Arc Minerals Limited
ARC MINERALS LIMITED
ANNUAL REPORT AND
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2019
Arc Minerals Limited
CONTENTS
CONTENTS
CORPORATE INFORMATION
CHAIRMAN’S STATEMENT
STRATEGIC REPORT & OVERVIEW OF OPERATIONS
DIRECTORS’ REPORT & FINANCE REVIEW
CORPORATE GOVERNANCE STATEMENT
DIRECTORS' RESPONSIBILITY STATEMENT
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
2
5
7
14
22
30
31
36
37
38
39
41
Arc Minerals Limited – Annual Report & Financial Statements 2019
1
Corporate Information
Directors
Nicholas von Schirnding
Brian McMaster
Jonathan de Thierry
Don Bailey
Mumena Mushinge
Rémy Welschinger
Chief Operations Officer
Vassilios Carellas
Chief Financial Officer
John Forrest
Director, Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Registered Address
Craigmuir Chambers
Road Town. Tortola
British Virgin Islands, VG 1110
Independent Auditor
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London, E14 4HD
Company Solicitors (UK)
Hill Dickinson LLP
105 Jermyn St, St James’s
London, SW1Y 6EE
Nominated Advisor and Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London, WC2R 1DJ
Broker
Optiva Securities Limited
49 Berkeley Square
London, W1J 5AZ
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 2019
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Overview
Arc Minerals Limited (“Arc Minerals”) is a dynamic junior company focused on the exploration and
development of its prospective portfolio of copper-cobalt and gold projects located primarily in Africa.
Key assets comprise:
•
Zamsort Ltd (66% owned) Copper Large Scale Exploration and Mining Licenses located in the
North West province of Zambia which comprises the following projects:
o 4km² small scale mining license
o 4km² small scale exploration license, all enclosed by a
o 399.8km² large scale exploration license
o Soil sampling and airborne geophysics identified 9 large scale copper targets
o 10,000m drilling programme underway
•
Zaco Ltd (47.5% owned) Copper Large Scale Exploration Licenses located in the North West
province of Zambia which comprises the following projects:
o 465km² large scale exploration licenses
o Soil sampling and airborne geophysics identified 4 large scale copper targets
• Casa Mining (99.4% owned):
o Three contiguous mining license areas – 133km² valid until 2045, enclosing a 55km
long ‘gold belt’
o Deposit with 3-million-ounce JORC-code compliant inferred resource established
o A further 8 additional targets confirmed within the 55km long gold belt
o Scoping study and additional drilling required to take project to the next stage of its
development
• Šturec Gold project (100% owned)
o 8 km² mining license area
o 1.3-million-ounce gold pre-feasibility stage project
o Pre-feasibility study completed in 2014 – post tax NPV of $145m (8% discount) and
IRR 26% at $1,343/oz Au price
Casa and Šturec have been designated for sale to allow the Company to focus on Zambia.
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.
2019 Highlights
• Consolidating interests in the Zambian licenses
Increased resource at Akyanga to 3 million ounces of gold
•
Flew an airborne geophysical programme over both Zamsort and Zaco license areas
•
• Completed the soil sampling program (1km profile lines) over entire Zamsort and Zaco
license areas
Identified 13 large copper targets
•
• Raised £6.7m from share placements
• Appointment of Mumena Mushinge and Rémy Welschinger to the Board
Arc Minerals Limited – Annual Report & Financial Statements 2019
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• Completed construction of small scale demonstration plant and resource drilling programme
at Kalaba
• Divestment of interest in Andiamo
• Commencement of a comprehensive infill soil sampling programme (200m spaced line
profiles) of the key target areas followed by a 10,000m diamond drilling programme in the
Zamsort and Zaco license areas
Business Model and Strategy
The strategic vision of Arc Minerals is to build a leading focused copper exploration and development
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 developing
resources; and
Supportive institutional and retail shareholder base.
•
Arc Minerals Limited – Annual Report & Financial Statements 2019
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Chairman’s Statement
This financial year was one of significant change for Arc Minerals, underpinned by the
transformational transaction of the Zamsort large-scale copper exploration license, which we believe
to be one of the most prospective grounds in the Domes region of the Copperbelt. The transaction
completed in June 2018 and made Arc Minerals the largest shareholder. We subsequently increased
our ownership to 66% (with an additional 5.35% convertible loan) and established a good working
relationship with Kopara Limited, which has the minority interest in the Zamsort and Zaco license
areas.
During the financial year, copper and base metal prices continued to stage a modest recovery as
results of solid global growth increased industrial demand, and the macro trends towards the use of
renewable energy and electric vehicles in particular continued, both of which consume significantly
larger volumes of copper than conventional uses. Although the last quarter of our financial year was
characterised by significant uncertainty in the equity markets, demand for copper remained steady
and in early 2019 there was a noticeable increase in price as copper inventories fell to their lowest
point in many years. Despite this lift in copper prices, the supply side response remains subdued with
a drop in copper exploration budgets and very few projects coming online to meet the ever-increasing
demand.
At Arc Minerals, we are well placed to benefit from this increase in the demand for copper. During the
year we made significant progress, in particular our continued exploration success at our large
Zambian copper licenses. At Zamsort we identified 13 large regional copper targets.
In addition to our work at the Kalaba Copper-Cobalt Project, we commenced a systematic exploration
programme on the larger license areas. We commenced a comprehensive soil geochemistry and
airborne geophysical programme with the aim of defining large copper targets. In total we collected
approximately 28,000 samples for the 1km spaced soil sampling program and a further 24,000 soil
samples for the 200m spaced infill soil sampling programme. The airborne geophysical programme
was conducted by Xcalibur Airborne Geophysics (Pty) Ltd, a global provider of airborne geophysical
surveys. The survey covered 5,218 line-kilometres and was conducted using a 200m linespacing
covering the entire Zamsort and Zaco licenses representing around 872 km². These exploration tools
proved to be very useful as the analysis identified 12 large scale regional copper targets.
Our geological models and database were subsequently independently verified and analysed by two
leading geological consultants including African Mineral Consultants who were part of the Kamoa
discovery team, a large high-grade copper deposit 140km north east of Zamsort in the DRC
Copperbelt. The consulting teams identified a further target called West Lunga, a 7-km long large
copper target, on the western part of our license. This new target has a significant footprint and we
are currently clearing the area to commence an initial drilling programme later this year.
In June 2019, we commenced a diamond drilling programme focussing initially on the Cheyeza East
area. Initial results demonstrated pervasive mineralisation with intersections of 28.5m at 1.32% Cu
including 13m grading 2.31% and 18m at 2.35% Cu including 7.60m grading 4.15% Cu. Further drill
Arc Minerals Limited – Annual Report & Financial Statements 2019
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results identified a mineralised area at Cheyeza East of 650m long and 300m wide. Even though we
are still at the early phases of the exploration campaign on this target, as a result of these initial results
we increased the scope from 2,400m to 5,000m.
At Casa, the Company reported a JORC (2012) compliant Resource update of 3 million ounces and as
a result of a strengthening gold price we have seen a significant increase in interest from international
third parties.
On a corporate level, we made changes to our Board, welcoming Mushinge Mumena (‘Mumena’) and
Rémy Welschinger as new directors. Mumena brings a wealth of experience with mining projects in
Zambia and has been a large shareholder in the Zamsort and Zaco projects. Rémy Welschinger is a
resource professional with significant financial experience in the metals and mining sector.
Michael Foster resigned from the Board in December 2018 and I would like to thank him on behalf of
the board for his contribution and wish him well with his future endeavours.
As part of our commitment to selling our non-core assets, in February, we divested our 18.44% interest
in Andiamo Exploration Limited to a private equity group for $250,000, realising a loss of £202,000.
We are currently also engaged in discussions regarding the sale of our interest in the Šturec gold
project where the company has applied for another underground mining permit, as well as our interest
in the Casa gold project. We continue to work actively on the sale of these assets. The expressions of
interest and subsequent discussions that we have had to date support our belief that the sale of these
assets will generate significant value for Arc Minerals. Naturally there is no guarantee that the ongoing
discussions will lead to a definitive outcome and the board will continue to monitor developments
and ensure that shareholders are kept apprised of developments.
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
30 September 2019
Arc Minerals Limited – Annual Report & Financial Statements 2019
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Strategic Report
Overview of Operations
Arc Minerals Limited (‘Arc’ or ‘the Company’) is incorporated in the British Virgin Island 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 the following principal areas of interest:
1. The Zamsort large scale exploration license (‘LEL’) on the Zambian side of the Central African
Copper Belt (‘CACB’ or ‘Copperbelt’) covering c 407km², is considered to be one of the last
unexplored parts of the Domes Region in north west Zambia, in close proximity to several word-
class mines;
2. The Zaco large scale exploration license, consisting of two license areas, adjacent to the north and
south of the Zamsort license area covers c. 465km²;
3. The Misisi Gold Project in the eastern part of the Democratic Republic of Congo (“DRC”). Misisi
hosts a 3-million-ounce gold depsoit at scoping study level and central to a 55km long gold belt,
all encompassed in three contiguous mining license areas valid until 2045 and covering an area of
133km²;
4. The Ṧturec Gold Project in Slovakia. Ṧturec host a 1.3 million gold equivalent Resource. The project
has a pre-feasibility study demonstrating robust economics of a discounted post-tax NPV of
$145m and IRR of 26% at a $1,343/oz gold price.
Zamsort and Zaco Large Scale Exploration License Areas (‘LEL’)
The Zamsort and Zaco LEL are located approximately 900 km from Lusaka, in the North Western
Province, and are 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 Zamsort and Zaco licenses 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, First Quantum Minerals’ Sentinel and
Kansanshi mines and Barrick Gold’s Lumwana mine, have been discovered and constructed to exploit
the mineral resources in the ‘new’ western part of the Domes Region of the Zambian Copperbelt.
These three ‘new’ mines today account for almost 70% of Zambian copper production and the Zamsort
and Zaco are in the same trend and in close proximity to these large operations.
The Zamsort Copper Project consists of three licences - a 4km² small-scale mining license which host
the Kalaba copper-cobalt project and an adjacent 4km2 small scale exploration license, all enclosed
by a large prospecting license area of 399.8km². The Zaco license which lies adjacent to the north and
south of the Zamsort licenses, consist of two large scale prospecting licences covering 465km². The
licenses were 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.
Arc Minerals Limited – Annual Report & Financial Statements 2019
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The Kalaba Copper-Cobalt Project benefits from a newly constructed Commercial Scale Demonstration
Plant (SCD”) and exploration work is currently underway at the other key target areas to complement
the ore feed from Kalaba in order to improve the overall economics of the CSD plant.
During the year Arc commenced a 200m spaced infill soil sampling programme over the target areas
identified by the previous year’s 1km spaced soil sampling programme as well as the airborne
geophysical programme.
In addition to the 28,000 soil samples analysed during the 1km spaced programme, a further 24,000
soil samples were collected and subsequently processed and analysed, over seven key target areas in
both the Zamsort and Zaco license areas.
In February 2019, the Company commissioned Xcalibur Airborne Geophysical (Pty) Ltd out of
Johannesburg to conduct a large-scale airborne geophysics programme. Xcalibur flew 5,218 line-
kilometres using a 200m line spacing over the licenses (see figure 1). A detailed review and analysis of
the soil sampling data and results of the airborne geophysical data identified 13 new large regional
copper targets on the licenses (see figure 2).
The Company also commissioned African Mineral Consultants and Douglas Haynes Discovery to review
and verify all technical data and the Company’s internal analysis. Both consultancies have extensive
experience in the Copperbelt and have been part of the Kamoa discovery team. Kamoa is a recently
discovered high-grade copper deposit in the DRC. The consultants confirmed the Company’s findings
as well as identified a further target called West Lunga, a 7km long area in the western part of the
license.
Figure 1. Regional copper in soils (1km spaced profiles) XRF results (left) and enlarged map on
Cheyeza East following the 200 m spaced infill profiles (right)
Figure 2. Key Target Areas identified by the Soil Sampling and Airborne Geophysical Programmes
Arc Minerals Limited – Annual Report & Financial Statements 2019
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Table 1. Regional targets ranked in order of priority
Rank
1
2
3
4
5
6
Target
Cheyeza East
West Lunga (Zaco)
Muswema
Lumbeta
Cheyeza West
Jatuma
Rank
7
8
9
10
11&12
13
Target
Southern Fold Zone
Nyambwezu
Musewena-Katondo (Zaco)
Fwiji (Zaco)
Kawunba 1&2
Chididi (Zaco)
In June 2019, the Company commenced a diamond drilling programme focussing initially on the
Cheyeza East area. Initial results demonstrated pervasive mineralisation with intersections of 28.5m
at 1.32% Cu including 13m grading 2.31% and 18m at 2.35% Cu including 7.60m grading 4.15% Cu.
Further drill holes intercepted 1.27% over 32m including 2.05% Cu over 17.50m and 2.79% Cu over
10.50m. The Company identified a mineralised area at Cheyeza East of 650m long and 300m wide.
Misisi Gold Project (Held for sale)
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 and during the year the Company
updated the Resources on the Akyanga Project. Akyanga now 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 2,215,000
ounces on a 73.84% attributable basis. The statement of Mineral Resources (Table 2) completed by
Denny Jones Pty Ltd (“Denny Jones”), a leading Australian based Resource Consultancy is reported in
accordance with the requirements of the 2012 JORC Code.
Arc Minerals Limited – Annual Report & Financial Statements 2019
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Table 2.
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 3 Geological cross-section
In addition to the Mineral Resource, an Exploration Target over the Akyanga East project has been
defined as summarised below.
Table 3
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.
Arc Minerals Limited – Annual Report & Financial Statements 2019
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5. A cut-off grade of 0.5 g/t has been used to define the Exploration Target.
Ṧturec Project (Held for sale)
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.
The Šturec Project is considered a non-core asset in line with the Company’s focus on its African
ventures.
Arc Minerals Limited – Annual Report & Financial Statements 2019
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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. Mr von Schirnding is also chairman
of Fodere, a private minerals processing business with a plant at Highveld steel and a non-executive
director of Jangada Mines plc.
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, 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, and is also currently a director of a number of ASX and AIM listed companies.
Jonathan De Thierry, Non-Executive Director
Jonathan de Thierry is an English graduate geologist with 25 years’ experience in mining and
investment banking in Africa & Europe. He is a founder of Casa Mining and has raised significant capital
for exploration and development of major DRC mineral projects.
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,
the Moro d'Oro mine in Brazil and the Neves Corvo mine in Portugal. He was also a director of a
number of Rio Tinto international companies including Palabora Mining and Rossing Uranium in Africa.
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.
Arc Minerals Limited – Annual Report & Financial Statements 2019
12
Mushinge Mumena, Non-Executive Director
Mushinge Mumena is a Zambian based entrepreneur with a long-standing history in the mining and
minerals industry. Mr Mumena is a director of a number of privately-owned Zambian based mining
and power generation businesses. Mr Mumena founded Zamsort Limited in 2005 and has been
instrumental in developing the Kalaba prospect.
Rémy Welschinger, Non-Executive Director
Remy Welschinger is the founder and managing director of Limehouse Capital, an investment holding
company specialising in natural resources projects. Up until 2018, he was head of commodities sales
in Europe for Deutsche Bank. Prior to that, Mr Welschinger was an Executive Director in the Fixed
Income and Commodities division of Morgan Stanley in London. Mr Welschinger graduated from Cass
Business School, London, with a MSc in Investment management.
Arc Minerals Limited – Annual Report & Financial Statements 2019
13
Directors’ Report
The Directors present their annual report on the affairs of the Group, together with the financial
statements and Auditor’s Report for the year ended 31 March 2019.
Principal activities
The Group is engaged in the business of acquiring, exploring and developing mineral properties in
Africa. The review of the business and future strategy is covered in the Chairman’s Statement on page
5 and Strategic Report on page 7.
Results and Dividends
The loss on continuing operations of the Group after taxation amounted to £6.3 million (2018: Gain of
£2 million). There were no dividends paid in 2019 (2018: nil).
Financial Summary
The year ended 31 March 2019 saw several significant corporate developments.
1) Arc increased its interest in Zamsort Limited from 14% to 66%. The additional 52% was
acquired with shares. Arc’s aggregate cost of its 66% interest in Zamsort is GBP 4.5M;
2) Arc advanced USD 3.4M to Zamsort to finance, along with our 34% equity partner,
approximately USD 1.25M of drilling and assaying and approximately USD 1.5M of
upgrades and refurbishment to the demonstration plant and associated infrastructure
including road and camp construction and maintenance;
3) Arc acquired a 47.5% interest in Zaco Limited which owns the 465km2 license adjacent to
Zamsort. The cost was USD 475,000;
4) Arc completed in May 2018 its offer to acquire Casa Mining Limited. It now owns 99.43%
at an aggregate book cost of GBP 4.9M;
5) Arc financed the USD 1.9M exploration program at Casa which resulted in a 100% increase
in the resource to 3.0M ounces;
6) Arc disposed of its 18.48% interest in Andiamo Exploration Limited for cash proceeds of
USD 250,000, realising a loss of £202,000.
Other information:
(i) Arc now owns 66% of Zamsort and 99.4% of Casa with an aggregate cost of GBP 9.4M. These
acquisitions were financed primarily by shares. In addition, Arc placed shares for cash which
generated GBP 6.7M before issue costs. Further details about share movements are provided in
Note 19 to the accounts.
(ii) Group total assets increased 28% from GBP 27.4M to GBP 35.2M and net assets increased 18%
from GBP 25.5M to GBP 30.0M.
Arc Minerals Limited – Annual Report & Financial Statements 2019
14
(iii) GBP 1.9M owed by the Group to Zamsort’s 34% shareholder ranks equally with Arc’s loans to
Zamsort which totalled approximately GBP 3.2M at 31 December 2018. The Arc loans to Zamsort
are not reflected in these consolidated accounts.
(iv) USD 2M of deferred consideration owed by Casa is non-recourse to Arc.
(v) The loss for the period from continuing operations of GBP 6.3M represents 1.08 pence per share
(2018 gain of GBP 2M, representing 1 penny per share). Because Arc’s controlling interest in
Zamsort was acquired in stages, goodwill, which normally would be recognised if the acquisition
had been completed in one stage, is expensed up to the point of control. In the accounts the
Group is reporting a loss of GBP 2.8M on acquisition of the first 49% of Zamsort and goodwill of
GBP 700k on the acquisition of 6% on 5 June 2018 when Zamsort became a subsidiary. For the
prior year, the Group reported a gain on business combination with Casa of GBP 10.5M.
Events after the reporting period
There are no events to report subsequent to 31 March 2019.
Held for sale assets and Held for sale liabilities
The Group has assets held for sale with a net book value of £27.0M (2018 - £25.4M comprising:
(i)
Shares in Casa Mining Ltd and other subsidiaries in the Democratic Republic of
the Congo, which own the Misisi gold assets with a net book value of £ 21.0M;
(ii) Shares in Ortac s.r.o and other subsidiaries in Slovakia, which own the Šturec
assets with a net book value of £6.0M
During 2018, the Directors initiated a programme to dispose of its Slovakian operations and assets and
in 2019 a similar programme was started for Casa. The valuations of these assets are estimates and
represent management’s best judgement in respect of their fair values. Management have based their
valuations of these projects on the level of interest shown, the valuation of the assets arising from
reports prepared by independent consultants and other factors. 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 reclassification to held for sale
assets, management impaired the Slovakian Asset by £6.7m in 2018 and a further £422k in 2019.
Financial assets at fair value through profit or loss
In 2018 the Group classified shares in Andiamo Exploration Limited as financial assets at fair value
through profit or loss in the amount of £392,000. During 2019 the group sold its interest in Andiamo
to a private equity group for US$250,000.
Interest >3%
The following shareholders have a notifiable interest in the Company at the date of this report:
• Mushinge Mumena
• Karl-Erik von Bahr
57,402,463 shares – 8.01%
43,065,000 shares – 6.01%
Arc Minerals Limited – Annual Report & Financial Statements 2019
15
Directors
The names of Directors who served of the date of this report are set out below:
Directors
Executive Directors
Nick von Schirnding
Non-Executive Directors
Brian Mc Master
Michael Foster
Jonathan De Thierry
Don Bailey
Mushinge Mumena
Rémy Welschinger
Directors’ Remuneration
Date of Appointment
Date of Resignation
24 January 2017
1 August 2017
-
-
1 December 2017
31 December 2018
2 January 2018
1 June 2018
05 February 2019
31 May 2019
-
-
-
-
The Group remunerates the Directors at levels commensurate with its size and 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 7 to the financial statements.
Directors’ Interest
The beneficial interests of the Directors as at the date of this report in the shares and options of the
Company are set out below:
Director
Annual Report 2019
Annual Report 2018
Shares
Options Warrants(i)
Shares
Options Warrants
Nick von Schirnding
17,080,532
15,620,195
4,555,557
11,693,482
1,800,000
Brian McMaster
2,555,557
2,375,000
555,557
2,000,000
375,000
Michael Foster*
-
-
-
8,693,492
Jonathan de Thierry
13,767,888
2,000,000
266,667
13,492,888
-
-
Don Bailey
7,697,224
3,700,000
665,557
7,041,667
3,700,000
Mumena Mushinge
57,402,463
800,000
333,334
Rémy Welschinger**
13,028,844
1,600,000
7,444,446
-
-
-
-
-
-
-
-
-
-
-
*Michael Foster resigned effective 31 December 2018
**Rémy Welschinger was appointed on 31 May 2019
(i) Financing warrants issued to Directors as part of the Company’s financings in October 2018 and
February 2019.
Arc Minerals Limited – Annual Report & Financial Statements 2019
16
None of the Directors exercised any share options during the year.
Corporate Governance
A statement on Corporate Governance is set out on page 22.
Key Performance Indicators
The Group increased in 2019 its stake in Zamsort Limited from 14% to 66% and then, together with our
partner in Zamsort, advanced approximately GBP 3.7M to finance commissioning of the demonstration
plant and 5,820 metres drilling at the Kalaba project. This changed the profile of the Group significantly
from prior years.
The indicators set out below were used by the Board during the year ended 31 March 2019.
Non-Financial KPIs
The Board established the following goals for management in June 2018:
1) Successful financing of the Company;
2) JORC resource at Misisi;
3) Commissioning of the demonstration plant;
4) Profitable operation at the demonstration plant;
5) Disposal of non-core assets.
Of these goals, (1), (2) and (3) were achieved, while (4) and (5) are works in progress.
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
(Note 3)
Measure
£ 000’s
%
2019
1,226
7.9(i)
Exploration costs capitalised
£ 000’s
3,181
2018
176
3.8
482
(i) 5.0% excluding Zamsort administrative expenses
During the year cash increased by £1,050,000 (2018: increase of £111,000). The Company raised gross
funds from share placements of £6,741,000 in 2019 versus £3,700,000 in 2018.
Exploration costs capitalised as intangible assets in the year were £3,181,000 (2018: £482,000).
KPIs for 2020 will include:
1) A maiden resource on the Exploration License at Zamsort and on the Zaco license;
2) Sale of non-core assets
Arc Minerals Limited – Annual Report & Financial Statements 2019
17
Health and Safety – number of reported incidents
There were no reportable incidents in the current year or prior year
Risk Management Report
A Risk Management Report is set out on Page 19
Environmental Policy
The Group is aware of the potential impact that its subsidiaries and associated company may have on
the environment. The Group uses its best efforts to ensure that with regard to the environment its
subsidiaries and associated company comply with local regulatory requirements and the revised
Equator Principles.
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.
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 programmes in Slovakia.
Statement of Disclosure to the Auditor
As at the date of this report the serving Directors confirm:
• 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 such information.
Auditor
PKF Littlejohn LLP has signalled 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. During 2019 Arc raised £6.7 million from the sale of
shares indicating strong investor support for the Group’s strategy. The Directors expect to deliver
results which will lead to continuing market support. In addition, the Company is pursuing all
opportunities to dispose of held for sale assets. 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
Arc Minerals Limited – Annual Report & Financial Statements 2019
18
statement on going concern included in note 1(f) to the Financial Statements. The auditors have
drawn attention to going concern within their audit report by way of a material uncertainty.
Risk Management Report
The Company’s risk exposures and the impact on the Company’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, guaranteed investment certificates and in
government treasury bills which are available on demand by the Company for its programs. The
Company does not invest in money market funds. The Company has no risk exposure to asset backed
commercial paper or auction rate securities.
Financing Risk
The development of the Group’s properties will depend on the Group’s ability to obtain financing
through the raising of equity capital, joint venture of projects, debt financing, asset sales, 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 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.
Arc Minerals Limited – Annual Report & Financial Statements 2019
19
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”). As such,
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 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. Variations in these commodity prices may affect potential third party interest in these projects
and the sale prices of these projects / assets.
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.
Arc Minerals Limited – Annual Report & Financial Statements 2019
20
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
30 September 2019
Arc Minerals Limited – Annual Report & Financial Statements 2019
21
Corporate Governance Statement
The Company is committed to maintaining the highest standards in corporate governance throughout
its operations and to ensure all of its practices are conducted transparently, ethically and efficiently.
The Company believes 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, and in accordance with the AIM Rules for Companies (as updated from time to time), the
Company has chosen to formalise its governance policies by complying with the UK's Quoted
Companies Alliance Corporate Governance Code (the "QCA Code").
The key challenges facing the company have been set out above in the Chairman’s Statement and the
Chief Executive’s Statement.
The Board currently consists of six Directors: An Executive Chairman and five Non-Executive Directors
(NEDs). The Board considers that appropriate oversight of the Company is provided by the currently
constituted Board.
QCA Code
The 10 principles set out in the QCA Code are listed below, with an explanation of how the Company
applies each of the principles and the reason for any aspect of non-compliance. There were no key
governance related matters that occurred during the year.
Business Model and Strategy
Arc’s strategy is to invest in early stage copper-cobalt and gold exploration assets primarily in
Africa and to realise their potential either through sale or development. Our aim is to create value
for our shareholders by improving on and expanding existing exploration assets and identifying
new exploration targets around existing licence areas. Arc is currently focused primarily on the
copper-cobalt projects of Zamsort Limited and Zaco Limited in Zambia.
Arc delivers on its strategic aims by (i) defining additional reserves and resources at its projects
and surrounding licence areas; (ii) securing appropriate funding; (iii) developing mineral resources
in situ; (v) maintaining good community relationships; and (vi) employing compliant
environmental governance practices.
The key challenges facing the company have been set out in the Risk Management report on page
19.
Understand Shareholders Needs and Expectations
The Board is committed to maintaining good communication and having constructive dialogue
with its shareholders. Significant developments are disseminated through the Regulatory News
Service (“RNS”) and timely updates to the Company’s website. Additionally, the Company holds
Investor update calls when appropriate during which Investors have access to the Chairman and
other Officers. Arc has an active and effective investor relations programme, which is the
responsibility of the Chairman, that includes institutional road-shows and presentations, effective
Annual General Meetings with presentations to shareholders and a high level of disclosure of
activity to its shareholders.
Consider Wider Stakeholder and Social Responsibilities
Arc Minerals Limited – Annual Report & Financial Statements 2019
22
The method used by the Company to obtain feedback from stakeholders is discussed below under
the heading Shareholder Communication.
The board has identified the Company’s stakeholders to include staff, suppliers, customers,
partners, local government and wider communities. A key part of Arc’s business model is
identifying the impact that activities will have on the surrounding communities at Arc’s projects.
The Company is always looking for opportunity to develop the wider communities in which it
operates and Arc behaves ethically in its recruitment, training and engagements. The
environmental impact of Arc’s activities is also carefully considered and the maintenance of high
environmental standards applied. Arc has established relationships with local and national
governments in the territories of its projects.
Risk management
Whilst the Board is ultimately responsible for identifying and managing areas of significant
business risk, it has established an Audit and Risk Committee that ensures effective Risk
Management systems are in place that identify and manage key Company risks, establish and
maintain effective controls, and ensure compliance with risk management policies and the
reporting of any non-compliance occurrences.
The Company’s risk management systems have identified the following key risks as applicable to
the Company and appropriate mitigation controls are in place. (Refer note 22 in the accounts)
• Exploration and Development Risk
• Political Risk in DRC and Zambia
• Licencing Risk
• Partner Risk
• Market Risk
• Community Relations
• Retention of Key Personnel
• Financing Risk
• Liquidity Risk
• Credit Risk
Well-functioning Board of Directors
The Board is comprised of a chief executive (Nick von Schirnding, Executive Chairman) and five
NEDs (Don Bailey, Mushinge Mumena, Brian McMaster, Jonathan De Thierry and Rémy
Welschinger). Each Director serves on the Board until the Annual General Meeting following his
election or appointment. The Executive Director works full time for the Company. NEDs generally
allocate at least 12 days per year to the Company.
Appropriate Skills and Experience of the Directors
The Board considers the current balance of sector, financial and public market skills and
experience which it embodies is appropriate for the size and stage of development of the
Company and that the Board has the skills and requisite experience necessary to execute the
Company’s strategy and business plan whist also enabling each Director to discharge his fiduciary
duties effectively. Details of the current Board of Directors biographies is provided on pages 12
and 13.
Arc Minerals Limited – Annual Report & Financial Statements 2019
23
The Board reviews annually, and when required, the appropriateness of its mix of skills and
experience to ensure that it meets the changing business needs.
The Company has a professional Company Secretary who assists the Executive Chairman in
preparing for and running effective board meetings, including the timely dissemination of
appropriate information. The Company Secretary provides advice and guidance to the extent
required by the board on the legal and regulatory environment.
Evaluate Board Performance
Arc reviews Board, Committee and individual director performance on an ongoing basis in the
context of its contribution to the Company’s financial performance.
The Remuneration Committee compares the performance of the Board with the requirements of
its Terms of Reference, the Company Vision and KPI’s and critically reviews the composition of the
Board. The evaluation of the Board is carried out annually and on a three-yearly cycle and the
Committee may enlist an independent evaluator as and when it deems it appropriate.
The Review Process, includes the following key considerations:
• Board’s mission and goals
• Board composition and effectiveness
• Performance against Strategic Plan
• Board s protocols and processes
• Relationships with Stakeholders – the CEO, membership, clients and funding bodies
• Continuous professional learning of Board Members
Succession planning is considered by the Board as a whole and reviewed annually.
Corporate Culture
The corporate culture of the Company is promoted throughout its employees and contractors and
is underpinned by compliance with local regulations and the implementation and regular review
and enforcement of various policies: Health and Safety Policy; Share Dealing Policy; Code of
Conduct; Anti-bribery and Corruption Policy, IT, communications and systems Policy and Social
Media Policy so that all aspects of the Company are run in a robust and responsible way.
It is the Board’s view that Arc’s corporate culture is consistent with its objectives, strategy and
business model. A significant part of the Company’s activities is centred upon what needs to be
an open and respectful dialogue with employees, clients and other stakeholders. Therefore, the
importance of sound ethical values and behaviours is crucial to the ability of the Company to
successfully achieve its corporate objectives.
The Board is aware that the tone and culture set by the Board will greatly impact all aspects of the
Company as a whole and the way that employees behave. The board adheres to its group-wide
corporate governance policies which include:
• anti-corruption and bribery;
• whistleblowing;
• health and safety;
• environment and community;
Arc Minerals Limited – Annual Report & Financial Statements 2019
24
• IT, communications and systems; and
• social media.
Maintain governance structures and processes that are fit for purpose and support good
decision-making by the board
Arc’s key strategic, financial and operational decisions are reserved exclusively for the Board. The
Board aims to meet every six to eight weeks or more frequently if activities require and is supplied
with appropriate and timely information. The Directors are free to seek any further information
that they consider necessary. All Directors have access to advice from the company secretariat
and office of Chief Financial Officer as well as independent professionals at the Group's expense.
Training is available for new Directors and other Directors as necessary. The directors’ biographies
can be found on the Company’s website at www.arcminerals.com/about-us/board-and-
management.
It is important that the board itself contains the right mix of skills and experience in order to deliver
the strategy of the Company. As such, the board is comprised of:
• an executive chairman, whose responsibility is the delivery of the Company's strategy and
governance model and communication with shareholders, and
• four independent, non-executive directors;
• one non-independent, non-executive director;
Director
Position
Independent
(Y/N)
Remuneration
Committee
Membership
Nomination
Committee
Membership
Audit & Risk
Committee
Membership
Nicholas von
Schirnding
Executive
Chairman
Brian
McMaster
Senior
Independent
Director
Jonathan de
Thierry
Non-Executive
Director
Don Bailey
Non-Executive
Director
Mumena
Mushinge
Non-Executive
Director
Rémy
Welschinger
Non-Executive
Director
N
Y
Y
Y
N
Y
-
-
Chairman
Member
-
-
Member
Chairman
Member
Member
-
-
-
-
Member
-
Member
Chairman
Arc Minerals Limited – Annual Report & Financial Statements 2019
25
A Director is considered non-independent if he is a PDMR within a subsidiary.
The board has appointed Mr Brian McMaster as Senior Independent Director. Additionally, the
Company has appointed a Company Secretary who assists the chairman in preparing for and
running effective board meetings, including the timely dissemination of appropriate information.
The Company Secretary provides advice and guidance to the extent required by the Board on the
legal and regulatory environment. The Company does not specify any minimum time commitment
from Directors and instead reviews their time commitment as part of their individual evaluations.
Each director serves on the board until the annual general meeting following his election or
appointment, and the board meets at least three times a year. Non-independent directors are
not part of any board committee.
The following matters are reserved for the Board:
Management Structure and Appointments
• Executive Director responsibilities.
• Board appointments or removals.
• Board and senior management succession, training, development and appraisal.
• Appointment or removal of Company Secretary.
• Appointment or removal of internal auditor.
• Remuneration, contracts, grants of options and incentive arrangements for Executive Directors
and senior management, including any plans to be put to shareholders for approval.
• Delegation of the Board's powers.
• Agreeing membership and terms of reference of board committees and task forces.
• Approval of delegated levels of authority, include the CEO’s limits, which must be in writing.
• Matters referred to the Board by the board committees.
Strategic/Policy Considerations
• Business strategy.
• Diversification/retrenchment policy.
• Ensuring maintenance of a sound system of internal control and risk management, including:
• Group’s risk appetite statements
• Procedures for detection of fraud and the prevention of bribery
• Approval of the overall levels of insurance for the group, including directors’ and officers’
liability insurance
• Agreement of codes of ethics and business practices.
• An on-going assessment of significant risks and effectiveness of internal controls.
• Calling of shareholders' meetings and approval of resolutions and corresponding
documentation to be put forward to shareholders at a general meeting, plus any circulars,
prospectuses and listing particulars.
• Avoidance of wrongful or fraudulent trading.
• Ensuring a satisfactory dialogue with shareholders based on the mutual understanding of
objectives.
• Considering the balance of interests between shareholders, employees, customers and the
community.
• Reviewing the group’s overall corporate governance arrangements.
• Undertaking an annual review of its own performance, that of its committees and individual
directors and the division of responsibilities.
Transactions
Arc Minerals Limited – Annual Report & Financial Statements 2019
26
• Transactions which are notifiable under the AIM Rules.
• Approval of major capital projects.
• Contracts which are material strategically or by reason of size entered into by the Company in
the ordinary course of business e.g. bank borrowings over £1 million and acquisitions or
disposals of fixed assets (including intangible assets such as intellectual property) above £1
million.
• Major investments (including the acquisition or disposal of interests of more than 3 per cent.
in the voting shares of any company or the making of any takeover offer.
• Contracts not in the ordinary course of business.
• Actions or transactions where there may be doubt over propriety.
• Approval of certain announcements, prospectuses, circulars and similar documents.
• Disclosure of directors' interests.
• Transactions with directors or other related parties.
Finance
• Raising new capital and confirmation of major financing facilities.
• Changes relating to the group’s capital structure, including the reduction of capital and/or
share issues.
• Treasury policies requested to be put in place by the Board.
• Discussion of any proposed emphasis of matter on the accounts.
• Final approval of annual and interim reports and accounts and material changes to accounting
policies.
• Appointment/reappointment or removal of the external auditor, to be put to shareholders for
approval in general meeting, following the recommendation of the Board or its Committee.
• Charitable and political donations.
• Approval and recommendation of dividends.
• Approval before each year starts of operating and capital expenditure budgets for the year and
any material changes to them.
General
• Major changes to the Group’s corporate structure.
• Any changes to the Company’s listing status and status as a plc.
• Approval of key policy documents including the share dealing code and MAR policy, anti-
bribery policy and whistleblowing policy.
• This schedule of matters reserved for board decisions.
The Board is supported by the audit and risk, remuneration and nomination committees as
described below.
Audit and Risk Committee
Arc’s Audit and Risk Committee is responsible for ensuring that the financial performance of the
Company is properly monitored and reported on and in this capacity interacts as needed with the
Company’s External Auditors. The Committee also considers risk management and internal
financial controls.
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
Arc Minerals Limited – Annual Report & Financial Statements 2019
27
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.
• overseeing the appointment of and the relationship with the external auditor.
The Audit and Risk Committee has three 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 Jonathan de Thierry, Don Bailey and Rémy Welschinger.
The committee chairman is Rémy Welschinger.
A copy of the terms of reference of the Audit and Risk Committee can be found on the Company’s
website.
Remuneration Committee
The purpose of the Remuneration Committee is to determine and agree with the board the
framework or broad policy for the remuneration of the Company’s chairperson and executive
directors. The main duties of the Remuneration Committee include:
The Remuneration Committee has three members, each of whom being independent, non-
executive directors. The current members of the committee are Brian McMaster, Jonathan de
Thierry and Don Bailey. Brian McMaster is the chairman of the committee.
A copy of the terms of reference of the Nomination Committees can be found on the Company’s
website.
Nomination Committee
The purpose of the Nomination Committee is to evaluate and determine the composition of the
Board itself. The main duties of the Nomination Committee therefore include:
• Regularly reviewing the structure, size and composition (including the skills, knowledge,
experience, independence and diversity) of the Board and make recommendations to the Board
with regard to any changes, succession planning and vacancies.
• identifying suitable candidates from a wide range of backgrounds to be considered for
positions on the Board.
The Nomination Committee has three members, each of whom being independent, non-executive
directors. The current members of the committee are Brian McMaster, Jonathan de Thierry and
Rémy Welschinger. Jonathan de Thierry is the chairman of the committee.
A copy of the terms of reference of the Nomination Committees can be found on the Company’s
website.
Given the small number of meetings held by of each of the above-mentioned Committees, neither
have produced a separate report, however the Company intends to review this requirement on
an annual basis.
Arc Minerals Limited – Annual Report & Financial Statements 2019
28
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 complaint 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.
Key Relationships
There are a number of key relationships and resources that are fundamental to the Company's
success, such as maintaining good relationships with local communities and governments where
the Company operates as well as with engineering and financing groups to ensure that the
company has adequate resources to deliver its strategy.
Shareholder Communications
The Company recognises that maintaining strong communications with its shareholders promotes
transparency and will drive value in the medium to long-term. Accordingly, the Company will
provide regular updates on the progress of the Company, detailing recent business and strategy
developments, in news releases which will be posted on the Company's website. In order to
continually improve transparency, the board would be delighted to receive feedback from
shareholders. Communications should be directed to info@arcminerals.com. Nicholas von
Schirnding has been appointed to manage the relationship between the Company and its
shareholders and will review and report to the board on any communications received.
Arc Minerals is committed to providing full and transparent disclosure of its activities, via the RNS
system of the London Stock Exchange. Historical annual reports and interim accounts are available
on the Company’s website.
Arc Minerals Limited – Annual Report & Financial Statements 2019
29
Directors’ Responsibility Statement
The Directors are responsible for preparing the Directors’ Report, the Risk Management Report, and
the Financial Statements 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”) and have elected
under company law to prepare the Company Financial Statements in accordance with IFRS.
Under company law the Directors must not approve the Financial Statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Group and the profit or loss of the Group
for that period.
In preparing the Group Financial Statements, the Directors are required to:
1. select suitable accounting policies and then apply them consistently;
2. make judgements and accounting estimates that are reasonable and prudent;
3. state whether they have been prepared in accordance with IFRS; and
4. 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 and enable them to ensure that the Financial Statements comply with applicable
law. 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. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
The Company is compliant with AIM Rule 26 regarding the Company’s website.
Arc Minerals Limited – Annual Report & Financial Statements 2019
30
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARC MINERALS LIMITED
Opinion
We have audited the group financial statements of Arc Minerals Limited (the ‘Group’) for the year
ended 31 March 2019 which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated Statement of Cash Flow, 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 2019 and of its loss
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 either
through a successful project/asset sale or external funding raising for on-going activities and
committed expenditure to be met.
The financial statements have been prepared on the going concern basis.
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 group’s ability to
continue as a going concern.
Our opinion is not modified in respect of this matter.
Our application of materiality
The materiality applied to the group financial statements was £380,000 (2018: £300,000), based on a
percentage of gross assets, as it is from these assets that the Group seeks to deliver returns for
Arc Minerals Limited – Annual Report & Financial Statements 2019
31
Independent Auditor’s Report (continued)
shareholders. 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. Materiality has been reassessed at the closing stages of the audit taking into
consideration new information which arose. No alterations were made to materiality at the conclusion
of 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 in respect of the carrying value of the held for sale assets and mines under
construction. 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 7 reporting components of the group,
a full audit was performed on the complete financial information of 6 components and, for the other
component, testing of all material items was performed.
Of the 9 reporting components of the group, 3 are located in Slovakia, 1 located in the UK, 1 located
in Mauritius, 1 located in DRC, 1 located in Zambia and 2 in the British Virgin Islands. The components
located in Slovakia, Mauritius, Zambia 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 and direction of the audit process. This, in
conjunction with the additional procedures performed such as obtaining supporting documentation
for the carrying value of the held for sale assets and well as the tangible and intangible assets held,
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. In addition to the matter described in the Material Uncertainty Related to
Going Concern section we have determined the matters described below to be the key audit matters
to be communicated in our report.
Key Audit Matter
How the scope of our audit responded to the
key audit matter
Classification and valuation of Zamsort Exploration and Production Assets (Note 11)
In November 2018, per an RNS, Zamsort's CSD
plant construction was successfully completed.
Our work included but was not limited to:
Arc Minerals Limited – Annual Report & Financial Statements 2019
32
Independent Auditor’s Report (continued)
Commercial production was expected
commence shortly after completion.
to
• Discussing and challenging
There is a risk that Management have not
correctly classified the production assets within
the appropriate fixed assets category and may
have incorrectly amortised/not amortised the
fixed assets in question.
There is the risk that the value of the assets are
impaired.
There is the risk that the exploration costs
incurred on the licences from which the plant
will obtain ore are incorrectly classified and that
the linked Exploration and Evaluation assets are
impaired.
management as to the status of the
plant and its intended production start
date;
• Considering and challenging
management’s impairment review of
the plant, including valuation methods
used;
• Ensuring valid mining licenses were
held; and
• Ensuring that the work performed on
the licences met the capitalisation
criteria of IFRS 6 and that the assets
were correctly categorised and
exploration and evaluation assets;
Classification and valuation of Assets Held for Sale (Note 5)
With the Slovakian subsidiaries being deemed
discontinued operations and held for sale as at
31 March 2018, but not being sold in the year-
end 31 March 2019, there is a risk that it may be
inappropriate to classify the subsidiaries as held
for sale again as at 31 March 2019.
Given that the Slovakian subsidiaries were not
sold during the year, there is a risk that the fair
value of the assets has decreased further and
thus an impairment may be required but may
not have been accounted for by Management.
During the year management committed to a
plan to dispose of the Exploration Assets held
within Casa Mining Limited which, at the year
end, were recorded at a carrying value of £6.0m
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 –
sale and
“Non-current assets held
discontinued operations” and that the value of
the asset is impaired.
for
Our work included but was not limited to:
• Ensuring
remain
that management
committed to a sale of the Slovakian
subsidiaries and that they remain in active
discussions with potential buyers with the
aim of securing a timely sale;
• Ensuring that management had agreed to a
plan to dispose of the Casa assets prior to
the year end, and the conditions of IFRS 5
had been met;
• Reviewing and challenging management’s
rationale on the valuation of the assets held
for sale; and
• Ensuring that the disclosure requirements of
IFRS have been met and that the valuation
has been appropriately disclosed as a
significant estimate.
Arc Minerals Limited – Annual Report & Financial Statements 2019
33
Independent Auditor’s Report (continued)
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 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 entity’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 entity’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
Arc Minerals Limited – Annual Report & Financial Statements 2019
34
Independent Auditor’s Report (continued)
the entity and the entity’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
2019
15 Westferry Circus
Canary Wharf
London E14 4HD
Arc Minerals Limited – Annual Report & Financial Statements 2019
35
Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income for the year ending 31 March 2019
Year to
31 March 2019
Year to
31 March 2018
Notes
£ 000s
£ 000s
Other Operating Income
Administrative expenses
Impairment
Operating loss
Interest and finance costs
Share of loss of associates accounted for using the equity
method
Loss on change of ownership status
Loss on sale of shares of Andiamo Exploration Limited
Gain on business combination
(Loss)/ Profit before income tax
Income tax expense
(Loss)/ Profit for the year from continuing operations
(Loss) from discontinued operations, net of tax
(Loss)/ Profit for the year
Other comprehensive income:
Item that may be subsequently reclassified to profit or loss
Increase in ownership in subsidiaries
Currency translation differences
Total comprehensive income for the year, net of tax
(Loss)/ 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
- From discontinued operations –Diluted
3
4/15
14
14
5
4
14
8
8
8
8
8
8
-
(2,341)
(582)
(2,923)
(318)
-
(2,809)
(202)
-
(6,252)
-
(6,252)
(188)
(6,440)
(767)
1,408
(5,799)
(6,003)
(249)
(6,252)
(6,550)
(249)
(6,799)
(1.12)
(0.98)
(1.08)
(0.95)
(0.03)
(0.03)
62
(970)
(7,161)
(8,069)
(11)
(87)
(224)
-
10,502
2,111
-
2,111
(91)
2,020
97
2,117
2,053
(33)
2,020
2,150
(33)
2,117
0.98
0.90
1.02
0.94
(0.04)
(0.04)
The notes on pages 41 to 68 are an integral part of these consolidated financial statements.
Arc Minerals Limited – Annual Report & Financial Statements 2019
36
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position as at 31 March 2019
ASSETS
Non-current assets
Intangible assets
Investment in associate
Financial assets at fair value through profit or loss
Property, plant and equipment
Total non-current assets
Current assets
Financial assets at fair value through profit or loss
Inventory
Assets held for sale
Prepayments and other receivables
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 – Casa
Long term loan payable – Zamsort
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
Note
s
11
13
15
11A
15
4
4
17
18
9
19
21
20
31 March 2019
31 March 2018
£ 000s
£ 000s
2,418
339
-
3,359
6,116
-
268
27,035
590
1,226
29,119
35,235
(1,944)
(1,443)
(3,387)
-
(1,891)
(5,278)
29,957
-
50,222
1,320
2,157
(24,438)
29,261
696
29,957
-
-
932
-
932
392
-
25,384
611
37
26,424
27,356
(1,553)
(336)
(1,889)
-
-
(1,889)
25,467
-
38,324
1,333
749
(16,257)
24,149
1,318
25,467
These financial statements were approved by the Board of Directors on 30 September 2019 and
signed on its behalf by:
Nicholas von Schirnding
Executive Chairman
The notes on pages 41 to 68 are an integral part of these consolidated financial statements.
Arc Minerals Limited – Annual Report & Financial Statements 2019
37
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows for the year ending
31 March 2019
Year to
31 March 19
Year to
31 March 18
Notes
£ 000s
£ 000s
Cash flows from operating activities
(Loss)/Profit before income tax and including discontinued operations
Gain on business combination
Interest Expense
Share based payment
Share of loss from associates
Loss on disposal of associate
Impairment of Intangible assets
Fair value loss on change of ownership status
Gain on disposal of fixed assets
Foreign exchange
Depreciation and amortisation
Net cash used in operating activities before changes in working capital
14
10
20
14
14
(6,440)
-
318
337
-
202
582
2,809
(144)
54
52
(2,230)
2,020
(10,502)
11
247
87
-
7,161
224
-
(27)
-
(779)
(Increase)/decrease in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
16
17
(268)
(253)
374
(2,377)
(17)
(496)
302
(990)
Cash flows from investing activities
Purchase of intangible assets
Purchase of fixed assets
Investment in Casa Mining Limited
Investment in Zaco Limited
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares – net of share issue costs
Shareholder loan – Zamsort
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
(3,181)
(1,231)
-
(297)
(4,709)
(571)
-
(2,046)
-
(2,617)
14
6,183
1,891
62
8,136
3,512
-
206
3,718
1,050
191
1,241
111
80
191
The notes on pages 41 to 68 are an integral part of these consolidated financial statements.
Arc Minerals Limited – Annual Report & Financial Statements 2019
38
Consolidated Statement of Changes in Equity
Consolidated Statement of Changes in Equity as at 31 March 2019
Share
premium
Attributable to the owners of the parent
Share based
payment
reserve
Foreign
exchange
reserve
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
Balance as at 1 April 2018
Loss for the year
Other comprehensive income(loss) for the year - currency
translation differences
Other comprehensive income(loss) for the year - increase in
ownership in subsidiaries
Total comprehensive income (loss) for the year
Share capital issued
Share based payments granted
Share based payments expired
Acquisition of 99.43% of Casa Mining Limited
Acquisition of 66% of Zamsort Limited
Total transactions with owners, recognised directly in equity
Share
capital
£ 000s
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
£ 000s
32,774
-
-
-
5,550
-
-
-
-
5,550
38,324
38,324
-
£ 000s
652
-
97
97
-
-
-
-
-
-
749
749
-
-
1,408
-
-
11,898
-
-
-
-
11,898
-
2,157
-
-
-
-
-
-
Retained
earnings
£ 000s
(19,345)
2,020
-
2,020
-
-
611
-
457
1,068
Total
£ 000s
15,778
2,020
97
2,117
5,550
247
-
-
457
6,254
Non-
controlling
interest
£ 000s
-
-
-
-
-
-
-
1,775
(457)
1,318
Total equity
£ 000s
15,778
2,020
97
2,117
5,550
247
-
1,775
-
7,572
£ 000s
1,697
-
-
-
-
247
(611)
-
-
(364)
1,333
(16,257)
24,149
1,318
25,467
1,333
-
(16,257)
(6,440)
24,149
(6,440)
1,318
-
25,467
(6,440)
-
-
-
-
337
(350)
-
-
(13)
-
1,408
-
1,408
(767)
(7,207)
-
-
350
-
(1,324)
(974)
(767)
(5,799)
11,898
337
-
-
(1,324)
10,911
-
-
-
-
-
(1,204)
582
(622)
(767)
(5,799)
11,898
337
-
(1,204)
(742)
10,289
Arc Minerals Limited Annual Report & Financial Statements 2018
39
Consolidated Statement of Changes in Equity
Balance as at 31 March 2019
-
50,222
2,157
1,320
(24,438)
29,261
696
29,957
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 41 to 68 are an integral part of these consolidated financial statements.
Arc Minerals Limited Annual Report & Financial Statements 2018
40
Notes to the financial statements
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 2019 were authorised
for issue by the Board on 30 September 2019
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 financial assets through profit and loss and held for sale assets
and liabilities 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
IFRS 9
(i)
IFRS 9 (2014) “Financial Instruments” supersedes IFRS 9 (2009), IFRS 9 (2010) and IFRS 9
(2013). The finalised version of IFRS 9 contains accounting requirements for financial
instruments, replacing IAS 39 “Financial Instruments: Recognition and Measurement”. The
content of IFRS 9 (2014) includes:
• Classification and measurement – financial assets are classified by reference to the business
model within which they are held and their contractual cash flow characteristics. The
standard introduces a fair value through other comprehensive income category for certain
debt instruments. Financial liabilities are classified in a similar manner to that under IAS 39
however there are differences in the requirements applying to the measurement of an
entity’s own risk.
Impairment – The standard introduces an expected credit loss model for the measurement
of the impairment of financial assets so it is no longer necessary for a credit event to have
occurred before a credit loss is recognised
•
• Hedge accounting – The standard introduces a new hedge accounting model that is designed
to be more closely aligned with how entities undertake risk management activities when
hedging financial and non-financial risk exposures.
• Derecognition – the requirements for the derecognition of financial assets and liabilities are
carried forward from IAS 39.
(ii)
IFRS 15
IFRS 15 “Revenue from Contracts with Customers” provides a single, principles based five-step
model to be applied to all contracts with customers. The standard includes guidance on the point in
which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a
Arc Minerals Limited Annual Report & Financial Statements 2019
41
Notes to the financial statements
contract and various related matters. IFRS 15 also introduces new disclosures about revenue.
There is no impact on the financial statements upon adopting IFRS 9 and IFRS 15.
ii) New standards and interpretations not yet adopted
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 2019 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 16 - Leases
IFRS 17 - Insurance Contracts
Amendments to Existing Standards
IFRIC 23 Uncertainty over Income Tax Treatments*
Annual Improvements to IFRSs (2015-2017 Cycle)*
Effective Date
1 January 2019
1 January 2021
1 January 2019
1 January 2019
Amendments to IFRS 9 Prepayment Features with Negative Compensation
1 January 2019
Amendments to IAS 28 Long-term Interests in Associates and Joint
Ventures
1 January 2019
Amendments to IAS 19 Plan Amendment, Curtailment or Settlement
1 January 2019
*Not yet adopted by European Union
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 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.
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 2019. The
audited accounts of Casa Mining Limited and Zamsort Limited are consolidated as of 31 December
2018 as it is deemed impractical to consolidate these companies as at 31 March 2019. Any significant
transactions between 1 January 2019 and 31 March 2019 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
Arc Minerals Limited Annual Report & Financial Statements 2019
42
Notes to the financial statements
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.
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
Arc Minerals Limited Annual Report & Financial Statements 2019
43
Notes to the financial statements
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 either successfully sell the
projects / assets held for sale (Casa and Šturec) or 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 2019.
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.
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.
Arc Minerals Limited Annual Report & Financial Statements 2019
44
Notes to the financial statements
The presentation currency (Pounds Sterling - GBP) is used primarily because the Parent Company Arc
Minerals Limited is listed on the Alternative Investment Market (AIM) of the London Stock Exchange
and raises its funding in GBP.
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
• 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 2019
45
Notes to the financial statements
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.
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 4, during 2018 the Group decided to dispose of its Slovakian operations and in
2019 Casa Mining Limited was also designated for sale. 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 based on discussions held and general market knowledge. In
forming this estimate management also consider the status of any sale and the prospect of any sale
completion within set time limits. Both the valuation and the time frame may change depending on
factors outside of the Directors control..
ii) 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.
Arc Minerals Limited Annual Report & Financial Statements 2019
46
Notes to the financial statements
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. Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable
value. Cost comprises all of costs of purchase, cost of conversion and other costs incurred in bringing
the inventories to their present location and condition. Weighted average cost is used to determine
the cost of ordinarily interchangeable items.
Mining inventory includes run of mine stockpiles, minerals in circuit and consumables. Stockpiles and
minerals in circuit are valued at the cost of production to their point in process using a weighted
average cost of production, or net realisable value, whichever is lower. Low grade stockpiles are only
recognised as an asset when there is evidence to support the fact that some economic benefit will
flow to the Group on the sale of such inventory. Consumables are valued at their cost of acquisition,
or net realisable value, whichever is lower.
n. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
o. 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.
p. Financial instruments
The Group’s financial instruments are classified as loans and receivables. 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).
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.
q. 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
Arc Minerals Limited Annual Report & Financial Statements 2019
47
Notes to the financial statements
residual value of each asset at 25% on a straight-line basis.
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.
r.
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.
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.
s. 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.
t. Assets held for sale
Arc Minerals Limited Annual Report & Financial Statements 2019
48
Notes to the financial statements
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.
u. 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.
v. 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.
Arc Minerals Limited Annual Report & Financial Statements 2019
49
Notes to the financial statements
w. Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently carried at amortised cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income statement over the period of the
borrowings, using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. To the extent that there
is no evidence that it is probable that some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services, and amortised over the period of the facility to which
it relates.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer
settlement of the liability for at least 12 months after the end of the reporting period.
x. Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a substantial period of time to
get ready for their intended use or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
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 whilst the activities in Slovakia Eritrea,
Zambia and the Democratic Republic of Congo relate to exploration and development work. Assets in
Slovakia and the Democratic Republic of Congo are held for sale while the Company’s interest in
Eritrea was sold in 2018.
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 2019
50
Notes to the financial statements
31 March 2019
Result
Operating (loss)/gain
Loss on sale of shares of Andiamo Exploration Ltd
Loss on change of ownership status (Zamsort)
Interest and finance costs
(Loss) Profit before Income Tax
UK/BVI
£ 000's
Slovakia
£ 000's
Zambia
£ 000's
DRC
£ 000’s
(1,320)
(202)
(2,809)
(318)
(4,649)
(92)
-
-
-
(92)
(1,511)
-
-
-
(1,511)
-
-
-
-
-
Total
£ 000's
(2,923)
(202)
(2,809)
(318)
(6,252)
Other information
Capital additions
Non-controlling interest
Assets
Non-current Assets
Available for sale financial assets
Held for sale assets
Inventory
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
-
-
-
-
-
582
-
114
-
696
339
-
-
-
422
1,196
1,957
-
-
836
836
-
-
6,000
-
5
-
6,005
-
34
-
34
5,777
-
-
268
163
30
6,238
1,891
-
607
2,498
-
-
21,035
-
-
-
21,035
-
1,910
-
1,910
6,116
-
27,035
268
590
1,226
35,235
1,891
1,944
1,443
5,278
Arc Minerals Limited Annual Report & Financial Statements 2019
51
Notes to the financial statements
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
-
-
-
-
-
392
-
-
-
-
-
322
1,318
472
1,318
932
-
-
-
-
18,495
-
-
-
139
19,427
392
6,724
637
176
6,724
392
932
18,634
27,356
-
(39)
-
(39)
-
-
-
-
-
-
-
-
(1,480)
-
(239)
(1,719)
(1,480)
(39)
(370)
(1,889)
Arc Minerals Limited Annual Report & Financial Statements 2019
52
Notes to the financial statements
3. Expenses by nature
Directors' fees
Wages and salaries
Office expenses
Travel and subsistence expenses
Professional fees – legal, consulting, exploration
AIM related costs including Public Relations
Auditor's remuneration – audit
Stock option expense
Foreign exchange loss
Other expenses
Casa administration costs
Zamsort administration costs
Total operating expenses
Auditors Remuneration
2019
£ 000's
406
114
35
170
302
183
42
337
196
24
-
532
2,341
During the year, the Group obtained the following services from the Company’s auditor:
Fees payable to the auditor for the audit of the consolidated financial
statements
Fees payable to the auditor for other services:
Tax advisory services
Total
Employee information
Group Staff Costs comprised:
Wages, salaries and benefits
Zamsort wages and salaries
Less: capitalised exploration expenditure
Charge to the profit or loss
The average number of persons employed in the Group, including Executive Directors, was:
Average number of persons employed:
Administration
Operations
Zamsort administration
Zamsort operations
2019
Number
12
2018
Number
1
1
10
40
63
4
-
-
5
Arc Minerals Limited Annual Report & Financial Statements 2019
53
2018
£ 000's
213
58
21
62
116
182
32
247
-
39
-
-
970
2018
£ 000's
32
3
35
2019
£ 000's
42
3
45
2019
£ 000's
114
453
-
567
2018
£ 000's
130
-
(72)
58
Notes to the financial statements
4. Held for sale assets/Discontinued operations
During 2018, the Group confirmed its intention to dispose of its Slovakian interests and announced a
similar plan for Casa in 2019. Active programs to locate buyers have been initiated. The associated
assets and liabilities are consequently presented as held for sale within these financial statements.
The related financial information is set out below:
a) Results of disposal group
2019
Casa
2019
Slovakia
2019
Total
2018
2018
Casa
Slovakia
2018
Total
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's £ 000's
(163)
(163)
-
(163)
(163)
-
(25)
(25)
-
(25)
(25)
-
(188)
(188)
-
(188)
(188)
-
(57)
(57)
-
(57)
(57)
-
(34)
(34)
-
(34)
(34)
-
(91)
(91)
-
(91)
(91)
-
2019
Casa
£000’s
162
(1,419)
1,265
8
2019
Slovakia
2019
Total
£000’s
£000’s
(27)
-
135
(1,419)
27
-
1,292
8
2018
2018
Casa
Slovakia
£000’s
(669)
(1,525)
2,269
75
£000’s
189
(184)
-
5
2018
Total
£000’s
(480)
(1,709)
2,269
80
2019
Casa
2019
Slovakia
2019
Total
2018
2018
Casa
Slovakia
2018
Total
£ 000's
20,881
-
8
146
-
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
5,801
159
26,682
159
18,495
-
6,290
175
24,784
175
7
2
31
15
148
31
139
26
-
15
190
54
154
217
54
21,035
6,000
27,035
18,660
6,724
25,384
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(i)
Operating activities
Investing activities
Financing activities
(i) includes only Casa Mining Limited expressed in US Dollars.
c) Assets and liabilities of disposal Group
Assets classified as held for sale
Intangible assets
Property, plant and equipment
Cash and cash equivalents
Trade and other receivables
Inventory
(2) Itemised as £6,000,000 for Šturec and £21,624,000 for Casa
Liabilities directly associated with assets classified as held for sale
Arc Minerals Limited Annual Report & Financial Statements 2019
54
Notes to the financial statements
Deferred consideration
Trade and other creditors
2019
Casa
£ 000's
1,535
375
1,910
2019
2019
2018
2018
Slovakia
£ 000's
-
34
34
Total
£
000's
1,535
409
Casa
Slovakia
£ 000's
1,480
£ 000's
-
34
1,944
1,514
39
39
2018
Total
£ 000's
1,479
74
1,553
Arc Minerals Limited Annual Report & Financial Statements 2019
55
Notes to the financial statements
During 2018, the Directors initiated a programme to dispose of its Slovakian operations and assets and
in 2019 a similar programme was started for Casa. The valuation of these asset is an estimate and
represents management’s best judgement in respect of their fair value. Management have based their
valuations of these projects on the level of interest shown, the valuation of the assets arising from
reports prepared by independent consultants and other factors. 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 reclassification to an Asset Held
for Sale, management have impaired the Slovakian Asset by £6.7m in 2018 and a further £422k
in 2019.
5. Taxation
Current income tax charge
Deferred tax charge/ (credit)
Total taxation charge/ (credit)
Taxation reconciliation
2019
£’000
2018
£’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 10 % (2018: 19.00 %)
Effects of:
Permanent differences
Tax losses carried forward
Non-taxable income/Non-deductible expenses for tax purposes
Total income tax expense
2019
£’000
(6,782)
680
-
-
(680)
-
2018
£’000
(835)
384
-
-
(384)
-
The deferred tax asset has not been provided for in accordance with IAS 12 due to uncertainty as to
when profits will be generated against which to relieve any such asset. The Group does not have a
material deferred tax liability at the year end.
The tax rate used in 2019 is the weighted average rate of the Republic of Zambia and British Virgin
Islands
6. Dividends
No dividends were paid (2018: nil).
Arc Minerals Limited Annual Report & Financial Statements 2019
56
Notes to the financial statements
7. Key management remuneration
Key management remuneration
2019
Executive Directors
Nicholas von Schirnding
Non-Executive Directors
Brian McMaster
Michael Foster *
Jonathan de Thierry
Don Bailey †
Mumena Mushinge †
Key Management Personnel
Vassilios Carellas (COO)
John Forrest (CFO)
2019
£ 000's
723
Short term employee benefits
Share based
payments
2018
£ 000's
560
Total
£ 000's
£ 000's
£ 000's
174
165
339
35
26
35
30
6
143
94
543
20
22
20
104
-
89
64
55
48
55
134
6
232
158
484
1,027
* Resigned as a Director during the year
† Appointed as a Director during the year. Mr Mushinge received USD 11,667 in fees from Zamsort Ltd
in the period since his appointment as a Director of the Company to 31 March 2019.
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 (CFO)
Short term
employee benefits
Share based
payments
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
No pension benefits are provided for any Directors (2018: nil).
Arc Minerals Limited Annual Report & Financial Statements 2019
57
Notes to the financial statements
8. 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.
(Loss) Gain
2019
£ 000's
(6,440)
2018
£ 000's
2,020
Weighted average number of ordinary shares (000s)
577,412
206,580
Potential diluted weighted average number of shares (000s)
659,211
224,598
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 discontinuing operations – basic
Net (loss) per share discontinuing operations – diluted
9. Loan payable
Loan payable
(1.12)
(0.98)
(1.08)
(0.95)
(0.03)
(0.03)
0.98
0.90
1.02
0.94
(0.04)
(0.04)
2019
£ 000’s
1,657
2018
£ 000’s
-
(i)
(ii)
(iii)
The loan is payable to the 34% shareholder in Zamsort Limited. The loan is unsecured and
repayable on 31 December 2021.
The loan ranks equally with Arc’s working capital loan to Zamsort of £2,576,000 which is
eliminated on consolidation of Zamsort in the group accounts.
In addition, and also eliminated on consolidation, Arc holds a convertible loan in Zamsort
in the amount of £443,000 (2018 – £386,000). This amount is repayable on 31 December
2020 or convertible into 5.35% of shareholding in Zamsort.
In summary, the Company had loans to Zamsort Limited of £3,019,000 at 31 December 2018 and
£3,286,000 at 31 March 2019.
10. Intangible assets
Cost
At 1 April 2017
Assets acquired on purchase
of Casa Mining Limited (see note 14)
Additions
Currency loss
Net book value as at 31 March 2018
Goodwill
Casa
£ 000's
Goodwill
Zamsort
£ 000's
Deferred
Exploration
Casa
£ 000's
Deferred
Exploration
Zamsort
£ 000's
-
-
-
-
-
-
-
-
-
-
-
18,737
322
(564)
18,495
-
-
-
-
-
Total
£ 000's
-
18,737
322
(564)
18,495
Arc Minerals Limited Annual Report & Financial Statements 2019
58
Notes to the financial statements
At 1 April 2018
Assets acquired on purchase
of Zamsort Limited (see note 14)
Additions, net
Currency gain
Reclassified as Deferred Exploration
(see note 14)
Transferred to Assets Held for Sale
(see note 5)
Net book value as at 31 March 2019
11. Fixed Assets
-
-
-
-
-
-
-
-
18,495
-
18,495
671
-
-
-
1,434
1,122
(671)
-
(21,051)
-
-
-
1,747
-
671
-
671
3,181
1,122
-
(21,051)
-
2,418
2,418
Cost
At 1 April 2018
Assets acquired on purchase
of Zamsort Limited (see note 14)
Disposals
Additions
Foreign exchange
At 31 Mar 2019
Depreciation
At 1 April 2018
Assets acquired on purchase
of Zamsort Limited (see note 14)
Disposals
Depreciation
Foreign exchange
At 31 Mar 2019
Net Book Value
At 1 April 2018
At 31 Mar 2019
Processing
Plant
£ 000's
Mining
Equipment
£ 000's
Motor
Vehicles
£ 000's
Furniture &
Fittings
£ 000's
-
2,487
-
1,149
(387)
3,249
-
-
-
-
-
-
-
3,249
-
378
(175)
71
(59)
215
-
(271)
83
(24)
40
(172)
-
43
-
188
(69)
-
(28)
91
-
(43)
17
(23)
7
(42)
-
49
-
38
-
11
(6)
43
-
(23)
-
(5)
3
(25)
-
18
Total
£ 000's
-
3,091
(244)
1,231
(480)
3,598
-
(337)
100
(52)
50
(239)
-
3,359
12. Investment in subsidiaries
At 31 March 2019, the Company held interests in the share capital of the following subsidiary
companies:
Company
Place of Business
% Ownership held Nature of business
Ortac Resources (UK) Limited
England and Wales
St. Stephans Gold s.r.o. *
Ortac s.r.o. *
Carpathian Minerals s.r.o. *
Slovak Republic
Slovak Republic
Slovak Republic
Casa Mining Limited
Republic of Mauritius
Leda Mining S.A. †
Zamsort Limited
Unico Minerals Limited ‡
Zaco Limited ‡
Democratic Republic of Congo
Republic of Zambia
British Virgin Islands
Republic of Zambia
100%
100%
100%
100%
92%
73%
66%
100%
Holding Company
Mineral Exploration
Mineral Exploration
Mineral Exploration
Mineral Exploration
Mineral Exploration
Mineral Exploration
Holding Company
37.5%
Mineral Exploration
Arc Minerals Limited Annual Report & Financial Statements 2019
59
Notes to the financial statements
* Wholly owned subsidiary of Ortac Resources (UK) Limited
† Subsidiary of Casa Mining Limited
‡ Zaco Ltd is a subsidiary of Unico Minerals Limited which was incorporated as a subsidiary of the Company in 2019 in British Virgin Islands with registered
office at Craigmuir Chambers, Road Town, Tortola, BVI; Interest in Zaco has increased to 47.5% since 31 March 2019.
The non-controlling interest shown within the primary statement arises as a result of the Group
owning less than 100% of the share capital in Casa Mining Limited, Leda Mining S.A. and Zamsort
Limited.
13. Investment in associates
Set out below are the associates of the Group during the year ended 31 March 2019.
1 April 2017
Acquired > 50%
31 March 2018
1 April 2018
Additions
Share of loss
31 March 2019
Andiamo
£ 000's
-
-
-
-
-
-
-
Casa
£ 000's
1,033
(1,033)
-
-
-
-
-
Zaco
£ 000’s
-
-
-
-
339
-
339
Total
£ 000's
1,033
(1,033)
-
-
339
-
339
Zaco Limited is a Zambian-registered company, now owned 47.5% by Arc (42.5% at 31March 2019
acquired for cash). The Chairman of Arc has been appointed Chairman of Zaco. The equity method will
be included to report Arc’s share of Zaco future earnings. There were no operations in 2019. Further
information about the assets of Zaco is included elsewhere in the Annual Report.
14. Acquisition of Zamsort Limited (“Zamsort”)
Zamsort is involved in the mining of and exploration for minerals in the Republic of Zambia. On 1 April
2018 the Company held a 14% interest in Zamsort at a cost of £546,000. The Company acquired equity
control on 5 June 2018.
Consideration - £5,332,000
In May 2017 in exchange for a 14% equity interest in Zamsort the Company agreed to convert
£546,000 (US$828,472) of US$1,200,000 Secured Loan Notes issued to the Company in 2015 by
Zamsort;
On 15 May 2018 the Company issued 102,083,333 shares with an imputed cost of £3,072,708 to
acquire a further 35% interest in Zamsort, thereby increasing its interest to 49%;
On 5 June 2018 the Company issued 17,500,000 shares with an imputed cost of £770,000 to acquire
a 6% interest in Zamsort, thereby increasing its interest to 55%, a controlling interest;
On 18 June 2018 the Company issued 12,000,000 shares with an imputed cost of £509,400 to acquire
a 6% interest in Zamsort, thereby increasing its interest to 61%;
Arc Minerals Limited Annual Report & Financial Statements 2019
60
Notes to the financial statements
On 11 July 2018 the Company issued 10,000,000 shares with an imputed cost of £420,000 to acquire
a 5% interest in Zamsort, thereby increasing its interest to 66%;
The acquisition resulted in Goodwill of £671,000 as follows:
Net assets acquired:
Cash and cash equivalents
Intangible assets
Fixed assets, net
Inventory
Trade and other receivables
Trade and other payables
Shareholder loans
Total net assets acquired
Total Consideration for 6% of Zamsort shares (49% - 55%)
Fair value of the associate at the Second Acquisition Date
Fair Value of Non-Controlling interest at the Second Acquisition Date
Less: Fair value of Zamsort
Goodwill
Goodwill has been allocated to Deferred exploration
£ 000s
62
218
2,753
507
151
(385)
(1,655)
1,651
770
809
743
(1,651)
671
If new information obtained within one year from the date of acquisition 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, the acquisition accounting will be
revised.
Non-controlling interest:
The non-controlling interest of Zamsort 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.
Impact of acquisitions on the results of the Group:
The contribution to net loss of the Group was a loss of £1,867,000 by Zamsort Limited. Group revenue
includes £Nil from the operations of Zamsort.
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 £895,000 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.
The financial statements of Zamsort Limited have been consolidated to
31 December 2018, as it is impractical to consolidate the balances as at 31 March 2019.
its year end of
Between 1 January 2019 and 31 March 2019 Zamsort incurred expenses of £393,000 and paid trade
creditors £295,000 with funds advanced by Arc Minerals Limited (£454,000) and the minority
shareholders (£234,000). As this expenditure was material in value, the consolidated financial
statements have been adjusted to incorporate these transactions in accordance with IFRS 10
Consolidated Financial Statement.
Arc Minerals Limited Annual Report & Financial Statements 2019
61
Notes to the financial statements
15. Financial assets at fair value through profit or loss
Opening Balance
Additions – Zamsort Limited
Acquired > 50% Zamsort Limited
Sale of Andiamo (2018 – Impairment)
As at 31 March
Current
Andiamo
Non-current
Zamsort
As at 31 March
2019
£ 000's
1,324
-
(932)
(392)
-
-
-
-
2018
£ 000's
1,644
141
-
(461)
1,324
392
932
1,324
(i) Current – financial assets at fair value through profit or loss
(a) Current available for sale assets
At 31 March 2018, the Group 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.
The Company’s interest in Andiamo was sold in 2019 for USD 250,000.
(ii) Long term financial assets at fair value through profit or loss – Zamsort Limited
14% Equity
Convertible loan and advances
2019
£ 000's
-
-
-
2018
£ 000's
546
386
932
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$371,528
which is convertible into 5.35% and has a repayment date of 31 December 2020. Interest of 8%
continues to accrue.
In 2019 the Company acquired a controlling interest in Zamsort Limited and its 14% equity interest is
included in the acquisition cost (Refer to Note 14A). The convertible loan has been eliminated on
consolidation of Zamsort Limited
16. Trade and other receivables
Current trade and other receivables
Other receivables
Prepayments
Total
Group
2017
£ 000's
577
13
590
Group
2018
£ 000's
635
2
637
Arc Minerals Limited Annual Report & Financial Statements 2019
62
Notes to the financial statements
Current trade and other receivables are all due within one year.
The fair value of trade and other receivables is the same as their carrying values as stated above.
Trade and other receivables do not contain any impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of
receivable mentioned above. The Group does not hold any collateral as security.
The carrying amounts of the Group’s current and non-current trade and other receivables are
denominated in the following currencies:
Current trade and other receivables
UK Pounds
US Dollars
Euros
Total
17. Trade and other payables
Current trade and other payables
Trade payables, other payables and accruals
Group
2019
£ 000's
427
163
-
590
Group
2019
£ 000's
1,443
1,443
Group
2018
£ 000's
6
631
-
637
Group
2018
£ 000's
370
370
The carrying values of trade and other payables are considered to be a reasonable approximation of
the fair value and are considered by the Directors as payable within one year.
18. Deferred consideration
Long term payable
Deferred consideration
Group
2019
£ 000's
-
-
Group
2018
£ 000's
-
-
Deferred consideration relates to US$ 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 January 2020. It is non-recourse to Arc
Minerals Limited. Deferred consideration of £1,535,000 and £1,480,000 as at 31 March 2019 and 31
March 2018 respectively has been reclassified as held for sale liabilities within Note 5 to the financial
statements.
19. Share capital
Authorised
Unlimited ordinary shares of no par value
£ 000's
-
Called up, allotted, issued and fully paid
Number
of shares
Nominal
value
Average price
per share
(pence)
Gross
Consideration
value
Arc Minerals Limited Annual Report & Financial Statements 2019
63
Notes to the financial statements
At 1 April 2017
Financings for cash
Issued in relation to the acquisition of
Casa Mining Limited
As at 31 March 2018
Financings for cash
Issued in relation to the acquisition of
Casa Mining Limited
Issued in relation to the acquisition of
Zamsort Limited
Issued to service providers in lieu of fees
Issued to management in lieu of fees
Issued pursuant to warrant exercises
As at 31 March 2019
82,134,987
151,666,667
85,902,258
319,703,912
223,625,025
13,085,988
141,583,333
2,051,793
5,400,000
487,500
705,937,551
-
-
-
-
-
-
-
-
-
-
2.00 - 3.00
2.35
2.40 - 4.50
2.53
3.37
2.83
3.33
2.90
GBP’000
3,700
2,018
5,718
6,759
331
4,772
58
180
14
12,114
Share issue costs in the amount of £215,618 were incurred in the period and set off against the share
premium account.
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 2018
Expired
Granted 30 May 2018
Granted 12 June 2018
Granted 12 June 2018
Granted 29 October 2018
31 March 2019
11.31
-
-
-
-
7.93
18,018,210
(1,812,097)
12,900,000
1,200,000
2,500,000
1,200,000
34,006,113
-
4.50
4.50
7.00
4.50
-
3.40
4.31
4.31
3.35
3.98
-
5
5
5
3
3.97
1,333
(350)
211
36
68
22
1,320
Of the options granted in May 2018, 10.5M are subject to vesting conditions linked to milestones. No
other options are subject to vesting conditions.
Options can be settled in cash and are typically granted for a term between three and five years at the
discretion of the Board of Directors upon recommendation by the Remuneration Committee.
The weighted average exercise price of the options outstanding at 31 March 2019 is 6.9 pence.
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.
The charge incurred during the year in relation to share based payments was £337,000 (2018:
£247,000)
Warrants
Grant
date
Number
Exercise
Price
Term
(years)
Share Price
at grant
Arc Minerals Limited Annual Report & Financial Statements 2019
64
Notes to the financial statements
1 April 2018
1 April 2018
15 May 2018
15 May 2018
15 May 2018
16 May 2018
18 June 2018
1 October 2018
10 October 2018
31 October 2018
17 December 2018
19 February 2019
Exercised during the year
Expired during the year
(pence)
2.00-5.50
2.25
2.40
3.36
6.00
2.90
6.00
4.50
6.50
4.50
3.20
4.50
0.1-2.61
3.59
1.13
1.13
1.13
4.13
1.22
2.01
2.53
1.76
2.22
2.89
pence
2.23
3.01
3.01
3.01
2.70
4.245
4.01
3.65
3.40
2.95
2.90
10,975,000
1,000,000
4,666,667
505,953
2,000,000
980,584
4,620,000
1,789,000
44,400,014
1,000,000
2,041,094
63,600,009
(487,500)
(3,750,000)
TOTAL
133,340,821
2.00-6.50
0.1-4.13
Weighted Average
5.01
2.49(i)
(i) Remaining term as at 31 March 2019
The charge incurred during the year in relation to warrants was £nil (2018: nil).
21. Share premium
Opening Balance
Total Additions (see note 19 for details)
Share issue costs
As at 31 March
See note 19 for a breakdown of share issues during the year.
22. Financial instruments and capital risk management
Financial Risk Management
Financial Risk Factors
2019
£ 000s
38,324
12,114
(216)
50,222
2018
£ 000s
32,774
5,738
(188)
38,324
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 pound sterling, US Dollar and Zambian Kwacha.
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. While the Zambian Kwacha has
depreciated 16% since acquisition the Kwacha risk is mitigated by the fact that Zamsort would only
Arc Minerals Limited Annual Report & Financial Statements 2019
65
Notes to the financial statements
have one month’s cash requirement on hand at any one time. The more significant risk in Zambia is a
US Dollar risk as the Shareholder Loan of our minority partner is denominated in US Dollars. 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: 2019
Increase/(decrease) in foreign exchange rate
b) Credit Risk
Credit risk arises from cash and cash equivalents.
20%
-20%
Group
£ 000's
760
(760)
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.
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
2019
£ 000's
1,196
30
1,226
2018
£ 000's
51
139
190
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 GBP:USD 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 2019.
Arc Minerals Limited Annual Report & Financial Statements 2019
66
Notes to the financial statements
Items at fair value as at 31 March 2019
Assets
Financial assets at fair value through profit or loss - shares (Note 15)
Total Assets
Level 1
£ 000's
-
-
Level 2
£ 000's
-
-
Level 3
£ 000's
-
-
Total
£ 000's
-
-
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
Financial assets at fair value through profit or loss - shares (Note 15)
Total Assets
Level 1
£ 000's
Level 2
£ 000's
Level 3
£ 000's
Total
£ 000's
-
-
-
-
1,324
1,324
1,324
1,324
Fair value hierarchy
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 £1,535,000
(USD 2,000,000) of debt classified as held for sale liabilities at 31 March 2019 which were acquired on
acquisition of Casa Mining Limited (2018 - £1,480,000 (USD 2,000,000)) and has capital, defined as the
total equity and reserves of the Group, of £30,485,000 (2018: £25,467,000).
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. 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.
Purchase of 5% of Zaco Limited
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Notes to the financial statements
After its acquisition of 37.5% of Zaco Limited, the Company was offered a further 5% at the same
proforma cost, US$ 50,000. At the time the Company was focused on financing its 5,800m Kalaba drill
program. Nicholas von Schirnding offered to make the purchase on behalf of the Company. The Board
accepted his offer and Mr von Schirnding purchased the 5% block with the expectation that the
Company would purchase it from him when financial conditions permitted. The 5% Zaco interest was
subsequently purchased at a cost of US$55,000 including a financing charge.
Remuneration of Key Management Personnel
The remuneration of the Directors and PDMRs is set out in note 8.
Of the amounts set out in note 8:
£35,000 was paid to a Personal Services Company (“PSC”) owned by Brian McMaster.
£55,000 was paid to a PSC owned by Vassilios Carellas.
£94,000 was paid to a PSC owned by John Forrest
Symbadon Company Limited is a company owned by Don Bailey and to which non-executive director
fees in the amount of £30,000 were paid and 2.5M share options were issued.
25. Ultimate controlling party
There is no ultimate controlling party in the opinion of the Board.
26. Events after the reporting period
There are no events to report subsequent to 31 March 2019.
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