last 15 years, reaching its 15 year peak
in September 2019;
-- Mining operations are inherently risky and susceptible to
interruption as evidenced by the recent and regrettable incident at
TSG's Asacha Gold Mine; and
-- TSG's development asset, Rodnikova, is not due for
development for some time and it is currently estimated that it
would require approximately $130 million of capital expenditure.
Accordingly, TSG would likely have to raise a combination of
further debt and equity if it were to develop this asset. The TSG
Independent Directors acknowledge that there is no certainty that
UFG would participate in further investment in TSG.
-- The Offer Price represents a premium of approximately:
- 18 per cent. to the closing price per TSG share of GBP1.00 on
17 March 2021 (being the last practicable date prior to the date of
the Announcement);
- 34 per cent. to the closing price per TSG share of GBP0.88 on
4 March 2021 (being the last business day prior to the date on
which Horvik first approached the TSG Independent Directors);
and
- 26 per cent. to the volume weighted average closing price per
TSG share of GBP0.94 for the one month period ended on 17 March
2021 (being the last practicable date prior to the date of the
Announcement).
-- As the Selling Shareholders' holdings represent greater than
50 per cent. of the share capital of TSG (excluding any shares held
in treasury), if the FAS Pre-Condition is satisfied, control of TSG
will have passed from the Selling Shareholders to Horvik.
-- If, through acceptances of the Offer, Horvik acquires
interests which, together with the TSG Shares it acquires pursuant
to the SPA, amount to at least 75 per cent. of the share capital of
TSG, Horvik will seek to cancel the admission of the TSG Shares to
trading on AIM, which, if such cancellation occurs, will mean there
is no liquid market in which to trade TSG shares.
-- If Horvik fails to acquire interests in at least 75 per cent.
of the share capital of TSG, Horvik intends to retain the Company's
listing on AIM. Pursuant to the Relationship Agreement described in
the Announcement, Horvik will be entitled to appoint three
directors and therefore, subject to the provisions of the
Relationship Agreement, will have significant influence over the
strategic direction and priorities of the Company, including any
future dividend payments and may have a different perspective on
these matters to other shareholders.
On 19 May 2021, Horvik announced that the Russian Federal
Antimonopoly Service ("FAS") had granted regulatory clearance in
connection with the Offer. Accordingly, the pre-condition to the
Offer has been satisfied and an offer document containing the terms
of the Offer will be posted to TSG Shareholders as soon as
practicable and in any event within 28 days of that
announcement.
I would like to take this opportunity to express my heartfelt
thanks to all our employees. In a very uncertain year, throughout
the prolonged risk of COVID-19, ensuring the health and wellbeing
of our people remained our first priority. Amid a global pandemic,
our excellent financial and operational performance is a direct
consequence of their skills and dedication; it is much
appreciated.
Lou Naumovski
Interim Chairman and Senior Independent Non-Executive
Director
"Providing sustainable return to shareholders"
Strategic report
Strategy
The Directors present the Strategic Report for the year ended 31
December 2020.
Strategy
The Group seeks to provide investors with access to a company
capable of generating industry-leading shareholder returns, while
maintaining a commitment to operational excellence and its social
and environmental responsibilities. The Group's current corporate
strategy is based on the following three pillars:
01.
Enhance existing operations
02.
Utilise stable platform for future growth opportunities
03.
Pursue selective accretive M&A opportunities
Proven track record of gold production
Principal activities
Trans-Siberian Gold plc is a UK-based resources company, whose
Asacha Gold Mine in the Far East of the Russian Federation has been
in production since September 2011.
The Company is a public limited company, operating under the
laws of England and Wales (the principal legislation being the
Companies Act 2006), incorporated and registered in England and
Wales with registered number 1067991 and domiciled in the United
Kingdom.
TSG is committed to creating value for all stakeholders on a
sustainable basis. For shareholders, value is derived from capital
appreciation in the Company's share price and distributions in the
form of dividends and share buybacks. Value is created by
supporting Russia's Far East economy through taxes paid, employment
and investment in communities.
How we deliver our strategy & create value
The Group makes use of various inputs and assets in our business
activities to create shareholder value. Our business is focused on
low-cost gold production and enabling investments. The outputs
represent the delivery of our business strategy.
Operating and Financial Review
Continuous improvement in operational performance
In 2020, the ninth full year of its operations, Asacha produced
45,066oz of gold doré.
TSG is focused on low cost, high-grade mining operations and
stable gold production from its 100% owned Asacha Gold Mine in
Kamchatka, Far East Russia. The Group also holds the licence for
the development and exploration of the Rodnikova Gold Deposit,
estimated to be one of the largest goldfields in Kamchatka.
Asacha Gold Mine
Production
In 2020, the ninth full year of its operations, Asacha achieved
an all-time record annual production of 45,066oz. of gold in doré
(2019: 43,479 oz.) and 78,875 oz. of silver in doré (2019: 111,557
oz).
The average processed ore gold grade in 2020 was 7.7 g/t, in
line with the 2019 average 7.8 g/t. The grade of gold has improved
during the year, resulting in the highest quarterly grade of 10.32
g/t in Q4 2020. The quality and consistency of ore from Vein 25
made a significant contribution to delivering these operational
achievements.
As indicated for some time, 2020 was a year of transition from
the Main Zone to the East Zone of the Asacha Gold Mine, which
contains significantly higher grade ore.
Mine production in Q1 2020 was relatively low as mineralisation
in the Main Zone becomes lower in grade and more erratic at depth.
This vertical zonation is typical of epithermal systems. Lower
grade stoping ore was required to be blended with existing
stockpiled ore, which resulted in a lower average mill feed
grade.
The second quarter of 2020 saw a return to substantially higher
average gold grades as the Company began to process high-grade ore
extracted from Vein 25 in the East Zone, with considerable progress
in mine development works at Vein 25. This continued into Q3 and Q4
2020, with average mill-feed gold grades supported in part by test
ore extracted from Vein 25, and leading the group to upgrade
initial production guidance.
Mining operations at Vein 25 were suspended for a short period
following a rock fall accident on 6 January 2021, and resumed on 5
March 2021, once full permitting approvals were granted.
Ore processing at the Asacha plant involves:
-- two-stage grinding with semi-autogenous grinding at the first
stage, ball milling at the second stage, pulp classification in
hydrocyclones by 0.75mm size and hydrocyclones' slurry thickening
in a high-capacity thickener;
-- cyanidation and carbon-in-leach process;
-- electric elution of loaded carbon by basic solutions under
pressure using IPS technology, acid treatment and thermal
regeneration of carbon;
-- melting of cathode deposits into doré alloy; and
-- cyanide destruction of slurry tailings by chlorination and
storing of neutralised tailings as diluted slurry.
Mining and production at Asacha in 2020 is shown in the
following table:
2020 2019 YoY
-------------------------- ------------- ------ ------- --- ------
Mine development metres 4,547 7,239 -37.2%
Ore extracted tonnes ('000) 170 142 +19.5%
Ore processed tonnes ('000) 196 179 +9.4%
Average feed gold grade g/t 7.7 7.8 -1.5%
Average feed silver grade g/t 16.2 23.4 -30.8%
Gold recovery rate % 94.2 95.3 -1.1%
Silver recovery rate % 78.4 81.5 -3.8%
Gold in doré oz. 45,066 43,479 +3.6%
Silver in doré oz. 78,875 111,557 -29.3%
Gold refined oz. 43,837 43,733 +0.2%
Silver refined oz. 80,673 109,851 -26.6%
-------------------------- ------------- ------ ------- --- ------
Employees and safety
At 31 December 2020 TSG's subsidiary TSG Asacha employed 579
staff, including personnel working in two shifts at the site (2019:
604 people).
The Group reported one non-operational fatality and 7 light
injuries in 2020 (2019: 7 light injuries, zero fatalities). Efforts
to improve the health and safety at Asacha continue as the Group
continues to invest in employee training and development, such as
labour and fire safety, accident response and emergency management,
safety and the safety of hydro-technical facilities. After the
period end, on 6 January 2021, the Company regretfully reported a
tragic accident due to a rock fall at Asacha's Vein 25, resulting
in two fatalities. A full investigation was commenced and
operations were immediately suspended following this event. On 5
March 2021, the Company announced it had been granted full
permitting approvals to resume mining operations at Vein 25 in the
East Zone of the Asacha Gold Mine.
COVID-19
The Group focused on implementing measures to ensure the safety
of our employees and contractors, the integrity of our operational
facilities and to prepare the business to face emerging challenges.
Consequently, operations saw limited direct interruption from the
COVID-19 pandemic.
We are proud to be a significant employer in the Kamchatka
region of the Far East of Russia. The health and wellbeing of all
our employees remains our utmost priority, and we are closely
monitoring the development of this global health crisis and its
potential impact on our people and operations. We have risk
mitigation policies in place aimed at communicating the best
precautionary measures to our staff to prevent the spread of the
virus. All personnel go through 14-day quarantine before entering
the mine site. We follow the latest government advice in all our
jurisdictions with regard to the current running of our
operations.
Reserves and Resources
As at 31 December 2020, the total mineral resource estimate for
Asacha (Measured, Indicated and Inferred), as reported on 16 March
2021, in accordance with the JORC Code (2012) was 645,000 oz of
contained gold.
The Mineral Resource Estimate ('MRE') for the Asacha Gold Mine
was updated by SRK Consulting Russia Ltd ('SRK') with an effective
date of 31 December 2020 and is available on the Company's website.
The resource estimate was updated to incorporate new data available
from exploration drilling and mining development, and to account
for mining depletion.
The results of 99 drillholes for 30,524m and 1,338 channel
samples over 3,034m were added to the database since the previous
resource estimation. The modelling approach and parameters used by
SRK for the new MRE model were generally similar to the approach
and parameters used for preparing the previous MRE.
The resource at Asacha occurs in two zones: Main and East zone
(both of which are currently being mined).
The Main zone hosts six defined veins, with the majority of the
resource contained in two of these, QV1 and QV2. Three veins have
been defined in the separate East zone of which QV25 is most
significant. The Main zone has a strike length of approximately
1500m, whilst the V25 South and V25 North in the East zone, which
have resources defined over a total of approximately 800m.
Infill and extension drilling of Vein 25 North has also defined
two minor domains (V25 North B and D), approximately parallel and
to the east of the main mineralisation.
Asacha JORC mineral resource - 31 December 2020
Classification Zone Tonnes Au g/t Ag g/t Au (koz) Ag (koz) Au (kg) Ag (kg)
----------------------- ------ ------- ------ ------ -------- -------- ------- -------
Measured Main 136,000 13 44 58 194 1,800 6,000
Measured V25S 14,000 41 49 19 22 600 700
----------------------- ------ ------- ------ ------ -------- -------- ------- -------
Measured Total 150,000 16 45 76 216 2,400 6,700
----------------------- ------ ------- ------ ------ -------- -------- ------- -------
Indicated Main 100,000 11 44 35 142 1,100 4,400
Indicated North 54,000 11 19 20 32 600 1,000
Indicated V25N 486,000 19 107 291 1,672 9,100 52,000
Indicated V25S 27,000 31 44 27 38 800 1,200
Indicated V7 V8 38,000 25 58 30 70 900 2,200
----------------------- ------ ------- ------ ------ -------- -------- ------- -------
Indicated Total 704,000 18 86 403 1,955 12,500 60,800
----------------------- ------ ------- ------ ------ -------- -------- ------- -------
Measured and Indicated Total 862,000 17 79 479 2,171 14,900 67,500
----------------------- ------ ------- ------ ------ -------- -------- ------- -------
Inferred Main 21,000 8 36 6 25 200 800
Inferred V25N 122,000 14 119 54 468 1,700 14,600
Inferred V25S 88,000 14 53 41 149 1,300 4,600
Inferred V7 V8 101,000 20 37 66 120 2,000 3,700
----------------------- ------ ------- ------ ------ -------- -------- ------- -------
Inferred Total 333,000 16 71 166 762 5,200 23,700
----------------------- ------ ------- ------ ------ -------- -------- ------- -------
-- Resources are reported above 4m*g/t Au cut-off grade
-- Resources are reported after mining depletion
-- Tonnage and grades have been rounded to reflect an appropriate level of precision
-- Rounding may mean that columns do not sum exactly
-- Mineral Resources are classified according to the definitions of the JORC Code
-- The updated Mineral Resource Estimate was prepared by Mr
Robin Simpson, a full-time employee of SRK Consulting (Russia) Ltd,
as a Principal Consultant (Resource Geology).
-- Mr Simpson is a Member of the Australian Institute of
Geoscientists (AIG), and has sufficient experience relevant to the
style of mineralisation and type of deposit under consideration and
to the activity which he is undertaking to qualify as a Competent
Person as defined by the 2012 edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves" (JORC Code). Accordingly, Mr. Simpson is a Competent
Person as defined by the AIM Guidance Note on Mining and Oil &
Gas Companies dated June 2009.
Sources of change between 2019 and 2020 resource estimates
Main Zone
The previous Mineral Resource Estimate for the Main Zone had a
total of 89,000 oz in Measured and Inferred. Although mining
depletion in the last eight months of 2020 is estimated to have
removed 25,000 t of in situ mineralisation, at 11 g/t for 9,000 oz
Au, after this depletion the Main Zone Measured and Indicated in
the new estimate now contains 93,000 oz of Au. The increase has
occurred because the new channel samples included in the update
are, on average, higher grade than the block estimates in the
corresponding areas of the previous model.
Reconciliation information from 2020 provides confidence that
the grades of the channel samples can be relied on for Mineral
Resource estimation.
None of the new core drilling information affects the Mineral
Resource estimate for the Main Zone.
East Zone Vein 25 North
From this estimation update, the major increase to the Asacha
Mineral Resources comes from the extension of the main Vein 25
North domain up to 100m down dip, and up to 200m along strike to
the north.
The wireframe interpretation of this domain omits some
intersections that were included in the interpretation Vein 25
North for the previous estimate. Although these intersections have
been interpreted as the continuation of the same Vein 25 North
mineralised vein, the omitted intersections occur at the edge of
the structure, and as clusters with average Au grades consistently
less than the nominal 4 g/t modelling threshold. In the new model,
SRK trimmed these low grade edges from the estimation domain.
The new drilling shows a 150m gap in the Vein 25 North
mineralisation, from approximately 55570N to 55720N. North of this
gap, SRK modelled a mineralised domain (V25 North E) based on four
holes from TSG's two northernmost lines of dri -- lling. Therefore,
potential remains for Vein 25 to continue northward along
strike.
The infill and extension drilling of Vein 25 North has also
defined two minor domains (V25 North B and D), approximately
parallel and to the east of the main mineralisation. These
secondary domains were not modelled as part of the previous Mineral
Resource estimate.
Exploration
In 2020, the Group continued to conduct exploration drilling.
Vein 25 remains open at depth and to the north, while its southern
extension has not yet been drilled.
TSG has identified new potential exploration targets at and near
the Asacha deposit based on the geophysical anomalies identified in
the course of an aeromagnetic survey completed in Q4 2020.
The low sulfidation epithermal style of mineralisation found at
the Asacha Gold Mine is favourable for high-grade deposits. The
Asacha licence area and more widely, the regional district, remain
under-explored which the Company believes presents an opportunity
to increase gold resources. As such, the Company has reinvested in
its exploration activities.
Rodnikova
On 23 April 2019, the Russian Federal Agency for Subsoil Use
("Rosnedra") issued a 20-year licence to AO Trevozhnoye Zarevo for
the development and exploration of Rodnikova. The acquisition cost
of the deposit was $3 million. Taking into consideration the fact
that the Asacha and Rodnikova deposits are believed to have similar
geology and mineralogy, the Company will determine the suitability
of utilising the existing processing techniques and plant at Asacha
for the ore at Rodnikova.
Mineral Resource Estimate for Rodnikova
On 10 February 2020, TSG published a JORC compliant MRE for the
Rodnikova Gold Deposit produced by SRK Consulting (Russia) Ltd for
the Company's wholly owned subsidiary, AO Trevozhnoye Zarevo. The
MRE was developed in accordance with the recommendations and
guidelines of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves as published by the
Joint Ore Reserves Committee of the Australasian Institute of
Mining and Metallurgy, Australian Institute of Geoscientists and
Minerals Council of Australia (the JORC Code, 2012 Edition).
The MRE confirmed Total Indicated & Inferred Resources of
6.3Mt at a grade of 5g/t of gold, for total contained +1Moz of
gold, of which Indicated Mineral Resources of 3.1Mt at a grade of
5.3g/t gold, for contained 519,000oz gold and Inferred Mineral
Resources of 3.2Mt at a grade of 4.8g/t gold, for contained
491,100oz gold. In addition, the MRE confirmed Total Indicated
& Inferred Resources of 6.3Mt at a grade of 36.79 g/t of
silver, for total contained 7.4Moz of silver. SRK's full report is
available on the Company's website at:
www.trans-siberiangold.com
Scoping Study
In February 2021, TSG announced the results of an independent
Scoping Study for the 100% owned Rodnikova Project in Kamchatka,
Far East Russia prepared by SRK Consulting (Russia) Ltd ("SRK"),
based on Indicated & Inferred Mineral Resources, reported in
accordance with the JORC Code (2012), of 6.3 Mt at an average grade
of 5.0 g/t gold, for a total of 1Moz contained gold.
The Scoping Study has identified economically viable development
options which justifies the advancement of the project. The Company
believes that the project continues to have additional upside
potential which it had planned to evaluate through additional
exploration and studies.
Location
The Rodnikova Gold Deposit is located in the south-eastern part
of the Kamchatka Peninsula, in the South Kamchatka ore region, in
the Yelizovo administrative district of the Kamchatka Region. There
is a 120km road from Petropavlovsk-Kamchatsky to the Rodnikova Gold
Deposit, including 65km of asphalt road. The Rodnikova Gold Deposit
is approximately 61 km from the Company's operating Asacha Gold
Mine.
Previous Exploration
The main exploration works on the Rodnikova Gold Deposit and its
flanks included reconnaissance exploration, diamond drilling (223
drill-holes for 47,377m), core sampling, development of two adit
levels totalling 822m, with a collection of channel and chip
samples, excavation of trenches to trace vein continuity along the
strike and channel sampling. The main exploration stages on the
deposit were completed in the 1980-1990s. Additional drilling
within the Rodnikovy mineralised zone and at its flanks was
undertaken as part of the 2005-2007 exploration program.
The main exploration reports, drawings and primary field
documentation for the Rodnikova Gold Deposit are kept in the
regional archives of the Ministry of Natural Resources. SRK is of
the opinion that exploration works were generally performed at the
level to meet the state standards of the Soviet Union and Russia,
and these standards are appropriate for collecting information to
be used for Mineral Resource estimation.
The database used to construct the resource model contains
information on 223 drill-holes, 332 trenches, 440 clearings and 83
cross-cuts, 15,027 core samples and 12,060 channel samples.
Rodnikova Gold Deposit JORC mineral resource - 10 February
2020
Classification Tonnes (Mt) Au (g/t) Au (t) Au ('000oz) Ag (g/t) Ag (t) Ag (Moz)
---------------- ----------- -------- ------ ----------- -------- ------ --------
Rodnikovy
Indicated 3.1 5.3 16.1 519 43.9 134.9 4.3
Inferred 1.7 4.3 7.4 238 32.3 55.7 1.8
Vilyuchinsky
Inferred 1.5 5.3 7.9 253 27.1 39.9 1.3
Total Indicated 3.1 5.3 16.1 519 43.9 134.9 4.3
---------------- ----------- -------- ------ ----------- -------- ------ --------
Total Inferred 3.2 4.8 15.3 491 29.9 95.7 3.1
---------------- ----------- -------- ------ ----------- -------- ------ --------
Notes:
-- Mineral Resources are reported in accordance with guidelines and provisions of the JORC Code.
-- Mineral Resources were estimated at a cut-off grade of 3.0
g/t within underground mining outlines.
-- The Competent Person for this report of Mineral Resources is
Mr Robin Simpson, an employee of SRK Consulting (Russia) Ltd. Mr
Simpson is a Member of the Australian Institute of Geoscientists
(AIG), and has sufficient experience relevant to the style of
mineralisation and type of deposit under consideration and to the
activity undertaken to qualify as a Competent Person.
Scoping Study Highlights
Production Potential
-- Life of mine ("LOM") 14 years
-- LOM is based on a Mineral Resource Estimate, reported in
accordance with the JORC Code (2012), of 6.3 Mt at an average grade
of 5.0 g/t gold
-- LOM gold production of 517,000 oz. at an average grade of
4.03 g/t
-- LOM silver production of 3,062,000 oz. at an average grade of
28.9 g/t
-- Sub-level stoping and underground mining methods assessed to
be optimal for the Project
-- Conventional CIL processing plant with processing capacity of
500 kt per annum
-- Gold recovery 94%
-- Cut-off grade of 3.5 g/t, calculated based on $1,250/oz gold
price assumption
-- Production schedule does not include any potential future
exploration success and Mineral Resource growth
Project Costs & Economics1
-- LOM Revenue of $715m
-- LOM Free Cash Flow of $126m
-- LOM CAPEX $133m of which $82m is initial/construction CAPEX
in year 1
-- Economics at LOM gold price of $1,600/oz (Management
sensitivity)
- Including application of TOR2:
- Post Tax NPV10% of $177.6m
- Post Tax Internal Rate of Return of 59.2%
- Excluding application of TOR
- Post Tax NPV10% of $117.6m
- Post Tax Internal Rate of Return of 40%
-- Economics at LOM gold price of $1,300/oz (SRK base case)
- Including application of TOR:
- Post Tax NPV10% of $92.4m
- Post Tax Internal Rate of Return of 35.3%
- Excluding application of TOR
- Post Tax NPV10% of $45.8m
- Post Tax Internal Rate of Return of 22%
-- Discounted Payback period of 4 years applying TOR, or maximum
of 6 years excluding TOR
Socio-economic contribution
-- It is anticipated that, should the project advance, as a
major employer in the Kamchatka region the project would create
approximately 800 employment opportunities and generate significant
tax remittances to regional and federal governments.
1. Scoping Study Project economics were prepared by SRK using an
LOM gold price of $1,300/oz. Sensitivities to gold price were
calculated by management to evaluate different Project
economics.
2. Advanced Special Economic Zones ("ASEZ") have been created in
the Far East of Russia under a "Territory of Advanced Development"
(also known as "TOR"), a special regime of treatment of foreign
investors who inject funds and capabilities to Russia's Far East,
whereby those foreign investors are provided with certain
incentives and benefits. In particular, there are reductions to
corporate profits tax, value added tax, land tax, mineral
extraction tax and social insurance payments. On 19 December 2019,
the Company confirmed that its operating subsidiary had been
confirmed as resident of ASEZ Kamchatka. The Company will apply for
the Project to be treated under the TOR regime in due course.
Rodnikovy
Gold mineralisation at the Rodnikova deposit is mainly
associated with hydrothermal-metasomatic formations.
The Rodnikovy vein zone is localised in a N-S trending
disjunctive fault. The fault thickness is 50-120m, the estimated
length is 3km. The fault zone hosts veins: 42, 43, 44, 52 and 53
which are accompanied by apophyses and numerous quartz veinlets.
The main plane of the ore-controlling fault is occupied by Vein 44
which is adjoined at various angles from the side of the hanging
wall by the remaining veins that form the main branching structure
of tensile fracturing.
The main veins are Veins 43 and 44 which contain 80% of the
mineralisation of the Rodnikovy vein zone. The maximum thickness of
the ore body is 23m and is observed on the 220m level. Gold grade
ranges from tenths of a gram per ton to 90-130g/t, with most
samples showing grades within a 4-70g/t range.
Mineralisation at the Rodnikova deposit is a typical quartz
low-sulphidation gold and silver. Gold and associated silver are
the only valuable ore components of significance. The main vein
minerals are: quartz (42.5-75%), adularia (9.5-16%) and carbonate
(5-28.6%). Diagnostic leach data shows that most of the gold in
analysed ore (88.7%) is amenable to cyanidation (in the presence of
a sorbent). Associated silver is mostly present in a
cyanide-amenable form (82.2%).
Vilyuchinsky
The Vilyuchinsky site is located in the north-western part of
the ore field, 4 km from the Rodnikovy site, on the watershed of
the Bystraya-Paratunka and Vilyucha rivers.
Two systems of ore-controlling faults (sub-meridional and
north-eastern) were identified within the site. Of major importance
is the system of the N-E trending disjunctive faults that form the
Vilyuchinsky ore-bearing vein zone of 400-500m wide traced over
some 3km. Productive mineralisation is mainly confined to shallow
veins that form tensile fractures (Vein 9). Vein 9 has an average
thickness of 2.9m, a strike length of 450m and a dip length of 90m.
The average gold grade is 9.82g/t, silver grade is 67.83g/t. 80% of
mineralisation at Vilyuchinsky is concentrated within Veins 9,
Regina, 6 and 13. Cost of sale decreased to $40.1 million (2019:
$40.3 million).
Financial Review
The Group generated all-time record revenue during 2020.
Revenue from the sale of 43,884 oz. gold (2019: 43,782 oz.) was
$79.3 million (2019: $61.3 million), and of 80,330 oz. of silver
(2019: 115,801 oz.) was $1.6 million (2019: $1.9 million).
Average realised prices were $1,808 per oz. gold and $20.4 per
oz. silver (2019: $1,399 per oz. gold and $16.0 per oz. silver).
All sales were made on spot basis.
Cost of sales decreased to $40.1 million (2019: $40.3
million).
Cash cost per oz. gold, was $536 (2019: $513). All-In Sustaining
Costs ('AISC') per oz. gold were $863 (2019: $941), as discussed in
note 36 in the financial statements.
The Group recorded an operating profit for the year of $27.5
million (2019: $14.4 million).
Administrative expenses amounted to $10.2 million (2019: $8.8
million).
Finance income was $0.03 million (2019: $0.07 million). Finance
costs were $1.8 million (2019: $1.6 million).
Financial Position
Total equity was $91.1 million at 31 December 2020 compared to
$78.2 million at 31 December 2019. The increase was mainly due to a
significant increase in retained earnings.
Non-current assets decreased from $88.5 million to $83.4
million.
Current assets increased from $28.8 million to $43.6 million,
the most significant item of which was cash and cash equivalents
increasing from $8.7 million to $22.4 million.
Loans and borrowings reduced substantially from $25.1 million at
31 December 2019 to $15.1 million at 31 December 2020, comprising
$13.2 million of bank loans (2019: $22.9 million) and $2.0 million
of equipment loans (2019: $2.2 million) described in note 23 to the
financial statements.
Current liabilities at 31 December 2020 totalled $15.7 million
(2019: $15.8 million).
As discussed in note 25 to the financial statements, the Group's
gearing ratio at 31 December 2020 was (8.65%) (2019: 17.34%).
Management
OOO Trans-Siberian Gold Management, TSG's 100%-owned subsidiary
in Moscow, provides managerial, technical, financial and
procurement services to TSG Asacha and currently has 21 staff,
including 2 technical managers based at Asacha and TSG Asacha's
Managing Director. TSG's Chief Executive Officer and Chief
Operating Officer are based in Moscow.
Going concern
The Group's operations are cash generative and management
tightly control the level of committed expenditure to ensure that
the Group has sufficient resources available to meet its
liabilities as they fall due. Regular cash forecasts are reviewed
to assess the potential impact of factors such as changes in
commodity prices, production rates and the timing of capital
expenditure. The Group has reported an operating profit for the
year of $27.5 million, an operating cash inflow of $41.2 million
and net increase in cash of $13.7 million. The Directors have
reviewed the Group's cash flow forecast for the period to 31
December 2022 and carried out multiple scenario analysis of
potential downsides including future lockdowns of various length;
production, workforce and supply chain disruptions together with
reasonably possible changes in commodity prices; and scheduled
repayments of loan facilities. The Directors further stress tested
combinations of various scenarios identifying no significant cash
concerns. Based on these analyses, the Directors believe that the
Group has sufficient resources to continue in operational existence
for the foreseeable future. Furthermore, the Directors have
considered the impact of Horvik's acquisition discussed in note 35
on the going concern of the Group. In forming their opinion the
Directors have relied upon the public statements made by Horvik
about its future intentions for the Group, which outline its
commercial and financial rationale for the acquisition. While the
Directors are unable to provide surety that such intentions will be
enacted, they are not aware of any planned actions which may cast
doubt over the Group's future operational existence. The Directors
have also considered the change of control clause within the
Company's credit facilities with VTB and are comfortable that this
does not have an impact on the going concern status of the Group in
light of the Group's cash position and the outstanding loan balance
at 31 December 2020 and for the reasons outlined in note 23 and
note 35. Therefore the Directors believe that the Group will
continue as a going concern and have prepared the financial
statements on that basis.
Events after the reporting date Takeover Offer
After the year-end, on 18 March 2021, the Company reached an
agreement with Horvik Limited on the terms of a recommended
pre-conditional mandatory cash offer to be made by Horvik for the
TSG ordinary shares not already held or agreed to be acquired by
Horvik.
Further information on Horvik and all documents relating to the
Offer are available at: https://horviklimited.com
Alexander Dorogov
Chief Executive Officer
8 June 2021
Key Performance Indicators
The following charts set out the key performance indicators
monitored by TSG's Board of Directors:
KPI's are how we measure our progress of delivering our
strategy.
Refined gold sales
43,884oz
+0.2%
(2019: 43,782oz)
Average realised gold price
$1,808
+29.2%
(2019: $1,399)
Cost of sales per oz. gold*
$876
-0.2%
(2019: $878)
Average dilution
48%
+37.1%
(2019: 35%)
Average feed gold grade
7.7 g/t
-1.5%
(2019: 7.8 g/t)
Gold recovery rate
94.2%
-1.1%
(2019: 95.3%)
Net Cash**
$7.3m
+156%
(2019: -$16.4m)
EBITDA
$42.7m
+61.7%
(2019: $26.4m)
Cash cost per oz. gold
$536
+4.5%
(2019: $513)
Ore extracted
170 tonnes ('000)
+19.5%
(2019: 142 tonnes ('000))
Ore processed
196 tonnes ('000)
+9.45%
(2019: 179 tonnes ('000))
Average employee numbers
608
-13%
(2019: 699)
AISC per oz. gold
$863
-8.3%
(2019: $941)
Reported injuries
7
+/-0%
(2019: 7)
* Net of silver credits
** Net cash is calculated as cash and cash equivalents less total borrowings
A Responsible Corporate Citizen
Trans-Siberian Gold is committed to a sustainable approach to
responsible business and reiterates the ongoing commitment to be a
good corporate citizen and a supportive and reliable partner for
local communities.
We strive to contribute to the sustainable development of the
remote region in which we operate and to create long-lasting
contributions to the economic, as well as the social prosperity of
local residents.
Stakeholders around the world are increasingly looking to
businesses to help address global development challenges. The
United Nations (UN) Sustainable Development Goals (SDGs) set out a
framework which helps businesses and their stakeholders better
understand and address those challenges. In 2015 the UN member
states adopted 17 SDGs for tackling poverty, protecting our planet
and working towards sustained peace and prosperity.
Our business activity touches directly and indirectly on many of
the UN SDGs and we continue to look for opportunities to do more to
support the SDGs.
Through our operations we are aligned to and directly contribute
to the development of SDGs 1, 3 and 8, which are supporting global
efforts to reach no poverty, ensuring good health and wellbeing of
our people and decent work and economic growth. Additionally, we
have also outlined SDGs of which we can support the delivery and on
which we can have a positive impact as a smaller business; this
includes goals 4, 6, 7, 9, 10, 12, 14, 15, 16.
How we contribute to the advancement of goals 1, 3 and 8:
Our operations are located in the remote, ecologically sensitive
and under-developed region of Kamchatka, where Trans-Siberian Gold
provides significant contribution to the achievement of the UN SDGs
by promoting regional development through creating opportunities
for local residents. We are a significant local employer and
taxpayer, employing 579 people in Petropavlovsk-Kamchatskiy and we
are a valued member of the Advanced Special Economic Zone (ASEZ)
providing important economic support to the region.
People are at the heart of our business, and through our social
activities we are committed to creating excellent working and
living conditions for our employees, their families and the
community in which we operate, thereby improving the living
standards and well-being of our people. Through our work in the
region and by taking a proactive approach, we focus on making
positive, sustainable contributions to the economic, as well as the
social prosperity of the residents of South Kamchatka.
Goal 1: No Poverty
-- We invest in our people and in the regions in which we
operate, providing attractive and inclusive employment
opportunities and training.
-- We pay taxes and royalties on our earnings and publicly
disclose all payments to governments.
Goal 3: Good Health and Well-being
-- We maintain a rigorous health and safety protocol and
reporting practices. At our operations, we test for traces of
substance misuse and screen for symptoms of COVID-19 related
illness.
-- We take serious steps to prevent toxic emissions that could
negatively impact the health of our employees and local
communities.
-- We encourage a healthy lifestyle among our employees and
promote personal well-being.
Goal 8: Decent Work and Economic Growth
-- We provide skilled work and communicate employment
opportunities locally, and contribute positively to the regional
economy of Kamchatka.
-- Our focus on local procurement, by ensuring we integrate
local suppliers into our supply chains where possible, ensures the
economic development of the region.
How we support goals:
Through our operations, we want to contribute to the development
of local communities, deliver long term value to our employees,
invest in local infrastructure, spur innovation and invest in
environmental protection. We seek to ensure that our activities do
not harm our employees, local communities or the environment. These
SDGs include areas where we can have a positive impact in the
region of presence as well as areas where we strive to mitigate any
potential negative impacts.
Empowering our community
Goal 4: Quality Education
Goal 9: Industry, Innovation and Infrastructure
Goal 10: Reduced Inequalities
Goal 16: Peace, Justice and Strong Institutions
-- Trans-Siberian Gold is an equal opportunities employer and we
provide attractive wages. We provide equitable access to employment
opportunities in our region.
-- We provide training to all our employees to refresh and
upgrade their skills; we are committed to developing our workforce
and providing employees with opportunity to progress within our
Company. In addition to this, we pride ourselves as a local
employer and provide skilled work in our region, contributing to
the economic growth of Petropavlovsk-Kamchatskiy.
-- We maintain an open and transparent approach to communicating
with authorities on a local, federal and national level and strive
to prevent all forms of conflict by ensuring clear channels of
stakeholder engagement.
Goal 6: Clean Water and Sanitation
Goal 7: Affordable and Clean Energy
Goal 12: Responsible Consumption and Production
Goal 14: Life Below Water
Goal 15: Life on Land
-- We take our responsibility with regard to environmental
stewardship very seriously. We carry out baseline and follow-up
environmental impact assessments to preserve the biodiversity in
the existing ecosystems surrounding our areas of operations, both
above land and below water, and regularly provide monitoring data
to the authorities.
-- In addition, we make concerted efforts to conserve our water
use, and ensure that waste is disposed of safely. Water life is
included in our corporate impact assessments. We monitor water
quality and provide monitoring data to the authorities.
-- To minimise our waste production, we blend lower grade ore
into our processing plant, and ensure that we dispose of our waste
carefully and responsibly.
-- Our tailings storage facilities (TSFs) are maintained to high
levels of safety and we provide disclosure on our TSF management
(refer to RNS announcement on 20 August 2019).
-- We monitor our fuel consumption closely and examine
opportunities to reduce our energy consumption and thereby
contribute to a potential reduction in emissions.
SECR Statement
Streamlined Energy and Carbon Reporting (SECR)
This report summarises, in accordance with the UK Government
requirements for SECR, the Group's estimated greenhouse gas
emissions & energy use and the implementation of energy
efficiency measures.
Greenhouse gas emission (See note 1)
In 2020 our total Global greenhouse gas (GHG) emissions
including Scope 1&2 were 19,4 kilotonnes carbon dioxide
equivalent (ktCO2e).
This represents a 2% increase compared with 2019 and is due to
an increase in metal (gold and silver) production volumes. But at
the same time, the Intensity Ratio of emission per ton of processed
ore decreased by 7%.
Emission (See note 2) Unit 2020 2019
----------------------------------------------------------------------------------------- ----------- ------ ------
Emission from activities for which the Group owns or controls including of fuel and
operation
of facilities. (Direct GHG emission - Scope 1) tn CO(2) e 10,393 10,206
Emission from the purchase of electricity (Indirect GHG Emission - Scope 2) tn CO(2) e 8,959 8,050
----------------------------------------------------------------------------------------- ----------- ------ ------
Total GHG Emission (Scope 1 + Scope 2) tn CO(2) e 19,352 18,257
----------------------------------------------------------------------------------------- ----------- ------ ------
Intensity Ratio Unit 2020 2019
---------------------------------- ------ ------- -------
Ore processed tn 196,226 179,373
GHG emission per tn ore processed kg/tn 99 102
---------------------------------- ------ ------- -------
Fuel and Energy consumption used to calculate above emission Unit 2020 2019
------------------------------------------------------------- ----- ------ ------
Fuel consumption used to calculate above emissions
Diesel tn 3,204 3,163
Petrol tn 38 20
Electricity consumption MWh 38,427 34,530
------------------------------------------------------------- ----- ------ ------
Energy efficiency measures
The company strives for the careful use of natural resources. To
reduce energy consumption, in 2020 a new Heat Recovery Unit was
installed to recover heat from diesel generators. This measure is
estimated to enable a saving of 5.7 MWh electricity per year, that
equals 1.3 ktn CO2e emission reduction.
Notes
1) All emissions and energy consumption figures are attributed
to The Group's wholly owned operational subsidiary TSG-Asacha. With
the exception of TSG-Asacha, the Company and other subsidiaries of
the Group had zero emissions in 2020.
2) In the absence of established factors to calculate GHG
emissions for Russia, TSG used physical indicators for our
consumption of various types of fuel, as well as the amount of
electricity consumed from an external supplier and converted them
into a volume of carbon dioxide emissions according to the UK
Government Conversion Factors for greenhouse gas (GHG) reporting,
provided by Department for Business Energy & Industry Strategy
separately for 2020 and 2019 years (
https://www.gov.uk/government/collections/government-conversion-factors-for-company-reporting
).
"Estimated saving of 5.7 MWh electricity per year"
Risk Review
A proactive and practical approach to managing risk
The risk management philosophy and tolerance levels of the Group
is set and overseen by the Board. Risk tolerance levels are aligned
with Board-approved strategic objectives and adjusted according to
changing internal and external scenarios.
Risks are formally reviewed by the Board and appropriate
processes put in place to monitor and mitigate them. If more than
one event occurs, the overall impact of such events may compound
the possible adverse effects on the Group.
Further details of how we engage with our stakeholders as a key
part of managing risk and fostering positive relationships are set
out in the Directors' Report.
Principal Movement
Risk Nature of Risk in Risk How we manage the risk Link to Strategy
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Regulatory flat
environment * The Group's activities are subject to extensive * Russia based management team have extensive * Enhance existing operations
Russian federal and regional laws and regulations. experience.
* Utilise stable platform for future growth
* Legal inconsistencies may arise in view of the legal * Monitoring changing legislation to ensure compliance. opportunities
and regulatory regime in Russia.
* Outsourced legal, taxation and other functions to * Selectively pursue accretive M&A opportunities
* Amendments to current laws and regulations, or more ensure subject matter excellence.
stringent implementation or interpretation of laws
and regulations, could have a material adverse impact
on the Group. * Cultivating good working relationships with
regulators and with representatives of the national
or local government.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Mining flat
legislation & * The Group is dependent upon the grant and renewal of * Monitoring changing legislation to ensure compliance. * Enhance existing operations
licensing appropriate licences, permits and regulatory
consents.
* Discussions are held with the appropriate * Utilise stable platform for future growth
authorities. opportunities
* Failure to comply with these could result in
additional costs, penalties being levied or the
suspension or revocation of the licence. * Policies, standards and procedures in place to ensure
compliance.
* Regular compliance review by advisers.
* Register of all mining titles.
* Asacha mining licence renewed in June 2018 for period
of 6 years.
* Rodnikova exploration licence awarded in April 2019
for period of 20 years.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Reserve and down
resource * Estimates may require revision based on actual * The Group estimates its mineral resources based on * Enhance existing operations
estimates production experience. information compiled by Competent Persons in
accordance with JORC.
* Utilise stable platform for future growth
* Volume and grade of reserves mined and processed and opportunities
recovery rates achieved may vary from those * Conduct detailed geological modelling and ensure that
anticipated. all analyses of exploration samples are undertaken by
accredited laboratories.
* Gold price may render reserves containing relatively
lower grades of gold mineralisation uneconomic. * Through re-appraisal of mineral resources and audit
of assumptions in Mineral Resource Estimate conducted
in conjunction with competent persons during the
year.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Environmental flat * Enhance existing operations
legislation & * Use of various chemicals and contaminants including * The Group monitors compliance with the relevant
compliance cyanide, are subject to extensive environmental and legislation and regulations and seeks to ensure that
health and safety laws and regulations. the Russian environmental authorities are satisfied
with the Group's compliance with applicable
environmental laws and regulations.
* Changes in regulations, or the interpretation of
regulations, may result in additional costs.
* Compliance with water-use licence guidelines.
* Pollution control and water catchment dams.
* Control of toxic materials in contained storage
areas.
* Continuous engagement with and reviews by regulators
on compliance.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Health & flat * Enhance existing operations
Safety * Subject to various environmental, health and safety * Management promote comprehensive safe working
regulations stipulated by the relevant regulatory practices.
agencies.
* The Group also organises safety training for
* The Group's operations require various employees.
licences/permissions with regard to the operation of
flammable, explosive and chemically aggressive
production facilities and the use of hazardous * Legal compliance, standards and procedures in place,
structures. and regular audits conducted.
* Stricter regulations could cause the Group to incur * Ongoing examination of workplace conditions.
additional costs in order to comply with the new
directives.
* Senior and experienced safety managers at operations.
* Independent oversight by regulators.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Mining and up * Enhance existing operations
processing * Exploration risks include geological and geotechnical * Technical and operational management have extensive
factors. experience from other Russian mining projects.
* Production risks include ore grade/quality, tonnages * Operational audits are undertaken by external
and recovery/yields. experts.
* Processing risks include industrial and mechanical * All buildings and installations at the Asacha mine
incidents, technical failures, labour disputes, fire, have been designed and constructed to withstand
flooding and other acts of God. seismic activity.
* Significant seismic activity in Kamchatka. * Logistical arrangements allow for weather disruption.
* Climatic conditions may impact the delivery of * Ore grades mined from the Main Zone did decrease in
supplies, equipment and fuel. Q4 2019 and Q1 2020 as the ore body gets more erratic
at depth. This is expected to be mitigated by higher
grade ore from the East Zone.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Property and flat * Enhance existing operations
Business * Unable to arrange comprehensive property and business * All buildings and installations at the Asacha mine
interruption interruption insurance for the Asacha mine at an have been designed and constructed to withstand
insurance acceptable cost. seismic activity and significant water ingress
arising from melting snow.
* No guarantee that operations at Asacha will not be
disrupted by property damage or other interruption. * Logistical arrangements allow for weather disruption.
* Risk has been discussed with the Company's major
shareholders.
* Underground water pumping station has been
commissioned.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Gold price flat
volatility * Gold price is affected by numerous factors which are * Focus on production costs to maximise margins and * Enhance existing operations
beyond the Group's control. remain a low-cost producer.
* Utilise stable platform for future growth
* Influencing factors include world production levels, * The Group assesses the economic viability of its opportunities
global and regional economic and political events, projects at gold prices based on long term trends and
inflation, currency exchange fluctuations, industrial forecasts.
and jewellery demand, speculative activity and the
political and economic conditions of major
gold-producing countries. * The Group tests its financial models for sensitivity
to the gold price.
* The Group does not currently hold any financial
instruments to hedge the gold price on its expected
future production and keeps this under review.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Taxation flat
* Tax legislation has been subject to change. * The Russia based management team have extensive * Enhance existing operations
experience to ensure full compliance with the Tax
Code and timely implementation of legislative
* The government's implementation of such legislation, changes. * Utilise stable platform for future growth
and the courts' interpretation thereof, has been opportunities
sometimes unclear, with few precedents established.
* Outsourced taxation function to ensure subject matter
excellence. * Selectively pursue accretive M&A opportunities
* Differing legal interpretations may exist both among
and within government ministries and organisations
and local inspectorates.
* The introduction of new tax provisions may affect the
Group's overall tax efficiency and may result in
significant additional tax liability.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
COVID-19 flat
* Global health pandemic. * Introduced precautionary measures to protect our * Enhance existing operations
staff to prevent the spread of the virus.
* Safety of our employees and contractors. * Utilise stable platform for future growth
* We continue to follow the latest government advice opportunities
with regard to the current running of our operations.
* Potential impacts are currently unknown but could
include production disruption due to government
restrictions, impacts on our workforce and supply * Operational staff are quarantined and tested prior to
chain disruption. Situation is continually changing. shift changes and travel to mine-site
* Office-based staff are working from home.
------------- ----------------------------------------------------------- -------- ----------------------------------------------------------- ----------------------------------------------------
Governance
Board of Directors
A highly experienced leadership team with significant expertise
in Russia.
Executive
Alexander Dorogov (aged 51)
Chief Executive Officer
Alexander Dorogov graduated from the State Finance Academy in
Moscow with a degree in financial management. Prior to joining
Trans-Siberian Gold Management LLC in November 2008, he was Chief
Financial Officer of the Alumina division of UC Rusal from 2005 to
2008. From 2009 till 2014 he also held the positions of deputy CEO
and CFO of the Ferroalloys division of Mechel. Between 2001 and
2005 he held various senior positions with a private investment
fund, supervising the acquisition of gold mines in Siberia and Far
East Russia, and previously spent five years with United Financial
Group.
Eugene Antonov (aged 46)
Chief Operating Officer
Eugene Antonov has more than 20 years of experience in the
mining industry, mainly in managerial positions with responsibility
for mine site operations and finance. Most recently he was an
integral part of the leadership team at the Kupol Mine in Far East
Russia which generated the largest annual cash flow and achieved
the lowest operating cost across Kinross Gold Corporation.
Between 1999 and 2007, he was employed at Bema Gold Corporation
in Canada in various executive finance roles, including Director of
Finance, until its acquisition by Kinross. His previous experience
also includes managerial positions at Teck in Canada.
Mr. Antonov, is a graduate of Pace University in New York and
holds a MBA awarded by the Rotman School of Management in Toronto.
Mr Antonov is also a member of the Chartered Professional
Accountants in Canada.
Non-Executive
Lou Naumovski (aged 64)
Lou Naumovski has more than three decades of experience working
in Russia, most recently as Vice President and General Director of
the Moscow office for Kinross Gold Corporation, the largest
Canadian investor in Russia. He also developed the business of Visa
International, serving as Senior Vice President and General Manager
Visa International Service Organisation (VISA), CEMEA region.
Additionally, he served as Senior Banker and Head of Mission for
the Russian Team of the European Bank of Reconstruction and
Development in Moscow, and he represented the Bank when the Russian
Prime Minister's Foreign Investment Advisory Council was first
founded. Mr. Naumovski has a BA (Honours) in Economics and
Political Science from the University of Toronto and an MA in
International Relations (specialised in Russian/Soviet affairs)
from the Norman Patterson School of International Affairs at
Carleton University in Ottawa.
Stewart Dickson (aged 43)
Stewart Dickson has significant corporate and commercial
experience across the natural resources and financial services
sectors. He currently also serves as Chief Executive Officer of ASX
listed Variscan Mines Limited and consults to the leadership teams
of a number of companies globally. His prior appointment was as
Managing Director and Head of Metals & Mining at Cantor
Fitzgerald Europe in London, with responsibility for client
coverage of public and private mining companies across precious
metals and base metals, bulks, fertilizers and specialty metals. He
has a broad range of experience advising small and mid-sized quoted
companies at Board level on financial advisory, corporate strategy,
equity capital markets, financings, M&A, corporate governance
and regulatory compliance. Prior to investment banking, Mr. Dickson
served in the British Army. He is a graduate of University College
London and holds a MBA from Henley Business School.
Directors who served during FY2020 and resigned on 26 May
pursuant to the Takeover Offer
Charles Ryan (aged 54)
Charles Ryan is a graduate of Harvard University. He was an
Associate and Principal Banker with the European Bank for
Reconstruction and Development in London, before becoming a founder
director of UFG. After UFG sold its investment banking business to
Deutsche Bank in 2006, he spent two years as Chief Country Officer
and Chief Executive Officer of Deutsche Bank in Russia, stepping
down in October 2008 to become Chairman of UFG Asset Management. He
is also a general partner with Almaz Capital and a director of PGI
Group plc, Yandex N.V., Limitless Mobile Limited, Preferred Sands,
Acumatica and serves on the Harvard Global Advisory Council and
Capital International Inc. Advisory Board.
Robert Sasson (aged 56)
Robert Sasson graduated from Exeter University with a degree in
Russian Studies and International Government. He worked for Phibro
Salomon before serving as the head of the St Petersburg office of
the European Bank for Reconstruction and Development from 1993.
Prior to joining UFG Asset Management in 2009, he spent three years
with a leading US hedge fund on private equity transactions in
Russia and Ukraine.
Florian Fenner (aged 50)
Florian Fenner joined UFG Asset Management as Managing Partner
in July 2002. In addition to his role as Managing Partner, Mr.
Fenner is also responsible for the overall management of UFG's
public markets funds business. Prior to joining UFG, from 2000 to
2002 he was the Head of Unifund's Moscow office with responsibility
for its Russia portfolio. From 1996, Mr. Fenner served as the
Deputy Head of Research at Brunswick Brokerage, one of Russia's
leading investment banks and in 1997 he became the Russian Equity
Portfolio Manager for Brunswick Capital Management. Before joining
Brunswick Brokerage, he worked as an investment banker for Schroder
Munchmeyer Hengst Co. in Frankfurt. Mr. Fenner is a CFA
charterholder and holds a degree in banking from Industrie- und
Handelskammer in Frankfurt-am-Main.
Corporate Governance Review
Continuous improvement and transparency in the practical
development of fit-for-purpose corporate governance structures.
Chairman's Statement
TSG is committed to transparency and high standards of corporate
governance and recognises that it contributes to the success of the
Company.
The Board applies the Quoted Companies Alliance Corporate
Governance Code (the 'QCA Code'). The Quoted Companies Alliance
('QCA') is the membership organisation which represents the
interests of small and mid-size quoted companies. Further
information about the QCA and copies of the QCA Code are available
at: www.theqca.com. The QCA Code is constructed around ten broad
principles. We are pleased to provide an explanation as to how the
Group meets and applies the principles in practice.
Due to the Takeover offer and pursuant to the SPA, changes to
the Board have occurred, which is customary in such circumstances
and for a transaction of this nature. Further details are set out
below.
How our governance supports the delivery of our strategy
All Directors are collectively responsible for the success of
the Group.
As the Chairman of the Company, I am responsible for the
leadership of the Board. The Chairman acts in an advisory capacity
to the Chief Executive Officer ('CEO') and to other Directors on
all matters concerning the interests and management of the Company
and, in coordination with the CEO, may play a role in the Company's
external relationships.
The Non-Executive Directors exercise judgment in respect of
Board decisions, and provide constructive challenge to executive
management and scrutinise the delivery of the Group's strategy,
which continues to provide shareholders with attractive
returns.
The Board is responsible for setting strategy and policies,
overseeing risk and corporate governance, and monitoring progress
towards meeting our objectives and annual plans. It is accountable
to shareholders for the proper conduct of the business and our
long-term success, and represents the interests of all
stakeholders. The Board conducts an annual review of the Group's
strategy.
The Senior Executive Team ('SET') takes the lead in developing
the strategy which is then reviewed, constructively challenged and
approved by the Board.
We are always mindful of the trust shareholders place in us as
your elected Directors and of our wider responsibilities to all of
TSG's stakeholders.
Lou Naumovski
Interim Chairman & Senior Independent Non-Executive
Director
8 June 2021
Strategy
Our strategic priorities
The Group seeks to provide investors with access to a company
capable of generating industry-leading shareholder returns, while
maintaining a commitment to operational excellence and its social
and environmental responsibilities.
The Group's current corporate strategy is set out in the
Strategic Report, together with an explanation of how we deliver
strategy (our business model) and how we measure our progress (our
Key Performance Indicators).
Risks
The management of the Group's business and the execution of its
strategy are subject to a number of risks. Risks are formally
reviewed by the Board and appropriate processes put in place to
monitor and mitigate them. This enables us to meet the expectations
of our shareholders and stakeholders.
The key operating risks affecting the Group, most of which are
those typically faced by other companies in the gold mining sector,
are set out in the Strategic Report.
Board Composition
As at the date of this statement, the Board comprised an Interim
Non-Executive Chairman, two Executive Directors and another
Non-Executive Director. Two additional Non-Executive Directors are
expected to join the Board having been nominated by Horvik Limited
which has announced a recommended mandatory offer for the
Company.
Leadership and Operation of the Board
Leadership & Responsibilities
In line with best practice, the roles of CEO and Chairman have
been, and will continue to be separated with a clear division of
responsibilities between them.
Lou Naumovski, is the Interim Chairman following the Board
changes pursuant to the offer. He is currently responsible for
leadership of the Board and ensuring its effectiveness and ensuring
that the Board operates in the interests of the shareholders and
other stakeholders.
Our CEO, Alexander Dorogov, leads the SET and has executive
responsibility for running our business.
The composition of the Board has changed recently to reflect the
Offer and may be subject to further changes.
Non-Executive Directors have a responsibility to uphold high
standards of integrity and probity and are required to have a
strong command of the issues relevant to the business in order to
make a positive contribution to the Board. Non-Executive Directors
support the Chairman and the Executive Directors in instilling the
appropriate culture and values.
Chairman
-- Leader of the Board
-- Responsible for effective communication flow between
Directors
-- Facilitates effective contribution from all Directors
-- Responsible for effective Board governance
-- Ensures effective communication with shareholders
Executive Directors
-- Lead and motivate the management team
-- Implement strategy and objectives as directed by the
Board
-- Develop Group policies and proposals for approval by the
Board and ensure effective implementation
Non-Executive Directors
-- Supply challenge and support to management
-- Bring independent mind-set and differing backgrounds and
experience to Board debates
-- Provide leadership and challenge on the Board Committees
-- Scrutinise the leadership of the Chairman
Company Secretary
-- Secretary to the Board and its Committees
-- Informs the Board on all matters reserved to it and ensures
papers are provided in sufficient detail and on time
-- Available to Directors in respect of Board procedures and
provides support and advice
-- Ensures the Board is kept informed on governance matters
The Board discharges its responsibilities through a programme of
meetings that includes regular reviews of financial performance and
business critical issues. All Non-Executive Directors are required
to ensure that there is sufficient consideration of business issues
prior to, and informed debate and challenge at, Board meetings. In
making decisions, they take into account the views of shareholders
and other stakeholders, given that such views may provide different
perspectives on the Company and its performance.
The Board also aims to ensure that a good dialogue with our
shareholders is maintained and that their issues and concerns are
understood and considered. Until recently, the Company's largest
shareholder, UFG Asset Management ('UFG'), was represented on the
Board by Charles Ryan, Robert Sasson and Florian Fenner (together
the 'UFG Representative Directors').
In accordance with the Company's adoption of the QCA Corporate
Governance Code, the Board has considered and adopted the
recommendation to put in place a relationship agreement with its
major shareholders. On 28 November 2019, a Relationship Agreement
was signed between the Company and certain entities of UFG. The
Relationship Agreement with UFG was terminated on 26 May 2021, in
connection with the Offer and in accordance with the Share Purchase
Agreement between Horvik and the Selling Shareholders as described
in an announcement made on 18 March 2021.
On 18 March 2021, Horvik and TSG entered into a relationship
agreement to ensure, among other things, that TSG carries on its
business independently of Horvik (the "Horvik Relationship
Agreement").
Reserved matters
There is a schedule of matters that the Board has specifically
reserved for its decision. This schedule is reviewed during each
financial year and includes matters such as setting the Group's
strategic aims and objectives, appointment and termination of any
Director, approving significant contractual commitments, approving
changes to the Group's share capital and corporate structure,
approving financial reports and ensuring the maintenance of a sound
system of internal control and risk management.
The matters that have not been expressly reserved to the Board
are delegated by the Board to its Committees or the CEO.
Operation of the Board
The Board held 17 meetings in FY 2020. In addition, the Board's
Audit Committee and Remuneration Committee each held 2
meetings.
Board Meeting Attendance for the FY20
Director Board Meetings Audit Committee Meetings Remuneration Committee Meetings
------------------ -------------- ------------------------ -------------------------------
Charles Ryan* 17(17) 1(2) 2(2)
Alexander Dorogov 17(17) - -
Eugene Antonov 17(17) - -
Robert Sasson* 17(17) 2(2) 2(2)
Florian Fenner* 17(17) - -
Lou Naumovski 17(17) - 2(2)
Stewart Dickson 16(16) 2(2) -
------------------ -------------- ------------------------ -------------------------------
Notes:
Number in brackets denotes number of meetings during the period
that Board members were entitled to attend.
* resigned with effect from 26 May 2021
Formal agenda, briefing papers and reports are sent to the Board
in advance of its meetings. As part of the business of each board
meeting, the CEO typically submits a progress report, giving
details of business performance and progress against the objectives
the Board has approved. To ensure that the Board has good
visibility of the key operating decisions of the business, members
of the SET may be invited to participate in Board meetings and meet
with Board members throughout the year. The Board also receives
management information and presentations on industry and regulatory
developments from internal and external subject matter experts.
Principal matters considered by the Board in FY20
Area of focus
Strategic matters
-- The Group's overall strategy, including its long-range plan
and budgets
-- The Group's capital structure, financing and strategy
-- Corporate development opportunities
-- Dividend declarations
Operational matters
-- Executive management reports, including business
performance
-- Quarterly production information and announcements
-- Health & Safety (notably increased as a result of the
fatalities in January 2021)
Stakeholders
-- Environment & Sustainability
-- Communities
Governance & Risk management
-- Reports from Board Committees
-- Succession planning for SET and Board-level roles
-- Financial and regulatory reporting
Board Committees for FY20
The Board delegates certain of its responsibilities to two Board
Committees, which have clearly defined terms of reference as
described below.
Audit Committee
The Audit Committee currently comprising Stewart Dickson
(chairman) and Lou Naumovski (until 26 May 2021 chaired by Charles
Ryan, the other members being Robert Sasson and Stewart Dickson),
meets at least twice a year and is responsible for ensuring that
the appropriate financial reporting procedures are properly
maintained and reported on and for meeting the auditors and
reviewing their reports relating to the financial statements and
internal control systems. It is also responsible for monitoring the
independence of the auditors. Executive Directors may attend
meetings of the Audit Committee by invitation; however, at least
once a year the Committee meets the auditors without Executive
Directors being present.
Principal matters considered by the Audit Committee in FY20
-- Financial and regulatory reporting
-- Objectivity and independence of the Company's auditor
Remuneration Committee
The Remuneration Committee currently comprising Lou Naumovski
(chairman) and Stewart Dickson (until 26 May 2021, chaired by
Charles Ryan, the other members being Robert Sasson and Lou
Naumovski), is responsible for reviewing the performance of the
Executive Directors and other Senior Executives and for determining
appropriate levels of their remuneration, in consultation with
external advisers as appropriate, with due regard to the interests
of shareholders. It meets as required. The committee also makes
recommendations to the Board in respect of employee incentives,
including the granting of share options.
The Company's remuneration policy is to provide competitive
rewards for its Executive Directors and other senior managers,
taking into account the performance of the Company and conditions
prevailing in the employment market for executives of equivalent
status, both in terms of the level of responsibility of their
position and their achievement of recognised job qualifications and
skills. Base salaries are reviewed annually. Details of Directors'
remuneration are disclosed in note 8 to the financial
statements.
It is the Company's policy that Executive Directors' service
contracts have no fixed term and that the notice period in those
service contracts does not exceed one year. Alexander Dorogov's and
Eugene Antonov's service contracts provide that either party may
terminate their employment by giving six months' written notice and
that the Company may make a payment in lieu of notice.
Principal matters considered by the Remuneration Committee in
FY20
-- Determination and review of levels of remuneration
-- Setting annual bonus targets
-- Board appointments
-- Termination arrangements for leavers
Further details relating to the remuneration of the Board is set
out in note 9 of the Financial Statements.
Board Committees Post Period End
A committee of TSG directors, all of whom are independent for
the purposes of the Offer from Horvik Limited, was formed to
consider and manage the conduct of the Offer. The committee
comprises Lou Naumovski (chairman), Stewart Dickson, Alexander
Dorogov and Eugene Antonov.
Due to Offer resulting in the resignation of the UFG
Representative Directors, Board committees have been re-configured
as described above.
Board effectiveness
Appointments to the Board and succession planning
Due to the size and scale of its operations, the Company
currently does not have a separate Nomination Committee. This
decision is kept under review. The Chairman and, where appropriate,
the full Board regularly review the composition of the Board and
the status of succession to both senior executive management and
Board-level positions. The skills and experience of current Board
members are compared with the skills and experience the Board
believes are appropriate to the Company's overall business and
strategic needs, both now and in the future. Any decision relating
to the appointment of Directors is made by the entire Board based
on the merits of the candidates and the relevance of their
background and experience.
The Board aims to maintain a balance in terms of the range of
experience and skills of individual Board members, which includes
relevant experience of international business, mining industry and
finance. The majority of the Board are fluent in Russian.
Biographies of the Board of Directors are set out earlier and
available at: http://www.trans-siberiangold.com/about-us/
leadership-team/
Board of Directors
Director Nationality Age Tenure
----------------- ------------- --- --------
Charles Ryan? USA 54 11 years
Alexander Dorogov RUSSIA 51 4 years
Eugene Antonov RUSSIA/CANADA 46 2 years
Robert Sasson? UK 56 7 years
Florian Fenner*? GERMANY 50 3 years
Lou Naumovski CANADA 64 3 years
Stewart Dickson UK 43 3 years
----------------- ------------- --- --------
Notes:
* Previously a Non-Executive Director of the Company between
2006 and 2013.
resigned as Director with effect from 26 May 2021.
The Board is very cognisant of the discussion in respect of
greater diversity in senior management and the boards of quoted
companies. While we support the aims of diversity, we do not
believe that a pre-determined quota system is appropriate for TSG
given its size and the scale of its operations. The Board ensures
that suitable candidates irrespective of age, gender, ethnicity or
nationality are considered objectively and fairly.
Independence of the Non-Executive Directors
The Board considers the independence of each Non-Executive
Director for the purpose of the QCA Code. The Board considers that
the current Non-Executive Directors are independent. Having
consulted with the Company's Nominated Adviser, Mr. Dickson was
considered no longer to be independent for the purposes of the QCA
Code. Messrs Ryan, Sasson and Fenner, all of whom resigned on 26
May 2021, are connected with UFG an established multi-asset
investment manager and long-term majority shareholder of TSG. TSG
has published the interests of UFG, its connected entities and
individuals in the Company's issued share capital, having received
such notification from UFG.
The Board believes that the Shareholder Directors (defined
below) have brought considerable business experience and made a
valuable contribution to the work of the Board. Given their
experience of investing in Russia, skills and familiarity with the
operating environment in which the Company's assets are located,
the Board believes their appointments to have been in the best
interests of the Company. The Board believes the representation of
UFG on the Board was proportional to its aggregated economic
interest and was beneficial to all shareholders. Further it
provided an effective conduit for understanding and meeting the
needs and expectations of shareholders holding approximately 55% of
TSG's issued shares in aggregate prior to the Takeover Offer
discussed in the Chairman's Statement.
A separate committee of TSG directors, all of whom were
independent for the purposes of the Offer from Horvik Limited, was
formed to consider and manage the conduct of the Offer.
Relationship Agreement with UFG
In accordance with the Company's adoption of the QCA Corporate
Governance Code, the Board has considered and adopted the
recommendation to put in place a relationship agreement with its
major shareholders. On 28 November 2019, a Relationship Agreement
was signed between the Company and certain entities of UFG. A
summary of the key terms of the Agreement is as follows:
1.
UFG has agreed, amongst other things, that: UFG shall (and shall
procure that each of their Associates shall) at all times exercise
their Voting Rights so as to procure, insofar as it is able to do
so by the exercise of those rights that: (i) all transactions,
agreements or arrangements entered into between a member of TSG and
a member and/or Associate of UFG will be conducted at arm's length
and on normal commercial terms; (ii) at all times the Independent
Directors constitute a majority of the Board of Directors of TSG so
as to enable decisions as to the implementation and enforcement of
this Agreement to be taken independently of UFG and/or their
Associates; (iii) where an Independent Director ceases to be either
an Independent Director or a Director of the Company, one or more
new Independent Directors may be appointed to the Board; and (iv)
any dealings or disputes (including any conflicts of interest)
between any member and/or Associate of UFG and any member of the
Company shall be passed to and dealt with on behalf of the Group by
a committee comprising only the Independent Directors.
2.
UFG will (i) not undertake any activity in conflict with those
of TSG which may render the Company incapable of carrying on its
business independently or lead to transactions and relationships
between the Company and any member and/or Associate of UFG which
are not at arm's length or on normal commercial terms or which
would constitute a Related Party Transaction (as defined under the
AIM Rules for Companies); or (ii) not propose or vote in favour of
any resolution which has the effect of waiving the pre-emption
rights in respect of issues of shares to the Controlling
Shareholders unless such resolution is supported by a majority of
the Independent Directors.
3.
TSG has granted UFG the right to nominate Directors to the Board
('Shareholder Directors'), commensurate with the aggregate holdings
of UFG as follows: (i) appoint up to a maximum of three Directors
if and for so long as UFG holds more than 50 per cent of the total
number of Ordinary Shares in issue; (ii) appoint up to a maximum of
two Directors if and for so long as UFG holds more than 40 per cent
of the total number of Ordinary Shares in issue; or (iii) appoint
up to a maximum of one Director if and for so long as UFG holds
more than 20 per cent of the total number of Ordinary Shares in
issue. Currently, Alexander Dorogov, Chief Executive Officer,
Eugene Antonov, Chief Operating Officer and Stewart Dickson and Lou
Naumovski, Non-Executive Directors, are independent of UFG. Charles
Ryan, Non-Executive Chairman, and Robert Sasson and Florian Fenner,
Non-Executive Directors, are not independent of UFG.
4.
In addition, the parties acknowledge and agree that UFG (or one
or more of their Associated Bodies Corporate) shall be retained to
provide certain advisory and support services to the Company on a
non-exclusive basis, which shall include, but not be limited to (i)
financing support; (ii) developing M&A strategy; (iii)
operational support; (iv) strategy development; and (v) deal
origination. In consideration for the provision of such services,
the Company shall pay UFG a fixed fee of $150,000 per annum,
increased to $200,000 per annum with effect from 1 July 2020
(inclusive of any VAT or equivalent).
A full copy of the Relationship Agreement which terminated on 26
May 2021 can be found on the Company's website.
Relationship Agreement with Horvik
On 18 March 2021, Horvik and TSG entered into a relationship
agreement to ensure, among other things, that TSG carries on its
business independently of Horvik (the "Relationship Agreement").
Under the Relationship Agreement, Horvik is entitled, subject to it
satisfying the FAS Pre-Condition and it having a certain level of
shareholding in TSG, to appoint up to three non-executive directors
to the TSG Board. Prior to satisfying the FAS Pre-Condition, Horvik
is also entitled to appoint an observer to the TSG Board, subject
to certain conditions set out in the Relationship Agreement.
In addition, Horvik agrees to certain undertakings in connection
with TSG carrying on its business independently of Horvik.
The Relationship Agreement will terminate (save for accrued
rights) if Horvik holds less than 20 per cent. of the issued share
capital of TSG (excluding any shares held in treasury) and Horvik
has a right to give written notice to TSG to terminate the
Relationship Agreement if Horvik holds 75 per cent. or more of the
entire issued share capital of TSG (excluding any shares held in
treasury).
A full copy of the Relationship Agreement can be found on the
Horvik's website: https://horviklimited.com
Time Commitment
The Company's expectation is that Non-Executive Directors should
be prepared to commit 15 days a year, as an absolute minimum, to
the Group's business.
In practice, Board members' time commitment exceeds this minimum
expectation when all the work that they undertake for the Group is
considered. As well as their work in relation to formal Board and
Board Committee meetings, the Non-Executive Directors also commit
time throughout the year to meetings, telephone calls and site
visits.
On those occasions when a Director is unavoidably absent from a
Board or Board Committee meeting they still receive and review the
papers for the meeting and typically provide verbal or written
input ahead of the meeting, so that their views are made known and
considered at the meeting. Should Directors have concerns of any
nature which cannot be resolved within the Board meeting, they have
the right to ensure that their view is recorded in the minutes.
Information & Support
The Company Secretary is responsible to the Chairman for
ensuring that all Board and Board Committee meetings are properly
conducted, that the Directors receive appropriate information prior
to meetings to enable them to make an effective contribution, and
that governance requirements are considered and implemented.
The Company maintains Directors' and Officers' Liability
insurance cover. Any Director may also take independent advice at
the Company's expense in the furtherance of his duties.
Re-election of Directors
In accordance with the Articles of Association, each year one
third of the Directors (generally those who have held office for
the longest time since their election) will retire from office at
the AGM. A retiring Director may be re-elected if eligible and a
Director appointed by the Board since the previous AGM may also be
elected, although in the latter case the Director's period of prior
appointment by the Board will not be taken into account for the
purposes of rotation.
A copy of the Company's Articles of Association is available on
its website at:
http://www.trans-siberiangold.com/media/1253/tsg-mem-arts.pdf
All shareholders and stakeholders are eligible to subscribe to
our email alerts.
http://www.trans-siberiangold.com/investor-relations/email-alerts-sign-up/
Board performance evaluation
The Company has not conducted an external evaluation of the
Board. The Board does conduct informal self-evaluation to consider
the efficacy of the Board as a whole, maintain effective governance
and ensure it is fit for purpose to deliver the Group's strategy,
which continues to provide all shareholders with attractive
returns.
Directors training and development
Directors' training needs are met by a combination of internal
presentations and external speaker presentations as part of Board
and Board Committee meetings. All Directors continue to have free
access to visit our mining operations outside scheduled Board
arrangements. Board training and development needs are reviewed on
an on-going basis. The Board views external directorships as being
an important source of industry knowledge and corporate governance
best practices. Directors may take independent professional advice,
as necessary, at the Company's expense in the furtherance of their
duties.
Relations with shareholders
TSG is committed to promoting effective and open communication
with all shareholders, ensuring consistency and clarity of
disclosure at all times. We strive to be accessible to both
institutional and private investors.
The Company has invested substantially in making information
more accessible to shareholders and stakeholders. This includes a
new corporate website, new corporate presentation and re-design of
our financial reports.
TSG has a designated Director who is the primary point of
contact with the investment community and is responsible for
maintaining TSG's on-going relations with investors and
shareholders.
In addition to its annual and half-year financial reports, TSG
publishes quarterly reports to the market, which provide further
information on production and operational performance. We aim to
present a balanced and understandable assessment of our strategy,
financial position and prospects.
We make information about the Group available to shareholders
through a range of media, including our corporate website,
http://www.trans-siberiangold.com, which contains a wide range of
data of interest to institutional and private investors. We
consider our website to be an important means of communication with
our shareholders. Additionally, we utilise a number of alternative
channels to engage with shareholders and stakeholders.
Institutional Investors
A structured engagement programme is in place to ensure regular
and proactive communication with shareholders and prospective
investors.
We aim to balance investor engagement throughout the year,
providing the opportunity for frequent interaction with all
investors through a variety of forums including meetings, mining
conferences and management presentations. We aim to periodically
hold investor days to update investors on our business and
strategy.
Private shareholders
We communicate with shareholders throughout the year through our
electronic notification of regulatory announcements, which include
notifications of dividends, the Annual General Meeting and other
initiatives which we feel may be of benefit to them.
Annual General Meeting
We encourage all shareholders to participate at our Annual
General Meeting ('AGM'). At the AGM a presentation of the Group's
activities is provided. All shareholders, including private
investors, have an opportunity at the AGM to put questions to
members of the Board about our operations and performance. Due to
the uncertainty presented by the COVID-19 global health pandemic,
the Board had to make alternative arrangements to conduct the 2020
AGM. To comply with best practice health advice and social
distancing measures, TSG will conduct the 2021 AGM on the basis of
a closed meeting with the minimum two persons present. The Company
encourages shareholders to submit proxy votes in connection with
the resolutions set out in the Notice of AGM. A separate
shareholder engagement meeting will be held after health
restrictions have been lifted and it is safe and practicable to do
so.
Stakeholder Engagement
We need constructive relationships with our stakeholders to
optimise our business. We listen to, and work with others, to
explore the challenges we face as a business.
We engage with all stakeholder groups to build meaningful
relationships and understand their expectations and aspirations.
This minimises any potential negative societal impact, optimises
the value we bring to local communities and maintains our licence
to operate.
We hold regular face-to-face meetings, conference calls and
participate in multi-stakeholder discussions. Further information
on how and why we engage with stakeholders is set out in 'Section
172' later in the report.
People & Culture
We value our people and encourage the development of talented
and motivated employees to support the continued performance of our
mining operations. We strive to build a sense of purpose and
achievement among all our people in the work we do.
Our culture is based on ethical values and behaviours which are
set out on the Company's website at:
http://www.trans-siberiangold.com/sustainability/our-people. We
believe that our culture and expected standards are consistent with
industry best-practice and our strategy.
The Group's policy is to consult and discuss with employees,
through unions, staff councils and at meetings, matters likely to
affect employees' interests.
The Board ensures that the policy is enacted and our values and
behaviours are recognised and respected by first hand employee
dialogue and observation on site visits ('walking the floor') and
management reports from the SET.
How to communicate with us
Email enquiries@trans-siberiangold.com
Telephone +44 (0) 1480 811871
Website http://www.trans-siberiangold.com
LinkedIn
https://www.linkedin.com/company/trans-siberian-gold-plc/
Instagram https://www.instagram.com/transsiberiangoldplc/
Post Trans-Siberian Gold plc, P.O. Box 278, St. Neots, PE19 9EA.
United Kingdom
Assessing our performance against the QCA Code - A summary
Principle Key points of how we deliver
-------------------------------------------------------- ------------------------------------------------------------
DELIVER GROWTH
----------------------------------------------------------------------------------------------------------------------
Establish a strategy and business model which promote
long-term value for shareholders. * Clearly stated & communicated on the Company's
website and in our corporate materials (annual
reports, investor presentations).
* How we deliver our strategy and measure progress
(KPIs) are set out in our Annual Report.
* Risks to our strategy and our actions to mitigate
them are set out in our Annual Report.
Seek to understand and meet shareholder needs and
expectations. * Clearly structured engagement programme in place for
both institutional and private investors.
* Investor roadshow feedback shared and discussed at
Board meetings.
* Invested in more comprehensive and appealing
corporate materials and website.
* Established multiple communication channels (online
and offline).
Take into account wider stakeholder and social
responsibilities and their implications for * Key stakeholders are identified and their needs are
long-term success. understood.
* Website disclosures of regional and local memberships
and activities.
* Transparency of Companies House filings of Payments
to Governments.
* Clear policy on Modern Slavery and Supply-Chain
management available on the Company's website.
Embed effective risk management, considering both
opportunities and threats throughout the * Risks to our strategy and our actions to mitigate
organisation. them are set out in our annual report.
-------------------------------------------------------- ------------------------------------------------------------
MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
----------------------------------------------------------------------------------------------------------------------
Maintain the board as a well-functioning, balanced team
led by the Chair. * Roles and responsibilities are set out online and in
the Company's Annual Report.
* Details about the operation of the Board are included
in this document.
* Composition of the Board and its effectiveness is
discussed in our Annual Report.
* The Company has a minimum of two independent
Non-Executive Directors.
* Non-independent Directors are identified, the reasons
why and their contribution are explained.
* Board committees are set out on the Company's website
and in our Annual Report.
* Details of time commitments and meeting attendance
are set out in this document.
Ensure that between them the Directors have the
necessary up-to-date experience, skills and * Biographies of Directors are available on the
capabilities. Company's website and in our annual report.
* Directors have a blend of mining sector, finance and
capital markets experience.
* Diversity considered but quota system assessed to be
inappropriate.
Evaluate board performance based on clear and relevant
objectives, seeking continuous improvement. * An internal board evaluation was intended to be
conducted for FY20, but was postponed as
impracticable during COVID-19 restrictions.
Promote a corporate culture that is based on ethical
values and behaviours. * Ethical values and behaviours are set out online.
* Values and behaviours are recognised and respected by
first hand employee dialogue and observation on site
visits ('walking the floor') and management reports
from the SET.
Maintain governance structures and processes that are
fit for purpose and support good decision-making * Governance structures and processes kept under
by the Board. review.
* This statement explains how we apply the QCA Code.
* Roles and responsibilities are set out on the
Company's website and in our Annual Report.
-------------------------------------------------------- ------------------------------------------------------------
BUILD TRUST
-------------------------------------------------------- ------------------------------------------------------------
Communicate how the Company is governed and is
performing by maintaining a dialogue with shareholders * Significantly increased our engagement with
and other relevant stakeholders. shareholders and stakeholders.
* Multi-channel communication channels to facilitate
dialogue and feedback - see online and this document.
* Governance information and documents freely
available.
-------------------------------------------------------- ------------------------------------------------------------
As a UK company with a listing on the AIM Market of the London
Stock Exchange, TSG is required to make certain statements
regarding the way it is governed. Accordingly, this statement in
its entirety explains how TSG applies the Ten Principles of the
Corporate Governance Code as set out in the QCA Code.
Directors' Report
The Directors present their annual report and audited
consolidated financial statements for the year ended 31 December
2020
Principal activities
Trans-Siberian Gold plc is a UK-based resources company, whose
Asacha Gold Mine in the Far East of the Russian Federation has been
in production since September 2011.
Results and dividends
The financial results for the year are set out in the Financial
Statements and show a net profit of $20.3 million for the year
ended 31 December 2020 (2019: $9.0 million).
During the financial year, the Company paid an interim dividend
of $0.08 per ordinary share, equivalent to approximately $7.0
million.
The Company has a track record of making regular, sustainable,
dividend payments however due to the Takeover offer, the Board is
unable to recommend a final dividend for FY20.
Share capital
The Company's issued share capital as at 31 December 2020 was
87,158,508 ordinary shares (2019: 110,053,073).
On 12 July 2019 the Company completed a share buy back from two
of its major shareholders within UFG Asset Management ('UFG')
amounting to 22,894,565 ordinary shares which were held in
treasury. On 26 May 2021, 4,787,816 ordinary shares were issued
from treasury in consideration of awards under the Company's Long
Term Incentive Plans which had vested as a result of the completion
of the acquisition of the shares of the Selling Shareholders by
Horvik Limited as described in the Company's announcement dated 18
March 2021.
Post period further shares were repurchased on-market wherefore
as at the date of this document the Company's issued share capital
comprises 91,739,867 ordinary shares together with 18,313,206
shares held in treasury.
Significant Shareholdings
At the date of this document, the following interests of 3% or
more in the issued share capital of the Company appeared in the
register maintained in accordance with section 808 of the Companies
Act 2006:
% of issued
share
Shareholder capital
----------------------- -----------
Horvik Limited 48.6%
UFG Capital
Investment Management 6.1%
BHF Asset Management 4.7%
Lord Michael
Spencer 3.3%
Hanover Nominees 3.3%
----------------------- -----------
The ultimate control of the Company is discussed in note 34 to
the financial statements.
Directors interests
At the date of this document, the Directors have the following
direct beneficial interests in the share of the Company:
No. of Ordinary
Director Shares
---------------- ---------------
Lou Naumovski Nil
Alexander
Dorogov 2,527,555
Eugene Antonov 1,380,249
Stewart Dickson 503,389
FELDI Limited* 29,999
---------------- ---------------
* Stewart Dickson is a Director and significant shareholder of
FELDI Limited.
These beneficial interests include ordinary shares transferred
from treasury on 26 May 2021 in satisfaction of LTIP Awards which
had vested as discussed below.
Long Term Incentive Plans
As announced on 8 June 2020 and 28 August 2020, the Company
established two Long Term Incentive Plans (the "LTIPs") under which
awards were made to the executive directors and certain
non-executive directors (the "LTIP Awards").
As a consequence of the increase in Horvik's interest in TSG
Shares, the LTIPs have vested under the change of control
provisions in the LTIP rules.
The LTIP Awards comprised a total of 4,347,988 conditional share
Awards and options in respect of 550,000 TSG Shares (the
"Options"). As reported on 29 April 2021 the Company had received
notice to exercise the Options (conditional upon the Second
Completion) and, where applicable, each LTIP Award holder had
elected for cashless settlement, whereby the Award Price is netted
off (at the Acquisition Price of GBP1.18 per TSG Share) against the
number of TSG Shares to be transferred to them in satisfaction of
their LTIP Award.
The Directors have irrevocably agreed, subject to the terms set
out in the announcement by Horvik on 18 March 2021, to accept the
cash offer to be made by Horvik in respect of their TSG Shares
including the Award Shares.
No equity incentives or options were granted or were in
existence during the year ended 31 December 2019.
Following the Second Completion, the Company transferred TSG
Shares to the Award Holders out of treasury (the "Award Shares") as
shown in the following table:
Aggregate Award Award Value (GBP) at
Award Holder Awards Price (GBP) GBP1.18/share Award Value (GBP) net Award Shares
------------------ --------- --------------- --------------------------------- --------------------- ------------
Alexander Dorogov 2,297,988 Nil 2,297,988
Eugene Antonov 1,300,000 Nil 1,300,000
Charles Ryan 250,000 25,000 295,000 270,000 228,813
Florian Fenner 250,000 25,000 295,000 270,000 228,813
Robert Sasson 250,000 25,000 295,000 270,000 228,813
Stewart Dickson 550,000 55,000 649,000 594,000 503,389
Total 4,897,988 4,787,816
------------------ --------- --------------- --------------------------------- --------------------- ------------
Political and charitable donations
During the financial year ended 31 December 2020 the Group made
no political donations (2019: $nil). In 2020 the Group has made a
charitable donation of approximately RUB 5million in connection
with the COVID-19 global health pandemic in Kamchatka.
Financial instruments
Details of the Group's financial instruments and its key
financial risks are set out in note 25 to the financial statements
which forms part of this Directors' Report.
Subsequent events
These events are discussed in the Operating and Financial Review
and in note 35 to the financial statements.
Going concern
The Group's operations are cash generative and management
tightly control the level of committed expenditure to ensure that
the Group has sufficient resources available to meet its
liabilities as they fall due. Regular cash forecasts are reviewed
to assess the potential impact of factors such as changes in
commodity prices, production rates and the timing of capital
expenditure. The Group has reported an operating profit for the
year of $27.5 million, an operating cash inflow of $41.2 million
and net increase in cash of $13.7 million. The Directors have
reviewed the Group's cash flow forecast for the period to 31
December 2022 and carried out multiple scenario analysis of
potential downsides including future lockdowns of various length;
production, workforce and supply chain disruptions together with
reasonably possible changes in commodity prices; and scheduled
repayments of loan facilities. The Directors further stress tested
combinations of various scenarios identifying no significant cash
concerns. Based on these analyses, the Directors believe that the
Group has sufficient resources to continue in operational existence
for the foreseeable future. Furthermore, the Directors have
considered the impact of Horvik's acquisition discussed in note 35
on the going concern of the Group. In forming their opinion the
Directors have relied upon the public statements made by Horvik
about its future intentions for the Group, which outline its
commercial and financial rationale for the acquisition. While the
Directors are unable to provide surety that such intentions will be
enacted, they are not aware of any planned actions which may cast
doubt over the Group's future operational existence.
The Directors have also considered the change of control clause
within the Company's credit facilities with VTB and are comfortable
that this does not have an impact on the going concern status of
the Group in light of the Group's cash position and the outstanding
loan balance at 31 December 2020 and for the reasons outlined in
note 23 and note 35. Therefore the Directors believe that the Group
will continue as a going concern and have prepared the financial
statements on that basis.
Disabled persons
Applications for employment by disabled persons are always fully
considered, bearing in mind the aptitudes of the applicant
concerned. In the event of members of staff becoming disabled,
every effort is made to ensure that their employment within the
Group continues and that the appropriate training is arranged. It
is the policy of the Group that the training, career development
and promotion of disabled persons should, as far as possible, be
identical to that of other employees.
Employee involvement
The Group's policy is to consult and discuss with employees,
through unions, staff councils and at meetings, matters likely to
affect employees' interests.
Information about matters of concern to employees is given
through information bulletins and reports which seek to achieve a
common awareness on the part of all employees of the financial and
economic factors affecting the Group's performance.
Further information about our people and culture is set out in
the Corporate Governance Review.
Directors
The Directors who held office during the year and up to the date
of signature of the financial statements were as follows:
Board of Directors
Director Notes
----------------- ------------------------------------------------------
Charles Ryan Resigned pursuant to the Takeover offer on 26 May 2021
Alexander Dorogov
Eugene Antonov
Robert Sasson Resigned pursuant to the Takeover offer on 26 May 2021
Florian Fenner Resigned pursuant to the Takeover offer on 26 May 2021
Lou Naumovski
Stewart Dickson
----------------- ------------------------------------------------------
In accordance with the provisions of the Company's Articles of
Association, Mr. Dickson will retire by rotation at the forthcoming
Annual General Meeting and, being eligible, offers himself for
re-election.
Board of Directors
The Company's board currently comprises two Executive Directors
and two Non-Executive Directors, including the Interim Chairman.
The Non-Executive Directors are considered by the board to be
independent of management and free from any business or other
relationship that could materially interfere with the exercise of
their independent judgement.
Under the Relationship Agreement with Horvik, it is entitled,
subject to it satisfying the FAS Pre-Condition and it having a
certain level of shareholding in TSG, to appoint three
non-executive directors to the TSG Board.
The Board ordinarily meets on a bi-monthly basis to determine
strategy and to approve budgets and business plans, major capital
expenditure, acquisitions and disposals. Additional meetings are
held as appropriate to transact other business. Formal agendas,
briefing papers and reports are sent to the Board in advance of its
meetings. The Board delegates certain of its responsibilities to
two Board Committees, which have clearly defined terms of reference
as described below.
The Directors have access to the advice and services of the
Company Secretary. Any Director may also take independent
professional advice at the Company's expense in the furtherance of
his duties. In accordance with the Articles of Association, each
year one third of the Directors (generally those who have held
office for the longest time since their election) will retire from
office at the AGM. A retiring Director may be re-elected if
eligible and a Director appointed by the Board may also be elected,
although in the latter case the Director's period of prior
appointment by the Board will not be taken into account for the
purposes of rotation.
Audit Committee
Refer to Corporate Governance Review
Remuneration Committee
Refer to Corporate Governance Review
Offer Committee
Refer to Corporate Governance Review
Qualifying third party indemnity provisions
The Company has made qualifying third-party indemnity
provisions, as defined in section 234 of the Companies Act 2006,
for the benefit of the Directors in respect of liabilities incurred
as a result of their office to the extent permitted by law. These
provisions remain in force at the reporting date. The Company also
maintained a Directors' and Officers' liability insurance policy
throughout the financial year.
Internal control
The Board is responsible for ensuring that the Group maintains
an adequate system of internal control and risk management. The
internal controls are designed to safeguard the Group's assets and
to ensure the reliability of financial information both for
internal use by management and for external reporting.
The Directors are aware that no system can provide absolute
assurance against material misstatement or loss but are satisfied
that the current controls and processes to manage significant risks
are adequate with regard to the current stage of the Group's
development.
Shareholders
The Board attaches great importance to maintaining good
relationships with all its shareholders and ensures that all price
sensitive information is released to its shareholders
simultaneously in accordance with the AIM Rules for Companies and
Market Abuse Regulations.
The Board believes that the AGM provides an important
opportunity for dialogue with private shareholders. Due to COVID-19
restrictions the AGM will be a closed meeting. A separate
shareholder engagement meeting will be held after health
restrictions have lifted and it is safe and practical to do so.
The Company's website, www.trans-siberiangold.com, is regularly
updated and contains a wide range of information about the
Group.
Further information about how the Group manages its relationship
with shareholders is set out in the Corporate Governance
Review.
Stakeholders
s172 Companies Act 2006
The Directors are well aware of their duty under s.172 of the
Companies Act 2006 to act in the way which they consider, in good
faith, would be most likely to promote the success of the Company
for the benefit of its members as a whole and, in doing so, to have
regard (amongst 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 as between members of the Company.
As a Board we have always been mindful of the long term when
taking decisions, and collectively and individually our aim is
always to uphold the highest standards of conduct. Similarly, we
understand that our business can only grow and prosper over the
long term if we understand and respect the views and needs of our
customers, colleagues and the communities in which we operate, as
well as our suppliers, the environment and the shareholders to whom
we are accountable.
We set out in the adjacent table our key stakeholder groups,
their material issues and how we engage with them. Each stakeholder
group requires a tailored engagement approach to foster effective
and mutually beneficial relationships. By understanding our
stakeholders, we can factor into Boardroom discussions the
potential impact of our decisions on each stakeholder group and
consider their needs and concerns, in accordance with s172 of the
Companies Act 2006.
This in turn ensures we continue to provide quality gold to our
customers, work effectively with our colleagues and contractors,
make a positive contribution to local communities and achieve
long-term sustainable returns for our investors. Acting in a fair
and responsible manner is a core element of our business
practice.
Ongoing engagement with our stakeholders
What matters to
Our Why they our Link to Mitigating our
stakeholders matter to TSG stakeholders How we engaged Principal Risks
------------ ------------- --------------- ------------------------------------------------------------ -------------------------------------------------
Customers They are the We know our
suppliers of customers seek * Sales of products * Reserve & Resource estimation
refined a reliable and
precious high quality
metals who source of * Laboratory analysis * Mining & Processing
rely on us precious metals
and other
gold miners * Correspondence * Gold price volatility
to
help them
deliver a
great service
to their
clients
------------ ------------- --------------- ------------------------------------------------------------ -------------------------------------------------
Employees They are a Our colleagues
key resource are concerned * Internal communications * Mining & Processing
of the Group, with
all dedicated opportunities
to extracting for personal * HR initiatives * Health & Safety
and development and
processing career
gold safely, progression; * 'Walking the floor' * COVID-19
responsibly a culture of
and inclusion and
profitably safety;
compensation
and benefits;
and the ability
to make a
difference
within TSG
------------ ------------- --------------- ------------------------------------------------------------ -------------------------------------------------
Communities Whilst we Our communities
operate in a want TSG to * Supported the prestigious annual dog racing * Mining & Processing
remote make a positive competition in Kamchatka
location, the contribution to
communities local society * Environmental legislation & compliance
in Kamchatka and make a * Made a RUB5m donation to the fight against COVID-19
are important positive in Kamchatka
as they difference by * Health & Safety
can be acting
directly or responsibly and
indirectly sustainably * COVID-19
affected by
our
operations.
We are proud
that we are a
significant
employer of
local people
and where
practicable,
source
supplies from
local
providers
------------ ------------- --------------- ------------------------------------------------------------ -------------------------------------------------
Suppliers Our suppliers Our supply
provide us chain stretches * Searching for local suppliers where possible * Mining & Processing
with inputs over regional
to enable and and national
enhance our borders. Our * Terms of trade * Environmental legislation & compliance
operations challenge is to
ensure
that their * Process and procurement monitoring * Health & Safety
operation is
aligned where
practicable, * COVID-19
with our
policies and
responsible
practices
------------ ------------- --------------- ------------------------------------------------------------ -------------------------------------------------
Government & The gold The regulatory
regulators mining and legislative * Formal enquiries * Regulatory environment
industry is authorities
subject to expect
government compliance with * Meetings * Mining legislation & licensing
policy which wide-ranging
is industry
implemented requirements * Trade Associations e.g. Union of Gold Producers of * Environmental legislation & compliance
through Russia
legislation
and * Taxation
regulation
* COVID-19
------------ ------------- --------------- ------------------------------------------------------------ -------------------------------------------------
Investors They are our Investors
providers of scrutinise our * Regular meetings (holder & non-holder) * Reserve & resource estimates
capital activity on a
without whom range of
we could not measures beyond * Communications such as quarterly operational results, * Mining & Processing
grow and financial annual reports and notices of general meetings
invest for performance to
future ensure * Property & business interruption insurance
success that investment * Stock Exchange announcements and press releases
risks are
limited and * Gold price volatility
returns are * Investor conferences
sustainable
* Taxation
* Detailed information about TSG and matters of
interest to investors on our website
* COVID-19
------------ ------------- --------------- ------------------------------------------------------------ -------------------------------------------------
Industry We often face We know the
similar positive impact * Meetings * Regulatory environment
opportunities working
and collaboratively
challenges as as an industry * Industry Conferences * Mining legislation & licensing
our peers in can have
the gold
mining * Trade Associations e.g. Union of Gold Producers of * Environmental legislation & compliance
industry. Russia
By sharing
knowledge and * Gold price volatility
best
practices we
can address * Taxation
them
* COVID-19
------------ ------------- --------------- ------------------------------------------------------------ -------------------------------------------------
Factoring our stakeholders into our decisions
By thoroughly understanding our key stakeholder groups, we can
factor their needs and concerns into Boardroom discussions.
The Board requires of itself an assessment and discussion of
potential impacts in connection with material decisions requiring
its approval that could impact on one or more of our stakeholder
groups.
This assessment and discussion assists the Directors in
performing their duties under s172 of the Companies Act 2006 and
provides the Board with assurance that the potential impacts on our
stakeholders are being carefully considered by management when
developing plans for Board approval.
The stakeholder assessment and discussion identifies:
-- potential benefits and areas of concern for each stakeholder
group;
-- the procedures and plans being implemented to mitigate
against any areas of concern; and
-- who is responsible for ensuring the mitigation plans are
being effectively implemented.
Independent Auditors
PricewaterhouseCoopers LLP have expressed their willingness to
continue in office and a Resolution to re-appoint them will be
proposed at the Annual General Meeting.
Statement of Directors' responsibilities in respect of the
financial statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group and the Company financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006.
The Group have also prepared financial statements in accordance
with and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
Under company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing the
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- state whether applicable international accounting standards
in conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
have been followed, subject to any material departures disclosed
and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable
and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are also responsible for safeguarding the assets
of the Group and Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006.
The Directors are responsible for the maintenance and integrity
of the company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
In the case of each Director in office at the date the
Directors' report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the Group's and Company's auditors are
unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group's and Company's
auditors are aware of that information.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the on-going
integrity of the financial statements contained therein.
On behalf of the Board
Alexander Dorogov
Chief Executive Officer
8 June 2021
Financial Statements
Independent Auditors' Report to the members of Trans-Siberian
Gold plc
Report on the audit of the financial statements
Opinion
In our opinion, Trans-Siberian Gold plc's Group financial
statements and Company financial statements (the "financial
statements"):
-- give a true and fair view of the state of the Group's and of
the Company's affairs as at 31 December 2020 and of the Group's
profit and the Group's and Company's cash flows for the year then
ended;
-- have been properly prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006; and
-- have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the
Annual Report and Financial Statements (the "Annual Report"), which
comprise: the Consolidated and Company Statements of Financial
Position as at 31 December 2020; the Consolidated Statement of
Comprehensive Income, the Consolidated and Company Statements of
Cash Flows and the Consolidated and Company Statements of Changes
in Equity for the year then ended; and the notes to the financial
statements, which include a description of the significant
accounting policies.
Separate opinion in relation to international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union
As explained in note 1.2 to the financial statements, the Group,
in addition to applying international accounting standards in
conformity with the requirements of the Companies Act 2006, has
also applied international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
In our opinion, the Group financial statements have been
properly prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors' responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC's Ethical
Standard, as applicable to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements.
Our audit approach
Overview
Audit scope
* We conducted full scope audits of two significant
components out of the Group's three separate
reporting entities which were selected due to their
size and risk characteristics.
* Specific audit procedures were performed on certain
balances and transactions at a further one reporting
unit.
* This enabled us to obtain 100% coverage of
consolidated revenue, 99% coverage of consolidated
profit before tax and 99% coverage of total assets
for the Group.
* To ensure sufficient oversight, direction and
responsibility of the audit work performed by our
component audit team in Russia, the Group team
performed a number of procedures throughout the audit
which included directing the audit approach and
procedures, conducting remote file reviews and
conducting remote face to face meetings with local
management and the component team.
Key audit matters
* Valuation of ore stocks (Group).
* Consideration of the impact of COVID-19 (Group and
Parent).
* Impairment of investments in subsidiaries (Parent).
Materiality
* Overall Group materiality: $894,000 (2019: $509,000)
based on 5% of three-year average profit before tax.
* Overall Company materiality: $376,000 (2019:
$407,000) based on 0.5% of total assets.
* Performance materiality: $670,000 (Group) and
$282,000 (Company).
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors'
professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
This is not a complete list of all risks identified by our
audit.
Impairment of investments in subsidiaries is a new key audit
matter this year. Impairment of property, plant and equipment,
which was a key audit matter last year, is no longer included
because there have been no impairment trigger events as at 31
December 2020 that could imply a risk of impairment in property,
plant and equipment. Otherwise, the key audit matters below are
consistent with last year.
Key audit matter How our audit addressed the key audit matter
-------------------------------------------------------- ------------------------------------------------------------
Valuation of ore stocks (Group)
Refer to note 20, Inventories. The Group's ore stocks We examined management's calculation of the valuation of
are valued at the lower of cost and the ore stocks and undertook the
net realisable value. At 31 December 2020 the ore stocks following procedures:
are valued at $8.1m (2019: $6.3m). * Understood management's decision and ability to blend
Historically management recognised a provision against low grade ore stocks with higher grade mined ore in
the low grade ore stocks but this provision the future;
was released in 2018 following management's decision to
start blending the low grade ore stocks
with the higher grade mined ore. This blending increased * Compared the gold prices used in the calculation to
the net realisable value of the low available market data;
grade ore stocks. In the financial year, mining
commenced in the East Zone of the Asacha Gold
Mine, which contains significantly higher-grade ore, * Tested management's cost assumptions and agreed them
increasing the blending and utilisation to actual costs incurred in 2020;
of the ore stocks.
The valuation and the current/non-current classification
of ore stocks is impacted by the * Tested management's calculation of the overall ore
grade, future ore blending ratios, ore processing and stocks volume and grade. This included sampling a
refining costs and the price of gold. number of ore batches and comparing the gold grade
The recoverability and valuation is dependent on the measured by the Group's internal specialists to the
ability of the Group to continue to blend results of the independent re-measurement performed
low grade and high grade ore. Management expects to have by a third-party;
fully processed all of the low grade
stocks by the end of 2021.
We focused on this area due to the material nature of * Considered the grade of future mined ore through
the balance and the judgement involved validating the volume and grade assumed in the life
in the valuation and the current/non-current of mine plan to the independent, third party reserves
classification of ore stocks. report;
* Assessed the competency, independence and objectivity
of the third-party engaged by management to value the
ore stocks; and
* Recalculated management's blending ratio which is
based on the size and grade of the ore stocks and
expected future mined ore.
In line with the life of mine plans, during 2020 ore mined
was of a higher grade than the
ore held in the stockpiles but the Group continued to
utilise the lower grade ore stocks by
blending these with the higher grades mined when feeding
the processing plant. This supports
the recoverability of the ore stocks.
Based on these enquiries and procedures, we are satisfied
with management's judgement that
a provision against the carrying value of the ore stocks is
not required. Finally, we considered
the adequacy of management's disclosure of the key
judgement in relation to the valuation
of the ore stocks, and their classification, and consider
it to be reasonable.
-------------------------------------------------------- ------------------------------------------------------------
Consideration of the impact of COVID-19 (Group and
Parent)
Refer to the Strategic Report, the Directors' Report and We obtained and considered management's assessment of the
note 1.4, Going concern. impact of COVID-19 on the Group's
COVID-19 was declared a pandemic by the World Health operations, the recoverability of its long-term assets, the
Organisation on 11 March 2020 and the carrying value of its assets and
ongoing response is having an unprecedented impact on liabilities and its ability to continue as a going concern.
the global economy. We undertook the following procedures:
Management have set out in the Annual Report the impact We considered the potential impact on the balance sheet,
that COVID-19 has had on the Group specifically around property, plant
and the Company and the actions that they have taken, and equipment and trade receivables and do not consider
and continue to take, to address the there to be any indicators of material
pandemic and its effect on the operations. impairment as at the balance sheet date or subsequently (for
The Directors considered the impact of the pandemic on disclosure only) and no provisions
the Group's operations, cash flows, or additional liabilities were recorded.
day to day operations, and the carrying amount of We reviewed the disclosures relating to the impact in the
long-term assets and receivables, as well year and the potential impact of
as a need to recognise additional liabilities. As part COVID-19 and found them to be consistent with the analysis
of this assessment, the Directors modelled performed.
various downside scenarios to their base case budgets The procedures we performed to evaluate the Directors' going
taking into account the possible effects concern assessment and our conclusions,
of COVID-19 on the operations. are set out in the "Conclusions relating to going concern"
Having taken into account these scenarios and a robust section below.
assessment of planned and possible Overall, we consider the assessment by management in
mitigating actions, the Directors concluded that the relation to COVID-19, and the associated
Group remains a going concern, that there disclosures in the Annual report, to be appropriate.
is no material uncertainty in respect of this conclusion
and that there is no impact on the
carrying values of assets and liabilities.
We determined the Directors' consideration of the impact
of COVID-19 to be a key audit matter.
-------------------------------------------------------- ------------------------------------------------------------
Impairment of investments in subsidiaries (Parent)
Refer to note 18, Investments in subsidiaries, and note We challenged the assessment of any impairment indicators
19, Subsidiaries. and considered it to be consistent
Impairment assessments require significant judgement and with the approach taken for the Group impairment assessment
there is a risk that the valuation and therefore reasonable.
of the assets may be incorrect, and any potential Based on our analysis of the assessment of the recoverable
impairment charge or reversal miscalculated. amount of each investment, we concur
As such, this was a key area of focus for our audit due that the carrying values of the investments in subsidiaries
to the size of the balance. are supportable and note that
As disclosed in note 18, the Company has investments of no impairment triggers were identified. We consider the
$74m in subsidiaries. Directors' conclusions and the associated
The Directors have considered the recoverability of the disclosures to be appropriate.
investments in subsidiaries at 31
December 2020 and determined that there were no triggers
for impairment, having considered
factors such as long-term gold prices, resource
estimates and expected production profiles.
Accordingly, they determined that the carrying values of
the investments in subsidiaries are
supportable.
-------------------------------------------------------- ------------------------------------------------------------
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Group and the Company, the accounting processes and controls, and
the industry in which they operate.
Trans-Siberian Gold plc is listed on AIM. The Group's principal
operation is the Asacha Gold Mine in Far East Russia. In
establishing the overall approach to the Group audit, we determined
the type of work that needed to be performed by us, as the Group
audit team, or by our PwC network component team in Russia.
Our Group audit scope focused primarily on the Asacha gold mine
in Russia, which was subject to a full-scope audit by our component
team in Russia. A full scope audit was also performed over the
parent company by the Group team. Specific audit procedures on
certain balances and transactions were performed at a further one
reporting unit. The above gave us coverage of 100% of consolidated
revenue, 99% coverage of consolidated profit before tax and 99%
coverage of total assets for the Group.
As COVID-19 prevented travel to Russia, we were unable to make a
site visit as planned; we instead conducted our oversight of our
component audit team through regular dialogue via conference calls,
video conferencing and other forms of communication as considered
necessary as well as remote working paper reviews to satisfy
ourselves as to the appropriateness of audit work performed by our
component audit team. We also attended key meetings virtually with
local management and our component audit team. We reviewed the
audit work of our component audit team, which included file
reviews, participation in key audit discussions with local
management and participation in the audit clearance meeting.
The Group engagement team directly performed the audit of the
consolidation. This, together with additional procedures performed
at the Group level, gave us the evidence we needed for our opinion
on the Group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Financial statements - group Financial statements - company
-------------------------------- ----------------------------------------- -----------------------------------------
Overall materiality $894,000 (2019: $509,000). $376,000 (2019: $407,000).
How we determined it 5% of three year average profit before 0.5% of total assets
tax
Rationale for benchmark applied Profit is the key indicator of the We have assessed that the most
Group's performance and the most appropriate benchmark for the Company,
appropriate benchmark which is primarily a
for materiality. Due to volatility in holding company, is total assets.
commodity prices which has impacted
profitability, we
have used a three-year average profit
before tax as the benchmark.
-------------------------------- ----------------------------------------- -----------------------------------------
For each component in the scope of our Group audit, we allocated
a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was between
$376,000 and $890,000. Certain components were audited to a local
statutory audit materiality that was also less than our overall
group materiality.
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% of overall
materiality, amounting to $670,000 for the Group financial
statements and $282,000 for the Company financial statements.
In determining the performance materiality, we considered a
number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and
concluded that an amount at the upper end of our normal range was
appropriate.
We agreed with those charged with governance that we would
report to them misstatements identified during our audit above
$89,000 (Group audit) (2019: $50,000) and $89,000 (Company audit)
(2019: $50,000) as well as misstatements below those amounts that,
in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the Directors' assessment of the Group's and
the Company's ability to continue to adopt the going concern basis
of accounting included:
-- Obtaining and reviewing the Group's cash flow forecasts for
the going concern period, challenging the Directors' assumptions
used and verifying that these were consistent with our existing
knowledge and understanding of the business, as well as with the
Board-approved budget;
-- Reviewing the Group's cash flow forecasts under various
downside scenarios, including a severe but plausible downside
scenario, evaluating the assumptions used, and verifying that the
Group is able to maintain liquidity within the going concern period
under these scenarios;
-- Testing the model for mathematical accuracy;
-- Understanding the Directors' assessment of the implications
of the Offer to acquire the Group made by Horvik for their going
concern assessment, which included reviewing the public
announcements made by Horvik outlining the commercial and financial
rationale for the Transaction and about its future intentions for
the Group; and considering the implications of the change in
control clause in the current financing arrangements. We note that
these public announcements confirmed Horvik's intention to continue
the operations of the Group as part of their strategy of
establishing an operational footprint in the Kamchatka region in
Russia.
-- Assessing the adequacy of the disclosure provided in note 1
of the financial statements.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group's and the Company's ability to continue as a going concern
for a period of at least twelve months from when the financial
statements are authorised for issue.
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Group's and
the Company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our auditors'
report thereon. The Directors are responsible for the other
information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we
identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic Report and Directors' Report, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic Report and Directors' Report
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Strategic Report and
Directors' Report for the year ended 31 December 2020 is consistent
with the financial statements and has been prepared in accordance
with applicable legal requirements.
In light of the knowledge and understanding of the Group and
Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic
Report and Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors'
responsibilities in respect of the financial statements, the
Directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The Directors
are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the
Group or the Company or to cease operations, or have no realistic
alternative but to do so.
Auditors' responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors' report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the Group and industry, we
identified that the principal risks of non-compliance with laws and
regulations related to compliance with UK and Russian tax
legislation and employment law, state and federal laws and
regulations and environmental legislation, and we considered the
extent to which non-compliance might have a material effect on the
financial statements. We also considered those laws and regulations
that have a direct impact on the financial statements such as the
Companies Act 2006. We evaluated management's incentives and
opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and
determined that the principal risks were related to posting
inappropriate journal entries to manipulate results and management
bias in key accounting estimates. The Group engagement team shared
this risk assessment with the component audit team so that they
could include appropriate audit procedures in response to such
risks in their work. Audit procedures performed by the Group
engagement team and/or component audit team included:
-- Enquiries of the Directors, management and the Group's legal
counsel, including consideration of known or suspected instances of
non-compliance with laws and regulations and fraud;
-- Inspection of supporting documentation, where
appropriate;
-- Evaluation of management's controls designed to prevent and
detect irregularities;
-- Review of minutes of meetings of the Board of Directors;
-- Challenging assumptions and judgements made by management in
relation to their significant accounting judgements and
estimates;
-- Identifying and testing journal entries, in particular any
journal entries posted with unusual account combinations; and
-- Review of related work performed by the component audit team,
including their responses to risks related to management override
of controls and to the risk of fraud in revenue recognition.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and
only for the Company's members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- we have not obtained all the information and explanations we
require for our audit; or
-- adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- certain disclosures of Directors' remuneration specified by
law are not made; or
-- the Company financial statements are not in agreement with
the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Timothy McAllister (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP Chartered
Accountants and Statutory Auditors London
8 June 2021
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2020
2020 2019
Notes $'000 $'000
--------------------------------------------------------------------------------------- ----- -------- --------
Revenue 4 80,975 63,108
Cost of sales (40,070) (40,300)
--------------------------------------------------------------------------------------- ----- -------- --------
Gross profit 40,905 22,808
Administrative expenses (10,243) (8,755)
Exceptional expenses 5 (1,987) -
Other operating income 811 68
Foreign exchange on operating activities (2,007) 287
--------------------------------------------------------------------------------------- ----- -------- --------
Operating profit 6 27,479 14,408
Finance income 11 30 70
Finance expenses 12 (1,784) (1,642)
Foreign exchange on financing activities 2,317 (241)
--------------------------------------------------------------------------------------- ----- -------- --------
Profit before taxation 28,042 12,595
Income tax on profit 14 (7,781) (3,589)
--------------------------------------------------------------------------------------- ----- -------- --------
Profit for the financial year 20,261 9,006
--------------------------------------------------------------------------------------- ----- -------- --------
Total comprehensive income for the year 20,261 9,006
--------------------------------------------------------------------------------------- ----- -------- --------
Total comprehensive income for the year is attributable to:
- Owners of the parent company 20,261 9,006
--------------------------------------------------------------------------------------- ----- -------- --------
Profit per share attributable to the owners of the parent company (expressed in cents)
- Basic 13 23.25 9.17
- Diluted 13 22.60 9.17
--------------------------------------------------------------------------------------- ----- -------- --------
The consolidated statement of comprehensive income has been
prepared on the basis that all operations are continuing
operations.
The accompanying notes form an integral part of these financial
statements.
Consolidated Statement of Financial Position
as at 31 December 2020
2020 2019
----------------------------------------------------------- ----- ------------------ ------------------
Notes $'000 $'000 $'000 $'000
----------------------------------------------------------- ----- -------- -------- -------- --------
Non-current assets
Intangible assets 16 6,381 3,868
Property, plant and equipment 17 76,314 83,242
Right of use assets 24 729 -
Inventories 20 - 1,370
----------------------------------------------------------- ----- -------- -------- -------- --------
83,424 88,480
----------------------------------------------------------- ----- -------- -------- -------- --------
Current assets
Inventories 20 16,158 15,357
Trade and other receivables 21 5,063 3,287
Current income tax receivable - 1,497
Cash and cash equivalents 22,400 8,697
----------------------------------------------------------- ----- -------- -------- -------- --------
43,621 28,838
----------------------------------------------------------- ----- -------- -------- -------- --------
Total assets 127,045 117,318
----------------------------------------------------------- ----- -------- -------- -------- --------
Current liabilities
Trade and other payables 22 (5,920) (5,981)
Current income tax payable (1,459) -
Borrowings 23 (8,180) (9,781)
Leases 24 (117) -
----------------------------------------------------------- ----- -------- -------- -------- --------
(15,676) (15,762)
----------------------------------------------------------- ----- -------- -------- -------- --------
Non-current liabilities
Borrowings 23 (6,969) (15,332)
Leases 24 (534) -
Provisions 26 (6,628) (1,264)
Deferred tax liability 27 (6,154) (6,720)
----------------------------------------------------------- ----- -------- -------- -------- --------
(20,285) (23,316)
----------------------------------------------------------- ----- -------- -------- -------- --------
Total liabilities (35,961) (39,078)
----------------------------------------------------------- ----- -------- -------- -------- --------
Net assets 91,084 78,240
----------------------------------------------------------- ----- -------- -------- -------- --------
Capital and reserves attributable to owners of the Company
Share capital 28 18,988 18,988
Treasury shares 28 (9,442) (9,442)
Share-based payments reserve 28 1,560 -
Retained earnings 28 79,978 68,694
----------------------------------------------------------- ----- -------- -------- -------- --------
Total equity 91,084 78,240
----------------------------------------------------------- ----- -------- -------- -------- --------
The accompanying notes form an integral part of these financial
statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 8 June 2021 and are signed on its
behalf by:
Alexander Dorogov
Chief Executive Officer
Company Statement of Financial Position
as at 31 December 2020
2020 2019
----------------------------------------------------------- ----- -------------- --------------
Notes $'000 $'000 $'000 $'000
----------------------------------------------------------- ----- ----- ------- ----- -------
Non-current assets
Investments in subsidiaries 18 73,976 82,950
Current assets
Trade and other receivables 21 1,010 2,750
Cash and cash equivalents 117 400
----------------------------------------------------------- ----- ----- ------- ----- -------
1,127 3,150
----------------------------------------------------------- ----- ----- ------- ----- -------
Total assets 75,103 86,100
----------------------------------------------------------- ----- ----- ------- ----- -------
Current liabilities
Trade and other payables 22 (872) (275)
----------------------------------------------------------- ----- ----- ------- ----- -------
Total liabilities (872) (275)
----------------------------------------------------------- ----- ----- ------- ----- -------
Net assets 74,231 85,825
----------------------------------------------------------- ----- ----- ------- ----- -------
Capital and reserves attributable to owners of the Company
Share capital 28 18,988 18,988
Treasury shares 28 (9,442) (9,442)
Share-based payments reserve 28 1,560 -
Retained earnings 28 63,125 76,279
----------------------------------------------------------- ----- ----- ------- ----- -------
Total equity 74,231 85,825
----------------------------------------------------------- ----- ----- ------- ----- -------
The accompanying notes form an integral part of these financial
statements.
As permitted by s408 Companies Act 2006, the Company has not
presented its own income statement and related notes. The Company's
loss for the year was $4,177,000 (2019: $1,348,000).
The financial statements were approved by the Board of Directors
and authorised for issue on 8 June 2021 and are signed on its
behalf by:
Alexander Dorogov
Chief Executive Officer
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
Share Treasury Retained Total
capital shares Share-based payments reserve earnings equity
Notes $'000 $'000 $'000 $'000 $'000
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Balance at 1 January 2019 18,988 - - 68,199 87,187
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Year ended 31 December 2019:
Profit and total comprehensive income for
the year - - - 9,006 9,006
Dividends 15 - - - (8,511) (8,511)
Share buyback 28 - (9,442) - - (9,442)
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Balance at 31 December 2019 18,988 (9,442) - 68,694 78,240
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Year ended 31 December 2020:
Profit and total comprehensive income for
the year - - - 20,261 20,261
Dividends 15 - - - (8,977) (8,977)
Share-based payments - - 1,560 - 1,560
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Balance at 31 December 2020 18,988 (9,442) 1,560 79,978 91,084
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
The accompanying notes form an integral part of these financial
statements.
Company Statement of Changes in Equity
for the year ended 31 December 2020
Share Treasury Retained Total
capital shares Share-based payments reserve earnings equity
Notes $'000 $'000 $'000 $'000 $'000
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Balance at 1 January 2019 18,988 - - 86,138 105,126
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Year ended 31 December 2019:
Loss and total comprehensive income for
the year - - - (1,348) (1,348)
Dividends 15 - - - (8,511) (8,511)
Share buyback 28 - (9,442) - - (9,442)
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Balance at 31 December 2019 18,988 (9,442) - 76,279 85,825
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Year ended 31 December 2020:
Loss and total comprehensive income for
the year - - - (4,177) (4,177)
Dividends 15 - - - (8,977) (8,977)
Share-based payments - - 1,560 - 1,560
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
Balance at 31 December 2020 18,988 (9,442) 1,560 63,125 74,231
----------------------------------------- ----- -------- -------- ---------------------------- --------- -------
The accompanying notes form an integral part of these financial
statements.
Consolidated Statement of Cash Flows
for the year ended 31 December 2020
2020 2019
------------------------------------------------------ ----- ------------------ -----------------
Notes $'000 $'000 $'000 $'000
------------------------------------------------------ ----- -------- -------- ------- --------
Cash flows from operating activities
Cash generated from operations 31 43,023 26,096
Interest paid (1,811) (1,592)
Income taxes paid (61) (5,562)
------------------------------------------------------ ----- -------- -------- ------- --------
Net cash generated from operating activities 41,151 18,942
Investing activities
Purchase of intangible assets (2,513) (3,868)
Purchase of property, plant and equipment (7,905) (6,084)
Proceeds on disposal of property, plant and equipment 12 13
Interest received 30 70
------------------------------------------------------ ----- -------- -------- ------- --------
Net cash used in investing activities (10,376) (9,869)
Financing activities
Proceeds from borrowings 12,316 16,317
Repayment of borrowings (20,250) (8,538)
Repayment of leases (146) -
Dividends paid (8,977) (8,511)
Share buyback - (9,442)
------------------------------------------------------ ----- -------- -------- ------- --------
Net cash used in financing activities (17,057) (10,174)
------------------------------------------------------ ----- -------- -------- ------- --------
Net increase/(decrease) in cash and cash equivalents 13,718 (1,101)
Cash and cash equivalents at beginning of year 8,697 9,725
Exchange differences on cash and cash equivalents (15) 73
------------------------------------------------------ ----- -------- -------- ------- --------
Cash and cash equivalents at end of year 22,400 8,697
------------------------------------------------------ ----- -------- -------- ------- --------
The accompanying notes form an integral part of these financial
statements.
Company Statement of Cash Flows
for the year ended 31 December 2020
2020 2019
-------------------------------------------------- ----- ---------------- -----------------
Notes $'000 $'000 $'000 $'000
-------------------------------------------------- ----- ------- ------- ------- --------
Cash flows from operating activities
Cash used in operations 32 (402) (2,130)
Investing activities
Repayment of loans by subsidiary companies 8,974 14,085
Interest received 120 12
-------------------------------------------------- ----- ------- ------- ------- --------
Net cash generated from investing activities 9,094 14,097
Financing activities
Share buyback - (9,442)
Dividends paid (8,977) (8,511)
-------------------------------------------------- ----- ------- ------- ------- --------
Net cash used in financing activities (8,977) (17,953)
-------------------------------------------------- ----- ------- ------- ------- --------
Net decrease in cash and cash equivalents (285) (5,986)
Cash and cash equivalents at beginning of year 400 6,365
Exchange differences on cash and cash equivalents 2 21
-------------------------------------------------- ----- ------- ------- ------- --------
Cash and cash equivalents at end of year 117 400
-------------------------------------------------- ----- ------- ------- ------- --------
The accompanying notes form an integral part of these financial
statements.
Notes to the Financial Statements
for the year ended 31 December 2020
1 Accounting policies
1.1 General information
Trans-Siberian Gold plc ("the Company") is a UK-based resources
company, with the objective of acquiring and developing a portfolio
of quality gold-mining assets in Russia. The Company is a public
limited company, incorporated and domiciled in England and Wales
and has three subsidiaries based in the Russian Federation
(together, "the Group"), one of which holds the licences for the
Asacha (where gold production commenced in 2011) and Rodnikova
deposits. The Company's registered office is 39 Parkside Cambridge
CB1 1PN United Kingdom.
The registered number of the Company is 01067991. The Company's
shares are traded on the AIM Market of the London Stock
Exchange.
1.2 Basis of preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
These financial statements have been prepared in accordance with
International Accounting Standards (IAS) in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
The consolidated financial statements are prepared in US dollars
($), rounded to the nearest thousand.
The preparation of financial statements in accordance with IAS
and in conformity with the requirements of the Companies Act 2006,
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates. The areas involving a higher degree of judgement or
complexity, or where assumptions and estimates are significant to
the consolidated financial statements, are disclosed in note 2.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision only
affects that period or in the period of revision and future periods
if the revision affects both current and future periods.
Standards, amendments and interpretations effective in 2020
A number of new and amended standards and interpretations issued
by the IASB and endorsed by European Union have become effective
for the first time for financial periods beginning on (or after) 1
January 2020 and have been applied by the Group in these financial
statements. None of these new and amended standards and
interpretations had a significant effect on the Group because they
are either not relevant to the Group's activities or require
accounting which is consistent with the Group's current accounting
policies.
Standards, amendments and interpretations that are not yet
effective and have not been early adopted
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB and endorsed by
European Union that are effective in future accounting periods and
which have not been adopted early. None of these are expected to
have a significant effect on the Group.
1.3 Basis of consolidation
The consolidated financial statements of the Group include the
financial statements of Trans-Siberian Gold plc and its
subsidiaries. Where the Company has control over an investee, it is
classified as a subsidiary. The Company controls an investee if all
three of the following elements are present: power over the
investee, exposure to variable returns from the investee and the
ability of the investor to use its power to affect those variable
returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of
control. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from
the date on which control ceases. Inter-company transactions,
balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated but
considered an impairment indicator of the asset transferred. The
accounting policies and financial year ends of its subsidiaries are
consistent with those applied by the Company.
Business combinations
The consolidated financial statements incorporate the results of
the business combinations using the acquisition method of
accounting. In the consolidated statement of financial position,
the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included
in the consolidated statement of comprehensive income from the date
on which control is obtained.
1.4 Going concern
The Group's operations are cash generative and management
tightly control the level of committed expenditure to ensure that
the Group has sufficient resources available to meet its
liabilities as they fall due. Regular cash forecasts are reviewed
to assess the potential impact of factors such as changes in
commodity prices, production rates and the timing of capital
expenditure. The Group has reported an operating profit for the
year of $27.5 million, an operating cash inflow of $41.2 million
and net increase in cash of $13.7 million. The Directors have
reviewed the Group's cash flow forecast for the period to 31
December 2022 and carried out multiple scenario analysis of
potential downsides including future lockdowns of various length;
production, workforce and supply chain disruptions together with
reasonably possible changes in commodity prices; and scheduled
repayments of loan facilities. The Directors further stress tested
combinations of various scenarios identifying no significant cash
concerns. Based on these analyses, the Directors believe that the
Group has sufficient resources to continue in operational existence
for the foreseeable future. Furthermore, the Directors have
considered the impact of Horvik's acquisition discussed in note 35
on the going concern of the Group. In forming their opinion the
Directors have relied upon the public statements made by Horvik
about its future intentions for the Group, which outline its
commercial and financial rationale for the acquisition. While the
Directors are unable to provide surety that such intentions will be
enacted, they are not aware of any planned actions which may cast
doubt over the Group's future operational existence. The Directors
have also considered the change of control clause within the
Company's credit facilities with VTB and are comfortable that this
does not have an impact on the going concern status of the Group in
light of the Group's cash position and the outstanding loan balance
at 31 December 2020 and for the reasons outlined in note 23 and
note 35. Therefore the Directors believe that the Group will
continue as a going concern and have prepared the financial
statements on that basis.
1.5 Revenue
The Company's subsidiary TSG Asacha has entered into contracts
for the sale of refined gold and silver, whereby 100% of its
refined production is sold to Russian bank VTB. Revenue arising
from sales under these contracts is recognised when the price is
determinable and the refined gold and silver have been transferred
from the TSG Asacha's metal account to VTB in accordance with the
terms of the contract at which point the performance obligation is
met.
Revenue is measured based on the consideration to which the
Group expects to be entitled under the terms of a contract with a
customer. In most cases the consideration is determined by
reference to the gold market price at the point of transfer from
the metal account. Consideration typically falls due upon
delivery.
1.6 Intangible assets
Intangible assets relate to the Group's deferred exploration and
evaluation expenditure. When the Group incurs expenditure after it
has obtained legal rights to explore a specific area but before the
technical feasibility and commercial viability of extracting a
mineral resource are demonstrated, the costs of acquiring the
rights to such mining properties and subsequent exploration and
evaluation costs, including attributable employment costs, are
deferred until the expected recovery of costs is considered
probable by the successful exploitation or sale of the asset.
General overheads are expensed immediately. Depreciation on
property, plant and equipment used on exploration and evaluation
projects is charged to deferred costs whilst the projects are in
progress.
Exploration and evaluation costs are not amortised.
Where a feasibility study indicates that the future recovery of
costs is not probable, full provision is made in respect of any
deferred costs. Where mining properties are abandoned, deferred
expenditure is written off in full.
Exploration expenditure incurred prior to the Group obtaining
licencing rights is expensed as incurred.
1.7 Property, plant and equipment
Property, plant and equipment are recorded at historical cost
less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Depreciation of property, plant and equipment is calculated
using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, being:
Buildings 3 to 20 years
Plant and machinery 2 to 12 years
Office equipment 3 to 5 years
Motor vehicles 4 to 7 years
Assets in the course of construction are not depreciated.
The gain or loss arising on the disposal of an asset is
determined as the difference between the sale proceeds and the
carrying value of the asset, and is recognised in the income
statement.
Mining properties
Once the technical feasibility and commercial viability of the
project are demonstrated, the capitalised exploration and
evaluation expenditure, other than that on buildings, machinery and
equipment, related to that project is transferred to tangible
assets as mining properties.
Mining properties are depleted on 'unit of production basis'
calculated based on the ratio of gold mined during a period to the
total volume of gold to be mined based on the estimated commercial
resources.
Commercial resources are mineral resources that are considered
probable of economic extraction and include measured, indicated and
inferred resources. While inferred resources have a lower degree of
geological certainty, they are included in the depletion
calculation due to the geology of the ore body which can be
characterised as vein structures - due to the uniform nature of the
veins, their presence can be inferred without high concentration of
drilling. The effectiveness of this approach has been justified
over time, with a high conversion of inferred resource having been
extracted already without major deviations from forecast.
Changes in commercial resources affecting unit of production
calculations are dealt with prospectively over the revised
remaining resources.
1.8 Determination of mineral resources
The Group estimates its mineral resources based on information
compiled by Competent Persons as defined in accordance with the
2012 edition of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (the JORC code).
1.9 Non-current investments
In its separate financial statements, the Company recognises
investments in subsidiary companies involved in mining operations,
exploration and development at cost less any provision for
impairment.
1.10 Impairment of non-current assets
The carrying amount of the Group's non-current assets is
compared to the recoverable amount of the assets whenever events or
changes in circumstances indicate that the net book value may not
be recoverable. The recoverable amount is the higher of value in
use and the fair value less costs to sell.
Value in use is estimated by reference to the net present value
of expected future cash flows of the relevant cash generating unit.
Individual mining properties are considered to be separate income
generating units for this purpose, except where they would be
operated together as a single mining business.
If the recoverable amount is less than the carrying amount of an
asset, an impairment loss is recognised. The revised carrying
amounts are amortised in line with the Group's accounting
policy.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of the
conditions that originally resulted in the impairment. The reversal
is recognised in the income statement and is limited to the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised in the prior
reporting periods.
1.11 Inventories
Raw materials and consumables, which consist of fuel and
materials used in mining operations, spare parts and tools for
development activities are initially recognised at cost, and
subsequently valued at the lower of cost and net realisable
value.
Stockpiles comprise ore containing gold and are valued at the
lower of weighted average cost (including direct labour costs and
related overheads, allocated on a value/gold content) and net
realisable value (using assay data to estimate the amount of gold
contained in the stockpiles, adjusted for expected gold recovery
rates). Ore extracted is allocated to stockpiles based on estimated
grade, with grades below defined cut-off levels treated as waste
and expensed. While held in physically separate stockpiles, the
group blends the ore from each stockpile when feeding the
processing plant to achieve the resultant gold content. Ore
stockpiles which are blended together or with future ore mined when
fed to the plant are assessed as an input to the gold production
process to ensure the combined stockpiles are carried at the lower
of cost and net realisable value. Ore stockpiles which are not
blended in production are assessed separately to ensure they are
carried at the lower of cost and net realisable value.
The processing of ore in stockpiles occurs in accordance with
the Life of Mine ("LoM") processing plan that has been optimised
based on the known mineral resources, current plant capacity and
mine design. Ore tonnes contained in the stockpile which exceed the
annual tonnes to be milled as per the mine plan in the following
year, are classified as non-current inventory in the statement of
financial position.
Finished goods (comprising refined gold and silver) and work in
progress (including gold in circuit and gold dore) are stated at
the lower of weighted average cost and net realisable value. Cost
includes direct materials, direct labour costs and production
overheads, including depreciation and depletion of relevant
property, plant and equipment and mining properties. Net realisable
value represents the estimated selling price less all expected
costs to completion and costs to be incurred in selling and
distribution.
1.12 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short term highly liquid investments with
original maturities of three months or less.
1.13 Financial instruments
Financial assets and financial liabilities are recognised in the
Group statement of financial position when the Group becomes a
party to the contractual provisions of the instrument. Financial
assets and financial liabilities are only offset and the net amount
reported in the consolidated statement of financial position and
statement of comprehensive income when there is a currently
enforceable legal right to offset the recognised amounts and the
Group intends to settle on a net basis or realise the asset and
liability simultaneously.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Financial assets
All regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by
regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in
their entirety at either amortised cost or fair value, depending on
the classification of the financial assets.
Classification of financial assets
Financial assets that meet the following conditions are measured
subsequently at amortised cost using the effective interest rate
method:
-- The financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and,
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
The Group does not hold any financial assets that meet
conditions for subsequent recognition at fair value through profit
or loss ("FVTPL") or at fair value through other comprehensive
income ("FVTOCI").
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
("ECL") on financial assets that are measured at amortised cost
which comprise mainly trade receivables. The amount of expected
credit losses is updated at each reporting date to reflect changes
in credit risk since initial recognition of the respective
financial instrument. The Group always recognises lifetime ECL on
trade receivables. The expected credit losses on these financial
assets are estimated using a provision matrix based on the Group's
historical credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and an
assessment of both the current as well as the forecast direction of
conditions at the reporting date, including time value of money
where appropriate.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
Financial liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics. All purchases of
financial liabilities are recorded on trade date, being the date on
which the Group becomes party to the contractual requirements of
the financial liability. Unless otherwise indicated the carrying
amounts of the Group's financial liabilities approximate to their
fair values. The Group's financial liabilities consist only of
financial liabilities measured at amortised cost.
Financial liabilities measured subsequently at amortised
cost
Financial liabilities that are not (i) contingent consideration
of an acquirer in a business combination, (ii) held -- for --
trading, or (iii) designated as at FVTPL, are measured subsequently
at amortised cost using the effective interest method. The Group's
financial liabilities measured at amortised cost comprise trade and
other payables, and loans and borrowings. The effective interest
method is a method of calculating the amortised cost of a financial
asset/liability and of allocating interest income/expense over the
relevant period. The effective interest rate is the rate that
discounts estimated future cash receipts/payments through the
expected life of the financial asset/liability or, where
appropriate, a shorter period.
Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when
the Group has extinguished its contractual obligations, it expires
or is cancelled. Any gain or loss on derecognition is taken to the
statement of comprehensive income.
1.14 Equity instruments
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset.
The Group's ordinary shares are classified as equity
instruments.
Where the Company purchases its own equity shares (treasury
shares), the consideration paid, including any directly
attributable incremental costs is deducted from equity attributable
to the Company's equity holders until the shares are cancelled or
re-issued. Where such ordinary shares are subsequently re-issued,
any consideration received, net of any directly attributable
incremental transaction costs, is included in equity attributable
to the Company's equity holders.
1.15 Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
Current tax is the expected tax payable or recoverable on the
taxable profit or loss for the year, using rates enacted at the
reporting date and any adjustments to the tax payable in respect of
previous years.
Deferred tax
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated
financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor
taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantively enacted by
the reporting date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except where the
timing of the reversal of the temporary difference is controlled by
the Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
Uncertain tax positions
The Group's uncertain tax positions are reassessed by management
at the end of each reporting period. Liabilities are recorded for
income tax positions that are open to significant judgement and
interpretation of tax laws that have been enacted or substantively
enacted by the end of the reporting period and which are likely to
result in additional taxes being levied if the positions were to be
challenged by the tax authorities. Adjustments for uncertain tax
positions, other than interest and fines, are recorded within the
income tax charge. Adjustments for uncertain tax positions in
respect of interest and fines are recorded within finance expenses
and administrative expenses respectively.
1.16 Provisions
Provisions for decommissioning, environmental restoration and
legal claims are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation and the amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Group companies are generally required to restore mine and
processing sites at the end of their producing lives to a condition
acceptable to the relevant authorities and consistent with the
Group's environmental policies. The expected cost of any committed
decommissioning or restoration programme, discounted to its net
present value where the effect of discounting is material, is
provided and capitalised at the beginning of each project. The
capitalised cost is amortised over the life of the operation and
the increase in the net present value of the provision for the
expected cost is included with interest and similar charges.
The costs of on-going programmes to prevent and control
pollution and to rehabilitate the environment are charged to profit
or loss as incurred.
1.17 Share-based payments
The Company makes equity-settled share-based payments to certain
Group employees under the terms of its LTIP scheme (note 30). The
fair value of options granted, measured by reference to the grant
date fair value, is recognised as an expense over a vesting period,
with a corresponding increase in equity.
The total amount to be expensed is determined by reference to
the fair value of the options granted:
-- including any market performance conditions such as the
Company's share price;
-- excluding the impact of any service and non-market
performance vesting conditions such as profitability, growth
targets and remaining an employee of the Group for a specified time
period; and
-- including the impact of any non-vesting conditions.
At the end of each reporting period, the Group revises its
estimate of the number of options that are expected to vest based
on the non-market vesting conditions and service conditions. It
recognises the impact of the revision to original estimates, if
any, in the statement of comprehensive income, with a corresponding
adjustment to equity.
When the options are exercised, the Company issues new shares or
utilises existing treasury shares. The proceeds received net of any
directly attributable transaction costs are credited to equity.
1.18 Leases
The Group accounts for a contract, or a portion of a contract,
as a lease when it conveys the right to use an asset for a period
of time in exchange for consideration. Leases are those contracts
that satisfy the following criteria:
-- There is an identified asset;
-- The Group obtains substantially all the economic benefits
from use of the asset; and,
-- The company has the right to direct use of the asset.
The Group considers whether the supplier has substantive
substitution rights. If the supplier does have those rights, the
contract is not identified as giving rise to a lease. In
determining whether the Group obtains substantially all the
economic benefits from use of the asset, the Group considers only
the economic benefits that arise from use of the asset. In
determining whether the Group has the right to direct use of the
asset, the Group considers whether it directs how and for what
purpose the asset is used throughout the period of use. If the
contract or portion of a contract does not satisfy these criteria,
the Group applies other applicable IFRSs rather than IFRS 16.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless this is not readily determinable, in which case
the Group's incremental borrowing rate on commencement of the lease
is used. Variable lease payments are only included in the
measurement of the lease liability if they depend on an index or
rate. In such cases, the initial measurement of the lease liability
assumes the variable element will remain unchanged throughout the
lease term. Other variable lease payments are expensed in the
period to which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- Amounts expected to be payable under any residual value
guarantee;
-- The exercise price of any purchase option granted in favour
of the Group if it is reasonably certain to assess that option;
and,
-- Any penalties payable for terminating the lease, if the term
of the lease has been estimated based on the termination option
being exercised.
Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- Lease payments made at or before commencement of the
lease;
-- Initial direct costs incurred; and,
-- The amount of any provision recognised where the group is
contractually required to dismantle, remove or restore the leased
asset.
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease.
When the Group revises its estimate of the term of any lease
(because, for example, it re-assesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted using a revised
discount rate. The carrying value of lease liabilities is similarly
revised when the variable element of future lease payments
dependent on a rate or index is revised, except the discount rate
remains unchanged. In both cases an equivalent adjustment is made
to the carrying value of the right-of-use asset, with the revised
carrying amount being amortised over the remaining (revised) lease
term. If the carrying amount of the right-of-use asset is adjusted
to zero, any further reduction is recognised in profit or loss.
Short-term leases
Rentals payable under short-term (less than 12 months) low value
leases, including any lease incentives received, are charged to
profit or loss on a straight line basis over the term of the
relevant lease except where another more systematic basis is more
representative of the time pattern in which economic benefits from
the leased asset are consumed.
1.19 Foreign exchange
Functional and presentation currency
Items included in the financial information of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency). The consolidated financial information is presented in
US dollars ($), which is the functional and presentation currency
of the Company and the functional currency of its subsidiaries. The
exchange rates on 31 December 2020 were GBP1:$1.3649 (2019:
GBP1:$1.3210) and $1:RUB73.8757 (2019: $1:RUB61.9057). The average
rates applied to transactions during the year were GBP1:$1.2837
(2019: GBP1:$1.2765) and $1:RUB72.3230 (2019: $1:RUB64.6184).
Transactions and balances
Foreign currency transactions are translated into the functional
currency at the average exchange rate ruling during the month in
which the transactions occur. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
profit or loss. Foreign exchange gains and losses resulting from
the translation of cash, cash equivalents and borrowings
denominated in foreign currencies are shown as financing
activities; all other foreign exchange gains and losses are shown
as operating activities.
1.20 Borrowing costs
The Group capitalises borrowing costs directly attributable to
the acquisition, construction or production of a qualifying asset
(one that takes a substantial period of time to get ready for use
or sale) as part of the cost of that asset. Finance costs incurred
in respect of the Group's general borrowings are expensed in profit
or loss as incurred.
1.21 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker has been identified as the Chief
Executive Officer.
The Group has one operating segment in Russia which has
production, exploration and development activities. Its operating
results are regularly reviewed by the Group's chief operating
decision maker in order to make decisions about the allocation of
resources and to assess its performance. The Group's activities in
the United Kingdom are of an administrative and corporate nature
and do not form part of the operating segment.
2 Judgements and key sources of estimation uncertainty
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.
Key sources of estimation uncertainty
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results.
The more significant areas requiring the use of management
estimates and assumptions relate to mineral resources that are the
basis of future cash flow estimates and unit-of-production
depreciation, depletion and amortisation calculations;
decommissioning, site restoration, environmental costs and closure
obligations; estimates of recoverable gold and other materials; and
asset impairments.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below:
Mining properties and property plant and equipment
The recoverability of the amounts shown in the Group statement
of financial position in relation to mining properties and
property, plant and equipment (and also the carrying value of the
Company's investments in its subsidiaries) are dependent upon
compliance with the terms of the relevant mineral rights licences,
extensions of the terms of those licences beyond their current
expiry dates, the political, economic and legislative stability of
the regions in which the Group operates, the Group's ability to
maintain the necessary financing to fulfil its obligations as they
arise, the successful extraction of the defined mineral resources
and the future profitable production or proceeds from the disposal
of properties.
Mineral resource estimates
Mineral resource estimates are estimates of the amount of gold
that can be economically and legally extracted from the Group's
mining properties. Such resource estimates and their changes may
impact the Group's reported financial position and results, in the
following way:
-- The carrying value of exploration and evaluation assets,
mining properties and property, plant and equipment may be affected
due to changes in estimated future cash flows;
-- Depreciation and amortisation charges in the statement of
comprehensive income may change where such charges are determined
using the unit of production method;
-- Provisions for rehabilitation and environmental provisions
may change where resource estimate changes affect expectations
about when such activities will occur and the associated cost of
these activities.
The Group estimates mineral resources based on information
compiled by appropriately qualified Competent Persons relating to
the geological and technical data on the size, depth, shape and
grade of the ore body and suitable production techniques and
recovery rates. Such an analysis requires complex geological
judgements to interpret the data. The estimation of recoverable
resources is based upon factors such as estimates of foreign
exchange rates, commodity prices, future capital requirements and
production costs, along with geological assumptions and judgements
made in estimating the size and grade of the ore body.
The Group's minerals resources include measured, indicated and
inferred resources. While inferred resources have a lower degree of
geological certainty, they are included due to the geology of the
ore body which can be characterised as vein structures - due to the
uniform nature of the veins, their presence can be inferred without
high concentration of drilling. The effectiveness of this approach
has been justified over time, with a high conversion of inferred
resource having been extracted already without major deviations
from forecast.
The Group reviews its mineral resource estimates on an annual
basis. Similar to previous years, the Group obtains a JORC (Joint
Ore Reserves Committee) compliant mineral resource (not a mineral
reserve) statement from a third party. The difference between
resources and reserves is the level of confidence of the presence
of economically viable minerals. As defined by JORC, resources meet
a threshold of having 'reasonable prospects of eventual economic
extraction'. As the economic assumptions used may change and as
additional geological information is produced during the operation
of the mine, the estimates of mineral resource may change.
Ore stocks
Stock is valued at the lower of cost or net realisable value.
Costs that are incurred in or benefit the production process are
accumulated as ore stockpiles, gold in process and gold bullion.
Although the quantities of recoverable metal are reconciled by
comparing the grades of ore to the quantities of gold and silver
actually recovered (metallurgical balancing), the nature of the
process inherently limits the ability to precisely monitor
recoverability levels. Net realisable value tests are performed at
least annually and represent the estimated future sales price of
the product based on contained gold and metals prices, less
estimated costs to complete production and bring the product to
sale. These net realisable tests take into account management's
estimate of the maximum values to be realised from ore stockpiles,
in some instances through blending of different ore stockpile
grades, prior to these being added to future processing plant
feeds. Judgement is required in assessing whether stockpiles of
different grades should be tested individually, or tested as inputs
to the gold production process, as detailed in the Group's
accounting policy.
Decommissioning, site restoration and environmental costs
The Group's mining and exploration activities are subject to
various laws and regulations governing the protection of the
environment. The Group recognises management's best estimate for
asset retirement obligations in the period in which they are
incurred. Actual costs incurred in future periods could differ
materially from the estimates. Additionally, future changes to
environmental laws and regulations, life of mine estimates and
discount rates could affect the carrying amount of this provision.
Such changes could similarly impact the useful lives of assets
depreciated on a straight-line-basis, where those lives are limited
to the life of mine. This is discussed further in note 26.
Critical judgements
The following judgements (apart from those involving estimates)
have had the most significant effect on amounts recognised in the
financial statements.
Deferred tax
The Group has incurred trading losses in previous periods which
give rise to potential deferred tax assets. The recognition of the
deferred tax asset is dependent upon the Group making sufficient
taxable profits in future periods to utilise those losses. This is
discussed further in note 27.
Uncertain tax positions
The Group's uncertain tax positions are reassessed by management
at the end of each reporting period. Liabilities are recorded for
income tax positions that are open to significant judgement and
interpretation of tax laws that have been enacted or substantively
enacted by the end of the reporting period and which are likely to
result in additional taxes being levied if the positions were to be
challenged by the tax authorities. During the year a provision of
$5,329,000 has been made in respect of the ambiguity relating to
certain tax deductions claimed by the Group in Russia. While
management are of the opinion, based on their interpretation of the
relevant tax legislation, that the tax deductions have been
lawfully claimed, it is probable that certain tax positions taken
by the Group could be challenged by the Russian tax authorities.
Accordingly, the Group has created a provision for the associated
taxes. This is discussed further in note 26.
Determination of functional currency
The Group has determined the US dollar as the functional
currency of its Russian operating subsidiary TSG Asacha on the
basis that it is the currency that influences its sale prices
(first primary indicator) and in which funds from financing
activities are generated and retained (secondary indicators).
Significant judgement has been exercised in determining the
functional currency of TSG Asacha, since the secondary primary
indicator related to the currency influencing TSG Asacha's labour,
materials and other costs of providing goods or services is the
Russian rouble.
3 Segment information
The Group's operations are entirely focused on gold production
and exploration and development activities within the Russian
Federation, with its corporate head office in the UK.
The operating segment has been identified on the basis of
internal reports about the components of the Group.
The Group has one reportable segment, being operations in
Russia, whose accounting policies are in line with those set out in
note 1. The operating results of this segment are regularly
reviewed by the Group's chief operating decision maker in order to
make decisions about the allocation of resources and to assess
their performance.
With the exception of UK administrative costs amounting to
$4,298,000 (2019: $2,117,000), the numbers in the primary
statements reflect the results of the sole operating segment. All
revenue arises from the production of gold with silver as a
by-product which is sold to one customer in Russia. All non-current
assets are located in Russia.
4 Revenue
2020 2019
$'000 $'000
---------------------------- ------ ------
Revenue analysed by product
Gold 79,336 61,257
Silver 1,639 1,851
---------------------------- ------ ------
80,975 63,108
---------------------------- ------ ------
5 Exceptional expenses
The exceptional expenses relate entirely to the settlement of
the Federal Service for Supervision of Use of Natural Resources,
RosPrirodNadzor's ('RPN') claim over the rates applied by the TSG
Asacha in its calculations of payments due for disposal of waste
materials. The claim was disputed by management and was brought
before the first instance court who decided in TSG Asacha's favour
on 4 October 2019. Subsequently, RPN appealed the decision and
claim settlement in the amount of $1,987,000 was agreed in August
2020.
6 Operating profit
2020 2019
$'000 $'000
--------------------------------------------------------------------- ------ ------
Operating profit for the year is stated after charging:
Exploration expenditure incurred prior to obtaining licencing rights 117 507
Depreciation/depletion of owned property, plant and equipment 12,883 11,999
Depreciation of right of use assets 131 -
Loss on disposal of property, plant and equipment 194 285
Share-based payments 1,560 -
Short-term lease charges 124 272
--------------------------------------------------------------------- ------ ------
7 Auditors' remuneration
Fees payable to the Company's auditors and associates:
2020 2019
$'000 $'000
---------------------------------------------------------------- ------ ------
For audit services
Audit of the financial statements of the Group and Company 113 66
Audit of the financial statements of the Company's subsidiaries 122 121
---------------------------------------------------------------- ------ ------
235 187
---------------------------------------------------------------- ------ ------
For other services
Taxation compliance services 10 -
All other non-audit services 130 -
---------------------------------------------------------------- ------ ------
140 -
---------------------------------------------------------------- ------ ------
8 Employees
The average monthly number of persons (including directors)
employed by the Group and Company during the year was:
Group Company
--------------- ---------------- ----------------
2020 2019 2020 2019
Number Number Number Number
--------------- ------- ------- ------- -------
Operations 537 564 - -
Administration 71 135 8 7
--------------- ------- ------- ------- -------
608 699 8 7
--------------- ------- ------- ------- -------
Their aggregate remuneration comprised:
Group Company
---------------------- -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
---------------------- ------ ------ ------ ------
Wages and salaries 13,772 13,789 1,556 1,177
Social security costs 3,032 3,189 - -
Share-based payments 1,560 - 1,560 -
---------------------- ------ ------ ------ ------
18,364 16,978 3,116 1,177
---------------------- ------ ------ ------ ------
-- $540,000 (2019: $nil) of employee costs have been capitalised
within intangible assets and $757,000 (2019: $643,000) within
property, plant and equipment.
-- $533,000 (2019: $837,000) of employee costs were charged to
inventories.
-- Employee benefit expense charged to the statement of
comprehensive income amounted to $16,534,000 (2019:
$15,498,000).
9 Directors' remuneration
2020 2019
$'000 $'000
------------------------------------- ------ ------
Remuneration for qualifying services 3,130 1,033
------------------------------------- ------ ------
Remuneration disclosed above includes the following amounts paid
to the highest paid director:
2020 2019
$'000 $'000
------------------------------------- ------ ------
Remuneration for qualifying services 1,730 568
------------------------------------- ------ ------
The following table shows the directors who served during the
year or in the previous year together with an analysis of their
remuneration:
Salary Fees Bonus Share-based payments Total 2020 Total 2019
$'000 $'000 $'000 $'000 $'000 $'000
------------------------ ------ ------ ------ -------------------- ---------- ----------
Executive directors
Alexander Dorogov 336 - 473 921 1,730 568
Eugene Antonov 250 - 234 377 861 272
Non-executive directors
Charles Ryan - 58 - 50 108 37
Robert Sasson - 58 - 50 108 37
Stewart Dickson - 13 - 112 125 11
Lou Naumovski - 90 - - 90 71
Florian Fenner - 58 - 50 108 37
------------------------ ------ ------ ------ -------------------- ---------- ----------
586 277 707 1,560 3,130 1,033
------------------------ ------ ------ ------ -------------------- ---------- ----------
During the year, management consultancy services have been
acquired on an arms length basis from FELDI Limited, of which
Stewart Dickson is a director and a shareholder, for $206,000
(2019: $186,000).
At the reporting date, the Directors serving during the year had
the following beneficial interests in the shares of the
Company:
Alexander Eugene Charles Florian Robert Stewart
Dorogov Antonov Ryan Fenner Sasson Dickson
Number Number Number Number Number Number
---------------------------------- --------- -------- --------- ----------- --------- --------
Shares
At 1 January 2019 - - 6,076,306 5,145,792 709,279 -
Additions 229,567 80,249 1,147,841 - 399,999 29,999
Disposals - - - (1,715,264) - -
---------------------------------- --------- -------- --------- ----------- --------- --------
At 31 December 2019 229,567 80,249 7,224,147 3,430,528 1,109,278 29,999
---------------------------------- --------- -------- --------- ----------- --------- --------
Additions - - - - - -
Disposals - - - - - -
---------------------------------- --------- -------- --------- ----------- --------- --------
At 31 December 2020 229,567 80,249 7,224,147 3,430,528 1,109,278 29,999
---------------------------------- --------- -------- --------- ----------- --------- --------
Alexander Eugene Charles Florian Robert Stewart
Dorogov Antonov Ryan Fenner Sasson Dickson
---------------------------------- --------- -------- --------- ----------- --------- --------
Percentage of total voting rights
At 31 December 2020 0.26% 0.09% 8.29% 3.94% 1.27% 0.03%
---------------------------------- --------- -------- --------- ----------- --------- --------
10 Pension arrangements
The Group does not provide a pension scheme for its directors or
employees (2019: none).
11 Finance income
2020 2019
$'000 $'000
-------------------------------------------- ------ ------
Interest income on short-term bank deposits 30 70
-------------------------------------------- ------ ------
12 Finance expenses
2020 2019
$'000 $'000
--------------------------------------- ------ ------
Interest payable on borrowings 1,703 1,548
Accretion of decommissioning provision 81 94
--------------------------------------- ------ ------
1,784 1,642
--------------------------------------- ------ ------
13 Earnings per share
The basic earnings per share for the year amounted to 23.25
cents per share (2019: 9.17 cents per share). The diluted earnings
per share for the year amounted to 22.60 cents per share (2019:
9.17 cents per share).
The calculation of basic earnings per 10p ordinary share is
based on the retained profit for the year of $20,261,000 (2019:
$9,006,000) and on 87,158,508 (2019: 98,291,305) ordinary shares,
being the weighted average number of ordinary shares in issue
(excluding treasury shares) and ranking for dividends during the
year.
Diluted earnings per ordinary share is calculated by adjusting
the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares. On 5
June 2020 and 27 August 2020 the Company awarded 4,897,988 of
options and contingently issuable shares under two new Long Term
Incentive Plans ('LTIP') which comprise performance based equity
and time restricted equity (note 30). Prior to this, the Company
did not have any dilutive potential ordinary shares. The number of
contingently issuable shares included in the diluted earnings per
share calculation is based on the number of shares that would be
issuable if the end of the reporting period was the end of the
contingency period.
The calculation of diluted earnings per 10p ordinary share is
based on the retained profit for the year of $20,261,000 and on
89,663,931 ordinary shares, being the weighted average number of
ordinary shares in issue (excluding treasury shares) of 87,158,508
adjusted for 2,505.423 of contingently issuable shares.
14 Income tax on profit
2020 2019
$'000 $'000
----------------------------------------------------------------- ------ ------
Current tax
Current tax - UK Corporation tax - -
Current tax - Russian Corporation tax 8,347 4,164
Adjustments to Russian Corporation tax in respect of prior years - (933)
----------------------------------------------------------------- ------ ------
Total current tax 8,347 3,231
----------------------------------------------------------------- ------ ------
Total current tax 8,347 3,231
----------------------------------------------------------------- ------ ------
Deferred tax
Origination and reversal of temporary differences (566) (427)
Adjustments in respect of prior years - 785
----------------------------------------------------------------- ------ ------
Total deferred tax (566) 358
----------------------------------------------------------------- ------ ------
Total tax charge for the year 7,781 3,589
----------------------------------------------------------------- ------ ------
Factors affecting corporation tax for the year
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits of the consolidated entities as
follows:
2020 2019
$'000 $'000
---------------------------------------------------------------------------------- ------ ------
Profit before taxation 28,042 12,595
---------------------------------------------------------------------------------- ------ ------
Expected tax charge based on the UK corporation tax rate of 19.00% (2019: 19.00%) 5,328 2,393
Tax effect of expenses that are not deductible in determining taxable profit 883 220
Effect of overseas tax rates 82 139
Over provided in prior years - (933)
Deferred tax adjustments in respect of prior years - 785
Foreign exchange differences 1,005 730
Unrecognised taxable losses carried forward 483 255
---------------------------------------------------------------------------------- ------ ------
Taxation charge for the year 7,781 3,589
---------------------------------------------------------------------------------- ------ ------
Factors affecting future tax charge
The main rate of UK corporation tax in the year was 19%. During
the year, legislation was enacted to maintain the corporation tax
rate at 19% from 1 April 2021, instead of reducing to 17% as
previously announced. On 10 March 2021, the UK government announced
that the corporation tax rate would increase from 19% to 25% from 1
April 2023. As the legislation was not substantively enacted at the
reporting date, deferred tax balances continue to be recognised at
19%.
15 Dividends
2020 2019
$'000 $'000
------------------------------------------------------- ------ ------
Final dividend for 2018 of $0.009 per ordinary share - 784
Interim dividend for 2018 of $0.052 per ordinary share - 5,722
Interim dividend for 2019 of $0.023 per ordinary share - 2,005
Final dividend for 2019 of $0.023 per ordinary share 2,005 -
Interim dividend for 2020 of $0.08 per ordinary share 6,972 -
------------------------------------------------------- ------ ------
8,977 8,511
------------------------------------------------------- ------ ------
16 Intangible assets
Deferred exploration and evaluation costs
Group $'000
--------------------------------------- -----------------------------------------
Cost
At 1 January 2019 -
--------------------------------------- -----------------------------------------
Additions 3,868
--------------------------------------- -----------------------------------------
At 31 December 2019 3,868
Additions 2,513
--------------------------------------- -----------------------------------------
At 31 December 2020 6,381
--------------------------------------- -----------------------------------------
Amortisation
At 1 January 2020 and 31 December 2020 -
--------------------------------------- -----------------------------------------
Carrying amount
At 31 December 2020 6,381
--------------------------------------- -----------------------------------------
At 31 December 2019 3,868
--------------------------------------- -----------------------------------------
At 1 January 2019 -
--------------------------------------- -----------------------------------------
The Company had no intangible assets at 31 December 2020 or 31
December 2019.
Additions in the year relate to the evaluation of the Rodnikova
gold deposit and exploration of Vein 25 North ("V25N").
Rodnikova is a high-grade gold and silver epithermal deposit
located in close proximity to the Company's operating Asacha Gold
Mine. It is estimated to contain 1Moz of gold with an average grade
of 5.3g/t. In April 2019 the Federal Agency for Subsoil Use
("Rosnedra") issued a licence to the Company's wholly owned
subsidiary TSG Asacha for the development and exploration of the
Rodnikova deposit for a tenure of 20 years.
V25N was discovered in September 2019 following a successful
drilling campaign. It is located approximately 400 metres north of
Vein 25 within the East Zone of the Company's operating Asacha Gold
Mine.
17 Property, plant and equipment
Mining Plant and Office Assets under
properties Buildings machinery equipment Motor vehicles construction Total
Group $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
Cost
At 1 January 2019 88,833 84,415 21,906 419 5,691 1,373 202,637
Additions 2,024 735 307 21 1,895 1,451 6,433
Disposals - (10) (1,184) (47) (26) - (1,267)
Transfers - 389 667 - - (1,056) -
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
At 31 December
2019 90,857 85,529 21,696 393 7,560 1,768 207,803
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
Additions 5,579 - 628 26 1,254 173 7,660
Disposals (260) (152) (2,076) (25) (336) - (2,849)
Transfers - - 1,733 - (666) (1,067) -
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
At 31 December
2020 96,176 85,377 21,981 394 7,812 874 212,614
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
Depreciation
At 1 January 2019 41,403 54,633 11,920 399 2,977 183 111,515
Depreciation
charge 5,434 5,255 2,289 16 1,021 - 14,015
Disposals - (10) (899) (47) (13) - (969)
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
At 31 December
2019 46,837 59,878 13,310 368 3,985 183 124,561
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
Depreciation
charge 5,380 5,038 2,471 15 1,379 - 14,283
Disposals (137) (37) (2,022) (20) (328) - (2,544)
Transfers - - 111 - (111) - -
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
At 31 December
2020 52,080 64,879 13,870 363 4,925 183 136,300
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
Carrying amount
At 31 December
2020 44,096 20,498 8,111 31 2,887 691 76,314
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
At 31 December
2019 44,020 25,651 8,386 25 3,575 1,585 83,242
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
At 1 January 2019 47,430 29,782 9,986 20 2,714 1,190 91,122
----------------- ---------------- --------- ---------------- ---------- -------------- --------------- -------
The Company had no property, plant and equipment at 31 December
2020 or 31 December 2019.
Bank borrowings are secured over certain property, plant and
equipment with the net book value of $13,315,000 as at 31 December
2020 (2019: $16,078,874.39) (note 23).
Capitalisation of depreciation and interest
-- $417,000 (2019: $198,000) of the depreciation charge is
included in additions to mining properties.
-- $nil (2019: $66,000) of the depreciation charge is included
in additions to assets under construction.
-- $984,000 (2019: $1,752,000) of the depreciation and mining
properties' depletion charges are included in inventory.
-- $86,000 (2019: $nil) and $1,000 (2019: $43,000) of interest
expense is included within additions to mining properties and
assets under construction respectively.
Mining properties
Mining properties assets relate to the Asachinskoye (Asacha)
mining licence held by the Company's subsidiary TSG Asacha.
On 8 September 1994, the Kamchatka Department of the Geological
Committee of the Russian Ministry for Natural Resources issued a
licence, after tender, to TSG Asacha for the exploration and
development of the Asacha minerals deposit in Kamchatka. The
licence includes the right to extract gold and silver and, pursuant
to the decision of the Federal Agency on Subsoil Use on 12
September 2013, its term was extended for five years until 1
September 2018. On 26 June 2018 the Group received a further
six-year extension to the licence term until 31 December 2024.
Impairment review
During the year there were no impairment triggers requiring an
impairment review under IAS 36 "Impairment of assets".
18 Investments in subsidiaries
Group Company
-------------- --------------
2020 2019 2020 2019
Notes $'000 $'000 $'000 $'000
---------------------------- ----- ------ ------ ------ ------
Investments in subsidiaries 19 - - 73,976 73,976
Loans to subsidiaries - - - 8,974
---------------------------- ----- ------ ------ ------ ------
- - 73,976 82,950
---------------------------- ----- ------ ------ ------ ------
The loans to subsidiaries were unsecured, bore interest between
6% and 8% and were fully repaid during the year.
Movements in investments in subsidiaries
Investments in subsidiaries Loans to subsidiaries Total
$'000 $'000 $'000
----------------------------- --------------------------- --------------------- --------
Cost
At 1 January 2019 73,976 22,302 96,278
Additions (interest accrued) - 757 757
Repayments - (14,085) (14,085)
----------------------------- --------------------------- --------------------- --------
At 31 December 2019 73,976 8,974 82,950
----------------------------- --------------------------- --------------------- --------
Additions (interest accrued) - 113 113
Repayments - (9,087) (9,087)
----------------------------- --------------------------- --------------------- --------
At 31 December 2020 73,976 - 73,976
----------------------------- --------------------------- --------------------- --------
Carrying amount
At 31 December 2020 73,976 - 73,976
----------------------------- --------------------------- --------------------- --------
At 31 December 2019 73,976 8,974 82,950
----------------------------- --------------------------- --------------------- --------
At 1 January 2019 73,976 22,302 96,278
----------------------------- --------------------------- --------------------- --------
19 Subsidiaries
Details of the Company's subsidiaries at 31 December 2020 are as
follows:
Name of Registered Nature of Class of % Held
undertaking office business shares held Direct
---------------------------------- --------------------------------- --------------- --------------------- -------
Office 1, 45 floor, 12 Vostok
tower, Presnenskaya nab, 123112
OOO Trans-Siberian Gold Management Moscow, Russian Federation Administration Participating shares 100
Office 7, 17 Murmanskaya St,
684000 Yelizovo, Kamchatka
JSC TSG Asacha Region, Russian Federation Mining Common shares 100
---------------------------------- --------------------------------- --------------- --------------------- -------
On 21 April 2021, the Company's wholly owned subsidiary AO
Trevozhnoye Zarevo ("TZ") changed its name to Joint-Stock Company
TSG Asacha ("JSC TSG Asacha" or "TSG Asacha").
On 2 February 2021, the Company incorporated a new subsidiary
company in Russia, OOO Rodnikovoe, of which it owns 100% of the
participating interest. Rodnikovoe's primary activity is to develop
and mine Rodnikova gold deposit (note 16).
20 Inventories
Group Company
------------------------------ -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
------------------------------ ------ ------ ------ ------
Non-current:
Ore stocks - 1,370 - -
------------------------------ ------ ------ ------ ------
- 1,370 - -
------------------------------ ------ ------ ------ ------
Current:
Gold in progress 1,786 1,666 - -
Silver in progress 199 76 - -
Ore stocks 8,062 4,926 - -
Raw materials and consumables 6,111 8,689 - -
------------------------------ ------ ------ ------ ------
16,158 15,357 - -
------------------------------ ------ ------ ------ ------
16,158 16,727 - -
------------------------------ ------ ------ ------ ------
Finished silver, gold in progress, silver in progress and ore
stocks include mining properties depletion $984,000 (2019:
$1,752,000).
21 Trade and other receivables
Group Company
-------------------------------------- -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
-------------------------------------- ------ ------ ------ ------
Trade receivables - 163 - -
Receivables from subsidiary companies - - 651 2,681
Other receivables 1,774 1,149 61 13
Prepayments 3,289 1,975 298 56
-------------------------------------- ------ ------ ------ ------
5,063 3,287 1,010 2,750
-------------------------------------- ------ ------ ------ ------
Amounts receivable from subsidiary companies in the prior year
included a short-term loan of $1,361,000. This loan was unsecured,
bore no interest and was fully repaid during the year. The
remaining amounts receivable from subsidiary companies represent
trading balances, are interest free, unsecured and repayable on
demand.
22 Trade and other payables
Group Company
------------------------------------ -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
------------------------------------ ------ ------ ------ ------
Trade payables 2,360 2,716 595 135
Amounts due to subsidiary companies - - 35 42
Social security and other taxes 944 21 - -
Other payables 2,374 3,146 - -
Accruals 242 98 242 98
------------------------------------ ------ ------ ------ ------
5,920 5,981 872 275
------------------------------------ ------ ------ ------ ------
Amounts due to subsidiary companies are unsecured, interest free
and repayable on demand.
23 Borrowings
Group Company
---------------- -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
---------------- ------ ------ ------ ------
Current:
Bank borrowings 7,765 9,502 - -
Equipment loans 415 279 - -
---------------- ------ ------ ------ ------
8,180 9,781 - -
---------------- ------ ------ ------ ------
Non-current:
Bank borrowings 5,410 13,432 - -
Equipment loans 1,559 1,900 - -
---------------- ------ ------ ------ ------
6,969 15,332 - -
---------------- ------ ------ ------ ------
15,149 25,113 - -
---------------- ------ ------ ------ ------
Movement in borrowings is analysed as follows:
Group Company
-------------------------------------------------- ----------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
-------------------------------------------------- -------- ------- ------ ------
At 1 January 25,113 17,093 - -
Proceeds from bank borrowings 11,806 13,683 - -
Repayment of bank borrowings and accrued interest (19,968) (8,027) - -
Proceeds from equipment loans 510 2,634 - -
Repayment of equipment loans and accrued interest (312) (511) - -
Foreign exchange on financing activity (2,000) 241 - -
-------------------------------------------------- -------- ------- ------ ------
At 31 December 15,149 25,113 - -
-------------------------------------------------- -------- ------- ------ ------
Bank borrowings
On 29 May 2020, the Group's wholly owned subsidiary TSG Asacha
entered into an agreement with VTB Bank for a $10 million revolving
credit line for a period of 3 years. The new facility replaced the
existing $5 million credit line which expired on 20 June 2020 and
will provide additional working capital and short-term liquidity
for the Group.
The interest rate on the new facility has been reduced from 6.2%
to 5.2% per annum. The credit agreement retains customary
representations and warranties from TSG Asacha to VTB and is
secured against the equity and fixed assets of TSG Asacha. Certain
amounts drawn down under the credit line must be repaid within one
year. TSG Asacha also retains its obligation to sell gold
exclusively to VTB Bank.
Furthermore, the Credit Committee of VTB agreed to lower the
current interest rate on a separate existing Russian
rouble-denominated credit line, which was provided to TSG Asacha in
2019 for a 4-year term at an annual interest rate of 10.7%. A
floating interest rate is now set on this existing facility,
calculated as 2.2% over the lending rate of the Russian Central
Bank. At 31 December 2020 the outstanding balance on this facility
amounted to RUB458 million (approximately $6.2 million). The
facility is secured against mining properties and buildings of TSG
Asacha.
The credit facilities with VTB bank contain a protective clause
permitting the lender to require early repayment of the loan if, as
a result of a change in the Company's controlling beneficiary
owners, circumstances exist which may imply that the credit
facility may not be repaid. On the basis that the Group is in a net
cash position, it can repay the loan at any time should it be
called upon. Early repayment has not been requested by VTB. This
coupled with the fact that VTB bank is also the financial adviser
to Horvik and intends to finance the cash consideration payable by
Horvik to TSG's shareholders (note 35) using debt to be provided
under a facilities agreement between VTB bank and Horvik, the
Directors are of the opinion that VTB bank will not request early
repayment following Horvik's acquisition.
Equipment loans
TSG Asacha entered into 8 separate equipment loans with AO VTB
Leasing for the total amount of RUB 206 million ($3.1 million) to
finance the acquisition of certain heavy machinery and equipment.
The loans are for a period from 3 to 5 years, secured over the
respective acquired assets and bear average annual effective
interest rate of 14%.
The effective interest rate is determined by discounting future
payments through the life of the loan. The future payments include
interest as well as arrangement fees and asset insurance.
24 Leases
Office lease
Group $'000
------------------------ ------------
Right of use assets
At 1 January 2020 -
Additions in the year 860
Amortisation (131)
------------------------ ------------
At 31 December 2020 729
------------------------ ------------
Total
Group $'000
------------------------ ------------
Lease liabilities
At 1 January 2020 -
Additions in the year (860)
Lease payments made 146
Unwinding of a discount (44)
Foreign exchange 107
------------------------ ------------
At 31 December 2020 (651)
------------------------ ------------
Current (117)
Non-current (534)
------------------------ ------------
(651)
------------------------ ------------
Leases relate entirely to the 5-year office rent agreement
entered into in February 2020.
25 Financial instruments
The Group is exposed through its operations to the following
financial risks: liquidity risk, credit risk, cash flow interest
rate risk, commodity price risk and foreign exchange risk. The
Board seeks to minimise the Group's exposure to those risks by
reviewing and agreeing policies for managing each financial risk
and monitoring them on a regular basis. No formal policies have
been put in place in order to hedge the Group's activities to the
exposure to interest risk, commodity price risk or currency risk,
however these may be considered in future. No derivatives or hedges
were entered into during the year.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its policies and processes for
managing those risks or the methods used to measure them unless
otherwise stated in this note.
Principal financial instruments
The Group's principal financial instruments, from which
financial instrument risk arises, comprise long and short-term
loans, cash and short-term deposits as well as trade and other
receivables and trade and other payables which arise directly from
its operations.
The table below shows the carrying value of the Group's
financial assets and financial liabilities.
Group Company
----------------------------------------- -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
----------------------------------------- ------ ------ ------ ------
Carrying amount of financial assets
Trade and other receivable 304 277 654 11,658
Cash and cash equivalents 22,400 8,697 117 400
----------------------------------------- ------ ------ ------ ------
Carrying amount of financial liabilities
Measured at amortised cost 18,402 28,107 872 275
----------------------------------------- ------ ------ ------ ------
Liquidity risk
The Group's policy is to ensure that it has sufficient cash to
allow it to meet its liabilities when they become due. Cash
forecasts identifying the Group's funding and liquidity
requirements are reviewed regularly by the Board.
The contractual maturities of the Group's financial liabilities
(which are all carried at amortised cost) are shown in the table
below:
Carrying Contractual 6 months 6 to 12 12 to 60
Group amount cash flows or less months months
2020 $'000 $'000 $'000 $'000 $'000
----------------------------------- -------- ----------- -------- ------- --------
Current financial liabilities:
Trade and other payables 2,602 2,602 2,602 - -
Loans and borrowings 8,167 8,167 4,619 3,548 -
Interest 13 636 364 272 -
Leases 117 117 59 58 -
Non-current financial liabilities:
Loans and borrowings 6,969 6,969 - - 6,969
Interest - 466 - - 466
Leases 534 534 - - 534
----------------------------------- -------- ----------- -------- ------- --------
18,402 19,491 7,644 3,878 7,969
----------------------------------- -------- ----------- -------- ------- --------
Carrying Contractual 6 months 6 to 12 12 to 60
Company amount cash flows or less months months
2020 $'000 $'000 $'000 $'000 $'000
----------------------------------- -------- ----------- -------- ------- --------
Current financial liabilities:
----------------------------------- -------- ----------- -------- ------- --------
Trade and other payables 872 872 872 - -
----------------------------------- -------- ----------- -------- ------- --------
Carrying Contractual 6 months 6 to 12 12 to 60
Group amount cash flows or less months months
2019 $'000 $'000 $'000 $'000 $'000
----------------------------------- -------- ----------- -------- ------- --------
Current financial liabilities:
Trade and other payables 2,994 2,994 2,994 - -
Loans and borrowings 9,683 9,683 5,121 4,562 -
Interest 98 750 424 326 -
Non-current financial liabilities:
Loans and borrowings 15,332 15,332 - - 15,332
Interest - 2,909 566 566 1,777
----------------------------------- -------- ----------- -------- ------- --------
28,107 31,668 9,105 5,454 17,109
----------------------------------- -------- ----------- -------- ------- --------
Carrying Contractual 6 months 6 to 12 12 to 60
Company amount cash flows or less months months
2019 $'000 $'000 $'000 $'000 $'000
----------------------------------- -------- ----------- -------- ------- --------
Current financial liabilities:
Trade and other payables 275 275 275 - -
----------------------------------- -------- ----------- -------- ------- --------
Credit risk
The credit risk on liquid funds is limited because the
counterparties are banks with credit ratings assigned by
international credit rating agencies. The Company has made
investments in and loans to one of its subsidiaries, recovery of
which is dependent on the future income generation of that
subsidiary.
The Group and Company's maximum exposure to credit risk by class
of individual financial instrument is shown in the table below:
2020 2019
-------------------------------- ------------------- -------------------
Carrying Maximum Carrying Maximum
value exposure value exposure
Group $'000 $'000 $'000 $'000
-------------------------------- -------- --------- -------- ---------
Current financial assets:
Trade and other receivables 304 304 277 277
Cash and cash equivalents 22,400 22,400 8,697 8,697
-------------------------------- -------- --------- -------- ---------
22,704 22,704 8,974 8,974
-------------------------------- -------- --------- -------- ---------
2020 2019
-------------------------------- ------------------- -------------------
Carrying Maximum Carrying Maximum
value exposure value exposure
Company $'000 $'000 $'000 $'000
-------------------------------- -------- --------- -------- ---------
Current financial assets:
Trade and other receivables - - 3 3
Loans to subsidiaries 654 654 2,681 2,681
Cash and cash equivalents 117 117 400 400
Non - current financial assets:
Loans to subsidiaries - - 8,974 8,974
-------------------------------- -------- --------- -------- ---------
771 771 12,058 12,058
-------------------------------- -------- --------- -------- ---------
Cash flow interest rate risk
The Group is exposed to cash flow interest rate risk from its
deposits of cash and cash equivalents with banks. The cash balances
maintained by the Group are managed in order to ensure that the
maximum level of interest is received for the available funds but
without affecting working capital flexibility.
With the exception of the RUB458 million (approximately $6.2
million) Russian rouble loan facility, all of the other Group's
borrowings are issued at fixed rates and do not expose the Group to
cash flow interest rate risk.
The RUB458 million Russian rouble loan facility bears a floating
interest rate calculated as 2.2% over the lending rate of the
Russian Central Bank which was 4.25% at the reporting date. A 1%
increase/decrease in the Russian Central Bank's rate will
decrease/increase the Group's profit by $59,000.
The interest rate profile of the Group and Company's financial
assets and liabilities at the reporting date was as follows:
Group Company
---------------- -------------------------------------------------- -------------- --------------
2020 2019 2020 2019
Cash $'000 $'000 $'000 $'000
---------------- -------------------------------------------------- ------ ------ ------ ------
US dollars Fixed rate 286 8,100 - -
US dollars Non-interest bearing 20,667 114 112 -
Sterling Non-interest bearing 4 338 4 338
Russian roubles Fixed rate 1,029 49 - -
Russian roubles Non-interest bearing 414 96 1 62
---------------- -------------------------------------------------- ------ ------ ------ ------
22,400 8,697 117 400
------------------------------------------------------------------- ------ ------ ------ ------
Group Company
---------------- -------------------------------------------------- -------------- --------------
2020 2019 2020 2019
Loans $'000 $'000 $'000 $'000
---------------- -------------------------------------------------- ------ ------ ------ ------
Russian roubles Floating rate - 6.45% (2019: Fixed rate - 10.70%) 6,819 9,710 - -
Russian roubles Fixed rate - 14% (2019: Fixed rate - 15.72%) 1,974 2,179 - -
US dollars Fixed rate - 5.2% (2019: Fixed rate - 6.2%) 6,343 13,126 - -
---------------- -------------------------------------------------- ------ ------ ------ ------
15,136 25,015 - -
------------------------------------------------------------------- ------ ------ ------ ------
The weighted average interest rate payable during the year was
5.2% (2019: 6.2%) on US dollar loans and 8.1% (2019: 11.62%) on
Russian rouble loans.
The weighted average interest rates earned during the year were
0.0% (2019: 0.0%) on floating rate sterling cash balances, 0.10%
(2019: 0.10%) on floating rate US dollar balances and 5.5% (2019:
5.5%) on floating rate Russian rouble balances.
At the year end, the Group had cash on overnight deposit.
Short-term deposits during the year included overnight, one-week
and one-month notice periods.
Commodity price risk
By the nature of its activities the Group is exposed to
fluctuations in commodity prices and, in particular, the price of
gold as these could affect its ability to raise further finance in
the future, its future revenue levels and the viability of its
projects. The Group does not currently hold any financial
instruments to hedge the commodity price risk on its expected
future production. The Board will keep this exposure under review,
taking account of the extent to which the commodity price risk can
be hedged and other factors including production risks and the
costs of the hedge programme.
Foreign currency risk
The Group reports in US dollars and conducts most of its
business in dollars and Russian roubles. It also conducts business
in sterling.
The table below shows the extent to which Group companies have
monetary assets and liabilities in currencies other than their
functional currency.
31 December 2020 31 December 2019
---------------------------- ------------------ ------------------
RUB GBP RUB GBP
$'000 $'000 $'000 $'000
---------------------------- --------- ------- --------- -------
Trade and other receivables 304 - 274 3
Trade and other payables (1,765) (837) (2,761) (233)
Cash 1,442 4 66 -
---------------------------- --------- ------- --------- -------
(19) (833) (2,421) (230)
---------------------------- --------- ------- --------- -------
Effect on profit of changes in exchange rates
Net foreign exchange gains totalling $310,000 (2019: $46,000)
have been recognised in the statement of comprehensive income for
the year. The exchange gains principally reflect the impact of the
depreciation of the Russian rouble on the Group's Russian rouble
denominated monetary items.
The table below shows the impact of changes in exchange rates on
the result and financial position of the Group:
31 December 2020 31 December 2019
------------------------------ ------------------ ------------------
RUB GBP RUB GBP
$'000 $'000 $'000 $'000
------------------------------ -------- -------- -------- --------
10% increase in exchange rate 2 76 220 21
10% decrease in exchange rate (2) (93) (269) (25)
------------------------------ -------- -------- -------- --------
Fair values of the Group's and Company's financial liabilities
and assets
The fair value of the Group's long-term borrowing (which is US
dollar fixed rate debt) and provisions are shown at their carrying
values as any differences are not material. The fair value of the
Group's and the Company's short-term borrowing, cash and cash
equivalents equates to their carrying value because of the short
maturity of these instruments. The fair values of the Group's and
the Company's trade and other payables and trade and other
receivables are not significantly different from their carrying
values. The fair values have been calculated by discounting
expected cash flows at prevailing interest rates and by applying
year end exchange rates.
Capital risk management
The Company is not required to comply with any externally
imposed capital requirements. The Company's Russian subsidiaries
are required to maintain net asset values equal to or above their
share capital. In previous years the Company has made additional
capital contributions to its subsidiaries through the forgiveness
of loans in order to correct negative equity positions in those
subsidiaries' local accounts.
The Group's primary objective when managing capital is to ensure
that there is sufficient capital available to support the Group's
funding requirements, including capital expenditure, in a way that
optimises the cost of capital, maximises shareholders' returns and
ensures the Group's ability to continue as a going concern. There
were no changes to the Group's capital management approach during
the year.
The Group may make adjustments to the capital structure as
opportunities arise, as and when borrowings mature or as and when
funding is required. This may take the form of raising equity, debt
finance, equipment supplier credits or a combination thereof.
The Group monitors capital on the basis of the gearing ratio,
which is defined as net debt divided by total capital. Net debt is
calculated as total borrowings (including current and non-current
borrowings as shown in the consolidated statement of financial
position) less cash and cash equivalents.
Total capital is calculated as equity as shown in the
consolidated statement of financial position plus net debt. While
the Group does not set absolute limits on the ratio, the Group
believes that optimally it should remain below 25%. The Company's
policy in respect of capital risk management is the same as that of
the Group.
The gearing ratios at 31 December 2020 and 2019 were as
follows:
Group Company
-------------------------------- ----------------- ----------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
-------------------------------- -------- ------- ------- -------
Total borrowings 15,149 25,113 - -
Less: cash and cash equivalents (22,400) (8,697) (117) (400)
-------------------------------- -------- ------- ------- -------
Net debt (7,251) 16,416 (117) (400)
-------------------------------- -------- ------- ------- -------
Total equity 91,084 78,240 74,231 85,825
-------------------------------- -------- ------- ------- -------
Total capital 83,833 94,656 74,114 85,425
-------------------------------- -------- ------- ------- -------
Gearing ratio (8.65)% 17.34% (0.16)% (0.47)%
-------------------------------- -------- ------- ------- -------
26 Provisions
Group Company
----------------------------------------- -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
----------------------------------------- ------ ------ ------ ------
Environmental/site restoration provision 1,299 1,264 - -
Uncertain tax provisions 5,329 - - -
----------------------------------------- ------ ------ ------ ------
6,628 1,264 - -
----------------------------------------- ------ ------ ------ ------
Movements in provisions
Group Company
---------------------------------- -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
---------------------------------- ------ ------ ------ ------
At 1 January 1,264 1,008 - -
Additional provisions in the year 5,329 - - -
Liability adjustment 163 34 - -
Unwinding of discount 81 94 - -
Exchange difference (209) 128 - -
---------------------------------- ------ ------ ------ ------
At 31 December 6,628 1,264 - -
---------------------------------- ------ ------ ------ ------
During the year a provision of $5,329,000 has been made in
respect of the ambiguity relating to certain tax deductions claimed
by the Group in Russia. While management are of the opinion, based
on their interpretation of the relevant tax legislation, that the
tax deductions have been lawfully claimed, it is probable that
certain tax positions taken by the Group could be challenged by the
Russian tax authorities. Accordingly, the Group has created a
provision for the associated taxes. The balance at 31 December 2020
is expected to be either fully utilised or released when the
inspection rights of the tax authorities with respect to the
relevant tax returns expire.
The environmental/site restoration provision relates to the site
restoration at the Asacha mine, which is expected to commence in
2027. The provision is estimated based on the regional data from
the Monitoring Ecological Centre of Kamchatka.
27 Deferred taxation
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon:
2020 2019
Group $'000 $'000
----------------------------------------------------------------------- ------ ------
Liability: Accelerated capital allowances 6,505 6,889
Asset: Tax losses (39) (43)
Asset: Other provisions (312) (126)
----------------------------------------------------------------------- ------ ------
Net deferred tax liabilities 6,154 6,720
----------------------------------------------------------------------- ------ ------
Net deferred tax liabilities to be recovered after more than 12 months 6,489 6,720
Net deferred tax assets to be recovered within 12 months (335) -
----------------------------------------------------------------------- ------ ------
6,154 6,720
----------------------------------------------------------------------- ------ ------
The Company has no deferred tax assets or liabilities.
Group Group Company Company
-------------------------------------------------------- ------ ------ ------- -------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
-------------------------------------------------------- ------ ------ ------- -------
Movements in the year:
Net liability at 1 January 6,720 6,362 - -
(Credited)/charged to statement of comprehensive income (566) 358 - -
-------------------------------------------------------- ------ ------ ------- -------
Net liability at 31 December 6,154 6,720 - -
-------------------------------------------------------- ------ ------ ------- -------
Deferred tax assets are recognised for tax losses carried
forward to the extent that the realisation of the relevant tax
benefit through future taxable profits is probable.
As at 31 December 2020, the Company had unrecognised tax losses
carried forward with a tax value, at the standard rate of
corporation tax in the UK of 19%, of $2,837,000 (2019:
$2,400,000).
The subsidiaries in Russia had recognised tax losses carried
forward with a tax value, at the standard rate of corporation tax
in Russia of 20%, of $39,000 (2019: $43,000).
28 Share capital and reserves
Group and Company
---------------------------------------------------------- ------------------------
2020 2019
Number Number
---------------------------------------------------------- ----------- -----------
Authorised
Ordinary shares of 10p each 150,000,000 150,000,000
---------------------------------------------------------- ----------- -----------
Group and Company
---------------------------------------------------------- ------------------------
2020 2019
$'000 $'000
---------------------------------------------------------- ----------- -----------
Issued and fully paid
87,158,508 (2019: 87,158,508) ordinary shares of 10p each 18,988 18,988
---------------------------------------------------------- ----------- -----------
On 12 July 2019 the Company completed a share buy back from two
of its major shareholders within UFG Asset Management ("UFG") and
bought back 22,894,565 of its existing ordinary shares by means of
an off-market share buyback transaction at a price of 33 pence per
share, representing a discount of 42% to the closing middle market
price of a TSG ordinary share on 1 May 2019, for an aggregate
purchase price of GBP7.56 million ($9.44 million) (the
"Buyback").
The Buyback was funded out of the Company's existing
distributable profits, facilitated by the repayment of intra-group
indebtedness by the Company's wholly owned subsidiary, TSG Asacha,
utilising a loan facility obtained by TSG Asacha from VTB Bank
(note 23).
At the reporting date the Company had 87,158,508 ordinary shares
in issue and held 22,894,565 ordinary shares in treasury.
Subsequently to the year end, in February 2021 the Company
announced a further share buyback and in March 2021 a recommended
pre-conditional mandatory cash offer for the Company, refer to note
35.
Reserves definition
Share capital
Share capital represents amounts subscribed for share capital at
nominal value.
Treasury shares
Weighted average cost of own shares held in treasury.
Share-based payments reserve
Share-based payments reserve relates to the fair value of the
share options that have been charged to the statement of
comprehensive income in line with IFRS 2 'Share-based payment'
requirements.
Retained earnings
Retained earnings represents the cumulative net gains and losses
recognised in the statement of comprehensive income less any
amounts reflected directly in other reserves.
29 Commitments
Short-term lease commitments
The Group leases various property, plant and machinery under
short-term cancellable lease agreements. The lease expenditure
charged to profit or loss during the year is disclosed in note
6.
At the reporting end date the Group had outstanding commitments
for future minimum lease payments under non-cancellable leases,
which fall due as follows:
Group Company
---------------- -------------- --------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
---------------- ------ ------ ------ ------
Within one year 86 161 - -
---------------- ------ ------ ------ ------
86 161 - -
---------------- ------ ------ ------ ------
Lease payments are effected by equal monthly instalments. Leased
equipment may only be used at the Asacha mine. Leased land and
buildings includes property in Moscow and Kamchatka.
Capital commitments
At the reporting date the Group had $4,624,000 of
non-cancellable capital commitments related to the Asacha mine
(2019: $2,825,000).
30 Share-based payment transactions
On 8 June and 28 August 2020 the Company announced two Long Term
Incentive Plans (the "LTIP" or the "Scheme") whose objective is the
sustained alignment of interests between directors and shareholders
to deliver long-term growth in shareholder value. Prior to this,
there were no options or warrants in existence. On 5 June 2020, the
Company granted 3,597,988 of contingently issuable shares to its
executive directors under the LTIP which comprise performance based
equity and time restricted equity.
On 27 August 2020 a further 1,300,000 of contingently issuable
share options were granted to four non-executive directors with an
exercise price of 10 pence per share and comprise performance based
equity and time restricted equity.
Number of share options Weighted average exercise price
--------------------------- ------------------------- ---------------------------------
2020 2019 2020 2019
Group and company Number Number GBP GBP
--------------------------- ------------- ---------- ---------------- ---------------
Outstanding at 1 January - - - -
Granted on 5 June 2020 3,597,988 - - -
Granted 27 August 2020 1,300,000 - 0.10 -
Expired - - - -
--------------------------- ------------- ---------- ---------------- ---------------
Outstanding at 31 December 4,897,988 - 0.03 -
--------------------------- ------------- ---------- ---------------- ---------------
Exercisable at 31 December - - - -
--------------------------- ------------- ---------- ---------------- ---------------
The options outstanding at 31 December 2020 had an exercise
price ranging from GBPnil to 10 pence per share, and a remaining
contractual life between 6 months and 30 months.
As a result of completion of Horvik acquisition on 26 May 2021
(note 35), all awards granted under the Company's Long Term
Incentive Plans vested under the change of control provisions in
the LTIP's rules. The awards were settled by the Company
transferring 4,787,816 of its shares out of treasury.
Group and company
The fair value of the options granted in the year was determined
using a Monte Carlo simulation model and ranged between $0.77 per
option and $1.40 per option. The significant inputs in the model
were as follows:
2020 2019
------------------------------------------------------------- ------ ------ --------- ------
Weighted average share price ($) 0.86 -
Weighted average exercise price ($) - -
Expected volatility (%) 52.00 -
Number of simulations 10,000.00 -
Expected dividends yields (%) 1.97 -
------------------------------------------------------------- ------ ------ --------- ------
Group Company
------------------------------------------------------------- -------------- -----------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
------------------------------------------------------------- ------ ------ --------- ------
Expense recognised in the year
Arising from equity settled share based payment transactions 1,560 - 1,560 -
------------------------------------------------------------- ------ ------ --------- ------
31 Cash generated from Group's operations
2020 2019
$'000 $'000
-------------------------------------------------- ------- -------
Profit for the year after tax 20,261 9,006
Adjustments for:
Taxation charged 7,781 3,589
Finance expenses 1,784 1,642
Finance income (30) (70)
Loss on disposal of property, plant and equipment 194 285
Unrealised foreign exchange differences (2,266) 290
Depreciation of property, plant and equipment 12,883 11,999
Depreciation of right of use assets 131 -
Share-based payments 1,560 -
Movements in working capital:
Decrease/(increase) in inventories 1,552 (402)
Increase in trade and other receivables (766) (1,057)
(Decrease)/increase in trade and other payables (61) 814
-------------------------------------------------- ------- -------
Cash generated from operations 43,023 26,096
-------------------------------------------------- ------- -------
32 Cash used in Company's operations
2020 2019
$'000 $'000
--------------------------------------------------- ------- -------
Loss for the year after tax (4,177) (1,348)
Adjustments for:
Finance income (120) (769)
Unrealised foreign exchange differences (9) (16)
Equity settled share based payment expense 1,560 -
Movements in working capital:
Decrease/(increase) in trade and other receivables 1,740 (107)
Increase in trade and other payables 604 110
--------------------------------------------------- ------- -------
Cash used in operations (402) (2,130)
--------------------------------------------------- ------- -------
33 Related party transactions
The directors of the Company consider that there are no key
management personnel, as defined by IAS 24, Related party
transactions, other than the directors themselves.
Directors' emoluments and their beneficial interests in the
ordinary shares of the Company are detailed in note 9.
Transactions between the Company and its subsidiaries and
between those subsidiaries include technical, management and other
services and loans as detailed below:
Purchases Balance at Purchases Balance at
(Sales) 31 December (Sales) 31 December
2020 2020 2019 2019
$'000 $'000 $'000 $'000
----------------------------------- --------- ------------ --------- ------------
Nature of transaction
Trans-Siberian Gold Plc
Technical services - 651 - 1,317
Other services - (35) - (42)
Loan interest (113) - (757) 5,864
Loans - - - 4,473
----------------------------------- --------- ------------ --------- ------------
(113) 616 (757) 11,612
----------------------------------- --------- ------------ --------- ------------
OOO Trans-Siberian Gold Management
Management services (1,964) 119 (1,806) 106
Other services - 35 - 42
----------------------------------- --------- ------------ --------- ------------
(1,964) 154 (1,806) 148
----------------------------------- --------- ------------ --------- ------------
JSC TSG Asacha
Technical services - (651) - (1,317)
Management services 1,964 (119) 1,806 (106)
Loan interest 113 - 757 (5,864)
Loans - - - (4,473)
----------------------------------- --------- ------------ --------- ------------
2,077 (770) 2,563 (11,760)
----------------------------------- --------- ------------ --------- ------------
Total - - - -
----------------------------------- --------- ------------ --------- ------------
During the year, management consultancy services have been
acquired from FELDI Limited, of which Stewart Dickson is director
and shareholder, for $206,000 (2019: $186,000). At the reporting
date $nil was owed to FELDI Limited (2019: $12,000). These services
have been provided at arm's length basis.
During the year, $175,000 (2019: $150,000) was paid to UFG Asset
Management under the terms of the shareholders' relationship
agreement entered into on 28 November 2019 between the Company and
certain entities of UFG Asset Management.
There were no other related party transactions.
34 Ultimate controlling party
At the reporting date the ultimate control of the Company was
with the individual investors in certain funds of UFG Asset
Management. No one investor was considered to be the ultimate
controlling party.
Following Horvik's acquisition discussed in note 35, as at the
date of this document, Horvik Limited is beneficially interested in
approximately 48.6% of the issued share capital of TSG (excluding
shares held in treasury). Horvik is required under Rule 9 of the
City Code on Takeovers and Mergers to make an offer for the TSG
Shares not already held or agreed to be acquired by Horvik. The
offer document containing the terms of the Offer will be posted to
TSG Shareholders as soon as practicable and in any event by 16 June
2021.
35 Events after the reporting date
On 18 March 2021, the Company announced a recommended
pre-conditional mandatory cash offer to be made by Horvik Limited
("Horvik") for the Company and that Horvik had agreed to acquire
44,558,918 of the Company's ordinary shares, representing
approximately 51.2 per cent. of the Company's issued share capital
(excluding any shares held in treasury), from a group of the
Company's shareholders (the "selling shareholders") (the
"acquisition").
In the first stage of the acquisition Horvik acquired 21,437,000
of the Company's ordinary shares, representing 24.7 per cent. of
the Company's issued share capital (excluding any shares held in
treasury) pro rata from each of the selling shareholders. The
acquisition of the remaining 23,121,918 Company's ordinary shares
from the selling shareholders was conditional upon Horvik receiving
clearance from the Russian Federal Antimonopoly Service which was
granted to Horvik on 19 May 2021 resulting in the pre-condition to
the offer being satisfied.
On 26 May 2021, Horvik completed the acquisition of the
remaining 23,121,918 Company's shares, representing approximately
26.6 per cent. of the issued share capital of the Company
(excluding any shares held in treasury). As a result, Horvik held
44,558,918 of the Company's shares, representing approximately 51.2
per cent. of the issued share capital of the Company (excluding any
shares held in treasury).
As a result of completion of the acquisition, the awards granted
under the Company's Long Term Incentive Plan (note 30) to executive
and non-executive directors vested under the change of control
provisions in the LTIP's rules. The awards were settled by the
Company transferring 4,787,816 of its shares out of treasury.
Following the LTIP's settlement, Horvik's shareholding in the
Company was diluted from approximately 51.2% of the Company's
issued share capital (excluding shares held in treasury) to
approximately 48.6% of the Company's issued share capital
(excluding shares held in treasury).
Under the terms of the offer, the Company's shareholders will
receive GBP1.18 in cash for each ordinary share of the Company,
which values the Company's entire issued and to be issued share
capital at approximately GBP108,253,043.
The terms of the offer represent a premium of approximately:
-- 18 per cent. to the closing price per Company's ordinary
share of GBP1.00 on 17 March 2021 (being the last practicable date
prior to the date of the offer announcement);
-- 34 per cent. premium to the closing price per Company's
ordinary share of GBP0.88 on 4 March 2021 (being the last Business
Day prior to the date on which Horvik first approached the
Company's Independent Directors); and
-- 26 per cent. to the volume weighted average closing price per
Company's ordinary share of GBP0.94 for the one month period ended
on 17 March 2021 (being the last practicable date prior to the date
of the offer announcement).
The credit facilities with VTB bank (note 23) contain a
protective clause permitting the lender to require early repayment
of the loan if, as a result of a change in the Company's
controlling beneficiary owners, circumstances exist which may imply
that the credit facility may not be repaid. On the basis that the
Group is in a net cash position, it can repay the loan at any time
should it be called upon. Early repayment has not been requested by
VTB. This coupled with the fact that VTB bank is also the financial
adviser to Horvik and intends to finance the cash consideration
payable by Horvik to TSG's shareholders using debt to be provided
under a facilities agreement between VTB bank and Horvik, the
Directors are of the opinion that VTB bank will not request early
repayment following Horvik's acquisition.
On 21 April 2021, the Company's wholly owned subsidiary AO
Trevozhnoye Zarevo ("TZ") changed its name to Joint-Stock Company
TSG Asacha ("JSC TSG Asacha" or "TSG Asacha").
On 26 February 2021, the Company initiated a share buyback
programme to purchase the Company's ordinary shares for an
aggregate amount of GBP1 million ("buyback amount"). The programme,
which was to be undertaken until the earlier of the buyback amount
being reached and the Company's Annual General Meeting in 2021,
resulted in the repurchase of 206,457 ordinary shares, now held in
treasury.
On 2 February 2021, the Company incorporated a new subsidiary
company in Russia, OOO Rodnikovoe, of which it owns 100% of the
participating interest. Rodnikovoe's primary activity is to develop
and mine Rodnikova gold deposit.
On 6 January 2021, the Group reported two fatalities at its
Asacha Gold mine which resulted in immediate suspension of all
mining operations at Vein 25 for a period of 2 months until a full
investigation by the Company and local authorities was completed.
In March 2021 the full permission was granted by the Federal
Service for Environmental, Technological and Nuclear Supervision
("Rostekhnadzor") for the Group to recommence mining operations at
Vein 25. Mining operations at the Main Zone and the processing unit
continued uninterrupted during the investigation period.
36 Non-GAAP Measures
The Group uses certain measures in this report that are not
defined under IFRS. Non-GAAP financial measures are provided as
additional information to investors to assist them with their
assessment of the Group's financial position and its operating
results. These measures are not in accordance with, or a substitute
for, IFRS, and may be different from or inconsistent with non-GAAP
financial measures used by other companies. These measures are
explained further below:
Cash costs
Cash costs are calculated on a consolidated basis and include
all costs absorbed into cost of sales, excluding mining tax,
depreciation, amortisation and depletion, net of by-product revenue
(silver). Cash costs per ounce of gold sold is calculated by
dividing the aggregate of these costs by total ounces sold.
2020 2019
$'000 $'000
-------------------------------------------------------------------------------------- -------- --------
Cost of sales 40,070 40,300
Adjustments for:
By-product revenue (silver) (1,639) (1,851)
Mining tax (2,330) (4,330)
Depreciation/depletion of property, plant and equipment included within cost of sales (12,559) (11,677)
-------------------------------------------------------------------------------------- -------- --------
Cash Cost 23,542 22,442
-------------------------------------------------------------------------------------- -------- --------
Gold sold (oz.) 43,884 43,782
-------------------------------------------------------------------------------------- -------- --------
Cash Cost ($) per oz. gold 536 513
-------------------------------------------------------------------------------------- -------- --------
Total Cash Costs
Total cash costs are calculated on a consolidated basis as cash
costs plus mining tax and administrative expenses. Total cash costs
per ounce of gold sold is calculated by dividing the aggregate of
these costs by total ounces sold.
2020 2019
$'000 $'000
----------------------------------------------------------------------------------------------------- ------ ------
Cash costs 23,542 22,442
Adjustments for:
Mining tax 2,330 4,330
Administrative expenses excluding exceptional expenses 10,243 8,755
Depreciation of property, plant and equipment and right of use assets included within administrative
expenses (455) (322)
Loss on disposal of property, plant and equipment included within administrative expenses (194) (285)
----------------------------------------------------------------------------------------------------- ------ ------
Total Cash Costs 35,466 34,920
----------------------------------------------------------------------------------------------------- ------ ------
Gold sold (oz.) 43,884 43,782
----------------------------------------------------------------------------------------------------- ------ ------
Total Cash Cost ($) per oz. gold 808 798
----------------------------------------------------------------------------------------------------- ------ ------
Earnings Before Interest, Tax, Depreciation and Amortisation
("EBITDA")
EBITDA is calculated on a consolidated basis as net
profit/(loss) for the period excluding income tax expense, finance
expense, finance income, foreign exchange movements, depreciation,
amortisation and depletion, and impairment charges.
2020 2019
$'000 $'000
---------------------------------------------------------------------------------------------- -------- --------
Revenue 80,975 63,108
Adjustments for:
Cost of sales (40,070) (40,300)
Administrative expenses including exceptional expenses (12,230) (8,755)
Other operating income 811 68
Total depreciation/depletion of property, plant and equipment and right of use assets charged
to income statement 13,014 11,999
Loss on disposal of property, plant and equipment 194 285
---------------------------------------------------------------------------------------------- -------- --------
EBITDA 42,694 26,405
---------------------------------------------------------------------------------------------- -------- --------
Adjusted Earnings Before Interest, Tax Depreciation and
Amortisation ('Adjusted EBITDA')
Adjusted EBITDA is calculated on a consolidated basis as EBITDA
less exceptional expenses and other non-cash items.
2020 2019
$'000 $'000
--------------------- ------ ------
EBITDA 42,694 26,405
Adjustments for:
Exceptional expenses 1,987 -
Share-based payments 1,560 -
--------------------- ------ ------
Adjusted EBITDA 46,241 26,405
--------------------- ------ ------
All-In Sustaining Costs ("AISC")
AISC reflect the full costs of keeping the mine in business and
include adjusted operating expenditure, sustaining corporate and
administrative expenditure, and sustaining capital and exploration
expenditure. It excludes non-sustaining costs related to new
operations and costs that are not related to current operations, as
well as taxes, finance costs and working capital adjustments.
2020 2019
$'000 $'000
----------------------------------------------------------------------------------------------------- ------ ------
Cash costs 23,542 22,442
Adjustments for:
Mining tax 2,330 4,330
Administrative expenses excluding exceptional expenses 10,243 8,755
Depreciation of property, plant and equipment and right of use assets included within administrative
expenses (455) (322)
Loss on disposal of property, plant and equipment included within administrative expenses (194) (285)
Purchase of property, plant and equipment 2,450 6,713
Non-sustaining exploration expenditure (117) (507)
Accretion of restoration costs 81 94
----------------------------------------------------------------------------------------------------- ------ ------
AISC 37,880 41,220
----------------------------------------------------------------------------------------------------- ------ ------
Gold sold (oz.) 43,884 43,782
----------------------------------------------------------------------------------------------------- ------ ------
AISC ($) per oz. gold 863 941
----------------------------------------------------------------------------------------------------- ------ ------
Company Information
Directors Alexander Dorogov Eugene Antonov Chief Executive Officer Chief Operating
Lou Naumovski Stewart Dickson Officer
Non-executive Director Non-executive
Director
Secretary Simon Olsen
Company number 01067991
Registered office 39 Parkside Cambridge United Kingdom
CB1 1PN
Business address P.O. Box 278 St. Neots PE19 9EA
Independent Auditors PricewaterhouseCoopers LLP 1 Telephone: +44 (0)20 7583 5000
Embankment Place London WC2N 6RH
Nominated Adviser & Corporate Broker Canaccord Genuity Limited 88 Wood Telephone: +44 (0)20 7523 8000
Street London EC2V 7QR
Joint Corporate Broker Panmure Gordon (UK) Limited One New Telephone: +44 (0)20 7886 2500
Change London EC4M 9AF
Bankers National Westminster Bank PLC City of
London Office PO Box 12258 1 Princes
Street London EC2R
8PA
Solicitors Locke Lord (UK) LLP 201 Bishopsgate Telephone: +44 (0)20 7861 9000
London EC2M 3AB Telephone: +44 (0)20 7012 9600
Akin Gump Strauss Hauer & Feld LLP 10
Bishops Square Eighth Floor London E1
6EG
Registrar Link Asset Services Northern House Telephone: 0871 664 0300 International:
Woodsome Park Fenay Bridge, +44 (0)20 8639 3399
Huddersfield West Yorkshire
HD8 0GA
Public Relations Hudson Sandler LLP 25 Charterhouse Telephone: +44 (0)20 7796 4133
Square London EC1M 6AE
UK - Registered office
39 Parkside, Cambridge, CB1 1PN, United Kingdom
UK - Head office
Trans-Siberian Gold plc, P.O. Box 278, St. Neots, PE19 9EA,
United Kingdom
Russia - Moscow office
Trans-Siberian Gold Management, LLC (TSGM), Office 1, 45th
Floor, Federation's East Tower (Vostok), Presnenskaya Naberezhnaya,
12, 123112 Moscow, Russia
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