Argos Resources Ltd
Annual Report
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 1
Contents
Page
Highlights
2
Joint Chairman’s statement and
Managing Director’s review
3
Statutory information
4
Statement of directors’ responsibilities
8
Corporate governance
Chairman’s statement
10
Strategy and business model
10
Risk management report
10
The board and committees
13
Directors
17
Going concern
19
Remuneration report
21
Group financial statements
Independent auditor’s report
23
Consolidated statement of comprehensive income
32
Consolidated statement of financial position
33
Consolidated statement of cash flows
34
Consolidated statement of changes in equity
35
Notes to the consolidated financial statements
36-51
Parent Company accounts
Statement of financial position
52
Statement of cash flows
53
Statement of changes in equity
54
Notes to the accounts
55-60
Investor Information and advisors
61
Argos Resources Ltd
Annual report 2021
Page 2
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 2021 on 25 July
2022.
US$356,000 loss (2020 loss of US$299,000).
US$304,000 cash reserves at 31 December 2021 (31 December 2020: US$438,000).
In April 2022 the Falkland Islands Government agreed to extend the licence from 1 May
2022 until 31 December 2022, with no additional work commitments.
A loan provided by the Chairman in June 2022 provides additional working capital and the
Company plans to raise additional capital to support a further extension of the Licence
beyond its current expiry date of 31 December 2022
Ownership changes in the adjacent Sea Lion oilfield and surging oil prices enhance outlook
for the Company.
Argos Resources Ltd
Annual report 2021
Page 3
Chairman’s statement and Managing Director’s review
The Company noted in its 2021 Interim Report the decision announced on 23rd September by Harbour
Energy plc, the then 60% owner and operator of the Sea Lion oilfield, to explore the options to exit the
project and its other license interests in the Falkland Islands. Since then, Navitas Petroleum LP has
committed to acquire Harbour’s interest and the operatorship of the field and has already commenced
work focussed on streamlining the development and reducing front-end capital costs. This is a positive
development for Argos Resources as a commitment by Navitas to develop Sea Lion will attract industry
attention to the North Falkland Basin and significantly increase the likelihood of the Company securing
a farm-in partner. This positive development, coupled with the surge in oil prices in 2022 and the
recognition that energy security has been an overlooked critical issue enhance the future prospects
for the Company.
The Company also announced last year that a pilot study had been commissioned to reprocess some
of the 3D seismic data on Licence PL001. The results of this work have been positive and sufficiently
encouraging that the Company intends to extend that work across the main prospects identified in
Licence PL001. The Company believes this additional work should further de-risk those prospects and
enhance its farmout potential. The results of the pilot study have been shared with the Falkland Island
Government and its technical advisers and the Company has informed them of its intention to seek a
further two year licence extension to 31st December 2024 to allow sufficient time for this work to be
undertaken and presented to the industry. Additional capital will need to be raised to meet the costs
of this technical work and to fund the Company’s working capital requirements should a licence
extension be offered.
Ian Thomson
John Hogan
Chairman
Managing Director
22 July 2022
Argos Resources Ltd
Annual report 2021
Page 4
Statutory information
The directors submit their report and the consolidated financial statements of Argos Resources Ltd and
its subsidiary (the “Group”), for the year ended 31 December 2021.
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 was further extended
in April 2022 and now expires on 31 December 2022.
Results and dividend
The results for the year and the Group’s financial position as at the year-end are shown in the attached
financial statements. The directors have not recommended a dividend for the year (2020: $nil).
Business review
The Group has returned a loss for the year ended 31 December 2021 of US$356,000 (2020: loss of
US$299,000) which equates to a loss per share of 0.15cents (2020: loss per share of 0.14 cents).
Administration expenses were US$355,000 in 2021 compared to US$303,000 in 2020.
Shareholders’ equity increased from US$29.2 million to US$29.4 million in the year since 31 December
2020, reflecting the fund raise less administration costs and investment in the licence area. Cash in the
year decreased from US$438,000 to US$304,000.
Outlook for the next financial year
The Group carried out a successful fund raise in April 2021 which funded the Company until mid-2022.
In June 2022 the Chairman agreed a drawdown facility of £110,000 to enable the Group to continue
beyond that point. The Group intends to seek a licence extension of a further two years to take the
licence to December 2024 and funding in support of a work programme which will be required under
any licence extension.
See Accounting Policy note 1 on page 37 for comments in relation to going concern.
Argos Resources Ltd
Annual report 2021
Page 5
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 30 June 2022, the Company has been notified of interests in 3% or more of the Company’s voting
rights, based on an issued share capital of 235,141,206, as shown below:
Shareholder/Fund manager
Percentage of
voting rights
Ian Thomson
14.93
Iain Aylwin
8.56
Orian Partners LP
5.91
JP Morgan Asset Management (UK) Ltd
4.63
Portogon Investments SA
4.25
Robert Smith
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
At 31 December 2021
Ordinary shares of
2 pence each
At 31 December 2020
Ordinary shares of
2 pence each
I M Thomson
Chairman
35,102,883
28,544,701
J Hogan
Managing Director
3,000,000
3,000,000
A Irvine
Finance Director
2,125,000
2,125,000
D Carlton
Non-executive
3,750,000
3,750,000
C Fleming
Non-executive
2,625,000
2,625,000
J Ragg
Non-executive
200,000
200,000
Total
46,802,883
40,244,701
Following the share subscription which took place in April 2021, 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’s shares which are detailed in the directors’ remuneration report
on page 22.
Argos Resources Ltd
Annual report 2021
Page 6
Statutory information (continued)
Directors’ service agreements
The terms of the directors’ service agreements or letters of engagement are summarised as follows.
The Company entered into a service agreement with the executive directors Ian Thomson, John Hogan
and Andrew Irvine on 8 July 2010 setting out the terms of their employment following the admission
to AIM, which took place on 29 July 2010. The terms of the service contracts permit termination by
either party giving notice to the other of not less than 12 months in the case of Ian Thomson and John
Hogan and 6 months for Andrew Irvine. There are no specific entitlements on termination of any of
the employments concerned.
Dennis Carlton, Christopher Fleming and James Ragg are engaged as non-executive directors upon the
terms of various letters of appointment, the principal terms of which are that each of them is
appointed for an initial term of up to three years commencing at the time of admission, subject to
early termination rights of not less than three months’ notice by either party. Each non-executive
director has been duly re-elected on the expiration of their term in office.
Related party transactions
See note 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 (2020: $nil).
Creditor payment policy
It is the Group’s policy to ensure that all of its suppliers are paid promptly and in accordance with
contractual obligations. Average creditor days for the year were 1 day (2020: 1 day), on the basis of
accounts payable (excluding retention held) as a percentage of purchase ledger turnover which
includes amounts capitalised.
Directors’ and officers’ insurance
The Group purchased directors’ and officers’ liability insurance. The directors may also, in their
capacity as directors, obtain independent legal advice at the Group’s expense if they consider it
necessary to do so.
Employees
The Group employees consisted of three executive and three non-executive directors during the course
of the year who are included in the total staff numbers shown in note 5 to these accounts.
Health, safety and the environment
It is the Company’s objective to maintain the highest standards for health and safety and the
protection of the environment which adhere to all applicable laws and represent best practice.
Argos Resources Ltd
Annual report 2021
Page 7
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 2021
Page 8
Statement of directors’ responsibilities in respect of the annual report and the
financial statements
The directors are responsible for preparing the annual report and the Group and parent Company
financial statements in accordance with applicable law and regulations.
Company law, in the Falkland Islands requires the directors to prepare group and parent company
financial statements for each financial year. Under that law the directors have elected to prepare the
Group and parent Company financial statements in accordance with applicable law as it applies in the
Falkland Islands and International Financial Reporting Standards as adopted by the European Union
(IFRSs).
The financial statements are required to give a true and fair view of the state of affairs of the Group
and parent Company and of the Group’s profit or loss for that period. The directors are also required
to prepare financial statements in accordance with the rules of the London Stock Exchange for
companies trading securities on the Alternative Investment Market. In preparing each of the Group
and parent Company financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether the Group and parent Company financial statements have been prepared in
accordance with IFRSs as adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Group and parent Company will continue in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable
accuracy at any time the financial position of the Company and enable them to ensure that the
financial statements comply with the Companies Act 1985 as applied in the Falkland Islands by the
Companies (Amendment) Ordinance 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors are responsible for ensuring the annual report and the financial statements are made
available on a website. Financial statements are published on the Company’s website in accordance
with legislation in the Falkland Islands governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of the directors. The directors’ responsibility also extends
to the ongoing integrity of the financial statements contained therein.
Statement as to disclosure of information to the auditor
Each director in office at the date of this report has confirmed, as far as he is aware, that there is no
relevant information of which the auditor is unaware. Each such director has confirmed that he has
taken all the steps that he ought to have taken as a director in order to make himself aware of any
relevant audit information and to establish that the auditor is aware of that information.
Argos Resources Ltd
Annual report 2021
Page 9
Statement of directors’ responsibilities in respect of the annual report and the
financial statements (continued)
Auditor
BDO LLP will be proposed for reappointment as auditors of the Company at the Annual General
Meeting of the Company in accordance with section 159 of the Companies Act 1948 as applied in the
Falkland Islands by the Companies Act (Amendment) Ordinance 2006.
On behalf of the board
Ian Thomson
Chairman
Date: 22 July 2022
Argos Resources Ltd
Annual report 2021
Page 10
Corporate governance
Chairman’s statement on corporate governance
As a company admitted to trading on AIM, Argos Resources Ltd is required to adopt a recognised
Corporate Governance Code and the Company has chosen to apply the Quoted Companies Alliance
(“QCA”) Corporate Governance Code. The Company believes that high standards of corporate
governance helps effective and efficient decision-making, reduces risk and adds value, which is
important for the long-term benefit of all stakeholders.
Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of
the board.
The board meets four times per year or more frequently if it needs to do so. There is a schedule of
matters reserved for board approval and this ensures that the board exercises control over all key
areas. Corporate Governance is a standing agenda item for each board meeting where directors
confirm their interests and related parties together with any external interests beyond a given
threshold. There is also an opportunity to raise any concerns in relation to corporate governance more
generally.
The Company has adopted an anti-bribery policy and rules for dealings in the Company’s shares, which
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’s objectives.
The Company has followed the QCA recommended location for each of the 10 principles in terms of
whether these are published on the Company’s website or in the annual report and accounts. The
annual report and accounts disclosures are detailed below and the website disclosures can be found
at http://www.argosresources.com/docs/arg-corporate-governance.pdf.
The following paragraphs describe how the company implements the key governance principles
contained within the QCA code in relation to the required disclosure in annual accounts.
Strategy and business model
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 funding for a work program in support
of a licence extension beyond December 2022 and seeking well-resourced partners to help the
Company meet the drilling commitment under the Licence.
Risk management
The Group’s business, financial condition and results could be materially adversely affected by a
number of factors.
Argos Resources Ltd
Annual report 2021
Page 11
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 until 1
May 2022 and beyond that a further extension was granted in April 2022. The licence now expires on
31 December 2022 and requires a well to be drilled by that date. There is a risk that the licence will
expire and not be extended.
Mitigation: In April 2022 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 and in that period a
further extension to 31 December 2022 was granted. Argos continues to discuss activity with the
Falkland Islands Government work programs which would support further licence extensions 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 for Licence PL001 is found.
Mitigation: The Group raised funds in April 2021 and in June 2022 agreed a drawdown facility with the
Chairman, which provides working capital going forward. The Group will need, and is actively working
towards raising further funds, to fund a work program in support of a further licence extension.
See Accounting Policy note 1 on page 37 for comments in relation to going concern
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 2021
Page 12
Corporate Governance
Risk management (continued)
Climate change risk
There is increasing global pressure to reduce the use of fossil fuels in energy production, in order to
lessen the impact this has on climate change.
Mitigation: Substituting oil and gas for greener, renewable forms of energy is complex and will take
time. During the transition to renewables, which will take a considerable number of years, oil and gas
will remain an important resource.
Argos Resources Ltd
Annual report 2021
Page 13
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 non-
executive directors which the board consider to be independent. All board appointments are for a
maximum of three years, with two directors offering themselves up for re-election, by rotation, at
each AGM.
The board’s executive chairman, Ian Thomson, is not considered independent as he holds a substantial
number of the Company’s shares and he has been on the board for more than 10 years. The Company
considers, however, that the benefit of his experience and long involvement with business in the
Falkland Islands more than outweighs the benefits of an independent chairman.
The policy for managing financial risks is set by the board following recommendations from the Finance
Director but the Company has no formal policy on the management of other specific types of risk. 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 length of 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. Given the size and nature of the Group’s operations and its stage 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 2021.
Argos Resources Ltd
Annual report 2021
Page 14
Corporate Governance (continued)
The Company complies with Rule 21 of the AIM Rules for Companies regarding dealings in the
Company’s shares and has adopted a code on dealing in securities to ensure compliance by directors.
Audit committee
The audit committee comprises James Ragg (committee chairman), Dennis Carlton and Chris Fleming.
The board considers all three members of the committee to be independent and is satisfied that at
least one, James Ragg, has recent and relevant financial experience.
The committee invites the remainder of the board and the external auditor to attend its meetings as
observers. It meets the external auditor, in the absence of the remainder of the board, at least once
per year.
The role and responsibilities of the audit committee have been set out in written terms of reference
which are principally:
risk assessment, particularly, but not exclusively, in respect of financial reporting risks;
assessment of processes relating to the Company’s control environment;
oversight of financial reporting;
evaluation of internal and external audit processes; and
development and implementation of policy on the provision of non-audit services by the
external auditor.
The audit committee has established procedures by which concerns regarding accounting or audit
matters may be brought to the committee chairman’s attention and the chairman can be contacted
by sending an email to info@argosresources.com.
The audit committee has considered the need for an internal audit function and regards this as
unnecessary given the Company’s current size and lack of complexity.
The audit committee makes recommendations to the board regarding the appointment,
reappointment and removal of external auditors. At the Annual General Meeting the shareholders
are requested to authorise the audit committee to fix the remuneration of the external auditors.
The audit committee recognises that, for smaller companies, it is cost-effective to procure certain non-
audit services from the external auditor but there is a need to ensure that provision of such services
does not impair, or appear to impair, the auditor’s independence or objectivity. The committee has
therefore put in place a written policy on the use of external auditors which includes clear limits on
the level of non-audit work beyond which the chairman of the audit committee must be consulted
before the assignment can be awarded to the external auditor.
The audit committee was satisfied throughout the year that the external auditor’s objectivity and
independence were in no way impaired by the nature of the non-audit work undertaken or any other
factors including the level of non-audit fees charged.
Argos Resources Ltd
Annual report 2021
Page 15
Corporate Governance (continued)
The audit committee held one meeting during the year and during that meeting the following items
were considered:
the auditors’ report to members of the audit committee; and,
in relation to the annual report:
changes in accounting policies and practices;
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 Quoted Companies Alliance (“QCA”) Corporate Governance Code,
AIM Rules and regulatory requirements;
compliance with corporate governance requirements;
narrative elements; and,
the draft RNS and annual report.
The chairman of the audit committee reports to the board on the committee’s discussions and minutes
of the committee’s meetings are circulated to all directors.
During the period since the year end one further meeting has been held.
Remuneration committee
Board performance is subject to regular review, as well as that of its committees and the individual
directors.
The Chairman meets with the non-executive directors annually, without the other executive directors
present, to evaluate executive director performance in terms of contribution and commitment. In
addition the Chairman also considers the non-executive director performance in terms of contribution
and independence.
The Remuneration Committee meets annually to review the terms, conditions and performance of the
directors.
Nominations committee
The board considers that, at its current stage of development, the Company does not require a
separate nominations committee. The functions of that committee, namely consideration of any new
appointments of directors to the board and succession planning, are carried out by the board as a
whole.
Given the size and nature of the Groups’ operations, and its stage of development, the board do not
believe that it is necessary to have any formal structure in place to deal with succession planning.
No appointments to the board were made in the year under review.
Argos Resources Ltd
Annual report 2021
Page 16
Corporate Governance (continued)
Internal controls
The board of directors is responsible for implementing and reviewing the effectiveness of the Group’s
system of internal control.
The system of internal control is designed to mitigate rather than eliminate risk and therefore provides
reasonable rather than total assurance against material misstatement or loss.
As noted above, the board does not consider it necessary, at the Company’s current stage of
development, to implement an internal audit capability.
The Directors, both executive and non-executive, are expected to devote sufficient time to carry out
their duties. Briefings take place where directors are unable to attend a meeting to ensure that all
contributions are considered.
Directors’ attendance
Directors’ attendance at board and committee meetings for the year is as set out below:
Board
meetings
Audit
committee
meetings
Remuneration
committee
meetings
I M Thomson (Chairman)
6
-
-
J Hogan
6
-
-
A Irvine
6
-
-
D Carlton (chairman, remuneration
committee)
6
1
1
C Fleming
3
1
1
J Ragg (chairman, audit committee)
6
1
1
Total meetings during the year
6
1
1
Argos Resources Ltd
Annual report 2021
Page 17
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
nature of the Groups’ operations, and its stage of development, the board do not believe that any formal
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 82)
Skills and experience
Ian, a Chartered Engineer, founded Argos in 1995. After an early career in the mining and energy equipment
industry, he became the Managing Director of Evergreen Resources Inc.’s exploration and production interests
in the UK and Europe.
External appointments
He is a director of a number of Falkland Islands and overseas companies engaged in fishing and other operations.
Committee membership
None
John Hogan
Managing Director (aged 69)
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 60)
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 2021
Page 18
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 71)
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 2021
Page 19
Corporate Governance (continued)
James Ragg LLB, FCA
Non-executive Director (aged 55)
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 Company will continue in operational
existence for the foreseeable future.
The Group and Parent Company’s ability to continue in operational existence is, however, subject to a
number of uncertainties as follows:
The Company’s PL001 Licence currently expires on 31 December 2022. The Company has already
advised the Falkland Islands Government of its wish to extend the Licence by a further 2 years beyond
this date to undertake new technical work and to market the results of that work to potential industry
partners. A formal application for this Licence extension cannot be submitted before the Falkland
Islands Government completes a review of its relationship with the oil and gas sector which is currently
underway and expected to be completed in Q3 2022. Assuming a favourable outcome to that review,
the Company intends at that time to submit a formal application for the extension to the Licence.
Any offer of such an extension is likely to be conditional on the Company demonstrating that it has
sufficient funding to carry out a work programme and cover administration costs during the Licence
term. Grant of an extension is therefore likely to be dependent on the Company raising significant
further funds in Q3/Q4 2022.
Failure to secure an offer of a licence extension or to raise sufficient funds to meet the conditions of
such an offer will result in the Company being unable to continue as a going concern in the near term.
Argos Resources Ltd
Annual report 2021
Page 20
Corporate Governance
Going concern (continued)
If a licence extension and funding are forthcoming then the Group’s ability to achieve its long term
strategy of developing its exploration projects remains dependent on finding an exploration partner
and the Group continues to seek partners to participate in drilling on its Licence. As at the date of sign
off on these financial statements the oil and gas markets continue to be in a state of considerable
turmoil with very high prevailing prices. The company does not anticipate making progress on finding
a partner until the markets show signs of greater stability but is hopeful that the drivers behind the
current situation will improve the chances of success.
If the Group is unable to find an exploration partner, raise funds or obtain further licence extensions
then it may be unable to realise its assets and discharge its liabilities in the normal course of business.
All the above factors indicate the existence of material uncertainties which cast significant doubt over
the Group and Parent Company’s ability to continue as a going concern, some of which may crystalise
before the end of 2022. 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 37.
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 2021
Page 21
Corporate Governance (continued)
Remuneration report
The remuneration committee comprises Dennis Carlton (committee chairman), Chris Fleming and
James Ragg. The board considers that all members of the remuneration committee are independent.
The committee’s role is to establish the Company’s policy for the remuneration of the executive
directors in order to ensure that all members of the executive management of the Company are
provided with appropriate incentives to encourage enhanced performance.
The committee met formally 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.
Directors’ remuneration for the year is as set out below:
2021
2021
2021
2020
Fees
Pension
contributions
Total
Fees and
total
£’000
£’000
£’000
£’000
I M Thomson
-
-
-
-
J Hogan
46
-
46
50
A Irvine
18
1
19
21
D Carlton
9
-
9
10
C Fleming
9
-
9
10
J Ragg
9
-
9
20
Total directors’
remuneration
91
1
92
101
Remuneration above
converted to $’000
125
2
127
130
On 2 December 2021 the directors agreed to suspend all directors fees and salaries from and including
December 2021 until the end of 2022.
Argos Resources Ltd
Annual report 2021
Page 22
Corporate Governance
Remuneration report (continued)
Share options
No changes were made to the share option scheme in the current or comparative years and the share
options expire on 11 November 2024.
The share options in place as at 31 December 2021 and held by directors are as follows:
Date of grant
Number of
options
brought
forward
Exercised
during the
year
Number of
options carried
forward
Exercise
price
(pence)
J Hogan
12/11/2009
4,805,818
-
4,805,818
2
D Carlton
12/11/2009
875,000
-
875,000
2
J Ragg
12/11/2009
1,025,000
-
1,025,000
2
Total
6,705,818
-
6,705,818
Argos Resources Ltd
Annual report 2021
Page 23
Independent auditor’s report to the members of Argos Resources
Ltd
Opinion on the financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 31 December 2021 and of the Group’s loss for the year
then ended;
•
the Group financial statements have been properly prepared in accordance with IFRSs
adopted by the European Union (EU IFRS);
•
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.
We have audited the financial statements of Argos Resources Ltd (the ‘Parent Company’)
and its subsidiary (the ‘Group’) for the year ended 31 December 2021 which comprise the
Consolidated 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 by virtue of the Companies (Amendment) Ordinance 2006 (“Falkland
Islands company law”).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in
the Auditor’s responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Argos Resources Ltd
Annual report 2021
Page 24
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Material uncertainty related to going concern
We draw attention to note 1 to the financial statements which explains that the Group and
Parent Company’s ability to continue as a going concern is dependent on securing an offer of
a licence extension and raising sufficient funds to meet the conditions of such an offer. 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 which may cast significant doubt over the Group’s
and Parent Company’s ability to continue as a going concern. Our opinion is not modified in
respect of this matter.
In auditing the financial statements, we have concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
We considered going concern to be a key audit matter based on our assessment of the risk
and the effect on our audit.
Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to
continue 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 2023 and compared the forecast overhead expenditure with actual historic
expenditure.
•
We have performed sensitivity analysis on the cash flow forecasts produced by Directors
to determine the level of headroom in the model, and the impact of the sensitivities on
when additional funding is raised
•
We have verified the current cash position of the Group by agreeing to bank statements.
•
We have reviewed the terms of the loan facility provided by the Chairman on 24 June
2022 for up to £110,000 and confirmed that this money is held in a client account at the
Group’s lawyers.
•
We discussed with Directors their plans regarding obtaining a licence extension beyond
31 December 2022. This included reading email correspondence with FIG.
•
We have considered the ability of the Group’s to raise additional equity funding which
included reading correspondence with the Group’s nominated advisor, recent fund raises
by other companies with interests in the Falkland islands and the Company’s ability to
raise capital in the past.
•
We have reviewed the disclosures throughout the financial statements to determine if
these are sufficient and in line with our understanding of the Group and the Parent
Company’s going concern status.
Our responsibilities and the responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report.
Argos Resources Ltd
Annual report 2021
Page 25
Overview
Coverage1
100% (2020: 100%) of Group loss before tax
100% (2020: 100%) of Group total assets
Key audit matters
2021
2020
Going concern
Valuation of intangible assets
Materiality
Group financial statements as a whole
$440,000 (2020: $450,000) based on 1.5% (2020:
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 the Group’s system of internal control, and assessing the risks
of material misstatement in the financial 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 both of the Group’s components,
Argos Resources Ltd and Argos Exploration Ltd, being the Parent Company and
wholly owned subsidiary respectively.
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. The
matters set out below are in addition to the Material Uncertainty related to going concern above
1 These are areas which have been subject to a full scope audit by the group engagement team
Argos Resources Ltd
Annual report 2021
Page 26
which is also a key audit matter. 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.
Key audit matter
How the scope of our audit addressed
the key audit matter
Valuation of
intangible
assets
(notes 1, 3,
10 and 17)
The Group’s exploration
and
evaluation
assets
relate
to
the
areas
licenced
in
the
North
Falkland
Basin
and
represent the key assets
on the Group’s statement
of financial position. As at
31 December 2021, the
Group’s exploration and
evaluation assets totalled
$29.1m (2020: $28.8m).
The Group performed an
impairment
indicator
review to assess whether
there were any indicators
of
impairment for
the
exploration assets and
whether impairment was
required, noting that the
Group holds title to all
licences until December
2022.
Given
the
inherent
judgement and estimates
related
to
mineral
resources associated with
the licence area involved
in
the
assessment of
potential
triggers
of
impairment
and
any
subsequently
required
assessment
of
the
carrying
value
of
the
exploration and evaluation
We
have
reviewed
Management’s
assessment of whether there were any
indicators of impairment.
Our work in connection with the indicators
of impairment included the following:
• We
assessed
and
challenged
Management’s impairment indicator
review to establish whether it was
performed in accordance with the
Group’s accounting policy and the
relevant accounting standard.
• We have obtained and reviewed the
correspondence from the Falkland
Islands Government approving the
extension of the licence from May 2022
to 31 December 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 discussed with Directors
their plans regarding obtaining a
licence
extension
beyond
31
December 2022. This included reading
email correspondence with FIG.
• We read the most recent independent
competent
person’s
report
and
considered whether it contained any
evidence to suggest that there are no
commercially
viable
quantities
of
mineral resources in the licence areas.
• We considered whether there was
evidence in the Group cash flow that
funding was available to maintain the
exploration and evaluation assets in full
and
considered
our
conclusions
alongside the material uncertainty
relating to going concern noted above.
Key observations:
Argos Resources Ltd
Annual report 2021
Page 27
assets, we considered this
to be a key audit matter for
the audit.
Based on the work undertaken, we found
the estimates and judgements made by
management in their impairment indicator
assessment to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in
evaluating the effect of misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic decisions of reasonable
users that are taken on the basis of the financial statements.
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:
Group financial statements
Parent company financial
statements
2021
2020
2021
2020
Materiality
$440,000
$450,000
$180,000
$180,000
Basis
for
determining
materiality
1.5% of total
assets
1.5% of total
assets
1.5% of total
assets
1.5%
of
total
assets
Rationale for the
benchmark
applied
We determined that an asset based measure is appropriate as
the Group’s principal activity is the exploration and development
of oil and gas assets and the Parent’s principle activity is a holding
company, such that the asset base is considered to be a key
financial metric for users of the financial statements.
Performance
materiality
$330,000
$340,000
$135,000
$135,000
Basis
for
determining
75% of materiality was considered a reasonable basis, taking into
consideration:
Argos Resources Ltd
Annual report 2021
Page 28
performance
materiality
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.
Specific materiality
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
$35,000 (2020: $30,000) based on 10% of loss after tax. We further applied a performance
materiality level of 75% of specific materiality to ensure that the risk of errors exceeding
specific materiality was appropriately mitigated.
Component materiality
The Group comprises the ultimate parent Company, Argos Resources Ltd, and its wholly owned
subsidiary Argos Exploration Ltd. Materiality for the subsidiary has been set at $400,000 (2020:
$340,000) based on 1.5% (2020: 1.5%) of Argos Exploration Ltd’s total assets. In the audit of Argos
Exploration Limited, we further applied performance materiality levels of 75% (2020: 75%) of the
component materiality to our testing to ensure that the risk of errors exceeding component materiality
was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in
excess of $22,000 (2020: $22,500). We also agreed to report differences below this threshold that, in
our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the Annual Report other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon. 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.
Argos Resources Ltd
Annual report 2021
Page 29
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.
Matters
on
which we are
required
to
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:
proper accounting records have not been kept by the Parent
Company, or proper returns adequate for our audit have not
been received from branches not visited by us; or
the Parent Company financial statements are not in agreement
with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law
are not made; or
we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of directors’ responsibilities in respect of the financial
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.
In preparing the financial statements, the Directors are responsible for assessing the Group’s
and the Parent Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations,
or have no realistic alternative but to do so.
Argos Resources Ltd
Annual report 2021
Page 30
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
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 fraud or non-compliance with laws and regulations;
•
Assessing the susceptibility of the Group's financial statements to material misstatement,
including how fraud might occur, and we believed the areas in which fraud might occur
were in the management override of controls and bias in accounting estimates and
judgements;
•
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.
Argos Resources Ltd
Annual report 2021
Page 31
A further description of our responsibilities is available on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in
accordance with section 235 of the Companies Act 1985 as it applies in the Falkland
Islands by virtue of the Companies (Amendment) Ordinance 2006. Our audit work has
been undertaken so that we might state to the Parent Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
BDO LLP, Statutory Auditor
London, UK
22 July 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered
number OC305127).
Argos Resources Ltd
Annual report 2021
Page 32
Consolidated statement of comprehensive income
Year ended 31 December 2021
Note
Year
ended
31 December
2021
$’000
Year
ended
31 December
2020
$’000
Administrative expenses
4
(355)
(303)
Finance income
-
1
Foreign exchange (losses)/gains
(1)
3
Loss for the year attributable to owners of
the parent
(356)
(299)
Total comprehensive loss for the
period attributable to owners of the parent
(356)
(299)
Basic and diluted loss per share (cents)
9
(0.15)
(0.14)
The notes on pages 36 to 51 form part of the financial statements.
Argos Resources Ltd
Annual report 2021
Page 33
Consolidated statement of financial position
As at 31 December 2021
Note
2021
2020
$’000
$’000
Assets
Non-current assets
Exploration intangible assets
10
29,135
28,815
29,135
28,815
Current assets
Other receivables
11
43
40
Cash and cash equivalents
304
438
Total current assets
347
478
Total assets
29,482
29,293
Liabilities
Current liabilities
Trade and other payables
12
54
59
Total liabilities
54
59
Total net assets
29,428
29,234
Capital and reserves attributable to
equity holders of the Company
Share capital
13
7,095
6,696
Share premium
30,222
30,071
Retained losses
(7,889)
(7,533)
Total shareholders’ equity
29,428
29,234
The notes on pages 36 to 51 form part of the financial statements.
These financial statements were approved by the directors and authorised for issue on 22 July 2022
and are signed on their behalf by:
I M Thomson
Chairman
Argos Resources Ltd
Annual report 2021
Page 34
Consolidated statement of cash flows
Year ended 31 December 2021
Note
Year
ended
31 December
2021
$’000
Year
ended
31 December
2020
$’000
Cash flows from operating activities
Loss for period before taxation
(356)
(299)
Adjustments for:
Finance income
-
(1)
Foreign exchange losses/(gains)
1
(3)
Net cash outflow from operating activities
before changes in working capital
(355)
(303)
(Increase)/decrease in other receivables
(3)
1
(Decrease)/increase in other payables
(5)
1
Net cash outflow from operating activities
(363)
(301)
Investing activities
Interest received
-
1
Exploration and development expenditure
(320)
(33)
Net cash used in investment activities
(320)
(32)
Financing activities
Issue of ordinary shares
550
-
Net cash from financing activities
550
-
Net decrease in cash and cash equivalents
(133)
(333)
Cash and cash equivalents at beginning of period
438
768
Exchange (losses)/gains on cash and cash
equivalents
(1)
3
Cash and cash equivalents at end of the year
304
438
The notes on pages 36 to 51 form part of the financial statements.
Argos Resources Ltd
Annual report 2021
Page 35
Consolidated statement of changes in equity
Year ended 31 December 2021
Share
capital
$’000
Share
premium
$’000
Retained
losses
$’000
Total
equity
$’000
At 1 January 2020
6,696
30,071
(7,234)
29,533
Total comprehensive loss for the
year
-
-
(299)
(299)
At 31 December 2020
and 1 January 2021
6,696
30,071
(7,533)
29,234
Total comprehensive loss for the
year
-
-
(356)
(356)
Shares issued during year
399
151
-
550
At 31 December 2021
7,095
30,222
(7,889)
29,428
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 36 to 51 form part of the financial statements.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 36
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. A further extension of 8 months
was granted in April 2022 and the Licence now expires on 31 December 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 22 July 2022
and are subject to adoption at the Annual General Meeting of shareholders which is expected to be
held in Stanley, Falkland Islands, in October 2022.
Basis of preparation
These financial statements have been prepared under the historical cost convention, using the
accounting policies set out below, which have been consistently applied unless stated otherwise. The
functional and presentational currency of the parent and subsidiary companies is considered to be US
Dollars (US$). All values are rounded to the nearest thousand Dollars ($’000) except where otherwise
indicated.
Changes in accounting standards
Standards which have been implemented in the year
The following new standards, amendments and interpretations are effective for the first time for
periods beginning on or after 1 January 2021 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:
Covid-19-Related Rent Concessions – Amendment to IFRS 16;
IBOR Reform and its Effects on Financial Reporting – Phase 2 - Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16;
IAS 8- effect of initial application of IFRS;
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 37
Accounting policies (continued)
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which have been
issued by the IASB that are effective in future accounting periods that the group has decided not to
adopt early. The most significant of these is as follows:
IAS 8 – impact disclosures with regard to a new IFRS which has been issued but not yet
effective and not applied early;
The following amendments are effective for the period beginning 1 January 2022:
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
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
and IAS 41); and
References to Conceptual Framework (Amendments to IFRS 3).
The following amendments are effective for the period beginning 1 January 2023:
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
Definition of Accounting Estimates (Amendments to IAS 8); and
Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments
to IAS 12).
The directors do not expect any other standards issued by the IASB, but not yet effective, to have a
material impact on the group.
The following is a list of other new and amended standards which, at the time of writing, had been
issued by the IASB but which are effective in future periods.
IFRS 17 Insurance Contracts;
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 Company will continue in operational
existence for the foreseeable future.
The Group and Parent Company’s ability to continue in operational existence is, however, subject to a
number of uncertainties as follows:
The Company’s PL001 Licence currently expires on 31 December 2022. The Company has already
advised the Falkland Islands Government of its wish to extend the Licence by a further 2 years beyond
this date to undertake new technical work and to market the results of that work to potential industry
partners. A formal application for this Licence extension cannot be submitted before the Falkland
Islands Government completes a review of its relationship with the oil and gas sector which is currently
underway and expected to be completed in Q3 2022. Assuming a favourable outcome to that review,
the Company intends at that time to submit a formal application for the extension to the Licence.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 38
Accounting policies (continued)
Any offer of such an extension is likely to be conditional on the Company demonstrating that it has
sufficient funding to carry out a work programme and cover administration costs during the Licence
term. Grant of an extension is therefore likely to be dependent on the Company raising significant
further funds in Q3/Q4 2022.
Failure to secure an offer of a licence extension or to raise sufficient funds to meet the conditions of
such an offer will result in the Company being unable to continue as a going concern in the near term.
If a licence extension and funding are forthcoming then the Group’s ability to achieve its long term
strategy of developing its exploration projects remains dependent on finding an exploration partner
and the Group continues to seek partners to participate in drilling on its Licence. As at the date of sign
off on these financial statements the oil and gas markets continue to be in a state of considerable
turmoil with very high prevailing prices. The company does not anticipate making progress on finding
a partner until the markets show signs of greater stability but is hopeful that the drivers behind the
current situation will improve the chances of success.
If the Group is unable to find an exploration partner, raise funds or obtain further licence extensions
then it may be unable to realise its assets and discharge its liabilities in the normal course of business.
All the above factors indicate the existence of material uncertainties which cast significant doubt over
the Group and Parent Company’s ability to continue as a going concern, some of which may crystalise
before the end of 2022. The financial statements do not include the adjustments that would result if
the Group was unable to continue as a 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.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 39
Accounting policies (continued)
Basis of consolidation
The consolidated financial statements incorporate the results of Argos Resources Ltd and its wholly
owned subsidiary undertaking as at 31 December 2021 using the acquisition method of accounting.
Where the acquisition method is used, the results of subsidiary undertakings are included from the
date of acquisition.
All inter-company accounts and transactions have been eliminated on consolidation.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating decision maker has been identified as the board
of directors.
The Group’s operations consist entirely of oil and gas exploration around the Falkland Islands and in
the opinion of the directors there is only one business segment and the information contained in the
financial statements reflects the operations within that segment.
Intangible assets – capitalised exploration expenditure, impairment and royalty interests
Evaluation and exploration (E&E) expenditure
As part of the 2015 farmout transaction the Group retained an ORRI of 5% of gross revenues from all
hydrocarbon discoveries developed within the Licence area and the accumulated historical E&E cost
was reclassified as “royalty interests”. The Group therefore believed that the most appropriate
method of accounting for the Noble and Edison withdrawal in 2018 was to reclassify the ORRI to E&E
asset accounting for it using the method, as permitted under IFRS 6 whereby all historic costs
associated with oil exploration are capitalised as intangible assets, pending determination of feasibility
of the project.
As an initial fair value could not be reliably determined the E&E asset was measured at cost, which was
the carrying amount of the ORRI, with no gain or loss. The E&E asset is therefore presented as an
intangible asset and carried at cost less accumulated amortisation and any impairment provision.
Costs incurred include appropriate technical and administrative expenses but not general overheads.
If an exploration project is successful, the related expenditures are transferred to tangible assets and
amortised over the estimated life of the commercial reserves. Where a licence is relinquished, a
project is abandoned, or is considered to be of no further value to the Group, the related costs are
written off.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 40
Accounting policies (continued)
Impairment
E&E assets are assessed for impairment when facts and circumstances suggest that the carrying
amount may exceed the recoverable amount.
In accordance with IFRS 6 the Group firstly considers the following facts and circumstances in their
assessment of whether the Group’s exploration and evaluation assets may be impaired:
whether the period for which the Group has the right to explore in a specific area has expired
during the period or will expire in the near future, and is not expected to be renewed;
whether substantive expenditure on further exploration for and evaluation of mineral
resources in a specific area is neither budgeted nor planned;
whether exploration for and evaluation of hydrocarbons in a specific area have not led to the
discovery of commercially viable quantities of hydrocarbons and the Group has decided to
discontinue such activities in the specific area; and,
whether sufficient data exists to indicate that although a development in a specific area is
likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely to
be recovered in full from successful development or by sale.
If any such facts or circumstances are noted the Group must perform an impairment test in accordance
with the provisions of IAS 36, assessing the recoverable amount of the E&E assets together with all
development and production assets, as a single cash generating unit (CGU). The aggregate carrying
value is compared against the expected recoverable amount of the CGU. The recoverable amount is
the higher of value in use and the fair value less costs to sell.
Any E&E impairment loss would be recognised in the income statement and separately disclosed.
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. These financial assets were referred to as ‘Loans and receivables’ in the
prior period. They are initially recognised at fair value plus costs that are directly attributable to the
acquisition or issue and subsequently carried at amortised cost less any provision for impairment. The
Group’s loans and receivables comprise cash and cash equivalents and other receivables in the
statement of financial position. Cash and cash equivalents comprise current account balances or short
term deposits at variable interest rates that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value. Any interest earned is accrued and
classified as interest receivable.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 41
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:
2021
2020
£:US$
1.35
1.37
Income taxes and deferred taxation
Deferred tax assets and liabilities are not discounted and shall be measured using the liability method
at the tax rates that are expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the
reporting date. Deferred income tax assets are recognised only to the extent that it is probable that
future taxable profit will be available against which the temporary differences can be utilised.
Share based remuneration
The Company issued share options to directors and key personnel on 12 November 2009 which were
due to expire on 11 November 2019. On 5 November 2019 the Board resolved to amend the terms of
any options (the "Options"), held by the directors, which had not been exercised prior to the original
expiry date of 11 November 2019. These options were extended by 5 years and now expire on 11
November 2024.
The Group accounts for the costs of the issue of these options and the related extension of the expiry
date in line with IFRS 2 “Share based payments”. Under this standard, the cost of providing for such
options is based on the fair value of the options at the date of grant or extension and is charged to the
consolidated statement of comprehensive income or, if appropriate, capitalised over the expected
vesting period of the options and credited to retained losses.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 42
2
Financial instruments
The Group’s financial assets comprise of cash and cash equivalents and other receivables, which are
categorised as “financial assets held at amortised cost”. These were referred to as ‘loans and
receivables’ in the prior period. Financial liabilities comprise other payables which are categorised as
financial liabilities held at amortised cost and these are all current financial liabilities.
It is, and has been throughout the period of the financial statements, the Group’s policy that no trading
in financial instruments shall be undertaken.
The policy for managing financial risks is set by the board following recommendations from the Finance
Director. The policy for each of the above risks is described in more detail below.
Foreign exchange
As the functional currency is US$ and some of the current monetary assets and liabilities are in Sterling
there is a risk of loss in relation to the net Sterling financial assets position, should there be a
devaluation of Sterling against US$. The risk of any loss, in terms of meeting future liabilities, is
however eliminated by matching the currencies of cash balances with the currencies of projected
liabilities.
As of 31 December 2021 the Group’s financial assets and financial liabilities were denominated in a
mixture of US$ and Sterling which consisted of:
Financial assets held at amortised cost
Sterling
denominated
$’000
US$
denominated
$’000
Total
$’000
Financial assets
Other receivables
17
26
43
Less: prepayments
(13)
(26)
(39)
Cash and cash equivalents
216
88
304
220
88
308
Financial liabilities held at amortised cost
Financial Liabilities
Other payables
(54)
-
(54)
Net financial assets
166
88
254
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 43
Financial instruments (continued)
At 31 December 2020 the comparative balances were:
Financial assets held at amortised cost
Sterling
denominated
$’000
US$
denominated
$’000
Total
$’000
Financial assets
Other receivables
14
26
40
Less: prepayments
(10)
(26)
(36)
Cash and cash equivalents
434
4
438
438
4
442
Financial liabilities held at amortised cost
Financial liabilities
Other payables
(59)
-
(59)
Net financial assets
379
-
383
If the US$ had strengthened against Sterling by 10%, the loss for the year would increase and equity
would reduce by $17K (2020: increase in loss and decrease in equity of $38K). Conversely if the US$
weakens against Sterling by 10% the loss for the year would decrease and equity would increase by
$17K (2020: decrease in loss and increase in equity of $38K).
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 2021:
Institution
2021
$’000
2020
$’000
Lloyds Bank PLC
259
382
Standard Chartered Bank
45
56
304
438
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 44
Financial instruments (continued)
Liquidity
This is the risk that the Group cannot meet its liabilities as these fall due. As the timing of significant
payments carries a degree of uncertainty cash balances are being kept in interest bearing term
deposits with periods of no longer than 6 months.
Credit risk
The Group is not exposed to credit risk as it does not trade, and the cash balances held by the Group
are spread between two reputable institutions. The comments made above in relation to counter-
party risk are relevant.
Fair values
The fair values of the Group’s financial assets and liabilities are not materially different from the
carrying values in the consolidated statement of financial position and notes to the financial
information.
3
Significant accounting judgements, estimates and assumptions
Impairment of intangible assets (significant judgement)
When making an assessment of whether or not there are facts and circumstances which may indicate
that an impairment review is required, the directors are required to exercise judgement. These
judgements include, assessing whether or not it is expected that future renewal of the licence will be
granted and assessing whether or not any of the geological data obtained to date indicates an
impairment review is required.
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.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 45
4
Administrative expenses
2021
$’000
2020
$’000
Directors’ remuneration (see note 5)
127
130
Professional fees
197
146
Other expenses
31
27
Total
355
303
5
Directors’ remuneration
2021
$’000
2020
$’000
Remuneration and fees
125
128
Pensions*
2
2
Share based payment expense (see note 7)
-
-
Total
127
130
*A Irvine is accruing retirement benefits under a defined contribution pension arrangement.
Directors’ remuneration, by director, is disclosed in the directors’ remuneration report on page 21.
The average monthly number of employees, including directors, during this and the preceding year
was 6.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 46
6
Auditor’s remuneration
2021
$’000
2020
$’000
Fees payable to the Company’s auditor for the
audit of the Company’s annual financial
statements
29
29
Fees payable to the Company’s auditor for the
audit of the subsidiary’s annual financial
statements
5
5
Review of interim accounts
-
-
Total payable for audit related services
34
34
Fees payable to the Company’s auditor for
other services:
Taxation
3
3
Fees payable to the Company’s auditor for the
Taxation services for the subsidiary company
2
3
39
40
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.
Average share
price on date
exercised
(pence)
Exercise price
(pence)
Number
At 1 January 2020 and
31 December 2021
2
6,705,818
All options outstanding at the end of the year had vested and were exercisable.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 47
8
Taxation
2021
$’000
2020
$’000
Total tax:
Corporation tax on losses for the year
-
-
Reconciliation of total tax:
(Loss)/profit before tax
(356)
(299)
(Loss/profit on ordinary activities multiplied by
the standard rate of corporation tax of 26%
(93)
(78)
Effects of:
Unrelieved tax losses and other deductions
arising in the period
40
78
Expenses not deductible for tax purposes
53
-
Total tax for the year
-
-
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:
2021
$’000
2020
$’000
Trading Losses Carried forward
9,200
9,000
Capital losses carried forward
22,900
22,900
Net Deferred Tax Asset
2,400
2,600
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.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 48
9
Earnings per share
2021
Number
2020
Number
Shares in issue brought forward (2 pence shares)
220,713,205
220,713,205
Share issued during year
14,428,001
-
Shares in issue carried forward
235,141,206
220,713,205
Weighted average number of ordinary shares
230,279,167
220,713,205
2021
$’000
2020
$’000
(Loss) for the year
(356)
(299)
Weighted average number of ordinary shares
in issue during the year
230,279,167
220,713,205
Basic (loss) per ordinary share (cents)
(0.15)
(0.14)
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 2020 and 2021 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.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 49
10 Exploration and
evaluation (E&E)
intangible assets
Exploration
& evaluation
(E&E) assets
$’000
Total
$’000
1 January 2020
28,737
28,737
Additions
78
78
At 31 December 2020 and
1 January 2021
28,815
28,815
Additions
320
320
At 31 December 2021
29,135
29,135
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 39.
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, although the original licence requirement to drill one well remains.
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
2021
$’000
2020
$’000
Prepayments
39
36
Other
4
4
43
40
12 Trade and other payables
2021
$’000
2020
$’000
Trade payables
1
1
Accruals
53
58
54
59
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 50
13 Share capital
2021
$’000
2020
$’000
Authorised:
500,000,000 ordinary shares of 2 pence each
14,960
14,960
Allotted, issued and fully paid:
Number
$’000
Ordinary shares of 2 pence each
At 1 January 2020 and
and 1 January 2021
220,713,205
6,696
Shares issued during year
14,428,001
399
At 31 December
235,141,206
7,095
14 Related party transactions
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:
2021
$’000
2020
$’000
Due to Argos Georgia Ltd at 1 January
-
-
Expenses paid on behalf of the Group
0.3
0.3
Creditor balances paid
(0.2)
(0.3)
Office running costs*
-
-
Due to Argos Georgia Ltd at 31 December
0.1
-
* 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 $16,000. The key management personnel are the directors only.
There have been no transactions with directors during the year other than remuneration paid to each
director which is disclosed in the directors’ remuneration report on page 21 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 2021 nor for the comparative period.
Notes to the consolidated financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 51
16 Contingent liabilities
The Group has no anticipated material contingent liabilities.
17 Events after the reporting date
The Licence
Argos announced on 11 April 2022 that the Falkland Islands Government ("FIG") had extended the
second term of the Company's PL001 Licence from 1 May 2022 to 31 December 2022, with no
additional work commitments.
The Company is currently in discussions with FIG regarding the terms on which a further extension of
the PL001 Licence may be granted, to enable Argos to undertake the necessary technical work to
progress the project. The Board expects that any extension beyond 31 December 2022 would be
subject to certain technical commitments from the Company, which would require Argos to raise
additional capital.
Loan Facility
Mr Ian Thomson, OBE, Chairman of Argos, has agreed to provide a loan facility of up to £110,000 to
the Company (the "Loan Facility"). Drawdown from the Loan Facility can be made at the Company's
request. The Loan Facility is available until 31 January 2023 with no interest accruing on borrowed
amounts. If the Company carries out a share issue by way of fund-raising, the lender shall be entitled
to convert the loan then outstanding into new shares issued on the same terms as those available to
other participants in the issue.
The Loan Facility, along with the Company's existing resources of approximately £100,000 as of 24
June 2022, will provide the Company with sufficient working capital until July 2023.
The provision of the Loan Facility is deemed to be a related party transaction for the purposes of the
AIM Rules for Companies. The Independent Directors consider, having consulted with the Company's
nominated adviser, Cenkos Securities plc, that the terms of the Loan Facility are fair and reasonable
insofar as the Shareholders are concerned.
Publication of Results
As a result of the Company's extended discussions regarding its funding position, and the associated
impact on the timing for the FY21 Accounts, the Company was not in a position to publish its 2021
Financial Statements by the deadline of 30 June 2022. Consequently, the Company's shares were
temporarily suspended from trading on AIM as of 7.30 a.m. on 1 July 2022, pending publication of the
FY21 Accounts.
Parent Company financial statements
Argos Resources Ltd
Annual report 2021
Page 52
Statement of financial position
As at 31 December 2021
2021
2020
Note
$’000
$’000
Assets
Non-current assets
Investments
6
2,120
2,120
2,120
2,120
Current assets
Other receivables
7
7,382
9,703
Cash and cash equivalents
304
438
Total current assets
7,686
10,141
Total assets
9,806
12,261
Liabilities
Current liabilities
Trade and other payables
8
37
39
Total liabilities
37
39
Total net assets
9,769
12,222
Capital and reserves attributable to
equity holders of the company
Share capital
9
7,095
6,696
Share premium
30,222
30,071
Retained losses
(27,548)
(24,545)
Total shareholders’ equity
9,769
12,222
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 $3,003
thousand (2020: $310 thousand loss).
The notes on pages 55 to 60 form part of the financial statements.
These financial statements were approved by the directors and authorised for issue on 22 July 2022
and are signed on their behalf by:
Ian Thomson
Chairman
Parent Company financial statements
Argos Resources Ltd
Annual report 2021
Page 53
Statement of cash flows
Year ended 31 December 2021
Year
ended
31 December
2021
$’000
Year
ended
31 December
2020
$’000
Cash flows from operating activities
(Loss) for period before taxation
(3,003)
(310)
Adjustments for:
Finance income
-
(1)
Foreign exchange
1
(3)
IFRS 9 provision/(credit)
2,667
31
Net cash (outflow) from operating activities
before changes in working capital
(335)
(283)
(Increase)/decrease in other receivables
(346)
(50)
(Decrease) in other payables
(2)
(1)
Net cash (outflow) from operating activities
(683)
(334)
Investing activities
Interest received
-
1
Net cash generated from investment activities
-
1
Financing activities
Issue of ordinary shares
550
-
Net (decrease) in cash and cash equivalents
(133)
(333)
Cash and cash equivalents at beginning of period
438
768
Exchange gains on cash and cash equivalents
(1)
3
Cash and cash equivalents at end of the year
304
438
The notes on pages 55 to 60 form part of the financial statements.
Parent Company financial statements
Argos Resources Ltd
Annual report 2021
Page 54
Statement of changes in equity
Year ended 31 December 2021
Share
capital
$’000
Share
premium
$’000
Retained
deficit
$’000
Total
equity
$’000
At 1 January 2020
6,696
30,071
(24,235)
12,532
Loss for year
-
-
(310)
(310)
At 31 December 2020
and 1 January 2021
6,696
30,071
(24,545)
12,222
Loss for year
-
-
(3,003)
(3,003)
Shares issued
399
151
-
550
At 31 December 2021
7,095
30,222
(27,548)
9,769
The notes on pages 55 to 60 form part of the financial statements.
Notes to the parent Company financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 55
1 Accounting policies
Basis of preparation
The financial statements have been prepared under the historical cost convention. All accounting
policies are consistent with those adopted in the Group financial statements except as otherwise
noted below.
The amount due from the subsidiary company is repayable on demand.
Investments
Investments are measured at cost at acquisition and are then subsequently measured at cost less
impairment
The Group’s financial assets comprise of cash and cash equivalents and other receivables, which are
categorised as “financial assets held at amortised cost” These financial assets were referred to as
‘loans and receivables’ in the prior period. Financial liabilities comprise other payables which are
categorised as financial liabilities held at amortised cost and these are all current financial liabilities.
Intercompany loan to the subsidiary company
The loan to the subsidiary company, Argos Exploration Limited, is classified as repayable on demand.
IFRS 9 requires consideration of the expected credit risk associated with the loan. As the subsidiary
company does not have any liquid assets to sell to repay the loan, should it be recalled, the conclusion
reached was that the loan should be categorised as stage 3 and the impairment assessment of the
loan has been performed using a lifetime expected credit loss model under IFRS 9.
As part of the assessment of expected credit losses of the intercompany loan receivable, the Directors
have considered the expected future oil prices; the value of the reserves reflected in the independent
economic assessment of the Licence area; the ability to sell the project, the ability to find a new farm-
out partner and the exploration project risk provided in the Competent Persons Report. The Directors
have also assessed the cash flow scenarios of the above considerations.
The credit risk of the intercompany loan is assessed at the end of each accounting period. There was
no change in the significant credit risk at year-end.
Changes in accounting standards
Please refer to changes in accounting standards, Note 1, in the group financial statements.
Going concern
Please refer to going concern, Note 1, in the group financial statements.
Notes to the parent Company financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 56
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$. The risk of any loss, in terms of meeting future liabilities, is
however eliminated by matching the currencies of cash balances with the currencies of projected
liabilities.
As of 31 December 2021 the Company’s financial assets and financial liabilities were denominated in
a mixture of US$ and Sterling which consisted of:
Amortised cost
Financial assets
Sterling
denominated
$’000
US$
denominated
$’000
Total
$’000
Other receivables
17
7,365
7,382
Less: prepayments
(14)
-
(14)
Cash and cash equivalents
216
88
304
219
7,453
7,672
Amortised cost
Financial liabilities
Other payables
(37)
-
(37)
Net financial assets
182
7,453
7,635
Notes to the parent Company financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 57
Financial instruments (continued)
At 31 December 2020 the comparative balances were:
Amortised cost
Current assets
Sterling
denominated
$’000
US$
denominated
$’000
Total
$’000
Other receivables
14
9,689
9,703
Less: prepayments
(10)
-
(10)
Cash and cash equivalents
434
4
438
438
9,693
10,131
Amortised cost
Financial liabilities
Other payables
(39)
-
(39)
Net financial assets
399
9,693
10,092
If the US$ had strengthened against Sterling by 10%, the loss for the year would increase and equity
would reduce by $18K (2020: increase in loss and reduction in equity of $40K). Conversely if the US$
weakens against Sterling the loss for the year would decrease and equity would increase by $18K
(2020: decrease in loss and increase in equity of $40K).
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 2021.
Institution
2021
$’000
2020
$’000
Lloyds Bank PLC
259
382
Standard Chartered Bank
45
56
304
438
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.
Notes to the parent Company financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 58
Financial instruments (continued)
Credit
The Company is not exposed to credit risk, other than amounts due from the subsidiary company, as
it does not trade and the cash balances held by the Company are spread between two reputable
institutions. Please refer to note 7 for the details of the expected credit loss on the intercompany
receivable due from the subsidiary company.
Fair values
The fair values of the Company’s financial assets and liabilities are not materially different from the
carrying values in the statement of financial position and notes to the financial information.
4 Loss attributable to the members of the parent Company
The loss for the year was $3,003 thousand (2020: loss of $310 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.
Notes to the parent Company financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 59
5 Staff costs
The information given in note 5 of the consolidated financial statements relates wholly to the
Company. There is no difference between the directors’ remuneration of the parent Company and
the Group.
6
Investments
2021
$’000
2020
$’000
Investment in subsidiary
Cost:
At 1 January and
31 December
2,120
2,120
The principal undertaking in which the Company’s interest at the year-end was 20% or more is as
follows:
Investment in subsidiary
Country of
incorporation
Percentage of voting
rights and ordinary
share capital held
Nature of business
Argos Exploration Ltd
Falkland Islands
100
Oil and gas
exploration
7
Other receivables
2021
$’000
2020
$’000
Amounts due from subsidiary company
25,840
25,498
Less: provision for impairment (see below)
(18,476)
(15,809)
Amounts due from subsidiary – net
7,364
9,689
Prepayments
14
10
Other
4
4
7,382
9,703
Movement in impairment provision on
amounts due from subsidiary company
2021
$’000
2020
$’000
As at 1 January
15,809
15,778
Increase/(decrease) in impairment
2,667
31
As at 31 December
18,476
15,809
Please refer to note 1 and 2 for the detail of how the provision for impairment has been calculated.
Notes to the parent Company financial statements
Year ended 31 December 2021
Argos Resources Ltd
Annual report 2021
Page 60
8
Trade and other payables
2021
$’000
2020
$’000
Trade payables
2
1
Accruals
35
38
37
39
9 Share capital
Share capital movements are set out note 13 on page 50 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
The information given in note 17 of the consolidated financial statements relates wholly to the
Company.
Argos Resources Ltd
Annual report 2021
Page 61
Investor Information and advisors
Registered office
Argos House
H Jones Road
Stanley
Falkland Islands
Auditors
BDO LLP
55 Baker Street
London, W1U 7EU
Business address
Argos House
H Jones Road
Stanley
Falkland Islands
Registrars
Computershare Investor Services (Jersey) Ltd
Queensway House
Hilgrove Street
St Helier
Jersey, JE1 1ES
Company Secretary
Kevin Kilmartin
Argos House
H Jones Road
Stanley
Falkland Islands
Bankers
Lloyds Bank PLC
3-5 Bridge Street
Newbury
UK, RG14 5HB
Nominated advisor and broker
Cenkos Securities PLC
6.7.8 Tokenhouse Yard
London, EC2R 7AS
Bankers
Standard Chartered Bank
Ross Road
Stanley
Falkland Islands
Solicitors (Falkland Islands law)
Kevin Kilmartin
Argos House
H Jones Road
Stanley
Falkland Islands
Website
www.argosresources.com