Arc Minerals Limited
ARC MINERALS LIMITED
ANNUAL REPORT AND
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED
31 DECEMBER 2021
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
4
6
9
17
24
26
32
33
34
35
37
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
1
Director, Executive Chairman
Finance Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Corporate Information
Directors
Nicholas von Schirnding
Rémy Welschinger
Brian McMaster
Caleb Mulenga
Valentine Chitalu
Chief Operations Officer
Vassilios Carellas
Registered Address
Craigmuir Chambers
Road Town. Tortola
British Virgin Islands, VG 1110
Registrars
Computershare Investor Services (Channel
Islands) Ltd
Ordnance House, 31 Pier Road
St Helier, JE4 8PW
Channel Islands
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 Joint Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London, WC2R 1DJ
Joint Broker
WH Ireland
3rd Floor Royal House
28 Sovereign Street
Leeds, LS1 4BJ
Financial Advisor
Rothschild & Co – Global Advisory
New Court, St Swithin’s Lane
London, EC4N 8AL
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
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Overview
Arc Minerals Limited (“Arc Minerals”, “Arc” or the “Company”) is a dynamic junior exploration and
development company focused on exploring for base metals, principally copper, in Africa. The Company
has a controlling interest in several licences in sub-Saharan Africa.
In the North-Western province in Zambia, Arc’s licences are located in the Domes region of the Zambian
Copperbelt near world-class mines such as First Quantum Minerals’ Sentinel and Kansanshi copper
mines and Barrick’s Lumwana mine.
The Company, via its Zambian subsidiaries, has a controlling stake over a number of areas under
licence located on the opposite flank of the Kabompo Dome to First Quantum’s Sentinel operations,
approximately 900km by road from Lusaka.
To date, Arc Minerals have carried out c.22,000m of drilling, collected and analysed c.75,000 soil
samples, and flown 10,700 line km’s of airborne geophysical surveys over the areas under licence,
which comprise:
• Large-Scale Exploration Licence (23004-HQ-LEL);
• Large-Scale Exploration Licence (23005-HQ-LEL);
• Small-Scale Exploration License (24958-HQ-SEL);
• Large-Scale Exploration Licence (19906-HQ-LEL).
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.
Business Model and Strategy
The strategic vision of Arc Minerals is to build a leading African focused base metals exploration and
development company leveraging off the three pillars that it has put in place for delivering on this vision:
• High quality project pipeline;
• Highly qualified and experienced team with a proven team track record of finding resources
and building mines; and
• Supportive institutional and retail shareholder base.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
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Chairman’s Statement
2021 Overview
2021 was a solid year for the Company. Notable milestones included raising gross proceeds of £2 million
through a placement in January 2021, acquisition of a 75% interest in the Virgo copper project in
Botswana, continued exploration activities in Zambia albeit at a slower pace as a result of the COVID
restrictions, continued discussions with strategic partners that culminated in a Joint Venture Transaction
with Anglo American plc (“Anglo American”) as a major partner for the Zambian copper and cobalt
assets.
The period of uncertainty and volatility before and during the initial global pandemic lockdown
dissipated and was followed by a strong rebound in global markets commencing at the end of the first
lockdown in the UK and continuing throughout 2021 and into 2022. Commodity prices performed
strongly due to a significant increase in demand, coupled with supply chain delays and staff shortages
due to the ongoing impacts of Covid-19.
At Arc Minerals, we moved quickly to ensure that business activities were managed and conducted in a
manner which continued to provide a safe working environment and enable continuity of operations.
Our health and safety policies and procedures were all updated for covid management, including PPE
requirements, protocols for testing, isolating and medical treatment and working from home
requirements. Staff and contractors were provided with appropriate training and all personal visiting
and operating on our sites were updated on the covid protocols as part of health and safety inductions.
Government imposed lockdowns and extensive travel restrictions resulted in many businesses and
government departments working at reduced capacity, remotely or from home. The onset of Covid-19
impacted a number of our staff and contractors and certain work was delayed due to travel restrictions.
Despite these challenges our team continued to make good progress on project activities and
discussions with potential strategic partners.
In January 2021, the company secured Hargreave Hale Ltd as a significant shareholder on its register
following a successful £2 million placing which was well supported by existing as well as new
shareholders.
In May 2021, we engaged Rothschild & Co as a financial advisor in respect of an anticipated transaction
on our copper and cobalt assets. We also continued to work on restructuring our Zambian entities to
optimise the corporate structure for an anticipated transaction.
During the year, the company carried out exploratory diamond drilling activities at both the Fwiji and
Cheyeza targets in Zambia. At Fwiji, drilling tested a coninident magnetic and soil anomaly 2.5km
southwest of the previous years drilling, with the last hole drilled intersecting copper sulphide
mineralisation in quartz veins and associated wall rock alteration.
At Cheyeza East, further drilling was carried out 500m to the northwest of the previous year’s oxide
drilling campaign. The programme was designed test an anomalous structural feature, with one of the
holes intersecting a zone of massive and disseminated sulphide mineralisation.
In October, the Company flew a high resolution (50m line spacing) airborne magnetic and radiometric
survey away with c.5,000 line kilometres flown over the Cheyeza, Muswema and Lumbeta target
areas. The survey has resulted in a new and simplified mineralisation model that opens over 20km of
strike length for focussed exploration in lower stratigraphy.
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In November, Arc acquired a 75% interest in the Virgo copper project in Namibia from Kopore Metals
Limited. The Virgo project is located in a emerging copper district in the Kalahari district in close
proximity of some larger discoveries. As Arc focuses on identifying early stage opportunities that can
become world-class operations, this acquisition is a very exciting opportunity for the group and we are
looking forward to reporting on the developments on this exciting exploration asset.
Anglo American transaction
During the period, Arc continued to progress its joint venture discussions with Anglo American plc in
respect to its copper and cobalt projects. In May 2022, the Company announced that it has signed a
Letter Agreement with Anglo American whereby Anglo American will have the right to retain a 70%
ownership in the Joint Venture company for an aggregate investment by Anglo American of up to USD
88.5 million including cash consideration of up to USD 14.5 million. This transaction is subject to
regulatory and shareholder approval but this transaction is a major validation of our geological
modelling and work to date and now paves the way for the execution of a comprehensive exploration
and development programme which will unlock significant value for the group.
Casa transaction
In 2020, Arc entered into a sale and purchase agreement with Golden Square Equity Partners Limited
(“Golden Square”) for the sale of its interest in Casa Mining Limited (“Casa”) which has a 73.84% stake
in the Misisi gold claims in the Democratic Republic of Congo (“DRC”). Despite Golden Square’s best
efforts, they failed to raise the funds for the acquisition and were subsequently replaced by Regency
Mining Limited (“Regency”). As announced on 29 April 2022, Arc concluded a transaction for its interest
in Casa and accepted 3 million shares in Tingo Inc. (OTC:TMNA) in settlement of the USD 5 million loan
note.
Governance
At a corporate level, we bolstered the board with the appointment of Mr Valentine Chitalu. Mr Chitalu
is a prominent entrepreneur in Zambia and southern Africa specialising in private equity and local
private sector development. He is the co-founder and Chairman of Phatisa Group, a private equity fund
manager in Sub-Saharan Africa, and has previously worked for the CDC Group in London and Lusaka.
Mr Chitalu already brings invaluable insights to the group and we look forward to his advise as the
group grows.
In addition the company has continued to strengthen its technical team in Zambia and Botswana and
will continue to do so throughout 2022 as the company progresses its exploration assets.
Sustainability
From an ESG perspective, I am proud to report that the Company continued with its local outreach
programme to support a number of communities in Zambia and we will continue to increase our levels
of community engagement as the copper and cobalt assets develop in 2022 and beyond.
Outlook
At the time of writing this report, it appears that the worst of the global pandemic is behind us, many
of the major economies have committed to large infrastructure development programmes focussed on
decarbonisation and the transition to renewable energy and electrification of transport.
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The COP26 conference held in Glasgow in November 2021, again underlined the importance of energy
transition minerals as more and more countries aim to achieve net zero by 2050. This enormous task
will continue to add pressure on the mining industry to deliver the critical minerals required for the
build out of renewable energy generation and distribution infrastructure.
Copper is expected to be a major beneficiary of these policies as the energy transition will require
significant additional copper supply over and above the current baseload requirements. This anticipated
uplift in demand comes at a time when supply is likely to be constrained due to prolonged
underinvestment in exploration and new mine development. Most market analysts suggest the gap
between supply and demand is widening and are expecting a prolonged period of strong prices.
Existing copper producers will inevitability need to replace or replenish dwindling reserves and the level
of exploration and M&A activity in the sector is expected to increase to meet this objective. With its
portfolio of copper assets, Arc Minerals is well positioned to benefit from a sustained strong outlook
for copper.
Also during period, Zambia elected President Hakainde Hichilema whose new government has made
the commitment to become Africa’s largest copper producer by 2025. To date his new government has
attracted significant investment into the mining sector and is expected to continue to do so in the
coming years.
Acknowledgements
I would like to extend my gratitude to our shareholders for their continued support over the past year
and look forward to reporting further on our progress during 2022.
As a final note, I would like to thank our employees, consultants and contractors for their continued
hard work and express my sincere thanks to all our stakeholders in Zambia, Botswana and internationally
for their support throughout the year. It is much appreciated.
Nicholas von Schirnding
Executive Chairman
30 June 2022
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
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Strategic Report
Overview of Operations
Arc Minerals 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.
Zambia Copper Projects
The Company, via its Zambian subsidiaries, has a controlling stake over a number of areas under
licence located on the opposite flank of the Kabompo Dome to First Quantum’s Sentinel operations,
approximately 900km from Lusaka.
The Zambian license areas are located approximately 900 km from Lusaka, in Mwinilunga,
Northwestern Province, and is well within the trending arm of the major geological structure known as
the Lufilian Arc (Copperbelt), on the western flank of the Kabompo Dome. The Copperbelt is home to
all the major copper mines in Zambia and these licenses represent one of the last dome-related areas
in Zambia yet to be explored in any detail.
Over the last fifteen years, three new major copper mines have been developed and constructed to
exploit the mineral resources in the new western part of the Zambian Copperbelt. This region now
accounts for a substantial part of Zambian copper production and the areas under licence are in close
proximity to large operations such as First Quantum Minerals’ Sentinel and Kansanshi mines and
Barrick Gold’s Lumwana mine.
The areas under licence 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.
The current areas under licence encompass 9 of 30 exploration targets that were ranked in the late-
90’s by the JV over the Kabompo Project, which include the top seven ranked targets. First Quantum
Minerals’ Kalumbila property, better known as the Trident Project, developed to become the Sentinel
copper mine which in 2020 achieved record copper production of over 251,000 tonnes. First Quantum’s
Enterprise Nickel project is also located on the flanks of the Kabompo Dome and approximately 40 km
to the east of the areas under licence.
At the time of the JV, Kalumbila was originally ranked number 22 out of JV’s top 30 Kabompo Project
targets with an original exploration target size of six million tonnes of ore; eventually a copper Resource
in excess of 1 billion tonnes of ore (one of the largest in Zambia) was demonstrated - during this same
period the initial Anglo-American exploration target for Kalaba exploration target was 150 million tonnes
of ore.
To date, Arc Minerals have carried out c.22,000m of drilling, collected and analysed c.75,000 soil
samples, and flown 10,700 line km’s of airborne geophysical surveys over the areas under licence,
which comprise:
• Large-Scale Exploration Licence (23004-HQ-LEL);
• Large-Scale Exploration Licence (23005-HQ-LEL);
• Small-Scale Exploration License (24958-HQ-SEL);
• Large-Scale Exploration Licence (19906-HQ-LEL).
During the year, the company carried out exploratory diamond drilling activities at both the Fwiji and
Cheyeza targets in Zambia. At Fwiji, four holes were drilled to test a coninident magnetic and soil
anomaly 2.5km southwest of the previous years drilling, with the fourth and final hole drilled
intersecting copper sulphide mineralisation in quartz veins and associated wall rock alteration.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
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A further three holes were drilled at Cheyeza East, 500m to the northwest of the previous years oxide
drilling campaign. The programme was designed test an anomalous structural feature, with the first
hole intersecting a zone of massive and disseminated sulphide mineralisation.
In October, the Company flew a high resolution (50m line spacing) airborne magnetic and radiometric
survey away with c.5,000 line kilometres flown over the Cheyeza, Muswema and Lumbeta target areas.
The survey has resulted in a new and simplified mineralisation model that opens over 20km of strike
length for focussed exploration in lower stratigraphy.
Botswana Copper Project
In November 2021, Arc Minerals Limited acquired a 75% interest in Alvis-Crest (Proprietary) Limited,
the holder of two prospecting licences (PL 135/2017 & PL 162/2017) in Botswana's Kalahari Copper
Belt (“KCB”), colloquially called the Virgo Project/Licences. The Virgo project is located in a emerging
copper district in the Kalahari district in close proximity of some larger discoveries and cover an area of
over 210km2. The Virgo licenses lie within (PL 165/2017) and adjacent (PL 135/2017) to the highly
prospective Central Structural Corridor and within 10km and 50km of the Zone 5 and Banana Zone
copper projects respectively, known as the two largest copper projects on the KCB.
Historically, two copper-nickel soil anomalies have already been recorded on PL 135/2017 and PL
162/2017 and are approximately 3km and 2.5km in strike length respectively. The largest of the two
anomalies, located on PL 135/2017, overlays an interpreted DKF-NPF contact, while a second more
intermittent anomaly may be linked to extensional faulting around the dome edge. The large coherent
anomaly on PL 162/2017, also appears to overlay the interpreted DKF-NPF contact on the northern
limb of a syncline.
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Governance
Board of Directors
Nicholas 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, Edenville Energy, and Orusur Mining, all of which are listed on AIM in
London.
Rémy Welschinger, Finance Director
Remy Welschinger has over 15 years' experience in finance. He was Head of Commodities Sales at
Deutsche Bank in Europe and, prior to that, an Executive Director in the Fixed Income and Commodities
division of Morgan Stanley in London. Rémy is an executive director of ASX-listed Infinity Lithium and
a director of Element-46 Ltd and Limehouse Capital Ltd, both private UK companies.
Brian McMaster, Non-Executive Director
Brian McMaster has over 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.
Caleb Mulenga, Non-Executive Director
Caleb Mulenga previously spent 8 years at the Development Bank of Zambia, subsequently moving
into the private sector and establishing Superior Milling Limited, of which he is currently the Executive
Chairman. He currently serves as the Chairman of Access Bank Zambia. Caleb also holds a bachelor's
degree in Business and Economics from the University of Zambia and an MBA from Webster University.
Valentine Chitalu, Non-Executive Director
Valentine Chitalu is an entrepreneur in Zambia and southern Africa specialising in private equity and
local private sector development. He is the co-founder and Chairman of Phatisa Group, a private equity
fund manager in Sub-Saharan Africa, and has previously worked for the CDC Group in London and
Lusaka, focusing on identifying investment opportunities and portfolio management, and was Chief
Executive Officer of the Zambian Privatisation Agency where he was responsible for the divestiture of
over 240 enterprises. Valentine is a Chartered Certified Accountant and holds a Masters in Economics
from Cambridge University.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
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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 period ended 31 December 2021.
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
4 and Strategic Report on page 6.
Change in Accounting Reference Date
As announced in February 2021, the Company elected to change its accounting reference date from
31 March to 31 December to align it with the accounting reference dates of its principal operating
subsidiaries in Zambia. As a result, the prior period account were prepared for the 9-month period 1
April 2020 to 31 December 2020.
Results and Dividends
During the period cash increased by £1.035m (31 December 2020: increase of £531k).
The loss on continuing operations of the Group after taxation amounted to £5.447m (31 December
2020: Loss of £1.640m). There were no dividends paid in the year ended 31 Dec 2021 (31 December
2020: nil).
Financial Summary
The following is a brief summary of notable events during the reporting period.
The Company continued to demonstrate its ability to successfully access capital markets. During the
year the Company raised a total of GBP 5m gross through placings for cash (GBP 3.56m) and from the
exercise of warrants and options (GBP 1.2m).
Events after the reporting period
Refer to Note 26
Interest >3%
The following shareholders have a notifiable interest in the Company as at 30 June 2022:
• Karl-Erik von Bahr
• Lärarnas Riksförbund
• Hargreave Hale Ltd
7%
5%
4%
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Directors
The names of Directors who served of the date of this report are set out below:
Directors
Date of Appointment
Date of Resignation
Executive Directors
Nick von Schirnding
Rémy Welschinger
Non-Executive Directors
Brian McMaster
Caleb Mulenga
Valentine Chitalu
Directors’ Remuneration
24 January 2017
31 June 2019
1 August 2017
29 October 2020
27 August 2021
-
-
-
-
-
The Group remunerates the Directors at levels commensurate with its size and experience of its
directors. The Remuneration Committee determines and has reviewed the Directors’ remuneration and
believes the levels are appropriate and in line with industry sector median levels of remuneration.
Further details can be found on discussion about the Remuneration Committee on page 23 within the
Corporate Governance Statement. Details of the Directors’ emoluments and payments made for
professional services rendered are set out in Note 7 to the financial statements.
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Directors’ Interest
The beneficial interest of the Directors in the shares and options of the Company are set out as
follows:
Director
Annual Report Dec 2021
Annual Report Dec 2020
Shares
Options * Warrants
Shares
Options Warrants
Nicholas von
Schirnding
Rémy
Welschinger
Brian
McMaster
Caleb
Mulenga(i)
Valentine
Chitalu (ii)
17,080,532
14,528,844
2,555,557
-
-
-
4,555,557 17,080,532 29,620,195 4,555,557
7,444,446 14,528,844 15,580,000 7,444,446
555,557
2,555,557
4,375,000
555,557
-
-
2,000,000
2,000,000
-
-
-
2,000,000
-
n/a
n/a
n/a
(i) Caleb Mulenga was appointed on 29 October 2020
(ii) Valentine Chitalu was appointed on 27 August 2021
None of the Directors exercised any share options during the period.
* Share options issued to certain directors and other PDMRs of the company were surrendered in exchange for consideration.
Please refer to Note 26 for more information.
Corporate Governance
A statement on Corporate Governance is set out on pages 17 to 24.
Key Performance Indicators
The Board monitors the activities and performance of the Group on a regular basis and uses both
financial and non-financial indicators to assess the Group’s performance.
Non-Financial KPIs
The Board established the following goals for management in 2022:
1. Drilling a discovery hole at Arc’s Botswana portfolio of licences
2. Expanding Arc’s portfolio of copper exploration and development assets in Africa
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Financial KPIs
The current financial KPIs are:
Financial KPIs
Measure
Dec 2021
Dec 2020
Total funds raised
Exploration costs capitalised
£ 000’s
£ 000’s
4,999
367
2,844
290*
* Exploration was affected by COVID-19
These KPIs will continue to be the priorities for the Group.
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 14.
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, martial 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 Zambia.
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.
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Auditor
PKF Littlejohn LLP has signalled its willingness to continue in office as auditor
Going Concern
The Directors have reviewed a forecast prepared by the executive and have a reasonable expectation
that the Group has sufficient funds to continue in operation and satisfy liabilities for the foreseeable future.
During the c.5 years ended 31 December 2021 Arc raised in excess of £15.5 million from the sale of
equity and exercise of warrants of which £3.5 million was raised in 2021 from the sale of shares. These
ongoing equity sales are indicative of consistent strong investor support. The Directors therefore consider
it appropriate, despite the loss incurred during the year, for the Company to continue to adopt the going
concern basis in preparing the Annual Report and Financial Statements. Further details on the Directors
assumptions and their conclusion are included in the statement on going concern included in Note 1(f)
to the Financial Statements.
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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 programmes. 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, 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.
The risk is mitigated by conservatively managing exploration funds such that subsequent exploration
expenditures are not committed until results from previous stages have been evaluated. There is regular
lab testing during the year’s exploration program to minimise unwarranted expenditure.
We have also assembled a talented team of professionals complemented by independent consultants
we engage regularly.
Most of the Zambian licences held by the Group are due for renewal in 2022. The Group is preparing
to make applications to renew these licences and the Directors and the Directors are not aware of any
reason why the licences will not be renewed.
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Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates,
foreign exchange rates, and commodity and equity prices. These fluctuations may be significant.
Interest Rate Risk: The Company is exposed to interest rate risk to the extent that its cash balances
bear variable rates of interest. The interest rate risks on cash and short-term investments and on the
Company’s, obligations are not considered significant.
Foreign Currency Risk
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates against
the Company’s reporting currency, pound sterling. The Company expects to continue to raise funds in
London and Europe in sterling. The Company conducts its primary business in Zambia (“Kwacha”) with
a significant portion of expenditures in that country, for example drilling expenditure, denominated in
USD. As the Company reports in Great British Pounds (“GBP”), it is subject to risk due to fluctuations
in the exchange rates between the GBP and each of the USD and Kwacha. Assets in Zambia and most
liabilities are denominated in Kwacha but the shareholder loan is denominated in USD. Changes in the
currency exchange rates between the Kwacha relative to foreign currencies can have a significant
impact on the group accounts. 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 Zamsort and Zaco copper
projects are related to the price of copper and the outlook for this mineral, 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 copper prices have fluctuated and are affected by numerous factors outside of the
Company’s control, including but not limited to: industrial demand; forward sales by producers and
speculators; levels of worldwide production; short-term changes in supply and demand because of
speculative hedging activities;
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 Dec 2021
16
Political Risk
In conducting operations in Zambia, the Company is subject to considerations and risks related to the
political, economic and legal environment in which the Company operates. Among other things, the
Company's results may be impacted by changes in the political and social conditions in Zambia 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.
COVID-19 outbreak
The COVID-19 outbreak was declared a pandemic by the World Health Organisation in March 2020.
The Group is constantly reviewing the potential impact to their operations and implementing measures
to mitigate any possible impact where possible. The health, safety and well-being of its employees and
contractors is prioritised over other aspects of the business.
To date, the Group has not seen a significant impact on its business. The outbreak and the response
of Governments in dealing with the pandemic is interfering with general activity levels within the
community, the economy and the operations of the Group. The scale and duration of these
developments remain uncertain as at the date of this report however they are not significantly impacting
the Company’s operations.
This Risk Management Report has been approved by the Board and signed on its behalf by:
Nicholas von Schirnding
Director & Executive Chairman
30 June 2022
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
17
Corporate Governance Statement
The Company is committed to maintaining the highest standards in corporate governance throughout
its operations and to ensure that all of its practices are conducted transparently, ethically and efficiently.
The Company believes that scrutinising all aspects of its business and reflecting, analysing and
improving its procedures will result in the continued success of the Company and improve shareholder
value. Therefore, and in accordance with the AIM Rules for Companies (as updated from time to time),
the Company continues 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, the
Strategic Report and the Directors’ Report.
The Board currently consists of five Directors: an Executive Chairman, a Finance Director and three
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
The QCA Code states that ‘the board must be able to express a shared view of the Company’s purpose,
business model and strategy.’
Arc’s strategy is to invest in highly prospective copper-cobalt 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 its copper-cobalt
projects in sub-Saharan Africa.
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;
(iv) maintaining good community relationships; and (v) employing compliant environmental governance
practices.
Understanding Shareholder Needs and Expectations
The QCA Code states ‘the directors must develop a good understanding of the needs and expectations
of the Company’s shareholder base.’
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.
Considering Wider Stakeholder and Social Responsibilities
The QCA Code states that long-term success relies upon good relations with a range of different
stakeholder groups both internal and external. The board needs to identify the Company’s stakeholders
and understand their needs, interests and expectations.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
18
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
The QCA Code states that ‘the board needs to ensure that the Company’s risk management framework
identifies and addresses all relevant risks in order to execute and deliver the Company’s strategy’.
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:
•
•
•
•
•
•
•
•
•
•
•
Exploration and Development Risk
Political Risk in sub-Saharan Africa
Licence and Permitting Risk
Market Risk
Foreign Currency Risk
Commodity Price Risk
Retention of Key Personnel
Financing Risk
Liquidity Risk
Credit Risk
Global Health Risk (Covid-19)
Well-functioning Board of Directors
The QCA Code states that ‘the board must be maintained as a well-functioning, balanced team led by
the Chair. The board should have an appropriate balance between executive and non- executive
directors and have at least two independent non-executive directors’.
Profiles of the Arc directors are available on the Company website at www.arcminerals.com.
The Board is currently comprised of two executive directors (Nick von Schirnding, Executive Chairman
and Rémy Welschinger, Finance Director) and three independent non-executive directors (“NEDs”)
(Brian McMaster, Caleb Mulenga and Valentine Chitalu).
As at the date of this statement, Arc’s board composition complies with the QCA Code and each
independent director has been assessed and is considered to be independent by the board. All
Directors are expected to devote the necessary time commitments required by their position.
Appropriate Skills and Experience of the Directors
The QCA Code states that ‘the board must have an appropriate balance of skills and experience and
not be dominated by one person or group of people’.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
19
Arc complies with the QCA Code and full biographical details of the directors and their skills and
experience can be found at www.arcminerals.com/about-us/board-and-management. The Directors
who have been appointed to the Company have been chosen because of the range of their skills and
experience and which are appropriate for the strategy and objectives of the Company. The Board
recognises that it currently is limited in diversity and this continues to form part of recruitment
consideration.
The Board considers the current balance of sector, financial and public market skills and experience
which it embodies as 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 whilst enabling each Director to discharge his fiduciary duties effectively.
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 Executive Chairman is assisted by the company secretariat in preparing for and running effective
board meetings, including the timely dissemination of appropriate information. The company secretariat
provides advice and guidance to the extent required by the board on the legal and regulatory
environment.
Evaluating Board Performance
The QCA Code states that ‘the board should regularly review the effectiveness of its performance as a
unit, as well as that of its committees and individual directors’.
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 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
Continuous professional learning of Board Members
Succession planning is considered by the Board as a whole and reviewed annually.
Corporate Culture
The QCA Code states that ‘the board should promote a corporate culture that is based on ethical values
and behaviours’.
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 as set out below so that all aspects of the Company are run responsibly.
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
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
20
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;
IT, communications and systems; and
social media.
Maintenance of Governance Structures and Processes
The QCA Code states that ‘the Company should maintain governance structures and processes in line
with its corporate culture and appropriate to its size and complexity’.
Board of Directors
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 Finance
Director 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;
an executive finance director, whose responsibility is to support the executive chairman in the
delivery of the Company’s strategy. In particular, the finance director is responsible for the
formulation and submission to the Board of the Group’s financial strategy and for the financial
performance of the Group in line with the Company’s strategy;
an independent, non-executive director; and
two non-executive directors;
A Director is considered independent if he is not a Person Discharging Managerial Responsibility
(“PDMR”) within the Group. Director experience and qualifications are set out in their profiles on page 8.
The board has appointed Mr Brian McMaster as Senior Independent Director. Additionally, the
Executive Chairman is assisted by the company secretariat in preparing for and running effective board
meetings, including the timely dissemination of appropriate information. The company secretariat
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.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
21
Director
Position
Independent
(Y/N)
Remuneration
Committee
Membership
Nomination
Committee
Membership
Audit & Risk
Committee
Membership
Nicholas von
Schirnding
Executive
Chairman
Rémy
Welschinger
Finance
Director
Brian
McMaster
Senior
Independent
Director
Caleb
Mulenga
Non-Executive
Director
Valentine
Chitalu
Non-Executive
Director
N
N
Y
Y
Y
The following matters are reserved for the Board:
Management Structure and Appointments
Member
Member
Member
-
Chairman
-
-
Chairman
-
-
-
Chairman
-
-
-
• 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.
• 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.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
22
• 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
• 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.
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 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:
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
23
•
•
•
•
•
reviewing the Company’s accounting policies and reports produced by internal and external
audit functions.
considering whether the Company has followed appropriate accounting standards and made
appropriate estimates and judgements, taking into account the views of the external auditor.
reporting its views to the board of directors if it is not satisfied with any aspect of the proposed
financial reporting by the Company.
reviewing the adequacy and effectiveness of the Company’s internal financial controls and
internal control and risk management systems.
reviewing the adequacy and effectiveness of the Company’s anti-money laundering systems
and controls for the prevention of bribery and receive reports on non-compliance.
• overseeing the appointment of and the relationship with the external auditor.
The Audit and Risk Committee has two members and at least one member has recent and relevant
financial experience. The current members of the committee are Valentine Chitalu and Nicholas von
Schirnding. The committee chairman is Valentine Chitalu. The full Terms of Reference of the Audit
Committee can be found here.
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:
•
reviewing the pay and employment conditions across the Company, including the board of
directors.
• approving targets and performance related pay schemes operated by the Company and all
share incentive plans and pension arrangements.
The Remuneration Committee has two members. The current members of the committee are Brian
McMaster and Nicholas von Schirnding. The committee chairman is Brian McMaster. The full Terms of
Reference of the Remuneration Committee can be found here.
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 two members. The current members of the committee are Caleb
Mulenga and Nicholas von Schirnding. The committee chairman is Caleb Mulenga. The full Terms of
Reference of the Nomination Committee can be found here.
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).
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
24
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 Communication
The QCA Code states that ‘a healthy dialogue should exist between the board and all of its stakeholders,
including shareholders, to enable all interested parties to come to informed decisions about the
company’.
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 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.
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 and Company 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 Company and of the profit
or loss of the Group and Company for that period.
In preparing the Group and Company Financial Statements, the Directors are required to:
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
25
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 and the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Group and the Company and enable them to ensure that the Financial
Statements comply with the Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and the Company 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.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
26
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARC MINERALS PLC
Opinion
We have audited the group financial statements of Arc Minerals Limited (the ‘group’) for the
year ended 31 December 2021 which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated Statement of Cash Flows and Notes to the
Financial Statements, including 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 December 2021 and of
its loss for the period 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate. Our
evaluation of the directors’ assessment of the group’s ability to continue to adopt the going
concern basis of accounting included obtaining management’s assessment of going concern
and associated cash flow forecasts which covered a period of at least 12 months from the
date of approval of the financial statements. We have reviewed the inputs to the cash flow
forecast for reasonableness, compared to historic financial information, and stress-tested
where appropriate.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on
the group’s ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
27
Independent Auditor’s Report (continued)
Our application of materiality
The materiality applied to the group financial statements was £142,000 (2020: £95,000),
based on a percentage of gross assets, as it is from these assets that the group seeks to deliver
returns for shareholders. Performance materiality has been set at 75% (2020: 75%) of
materiality, and the threshold for which we communicate errors to the Audit and Risk
Committee has been set at £7,100 (2020: £4,170). We apply the concept of materiality in both
planning and performing the audit and evaluating the effect of misstatements. At the
planning stage, materiality is used to determine the financial statements areas that are
included within the scope of the audit and the extent of the sample sized 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 either during or at the
conclusion of the audit.
Our approach to the audit
In designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular we looked at areas involving significant
accounting estimates and judgements by the directors such as the carrying value of the
exploration and evaluation assets and the recoverability of loan note receivables, as well as
the acquisition of Alvis Crest, and considered future events that are inherently uncertain. As
in all of 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 4 components of the group,
a full scope audit was performed on the complete financial information of 3 components, and
For the component not considered significant, we performed a limited scope review which
analytical review together with substantive testing as appropriate on group audit risk areas
applicable to those components based on their relative size, risks in the business and our
knowledge of the entity appropriate to respond to the risk of material misstatement.
Component auditors were used for the significant component in Zambia, operating under our
instruction. The engagement partner 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
documentation for the carrying value of the assets held, gave us sufficient 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,
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
28
Independent Auditor’s Report (continued)
and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Key Audit Matter
How our scope addressed this matter
Carrying value of exploration assets
(Note 10)
The carrying value of intangible assets as at
31 December 2021 was £4,490k which
comprises of exploration and evaluation
expenditure on the Zambian licence area.
There is the risk that the carrying value of
this project is impaired and that exploration
and development costs capitalised during
the period have not been capitalised in
accordance with IFRS 6. Due to the
complexity and estimation uncertainty,
the audit team raised this as a key audit
matter.
Our work in this area included:
• Reviewing
and
the
impairment indicators in IFRS 6 in
relation to the asset held;
considering
• Obtaining support for ownership;
• Reviewing with management the basis
for impairment or non-impairment and
challenging any assumptions made;
and
• Performing substantive
testing on
capitalised expenditure during
the
period to ensure it met the capitalisation
criteria of IFRS 6.
In forming our opinion, which is not modified,
we draw to the users attention the disclosure
within note 10 and within the Critical Accounting
Estimates and Judgements which states that
most of the Zambian licences held by the Group
are due for renewal in 2022. The Group is
preparing to make applications to renew these
licences and the Directors are not aware of any
reason why the licences will not be renewed.
This indicates the existence of a material
uncertainty over the carrying value of the
Zambian exploration and evaluation assets,
which may
if
appropriate licensing is not in place. The
the
Financial statements do not
adjustments that would result if the Company
was unsuccessful in renewing the licences.
impairment
include
in an
result
Loan notes receivable (Note 15)
On 31 December 2021 Arc Minerals Plc had
loan notes due from Casa Mining. There is a
risk that these loan notes are not recoverable
and should be impaired for the period ended
31 December 2021. Due to the complexity
and estimation uncertainty, the audit team
raised this as a key audit matter.
Our work in this area included:
• Reviewing Regulatory News Service
(RNS) and signed agreements signed
to ensure consistency.
• Reviewing management’s assessment
of the likelihood of recoverability.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
29
Independent Auditor’s Report (continued)
• Recalculation of the expected value
given the movements in the foreign
currency.
• Ensuring adequate disclosure
throughout the financial statements in
line with the reporting requirements of
the applicable standards.
Our work in this area included:
• Reviewing the at acquisition
calculations and assessment of the at
acquisition numbers in accordance
with IFRS 3.
Obtaining an understanding of the
investment and nature at the
investment date and assessing that
the calculation is in accordance with
IFRS 3.
• Reviewing
consolidation
the
adjustments related to the acquisition.
• Reviewing of disclosures in line with the
requirements of IFRS.
Acquisition of Alvis Crest (note 14)
On 24 March 2021, the Company signed a
binding term sheet for the acquisition of
75% of Alvis Crest. Arc acquired control
of Alvis on 11 November 2021.
There is a risk that the group has not
accounted for the purchase of Alvis Crest
Proprietary Limited (“Alvis”) in terms of IFRS
3 and amounts that are capitalised to
intangible assets has been calculated
incorrectly when calculating goodwill. Due to
the complexity and estimation uncertainty,
the audit team raised this as a key audit
matter.
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 contained within the annual report. Our opinion on the group financial
statements does not cover the other information and, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
30
Independent Auditor’s Report (continued)
Responsibilities of directors
As explained more fully in the directors’ report, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the group and the sector in which they operate to identify
laws and regulations that could reasonably be expected to have a direct effect on the
financial statements. We obtained our understanding in this regard through discussions
with management and the application of cumulative audit knowledge and experience of the
sector.
• We determined the principal laws and regulations relevant to the group in this regard to be
those arising from AIM rules and local mining and exploration regulations applicable to the
subsidiaries. There was regular interaction with the component auditors during all stages
of the audit, including procedures designed to identify non-compliance with laws and
regulations, including fraud.
• We designed our audit procedures to ensure the audit team considered whether there were
any indications of non-compliance by the group with those laws and regulations. These
procedures included, but were not limited to enquiries of management, review of minutes
and RNS announcements and review of legal and regulatory correspondence.
• We also identified the risks of material misstatement of the financial statements due to
fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud
arising from management override of controls, that the potential for management bias was
identified in relation to the impairment assessment of intangible assets. We addressed this
by challenging the assumptions and judgements made by management when evaluating
any indicators of impairment.
• As in all of our audits, we addressed the risk of fraud arising from management override of
controls by performing audit procedures which included, but were not limited to: the testing
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
31
Independent Auditor’s Report (continued)
of journals; reviewing accounting estimates for evidence of bias; and evaluating the
business rationale of any significant transactions that are unusual or outside the normal
course of business
Because of the inherent limitations of an audit, there is a risk that we will not detect all
irregularities, including those leading to a material misstatement in the financial statements
or non-compliance with regulation. This risk increases the more that compliance with a law
or regulation is removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of non-compliance. The risk
is also greater regarding irregularities occurring due to fraud rather than error, as fraud
involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located
on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members. Our audit work has been undertaken
so that we might state to the company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone, other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have
formed.
Zahir Khaki (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
30 June 2022
15 Westferry Circus
Canary Wharf
London E14 4HD
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
32
Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income for the year ended 31 December 2021
Notes
31 December
2021
£ 000s
31 December
2020
£ 000s
Administrative expenses
Interest and finance costs
Loss on change of ownership status
Operating loss
Gain on disposal of held for sale investments
Loss for the year before tax
Income tax expense
Loss for the year
Other comprehensive income:
Item that may be subsequently reclassified to profit or loss
Currency translation differences
Total comprehensive loss for the year, net of tax
Loss attributable to:
Equity holders of the parent
Non-controlling interest
Total comprehensive loss attributable to:
Equity holders of the parent
Non-controlling interest
Earnings 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
3
14
3
5
20
20
8
8
8
8
(5,447)
-
-
(5,447)
-
(1,529)
(163)
-
(1,692)
52
(5,447)
(1,640)
-
-
(5,447)
(1,640)
597
(4,850)
(5,359)
(88)
(5,447)
(5,142)
292
(4,850)
(0.50)
(0.40)
(0.50)
(0.40)
(3,020)
(4,660)
(1,525)
(115)
(1,640)
(4,545)
(115)
(4,660)
(0.49)
(0.40)
(0.49)
(0.40)
The notes on pages 38 to 65 are an integral part of these consolidated financial statements.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
33
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position as at 31 December 2021
31 December 2021
31 December 2020
Notes
£ 000s
£ 000s
ASSETS
Non-current assets
Intangible assets
Fixed assets
Total non-current assets
Current assets
Inventory
Trade and other receivables
Assets held for sale
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Long term payables
TOTAL LIABILITIES
NET ASSETS
Share Capital
Share premium
Share based payment reserve
Warrant reserve
Foreign exchange reserve
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
TOTAL EQUITY
10
11
15
4
16
9
17
19
18
18
20
4,490
22
4,512
-
4,410
3,592
1,735
9,737
14,249
(1,338)
(1,338)
(4,735)
(6,067)
8,182
-
62,019
273
84
(1,885)
(53,385)
7,106
1,076
8,182
2,440
2,118
4,558
15
3,932
-
700
4,647
9,205
(351)
(351)
(3,308)
(3,659)
5,546
-
55,755
1,368
84
(3,111)
(49,056)
5,040
506
5,546
These financial statements were approved by the Board of Directors on 30 June 2022 and signed on
its behalf by:
Nicholas von Schirnding
Executive Chairman
The notes on pages 38 to 65 are an integral part of these consolidated financial statements.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
34
Notes
18
15
16
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows for the period ended
31 December 2021
Cash flows from operating activities
Loss before income tax and including discontinued operations
Interest Expense
Share based payment and warrants issued
Gain on disposal of held for sale investments
Foreign exchange
Depreciation and amortisation
Net cash used in operating activities before changes in working capital
Decrease in inventories
Decrease in trade and other receivables
Increase (Decrease) in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of fixed assets
Proceeds on disposal of held for sale investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares – net of share issue costs
Proceeds from exercise of share based payments
Minority shareholder loans
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year
Period to
31 December
2021
£ 000s
Year to
31 December
2020
£ 000s
(5,447)
-
23
-
114
31
(5,279)
15
(431)
2,116
1,700
(367)
-
-
(367)
3,564
1,199
292
5,055
1,035
700
1,735
(1,529)
(163)
390
52
122
53
(1,075)
-
83
(1,466)
(2,458)
(290)
(33)
178
(145)
2,258
474
402
3,134
531
169
700
In 2020, the major non-cash transactions were shares issued in lieu of payment under the drill for
equity programme (Note 17)
The notes on pages 38 to 65 are an integral part of these consolidated financial statements.
Arc Minerals Limited – Annual Report & Financial Statements Dec 2021
35
Consolidated Statement of Changes in Equity
Consolidated Statement of Changes in Equity as at 31 December 2021
Attributable to equity holders of the Company
Share
capital
Share
premium
£ 000s
£ 000s
Balance as at 1 Jan 2021
Loss for the year
Other comprehensive income(loss) for the year - currency
translation differences
Total comprehensive income (loss) for the year
Share capital issued
Granted during the period
Surrendered during the period
Share options expired during the period
Effect of foreign exchange on opening balance (Note 20)
Investment by NCI in the year (Note 20)
Total transactions with owners, recognised directly in
equity
Balance as at 31 December 2021
-
-
-
-
-
-
-
-
-
-
-
-
55,755
-
-
-
6,264
-
-
-
-
-
6,264
62,019
629
(1,885)
Foreign
exchange
reserve
£ 000s
(3,111)
-
597
597
-
-
-
-
629
-
Share
based
payment
reserve
£ 000s
1,368
-
-
-
-
23
(1,118)
-
-
-
(1,095)
273
Warrant
reserve
Retained
earnings
Total
£ 000s
84
-
-
-
-
-
-
-
-
-
£ 000s
(49,056)
(5,447)
-
(5,447)
-
-
1,118
-
-
-
-
84
118
(53,385)
£ 000s
5,040
(5,447)
597
(4,850)
6,264
23
-
-
629
-
5,916
7,106
Non-
controlling
interest
£ 000s
506
-
-
-
-
-
-
-
145
425
570
1,076
Total equity
£ 000s
5,546
(5,447)
593
(4,854)
6,264
23
-
-
774
425
7,486
8,182
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
36
Consolidated Statement of Changes in Equity
Balance as at 1 April 2020
Loss for the period
Other comprehensive (loss) for the year - currency
translation differences
Total comprehensive loss for the year
Share capital issued
Granted during the period
Expired during the period
Share options expired during the period
Effect of foreign exchange on opening balance (Note 20)
Investment by NCI in the period (Note 20)
Total transactions with owners, recognised directly in
equity
Balance as at 31 December 2020
Attributable to equity holders of the Company
Share
capital
Share
premium
£ 000s
£ 000s
-
-
-
-
-
-
-
-
-
-
-
-
51,231
-
-
-
4,524
-
-
-
-
-
4,524
55,755
Foreign
exchange
reserve
Share
based
payment
reserve
Warrant
reserve
Retained
earnings
Total
Non-
controlling
interest
Total equity
£ 000s
(91)
-
(3,020)
(3,020)
-
-
-
-
-
-
-
(3,111)
£ 000s
£ 000s
998
-
-
-
-
390
(20)
-
-
-
84
-
-
-
-
-
-
-
-
-
£ 000s
(47,436)
(1,640)
-
(1,640)
-
-
20
-
-
-
370
1,368
-
84
20
(49,056)
£ 000s
4,786
(1,640)
(3,020)
(4,660)
4,524
390
-
-
-
-
4,914
5,040
£ 000s
896
-
-
-
-
-
-
-
(168)
(222)
(390)
506
£ 000s
5,682
(1,640)
(3,020)
(4,660)
4,524
390
-
-
(168)
(222)
4,524
5,546
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 Zamsort Limited and Zaco Investments Limited.
The notes on pages 38 to 65 are an integral part of these consolidated financial statements.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
37
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 period ended 31 December 2021 were
authorised for issue by the Board on 30 June 2022.
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
The following amendments to standards have become effective for the first time for annual reporting
periods commencing on 1 January 2021 and have been adopted in preparing these financial
statements:
•
Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS
4 and IFRS 16) being the second part to a two-phase project which finalises the IBOR and other
interest rate benchmarks reform; and
• Covid-19-related rent concessions – amendments to IFRS 16.
The adoption of these amendments had no impact on the financial statements.
At the date of approval of these financial statements, the following amendments to IFRS which have
not been applied in these financial statements were in issue but not yet effective:
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
38
Notes to the financial statements
• Amendments to IFRS 3 Business Combinations – Reference to the Conceptual
Framework – effective 1 January 2022;
• Amendments to IAS 16 Property, Plant and Equipment – effective 1 January 2022;
• Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets –
effective 1 January 2022;
• Annual Improvements to IFRS Standards 2018-2020 Cycle – effective 1 January 2022;
and
• Amendments to IFRS 4 Insurance Contracts – Deferral of IFRS 9 – effective 1 January
2023
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 December 2021.
Subsidiaries are entities over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are de-consolidated from the date
that control ceases.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of the Group are
eliminated in full on consolidation.
e. Associates
Associates are entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting. Under the equity method, the investment
is initially recognised at cost and the carrying amount is increased or decreased to recognise the
investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s
investment in associates includes any goodwill identified on acquisition.
Where the ownership interest in an existing investment is increased whereby significant influence is
obtained, the Group re-measures the existing investment immediately prior to obtaining significant
influence with resulting gains/losses recognised immediately in profit or loss. The fair value of the
existing investment added to the fair value of the consideration of the additional investment is treated
as the deemed cost and is continued to be accounted for under the equity method.
If the ownership interest in an associate is reduced but significant influence is retained, only a
proportionate share of the amounts previously recognised in other comprehensive income is
reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the statement of comprehensive
income, and its share of post-acquisition movements is recognised in the other comprehensive income
section of the statement of comprehensive income with a corresponding adjustment to the carrying
amount of the investment. When the Group’s share of losses in an associate equals or exceeds its
interest in the associate, including any unsecured receivables, the Group does not recognise further
losses, unless it has incurred legal or constructive obligations or made payments on behalf of the
associate.
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
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
39
Notes to the financial statements
impairment as the difference between the recoverable amounts of the associate and its carrying value
and recognises the amount adjacent to ‘share of profit/loss of associate’ in the group statement of
comprehensive income.
When the Group loses significant influence over an associate, it derecognises that associate and
recognises a profit or loss being the difference between the sum of the proceeds received and any
retained interest, and the carrying amount of the investment in the associate at the date significant
influence is lost.
Gains and losses resulting from upstream and downstream transactions between the Group and its
associates are recognised in the Group’s financial statements only to the extent of unrelated investor’s
interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of associates have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Impairment gains and losses arising in investments in associates are recognised in the statement of
comprehensive income.
When the Group gains control of an associate the fair value of the associate undertaking is then
assessed with any gain or loss arising being recognised within the income statement.
f. Going Concern
The Directors have reviewed a forecast prepared by the executive and have a reasonable expectation
that the Group has sufficient funds to continue in operation and satisfy liabilities for the foreseeable future.
During the c.5 years ended 31 December 2021 Arc raised in excess of £15.5 million from the sale of
equity and exercise of warrants of which £3.5 million was raised in 2021 from the sale of shares. These
ongoing equity sales are indicative of consistent strong investor support. The Directors therefore consider
it appropriate, despite the loss incurred during the year, for the Company to continue to adopt the going
concern basis in preparing the Annual Report and Financial Statements. Further details on the Directors
assumptions and their conclusion are included in the statement on going concern included in Note 1(f)
to the Financial Statements.
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
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
40
Notes to the financial statements
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 pound sterling (GBP). 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 Zambian subsidiaries is the
Zambian Kwacha (“ZMW”). The functional currency of the Botswana subsidiary is the Botswanan Pula
(BWP). The functional currency for all other entities is GBP.
The presentational currency (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
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
41
Notes to the financial statements
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.
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)
Valuation of exploration, evaluation and development expenditure
The value of the Group’s exploration, evaluation and development expenditure is dependent upon
the success of the Group in discovering economic and recoverable mineral resources, especially in
countries of operation where political, economic, legal, regulatory and social uncertainties are
potential risk factors.
The future revenue flows relating to these assets are uncertain and will also be affected by
competition, relative exchange rates and potential new legislation and related environmental
requirements.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
42
Notes to the financial statements
Most of the Zambian licences held by the Group are due for renewal in 2022. The Group is preparing
to make applications to renew these licences and the Directors and the Directors are not aware of any
reason why the licences will not be renewed.
The Group’s ability to continue its exploration programmes and develop its projects is dependent on
future fundraising, as well as the successful application of appropriate licensing, 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.
(ii)
Valuation of Casa Royalty
There are a number of key factors which affect the valuation of the Casa Royalty which has a face
value of US$ 45m (GBP 40m). These include (a) development and construction timeframe; (b)
appropriate discount factor; (c) availability of construction financing; (d) political stability (e) gold price
and (f) ability to control timing of receipt.
Given these uncertainties the Company has elected to assign nil value to the Royalty. The Company
will reassess this carrying value in future as the Misisi Project progresses along the development curve.
Further information can be found in Note 4 (d)(ii)
(iii)
Sturec Resource Royalty
As disclosed in Note 4(d)(ii) Sturec was sold in February 2020. As part of the transaction if before
November 2024, the Šturec JORC Indicated and Measured Resource exceeds 1.5 million ounces gold
at a grade greater than 2.5g/t (inclusive of recoverable Ag equivalent), MetalsTech will pay Arc a
further A$2 royalty per additional ounce of gold. This royalty is capped at 7 million ounces of gold or
Australian dollars 11M. Because of the general uncertainty about the size of the Sturec resource and
the difficulties of operating in Slovakia the Company has not recorded the royalty in the accounts.
(iv)
Recoverability of the US$ 5 million receivable in respect of the Casa Sale, first reported at
31 March 2021
The Casa asset was sold during the year ended 31 March 2020 with the consideration being a mixture
of cash and royalty as above. The cash element was due for payment on 19 March 2021. As reported
in Note 15, the terms of the original loan note were amended. Subsequent to the year end, as
announced on 29 April 2022, the loan note was satisfied in full.
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.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
43
Notes to the financial statements
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 that 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
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
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
44
Notes to the financial statements
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
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 to
be 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
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
45
Notes to the financial statements
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 EPS 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. Fully-diluted EPS adjusts Basic EPS to reflect the
impact if all share purchase warrants and options were exercised.
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.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
46
Notes to the financial statements
y. COVID-19
Exposure to COVID-19 impacted the development of exploration assets in the prior period, but the
impact of COVID-19 has since reduced and the Company is returning to normal activity.
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 administrative in nature whilst the activities in Zambia and Botswana relate
to exploration and development work.
Segment results, assets and liabilities include items directly attributable to a segment as well as those
that can be allocate on a reasonable basis.
31 December 2021
Result
Loss from continuing operations
Loss before Income Tax
Other information
Non-controlling interest
Assets
Non-current Assets
Assets classified as held for sale
Current assets excluding cash and cash
equivalents
Cash and equivalents
Consolidated total assets
Liabilities
Non-current liabilities
Current liabilities
Consolidated total liabilities
BVI
£ 000's
5,200
5,200
-
-
143
-
4,284
1,705
6,132
-
2,412
2,412
Zambia
£ 000's
Botswana
£ 000's
277
277
987
987
2,827
3,592
126
28
6,573
3,484
55
3,539
-
-
89
89
1,542
-
-
2
1,544
116
-
116
Total
£ 000's
5,447
5,447
1,076
1,076
4,512
3,592
4,410
1,735
14,249
3,600
2,467
6,067
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
47
Notes to the financial statements
31 December 2020
Result
Loss from continuing operations
Loss before Income Tax
Other information
Non-controlling interest
Assets
Non-current Assets
Inventory
Current assets excluding cash and cash equivalents
Cash and equivalents
Consolidated total assets
Liabilities
Non-current liabilities
Current liabilities
Consolidated total liabilities
BVI
£ 000's
1,302
1,302
-
-
-
-
3,808
693
4,501
-
272
272
Zambia
£ 000's
338
338
506
506
4,558
15
124
7
4,704
3,308
79
3,387
Total
£ 000's
1,640
1,640
506
506
4,558
15
3,932
700
9,205
3,308
351
3,659
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
48
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
Surrendered options consideration
Other expenses
Zaco administration costs
Zamsort administration costs
Foreign exchange gain
Total operating expenses
Auditors Remuneration
Note
7
31 Dec
2021
£ 000's
918
-
78
4
692
138
40
23
3,474
2
91
186
(199)
5,447
During the period, the Group obtained the following services from the Company’s auditor:
Fees payable to the auditor for the audit of the consolidated financial
statements
Total
Employee information
Group Staff Costs comprised:
Wages, salaries and benefits TBC
Zambia wages and salaries
Botswana wages and salaries
Charge to the profit or loss
31 Dec
2021
£ 000's
40
40
31 Dec
2021
£ 000's
-
-
-
-
The average number of persons employed in the Group, including Executive Directors, was:
Average number of persons employed:
Head office administration
Zambia administration
Zambia operations
Botswana administration
31 Dec
2021
Number
-
-
-
-
-
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
31 Dec
2020
£ 000's
384
-
49
-
282
65
28
390
-
(6)
77
382
(122)
1,529
31 Dec
2020
£ 000's
28
28
31 Dec
2020
£ 000's
-
116
-
116
31 Dec
2020
Number
3
5
27
-
35
49
Notes to the financial statements
4. Disposals of held for sale assets
In November 2021, management made the decision to pursue a settlement agreement in relation to
the legal claims against the Company’s Zambian subsidiary, Zamsort Ltd (See note 26). The related
held for sale assets are presented in (c).
During 2018 the Group confirmed its intention to dispose of Sturec and announced a similar plan for
Casa in 2019. During 2020 both assets were sold as summarised in (d)
The related financial information is set out below:
a) Results of disposal group prior to sale
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 prior to sale
Operating activities
Investing activities
Financing activities
c) Assets and liabilities of disposal Group (i)
Assets classified as held for sale
Intangible assets
Property, plant and equipment
Cash and cash equivalents
Trade and other receivables
Inventory
Dec
2021
Dec
2021
Dec
2020
Dec
2020
Dec
2020
Zamsort
£ 000's
-
-
-
-
-
-
Total
Total
Casa Slovakia
£ 000's £ 000's £ 000's £ 000's
-
-
-
-
-
-
(41)
(41)
-
(41)
(41)
(29)
(80)
(80)
-
(80)
(80)
(81)
(121)
(121)
-
(121)
(121)
(110)
Dec
2021
Zamsort
Dec
2021
Total
£ 000's £ 000's
-
-
-
-
-
-
-
-
Dec
2020
Casa
£ 000’s
(29)
(303)
332
-
Dec
2020
Slovakia
£ 000’s
(81)
-
81
-
Dec
2020
Total
£ 000’s
(110)
(303)
413
-
Dec
2021
Dec
2021
Dec
2020
Dec
2020
Dec
2020
Zamsort
£ 000's
899
2,674
-
-
19
3,592
Total
Total
Casa Slovakia
£ 000's £ 000's £ 000's £ 000's
-
-
-
-
-
-
899
2,674
-
-
19
3,592
-
-
-
-
-
-
-
-
-
-
-
-
(i) The assets classified as available for sale by the Zamsort subsidiary is a result of the Zamsort Settlement agreement. Refer to events after balance sheet
(note 26) for a summary.
(i) In 2020 Held for sale assets and liabilities were sold as summarised below in (d).
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
50
Notes to the financial statements
Liabilities directly associated with assets classified as held for sale (i)
Deferred consideration
Trade and other payables
d) Disposal of assets Held for sale
Dec
2021
Zamsort
Dec
2021
Total
Dec
Dec
2020
2020
Casa Slovakia
Dec
2020
Total
£ 000's £ 000's
-
-
£ 000's
-
£ 000's £ 000's
-
-
-
-
-
-
-
-
-
-
-
-
(i)
In February 2022, the Company announced that the parties to the legal cases in Zambia and
in the UK have come to an agreement to settle various disputed matters and for all legal
proceedings to be permanently dropped (the “Settlement Agreement”). As part of the
Settlement Agreement, the Group agreed to transfer to the claimant parties for nil
consideration, 100% of the issued share capital of Zamsort Ltd (the “Zamsort Transfer”), which
owns the pilot plant and related assets.
The pilot plant, related equipment and intangible assets that relate to the Original Zamsort
License Area will remain in Zamsort have been treated as available for sale assets in these
consolidated financial statements. All other assets and liabilities of Zamsort immediately
preceding the date of the Zamsort Transfer (the “Transferred Assets & Liabilities”) will be
transferred to Handa Resources Ltd or another subsidiary in the Group at the discretion of Arc
Minerals Ltd and as such has not been presented as available for sale assets and does not have
an impact on the consolidated financial statements.
(ii) On 7 February 2020 the Company announced the sale of its Sturec assets in return for
Australian$ 750,000 which has been received and a royalty capped at AUD 11,000,000
calculated as AUD 2 per excess ounce if at any time during the 3 year period commencing
November 2021 the Sturec resource exceeds 1.5M ounces grading 2.5 g/t up to 7.0M ounces.
Proceeds of £ 381,000 have been recorded in the accounts which generated a loss of £5.584M.
(iii) On 18 March 2020 the Company announced the sale of its shareholding in Casa Mining Limited
in return for a US$ 5,000,000 interest-free note originally payable on 19 March 2021 and a 3%
Royalty calculated on net smelter production capped at US$45,000,000. The $5m loan note
was subsequently extended and, as announced in the RNS dated 29 April 2022, satisfied in
full.
There were a number of key factors which affect the valuation of the Casa Royalty which has
a face value of US$ 45,000,000. These include (a) development and construction timeframe;
(b) appropriate discount factor; (c) availability of construction financing; (d) political stability
and (e) gold price.
Given these uncertainties the Company has elected to assign nil value to the Royalty. The
Company will reassess this carrying value in future as the Misisi Project progresses along the
development curve.
Proceeds of £4.032m have been recorded in the accounts which generated a loss of £15.087m
from the sale of the Misisi project.
The total loss on disposal of assets held for sale is £20.671m.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
51
Notes to the financial statements
5. Taxation
Current income tax charge
Deferred tax charge/ (credit)
Total taxation charge/ (credit)
Taxation reconciliation
31 Dec
2021
£’000
31 Dec
2020
£’000
-
-
-
-
-
-
The charge for the period can be reconciled to the loss per the consolidated statement of
comprehensive income:
Loss before income tax
Tax on loss at the weighted average Corporate tax rate of 1.78% (Dec 2020: 6.2%)
Effects of:
Permanent differences
Tax losses carried forward
Losses not subject to corporation tax
Total income tax expense
31 Dec
2021
£’000
5,447
97
-
(5)
(92)
-
31 Dec
2020
£’000
1,640
102
-
-
(102)
-
The weighted average applicable tax rate of 1.78% (2020: 6.2%) used is a combination of the 0%
corporation tax in the BVI (2020:0%) and 35% corporation tax in Zambia (2020: 30%).
A 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 is the weighted average rate of the Republic of Zambia and British Virgin Islands.
Unused tax losses available in Zambia approximate Zambian Kwacha 191m at 31 December 2021
(31 December 2020 - Kwacha 166m) approximately GBP 8.5m (31 December 2020 - £5.7m).
6. Dividends
No dividends were paid (31 December 2020: nil).
7. Key management remuneration
Key management remuneration
31 December 2021
Executive Directors
Nicholas von Schirnding
Rémy Welschinger
Non-Executive Directors
Brian McMaster
31 Dec
2021
£ 000’s
1,129
Short term
employee benefits
Share based
payments (i)
31 Dec
2020
£ 000’s
870
Total
£ 000’s
£ 000’s
£ 000’s
450
334
47
-
-
-
450
334
47
52
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
Notes to the financial statements
Caleb Mulenga
Valentine Chitalu*
Key Management Personnel
Vassilios Carellas (COO)
* Appointed as a Director during the period
(i) Certain options were surrendered in January 2021 (see Note 16] for more information).
31 December 2020
Executive Directors
Nicholas von Schirnding
Rémy Welschinger *
Non-Executive Directors
Brian McMaster
Caleb Mulenga *
Mumena Mushinge §†
Don Bailey §
Key Management Personnel
Vassilios Carellas (COO)
* Appointed as a Director during the year
§ Resigned as a Director during the period
71
16
211
1,129
-
23
-
23
71
39
211
1,152
Short term
employee benefits
Share based
payments (i)
Total
£ 000’s
£ 000’s
£ 000’s
182
130
27
6
24
15
123
507
127
100
18
18
18
-
82
363
309
230
45
24
42
15
205
870
† Mr Mushinge received USD 70k in fees from Zamsort Ltd as a Director of the Company in the financial year to 31 March 2020.
(i) Certain options were surrendered in January 2021 (see Note 16] for more information).
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 period.
(Loss) Gain
31 Dec
2021
£ 000’s
(5,447)
31 Dec
2020
£ 000’s
(1,640)
Weighted average number of ordinary shares (000s)
1,098,646
942,667
Potential diluted weighted average number of shares (000s)
1,346,957
1,171,034
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
(0.50)
(0.40)
(0.50)
(0.40)
(0.17)
(0.14)
(0.17)
(0.14)
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
53
Notes to the financial statements
9. Long term payables
Minority shareholder loans
Surrended share options payable
31 Dec
2021
£ 000’s
3,606
1,129
4,735
31 Dec
2020
£ 000’s
3,308
-
3,308
(i)
(ii)
The minority shareholder loans are payable to the minority shareholder in Zamsort
Limited, Zaco Limited and Alvis-Crest (Proprietary) Limited in the amount of USD 4.33M,
USD 367k and USD 153k respectively, respectively, as at 31 December 2021 (31 December
2020: USD 4.33M, USD 179k and nil, respectively). The loans are unsecured and loan
holders have agreed to roll forward the loans until a liquidity event occurs.
The minority shareholder loans rank equally with Arc’s working capital loans to Zamsort
(USD 7.29M), Zaco (USD 964k) and Alvis-Crest (USD 466k) which are eliminated on
consolidation of Zamsort and Zaco in the group accounts. The loans are unsecured and
loan holders have agreed to roll forward the loans until a liquidity event occurs.
In summary, the Company had loans to Zamsort, Zaco and Alvis-Crest at 31 December 2021 of USD
7.29M, USD 964k and USD 466k, respectively (31 December 2020: USD 8.1M, USD 492k and USD nil,
respectively).
10. Intangible assets
Cost
At 1 Apr 2020
Additions
Currency loss
Net book value as at 31 Dec 2020
At 1 Jan 2021
Additions
Reclassification of intangible assets to
held for sale assets
Currency gain/(loss)
Net book value as at 31 Dec 2021
Deferred
Exploration
Deferred
Exploration
Zaco
£ 000’s
Zamsort
£ 000’s
Prospecting
and
exploration
rights
Alvis-Crest
£ 000’s
Other
Intangible
Assets
Total
£ 000’s
£ 000’s
10
152
(10)
152
152
344
-
459
955
4,019
138
(1,869)
2,288
2,288
16
(899)
630
2,035
-
-
-
-
-
1,312
-
-
1,312
-
-
-
-
-
188
-
-
188
4,029
290
(1,879)
2,440
2,440
1,860
(899)
1,089
4,490
The Group’s Intangible assets are comprised of evaluation and exploration expenditures in respect of
the licences in Zambia and goodwill. Other Intangible Assets include exploration expenditures incurred
by the Group.
Exploration projects in Zambia are at an early stage of development and there are no JORC (Joint Ore
Reserves Committee) or non-JORC compliant resource estimates available to enable value in use
calculations to be prepared.
The Directors have undertaken a review to assess whether circumstances exist which could indicate
the existence of impairment as follows:
•
The Group no longer has title to mineral leases.
• A decision has been taken by the Board to discontinue exploration due to the absence of
a commercial level of reserves.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
54
Notes to the financial statements
•
Sufficient data exists to indicate that the costs incurred will not be fully recovered from
future development and participation.
Most of the Zambian licences held by the Group are due for renewal in 2022. The Group is preparing
to make applications to renew these licences and the Directors and the Directors are not aware of any
reason why the licences will not be renewed.
Following their assessment, the Directors concluded that no impairment charge is necessary.
11. Fixed Assets
Cost
At 1 Apr 2020
Disposals
Additions
Foreign exchange
At 31 Dec 2020
At 1 Jan 2021
Impairment
Alvis-Crest acquisition
Disposals
Additions
Reclassification of fixed assets to held
for sale assets
Foreign exchange
At 31 Dec 2021
Depreciation
At 1 Apr 2020
Disposals
Depreciation
Foreign exchange
At 31 Dec 2020
At 1 Jan 2021
Disposals
Alvis-Crest acquisition
Depreciation
Reclassification of fixed assets to held
for sale assets
Foreign exchange
At 31 Dec 2021
Processing
Plant
£ 000’s
Mining
Equipment
£ 000’s
Motor
Vehicles
£ 000’s
Furniture &
Fittings
£ 000’s
3,183
-
13
(1,133)
2,063
2,063
-
-
-
-
(2,652)
589
-
-
-
-
-
-
-
-
-
-
-
164
-
-
(32)
132
132
-
-
-
-
(169)
37
-
(45)
-
(35)
(18)
(98)
(98)
-
-
(21)
148
(29)
-
34
-
76
(12)
18
(26)
56
56
-
14
-
-
-
16
86
(54)
11
(13)
18
(38)
(38)
-
(9)
(8)
-
(11)
(66)
18
20
33
(1)
2
(8)
26
26
(1)
-
-
-
-
8
33
(29)
-
(5)
11
(23)
(23)
-
-
(2)
-
(6)
(31)
3
2
Total
£ 000’s
3,456
(13)
33
(1,199)
2,277
2,277
(1)
14
-
-
(2821)
650
119
(128)
11
(53)
11
(159)
(159)
-
(9)
(31)
148
(46)
(97)
2,118
22
Net book value – 31 Dec 2020
Net book value – 31 Dec 2021
2,063
-
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
55
Notes to the financial statements
12. Investment in subsidiaries
At 31 December 2021, the Company held interests in the share capital of the following subsidiary
companies.
Place of Business
% Ownership held Nature of business
Company
Zamsort Limited
Unico Minerals Limited ‡
Zaco Investments Limited ‡
Handa Resources Limited
Republic of Zambia
British Virgin Islands
Republic of Zambia
Republic of Zambia
66%
Mineral Exploration
100%
72.5%
66%
75%
Holding Company
Mineral Exploration
Mineral Exploration
Mineral Exploration
Alvis-Crest (Proprietary) Limited
Republic of Botswana
‡ Zaco Investments Limited 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;
Zamsort Limited registered office at 69B/6 Wite Wood Road Lusaka Zambia
Handa Resources Limited registered office at Plot No. 1266, Haile Selassie Avenue, Longacres, Lusaka, Zambia
Alvis Crest (Proprietary) Limited is registered at c/o Upt Secretarial Services (Pty) Limited, Plot 465, Mathangwane Road, Extension 4, Gaborone, Botswana
The non-controlling interest shown within the primary statement arises as a result of the Group
owning less than 100% of a subsidiary company.
13 Acquisition of Zaco Investments Limited (“Zaco”)
Zaco is involved in the exploration for minerals in the Republic of Zambia. The Company acquired
equity control on 3 December 2019.
On 1 April 2020 the Company held a 52.5% interest in Zaco at a cost of £398,766. The Company
currently holds 72.5% of Zaco with an aggregate cost of £573,766 having acquired in May 2020 a
further 20% from a former director of the Company, for a consideration of 10 million shares in Arc at
a cost of £175,000 (Note 23).
Non-controlling interest
The non-controlling interest of these acquisitions 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.
14. Acquisition of Alvis-Crest (Proprietary) Limited
Alvis
On 4 November 2021, the Group concluded the acquisition of 75% of the share capital of Alvis-Crest
(Proprietary) Limited (“Alvis Crest”) and 75% of the exiting shareholder loans to the value of BWP
5,392,291 (£350k) for a total consideration of £1.2m through the issue of 35,488,259 fully paid
ordinary shares of no par value in the Company (“Consideration Shares”) at a 10-VWAP share price up
to and including 3 November 2021 of 3.3814 pence per share. The consideration attributable to the
acquisition of the 75% share capital of Alvis Crest is £850k. In addition, the Company recorded £41k
of legal fees in connection with the acquisition which has been capitalised. Arc have the option to
acquire the remaining 25% of Alvis for US$5m exercisable until Arc makes a final investment decision,
which would be upon the completion of a bankable feasibility study in respect of the licences. Arc
acquired control of Alvis Crest effective 11 November 2021. The acquisition meets the definition of a
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
56
Notes to the financial statements
business combination and has been accounted for using the acquisition accounting method in
accordance with IFRS.
Alvis holds two prospecting licenses in the Botswana Kalahari Copperbelt, adjacent to the world-class
high-grade copper-silver project Zone 5, owned by Khoemacau Copper Mining ("Licenses").
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
goodwill are as follows:
Prospecting and exploration rights
Capitalised exploration expenditure
Fixed assets
Minority shareholder loan
Acquired shareholder loan
Total fair value
Transaction costs
Consideration
Goodwill
Fair value
£ 000’s
1,312
41
5
(117)
(350)
(891)
41
850
-
Non-controlling interest
The non-controlling interest of these acquisitions 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.
15. Trade and other receivables
Current trade and other receivables
Other receivables
Loan Note – Casa sale (USD 5,000,000)
Prepayments
Short-term investment
Total
Casa Loan Note
Group
31 Dec
2021
£ 000’s
241
3,710
20
439
4,410
Group
31 Dec
2020
£ 000’s
269
3,663
-
-
3,932
Included in receivables is a secured loan note of US$5 million (£3,710k) issued by Golden Square to
Arc (the “Casa Loan Note”). The Casa Loan Note relates to the disposal of Casa as first announced in
the RNS dated 18 March 2020. The Casa Loan Note was subsequently extended and, as announced in
the RNS dated 29 April 2022, satisfied in full. The Company believes that the carrying value of the Casa
Loan Note as at 31 December 2021 is reasonable.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
57
Notes to the financial statements
The carrying amounts of the Group’s trade and other receivables are denominated in the following
currencies:
Current trade and other receivables
UK Pounds
US Dollars
Zambian Kwacha
Botswana Pula
Total
16. Trade and other payables
Current trade and other payables
Surrended share options payable
Trade payables, other payables and accruals
Included in trade and other payables are the following:
Surrendered Share Options Payable
Group
31 Dec
2021
£ 000’s
574
3,710
126
-
4,410
Group
31 Dec
2021
£ 000’s
1,129
209
1,338
Group
31 Dec
2020
£ 000’s
269
3,663
-
-
3,932
Group
31 Dec
2020
£ 000’s
-
351
351
As announced on 16 March 2021, a number of persons discharging managerial responsibility ("PDMR")
surrendered 75,837,378 share options which were exercisable at a profit. In lieu of this surrender, the
share option holders were compensated in line with the Black-Scholes fair value model, using a 10-
day VWAP of 6.94p through cash and / or shares to be issued at the Company's discretion to a total
value of £3,474,179 ("Consideration") according to a compensation schedule which will be phased
over the next 3 years at the Company's discretion ("Payment Period").
Subsequent to the surrender of share options as herein described, there remained 16,333,334 share
options outstanding.
Unsecured loan notes
As at 31 December 2020 unsecured loan notes were £220k and repayable within 12 months. They
comprised of EUR 200k of 10% unsecured loan notes.
The entire outstanding balance of unsecured loan notes were converted to equity in January 2021
(£220k including accrued interest).
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.
17. Share capital
Authorised
Unlimited ordinary shares of no par value
Called up, allotted, issued and fully paid
As at 1 April 2020
737,927,497
Number
of shares
Nominal
value
£ 000’s
-
Average
price per
share
(pence)
Gross
Consideration
value
GBP’000
1,018
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
58
Notes to the financial statements
Financings for cash
Issued in relation to the acquisition of
20% of Zaco Investments Limited
Issued under the Drill-for-Equity Programme
Issued to creditors in lieu of payment
Issued on conversion of convertible debt
Issued pursuant to warrant exercises
As at 31 December 2020
Financings for cash
Issued on conversion of convertible debt
Issued pursuant to share based payment
exercised
Issued to creditors in lieu of payment
Issued pursuant to warrant exercises
Issued in relation to the acquisition of
75% of Alvis-Crest (Pty) Ltd
139,451,726
10,000,000
10,084,183
-
79,426,868
15,799,557
992,689,831
84,835,160
6,293,572
4,400,000
1,200,000
25,613,064
35,488,259
1.70
1.80
2.58
-
1.70
3.00
3.50-6.50
3.5
3.00-5.00
6.70
3.00-6.50
3.38
-
-
-
-
-
-
-
-
-
-
-
As at 31 December 2021
1,150,519,886
2,371
180
261
-
1,350
474
4,636
3,800
220
190
80
1,009
1,200
6,499
Share issue costs in the amount of £235,450 (31 December 2020 – £112,955) were incurred in the
period and set off against the share premium account.
18. Share based payments and Warrants
Share Options
During the period 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 2020
Expired
Granted 5 June 2020
Granted 15 December 2020
31 December 2020
1 January 2021
Expired
Prior year adjustments
Surrendered/Exercised
during the period
Granted
31 December 2021
3.62
-
-
-
3.71
3.71
3.69
52,026,115
-
41,000,000
2,000,000
95,026,115
95,026,115
-
1,044,597
(80,237,378)
2,000,000
17,833,334
-
3.00
4.50
-
-
-
-
2.23
3.95
-
-
-
4.50
3.33
3.44
-
2.42
2.96
2.89
2.89
-
-
-
2.82
1.83
998
-
373
18
1,389
1,389
-
(20)
(1,118)
22
273
* As disclosed in the statement of changes in equity, the value of these options (£20k) have been
reversed in the current financial period through retained earnings as the amounts were not material.
Of the options granted in May 2018, 10.5M were subject to vesting conditions linked to milestones.
In September 2020, the Remuneration committee determined that all of the vesting conditions had
been met or were otherwise no longer appropriate pursuant to the disposals of the non-core assets
(Akyanga/Misisi). No other options are/were 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 December 2021 is 3.69 pence
(31 December 2020 - 3.71 pence).
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
59
Notes to the financial statements
In the Black-Scholes model the key inputs for the options granted in 2020 were Volatility as 75%, the
Risk Free Interest Rate as 0% 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 £23,000 (31 December
2020 – £391,000).
Warrants
Grant
date
1 January 2021
Exercised during the period
Expired during the period
TOTAL 31 December 2021
Number
230,476,911
(25,613,064)
(39,004,179)
165,859,668
Exercise
Price
(pence)
Term
(years)
Share Price
at grant
pence
Weighted Average
3.76
0.49 (i)
(i) Remaining term as at 31 December 2021
The charge incurred during the period in relation to warrants was nil. (31 December 2020: £4,000
which was not considered material).
Grant
date
1 April 2020
17 June 2020 Placing Warrants
17 June 2020 Conversion Warrants
17 June 2020 CLN Warrants
17 June 2020 Broker Warrants
Exercised during the period
Expired during the period
TOTAL 31 December 2020
Number
142,849,330
69,725,864
39,713,434
5,764,887
873,906
(15,799,557)
(12,650,953)
230,476,911
Share Price
at grant
pence
Exercise
Price
(pence)
2.25-6.50
3.00
3.00
4.50
3.00
Term
(years)
0.1-4.68
1.46
1.46
3.46
1.46
Weighted Average
4.99
1.35 (i)
(i) Remaining term as at 31 December 2020
The charge incurred during the period in relation to warrants was £4,000 which was not considered
material.
19. Share premium
Opening Balance
Total Additions
Share issue costs
As at 31 December
31 Dec
2021
£ 000s
55,755
6,499
(235)
62,019
31 Dec
2020
£ 000s
51,231
4,636
(112)
55,755
See Note 18 for a breakdown of share issues during the period.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
60
Notes to the financial statements
20.
Non-Controlling Interest (NCI)
As at 31 Mar 2020
Effect of foreign exchange on opening balance
Investment by NCI in the period
As at 31 Dec 2020
Effect of foreign exchange on opening balance
Investment by NCI in the period
As at 31 Dec 2021
Alvis-Crest
£ 000s
-
-
-
-
-
89
89
Zamsort
£ 000s
891
(167)
(294)
430
124
252
806
Zaco
£ 000s
5
(1)
72
76
21
84
181
Total
£ 000s
896
(168)
(222)
506
145
425
1,076
21. Financial instruments and capital risk management
Financial Risk Management
Financial Risk Factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency
risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects
on the Group’s financial performance.
Risk management is carried out by the Board of Directors under policies approved at Board meetings.
The Board frequently discusses principles for overall risk management including policies for specific
areas such as foreign exchange.
a) Market Risk
i) Foreign Exchange Risk
The Group operates internationally and is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the pound sterling, US Dollar (“USD”) and Zambian
Kwacha (“ZMW”). 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 approximately 21% since 31 March 2020 the Kwacha risk is mitigated by the
fact that Zamsort would only have one month’s cash requirement on hand at any one time. Another
significant risk in Zambia is a US Dollar risk as the Shareholder Loan of our minority partner is
denominated in US Dollars. The Group’s acquisition of Alvis-Crest was completed in November 2021
and therefore the Group’s exposure to foreign currency risk arising from the Botswana Pula (BWP) is
transient. As a result, no sensitivity analysis is presented for the Botswana Pula.The Directors consider
that, for the time being, no hedging or other arrangements are necessary to mitigate this risk.
The potential impact of a 20% increase/(decrease) in the GBP:USD foreign exchange rate on the
carrying value of the Casa Note is £742k/(£742k).
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:ZMW foreign
exchange rate on the Group’s loss for the period and on equity is as follows:
Potential impact on Zambian kwacha expenses: 2021
Increase/(decrease) in GBP:ZMK rate
Potential impact on Zambian kwacha expenses: 2020
Increase/(decrease) in GBP:ZMK rate
20%
-20%
Group
£ 000’s
(55)
55
20%
(307)
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
61
Notes to the financial statements
-20%
307
b) Credit Risk
Credit risk arises from cash and cash equivalents.
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 reputable
institutions.
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. The Group’s strategy for managing cash is to assess opportunity for interest
income whilst ensuring cash is available to match the profile of the Group’s expenditure. This is
achieved by regular monitoring of interest rates and monthly review of expenditure forecasts. Short
term interest rates on deposits remained very unattractive during the fiscal year and management
employed short-term investment strategies to protect working capital reserves.
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
Zambian Kwacha (ZMK)
Botswana Pula (BWP)
At end of period
Dec
2021
£ 000’s
1,706
-
28
1
1,735
Dec
2020
£ 000’s
282
418
418
700
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 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.
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
62
Notes to the financial statements
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 has capital, defined
as the total equity and reserves of the Group, of £ 8,182,000 (December 2020: £5,546,000).
The Group monitors its level of cash resources available against future planned exploration and
evaluation activities and issues new shares in order to raise further funds from time to time.
22. Commitments
Alvis-Crest committed exploration expenditure
Arc is committed to spending US$200,000 per annum on the Virgo Project.
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.
23. 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. The acquisition of Zaco in prior periods
was a related party transactions and detail thereof is disclosed separately in Note 13. There were no
other transactions with related parties during the reporting period, except as disclosed below:
Remuneration of Key Management Personnel
The remuneration of the Directors and PDMRs is set out in Note 7.
Of the amounts set out in Note 7:
£210,638 (2020 – £123,000) was paid to VC Resources Ltd, a PSC owned by Vassilios Carellas.
£nil (2020 – £15,000) was paid to a PSC owned by Don Bailey
As announced on 16 March 2021, share options issued to certain directors and other PDMRs of the
company were surrendered in exchange for consideration. Please refer to Note 16 for more
information.
24. Contingent liability
Zamsort Limited is named in a lawsuit before the High Court in Zambia for USD 265,000 of damages
pertaining to a discussion involving the former owners of Zamsort and a third party held in 2014. Legal
advisors to Zamsort have advised that the claim is without merit. A bond has been deposited with the
court and is included in current assets. The amount of the bond is 2.8M Zambian Kwacha (GBP 125k),
approximately 50% of the damages claimed.
25. Ultimate controlling party
There is no ultimate controlling party in the opinion of the Board.
26. Events after the reporting period
Joint venture agreement with Anglo American
The Company announced on 12 May 2022 that it had entered into an agreement with a subsidiary of
Anglo American plc (the "Agreement"). Under the Agreement the parties intend to form a joint
venture with respect to the Company's Copper-Cobalt project located in the North-Western province
of Zambia ("Joint Venture") and Anglo American will have the right to retain a 70% ownership in the
Arc Minerals Limited Annual Report & Financial Statements Dec 2021
63
Notes to the financial statements
Joint Venture for an aggregate investment by Anglo American of up to USD 88,500,000, including cash
consideration of up to USD 14,500,000.
The key commercial terms of the Joint Venture that had been agreed in principle in the Agreement
are as follows:
• Upon signing of the Joint Venture Documents ("Effective Date"), a Joint Venture vehicle will be
formed with initial ownership interests by Anglo American and Arc of 70% and 30%, respectively
("Initial Ownership Interests");
• Anglo American has the right to retain an Ownership Interest of 51%, by:
o
funding exploration expenditures equal to USD 24,000,000 on or before the date that is
180 days after the third anniversary of the Effective Date ("Phase I End Date"); and
o making cash payments to Arc Minerals totalling up to USD 14,500,000, as follows:
§ USD 3,500,000 upon signing of the Joint Venture Documents ("Effective Date");
§ USD 1,000,000 on the first anniversary of the Effective Date;
§ USD 1,000,000 on the second anniversary of the Effective Date;
§ USD 1,000,000 on the third anniversary of the Effective Date; and
§ USD 8,000,000 by the Phase I End Date.
• Following the completion of Phase I, Anglo American will have the right to retain an additional
ownership interest equal to 9% (for a total ownership interest of 60%) by funding USD
20,000,000 of additional exploration expenditures within 2 years of the Phase I End Date
("Phase II End Date")
• Following the completion of Phase II, Anglo American will have the right to retain an additional
ownership interest equal to 10% (for a total ownership interest of 70%) by funding USD
30,000,000 within 2 years of the Phase II End Date.
• Anglo American, for as long as it holds the largest interest in the Joint Venture, shall have the
right to nominate three directors and Arc shall have the right to nominate two directors. Joint
Venture board decisions shall be adopted by simple majority vote.
The Agreement sets out the core principles under which the Joint Venture will be formed subject to
satisfactory due diligence, a restructuring of the Company's assets in preparation for the Joint Venture,
negotiation and execution of definitive agreements, the approval of the transaction by the relevant
boards of directors and the relevant government and regulatory authorities and other customary
conditions.
An exclusivity period has been agreed for up to 90 days to allow for due diligence, and up to an
additional 90 days for the negotiation and execution of the Joint Venture Documents.
Zamsort Settlement
As announced in February 2022, the Company announced that the parties to the legal cases in Zambia
and in the UK have come to an agreement to settle various disputed matters and for all legal
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Notes to the financial statements
proceedings to be permanently dropped (the "Settlement Agreement"). The Settlement Agreement
was submitted to Zambian courts to effect a Consent Judgement which has the force of law.
In return for the claimant parties, being Terra Metals Limited, Zambia Mineral Exchange Corporation
Limited and their related parties (Mumena Mushinge, Brian Chisala and Katambi Bulawayo),
relinquishing all claims against Zamsort or any other company in the Arc Minerals Ltd Group, present
or contingent, and in full and final settlement of all claims in formal conclusion of all matters, the
Group agreed to transfer to the claimant parties, for nil consideration, 100% of the issued share capital
of Zamsort Ltd (the “Zamsort Transfer”), which owns the pilot plant. The Group also agreed to consent
to the claimant parties applying for the 8 square kilometre small mining and small exploration license
areas that were previously in existence at Zamsort prior to Arc's involvement (the “Original Zamsort
License Area”).
Aside from the pilot plant, related equipment and intangible assets that relate to the Original Zamsort
License Area which will remain in Zamsort and which have been treated as available for sale assets in
these consolidated financial statements (see Note 4), all other assets and liabilities of Zamsort
immediately preceding the date of the Zamsort Transfer (the “Transferred Assets & Liabilities”) will be
transferred to Handa Resources Ltd or another subsidiary in the Group at the discretion of Arc
Minerals Ltd and as such has no impact on the consolidated financial statements.
All of the Group’s representative directors who served on the board of directors of Zamsort resigned
effective 1 April 2022.
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