Argos Resources Ltd
Annual Report
Year ended 31 December 2019
Contents
Highlights
Joint Chairman’s statement and
Managing Director’s review
Statutory information
Statement of directors’ responsibilities
Corporate governance
Chairman’s statement
Strategy and business model
Risk management report
The board and committees
Directors
Remuneration report
Group financial statements
Independent auditor’s report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Parent Company accounts
Statement of financial position
Statement of cash flows
Statement of changes in equity
Notes to the accounts
Investor Information and advisors
Page
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10
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27
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31-47
48
49
50
51-56
57
Argos Resources Ltd
Annual report 2019
Page 1
Highlights
Argos Resources Ltd (AIM: ARG.L), the Falkland Islands based exploration company focused on the
North Falkland Basin, announced its financial results for the year ended 31 December 2019 on 28
February 2020.
• US$401,000 loss (2018: profit of US$406,000)
• US$768,000 cash reserves at 31 December 2019 (31 December 2018: US$788,000)
•
•
•
The Working Interest in the Licence was transferred back to Argos in February 2019
The current Second Phase of the Licence, which was due to expire in November 2019, was
extended by the Falkland Islands Government until 1 May 2021, with no additional work
commitments
The Group continued to receive quarterly cash payments from Noble and Edison of
£75,000 per quarter, which were recognised as income in 2018 until 27 December 2019,
under the termination terms of the Participation Agreement
Argos Resources Ltd
Annual report 2019
Page 2
Joint Chairman’s statement and Managing Director’s review
In October 2018, Noble Energy Falklands Limited (“Noble”) and Edison International S.p.A (“Edison”)
served notice of their intention to withdraw from Production Licence PL001 (the “Licence”) in the
North Falkland Basin, in which Argos held a 5% Overriding Royalty Interest under a Participation
Agreement. Noble and Edison’s Working Interests in the Licence were transferred back to Argos in
February 2019. The Licence covers an area of approximately 1,126 square kilometres in the North
Falkland Basin.
Under the terms of a Participation Agreement between the Company, Noble and Edison, the Company
continued to receive quarterly cash payments from Noble and Edison of £75,000 per quarter during
2019, up until 27 December 2019. These payments contributed to a cash balance of $768,000 at year
end 2019, leaving the Group adequately financed for at least twelve months beyond sign-off. In order
to continue as a going concern beyond that point the Company will need to raise further finance, either
through a new partner or by raising funds in an equity issue. Further details on going concern are
contained in note 1 of the financial statements.
The Company has successfully extended the Second Phase of the Licence from November 2019 to 1
May 2021, thereby creating additional time to secure new partners in the Licence. A further extension
may be sought to allow adequate time for drilling within the Licence area.
The Company is actively seeking other partners to participate in the development of the Licence.
Ian Thomson
Chairman
27 February 2020
John Hogan
Managing Director
Argos Resources Ltd
Annual report 2019
Page 3
Statutory information
The directors submit their report and the consolidated financial statements of Argos Resources Ltd and
its subsidiary (the “Group”), for the year ended 31 December 2019.
Principal activity
In October 2018, Noble Energy Falklands Limited (“Noble”) and Edison International S.p.A (“Edison”)
served notice of their intention to withdraw from Production Licence PL001 (the “Licence”) in the North
Falkland Basin, in which the Group held a 5% Overriding Royalty Interest under a participation
agreement. The Licence covers an area of approximately 1,126 square kilometres in the North Falkland
Basin.
On receipt of the notice the Group exercised the option under the Participation Agreement to have the
Licence reassigned to them which effectively terminated the Participation Agreement and the Working
Interest in the Licence was transferred back to Argos in February 2019.
The current Second Phase of the Licence, which was due to expire 25 November 2019, has been
extended by the Falkland Islands Government until 1 May 2021.
Results and dividend
The results for the year and the Group’s financial position as at the year-end are shown in the attached
financial statements. The directors have not recommended a dividend for the year (2018: $nil).
Business review
The Group has returned a loss for the year ended 31 December 2019 of $401,000 (2018: profit of
$406,000) which equates to a loss per share of 0.18 cents (2018: profit of 0.18 cents). The loss in 2019
reflects the administration cost of operating the Group following the withdrawal of Noble and Edison.
The profit in 2018 was due to the recognition of the full amount of the income due under the
termination terms of the Participation agreement.
Administration expenses were $433,000 in 2019 compared to $334,000 in 2018, due largely to the
$88,000 share based payment charge for the extension of the options scheme.
Shareholders’ equity has decreased from $29.9 million to $29.5 million in the year since 31 December
2018, reflecting the administration costs. Cash in the year decreased from $788,000 to $768,000.
Outlook for the next financial year
Argos continued to receive quarterly cash payments from Noble and Edison until 27 December 2019,
following their withdrawal from the Participation Agreement. The cash available will fund the Group in
its search for a farmout partner.
The Group is therefore fully funded for at least twelve months beyond sign-off.
See Accounting Policy note 1 on page 31 for comments in relation to going concern.
Argos Resources Ltd
Annual report 2019
Page 4
Statutory information (continued)
Key performance indicators
At this stage in its development, the directors do not consider that standard industry key performance
indicators are relevant.
Principal risks and uncertainties
Risks in relation to financial instruments are explained within note 2 to the Group financial statements.
A discussion of other potential risks can be found in the risk management report on page 10.
Substantial shareholders
As at 18 February 2020, the Company has been notified of interests in 3% or more of the Company’s
voting rights, based on an issued share capital of 220,713,205, as shown below:
Shareholder/Fund manager
Ian Thomson
Iain Aylwin
Orian Partners LP
Salida Capital International
JP Morgan Asset Management (UK) Ltd
Portogon Investments SA
Robert Smith
Percentage of
voting rights
12.93
9.11
6.29
6.33
4.93
4.53
4.27
Directors and their interests
The interests of the directors and their immediate families and of persons connected with the directors,
within the meaning of the Acts, in the share capital of the Company are as follows:
Name
I M Thomson
J Hogan
A Irvine
D Carlton
C Fleming
J Ragg
Total
Chairman
Managing Director
Finance Director
Non-executive
Non-executive
Non-executive
At 31 December 2019
Ordinary shares of
2 pence each
28,544,701
3,000,000
2,125,000
3,750,000
2,625,000
200,000
At 31 December 2018
Ordinary shares of
2 pence each
28,544,701
3,000,000
2,125,000
3,750,000
2,625,000
200,000
40,244,701
40,244,701
The directors also hold options in the Company’s shares which are detailed in the directors’ remuneration report
on page 20.
Argos Resources Ltd
Annual report 2019
Page 5
Statutory information (continued)
Directors’ service agreements
The terms of the directors’ service agreements or letters of engagement are summarised as follows.
The Company entered into a service agreement with the executive directors Ian Thomson, John Hogan
and Andrew Irvine on 8 July 2010 setting out the terms of their employment following the admission
to AIM, which took place on 29 July 2010. The terms of the service contracts permit termination by
either party giving notice to the other of not less than 12 months in the case of Ian Thomson and John
Hogan and 6 months for Andrew Irvine. There are no specific entitlements on termination of any of
the employments concerned.
Dennis Carlton, Christopher Fleming and James Ragg are engaged as non-executive directors upon the
terms of various letters of appointment, the principal terms of which are that each of them is
appointed for an initial term of up to three years commencing at the time of admission, subject to
early termination rights of not less than three months’ notice by either party. Each non-executive
director has been duly re-elected on the expiration of their term in office.
Related party transactions
See note 15.
Events after the reporting date
See note 18.
Financial instruments
For the year under review the Group held no financial instruments outside of cash, payables and
receivables. The policies for financial risk management are disclosed in note 2.
Political and charitable contributions
The Group made no political or charitable donations in the year under review (2018: $nil).
Creditor payment policy
It is the Group’s policy to ensure that all of its suppliers are paid promptly and in accordance with
contractual obligations. Average creditor days for the year were 9 days (2018: 1 days), on the basis of
accounts payable (excluding retention held) as a percentage of purchase ledger turnover which
includes amounts capitalised.
Directors’ and officers’ insurance
The Group purchased directors’ and officers’ liability insurance. The directors may also, in their
capacity as directors, obtain independent legal advice at the Group’s expense if they consider it
necessary to do so.
Employees
The Group employees consisted of three executive and three non-executive directors during the course
of the year who are included in the total staff numbers shown in note 6 to these accounts.
Health, safety and the environment
It is the Company’s objective to maintain the highest standards for health and safety and the
protection of the environment which adhere to all applicable laws and represent best practice.
Argos Resources Ltd
Annual report 2019
Page 6
Statutory information (continued)
Social and community
The Falkland Islands is a small community and the Company is conscious that the impact of its activities
on the country could be significant. The Company believes that working closely with the Falkland
Islands Government and seeking views through consultation with stakeholder groups should help to
ensure a positive impact from its operations on the Falkland Islands and its population.
Argos Resources Ltd
Annual report 2019
Page 7
Statement of directors’ responsibilities in respect of the annual report and the
financial statements
The directors are responsible for preparing the annual report and the Group and parent Company
financial statements in accordance with applicable law and regulations.
Company law, in the Falkland Islands requires the directors to prepare group and parent company
financial statements for each financial year. Under that law the directors have elected to prepare the
Group and parent Company financial statements in accordance with applicable law as it applies in the
Falkland Islands and International Financial Reporting Standards as adopted by the European Union
(IFRSs).
The financial statements are required to give a true and fair view of the state of affairs of the Group
and parent Company and of the Group’s profit or loss 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. In preparing each of the Group
and parent Company financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and estimates that are reasonable and prudent;
•
state whether the Group and parent Company financial statements have been prepared in
accordance with IFRSs as adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Group and parent Company will continue in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable
accuracy at any time the financial position of the Company and enable them to ensure that the
financial statements comply with the Companies Act 1985 as applied in the Falkland Islands by the
Companies (Amendment) Ordinance 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors are responsible for ensuring the annual report and the financial statements are made
available on a website. Financial statements are published on the Company’s website in accordance
with legislation in the Falkland Islands governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of the directors. The directors’ responsibility also extends
to the ongoing integrity of the financial statements contained therein.
Statement as to disclosure of information to the auditor
Each director in office at the date of this report has confirmed, as far as he is aware, that there is no
relevant information of which the auditor is unaware. Each such director has confirmed that he has
taken all the steps that he ought to have taken as a director in order to make himself aware of any
relevant audit information and to establish that the auditor is aware of that information.
Argos Resources Ltd
Annual report 2019
Page 8
Statement of directors’ responsibilities in respect of the annual report and the
financial statements (continued)
Auditor
BDO LLP will be proposed for reappointment as auditors of the Company at the Annual General
Meeting of the Company in accordance with section 159 of the Companies Act 1948 as applied in the
Falkland Islands by the Companies Act (Amendment) Ordinance 2006.
On behalf of the board
Ian Thomson
Chairman
Date: 27 February 2020
Argos Resources Ltd
Annual report 2019
Page 9
Corporate governance
Chairman’s statement on corporate governance
As an AIM company, Argos Resources Ltd is required to adopt a recognised Corporate Governance
Code and the Company has chosen to apply the Quoted Companies Alliance (“QCA”) Corporate
Governance Code. The Company believes that high standards of corporate governance helps effective
and efficient decision-making, reduces risk and adds value, which is important for the long-term
benefit of all stakeholders.
Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of
the board.
The board meets four times per year or more frequently if it needs to do so. There is a schedule of
matters reserved for board approval and this ensures that the board exercises control over all key
areas. Corporate Governance is a standing agenda item for each board meeting where directors
confirm their interests and related parties together with any external interests beyond a given
threshold. There is also an opportunity to raise any concerns in relation to corporate governance more
generally.
The directors believe that the open and transparent process at board meetings and other more
informal updates helps to promote and monitor a healthy corporate culture which assists with meeting
the Company’s objectives.
The Company has also adopted rules for dealings in the Company’s shares to ensure compliance by
directors. Any proposed share transaction by a director requires approval from the Chairman.
The Company has followed the QCA recommended location for each of the 10 principles in terms of
whether these are published on the Company’s website or in the annual report and accounts. The
annual report and accounts disclosures are detailed below and the website disclosures can be found
at http://www.argosresources.com/docs/arg-corporate-governance.pdf.
The following paragraphs describe how the company implements the key governance principles
contained within the QCA code in relation to the required disclosure in annual accounts.
Strategy and business model
Following the withdrawal of Noble and Edison the Company indicated its intention to take a
reassignment of the Licence and this process was concluded and the Licence re-assigned in February
2019.
Although the Participation Agreement has now terminated the Group continued to receive quarterly
cash payments of £75,000 per quarter, which equates to $96,000 at the year-end exchange rate, until
27 December 2019, being 450 days after the notice to withdraw. The Group is fully funded for a period
of more than 12 months beyond sign-off.
The main challenge and focus of the business going forward is to attract well-resourced partners to
meet the drilling commitment under the Licence.
Risk management
The Group’s business, financial condition and results could be materially adversely affected by a
number of factors.
Argos Resources Ltd
Annual report 2019
Page 10
Corporate Governance (continued)
General exploration risk
Whilst results in the surrounding area are encouraging with respect to the oil and gas potential of the
area and interpretation of the seismic data has indicated extensive prospectivity within the Argos
Licence area, no commercial volumes of oil or gas have yet been discovered and there is no certainty
that such discoveries will ever be made.
Mitigation: Although Noble and Edison have served notice to withdraw from the Licence there is no
indication that this was due to a lack of prospectivity and the Company is actively seeking new partners
to continue exploration in the area covered by the Licence.
Licence risk
The licence requires a well to be drilled by 1 May 2021. There is a risk that the licence will expire and
not be extended.
Mitigation: In November 2019 an extension of the Licence was approved by the Executive Council of the
Falkland Islands Government and by the UK Secretary of State for Foreign and Commonwealth Affairs.
This approval extended the current Second Phase of the Licence to 1 May 2021. Argos continues to
discuss activity with the Falkland Islands Government and the Company is actively seeking new partners
to continue exploration in the Licence area.
Commercial risk
Even if quantities of oil or gas are discovered, there is a risk that these will not be developed.
Mitigation: The Company is actively seeking partners with strong financial backgrounds and track
records of expediting the process from commercial discovery to production.
Funding risk
There is a risk that funds run out before a partner is found.
Mitigation: The Company has sufficient cash reserves to meet the ongoing overhead for a period of
more than one year beyond sign-off, during which time the Company could seek to raise further finance
if required.
Political risk
The Argentine Government has not relinquished its claims to sovereignty over the Falkland Islands and
the surrounding maritime areas.
Mitigation: In a referendum, conducted in 2013, the Falkland Islanders voted unequivocally to remain
as a British Overseas Territory and the UK Government has stated that it has no doubt about its
sovereignty and remains fully committed to the offshore prospecting policy pursued by the Falkland
Islands Government.
The Board
The board members have a collective responsibility and legal obligation to promote the interests of
the company, and are collectively responsible for defining corporate governance arrangements.
The board (and committees) are provided with high quality information in a timely manner to facilitate
proper assessment of the matters requiring a decision or insight.
Argos Resources Ltd
Annual report 2019
Page 11
Corporate Governance (continued)
The board has an appropriate balance between executive and non-executive directors, with three
independent non-executive directors.
The board’s executive chairman, Ian Thomson, is not considered independent as he holds a substantial
number of the Company’s shares and he has been on the board for more than 10 years. The Company
considers, however, that the benefit of his experience and long involvement with business in the
Falkland Islands more than outweighs the benefits of an independent chairman.
The policy for managing financial risks is set by the board following recommendations from the Finance
Director but the Company has no formal policy on the management of other types of risk as the
directors are the only employees and as such decisions on risk are not delegated but assessed by the
board in relation to all key management decisions.
Whilst the non-executive directors are shareholders in the Company and hold options to acquire
shares in the Company, this is not considered a significant threat to their independence and the Board
is satisfied that it has a suitable balance between independence on the one hand, and knowledge of
the Company on the other, to enable it to discharge its duties and responsibilities effectively.
Dennis Carlton is the senior non-executive director. Dennis is considered a valuable member of the
Board and his experience in the oil industry more than outweighs any perceived loss of independence
due to the time he has served as non-executive.
Should shareholders have concerns which have not been adequately addressed by the chairman or
managing director, he can be contacted by sending an email to info@argosresources.com. The same
address can also be used to contact James Ragg, chairman of the audit committee.
The board has agreed to meet four times per year or more frequently if it needs to do so. There is a
schedule of matters reserved for board approval and this ensures that the board exercises control over
all key areas.
The Chairman meets with the non-executive directors annually, without the other executive directors
present, to evaluate executive director performance in terms of contribution and commitment. In
addition the Chairman also considers the non-executive director performance in terms of contribution
and independence.
The Company complies with Rule 21 of the AIM Rules for Companies regarding dealings in the
Company’s shares and has adopted a code on dealing in securities to ensure compliance by directors.
Audit committee
The audit committee comprises James Ragg (committee chairman), Dennis Carlton and Chris Fleming.
The board considers all three members of the committee to be independent and is satisfied that at
least one, James Ragg, has recent and relevant financial experience.
The committee invites the remainder of the board and the external auditor to attend its meetings as
observers. It meets the external auditor, in the absence of the remainder of the board, at least once
per year.
Argos Resources Ltd
Annual report 2019
Page 12
Corporate Governance (continued)
The role and responsibilities of the audit committee have been set out in written terms of reference
which are principally:
risk assessment, particularly, but not exclusively, in respect of financial reporting risks;
•
• assessment of processes relating to the Company’s control environment;
• oversight of financial reporting;
• evaluation of internal and external audit processes; and
• development and implementation of policy on the provision of non-audit services by the
external auditor.
The audit committee has established procedures by which concerns regarding accounting or audit
matters may be brought to the committee chairman’s attention and the chairman can be contacted
by sending an email to info@argosresources.com.
The audit committee has considered the need for an internal audit function and regards this as
unnecessary given the Company’s current size and lack of complexity.
The audit committee makes recommendations to the board regarding the appointment,
reappointment and removal of external auditors. At the Annual General Meeting the shareholders
are requested to authorise the audit committee to fix the remuneration of the external auditors.
The audit committee recognises that, for smaller companies, it is cost-effective to procure certain non-
audit services from the external auditor but there is a need to ensure that provision of such services
does not impair, or appear to impair, the auditor’s independence or objectivity. The committee has
therefore put in place a written policy on the use of external auditors which includes clear limits on
the level of non-audit work beyond which the chairman of the audit committee must be consulted
before the assignment can be awarded to the external auditor.
The audit committee was satisfied throughout the year that the external auditor’s objectivity and
independence were in no way impaired by the nature of the non-audit work undertaken or any other
factors including the level of non-audit fees charged.
The audit committee held one meeting during the year and during that meeting the following items
were considered:
•
•
the auditors’ report to members of the audit committee; and,
in relation to the annual report:
changes in accounting policies and practices;
significant adjustments resulting from the audit;
the going concern position of the company for a period of 12 months from the date of
judgement areas and accounting issues which are of a subjective nature;
approval of the accounts;
whether there is any indication of impairment to the carrying value of the capitalised
exploration expenditure;
compliance with accounting standards;
compliance with the Quoted Companies Alliance (“QCA”) Corporate Governance Code,
AIM Rules and regulatory requirements;
compliance with corporate governance requirements;
narrative elements; and,
the draft RNS and annual report.
Argos Resources Ltd
Annual report 2019
Page 13
Corporate Governance (continued)
The chairman of the audit committee reports to the board on the committee’s discussions and minutes
of the committee’s meetings are circulated to all directors.
During the period since the year end one further meeting has been held.
Remuneration committee
Board performance is subject to regular review, as well as that of its committees and the individual
directors.
The Chairman meets with the non-executive directors annually, without the other executive directors
present, to evaluate executive director performance in terms of contribution and commitment. In
addition the Chairman also considers the non-executive director performance in terms of contribution
and independence.
The Remuneration Committee meets annually to review the terms, conditions and performance of the
directors.
Nominations committee
The board considers that, at its current stage of development, the Company does not require a
separate nominations committee. The functions of that committee, namely consideration of any new
appointments of directors to the board and succession planning, are carried out by the board as a
whole.
No appointments to the board were made in the year under review.
Argos Resources Ltd
Annual report 2019
Page 14
Corporate Governance (continued)
Internal controls
The board of directors is responsible for implementing and reviewing the effectiveness of the Group’s
system of internal control.
The system of internal control is designed to mitigate rather than eliminate risk and therefore provides
reasonable rather than total assurance against material misstatement or loss.
As noted above, the board does not consider it necessary, at the Company’s current stage of
development, to implement an internal audit capability.
The Directors are expected to devote sufficient time to carry out their duties. Briefings take place
where directors are unable to attend a meeting to ensure that all contributions are considered.
Directors’ attendance
Directors’ attendance at board and committee meetings for the year is as set out below:
I M Thomson (Chairman)
J Hogan
A Irvine
D Carlton (chairman, remuneration
committee)
C Fleming
J Ragg (chairman, audit committee)
Total meetings during the year
Board
meetings
5
5
5
4
1
4
5
Audit
committee
meetings
-
-
-
Remuneration
committee
meetings
1
-
1
1
1
1
1
2
2
2
2
Argos Resources Ltd
Annual report 2019
Page 15
Corporate Governance (continued)
Directors
The board believes that there is an appropriate balance of sector, financial and public markets skills and
experience, as well as an appropriate balance of personal qualities and capabilities. The Board supports
members in their efforts to keep up to date with changing regulations and practices largely through Continuing
Professional Development (CPD) as required by relevant professional body memberships. Details of individual
board members are listed on the following pages, together with their qualifications, external appointments and
any committee positions that they hold.
Ian Thomson OBE
Executive Chairman (aged 80)
Skills and experience
Ian, a Chartered Engineer, founded Argos in 1995. After an early career in the mining and energy equipment
industry, he became the Managing Director of Evergreen Resources Inc.’s exploration and production interests
in the UK and Europe.
External appointments
He is a director of a number of Falkland Islands and overseas companies engaged in fishing and other operations.
Committee membership
None
John Hogan
Managing Director (aged 66)
Skills and experience
John joined the board in 2005. John is a qualified geologist who has spent over 40 years in the oil industry. He
was Chief Operating Officer of LASMO PLC and Managing Director of LASMO North Sea between 1989 and 2000.
Since 2000, he has been active at board level in a number of privately held and quoted energy businesses
internationally.
External appointments
John stepped down from the board of Chrysaor Holdings Ltd during 2019.
Committee membership
None
Andrew Irvine FCCA
Finance Director (aged 58)
Skills and experience
Drew joined the board in 2005. After qualifying as a Chartered Certified Accountant in Scotland, Drew managed
the Pannell Kerr Foster related accounting practice in the Falkland Islands. Drew is now a Falkland Islands
resident and is a director of a number of Falkland Island companies.
Argos Resources Ltd
Annual report 2019
Page 16
Corporate Governance (continued)
External appointments
He is a director of Argos Group Limited, a Falkland Islands fishing quota holder, a member of the board of the
Falkland Islands Fishing Companies Association and chairman of the Falkland Islands Pensions Scheme.
Committee membership
None
Dennis Carlton
Senior Non-executive Director (aged 69)
Skills and experience
Dennis joined the board in 2005, having served on the board of Argos Exploration since 1995. Dennis is a qualified
petroleum geologist and has been involved with the North Falkland Basin since 1995. He was Chief Operating
Officer of Evergreen Resources Inc. between 1981 and 2004, and following its merger, Vice President of
Exploration, Western Division for Pioneer Natural Resources USA Inc. until 2008.
External appointments
He is currently consulting for a number of other private companies operating in the energy and other sectors.
Committee membership
Dennis is a member of the Audit Committee and Chairman of the Remuneration Committee.
Christopher Fleming
Non-executive Director (aged 60)
Skills and experience
Christopher joined the board in 2008. Christopher graduated from Aberdeen University with an M.A. in
Economics and Law and joined Morgan Grenfell in 1985. Between 1987 and 2005 he was involved in the
development of the Gilt Sales operations of Bankers Trust, Deutsche Bank and SBC Warburg as Head of
Government Bond Sales of each of the banks. From 2005 to 2009 he was Head of EMEA Flow Rates, Credit and
Currency Sales for RBS Global Markets and retired as Head of Global Markets EMEA Sales for Nomura
International PLC in August 2016. In June 2017 Chris returned to Nomura as Vice Chairman of EMEA Wholesale.
External appointments
Christopher is Chairman and co-founder of “mentorxchange", a company set up in 2016.
Committee membership
Christopher is a member of the Audit Committee and a member of Remuneration Committee.
Argos Resources Ltd
Annual report 2019
Page 17
Corporate Governance (continued)
James Ragg LLB, FCA
Non-executive Director (aged 53)
Skills and experience
James joined the board in 2008. James qualified as a Chartered Accountant in 1995, and after eight years with
Saffery Champness, joined a Haines Watts accountancy practice as an audit and assurance partner in 2004. He
subsequently managed the de-merger of his firm from Haines Watts and its renaming as Blue Spire South LLP
where he was a Management Partner until September 2012, and a non-executive partner until September 2013.
External appointments
He is currently heading up the finance and development operations for a group of private companies.
Committee membership
James is Chairman of the Audit Committee and a member of the Remuneration Committee.
Going concern
The financial statements have been prepared on the going concern basis as, in the opinion of the directors, there
is a reasonable expectation that the Group and the Company will continue in operational existence for the
foreseeable future.
At 31 December 2019, the Group had sufficient cash resources to continue for a period in excess of 12 months
beyond sign off.
The Company’s ability to achieve its long term strategy of developing its exploration projects is dependent on
finding an exploration partner and discussions are underway with interested parties to achieve that. In order to
continue as a going concern beyond the 12 month horizon the company will also need to raise further finance,
either through such a partner or by raising funds in an equity issue.
As described above, the Directors expect to be able to find an exploration partner, given previous interest and
the significant prospectivity within the Licence area, and the Company’s history of raising funds through the issue
of equity, the directors also consider that the Company is likely to be able to raise the required capital. However,
there are currently no binding agreements in place. Should the Directors be unable to raise sufficient funds or
find an exploration partner, the Company may be unable to realise its assets and discharge its liabilities in the
normal course of business.
These factors indicate the existence of a significant material uncertainty which may cast doubt over the Group’s
and Company’s ability to continue as a going concern. The financial statements do not include the adjustments
that would result if the Group or Company were unable to continue as a going concern.
See also Accounting Policy note 1 on page 32.
Capital
Capital is managed to ensure that the Group is able to continue as a going concern. The Group is not
subject to any externally imposed capital requirements.
Argos Resources Ltd
Annual report 2019
Page 18
Corporate Governance (continued)
Remuneration report
The remuneration committee comprises Dennis Carlton (committee chairman), Chris Fleming and
James Ragg. The board considers that all members of the remuneration committee are independent.
The committee’s role is to establish the Company’s policy for the remuneration of the executive
directors in order to ensure that all members of the executive management of the Company are
provided with appropriate incentives to encourage enhanced performance.
The committee met formally twice during the year under review and held a number of informal
discussions. The committee did not recommend any changes to remuneration for executive members
of the Board.
Directors’ remuneration for the year is as set out below:
2019
2019
Pension
contributions
£’000
-
-
1
-
-
-
1
2
Fees
£’000
-
50
20
10
10
10
100
127
2019
Share
option
fair value
£’000
-
49
-
9
-
10
68
89
2019
Total
£’000
-
99
21
19
10
20
169
2018
Fees and
total
£’000
-
50
21
10
10
10
101
218
134
I M Thomson
J Hogan
A Irvine
D Carlton
C Fleming
J Ragg
Total directors’
remuneration
Remuneration above
converted to $’000
Argos Resources Ltd
Annual report 2019
Page 19
Corporate Governance
Remuneration report (continued)
Share options
On 5 November 2019 the Board resolved to amend the terms of any options (the "Options"), held by
the current directors, which had not been exercised prior to the original expiry date of 11 November
2019. The option expiry date was extended by 5 years to 11 November 2024. No other amendments
were made to the terms of the Options.
The share options in place as at 31 December 2019 and held by directors are as follows:
Date of grant
12/11/2009
12/11/2009
12/11/2009
12/11/2009
12/11/2009
Number of
options
brought
forward
4,805,818
-
875,000
-
1,025,000
6,705,818
Exercised
during the
year
Number of
options carried
forward
Exercise
price
(pence)
-
-
-
-
-
-
4,805,818
-
875,000
-
1,025,000
6,705,818
2
2
2
2
2
J Hogan
A Irvine
D Carlton
C Fleming
J Ragg
Total
Argos Resources Ltd
Annual report 2019
Page 20
Independent auditor’s report to the members of Argos Resources Ltd
Opinion
We have audited the financial statements of Argos Resources Ltd (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the year ended 31 December 2019 which comprise the consolidated
statements of comprehensive income, the consolidated and company statements of financial position,
the consolidated and company statements of cash flows, the consolidated and company statements
of changes in equity and notes to the financial statements including a summary of significant
accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements
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
company law in the Falkland Islands.
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 2019 and of the Group’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 company law in the Falkland
Islands; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 1985 as amended by the Companies (Amendment) Ordinance 2006 as it applies In
the Falkland Islands.
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 the 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.
Material uncertainty relating to going concern
We draw attention to note 1 to the financial statements which explains that the Group and Parent
Company’s ability to continue as a going concern is dependent on the finding of an exploration partner
and obtaining further funding. As stated in note 1, these conditions indicate the existence of a material
uncertainty which may cast significant doubt over the Group’s and Parent Company’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
Argos Resources Ltd
Annual report 2019
Page 21
We considered going concern to be a Key Audit Matter based on our assessment of the risk and the
effect on our audit. We performed the following work in response to this Key Audit Matter:
• We have obtained and reviewed the cash flow forecasts which cover the period to December
2021 and compared the forecast overhead expenditure with actual historic expenditure.
• We have performed sensitivity analysis on the cash flow forecasts produced by management
to determine the level of headroom in the model.
• We have verified the current cash position of the Group by agreeing to bank statements.
• We have reviewed the disclosures throughout the financial statements to determine if these
are sufficient and in line with our understanding of the Group’s going concern status.
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 period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) we identified, including those which had
the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. In addition to the matter described in the Material uncertainty related to
going concern section, we have determined the matters described below to be the key audit matters
to be communicated in our report.
Key audit
matter
Valuation of intangible assets (notes 1, 3 and 11)
On 3 October 2018 Noble & Edison gave notice of their intention to
withdraw from the Participation Agreement and surrender the Falkland
Islands Production Licence PL001 to Argos on 2 January 2019.
Upon withdrawal, Noble & Edison transferred the PL001 exploration
licence to Argos. The Overriding Royalty Interest (ORRI) asset ceased to
exist with termination of the Participation Agreement and the ORRI
royalty asset was transferred back to an Exploration asset. The
exploration licence was due to terminate in November 2019 but was
extended to May 2021 after approval by the Falkland Islands
government.
There is a risk that the carrying value of the intangible asset is higher
than the recoverable amount. The underlying asset is an exploration
asset and Management must consider the asset for impairment
indicators in accordance with accounting standards.
Reviewing indicators of impairment often requires significant estimates
and judgement and therefore we identified this as a key audit matter.
Argos Resources Ltd
Annual report 2019
Page 22
How we
addressed
the key audit
matter in the
audit
We have obtained and reviewed the correspondence from the Falkland
Islands Government approving the extension of the licence to May 2021.
We have reviewed Management’s assessment of whether there were
any indicators of impairment.
Our work in connection with the indicators of impairment included the
following:
• We reviewed the terms of the licence to check that it had been
reassigned to Argos and to check the period that it covers.
• We examined management’s forecasts for evidence of budgeted
costs in respect of the exploration asset.
• We read the competent person’s report and considered whether
it contained any evidence to suggest that there are no
commercially viable quantities of mineral resources in the licence
areas.
• We considered whether the asset would be commercially viable
with reference to future oil prices.
Key observations:
Based on the work undertaken, we concur with the management’s
assessment that there are no indicators of impairment in respect of the
exploration asset.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the
effect of misstatements. We consider materiality to be the magnitude by which misstatements,
including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements. Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their effect on the financial statements
as a whole.
Materiality for the Group financial statements as a whole was set at $450,000 for 2019, being 1.5% of
total assets, which we consider to be the most significant determinant of the Group’s financial
performance for the users of the financial statements (2018: $500,000 based on 1.6% of total assets).
Materiality for the Parent Company has been capped at 75% of Group materiality, $337,500 for 2019
and at 80% for 2018 at $400,000. Materiality for the subsidiary, Argos Exploration Limited materiality
has also been set at $337,500 on a similar basis of 75% of Group materiality.
Argos Resources Ltd
Annual report 2019
Page 23
In performing the audit, we apply a lower performance materiality at the individual account or balance
level which is set at an amount to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality. Performance
materiality was set at 75% of the above materiality levels, with performance materiality of $337,500
for Group (2018: $375,000) and $253,000 for both Parent and Argos Exploration Limited (2018:
$300,000 and $225,000 respectively). This threshold was used as a reasonable basis, taking into
consideration; the expected value of misstatements was likely to be very low, based on past
experience. There are few accounts which are subject to estimation, the components are all based
within one location and there are no brought forward adjustments from the prior period. In addition,
a specific materiality of $40,000 (2018: no specific materiality) was set using 10% of loss after tax for
the statement of comprehensive income to ensure sufficient coverage was obtained given the level of
expenditure is lower than asset balances.
We agreed with the audit committee that we would report to the committee all individual audit
differences identified during the course of our audit in excess of $22,500. We also agreed to report
differences below these thresholds that, in our view warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including the Group’s system of internal control, and assessing the risks of material misstatement in
the financial statements at the Group level.
The Group audit team performed a full scope audit of Argos Resources Limited and Argos Exploration
Limited, being the Parent Company and wholly owned subsidiary respectively.
Other information
The Directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the other information and, except to
the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Argos Resources Ltd
Annual report 2019
Page 24
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation where company law in the
Falkland Islands 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.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 8, the Directors are
responsible for the preparation of the 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 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.
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: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Argos Resources Ltd
Annual report 2019
Page 25
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with section
235 of the Companies Act 1985 as it applies in the Falkland Islands by virtue of the Companies
(Amendment) Ordinance 2006. Our audit work has been undertaken so that we might state to the
Parent 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 Parent Company and the Parent Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
BDO LLP, Statutory Auditor
London, United Kingdom
27 February 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
Argos Resources Ltd
Annual report 2019
Page 26
Consolidated statement of comprehensive income
Year ended 31 December 2019
Note
4
5
Year
ended
Year
ended
31 December
31 December
2019
$’000
-
(433)
4
28
(401)
(401)
2018
$’000
784
(334)
4
(48)
406
406
10
(0.18)
0.18
Other income
Administrative expenses
Finance income
Foreign exchange gains/(losses)
(Loss)/profit for the year attributable to
owners of the parent
Total comprehensive (loss)/income for the
period attributable to owners of the parent
Basic and diluted (loss)/
earnings per share (cents)
The notes on pages 31 to 47 form part of the financial statements.
Argos Resources Ltd
Annual report 2019
Page 27
Consolidated statement of financial position
As at 31 December 2019
Note
11
12
13
14
Assets
Non-current assets
Exploration intangible assets
Current assets
Other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total net assets
Capital and reserves attributable to
equity holders of the Company
Share capital
Share premium
Retained losses
Total shareholders’ equity
2019
$’000
28,737
28,737
86
768
854
2018
$’000
28,749
28,749
392
788
1,180
29,591
29,929
58
58
61
61
29,533
29,868
6,696
30,071
(7,234)
6,696
30,071
(6,899)
29,533
29,868
The notes on pages 31 to 47 form part of the financial statements.
These financial statements were approved by the directors and authorised for issue on 27 February
2020 and are signed on their behalf by:
I M Thomson
Chairman
Argos Resources Ltd
Annual report 2019
Page 28
Consolidated statement of cash flows
Year ended 31 December 2019
Cash flows from operating activities
(Loss)/profit for period before taxation
Adjustments for:
Finance income
Foreign exchange (gain)/loss
Share based remuneration expensed
Net cash (outflow)/inflow from operating activities
before changes in working capital
Decrease/(increase) in other receivables
(Decrease)/increase in other payables
Net cash inflow from operating activities
Investing activities
Interest received
Exploration and development expenditure
Net cash (used)/generated in investment activities
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at beginning of period
Exchange (gains/losses) on cash and cash
equivalents
Cash and cash equivalents at end of the year
Year
ended
Year
ended
31 December
31 December
2019
$’000
(401)
2018
$’000
406
Note
(4)
(28)
89
(344)
377
(3)
30
4
(82)
(78)
(48)
788
28
768
(4)
50
-
452
(378)
2
76
4
-
4
80
758
(50)
788
The notes on pages 31 to 47 form part of the financial statements.
Argos Resources Ltd
Annual report 2019
Page 29
Consolidated statement of changes in equity
Year ended 31 December 2019
At 1 January 2018
Total comprehensive income for
the year
At 31 December 2018
And 1 January 2019
Total comprehensive income for
the year
Share based income expense
Share based income adjustment
for expired options
Share
capital
$’000
6,696
Share
premium
$’000
30,071
Retained
losses
$’000
(7,305)
Total
equity
$’000
29,462
-
-
406
406
6,696
30,071
(6,899)
29,868
-
-
-
-
-
-
(401)
89
(23)
(401)
89
(23)
At 31 December 2019
6,696
30,071
(7,234)
29,533
The share premium reserve comprises the amount subscribed for share capital in excess of its nominal
value.
Retained losses represent the accumulated gains and losses recognised in the financial statements and
the share payment reserve.
The notes on pages 31 to 47 form part of the financial statements.
Argos Resources Ltd
Annual report 2019
Page 30
Notes to the consolidated financial statements
Year ended 31 December 2019
1 Accounting policies
The Group and its operations
Argos Resources Ltd is an AIM quoted, limited liability company. The Group comprises the ultimate
parent Company, Argos Resources Ltd, and its wholly owned subsidiary Argos Exploration Ltd. Argos
Resources Ltd is incorporated and domiciled in the Falkland Islands under registration number 10605.
The address of its registered office is Argos House, H Jones Road, Stanley, Falkland Islands, FIQQ 1ZZ.
Following the withdrawal of Noble and Edison from Licence PL001 the Company exercised the option
under the Participation Agreement to have the Licence reassigned to them, which effectively
terminated the Participation Agreement. The Licence re-assignment process was concluded in
February 2019. In November 2019 the Falkland Islands Government agreed to extend the Licence to 1
May 2021. It was due to expire in November 2019.
Statement of compliance
The consolidated financial statements are prepared in compliance with International Financial
Reporting Standards as adopted by the European Union (IFRSs) and interpretations of those standards
as issued by the International Accounting Standards Board, and applicable legislation. The
consolidated financial statements were approved for issue by the board of directors on 27 February
2020 and are subject to adoption at the Annual General Meeting of shareholders which is expected to
be held in Stanley, Falkland Islands, in October 2020.
Basis of preparation
These financial statements have been prepared under the historical cost convention, using the
accounting policies set out below, which have been consistently applied unless stated otherwise. The
functional and presentational currency of the parent and subsidiary companies is considered to be US
Dollars (US$). All values are rounded to the nearest thousand Dollars ($’000) except where otherwise
indicated.
Changes in accounting standards
Standards which have been implemented in the year
The following new standards, amendments and interpretations are effective for the first time for
periods beginning on or after 1 January 2019 but have not had a material effect on the Group and so
have not been discussed in detail in the notes to the financial statements:
•
IFRS 9 (2014) Financial Instruments (Amendment – Prepayment Features with Negative
Compensation and Modification of Financial Liabilities);
IFRS 16 Leases;
IFRIC 23 Uncertainty over Income Tax Treatments;
•
•
• Annual Improvements to IFRSs 2015 – 2018 Cycle (IFRS 3 Business Combinations, IFRS 11 Joint
•
•
Arrangements, IAS 12 Income Taxes, IAS 23 Borrowing Costs);
IAS 19 Employee Benefits (Amendment – Plan Amendment, Curtailment or Settlement);
IAS 28 Investments in Joint Ventures (Amendment – Long-term Interests in Associates and
Joint Ventures).
Argos Resources Ltd
Annual report 2019
Page 31
Notes to the consolidated financial statements
Year ended 31 December 2019
Accounting policies (continued)
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which have been
issued by the IASB that are effective in future accounting periods that the group has decided not to
adopt early. The most significant of these is are as follows, which are all effective for the period
beginning 1 January 2020:
•
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors (Amendment – Definition of Material);
IFRS 3 Business Combinations (Amendment – Definition of Business);
•
• Revised Conceptual Framework for Financial Reporting
Argos is currently assessing the impact of these new accounting standards and amendments.
Going concern
Following the withdrawal of Noble and Edison the Licence was re-assignment to Argos in February 2019
and the Falkland Islands Government agreed to extend the Licence to 1 May 2021 as it was due to
expire in November 2019.
The Group continued to receive quarterly cash payments of £75,000 per quarter, which equates to
$96,000 at the year-end exchange rate, until 27 December 2019, a period of 450 days after the notice
to withdraw.
The financial statements have been prepared on the going concern basis as, in the opinion of the
directors, there is a reasonable expectation that the Group and the Company will continue in
operational existence for the foreseeable future.
At 31 December 2019, the Group had sufficient cash resources to continue for a period in excess of 12
months beyond sign off.
The Company’s ability to achieve its long term strategy of developing its exploration projects is
dependent on finding an exploration partner and discussions are underway with interested parties to
achieve that. In order to continue as a going concern beyond the 12 month horizon the company will
also need to raise further finance either through such a partner or by raising funds in an equity issue.
As described above, the Directors expect to be able to find an exploration partner, given previous
interest and the significant prospectivity within the Licence area, and the Company’s history of raising
funds through the issue of equity, the directors also consider that the Company is likely to be able to
raise the required capital. However, there are currently no binding agreements in place. Should the
Directors be unable to raise sufficient funds or find an exploration partner, the Company may be unable
to realise its assets and discharge its liabilities in the normal course of business.
Argos Resources Ltd
Annual report 2019
Page 32
Notes to the consolidated financial statements
Year ended 31 December 2019
Accounting policies (continued)
These factors indicate the existence of a significant material uncertainty which may cast doubt over
the Group’s and Company’s ability to continue as a going concern. The financial statements do not
include the adjustments that would result if the Group or Company were unable to continue as a going
concern.
Basis of consolidation
The consolidated financial statements incorporate the results of Argos Resources Ltd and its wholly
owned subsidiary undertaking as at 31 December 2019 using the acquisition method of accounting.
Where the acquisition method is used, the results of subsidiary undertakings are included from the
date of acquisition.
All inter-company accounts and transactions have been eliminated on consolidation.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating decision maker has been identified as the board
of directors.
The Group’s operations consist entirely of oil and gas exploration around the Falkland Islands and in
the opinion of the directors there is only one business segment and the information contained in the
financial statements reflects the operations within that segment.
Intangible assets – capitalised exploration expenditure, impairment and royalty interests
Evaluation and exploration (E&E) expenditure
As part of the 2015 farmout transaction the Group retained an ORRI of 5% of gross revenues from all
hydrocarbon discoveries developed within the Licence area and the accumulated historical E&E cost
was reclassified as “royalty interests”. The Group therefore believed that the most appropriate
method of accounting for the Noble and Edison withdrawal in 2018 was to reclassify the ORRI to E&E
asset accounting for it using the method, as permitted under IFRS 6 whereby all historic costs
associated with oil exploration are capitalised as intangible assets, pending determination of feasibility
of the project.
As an initial fair value could not be reliably determined the E&E asset was measured at cost, which was
the carrying amount of the ORRI, with no gain or loss. The E&E asset is therefore presented as an
intangible asset and carried at cost less accumulated amortisation and any impairment provision.
Costs incurred include appropriate technical and administrative expenses but not general overheads.
If an exploration project is successful, the related expenditures are transferred to tangible assets and
amortised over the estimated life of the commercial reserves. Where a licence is relinquished, a
project is abandoned, or is considered to be of no further value to the Group, the related costs are
written off.
Argos Resources Ltd
Annual report 2019
Page 33
Notes to the consolidated financial statements
Year ended 31 December 2019
Accounting policies (continued)
Impairment
E&E assets are assessed for impairment when facts and circumstances suggest that the carrying
amount may exceed the recoverable amount.
In accordance with IFRS 6 the Group firstly considers the following facts and circumstances in their
assessment of whether the Group’s exploration and evaluation assets may be impaired:
• whether the period for which the Group has the right to explore in a specific area has expired
during the period or will expire in the near future, and is not expected to be renewed;
• whether substantive expenditure on further exploration for and evaluation of mineral
resources in a specific area is neither budgeted nor planned;
• whether exploration for and evaluation of hydrocarbons in a specific area have not led to the
discovery of commercially viable quantities of hydrocarbons and the Group has decided to
discontinue such activities in the specific area; and,
• whether sufficient data exists to indicate that although a development in a specific area is
likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely to
be recovered in full from successful development or by sale.
If any such facts or circumstances are noted the Group must perform an impairment test in accordance
with the provisions of IAS 36, assessing the recoverable amount of the E&E assets together with all
development and production assets, as a single cash generating unit (CGU). The aggregate carrying
value is compared against the expected recoverable amount of the CGU. The recoverable amount is
the higher of value in use and the fair value less costs to sell.
Any E&E impairment loss would be recognised in the income statement and separately disclosed.
Overriding royalty interest (ORRI)
In October 2018 Noble and Edison served notice of their intention to withdraw from the Licence in
which the Group retained an ORRI entitling them to 5% of all oil and gas produced from all hydrocarbon
discoveries developed within the Licence area. The Participation Agreement was terminated in
October 2018 when Argos exercised the option to have the Licence reassigned to them.
The Group considered that the ORRI was similar in economic terms to holding a direct interest in the
underlying licence as there was only a right to receive benefit from the ORRI on production and many
of the risks faced by the Group were the same as those faced by the owner of the licence. These risks
were seen as:
• Existence risk - whether oil is found in commercially extractable quantities;
• Production risk – whether the operator is able to get any discovery to commercial production;
• Timing risk – commencement and quantity as determined by the operator; and,
• Price risk – determined by future commodity supply and demand.
Argos Resources Ltd
Annual report 2019
Page 34
Notes to the consolidated financial statements
Year ended 31 December 2019
Accounting policies (continued)
Revenue and income
Income from the Participation Agreement was recognised each quarter on receipt until the notice to
withdraw from the Participation Agreement was received in October 2018. The termination clause of
the Participation agreement requires Noble & Edison to continue to pay Argos the income from the
Participation Agreement for a period of 450 days after notice has been given. The full amount of
income remaining under the agreement was recognised in 2018, as Argos are contractually entitled to
the income under the termination clause of the agreement. The remaining income was received in
quarterly payments until 27 December 2019.
Investment income consists of interest receivable for the period. Interest income is recognised as it
accrues.
Financial instruments
Financial assets
The Group classifies its financial assets depending on the purpose for which the asset was acquired.
The Group has classified its financial assets as amortised cost.
Financial assets held at amortised cost
These assets are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. These financial assets were referred to as ‘Loans and receivables’ in the
prior period. They are initially recognised at fair value plus costs that are directly attributable to the
acquisition or issue and subsequently carried at amortised cost less any provision for impairment. The
Group’s loans and receivables comprise cash and cash equivalents and other receivables in the
statement of financial position. Cash and cash equivalents comprise current account balances or short
term deposits at variable interest rates that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value. Any interest earned is accrued and
classified as interest receivable.
The effect of discounting on these financial instruments is not considered to be material.
Financial liabilities
The Group classifies its financial liabilities depending on the purpose for which the liability was
incurred. All are non-derivative liabilities and are measured at amortised cost.
The effect of discounting on these financial instruments is not considered to be material.
Cash and cash equivalents
This includes cash in hand and deposits held with banks.
Argos Resources Ltd
Annual report 2019
Page 35
Notes to the consolidated financial statements
Year ended 31 December 2019
Accounting policies (continued)
Foreign currencies
The functional and presentational currency is US Dollars (US$). Transactions denominated in
currencies other than US$ are translated at the rate of exchange ruling at the date of the transaction.
Monetary amounts held in currencies other than US$ are converted at the rate ruling at the year end.
Any translation differences are dealt with in the consolidated statement of comprehensive income.
The year-end rates of exchanges used were:
£:US$
2019
1.33
2018
1.28
Income taxes and deferred taxation
Deferred tax assets and liabilities are not discounted and shall be measured using the liability method
at the tax rates that are expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the
reporting date. Deferred income tax assets are recognised only to the extent that it is probable that
future taxable profit will be available against which the temporary differences can be utilised.
Share based remuneration
The Company issued share options to directors and key personnel on 12 November 2009 which were
due to expire on 11 November 2019. On 5 November 2019 the Board resolved to amend the terms of
any options (the "Options"), held by the directors, which had not been exercised prior to the original
expiry date of 11 November 2019. These options were extended by 5 years and now expire on 11
November 2024.
The Group accounts for the costs of the issue of these options and the related extension of the expiry
date in line with IFRS 2 “Share based payments”. Under this standard, the cost of providing for such
options is based on the fair value of the options at the date of grant or extension and is charged to the
consolidated statement of comprehensive income or, if appropriate, capitalised over the expected
vesting period of the options and credited to retained losses.
Argos Resources Ltd
Annual report 2019
Page 36
Notes to the consolidated financial statements
Year ended 31 December 2019
2
Financial instruments
The Group’s financial assets comprise of cash and cash equivalents and other receivables, which are
categorised as “financial assets held at amortised cost”. These were referred to as ‘loans and
receivables’ in the prior period. Financial liabilities comprise other payables which are categorised as
financial liabilities held at amortised cost and these are all current financial liabilities.
It is, and has been throughout the period of the financial statements, the Group’s policy that no trading
in financial instruments shall be undertaken.
The policy for managing financial risks is set by the board following recommendations from the Finance
Director. The policy for each of the above risks is described in more detail below.
Foreign exchange
As the functional currency is US$ and some of the current monetary assets and liabilities are in Sterling
there is a risk of loss in relation to the net Sterling financial assets position, should there be a
devaluation of Sterling against US$. The risk of any loss, in terms of meeting future liabilities, is
however eliminated by matching the currencies of cash balances with the currencies of projected
liabilities.
As of 31 December 2019 the Group’s financial assets and financial liabilities were denominated in a
mixture of US$ and Sterling which consisted of:
Financial assets held at amortised cost
Sterling
denominated
$’000
US$
denominated
$’000
Total
$’000
Financial assets
Other receivables
Less: prepayments
Cash and cash equivalents
15
(11)
744
748
71
(71)
24
24
Financial Liabilities
Other payables
Add: amounts received in advance
Net financial assets
Financial liabilities held at amortised cost
(58)
-
690
-
24
86
(82)
768
772
(58)
-
714
Argos Resources Ltd
Annual report 2019
Page 37
Notes to the consolidated financial statements
Year ended 31 December 2019
Financial instruments (continued)
At 31 December 2018 the comparative balances were:
Financial assets
Other receivables
Less: prepayments
Cash and cash equivalents
Financial assets held at amortised cost
Sterling
denominated
$’000
US$
denominated
$’000
392
(10)
781
1,163
-
-
7
7
Total
$’000
392
(10)
788
1,170
Financial liabilities
Other payables
Add: amounts received in advance
Net financial assets
Financial liabilities held at amortised cost
(61)
-
1,102
-
7
(61)
-
1,109
If the US$ had strengthened against Sterling by 10%, the profit for the year would decrease and equity
would reduce by $69K (2018: decrease in profit and equity of $110K). Conversely if the US$ weakens
against Sterling by 10% the profit for the year and equity would increase by $69K (2018: increase in
loss and equity of $110K).
Counter-parties
This is the risk that a third party failure results in loss to the Group such as a bank collapse resulting in
the loss of deposits. To mitigate against this risk cash deposits are spread between two high quality
institutions, Lloyds Bank PLC, which is part owned by the British government, and Standard Chartered
Bank. The following was the split of funds between the various institutions at 31 December 2019:
Institution
Lloyds Bank PLC
Standard Chartered Bank
2019
$’000
637
131
768
2018
$’000
645
143
788
Argos Resources Ltd
Annual report 2019
Page 38
Notes to the consolidated financial statements
Year ended 31 December 2019
Financial instruments (continued)
Liquidity
This is the risk that the Group cannot meet its liabilities as these fall due. As the timing of significant
payments carries a degree of uncertainty cash balances are being kept in interest bearing term
deposits with periods of no longer than 6 months.
Credit risk
The Group is not exposed to credit risk as it does not trade, and the cash balances held by the Group
are spread between two reputable institutions. The comments made above in relation to counter-
party risk are relevant.
Fair values
The fair values of the Group’s financial assets and liabilities are not materially different from the
carrying values in the consolidated statement of financial position and notes to the financial
information.
3
Significant accounting judgements, estimates and assumptions
Impairment of intangible assets (significant judgement)
When making an assessment of whether or not there are facts and circumstances which may indicate
that an impairment review is required, the directors are required to exercise judgement. These
judgements include, assessing whether or not it is expected that future renewal of the licence will be
granted and assessing whether or not any of the geological data obtained to date indicates an
impairment review is required.
The directors consider there are no indicators under IFRS 6 to trigger an impairment review.
Going concern (significant judgement)
The financial statements have been prepared on the going concern basis as, in the opinion of the
directors, there is a reasonable expectation that the Group and the Company will continue in
operational existence for the foreseeable future.
At 31 December 2019, the Group had sufficient cash resources to continue for a period in excess of 12
months beyond sign off.
The Company’s ability to achieve its long term strategy of developing its exploration projects is
dependent on finding an exploration partner and discussions are underway with interested parties to
achieve that. In order to continue as a going concern beyond the 12 month horizon the company will
also need to raise further finance either through such a partner or by raising funds in an equity issue.
Argos Resources Ltd
Annual report 2019
Page 39
Notes to the consolidated financial statements
Year ended 31 December 2019
Significant accounting judgements, estimates and assumptions (continued)
As described above, the Directors expect to be able to find an exploration partner, given previous
interest and the significant prospectivity within the Licence area, and the Company’s history of raising
funds through the issue of equity, the directors also consider that the Company is likely to be able to
raise the required capital. However, there are currently no binding agreements in place. Should the
Directors be unable to raise sufficient funds or find an exploration partner, the Company may be
unable to realise its assets and discharge its liabilities in the normal course of business.
These factors indicate the existence of a significant material uncertainty which may cast doubt over
the Group’s and Company’s ability to continue as a going concern. The financial statements do not
include the adjustments that would result if the Group or Company were unable to continue as a going
concern.
4 Other income
Income from the Participation Agreement
Total
2019
$’000
-
-
2018
$’000
784
784
The termination clause of the Participation agreement required Noble & Edison to continue to pay
Argos the income from the Participation Agreement for a period of 450 days after notice had been
given. The full amount of income remaining under the agreement was recognised on termination, as
Argos were contractually entitled to the income under the termination clause of the agreement. The
remaining income was received over quarterly payments until 27 December 2019.
5 Administrative expenses
Directors’ remuneration (see note 6)
Professional fees
Other expenses
Total
6 Directors’ remuneration
Remuneration and fees
Pensions*
Share based payment expense (see note 8)
Total
2019
$’000
218
161
54
433
2019
$’000
127
2
89
218
2018
$’000
134
159
41
334
2018
$’000
132
2
-
134
*A Irvine is accruing retirement benefits under a defined contribution pension arrangement.
Directors’ remuneration, by director, is disclosed in the directors’ remuneration report on page 19.
The average monthly number of employees, including directors, during this and the preceding year
was 6.
Argos Resources Ltd
Annual report 2019
Page 40
Notes to the consolidated financial statements
Year ended 31 December 2019
7 Auditor’s remuneration
Fees payable to the Company’s auditor for the
audit of the Company’s annual financial
statements
Fees payable to the Company’s auditor for the
audit of the subsidiary’s annual financial
statements
Review of interim accounts
Total payable for audit related services
Fees payable to the Company’s auditor for
other services:
Taxation
Fees payable to the Company’s auditor for the
Taxation services for the subsidiary company
2019
$’000
2018
$’000
30
5
-
35
4
6
45
25
5
-
30
2
1
33
Argos Resources Ltd
Annual report 2019
Page 41
Notes to the consolidated financial statements
Year ended 31 December 2019
8
Share based remuneration
In 2009 Argos Resources Ltd introduced an equity-settled share based remuneration scheme for
employees and key personnel, the only vesting condition being that the individual remains a director
or employee of the Group or, where not an employee, serves out the full contract term over the
vesting period.
On 5 November 2019 the Board resolved to amend the terms of any options (the "Options"), held by
the current directors, which had not been exercised prior to the original expiry date of 11 November
2019. The option expiry date was extended by 5 years to 11 November 2024, which is accounted for
on an incremental value basis. No other amendments were made to the terms of the Options.
At 1 January 2018 and
1 January 2019
Options expired during the year
At 31 December 2019
Average share
price on date
exercised
(pence)
Exercise price
(pence)
Number
2
2
2
8,080,818
(1,375,000)
6,705,818
All options outstanding at the end of the year had vested and were exercisable.
The following information is relevant in the determination of the fair value of options extended in 2019
under the equity-settled share based remuneration scheme operated by Argos Resources Ltd:
Option pricing model used
Weighted average exercise price
Exercise price
Weighted average contractual life
Expected volatility
Risk-free interest rate
Expected dividend growth rate
Fair value of options granted
Black-Scholes
2 pence
2 pence
5.02 years
73.8%
0.5%
N/A%
1.32 cents
The volatility assumption, measured at the standard deviation of expected share price returns, is based
on a statistical analysis of daily share prices over the last five years.
Charge for share based payment
Expensed through the income statement
Adjustment to exploration expenditure for
options expired and previously capitalised1
Equity-settled
2019
$’000
89
(23)
(66)
2018
$’000
-
-
-
1 Expired options relate to a contractor and not a director or employee.
Argos Resources Ltd
Annual report 2019
Page 42
Notes to the consolidated financial statements
Year ended 31 December 2019
9 Taxation
Total tax:
Corporation tax on losses for the year
Reconciliation of total tax:
(Loss)/profit before tax
(Loss/profit on ordinary activities multiplied by
the standard rate of corporation tax of 26%
Effects of:
Unrelieved tax losses and other deductions
arising in the period
Receipts not taxable
Interest receivable not taxable
Expenses not deductible for tax purposes
Total tax for the year
2019
$’000
-
(401)
(104)
103
-
-
1
-
2018
$’000
-
406
105
94
(204)
-
5
-
The Group has capital tax losses carried forward of $23m. The resulting deferred tax assets and
liabilities have been offset and the Group and Company intend to manage the assets in the future so
as to utilise all of the carried forward capital and trading losses.
The group has the following temporary differences:
Trading Losses Carried forward
Capital losses carried forward
Accelerated tax depreciation
Net Deferred Tax Asset
2019
$’000
8,600
22,900
(28,700)
2,200
2018
$’000
7,900
22,900
(28,700)
2,100
The resulting deferred tax assets and liabilities have been offset and the Group and Company intend
to manage the assets in the future so as to utilise all of the carried forward losses.
In respect of the net deferred tax asset, no deferred tax asset has been recognised due to the uncertain
timing of the utilisation of losses.
Argos Resources Ltd
Annual report 2019
Page 43
Notes to the consolidated financial statements
Year ended 31 December 2019
10 Earnings per share
Shares in issue brought forward (2 pence shares)
Shares in issue carried forward
Weighted average shares in issue
(Loss)/profit for the year
Weighted average number of ordinary shares
in issue during the year
2019
Number
220,713,205
2018
Number
220,713,205
220,713,205
220,713,205
220,713,205
220,713,205
2019
$’000
(401)
2018
$’000
406
220,713,205
220,713,205
Basic (loss)/earnings per ordinary share (cents)
(0.18)
0.18
Diluted earnings per share
Shares in issue brought forward (2 pence shares)
Dilutive securities in issue during the period but not
converted
Shares in issue, plus the weighted average number of
dilutive securities in issue but not converted
Weighted average number of shares, plus the weighted
average number of dilutive securities in issue during the
period but not converted
(Loss)/profit for the year
Weighted average number of shares, plus the weighted
average number of dilutive securities in issue during the
period but not converted
2019
Number
220,713,205
2018
Number
220,713,205
-
8,080,818
220,713,205
228,794,023
220,713,205
228,794,023
2019
$’000
(401)
2018
$’000
406
220,713,205
228,794,023
Diluted (loss)/earnings per ordinary share (cents)
(0.18)
0.18
Basic earnings per share has been computed by dividing the earnings by the weighted average number
of shares in issue during the period.
Diluted earnings per share is calculated by dividing the earnings by the weighted average number of
shares, plus the weighted average number of dilutive securities in issue during the period but not
converted. However, as the Group is reporting a loss in 2019 the share options are considered anti-
dilutive because the exercise of share options would have the effect of reducing the loss per share and
are therefore excluded from the calculation for that year.
Argos Resources Ltd
Annual report 2019
Page 44
Notes to the consolidated financial statements
Year ended 31 December 2019
11 Exploration and
evaluation (E&E)
intangible assets and
royalty interest (ORRI)
Royalty
interests
$’000
Exploration
& evaluation
(E&E) assets
$’000
Total
$’000
1 January 2018
28,749
-
28,749
Royalty interests
reclassified as E&E assets
At 31 December 2018 and
1 January 2019
Additions
Adjustment for share options expired
At 31 December 2019
(28,749)
28,749
-
-
-
-
28,749
28,749
11
(23)
11
(23)
28,737
28,737
The Group reclassified “royalty interests” as E&E expenditure on termination of the Participation
Agreement in October 2018. Details of the accounting policies adopted by the Group for these types
of assets and the consideration of impairment is detailed in note 1 on page 34. The licence was
approved and re-assigned back to Argos In February 2019.
The Licence was due to expire on 29 November 2019 and prior to expiry the Falkland Islands
Government extended the second term of the Licence by eighteen months, to 1 May 2021, with no
additional work commitments.
The Company has a commitment to drill one exploration well within the licence area by the end of the
second term of the licence and is actively seeking new partners to continue exploration in the Licence
area.
12 Other receivables
Income from the Participation Agreement
Prepayments
Other
13 Trade and other payables
Trade payables
Accruals
2019
$’000
-
82
4
86
2019
$’000
7
51
58
2018
$’000
378
10
4
392
2018
$’000
1
60
61
Argos Resources Ltd
Annual report 2019
Page 45
Notes to the consolidated financial statements
Year ended 31 December 2019
14 Share capital
Authorised:
500,000,000 ordinary shares of 2 pence each
Allotted, issued and fully paid:
Ordinary shares of 2 pence each
At 1 January 2018 and
and 31 December 2019
15 Related party transactions
2018
$’000
2018
$’000
14,960
14,960
Number
$’000
220,713,205
6,696
Argos Georgia Ltd is a related party of the Group due to one of the Group’s directors, Ian Thomson,
having a significant shareholding in Argos Georgia Ltd. Transactions with Argos Georgia Ltd during the
year are as follows:
Due to Argos Georgia Ltd at 1 January
Expenses paid on behalf of the Group
Loans repaid/creditor balances paid
Office running costs*
Due to Argos Georgia Ltd at 31 December
2019
$’000
-
12
(12)
-
-
2018
$’000
-
5
(5)
-
-
* The services and agency agreement between the Company and Argos Georgia Ltd in which Argos Georgia Ltd
provided certain agency, accounting, secretarial and operational services to the Company was terminated with
effect from 31 March 2016. The cost of continued provision of these services, which has not been charged for,
is $15,000. The key management personnel are the directors only.
There have been no transactions with directors during the year other than remuneration paid to each
director which is disclosed in the directors’ remuneration report on page 19 and in note 6.
16 Commitments
(a) Capital commitments
The Second Phase of the PL001 licence requires an Oil Well to be drilled.
(b) Operating commitments
There were no ongoing commitments at 31 December 2019 nor for the comparative period.
Argos Resources Ltd
Annual report 2019
Page 46
Notes to the consolidated financial statements
Year ended 31 December 2019
17 Contingent liabilities
The Group has no anticipated material contingent liabilities.
18 Events after the reporting date
There were no reportable events occurring after the balance sheet date.
Argos Resources Ltd
Annual report 2019
Page 47
Parent Company financial statements
Statement of financial position
As at 31 December 2019
Assets
Non-current assets
Investments
Current assets
Other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total net assets
Capital and reserves attributable to
equity holders of the company
Share capital
Share premium
Retained losses
Total shareholders’ equity
Note
6
7
8
9
2019
$’000
2,120
2,120
9,685
768
2018
$’000
2,120
2,120
9,795
788
10,453
10,583
12,573
12,703
41
41
44
44
12,532
12,659
6,696
30,071
(24,235)
6,696
30,071
(24,108)
12,532
12,659
The notes on pages 51 to 56 form part of the financial statements.
These financial statements were approved by the directors and authorised for issue on 27 February
2020 and are signed on their behalf by:
Ian Thomson
Chairman
Argos Resources Ltd
Annual report 2019
Page 48
Parent Company financial statements
Statement of cash flows
Year ended 31 December 2019
Cash flows from operating activities
(Loss)/profit for period before taxation
Adjustments for:
Finance income
Foreign exchange
Share based remuneration expensed
IFRS 9 (credit)/provision
Net cash (outlow)/inflow from operating activities
before changes in working capital
Decrease/(Increase) in other receivables
(Decrease)/increase in other payables
Net cash (outflow)/inflow from operating activities
Investing activities
Interest received
Net cash generated from investment activities
Net (decrease)/increase in
cash and cash equivalents
Cash and cash equivalents at beginning of period
Exchange gains/(losses) on
cash and cash equivalents
Cash and cash equivalents at end of the year
The notes on pages 51 to 56 form part of the financial statements.
Year
ended
31 December
Year
ended
31 December
2019
$’000
(193)
(4)
(28)
89
(182)
(318)
269
(3)
(52)
4
4
(48)
788
28
768
2018
$’000
28
(4)
50
-
2
76
(3)
3
76
4
4
80
758
(50)
788
Argos Resources Ltd
Annual report 2019
Page 49
Parent Company financial statements
Statement of changes in equity
Year ended 31 December 2019
Share
capital
$’000
Share
premium
$’000
Retained
earnings/
(deficit)
$’000
Total
equity
$’000
At 1 January 2018
6,696
30,071
(24,136)
12,631
Profit for year
-
-
28
28
At 31 December 2018
And 1 January 2019
(Loss) for year
Share based income expense
Share based income adjustment
for expired options
6,696
30,071
(24,108)
12,659
-
-
-
-
-
-
(193)
89
(23)
(193)
89
(23)
At 31 December 2019
6,696
30,071
(24,235)
12,532
The notes on pages 51 to 56 form part of the financial statements.
Argos Resources Ltd
Annual report 2019
Page 50
Notes to the parent Company financial statements
Year ended 31 December 2019
1 Accounting policies
Basis of preparation
The financial statements have been prepared under the historical cost convention. All accounting
policies are consistent with those adopted in the Group financial statements except as otherwise
noted below.
The amount due from the subsidiary company is repayable on demand.
Investments
Investments are measured at cost at acquisition and are then subsequently measured at cost less
impairment
The Group’s financial assets comprise of cash and cash equivalents and other receivables, which are
categorised as “financial assets held at amortised cost” These financial assets were referred to as
‘loans and receivables’ in the prior period. Financial liabilities comprise other payables which are
categorised as financial liabilities held at amortised cost and these are all current financial liabilities.
Intercompany loan to the subsidiary company
The loan to the subsidiary company, Argos Exploration Limited, is classified as repayable on demand.
IFRS 9 requires consideration of the expected credit risk associated with the loan. As the subsidiary
company does not have any liquid assets to sell to repay the loan, should it be recalled, the conclusion
reached was that the loan should be categorised as stage 3 and the impairment assessment of the
loan has been performed using a lifetime expected credit loss model under IFRS 9.
As part of the assessment of expected credit losses of the intercompany loan receivable, the Directors
have considered the expected future oil prices; the value of the reserves reflected in the independent
economic assessment of the Licence area; the ability to sell the project, the ability to find a new farm-
out partner and the exploration project risk provided in the Competent Persons Report. The Directors
have also assessed the cash flow scenarios of the above considerations.
The credit risk of the intercompany loan is assessed at the end of each accounting period. There was
no change in the significant credit risk at year-end.
Changes in accounting standards
Please refer to changes in accounting standards, Note 1, in the group financial statements.
Going concern
Please refer to going concern, Note 1, in the group financial statements.
Argos Resources Ltd
Annual report 2019
Page 51
Notes to the parent Company financial statements
Year ended 31 December 2019
2 Significant accounting judgements, estimates and assumptions
Application of the expected credit loss model prescribed by IFRS 9
IFRS 9 requires the Parent company to make assumptions when implementing the forward-looking
expected credit loss model. This model is required to be used to assess the intercompany loan
receivable from Argos Exploration Limited for impairment.
Please refer to accounting policies, Note 1, in the parent Company financial statements for more
information.
3 Financial instruments
The policy for managing financial risks is set by the board following recommendations from the Finance
Director.
Foreign exchange
As the functional currency is US$ and some of the current monetary assets and liabilities are in Sterling
there is a risk of loss in relation to the net Sterling financial assets position, should there be a
devaluation of Sterling against US$. The risk of any loss, in terms of meeting future liabilities, is
however eliminated by matching the currencies of cash balances with the currencies of projected
liabilities.
As of 31 December 2019 the Company’s financial assets and financial liabilities were denominated in
a mixture of US$ and Sterling which consisted of:
Financial assets
Other receivables
Less: prepayments
Cash and cash equivalents
Financial liabilities
Other payables
Net financial assets
Amortised cost
Sterling
denominated
$’000
15
(11)
744
US$
denominated
$’000
9,670
-
24
Total
$’000
9,685
(11)
768
748
9,694
10,442
Amortised cost
(41)
707
-
9,694
(41)
10,401
Argos Resources Ltd
Annual report 2019
Page 52
Notes to the parent Company financial statements
Year ended 31 December 2019
Financial instruments (continued)
At 31 December 2018 the comparative balances were:
Current assets
Other receivables
Less: prepayments
Cash and cash equivalents
Amortised cost
Sterling
denominated
$’000
14
(10)
781
US$
denominated
$’000
9,781
-
7
Total
$’000
9,795
(10)
788
785
9,788
10,573
Amortised cost
Financial liabilities
Other payables
Net financial assets
(44)
741
-
9,788
(44)
10,529
If the US$ had strengthened against Sterling by 10%, the profit for the year would decrease and equity
would reduce by $71K (2017: decrease in profit and equity of $74K). Conversely if the US$ weakens
against Sterling the profit for the year and equity would increase by $71K (2017: increase in profit and
equity of $74K).
Counter-parties
This is the risk that a third party failure results in loss to the Group such as a bank collapse resulting in
the loss of deposits. To mitigate against this risk cash deposits are spread between two high quality
institutions, Lloyds Bank PLC, which is part owned by the British government, and Standard Chartered
Bank. The following was the split of funds between the various institutions at 31 December 2019.
Institution
Lloyds Bank PLC
Standard Chartered Bank
2019
$’000
637
131
768
2018
$’000
645
143
788
Interest rates
The Company is not exposed to interest rate risk as there are no interest bearing loans or balances
outstanding to providers of finance.
Liquidity
This is the risk that the Company cannot meet its liabilities as these fall due. As the timing of significant
payments carries a degree of uncertainty cash balances are being kept in interest bearing term
deposits with periods of no longer than 6 months.
Argos Resources Ltd
Annual report 2019
Page 53
Notes to the parent Company financial statements
Year ended 31 December 2019
Financial instruments (continued)
Credit
The Company is not exposed to credit risk, other than amounts due from the subsidiary company, as
it does not trade and the cash balances held by the Company are spread between two reputable
institutions. Please refer to note 7 for the details of the expected credit loss on the intercompany
receivable due from the subsidiary company.
Fair values
The fair values of the Company’s financial assets and liabilities are not materially different from the
carrying values in the statement of financial position and notes to the financial information.
4 Loss attributable to the members of the parent Company
The loss for the year was $193 thousand (2018: profit of $28 thousand). A separate income statement
for the Company has not been presented as permitted by the Companies Act 1985 as applied in the
Falkland Islands by the Companies (Amendment) Ordinance 2006.
Argos Resources Ltd
Annual report 2019
Page 54
Notes to the parent Company financial statements
Year ended 31 December 2019
5 Staff costs
The information given in note 6 of the consolidated financial statements relates wholly to the
Company. There is no difference between the directors’ remuneration of the parent Company and
the Group.
6
Investments
Investment in subsidiary
Cost:
At 1 January and
31 December
2019
$’000
2018
$’000
2,120
2,120
The principal undertaking in which the Company’s interest at the year-end was 20% or more is as
follows:
Investment in subsidiary
Country of
incorporation
Percentage of voting
rights and ordinary
share capital held
Nature of business
Argos Exploration Ltd
Falkland Islands
7 Other receivables
Amounts due from subsidiary company
Less: provision for impairment (see below)
Amounts due from subsidiary – net
Prepayments
Other
Movement in impairment provision on
amounts due from subsidiary company
As at 1 January
Restatement through opening retained earnings
(Decrease)/increase in impairment in year
As at 31 December
100
2019
$’000
25,448
(15,778)
9,670
11
4
9,685
2019
$’000
15,960
-
(182)
15,778
Oil and gas
exploration
2018
$’000
25,741
(15,960)
9,781
10
4
9,795
2018
$’000
-
15,958
2
15,960
Please refer to note 1 and 2 for the detail of how the provision for impairment has been calculated.
Argos Resources Ltd
Annual report 2019
Page 55
Notes to the parent Company financial statements
Year ended 31 December 2019
8 Trade and other payables
Trade payables
Accruals
2019
$’000
7
34
41
2018
$’000
1
43
44
9 Share capital
Share capital movements are set out note 14 on page 46 of the consolidated financial statements.
10 Other statutory disclosures
Audit services
Costs incurred on audit and other services provided by the auditor are provided on a consolidated
basis in note 7 of the consolidated financial statements.
Share based remuneration
The information given in note 8 of the consolidated financial statements relates wholly to the
Company.
Related party transactions
The information given in note 15 of the consolidated financial statements relates wholly to the
Company.
Commitments
The information given in note 16 of the consolidated financial statements relates wholly to the
Company.
Events after the balance sheet date
There were no reportable events occurring after the balance sheet date.
Argos Resources Ltd
Annual report 2019
Page 56
Investor Information and advisors
Registered office
Argos House
H Jones Road
Stanley
Falkland Islands
Business address
Argos House
H Jones Road
Stanley
Falkland Islands
Company Secretary
Kevin Kilmartin
Argos House
H Jones Road
Stanley
Falkland Islands
Nominated advisor and broker
Cenkos Securities PLC
6.7.8 Tokenhouse Yard
London, EC2R 7AS
Solicitors (Falkland Islands law)
Kevin Kilmartin
Argos House
H Jones Road
Stanley
Falkland Islands
Auditors
BDO LLP
55 Baker Street
London, W1U 7EU
Registrars
Computershare Investor Services (Jersey) Ltd
Queensway House
Hilgrove Street
St Helier
Jersey, JE1 1ES
Bankers
Lloyds Bank PLC
3-5 Bridge Street
Newbury
UK, RG14 5HB
Bankers
Standard Chartered Bank
Ross Road
Stanley
Falkland Islands
Website
www.argosresources.com
Argos Resources Ltd
Annual report 2019
Page 57