Alien Metals Ltd Annual Report For the year ended 31 December 2020 Contents Chair’s & Chief Executive statement ................................................................... 3 Business overview .......................................................................................... 5 Strategy and business model ................................................................... 5 Financial highlights .............................................................................. 5 Overview of operations .......................................................................... 5 Copper project ................................................................................... 5 Silver projects .................................................................................... 5 Iron Ore projects ................................................................................. 6 Future outlook .................................................................................... 6 Governance ................................................................................................. 7 Chair’s Corporate governance statement ..................................................... 7 Board leadership ................................................................................. 8 Nomination & Remuneration Committee Report ........................................... 12 Audit Committee Report ....................................................................... 16 Risk Management ................................................................................ 16 Financial statements ..................................................................................... 23 Directors’ responsibilities statement ......................................................... 23 Independent auditor’s report .................................................................. 24 Consolidated statement of comprehensive income ........................................ 28 Consolidated statement of financial position ............................................... 29 Consolidated statement of cash flows ....................................................... 30 Consolidated statement of changes in equity ............................................... 31 Notes to the financial statements ............................................................ 32 Other information ........................................................................................ 55 Forward looking statements Certain information in this annual report may constitute a forward-looking statement. Forward-looking statements are frequently characterised by words such as “plan”, “expect”, “forecast”, “project”, “intend”, “believe”, “anticipate”, “expect”, “budget”, “scheduled”, “outlook” and other similar words or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are not guarantees of future performance. Rather, they are based on current opinions and estimates of management and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ from any future results or developments expressed or implied from each forward-looking statement. Each forward-looking statement is expressed only as at the date on which it is made and the Company undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change, other than as required by securities laws. The reader is cautioned not to place undue reliance on forward-looking statements. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 2 Chair & Chief Executive’s statement 2020 marked a year of growth as the Company, headed by a high-quality geological team, focused on its strategy to advance its assets up the value curve; with new prospects in Western Australia added to our diversified portfolio, they lay the groundwork for a busy and productive year. The impact of the Covid-19 pandemic influenced all aspects of the company and the personnel for the whole year but the whole team pulled together to mitigate wherever possible any risk of infection to all employed and contracted personnel and ensure all worked within their relative government guidelines to keep everyone safe while progressing where possible and safely exploration work in the field and research and business dealings in the office. Even with the global pandemic impacting all aspects of normal life the company was able to still achieve some significant milestones during the year notably further acquisition of a significant exploration licence around the Elizabeth Hill Mining licence in the Pilbara region of Western Australia and signing a mid tier Canadian Exploration and Mining company for a significant earn in agreement on the Donovan 2 Copper Gold project in Mexico while also having a significant uplift in the markets awareness of the company. The Company’s Technical Director, Bill Brodie Good, with over 25 years of experience in mineral exploration, was appointed CEO in September 2020 and continued on an acquisition-led strategy as well as looking for partners to work with moving forward. We focused on strengthening our portfolio of diversified assets to encompass silver and precious metals projects in Mexico and newly acquired silver and iron ore projects in Western Australia. Reducing overheads is a practice from previous years that has stayed with us and was even more necessary in 2020 whereby all aspects of cost cutting were maintained including the Directors taking a reduction in directors fees, streamlining corporate overhead costs where possible to minimise overheads. In 2020, we continued to bring value by acquiring a significant new project within an established mining community that has a stable political background and assures a strong operation control. During 2020, we are delighted to have finalised the acquisition of the Elizabeth Hill Silver Project in the Pilbara region of Western Australia and furthermore securing a significant new exploration licence ELA47/4422, Munni Munni North, covering some 117km2 that wraps around the Elizabeth Hill Mining Licence including a significant historical data package and some surface soil samples collected in 2019 but never processed. Furthermore, in October 2020 Alien signed an Earn-in Agreement with Capstone Mining Corp of Canada (TSX: CS) over the Donovan 2 Copper-Gold project in Mexico. Pursuant to the Agreement, Capstone has the ability to acquire up to an 80% interest in Donovan 2 by sole funding the Project up to completion of a Prefeasibility Study. Highlights of the agreement are that Capstone can earn an initial 65% interest in Donovan 2 through a combination of cash payments and committed expenditure, consisting of US$290,000 in cash payments to Alien over three years and US$3,600,000 in valid exploration expenditure over three years (including US$150,000 being incurred by 31 December 2020). Capstone can increase their interest from 65% to 75% by making a further cash payment of US$200,000 and funding the costs associated with a Preliminary Economic Assessment (PEA). Following delivery of the PEA, in the event Alien elects not to contribute pro-rata to its 25% interest, Capstone Mining has the ability to sole-fund the costs of a Prefeasibility Study (PFS) to earn an additional 5% in Donovan 2 (bringing their holding to 80% and Alien 20%) . Thereafter, each party will fund their pro-rata interest in the Project or dilute according to industry standard mechanisms. In the event Alien dilutes to below 5%, its interest will convert to a 2% Royalty. This was a significant transaction with Capstone and delivered the potential for immediate advancement of the Donovan 2 Copper-Gold project while allowing Alien to focus exploration activities across its other project portfolio. We are committed to continue delivering on the strategy of advancing our projects through the exploration phases with our high quality geological team’s expertise while seeking to identify a suitable partner for an earned-in agreement or a joint venture at a price which will not overly dilute existing Shareholders. We intend, as we have proved with the Capstone deal, in joining with potential partners on other projects, to ensure the costs and capital commitments are minimised. We believe that in order to successfully grow this vision, we need to focus on channelling the funds invested in it towards exploration activity and business development, and this is at the heart of everything we do. The Company’s work to identify suitable partners for a joint venture or earned-in agreement included our Mexican silver projects and gold and copper project. Alien works based on a strict selection criteria centred on assessing risk, appropriate scale and likely upside. We look forward to sharing further results from our exploration work at our various sites following the completion of our 2 Placings in Q3 and Q4 2020 that were extremely successful and have provided the company with an excellent funding for advancing all the exploration projects as well as looking at further acquisitions in 2021. w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 3 Dan Smith Chairman Bill Brodie Good CEO & Technical Director O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 4 Business overview Strategy and business model Alien Metals’ objective is to create a multi-commodity portfolio of exploration and mining projects in jurisdictions with established mining communities, stable political backgrounds, and where strong operational controls can be assured. The group has operated in Mexico for over ten years during which time it has established long-term relationships with local government, communities, and key stakeholders. Alien Metals’ geological experts assess and identify projects for potential mineralisation. Wherever possible, the projects are acquired on a low-cost option basis whilst preliminary exploration is undertaken to assess the merits of further work. The Company routinely evaluates mining projects in jurisdictions other than Mexico and Australia. During 2020, this included West Africa, Europa and Latin America. studies evidence Where preliminary sufficient mineralisation, increasingly comprehensive studies will be undertaken with a view to delineating a compliant mineral resource estimate in readiness of potential sale of the asset to a producing mining company, at which time a significant premium over its acquisition and development cost may be justified. Financial highlights All dollar amounts in this annual report and financial statements are US dollars, unless stated otherwise. As at 31 December 2020, the Group had total assets of $9.4 million (2019: $0.7 million) of which $5.6 million (2019: $0.2 million) was cash. The Group had total liabilities of $0.3 million (2019: $0.1 million) of which $0.3 million were current liabilities (2019: $0.1 million). In the year ended 2020 the Group made an operating loss of $1.2million (2019: $1 million) and a loss per share of 0.052 cents (2019: 0.1 cents). Overview of operations During 2020, the Group completed its initial high-level review and some exploration work over its portfolio of mining concessions in Mexico covering an area of over approximately 1,500 hectares, to advance the projects in knowledge and potential. The Group was also active across its highly prospective Australian projects of Elizabeth Hill Silver and the Hamersley Iron Ore projects. As at 31 December 2020, the Company held 12 fully owned mining concessions in Mexico, and was in the process of obtaining an option to acquire an interest in 1 additional project. It should be noted that the company dropped 4 of these licences in Mexico in early 2021 by not paying the required annual rent as per Mexican Mining Code due to the 4 projects being too small, totally underexplored and the company felt of no value to maintain. Copper project Donovan 2 project The Company’s 750-hectare Donovan 2 project is located to the southeast of Zacatecas city and in close proximity to other wholly owned projects within Alien’s portfolio within the Mexican precious and base metals belt. The Teck Resources San Nicolás copper zinc deposit and Minera Frisco El Coronel gold mine are both located within 25km. Alien Metals' preliminary exploration programme on this project, has identified several areas that exhibit pathfinder indicators of volcanogenic massive sulphide (VMS)-style mineralisation, and ground magnetic geophysics and induced polarisation have confirmed indications of sub-surface VMS-style mineralisation. Further to the earn in agreement with Capstone Mining a more detailed ground IP survey was carried out by Capstone in November/December 2020 to further delineate drill targets. Results and targets were defined in early 2021 to coincide with planned drilling program by Capstone. Silver & Precious Metals projects Elizabeth Hill project The Elizabeth Hill project is situated approximately 45 km south of Karratha in the 61,000 km2 Achaean Pilbara Block of the Pilbara Craton. The Project is well located, lying 40 km from the deep-water port at Dampier and 8 km from rail infrastructure. The Elizabeth Hill Silver Project was mined between 1998 and 2000 via underground mining, primarily between the 62 m and 102 m levels. Silver production totalled approximately 16,800 tonnes of ore grading 2,195 g/t Ag (70.24 oz/t Ag) generating 1,170,000 ounces Ag, including some very large specimens of native silver. 5 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O Munni Munni North project ELA 47/4422 is a 117km2 tenement which wraps around the Elizabeth Hill Silver Mining Lease on all sides and includes a portion of the Munni Munni intrusive complex to the south and southwest. The highly prospective Munni Munni fault strikes north- south through the tenement and into the Elizabeth Hill ML on which the Elizabeth Hill Silver deposit is associated with. There is also some strike length of the Hunters Reef, a Platinum Group Element target geological feature related to the Munni Munni Deposit defined just to the south of this ELA. Los Campos project The Los Campos project comprises four concessions covering an area of approximately 500 hectares and is located on the south side of the city of Zacatecas and only 3 km from the Endeavour Silver El Compas silver mine. The property contains at least two known veins: the Los Campos vein and the San Rafael vein, which were both partially mined historically. The Los Campos vein system has been developed along a strike distance of 3.3km and to depths exceeding 100m. Geological mapping and sampling discovered additional veins running either parallel or nearly parallel to the Los Campos vein. San Celso project The 88-hectare San Celso project is located in the historic mining district of Pánfilo Natera-Ojocaliente. It contains two highly mineralised veins: the San Celso and Las Cristinitas veins which were also partially mined historically. Work carried out during 2019 and 2020 confirmed the high grade of these veins. Iron Ore projects Hancock Ranges Project – 51% The Hancock Ranges Iron Ore Project. E47/3954, is within 20kms of the Newman township and borders licences held by Fortescue Metals Group, Hancock Prospecting, BHP Billiton (Mount Whaleback), Hope Downs and Brockman Mining. The Licence has been subject to historical exploration by Rio Tinto plc, BHP Group plc, and more recently Volta Mining Limited, where drilling intercepted mineralisation within the Brockman Iron Formation including 126m @ 60.28% Fe from surface (Hole 14SERC004). Brockman Iron Project – 51% This tenement hosts part of the historic BHP Deposit 20 iron ore target and the historic BHP Deposit 19 Fe target sits on the south-eastern boundary. This tenement is dominated by the Brockman Iron Formation which underlies the majority of the tenement area. Recent alluvial cover is prevalent and covers the indicated Brockman Iron Formation. In late 2020 the Company undertook further field exploration at Hancock Range and Brockman Iron, which culminated in the maiden drilling program at Brockman commencing in early 2021. Future outlook The Company entered 2021 with a strong balance sheet and a solid portfolio of advanced exploration assets in Western Australia and Mexico. Despite global challenges attributed to the COVID-19 pandemic, Alien has been able to advance its key projects, Hamersley Iron Ore, Elizabeth Hill and Donovan 2. (cid:3) So far in 2021, the Company has successfully completed a maiden drilling program at the Hancock Ranges Project, undertaken an airborne magnetic survey at Elizabeth Hill and Munni Munni North, and progressed a number of desktop studies to guide high- impact exploration work in the second half of the year. Alien is well financed, with quality assets and a strong technical team, and looks forward to a busy 2021 and beyond. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 6 Governance Chair’s corporate governance statement Alien Metals recognises the value and importance of maintaining the highest standards of corporate governance and is committed to the principles of corporate governance founded on accountability, leadership and stakeholder management. (cid:3) Although compliance with the 2018 UK Corporate Governance Code (“the Code”) is not compulsory for AIM companies, the directors aim to apply its provisions where practical and in relation to the size and stage of development of the Company. The Board is conscious that the corporate governance environment is constantly evolving and the charters and policies under which it operates are regularly reviewed and amended as required. The Code is widely recognised as setting the highest standard for corporate governance and is written to accommodate very large companies as well as much smaller ones. The directors have therefore satisfied themselves that appropriate governance structures, policies and procedures are in place, and have made training available to all directors. All directors have access to the services of the Company Secretary, who is responsible for advising the Board on all governance matters. Both the appointment and removal of the Company Secretary are matters for the whole Board. The provisions of the Code that the Company does not apply are summarised below and described in further detail within this annual report: Employee engagement Due to the Company only having a small number of employees, the Board has not appointed a director from the workforce, created a formal workforce advisory panel or designated a non-executive director to engage with the workforce. This is contrary to Code provision 5 and is explained in the section headed “Culture and employees” on page 10. Senior independent director The Board has not appointed a senior independent director. This is contrary to Code provision 12 and is explained in the section headed “Senior Independent Director” on page 9. Annual evaluation of the performance of the Board The Board does not carry out a formal annual evaluation of its the performance, its committees, the Chair and individual directors. This is contrary to Code provision 21 and is explained in the section headed “Board assessments” on page 15. Board Committees Currently, the Company has insufficient independent non-executive directors to enable it to meet the criteria for the composition of its committees, contrary to Code provision 24 and Code provision 32 and is explained in more detail on pages 11 and 12. Performance related pay Non-executive directors participate in the Company’s share option plan. This is contrary to Code provision 34 and is explained in the section headed “Share Option Plan and Option-Based Awards” on page 13 and 14. (cid:3) w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 7 Board leadership The Board of Directors is responsible for overseeing the long term success and strategic direction of the Company in accordance with the schedule of matters reserved for board decision and it responsible for monitoring the activities of the executive management. Non-executive Chair Dan Smith (appointed 26 February 2019) Skills and experience Dan Smith has over 13 years’ capital markets experience working in various roles including as an Executive and Non-Executive Director and Company Secretary of companies with shares quoted on AIM, ASX and NSX. He is the founder of Minerva Corporate Pty Ltd, a boutique corporate services firm focused on providing corporate advisory, company secretarial, and accounting services to listed and unlisted entities, as well as compliance manager services for IPOs and RTOs across sectors including natural resources. Dan is currently a Non-Executive Director and Company Secretary of AIM traded Europa Metals Ltd, a European focused zinc-lead exploration company, and is director and company secretary for a range of companies listed on the ASX. Roles on Board committees Member: Member: Audit Committee Nomination & Remuneration Committee Chief Executive Officer and Technical Director Bill Brodie Good (appointed 4 July 2019) Skills and experience Douglas William (“Bill”) Brodie Good, BSc and BA (Hons) has worked in minerals exploration in over 40 countries, across Africa, the Middle East, Central Asia and SE Asia, since his geological studies and early years in the mining industry in Australia. Bill has over 25 years in mineral exploration, working for start-ups, juniors, mid- tier and major (Rio Tinto Mining and other Rio Tinto group companies in a variety of roles) resource companies, as well as 5 years as a principal with SRK Exploration Services Ltd, a leading global mining consultancy group. Roles on Board committees None Non-executive Director Mark Culbert (appointed 23 July 2020) Skills and experience Mark is an experienced litigation lawyer and is the Managing Director of iLaw Solicitors Limited, a City Legal 500 law firm, which he co-founded in 2006. His speciality areas are intellectual property, technology and media disputes. Mark is the Chairman of the IT Disputes Group of the Society for Computers & Law, an Associate Member of the Chartered Institute of Trade Mark Attorneys and an Associate Member of the Australian Risk Policy Institute. Roles on Board committees Member: Audit Committee Member: Nomination & Remuneration Committee Non-executive director Christopher Gordon (resigned 23 July 2020) Skills and experience Chris Gordon has a Bachelor of Economics degree awarded by the University of London and over 10 years’ experience in the financial services sector in London, working in dealing and trading roles with a focus on raising capital for listed companies. Chris Gordon previously acted as a non-executive director for Gunsynd plc which is listed on AIM. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 8 Non-executive director James Cable (resigned 24 November 2020) Skills and experience James Cable has been a chartered accountant for over 40 years and has extensive experience at board level in various companies. He has significant international and commercial experience gained in the Middle East, Africa, Far East and Europe in several business sectors including natural resources and construction. He is a former Finance Director of Kopane Diamond Developments Plc and Mantle Diamonds Ltd and he advises natural resources companies on corporate strategy and project finance and is a director of GemRock Company Ltd. Company Secretary St James’s Corporate Services Limited (“SJCS”) (appointed 10 January 2020) Skills and experience SJCS is co-owned by Phil Dexter and Jane Kirton. Phil has in excess of 40 year’s experience in the company secretarial environment and has worked in the natural resources sector since 1977. During that time he has worked with most of the leading South African mining companies and assisted on numerous corporate transactions involving acquisitions, reorganisations and restructurings, rights offers and fund raisings. Jane has over 20 year’s experience in the company secretarial environment and qualified as a Chartered Secretary in 2007. Roles on Board committees Secretary: Secretary: Audit Committee Nomination & Remuneration Committee The following documents are available on the Company’s website, www.alienmetals.uk: schedule setting out the division of responsibilities between the Chair and CEO; (cid:120)(cid:3) (cid:120)(cid:3) matters reserved for board decision (cid:120)(cid:3) (cid:120)(cid:3) Terms of Reference of the Nomination & Remuneration Committee Terms of Reference of the Corporate Governance Independent directors At least half the Board, including the Chair, comprises independent non-executive directors who provide a balance of skills and experience, and who are responsible for providing constructive challenge to and assistance in, developing proposals on strategy. All the non-executive directors participate in the Company’s share option plan; the extent of their participation is not considered to impact their independence. Dan Smith and Mark Culbert are both deemed independent. Senior Independent Director The role of a Senior Independent Director is to provide a sounding board for the Chair and serve as an intermediary for the other directors and shareholders. In addition, a senior independent director would be expected to meet the other non-executive directors without the Chair present, to appraise his performance. The Company Secretary, as well as each of the non-executive directors, is available as a sounding board to the Chair and to serve as an intermediary for shareholders. The Company Secretary is also available to serve as an intermediary for any of the directors when required. Due to the size of the Board, the nomination of any one particular director to act as a Senior Independent Director is not currently considered to be appropriate and would not improve its effective operation. However, the matter is kept under review. The process through which board assessments are undertaken is more fully described in the section headed “Board assessments”, on page 15. Operation of the board All directors are required to allocate sufficient time to the Company to discharge their responsibilities effectively. In any decision-making, the directors are required to exercise their judgement in determining the likely impact of each decision as to the likelihood of promoting the success of the company for the benefit of its members as a whole. In doing so, the directors consider whether the decision is likely to promote the success of the company for the benefit of its members as a whole, having regard for (amongst other matters): 9 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r (a)(cid:3) the likely consequences of any decision in the long term, (b)(cid:3) the interests of the company's employees, (c)(cid:3) the need to foster the company's business relationships with suppliers, customers and others, (d)(cid:3) the impact of the company's operations on the community and the environment, (e)(cid:3) the desirability of the company maintaining a reputation for high standards of business conduct, and (f)(cid:3) the need to act fairly as between members of the company. The Chair is ultimately responsible for ensuring that each board decision is taken having sufficient information on and with all due discussion of, each of the aforementioned items as is relevant to such decision. The Company has a schedule of matters reserved for its own decision and two committees comprised entirely of non-executive directors: the Audit Committee and the Nomination & Remuneration Committee. Although an Executive Committee was established in the past, from May 2019, the Company had only 1 Executive Director and therefore it has not met since that date and is not expected to meet until such time as additional members are appointed. Each committee has formally delegated responsibilities by way of Terms of Reference. The performance of the Board, committees and individual directors are reviewed but no formal evaluation has taken place. Board meeting attendance The small size of the Board and frequent telephonic or other remote contact between the directors enables decisions to be taken quickly and effectively using written resolution procedures rather than physical board meetings. Only 1 board meeting took place during the year in October 2020, at which all directors at that time were present i.e. Dan Smith, Bill Brodie Good, James Cable and Mark Culbert. All other resolutions of the directors were effected by written resolution. Value generation and preservation The Company’s business model and opportunities immediately available are more fully described in the “Business overview” section of this annual report. Over the long-term, the Company seeks to create value by acquiring mining rights, demonstrating the presence of mineralisation and thereby significantly increasing the value of those mining rights. As the Company does not expect to generate operating revenues in the immediate future, it is dependent upon the financial support of new or existing investors and it is believed that companies that are well-governed enjoy a lower cost of capital which, all things being equal, should translate to greater business success. The risks to the business are set out in the Risk Management section commencing on page 16. Culture and employees At the Company’s present stage of development, it has two employees and its culture therefore exists principally in the boardroom and amongst any contractors. In the UK, all contractors report directly to the CEO. Overseas, all contractors report directly to the country manager. The country manager reports to the CEO. It is considered that the board is well positioned to ensure that policy, practices and behaviour throughout the business is aligned with the Company’s purpose, values and strategy. In the event that the Board had any concerns, it would require the CEO or country manager to take remedial action. The Board recognises the importance of the remuneration structure supporting its strategy and reinforcing the culture of the organisation. This is further described in the Nomination and remuneration committee report on page 12. Relations with shareholders The Chair welcomes major shareholders to discuss the Company’s strategy and governance, including, as explained in the Nomination & Remuneration Committee Report, on the appointment of key board appointments. The Chair reports to the Board as a whole, on the views of major shareholders. All investors are encouraged and welcomed at the Company’s annual general meeting, at which there is opportunity to pose questions to the directors. However, as shareholders were not able to attend the 2020 AGM due to COVID-19 restrictions, a dial-in facility was made available to enable shareholders to participate in the meeting. Following the conclusion of the formal business of the meeting, the CEO gave an update on the Company’s activities and answered questions from shareholders. 10 Annual general meeting At the Company’s annual general meeting held during 2020, all resolutions were passed by a poll and proxy voting figures were published immediately following the AGM. Major shareholders As at 5 May 2021 being the latest practicable date, the Company had been notified of the following companies or individuals interested 3% or more of the Company’s shares: Shareholder Windfield Metals Pty Gravner Ltd No. shares 220,000,000 202,247,000 % 6.43 5.91 Conflicts of interest All Directors have duties under the BVI Business Companies Act to act with care, diligence and skill, in the best interests of the Company. Certain directors and officers of the Company may also serve as directors and/or officers of, or have investments in other companies involved in mineral exploration and development and consequently there is the potential for conflicts of interest. Conflicts of interest can arise amongst shareholders, especially where one shareholder, or a small group of shareholders, has a significant stake in the Company. The directors must not to allow this to compromise or override their independent judgement, especially in the context of acting fairly as between members of the Company. In the event a conflict of interest should arise, each individual so conflicted is required to disclose the conflict in accordance with the Company’s Articles of Association in order that it can be considered and approved if appropriate. No director may vote on any matter in which he or she may be deemed to be interested. On an ongoing basis, each director is responsible for informing the Company Secretary of any new actual or potential conflicts that may arise or if there are any changes in circumstances that may affect an authorisation previously given. Even when provided with authorisation, a director is not absolved from his or her statutory duties. Board Committees The Board of Directors has two standing committees: Audit Committee (cid:120)(cid:3) (cid:120)(cid:3) Nomination & Remuneration Committee The Company Secretary is Secretary to each Committee and attends all meetings. The Board considers that each of the Committees has an appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively. The Corporate Governance Committee and a Health & Safety Committee were dissolved in July 2018 as the size of the Board and the extent of operations did not warrant their continuance. Audit Committee The Audit Committee meets at appropriate times in the reporting and audit cycle, and otherwise as required. It is responsible for nominating the external auditor recommending to the Board the auditor’s compensation, overseeing the work of the auditor, and approving any proposals for non-audit services. The Audit Committee is also responsible for reviewing public announcements relating to the Company’s profit or loss or cash flow, satisfying itself of the adequacy of procedures for the release of financial information, and ensuring the maintenance of appropriate and proportionate procedures for addressing matters relating to accounting, internal financial controls and auditing matters. It is the Board of Directors’ conclusion that each of the members of the Audit Committee has an understanding of the accounting principles used by the Company to prepare its financial statements, the ability to assess the general application of such accounting principles in connection with the accounting for estimates, accruals and reserves, and experience in evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company's financial statements. w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 11 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r During the year Dan Smith, James Cable (until 24 November 2020), Chris Gordon (until 23 July 2020) and Mark Culbert (from 23 July 2020) served as members of the Audit Committee. The Audit Committee Terms of Reference (”TORs”), in accordance with the provisions of the Code, require it to comprise of not less than 3 independent non-executive directors and also provide that the Chair of the Board should not be member. However, as a result of the resignation of James Cable earlier in the year, the Audit Committee comprises of only 2 non-executive directors, one of which is Dan Smith and is therefore non- compliant with its TORs. However, the Code does allow audit committees of smaller companies to comprise of only 2 independent non-executive directors. Accordingly, the Terms of Reference were amended subsequent to the year-end to reflect this. Until such time as an additional independent non-executive director is appointed, the Board has agreed that Dan Smith may remain a member. Nomination & Remuneration Committee The Nomination & Remuneration Committee (“the N&R Committee”) meets at least once each year, and otherwise as required. It is responsible for identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise, having due regard for the structure, size and composition of the Board together with the skills, knowledge, experience and diversity of both the Board and the individual. Additionally, the N&R Committee is responsible for reviewing the results of any board effectiveness review that relates to the composition of the board. The scale and structure of the remuneration and compensation packages for the directors is set taking into account time commitment, comparatives, and risks and responsibilities, to ensure that the amount of individual’s previous performance, achievements, experience, compensation adequately reflects the responsibilities and the risks of the office or position held, and in the context of the Company’s risk profile, to ensure they do not encourage excessive risk taking. During the year Dan Smith, James Cable (until 24 November 2020), Chris Gordon (until 23 July 2020) and Mark Culbert (from 23 July 2020) served as members of the N&R Committee. Subsequent to the year-end, the Board agreed that a separate Nomination Committee and a separate Remuneration Committee be constituted to replace the current N&R Committee. However, the Code requires the chair of the Remuneration Committee to have served on a remuneration committee for at least 12 months prior to appointment and for it to comprise of a minimum of 2 independent non-executive directors and for the Nomination Committee to comprise of a majority of non-executive directors. Currently, it would not be possible to meet any of these criteria and therefore the constitution of the separate committees has been deferred until such time as an additional independent non-executive director is appointed. Nomination and remuneration committee report Overview The N&R Committee makes recommendations to the Board as to the appropriate structure, size and composition (including the skills, knowledge, experience and diversity) of the Board and is responsible for identifying and nominating suitable candidates to fill Board vacancies. The N&R Committee is also responsible for recommending the remuneration policy to the Board, determining the remuneration of the directors and senior executives, ensuring that remuneration is reported correctly, and reviewing the results of any assessment of the effectiveness of the Board. The N&R Committee meets as required each year to review the performance of the executive directors and to determine their respective compensation. The N&R Committee is governed by terms of reference, which are available on the Company’s website at www.alienmetals.uk. The N&R Committee’s terms of reference require it to review its own terms of reference once a year; they were last amended on 28 September 2019. During the year, Mark Culbert joined the Board as an independent non-executive director and Bill Brodie Good was appointed as CEO and Technical Director. Chris Gordon and James Cable resigned as non-executive directors on 23 July 2020 and 24 November 2020 respectively. The directors received a significant award of share options to ensure there was a strong link between their contribution to the Company and their reward. The Board is not aware that the workforce has any particular desire to engage in the discussion of remuneration policy and how executive remuneration aligns with wider company pay policy. The Board will make appropriate provision should it appear that this is not the case or the situation changes. 12 Although the Chairman of the N&R committee has not served on a remuneration committee for at least 12 months prior to appointment, as required by the Code, the members of the N&R Committee have the necessary experience of executive compensation matters relevant to their responsibilities as members of such a committee by virtue of their respective professions, contacts within the minerals industry as well as experience in the broader business community. In addition, each member of the N&R Committee keeps abreast on a regular basis of trends and developments affecting executive compensation. Nonetheless, it is the intention that an additional non-executive director who meets the requirements of the Code will be appointed to the Board and will assume the role of Chairman of the Committee in due course. Neither the Company nor the N&R Committee engaged independent consultants to evaluate the levels of compensation during the year ended 31 December 2020. The recommendations of the N&R Committee are submitted to the independent members of the Board of Directors for consideration and approval. Remuneration policy The Company’s remuneration policy is intended to support the Company’s long-term strategy and sustainable success in a manner consistent with the Company’s purpose and values, attracting and retaining the highest quality of directors and senior executives. The pay policy is to: (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) align the interests of the Board and senior executives with shareholders’ align the interests of the workforce (including the Board and senior executives) with the Company’s purpose and values, avoid incentivising excessive risk taking by the Board and senior executives, be proportionate to the contribution of the individuals concerned, and to be sensitive to pay and employment conditions elsewhere in the group. The remuneration policy does not require post-employment shareholding requirements. Share options ordinarily lapse upon the resignation of the option holder. The scale and structure of the remuneration and compensation packages of directors is set taking into account time commitment, comparatives, risks and responsibilities, to ensure that the amount of compensation adequately reflects the individual’s previous performance, achievements, experience, responsibilities and risks of the office or position held, and in the context of the Company’s risk profile, to ensure they do not encourage excessive risk taking on the part of the recipient of such compensation. As the Company is at an early stage of development, the use of traditional performance standards, such as corporate profitability, is not considered by the N&R Committee to be appropriate in the evaluation of corporate or directors’ performance. Discretionary bonuses may be paid to aid staff retention and reward performance. The Board considers that the remuneration policy has operated as intended in terms of company performance and quantum. The Company provides executive directors with base salaries which represent their minimum compensation for services rendered during the financial year. The base salaries of directors and senior executives depend on the scope of their experience, responsibilities, and performance. A description of the material terms of each director’s contract is provided under “Terms of Directors’ Employment, Termination and Change of Control Benefits” below. The N&R Committee has considered the risk implications of the Company’s compensation policies and practices and has concluded that there is no appreciable risk associated with such policies and practices since such policies and practices do not have the potential of encouraging an executive officer or other applicable individual to take on any undue risk or to otherwise expose the Company to inappropriate or excessive risks. Furthermore, although the Company does not have in place any specific prohibitions preventing executives from purchasing financial instruments, including prepaid variable forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset a decrease in market value of options or other equity securities of the Company granted in compensation or held directly or indirectly, by the director, the Company is unaware of the purchase of any such financial instruments by any director. The Company does not anticipate making any significant changes to its compensation policies and practices during 2021. Share Option Plan and Option-Based Awards All share options granted under the Company’s Unapproved option plan as amended and restated effective as of 1 December 2006 have now lapsed and no further share options will be awarded under this plan. w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 13 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r The Company currently has EMI share option plan (“Approved Plan”) which was adopted by the Board on 3 February 2018, and which provides for the award of share options under HMRC’s approved Enterprise Management Incentive scheme, the Company Share Option Plan, as well as Unapproved share options. In February 2018, the Board resolved that no further options would be granted under the Unapproved Plan and succeeded it with the Approved Plan. Share options are approved by the Board of Directors on the recommendation of the Nomination & Remuneration Committee. Option awards are reviewed periodically, take into account previous option grants, changes in executive positions and overall contribution to the Company. The Approved Plan provides that the maximum number of shares which may be reserved and set aside for issue under it, is 10% of the Company’s issued share capital at the date of grant. The aggregate number of shares which may be reserved for issuance to any one person under the Share Option Plan and which are subject to outstanding options granted under a prior plan, must not exceed 5% of the issued shares (determined at the date the option was granted), in a 12-month period. The Company’s non-executive directors participate in the Unapproved Plan because the Board considers that the holding of options helps align the interests of the non-executive directors with shareholders by incentivising their decision making with a view to providing growth in the Company’s share price. The Company’s long-term success will be dependent upon raising additional finance in future; aligning the interests of all directors and senior executives with shareholders incentivises all concerned to achieve the best possible price for such placings and to minimise undue dilution of interests. Summary Compensation Table The following table sets forth the compensation awarded, paid to or earned by each director during 2020, rounded to the nearest US$1,000. All figures in US$ Director and position D. J. Smith Non-Executive Chairman B. Brodie Good CEO & Technical Director M. C. Culbert Non-Executive Director J. S. Cable Non-Executive Director C. C. Gordon Non-Executive Director D. V. Edmonds Executive Chair P. Taylor Chief Executive Officer Appointed / Resigned Appointed 26 February 2019 Appointed 5 July 2019 Appointed 23 July 2020 Resigned 24 November 2020 Resigned 23 July 2020 Resigned 30 April 2019 Resigned 8 July 2019 Base Salary / Fees / Pensions 63,000 2020 Option based awards - 2019 Base Salary / Fees 42,000 Option based awards 19,000 Total 63,000 Total 61,000 166,000 18,000 184,000 51,000 10,000 61,000 6,000 3,000 9,000 - - - 21,000 3,000 24,000 32,000 2,000 34,000 13,000 - 1,000 - - - 13,000 32,000 - 14,000 - - 32,000 14,000 1,000 119,000 32,000 151,000 Salaries are paid in pounds sterling and translated to US dollars based on the average £:$ foreign exchange rate for each respective year (2020: 1.2833; 2019: 1.2760). The fair value of options granted is calculated using the Black-Scholes model as this model is widely accepted as an industry standard and is considered to provide the best estimation of value. Further details are set out in note 16. Notes: (1)(cid:3) (2)(cid:3) 14 Appointment of new directors and succession planning The N&R Committee recognises that an effective board comprises a range and balance of skills, experience, knowledge, gender and independence, with individuals that are prepared to challenge each other whilst working as a team, which requires a range of personal attributes, including character, intellect, sound judgement, honesty and courage. The Board and its advisers have significant experience in the mining sector and from that, a strong network of individuals working in the sector. In the first instance, the N&R Committee in consultation with the Chair identify the Board’s needs, and potential candidates believed to have the right blend of attributes to complement the Board, are identified and shortlisted from this broad network. Given this experience and network, the Board does not consider it necessary to openly advertise positions or, generally, to use executive search consultants, however, in the event the N&R Committee is unsatisfied with the suitability of candidates which have been presented from the identification process, an executive search agency would be appointed. The Company usually has very limited need for the service of executive search agencies and therefore does not maintain a relationship with any one particular firm. For key appointments, such as the appointment of the Chair, a representative from the Board may discuss the proposed appointment with significant investors. Once a suitable candidate has been identified, the Company’s Nominated Advisor carries out searches to provide assurance of their suitability. Diversity and inclusion There are many forms of diversity in the workplace: age, gender, race, national or ethnic origin, religion, language, political beliefs, sexual orientation and physical ability, as well as diversity of perspective arising from individuals’ skills, experience and working styles providing different perspectives and approaches to finding solutions. The present gender balance of senior management is exclusively male; the Board recognises this would benefit from improved balance, and the N&R Committee is cognisant of this when seeking candidates. Appointment and removal of directors The powers of the directors of the Company are determined by its Articles of Association and British Virgin Islands (“BVI”) legislation, each of which contain rules about the appointment and replacement of directors. They provide that subject to certain conditions, directors may be appointed by an ordinary resolution of the members or by a resolution of the directors, provided that, in the latter instance, a director appointed in this way retires at the first AGM following his or her appointment. The Company’s Articles of Association also provide that directors should normally be subject to re-election at the AGM at intervals of three years although directors may volunteer to stand for re-election annually. A director may cease to be a director: •(cid:3) By special resolution of the members approved by 75% of the shareholders entitled to vote •(cid:3) By resolution of the directors •(cid:3) •(cid:3) If he resigns If he ceases to meet the eligibility requirements under the BVI Companies Act. Where any director resigns and has concerns about the operation of the board or the management of the company, they are asked to provide a written statement to the Chair to circulate to the Board. Board assessments The Chair continuously considers the performance of the Board, its committees and of individual directors, and provides feedback when appropriate. Similarly, the Chair invites feedback in the same manner from the Non- Executive Directors and the Company Secretary. The N&R Committee considers the time and cost involved in carrying out a formal process, especially one that is externally facilitated, cannot be justified for the Company at this stage in its development. The N&R Committee acknowledges the merits in carrying out formal board evaluations and will monitor the continuing suitability of this stance as the Company grows in size. w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 15 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r Audit committee report Overview The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Company’s management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the Committee reviewed and discussed the audited consolidated financial statements and the notes to them, as set out on pages 28 to 54 of this annual report, with Company management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Committee is governed by terms of reference, which are available on the Company’s website at www.alienmetals.uk. The Audit Committee’s terms of reference require were reviewed and amended post the year-end, in February 2021. Independence of the external auditor The independence of the auditor is considered by the Audit Committee each year. In assessing the auditor’s independence, the Audit Committee consider: Ratio of audit fees to non-audit fees Length of tenure (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) Whether there are any known material relationships between the Company, its directors and senior executives, and the audit firm, its partners, and the audit team Application of constructive challenge and professional scepticism (cid:120)(cid:3) Audit and non-audit fees are disclosed in note 4 to the financial statements, on page 39. The Audit Committee considers the nature and value (in the context of the audit fee) of any non-audit services on the auditor’s independence, and is required to give its prior approval of any such non-audit services. Effectiveness of the external audit process In considering the effectiveness of the external audit process, the Audit Committee consider: (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) Effectiveness of the audit plan, its delivery and execution Knowledge and experience of the audit team Robustness of the audit Internal audit function The Audit Committee considers annually whether there is a need for an internal audit function and makes a recommendation to the Board if a change is considered to be appropriate. The Company’s operations are small in scale, the organisational structure is flat, and the cost of an internal audit function is not justified at present. Risk management The financing, exploration, development and mining of any of the Company’s properties is subject to a number of factors including the price of copper, silver, gold, lead and zinc, laws and regulations, political conditions, currency fluctuations, environmental regulations, hiring and retaining qualified people and obtaining necessary services in jurisdictions where the Company operates. The Board periodically carries out robust assessments of the emerging and principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity. The assessment includes a review of all material controls including those which are related to finance, operations and compliance. The Audit Committee is responsible for monitoring the effectiveness of the Company’s risk management and internal control systems, and reports to the Board as required. Alien Metals operates with a small team of key personnel and with open lines of internal communication. Where new risks are identified, these are reported to the Company Secretary or the Executive Director. Where practicable, a method of mitigation is determined, and the risk together with any form of mitigation is presented to the Board for discussion. The following is a brief discussion of those distinctive or special characteristics of the Company’s operations and industry which may have a material impact, or constitute risk factors in respect of the Company’s future financial performance. 16 Principal risks and uncertainties Key risks Description of risk Mitigating factors Strategic risks Exploration and development and acquisitions future No reserves or resources and risks incidental The Company's operations are subject to all of the hazards exploration, development, and the production of minerals, including damage to life or property, environmental damage and legal liability for damage, which could have a material adverse impact on the business and its financial performance. to The Company intends to acquire additional mining concessions in Mexico, Australia or elsewhere in the world. The Company may be unable to obtain suitable mining concessions at competitive prices. Any exploration programme entails risks relating to the location of economic ore bodies, the development of appropriate metallurgical processes, the receipt of necessary governmental permits and the construction of mining and processing facilities. In the event that the Company’s portfolio of mining concessions are deemed by management not to warrant further exploration and the Company is unsuccessful in acquiring suitable new projects, the Company will have no exploration or development projects to pursue. The Company does not hold any concessions in respect of which reserves or resource estimates have been established that comply with Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Standards and industry similar Guidelines or other standards. recognised No assurance can be given that any exploration programme will result in any new commercial mining operation or in the discovery of new resources. concessions Our mineral are evaluated carefully by qualified independent and geologists, advisors are engaged as and when appropriate. The management has significant experience operating in Mexico and Australia. team The Company has had significant success in the past at delineating mineral resources in accordance with NI 43-101. Key risks Description of risk Mitigating factors Strategic risks Mineral concessions and titles risks In relation to exploration and mining concessions over which the Company holds legal rights, if the Company fails to fulfil the specific terms of any of its concessions or operates in the concession areas in a manner that violates Mexican or Australian mining law, regulators may impose fines, suspend or revoke the concessions, any of which could have a material adverse effect on the Company's operations and proposed operations. Ownership of the mineral concessions in Mexico has been transferred from the Company’s former operating subsidiary Alien Metals de Mexico SA de CV (“ASM”) to its new operating subsidiary, Compañía Minera Estrella de Plata SA de CV (“CMEP”). Whilst the Company has previously received legal opinions in respect of title of ASM to its properties there is no guarantee that title to such properties will not be challenged or impugned by third parties. The Company’s concessions could be subject to prior unregistered agreements, transfers or The Company’s mineral concessions have been registered in the name of CMEP and no contest or objection was received. The Company is aware of necessary minimum expenditure and annual rental obligations its exploration and mining permits and maintains the necessary payments and expenditure obligations to negate any risk from this aspect. for all Prior to entering into agreements relating to mineral concessions, formal searches and reviews of legal documentation are conducted to provide evidence of the legal owner, including outsourcing of 17 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r Key risks Description of risk Mitigating factors Strategic risks other claims and title could be affected by unidentified or unknown defects or government actions. A formal legal opinion has not been obtained as to the legal title of CMEP to the mineral concessions. legal diligence to legal practitioners. tenement and/or due Key risks Description of risk Mitigating factors Failure to obtain sufficient financing for any projects would result in a delay or indefinite postponement of exploration, development or production on properties covered by the Company's concessions or even the loss of a concession. Additional financing might not be available when needed, or if available, the terms of such financing might not be favourable to the Company and could involve substantial dilution to shareholders. In the absence of adequate funding or cost reductions, the Company may not be able to continue as a going concern. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at 31 December 2020, the Company had cash of $5.6m to settle accounts payable of $296k. The Company’s accounts payable have contractual maturities of less than 30 days and are subject to normal trade terms. In the short-term, liabilities will be funded by cash. The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern and have access to adequate funding for its exploration and development projects, so that it can provide returns for shareholders and benefits for other stakeholders. The Group manages the capital structure and makes adjustments in the light of changes in economic conditions and risk characteristics of the underlying assets. The price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments in the market. The Company’s exploration expenditure is made in Mexican pesos, Australian dollars or US dollars and head office expenses are predominantly made in the UK in pounds sterling. The Company is therefore exposed to the movement in exchange rates for these currencies. At the year end the majority of the Company’s cash resources were held in GBP. The Company therefore also has downside exposure to any weakening of pound sterling against the US dollar as this would increase Financial risks Requirement of additional financing Liquidity risk Capital management risk Price risk Foreign currency risk 18 The Company has an experienced board and management team with significant experience in financing mining activities. The Company has been successful in raising funds in the past and it is our intention to raise additional funds in future to support the ongoing development of the business. that satisfied The Company ensures sufficient funds will be available to allow it to meet its liabilities as they fall due. To achieve this cash balances and cash flow projections are reviewed by the Board on a regular basis. The Board will not commit to material expenditures prior to sufficient being funding is available. In order to maintain or adjust the capital structure the Group may issue new shares, acquire debt, or sell assets. Management regularly reviews cash flow forecasts to determine whether the Group has sufficient cash reserves to meet capital working future take and requirements advantage business of opportunities. The Company does not currently have any financial instruments in issue other than share options and warrants. to The Company does not hedge its exposure to price risk. The Company does not currently hedge foreign exchange risk. There is not considered to be any material exposure in respect of other monetary and liabilities of the Group. assets Key risks Description of risk Mitigating factors Financial risks expenses in US dollar terms and accelerate the depletion of the Company’s cash resources. Any strengthening of pound sterling, Australian dollars or the Mexican peso against the US dollar would, however, result in a reduction in expenses in US dollar terms and preserve the Company’s cash resources. In addition, any movements in pounds sterling, Australian dollars or Mexican peso would affect the presentation of the consolidated statement of financial position when the net assets of the Mexican subsidiary and parent company in the UK are translated from their functional currencies into US dollars. The Company’s credit risk is primarily attributable to cash and the financial stability of the institutions holding it. The Group’s maximum exposure to credit risk is attributable to cash. The credit risk on cash is limited because the Group invests its cash in deposits with well capitalised financial institutions with strong credit ratings. The Company may from time to time hold shares in other mining companies, such as SGL UK. There is not always a liquid market for the shares in companies such as SGL UK companies and so it may not always be possible to sell such shares at the optimum time or price. Credit risk Investment risk The Company invests its cash in deposits with well-capitalised financial institutions with strong credit ratings. The Company has previously been successful in realising value from investments. Key risks Description of risk Mitigating factors External risks Metals prices The Company’s ability to obtain further financing will depend in part on the price of commodity prices, including copper, silver, lead and zinc, and the industry’s perception of its future price. The Company's resources and financial results of operations will also be affected by fluctuations in metal prices over which the Company has no control. A reduction in the metal prices could from being prevent economically mined or result in curtailment of existing production activities or result in the impairment and write-off of assets. the Company’s properties It is an accepted risk that the Company’s performance will be impacted by the price of metals. The Board and management believe the price of precious metals in particular, will increase in the long term. The Company does not hedge its exposure to metals prices. The price of commodities, which is affected by numerous factors including inflation levels, fluctuations in the US dollar and other currencies, supply and demand and political and economic conditions, could have a significant influence on the market price of the Company’s common shares. Key risks Description of risk Mitigating factors Operational risks Reliance on contractors The Company relies on contractors to implement exploration and development programmes. The failure of in The Company has operated Zacatecas in Mexico, for several 19 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r Key risks Description of risk Mitigating factors Operational risks a contractor or key service provider to perform properly its services to the Company could delay or inconvenience the Company’s operations, and have a materially adverse effect on the Company. years and has well-established and trusted relationships with various contractors. The Company also has considerable experience operating in Australia. and significant Certain of the Company’s directors have recent in other experience operating global jurisdictions, which may help identify reliable contractors. The Board has established a Nomination Remuneration Committee which is responsible for considering succession planning and ensuring remuneration is sufficient to attract and retain staff of the necessary calibre. & The Company has an experienced board and management team with an awareness and knowledge of these types of risk. to their acquisition Concessions are evaluated carefully prior for environmental risks and consultants are engaged to advise on specific risks when appropriate. The Company has an excellent track record on environmental matters. directors believe of Mexico the The governments and Australia support the development of natural resources by foreign operators. Key personnel Environmental factors The Company's business is dependent on retaining the services of a small number of key personnel of the appropriate calibre as the business develops. The Company has entered into employment agreements with certain key managers. The success of the Company is, and will continue to be to a significant extent, dependent on the expertise and experience of the directors and senior management. The loss of one or more of these individuals could have a materially adverse effect on the Company. The Company does not currently have any insurance in place with respect to key personnel. The Company's operations are subject to environmental regulation in the jurisdictions in which it operates. Such regulation covers a wide variety of matters including, without limitation, prevention of waste, pollution and protection of the environment, labour regulations and health and safety. The Company might also be subject under such regulations to clean-up costs and liability for toxic or hazardous substances, which might exist on or under any of the properties covered by its concessions, or which might be produced as a result of its operations. If the Company does not comply with environmental regulations or does not file environmental impact statements in relation to each of its concessions, it might be subject to penalties, its operations might be suspended, closed and/or its concessions may be revoked. Environmental legislation and permit requirements are likely to evolve in a manner which will require stricter fines and standards and enforcement, penalties stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their directors and employees. increased non-compliance, more for The Company's activities could be subject to prolonged disruptions due to weather conditions depending on the location of operations in which the Company has interests. The Company is conducting its exploration activities in the Zacatecas region Mexico, and in Western Australia. The Company may be adversely affected by changes in economic, political, judicial, administrative or other regulatory factors such as taxation these jurisdictions, where the Company operates and holds its major assets. Mexico may have a more volatile political environment and/or more challenging trading conditions than in some other parts of the world. There is no assurance that Political risk 20 Key risks Description of risk Mitigating factors Operational risks future political and economic conditions in Mexico will not result in the government of Mexico adopting different policies in respect of foreign development and ownership of mineral resources. Any such changes in policy may result in changes in laws affecting ownership of assets, taxation, rates of exchange, environmental protection, labour relations, and repatriation of income and return of capital. These changes may affect both the to undertake exploration and Company's ability development activities in respect of future properties in the manner currently contemplated, as well as its ability to continue to explore and develop those properties, in respect of which it has obtained exploration and development rights to date. Under the mineral property concessions and certain other contractual agreements to which a member of the Group is, or may in the future become, a party, any such company is, or may become, subject to payment and other obligations. If such obligations are not complied with when due, in addition to any other remedies which may be available to other parties, this could result in dilution or forfeiture of interests held by such companies. The operations of the Company require approvals, licenses and permits from various regulatory authorities, governmental and otherwise. There can be no guarantee that the Company will be able to obtain or maintain all necessary approvals, licenses and permits that may be required to explore and develop its various projects and/or commence construction or operation of mining facilities that economically justify the cost. The Company competes with numerous other companies and individuals in the search for and acquisition of mineral claims, leases and other mineral interests, as well as for the recruitment and retention of qualified employees. There is significant competition for the silver and other precious metals opportunities available and, as a result, the Company may be unable to acquire further mineral concessions on terms it considers acceptable. Certain directors and officers of the Company also serve as directors and/or officers of other companies involved in mineral exploration and consequently there is the potential for conflicts of interest. The Company expects that any such director or officer shall disclose such interest in accordance with its articles of association or his contractual obligations to the Company and any decision made by any of such directors and officers involving the Company will be made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of the Company and its shareholders. and development Payment obligations Regulatory approvals Competition Conflicts of interest The directors have in place a system of internal controls to ensure any payment obligations are complied with. The Company has significant experience in operating in Mexico and Australia, and believes that the Company holds or will obtain all necessary approvals, licenses and permits under applicable laws and regulations in respect of its current projects. The Company and its management team have significant experience in in Mexico. mining operations and Through relationships Mexico, counterparties may consider the Company to have lower transaction risk than its competitors. experience its in Articles Company’s The of Association have been adopted by shareholders and any conflicts of interest in accordance with the rules set out therein. dealt with are In the event of a conflict of interests, the conflicted director shall not vote on the relevant matter. Viability statement and going concern The Board has assessed the prospects of the Group over a period of 12 months from the date of approval of these financial statements, involving a review of the Group’s forecast prepared for the year ending 31 December 2021 and taking account of the Board’s intentions for future activities after that date. As explained further in note 2(C), taking account of the Group’s current position and principal risks, over a 12 month period, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over that period albeit additional funding will be required to enable the Group to meet all of its objectives. The raising of additional funding is fundamental to the future success of the business and therefore gives rise to 21 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O a material uncertainty, although the Board notes the Group’s successful track record in having raised finance in the past as necessary to meet the Group’s ongoing cash requirements. The Board considers these periods of assessment to be appropriate because they contextualise the Company’s financial position, business model and strategy. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 22 Financial statements Directors’ responsibilities statement The directors are responsible for preparing the annual report and financial statements and have prepared the Group financial statements in accordance with International Financial Reporting Standards in order to give a true and fair view of the state of affairs of the Group and of its profit or loss for that period, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. In preparing these financial statements the directors are required to: select suitable accounting policies and then apply them consistently; (cid:120)(cid:3) (cid:120)(cid:3) make judgements and accounting estimates that are reasonable and prudent; (cid:120)(cid:3) state whether they have been prepared in accordance with IFRSs, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business. (cid:120)(cid:3) The directors are responsible for keeping records that are sufficient to show and explain the Group and Company’s transactions and will, at any time, enable the financial position of the Group and Company to be determined with reasonable accuracy. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the British Virgin Islands governing the preparation and dissemination of the Company’s financial statements and other information included in the annual reports may differ from legislation in other jurisdictions. The directors consider this Annual report and accounts, taken as a whole, is fair, balanced, understandable, and provides the information necessary for shareholders to assess the company’s position, performance, business model and strategy. Statement as to disclosure of information to auditor Each of the persons who is a Director at the date of approval of this annual report confirms that: (cid:120)(cid:3) (cid:120)(cid:3) so far as the Director is aware, there is no relevant audit information of which the Group’s auditor is unaware; and the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. Jeffreys Henry LLP continued as auditor to the Group, a resolution proposing that they be re-appointed will be put at a General Meeting. On behalf of the board, D Smith Director 19 May 2021 (cid:3) 23 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ALIEN METALS LTD Opinion We have audited the consolidated financial statements of Alien Metals Ltd (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2020 which comprise the consolidated statement of income and other comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows, the consolidated statement of changes in equity and the notes to the consolidated financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and United Kingdom International Financial Reporting Standards (IFRSs). In our opinion: (cid:120)(cid:3) (cid:120)(cid:3) the group financial statements give a true and fair view of the state of the Group’s affairs as at 31 December 2020 and of the Group’s loss for the year then ended; and the group financial statements have been properly prepared in accordance with UK IFRSs; Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included a detailed review of the Group’s forecasts in comparison to available management accounts at the date of these financials to assess the reasonability of the estimates made. We have further performed a sensitivity analysis to conclude on the degree to which current cash reserves will be able to sustain the Group for at least a further twelve months from the date of these financials. 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 ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Our audit approach Audit scope The Group is made up of Alien Metals Limited and its four significant subsidiaries. The main trading entities of the group are Alien Metals Limited, Compañía Minera Estrella de Plata S.A. de C.V. and A.C.N. 643 478 371 Pty Ltd. Our full audit scope covered 100% of losses before tax and 100% of net assets across the group. Significant changes in our approach No significant changes have been made to our audit approach. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our 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) we identified, 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 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. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r (cid:120)(cid:3) Carrying value of intangible assets These are explained in more detail below. Key audit matters 24 Key audit matters Key audit matter Carrying value of intangible assets Intangible assets comprise exploration assets, being accumulated licence acquisition costs and subsequent capitalised expenditure on those concessions. The Group had intangibles of US$3,641k at the year-end (2019: US$492k). Included within intangibles assets were additions relating to capitalised exploration costs, capitalised licence acquisition costs and consideration payable in respect of licences acquired during the period. The Directors have a duty to confirm that all intangibles are correctly recognised. As these are the group’s primary assets, the continued existence and ownership of these assets is a key audit matter. Additionally, management is required by IFRS 6 to consider whether there are any impairment indicators which may suggest that the exploration costs will not be recoverable. Such indicators include the expiry or potential non-renewal of licences, absence of planned or budgeted expenditure on further exploration, the discontinuance of exploration activities in a specific area consequent on the non-discovery of commercially viable minerals, or data which indicates that the carrying amount of the asset is unlikely to be recovered in full through development or sale of the asset. How our audit addressed the key audit matter We have performed the following audit procedures: (cid:120)(cid:3) We have confirmed the existence and ownership of key licenses to confirm that the group holds a valid right to explore the projects. (cid:120)(cid:3) We have vouched additions of exploration costs and ensured compliance with IFRS 6. (cid:120)(cid:3) We have reviewed expert reports in relation to the concessions and their future viability. (cid:120)(cid:3) We have reviewed disclosures made in the financial statements. (cid:120)(cid:3) We have reviewed the estimates in relation to the contingent consideration payable and whether this has been recognised in accordance with IFRS. (cid:120)(cid:3) We have reviewed the directors’ consideration of impairment indicators and comparing this to other information available to us, including RNS announcements, expenditure, management’s future plans and budgets. past Based on the audit work performed we are satisfied that the management have appropriately considered the carrying value in accordance with accounting standards. Our application of 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: Overall materiality How we determined it Rationale for benchmark applied Group financial statements US$94,000 (2019: US$18,500). Based on 1% of gross assets (2019: 2.5% of gross assets) We believe that the gross assets are a primary measure used by shareholders in assessing the performance of the Group, as the group is at a pre-revenue stage and is asset heavy. 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 US$54,000 and US$85,000. Performance materiality We set performance materiality at a level lower than overall materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 75% of Group materiality for the 2020 audit (2019: 75%). We determined performance materiality with reference to factors such as our understanding of the Group and its complexity, the quality of the control environment and ability to rely on controls and the low level of uncorrected misstatements in the prior year audit. 25 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r Error reporting threshold We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above US$4,700 (Group audit) (2019: US$1,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. An overview of the scope of our audit 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, the accounting processes and controls, and the industry in which they operate. The group financial statements are a consolidation of 3 reporting units, comprising the Group’s operating businesses. The Group comprises the parent undertaking, incorporated in the British Virgin Islands, its principal operating subsidiaries, Compania Minera Estrella de Plata S.A de C.V and A.C.N. 643 478 371 Pty Ltd and five non-trading or intermediate holding companies, all registered in England. A full scope audit to group materiality levels was performed on the parent undertaking and its main subsidiaries Compania Minera Estrella de Plata S.A de C.V and A.C.N. 643 478 371 Pty Ltd. This resulted in 100% coverage of consolidated expenditures and 100% of the group’s gross and net assets. We performed audits of the complete financial information of the Group reporting units which we regarded as being individually financially significant to the Group, namely Alien Metals Limited and A.C.N. 643 478 371 Pty Ltd. We also performed specified audit procedures over other intangible assets, as well as certain account balances and transaction classes that we regarded as material to the Group at the 3 reporting units. The Group engagement team performed all audit procedures. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion 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 such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in 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 in this regard. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 23, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors 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 group financial statements, the directors are responsible for assessing the group’s and parent 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 parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s 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 auditor’s 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: 26 The extent to which the audit was considered capable of detecting irregularities including fraud Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows: (cid:120)(cid:3) the senior statutory auditor ensured the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations; (cid:120)(cid:3) we identified the laws and regulations applicable to the company through discussions with directors and other management. (cid:120)(cid:3) we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including taxation legislation, data protection, anti-bribery, employment, environmental, health and safety legislation and anti-money laundering regulations. (cid:120)(cid:3) we assessed the extent of compliance with the laws and regulations identified above through making (cid:120)(cid:3) enquiries of management and inspecting legal correspondence. identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit; and (cid:120)(cid:3) we assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by: o(cid:3) making enquiries of management as to where they considered there was susceptibility to fraud, o(cid:3) their knowledge of actual, suspected and alleged fraud; considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations. To address the risk of fraud through management bias and override of controls, we: (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) performed analytical procedures to identify any unusual or unexpected relationships; tested journal entries to identify unusual transactions; assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 of the Group financial statements were indicative of potential bias; investigated the rationale behind significant or unusual transactions. In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to: o(cid:3) o(cid:3) o(cid:3) o(cid:3) agreeing financial statement disclosures to underlying supporting documentation; reading the minutes of meetings of those charged with governance; enquiring of management as to actual and potential litigation and claims; reviewing correspondence with HMRC and the group’s legal advisors. There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of noncompliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of this report This report is made solely to the Company's members, as a body, in accordance with our engagement letter. Our audit work has been undertaken so that we might state to the Company's members those matters that we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, or the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. Sanjay Parmar Senior Statutory Auditor For and on behalf of Jeffreys Henry LLP (Statutory Auditors) Finsgate 5-7 Cranwood Street London EC1V 9EE 19 May 2021 (cid:3) 27 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r Consolidated statement of comprehensive income For the year ended 31 December 2020 (Tabulated amounts expressed in thousands of US dollars unless otherwise stated) Note 2020 2019 Continuing operations Administrative expenses Operating loss Net finance charges Loss for the year before taxation Tax Loss for the year attributable to equity shareholders of the parent Other comprehensive income that may be reclassified to profit or loss: Foreign exchange translation differences recognised directly in equity Movement in equity instrument Other comprehensive income for the year Total comprehensive loss for the year attributable to equity shareholders of the parent Basic and diluted loss per share (US cents/share) All activities relate to continuing operations. 4 7 8 19 (1,223) (1,223) (3) (1,226) - (1,226) 362 40 402 (824) (1,042) (1,042) (4) (1,046) - (1,046) 10 (81) (71) (1,117) 9 (0.052) (0.1) The accompanying notes are an integral part of these consolidated financial statements. (cid:3) 28 Consolidated statement of financial position As at 31 December 2020 (Tabulated amounts expressed in thousands of US dollars unless otherwise stated) Assets Financial asset investments Intangible assets Property, plant and equipment Total non-current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity attributable to equity shareholders of the parent Share capital Warrant reserve Share-based payment reserve Equity investment reserve Foreign exchange translation reserve Accumulated losses Total equity Liabilities Trade and other payables Total current liabilities Total liabilities Total equity and liabilities Note 2020 2019 19 10 11 12 13 14 14 14 14 17 40 3,641 - 3,681 135 5,627 5,762 9,443 65,181 872 1,033 (232) 2,249 (59,957) 9,146 297 297 297 9,443 - 492 1 493 63 166 229 722 56,814 261 1,121 (272) 1,887 (59,212) 599 123 123 123 722 The financial statements were approved and authorised for issue by the Board of Directors on 19 May 2021 and were signed on its behalf by: (cid:39)(cid:68)(cid:81)(cid:3)(cid:54)(cid:80)(cid:76)(cid:87)(cid:75)(cid:3)(cid:3) (cid:49)(cid:82)(cid:81)(cid:16)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81) The accompanying notes are an integral part of these consolidated financial statements. (cid:3) w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 29 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r Consolidated statement of cash flows For the year ended 31 December 2020 (Tabulated amounts expressed in thousands of US dollars unless otherwise stated) Cash flows from operating activities Loss before tax from continuing operations Adjustments for non-cash items: Depreciation Exchange difference Issue of share options Finance charges Equity-settled share-based payment transactions (Increase)/Decrease in trade and other receivables Increase in trade and other payables Cash used in operating activities Cash flows from investing activities Net interest expense Purchase of intangible assets Cash used in investing activities Cash flows from financing activities Proceeds from convertible loan Proceeds from issue of share capital Issue costs Exercise of options and warrants Cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on translation Cash and cash equivalents at 31 December Note 2020 2019 (1,226) (1,046) 11 7 12 17 7 10 14 14 1 5 24 3 - (70) 176 (1,087) (3) (590) (593) - 6,185 (371) 971 6,785 5,105 166 356 5,627 2 (6) 5 64 34 46 (901) (1) (261) (262) 264 834 (76) - 1,022 (141) 298 9 166 The accompanying notes are an integral part of these consolidated financial statements.(cid:3) 30 Consolidated statement of changes in equity For the year ended 31 December 2020 (Tabulated amounts expressed in thousands of US dollars unless otherwise stated) Balance: 31 December 2019 Loss for the year Foreign exchange translation differences recognised directly in equity Movement on equity investment fair value Total comprehensive income Total comprehensive income Shares issued for cash Share issue costs Issue of share options Cancellation of warrants Fair value of warrants issued Balance: 1 January 2020 Loss for the year Foreign exchange translation differences recognised directly in equity Movement in equity investment Total comprehensive income Shares issued Share issue costs Shares issued to settle creditors Issue of share options Exercise of share options Share options lapsed Project acquisitions Fair value of warrants issued Exercise of warrants Balance: 31 December 2020 Share capital Warrant reserve Share based payment reserve Equity investment reserve Foreign exchange translation reserve Accumulated losses Total 53,870 - 2,183 - 1,057 - (185) - 1,871 - (58,166) (1,046) 630 (1,046) - - - - - - - - 1,098 (76) - 2,166 (244) - - - (2,166) 244 - - - - - - 64 - - (6) (81) (87) 16 - - - 10 (81) 16 (1,046) (1,117) (56) (70) (1,533) (1,659) - - - - - - - - - - - - - - - 1,098 (76) 64 - - 599 56,814 261 1,121 (272) 1,887 (59,212) - - - 6,185 (371) 6 - 46 - 2,230 (653) 924 65,181 - - - - - - - - - - - - - - - - 981 (369) 872 24 (55) (57) - - - 1,033 - - 40 40 - - - - - - - - - (232) - (1,226) (1,226) 362 - 362 362 - - - - - - - - - 2,249 (1,226) - - - - 55 57 - - 369 (59,957) 40 (824) 6,185 (371) 6 24 46 - 2,230 328 924 9,146 The accompanying notes are an integral part of these consolidated financial statements. 31 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O Reporting entity 1.(cid:3) Alien Metals Ltd (the “Company”) is a public company limited by shares and was incorporated in the British Virgin Islands. The consolidated financial statements for the year ended 31 December 2020 comprise the Company and its subsidiaries (together referred to as the “Group”). The Group is primarily involved in the acquisition and development of mineral resource assets. 2.(cid:3) Basis of preparation a)(cid:3) Statement of compliance The consolidated financial statements for the year ended 31 December 2020 have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board, IFRIC interpretations and the British Virgin Island Business Companies Act 2004. The Group has adopted all of the new and revised Standards and Interpretations that are relevant to its operations and effective for accounting periods beginning 1 January 2020. The adoption of these new and revised Standards and Interpretations had no material effect on the profit or loss or financial position of the Group. The Group has not adopted any standards or interpretations in advance of the required implementation dates. Amendments to Existing Standards Amendments to References to the conceptual framework in IFRSs Amendment to IFRS 3 Business Combinations: Definition of Business Amendments to IAS 1 and IAS 8: Definition of Material Amendments to IRFS 9, IAS 39 and IFRS 17: Interest Rate Benchmark Reform Issued Date IASB mandatory effective date1 29-Mar-18 22-Oct-18 31-Oct-18 01-Jan-20 01-Jan-20 01-Jan-20 01-Jan-20 The accounts were approved by the board and authorised for issue on 19 May 2021. b)(cid:3) Future standards and possible effects At the date of authorisation of these financial statements, a number of amendments to existing standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective for the year presented. The Directors do not expect that the adoption of these standards will have a material impact on the financial information of the Group in future periods. c)(cid:3) Going concern The directors regularly review cash flow forecasts to determine whether the Group has sufficient cash reserves to meet future working capital requirements and discretionary business development opportunities including exploration activities. The Group’s assets are at an early stage and in order to meet financing requirements for their development the Company has raised funds by way of several discrete share placements, which is a common practice for junior mineral exploration companies. The directors believe the funds raised during the period are sufficient to complete existing work programs, therefore consider it appropriate to prepare the Group’s financial statements on a going concern basis. d)(cid:3) Use of estimates and judgement The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r (cid:3) 32 2.(cid:3) Basis of preparation (continued) d) Use of estimates and judgement (continued) Information about such judgements and estimates are contained in the accounting policies and/or the notes to the consolidated financial statements. Areas of judgement that have the most significant effect on the amounts recognised in the consolidated financial statements: (cid:120)(cid:3) Impairment of exploration and evaluation costs – Notes 3(E), 10 Determination as to whether, and by how much, an asset or cash generating unit is impaired involves management estimates. Management uses the following triggers to assess whether impairment has occurred (the list is not exhaustive): (cid:190)(cid:3) (cid:190)(cid:3) the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future and is not expected to be renewed. substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. (cid:190)(cid:3) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area. sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full on successful development or by sale. (cid:190)(cid:3) (cid:120)(cid:3) As at 31 December 2020, it was considered that none of the impairment triggers had arisen and the assets were being evaluated for future potential exploration. In any such case, or similar cases, the Group will measure, present, and disclose any resulting impairment loss in accordance with IAS 36. For further information please refer to notes 3(E) and 10. (cid:120)(cid:3) Estimation of share-based payment costs Where appropriate, the Group estimates the fair value of share-based payments using the Black-Scholes model taking into account the terms and conditions upon which the share-based payment was granted. For further information please refer to notes 3(K) and 16. (cid:120)(cid:3) Valuation of financial asset investments The Group measures financial assets investments with fair value through other comprehensive income (FVTOCI) at fair value. Management determine the appropriate valuation techniques and inputs for fair value measurement. In estimating the fair value, the Group uses market-observable data to the extent it is available. For further information please refer to notes 3(H) and 19. e)(cid:3) Functional and presentation currency These consolidated financial statements are presented in United States dollars, rounded to the nearest thousand dollars, as the Company believes it to be the most appropriate and meaningful currency for investors. The functional currencies of the Company and its subsidiaries, Compañía Minera Estrella de Plata SA de CV (“CMEP”) and A.C.N 643 478 371 Pty Ltd, are pounds sterling, Mexican pesos and Australian dollars respectively. For the reporting purposes the following exchange rates have been used: GBP: USD Closing rate 1: 1.35772 (2019: 1.312) Average rate 1: 1.28329 (2019: 1.276) MXN: USD Closing rate 1: 0.05027 (2019: 0.053) Average rate 1: 0.0469 (2019: 0.052) AUD: USD Closing rate 1: 0.76619 Average rate 1: 0.69012 (cid:3) w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 33 3.(cid:3) Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by Group entities. (A) Basis of consolidation (i) Subsidiaries An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control is obtained up to the date that control ceases. (ii) Transactions eliminated on consolidation Intra-group balances and any unrealised gains, losses, income or expenses arising from intra- group transactions are eliminated in preparing the consolidated financial statements. (B) Joint operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities relating to the arrangement. (cid:3) At 31 December 2020 the Group held a 51% interest in a joint operation with Windfield Metals Pty Ltd, to develop the Hancock Ranges and Brockman Iron Ore Projects in Australia. There is considered to be joint control due to the contractual arrangement which stipulates that there is an agreed sharing of control of the arrangement. The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate headings. (C) Foreign Currency (i) Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the date of the consolidated statement of financial position are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the dates the fair value was determined. (ii) Financial statements of operations The assets and liabilities of operations, including goodwill and fair value adjustments arising on consolidation, are translated to United States dollars at exchange rates ruling at the date of the consolidated statement of financial position. The revenues and expenses of operations are translated to United States dollars at rates approximating to the exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in other comprehensive income. They are reclassified to profit or loss upon disposal. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are reclassified to the profit or loss as part of the profit or loss on disposal. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r (cid:3) 34 3. Significant accounting policies (continued) (D) Income tax expense comprises current and deferred tax. Income tax expense Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. Deferred tax is not recognised for the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries that will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Loss per share (E) The Group presents basic and diluted loss per share (“LPS”) data for its common shares. Basic LPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted LPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potentially dilutive common shares, which comprise warrants, share options and conversion of the loan note into shares. (F) Intangible assets (i) Deferred exploration and evaluation costs These comprise costs directly incurred in exploration and evaluation as well as the cost of mineral licences. Costs which are capitalised include costs of licence acquisition, technical services and studies, exploration drilling and testing and appropriate technical and administrative expenses but do not include general administrative expenses or costs incurred prior to having obtained the legal rights to explore an area, which are expensed directly to the income statement account as they occur. They are capitalised as intangible assets pending the determination of the feasibility of the project. When the decision is taken to develop a mine the related intangible assets are transferred to property, plant and equipment and the exploration and evaluation costs are amortised over the estimated life of the project. Where a project is abandoned or is determined not economically viable, the related costs are written off. The recoverability of deferred exploration and evaluation costs is dependent upon a number of factors common to the natural resource sector. These include the extent to which the Company can establish mineral reserves on its properties, the ability of the Company to obtain necessary financing to complete the development of such reserves and future profitable production or proceeds from the disposition thereof. Option fees received in respect of Earn-in agreements are offset against the relevant exploration asset. If the amount exceeds the value of the asset, the balance will be recognised via the income statement. (cid:3) w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 35 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 3. Significant accounting policies (continued) (G) Property, plant and equipment (i) Depreciation Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives for the current and comparative periods are as follows: •(cid:3) plant and equipment: 5 to 10 years •(cid:3) motor vehicles: 4 years The residual value, if not insignificant, is reassessed annually. Impairment of non-financial assets (H) The carrying amounts of the Group’s assets are reviewed at the date of each consolidated statement of financial position to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Impairment is measured by comparing the carrying values of the asset with its recoverable amount. The recoverable amount of the asset is the higher of the assets' fair value less costs to sell and its value-in-use, which is measured by reference to discounted future cash flow. An impairment loss is recognised in the income statement immediately. When there is a change in the estimates used to determine the recoverable amount, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately, unless the asset is carried at its revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (I) Financial instruments Financial instruments are recognised in the statements of financial position when the Group has become a party to the contractual provisions of the instruments. Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. On de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. (i) Financial assets carried at amortised cost These assets incorporate such types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Impairment of provisions for receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the receivables. On confirmation that the receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. The Group's financial assets measured at amortised cost comprise other receivables and cash and cash equivalents in the consolidated statement of financial position. 36 3. Significant accounting policies (continued) (I) Financial instruments (continued) (ii) (iii) (iv) Financial assets with fair value through other comprehensive income (FVTOCI) The Group has a strategic investment in an unlisted entity (SGL, note 19), which is not accounted for as subsidiary, associate or jointly controlled entity. For that investment, the Group has made an irrevocable election to classify the investment at fair value through other comprehensive income rather than through profit or loss as the Group considers this measurement to be the most representative of the business model for this asset. It is carried at fair value with changes in fair value recognised in other comprehensive income and accumulated in the equity instrument reserve through other comprehensive income reserve. Upon disposal any balance within the equity instrument reserve is reclassified directly to retained earnings and is not reclassified to profit or loss. Dividends are recognised in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment, in which case the full or partial amount of the dividend is recorded against the associated investments carrying amount. Purchases and sales of financial assets measured at fair value through other comprehensive income are recognised on settlement date with any change in fair value between trade date and settlement date being recognised in the equity instrument reserve. Financial liabilities measured at amortised cost Financial liabilities measured at amortised cost include current borrowings and trade and other payables that are short term in nature. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled. Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: (cid:120)(cid:3) (cid:120)(cid:3) In the principal market for the asset or liability; or In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: (cid:120)(cid:3) (cid:120)(cid:3) (cid:120)(cid:3) Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities; Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O (cid:3) 37 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 3. Significant accounting policies (continued) (I) Financial instruments (continued) (v) Fair value measurement (continued) For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re- assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. (J) Warrants The Company estimates the fair value of the future liability relating to issued warrants using (cid:120)(cid:3) (cid:120)(cid:3) residual method, where a warrant was issued and included as a part of a package placement of “1 share + 1 warrant”; the Black-Scholes pricing model taking into account the terms and conditions upon which the warrants were issued, if the warrant was granted on its own. Warrants relating to equity finance are recorded as a reduction of capital stock based on the fair value of the warrants. (K) Share capital – common shares Incremental costs directly attributable to the issue of common shares and share options are recognised as a deduction from equity. (L) Share-based payment transactions The share option programme allows Group directors, officers, employees and consultants to acquire shares of the Company. Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date and are recognised as an expense with a corresponding increase in equity. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Directors’ estimate of equity instruments that will eventually vest, with a corresponding increase in equity. Where the conditions are non- vesting, the expense and equity reserve arising from share-based payment transactions is recognised in full immediately on grant. The fair value of the options granted is measured using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest, except if the change is due to market-based conditions not being satisfied. (M) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. The carrying amount of these assets approximates their fair value. (N) Segmental 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, who is responsible for allocating resources and assessing performance of the operating segments and making strategic decisions, has been identified as the Board of Directors. The Board of Directors considers there to be only one operating segment during the year, the exploration, development and exploitation of mineral resources, and three geographical segments, being Mexico, Australia and United Kingdom.(cid:3) 38 4.(cid:3) Operating loss Operating loss is stated after charging: Depreciation Fees payable to the Group’s auditor for the audit of the annual financial statements Exchange loss 2020 1 2019 2 31 56 29 14 5.(cid:3) Segmental analysis Statement of comprehensive income Year ended 31 December 2020 Administration expenses Operating loss Net finance charges Tax Loss for the year attributable to equity shareholders of the parent Statement of financial position Year ended 31 December 2020 Segment assets Segment liabilities Segment net assets Statement of comprehensive income Year ended 31 December 2019 Administration expenses Operating loss Net finance charges Tax Loss for the year attributable to equity shareholders of the parent Statement of financial position Year ended 31 December 2019 Segment assets Segment liabilities Segment net assets (cid:3) Mexico Australia (108) (108) (1) - (109) 16 16 - - 16 Mexico Australia 311 (1) 310 3,312 - 3,312 Mexico Australia 76 76 - - 76 - - - - - Mexico Australia 244 (1) 243 - - - United Kingdom/ other (1,131) (1,131) (2) - (1,133) United Kingdom/ other 5,820 (296) 5,524 United Kingdom/ other (1,118) (1,118) (4) - (1,122) United Kingdom/ other 478 (122) 356 Total (1,223) (1,223) (3) - (1,226) Total 9,443 (297) 9,146 Total (1,042) (1,042) (4) - (1,046) Total 722 (123) 599 39 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 6.(cid:3) Staff numbers and costs The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows: Finance and administration Technical Total staff numbers The aggregate staff costs of these persons as follows: Wages and salaries Social security costs Pension Share based payments Total staff costs Remuneration of key management personnel Key management personnel remuneration is detailed below: Executive directors B Brodie Good P Taylor (resigned 5 July 2019) D V Edmonds (resigned 11 April 2019) Non-executive directors D J Smith J S Cable (resigned 24 Nov 2020) M C Culbert (appointed 23 Jul 2020) C C Gordon (resigned 23 Jul 2020) Other key management Company Secretary (resigned 10 Jan 2020) Total remuneration 2020 3 1 4 2020 335 24 9 23 391 2019 5 - 5 2019 362 36 10 64 472 2020 Salary/Fees 2019 Salary/Fees 184 1 - 63 21 7 13 53 342 51 119 14 42 32 - 32 81 371 The above remuneration excludes social security costs incurred by the Group. Including these social security costs, the total short-term employee benefits for the year in respect of key management personnel amounted to $344,000 (2019: $471,000). Wages and salaries Paid directly Paid via related party consultancy companies Share based payment charge Total 2020 2019 255 63 24 342 320 42 63 425 Share based payment charges relate to the fair value charge attributed to share options granted, further details are disclosed in note 16. 7.(cid:3) Net finance charges Finance charges Interest income Total net investment income (cid:3) 40 2020 2019 (3) - (3) (5)(cid:3) 1 (4) 8.(cid:3) Income tax recognised in the income statement Current tax Reconciliation of effective tax rate Loss before tax Income tax using the domestic corporation tax rate of 19% (2019: 19%) Non-deductible expenses Effect of timing differences Depreciation in excess of capital allowances Adjustments relating to different tax rates of subsidiary Tax losses carried forward not recognised Total tax expense 2020 - 2019 - 2020 (1,226) (233) 34 - - - 199 - 2019 (1,046) (199) 18 - - - 181 - At the year end the Group had tax losses to carry forward of approximately $26,772,000 (2019: $25,577,000). Under IFRS a net deferred tax asset of approximately $5,099,050 (2019: $4,872,000) has not been recognised due to the uncertainty as to the amount that can be utilised. No adjustments are required in respect of the subsidiaries. 9.(cid:3) Loss per share Basic loss per share The calculation of basic loss per share at 31 December 2020 was based on the loss attributable to common shareholders of $1,226,000 (2019: $1,046,000) and a weighted average number of common shares outstanding during the year ended 31 December 2020 of 2,337,874,313 (2019: 1,103,098,525). Loss from continuing operations Loss attributable to common shareholders Basic and diluted loss per share in US cents 2020 1,226 1,105 0.052 2019 1,046 1,046 0.1 Diluted Loss per share The potential increase in common shares from the exercise of any outstanding share purchase warrants and share options would be anti-dilutive as the Group has a net loss. These potential common shares are therefore excluded from the calculation and the diluted loss per share figure reported is the same as the basic loss per share. (cid:3) w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 41 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 10.(cid:3) Intangible assets Cost At 1 January 2019 Additions Foreign exchange At 31 December 2019 Additions Licences relinquished Initial option fee (Donovan 2) Foreign exchange At 31 December 2020 Deferred exploration costs 231 251 10 492 3,313 (99) (52) (13) 3,641 Deferred exploration costs relate to the initial acquisition of the licences and subsequent exploration expenditure incurred in evaluating the projects. During the year new licence acquisition costs were capitalised as follows: Hammersley – Brockman & Hancock Ranges Iron Ore Project On 19 March 2020, $240,291 was capitalised from the issue of 200,000,000 ordinary shares and 66,666,667 warrants, and a further $135,772 deferred cash consideration was also capitalised. Elizabeth Hill Mine Project On 25 September 2020, $1,966,577 was capitalised from the issue of 200,000,000 ordinary shares and 49,536,471 warrants. A loan made to the vendor to complete the sale was also capitalised to the value of $84,394. Munni Munni North Project On 1 October 2020, $350,991 was capitalised from the issue 37,357,190 ordinary shares, and further cash consideration of $36,738 was also capitalised. Exploration in Mexico is undertaken by Compañía Minera Estrella de Plata S.A. de C.V., a wholly owned subsidiary, that owns 12 exploration licences. Donovan 2 – Earn-in Agreement On 22 October 2020, CMEP executed an Earn-in Agreement with Capstone Mining Corp over its Donovan 2 licence. Pursuant to the agreement, Capstone has the ability to acquire up to an 80% interest in Donovan 2 by sole funding the project up to completion of a Prefeasibility Study. Further details are reported in note 22. 11.(cid:3) Property, plant and equipment Plant and equipment Vehicles Total 2 2 (2) - (1) - (1) (1) 2 - 1 1 - 7 7 - 7 (5) (2) (7) - - (7) 2 - - 9 9 (2) 7 (6) (2) (8) (1) 2 (7) 3 1 - Cost At 31 December 2018 At 31 December 2019 Disposals At 31 December 2020 Depreciation and impairment losses At 31 December 2018 Depreciation At 31 December 2019 Depreciation Disposals At 31 December 2020 Carrying amounts At 31 December 2018 At 31 December 2019 At 31 December 2020 (cid:3) 42 12.(cid:3) Trade and other receivables Other receivables Prepayments Total trade and receivables 13.(cid:3) Cash and cash equivalents Bank balances Cash and cash equivalents in the statement of cash flows 14.(cid:3) Share capital and reserves Share Capital 2020 73 62 135 2020 5,627 5,627 2019 17 46 63 2019 166 166 Authorised The Company is authorised to issue an unlimited number of common shares of no par value. Issued and outstanding common shares Changes for the years ended 31 December 2020 and 2019 are detailed in the following table: 2020 2019 Opening balance 1 January Shares issued for cash Shares issued – exercise of warrants and options Issue costs of share issuance Fair value of share warrants issued Shares issued - project acquisitions Expiry of warrants Shares invoice Closing balance 31 December issued – settle supplier Number of shares (000s) 1,351,723 1,264,962 363,416 - - 437,357 - 3,333 Amount 56,814 6,185 970 (371) (653) 2,230 - 6 Number of shares (000s) 716,143 635,580 - - - - - - Amount 53,870 1,098 - (76) (244) - 2,166 - 3,420,791 65,181 1,351,723 56,814 During the years ended 31 December 2020 and 2019, the Company made share issuances as set out below. 2020 (cid:120)(cid:3) On 10 March 2020, 466,666,666 common shares were issued at £0.0015 each, raising £700,000 ($917,189), before costs. (cid:120)(cid:3) On 19 March 2020, 200,000,000 common shares were issued at £0.00078, £156,000 ($185,253) as part consideration shares for the Hancock Ranges and Brockman Iron Ore Projects. (cid:120)(cid:3) On 18 May 2020, 343,750,000 common shares were issued at £0.0008, raising £275,000 ($332,626), before costs, and a further 3,333,333 common shares were issued at £0.0015 each to settle a supplier invoice of £5,000 ($6,047). (cid:120)(cid:3) On 8 September 2020, 40,972,222 common shares were issued in respect of 22,222,222 warrants exercised at £0.003 each, for total of £66,667 ($87,933), and 18,750,000 warrants exercised at £0.0015 each, for a total of £28,125 ($37,097). (cid:120)(cid:3) On 11 September 2020, 227,272,727 common shares were issued at £0.0055 each, raising £1,250,000 ($1,615,500) before costs. (cid:120)(cid:3) On 18 September 2020, 92,812,500 common shares were issued in respect of 63,333,333 warrants exercised at £0.003 each, £190,000 ($245,888), and 29,479,167 warrants exercised at £0.0015 each, £44,219 ($57,226). (cid:120)(cid:3) On 24 September 2020, 72,291,667 common shares were issued in respect of 56,250,000 warrants exercised at £0.0015 each, £84,375 ($107,374), and 16,041,667 warrants exercised at £0.0012 each, £19,250 ($24,497). (cid:120)(cid:3) On 1 October 2020, 17,500,000 common shares were issued in respect of warrants exercised at £0.0015 each, £26,250 ($33,785). (cid:120)(cid:3) On 1 October 2020, 4,800,000 common shares were issued in respect of options exercised at £0.0025 each, £12,000 ($15,445). 43 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 14.(cid:3) Share capital and reserves (continued) (cid:120)(cid:3) On 25 September 2020, 200,000,000 common shares were issued at £0.00665 each, £1,330,000 ($1,693,675) as part consideration for the Elizabeth Hill Mine Project acquisition. (cid:120)(cid:3) On 1 October 2020, 37,357,190 common shares were issued at £0.0073 each, £272,707 ($350,991) as part consideration for the Munni Munni Project acquisition. (cid:120)(cid:3) On 9 October 16,805,556 common shares were issued in respect of 10,555,556 warrants exercised at £0.003 each, £31,667 ($40,946), and 6,250,000 warrants exercised at £0.0015 each, £9,375 ($12,122). (cid:120)(cid:3) On 19 October 2020, 1,875,000 common shares were issued in respect of warrants exercised at £0.0015 each, £2,813, ($3,631). (cid:120)(cid:3) On 28 October 2020, 81,262,709 common shares were issued in respect of 13,333,334 warrants exercised at £0.003 each, £40,000 ($52,151), 67,229,375 warrants exercised at £0.0015 each, £100,844 ($131,477), and 700,000 warrants exercised at £0.0025 each, £1,750 ($2,282). (cid:120)(cid:3) On 28 October 2020, 2,000,000 common shares were issued in respect of options exercised at £0.0025 each, £5,000 ($6,519). (cid:120)(cid:3) On 5 November 2020, 7,342,373 commons shares were issued in respect of options exercised at £0.0025 each, £18,356 ($23,847). (cid:120)(cid:3) On 12 November 2020, 17,055,223 commons shares were issued in respect of 14,833,000 warrants exercised at £0.0025 each, £37,083 ($49,105), and 2,222,223 warrants exercised at £0.003 each, £6,667 ($8,828). (cid:120)(cid:3) On 24 November 2020, 3,904,408 commons shares were issued in respect of 1,682,186 warrants exercised at £0.0025 each, £4,205 ($5,607), and 2,222,222 warrants exercised at £0.003 each, £6,667 ($8,888). (cid:120)(cid:3) On 30 November 2020, 227,272,727 common shares were issued at £0.011 each, raising £2,500,000 ($3,319,775) before costs. (cid:120)(cid:3) On 7 December 2020, 1,050,000 common shares were issued in respect of warrants exercised at £0.0025 each, £2,625 ($3,525). (cid:120)(cid:3) On 14 December 2020, 3,435,445 commons shares were issued in respect of warrants exercised at £0.0025 each, £8,589 ($11,358). (cid:120)(cid:3) On 21 December 2020, 308,028 commons shares were issued in respect of warrants exercised at £0.0025 each, £770 ($1,040). Warrants Warrant reserve The warrants reserve arises on the issue of warrants. Refer note 15 for further information. Opening balance 1 January Fair value of warrants issued Exercise of warrants Expiry of warrants Closing balance 31 December 2020 261 980 (369) - 872 2019 2,183 244 - (2,166) 261 (cid:3) 44 14.(cid:3) Share capital and reserves (continued) Share-based payment reserve The share-based payment reserve arises on the grant of share options to directors, employees and other eligible persons under the share option plan. Refer note 16 for more information. Opening balance 1 January Fair value of share options issued Share options exercised Share options lapsed Closing balance 31 December 2020 1,121 24 (55) (57) 1,033 2019 1,057 64 - - 1,121 Foreign exchange translation reserve The translation reserve comprises foreign exchange differences arising from the translation of the financial statements of operations that do not have a US dollar functional currency. Exchange differences arising are classified as equity and transferred to the Group’s translation reserve. Accumulated losses Accumulated losses contain losses incurred in the current and prior years. 15.(cid:3) Warrants issued The number and weighted average exercise price of warrants in issue for the year ended 31 December 2020 and 2019: 2020 2019 Outstanding (000s) 216,695 527,900 (349,273) - 395,322 Weighted average exercise price (£) 0.01 0.0022 0.0020 - 0.0024 Outstanding (000s) 393,235 202,247 - (378,787) 216,695 Weighted average exercise price (£) 0.01 0.01 - 0.01 0.01 Opening balance 1 January Issued Exercised Cancelled Closing balance 31 December 2020 (cid:120)(cid:3) On 10 March 2020, 155,555,555 common share purchase warrants were issued in conjunction with a cash placing, exercisable at £0.003 each, the fair value being £147,183 ($192,850). In addition, a further 40,000,000 common share purchase warrants were issued as broker warrants, exercisable at £0.0015 each, the fair value being £58,523 ($76,682). (cid:120)(cid:3) On 19 March 2020, 66,666,667 commons share purchase warrants were issued, as part consideration for the Hancock Ranges and Brockman Iron Ore Projects, exercisable at £0.0019 each, the fair value being £46,347 ($55,037). (cid:120)(cid:3) On 18 May 2020, 171,875,000 common share purchase warrants were issued in conjunction with a cash placing, exercisable at £0.0015 each, the fair value being £79,094 ($95,668). In addition, a further 18,666,667 common share purchase warrants were issued as broker warrants, exercisable at £0.0012 each, the fair value being £9,549 ($11,550). (cid:120)(cid:3) On 4 September 2020, 12,000,000 common share purchase warrants were issued as broker warrants, exercisable at £0.006, the fair value being £74,363 ($98,815). (cid:120)(cid:3) On 25 September 2020, 49,536,471 common share purchase warrants were issued as part consideration of the Elizabeth Hill Mine Project, exercisable at £0.0025 each, the fair value being £214,302 ($272,901). (cid:120)(cid:3) On 23 November 2020, 13,600,000 common share purchase warrants were issued as broker warrants, (cid:120)(cid:3) exercisable at £0.0013 each, the fair value being £133,544 ($177,335). During 2020, 349,272,758 common share purchase warrants were exercised, as detailed within share capital. (cid:3) w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 45 15.(cid:3) 2019 Warrants issued (continued) (cid:120)(cid:3) On 10 April 2019 202,247,000 common share purchase warrants were issued, exercisable at £0.0015 per common share, until 31 January 2022. These warrants were issued as a part of the full settlement of subsisting convertible loan. Fair value of Warrants and assumptions The estimate of the fair value of the Warrants is measured based on the Black-Scholes model. The following inputs were used in the calculation of the fair value of the warrants granted. Fair value ($000s) 10 Mar 193 10 Mar 77 2020 19 Mar 18 May 18 May 4 Sep 67 12 96 99 25 Sep 285 23 Nov 177 2019 17 Apr 244 Share price (£) 0.00215 0.00215 0.0015 0.0009 0.0009 0.009 0.00625 0.01525 0.0010 Expected volatility Expected warrants life (years) Expected dividend yield Risk-free interest rate 100% 100% 100% 100% 100% 100% 100% 100% 103.38% 2 Nil 0% 3 Nil 0% 2 Nil 0% 3 Nil 0% 3 Nil 0% 3 Nil 0% 1.5 Nil 0% 3 Nil 0% 2.8 Nil 0.823% The expected volatility is based on the historical share prices of a group of companies deemed to be comparable. Share-based payment transactions 16.(cid:3) The number and weighted average exercise prices of share options for the years ended 31 December 2020 and 2019 are set out below. 2020 2019 Outstanding (000s) 81,327 Weighted average exercise price (£) 0.0025 Outstanding (000s) 36,785 Weighted average exercise price (£) 0.025 60,000 (14,142) (22,350) 104,835 0.0050 0.0025 0.0025 0.0041 44,542 - - 81,327 0.0025 - - 0.0025 Opening balance 1 January Issued Exercised Lapsed Closing balance 31 December Share options in issue at 31 December 2020: Issued 2017 2018 2019 2019 2019 2019 2019 2019 2020 2020 2020 Outstanding shares 1,250,000 15,142,373 1,100,000 12,342,509 5,000,000 3,000,000 3,000,000 4,000,000 18,750,000 18,750,000 22,500,000 Exercisable shares 1,250,000 20,142,373 1,100,000 12,342,509 17,142,373 3,000,000 3,000,000 4,000,000 18,750,000 18,750,000 22,500,000 Exercise price £0.0100 £0.0025 £0.0025 £0.0025 £0.0025 £0.0022 £0.0030 £0.0045 £0.0045 £0.0050 £0.0055 Expiry 09-Feb-22 14-May-23 28-Mar-24 28-Mar-24 14-May-23 28-Mar-24 28-Mar-24 28-Mar-24 30-Aug-23 30-Aug-23 30-Aug-23 The share options outstanding at 31 December 2020 if exercised, will be settled by issue of equity. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 46 Share-based payment transactions (continued) The weighted average remaining contractual life of share options as at 31 December 2020 was 991 days. Fair value of share options and assumptions The estimate of the fair value of the share options is measured based on the Black-Scholes model. The following inputs were used in the calculation of the fair value of the options granted during the year. Share price (£) Exercise price (£) Expected volatility Vesting date Expected option life (years) Expected dividend yield Risk-free interest rate 1 September 2020 0.0045 0.0045 100% 1 September 2020 1 September 2020 0.0045 0.0050 100% 0.0045 0.0055 100% 1 March 2021 1 September 2021 1 September 2021 3 Nil 0% 3 Nil 0% 3 Nil 0% As at 31 December 2020, a fair value charge of $24,000 in respect of the 60,000,000 share options issued on 1 September 2020 was posted to the income statement. The expected volatility is based on the historical share prices of a group of companies deemed to be comparable. Share options held by directors and senior management at 31 December 2020: Holder D J Smith B Brodie Good M C Culbert Shares Options 3,085,627 3,085,627 6,171,255 3,000,000 3,000,000 4,000,000 15,000,000 15,000,000 15,000,000 1,875,000 1,875,000 3,750,000 Exercise price Grant Date Vesting Date Expiry1 £0.0025 £0.0025 £0.0025 £0.0022 £0.0030 £0.0045 £0.0045 £0.0050 £0.0055 £0.0045 £0.0050 £0.0055 29 Mar 2019 29 Mar 2019 29 Mar 2019 29 Jun 2019 29 Sep 2019 29 Mar 2020 28 Mar 2024 28 Mar 2024 28 Mar 2024 30 Sep 2019 30 Sep 2019 30 Sep 2019 01 Sep 2020 01 Sep 2020 01 Sep 2020 01 Sep 2020 01 Sep 2020 01 Sep 2020 1 Oct 2019 1 Oct 2019 1 Oct 2019 01 Mar 2021 01 Sep 2021 01 Sep 2021 01 Mar 2021 01 Sep 2021 01 Sep 2021 28 Mar 2024 28 Mar 2024 28 Mar 2024 30 Aug 2023 30 Aug 2023 30 Aug 2023 30 Aug 2023 30 Aug 2023 30 Aug 2023 1 The expiry date is subject to the terms and conditions contained in the share option plan. 17.(cid:3) Trade and other payables Trade payables Other payables Total trade and other payables (cid:3) 2020 87 209 297 2019 86 37 123 47 w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r 18.(cid:3) Group entities Significant Subsidiaries Compañía Minera Estrella de Plata S.A. de C.V. Mexico Arian Silver Corporation (UK) Ltd Arian Silver (Holdings) Limited A.C.N. 643 478 371 Pty Ltd England and Wales England and Wales Australia Country of incorporation and operation Principal activity Mining exploration Holding Holding Mining exploration Alien Metals Ltd effective interest 2020 100% 100% 100% 100% 2019 100% 100% 100% - 19.(cid:3) Financial instruments and financial risk management The principal financial instruments used by the Group from which financial risk arises are as follows: Categories of financial instruments Cash and cash equivalents (note 13) Trade and other receivables (note 12) Total financial assets measured at amortised cost Financial assets at fair value through other comprehensive income Total financial assets Trade and other payables measured at amortised cost (note 17) Total financial liabilities 2020 5,627 73 5,700 40 5,740 297 297 2019 166 17 183 81 264 123 123 Exposure to interest rate and foreign currency risks arises in the normal course of the Group’s business. Derivative financial instruments are not used to hedge exposure to fluctuations in foreign exchange rates and interest rates. The Group’s policy is to retain its surplus funds on short term deposits. Credit risk is managed by ensuring that surplus funds are only deposited with well-established financial institutions of high quality credit standing. Market risk Market risk is the risk that the Group’s future earnings will be adversely impacted by changes in market prices. Market risk for Alien Metals comprises two types of risk: price risk and foreign currency risk. Price risk The price risk is the risk that the Group’s future earnings will be adversely impacted by changes in the market prices of commodities. Foreign currency risk The Group’s operational expenditure is made in Mexico in Mexican pesos, in Australia in Australian dollars, and head office expenses are predominantly made in the UK in pounds sterling, and United States dollars. The Group is therefore exposed to the movement in exchange rates for these currencies. The Group does not currently hedge foreign exchange risk. At the year end the majority of the Group’s cash resources were held in pounds sterling. The Group therefore also has downside exposure to any strengthening of United States dollar, Australian dollar, or the Mexican peso against pounds sterling as this would increase expenses in pounds sterling terms and accelerate the depletion of the Group’s cash resources. Any weakening of United States dollar, Australian dollar or the Mexican peso against pounds sterling would, however, result in a reduction in expenses in pounds sterling terms and preserve the Group’s cash resources. The carrying amounts of the Group’s foreign currency denominated financial assets and monetary liabilities at the reporting date are as follows: Liabilities Assets 2020 296 - - - 1 2019 122 - - - 1 2020 5,668 30 39 1 2 2019 175 7 - - 1 Pounds sterling United States dollars Australian dollars Canadian dollars Mexican pesos 48 19.(cid:3) Financial instruments and financial risk management (continued) Sensitivity Analysis The Group holds cash in pounds sterling to settle accounts payable balances derived in that currency. The main risk is through foreign exchange fluctuations in companies where the cash balances are held in a currency that is different to the functional currency. Exposure to foreign currency risk sensitivity analysis: 15% strengthening in the United States dollar 15% weakening in the United States dollar Against Sterling US$ (800) 800 A 15% variation is considered an appropriate level of sensitivity given recent levels of foreign exchange volatility. Interest rate risk Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that the Group uses. Treasury activities take place under procedures and policies approved and monitored by the Board to minimise the financial risk faced by the Group. Interest bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. No sensitivity analysis has been disclosed as management does not consider any reasonable fluctuation in interest rates to be sufficiently material to disclose. Liquidity risk The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. The directors regularly review cash flow forecasts to determine whether the Group has sufficient cash reserves to meet future working capital requirements and discretionary business development opportunities including exploration activities. As at 31 December 2020, the Company had cash and other receivables of $5.7m to settle accounts payable of $297k. The Company’s accounts payable have contractual maturities of less than 30 days and are subject to normal trade terms. In the short-term, liabilities will be funded by cash. The Group’s assets are at an early stage and in order to meet financing requirements for their development the Company has raised funds by way of several share placements, which is a common practice for junior mineral exploration companies. Although the Company has been successful in the past in raising equity finance, there can be no assurance that the funding required by the Group will be made available to it when needed or, if such funding were to be available, that it would be offered on reasonable terms. The terms of such financing might not be favourable to the Group and might involve substantial dilution to existing shareholders. Credit risk Credit risk is the risk of loss associated with a counterparty’s inability to fulfil its payment obligations. The Group’s maximum exposure to credit risk is attributable to cash. The credit risk on cash is limited because the Group invests its cash in deposits with well capitalised financial institutions with strong credit ratings. Fair values Financial instruments not measured at fair value include cash and cash equivalents, trade and other receivables, trade and other payables. It is the Board’s opinion that the carrying values of the cash and cash equivalents, the other receivables, all trade and other payables in the consolidated statement of financial position approximate their fair values due to their short-term nature. Fair value disclosures for financial asset investment in SGL are shown below in this note. Capital management The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern and have access to adequate funding for its exploration and development projects, so that it can provide returns for shareholders and benefits for other stakeholders. The Group manages the capital structure and makes adjustments in the light of changes in economic conditions and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure the Group may issue new shares, acquire debt, or sell assets. Management regularly reviews cash flow forecasts to determine whether the Group has sufficient cash reserves to meet future working capital requirements and to take advantage of business opportunities. (cid:3) w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 49 19.(cid:3) Financial instruments and financial risk management (continued) Financial asset investment The Company has only one investment, which is an equity investment into the shares of Siberian Goldfields Limited “SGL”, an unlisted company with interests in gold and iron ore deposits in Siberia, Russia. The classification of the equity investments into SGL share is disclosed as fair value through other comprehensive income under IFRS 9. The Directors are in discussion with various parties who are interested in acquiring the Company’s shares in SGL. The amount reflected below is considered the minimum amount that will be received if an SPA is entered into. The following table shows the changes to the fair value of the Company’s Level 2 financial assets: Opening balance Change in fair value recognised in OCI Foreign exchange Closing balance 20.(cid:3) Operating lease arrangements 2020 - 40 - 40 2019 78 (81) 3 - At the reporting date, the Group had outstanding commitments for future minimum lease payments under non- cancellable operating leases, which fall due as follows: Within one year 21.(cid:3) Ultimate controlling party There is no ultimate controlling party of the Company. 2020 11 2019 34 Significant agreements and transactions 22.(cid:3) The following are significant agreements and transactions recently undertaken having an impact in the year under review. Financing (cid:120)(cid:3) On 25 February 2020, the Company announced it had raised £700,000 by way of a placing of 466,666,666 new ordinary shares at a price of £0.0015 per share. The Company also granted participating investors 155,555,555 two-year warrants with an exercise price of £0.003 per share. A further 40,000,000 three- year broker warrants were issued at an exercise price of £0.0015 per share. (cid:120)(cid:3) On 11 May 2020, the Company announced it had raised £275,000 by way of placing 343,750,000 new ordinary shares at a price of £0.0008 per share. The Company also granted participating investors with 171,875,000 two-year warrants with an exercise price of £0.015 per share. A further 18,666,667 three- year broker warrants were issued at an exercise price of £0.0012 per share. (cid:120)(cid:3) On 7 September 2020, the Company announced the receipt of exercise notices and the respective subscription payments and issued 22,222,222 new ordinary shares of no par value at an issue price of £0.003 per share, and 18,750,000 new ordinary shares of no par value at an issue price of £0.0015 per share. (cid:120)(cid:3) On 4 September 2020, the Company announced it had raised £1.25m by way of a placing of 227,272,727 new ordinary shares at a price of £0.0055 per share. In addition, 12,000,000 three-year broker warrants were issued at an exercise price of £0.006 per share. (cid:120)(cid:3) On 14 September 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 63,333,333 new ordinary shares of no par value at an issue price of £0.003 per share, and 29,479,167 new ordinary shares of no par value at an issue price of £0.0015 per share. O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r (cid:3) 50 22.(cid:3) Significant agreements and transactions (continued) (cid:120)(cid:3) On 18 September 2020, the Company announced the receipt and exercise notices and respective subscription payments and issued 56,250,000 new ordinary shares of no par value at an exercise price of £0.0015 per share and 16,041,667 new ordinary share of no par value at an issue price of £0.0012 per share. (cid:120)(cid:3) On 25 September 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 17,500,000 new ordinary shares of no par value at an issue price of £0.0015 per share and 4,800,000 new ordinary shares of no par value at an issue price of £0.0025 per share. (cid:120)(cid:3) On 6 October 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 6,250,000 new ordinary shares of no par value at an issue price of £0.0015 per share and 10,555,556 new ordinary shares of no par value at an issue price of £0.003 each. (cid:120)(cid:3) On 13 October 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 1,875,000 new ordinary shares of no par value at an issue price of £0.0015 each. (cid:120)(cid:3) On 22 October 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 13,333,334 new ordinary shares of no par value at an issue price of £0.003 each, 67,229,375 new ordinary shares of no par value at an issue price of £0.0015 each, and 2,700,000 new ordinary shares of no par value at an issue price of £0.0025 each. (cid:120)(cid:3) On 2 November 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 7,342,373 new ordinary shares of no par value at an issue price of £0.0025 per share. (cid:120)(cid:3) On 9 November 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 14,833,000 new ordinary shares of no par value at an issue price of £0.0025 per share, and 2,222,223 new ordinary shares of no par value at an issue price of £0.003 per share. (cid:120)(cid:3) On 18 November 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 1,682,186 new ordinary shares of no par value at an issue price of £0.0025 each, and 2,222,222 new ordinary shares of no par value at an issue price of £0.003 per share. (cid:120)(cid:3) On 23 November 2020, the Company announced it had raised £2.5m by way of a placing of 227,272,727 new ordinary shares at a price of £0.011 per share. The Company also issued 13,600,000 three-year broker warrants with an exercise price of £0.013 per share. (cid:120)(cid:3) On 1 December 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 1,050,000 new ordinary shares of no par value at an issue price of £0.0025 per share. (cid:120)(cid:3) On 8 December 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 3,435,445 new ordinary shares of no par value at an issue price of £0.0025 per share. (cid:120)(cid:3) On 15 December 2020, the Company announced the receipt of exercise notices and respective subscription payments and issued 308,028 new ordinary shares of no par value at an issue price of £0.0025 per share. Issue of options (cid:120)(cid:3) On 1 September 2020, the Company announced the recommendation to issue 60,000,000 unapproved share options to Directors. Bill Brodie Good was issued 45,000,000 three-year share options with exercise prices of £0.0045, £0.0050 and £0.0055. James Cable and Mark Culbert were each issued 7,500,000 three-year share options with exercise prices of £0.0045, £0.0050 and £0.0055. (cid:3) w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 51 O v e r v i e w G o v e r n a n c e F i n a n c i a l s 22.(cid:3) Significant agreements and transactions (continued) Hammersley Iron Ore Project – Hancock Ranges & Brockman (cid:120)(cid:3) On 19 March 2020, the Company announced it had entered a joint venture agreement with Windfield Metals Pty Ltd, following its previously notified decision to exercise its option to acquire a 51% interest in the Hancock Ranges & Brockman Iron Ore Projects. As consideration the Company issued 200,000,000 new ordinary shares at a price of £0.00078 each. The Company also issued 66,666,666 three-year warrants with an exercise price of £0.0019 each. A further £100,000 is payable 12 months from 18 March 2020, and 100,000,000 performance shares, to be issued upon achieving the following performance hurdles: 1.(cid:3) 2.(cid:3) 10,000,000 tonne JORC inferred resource at greater than 54% Fe (Hurdle 1); and 20,000,000 tonne JORC inferred resource at greater than 54% Fe (Hurdle 2). Elizabeth Hill Mine Project (cid:120)(cid:3) On 25 September 2020, the Company announced the completion of the Elizabeth Hill Mine project acquisition. In accordance with the SPA dated 4 December 2019, the Company issued 200,000,000 new ordinary shares at an issue price of £0.00665 per share, and 49,536,471 two-year warrants with an exercise price of £0.0025 per share. Munni Munni North Projecta (cid:120)(cid:3) On 1 October 2020, the Company announced the acquisition of the Munni Munni North project. The consideration paid was ~AU$36,000 cash and the issue of 37,357,190 new ordinary shares at a price of £0.0073 each. Donovan 2 – Earn-in agreement (cid:120)(cid:3) On 22 October, CMEP executed an Earn-in Agreement with Capstone Mining Corp over its Donovan 2 licence. Pursuant to the agreement, Capstone has the ability to acquire up to an 80% interest in Donovan 2 by sole funding the project up to completion of a Prefeasibility Study. Initial option Stage Period a) b) c) d) Date of execution By 31 December 2021 By 31 December 2022 By 31 December 2023 Second option Cash payment $50,000 $50,000 $100,000 $100,000 Work or other expenditure $150,000 by 31 December 2020 $450,000 by 31 December 2021 $1,000,000 by 31 December 2022 $2,000,000 by 31 December 2023 % Earned - - - +65% Period By 30 March 2024 Cash payment $200,000 TOTAL Notes: $500,000 Work or other expenditure Delivery of Assessment Delivery of Prefeasibility Study Preliminary Economic % Earned +10% +5% 80% 1.(cid:3) Capstone can accelerate work expenditure at their election 2.(cid:3) If the Company chooses not to fund its pro-rata costs of the prefeasibility study, Capstone is entitled to a further 5% interest post-delivery of prefeasibility study If the Company dilutes to a 2% Royalty, Capstone has the ability to buy back 1% of the Royalty for $1,000,000 Under the terms of the Earn-in agreement, Capstone has given CMEP a right of first refusal to acquire the project should Capstone choose to dispose of its interest. Alien will remain the operator of the project up until the end of initial option stage a). 3.(cid:3) (cid:3) O t h e r 52 23.(cid:3) Related parties Control of the Company In the opinion of the Board, at 31 December 2020 there was no ultimate controlling party of the Company. Identity of related parties The Company and its subsidiaries have related party relationships with their respective directors. Directors’ interests in shares of the Company At 31 December 2020, none of the Directors of the Company or their immediate relatives had an interest in the Common shares of the Company (2019: nil). Refer note 24 for details on dealings after the period end. Transactions with key management personnel During the year ended 31 December 2020 the Company entered into the following transactions involving key management personnel: During the period KBG Consultants a company in which Bill Brodie Good is a director, charged the Company a total of $47,803 (2019: $29,584) for geological consultancy services. There was no outstanding balance at 31 December 2020 (2019: nil). During the period Sorrento Resources International, a company in which Dan Smith and Mark Culbert are directors, charged the Company a total of $128,101 (2019: $46,277) for corporate advisory fees. There was a balance of $6,631 outstanding at 31 December 2019 (2019: nil). During the period Minerva Corporate Pty Ltd, a company in which Dan Smith is a director, charged the Company a total of $25,041 (2019: $6,498) for consultancy services and expenses. There was a balance of $4,888 outstanding at 31 December 2020 (2019: nil). During the period Orwellian Investments, a company in which Dan Smith is a director, charged the Company a total of $36,253 (2019: nil) for directors’ fees. There was no outstanding balance at 31 December 2020 (2019: nil). During the period iLaw, a company in which Mark Culbert is a partner, charged the Company a total of $21,683 (2019: nil) for legal fees. There was a balance of $7,158 outstanding at 31 December 2020 (2019: nil). Key management personnel participate in the Group’s share option programme as disclosed in note 16. Key management personnel compensation is disclosed in note 6. 24.(cid:3) Significant events after the reporting period On 15 January 2021, the Company announced the receipt of exercise notices and respective subscription payments and issued 2,000,000 new ordinary shares of no par value at an issue price of £0.003 each. On 3 February 2021, the Company received notification that Mark Culbert, a non-executive director of the Company, purchased 5,000,000 ordinary shares at a price of £0.0125 each, representing 0.15% of the Company’s issued share capital. On 10 February 2021, and further to announcements on 16 September 2020 and 2 February 2021, the Company announced the issue of 100,000 new ordinary shares of no par value, at an issue price of £0.00975 per share, in consideration for the option to acquire the Nueva Andromeda permit. Under the terms of the option, the Company has agreed to pay $100,000 if it should exercise the option to acquire the permit. On 10 March 2021, the Company announced the signing of a 60 day exclusivity agreement with Wombat Resources Pty Ltd, the owner of the historic tailings on site within the Elizabeth Hill Mining licence area. Using this period to carry out further assessment of the tailings in situ and potentially negotiate an acquisition of the rights and title to the Elizabeth Hill tailings project. On 17 March 2021, the Company announced the receipt of exercise notices and respective subscription payments and issued 2,222,222 new ordinary shares of no par value at an exercise price of £0.003 each. w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 53 O v e r v i e w G o v e r n a n c e F i n a n c i a l s O t h e r Contingent liabilities 25.(cid:3) The Group has been informed that a former employee has started legal proceedings against the Group for unfair dismissal. The Group vigorously denies that it was at fault and is intending to defend itself against any such action. Legal advice received supports the director’s belief that the claim is without merit. It is anticipated the case will be concluded by the end of 2021. In the event that the Group is found to be liable, and whilst a considerably larger figure has been claimed, the directors have been advised that the compensation payable is highly unlikely to exceed US$81,000. The directors note that in the event of an unfavourable judgement the Group would not be able to recoup the loss from another party. (cid:3) 54 Other information Directors The following individuals served as directors to the Company during the year ended 31 December 2020: Dan John Smith Bill Brodie Good Mark Culbert Christopher Charles Gordon James Seymour Cable (appointed 26 February 2019) (appointed 4 July 2019) (appointed 23 July 2020) (appointed 15 May 2018; resigned 23 July 2020) (appointed 17 October 2006; resigned 24 November 2020) Company contacts and advisers Auditors Jeffreys Henry LLP Finsgate 5-7 Cranwood Street London EC1V 9EE United Kingdom Registrar (BVI) Computershare Investor Services (BVI) Limited c/o Queensway House Hilgrove Street St Helier JE1 1ES Jersey Registered office Craigmuir Chambers P.O. Box 71 Road Town Tortola British Virgin Islands UK head office UK head office Green Park House 16 Berkeley Street 15 Stratton Street London W1J 8DZ London W1J 8LQ United Kingdom Nominated Advisor Beaumont Cornish Ltd 10th Floor 30 Crown Place London EC2A 4EB United Kingdom Registrar (UK depository interests) Computershare Investor Services plc The Pavilions Bridgewater Road Bristol BS99 7NH United Kingdom Company registration number UK FC027089 BVI 1029783 Website www.alienmetals.uk w e i v r e v O e c n a n r e v o G s l a i c n a n i F r e h t O 55 (cid:36)(cid:89)(cid:82)(cid:70)(cid:72)(cid:87)(cid:87)(cid:72)(cid:3)(cid:47)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:15)(cid:3)(cid:47)(cid:82)(cid:81)(cid:71)(cid:82)(cid:81)
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