Arc Minerals Limited
ARC MINERALS LIMITED
(FORMERLY ORTAC
RESOURCES LIMITED)
ANNUAL REPORT AND
FINANCIAL STATEMENTS FOR
THE YEAR ENDED 31 MARCH
2018
Arc Minerals Limited
CONTENTS
CONTENTS
CORPORATE INFORMATION
CHAIRMAN’S STATEMENT AND OPERATIONS AND FINANCE REVIEW
STRATEGIC REPORT
DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2
3
6
12
19
22
26
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOW
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
27
28
29
31
Arc Minerals Limited Annual Report & Financial Statements 2018
1
Company Information
Directors
Nick Von Schirnding Director, Executive Chairman
Don Bailey
Michael Foster
Jonathan de Thierry Non-Executive Director
Non-Executive Director
Brian McMaster
Non-Executive Director
Non-Executive Director
COO
Vassilios Carellas
CFO and Company Secretary
Chuck Forrest
Registered address
Craigmuir Chambers
Road Town. Tortola
British Virgin Islands VG 1110
Independent auditor
PKF Littlejohn LLP
1 Westferry Circus
Canary Wharf
London E14 4HD
Company solicitors (UK)
Hill Dickinson LLP
Nominated advisor and Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London WC2R 1DJ
Registrars
Computershare Investor Services (Channel Islands) Ltd
PO Box 83
Ordnance House, 31 Pier Road
St Helier JE4 8PW
Channel Islands
Arc Minerals Limited Annual Report & Financial Statements 2018
2
Overview
Arc Minerals Limited (“Arc Minerals”) is a dynamic junior company focused on the exploration and
development of its portfolio of copper-cobalt and gold projects located in Africa. Key assets comprise:
• Zamsort Copper-Cobalt Project (66% owned) located in the Zambian Copperbelt, Zambia
which comprises the following projects:
o Kalaba copper-cobalt project;
4km² small scale mining license (“SML”), enclosed by a
1,000km² large prospecting license (“LPL”)
11,000m drilling programme underway
• Casa Gold (99.4% owned):
o 66km² exploration license, highly prospective for gold
o 3 million ounce gold deposit located
o Scoping study underway
Coupled with its exciting project portfolio, Arc Minerals has a strong technical and commercial team
with extensive experience in Africa and a proven track record of bringing mining projects into production.
2018 Highlights
• Raised £ 3,700,000 from share placements
• Commencement of a 5,000m drilling programme of the Southern part of the 1.5 M oz Au
Akyanga project
• Consolidating ownership of Zamsort
• Appointment of Nick von Schirnding as Executive Chairman
• Appointment of Brian McMaster, Michael Foster and Jonathan de Thierry to the Board
Business Model and Strategy
The strategic vision of Arc Minerals is to build a leading African focused copper and gold exploration
company leveraging off the three core fundamentals it has put in place for delivering on this vision:
• High quality project pipeline;
• Highly qualified and experienced team with a proven team track record of finding resources
and building mines; and
• Supportive institutional and retail shareholder base.
Arc Minerals Limited Annual Report & Financial Statements 2018
3
Chairman’s Statement
It has been an exciting year for Arc Minerals. Since taking over as Chairman in September 2017, my
focus has been on agreeing a new way forward for the Company, revamping the Board and
management, renaming the group (formerly Ortac Resources) and delivering on our revised strategy.
This involved simplifying the Company’s focus on its two key African projects and to take control over
these, namely Casa Mining Limited (“Casa”) and Zamsort Limited (“Zamsort”), in both of which we had
only minority stakes. Additionally, we agreed to divest the balance of the portfolio which includes the
Slovakian gold project, Šturec, as well as the Andiamo exploration project in Eritrea.
It is the Board’s firm belief that delivering on our new strategy will drive value for all our stakeholders,
particularly at a time of increasing demand for metals. As we executed on our new strategy it was
pleasing to see the market’s support for the Company, resulting in our market capitalisation increasing
from circa £3.4 m on 31 March 2017 to over £26m today.
In November 2017 we made an all share offer for Casa which was unanimously accepted by Casa
shareholders. We now have 99.4% ownership of Casa which holds the large and highly prospective
Misisi Gold Project (“Misisi”) in the DRC, a 55 km mineralised gold belt in south Kivu. At around the
same time we commenced an initial 5,000 metre drilling programme focussed on the southern
extensions of the 1.5-million ounce Akyanga gold project as well as a soil sampling programme to test
for continuations to the east. The acquisition of Casa produced a gain on business combination of
£10.5M which contributed to a profit from operations of £2.0M (1.0p per share). Arc owned a 43% fully-
diluted interest in Casa at the time of acquisition which was a significant factor contributing to the gain.
More details may be found in Note 14 to the accounts.
In all, over 6,000m of diamond drilling was carried out at the Akyanga deposit and the 110th diamond
drill hole delivered the highest ever grade assaying 8.04 g/t Au over 24.75m. The results of the drilling
programme formed part of the planned resource upgrade and in June this year we announced a
doubling of the resource to 3 million ounces (JORC compliant) grading 2.16 g/t of gold – a major
milestone for the Company - and which we believe is now of sufficient size and grade to attract interest
from potential 3rd parties.
We also made major progress at increasing our ownership and control of Zamsort, which holds the
large and exciting Kalaba Copper and Cobalt Project (“Kalaba”) in northwest Zambia. Having historically
held two convertible loan notes in Zamsort, we now own a direct 66% interest in Zamsort, with a
remaining 5% outstanding convertible loan note. There is now only one remaining minority interest in
Zamsort, namely Kopara, and we have recently agreed with Kopara to jointly fund all future expenditure
at Zamsort.
Over the last few months at Zamsort we completed a comprehensive ground geophysics programme
that generated a significant number of drill targets. In July 2018, we commenced an 11,000 metres
drilling programme with the aim to delineate a shallow resource for the commercial scale demonstration
plant (which we expect to be in production before the end of 2018) as well as establish a maiden mineral
resource at Kalaba.
On a corporate level, we made major changes to strengthen our Board, welcoming Brian McMaster,
Michael Foster, Jonathan de Thierry and Don Bailey as new directors. Brian brings a wealth of
experience having developed and listed numerous junior mining companies both in Australia and the
UK. Michael and Jonathan are founder directors of Casa Gold and have been instrumental in the
development of this project. Don was formerly co-head of mining at Rio Tinto where he led the
Arc Minerals Limited Annual Report & Financial Statements 2018
4
development of a number of world-class copper projects and later founded LionOre Mining International
Ltd which started as a junior mining company and was ultimately acquired by Norilsk Nickel.
Anthony Balme, Paul Heber and Vassilios Carellas stepped down from the Board in 2017 and I am
pleased that Vassilios Carellas has now taken up the role of COO. I would like to thank Anthony and
Paul for their contributions to the Company over a number of years.
As part of selling our non-core assets, we entered into a non-binding agreement with AMED Funds, an
African focussed mining private equity group for the sale of our interest in Andiamo Exploration Limited
for $532,000. We are also engaged in discussions with regard to the sale of our interest in the Ṧturec
gold project.
On a final note, I would like to take this opportunity to thank our shareholders and employees for their
continued support during this transformative time for the Company. I look forward to reporting on our
progress in the months ahead.
Nick von Schirnding
Executive Chairman
17 August 2018
Arc Minerals Limited Annual Report & Financial Statements 2018
5
Strategic Report
Overview of Operations
Arc Minerals is incorporated in the British Virgin Islands and is engaged in the business of acquiring,
exploring and developing mineral properties. The Company’s stock trades in British Pounds Sterling
on the AIM Market in London under the symbol ARCM.
Arc Minerals has two principal areas of interest:
1. Zamsort, the Kalaba Copper Cobalt Project in the Zambian Copperbelt, Zambia which covers c.
1,000km² in one of the last unexplored copper domes in Zambia and in close proximity to existing
world-class mines;
2. Casa Mining Limited, the Misisi Gold Project in the eastern part of the Democratic Republic of
Congo (“DRC”). Misisi hosts a 3-million-ounce gold project and is at scoping study level targeting
annual gold production of 150k-200koz;
Arc Minerals also, at 31 March 2018, held interests in the following assets:
(i)
(ii)
the Ṧturec Gold Project in Slovakia. Ṧturec hosts a 1.3 million gold equivalent Resource.
The project has a pre-feasibility study demonstrating robust economics;
Andiamo Exploration Limited (“Andiamo”), a company that is exploring in Eritrea for gold-
copper-zinc Volcanogenic Massive Sulphide (“VMS”) mineralisation. On 9 July, the
Company entered into a non-binding head of terms with AMED, an African focussed mining
private equity fund to sell its interest for US$532,000.
Kalaba Copper-Cobalt Project
The Kalaba Copper-Cobalt Project is located approximately 900 km from Lusaka (see Figure 1), in
Mwinilunga, North Western Province, and is well within the trending arm of the major geological
structure known as the Lufilian Arc (Copperbelt), on the western flank of the Kabompo Dome. The
Copperbelt is home to all the major copper mines in Zambia and Kalaba represents one of the last
dome-related areas in Zambia yet to be explored in any detail.
Over the last thirteen years, three new major copper mines have been discovered and constructed to
exploit the mineral resources in the new western part of the Zambian Copperbelt. This region now
accounts for more than 80% of Zambian copper production and Kalaba is in close proximity to large
operations such as First Quantum Minerals’ Sentinel and Kansanshi mines and Barrick Gold’s
Lumwana mine.
The Kalaba Project consists of two licences - a 4km² Small-Scale Mining License (‘SML’) enclosed by
a Large Prospecting License (‘LPL’) area of 1000km². Kalaba was previously explored by Equinox
Minerals Limited ('Equinox') and Anglo American Prospecting Services (‘AAPS’) by way of the ‘Zambezi
Joint Venture’ (‘JV’) through AAPS's affiliate Zamanglo Prospecting Ltd (‘Anglo American’) during the
late 1990s as part of the Kabompo Project.
The current LPL encompasses 9 of 30 exploration targets that were ranked in the late-90’s by the JV
over the Kabompo Project, which include the top 7 ranked targets. First Quantum Minerals’ Kalumbila
property, better known as the Trident Project, developed to become the Sentinel copper mine and is
forecast to produce approximately 220,000 tonnes of copper in 2018. Its Enterprise Nickel project, is,
Arc Minerals Limited Annual Report & Financial Statements 2018
6
like Kalaba, also located at the flanks of the Kabompo dome and approximately 40km to the east of
Zamsort’s licenses.
At the time of the JV, Kalumbila was originally ranked number 22 out of JV’s top 30 Kabompo Project
targets with an original exploration target size of 6 million tonnes of ore; eventually a copper Resource
in excess of 1 billion tonnes of ore (one of the largest in Zambia) was demonstrated - during this same
period the initial Anglo-American exploration target for Kalaba exploration target was 150 million tonnes
of ore.
Previous limited exploration work at Kalaba has resulted in the delineation of a non-code compliant in-
house copper-cobalt Resource estimate of 16.59Mt @ 0.94% Cu Eq. Arc Minerals firmly believe that
the Kalaba Prospect and along with the exploration targets in the LPL offer significant potential for
proving a major tier-one copper-cobalt discovery.
The most recent trenching results completed in the Kalaba open pit include:
• 95m @ 2.08% Copper and 0.26% Cobalt in pit trench line 3,
• 30m @ 2.10% Copper and 0.24% Cobalt in pit trench line 4,
• 20m @ 1.73% Copper and 0.25% Cobalt in pit trench line 7,
• 15m @ 0.72% Copper and 0.38% Cobalt in pit trench line 6.
Zamsort have advanced the construction of a CSD plant, with the construction of the plant
approximately 75% complete. It is anticipated that the plant could begin production of copper and cobalt
within the next six months. Arc is also in the process of building a new management team at Kalaba
who will be undertaking a full assessment of current operations including historical exploration data as
well as optimising the plant. At present, it is estimated that Zamsort has approximately 10,000 tonnes
of screened ore grading 3.5% ASCu stockpiled on site and ready to be processed through the CSD
plant.
Misisi Gold Project
The Misisi Gold Project (“Misisi”) is a large and prospective exploration property located near the town
of Misisi located 250km south of Bukavu, the provincial capital of the South Kivu Province in the
Democratic Republic of the Congo. Misisi hosts the Akyanga deposit which currently has an Inferred
Mineral Resource of 44.4 million tonnes at 2.16 grams per tonne containing 3 million ounces on a 100%
basis and 2,137,500 ounces on a 71.25% attributable basis. On 28 June 2018 Arc announced an
update of the Mineral Resource Estimate completed in 2018 by Denny Jones Pty Ltd (“Denny Jones”),
a leading Australian based Resource Consultancy in accordance with the requirements of the 2012
JORC Code as summarised in Table 0.1.
Arc Minerals Limited Annual Report & Financial Statements 2018
7
Table 0.1 Akyanga Mineral Resource estimate - cut-off grade of 0.5 g/t Au –
June 2018 (100% Basis)
Category
Tonnes
(millions)
Gold grade
(g/t)
Inferred Resource
44.3
2.16
Contained
Gold
(million oz)
3.0
1. Mineral Resources, which are not Mineral Reserves, do not have demonstrated economic viability. The estimate of
Mineral Resources may be materially affected by environmental, permitting, legal, marketing, or other relevant issues.
The Mineral Resources in this report were reported using the guidelines of JORC (2012).
2. The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been
insufficient exploration to define these Inferred Resources as an Indicated or Measured Mineral Resource. It is
uncertain if further exploration will result in upgrading them to an Indicated or Measured Mineral Resource category.
3. Contained metal and tonnes figures in totals may differ due to rounding.
Figure 1 Geological cross-section
In addition to the Mineral Resource, an Exploration Target over the Akyanga East project has been
defined as summarised below in Table 0.2.
Table 0.2 Akyanga East Exploration Target – June 2018 (100% Basis)
Category
Upper Range
Lower Range
Tonnes
(millions)
7.1
3.1
Gold Grade
(g/t)
2.43
1.94
Contained
Gold
(million oz)
0.6
0.2
4. The quantity and grade of the reported Exploration Target are uncertain in nature and there has been insufficient
exploration to define an Inferred Resource. It is uncertain if further exploration will result in the estimation of Mineral
Resources.
5. A cut-off grade of 0.5 g/t has been used to define the Exploration Target.
Arc Minerals Limited Annual Report & Financial Statements 2018
8
Ṧturec Project
The Ṧturec gold project is a large prospective gold exploration license. The project is located in central
Slovakia approximately 1.5km north east of the town of Kremnica and, as the crow flies, 17km west of
central Slovakia's largest city, Banská Bystrica. The project has a JORC (2004) compliant mineral
Resource of 1.36 Million oz of gold equivalent. A Pre-Feasibility Study (‘PFS’) of the mining aspects of
the Šturec Project was completed by SRK Consultants (“SRK”), a leading international engineering firm
in April 2013. The PFS was in turn built upon an earlier Scoping Study completed by SRK in January
2012; both studies confirmed the economic viability of the Šturec Project. SRK PFS confirms the
economic viability of the Šturec project.
Since the publication of the PFS, the Company has been working with the local community and
stakeholders to develop win-win sustainable mining solutions with the aim to realise a long-term
subsumable mining operation benefitting all stakeholders. Arc Minerals’ new strategic direction the
Board views the Ṧturec project as non-core and in this light Arc Minerals is currently engaged in a
number of discussions with several groups with the aim to divest of the Ṧturec project, and has been
reclassified in these financial statements as an Asset Held for Sale.
Arc Minerals Limited Annual Report & Financial Statements 2018
9
Governance
Board of Directors
Nick Von Schirnding, Director and Executive Chairman
Nick von Schirnding has over 25 years' experience in the mining sector across a number of
geographies. Nick was CEO of Asia Resource Minerals plc, a FTSE listed mining company. Prior to this
Nick was a senior executive with Anglo American plc and De Beers. Nick is also chairman of Fodere, a
private minerals processing business with a plant at Highveld Steel in South Africa and is a non-
executive director of Jangada Mines, listed in the UK with assets in Brazil.
Don Bailey, Non-Executive Director
Don Bailey, a former head of mining operations for Rio Tinto in Africa, South America and Europe,
spent 30 years with Rio Tinto where as Joint Global Head of Mining Operations he was responsible for
the development of numerous major international projects including the Escondida mine in Chile.
Subsequent to his time with Rio Tinto, Don was a founder member, CEO and Chairman of LionOre
Mining International Ltd ("LionOre") which developed from a start-up into a mid-tier mining company
and was ultimately acquired by Norilsk Nickel in June 2007 which generated a significant return to
LionOre shareholders.
Brian McMaster, Non-Executive Director
Brian McMaster has almost 20 years’ experience in the area of corporate reconstruction and turnaround
and performance improvement and 20 years in the mining and exploration industry. Brian’s recent
experience includes founding Harvest Minerals and Jangada Mines, AIM listed companies with Potash
and PGM projects in Brazil respectively, which he is Chairman of, as well as numerous reorganisations
and the recapitalisation and listing of 12 Australian companies.
Brian’s career to date includes significant working periods in the United States, South America, Asia,
India and UK. Brian was a founding director in venture capital and advisory firm, Garrison Capital Pty
Ltd.
Michael Foster, Non-Executive Director
Michael Foster is the Founder and Executive Chairman of Casa Mining Limited, Managing Director of
Kavango Resources plc and is Chairman of Premier African Minerals, listed on AIM. Before this he was
the non-executive Chairman of Copperbelt Minerals Limited, a private company that discovered a
copper-cobalt deposit in the Democratic Republic of Congo and was sold in 2012 for $191 million.
He has also held senior roles at a number of businesses on AIM and was Managing Director of Reunion
Mining PLC, a Main Market listed Africa focused mining and exploration company, with assets in
Namibia and Zimbabwe. Michael holds an MBA in in Business Studies from the London Business
School and has a B.Sc (Hons) in Geology from the University of St Andrews, Scotland.
Arc Minerals Limited Annual Report & Financial Statements 2018
10
Jonathan De Thierry, Non-Executive Director
Jonathan de Thierry is a graduate geologist with 25 years’ experience in mining and investment banking
in Africa & Europe having worked in the City of London for a number of international banks. Jonathan
is a founder of Casa Mining and has raised significant capital for exploration and development of other
major DRC mineral projects.
Arc Minerals Limited Annual Report & Financial Statements 2018
11
DIRECTORS’ REPORT
The Directors are pleased to present this year’s annual report together with the audited consolidated
financial statements for the year ended 31 March 2018.
Principal Activities and Business Review
The principal activities of the Group are outlined in the Strategic Report and in the Chairman’s
Statement
Results and Dividends
The profit on continuing operations of the Group after taxation amounted to £ 2.020m (2017: Loss of
£0.835m). There were no dividends paid in 2018 (2017: nil).
Events after the reporting period
The share exchange offer for Casa Mining Limited was open until 9 May 2018. On expiry of the offer
the Company had increased its interest in Casa from 92.1% at 31 March 2018 to 99.4%.
The Company has acquired in stages 52% of Zamsort Limited which increases its interest to 66%
excluding a 5.35% convertible note. Consideration for the purchases was 141,583,333 ordinary shares.
The Company has received an offer of USD 532,000 for its shares in Andiamo Exploration Limited. The
offer is conditional and has a long stop date of 4 September 2018.
See Note 27 for additional information in respect of events after the reporting period.
Held for sale assets
The Group has Held for sale assets in the amount of £ 6,709,000 comprised of:
(i)
Shares in Ortac sro and other subsidiaries in Slovakia which own the Sturec assets -
valued at £ 6,709,000
As reported in Note 24, in 2018 the group repurchased the Vendor Royalty and NSR which gives the
Group additional flexibility in negotiations with prospective buyers. In 2018 the Group impaired the
carrying value of the Slovakian Held for sale assets by £6,700,000 to £6,709,000 (approximately
50%). The Directors wish to emphasize that the Group has received expressions of interest but no
formal offers and the final selling price could be lower or higher than the current carrying value.
Available for sale assets
The Group has Available for sale assets in the amount of £ 392,000 comprised of shares in Andiamo
Exploration Limited.
Subsequent to year end the Group accepted an offer of US$ 532,000 for its 18% shareholding. The
offer is conditional until the date of closing scheduled for 4 September 2018. The Group impaired the
carrying value of Andiamo by £461,000 to £392,000 during the period.
Interests > 3%
The following shareholders have a notifiable interest in the Company:
- Mushinge Mumena and spouse 73,937,495 shares (12.75%)
Arc Minerals Limited Annual Report & Financial Statements 2018
12
Consolidation of Casa Mining Limited
Casa Mining Limited has been consolidated as at 31 December 2017, as it has been deemed
impractical to consolidate as at 31 March 2018. There have been no significant transactions between 1
January 2018 and 31 March 2018 which would require recognition in these financial statements. The
Company has funded Casa during this time and this is reflected within the statement of cash flows.
Directors
The names of the Directors who served to the date of this report are set out below.
Director
Executive Directors:
Nicholas von Schirnding
Anthony Balme
Vassilios Carellas
Don Bailey
Non-Executive Directors
Paul Heber
Brian McMaster
Michael Foster
Jonathan de Thierry
Directors’ Remuneration
Date of Appointment Date of Resignation
24 January 2017
-
-
1 June 2018
-
30 October 2017
11 September 2017
-
-
1 August 2017
1 December 2017
2 January 2018
11 September 2017
-
-
-
The Group remunerates the Directors at levels commensurate with its size and the experience of its
Directors. The Remuneration Committee has reviewed the Directors’ remuneration and believes the
levels uphold these objectives. Details of the Directors’ emoluments and payments made for
professional services rendered are set out in note 8 to the financial statements.
Directors’ Interests
The beneficial interests of the Directors in the shares and options of the Company are as follows:
Director
Nicholas von Schirnding
Brian McMaster
Michael Foster**
Jonathan de Thierry
Don Bailey
2018 2017
Shares*
Shares
593,333
11,693,482
-
2,000,000
-
8,693,492
-
13,492,888
-
7,041,667
2018 2017
Options *
1,800,000
375,000
-
-
-
Options
11,620,125
375,000
-
-
3,700,000
* In March 2017 the Company’s shares were consolidated 1:100
** includes spouse
None of the Directors exercised any share options during the year.
Corporate Governance
A statement on Corporate Governance is set out on pages 19 to 20.
Arc Minerals Limited Annual Report & Financial Statements 2018
13
Key Performance Indicators
The Board monitors the activities and performance of the Group on a regular basis and uses both
financial and non-financial indicators to assess the Group’s performance.
The Group underwent a significant expansion of assets in 2018 and has continued this trend in fiscal
year 2019. The Company increased its interest in Casa Mining Limited in 2018 from 22.2% to 99.4%
The indicators set out below were used by the Board during the year ended 31 March 2018.
Financial KPIs
The historical financial KPIs monitored by the Board concern levels and usage of cash. However new
financial KPIs will be considered for the future when the Zamsort plant is commissioned. Three main
financial KPIs for the Group allow it to monitor costs and plan future exploration and development
activities.
Financial KPIs
Cash and cash equivalents
Administrative expenses as a % of total assets
Exploration costs capitalised
Measure
£ 000's
%
£ 000's
2018
191
2%
482
2017
80
4%
14
During the year cash increased by £111,000 (2017: decrease of £348,000).
The Company raised gross funds from share placements of £3,700,000 in 2018 versus £752,000 in
2017.
Exploration costs capitalised as intangible assets in the year were £482,000 (2017: £14,000).
At 31 March 2018, the Group’s intangible assets, including intangible assets of Casa Mining Limited,
had a carrying value of £18,495,000 (2017: £12,739,000) excluding approximately £6,709,000 of
Slovakian intangible assets classified as Held for sale assets.
KPIs for 2019 will include;
(i)
(ii)
Successful commissioning of the Zamsort plant and;
A maiden JORC resource at Zamsort
Non-Financial KPIs
The Board monitors the following key non-financial KPIs on a regular basis:
Health and safety – number of reported incidents
There were no reportable incidents in the current or prior year.
Risk Management Report
A Risk Management Report is set out on Page 17.
Environmental Responsibility
The Group is aware of the potential impact that its subsidiary, associated companies and investments
may have on the environment. Accordingly, the Group ensures that with regard to the environment, it
and its subsidiaries and associated companies as a minimum comply with applicable European Union
and local regulatory requirements, as well as the revised Equator Principles.
Arc Minerals Limited Annual Report & Financial Statements 2018
14
Employment Policy
The Group is committed to promoting policies to ensure that high calibre employees are attracted,
motivated and retained for the ongoing success of the business. Employees and those who seek to
work within the Group are treated equally regardless of sex, marital status, creed, colour, race or ethnic
origin.
Health and Safety
The Group’s aim is to maintain a high standard of workplace safety. In order to achieve this, the Group
provides training and support to employees and sets demanding standards for workplace safety.
Insurance
The Group maintains insurance in respect of its Directors and Officers against liabilities in relation to
the Company and the Group. The Group maintains insurance in respect of its exploration and
development and operational programs in Slovakia.
Statement of Disclosure of Information to the Auditor
As at the date of this report the serving Directors confirm that:
• So far as each Director is aware, there is no relevant audit information of which the Group’s
auditor is unaware, and
• The Directors have taken all the steps that they ought to have taken in order to make
themselves aware of any relevant audit information and to establish that the Group’s auditor is
aware of that information.
Auditor
PKF Littlejohn LLP has signified its willingness to continue in office as auditor.
Going Concern
Notwithstanding the loss incurred during the year under review, the Directors have a reasonable
expectation that the Group will be able to raise funds to provide adequate resources to continue in
operational existence for the foreseeable future. From May 2017 - May 2018 Arc raised £6.2M from the
sale of shares indicating strong investor support for the Group strategy. The Directors expect to deliver
results which will lead to continuing market support. In addition, the Zamsort plant is forecast to deliver
positive cashflow early in 2019. The Directors therefore consider it appropriate for the Company to
continue to adopt the going concern basis in preparing the Annual Report and Financial Statements.
Further details on the Directors assumptions and their conclusion are included in the statement on going
concern included in note 1f to the Financial Statements. The auditors have drawn attention to going
concern within their audit report by way of a material uncertainty.
Arc Minerals Limited Annual Report & Financial Statements 2018
15
Directors’ Responsibility Statement
The Directors are responsible for preparing the Annual Report in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group Financial Statements for each financial year. The
Directors are required by the AIM Rules of the London Stock Exchange to prepare Group financial
statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the
European Union.
The Directors must not approve the Financial Statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period.
In preparing the Group Financial Statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether applicable IFRSs as adopted by the European Union have been followed for
the group financial statements, 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 will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s transactions and disclose with reasonable accuracy at any time the financial
position of the Group. They are also responsible for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Arc Minerals website.
Other
Legislation in the British Virgin Islands governing the preparation and dissemination of the financial
statements may differ from legislation in other jurisdictions.
This report was approved by the Board and was signed on its behalf:
Nicholas von Schirnding
Executive Chairman
17 August 2018
Arc Minerals Limited Annual Report & Financial Statements 2018
16
Risk Management Report
The Group’s risk exposures and the impact on the Group’s financial instruments are summarised as
follows:
Credit Risk
Credit risk is the risk of potential loss to the Company if a counterparty to a financial instrument fails to
meet its contractual obligations. The Company’s credit risk is primarily attributable to its liquid financial
assets, including cash, receivables, and balances receivable from the government. The Company limits
the exposure to credit risk in its cash by only investing its cash with high-credit quality financial
institutions in business and savings accounts.
Financing Risk
The development of the Group’s assets will depend on the Group’s ability to obtain financing through
the raising of equity capital, joint venture of projects, debt financing, farm outs or other means. There is
no assurance that the Group will be successful in obtaining the required financing. If the Group is unable
to obtain additional financing as needed, some interests may be relinquished, and/or the scope of the
operations reduced.
Liquidity Risk
Liquidity risk is the risk that the Company will not have the resources to meet its financial obligations as
they fall due. The Company manages this risk by closely monitoring cash forecasts and managing
resources to ensure that it will have sufficient liquidity to meet its obligations. All of the Company’s
current financial liabilities are anticipated to mature within the next ninety days.
Exploration and Development Risk
There is no assurance that the Group’s exploration and development activities will be successful, and
statistically few properties that are explored are ultimately developed into profitable producing mines.
Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates,
foreign exchange rates, and commodity and equity prices. These fluctuations may be significant.
Interest Rate Risk: The Company is exposed to interest rate risk to the extent that its cash balances
bear variable rates of interest. The interest rate risks on cash and short-term investments and on the
Company’s, obligations are not considered significant.
Foreign Currency Risk: The Company is exposed to the financial risk related to the fluctuation of foreign
exchange rates against the Company’s functional currency, which is the United States dollar (“USD”).
The Company expects to continue to raise funds in London and Europe. The Company conducts its
business in Zambia (“Kwacha”) the Democratic Republic of Congo (“DRC Francs”) and Slovakia
(“Euros”) with a significant portion of expenditures in that country denominated in USD and, in addition,
a portion of the Company’s business is conducted in Great British Pounds (“GBP”). It is subject to risk
due to fluctuations in the exchange rates between the GBP and each of the USD, Kwacha, DRC Francs,
Euros. A significant change in the currency exchange rates between the USD relative to foreign
Arc Minerals Limited Annual Report & Financial Statements 2018
17
currencies could influence company’s results of operations, financial position or cash flows. The
Company has not hedged its exposure to currency fluctuations.
Commodity Price Risk - While the value of the Company’s core mineral resource properties, the Kalaba,
Misisi and Ṧturec projects are related to the price of copper and gold and the outlook for these minerals,
the Company currently does not have any operating mines and hence does not have any hedging or
other commodity-based risks in respect of its operational activities.
Historically, gold and copper prices have fluctuated and are affected by numerous factors outside of the
Company’s control, including but not limited to: industrial and retail demand; central bank lending;
forward sales by producers and speculators; levels of worldwide production; short-term changes in
supply and demand because of speculative hedging activities; and other factors related specifically to
gold.
Licensing Risk
The Group’s exploration and development activities are dependent upon the grant of appropriate
licences, concessions, leases, permits and regulatory consents which may be withdrawn or made
subject to limitations or performance criteria. Such licences and permits are as a practical matter subject
to the discretion of the applicable Government or Government office. The Group must comply with
known standards, existing laws and regulations that may entail greater or lesser costs and delays
depending on the nature of the activity to be permitted. The interpretations, amendments to existing
laws and regulations, or more stringent enforcement of existing laws and regulations could have a
material adverse impact on the Group’s results of operations and financial condition. Whilst the Group
continually seeks to do everything within its control to ensure that the terms of each licence are met and
adhered to, third parties may seek to exploit any technical breaches in licence terms for their own
benefit. There is a risk that negotiations with a Government in relation to the grant, renewal or extension
of a licence may not result in the grant, renewal or extension taking effect prior to the expiry of the
previous licence period, and there can be no assurance of the terms of any extension, renewal or grant.
Political Risk
In conducting operations in Zambia, DRC and Slovakia, the Company is subject to considerations and
risks related to the political, economic and legal environments in which the Company operates. Among
other things, the Company's results may be impacted by changes in the political and social conditions
in these countries, and by changes in governmental policies with respect to mining laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of
taxation.
This Risk Management Report has been approved by the Board and signed on its behalf by:
Nick Von Schirnding
Director & Executive Chairman
17 August 2018
Arc Minerals Limited Annual Report & Financial Statements 2018
18
Corporate Governance Statement
Arc Minerals Limited (the "Company") is committed to maintaining the highest standards, in corporate
governance throughout its operations and ensuring all of its practices are conducted transparently,
ethically and efficiently. The Company believes that scrutinising all aspects of its business and
reflecting, analysing and improving its procedures will result in the continued success of the Company
and improve shareholder value. Therefore, the Company has chosen to formalise its governance
policies by complying with the UK's Quoted Companies Alliance Corporate Governance Guidelines for
Small and Mid-Size Quoted Companies (the "QCA Code").
Accordingly, the Company has established specific committees and implemented certain policies, to
ensure that:
•
•
•
•
it is led by an effective Board which is collectively responsible for the long-term success of the
Company;
the Board and the committees have the appropriate balance of skills, experience,
independence and knowledge of the Company to enable them to discharge their respective
duties and responsibilities effectively;
the Board establish a formal and transparent arrangement for considering how it applies the
corporate reporting, risk management and internal control principles and for maintaining an
appropriate relationship with the Company's auditors; and
there is a dialogue with shareholders based on the mutual understanding of objectives.
In addition, the Company has adopted policies in relation to:
• anti-bribery and corruption;
• whistleblowing;
• health and safety;
• environment and community;
•
•
IT, communications and systems; and
social media,
so that all aspects of the Company are run in a robust and responsible way.
The Board of Directors
The Board of Directors is responsible for the proper management of the Company by formulating,
reviewing and approving the Company's strategy, budgets and corporate actions. To achieve its
objectives, the Board adopts the twelve principles of the QCA Code. Through successfully implementing
these principles, the Company is able to deliver long term growth for shareholders and maintain a
flexible, efficient and effective management framework within an entrepreneurial environment.
Arc Minerals Limited Annual Report & Financial Statements 2018
19
It is important that the Board itself contains the right mix of skills and experience to guide the strategy
of the Company. The Board is comprised of:
•
the Chairman, whose primary responsibility is the delivery of the Company's corporate
strategy;
• Four Non-Executive Directors to oversee the corporate governance in the Group; and
• The Board has appointed Michael Foster as senior independent director.
Each Director serves on the Board indefinitely and the Board meets at least three times a year.
Corporate Governance
In compliance with UK best practice, the Board has established corporate governance committees.
Audit Committee
The purpose of the Audit Committee is to monitor the integrity of the Financial Statements of the
Company.
Some of the Audit Committee's duties include:
•
•
•
•
•
reviewing the Company's accounting policies and reports produced by internal and external
audit functions;
considering whether the Company has followed appropriate accounting standards and made
appropriate estimates and judgements, taking into account the views of the external auditor;
reporting its views to the Board of Directors if it is not satisfied with any aspect of the
proposed financial reporting by the Company;
reviewing the adequacy and effectiveness of the Company’s internal financial controls and
internal control and risk management systems;
reviewing the adequacy and effectiveness of the Company's anti-money laundering systems
and controls for the prevention of bribery and receive reports on non-compliance; and
• overseeing the appointment of and the relationship with the external auditor.
The Audit Committee has two members, each of whom being independent, Non-Executive Directors,
and at least one member has recent and relevant financial experience. The current members of the
committee are Michael Foster and Brian McMaster.
Remuneration and Nomination Committee
The purpose of the Remuneration and Nomination Committee is to determine and agree with the Board
the framework or broad policy for the remuneration of the Company’s Chairperson and the Executive
Directors as well as the composition of the Board itself.
Arc Minerals Limited Annual Report & Financial Statements 2018
20
Some of the Remuneration and Nomination Committee's duties include:
•
reviewing the pay and employment conditions across the Company, including the Board of
Directors;
• approving targets and performance related pay schemes operated by the Company and all
•
•
share incentive plans and pension arrangements;
regularly reviewing the structure, size and composition (including the skills, knowledge,
experience and diversity) of the Board and make recommendations to the Board with regard
to any changes succession planning and vacancies; and
identifying suitable candidates from a wide range of backgrounds to be considered for
positions on the Board.
The Remuneration and Nomination Committee has two members, each of whom being independent,
Non-Executive Directors. The current members of the committee are Brian McMaster and Nicholas von
Schirnding.
Share Dealing Code
The Company has adopted a share dealing code to ensure Directors and certain employees do not
abuse, and do not place themselves under suspicion of abusing inside information of which they are in
possession and to comply with its obligations under the Market Abuse Regulation ("MAR") which
applies to the Company by virtue of its shares being traded on AIM. Furthermore, the Company's share
dealing code is compliant with the AIM Rules for companies published by the London Stock Exchange
(as amended from time to time).
Under the share dealing code, the Company must:
• disclose all inside information to the public as soon as possible by way of market announcement
unless certain circumstances exist in which the disclosure of the inside information may be
delayed;
•
keep a list of each person who is in possession of inside information relating to the Company;
• procure that all persons discharging managerial responsibilities and certain employees are
given clearance by the Company before they are allowed to trade in Company securities; and
• procure that all persons discharging managerial responsibilities and persons closely associated
to them notify both the Company and the Financial Conduct Authority of all trades in Company
securities that they make.
Arc Minerals Limited Annual Report & Financial Statements 2018
21
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARC MINERALS LIMITED
Opinion
We have audited the financial statements of Arc Minerals Limited (the ‘Group’) for the year ended 31
March 2018 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated
Statement of Changes in Equity and the notes to the financial statements, including a summary of the
significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion, the group financial statements:
•
•
give a true and fair view of the state of the Group’s affairs as at 31 March 2018 and of its profit
for the year then ended; and
have been properly prepared in accordance with IFRSs as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty relating to going concern
We draw attention to note 1f in the financial statements which identifies conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. The Group is not expected to
generate positive cashflows from operations in the 12 months from the date at which these financial
statements were signed and will need to raise additional funds to provide working capital for on-going
activities and meet committed expenditure.
The financial statements have been prepared on the going concern basis. The ability of the Group to
meet its proposed development expenditure and to provide additional working capital is dependent on
successful fundraising.
As stated in note 1f, these events or conditions, along with the other matters set forth in note 1f, indicate
that a material uncertainty exists that may cast significant doubt on the ability of the Group to continue
as a going concern.
Our opinion is not modified in this respect.
Arc Minerals Limited Annual Report & Financial Statements 2018
22
Independent Auditor’s Report (continued)
Our application of materiality
The materiality applied to the financial statements was £300,000 (2017: £220,000), based on a
percentage blend of gross assets, net assets and net profit. We apply the concept of materiality both in
planning and performing the audit, and evaluating the effect of misstatements. At the planning stage
materiality is used to determine the financial statement areas that are included within the scope of the
audit and the extent of the sample sizes during the audit.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risk of material misstatement
in the financial statements. In particular, we looked at areas involving significant accounting estimates
and judgements by the director’s and considered future events that are inherently uncertain. As in all
our audits, we also addressed the risk of management override of internal controls, including among
other matters consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud. Of the 6 reporting components of the group, a full audit was performed on
the complete financial information of 5 components and, for the other component, testing of all material
items was performed.
Of the 6 reporting components of the group, 2 are located in Slovakia, 1 located in the UK, 1 located in
Mauritius, 1 located in DRC and 1 in the British Virgin Islands. The components located in Slovakia,
Mauritius and DRC are audited by local auditors, operating under our instruction. The Senior Statutory
Auditor interacted regularly with the component audit team during all stages of the audit and was
responsible for the scope of direction of the audit process. This, in conjunction with the additional
procedures performed, gave us appropriate evidence for our opinion on the group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
Carrying value of exploration assets:
The carrying value of the exploration assets as at 31 March 2018 was £18.5m which comprises
of exploration and development expenditure in respect of the licences held in the DRC. There
is the risk that the carrying value of these assets is impaired and that the exploration and
development costs capitalised during the year do meet the required recognition criteria per
IFRS 6.
How the scope of our audit responded to the key audit matter
We performed an impairment review of the carrying value of the intangible asset held.
Our work included:
• Reviewing and considering the impairment indicators in IFRS 6 in relation to the asset
held;
• Obtaining support for ownership;
Arc Minerals Limited Annual Report & Financial Statements 2018
23
Independent Auditor’s Report (continued)
• Reviewing managements basis for impairment or non-impairment and challenging any
assumptions made; and
• Reviewing the work undertaken by component auditors.
We undertook substantive testing on capitalised expenditure during the year to ensure it met
the capitalisation criteria of IFRS 6.
Acquisition of Casa Mining Limited:
During the year, the Company gained control of Casa Mining Limited through a step
acquisition and a bargain purchase arose as a result. There is the risk that the step acquisition
has been incorrectly accounted for and that a bargain purchase should not have arisen on the
acquisition.
How the scope of our audit responded to the key audit matter
We performed a review of the business combination workings.
Our work included:
• A review of the fair value of the Associate prior to gaining control;
• Recalculation of the gain on bargain purchased recorded;
• Obtaining support for ownership documents;
• Reviewing the consolidation workings;
• Consideration of the appropriateness of the disclosures made; and
• Consideration of the rationale as to why the bargain purchase arose.
Classification and valuation of Assets Held for Sale:
During the year, management committed to a plan to dispose of the Slovakian Exploration
Assets which, at the year end, were recorded at a carrying value of £6.3m as an Asset Held for
Sale. There is a risk that the classification of the assets and the valuation of the assets is not
in accordance with IFRS 5 – “Non-current assets held for sale and discontinued operations”.
How the scope of our audit responded to the key audit matter
We have performed the following work in order to address the identified risk:
• Obtained evidence that management had agreed to a plan to dispose of the assets
prior to the year end, and the conditions of IFRS 5 had been met;
• Reviewed and challenged management’s rationale on the valuation of the asset; and
• Ensured that the disclosure requirements of IFRS have been met and that the valuation
has been appropriately disclosed as a significant estimate.
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information. Our
opinion on the Group financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
Arc Minerals Limited Annual Report & Financial Statements 2018
24
Independent Auditor’s Report (continued)
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the
preparation of the Group financial statements and for being satisfied that they give a true and fair view,
and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the Group financial statements, the directors are responsible for assessing the Group’s
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
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with our letter of
engagement. Our audit work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions
we have formed.
Joseph Archer (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Statutory auditor
17 August 2018
1 Westferry Circus
Canary Wharf
London E14 4HD
Arc Minerals Limited Annual Report & Financial Statements 2018
25
Consolidated Statement of Financial Position
Consolidated Statement of Comprehensive Income for the year
ending 31 March 2018
Year to
31 March 2018
Year to
31 March 2017
Notes
£ 000s
£ 000s
-
64
(780)
(247)
(7,161)
(8,124)
(11)
-
40
(572)
(117)
(655)
(1,304)
67
(87)
(224)
Revenue
Other Operating Income
Administrative expenses
Share-based payments
Impairment
Operating loss
Finance Income (expense)
Share of loss of associates accounted for using the equity
method
(Loss)/Gain on change of ownership status
Gain on Business Combination
Profit/(Loss) before income tax
Income tax expense
Profit/(Loss) for the year from continuing operations
(Loss) from discontinued operations, net of tax
Profit/(Loss) for the year
Other comprehensive income:
Item that may be subsequently reclassified to profit or loss
3
4
20
5/15
10
14
14
6
5
10,502
2,056
-
2,056
(36)
2,020
Currency translation differences
Total comprehensive income for the year, net of tax
97
2,117
Profit attributable to:
Equity holders of the parent
Non-controlling interest
Total comprehensive income attributable to:
Equity holders of the parent
Non-controlling interest
Profit (Loss) per share attributable to owners of the parent
during the year
- Basic (pence per share)
- Diluted (pence per share)
- From continuing operations – Basic
- From continuing operations – Diluted
- From discontinued operations – Basic and Diluted
9
9
9
9
9
2,053
(33)
2,150
(33)
1.0
0.9
1.0
0.9
(0.0)
The notes on pages 31 to 59 are an integral part of these consolidated financial statements.
(34)
575
-
(696)
-
(696)
(139)
(835)
878
43
(835)
-
43
-
(1.2)
(1.2)
(1.0)
(1.0)
(0.2)
Arc Minerals Limited Annual Report & Financial Statements 2018
26
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position as at 31 March 2018
31 March 2018
31 March 2017
Note
£ 000s
£ 000s
ASSETS
Non-current assets
Intangible assets
Investment in associate
Available for sale financial assets
Total non-current assets
Current assets
Trade and other receivables
Available for sale financial assets
Assets held for sale
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Held for sale liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Long term payable
TOTAL LIABILITIES
NET ASSETS
Share Capital
Share premium
Share based payment reserve
Foreign exchange reserve
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
TOTAL EQUITY
11
13
15
16
15
5
5
17
18
19
21
20
18,495
-
932
19,427
637
392
6,724
176
7,929
27,356
(39)
(370)
(409)
(1,480)
(1,889)
25,467
-
38,324
1,333
749
(16,257)
24,149
1,318
25,467
-
1,033
791
1,824
124
853
13,013
71
14,061
15,885
(45)
(62)
(107)
-
(107)
15,778
-
32,774
1,697
652
(19,345)
15,778
-
15,778
These financial statements were approved by the Board of Directors on 17 August 2018 and signed on its behalf by:
Nicholas von Schirnding
Executive Chairman
The notes on pages 31 to 59 are an integral part of these consolidated financial statements.
Arc Minerals Limited Annual Report & Financial Statements 2018
27
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows for the year ending
31 March 2018
Year to
31 March 18
Year to
31 March 17
Notes
£ 000s
£ 000s
Cash flows from operating activities
Profit/(Loss) before income tax and including discontinued operations
Gain on business combination
Interest Expense/(Income)
Share based payment
Share of loss from associates
Impairment of Intangible assets
Fair value gain/(loss) on change of ownership status
Foreign exchange
Depreciation and amortisation
14
10
20
14
14
2,020
(10,502)
11
247
87
7,161
224
(27)
-
(779)
Net cash used in operating activities before changes in working capital
(Increase)/decrease in inventories
(Increase)/Decrease in trade and other receivables
Decrease/(increase) in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Investment in Casa Mining Limited
Investment in Zamsort Limited
Purchase of available-for-sale financial assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares- net of share issue costs
Cash acquired on acquisition of Casa mining Limited
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year
16
17
14
(17)
(496)
302
(990)
(571)
(2,046)
-
-
(2,617)
3,512
206
3,718
111
80
191
(835)
-
(67)
117
34
655
(575)
21
(650)
(3)
72
(42)
(623)
(14)
-
(377)
(50)
(441)
716
-
716
(348)
428
80
The notes on pages 31 to 59 are an integral part of these consolidated financial statements.
Arc Minerals Limited Annual Report & Financial Statements 2018
28
Consolidated Statement of Changes in Equity
Consolidated Statement of Changes in Equity as at 31 March 2018
Attributable to the owners of the parent
Share
capital
Share
premium
Foreign
exchange
reserve
Share based
payment
reserve
Retained
earnings
£ 000s
£ 000s
£ 000s
£ 000s
£ 000s
Total
Non-
controlling
interest
£ 000s
£ 000s
Balance as at 1 April 2016
Loss for the year
Other comprehensive income for the year- Currency translation differences
Total comprehensive income for the year
Share capital issued
Share issue expenses
Share based payments granted
Share based payments expired
Total transactions with owners, recognised directly in equity
Balance as at 31 March 2017
Balance as at 1 April 2017
Income for the year
Other comprehensive income(loss) for the year- Currency translation
differences
Total comprehensive income (loss) for the year
Share capital issued
Share based payments granted
Share based payments expired
Fair Value of NCI on acquisition of Casa Mining Limited
Acquisition of NCI of Casa Mining Limited
Total transactions with owners, recognised directly in equity
Balance as at 31 March 2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32,075
-
-
-
752
(36)
(17)
-
699
32,774
32,774
-
-
-
5,550
-
-
-
-
5,550
(226)
-
878
878
-
-
-
-
-
652
652
-
97
97
-
-
-
-
-
-
2,320
-
-
-
-
-
134
(757)
(623)
1,697
1,697
-
-
-
-
247
(611)
-
-
(364)
(19,267)
(835)
-
(835)
-
-
-
757
757
(19,345)
(19,345)
2,020
-
2,020
-
-
611
-
457
1,068
14,902
(835)
878
43
752
(36)
117
-
833
15,778
15,778
2,020
97
2,117
5,550
247
-
-
457
6,254
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,775
(457)
1,318
Total equity
£ 000s
14,902
(835)
878
43
752
(36)
117
-
833
15,778
15,778
2,020
97
2,117
5,550
247
-
1,775
-
7,572
38,324
749
1,333
(16,257)
24,149
1,318
25,467
Arc Minerals Limited Annual Report & Financial Statements 2018
29
Consolidated Statement of Changes in Equity
Share capital: This represents the nominal value of equity shares in issue and is nil as the shares have a nil par value.
Share premium: This represents the premium paid above the nominal value of shares in issue.
Foreign exchange reserve: This reserve represents exchange differences arising from the translation of the financial statements of foreign subsidiaries and the retranslation of monetary items forming part of
the net investment in those subsidiaries.
Share-based payments reserve: This represents the value of share-based payments provided to employees and Directors as part of their remuneration and provided to consultants and advisors hired from time
to time as part of the consideration paid. The reserve represents the fair value of options and performance share rights recognised as an expense. Upon exercise of options or performance share rights, any
proceeds received are credited to share capital and share premium.
Retained earnings: This represents the accumulated profits and losses since inception of the business and adjustments relating to options and warrants.
Non-Controlling Interest: This represents the Non-Controlling Interest element of Casa Mining Limited.
The notes on pages 31 to 59 are an integral part of these consolidated financial statements.
Arc Minerals Limited Annual Report & Financial Statements 2018
30
Notes to the financial statements (continued)
NOTES TO THE FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
a. General Information and Authorisation of Financial Statements
The Company is registered in the British Virgin Islands under the BVI Business Companies Act
2004 with registered number 1396532 and is located at Craigmuir Chambers, Road Town,
Tortola. The Company’s ordinary shares are traded on the AIM Market operated by the
London Stock Exchange.
The principal activity of the Company during the year was that of a holding company for a
group engaged in the identification, evaluation, acquisition and development of natural
resource projects.
The Financial Statements of Arc Minerals Limited for the year ended 31 March 2018 were
authorised for issue by the Board on 17 August 2018.
b. Basis of Preparation
The financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) as adopted by the
European Union.
The consolidated financial statements have been prepared on the historical convention, as
modified by the measurement to fair value of available-for-sale financial assets as described
in the accounting policies below.
The financial information is presented in Pounds Sterling (£) and all values are rounded to the
nearest thousand Pounds Sterling (£000’s) unless otherwise stated.
The principal accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied unless otherwise
stated.
c. New and amended standards adopted by the Group
The standards which applied for the first time this year have been adopted and have not had
a material impact.
The International Accounting Standards Board (IASB) has issued the following new and
revised standards, amendments and interpretations to existing standards that are not
effective for the financial year ending 31 March 2018 and have not been adopted early. The
Group is currently assessing the impact of these standards and based on the Group’s current
operations do not expect them to have a material impact on the financial statements.
New Standards
IFRS 15 - Revenue from Contracts with Customers
IFRS 9 - Financial Instruments
IFRS 16 - Leases
IFRS 17 - Insurance Contracts
Effective Date
1 January 2018
1 January 2018
1 January 2019
1 January 2021
Arc Minerals Limited Annual Report & Financial Statements 2018
31
Notes to the financial statements (continued)
Amendments to Existing Standards
Clarifications to IFRS 15 revenue from Contracts with Customers
1 January 2018
Classification and Measurement of Share-based Payment
Transactions (Amendments to IFRS 2)*
1 January 2018
IFRIC 22 Foreign Currency Transactions and Advance Consideration*
1 January 2018
Annual Improvements to IFRSs (2014-2016 Cycle)*
IFRIC 23 Uncertainty over Income Tax Treatments*
Annual Improvements to IFRSs (2015-2017 Cycle)*
*Not yet adopted by European Union
1 January 2018
1 January 2019
1 January 2019
Arc has progressed further its projects dealing with the implementation of these key new
accounting standards and is able to provide the following information regarding their likely
impact:
IFRS 9 ‘Financial Instruments’
The standard replaces all phases of the financial instruments project and IAS 39 ‘Financial
Instruments: Recognition and Measurement’. The standard is effective from periods
beginning on or after 1 January 2018 and introduces:
• new requirements for the classification and measurement of financial assets and
financial liabilities;
• a new model for recognising provisions based on expected credit losses; and,
• simplified hedge accounting by aligning hedge accounting more closely with an
entities risk management methodology.
The adoption of IFRS 9 is unlikely to have a material impact on the consolidated results of the
Group.
IFRS 15 ‘Revenue from Contracts with Customers’
The standard is effective for periods commencing on or after 1 January 2018. This standard
introduces a new revenue recognition model and replaces IAS 18 ‘Revenue’, IAS 11
‘Construction Contracts’, IFRIC 13 ‘Customer Loyalty Programmes’, IFRIC 15 ‘Agreements for
the Construction of Real Estate’, IFRIC 18 ‘Transfer of Assets from Customers’ and SIC-31
“Revenue – Barter Transactions Involving Advertising Services.’ As the Group has no revenue
at present the introduction of IFRS 15 will have no impact in the financial statements.
IFRS 16 ‘Leases’
The standard is effective for periods commencing on or after 1 January 2019 and has been
endorsed by the EU. Under the provisions of the standard most leases, including the majority
of those previously classified as operating leases, will be brought onto the statement of
financial position, as both a right-of-use asset and a largely offsetting lease liability. The right-
of-use asset and lease liability are both based on the present value of lease payments due
over the term of the lease, with the asset being depreciated in accordance with IAS 16
‘Property, Plant and Equipment’ and the liability increased for the accretion of interest and
reduced by lease payments. The directors continue to consider the potential effects on the
Group’s financial statements and do not currently expect that there will be a material impact.
Arc Minerals Limited Annual Report & Financial Statements 2018
32
Notes to the financial statements (continued)
d. Basis of Consolidation
The consolidated financial statements consolidate the financial statements of Arc Minerals
Limited and the audited financial statements of its subsidiary undertakings made up to 31
March 2018 except for Casa Mining Limited 92.1% owned by the Company. The audited
accounts of Casa Mining Limited are consolidated as of 31 December 2017 as it is deemed
impractical to consolidate Casa Mining as at 31 March 2018. Any significant transactions
between 1 January 2018 and 31 March 2018 have been recognised accordingly in these
financial statements.
Subsidiaries are entities over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity. Subsidiaries are
fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
When necessary, adjustments are made to the financial statements of subsidiaries to bring
their accounting policies into line with the Group's accounting policies. All intra-group assets
and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
e. Associates
Associates are entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for using the equity method of accounting. Under
the equity method, the investment is initially recognised at cost and the carrying amount is
increased or decreased to recognise the investor’s share of the profit or loss of the investee
after the date of acquisition. The Group’s investment in associates includes any goodwill
identified on acquisition.
Where the ownership interest in an existing investment is increased whereby significant
influence is obtained, the Group re-measures the existing investment immediately prior to
obtaining significant influence with resulting gains/losses recognised immediately in profit or
loss. The fair value of the existing investment added to the fair value of the consideration of
the additional investment is treated as the deemed cost and is continued to be accounted for
under the equity method.
If the ownership interest in an associate is reduced but significant influence is retained, only
a proportionate share of the amounts previously recognised in other comprehensive income
is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the statement of
comprehensive income, and its share of post-acquisition movements is recognised in the
other comprehensive income section of the statement of comprehensive income with a
corresponding adjustment to the carrying amount of the investment. When the Group’s
share of losses in an associate equals or exceeds its interest in the associate, including any
unsecured receivables, the Group does not recognise further losses, unless it has incurred
legal or constructive obligations or made payments on behalf of the associate.
Arc Minerals Limited Annual Report & Financial Statements 2018
33
Notes to the financial statements (continued)
The Group determines at each reporting date whether there is any objective evidence that
the investment in the associate is impaired. If this is the case, the Group calculates the
amount of impairment as the difference between the recoverable amounts of the associate
and its carrying value and recognises the amount adjacent to ‘share of profit/loss of associate’
in the group statement of comprehensive income.
When the Group loses significant influence over an associate, it derecognises that associate
and recognises a profit or loss being the difference between the sum of the proceeds received
and any retained interest, and the carrying amount of the investment in the associate at the
date significant influence is lost.
Gains and losses resulting from upstream and downstream transactions between the Group
and its associates are recognised in the Group’s financial statements only to the extent of
unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies
of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Impairment gains and losses arising in investments in associates are recognised in the
statement of comprehensive income.
When the Group gains control of an associate the fair value of the associate undertaking is
then assessed with any gain or loss arising being recognised within the income statement.
f. Going Concern
The financial statements have been prepared on a going concern basis. The Group’s assets
are not generating revenues, operating cash outflows have been incurred in the year and an
operating loss and cash outflow from operations is expected in the 12 months subsequent to
the date of these financial statements being signed and, as a result, the Group will need to
raise funding to finance their ongoing activities and non-discretionary expenditures.
Based on the Board’s assessment that the necessary funds will be raised, cash flow budgets
can be achieved and the Directors have a reasonable expectation that the Group has access
to adequate resources to continue in operational existence for the foreseeable future. Thus,
they continue to adopt the going concern basis of accounting in preparing the annual financial
statements for the year ended 31 March 2018.
Should the Group be unable to continue trading, adjustments would have to be made to
reduce the value of the assets to their recoverable amounts, to provide for further liabilities
which might arise and to classify fixed assets as current.
The auditors make reference to a material uncertainty in relation to going concern within
their audit report.
Arc Minerals Limited Annual Report & Financial Statements 2018
34
Notes to the financial statements (continued)
g. Business combinations
The Group applies the acquisition method to account for business combinations. The
consideration transferred for the acquisition of the subsidiary is the fair value of the assets
transferred, the liabilities incurred to the former owners of the acquiree and the equity
interests issued by the Group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at acquisition date. The Group recognises any non-
controlling interest in the acquiree on an acquisition by acquisition basis; either at fair value
or at the non-controlling interest’s proportionate share of the recognised amounts of the
acquiree’s identifiable net asset.
Acquisition related costs are expensed as incurred.
If a business combination is achieved in stages, the acquisition date carrying value of the
acquiree’s previously held interest in the acquire is re-measured to fair value at the
acquisition date; any gain or loss arising from such a re-measurement are recognised in profit
or loss.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred
and the fair value of non-controlling interest over the identifiable net assets acquired and
liabilities assumed. If this consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised in profit or loss in the Income Statement.
Any interest of non-controlling interests in the acquiree is initially measured at the minority’s
proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.
There are no non- controlling shareholders of subsidiaries.
h. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided
to the Board, being the Group’s chief operating decision-maker (“CODM”).
i. Foreign currencies
The Group presentational currency is Pounds Sterling. Each entity in the Group determines
its own functional currency and items included in the financial statements of each entity are
measured using that functional currency. At present the functional currency for the Slovakian
subsidiaries is the Euro, while for Casa Mining Limited and Zamsort Limited it is the US Dollar.
The presentation currency (Pounds Sterling) is used primarily because the Parent Company
Arc Minerals Limited is listed on the Alternative Investment Market (AIM) of the London
Stock Exchange.
The results and financial position of all the Group entities that have a functional currency
different from the presentation currency are translated into the presentation currency as
follows:
• monetary assets and liabilities for each balance sheet presented are translated at the
closing rate at the date of that balance sheet;
•
income and expenses are translated at average exchange rates during the accounting
year; and
Arc Minerals Limited Annual Report & Financial Statements 2018
35
Notes to the financial statements (continued)
• all resulting exchange differences are recognised in other comprehensive income where
material.
On consolidation, exchange differences arising from the translation of the net investment in
foreign entities, and of monetary items receivable from foreign subsidiaries for which
settlement is neither planned nor likely to occur in the foreseeable future are taken to other
comprehensive income. When a foreign operation is sold, such cumulative exchange
differences are subsequently reclassified in the income statement as part of the gain or loss
on sale.
j. Taxation
Tax is recognised in the consolidated Statement of Comprehensive Income, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity.
In this case, the tax is also recognised in other comprehensive income or directly in equity,
respectively.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary
differences arising from differences between the carrying amount of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable
profit. However, deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of
an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss.
In principle, deferred tax liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries and associates, and interests in joint ventures, except where the
Company is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred tax assets and liabilities
relate to taxes levied by the same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled. Deferred tax assets and liabilities are not discounted.
There has been no tax credit or expense for the year relating to current or deferred tax.
Arc Minerals Limited Annual Report & Financial Statements 2018
36
Notes to the financial statements (continued)
k. Intangible assets
Exploration and evaluation assets
Exploration and development costs are carried forward in respect of areas of interest where
the consolidated entity’s rights to tenure are current and where these costs are expected to
be recouped through successful development and exploration, or by sale. Alternatively, these
costs are carried forward while active and significant operations are continuing in relation to
the areas of interest and it is too early to make reasonable assessment of the existence or
otherwise of economically recoverable reserves. When the area of interest is abandoned,
exploration and evaluation costs previously capitalised are impaired.
Costs incurred by the Company on behalf of its subsidiaries and associated with mining
development and investment are capitalised on a project-by-project basis pending
determination of the feasibility of the project. Costs incurred include appropriate technical
and administrative expenses but not general overheads. If a mining development project is
successful, the related expenditures will be written-off over the estimated life (useful
economic life) of the commercial ore reserves on a unit of production basis. Impairment
reviews are carried out regularly by the Directors of the Company. Where a project is
abandoned, or is considered to be of no further commercial value, the related costs will be
written off to the Statement of Comprehensive Income.
The recoverability of these costs is dependent upon the discovery of economically
recoverable reserves, the ability of the Group to obtain necessary financing to complete the
development of reserves and future profitable production or proceeds from the disposal of
recoverable reserves.
l. Significant accounting judgements, estimates and assumptions
Critical Accounting Estimates and Judgements
The preparation of financial statements using accounting policies consistent with IFRS
requires the Directors to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities and the reported
amounts of income and expenses. The preparation of financial statements also requires the
Directors to exercise judgement in the process of applying the accounting policies. Changes
in estimates, assumptions and judgements can have a significant impact on the financial
statements.
Critical accounting estimates and judgements
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised prospectively from the period in which the estimates are
revised. The following are the key estimate and assumption uncertainties that have a
significant risk of resulting in a material adjustment within the next financial year:
i) Assets held for sale
As described in note 5, during the year the Group decided to dispose of its Slovakian
operations and, as a result, they have been reclassified as assets held for sale. This
reclassification has required the Board to measure these items at the lower of carrying
amount and fair value less costs to sell. The valuation of these items represents
management’s best estimate thereon and the key factors considered therein are disclosed in
note 5 to the financial statements.
Arc Minerals Limited Annual Report & Financial Statements 2018
37
Notes to the financial statements (continued)
ii) Available for sale assets
The Board have conducted an assessment of the Group’s available for sale financial assets.
This exercise requires the board to make numerous estimates and judgements in relation to
asset carrying values, using the information they have to hand at a certain moment in time.
The provision of other information and use of other inputs may affect the carrying value of
these investments.
iii) Valuation of exploration, evaluation and development expenditure
The value of the Group’s exploration, evaluation and development expenditure is dependent
upon the success of the Group in discovering economic and recoverable mineral resources,
especially in countries of operation where political, economic, legal, regulatory and social
uncertainties are potential risk factors.
The future revenue flows relating to these assets are uncertain and will also be affected by
competition, relative exchange rates and potential new legislation and related environmental
requirements.
The Group’s ability to continue its exploration programmes and develop its projects is
dependent on future fundraising, the outcome of which is uncertain. The ability of the Group
to continue operating within its jurisdiction is dependent on a stable political environment
which is uncertain. This may also impact the Group’s legal title to assets held which would
affect the valuation of their assets.
The Group therefore makes estimates in relation to the valuation of these assets with
consideration of these factors.
There have been no changes to any past valuations.
m. Cash and cash equivalents
Cash and Cash Equivalents comprise cash at bank and in hand.
n. Trade and other receivables
Receivables are recognised initially at cost, being their initial fair value. These are classified
as loans and receivables, and so are subsequently carried at cost using the effective interest
method. The Directors are of the view that such items are collectible and no provisions are
required.
o. Financial instruments
The Group’s financial instruments are classified as loans and receivables and available for sale
financial assets. The classification depends on the purpose for which the financial instruments
were acquired. Management determines the classification of its financial instruments at
initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market, and comprise trade and other receivables
and cash and cash equivalents (see separate accounting policies for these items).
Available-for-sale financial assets are non-derivatives that are not included in any other
category, and comprise current asset investments. They are initially recognised at fair value
plus transaction costs, and are subsequently carried at fair value with changes in fair value
being recognised in other comprehensive income.
Arc Minerals Limited Annual Report & Financial Statements 2018
38
Notes to the financial statements (continued)
Trade and other payables are classified as financial liabilities, and are initially recognised a
cost, being their fair value, and subsequently measured at amortised cost using the effective
interest method. Any interest is recognised as a finance cost within the statement of
comprehensive income.
There is no material difference between the carrying values and fair value of the Group’s
financial instruments.
p. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any
accumulated impairment losses.
Depreciation is provided on all property, plant and equipment to write off the cost less
estimated residual value of each asset over its expected useful economic life on a straight-
line basis at the following annual rates:
• Office equipment 20% or straight line over the period of the lease- whichever is the
lesser;
• Field equipment – between 5% and 25%.
All assets are subject to annual impairment reviews.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably. The carrying
amount of the replacement part is derecognised. All other repairs and maintenance are
charged to the Statement of Comprehensive Income during the financial period in which they
are incurred.
The asset’s residual value and useful economic lives are reviewed, and adjusted if appropriate,
at the end of each reporting period.
An asset’s carrying value is written down to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposal are determined by comparing the proceeds with the carrying
amount and are recognised within the Statement of Comprehensive Income.
q. Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may
be impaired. If any such indication exists, or when annual impairment testing for an asset is
required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in
use. This is determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of assets, and the
asset's value in use cannot be estimated to be close to its fair value. In such cases, the asset
is tested for impairment as part of the cash-generating unit to which it belongs. When the
carrying amount of an asset or cash-generating unit exceeds its recoverable amount, it is
considered impaired and is written down to its recoverable amount.
Arc Minerals Limited Annual Report & Financial Statements 2018
39
Notes to the financial statements (continued)
In assessing value in use, estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. Impairment losses relating to continuing operations
are recognised in those expense categories consistent with the function of the impaired asset,
unless the asset is carried at revalued amount (in which case the impairment loss is treated
as a revaluation decrease).
An assessment is also made at each reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognised impairment
loss is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognised. If that is the case, the
carrying amount of the asset is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognised for the asset in prior years. Such reversal is
recognised in the Statement of Comprehensive Income unless the asset is carried at revalued
amount, in which case the reversal is treated as a revaluation increase. After such a reversal,
the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying
amount, less any residual value, on a systematic basis over its remaining useful life.
r. Trade and other payables
Trade and other payables are carried at amortised cost under the effective interest method
and represent liabilities for goods and services provided to the Group prior to the end of the
financial year that are unpaid and arise when the Group becomes obliged to make future
payments in respect of the purchase of these goods and services.
s. Assets held for sale
Assets (or disposal groups) classified as held for sale are measured at the lower of their
carrying amount or fair value less costs to sell.
The Group classifies an asset (or disposal groups) as held for sale if their carrying amount is
to be recovered through a sale transaction rather than through continued use. The Group
considers this the case when the asset (or disposal group) is available for immediate sale in
its present condition subject only to terms that are usual and customary for sales of such
assets (or disposal groups) and the sale is considered to be highly probable.
A sale is considered to be highly probable if the Board of Directors is committed to a plan to
sell the asset (or disposal group), and an active programme to locate a buyer and complete
the plan has been initiated and is expected to complete within one year of classification.
Assets held for sale are no longer depreciated or amortised while they are classified as held
for sale. Interest and other expenses attributable to the liabilities of the disposal group
continue to be recognised.
Assets classified as held for sale are presented separately from the other assets in the
statement of financial position. The liabilities classified as held for sale are presented
separately from other liabilities in the statement of financial position.
Arc Minerals Limited Annual Report & Financial Statements 2018
40
Notes to the financial statements (continued)
t. Share-based payments
The Group provides benefits to senior personnel, consultants and advisors of the Group in the
form of share-based payments, whereby such parties render services in exchange for shares
or rights over shares (equity-settled transactions).
The cost of these equity-settled transactions with such parties is measured by reference to
the fair value of the equity instruments at the date at which they are granted. The fair value
is determined by using a Black-Scholes model.
In valuing equity-settled transactions, no account is taken of any performance conditions,
other than conditions linked to the price of the shares of Arc Minerals Limited (market
conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase
in equity, over the period in which the performance and/or service conditions are fulfilled,
ending on the date on which the relevant party become fully entitled to the award (the vesting
period).
The cumulative expense recognised for equity-settled transactions at each reporting date
until vesting date reflects:
the extent to which the vesting period has expired and;
(i)
(ii) the Group’s best estimate of the number of equity instruments that will ultimately vest.
No adjustment is made for the likelihood of market performance conditions being met, as the
effect of these conditions is included in the determination of fair value at grant date. The
charge to the Income Statement for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where
vesting is only conditional upon a market condition.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in
the computation of earnings/ (loss) per share.
u. Earnings per share
Basic Earnings per share is calculated as profit attributable to equity holders of the parent for
the period, adjusted to exclude any costs of servicing equity (other than dividends), divided
by the weighted average number of ordinary shares, adjusted for any bonus element.
2. Segmental analysis
Segment information has been determined based on the information reviewed by the Board
for the purposes of allocating resources and assessing performance. No revenue is currently
being generated.
Head office activities are mainly administrative in nature and are located in the UK/BVI whilst
the activities in Slovakia (assets held for sale), Eritrea, Zambia and Democratic Republic of
Congo relate to exploration and development work.
Segment results, assets and liabilities include items directly attributable to a segment as well
as those that can be allocate on a reasonable basis.
Arc Minerals Limited Annual Report & Financial Statements 2018
41
Notes to the financial statements (continued)
31 March 2018
Result
Operating gain/(loss)
Fair value loss
Share of loss of associate
Impairment
Gain on Business Combination
Finance income
UK/BVI
£ 000's
Slovakia
£ 000's
Eritrea
£ 000's
Zambia
£ 000's
DRC
£ 000’s
Total
£ 000's
(995)
-
-
-
-
-
31
-
-
(6,700)
-
-
-
-
-
(461)
-
-
-
-
-
-
-
(11)
(35)
(224)
(87)
-
10,502
-
(999)
(224)
(87)
(7,161)
10,502
(11)
Profit (Loss) before Income Tax
(995)
(6,669)
(461)
(11)
10,156
2,020
Other information
Capital additions
Non controlling interest
Assets
Non-current Assets
Available for sale financial assets
Held for sale assets
Current assets excluding cash and cash
equivalents
Cash and equivalents
Consolidated total assets
Liabilities
Non-current liabilities
Held for sale liabilities
Current liabilities
Consolidated total liabilities
-
-
-
-
637
37
674
-
-
(131)
(131)
150
-
-
-
6,724
-
-
6,724
-
(39)
-
(39)
-
-
-
392
-
-
-
392
-
-
-
-
-
-
322
1,318
472
1,318
932
-
-
-
-
932
-
-
-
-
18,495
-
-
-
139
18,634
(1,480)
-
(239)
(1,719)
19,427
392
6,724
637
176
27,356
(1,480)
(39)
(370)
(1,889)
Arc Minerals Limited Annual Report & Financial Statements 2018
42
Notes to the financial statements (continued)
31 March 2017
Result
Operating loss
Fair value gain/(loss)
Share of loss of associate
Impairment
Finance income
Loss before & after taxation
Other information
Depreciation and impairment
Investment into available for sale financial
assets
Investment in associate
Capital additions
Assets
Non-current Assets
Held for sale assets
Current assets excluding cash and cash
equivalents
Cash and equivalents
Consolidated total assets
Liabilities
Non-current liabilities
Held for sale liabilities
Current liabilities
Consolidated total liabilities
3. Other operating income
Rental income
Other sundry income
UK/BVI
£ 000's
Slovakia
£ 000's
Eritrea
£ 000's
Zambia
£ 000's
DRC
£ 000’s
Total
£ 000's
(659)
-
-
-
-
(659)
6
-
-
-
-
-
-
71
71
-
-
(62)
(62)
(129)
-
-
(655)
-
(784)
15
-
-
14
-
13,016
-
-
13,016
-
(45)
-
(45)
-
(53)
(18)
-
-
(71)
-
853
-
-
-
-
853
-
853
-
-
-
-
-
-
-
-
67
67
-
791
-
-
-
-
912
-
912
-
-
-
-
2018
£ 000's
-
64
64
-
628
(16)
-
-
612
(788)
575
(34)
(655)
67
(835)
-
21
-
1,033
-
1,033
-
-
-
1,033
-
-
-
-
1,644
1,033
14
1,033
13,016
1,765
71
15,885
-
(45)
(62)
(107)
2017
£ 000's
20
20
40
Arc Minerals Limited Annual Report & Financial Statements 2018
43
Notes to the financial statements (continued)
4. Expenses by nature
Directors' fees (excluding share based payments)
Wages and salaries
Office expenses
Travel and subsistence expenses
Professional fees - legal, consulting, exploration
AIM related costs including Public Relations
Auditor's remuneration – audit
Casa administration costs
Other expenses
Total operating expenses
Employee information
Group Staff Costs comprised:
Wages, salaries and benefits
Less: capitalised exploration expenditure
Charge to the profit or loss
2018
£ 000's
2017
£ 000's
213
58
21
62
116
182
32
57
39
780
167
57
32
34
114
131
25
-
12
711
2018
£ 000's
130
(72)
58
2017
£ 000's
63
(6)
57
The average number of persons employed in the Group, including Executive Directors, was:
Average number of persons employed:
Operations
Administration
2018
Number
2017
Number
4
1
5
4
2
6
5. Assets Held for Sale/Discontinued operations
During the year, the Group announced its intention to dispose of its Slovakian interests and
initiated an active programme to locate a buyer. The associated assets and liabilities are
consequently presented as held for sale within these financial statements.
The related financial information is set out below:
Arc Minerals Limited Annual Report & Financial Statements 2018
44
Notes to the financial statements (continued)
a) Results of disposal group
Expenses
Loss before income tax
Income tax
Loss after tax
Loss from discontinued operations
Other comprehensive income from discontinued operations
b) Cash flows of disposal Group
Operating activities
Investing activities
Financing activities
Net cash from discontinued operations
c) Assets and liabilities of disposal Group
Assets classified as held for sale
Intangible assets
Property, Plant and Equipment
Cash at bank
Trade and other receivables
Inventory
Total assets of disposal Group
Liabilities directly associated with assets classified as held for sale
Trade creditors
Total liabilities of disposal Group held for sale
2018
£ 000's
(36)
(36)
-
(36)
(36)
(36)
2018
£ 000's
255
(249)
-
6
2018
£ 000's
6,290
175
15
190
54
6,724
2018
£ 000's
39
39
2017
£ 000's
(139)
(139)
-
(139)
(139)
(139)
2017
£ 000's
20
(14)
-
6
2017
£ 000's
12,739
211
9
17
37
13,013
2017
£ 000's
45
45
Arc Minerals Limited Annual Report & Financial Statements 2018
45
Notes to the financial statements (continued)
During the period, the Directors initiated a programme to dispose of its Slovakian operations
and assets. The valuation of the asset is an estimate and represents managed best judgement
in respect of its fair value. Prior to classification as an asset held for sale, the Slovakian
operations were valued at £13m and were supported by a JORC compliant report.
Management have based their valuation on the levels of interest shown, the valuation of the
asset within the report, the fact that the associated contingent liability has now been
extinguished the current resource market, and initial expenses of interest. There can be no
guarantee that the asset will be sold for the amount disclosed within the financial statements
and as such any difference to the price will impact accordingly upon the financial statements.
On revaluation to an Asset Held for Sale, management have impaired the Slovakian Asset by
£6.7m.
6. Taxation
Current income tax charge
Deferred tax charge/ (credit)
Total taxation charge/ (credit)
Taxation reconciliation
2018
£’000
2017
£’000
-
-
-
-
-
-
The charge for the year can be reconciled to the loss per the consolidated statement of
comprehensive income:
Gain (Loss) before income tax
Tax on loss at the weighted average Corporate tax rate of 19.00 % (2017: 14.38 %)
Effects of:
Permanent differences
Tax losses carried forward
Non-taxable income/Non-deductible expenses for tax purposes
Total income tax expense
2018
£’000
2,020
2017
£’000
(835)
384
(120)
-
-
(384)
-
-
-
120
-
The deferred tax asset has not been provided for in accordance with IAS 12. The Group
does not have a material deferred tax liability at the year end.
The tax rate used in 2018 is the UK Corporate rate which is higher than either the Republic
of Mauritius or British Virgin Islands. There is no income earned in the Democratic Republic
of Congo.
7. Dividends
No dividends were paid (2017: nil).
Arc Minerals Limited Annual Report & Financial Statements 2018
46
Notes to the financial statements (continued)
8. Key management remuneration
Key management remuneration
2018
Executive Directors
Nicholas Von Schirnding
Non-Executive Directors
Anthony Balme *
Brian McMaster
Michael Foster
Jonathan de Thierry
Paul Heber*
Key Management Personnel
Vassilios Carellas (COO) *
John Forrest (CF)
2018
£ 000's
560
Short term employee benefits
Share based*
compensation
2017
£ 000's
268
Total
£ 000's
£ 000's
£ 000's
69
25
30
10
8
8
114
49
313
120
189
-
15
-
-
-
112
-
247
25
45
10
8
8
226
49
560
* Resigned as a Director during the year
2017
Executive Directors
Anthony Balme
Vassilios Carellas
Non-Executive Directors
Paul Heber
Nicholas Von Schirnding
Short term employee benefits
Share based
compensation
Total
£ 000's
£ 000's
£ 000's
38
108
18
3
167
29
33
5
34
101
67
141
23
37
268
• Consists of share options valued by using the Black Scholes method.
No pension benefits are provided for any Directors (2017: nil).
Arc Minerals Limited Annual Report & Financial Statements 2018
47
Notes to the financial statements (continued)
9. Earnings per share
The calculation of Earnings per share is based on the loss attributable to equity holders
divided by the weighted average number of shares in issue during the year.
Gain (Loss)
2018
£ 000's
2,020
2017
£ 000's
(835)
Weighted average number of ordinary shares per share (000s)
206,580
69,166*
Potential diluted weighted average number of shares (000s)
224,598
69,166**
Basic earnings per share (expressed in pence)
Fully Diluted earnings per share (expressed in pence)
Net Profit (loss) per share continuing operations – basic
Net Profit (loss) per share continuing operations – diluted
Net (loss) per share continuing operations – basic and diluted
*
Restated to reflect 1:100 share consolidation
1.0
0.9
1.0
0.9
(0.0)
(1.2)*
(1.2)**
(1.0)
(1.0)
(0.2)
** As the inclusion in 2017 of potential Ordinary shares would result in a decrease in the
loss per share, they are considered to be anti-dilutive. As such, diluted and basic earnings per
share in 2017 are the same.
10. Finance income/(expense)
Interest on Zamsort Loan
2018
£ 000’s
(11)
2017
£ 000’s
67
During the year the Company converted £545,905 (USD 828,472) into a 14% equity interest
in Zamsort Limited. Accrued interest (8%) to the point of conversion was renegotiated which
resulted in an adjustment of the amount of interest recorded in prior years.
11. Intangible assets
Goodwill
Exploration
and
evaluation
assets
Total
£ 000's
£ 000's
£ 000's
Cost
At 1 April 2016
Additions
Currency translation adjustments
Impairment
Transferred to Held for sale assets (see note 5)
Net book value as at 31 March 2017
At 1 April 2017
Assets acquired on purchase of Casa Mining Limited (see note 14)
Additions
Currency loss
169
-
-
-
(169)
-
-
-
-
-
12,347
14
864
(655)
(12,570)
-
-
18,737
322
(564)
Arc Minerals Limited Annual Report & Financial Statements 2018
12,516
14
864
(655)
(12,739)
-
-
18,737
322
(564)
48
Notes to the financial statements (continued)
Net book value as at 31 March 2018
-
18,495
18,495
12. Investment in subsidiaries
At 31 March 2018, the Company held interests in the share capital of the following
subsidiary companies:
Company
Ortac Resources (UK) Limited
St. Stephans Gold s.r.o.*
Ortac s.r.o *
Carpathian Minerals s.r.o. *
Casa Mining Limited
Leda Mining sarl **
Place of Business
England and Wales
Slovak Republic
% Ownership held Nature of business
100%
100%
Holding Company
Mineral Exploration
Slovak Republic
Slovak Republic
Republic of Mauritius
Democratic Republic of Congo
100%
100%
92%
73%
Mineral Exploration
Minerals Exploration
Minerals Exploration
Minerals Exploration
* Wholly owned subsidiary of Ortac Resources (UK) Limited.
** Subsidiary of Casa Mining Limited
The non-controlling interest shown within the primary statement arises as a result of the
Group not owning 100% of the share capital in Casa Mining Limited and its subsidiary, Leda
Mining Srl.
13. Investment in associates
Set our below are the associates of the Group during the year ended 31 March 2018.
1 April 2016
Transfer of available for sale financial assets (note 15)
Additions
Share of loss
Fair value adjustment
Transfer to available for sale financial assets (note 15)
31 March 2017
1 April 2017
Acquired > 50%
31 March 2018
Andiamo
£ 000's
874
-
50
(18)
(53)
(853)
-
-
-
-
Casa
£ 000's
-
340
81
(16)
628
-
1,033
1,033
(1,033)
-
Total
£ 000's
874
340
131
(34)
575
(853)
1,033
1,033
(1,033)
-
Nature of investment in associates during 2018 and 2017:
Name of entity
Address of Registered Office
Andiamo Exploration Ltd
6 Gresham Street, London UK
Casa Mining Ltd
24 CyberCity Ebene Mauritius
% ownership
interest
18
Nature of
relationship
See note i
Measurement
method
Equity
92 (post date at
which control
was gained)
See note ii
Equity
Arc Minerals Limited Annual Report & Financial Statements 2018
49
Notes to the financial statements (continued)
14. Gain on Business Combination- Casa Mining Limited
Casa Mining Limited (“Casa”) is involved in the exploration of gold and other minerals in the
Democratic Republic of Congo. On 1 April 2017 the Company had a 22.2% interest in Casa.
In May 2017 the Company purchased a US$2,000,000 convertible loan note issued by Casa
(“CLN”). The terms of the CLN provided that it could be converted at US$ 0.65.
On 4 November 2017, the conversion price of the CLN was amended to US$ 0.5586, the
Company purchased a further 2,576,255 shares of Casa and the CLN was converted into
3,580,450 Casa shares.
On 10 November 2017 the Company announced a takeover offer for the balance of the Casa
shares it did not own. The terms of the offer were 14.85775 Company shares for each Casa
share which was equivalent to 2.875p per Company share. At 31 March 2018 the Company’s
interests in Casa Mining Limited was 92.1%.
The acquisition resulted in a Gain on Business Combination of £ 10,502,000 as follows:
Carrying Value of Investment at 1 April 2017
22.2% share of loss to Acquisition Date of 4 November 2017
Fair Value Adjustment of Associate
Fair Value of Associate at Acquisition Date
Total Consideration for CLN and 2,576,255 Casa shares
Fair Value of Non-Controlling interest at Acquisition Date
Fair value of Casa Mining Limited
Net assets acquired:
Cash and cash equivalents
Intangible assets
Trade and other receivables
Trade and other payables
Long term debt
Total net assets acquired
Less: Fair Value of Casa Mining Limited
Gain on business combination
Bargain purchase:
£ 000s
1,033
(87)
(224)
722
2,646
1,775
5,143
206
18,737
51
(290)
(3,059)
15,645
(5,143)
10,502
The Group was able to take advantage of favourable market conditions to acquire a
controlling interest in Casa Mining Limited, in which it already held a 43% fully-diluted
interest, at a valuation which produced a Gain on Business Combination. This was a result of
the Group having ready access to funds which were required by Casa to move forward with
its exploration and evaluation programmes.
Non-controlling interest:
The non-controlling interest of Casa Mining Limited at the date of acquisition were measured
at the fair value of these interests. This fair value was estimated by the consideration offered
by the Company to acquire the controlling interest.
Arc Minerals Limited Annual Report & Financial Statements 2018
50
Notes to the financial statements (continued)
Impact of acquisitions on the results of the Group:
The contribution to net profit of the Group was a loss of £35,000 by Casa Mining Limited.
Group revenue includes £Nil from the operations of Casa Mining Limited.
If these businesses were acquired at the beginning of the reporting period Group revenue
would have been £Nil, and loss for the year from continuing operations would have been
£402,000 more.
The directors of the Group consider these results to be representative of the performance of
the combined Group, annualised, and provide a reference point for comparison against
periods in the future. In 2018 Casa had no revenues and a loss since acquisition of US$54,000
(31 December 2017: loss of US$564,000).
The financial statements of Casa Mining Limited have been consolidated to its year end of 31
December 2017, as it is impractical to consolidate the balances as at 31 March 2018. There
have been no significant transactions during the period 1 January 2018 – 31 March 2018
which would require any adjustment in these financial statements.
15. Available for sale financial assets
Opening Balance
Additions – Zamsort Limited
Additions - Casa Mining Ltd
Transfer of Casa Mining Ltd to Investment in associates
Transfer of Andiamo Exploration Limited from Investment in associate
Impairment of Andiamo
As at 31 March
Current
Andiamo
Non-current (oZamsort Limited)
As at 31 March
(i) Current - available for sale assets
(a) Current available for sale assets
2018
£ 000's
1,644
141
-
-
-
(461)
1,324
392
932
1,324
2017
£ 000's
835
-
296
(340)
853
-
1,644
853
791
1,644
At 31 March 2018, the Group has impaired the carrying value of Andiamo by £461,000. This
was a result of the expected sale of the asset and yet end indication of the expected sale
amount.
(ii) Long term available for sale assets - Zamsort Limited
14% Equity
Convertible loan and advances
Arc Minerals Limited Annual Report & Financial Statements 2018
2018
£ 000's
546
386
2017
£ 000's
-
791
51
Notes to the financial statements (continued)
In May 2017 the Company agreed with Zamsort Limited to convert US$828,472 of
US$1,200,000 Secured Loan Notes issued by Zamsort to the Company in 2015 and to release
its secured debenture in exchange for a 14% shareholding in Zamsort and a loan note with a
principal amount of US$371,528 which is convertible into 5.35% and has a repayment date of
31 December 2018. Interest of 8% continues to accrue.
932
791
16. Trade and other receivables
Current trade and other receivables
Other receivables
Prepayments
Total
Group
2018
£ 000's
635
2
637
Group
2017
£ 000's
124
-
124
Current trade and other receivables are all due within one year.
Loans advanced to subsidiaries are unsecured, interest free and have no fixed repayment
date. Accounts for Casa were consolidated at 31 December 2017. During the period 1 January
2018 to 31 March 2018, Arc advanced £494,000 (US$ 685,000), which is included within
receivables.
The fair value of trade and other receivables is the same as their carrying values as stated
above.
Trade and other receivables do not contain any impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class
of receivable mentioned above. The Group does not hold any collateral as security.
The carrying amounts of the Group’s current and non-current trade and other receivables
are denominated in the following currencies:
Current trade and other receivables
UK Pounds
US Dollars
Euros
Total
17. Trade and other payables
Current trade and other payables
Trade payables, other payables and accruals
Group
2018
£ 000's
6
631
-
637
Group
2018
£ 000's
370
370
Group
2017
£ 000's
-
122
2
124
Group
2017
£ 000's
62
62
The carrying values of trade and other payables are considered to be a reasonable
approximation of the fair value and are considered by the Directors as payable within one
year.
Arc Minerals Limited Annual Report & Financial Statements 2018
52
Notes to the financial statements (continued)
18. Long Term Payable
Long term payable
Deferred consideration
Group
2018
£ 000's
1,480
1,480
Group
2017
£ 000's
-
-
Long term debt relates to deferred consideration of US$ 2,000,000 incurred by Casa Mining Ltd when
that Company purchased and cancelled shares from a shareholder, Tremont Master Holdings. The
amount is unsecured, non-interest bearing and due for payment in April 2020.
19. Share capital
Authorised
Unlimited Ordinary shares of no par value
Called up, allotted, issued and fully paid
As at 31 March 2016
26-27 September 2016
24 October 2016
26 October 2016
Consolidation
As at 31 March 2017
2 May 2017
30 October 2017
17 November 2017
17 December 2017
18 February 2018
18 March 2018
As at 31 March 2018
£ 000's
-
Number of shares
5,732,211,373
Nominal value
-
1,480,000,000
251,296,486
750,000,000
(8,131,372,872)
82,134,987
66,666,667
85,000,000
66,554,808
11,042,838
7,488,893
815,719
-
-
-
-
-
-
-
-
-
-
-
319,703,912
-
On 2 May 2017 66,666,667 ordinary shares of no par value were issued at a price of 3 pence
per share for a cash consideration of £2,000,000.
On 30 October 2017 85,000,000 ordinary shares of no par value were issued at a price of 2
pence per share for a cash consideration of £1,700,000.
On 17 November 2017, 66,554,808 ordinary shares of no par value were issued at a price of
2.375 pence per share for non-cash consideration of £1,580,676 to acquire 4,479,468 shares
of Casa Mining Limited.
On 17 December 2017, 11,042,838 ordinary shares of no par value were issued at a price of
2.375 pence per share for non-cash consideration of £ 262,267 to acquire 743,238 shares of
Casa Mining Limited.
On 18 February 2018, 7,488,893 ordinary shares of no par value were issued at a price of
2.350 pence per share for non-cash consideration of £ 175,989 to acquire 504,040 shares of
Casa Mining Limited.
Arc Minerals Limited Annual Report & Financial Statements 2018
53
Notes to the financial statements (continued)
On 18 March 2018, 815,719 ordinary shares of no par value were issued at a price of 2.250
pence per share for non-cash consideration of £ 18,916 to acquire 54,902 shares of Casa
Mining Limited.
20. Share based payments and Warrants
Share Options
During the year the following share options were issued and valued using the Black Scholes
method:
Weighted
Avg Price
(pence)
Number
Exercise
Price
(pence)
Share price
at grant
(pence)
Weighted Avg
Term
(years)
Value
(000s)
**
1 April 17
Granted 01August 17
Expired
Granted 12 November 17
31 March 18
30.46
-
-
-
11.31
6,848,000
375,000
(1,230,500)
12,025,710
18,018,210
3.0
-
2.625
3.0
-
2.625
4.10
5
-
5
3.98
1,697
15
(611)
232
1,333
In the Black Scholes model the key inputs were Volatility as 100%, the Risk Free Interest Rate
as 0.55% and the dividend yield as 0%.
** Under IFRS 2 “Share-based Payments”, the Company determines the fair value of options
issued to Directors, Employees and other parties as remuneration and recognises the amount
as an expense in the Statement of Comprehensive Income with a corresponding increase in
equity.
Warrants
Grant
date
Number
1 April 17
4,575,000
8 May 2017
8 May 2017
900,000
1,500,000
3 Nov 2017
4,000,000
TOTAL
10,975,000
Exercise
Price
(pence)
2.90-5.50
3.00
3.00
2.00
Term
(years)
Share Price
at grant
pence
2-5
3
2
2
3
3
2
The charge incurred during the year in relation to share based payments was £247,000 (2016:
£117,000).
Arc Minerals Limited Annual Report & Financial Statements 2018
54
Notes to the financial statements (continued)
21. Share premium
Opening Balance
Total Additions (see note 20 for details)
Share issue costs
As at 31 March
2018
£ 000s
32,774
5,738
(188)
38,324
2017
£ 000s
32,075
752
(53)
32,774
See note 20 for a breakdown of share issues during the year.
22. Financial instruments and capital risk management
Financial Risk Management
Financial Risk Factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign
currency risk and price risk), credit risk and liquidity risk. The Group’s overall risk management
programme focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance.
Risk management is carried out by the Board of Directors under policies approved at Board
meetings. The Board frequently discusses principles for overall risk management including
policies for specific areas such as foreign exchange.
a) Market Risk
i) Foreign Exchange Risk
The Group operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the UK pound sterling and US Dollar.
Foreign exchange risk arises from recognised monetary assets and liabilities, where they may
be denominated in a currency that is not the Group’s functional currency. The exposure to
this risk is not considered material to the Group’s operations and thus the Directors consider
that, for the time being, no hedging or other arrangements are necessary to mitigate this risk.
On the assumption that all other variables were held constant, and in respect of the Group
and the Company’s expenses the potential impact of a 20% increase/decrease in the GBP:
USD Foreign exchange rate on the Group’s loss for the year and on equity is as follows:
Potential impact on USD expenses: 2018
Increase/(decrease) in foreign exchange rate
b) Credit Risk
Credit risk arises from cash and cash equivalents.
20%
-20%
Group
£ 000's
113
(113)
The Group considers the credit ratings of banks in which it holds funds in order to reduce
exposure to credit risk. The Group will only keep its holdings of cash and cash equivalents
with institutions which have a minimum credit rating of ‘A’.
The Group considers that it is not exposed to major concentrations of credit risk.
Arc Minerals Limited Annual Report & Financial Statements 2018
55
Notes to the financial statements (continued)
The Group holds cash as a liquid resource to fund its obligations. The Group’s cash balances
are held primarily in Sterling and US Dollars. The Group’s strategy for managing cash is to
maximise interest income whilst ensuring its availability to match the profile of the Group’s
expenditure. This is achieved by regular monitoring of interest rates and monthly review of
expenditure forecasts.
The Group has a policy of not hedging and therefore takes market rates in respect of foreign
exchange risk; however, it does review its currency exposures on an ad hoc basis. Currency
exposures relating to monetary assets held by foreign operations are included within the
foreign exchange reserve in the Group Balance Sheet.
The currency profile of the Group’s cash and cash equivalent is as follows:
Cash and cash equivalents
Sterling
US Dollars
At end of year
2018
£ 000's
51
139
190
2017
£ 000's
73
7
80
On the assumption that all other variables were held constant, and in respect of the Group’s
cash position, the potential impact of a 20% increase in the UK Sterling:US Dollar foreign
exchange rate would not have a material impact on the Group’s cash position and as such is
not disclosed.
c) Liquidity Risk
To date the Group has relied upon equity funding to finance operations. The Directors are
confident that adequate funding will be forthcoming with which to finance operations.
Controls over expenditure are carefully managed.
The Group ensures that its liquidity is maintained by a management process which includes
projecting cash flows and considering the level of liquid assets in relation thereto, monitoring
Balance Sheet liquidity and maintaining funding sources and back-up facilities.
Fair Value Estimation
The following table presents the Group’s financial assets and financial liabilities that are
measured at fair value at 31 March 2018.
Items at fair value as at 31 March 2018
Assets
Available for sale assets - shares (Note 15)
Total Assets
Level 1
£ 000's
-
-
Level 2
£ 000's
-
-
Level 3
£ 000's
1,324
1,324
Total
£ 000's
1,324
1,324
The following table presents the Group’s financial assets and financial liabilities that are
measured at fair value at 31 March 2017.
Items at fair value as at 31 March 2017
Assets
Available for sale assets - shares (Note 15)
Level 3
£ 000's
1,644
Level 1
£ 000's
-
Level 2
£ 000's
-
Total
£ 000's
1,644
Total Assets
-
-
1,644
1,644
Fair value hierarchy
Arc Minerals Limited Annual Report & Financial Statements 2018
56
Notes to the financial statements (continued)
The Group uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets.
Level 2: other techniques for which all inputs that have a significant effect on the recorded
fair value are observable, either directly or indirectly.
Level 3: techniques that use inputs that have a significant effect on the recorded fair value
that are not based on observable market such as industry knowledge and experience of the
Directors.
The movement in the levels during the year to 31 March 2018 are attributable to the changes
in ownership status during the period and any additional equity purchases or fair value
adjustments required as a result.
Capital Risk Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to position
as a going concern and to continue its exploration and evaluation activities. The Group had
£1,480,000 (USD 2,000,000) of debt at 31 March 2018 acquired on acquisition of Casa Mining
Limited (2017 -Nil) and has capital, defined as the total equity and reserves of the Group, of
£32,167,000 (2017: £15,778,000).
The Group monitors its level of cash resources available against future planned exploration
and evaluation activities and may issue new shares in order to raise further funds from time
to time.
23. Commitments
Operating leases
There are no operating leases.
Exploration commitments
Ongoing exploration expenditure is required to maintain title to the Group’s mineral
exploration permits. No provision has been made in the Group financial statements for these
amounts as the expenditure is expected to be fulfilled in the normal course of the operations
of the Group.
24. Contingent Liabilities
Vendor royalty and NSR arose as part of the consideration in 2010 for the Group’s acquisition
of Kremnica Gold s.r.o. and Kremnica Gold Mining s.r.o.(since 1 April 2014 both merged
together and renamed Ortac s.r.o).
During the year the Company purchased both the Vendor royalty and the NSR for a total
consideration of £50,000.
The contingent liability at 31 March 2018 is £ Nil (2017: £3,040,000).
Arc Minerals Limited Annual Report & Financial Statements 2018
57
Notes to the financial statements (continued)
25. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note. There were no other
transactions with related parties.
Remuneration of Key Management Personnel
The remuneration of the Directors is set out in note 8.
£11,700 was paid to Carter Capital Limited in respect of services provided to the Company
by A Balme. A Blame is a director of said company. This amount has been included in the
remuneration report.
£64,000 was paid to VC Resources Limited in respect of services provided to the Company
by V Carellas. V Carellas is a director of said company. This amount has been included in the
remuneration report.
All other key management were paid their remuneration directly.
At the date of the Annual Report M Foster, V Carellas and N von Schirnding are Directors of
Casa Mining Limited. J de Thierry was formerly a Director. N von Schirnding is currently a
Director of Zamsort Limited having replaced V Carellas.
26. Ultimate controlling party
There is no ultimate controlling party in the opinion of the Board.
27. Events after the reporting period
(i) The share exchange offer for Casa Mining Limited was open until 9 May 2018. On
expiry of the offer the Company had increased its interest in Casa from 92.1% at 31
March 2018 to 99.4%
(ii) On 6 June 2018, the Company gained control of Zamsort Limited through acquiring
52% of its share capital. This shareholding subsequently increased to 66% on 11 July
2018. The 66% excludes the convertible loan note details of which can be found in
note 15. Consideration for the purchases was 141,583,333 ordinary shares.
A gain on the fair value revaluation of the investment has been calculated as follows:
Carrying value of the investment
Fair Value of investment
Gain on revaluation
£’000
545
980
435
Arc Minerals Limited Annual Report & Financial Statements 2018
58
Notes to the financial statements (continued)
Details of net assets acquired are as follows:
Purchase consideration (102,083,333 shares @ 2.4p)
Fair Value of investment
Non-controlling interest
Fair value of net assets acquired (see below)
Value of licences/Intangible assets
Goodwill
On acquisition
£’000
2,450
980
3,570
7,000
2,729
4,271
-
The net assets and liabilities arising from the acquisition, provisionally determined, are
as follows:
Cash and cash equivalents
Property, plant and equipment
Intangible assets
Inventory
Trade and other receivables
Trade and other payables
Shareholder loans
Net assets acquired
On acquisition
£’000
4
2,847
422
1,088
4
(417)
(1,219)
2,729
If new information obtained within one year from the acquisition date about the facts
and circumstances that existed at the acquisition date identifies adjustments to the
above amounts, or any additional provisions that existed at the acquisition date, then
the acquisition accounting will be revised.
(iii) The Company has received an offer of USD 532,000 for its shares in Andiamo
Exploration Limited. The offer is conditional and has a long stop date of 4 September
2018.
Arc Minerals Limited Annual Report & Financial Statements 2018
59