Altius Minerals
Annual Report 2018

Plain-text annual report

ALTUS STRATEGIES PLC ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 Company Registration No. 10746796 (England and Wales)  CONTENTS Company Information Key highlights Chairman’s statement Business overview Chief Executive Officers’ statement Strategic report Key performance indicators Principal risk and uncertainties Corporate and social responsibility Financial review Review of operations by country Corporate governance report Directors' report Directors’ remuneration report Statement of directors’ responsibilities Independent auditor's report Independent auditor’s report in respect of Canadian national instrument 52-107 Group statement of comprehensive income Group statement of financial position Company statement of financial position Group statement of changes in equity Company statement of changes in equity Group statement of cash flows Company statement of cash flows Notes to the financial statements 1 3 4 6 9 13 13 14 16 17 20 26 34 37 42 43 47 51 52 53 54 55 56 57 58 Company Information Non-executive Chairman David Netherway Chief Executive Officer Steven Poulton Executive Director Matthew Grainger Non-executive Director Robert Milroy Non-executive Director Michael Winn Chief Financial Officer David Miles Secretary Matthew Grainger Company number 10746796 Registered office Independent Auditor Bankers Orchard Centre 14 Station Road Didcot Oxfordshire OX11 7LL United Kingdom PKF Littlejohn LLP Statutory Auditor 1 Westferry Circus Canary Wharf London E14 4HD United Kingdom HSBC Bank Plc 186 Broadway Didcot Oxfordshire OX1 1BE United Kingdom Nominated Adviser & Broker SP Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London W1S 2PP United Kingdom 1 Solicitors Registrar (UK) Registrar (Canada) PR Adviser Gowling WLG (UK) LLP 4 More Place Riverside London SE1 2AU United Kingdom Michael Provenzano Northwest Law Group Suite 704, Box 35 595 Howe Street Vancouver British Columbia V6C 2T5 Canada Computershare Investor Services Plc The Pavilions Bridgewater Road Bristol BS13 8AE United Kingdom Computershare Investor Services Inc. 510 Burrard St, 3rd Floor Vancouver British Columbia V6C 3B9 Canada Blytheweigh 4-5 Castle Court London EC3V 9DL United Kingdom 2 Key highlights Corporate highlights • Completion of the Plan of Arrangement with Legend Gold Corp. - Six advanced exploration licences in Mali - - New JV partner in ASX-listed Resolute Mining Ltd - Shareholder base strengthened in North America Four licences strategically adjacent to the Sadiola gold mine • Dual listing of the Company’s shares on the TSX-V alongside AIM listing • • Discussions with potential Joint Venture partners across project portfolio Agreement to vend Cameroon Bauxite JV into JV partner for equity plus royalty Operational highlights Potential VMS style copper and gold discovery at Daro in Ethiopia • • New copper and zinc focused exploration licences granted in Morocco • Major artisanal gold workings discovered at the Zolowo licence in Liberia • Grant of the Company’s first exploration licence in Côte d’Ivoire • • Drill targets defined at Lakanfla gold project in Mali Additional high grade iron ore discovered at Bikoula licence in Cameroon Financial highlights • • • Fundraise of £2.3m/C$4.1m (before expenses) in April 2018 with strong institutional support Cash outflow of £1.8m/C$3.1m from operating activities during the year Cash and marketable securities of £1.6m/C$2.8m (cash balance of £0.7m/C$1.3m and listed equity holdings of £0.9m/C$1.5m as at 31 December 2018 3 Chairman’s Statement Reflection on the year 2018 was a significant year for the Company. We materially expanded the firm’s assets and shareholder base by way of our Plan of Arrangement with Legend Gold Corp, which was listed on the TSX Venture exchange in Toronto (“TSX-V”). From a financial standpoint the deal brought intangible assets worth £3.7 million on to our balance sheet and, critically, the deal expanded our portfolio of projects across Africa, with six new and exceptionally prospective advanced gold licences in Mali, one of which was already under a JV agreement with ASX-listed Resolute Mining Ltd. Shortly after this deal, Altus completed a £2.3m/C$4.1m financing and successfully listed on the TSX-V. I am delighted to take the opportunity here to welcome our new shareholders to our register and thank them for their continued support. Company vision and focus The vision we are pursuing is to develop a portfolio of royalty income streams and minority interests in mines across Africa, through the generation of exploration projects and advancing them with joint venture partners. The portfolio continues to evolve with 17 projects now undergoing exploration activity and a number of JV arrangements having been made or under discussion. The portfolio approach is important to us, as it mitigates inherent exploration risk and geopolitical risk, and by partnering at the advanced stages we reduce our own reliance on capital markets. Our focus remains on the vast and prospective continent of Africa, as this is where projects can still be discovered and developed rapidly and cost efficiently from surface. Board Our initial public offering on London’s AIM in August 2017 was a counter-cyclical move by the Company and one which has proven to be pivotal. Within a few months the listing had acted as a springboard for us to undertake our combination with Legend Gold, complete a financing and dual list on the TSX-V. The remainder of 2018 has provided an opportunity for the Board to bed in, and get to grips with the enlarged operations of the Company and its dual-listed status with the governance requirements in two jurisdictions. As laid out in our Corporate Governance Report, the board members bring a range of talents and a wealth of relevant multi-national experience to meet the challenges ahead, and I am encouraged by the enthusiasm and dedication to the success of Altus that the Board has demonstrated. Board focus By the end of 2018 Altus was listed in two countries and conducting exploration activities in six more. The board is keenly aware that the growing size and complexity of is operations means that it must keep a sharp focus on good governance in all spheres of its activity, which involves keeping its assets in good standing, preserving the value of shareholders’ interests, maintaining compliance with laws and regulations, and upholding the highest standards in its conduct. Looking forward Altus is on track to become a specialist mining royalty company. What sets us apart is that we are generating our own opportunities for future royalties, by making and monetising mineral discoveries. The forthcoming year promises to be another exciting and busy time for the Altus team. A number of the Company’s assets have been developed to the stage of readiness for drilling with JV partners, and I have been greatly encouraged by the level of interest shown by third parties over recent months. I am 4 confident that the team has the ability to secure advantageous agreements, and I look forward to seeing their hard work continue to bear fruit. David Netherway Non-Executive Chairman 29 April 2019 5 Business Overview Our business at a glance Altus is a project and royalty generator focused on mineral exploration in Africa. The Company is based in the UK and dual-listed in the UK (AIM: ALS) and in Canada (TSX-V: ALTS). It identifies and acquires geologically prospective exploration licences through its local African subsidiaries, makes discoveries and seeks joint ventures with third parties to advance these into production. Altus seeks to retain cash- generating royalty interests on each of its projects. Project and royalty generator model Our business model is to make and monetise mineral discoveries. We proactively seek joint venture partners to finance the exploration and development of the projects we have generated, in return for a share in their ownership and the payment of future royalties to Altus. Our goal is to create shareholder value by participating in the potentially substantial and long term returns on capital that can be made by making economic mineral discoveries. Our business model Risk diversification is at the heart of our philosophy, and we enact this by exploring for a variety of minerals at multiple locations across several jurisdictions. At the end of 2018 the Group had a diversified portfolio of seventeen projects, exploring for six different commodities across six countries. This diversification means that the portfolio is constantly evolving: new licences are added, licences that are not considered to be a good prospect are relinquished, those for which onsite surveying works and office-based data and sample analysis indicate a potentially economic discovery can be made are actively marketed, licences that are under JV partnerships will be drilled, and the successful of these will result in mines being built and royalties accruing to Altus on the mineral assets produced. 6 Our royalty generation pyramid Altus generates projects by selectively acquiring mineral exploration licences and advancing projects through the work of its team of geologists and analysts. At each level, any projects that prove to be uneconomic are dropped. Successful projects progress up the pyramid toward advanced exploration with JV partners and eventually the definition and monetisation of the resource. As each project matures and develops Altus reduces its ownership in each project but retains a royalty-generating interest. Focus on Africa Altus is focused on Africa where, due to the relative lack of exploration using modern techniques, economic mineral deposits can still be discovered cropping out at surface. According to a recent survey by MinEx Consulting, 24% of global discoveries in the prior decade were found on the continent, despite it being the recipient of only 14% of the global exploration budgets. The same survey reported that deposits in Africa (excluding South Africa) are being discovered at average depths of just 9m, which is much shallower than the average global depth of 78m; in Canada the average discovery depth is over 125m. 7 A growing portfolio of assets across Africa This opportunity to make discoveries across Africa without recourse to expensive subsurface exploration, geophysical technologies or extensive drilling programmes, means that the Company can potentially generate more value, at greater speed and with lower risk in Africa, than in almost any other part of the world. Given the collective geographical, geological and operational expertise of our management and advisory teams, we believe Altus is ideally positioned to exploit this opportunity. 8 Chief Executive’s Review “We are actively building a diversified mining royalty business in Africa. By generating our own projects and inviting joint venture partners to participate financially in the next phases of exploration and development, in return for a stake in each asset, we are creating a portfolio of potentially significant future long term royalty income streams. Up front cash and equity payments from our partners’ mean we can accelerate value creation, by generating new projects to be fed into the royalty pipeline.” Introduction Altus is evolving from a project generator into a royalty company. Our portfolio of projects has been steadily developing, and now with two projects under JV, and a range of discussions taking place regarding our JV-ready projects we can see that the goal of our projects reaching the stage of income generating royalties is closer than ever. We recognise that the highest returns in the mining sector can be generated in the first instance by making an economic discovery and that returns can be compounded by retaining long term royalty interests on these, to generate the potential for continuous and zero cost income streams. We provide our shareholders with exposure to both of these elements and, critically, without exposing them to the financial and other material risks that are inherent in mineral exploration and mine building. By adopting a portfolio approach we accelerate the discovery process as well as mitigate many of the geological and geopolitical risks that are inherent to the mining sector. We stake or acquire prospective targets and our exploration teams drive forward the most promising ones, while discarding those that we do not believe will generate an economic discovery. Once we have made a potential discovery we actively promote the opportunity to potential partners to finance the next stages of exploration and ultimately take the asset into production. Our typical partner might be a large mining group or midcap, seeking to strengthen their project pipeline; alternatively, it may be a junior company seeking a new flagship asset. This has been another very active year for Altus. On the corporate front we completed our Plan of Arrangement with Legend Gold Corp., undertook a capital raise with a number of notable new shareholders joining our register and secured a dual listing on the TSX-V. We also continued to apply our royalty generation model, making mineral discoveries in Africa and entering discussions with potential partners. This has all taken considerable organisation and co-ordination, and a great deal of effort and dedication on behalf of the whole team. I take the opportunity here to thank them all for the highly professional and diligent way in which they have helped to enact our strategy and achieve the objectives of the Company during the year. Strategy implementation Our royalty generation strategy is validated as each of our projects progresses through the various stages of development, from grant of licence through exploration to JV readiness, resource definition and eventually mining. 2018 has been an encouraging year in this respect. We have seventeen projects in our growing portfolio. The most advanced royalty asset in which Altus has an interest, is a 2.5% Net Profit Interest on the southern portion of the Ndablama gold project in western Liberia, which is being developed by AIM and TSE-listed Avesoro Resources. Ndablama forms part of a Mineral Development Agreement which hosts the multi-million-ounce New Liberty gold mine. Two further Altus projects are 9 under JV arrangements, one for gold in Mali with ASX-listed Resolute Mining and one for bauxite in Cameroon with ASX-listed Canyon Resources. We have agreed with Canyon to terminate the JV and vend the JV projects into Canyon for Canyon equity and a US$1.50/t royalty. After the end of the year, Altus announced a Terms Sheet with ASX-listed Indiana Resources in respect of two of our gold projects in Mali and a Terms Sheet with unlisted Australian company Corben Resource in respect of our gold projects in Liberia and Cameroon. During 2018, our team has been diligently analysing a range of technical datasets generating new targets and undertaking field exploration, using geophysics as well as collecting soil, stream and rock samples across key targets. This work has helped to advance the prospects across a number of our licences. Notable successes have been the definition of drill targets at the strategically located Lakanfla gold project in western Mali, and the identification of new copper and gold prospects at the Daro licence in Ethiopia. As well as advancing existing projects, the Company has sought to replenish its portfolio of licences. During 2018 it was granted a new licence for gold exploration in eastern Côte d’Ivoire, three new licences in Morocco for copper and zinc and, as at the end of the year, Altus had three further applications pending grant – two in Côte d’Ivoire (one for gold and one for nickel-cobalt) and one in Ethiopia. The geographical and commodity diversification reflects the Company’s intent to continue to expand the scope of its portfolio. Securing the six licences in Mali through the completion of the Plan of Arrangement with Legend clearly demonstrated another strand of the Company’s strategy, which is to expand and develop our portfolio not just though applications for new licences, but also through acquisitions and business combinations. Market review Our “market” is ultimately in the availability of JV and other strategic partners. Their access to funding is an important consideration as they will advance our projects through drilling to the identification and, if economic, the development of a resource. During the last year the level of enquiries coming into the Company has noticeably increased. This has been true both for companies looking to enter into a JV arrangement and for investors looking to participate in project equity. Australia and Canada are the main active sources of such enquiries, but not exclusively so. The broader commodity backdrop has been relatively muted. Gold, which, alongside copper is often seen as a bell weather for the mining sector, was range bound between US$1,200 and US$1,350 during the year. The correlation between the gold price and the share performance of gold mining stocks is well documented and perhaps axiomatic. Unsurprisingly, the market for mining equities has been equally range bound, with the GDX, an exchange-traded fund (ETF) for gold miners, trading in a similar narrow range. There are a number of active factors, which, we believe, will support the price of gold over the coming years. Highest among these would be continued central bank purchases, especially from emerging market countries with growing economies wishing to diversify their reserves. This trend also reflects a perceived risk of a global downturn and of a relatively weaker dollar in the year to come, creating price inflation. A decade of uninterrupted growth, fuelled by excessively low interest rates combined with loose monetary policy in many countries has created distortions in asset prices across the globe. For these reasons, half of the Group’s portfolio of projects are in gold. However, Altus is actively building a portfolio which is diversified by commodity to gain exposure to the critical metals of the coming decade. The evolution of battery technology is reshaping the world to no 10 less an extent than the advent of the combustion engine did at the end of the Nineteenth Century. It is well known that there will be a vast and sustained increase in demand for specialist battery metals such as cobalt, lithium and vanadium as the current worldwide research resolves to establish the best and most cost-effective battery solution. We believe that copper will remain the primary beneficiary of an increasingly electrified world. The International Copper Association has said that demand for copper for use in electric vehicles alone is expected to increase from 0.18m tonnes to 1.7m tonnes per annum between 2017 and 2027. In the macro-economy, this will create a set of drivers quite separate and, in some ways, disconnected from the current inter-locking drivers of the gold price. As noted above, the Company has a number of copper prospects in Ethiopia and Morocco and an application for nickel/cobalt in Côte d’Ivoire. As well as measures to increase battery capacity, solutions are also being engineered to increase energy efficiency thereby requiring less energy consumption. Aluminium, the ore for which is called bauxite, is a lightweight metal and this energy efficient property means we expect demand for the metal to continue to increase in the years ahead. Our shareholding in ASX-listed Canyon Resources is also set to increase when the JV termination and vend-in of our Birsok and Mandoum bauxite projects in central Cameroon completes, which is anticipated to occur in the second quarter of 2019. On completion of the termination of the JV, Altus will receive an initial 25 million shares in Canyon with a current market value of approximately £2.9m/C$5.04m, and for vending in of the JV projects and grant of a mining licence to Canyon, Altus will receive a further 5 million shares with a current market value of approximately £0.6m/C$1.0m along with a $1.50/t royalty on the former JV projects. Altus currently owns shares in Canyon with an approximate market value of £0.8m/C$1.4m which were received by Altus along with a cash payment of A$150,000 as part of the original JV terms. Having undertaken less than US$150,000 in generating the bauxite project, this series of transactions when complete, will underscore the substantial returns that our business model can generate. Funding The Company’s listing on the TSX-V exchange in Toronto in June was a major development, and is already significantly enhancing the Company’s ability to attract investors, as well as publicising its projects to potential JV partners. The Canadian market is a global hub for mining stocks, and our presence there greatly strengthens the Company as we grow our royalty generating business. The Company’s proven ability to raise finance in April 2018 was set against a backdrop of broad investor antipathy to resource stocks in general, with the lure of speculative marijuana equities, as well as continued interest in block chain, crypto and other alternative tech plays absorbing substantial risk capital. The wider markets have also seen the rise of algorithmic passive trading, which tends to seek out lower risks and higher liquidity stocks. The drift down of the Company’s share price since our IPO and dual listing, on relatively low trading volumes, does not, in the opinion of the directors, reflect the enormous potential of the Company to deliver shareholder value, both through its current pipeline of projects and its ability to continue to grow and monetise its portfolio. With an aggregate shareholding of 36.17% of the Company, the financial interests of the board are strongly aligned to those of all shareholders. In order to continue to ensure cash (which at 31 December 2018 stood at approximately £725,000/C$1,260,000) is spent on operational activities, a number of the directors have elected to accrue some or all of their 2018 fees, salary and where applicable pension entitlement. This was also the case in previous years. Approximately £268,000/C$466,000 is currently being accrued in this form, to be paid at a later date in either cash or, subject to the necessary regulatory approvals, in equity of the Company. Where permissible, the directors may also participate in future 11 capital raises, which is a consistent and positive feature of the Altus board. Given the continued ‘bear market’ conditions in the mining sector and the strong commitment of the directors, it is anticipated that further such amounts will be accrued in 2019. Altus Concert Party The Company has agreed with the Takeover Panel Executive an amendment to the list of certain shareholders of the Company who have previously been presumed to be acting in concert under the UK Takeover Code (the “Concert Party”). The Board has concluded that Robert Milroy, Guy Pas and Malcolm Burne shall no longer be considered to be members of the Concert Party. The Concert Party therefore now consists of Steven Poulton, Susannah Poulton, Matthew Grainger, Anna Grainger, David Netherway and Diane Rissik. These parties in aggregate hold interests in 45,048,100 Ordinary Shares of 1p each in the Company, equivalent to 25.32 per cent. of the Company's issued and voting share capital. These individuals do not hold any options or warrants in the Company. Shareholders should note that the Concert Party is free to increase its aggregated interest to 29.99 per cent. of the Company's issued and voting share capital without incurring an obligation under Rule 9 of the Takeover Code. Outlook Altus has a solid and proven business model, a strong and entrepreneurial team, and has established a formidable foundation for the year ahead. We have embraced the counter-cyclical nature of the resource sector and are continuing to make discoveries and enter royalty generating transactions across our growing portfolio. Our team has the essential vision, determination and energy to sustain the incredibly strong progress we have made to date. Steven Poulton Chief Executive Officer 29 April 2019 12 Strategic Report KPIs The Board use a mixture of financial and non-financial KPIs to help monitor the performance of the Group. The Group is at a pre-revenue stage of development, which means that the main financial KPIs relate to the management of cash and expenses. These are as follows. Cash and cash equivalents Exploration costs as a percentage of total operating costs Capitalisation of exploration costs in the year * 2018 2017 £724,785 34% £122,158 £523,344 23%** £46,235 * Excluding assets acquired through the Plan of Arrangement with Legend Gold Corporation. ** Measurement of the KPI regarding exploration costs has been adjusted. In the 2017 annual report the denominator used was the loss before taxation. This has been changed to operating costs, comprising exploration costs, administrative expenses, IPO costs and costs related to the plan of arrangement with Legend. Under this measurement the percentage of total operating costs represented by exploration costs for 2017 was re-stated from 30% to 23%. The increase from 23% to 32% in 2018 reflects the growth in the Group’s exploration activities, while Administrative costs were reduced from £1.5m to £1.2m due to lower wage costs. The Group’s cash balance increased by £200,000 as it raised £2.3 million (C$4.1 million) (before expenses) in April 2018, through the issue of 27,391,616 new units at C$0.15 per unit (with each unit comprising one Ordinary share and one five year warrant to purchase one Ordinary share at C$0.30c). The Company undertook its IPO on the London AIM market in August 2017, completed its plan of arrangement with TSX-V listed Legend Gold Corporation (“Legend”) in January 2018 and completed its dual listing on the TSX-V in Toronto in June 2018. As well as a growth in expensed exploration costs, there was a 165% increase in the value of capitalised costs in 2018. A third of this value related to the Legend exploration licences in Mali, and the majority of the remaining two thirds related to the Group’s pre-existing portfolio of licences. Capitalised expenses on newly granted licences were relatively modest. Non-Financial KPIs The Board monitors the following non-financial KPIs on a regular basis. Portfolio size – projects in which Altus holds an interest Indicates the scale of the Group’s operations 31 December 2018 31 December 2017 18 projects 14 projects Single largest exposure Indicates the diversification of risk within the Group’s portfolio 31 December 2018 31 December 2017 By Geography Mali - 33% Morocco – 36% By Mineral Gold – 56% Gold – 29%, Copper – 29% 13 Principal risks and uncertainties Risk description and impact Risk management strategy The Group’s projects may not contain economically recoverable volumes of minerals or metals, due to insufficient quality or quantity. Delays in the construction and commissioning of mining projects or other technical difficulties may make the deposits unattractive to exploit. Risk is diversified by holding a portfolio of projects. At every stage of the exploration process, projects are rigorously reviewed, both internally and by qualified third-party consultants, to determine if the results justify the next stage of exploration expenditure. Exploration activities, particularly more advanced activities such as drilling, carry a risk of local environmental damage or other issues, such as fuel spills, contamination of water courses, dust creation and damage to agricultural land or wild flora and fauna. Exploration activity exposes the Group’s employees to additional health and safety risks, such as accessing sites, use of equipment, and exposure to extreme weather or other environmental hazards. A reduction in global demand for gold, copper or other metals could lead to a significant fall in the value of the Group’s exploration assets and the cash flow from any production, or even result in the abandonment of a project should it prove uneconomical to develop. Similarly, commodity prices could fall in reaction to changes in international economic trends, impacting the revenue generated by projects in which the Group holds an interest. This may have a material adverse impact on the operating results and financial condition of the Group. The Group aims to comply with provisions of PDAC’s E3+ guidance on responsible exploration as applicable. It maintains its own Environmental Management Plan, which is regularly reviewed, and publicised to site-based employees. This contains a set of actions for each project based on a policy of Avoid, Mitigate, Remedy. The Group keeps the wellbeing of its employees as the highest of its priorities. Employees must be up to date with all recommended vaccinations, FCO travel advice is followed at all times, and regular first aid and other operational training is provided. Altus has adopted a counter-cyclical business model which seeks to grow fastest during economic downturns. It has structured itself as a Company that can run extremely lean operations to undertake early-stage exploration. The Company does not expose itself to significant long-term liabilities or spending commitments, and works with funded JV partners for the advanced stages of exploration. The successful exploration and development of natural resources on any project will require significant capital investment. The Group may not be successful in procuring the requisite funds on terms which are acceptable to it (or at all) and, if such funding is unavailable, the Group may be required to reduce its level of exploration activity and divest or relinquish its assets. The Group intends to secure capital by bringing in joint venture partnerships including established mining groups and investors, and through the issue of additional equity capital in the Company. This strategy is evidenced through Altus’ joint venture agreement with Resolute Mining, a mid-tier gold producer which is listed on the ASX, and the presence of a number of leading natural resources sector investors on the Company’s share register. 14 The exploration licences and operations of the Group are in jurisdictions outside the United Kingdom, which subjects the Group to political risk. Adverse impacts could include the withdrawal or suspension of licences, and cancellation or onerous changes to permits or regulatory consents. The Group is dependent upon a small executive team and other key personnel. The loss of these employees or the inability to attract additional qualified personnel as the Group grows restrict the ability of the Group to manage an expanded portfolio of projects. As a small, UK-based junior project and royalty generator, Altus could struggle to attract JV partners to advance its projects to mine- readiness, and to create a long-term revenue stream. Brexit Financial risks Material financial risks are listed below. Financial risks are also discussed in Note 24. It will take some time for revenue streams from active mines to positively impact Altus’ cashflow, and until then, the Group will be reliant on funding from shareholders. The Group’s shareholder financing is denominated in pounds sterling and Canadian dollars. Its exploration funding is incurred in a range of African currencies. The Group makes every effort to ensure it has robust commercial agreements covering its activities. It maintains comprehensive documentation covering its licence assets and the board and management oversee the good standing of these assets. The Remuneration Committee reviews the Company’s compensation package annually to ensure that it remains competitive (see Directors’ remuneration report, pages 36-41). The Company maintains strong links with industry bodies and training establishments to ensure access to a wide pool of talent. In the last two years Altus has listed on both the AIM in the UK and the TSX-V in Canada, building a shareholder base and an industry reputation. Potential partners are engaged in these markets and elsewhere, including the ASX market in Australia. Altus actively markets its portfolio through news releases and its website, and networks with investors and partners at conferences and industry events. Altus does not expect to have any significant exposure to the European market in the short and medium terms. The Group aims to maximise the opportunities for converting projects into revenue-generating assets by advancing the exploration of its licences and actively marketing them to potential partners, whist at the same time maintaining a disciplined attitude to expenditure and preserving its cash. The Group also seeks joint ventures on its projects with third parties, which can reduce the Group’s reliance on shareholder funding. The impact of foreign exchange is monitored to inform the decision whether or not to hedge currency exposure. Currently the Group does not hedge as the impact is considered immaterial (2018: £15,000 gain, 2017: £14,000 gain). 15 Corporate and social responsibility Sustainability and environmental protection Altus is committed to conducting its business operations in a sustainable manner and strives continuously to limit the impact of its activities on the natural environment and on the local communities in the regions where it has operations. Altus is a mineral explorer and developer, not a mining company, Therefore, the environmental impact directly associated with its activities is minimal. To ensure proper environmental stewardship on its projects, Altus ensures that all areas it explores are properly maintained, conserved and rehabilitated. A central tenet of the Group’s policy is the Environmental Management Plan (EMP), which guides the Group’s on-site activities from the planning stage through on-site operation to the return of sites to local communities once activity has finished. Many of the areas of operation are regions of subsistence farming, and Altus and its employees are aware that the impact of operations may not be limited to nuisance or upset, but could have a serious impact on the livelihoods of local people. As a result, the Group operates a number of policies to prevent problems and to remediate those that cannot be avoided. Where arable or grazing land is affected, rates of compensation are agreed with the local authorities before invasive activity begins. Meetings are held with local stakeholder groups to explain the project, to listen to local concerns and to mitigate any potential problems. At the other end of the project cycle, once activities have ceased, the Group arranges for replanting of crops or the promotion of flora re-growth, and returns to monitor progress after six months. Community engagement Altus is mindful that it has the capacity to have a positive impact in its areas of operation, many of which are remote and offer little alternative opportunity to local people. It employs a range of local people from trained geologists to administrative support and drivers. At the end of 2018 it employed 14 people in 5 African countries. To some of the local people in the more rural sites, it offers the opportunity to get involved in the exploration activity and to gain transferable skills such as operating geotechnical equipment. Altus has also taken geology students from the University at Mekele in Ethiopia to visit its exploration sites. Human rights Altus is committed to best-practice in socially and morally responsible exploration and in the development of mineral resources for the benefit of all stakeholders. The activities of the Group are in line with applicable laws on human rights. Health & Safety Altus takes the health and wellbeing of its employees extremely seriously and works continuously to minimise the hazards encountered. A comprehensive health and safety programme is maintained incorporating official guidelines, industry best practice, lessons from previous incidents and employee suggestions. There have been two road traffic accidents affecting the Group in the last two years, both involving third party drivers and vehicles. In Cameroon in February 2018, a lorry contracted by Altus to carry rock samples for the Company crashed, resulting in the deaths of five people at the scene. The Board of Altus offered immediate assistance to the people affected. An accident occurred in Liberia at the end of 2017 16 involving a hired car and driver transporting Company employees; there were no injuries resulting from this incident. While Altus could not have prevented these accidents, they starkly reiterated the importance of high safety standards. Altus continues to review all of its standards regularly and to stringently vet its suppliers and service providers. Employees Altus understands that its team is central to its future development and success. The aim of the Group is to create an environment that will attract and retain staff, and motivate employees to maximise their potential. The Company provides a fair remuneration package, and gives due consideration to requests for flexible working arrangements. It aims to give employees exposure to wider aspects of the Company’s operations. The Group promotes a culture of openness among its employees and welcomes their input into the good running of its operations. Altus has a long track record in recruiting and training promising geologists. Each year the Group typically offers at least one MSc level project thesis to students of geology or mining geology. The Group is also proud to provide internships for recent graduates, allowing them to gain flexible work experience and if available the opportunity for a full-time role with the Group. The Group welcomes diversity within its workforce and does not discriminate against its employees, workers or job applicants on the grounds of age, gender, ethnicity, disability, nationality, race, religious beliefs, or sexual orientation. Financial review The table below shows the breakdown of expenditure in 2018 between exploration costs (blue), directors and administration team costs (gold) and overheads (grey). Site licences includes capitalised licence fees and land rents. 17 Income Income from recharging costs to JV partners reduced from £401,000 to £90,000 primarily as a result of the discontinuation in the first quarter of the JV arrangement with JOGMEC on the Tigray-Afar licence in northern Ethiopia. Recharged costs in 2018 related mainly to the JV arrangement with Canyon Resources on the Birsok and Mandoum licences in central Cameroon. Other income in 2018 was derived primarily from a fair value gain of £282,000 on the Group’s investment in Canyon Resources; this was on top of a gain on this investment in 2017 of £129,000. Expenses Exploration costs increased from £556,000 to £631,000 (see note 6). This reflected an increase in the number of licences incurring spend from nine in 2017 to nineteen in 2018, including the six additional Mali licences incorporated from Legend’s portfolio. The Group’s exploration team did not increase in number during the year, apart from the addition of former Legend employees. The pattern of spend reflected a more even spread between projects, and a reduction in some areas as projects reached JV - ready status. Cameroon was the highest area of spend in both years (2018: £146,000 and 2017: £220,000). The Group’s newest area of operation, Côte d’Ivoire, incurred £44,000 of cost (2017: £nil). By nature of spend, operations costs in Africa increased most significantly (34%), compared to an 11% increase in local administrative expenses and an 11% decrease in in-country travel costs. Administrative expenses in the Income Statement covers UK costs, including geologists and their travel to Africa, as well as UK office overheads and group operations (see note 7). Overall these costs fell from £1,497,000 to £1,221,000, a reduction of 18% (see also financial KPI’s). The main reduction was in employee costs (see note 10), from £1,092,000 to £746,000, due to the exceptional bonuses in 2017 paid to directors and employees (2018: £1,500 and 2017: £301,000). The main increase in administrative expenses was for legal and professional fees, from £140,000 in 2017 to £203,000, which reflected the increased complexity of the Group since its listing on London’s AIM in August 2017, the Plan of Arrangement with Legend in January 2018, the private placement completed in April 2018 and the dual listing of the Company on Toronto’s TSX-V in June 2018. IPO and acquisition related costs expensed in the Income Statement fell from £372,000 to £19,000, with a vast portion of the costs for preparing the Plan of Arrangement with Legend being incurred in 2017. The table below shows local costs in each location of the Group’s operations. Details of expenditure are included in notes 5 to 14 to the Financial Statements. 18 £’000 Geologists Executives Non-exec. Admin Consultants Site costs Travel Office Legal & prof. Other Total K U 191 312 106 132 57 2 67 88 144 12 1,111 n o o r e m a C 40 - - 25 - 12 24 - - 52 153 e r i o v I ’ d e t ô C - - - - - 2 28 - - 21 51 a i p o h t E i 26 - - 20 - 28 42 - 1 28 145 a d a n a C - - - - - - - - 71 - 71 a i r e b i L 37 - - - - 17 34 - - 33 121 i l a M 14 - - 37 - 11 9 - (2) 57 126 o c c o r o M 20 - - 26 - 13 16 - 1 17 93 Total 328 312 106 240 57 85 220 88 215 220 1,871 Assets and cash The net assets of the Group jumped from £1,077,000 to £5,266,000 owing to the increase of £3,920,000 in intangible assets, £3,800,000 of which was derived from bringing the six gold exploration licences in Mali on to the balance sheet. In addition, the value of investments increased due to the fair value gain of £282,000 on the Group’s holding in Canyon Resources, and an increase in the cash balance of £202,000 (see below); trade and other receivables dropped by £32,000 due to lower prepayments and trade and other payables increased by £189,000 due to higher accruals and Legend liabilities taken on by the Group. The values of the intangible assets of the Group are reviewed at each reporting date (see note 16). During 2018 impairments totalling £20,000 were made to two licences, Bella Yella in Liberia and Negash in Ethiopia, in which the Group decided to discontinue its operations and relinquish the licences. The cash balance of the Group increased from £523,000 to £725,000. The cash increase in the year of £202,000 (2017: £107,000 increase) resulted from the proceeds of share and warrant issues of £2,258,000 offset against operating spend of £1,802,000 and investing spend of £270,000. The fundraising announced in April 2018 was a non-brokered private placement of 27,391,616 units at an issue price of C$0.15 with existing and new institutional and private investors. Each unit comprised one share plus a warrant for the purchase of one additional share at a price of C$0.30, exercisable within five years. Based on the spending profile of 2018, the cash balance at the end of the year will be insufficient to fund operations for the whole of 2019. The Group will continue to preserve cash but recognises that it will be necessary to either, or a combination of, raise additional funding, sell its equity position in Canyon or enter joint venture agreements which include cash pre-payments within the next twelve months. The directors are confident, based on the experience of raising finance in each of the two previous years, the liquidity profile of Canyon and the signing of two Letters of Intent for separate JVs with an ASX- listed company and an unlisted Australian company after the end of the period, that the necessary finance will be forthcoming, and have prepared the financial statements accordingly on a going concern basis. 19 Review of operations by country Operations in Cameroon Projects: Metals: 3 Gold, bauxite, iron ore LABOUM (northern Cameroon, 189km², gold) Laboum is located 600km northeast of the capital city of Yaoundé. The licence hosts a major Pan-African age, regional shear zone which is up to 5km wide and which comprises highly prospective Birimian metavolcanic and metasedimentary rocks. Results of a ground magnetic survey and regional soil sampling programme completed by the Company have defined numerous anomalies that are coincident with structural targets. Dilational and fold structures are considered to be excellent targets for potentially economic gold deposits. Rock chip sampling produced grades of up to 24.50g/t Au, 16.15g/t Au from quartz veins and 6.86g/t Au from sheared and silicified metasediments. Exploration in 2018 defined the Rey prospect that hosts numerous artisanal alluvial gold workings over a 1km strike length of the shear zone with exposure of mylonite, diorite and felsic intrusives. This discovery extends the prospective zone over the shear zone to 18km. After the end of the year, on 24 April 2019 Altus signed a Terms Sheet for a royalty and JV agreement with Corben Resources (“Corben”), an unlisted Australian company, whereby Corben can earn up to a 100% interest in the project. Details of the agreement are available on the Company’s website (www.altus-strategies.com/news, entry dated April 24 2019). BIRSOK (Birsok & Mandoum licences, central Cameroon, 372km², bauxite) The licences are located 370km northeast of the capital city of Yaoundé. From 2013 to October 2018 they were under a joint venture with ASX-listed Canyon Resources Ltd. The project is contiguous with Canyon’s Minim-Martap potentially world class bauxite project. In October 2018, Altus announced that the project would be vended to Canyon for equity and a royalty. Details of the agreement with Canyon are available on the Group’s website (www.altus-strategies.com/news, entries dated Oct 11, 2018 and Feb11, 2019). Completion of the agreement is expected in Q2 2019. BIKOULA (Bikoula & Ndjele licences, southern Cameroon, 400km², iron ore) Bikoula is located 150km south of the capital city of Yaoundé. The licence is situated on the western geological strike of the Nkout iron ore deposit and 160km west of the Mbalam iron ore deposit. The licences are adjacent to the road linking to the deep-water port at Kribi and are 30km north of the proposed trans-Cameroon east-west iron ore rail line. The Group has defined a maiden JORC-compliant Inferred Mineral Resource of 46 Mt at 44% Fe (not in accordance with NI43-101), from less than 25% of the 17km long Libi Hills prospect. To date 48 drill holes have been completed at Bikoula. During 2018, Altus pitted a large airborne magnetic anomaly at Nkout North. This work discovered further supergene haematite within reddish clayey soils. The Group consider this prospect and the undrilled remainder of the Libi Hills prospect represent excellent targets for the definition of further grade iron ore resources. Altus is seeking a partner to advance the project with an enlarged pitting programme, followed by further resource definition drilling. 20 Operations in Morocco Projects: Metals: 4 Copper, lead, zinc, silver, gold AGDZ (central Morocco, 60km², copper-silver) Agdz comprises four contiguous permits in the Anti-Atlas Mountains, 350km south of the capital city Rabat and 14km from the Bouskour copper mine which is operated by the Moroccan state mining group, Managem. Altus has carried out geological mapping, surface outcrop sampling, reconnaissance trenching and ground magnetic surveys. This work has defined strongly mineralised and altered zones and a clear structural context. Three main prospects have been identified to date at Makarn, Amzwaro and Minière from which rock-chip samples have returned assay results up to 26.5 % Cu and 448 g/t Ag and an initial rock-chip channel sample returned 1.25 % Cu and 96 g/t Ag over 9.3m, with grades up to 2.26 % Cu and 223 g/t Ag. Rock-chip and spoil samples from the Minière prospect, which hosts multiple underground workings that exploit a series of sub-parallel alteration zones, have returned 13.0 % Cu, 6.0 % Cu and 5.0 % Cu. Mapped alteration in the Makarn prospect is analogous to that of the Bouskour mine over a 0.5km strike length mapped to date. TAKZIM (central Morocco, 72km², copper-zinc) Takzim comprises five permits located 35km northeast of the city of Marrakech and 7km east of the historical Bir-n-Hass copper mine. Altus conducted soil sampling over a 1.6km² area proximal to a historical excavation that returned 2.22% Zn from outcrop sampling. Results have identified a coherent 600m x 150m Zn-Pb anomaly along strike. Outcrop sampling of narrow haematite-rich nodules and lenses within these veins returned highly anomalous Co with grades up to 0.15% Co and 0.14% Co. Future work at Takzim is aimed at uncovering the extent of the anomaly and defining potential targets. ZAER (central Morocco, 96km², copper) Zaer comprises six permits located 80km south of the city of Rabat in the Hercynian Massif, which contains three large granitic plutons that have been intruded into a sequence of sediments. The region hosts active and historical mines for copper, tin, tungsten, lead and zinc. Zaer is strategically located covering a 20km strike length of metamorphic aureole along a granite-metasediment contact. AMMAS (central Morocco, 32km², VMS) Ammas is comprised of two permits, located 30km south of the city of Marrakech. The project is 3km southeast and along strike of Managem’s Hajjar Zn-Pb-Cu VMS mine. The Hajjar mine exploits a number of buried and folded massive sulphide lenses. A letter of intent, signed with Raptor Resources Ltd in September 2018 to earn up to a 100% interest on Moroccan projects, was subsequently terminated by mutual consent in February 2019. Altus continues to advance discussions with other third parties. Other projects in Morocco In 2018 the Group relinquished the Oulmes, Ment, Tamatert and Ouarzazate licences in Morocco as after initial exploration work these licences were not considered likely to host an economic deposit. 21 Operations in Mali Projects: Metals: 6 Gold KORALI SUD (western Mali, 83km², gold) Korali Sud (“Diba”) is located in the Kayes region of western Mali, approximately 450km northwest of the capital city of Bamako. The project is 13km southwest of the Sadiola gold mine, which is operated by AngloGold Ashanti (JSE: ANG, NYSE: AU, ASX: AGG), IAMGOLD (TSX: IMG, NYSE: IAG) and the Malian government. Both Sadiola and Korali Sud are situated on the Senegal-Malian shear corridor within the world renowned ‘Kenieba window’. Korali Sud hosts the Diba historical resource (see Table 1 below), as prepared for Legend by AMEC Americas Limited (“Technical Report and Mineral Resource Estimate Diba Badiazila Gold Property Mali, West Africa”, 30 June 2013) and filed on SEDAR by Legend on 20 September 2013. The resource comprises stacked lenses which dip approximately 35-40 degrees ESE within the oxide zone. Table 1: Diba project mineral resource Category Tonnes (kt) Au Grade (g/t) Au Contained (koz) Indicated Inferred 6,348 720 1.35 1.40 275.2 32.5 Notes: Applying a 0.5g/t cut-off grade and a US$1,200/oz gold price as reported in 2013 NI 43-101 technical report. Historical drill results from the Diba prospect (unverified by the Group) include 12m at 20.66g/t Au and 32m at 2.06g/t Au. Diba has a potentially low mining strip ratio with relatively limited overburden and a high proportion of the potential ore is in the oxide zone. Deeper drilling at Diba targeting the sulphide zone has intersected 1.32g/t Au over 45m (from 93m). The sulphide zone remains open at depth. Oxide gold mineralisation at Diba is mainly found in saprolite which is within 50m of the surface, across a compact 1,200m² area drilled to date. The deposit is controlled by a number of structures with gold occurring as fine grained disseminations and localised high grade calcite-quartz veinlets. Altus has defined multiple targets for follow up exploration and drilling which have the potential to increase the historical resource. LAKANFLA (western Mali, 24km², gold) Lakanfla is located in the Kayes region of western Mali, approximately 450km northwest of the capital city of Bamako. The project is 5km east of Korali Sud and 6.5km from (and considered to be geologically analogous to) the karst-type FE3 and FE4 open pits that form part of the Sadiola gold mine. It is also considered to be geologically analogous to the Yatela karst-type gold deposit, which was mined between 2001 and 2015, located 35km to the northwest. The project hosts a significant number of active and historical artisanal gold workings which are coincident with major geochemical and gravity anomalies surrounding a granodiorite intrusion. Historical drilling (unverified by the Group) has returned encouraging intersections including 9.78g/t Au over 12m and 5.20g/t Au over 16m. Historical drilling targeted breccia mineralisation of the granodiorite, and intersected low grade gold mineralisation in limestones, voids and loose sands at depth, features 22 which are indicative of karst. A low gravity geophysical anomaly and corresponding surface slumps features, are also considered to be significant indicators. The karst targets remain to be drill tested. The next phase of work at Lakanfla is expected to include drill testing. Subsequent to the reporting period, on 7th February 2019 the Company signed a joint venture term sheet with ASX-listed Indiana Resources (“Indiana”, ASX: IDA), whereby Indiana may earn up to 85% of the Lakanfla and Tabakorole gold projects. The due diligence process is underway at the time of writing. Details of the agreement are available at the Group’s website (www.altus-strategies.com/news, entry dated Feb 7, 2019). TABAKOROLE (southern Mali, 100km², gold) Tabakorole is located 280km south of the capital city of Bamako and sits on the Massagui Belt, which hosts the Morila gold mine operated by Barrick. Exploration to date has identified a 2.7km long shear zone which is up to 200m wide and hosts a historical mineral resource (Table 2). Historical drilling (unverified by the Group) has returned encouraging intersections including 2.02g/t Au over 18m. Table 2: Tabakorole project historical mineral resource Oxide Sulphide Category Indicated Inferred Indicated Inferred Tonnes (t) 1,040,000 960,000 6,840,000 9,590,000 Grade (g/t Au) 1.01 1.114 0.94 1.03 Metal (Oz Au) 34,000 35,000 207,000 318,000 During 2018 the Group undertook pitting and sampling. The results indicate the potential for a parallel mineralised trend. The next phase of work at Tabakorole is expected to include scoping studies and resource definition drilling, along with testing of further targets. Tabakorole was included in the term sheet signed with Indiana (see Lakanfla above). DJELIMANGARA (western Mali, 55km², gold) Djelimangara is located in the Kayes region of western Mali, approximately 450km northwest of the capital city of Bamako. The project is 3km southeast from Korali Sud, and comprises four priority prospects: Sourounkoto, Kamana, Woyanda and Manankoto. These are characterised by gold-in-soil anomalies of up to 2.5km in length, coincident with hard rock gold workings in fine metasediments. Historical drilling (unverified by the Group) has reportedly returned encouraging intersections including 1.34g/t Au over 30m. The next phase of work is expected to include infill termite mound sampling, channel sampling of artisanal workings, trenching and infill auger sampling, to generate priority drill targets. Altus is seeking a JV partner to undertake auger drilling over priority targets to refine trench and drill targets. SEBESSOUNKOTO SUD (western Mali, 29km², gold) Sebessounkoto is located in the Kayes region of western Mali, approximately 450km northwest of the capital city of Bamako. The project is 15km south east of the Diba project. Historical trenching undertaken by Barrick (formerly Randgold Resources), reportedly returned up to 0.68g/t Au over 61m. During 2018 the Group defined the Soa gold prospect covering a 2.7km long gold-in-soil anomaly, identified from mapping artisanal workings, and sampling spoil and termite mounds. Spoil samples returned up to 5.18g/t Au, 3.98g/t Au and 2.4g/t Au. 23 Artisanal mining has focused on saprolite along a brittle-ductile shear zone typically associated with a stockworks of ‘smoky quartz’ veins. A review of the historical VTEM data has identified a 6.3km long anomaly parallel to the Soa prospect. Altus is seeking a JV partner to undertake auger drilling over priority targets to refine trench and drill targets. PITIANGOMA EST (southern Mali, 106km², gold) Pitiangoma Est is located 300km southeast of the capital city of Bamako. The licence is subject to a joint venture with ASX-listed Resolute Mining Limited (“Resolute”) and is located on the Syama shear zone, 15km from the Tabakoroni deposit and 40km from the Syama gold mine (both owned by Resolute). Resolute can earn up to a 70% interest in the project by funding US$3million in exploration and completing a feasibility study. Thereafter Altus may elect to co-fund its 30% interest on a pro rata basis, or exchange its interest for a 2% Net Smelter Return royalty. Prior to the Resolute JV, exploration included airborne geophysics (VTEM), RC drilling (2,160m) and diamond drilling (6,450m). Resolute has reportedly completed 110 air core drill holes for a total of 4,869m and a gradient array IP survey focussed on the Misseni Prospect, and this has reportedly been followed up by a 7-hole (3,167m) RC drilling programme in 2017. Altus has not verified the historical drilling data at the project. Operations in Ethiopia Projects: Metals: 2 Copper, gold, silver DARO (northern Ethiopia, 412km², copper-gold) Daro is located approximately 95km west of the Company’s Tigray-Afar Cu-Ag project, 570km north of Ethiopia’s capital, Addis Ababa. Granted in October 2017, the project targets potential Volcanogenic Massive Sulphide (“VMS”) copper and gold deposits. It is situated in the Neo-Proterozoic Nakfa Terrane, which hosts a number of significant VMS base metal and gold deposits and mines. Extensive prospecting and regional mapping has identified key geological markers for a VMS deposit type setting. These include the presence of bimodal volcanics, extensive chert horizons and associated metasediments, which conform to an ophiolite complex of ancient oceanic crust and seafloor sediments. During 2018 Altus defined four priority prospects at Keren, Teklil, Wedihazo and Simret. The Keren prospect strikes for 2km with grab and outcrop samples returning up to 37g/t Au and 10.35g/t Au. At the 2.5km long Teklil prospect, located within an ophiolite complex, rock chip and grab samples have returned 24% Cu, 6.51g/t Au and 203g/t Ag. Rock chip and grab sample results at the 0.5km long Wedihazo prospect, have returned up to 22.3% Cu and 0.24g/t Au. At the Simret prospect, exploration results have returned up to 944g/t Ag, 3.55g/t Au and 2.72% Pb and discovered Au-Ag-Cu-Pb-Zn bearing quartz veins and gossanous float. Altus is actively seeking JV partners for Daro to conduct trenching and a geophysical gravity survey with the aim of defining targets for a follow up maiden drill programme. TIGRAY-AFAR (northern Ethiopia, 242km2, copper-silver) Tigray-Afar is located approximately 95km east of the Company’s Daro Cu-Au project, 580km north of Addis Ababa. An evaluation of previous exploration data, has identified a potential sediment hosted 24 copper target within a 5km long VTEM conductor. The zone hosts gossans at surface which are interpreted to overlay a potential copper sulphide target which has yet to be drill tested. The next steps for the project will be to conduct a 2,000m 5-hole programme to test the presence of sedimentary hosted copper mineralisation. Altus is actively seeking JV partners for Tigray-Afar. Operations in Liberia Projects: Metals: 1 Gold ZOLOWO (western Liberia, 466km², gold) Zolowo is located 190km northeast of the capital city of Monrovia. The licence targets a significant 33km long Archaean-age greenstone belt on the West African Craton. Results from 2018 sampling of in situ quartz veins and spoil from artisanal workings returned encouraging grades up to 30.70g/t Au, 9.10g/t Au, 8.8g/t Au, 4.3g/t Au and 2.95g/t Au. The next phase of work will include systematic soil and trenching programme. Zolowo was included in the Terms Sheet signed with Corben Resources (see Operations in Cameroon, Laboum project, on page 20). Other projects in Liberia In 2018 the Group relinquished the Bella Yella gold project as the scale and continuity of potential gold bearing structures was not considered sufficient to attract a JV partner. Operations in Côte d’Ivoire Projects: Metals: 1 (+ 2 applications pending) Gold, nickel, cobalt PRIKRO (southwest Côte d’Ivoire, 370km², gold) Prikro is located 240km southeast of the capital city of Abidjan. The project targets a favourable folded and sheared Birimian-aged greenstone sequence intruded by felsic plutons, and hosts historical Au, Cu, Zn and Mo mineral occurrences. The next phase of work will include prospecting, mapping and termite sampling. Cautionary note regarding historical data Readers are cautioned that data on the Mali licences in this written disclosure is historical exploration data that has not been verified by a Qualified Person. Not all historical samples are available and Altus does not have complete information on the quality assurance or quality control measures taken in connection with the exploration results, or other exploration or testing details regarding these results. The potential tonnages and grades described in this disclosure are conceptual in nature and are based on previous drill results that defined the approximate length, thickness, depth and grade of the portion of the historical resource estimate. There has been insufficient exploration to define current resources and the Company cautions that there is a risk further exploration will not result in the delineation of current mineral resources. The historical data should therefore not be relied upon until the Company can confirm them. 25 Corporate Governance Report Introduction Since the implementation of changes to the London Stock Exchange AIM rules in September 2018 Altus has formally adopted the QCA Corporate Governance Code, and applies the ten principles of the QCA Code as set out in the statement below and detailed in this report. Section 19 of the Corporate Finance Manual issued by the TSX-V requires only that the corporate governance practices and processes they adopt be appropriate. Therefore, since its listing on the TSX- V, the Group has continued to follow the same practices that it adopted upon listing on AIM in London in 2017. The Group’s AIM Compliance Code, dating from its listing, is published on the Company’s website at it https://www.altus-strategies.com/corporate/corporate-governance/ and published its Corporate Governance Statement. in September 2018 Details of the Group’s response to the framework laid down by the QCA are contained within this report and other sections of the Annual Report and Financial Statements as follows. Corporate governance principle Strategy and business model Reference Business Overview Shareholder needs and expectations Corporate Governance Report Responsibilities to stakeholders Strategic Report Risk management Composition of the Board Corporate Governance Report Strategic Report Financial Statements note 24 Corporate Governance Report Board experience, skills and capabilities Corporate Governance Report Board performance evaluation Corporate culture Governance structures Corporate Governance Report Corporate Governance Report Corporate Governance Report Communication with shareholders/stakeholders Corporate Governance Report Page(s) 6-8 16-17 14-15 78-79 Statement of Corporate Governance The Board of Directors is responsible for the management of the Group on behalf of its shareholders. The objective of the Group is to create long term value for shareholders, and the Board is responsible for delivering that objective through its governance of the Company and its subsidiaries. The Directors have overall responsibility for the corporate governance of the Group and recognise the importance of the highest standards of behaviour and accountability. Several aspects of the business in its current guise offer particular challenges to the Board in respect of its approach to corporate governance, in particular: • Complexity of operation in relation to size The Group’s current activities include managing licence assets, entering JV and royalty arrangements, transferring licences and companies and managing a group structure across 10 jurisdictions, all with a team of about 30 employees and consultants. 26 • Expansion of operations During 2018, Altus increased its areas of project operation from four to six countries, adding Mali and Côte d’Ivoire, as well as activities in Canada associated with its TSX-V dual listing. • Areas of operation The focus of Altus’ exploration and the location of all of its intangible assets is Africa. Of the six countries in which it currently has project operations, only one (Morocco) appears inside the top 100-ranked countries in the World Bank’s international index of ease of doing business (May 2018). • Becoming a listed company In quick succession the Company has listed in London and, 10 months later, in Toronto. This opportunity has brought with it responsibilities to shareholders predominantly in Europe and North America, and obligations for compliance with two regulatory regimes. The Board is mindful that a strong corporate culture has a fundamental impact on the development of the Company’s strategy, and is an essential tool in delivering that strategy, as well as in judging risk, meeting challenges and dealing with external stakeholders. The Board seeks to foster a culture of openness, respect, frequent communication and shared responsibility. To do this it promotes interaction between the Board and senior management, employees in various locations, shareholders and partners. Members of the Board make themselves accessible and willing to act as a sounding board or a source of guidance, and by example encourage the permeation of this culture throughout the management and wider team, both in the UK and Africa. The effect of this open culture is to encourage dialogue at all levels, and to provide an environment in which all employees can have the confidence to raise issues and offer solutions without fear of recrimination or censure. With openness comes shared responsibility, as management is not viewed as a closed shop where all decisions are taken. Instead, employees are expected to act on issues, in discussion with relevant parties, rather than leave their resolution to someone else. In the development and implementation of strategy this enables free and frank discussion of options and their relative merits. It encourages all employees to highlight risks, and facilitates timely discussion of issues and challenges, as well as swift and well-considered responses and actions. The values that bind the team together extend to its dealings with external stakeholders, encouraging engagement with shareholders, project partners and local communities in areas of exploration, and displaying a respect and sense of responsibility that fosters mutual co-operation. Board Composition The Group’s Board of Directors comprises a Non-executive Chairman, a Chief Executive Officer, one Executive Director and two further Non-executive Directors. The Group’s business is directed by the Board and is managed on a day-to-day basis by the Chief Executive Officer and Executive Director, who are based at the Company’s registered offices in Didcot, United Kingdom. The Group’s Chief Financial Officer, who is not a director or an employee of the Company, is based in Vancouver, Canada. The Chairman and both Non-executive Directors are classified as independent by the Toronto Stock Exchange. The articles of association provide that each director retires and stands for re-election at the AGM every three years. All new directors appointed since the previous AGM are required to stand for election. In 27 2018 all directors served for the whole of the year except for Non-executive Director Michael Winn, who was appointed on 30 January 2018. The Board members combine a broad range of skills and expertise in the fields of geology and mineralisation, strategy, finance and corporate governance. Position Appointment date David Netherway Non-executive Chairman 21-May-17 Steven Poulton Chief Executive 28-Apr-17 Matthew Grainger Executive 28-Apr-17 Robert Milroy Non- executive 21-May-17 Michael Winn Non- executive 30-Jan-18 Status Independent Audit Committee Remuneration Committee Member Member Not independent - - Not independent - - Independent Independent Chair Chair Member Member David Netherway Non-Executive Chairman David is a mining engineer with over 40 years of experience in the mining industry. David was involved in the construction and development of the New Liberty, Iduapriem, Siguiri, Samira Hill and Kiniero gold mines in West Africa and has mining experience in Africa, Australia, China, Canada, India and the Former Soviet Union. David served as the CEO of Shield Mining until its takeover by Gryphon Minerals, prior to that he was the CEO of Toronto listed Afcan Mining Corporation, a China focused gold mining company that was sold to Eldorado Gold in 2005. He was also the Chairman of Afferro Mining which was acquired by IMIC in 2013. David has held senior management positions in a number of mining companies including Golden Shamrock Mines, Ashanti Goldfields and Semafo Inc. He is a former director of Altus Resource Capital and Altus Global Gold. Mr. Netherway is currently the non-executive Chairman of Kilo Goldmines [TSX: KGL] and of Canyon Resources [ASX: CAY] which is Altus’ partner in the Birsok and Mandoum Project and he is a non-executive director of Avesoro Resources (formerly Aureus Mining) [TSX/AIM: ASO] and of Kore Potash plc [ASX, AIM & JSE: KP2]. Steven Poulton Chief Executive Officer Steven is the Chief Executive and co-founder of Altus Strategies and a director of its exploration subsidiaries. He holds an Honours degree in Geology from Southampton University and a Master's degree in Mining Geology from the Camborne School of Mines. He started his career with Mano River in 1998, joining the board in 2007. In 2002 he co-founded and was Chief Executive of Ariana Resources, a gold producer in Turkey which listed on AIM in 2005 [AIM: AAU]. In 2004 he founded and was interim Chairman of African Aura Resources which listed on the TSX-V in 2008 and which through its merger with Mano River in 2009 created African Aura Mining. In 2011 African Aura Mining was divested into Afferro Mining, which was acquired by IMIC in 2013 for approximately US$200m, and west African gold producer Avesoro Resources (formerly Aureus Mining) [TSX/AIM: ASO]. In 2007 he was a founding non- executive director of west Africa focused diamond development company Stellar Diamonds. Stellar listed on AIM by way of a reverse takeover of West African Diamonds in 2010 and was acquired by Newfield Resources [ASX:NWF] in 2018. In 2008 Altus co-founded and Steven was joint Investment Manager to Altus Resource Capital, a five year closed-ended and long-only investment fund, focused on junior resource equities. Altus Resource Capital listed on the LSE in 2009 and by 2011 had 28 approximately US$150m of assets under management. He is a director of Aegis Asset Management and a co-founder of industry networking groups 'The Oxford Mining Club' and 'Resource IQ'. He is a Fellow of the Geological Society of London, a Fellow of the Institute of Materials, Minerals and Mining and a member of the Association of Mining Analysts. Matthew Grainger Executive Director Matthew is an Executive Director and co-founder of Altus Strategies and a director of its exploration subsidiaries. He holds an Honours degree in Earth Science from Anglia Ruskin University and a Master's degree in Mining Geology from the Camborne School of Mines. Matthew joined Cambridge Mineral Resources in 1999 and in 2002 he co-founded Ariana Resources which listed on AIM in 2005 [AIM: AAU]. In 2006 he joined African Aura Resources as Chief Operating Officer which listed on the TSX-V in 2008 and, through its merger with Mano River in 2009, created African Aura Mining, which in 2011 was divested into Afferro Mining which was acquired by IMIC in 2013 and gold producer Avesoro Resources (formerly Aureus Mining) [TSE/AIM: ASO]. Matthew is a director of Aegis Holdings and a co-founder of industry networking groups The Oxford Mining Club and Resource IQ. Robert Milroy Non-Executive Director Robert is Chairman of Milroy Capital Ltd a family investment company that manages various private equity investments in natural resources, engineering, renewable energy and commercial real estate. He has over 40 years of operational experience either as an owner or senior manager in the investment, mining and petroleum industries. He was a founding and Managing Director of the Corazon Capital Group; a Guernsey regulated investment management and stockbroking company for 14 years until its takeover by Canaccord Genuity in 2010. In addition, he was the Managing Director of Eagle Drilling, a drilling firm that specialised in hard rock core drilling in Central and Western Africa. Currently he is a Non-Executive Director of the Energy Venture Funds III, IV, V and Chairman of the Zeropex Group Ltd a water engineering firm. Previously he was a Non-Executive Director of Altus Resource Capital, Altus Global Gold and Genuity Energy a UK onshore oil and gas exploration firm. Robert is also a noted speaker and financial author, having written the Standard & Poor's Guides to Offshore Investment Funds. Robert graduated with a Bachelor of Commerce (Honours) from the University of Manitoba in 1971. He is a Member of the Association of Mining Analysts, Chartered Institute for Securities & Investment, Petroleum Exploration Society of Great Britain and Institute of Directors. Michael D. Winn Non-Executive Director Michael was the Chairman and CEO at Legend Gold Corp. a TSX-V listed company which was acquired by Altus in January 2018. Michael is President of Seabord Capital Corp. which provides investment analysis and financial services to companies operating in the energy and mining sectors. Michael is also President of Seabord Services Corp., a Canadian company providing management and regulatory services to private & public mining companies. He worked as an analyst for Global Resource Investments Ltd. from 1993 to 1997 where he specialized in the evaluation of emerging oil and gas and mining companies, and has worked in the oil and gas industry since 1983 and the mining industry since 1992. Michael is currently a director and officer of several TSX-V and NYSE listed companies operating in Canada, Latin America, Europe and Africa. He holds a B.S. in Geology from the University of Southern California. 29 David Miles Chief Financial Officer Mr Miles is a Chartered Professional Accountant with a BSc in Geology who has over 20 years’ experience in a large multinational corporate environment, primarily with Cominco Ltd. While with Cominco, he held various positions in corporate finance including Exploration Controller, responsible for the financial reporting of the corporation's eight international exploration subsidiaries as well as reporting for Canadian based exploration. From 2002 to 2004, David was the corporate controller for Quest Capital Corp. (formerly Viceroy Resource Corporation). David is currently the CFO of TSX-V listed Lara Exploration Ltd. and was formerly the CFO of Legend Gold Corp. a TSX-V listed company which was acquired by Altus in January 2018. David was also formerly the CFO at the following TSX-V listed companies: Reservoir Minerals Inc. Revelo Resources Corp., Colombian Mines Corporation, Esperanza Resources Corp., Nevgold Resource Corp., Inca Pacific Resources Corp, Eurasian Minerals Inc., Sanu Resources Ltd., Prospector Consolidated Resources Inc., Standard Uranium Inc. and Alexco Resource Corp. Segregation of duties The responsibilities of the Chairman include providing leadership to the Board, the efficient organisation and conduct of the Board’s function, setting the Board’s agenda, briefing all directors in relation to issues arising at Board meetings and ensuring that adequate time is available for discussion of all agenda items. The Chairman is also responsible for effective shareholder communication, arranging Board performance evaluation, promoting a culture of openness and debate by facilitating the effective contribution to the Board of non-executive directors in particular, and for ensuring constructive and respectful relations between the executive and non-executive directors and between the Board and senior management. The executive directors co-ordinate the day-to-day running of the Group, and are responsible for making recommendations to the Board regarding short and medium-term budgets, and targets, strategies and objectives for the Group. The Company makes available independent professional and legal advice to all directors, to ensure they are able to discharge their duties. In addition, all Board members have access to the services of the Company Secretary, who is responsible for ensuring compliance with all Board procedures. Function of the Board and its Committees The Board is responsible for approving the Group strategy and policies, for safeguarding the assets of the Group, and is the ultimate decision-making body of the Group in all matters except those that are reserved for specific shareholder approval. The Board generally meets on a quarterly basis with additional meetings as and when required. Through these meetings it provides control, guidance and oversight in reference to those matters reserved for its decision. This includes: - approval of the budget and business plan - major capital expenditure - acquisitions and disposals - risk management policies - approval of the financial statements 30 The Board delegates certain aspects of its responsibilities to the Board committees which have terms of reference as listed below. Audit Committee The Audit Committee comprises Robert Milroy, David Netherway and Michael Winn and is chaired by Robert Milroy. It meets at least twice a year. The committee has responsibility for ensuring the integrity of the financial statements, and that the financial performance of the Company is properly measured and reported by overseeing the production of annual and interim accounts and results announcements, and confirming any changes to accounting policies. The Audit Committee has unrestricted access to the Company’s external auditor in London, PKF Littlejohn LLP. It reviews reports from the auditor, including recommendations regarding accounting and other internal controls. It advises the Board with regard to the appointment of the auditor and monitors the extent of non-audit services undertaken. The committee monitors the effectiveness of internal controls and risk management systems on behalf of the Board (see “Risk Management” section later in this report). Remuneration Committee The Remuneration Committee comprises Robert Milroy, David Netherway and Michael Winn and is chaired by Robert Milroy. It meets at least once a year. The committee has responsibility for determining the Group’s remuneration policies, and, within these terms, for making recommendations to the Board on the individual remuneration packages of the Company’s Chief Executive, Chairman and the Executive and Non-executive Directors. This includes salary, bonus and incentive payments, and awards of shares and share options. Decisions regarding remuneration of the Group’s employees are delegated to the Group’s management, subject to approval of the annual budget and interim forecasts by the Board. The committee may consult with the Chief Executive as appropriate. No Director may be involved in any discussions relating to his remuneration. Nomination Committee Given the size of the Board and the long-term stability of the management team, the Board has not yet established a separate Nomination Committee. The Board is collectively responsible for reviewing the structure, size and composition (including skills, knowledge and experience) of itself and its committees, and for considering appointments of additional and replacement directors. Meeting attendance Attendance at the meetings of the Board and committee meetings during the year is set out below. The denominator is the number of meetings the director was eligible to attend. Michael Winn was appointed to the Board on 30 January 2018. David Netherway Steven Poulton Matthew Grainger Robert Milroy Michael Winn Board Audit Committee 11/11 11/11 10/11 10/11 7/8 4/5 n/a n/a 5/5 4/5 Remuneration Committee 1/1 n/a n/a 1/1 1/1 31 Responsibilities of the Board Internal controls The Board acknowledges its responsibility for the Group’s system of internal controls and procedures for the purpose of protecting shareholders’ interests and safeguarding of the Group’s assets. This covers operations, financial and risk management and regulatory compliance. Such systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives; any system can provide only reasonable, and not absolute, assurance against material misstatement or loss. In adopting its controls and procedures, the Board takes into consideration their appropriateness to the Group, given its size, complexity, stage of development, regulatory environment (AIM and TSX-V) and areas of operation. In at least one of the meetings of the Audit Committee each year the Group’s internal controls and procedures are reviewed for effectiveness, and amended, updated and expanded as deemed necessary. The Board ensures that its controls are applied as consistently as possible across its subsidiary companies in the UK and overseas. By far the most significant assets of the Group are its exploration licences. The Board reviews the standing of the licences each quarter with respect to the fulfilment of local requirements to submit renewals, reports and other documentation, to pay fees and taxes, and to undertake certain levels of exploration. Risk Management The Board considers risk assessment to be important in achieving its strategic objectives. There is a process of evaluation of performance targets through regular reviews by senior management of forecasts, project milestones, budgets and timelines. In identifying potential risks, the Board looks at: Inherent risk of mining prospects - - Macroeconomic environment, particularly with regard to the gold price - Financing environment - Operational environment The Board has concluded that given the size and level of development of the Group it is currently not appropriate to establish an internal audit function, although it will keep this option under review. Anti-bribery and anti-corruption The Company has implemented an anti-bribery and anti-corruption policy and also implemented appropriate procedures to ensure that the Board, employees and consultants of the Group comply with the UK Bribery Act 2010. Financial information The Group’s management has adopted internal controls to provide reasonable assurance regarding the reliability of financial information, both for internal financial control, and for the preparation of published financial statements. These controls are set out in a framework document entitled ‘Financial Position and Prospects Procedures’. The controls are reviewed regularly throughout the year. Management accounts are produced on a monthly basis, results are reviewed against an annual budget and periodic reforecasts, and significant variances are reported. 32 The financial statements for 2018 have been reviewed by the Audit Committee in consultation with the Group’s auditor, PKF Littlejohn LLP. Particular attention was paid to the Group’s cash position, presentation of the accounts on a going concern basis and access to future funding, and to support for the value of the Group’s intangible assets as represented by its capitalised licence costs. The Audit Committee regularly reviews the provision of non-audit services from its auditors. It is satisfied that the provision of non-audit services by PKF Littlejohn LLP is compatible with the general standard of independence for auditors and does not give rise to any conflict of interest. Share dealing code The Company has adopted a share dealing code for the Directors and applicable employees to ensure compliance with the AIM rules relating to dealings in the Company’s securities and with the Market Abuse Regulations as applied to AIM-listed companies. Relations with shareholders The Board is accountable to the Company’s shareholders and as such it is important for the Board to appreciate the aspirations of shareholders and equally that the shareholders understand how the actions of the Board and short-term financial performance relate to the achievement of the Group’s longer-term goals. The Board is committed to effective communication with the shareholders of the Company. Formal communication is provided through the publication of the Annual Report and quarterly operational updates and financial results. In addition, news releases are issued throughout the year and the Company maintains a website (www.altus-strategies.com) on which press releases, corporate presentations and financial information are available to view. Shareholders and other interested parties can subscribe to receive notification of news updates and other documents from the Company via email. Enquiries from individual shareholders on matters relating to the business of the Company are welcomed. Executive Directors meet and hold calls with major shareholders to discuss the progress of the Company and provide periodic feedback to the Board following meetings with shareholders. This includes travelling to Canada and the US to meet North American-based shareholders. The Board welcomes the attendance of shareholders at the Annual General Meeting and the Executive Directors are happy to answer shareholders’ questions. By order of the Board David Netherway Chairman 29 April 2019 33 Directors’ Report The directors present their annual report and financial statements for the year ended 31 December 2018. Company Altus Strategies plc is the parent company of group. It is a public limited company listed on London’s AIM and Toronto’s TSX-V and incorporated and registered in the United Kingdom. The registered office address is The Orchard Centre, 14 Station Road, Didcot, Oxfordshire, OX11 7LL, United Kingdom. Principal activity The principal activity of the Group and Company is that of a project and royalty generator in the field of mineral exploration. An overview of the business model is included on pages 6-8, and a detailed review of the Group’s activities, together with expected future developments and objectives of the Group, is provided within the Strategic Report on pages 13-25. Results and dividends The results for the year are set out in the Group Statement of Comprehensive income. No ordinary dividends were paid during the year (2017: £Nil). The directors do not recommend payment of a final dividend. Directors The directors who, unless otherwise indicated, held office during the year and up to the date of signature of the financial statements were as follows. David Netherway (Non-executive Chairman) Steven Poulton (Chief Executive Officer) Matthew Grainger (Executive Director) Robert Milroy (Non-executive Director) Michael Winn (Non-executive Director - appointed 30 January 2018) Share Capital Details of the share capital and movements in share capital during the year are disclosed in note 27 to the financial statements. During the year no share options were issued to directors. Substantial shareholdings The Directors are aware of the following substantial interests or holdings in 3% or more of the Company’s ordinary called up share capital as at 26 April 2019. Major shareholders (* indicates Director of the Company) Steven Poulton* Michael Winn* Exploration Capital Partners 2012 Limited Partnership David Netherway* Matthew Grainger* Euro Pacific Gold Fund Exploration Capital Partners 2014 Limited Partnership Creditforce Limited Number of shares 25,150,000 18,719,898 17,458,000 10,750,600 9,147,500 6,680,000 6,000,000 6,000,000 % of issued capital 14.14% 10.52% 9.81% 6.04% 5.14% 3.75% 3.37% 3.37% 34 Company’s listing The Company’s ordinary shares have been trading on AIM in London since 10 August 2017 and on TSX-V in Toronto since 6 June 2018. Going Concern and availability of finance The Directors have a reasonable expectation that the Group and Company will be able to access adequate financial resources to continue in operational existence for the foreseeable future and, therefore, they continue to adopt the going concern basis in the preparation of the annual report and financial statements. Further details on the Directors’ assumptions are included in the statement on going concern in note 1 of the financial statements. Website publication The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website (www.altus-strategies.com) and for ensuring the annual report and the financial statements are made available on its website. Financial statements are published on the website in accordance with UK legislation governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The Group is compliant with AIM Rule 26 regarding the Group’s website. Principal Risks and uncertainties The principal risks and uncertainties of the Group are outlined in the Strategic Report on pages 13-15. Share dealing The Company has adopted a share dealing code for the Directors and relevant employees in accordance with the AIM Rules and Market Abuse Regulations and takes proper steps to ensure their compliance. Details of this code are set out in the Corporate Governance Report on pages 26 to 33. Directors and their interests The Directors who served during the year, together with their directly beneficial interests in the shares of the Company are as follows. David Netherway1 Steven Poulton2 Matthew Grainger3 Robert Milroy4 Michael Winn 31 December 2018 10,750,600 25,150,000 9,147,500 575,000 17,969,898 6.04% 14.14% 5.14% 0.32% 10.52% 31 December 2017 10,750,600 24,354,569 8,747,500 250,000 - 9.98% 22.62% 8.12% 0.23% - 1. Includes 1,333,400 Ordinary Shares held by Diane Rissik 2. Includes 1,600,000 Ordinary Shares held by Susannah Poulton 3. Includes 720,000 Ordinary Shares held by Anna Grainger 4. Held through Milroy Capital Limited a company controlled by Robert Milroy Future developments The Group will continue to execute its project and royalty generator business model during 2019. Its activities are expected to include: - - undertaking costed mineral exploration programmes across the Group’s portfolio of projects; entering and furthering discussions and agreements with third parties for new joint ventures and royalty deals on the Group’s projects; and considering potential project, royalty and company acquisition opportunities. - 35 Suppliers & Contractors The Group has a prompt payment policy and seeks to ensure that all liabilities are settled within the supplier’s terms. Through fair dealings the Group aims to cultivate the goodwill of its contractors, consultants and suppliers. Key performance indicators (KPIs) Information on the Group’s KPIs is included in the Strategic Report on page 13. Financial risk management In common with all other businesses, the Group is exposed to a variety of financial risks that arise from its area of operations. These include the effect of changes in foreign currency exchange rates, funding risk, credit risk and liquidity risk. The Group has a risk management programme in place that seeks to limit the adverse effects on the financial performance of the Group. The Group does not use derivative financial instruments to manage foreign currency risk and, as such, no hedge accounting is applied. Financial risks are detailed in the Principal risks and uncertainties section of the Strategic Report on pages 13-15 and in note 24 of the financial statements. Events after the reporting date The events after the reporting date are set out in note 31 to the Financial Statements. Directors’ and Officers’ Indemnity Insurance The Group maintains Directors and Officers insurance, and its provision for qualifying third-party indemnity for the benefit of its Directors and Officers was in place throughout the year and remained in place at the reporting date. Annual General Meeting The Annual General Meeting of the Company will be held at the Company’s offices of the Company on Thursday 27 June 2019. Auditor PKF Littlejohn LLP has indicated its willingness to continue in office as the Group’s auditor. A resolution proposing that they be re-appointed will be put forward at the Annual General Meeting. Statement of disclosure to auditor So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the Directors individually have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the company’s auditor is aware of that information. On behalf of the board, Steven Poulton Chief Executive Officer 29 April 2019 36 Directors’ Remuneration Report Remuneration Committee The Remuneration Committee comprises Robert Milroy, David Netherway and Michael Winn and is chaired by Robert Milroy. It meets at least once a year. Further details are included in the Corporate Governance Report on pages 30-31. Due to the parent company’s listing on AIM it is not required to comply with the following regulations, and has therefore excluded certain disclosures required by these regulations. - Report Regulations 2013 - UKLA Listing Rules - the disclosure provisions under schedule 8 to SI 2008/410 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 Remuneration policy for Executive and Non-executive Directors The remuneration policy for executive directors is designed to provide a competitive package, to reward good performance and to align the directors’ interests with those of shareholders. The package includes basic salary (which may be partly deferred and paid in shares), bonus and company pension contributions in line with Group policy, as well as share options, although during 2018 no share options were held by or granted to any director. Remuneration packages are reviewed annually. Bonuses for executive directors in 2018 were set at 75% of basic salary and linked to a number of KPI targets. As these KPIs were not met in the year, no bonuses were paid in respect of the reporting period. Non-executive Directors receive only basic fees and do not receive bonuses or company pension contributions. They are included in the policy on share options although during 2018 no options were held, granted or exercised. Contracted and deferred remuneration In each year directors may choose to defer some of their remuneration, whether this is salary or company pension contributions, until such time as the Company has either the headroom to be able to allot further shares to its directors, or has the liquid resources available to be able to settle the deferred amounts in cash. Deferred remuneration is recorded in the accounts by way of an accrual. At the end of 2017 an insufficient accrual had been recorded in respect of all the remuneration which had been deferred up to that point. A correction was made to the accounts during 2018, which means that the charge for the year appears higher than the salary or fees due for the year, and higher than the cash amount that has actually been received by the directors. The cost of directors’ remuneration recorded in the accounts in 2018 was £413,803, comprising £401,483 for salaries and fees and £11,670 for pension contributions. Of this figure, £323,083 was in respect of the financial year 2018, made up of £300,833 for salaries and fees and £22,250 for pensions. The remainder was a correction in respect of prior years. Of the remuneration payable for 2018, £185,825 was paid in cash (£183,500 salaries and £2,325 pension), and no remuneration was settled in equity. £137,258 was deferred and remained outstanding at the reporting date. The total value of deferred remuneration for 2018 and prior years at the end of the year was £268,070. 37 The table below is a reconciliation of remuneration payable for 2018, accrual adjustments for prior years and the charge in the accounts in the year as recorded in note 11 to the financial statements. Salary / Fees Contracted salary/fees 2018 Deferred salary under accrued in 2017 Prepayment of 2017 salary released in 2018 Charge in the year Pensions Contracted pensions 2018 Release in 2018 of over accrued 2017 pension Charge in the year David Netherway £ Steven Poulton £ Matthew Grainger £ Robert Milroy £ Michael Winn £ Total £ 35,000 122,500 100,000 25,000 18,333 300,833 2,083 59,179 13,667 13,541 12,500 - - - - - 88,470 12,500 49,583 181,679 113,667 38,541 18,333 401,803 - - - 12,250 (8,255) 10,000 (2,325) 3,995 7,675 - - - - - - 22,250 (10,580) 11,670 Remuneration payable for the three years 2016 – 2018 Remuneration payable to the directors of Altus per the for the last three years, comprising salary or fees, bonus and pension contributions is in the table below. Payable: Salary/fees Bonus Pension Total David Netherway £ 35,000 29,166 25,000 - - 18,285 - - - 35,000 29,166 43,285 Steven Poulton £ Matthew Grainger £ 122,500 86,250 90,000 - 74,503 - 12,250 8,625 9,000 134,750 169,378 99,000 100,000 86,250 90,000 - 150,502 - 10,000 8,625 9,000 110,000 245,377 99,000 Robert Milroy £ 25,000 20,833 - - - - - - - 25,000 20,833 - Michael Winn £ 18,333 - - - - - - - - 18,333 - - Total £ 300,833 222,499 205,000 - 225,005 - 22,250 17,250 18,000 323,083 464,754 241,285 2018 2017 2016 2018 2017 2016 2018 2017 2016 2018 2017 2016 38 Remuneration paid during the three years 2016 – 2018 Remuneration actually paid to directors (prior to the applicable deductions of tax or national insurance), either in cash or equity, for the last three years was as follows. David Netherway Chairman Cash £ Equity £ - - - - - - - - - - - - - 75,000 - - - 18,285 - - - - 75,000 18,285 Received: Salary/fees Bonus Pension Total 2018 2017 2016 2018 2017 2016 2018 2017 2016 2018 2017 2016 Steven Poulton CEO Matthew Grainger Executive Cash £ 97,500 37,500 57,750 - 31,378 - - - - 97,500 68,878 57,750 Equity £ - 72,500 - - - - - - - - 72,500 £ Cash £ 86,000 - 68,083 33,750 - 80,400 - - - 128,940 - - - - - 40,200 - - - 86,000 237,223 33,750 - 80,400 Robert Milroy Michael Winn Non-executive Non-executive Equity Equity Cash £ £ £ £ Equity Cash - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Equity received in respect of salary/fees in 2017 by David Netherway: £75,000 comprising 600,000 shares at a price of 12.5p Equity received in respect of salary/fees in 2017 by Steven Poulton: £72,500 comprising 580,000 shares at a price of 12.5p Equity received in respect of salary/fees in 2017 by Matthew Grainger: £33,750 comprising 270,000 shares at a price of 12.5p Equity received in respect of bonus in 2016 by David Netherway: £18,285 comprising 1,150 shares at a price of £15.90 Total Cash £ 183,500 105,583 138,150 - 160,318 - - 40,200 - 183,500 306,101 138,150 Equity £ Total £ - 183,500 181,250 286,833 - 138,150 - - - 160,318 18,285 18,285 - - 40,200 - - - - 183,500 181,250 487,351 18,285 156,435 39 Deferred remuneration for the three years 2016 – 2018 Remuneration that directors elect to defer in respect of the three years 2016-2018, and which formed the balance of deferred remuneration at the end of the year is as follows. Deferred: Salary/fees Bonus Pension Total David Netherway £ 35,000 4,166 - - - - - 35,000 4,166 - - 39,166 Steven Poulton £ 25,000 28,750 43,125 12,250 8,625 9,000 20,250 37,250 80,500 9,000 20,250 147,000 Matthew Grainger £ 14,000 13,667 21,562 7,675 - - - 21,675 35,229 - - 56,904 Robert Milroy £ 25,000 20,833 - - - - - 25,000 20,833 - - 45,833 Michael Winn £ 18,333 - - - - - - 18,333 - - - 18,333 Total £ 117,333 67,416 64,687 19,925 8,625 9,000 20,250 137,258 140,728 9,000 20,250 268,070 2018 2017 2017 2018 2017 2016 Prior 2018 2017 2016 Prior Total Purchase of Company shares by directors In addition to deferring remuneration, the directors of the Company have used their own income to purchase shares in the Company; these purchases in 2017-2018 were as follows. David Netherway Chairman Steven Poulton CEO Robert Matthew Grainger Milroy Executive Non-exec. Non-exec. Michael Winn Total 2018 Value £ Shares Average price p 2017 Value £ Shares Average price p Total Value £ Shares Average price p - - - 25,613 795,431 3.22 15,055 400,000 3.76 41,479 1,114,000 3.72 163,084 2,056,800 7.93 101,518 3,017,800 3.36 41,479 1,114,000 3.72 188,697 2,852,231 6.62 116,573 3,417,800 3.41 11,798 325,000 3.63 31,250 250,000 12.50 43,048 575,000 7.49 - - - - - - - - - 52,465 1,520,431 3.45 337,331 6,438,600 5.24 389,796 7,959,031 4.90 Service period Both executive directors have service contracts with the Group with notice periods of three months. No director has a service agreement with a notice period in excess of three months. 40 Share options Prior to listing on AIM, Altus Strategies Ltd (now a wholly-owned subsidiary, Altus Exploration Management Limited) had previously issued Enterprise Management Incentive (“EMI”) and non-EMI share options to directors, employees and external associates. All of the issued and outstanding share options were either exercised or cancelled prior to the AIM listing. At 1 January 2018 there were no options outstanding, either EMI or non-EMI. During 2018 the Company had no share option scheme in place; no options were in existence during the year or outstanding at the reporting date. By order of the Board Robert Milroy Chairman of the Remuneration Committee 29 April 2019 41 Statement of Directors’ Responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group and Parent Company for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and in accordance with the rules of the Toronto Stock Exchange. In preparing these financial statements, the directors are required to: • • • • select suitable accounting policies and apply them consistently state whether applicable IFRSs as adopted by the European Union have been followed for the Group and Parent Company financial statements, subject to any material departures disclosed and explained in the financial statements make judgements and accounting estimates that are reasonable and prudent prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Parent Company 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 United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions. The Company is compliant with AIM Rule 26 regarding the Company’s website. On behalf of the board Steven Poulton Chief Executive Officer 29 April 2019 42 Independent Auditor’s Report Opinion We have audited the financial statements of Altus Strategies plc (the parent company) and its subsidiaries (the group) for the year ended 31 December 2018 which comprise the Group Statement of Comprehensive Income, the Group and Parent Company Statement of Financial Position, the Group and Parent Company Statement of Changes in Equity, the Group and Parent Company Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion: • • • • The financial statements give a true and fair view of the state of the group’s and of the parent company's affairs as at 31 December 2018 and of the group’s and parent company’s loss for the year then ended; The group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; The parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 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 group and parent 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 We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • • the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. Our application of materiality The materiality applied to the Group financial statements was £180,000, based on thresholds for net assets and the loss before tax. The performance materiality was £126,000. 43 An overview of the scope of the audit As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors and considered future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. The accounting records of the parent company and all subsidiary undertakings are centrally located and audited by us based upon Group materiality or risk to the Group. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year 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. We have determined the following key audit matters and set out our findings: Key Audit Matter Valuation and recoverability of exploration assets and, for the parent company, amounts due from subsidiary and related undertakings (refer notes 16,18 and 20). The carrying value of intangible assets as at 31 December 2018 is £4,071,870 which comprises costs associated with exploration licenses and projects in Africa. The carrying value of investments in subsidiaries, together with intra- group receivables was £7,287,035 as at 31 December 2018. How the scope of our audit responded to the key audit matter We reviewed the Group’s exploration licences and permits to confirm good title and standing. For licences which had expired and are in the process of renewal, we assessed the relevant factors, in conjunction with discussions with management, likelihood of renewal. regarding the We reviewed the terms and status of the joint venture agreements in place, in conjunction with the accounting treatment adopted under the terms of those agreements. These carrying values are tested annually for impairment. There is a risk that the carrying their direct impaired given values dependence on early stage exploration projects. are The early stage projects were reviewed for indicators of impairment in accordance with IFRS 6. We discussed with management the scope of their future budgeted and planned expenditure on the licence area. recoverability of amounts due from related undertakings were the underlying to reference The subsidiary and assessed by exploration projects. 44 Other information The other information comprises the information included in the Annual Report, other than the Group and Parent Company’s financial statements and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the Group and Parent Company 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. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of our audit: • • the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • • • • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the Parent Company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors' remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. 45 Responsibilities of directors As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the Group and Parent Company 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 and Parent Company financial statements, the directors are responsible for assessing the Group 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 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. 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 our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters 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 and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. David Thompson (Senior Statutory Auditor) for and on behalf of PKF Littlejohn LLP Statutory Auditor 1 Westferry Circus Canary Wharf London E14 4HD 29 April 2019 46 Independent Auditor’s Report in respect of Canadian National Instrument 52-107 Opinion We have audited the financial statements of Altus Strategies plc and its subsidiaries (the “group”) for the year ended 31 December 2018 which comprise the Group Statement of Comprehensive Income, the Group Statement of Financial Position, the Group Statement of Changes in Equity, the Group Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (“IAASB”). In our opinion: • • the group financial statements present fairly, in all material respects, the financial position of the group as at 31 December 2018 and 31 December 2017 and its financial performance and its cash flows for the years then ended; and the group financial statements have been properly prepared in accordance with IFRSs as issued by the IAASB. Basis for Opinion: We conducted our audit in accordance with International Standards on Auditing (ISAs) as issued by IAASB 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 group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the group financial statements in the UK, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA code. 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 We have nothing to report in respect of the following matters in relation to which the ISAs require us to report to you where: • • the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year 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. 47 We have determined the following key audit matters and set out our findings: Key Audit Matter Valuation and recoverability of exploration assets and, for the parent company, amounts due from subsidiary and related undertakings (refer notes 16,18 and 20). The carrying value of intangible assets as at 31 December 2018 is £4,071,870 which comprises costs associated with exploration licenses and in Africa. The carrying value of projects investments in subsidiaries, together with intra- group receivables was £7,287,035 as at 31 December 2018. How the scope of our audit responded to the key audit matter We reviewed the Group’s exploration licences and permits to confirm good title and standing. For licences which had expired and are in the process of renewal, we assessed the relevant factors, in conjunction with discussions with management, likelihood of renewal. regarding the We reviewed the terms and status of the joint venture agreements in place, in conjunction with the accounting treatment adopted under the terms of those agreements. These carrying values are tested annually for impairment. There is a risk that the carrying their direct impaired given values dependence on early stage exploration projects. are The early stage projects were reviewed for indicators of impairment in accordance with IFRS 6. We discussed with management the scope of their future budgeted and planned expenditure on the licence area. recoverability of amounts due from related undertakings were the underlying to reference The subsidiary and assessed by exploration projects. Other information The other information comprises the information included in the annual report and the management discussion and analysis, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and 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. 48 Responsibilities of management Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the group’s and the 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. Those charged with governance are responsible for overseeing the Company’s financial reporting process. 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 International Standards on Auditing (ISAs) 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. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the group’s financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. • • Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause the group and the parent company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation (i.e. gives a true and fair view). • • Are required to report on consolidated financial statements, obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for the audit opinion. 49 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The partner in charge of the audit resulting in this independent auditors’ report is David Thompson. David Thompson (Engagement Partner) for and on behalf of PKF Littlejohn LLP Statutory Auditor 1 Westferry Circus Canary Wharf London E14 4HD 29 April 2019 50 ALTUS STRATEGIES PLC GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018 Company Registration No. 10746796 Continuing operations Management fees and costs recovered from joint venture partners Exploration costs expensed Administrative expenses IPO and acquisition related costs Loss from operations Investment income Other operating income Fair value gain on investments Loss before taxation Income tax Loss for the year Exchange differences on retranslation of net assets of subsidiaries Total comprehensive loss for the year Notes 4 6 7 12 13 14 Loss for the year attributable to: - Owners of the parent company - Non-controlling interest Total comprehensive income for the year attributable to: - Owners of the parent company - Non-controlling interest 2018 £ 89,678 (630,902) (1,221,110) (19,284) (1,781,618) 62 1,977 282,227 (1,497,352) - (1,497,352) (76,992) (1,574,344) 2017 £ 401,228 (556,447) (1,497,498) (371,753) (2,024,470) 61 33,588 129,142 (1,861,679) (1,126) (1,862,805) - (1,862,805) (1,494,863) (2,489) (1,497,352) (1,860,145) (2,660) (1,862,805) (1,571,855) (2,489) (1,574,344) (1,860,145) (2,660) (1,862,805) Earnings per share (pence) attributable to the owners of the parent Basic earnings per share 15 (0.90) (1.84) The notes on pages 58-83 form part of these financial statements. 51 ALTUS STRATEGIES PLC GROUP STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018 Company Registration No. 10746796 Notes 16 17 18 20 21 22 27 27 Non-current assets Intangible assets Property, plant and equipment Investments Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Provisions Total liabilities Net current assets Net assets Equity Share capital Share premium Translation reserve Other reserves Retained earnings Total equity attributable to owners of the parent Non-controlling interest Total equity 2018 £ 4,071,870 7,932 883,763 4,963,565 79,292 724,785 804,077 5,767,642 (486,934) (15,000) (501,934) 302,143 5,265,708 1,777,827 6,018,822 (76,992) 5,770,070 (8,151,527) 5,338,200 (72,492) 5,265,708 2017 £ 151,875 2,386 601,536 755,797 110,669 523,344 634,013 1,389,810 (298,055) (15,000) (313,055) 320,958 1,076,755 1,076,808 999,000 - 5,727,614 (6,656,664) 1,146,758 (70,003) 1,076,755 The notes on pages 58-83 form part of these financial statements. The financial statements were approved by the board of directors and authorised for issue on 29 April 2019 and are signed on its behalf by: Steven Poulton Chief Executive Officer 52 ALTUS STRATEGIES PLC COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018 Company Registration No. 10746796 Non-current assets Investments Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Total liabilities Net current assets Net assets Equity Called up share capital Share premium Other reserves Retained earnings Total equity Notes 2018 £ 2017 £ 18 20 21 27 27 4,608,930 965,808 2,705,706 37,544 2,743,250 7,352,180 (117,033) (117,033) 2,626,217 7,235,147 1,777,827 6,018,822 42,456 (603,958) 7,235,147 527,913 291,087 819,000 1,784,808 (91,662) (91,662) 727,338 1,693,146 1,076,808 999,000 - (382,662) 1,693,146 As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own statement of comprehensive income and related notes. The Company’s loss for the year was £221,296 (2017: £382,662). The notes on pages 58-83 form part of these financial statements. The financial statements were approved by the board of directors and authorised for issue on 29 April 2019 and are signed on its behalf by: Steven Poulton Chief Executive Officer 53 ALTUS STRATEGIES PLC GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 Balance at 1 January 2017 Year ended 31 December 2017 Loss and total comprehensive income for the year Issue of share capital Issue of warrants Capital reorganisation Share options exercised Total transactions with owners, recognised directly in equity Balance at 31 December 2017 Year ended 31 December 2018 Loss for the year Other comprehensive loss for the year Total comprehensive income for the year Issue of share capital Share issue costs Issue of warrants Warrants exercised Total transactions with owners, recognised directly in equity Balance at 31 December 2018 27 27 Notes Share capital £ 104,526 Share premium account £ 5,770,590 - 127,200 - 845,082 - - 1,901,106 - (6,672,696) - 972,282 1,076,808 (4,771,590) 999,000 Translation reserve - - - - - - - - Other reserves £ (92,323) Retained earnings £ (4,807,839) Total equity £ 974,954 Non- controlling interest £ (67,343) Total £ 907,611 - - 3,643 5,827,614 (11,320) (1,860,145) - - - 11,320 (1,860,145) 2,028,306 3,643 - - (2,660) - - - - (1,862,805) 2,028,306 3,643 - - 5,819,937 5,727,614 11,320 (6,656,664) 2,031,949 1,146,758 - (70,003) 2,031,949 1,076,755 - - - - - 684,519 - - 16,500 - 5,103,396 (146,274) - 62,700 - (76,992) (76,992) - - - - - - (1,494,863) - (1,494,863) (76,992) (2,489) - (1,497,352) (76,992) - - - 42,456 - (1,494,863) - - - - (1,571,855) 5,787,915 (146,274) 42,456 79,200 (2,489) - - - - (1,574,344) 5,787,915 (146,274) 42,456 79,200 701,019 1,777,827 5,019,822 6,018,822 - (76,992) 42,456 5,770,070 - (8,151,527) 5,763,297 5,338,200 - (72,492) 5,763,297 5,265,708 The notes on pages 58-83 form part of these financial statements. 54 ALTUS STRATEGIES PLC COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 Share capital £ Share premium account £ Other reserves £ Retained earnings £ Total £ Notes - - - (382,662) (382,662) 27 1,076,808 1,076,808 999,000 999,000 - - - 2,075,808 - 2,075,808 Year ended 31 December 2017 Loss and total comprehensive income for the year Issue of share capital Total transactions with owners, recognised directly in equity Balance at 31 December 2017 1,076,808 999,000 - (382,662) 1,693,146 Year ended 31 December 2018 Loss and total comprehensive income for the year Issue of share capital Share issue costs Issue of warrants Exercise of warrants Total transactions with owners, recognised directly in equity - - - (221,296) (221,296) 27 684,519 - - 16,500 701,019 - 5,103,396 (146,274) - 42,456 - 42,456 - 62,700 5,019,822 - 5,787,915 (146,274) - 42,456 - - 79,200 - 5,763,297 Balance at 31 December 2018 1,777,827 6,018,822 42,456 (603,958) 7,235,147 The notes on pages 58-83 form part of these financial statements. 55 ALTUS STRATEGIES PLC GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018 Cash flows from operating activities Loss from operations Other operating income Less: movement in depreciation Less: impairment of intangible assets Foreign exchange on foreign operations Equity-settled share based payments Decrease in trade and other receivables Increase/(decrease) in trade and other payables Net cash outflow used in operating activities Investing activities Cash acquired on purchase of subsidiary Purchase of intangible assets Purchase of property, plant and equipment Interest received Net cash used in investing activities Financing activities Net proceeds from the issue of shares and warrants Net cash generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Exchange movements on cash and cash equivalents Cash and cash equivalents at end of the year 2018 £ (1,781,618) 1,977 7,331 20,529 (77,082) - 34,712 7,453 (1,786,698) 13,222 (270,534) (12,876) 62 (270,126) 2,258,175 2,258,175 201,351 523,344 90 724,785 2017 £ (2,024,470) 33,588 1,413 - 351,981 143,809 (29,826) (1,523,505) - (1,734) (46,235) 61 (47,908) 1,678,843 1,678,843 107,430 415,914 - 523,344 Significant non- cash transactions On 31 January 2018, the Company acquired 100% of the trade and assets of Legend Gold Corp. by way of a Plan of Arrangement through the issue of equity in the Company. See note 8 for further details. During the year, the Company issued warrants to consultants as consideration for the raising of funds in the year. These have been treated as a share based payment and further detail is included in note 26. The notes on pages 58-83 form part of these financial statements. 56 ALTUS STRATEGIES PLC COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018 Cash flows from operating activities Loss on ordinary activities Foreign exchange (Increase)/decrease in trade and other receivables Increase in trade and other payables (Increase)/decrease in intercompany balances Net cash used in operating activities Investing activities Purchase of investments Net cash used in investing activities Financing activities Proceeds from the issue of shares Net cash generated from financing activities Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 2018 £ (221,296) - 283 14,676 (2,167,381) (2,373,718) (138,000) (138,000) 2,258,175 2,258,175 (253,543) 291,087 37,544 2017 £ (382,662) 40 (17,189) 91,622 (510,724) (818,913) - - 1,110,000 1,110,000 291,087 - 291,087 Significant non- cash transactions On 31 January 2018, the Company acquired 100% of the trade and assets of Legend Gold Corp. by way of a Plan of Arrangement through the issue of equity in the Company. See note 8 for further details. During the year, the Company issued warrants to consultants as consideration for the raising of funds in the year. These have been treated as a share based payment and further detail is included in note 26. The notes on pages 58-83 form part of these financial statements. 57 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 1 Accounting policies Company information Altus Strategies plc is a public company limited by shares and incorporated in England and Wales. The registered office is 14 Station Road, Didcot, Oxfordshire, OX11 7LL, United Kingdom. The Group consists of Altus Strategies plc and all of its subsidiaries, as listed in note 19. Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS interpretations committee (IFRS IC) interpretations as adopted for use in the European Union and with IFRS and their interpretations issued by the IASB. The consolidated financial statements have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, (except as otherwise stated). The financial statements have been prepared on the historical cost basis, as modified by the valuation of financial assets at fair value through profit or loss. The principal accounting policies adopted are set out below. The financial statements are prepared in British Pounds Sterling (£), which is the functional currency of the Company. Monetary amounts in these financial statements are rounded to the nearest whole pound. As permitted by section 408 of the Companies Act 2006, the Company has not presented its own statement of comprehensive income and related notes. The Company’s loss for the year was £221,296 (2017: £382,662). Basis of consolidation The consolidated financial statements comprise the financial statements of Altus Strategies plc and its subsidiaries as at 31 December 2018. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Altus Strategies plc was incorporated on 28 April 2017. On 14 June 2017, Altus Strategies plc acquired the entire share capital of Altus Exploration Management Limited by way of a share for share exchange. The transaction was treated as a group reconstruction and accounted for using the reverse merger accounting method. Accordingly, the financial information for the prior year (2017) has been presented as if Altus Exploration Management Limited was owned by Altus Strategies plc throughout the entire prior year. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls and investee if, and only if, the Group has: • • • power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) Exposure, or rights, to variable returns from its involvement with the investee The ability to use its power over the investee to affect its future Generally, there is a presumption that a majority of the voting rights results in control. To support this presumption and when the Group has less than a majority of the voting rights or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has the power over an investee, including: • • • The contractual arrangements with the other vote holders of the investee Rights arising from other contractual arrangements The Group’s voting rights and potential voting rights 58 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 1 Accounting policies (continued) The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. During the year, the Company acquired 100% of the trade and assets of Legend Gold Corporation. Management concluded that the transaction did not meet the criteria of a purchase of an entity and as such was accounted for as an asset acquisition and not a business combination under IFRS 3. See note 8 for further detail. “Joint ventures” as referred to in the financial statements refer to agreements with exploration partners and not joint ventures as defined within IFRS 11. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent company of the Group and to the non-controlling interests, even if this results in the non- controlling interests having a deficit balance. All inter- group assets and liabilities, equity income, expense and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Going concern The Directors have at the time of approving the financial statements, a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. In common with many junior resource investment and exploration companies, the Group and Company raise funds in discrete tranches from existing shareholders and /or new investors. The Directors and management are using funds for the evaluation of resource investment and exploration opportunities. The Company expects that it will have to raise additional funds to provide sufficient working capital through the next financial year by equity placings or the sale of its equity position in Canyon Resources Limited. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements. Exceptional items Exceptional items are disclosed separately in the financial statements where it is necessary to do so, to provide further understanding of the financial performance of the Group. They are material items of income of expense that have been shown separately due to the significance of their nature or amount. IPO and acquisition related costs are included as exceptional items in profit or loss. Fair value measurement IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the Group uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the Company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards. 59 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 1 Accounting policies (continued) Foreign exchange Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the Statement of Comprehensive Income for the period. 2 Adoption of new and revised standards and changes in accounting policies New and amended standards adopted by the Group and Company The Group and Company have applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2018: IFRS 9 Financial Instruments; IFRS 15 Revenue from Contracts with Customers; • • • Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2; and • Annual Improvements 2014-2016 Cycle. IFRS 15 became effective as at 1 January 2018. The revenue in the Group is derived from management charges with group entities and joint-venture partners. There is no material impact on the financial statements as a result of the transition to IFRS 15. IFRS 9 became effective as at 1 January 2019. The effective of the transition to IFRS 9 is detailed in note 23. Other than as described above, there has been no material impact on the financial statements as a result of the adoption of the new and amended standards. New and revised IFRSs in issue but not yet effective The Group and Company have not applied the following new and revised Standards and Interpretations that have been issued but are not yet effective: IFRS 16 Leases IFRIC 23 Uncertainty over Income Tax Treatments IAS 28 (Amendments) Long-term interests in Associates and Joint Ventures • • • • Annual Improvements to IFRS Standards 2015-2017 Cycle • Amendments to IFRS 3: Business Combinations • Amendments to IAS 1 and IAS 8: Definition of material *subject to EU endorsement Effective date for annual periods beginning on or after 1 January 2019 1 January 2019 1 January 2019 1 January 2019 * 1 January 2020 *1 January 2020 The Group is evaluating the impact of the new and amended standards above. The directors believe that these new and amended standards are not expected to have a material impact on the Group and Company's results or shareholders' funds. The Group and Company expect that the adoption of IFRS 16 will have no material impact on the financial statements as the Group and Company have no material lease agreements. 60 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 3 4 Critical accounting estimates and judgements The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are shown in the following notes. Impairment of deferred exploration costs Share based payments Fair value estimation on acquisition Note 16 Note 26 Note 8 Segmental analysis Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. At the current stage of the Group’s development, management considers there to be one income segment, which is the recovery of exploration expenses and associated management costs from joint venture partners. Income attributable to this segment in 2018 was £89,678 (2017: £401,228). All of this income was associated with the Group’s activities in Africa. Group Management fees and costs recovered from joint venture partners Loss from operations Reportable segment assets Reportable segment liabilities Management fees and costs recovered from joint venture partners Loss from operations Reportable segment assets Reportable segment liabilities 5 Operating loss Operating loss for the year is stated after Exchange losses/(gains) Exploration and development costs (note 6) IPO and acquisition related costs Depreciation Share-based payments Operating lease charges UK 2017 £ - Africa 2017 £ 401,228 Total 2017 £ 401,228 (1,829,925) (194,545) (2,024,470) 1,075,825 (241,062) 313,985 (71,993) 1,389,810 (313,055) 2018 £ 40,678 2018 £ 49,000 2018 £ 89,678 (1,143,365) (638,253) (1,781,618) 1,565,829 (441,477) 4,201,813 (60,547) 5,767,642 (501,934) 2018 £ (25,726) 630,902 19,284 7,331 12,854 38,222 2017 £ (14,318) 556,447 371,753 1,413 3,643 350,846 61 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 6 Exploration and development costs The Group’s costs derived from its operations in countries in which it holds licences are detailed below. Location and licence Cameroon Bikoula Birsok Laboum Mandoum Ndjele Cameroon - general Ethiopia Daro Tigray-Afar Ethiopia - general Côte D’Ivoire Prikro Zenoula Côte d’Ivoire - general Liberia Zolowo Liberia - general Mali Diba (Korali Sud) Djelimangara Lakanfla Sebessounkoto Sud Tabakorole Mali - general Morocco Agdz Ammas Takzim Zaer Morocco - general Other Total Administrative expenses 2018 £ Operational expenses 2018 £ Travel expenses 2018 £ 296 502 25,877 103 37 76,779 6,147 1,325 54,328 2,329 41 19,623 17,796 17,158 176 196 391 401 548 90,424 1,836 - 18 - 60,826 16,017 393,174 7,700 - 12,427 61 442 11,304 43,837 271 2,345 9,850 1,298 4,227 39,337 1,958 5,388 125 2,818 1,766 2,586 6,111 2,860 1,843 10,810 176 2,369 25 171,934 6,075 - 2,810 - - 1,552 9,412 50 4,877 1,766 222 4,676 19,349 38 - - - - 552 7,138 327 82 1,521 14 5,333 - 65,794 Total 2018 £ 14,071 502 41,114 164 479 89,635 59,396 1,646 61,550 13,945 1,561 28,526 76,482 19,154 5,564 321 3,209 2,167 3,686 103,673 5,023 1,925 12,349 190 68,528 16,042 630,902 62 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 6 Exploration and development costs (continued) Location and licence Cameroon Laboum Birsok & Mandoum Bikoula & Ndjele Cameroon - general Ethiopia Tigray-Afar Ethiopia – general Liberia Bella Yella Zolowo Liberia – general Morocco Agdz Takzim Morocco – general Other Total Administrative expenses 2017 £ Operational expenses 2017 £ Travel expenses 2017 £ 63,390 1,032 1,715 68,989 24,281 79,788 9,418 23,564 153 47,803 189 3,162 (345) 44,508 4,405 4,575 - - 33,151 - 1,692 970 16,379 7,345 24 - - Total 2017 £ 144,344 1,221 6,569 69,614 85,168 91,538 14,017 23,564 153 447 457 77,262 4,275 354,771 7,975 571 10,524 4,479 127,846 6,615 38 3,899 3,717 73,830 15,037 1,066 91,685 12,471 556,447 7 Administrative expenses Administrative expenses include the following balances. Group Employee costs (note 10) Consultants and contractors Costs incurred on behalf of joint venture partners Legal and professional expenses Travel expenses Premises and office expenses Exchange gains Depreciation of property, plant and equipment Impairment of licence Other expenses 2018 £ 746,022 56,808 7,988 203,250 84,151 88,826 (25,726) 7,331 20,529 31,931 1,221,110 2017 £ 1,091,773 - 195,196 140,045 29,079 - (14,318) 1,413 - 54,310 1,497,498 63 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 8 Plan of Arrangement with Legend Gold Corporation On 30 January 2018, Altus acquired all of the outstanding shares of LGN Holdings (BVI) Inc. (“Legend”), a 100% subsidiary of Legend Gold Corporation. A summary of the purchase price allocation for the Legend acquisition is as follows. Purchase Price Legend common shares outstanding as at January 30, 2018 Exchange Ratio Altus common shares issued to Legend shareholders Fair value of Altus common share, in GBP on January 30, 2018 Fair value of Altus common shares issued, in GBP Fair value of outstanding Legend warrants exchanged for Altus warrants Altus transaction costs Preliminary Purchase Price Purchase Price Allocation Cash and cash equivalents Receivables Intangible assets Property and equipment Trade and other payables Notes payable Total identifiable net assets 13,686,752 3.0 41,060,256 £0.085 £3,490,122 £100,000 £138,000 £3,728,122 £ 13,223 3,534 3,890,657 2,133 (140,249) (41,176) 3,728,122 The value of the Altus ordinary shares was calculated based on the issuance of 41,060,256 shares at a price per share of £0.085 which was the closing Altus share price on 30 January 2018. The replacement of Legend’s warrants has been valued using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model are as follows. Weighted average Share price on issue Exercise price of warrants Risk free rate Expected life (years) Expected volatility Dividend rate Warrants £0.085 £0.048 0.60% 1.42 100% 0.00% At the time of acquisition Altus had only recently become a public company and therefore did not have much trading history on which to base volatility. A volatility of 100% has been assumed for the purposes of this calculation. The fair value of the replacement warrants is based on the outstanding 2,888,618 warrants outstanding adjusted for the Share Exchange Ratio of 3.0 of Altus common shares per Legend warrant. The fair value per common share of Altus is the closing price on the Alternative Investment Market (“AIM”) on January 30, 2018 and the foreign exchange rate of 1.7396 is the closing GBP to CAD exchange rate published by the Bank of England on January 30, 2018. 64 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 8 Acquisition of Legend Gold Corporation (continued) During the year warrants valued at £85,000 using the fair value model at acquisition were exercised. The value of the investment has been adjusted by this value on exercise. At 31 December 2018 a further £15,000 of warrants remained to be exercised. The transaction has been treated as an asset acquisition by Altus and therefore estimated transaction costs attributable to the acquisition totalling £138,000 have been included in the preliminary purchase price. The transaction costs are mainly legal expenses. Under IFRS 3, a business must have three elements: inputs, processes and outputs. Legend was an early stage exploration company and had no mineral reserves and no plan to develop a mine. Legend did have title to mineral properties, but these could not be considered inputs because of their early stage of development. Legend had no processes to produce outputs. Legend had not completed a feasibility study or a preliminary economic assessment on any of its properties and had no infrastructure or assets that could produce outputs. There was also no management or personnel within the Company that had any experience or expertise in mine development, mining, construction of mill equipment or in milling processes. Therefore, Management’s conclusion was that the transaction was an asset acquisition and not a business acquisition. 9 Auditor’s remuneration Fees payable to the company’s auditor for the financial year were as follows. For audit services Audit of the financial statements of the group and company 2018 £ 21,500 2017 £ 20,500 10 Employees Employee benefits The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets. The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received. Termination benefits are recognised immediately as an expense when the Group is demonstrably committed to terminate the employment of an employee or to provide termination benefits. The average number of employees of the Group during the year was as follows. Altus Strategies plc has no employees and incurs no remuneration costs. Group Directors Employees (excluding consultants and associates) 2018 Number 5 23 27 2017 Number 4 20 24 65 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 10 Employees (continued) Of the employees, 8 are employed in the UK and 15 are employed in four countries in Africa. Remuneration of African-contracted employees is included in Exploration Costs. Remuneration of Directors and UK- contracted employees comprised the following costs. Group Wages and salaries Bonuses Social security costs Pension costs Other costs 2018 £ 660,469 1,500 49,877 25,420 8,756 746,022 2017 £ 623,038 300,967 94,617 73,151 - 1,091,773 11 Directors’ remuneration Details of directors’ remuneration are included in the Directors’ Remuneration Report on pages 37-41. As noted in the report, the 2018 salaries figure includes additional accruals for fees relating to prior years. Further, each director has elected to defer some or all of their fees/salary, and remuneration has been paid to directors in cash and equity. Directors’ remuneration recorded in the year was as follows. Fees/salaries Bonuses Pensions Total 2018 2017 2018 2017 2018 2017 2018 2017 £ £ 49,583 38,541 18,333 12,500 13,542 - £ - - - £ - - - £ - - - £ - - - £ £ 49,583 38,541 18,333 12,500 13,542 - 181,679 113,667 401,803 56,500 72,583 155,125 - 31,379 - 128,940 - 160,319 3,995 7,675 11,670 4,469 44,669 49,138 185,674 92,348 121,342 246,192 413,473 364,582 Non-executive directors David Netherway Robert Milroy Michael Winn Executive directors Steven Poulton Matthew Grainger Total During 2018 retirement benefits accrued under defined contribution schemes for 2 directors (2017: 2 directors). 12 Finance income Group Interest on bank deposits 2018 £ 62 2018 £ 61 66 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 13 Other gains and losses See note 18 for accounting policy and detail of financial assets held at fair value through profit or loss. Group Fair value gains/(losses) on financial assets at fair value through profit or loss 2018 £ 2017 £ 282,227 129,142 14 Income tax Income tax represents the sum of the tax currently payable and deferred tax. Current tax Current tax is based on taxable profit or loss for the year. Taxable profit or loss differs from net profit or loss as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date. Deferred tax Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit or loss, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority. Current tax for the year is as follows. Group Foreign current tax on profit for the current year Current tax for the year for the Company was £nil (2017: £nil). 2018 £ - 2017 £ 1,126 67 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 14 Income tax (continued) The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits/ (losses) of the consolidated entities as follows. Group Loss before taxation Expected tax charge based on the standard rate of corporation tax in the UK of 19% (2017: 19.25%) Tax effect of: - Expenses not deductible for tax purposes - Impairment not deductible for tax purposes %) - Unutilised tax losses for which no deferred tax asset is recognised - Utilised tax losses brought forward - Permanent capital allowances in excess of depreciation - Effect of overseas tax rates Tax expense for the year 2018 £ (1,497,352) 2017 £ (1,861,679) (284,497) (358,373) 42,581 3,900 238,016 - - - - 104,823 - 253,216 243 91 1,126 1,126 The Group has tax losses of approximately £1,331,000 (2017: £1,089,000) available to carry forward against future taxable profits. No deferred tax asset has been recognised in view of the uncertainty over the timing of future taxable profits against which the losses may be offset. Earnings per share The basic loss per share is calculated by dividing the loss attributable to owners of the parent company by the weighted average number of ordinary shares in issue during the year. Dilution is represented by a number of warrants outstanding, which at the end of the year numbered 28,603,477. No diluted earnings per share is presented as the loss-making nature means the warrants are anti-dilutive. Loss attributable to owners (£) Weighted average number of ordinary shares in issue Basic loss per share (pence) 2018 (1,494,863) 166,350,683 (0.90) 2017 (1,860,145) 100,929,581 (1.84) Intangible assets Expenditure on exploration activities is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated. Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following basis. Deferred exploration costs: Not amortised Deferred exploration costs comprise exploration licence fees capitalised in accordance with IFRS 6 “Exploration for and Evaluation of Mineral Resources.” Licences are initially measured at cost. Management tests quarterly whether deferred exploration costs require impairment. Each exploration project is subject to a quarterly review either by a consultant or senior Company geologist to determine if the exploration results returned to date warrant further exploration expenditure and have the potential to result in an economic discovery. This review takes into consideration 68 15 16 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 16 Intangible assets (continued) long-term metal prices, anticipated resource volumes and grades, permitting and infrastructure, external factors affecting the project, as well as the likelihood of on-going funding from current or potential joint venture partners. In the event that a project does not represent an economic exploration target and results indicate that there is no additional upside, or that future funding from joint venture partners is unlikely, a decision will be made to discontinue exploration. A further review of the recommendations of the consultant or senior Company Geologist is then performed by management. Group Mali Korali Sud (Diba) Lakanfla Djelimangara Sebessounkoto Sud Tabakorole Pitiangoma Est Adjustment on exercise of warrants Cameroon Laboum Bikoula Ndjele Birsok Mandoum Ethiopia Tigray-Afar Daro Negash Morocco Agdz Takzim Zaer Ivory Coast Prikro Toura (application) Liberia Zolowo Bella Yella At 1 January 2018 Additions Additions through acquisition of subsidiary Disposals & impairment FX adjust- ments - - - - - - - 7,078 13,982 - 13,955 6,965 - 1,361,729 583,598 389,066 389,066 583,598 583,598 - (85,000) 22,203 17,419 2,054 44,130 29,375 14,406 - 331 1,759 - - - - 15,840 17,711 4,273 21,000 9,835 1,346 - - 2,947 616 - 1,474 1,338 - - - - - - - - - - - - - - - - - - - - - - - - - - - (331) - - - - - 4,701 1,653 1,410 949 1,884 2,114 - - - - - - - - - - - - - - At 31 December 2018 1,373,508 599,233 390,476 403,970 592,447 585,712 (85,000) 38,043 35,130 6,327 65,130 39,210 15,752 - - 4,706 616 - 1,474 1,338 - 20,198 151,875 3,798 - 122,158 - - 3,805,655 - (20,198) (20,529) - - 12,711 3,798 - 4,071,870 69 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 16 Intangible assets (continued) Group Cost At 1 January 2017 Additions Disposals At 31 December 2017 Amortisation and impairment At 1 January 2017 Disposals At 31 December 2017 Carrying amount At 31 December 2016 At 31 December 2017 Deferred exploration costs £ 105,640 46,235 - 151,875 - - - Total £ 105,640 46,235 - 151,875 - - - 105,640 151,875 105,640 151,875 17 Property, plant and equipment Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases: Fixtures and fittings Computers Plant and Machinery Motor vehicles 4 years straight line 2 years straight line 4 years straight line 2 years straight line The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in profit or loss. Impairment of non-current assets At each reporting end date, the Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. 70 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 17 Property, plant and equipment (continued) Group Cost At 1 January 2018 Acquisition of subsidiary Additions Disposals At 31 December 2018 Amortisation and impairment At 1 January 2018 Acquisition of subsidiary Charge in the year Disposals At 31 December 2018 Carrying amount At 31 December 2017 At 31 December 2018 Cost At 1 January 2017 Additions Disposals At 31 December 2017 Amortisation and impairment At 1 January 2017 Charge in the year Disposals At 31 December 2017 Carrying amount At 31 December 2016 At 31 December 2017 Plant and machinery Fixtures, fittings and equipment Computer equipment Motor vehicles Total £ 240 - 555 - 795 240 - 90 - 330 £ £ £ £ 4,359 40,769 - (179) 44,949 3,022 40,769 507 (179) 44,119 22,612 - 12,321 (10,890) 24,043 21,563 - 6,734 (10,891) 17,406 23,140 54,553 - - 77,693 23,140 54,553 - - 77,693 50,351 95,322 12,876 (11,069) 147,480 47,965 95,322 7,331 (11,070) 139,548 - 465 1,337 830 1,049 1,0491,049 6,637 - - 2,386 7,932 £ 240 - - 240 240 - - 240 £ £ £ £ 3,832 527 - 4,359 2,497 525 - 3,022 21,405 1,207 - 22,612 20,675 888 - 21,563 23,140 - - 23,140 23,140 - - 23,140 48,617 1,734 - 50,351 46,552 1,413 - 47,965 2,065 2,386 - - 1,335 1,337 730 - - 1,049 1,049 Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 71 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 18 Investments The Group holds both financial assets at amortised cost and financial assets at fair value through profit and loss. See note 23 for further information on the accounting policies applied to financial assets. The Company’s investments in subsidiary are held at fair value. As there is no active market, fair value is considered to be amortised cost less impairments. Investments carried at fair value through profit or loss comprise listed equity shares (Level 1). The fair value of these equity shares is determined by reference to published price quotations in an active market. Investments in subsidiaries Investments carried at fair value 2018 £ - 883,763 883,763 Group 2017 £ - 601,536 601,536 2018 £ 4,608,930 - 4,608,930 Company 2017 £ 965,808 - - 965,808 965,808 19 Subsidiaries Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss. In 2017, the Company undertook a capital reorganisation by way of a share for share exchange with the shareholders of Altus Strategies Limited. Subsequent to the exchange Altus Strategies Limited became a 100% subsidiary of the Company and was renamed Altus Exploration Management Limited. Altus Strategies plc has direct investments in the following subsidiary undertakings. Name of undertaking Incorporated % Principal activity Altus Exploration Management Limited1 Legend Holdings (BVI) Inv11 UK BVI Holding 100.00 100.00 Business support services Holding company Altus Strategies plc is the ultimate parent but not the immediate parent of the following subsidiary undertakings. Name of undertaking Aeos Gold Limited1 Auramin Limited1 Aluvance Limited1 Alures Mining Limited1 Altau Resources Limited1 Aterian Resources Limited1 Oxford Mining Club Limited1 Altau Resources Limited2 Aucam SA5 Valnord SA5 Incorporated UK UK UK UK UK UK UK Ethiopia Cameroon Cameroon % Holding Principal activity 100.00 Gold exploration 99.00 Gold exploration 97.26 Iron ore exploration 100.00 Bauxite exploration 100.00 Copper exploration 100.00 Mineral exploration 50.00 Events 100.00 Copper exploration Iron ore exploration 97.26 99.00 Gold exploration 72 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 Mining & Exploration Services Limited6 Azru Resources SARL AU8 AuCrest Sarl4 Etruscan Resources Mali SARL12 Legend Gold Mali SARL12 LGC Exploration Mali SARL12 LGC Piti SARL12 Liberia Morocco Ivory Coast Mali Mali Mali Mali 99.00 Gold exploration 100.00 Copper exploration 100.00 Gold exploration 100.00 Gold exploration 100.00 Gold exploration 100.00 Gold exploration 100.00 Gold exploration The registered office addresses applying to the tables in this note are as follows. Registered office addresses. 1 14 Station Road, Didcot, Oxfordshire OX11 7LL, United Kingdom 2 Bole Sub-City, Kebele 08/09, House No. 811/A, P.O.Box 2633, Addis Ababa, Ethiopia 3 Suite 24, First Floor, Eden Plaza, Eden Island, Victoria, PO Box 438, Mahé, Seychelles 4 Cocody Les Deux Plateux, Rue des Jardins, Residence Aziz, Porte B, 20 BP 725 Abidjan 20, Ivory Coast 5 BP: 5405 Bastos, Dernier poteau, Yaoundé, Cameroon 6 PO Box 10-3218, 1000 Monrovia 10, Liberia 7 Appt 9, IMM 18, Rue Jbel Tazekka, Agdal, Rabat, 10090, Morocco 8 46, Avenue Oqba, Appt No. 2, Agdal, Rabat, Morocco 9 2, Berthan Macauley Street, Freetown, Sierra Leone 10 Quartier Diguel Nord, N’Djamena, Chad 11 MMG Trust (BVI) Corp, Pasea Estate, Road Town, Tortola, British Virgin Islands 12 Porte 608, Rue 136, Korofina Nord, Bamako, Mali The following are dormant subsidiaries. Name of undertaking Aeos Resources Limited3 Altaucam Resources Limited3 Altau Holdings Limited3 Avance African Group Limited3 Aucam Resources Limited3 Inland Exploration Limited3 Westcoast Exploration Limited3 Mansion Resources Limited3 Altar Resources Limited3 Eagle Resources Limited3 Enigma Resources Limited3 Atlas Minerals3 Atlantic Minerals3 Alboran Minerals3 Addax Minerals3 Akkari Minerals3 Aures Minerals3 Azilal Minerals3 Altus Diamonds3 Avanor SARL4 Avanex SARL4 Bauxex SA5 Af Resources SARL AU7 Adrar Resources SARL AU7 Altus Mining (SL)9 Incoporated Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Seychelles Ivory Coast Ivory Coast Cameroon Morocco Morocco Sierra Leone % Holding Principal activity 100.00 Dormant 100.00 Dormant 100.00 Dormant 97.26 Dormant 97.26 Dormant 100.00 Dormant 100.00 Dormant 99.00 Dormant 99.00 Dormant 99.00 Dormant 99.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 97.26 Dormant 97.26 Dormant 97.26 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 73 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 Apalex Sarl4 Aza Minerals Sarl7 Akassori10 Legend Mali Holdings (BVI) Inc Legend Mali (BVI) II Inc Legend Mali (BVI) III Inc Legend Mali (BVI) IV Inc Legend Mali (BVI) V Inc Legend Mali (BVI) VI Inc LGC Kayes SARL Ivory Coast Morocco Chad BVI BVI BVI BVI BVI BVI Mali 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 100.00 Dormant 20 Trade and other receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and are therefore all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components, in which case they are recognised at fair value. The group holds the trade receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest method. Trade receivables VAT recoverable Amounts due from group undertakings Amounts due from related parties Prepayments Other receivables Group 2018 £ - 22,048 2017 £ 1,051 32,754 Company 2018 £ - 10,695 2017 £ - 2,485 - 30,037 27,204 3 79,292 - 2,678,105 510,724 31,468 45,392 4 110,669 - 16,906 - 2,705,706 - 14,704 - 527,913 Trade receivables - credit risk All trade receivables are denominated in £ sterling and are fully performing. Fair value of trade receivables The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value. No significant receivable balances are impaired at the reporting end date. 74 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 21 Trade and other payables Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method. Trade payables Accruals and deferred income Other payables Group 2018 £ 109,615 291,582 85,737 486,934 2017 £ 78,000 189,070 30,985 298,055 Company 2018 £ 34,477 17,154 65,402 117,033 2017 £ 56,012 29,400 6,250 91,662 22 Provisions Provisions are recognised when the Group or Company has a legal or constructive present obligation as a result of a past event and it is probable that the Group or Company will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Provisions Group 2018 £ 15,000 2017 £ 15,000 Company 2018 £ - 2017 £ - All provisions are expected to be settled within 12 months of the reporting date. A provision has been recognised in accordance with IAS 37 in respect of the company's obligation to its landlord for dilapidations on the expiry of its lease. The provision has been recognised because there is an obligation at the reporting date as a result of an onerous contract, where outflow is probable to settle the obligation and a reliable estimate can be made. 23 Financial instruments The Group’s financial instruments, and their respective accounting policies are as follows. Cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held at call with banks and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities. Financial assets Financial assets are recognised in the statement of financial position when the Group or Company becomes party to the contractual provisions of the instrument. 75 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 23 Financial instruments (continued) Financial assets are classified into specified categories. The classification depends on the nature and purpose of the financial assets and is determined at the time of recognition. Financial assets are measured at either amortised cost of at fair value through profit or loss. Financial assets at fair value through profit or loss are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current. Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are held at amortised cost. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. The Group’s and Company’s loans and receivables comprise trade and other receivables and cash and cash equivalents. Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition. Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting end date. For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity. Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition. Derecognition of financial liabilities Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire. 76 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 23 Financial instruments (continued) Equity instruments Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. On 1 January 2018, the Group adopted all of the requirements of IFRS 9 – Financial Instruments. IFRS 9 uses a single approach to determine whether a financial asset is classified and measured at amortised cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments and the contractual cash flow characteristics of the financial asset. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9, therefore the Group’s accounting policy with respect to financial liabilities is unchanged. The Group completed an assessment of its financial assets and liabilities as at 1 January 2018. The following table shows the original classification of the Group and Company’s financial instruments under IAS 39 and the new classification under IFRS 9. Financial Assets and Liabilities Financial assets Cash and cash equivalents Trade and other receivables Equity investments Financial liabilities Trade and other payables Original Classification – IAS 39 New Classification – IFRS 9 Loans and other receivables Loans and other receivables Fair value through Profit or Loss Amortised cost Amortised cost Fair value through Profit or Loss Amortised cost Amortised cost The adoption of IFRS 9 did not result in any changes to the Group and Company’s financial statements. The Group’s financial assets are recorded as follows. Group Investments Cash and cash equivalents Trade and other receivables 2018 Assets at amortised cost £ - 724,785 52,089 776,874 2018 Assets at FVPL £ 883,763 - - 883,763 2017 Assets at amortised cost £ - 523,344 65,277 588,621 The Company’s financial assets are recorded as follows. Company Investments Cash and cash equivalents Trade and other receivables 2018 Assets at amortised cost £ - 37,544 2,688,801 2,726,345 2018 Assets at FVPL £ 4,608,930 - - 4,608,930 2017 Assets at amortised cost £ - 291,087 513,020 804,107 2017 Assets at FVPL £ 601,536 - - 601,356 2017 Assets at FVPL £ 965,808 - - 965,808 77 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 23 Financial instruments (continued) The Group and Company have the following financial liabilities. Group Trade and other payables Company Trade and other payables 2018 Liabilities at amortised cost £ 195,352 2017 Liabilities at amortised cost £ 108,985 £ 99,878 £ 62,262 24 Financial risk management The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk, price risk and interest rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Groups financial performance. There has been no change in the Group’s risk management programme from previous years. Market risk The Group’s activities potentially expose it to market risks, which is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate and foreign currency risk, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates and foreign exchange rates. Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from holding cash in various currencies. The Group's functional currency is pound sterling, and major purchases are transacted in pounds sterling, US dollars, West African francs, Ethiopian birr, Moroccan dirham and the Liberian dollar. The Group’s head office expenditures are mainly incurred in pounds sterling and the majority of its exploration costs are incurred in the local African currencies. The Group believes the foreign exchange risk derived from currency fluctuations is not significant to its financial performance, and therefore does not consider it necessary to actively manage foreign exchange risk. For the year ended 31 December 2018, the Group had an exchange gain of £25,726 (2017: £14,318) which was not material to its operations. Commodity price risk The Group’s principal activity is the exploration for economic mineral deposits in Africa. The Group is therefore exposed to commodity price risks in the valuation of base minerals, which may impact the commercial viability of the licences it holds or impact the raising of future financing. The Group therefore maintains a diversified portfolio of licences in order to mitigate the risk of changes in the prices of individual base metals. Credit risk Credit risk is the risk of suffering financial loss should the Group’s customers, clients or counterparties fail to fulfil their contractual obligations to the Group. The Group’s core business is the exploration for economic mineral deposits in Africa and therefore the majority of expenditure is incurred in cash. The Group therefore only has significant exposure on its cash and cash equivalents. The Group mitigates this risk by depositing surplus cash with financial institutions with acceptable credit ratings. The carrying value of financial assets approximates their fair value and the maximum exposure as at the Statement of Financial Position date is outlined in the following table. 78 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 24 Financial risk management (continued) Group Trade receivables Other receivables VAT recoverable Amounts due from related parties Prepayments Cash and cash equivalents 2018 £ - 3 22,048 30,037 27,204 724,785 804,077 2017 £ 1,051 4 32,754 31,468 45,392 523,342 634,011 Interest rate risk Interest rate risk is the possibility that changes in interest rates will result in higher financing costs or reduced income from the Group’s interest-bearing financial assets and liabilities. The Group is primarily financed through equity and interest rate risk arising on interest income is immaterial. The Group therefore does not currently consider it necessary to actively manage interest rate risk. Liquidity risk Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due. Prudent liquidity risk management is achieved by maintaining sufficient cash balances and the availability of funding through an adequate amount of committed credit facilities. The Group manages liquidity by maintaining sufficient cash with banks to meet its changing commitments. The Group’s objective is to ensure that there are sufficient committed financial resources to meet its current obligations and its future business requirements for a minimum of twelve months. At present the Group does not make use of any credit or debit facilities. The table below presents the cash flows payable by the Group under remaining contractual maturities at the Statement of Financial Position date. The amounts disclosed in the table are the contractual undiscounted cash flows. The carrying values of financial liabilities approximates their fair values. 2018 Trade payables Other payables Accruals and deferred income Provisions 2017 Trade payables Other payables Accruals and deferred income Provisions Up to 3 months £ 109,615 31,203 291,582 - 432,400 Up to 3 months £ 78,000 30,985 189,070 15,000 313,055 3 to 12 months £ - 32,603 - - 32,603 3 to 12 months £ - - - - - Over 12 months £ - 21,931 - 15,000 36,931 Over 12 months £ - - - - - Total £ 109,615 85,737 291,582 15,000 501,934 Total £ 78,000 30,985 189,070 15,000 313,055 79 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 25 26 Retirement benefit schemes Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. For those employees that pay into a Self-Invested Personal Pension scheme (SIPP) the Company matches their contributions up to an agreed salary percentage. At 31 December 2018 unpaid employer’s pension liabilities stood at £74,557 (2017: £78,906) of which £57,800 was for Executive Directors (2017: £35,550). Defined contribution scheme Charge for the year 2018 £ 25,420 2017 £ 3,198 Share based payments Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity. When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value. Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately. Equity instrument movements in the year No shares were allotted to directors or employees in settlement of services during the year (2017: 1,192,814 shares), and there was no charge to the income statement in this regard (2017: £149,102). The Company does not currently operate a share option scheme either for directors or employees. Of the schemes previously in operation there were no options outstanding at 31 December 2018. No expense was recorded in the year in respect of share options schemes (2017: £3,643). During the year, the Company issued 911,861 warrants to consultants as consideration for raising equity finance as part of the private placing in the year. The fair value of the warrants issued as compensation for the finder’s fees was determined using the Black Scholes option pricing model. The assumptions used in the valuation are as follows: Share price on issue Exercise price of share warrants Volatility Duration Risk free rate Dividend rate Assumption 8.00p 12.50p 75% 3 years 0.89% 0.00% The fair value of £27,455 (2017: £Nil) was recognised as a deduction from share premium during the year. 80 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 26 Share based payments (continued) On 30 January 2018 the Company acquired the trade and assets of Legend Gold Corporation (“Legend”), in respect of which it issued 41,060,256 Ordinary shares. Under the terms of the acquisition, the Company agreed to honour outstanding warrants for Ordinary shares of Legend at a ratio of 3:1 for Ordinary shares of Altus Strategies plc. Further detail is included in note 8. During the year 1,650,000 new Ordinary shares were issued in respect of the exercise of the Legend warrants. On 18 April the Company announced that it had listed on the TSX Venture Exchange and had placed 27,391,616 new Ordinary shares. Each new share entitled the subscriber to one Ordinary share purchase warrant, exercisable to purchase one Ordinary share for five years at an exercise price of C$0.30. These warrants have not been valued using the Black Scholes model as the shares were attached to a share in the Company and the full value paid has been attributed to the share and recognised in share premium. The details of the warrants issued during the year are as follows. Grant date Expiry date 30 January 2018 08 September 2019 18 April 2018 18 April 2023 18 April 2018 18 April 2021 Shares Exercise price in £ per share 2018 2017 0.048 0.167 0.125 0.158 1,950,000 27,391,616 911,681 30,253,477 - - - - 2018 2017 Outstanding as at 1 January Granted Expired Exercised Number 110,000 30,253,477 (110,000) (1,650,000) Outstanding as at 31 December 28,603,477 Exercisable at 31 December 28,603,477 Weighted average exercise price (£) 0.100 0.158 0.100 0.048 0.164 0.164 Weighted average exercise price (£) - 0.100 - - 0.100 0.100 Number - 110,000 - - 110,000 110,000 The weighted average remaining life of the warrants outstanding is 4.2 years. 27 Share capital and share premium Share capital and share premium include ordinary shares in Altus Strategies plc issued to shareholders and warrants and options that have been exercised. 81 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 27 Share capital and share premium (continued) Company At 1 January 2017 Issue of new shares Capital reorganization At 31 December 2017 Issue of new shares Share issue costs Exercise of warrants At 31 December 2018 * All shares have been issued, authorized and fully paid Number of shares* 96,580,814 11,100,000 - 107,680,814 68,451,872 - 1,650,000 177,782,686 Ordinary share capital £ 104,526 127,200 845,082 1,076,808 684,519 - 16,500 1,777,827 Share premium £ 5,770,590 1,901,106 (6,672,696) 999,000 5,103,396 (146,274) 62,700 6,018,822 29 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases. Rentals payable under operating leases, less any lease incentives received, are charged to income on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed. At the reporting date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows. Group Within one year Between 2 and 5 years 2018 £ 4,519 - 4,519 2017 £ 2,441 - 2,441 30 Related party transactions For detail on directors’ remuneration in the year see the Directors’ Remuneration Report on pages 37-41 and note 11. Seabord Services Corp. (“Seabord”) is a management services company that provides to the Group the services of its Chief Financial Officer, David Miles, and his administrative support team. Seabord provided similar services to Legend Gold Corp. before its acquisition by the Group in January 2018. One non- executive director of the Group is also a director of Seabord. The value of services provided by Seabord in the year was £21,295 (2017: not related). The amount payable to Seabord at the end of the year was £44,775 (2017: nil). Canyon Resources Ltd (“Canyon”) is a joint venture partner of the Group in respect of the Birsok and Mandoum project in Cameroon. One non-executive director of the Group is also a director of Canyon. The value of services provided to Canyon during the year was £18,580 (2017: £33,262). The Aegis group of companies (“Aegis”) comprises Aegis Holdings Ltd, Aegis Asset Management Ltd, Aegis Asterion Ltd and Aegis Exploration Management Ltd, and shares three directors with the Group (Aegis Exploration Management Ltd only two directors). The value of costs recharged to Aegis during the year was £482 (2017: nil). 82 ALTUS STRATEGIES PLC NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2018 31 Subsequent events Termination of agreement with Raptor Resources On 1 February 2019 the Company announced the termination of its agreement with Raptor Resources Ltd, which had been signed in September 2018. The agreement envisaged Raptor earning a 100% interest in Atlantic Resources Ltd a wholly owned subsidiary of Aterian Resources Ltd, the Company’s wholly owned Moroccan focused exploration subsidiary. Share issues On 1 February 2019 the Company announced its intention to issue 2,116,973 shares to two consultants. Drill sites identified and prospect defined in Mali On 4 February 2019 the Company announced that it has defined a series of drill targets to test the potential of expanding the Diba gold project (“Diba”). Diba is strategically located 13km south of the multi million-ounce Sadiola gold mine in the world-renowned Kenieba Window gold belt in the west of Mali. A further announcement was made on 9 April 2019 with respect to the definition of drill targets at another of the Company’s Mali licences, the Tabakorole gold project (“Tabakorole”) in the south of the country. Tabakorole is located on the Massagui gold belt, approximately 100km southwest of the multi-million ounce Morila gold mine. On 17 April 2019 the definition of a further significant prospect at the Diba project was announced. Mali joint venture On 5 February 2019 the Company signed a non-binding term sheet with Indiana Resources Ltd (“Indiana”) for a joint venture. Subject to entering a definitive agreement, Indiana will have the option to earn up to an 85% interest in Legend Mali (BVI) II Inc. (“Legend”), a wholly-owned subsidiary of the Company. Legend holds a 100% interest in the Lakanfla and Tabakorole gold projects located in western and southern Mali respectively. Indiana may earn its interest by funding the exploration and development of the Projects. The term sheet is subject to exclusivity provisions for 60 days following signing. On 13 March 2019, the due diligence period was extended for a further 30 days to 6 May 2019. Termination of JV and sale of bauxite joint venture On 11 February 2019 the Company announced that it had terminated its joint venture agreement with Canyon Resources Limited (“Canyon”), which had been in place since December 2013, and had sold the subsidiary (Aucam Resources SA Ltd, “Aucam”) that held the two licences that were the subject of the JV (Birsok and Mandoum) to Canyon. Consideration due to the Company is 25 million Canyon shares in respect of the JV termination, and 5 million Canyon shares in respect of the sale of Aucam, the latter consideration being dependent on the execution of a mining convention on Canyon’s Minim Martap project. Royalty and JV agreement on Liberia and Cameroon projects On 24 April 2019 the Company signed a non-binding term sheet with Corben Resources (“Corben”) covering two gold projects: the Zolowo project in Liberia will be transferred to Corben in return for cash, equity and a Net Smelter Return royalty subject to resource definition; the Laboum project in Cameroon will be put into a JV in which Corben can earn up to a 100% interest by funding exploration and development of the project. 83 

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