Amerigo Resources
Annual Report 2020

Plain-text annual report

Argos Resources Ltd Annual Report Year ended 31 December 2020 Contents Highlights Joint Managing D Statutory information and Corporate governance Strategy and business model Risk management report The board and committees Directors Going concern Remuneration report Group financial statements 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 2 3 4 8 10 10 10 12 16 18 20 22 29 30 31 32 33-48 49 50 51 52-57 58 Argos Resources Ltd Annual report 2020 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 2020 on 1 June 2021. US$299,000 loss (2019: loss of US$401,000) US$438,000 cash reserves at 31 December 2020 (31 December 2019: US$768,000) In April 2021 the Falkland Islands Government agreed to a 12 month extension of the Second Phase of the Licence, with no additional work commitments. The licence now expires on 1 May 2022 $550,000 fund raising in April 2021 means the Group is fully funded for at least 12 months from sign-off of these accounts Argos Resources Ltd Annual report 2020 Page 2 Joint During the reporting period Brent crude oil prices plummeted from over $65 per barrel at year-end 2019 to a low of $20 per barrel in April 2020. The fall in prices was driven initially by competition from OPEC for market share and then exacerbated later by the significant drop in global energy demand as a result of the Covid-19 pandemic supressing oil and gas consumption globally. The industry was hit hard by this unexpected sharp drop in demand and commodity prices, and responded by reducing costs, cutting capital expenditure and delaying projects. Acknowledging this slowdown in activity, the Company requested an extension to the Licence term as more time will be required to recover from this downturn. In April 2021 the Falkland Islands government agreed to a twelve month extension to the Second Phase of the Licence to 1st May 2022. In April 2021 the Company also announced that, subject to shareholder approval, it had raised $550,000 through the placing of new shares. Shareholder approval was obtained at a General Meeting on 30th April. The fund raise, when added to existing cash rese working capital requirements through the term of the Licence extension as well as costs expected to By the end of 2020 Brent crude oil prices had recovered to $50 per barrel and had fully recovered to the $65 per barrel range by April 2021. The oil industry is cautiously increasing activity in response to this recovery albeit still being hampered by operational and logistical difficulties caused by the continuing Covid-19 restrictions. The Company continues to seek partners to participate in drilling on its Licence and is currently engaged with a number of counterparties who have expressed interest. Given the current challenging environment the Company believes it may be some time before any expressions of interest are translated into commitments. Ian Thomson Chairman 28 May 2021 John Hogan Managing Director Argos Resources Ltd Annual report 2020 Page 3 Statutory information The directors submit their report and the consolidated financial statements of Argos Resources Ltd and for the year ended 31 December 2020. Principal activity The principal activity of the Group is exploration for oil and gas in the area licensed to it in the North Falkland Basin. The Licence covers an area of approximately 1,126 square kilometres and was extended by 12 months by the Falkland Islands Government on 20 April 2021. The Licence now expires on 1 May 2022. Results and dividend The results for the year and the Group financial statements. The directors have not recommended a dividend for the year (2019: $nil). year-end are shown in the attached Business review The Group has returned a loss for the year ended 31 December 2020 of $299,000 (2019: loss of $401,000) which equates to a loss per share of 0.14 cents (2019: loss per share of 0.18 cents). Administration expenses were $303,000 in 2020 compared to $433,000 in 2019. The difference is due largely to a one off $88,000 share-based payment charge for the extension of the options scheme in 2019 and the slowdown and reduced travel in 2020, experienced by the sector due to Covid-19. 2019, reflecting the administration costs. Cash in the year decreased from $768,000 to $438,000. decreased from $29.5 million to $29.2 million in the year since 31 December Outlook for the next financial year The Group carried out a successful fund raise in April 2021 which will fund the continuing search for a farmout partner and means that the Group is fully funded for the period of the licence extension, and at least 12 months from sign-off of these accounts. See Accounting Policy note 1 on page 34 for comments in relation to going concern. Argos Resources Ltd Annual report 2020 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 5 May 2021, the Company has been notified of interests in 3% or more of the Company rights, based on an issued share capital of 235,141,206, as shown below: Shareholder/Fund manager Ian Thomson Iain Aylwin Orian Partners LP JP Morgan Asset Management (UK) Ltd Portogon Investments SA Robert Smith Percentage of voting rights 14.93 8.56 5.91 4.63 4.25 4.01 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 2020 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 2019 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 Following the share subscription which took place after the year end and referred to in Note 17, Ian Thomson subscribed for a further 6,558,182 new shares bringing the total shares held by him to 35,102,883. The directors also hold options in the Company on page 21. Argos Resources Ltd Annual report 2020 Page 5 Statutory information (continued) agreements The terms of the director 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. as follows. 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 mont . Each non-executive director has been duly re-elected on the expiration of their term in office. Related party transactions See note 14. Events after the reporting date See note 17. 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 (2019: $nil). Creditor payment policy contractual obligations. Average creditor days for the year were 1 day (2019: 9 days), on the basis of accounts payable (excluding retention held) as a percentage of purchase ledger turnover which includes amounts capitalised. capacity as directors, obtain independent 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 5 to these accounts. Health, safety and the environment protection of the environment which adhere to all applicable laws and represent best practice. the Argos Resources Ltd Annual report 2020 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 2020 Page 7 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 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 2020 Page 8 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: 28 May 2021 Argos Resources Ltd Annual report 2020 Page 9 Corporate governance 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 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 Company has adopted an anti- require any proposed share transaction by a director to be pre-approved by the Chairman. The directors believe that these, 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 has followed the QCA recommended location for each of the 10 principles in terms of 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 The principal activity of the Group is exploration for oil and gas in the area licensed to it in the North Falkland Basin. The Licence covers an area of approximately 1,126 square kilometres and the main challenge and focus of the business going forward is to attract well-resourced partners to meet the drilling commitment under the Licence. Following a successful fund raise in April 2021 the Group is fully funded for at least 12 months from sign-off of these accounts. Risk management number of factors. and results could be materially adversely affected by a Argos Resources Ltd Annual report 2020 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 withdrew 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 was extended by 12 months by the Falkland Islands Government on 20 April 2021 and now expires on 1 May 2022. The licence requires a well to be drilled by 1 May 2022. There is a risk that the licence will expire and not be extended. Mitigation: In April 2021 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 2022. 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: Following a successful fund raise in April 2021 the Group is fully funded for at least 12 months from sign-off of these accounts, 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. Argos Resources Ltd Annual report 2020 Page 11 Corporate Governance (continued) 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. The board has an appropriate balance between executive and non-executive directors, with three independent non-executive directors. All board appointments are for a maximum of three years, with two directors offering themselves up for re-election, by rotation, at each AGM. number of t 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 on an individual basis with the head of the Audit Committee at least monthly. In addition, individual telephone meetings are held with the Senior non-executive director on a bi- monthly basis. tage of development the board do not believe that any formal procedures beyond this are necessary. No significant changes took place following discussions which took place during 2020. Argos Resources Ltd Annual report 2020 Page 12 Corporate Governance (continued) The Company complies with Rule 21 of the AIM Rules for Companies regarding dealings in the 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. 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; 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 by sending an email to info@argosresources.com. The audit committee has considered the need for an internal audit function and regards this as 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 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 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. Argos Resources Ltd Annual report 2020 Page 13 Corporate Governance (continued) The audit committee held one meeting during the year and during that meeting the following items were considered: the audit in relation to the annual report: report to members of the audit committee; and, changes in accounting policies and practices; judgement areas and accounting issues which are of a subjective nature; significant adjustments resulting from the audit; the going concern position of the company for a period of 12 months from the date of 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 AIM Rules and regulatory requirements; compliance with corporate governance requirements; narrative elements; and, the draft RNS and annual report. , 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. believe that it is necessary to have any formal structure in place to deal with succession planning. he board do not No appointments to the board were made in the year under review. Argos Resources Ltd Annual report 2020 Page 14 Corporate Governance (continued) Internal controls The board of 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. 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. 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 5 2 5 5 Audit committee meetings - - - Remuneration committee meetings - - - 1 1 1 1 1 1 1 1 Argos Resources Ltd Annual report 2020 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. Given the size and monitoring of the development or mentoring needs of individual directors is necessary, beyond the annual informal assessment carried out by the Chairman. 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 81) Skills and experience Ian, a Chartered Engineer, founded Argos in 1995. After an early career in the mining and energy equipment industry, he became 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 68) 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. Committee membership None Andrew Irvine FCCA Finance Director (aged 59) 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 2020 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 70) 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 61) 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 2020 Page 17 Corporate Governance (continued) James Ragg LLB, FCA Non-executive Director (aged 54) 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. On 7 April 2021 the Company announced that it had conditionally raised US$550,000 through a subscription by certain new shareholders and Ian Thomson, Executive Chairman of the Company and the Fundraise was ratified by the passing of the required Resolutions at a General Meeting held on 30 April 2021. On 20 April 2021 the Falkland Islands Government agreed an extension the second term of the Company's PL001 Licence by twelve months, to 1 May 2022. Following the successful fund raise in April 2021 the Group has sufficient cash resources to continue for at least 12 months from sign-off of these accounts. on finding an exploration partner. The Group continues to seek partners to participate in drilling on its Licence and is currently engaged with a number of counterparties who have expressed interest. However, given the current challenging environment the Group believes it may be some time before any expressions of interest are translated into commitments and further extensions to the Licence term may be required. In order to continue as a going concern beyond the current Licence term, which expires on 1 May 2022, the Company will need to raise further finance, either through a farmout partner or by raising funds in an equity issue. Argos Resources Ltd Annual report 2020 Page 18 Corporate Governance Going concern (continued) Should the Directors be unable to raise sufficient funds, find an exploration partner, or negotiate further Licence extensions the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. These factors indicate the existence of a material uncertainty which may cast significant doubt over concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern. See also Accounting Policy note 1 on page 34. 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 2020 Page 19 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. 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 once 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. I M Thomson J Hogan A Irvine D Carlton C Fleming J Ragg remuneration Remuneration above 2020 2020 2020 Pension contributions Fees Total 2019 Fees and total - 50 20 10 10 10 100 128 - - 1 - - - 1 2 - 50 21 10 10 10 - 99 21 19 10 20 101 169 130 218 Argos Resources Ltd Annual report 2020 Page 20 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 2020 and held by directors are as follows: Date of grant 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 J Hogan D Carlton J Ragg Total Argos Resources Ltd Annual report 2020 Page 21 Opinion on the financial statements In our opinion: the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 1985 as it applies in the Falkland Islands by virtue of the Companies (Amendment) Ordinance 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 1985 as it applies in the Falkland Islands by virtue of the Companies (Amendment) Ordinance 2006. statement of comprehensive income, the Consolidated and Parent Company statements of financial position, the Consolidated and Parent Company statements of cash flows, the Consolidated and Parent 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 Group 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 the Companies Act 1985 as it applies in the Falkland Islands b 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 the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remain independent of the Group and the Parent Company in accordance with the ethical Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Material uncertainty related to going concern We draw attention to note 1 to the financial statements which explains that the Group and Parent continue as a going concern is dependent on the finding of an exploration partner, obtaining further funding and negotiating further License extensions. As stated in note 1, these events or conditions, along with other matters as set out in note 1, indicate that a material uncertainty exists concern. Our opinion is not modified in respect of this matter. In auditing the financial statements, we have basis of accounting in the preparation of the financial statements is appropriate. We considered going concern to be a Key Audit Matter based on our assessment of the risk and the effect on our audit. Argos Resources Ltd Annual report 2020 Page 22 to adopt the going concern basis of accounting and in response to the Key Audit Matter included: We have obtained and reviewed the cash flow forecasts which cover the period to December 2022 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 discussed with management their plans regarding finding an exploration partner and confirmed they have included expenditure in their forecast to assist them achieve this. We have obtained and reviewed the correspondence from the Falkland Islands Government approving the extension of the licence from May 2021 to May 2022 and we have reviewed the terms of the licence to check that it had been reassigned to Argos and to check the period that it covers. We have reviewed the disclosures throughout the financial statements to determine if these are Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Overview Coverage1 Key audit matters Materiality 100% (2019: 100%) of Group loss before tax 100% (2019: 100%) of Group total assets 2020 2019 Going concern Valuation of intangible assets Group financial statements as a whole $450,000 (2019: $450,000) based on 1.5% (2019: 1.5%) of Total assets. An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. 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. 1 These are areas which have been subject to a full scope audit by the group engagement team Argos Resources Ltd Annual report 2020 Page 23 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that 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 of our report, we have determined the matter below to be the key audit matter to be communicated in our report. Our application of materiality Argos Resources Ltd Annual report 2020 Page 24 In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. 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. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: for Materiality Basis determining materiality Rationale for the benchmark applied Performance materiality Basis determining performance materiality Group financial statements Parent company financial statements 2020 $450,000 1.5% of assets total 2019 $450,000 1.5% of assets total 2020 $180,000 1.5% of assets total 2019 $337,500 75% of Group materiality We determined that an asset based measure is ity is the exploration and development of oil and gas assets company, such that the asset base is considered to be a key financial metric for users of the financial statements. $340,000 $337,500 $135,000 Calculated as a of percentage group materiality the given assessment of aggregation risk. $253,000 for 75% of materiality was considered a reasonable basis, taking into consideration: the expected value of misstatements was likely to be 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. We also determined that for the statement of comprehensive income, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined materiality for these items to be $30,000 (2019: $40,000) based on 10% of loss after tax. We further applied a performance materiality level of 75 % of specific materiality omponent materiality The Group comprises the ultimate parent Company, Argos Resources Ltd, and its wholly owned subsidiary Argos Exploration Ltd. Materiality for the subsidiary, Argos Exploration Limited has been set at $340,000 (2019: $337,500) on a similar basis of 75% of Group materiality. Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of $22,500 (2019: $22,500). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Argos Resources Ltd Annual report 2020 Page 25 Other information The directors are responsible for the other information. The other information comprises the information included in the annual report oth 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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. Other Falkland Islands company law reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Falkland Islands company law and ISAs (UK) to report on certain opinions and matters as described below. on Matters which we are to required report by exception We have nothing to report in respect of the following matters in relation to which the Falkland Islands company law 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 made; or we have not received all the information and explanations we require for our audit. ot Responsibilities of Directors statements, 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. 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. Argos Resources Ltd Annual report 2020 Page 26  responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole eport 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. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: We obtained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates and considered the significant laws and regulations to be those relating to the industry, financial reporting framework, tax legislation and the listing rules; We held discussions with management and the Board to consider any known or suspected instances of non-compliance with laws and regulations or fraud identified by them; Reviewing minutes from board meetings of those charged with governance to identify any instances of non-compliance with laws and regulations; Assessing the susceptibility of the Group's financial statements to material misstatement, including how fraud might occur; In response to the risk of management override of control, we identified and tested any large or unusual (those with key risk characteristics) journal entries made in the year; We reviewed estimates and judgements applied by Management in the financial statements to assess their appropriateness and the existence of any systematic bias (refer to key audit matter above); and Communicating relevant identified laws and regulations and potential fraud risks to all audit team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. www.frc.org.uk/auditorsresponsibilities. Argos Resources Ltd Annual report 2020 Page 27 Use of our report 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 for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility work, for this report, or for the opinions we have formed. BDO LLP, Statutory Auditor London, UK 28 May 2021 Argos Resources Ltd Annual report 2020 Page 28 Consolidated statement of comprehensive income Year ended 31 December 2020 Administrative expenses Finance income Foreign exchange gains Note 4 (Loss) for the year attributable to owners of the parent Total comprehensive (loss) for the period attributable to owners of the parent Basic and diluted (loss) per share (cents) 9 The notes on pages 33 to 48 form part of the financial statements. Year ended Year ended 31 December 31 December 2020 $ (303) 1 3 2019 $ (433) 4 28 (299) (401) (299) (0.14) (401) (0.18) Argos Resources Ltd Annual report 2020 Page 29 Consolidated statement of financial position As at 31 December 2020 Note 2020 2019 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 10 11 12 13 28,815 28,815 28,737 28,737 40 438 478 86 768 854 29,293 29,591 59 59 58 58 29,234 29,533 6,696 30,071 (7,533) 6,696 30,071 (7,234) 29,234 29,533 The notes on pages 33 to 48 form part of the financial statements. These financial statements were approved by the directors and authorised for issue on 28 May 2021 and are signed on their behalf by: I M Thomson Chairman Argos Resources Ltd Annual report 2020 Page 30 Consolidated statement of cash flows Year ended 31 December 2020 Cash flows from operating activities (Loss) for period before taxation Adjustments for: Finance income Foreign exchange (gains) Share based remuneration expensed Net cash (outflow) from operating activities before changes in working capital Decrease in other receivables Increase/(Decrease) in other payables Net cash outflow from operating activities Investing activities Interest received Exploration and development expenditure Net cash (used) in investment activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Exchange gains on cash and cash equivalents Cash and cash equivalents at end of the year Note Year ended Year ended 31 December 31 December 2020 $ (299) (1) (3) - 2019 $ (401) (4) (28) 89 (303) (344) 1 1 (301) 1 (33) (32) (333) 768 3 438 377 (3) 30 4 (82) (78) (48) 788 28 768 The notes on pages 33 to 48 form part of the financial statements. Argos Resources Ltd Annual report 2020 Page 31 Consolidated statement of changes in equity Year ended 31 December 2020 At 1 January 2019 Total comprehensive income for the year Share based income expense Share based income adjustment for expired options At 31 December 2019 and 1 January 2020 Total comprehensive income for the year Share capital Share premium Retained losses Total equity 6,696 30,071 (6,899) 29,868 - - - - - - (401) 89 (23) (401) 89 (23) 6,696 30,071 (7,234) 29,533 - - (299) (299) At 31 December 2020 6,696 30,071 (7,533) 29,234 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 33 to 48 form part of the financial statements. Argos Resources Ltd Annual report 2020 Page 32 Notes to the consolidated financial statements Year ended 31 December 2020 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. The principal activity of the Group is exploration for oil and gas in the area licensed to it in the North Falkland Basin. The Licence covers an area of approximately 1,126 square kilometres and was extended by 12 months by the Falkland Islands Government on 20 April 2021. The Licence now expires on 1 May 2022. 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 28 May 2021 and are subject to adoption at the Annual General Meeting of shareholders which is expected to be held in Stanley, Falkland Islands, in October 2021. 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 D indicated. The following new standards, amendments and interpretations are effective for the first time for periods beginning on or after 1 January 2020 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: IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Disclosure Initiative - Definition of Material); Accounting Estimates and Errors (Amendment IFRS 3 Business Combinations (Amendment Definition of Business); Conceptual Framework for Financial Reporting (Revised); and, Phase 1. IBOR Reform and its Effects on Financial Reporting Argos Resources Ltd Annual report 2020 Page 33 Notes to the consolidated financial statements Year ended 31 December 2020 Accounting policies (continued) 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 as follows: Covid-19-Related Rent Concessions IBOR Reform and its Effects on Financial Reporting Amendment to IFRS 16; Phase 2; Onerous Contracts Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 Cost of Fulfilling a Contract (Amendments to IAS 37); and IAS 41); and, References to Conceptual Framework (Amendments to IFRS 3). The directors have assessed the impact of the above amendment and do not believe that it will have any impact on the Group reporting. 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. On 7 April 2021 the Company announced that it had conditionally raised US$550,000 through a subscription by certain new shareholders and Ian Thomson, Executive Chairman of the Company and the Fundraise was ratified by the passing of the required Resolutions at a General Meeting held on 30 April 2021. On 20 April 2021 the Falkland Islands Government agreed to an extension of the second term of the Company's PL001 Licence by twelve months, to 1 May 2022. Following the successful fund raise in April 2021 the Group has sufficient cash resources to continue for at least 12 months from sign-off of these accounts. on finding an exploration partner. The Group continues to seek partners to participate in drilling on its Licence and is currently engaged with a number of counterparties who have expressed interest. However, given the current challenging environment the Group believes it may be some time before any expressions of interest are translated into commitments and further extensions to the Licence term may be required. In order to continue as a going concern beyond the current Licence term, which expires on 1 May 2022, the Company will need to raise further finance, either through a farmout partner or by raising funds in an equity issue. Argos Resources Ltd Annual report 2020 Page 34 Notes to the consolidated financial statements Year ended 31 December 2020 Accounting policies (continued) Should the Directors be unable to raise sufficient funds, find an exploration partner, or negotiate further Licence extensions the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. These factors indicate the existence of a material uncertainty which may cast significant doubt over statements do not include the adjustments that would result if the Group was 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 2020 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. 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. capitalised exploration expenditure, impairment and royalty interests Intangible assets 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 . 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 2020 Page 35 Notes to the consolidated financial statements Year ended 31 December 2020 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 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. Revenue and income The Group has no income other than investment income which 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. 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 alents 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. Argos Resources Ltd Annual report 2020 Page 36 Notes to the consolidated financial statements Year ended 31 December 2020 Accounting policies (continued) 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. 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$ 2020 1.37 2019 1.33 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 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 2020 Page 37 Notes to the consolidated financial statements Year ended 31 December 2020 2 Financial instruments financial assets held at amortised cost financial liabilities held at amortised cost and these are all current financial liabilities. Financial liabilities comprise other payables which are categorised as 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$. The risk of any loss, in terms of meeting future liabilities, is however eliminated by matching the currencies of cash balances with the currencies of projected liabilities. As of 31 December 2020 the Group s financial assets and financial liabilities were denominated in a mixture of US$ and Sterling which consisted of: Financial assets Other receivables Less: prepayments Cash and cash equivalents Financial Liabilities Other payables Net financial assets Financial assets held at amortised cost Sterling denominated US$ denominated Total 14 (10) 434 438 26 (26) 4 4 Financial liabilities held at amortised cost (59) 379 - 4 40 (36) 438 442 (59) 383 Argos Resources Ltd Annual report 2020 Page 38 Notes to the consolidated financial statements Year ended 31 December 2020 Financial instruments (continued) At 31 December 2019 the comparative balances were: Financial assets Other receivables Less: prepayments Cash and cash equivalents Financial liabilities Other payables Net financial assets Financial assets held at amortised cost Sterling denominated US$ denominated Total 15 (11) 744 748 71 (71) 24 24 Financial liabilities held at amortised cost (58) 690 - 24 86 (82) 768 772 (58) 714 If the US$ had strengthened against Sterling by 10%, the loss for the year would increase and equity would reduce by $38K (2019: increase in loss and decrease in equity of $69K). Conversely if the US$ weakens against Sterling by 10% the loss for the year would decrease and equity would increase by $38K (2019: decrease in loss and increase in equity of $69K). 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 2020: Institution Lloyds Bank PLC Standard Chartered Bank 2020 2019 382 56 438 637 131 768 Argos Resources Ltd Annual report 2020 Page 39 Notes to the consolidated financial statements Year ended 31 December 2020 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 carrying values in the consolidated statement of financial position and notes to the financial information. 3 Significant accounting judgements, estimates and assumptions 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. 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. On 7 April 2021 the Company announced that it had conditionally raised US$550,000 through a subscription by certain new shareholders and Ian Thomson, Executive Chairman of the Company and the Fundraise was ratified by the passing of the required Resolutions at a General Meeting held on 30 April 2021. On 20 April 2021 the Falkland Islands Government agreed to an extension of the second term of the Company's PL001 Licence by twelve months, to 1 May 2022. Following the successful fund raise in April 2021 the Group has sufficient cash resources to continue for at least 12 months from sign-off of these accounts. Argos Resources Ltd Annual report 2020 Page 40 Notes to the consolidated financial statements Year ended 31 December 2020 Significant accounting judgements, estimates and assumptions (continued) on finding an exploration partner. The Group continues to seek partners to participate in drilling on its Licence and is currently engaged with a number of counterparties who have expressed interest. However, given the current challenging environment the Group believes it may be some time before any expressions of interest are translated into commitments and further extensions to the Licence term may be required. In order to continue as a going concern beyond the current Licence term, which expires on 1 May 2022, the Company will need to raise further finance, either through a farmout partner or by raising funds in an equity issue. Should the Directors be unable to raise sufficient funds, find an exploration partner, or negotiate further Licence extensions the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. These factors indicate the existence of a material uncertainty which may cast significant doubt over not include the adjustments that would result if the Group was unable to continue as a going concern. 4 Administrative expenses n (see note 5) Professional fees Other expenses Total 5 Remuneration and fees Pensions* Share based payment expense (see note 7) Total 2020 $ 130 146 27 303 2019 218 161 54 433 2020 2019 128 2 - 130 127 2 89 218 *A Irvine is accruing retirement benefits under a defined contribution pension arrangement. on page 20. The average monthly number of employees, including directors, during this and the preceding year was 6. Argos Resources Ltd Annual report 2020 Page 41 Notes to the consolidated financial statements Year ended 31 December 2020 6 2020 2019 Fees payable to the auditor for the statements statements Review of interim accounts Total payable for audit related services other services: Taxation Taxation services for the subsidiary company 29 5 - 34 3 3 40 30 5 - 35 4 6 45 Argos Resources Ltd Annual report 2020 Page 42 Notes to the consolidated financial statements Year ended 31 December 2020 7 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 2019 Options expired during 20192 At 31 December 2019 and 31 December 2020 Average share price on date exercised (pence) Exercise price (pence) 2 2 2 Number 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 capitalised Equity-settled 2020 $ - - - 2019 $ 89 (23) (66) 2 Expired options relate to a contractor and not a director or employee. Argos Resources Ltd Annual report 2020 Page 43 Notes to the consolidated financial statements Year ended 31 December 2020 8 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 2020 2019 - (299) (78) 78 - - - - - (401) (104) 103 - - 1 - 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 2020 2019 9,000 22,900 (28,700) 2,600 8,600 22,900 (28,700) 2,200 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 2020 Page 44 Notes to the consolidated financial statements Year ended 31 December 2020 9 Earnings per share Shares in issue brought forward (2 pence shares) Shares in issue carried forward Weighted average shares in issue (Loss) for the year Weighted average number of ordinary shares in issue during the year Basic (loss) per ordinary share (cents) 2020 Number 220,713,205 2019 Number 220,713,205 220,713,205 220,713,205 220,713,205 220,713,205 2020 (299) 2019 (401) 220,713,205 220,713,205 (0.14) (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. As the Group is reporting a loss for both 2019 and 2020 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 2020 Page 45 Notes to the consolidated financial statements Year ended 31 December 2020 10 Exploration and evaluation (E&E) intangible assets 1 January 2019 Additions Adjustment for share options expired At 31 December 2019 and 1 January 2020 Additions At 31 December 2020 Exploration & evaluation (E&E) assets Total 28,749 28,749 11 (23) 11 (23) 28,737 28,737 78 28,815 78 28,815 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 35. The Licence was due to expire on 1 May 2021 and prior to expiry the Falkland Islands Government extended the second term of the Licence by 12 months, to 1 May 2022, 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. 11 Other receivables Prepayments Other 12 Trade and other payables Trade payables Accruals 2020 2019 36 4 40 82 4 86 2020 2019 1 58 59 7 51 58 Argos Resources Ltd Annual report 2020 Page 46 Notes to the consolidated financial statements Year ended 31 December 2020 13 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 2019 and and 31 December 2020 14 Related party transactions 2020 2019 14,960 14,960 Number 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 Creditor balances paid Office running costs* Due to Argos Georgia Ltd at 31 December 2020 2019 - 0.3 (0.3) - - - 12 (12) - - * 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 report on page 20 and in note 5. 15 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 2020 nor for the comparative period. Argos Resources Ltd Annual report 2020 Page 47 Notes to the consolidated financial statements Year ended 31 December 2020 16 Contingent liabilities The Group has no anticipated material contingent liabilities. 17 Events after the reporting date On 7 April 2021 the Group announced that it had conditionally raised US$550,000 through a subscription by certain new shareholders and Ian Thomson, Executive Chairman of the Company and the Fundraise was ratified by the passing of the required Resolutions at a General Meeting held on 30 April 2021. Following the successful fund raise in April 2021 the Group has sufficient cash resources to continue for at least 12 months beyond sign -off of these accounts. On 20 April 2021 the Falkland Islands Government agreed to an extension of the second term of the Company's PL001 Licence by twelve months, to 1 May 2022. Argos Resources Ltd Annual report 2020 Page 48 Parent Company financial statements Statement of financial position As at 31 December 2020 Assets Non-current assets Investments 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 s equity Note 6 7 8 9 2020 2019 2,120 2,120 9,703 438 2,120 2,120 9,685 768 10,141 10,453 12,261 12,573 39 39 41 41 12,222 12,532 6,696 30,071 (24,545) 6,696 30,071 (24,235) 12,222 12,532 The Company has elected to take the exemption under section 230 of the Companies Act 1985, to not present the parent company income statement. The net loss for the parent company was $310 thousand (2019: $193 thousand loss). The notes on pages 52 to 57 form part of the financial statements. These financial statements were approved by the directors and authorised for issue on 28 May 2021 and are signed on their behalf by: Ian Thomson Chairman Argos Resources Ltd Annual report 2020 Page 49 Parent Company financial statements Statement of cash flows Year ended 31 December 2020 Cash flows from operating activities (Loss) for period before taxation Adjustments for: Finance income Foreign exchange Share based remuneration expensed IFRS 9 provision/(credit) Net cash (outflow) from operating activities before changes in working capital (Increase)/decrease in other receivables (Decrease) in other payables Net cash (outflow) from operating activities Investing activities Interest received Net cash generated from investment activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Exchange gains on cash and cash equivalents Cash and cash equivalents at end of the year The notes on pages 52 to 57 form part of the financial statements. Year ended 31 December Year ended 31 December 2020 2019 (310) (193) (1) (3) - 31 (4) (28) 89 (182) (283) (318) (50) (1) (334) 1 1 (333) 768 3 438 269 (3) (52) 4 4 (48) 788 28 768 Argos Resources Ltd Annual report 2020 Page 50 Parent Company financial statements Statement of changes in equity Year ended 31 December 2020 Share capital Share premium Retained earnings/ (deficit) Total equity At 1 January 2019 6,696 30,071 (24,108) 12,659 (Loss) for year Share based income expense Share based income adjustment for expired options At 31 December 2019 and 1 January 2020 - - - - - - (193) 89 (23) (193) 89 (23) 6,696 30,071 (24,235) 12,532 (Loss) for year - - (310) (310) At 31 December 2020 6,696 30,071 (24,545) 12,222 The notes on pages 52 to 57 form part of the financial statements. Argos Resources Ltd Annual report 2020 Page 51 Notes to the parent Company financial statements Year ended 31 December 2020 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 h and cash equivalents and other receivables, which are These financial assets were referred to as . 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 2020 Page 52 Notes to the parent Company financial statements Year ended 31 December 2020 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$. The risk of any loss, in terms of meeting future liabilities, is however eliminated by matching the currencies of cash balances with the currencies of projected liabilities. As of 31 December 2020 the a mixture of US$ and Sterling which consisted of: financial assets and financial liabilities were denominated in Financial assets Other receivables Less: prepayments Cash and cash equivalents Financial liabilities Other payables Net financial assets Amortised cost Sterling denominated US$ denominated 14 (10) 434 438 9,689 - 4 9,693 Amortised cost Total 9,703 (10) 438 10,131 (39) 399 - 9,693 (39) 10,092 Argos Resources Ltd Annual report 2020 Page 53 Notes to the parent Company financial statements Year ended 31 December 2020 Financial instruments (continued) At 31 December 2019 the comparative balances were: Current assets Other receivables Less: prepayments Cash and cash equivalents Financial liabilities Other payables Net financial assets Amortised cost Sterling denominated US$ denominated 15 (11) 744 748 9,670 - 24 9,694 Amortised cost Total 9,685 (11) 768 10,442 (41) 707 - 9,694 (41) 10,401 If the US$ had strengthened against Sterling by 10%, the loss for the year would increase and equity would reduce by $40K (2019: increase in loss and reduction in equity of $71K). Conversely if the US$ weakens against Sterling the loss for the year would decrease and equity would increase by $40K (2019: decrease in loss and increase in equity of $71K). 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 2020. Institution Lloyds Bank PLC Standard Chartered Bank 2020 2019 382 56 438 637 131 768 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 2020 Page 54 Notes to the parent Company financial statements Year ended 31 December 2020 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 carrying values in the statement of financial position and notes to the financial information. not materially different from the 4 Loss attributable to the members of the parent Company The loss for the year was $310 thousand (2019: profit of $193 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 2020 Page 55 Notes to the parent Company financial statements Year ended 31 December 2020 5 Staff costs The information given in note 5 of the consolidated financial statements relates wholly to the Company. There is no difference Company and the Group. 6 Investments Investment in subsidiary Cost: At 1 January and 31 December The principal undertaking in which the Company follows: 2020 $ 2019 $ 2,120 2,120 year-end was 20% or more is as Investment in subsidiary Country of incorporation Percentage of voting rights and ordinary share capital held Nature of business Argos Exploration Ltd Falkland Islands 100 Oil and gas exploration 7 Other receivables Amounts due from subsidiary company Less: provision for impairment (see below) Amounts due from subsidiary Prepayments Other net Movement in impairment provision on amounts due from subsidiary company As at 1 January Increase/(decrease) in impairment As at 31 December 2020 2019 25,498 (15,809) 25,448 (15,778) 9,689 10 4 9,703 9,670 11 4 9,685 2020 2019 15,778 31 15,809 15,960 (182) 15,778 Please refer to note 1 and 2 for the detail of how the provision for impairment has been calculated. Argos Resources Ltd Annual report 2020 Page 56 Notes to the parent Company financial statements Year ended 31 December 2020 8 Trade and other payables 2020 2019 Trade payables Accruals 9 Share capital 1 38 39 7 34 41 Share capital movements are set out note 13 on page 47 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 6 of the consolidated financial statements. Share based remuneration The information given in note 7 of the consolidated financial statements relates wholly to the Company. Related party transactions The information given in note 14 of the consolidated financial statements relates wholly to the Company. Commitments The information given in note 15 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 2020 Page 57 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 2020 Page 58 

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