Armadale Capital PLC
Annual Report 2017

Plain-text annual report

Armadale Capital Plc Annual Report and Accounts 31 December 2017 Armadale Capital Plc Contents Officers and Professional Advisers ........................................................................................................ 3 Strategic Report ................................................................................................................................... 4 Directors’ Report ................................................................................................................................ 14 Independent Auditor’s Report ............................................................................................................ 20 Consolidated Statement of Comprehensive Income ........................................................................... 26 Consolidated Statement of Financial Position ..................................................................................... 27 Company Statement of Financial Position ........................................................................................... 28 Consolidated Statement of Changes in Equity ..................................................................................... 29 Company Statement of Changes in Equity .......................................................................................... 30 Consolidated Statement of Cash Flows ............................................................................................... 31 Company Statement of Cash Flows ..................................................................................................... 32 Notes to the financial statements ....................................................................................................... 33 Notice of Annual General Meeting...................................................................................................... 62 Form of Proxy ..................................................................................................................................... 66 2 | P a g e Armadale Capital Plc Officers and Professional Advisers Directors Emmanuel S Mahede Nicholas Johansen Secretary Timothy Jones Registered office I Arbrook Lane Esher Surrey, KT10 9EG Nominated Adviser and Joint Broker finnCap Ltd 60 New Broad Street London EC2M 1JJ Joint Broker SVS Securities PLC 20 Ropemaker Street London EC2Y 9AR Auditors BDO LLP 55 Baker Street London W1U 7EU Solicitors Druces LLP Salisbury House London Wall London EC2M 5PS Registrars Share Registrars Limited Craven House West Street Farnham Surrey GU9 7EN 3 | P a g e Armadale Capital Plc Strategic Report For the year ended 31 December 2017 During the year under review, Armadale has continued to operate as a diversified investing company focused on natural resource projects in Africa. The Company’s investment portfolio is divided into two groups: • Actively managed investments: where the Company has majority ownership of the investment • Passively managed investments: where the Company has a minority investment, typically in a quoted company, and does not have management control. Actively Managed Investments: Mpokoto Gold Project, DRC (“MPOKOTO”) The Mpokoto project was the subject of a joint venture agreement with Kisenge Mining Pty Ltd (‘Kisenge Mining’) throughout the year under review and, as such, is considered a non-core investment asset of Armadale. During the year under review, our joint venture partners Kisenge Mining carried out work in following areas: • Review of the DFS study focusing on reducing capital costs and phased mining program starting with oxides. Streamlining of ongoing costs in DRC • In the period after the year under review Armadale commenced negotiations towards a contract for divestment of its investment in Mpokoto with a potential buyer under following basic terms: • US$75,000 on contract signature • US$187,500 within 12 months of signing • US$300,000 on commencement of production • Gold production royalty of 1.5% Kisenge Mining has agreed that it would withdraw from the joint venture agreement in order to allow the sale of Mpokoto to proceed once a contract for divestment of Mpokoto is finalised. Negotiations are continuing with a potential buyer with expectations for finalisation in May/June 2018. This will provide the Company with additional funds to accelerate the development of the Mahenge Liandu graphite project. Mahenge Liandu Graphite Project, Tanzania ‘MAHENGE LIANDU’ The Company continued to deliver exceptional results at its 100% owned Mahenge Liandu Graphite project during 2017. The Project is located in a highly prospective region with a high-grade JORC compliant indicated and inferred mineral resource estimate of 51.1Mt @ 9.3% TGC, making it one of the largest high-grade resources in Tanzania, and work to date has demonstrated Mahenge Liandu’s potential as a commercially viable deposit with significant tonnage, high-grade coarse flake and near surface mineralisation (implying a low strip ratio) contained within one contiguous ore body. 4 | P a g e Armadale Capital Plc Strategic Report (continued) For the year ended 31 December 2017 The main focus of activities was the completion of a Scoping Study which was managed by Battery Limits, an Australian based engineering company. The study was based on a throughput of 400,000pta over a 32 year mine life. The results of the study showed the project has robust economics and warrants further development. The Company believes the timing of the planned mine development will coincide with growing opportunities in the graphite market with strong outlook for increased graphite demand from the burgeoning lithium ion battery, expandable graphite, as well as traditional graphite, markets. Project Location The Mahenge Project is located in the Morogoro region, Ulanga district, Tanzania close to existing transport infrastructure. It is 10 km south of the Mahenge township and about 76 km via a well maintained dirt road to Ifakara after which it is 400 km by sealed road from Dar-es-Salaam port. Location of Mahenge prospect Project Geology The prospect is situated within the pan African Mozambique belt, which is the orogenic belt resulting from activities taking place in the Neoproterozoic time. The belt extends along the eastern border of Africa from Ethiopia through Kenya and Tanzania. The orogenic event resulted in a complex series of geological events including the rifting system. The belt consists of high-grade mid-crustal rocks with a Neoproterozoic metamorphic overprint. It is divided into the Western Granulite and Eastern Granulite. The deposit is situated in the Eastern Granulites. The belt has undergone retrograde metamorphism which resulted in the present upper amphibolite metamorphic facies in the project area. 5 | P a g e Armadale Capital Plc Strategic Report (continued) For the year ended 31 December 2017 Systematic drilling indicated the existence of broad, shallow to steep dipping schists overlaying granitic gneisses/gneiss. The gneisses are underlaid by marble units. The graphitic schists form alternating compositional layering, with quartz being the content that differentiates these units. High grade graphite schists (graphite schist) have a lower composition of quartz. Medium to low grade graphite schists (quartz graphite schist) have a higher visual quartz percentage. The marble unit likely forms the base of the sequence (there has not been drilling done beyond the marble unit). The drilling results have been very consistent with the structural measurements taken during the mapping program which suggested gentle to steep dipping to the south and south-southwest. The mineralization remains open in all directions. Typical Liandu cross section showing mineralised units Drilling Completed Drilling in 2015-2016 comprised 21 RC holes. More drilling was completed in 2017, which increased the total to 49 RC holes for 2,419m of drilling. The 2015-2016 drilling aimed to define the mineralisation units and calculate the initial JORC compliant resource. The 2017 drilling aimed at infill drilling the existing pattern to upgrade the resource classification, extend the available resources and better define the mineralised units laterally within the deposit. The drilling targeted a higher-grade zone within the deposit and drilling was concentrated in the northern part of the tenement. A map of all of the drilling completed to date is shown below. 6 | P a g e Strategic Report (continued) For the year ended 31 December 2017 1 Mahenge Liandu drill hole locations Armadale Capital Plc Resource Update In December 2016, Armadale announced an upgraded estimated Inferred Resource for Mahenge of 40.9 Mt @ 9.4% Total Graphitic Carbon (TGC). Additional resource drilling was undertaken in 2017 and returned extensive high-grade intersections of graphite that show coarse graphite through visual inspection. Following this drilling program, a new Mineral Resource Estimate was announced in Feb 2018 comprising 51.1 Mt @ 9.3% TGC including Indicated Resource of 12.4 Mt @ 9.1% TGC and Inferred Resource of 38.7 Mt @ 9.3% TGC. Tonnage (Mt) Cutoff TGC (%) Inferred Indicated Total 12.4 38.7 51.1 3.3 3.5 3.5 Average TGC (%) 9.1 9.3 9.3 Table 1. Mahenge Liandu Resource Statement Metallurgical Testwork During the year a metallurgical test work program was completed on bulk surface samples which was used as a basis for initial process design information as well as graphite flake size, concentrate grades and recoveries. The results of the program showed the deposit is capable of producing high purity coarse flake graphite. 7 | P a g e Armadale Capital Plc Strategic Report (continued) For the year ended 31 December 2017 Combined cleaner concentrate grade and size distribution from the bulk test Flake Size Microns 4088-09 Mass (%) TGC Grade (%) Super Jumbo Jumbo Large Medium Small Fine > 500 300 – 500 180 – 300 150 – 180 75 --150 < 75 3.67 20.8 23.6 18.4 21.8 11.8 97.9 97.9 97.9 98.1 98.3 97.1 Process Description The Scoping Study was based on a processing plant designed to treat 400 ktpa of ore. The ore will be two-stage crushed, followed by grinding in a rod mill, with graphite recovered by flotation. The process includes separation of graphite into coarse and fine concentrates at an intermediate stage, followed by inter-stage re-grind milling and flotation to improve liberation and product purity. The flotation concentrate will then be then dewatered by filtration, dried, and bagged. Results of the Scoping Study During 2017 a Scoping Study was progressed at the Mahenge Liandu project which included the completion of a mine optimisation study, infill drilling and the resource upgrade. The results of the Scoping Study were announced in March 2018. The Scoping Study confirmed the combination of high graphite feed grade and coarse flake high purity graphite product and provided highly robust and compelling economics for the Mahenge Liandu project. The Scoping Study, based on a 400,000 tpa throughput, had following key economics: • Producing an average of 49,000tpa of high quality graphite products for a 32 year mine life. • The near surface nature of the deposit produced a low strip ratio of approximately 1:1 for the life of the mine. • The Project has a low operating cost of US$408/t and is based on an average life of mine grade of 12.5% Total Graphitic Carbon (‘TGC’) • The project has a pre-tax IRR of 122% and NPV of US$349m with a low development capex of US$35m • The maximum drawdown during the construction of the Project is US$34.9m and the after-tax payback period is 1.2 years • There remains significant scope to further improve returns, with staged expansions as the current mine plan is based on approximately 25% of the total resource. 8 | P a g e Strategic Report (continued) For the year ended 31 December 2017 Summary of project financial performance Armadale Capital Plc Financial Performance Summary Project Life Total LOM Net Revenue Total LOM EBITDA Total LOM Net Cash Flows Before Tax Total LOM Net Cash Flows After Tax NPV @ 10.0% - before tax NPV @ 10.0% - after tax IRR - before tax IRR - after tax Project Capital Expenditure Payback Period - after tax - from 1st ore Units (years) (US$ M, real) (US$ M, real) (US$ M, real) (US$ M, real) (US$ M, real) (US$ M, real) LOM 31.8 1,977.7 1,196.0 1,134.7 794.3 348.7 239.1 (%, real) 122.5% (%, real) 89.3% (US$ M, real) (years) 34.9 1.2 The Scoping Study results validate the Directors’ long held confidence in the commercial potential and economic value of the Mahenge project. The results will be used in the upcoming Definitive Feasibility Study to advance the project to a decision to mine in 2019. Based on the Scoping Study results the Company will also commence negotiations with identified strategic funders and offtake partners and continue to examine a range of potential markets and customers. Exploration Licences The Company holds following exploration tenements for Mahenge Liandu: • PL10846/2016 granted on 21/9/2016 expires 20/9/2020 area 7.34 square kilometres • PL10840/2016 granted 21/9/2016 expires 20/9/2020 area 21.89 square kilometres 9 | P a g e Armadale Capital Plc Strategic Report (continued) For the year ended 31 December 2017 Exploration and Development Programme The Definitive Feasibility Study for the Mahenge Liandu project will commenced in Q2 2018 and expected to be substantially complete by Q4 2018. The Feasibility Study will focus on defining graphite product quality with a wide diameter diamond core drilling programme aimed at generating samples for marketing. During Q2 and Q3 2018, it is planned to conduct following activities to support the Feasibility Study: • A diamond drilling programme to obtain samples for metallurgical test work and marketing • A geotechnical drilling programme to define the final pit wall design • Product marketing towards the goal of achieving binding offtake agreements • The construction of water production bores to determine the flow rates and ground water conditions in the Project area • Environmental and social studies covering the Project area and completion of a Relocation Action plan (RAP) for the people who may be impacted through the development of the Project • Progressing towards application of mining permits • Calculation of Proved and Probable Reserves • Finalisation of production flowsheets and final plant design parameters Passively Managed Investments: Mine Restoration Investments Limited (“MRI”), South Africa The shares in MRI are being carried at Nil market value (2016: Nil) as MRI shares were suspended from trading on the Johannesburg Stock Exchange. Quoted portfolio The Company has a small portfolio of quoted investments, principally in gold production companies where the directors believe there are opportunities for capital gain. The Company continues to keep its portfolio under review. Funding Plan The Company secured a £400,000 debt facility in October 2017 with a consortium of a few high net worth investors. Up to April 2018, £200,000 of the facility was drawn to support working capital and development work in completing the scoping study for Mahenge Liandu. In addition to the debt facility, the Company raised £963,500 in April 2018 through the placement of 58,393,941 new ordinary shares to existing investors in UK and Australia. The funds raised will be used for working capital and for the commencement of Feasibility Study (FS) for Mahenge Liandu. It is expected that further funding will be required during the 2018 financial year. 10 | P a g e Armadale Capital Plc Strategic Report (continued) For the year ended 31 December 2017 Sustainable development The Company is committed to sustainable development and conducting its business ethically. Given that the Company invests in the mining industry, Armadale focuses on health and safety, being environmentally responsible, and supporting the communities close to its investments. Corporate Information Principal risks and uncertainties There are numerous risks associated with the mineral industry, especially in Africa. The Board regularly reviews the risks to which the Group is exposed and endeavours to minimise them as far as possible. The following summary, which is not exhaustive, outlines some of the risks and uncertainties currently facing the Group: • The Group is exposed to two minerals namely gold and graphite. With gold, the Group is vulnerable to fluctuations in the prevailing market price of gold and to variations of the US dollar, in which sales will be denominated. Graphite is a relatively new commodity whose market is being driven by demand in renewable energy. It is thus vulnerable to global energy policies. • The impact of BREXIT on companies operating in the UK is still being monitored. Thus far Brexit has not impacted the Group’s ability to raise funds. • The exploration for and development of mineral resources involves technical risks, infrastructure risks and logistical challenges, which even a combination of careful evaluation and knowledge may not eliminate. • There can be no assurance that the Group’s projects will be fully developed in accordance with current plans. • Future development work and subsequent financial returns arising may be adversely affected by factors outside the control of the Group. • The availability and access to future funding within the global economic environment. • The Group operates in multiple national jurisdictions and is therefore vulnerable to changes in government policies which are outside its control. The mining regulation changes in Tanzania are still being evaluated, however they seem to have minimal impact on investment in graphite mining. The Group continues to monitor the implementation of the new changes to evaluate and mitigate sovereign risks. • The DRC has recently enacted new mining rules. It is not expected that the changes will have a significant impact on the divestment of the Company’s Mpokoto project. Some of the mitigation strategies the Group applies in its present stage of development include, among others: • Proactive management to reducing fixed costs. • Rationalisation of all capital expenditures. 11 | P a g e Armadale Capital Plc Strategic Report (continued) For the year ended 31 December 2017 • Maintaining strong relationships with government (employing local staff and partial government ownership), which improves the Group’s position as a preferred small mining partner. • Engagement with local communities to ensure our activities provide value to the communities where we operate. • Alternative and continued funding activities with a number of options to secure future funding to continue as a going concern. The Directors regularly monitor such risks and will take actions as appropriate to mitigate them. The Group manages its risks by seeking to ensure that it complies with the terms of its agreements, and through the application of appropriate policies and procedures, and via the recruitment and retention of a team of skilled and experienced professionals. Key performance indicators The Group’s current key performance indicators (KPIs) are the performance of its underlying investments, measured in terms of the development of the specific projects they relate to, the increase in capital value since investment and the earnings generated for the Group from the investment. The Directors consider that it is still too early in the investment cycle of any of the investments held, for meaningful KPIs to be given. Success is also measured through the identification and investment in suitable additional opportunities that fit the Group’s investment objectives. The acquisition of Mahenge Liandu graphite project is such success. Outlook Looking to the future, the positive scoping study results strengthen the directors view that the Mahenge Liandu project provides a positive outlook for the progression of the project, and hence for the Group. Financial results For the year ended 31 December 2017 the Group did not earn any revenues as its business related solely to the making of investments in non-revenue producing resource projects and companies. The Group made a loss after tax of £6.177 million (2016: £0.922 million) for the year ended 31 December 2017. The principal component of this loss was an impairment charge of £5.726 million in respect of the Mpokoto project. The directors are in the process of negotiating the sale of this project and determined that it is appropriate to recognise an impairment charge based on the estimated net sales proceeds that will be received upon a disposal. Other than this, the loss comprises the administrative expenses associated with operating a public company and finance costs. Funds raised during the year amounted in total to £0.85 million of which £0.65 million came from a placing of shares and £0.2 million from the initial drawdown of a new loan facility of £0.4 million. Other 12 | P a g e Armadale Capital Plc Strategic Report (continued) For the year ended 31 December 2017 share issues during the year were in respect of loan note conversions and the discharge of certain consultants’ invoices. Since the year end, a further £0.964 million has been raised from a placing of shares and the balance of the new loan facility, £0.2 million, remains available for drawdown. At 31 December 2017, the Group had cash of £0.065 million (2016: £0.116 million) and debt of £0.634 million (2016: £0.45 million). Emmanuel S Mahede Director 22 May 2018 13 | P a g e Armadale Capital Plc Directors’ Report For the year ended 31 December 2017 The Directors submit their report and the financial statements of Armadale Capital Plc (‘Armadale’ or the ‘Company’) for the year ended 31 December 2017. Results and dividends The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The loss of the Group for the year ended 31 December 2017 was £6,177,014, (2016, £921,675). As part of the process of preparing these accounts, the Directors are required to review the carrying value of all its assets. As a result of this review the Directors have recognised an impairment charge of £5,726,445 in the year which has reduced the carrying value of the exploration and evaluation of assets (net of associated liabilities) relating to the Mpokoto project to £194,401, being their estimated realisable value based on signed heads of agreement which is subject to execution of a formal binding agreement. The Directors do not recommend the payment of a dividend (2016: £nil). Business review A review of the Group’s operations and plans for the future of the business are included in the Strategic Report. Directors The following Directors have held office during the year: Emmanuel S Mahede Nicholas Johansen William Frewen (resigned 28 February 2017) Directors’ interests Directors’ interests, including family interests, in the Ordinary Share capital, were as follows: 31 December 2017 31 December 2016 No: - 1,000,000 800,000 No: 1,000,000 500,000 500,000 W Frewen* ES Mahede N Johansen 14 | P a g e Directors’ Report (continued) For the year ended 31 December 2017 Directors also hold options over Ordinary Shares as follows: W Frewen* ES Mahede N Johansen *resigned 28 February 2017 Substantial shareholdings Armadale Capital Plc 31 December 2017 31 December 2016 No: No: - 500,000 500,000 2,000,000 500,000 500,000 At 18 May 2018 the Company was aware of the following interests in 3% or more of the issued share capital of the Company: Name Kabunga Holdings SVS Nominees HSDL Nominees Resource Corporate Vidacos Nominees Barclays Nominees Hargreaves Lansdown Nominees Pershing Nominees 11.4% 11.0% 9.8% 6.5% 6.3% 6.0% 5.2% 5.2% 15 | P a g e Armadale Capital Plc Directors’ Report (continued) For the year ended 31 December 2017 Issue of Shares Details of Ordinary Shares issued during the year are set out in note 19 to the financial statements. Shares under option or issued on exercise of options Shares held under option are detailed in note 20 to the financial statements. Indemnification of officers of the Company During the financial year, the Company paid a premium in respect of a contract insuring the Directors against liability when acting for the Company. Remuneration of Directors The directors received the following fees by way of remuneration W Frewen ES Mahede N Johansen 2017 £’000 2016 £’000 7 30 30 17 22 21 The Remuneration of directors is determined by the Board within the limits set out in the Articles of Association of the Company. 16 | P a g e Armadale Capital Plc Directors’ Report (continued) For the year ended 31 December 2017 Statement of Directors’ responsibilities The Directors are responsible for preparing the strategic report, the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the group and company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 company and of the profit or loss of the group and company for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether the financial statements have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Website publication The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein. 17 | P a g e Armadale Capital Plc Directors’ Report (continued) For the year ended 31 December 2017 Going Concern The financial statements have been prepared on the going concern basis as, in the opinion of the directors, there is a reasonable expectation that the Group and the Company will continue in operational existence for the foreseeable future. At 31 December 2017, the Group had cash of £65,163 and borrowings of £634,036, comprising convertible loan notes of £431,406 due July 2018 and a loan of £202,630 due October 2019. The Noteholders have confirmed their willingness to extend the Notes for a further period of 12 months on the same terms. Since the end of the year, the Company has continued its appraisal operations at its Mahenge Liandu graphite project. In order to fund this exploration and evaluation expenditure together with Group overheads, the Company raised £963,500 through a share placing. At 18 May 2018, the Company had cash of approximately £560,000 and an available loan facility of £200,000. The directors have prepared a cash flow forecast for the next twelve months which shows that the cash in hand is sufficient to meet current commitments in respect of exploration expenditure and corporate overheads for a period of approximately seven months. The Company’s ability to continue as a going concern and to achieve its long term strategy of developing its exploration projects is dependent on the extension and/or conversion of the loan notes and further fundraising. As described above, the Directors expect to be able to convert or extend the existing loan notes, and against the background of the encouraging initial results from the Mahenge Liandu graphite project and the Company’s history of raising funds through the issue of equity, the directors also consider that the Company is likely to be able to raise the required capital. However, there are currently no binding agreements in place. Should the Directors be unable to raise sufficient funds and extend or convert the loan notes, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business. These factors indicate the existence of a significant material uncertainty which may cast doubt over the Group’s and Company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group or Company were unable to continue as a going concern. Principal risks and uncertainties The Group’s risks and use of financial instruments are described in Note 4 to the financial statements. Other risks are described in the Chairman’s Statement and the Strategic Report. 18 | P a g e Armadale Capital Plc Directors’ Report (continued) For the year ended 31 December 2017 Directors’ Confirmation The Directors who held office at the date of approval of this Directors’ Report confirm that so far as each Director is aware: (a) there is no relevant audit information of which the Company’s auditors are unaware; and (b) each Director has taken all the steps that ought to have been taken as a Director, including that making appropriate enquiries of fellow Directors and of the Company’s auditors purpose, in order to be aware of any information needed by the Company’s auditors in connection with preparing their report and to establish that the Company’s auditors are aware of that information. for On behalf of the Board Timothy Jones Secretary 22 May 2018 19 | P a g e Armadale Capital Plc Independent Auditor’s Report to the Shareholders of Armadale Capital Plc For the year ended 31 December 2017 Opinion We have audited the financial statements of Armadale Capital PLC (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2017 which comprise the consolidated statement of comprehensive income, the consolidated and company statement of financial position, the consolidated and company statement of changes in equity, the consolidated and company statement of cash flows, and the related notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion: • • • • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2017 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 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 parent company and the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty relating to going concern We draw attention note 2.2 to the financial statements concerning the parent company and group’s ability to continue as a going concern which is dependent on the group’s ability to raise further funds and to convert or extend its existing loan notes. However, there are currently no binding agreements in place. These conditions indicate the existence of a material uncertainty which may cast significant doubt over the group’s and the parent company’s ability to continue as a going concern. The financial statements do not include any adjustments that would result if the Group and the parent company was unable to continue as a going concern. Our opinion is not modified in respect of this matter. 20 | P a g e Armadale Capital Plc Independent Auditor’s Report to the Shareholders of Armadale Capital Plc (continued) For the year ended 31 December 2017 We considered going concern to be a Key Audit Matter based on our assessment of the risk and the effect on our audit. We performed the following work in response to this key audit matter: • • • • We challenged the Director’s forecasts to assess the parent company and group’s ability to meet their financial obligations as they fall due within the period of twelve months from the date of approval of the financial statements by reviewing the assumptions and inputs in the cashflow forecast to assess whether these were in line with our understanding of the company’s operations and other information obtained by us during the course of the audit. We performed a mechanical check on the cashflow forecast model prepared by Management. We assessed Management’s ability to prepare the cashflow forecast by confirming committed spend and opening cash positions, and Reviewed the disclosure included within the financial statements. Use of our report This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Key audit matters In addition to the matter described in the material uncertainty related to going concern section key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 21 | P a g e Armadale Capital Plc Independent Auditor’s Report to the Shareholders of Armadale Capital Plc (continued) For the year ended 31 December 2017 Key Audit Matter Identified Carrying value of exploration assets The Group’s exploration and evaluation assets, Mpokoto Gold Project and Mahenge Liandu Project, represent the key assets on the Group’s statement of financial position. Mpokoto Gold Project Post year-end the Group announced they had entered into a heads of terms agreement to sell their interest in the Mpokoto Gold Project at a reduced consideration compared to the carrying value, giving rise to a risk of impairment at year-end and a risk over the accounting treatment of the asset at year-end under IFRS 5 Held for Sale. In light of this Management performed an impairment indicator review at year-end and concluded there was evidence to impair the asset to the recoverable consideration. Mahenge Liandu Project Management performed an impairment indicator review to assess whether there were any indicators of impairment for the exploration asset and whether impairment was appropriate, noting the significant positive drilling results throughout 2017. Following this assessment, the Board concluded that no impairment was required. Given the inherent judgement involved in the assessment of impairment indicators and the carrying value of the exploration and evaluation assets, we considered the carrying value of exploration and evaluation assets to be a significant risk for the audit. How we addressed the matter: Mpokoto Gold Project We assessed Management’s impairment indicator review, performed in accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources. In doing so, we reviewed and critically challenged: the carrying value prior to impairment and reclassification to assets held for sale; the appropriateness of reclassification to assets held for sale under IFRS 5 and Management’s view of the recoverability of the sale consideration. Mahenge Liandu Project We assessed Management’s impairment indicator review performed in accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources. In doing so, we reviewed and critically challenged: licence status and expiry dates, any required work programmes including associated commitments and obligations external feasibility studies. 22 | P a g e Armadale Capital Plc Independent Auditor’s Report to the Shareholders of Armadale Capital Plc (continued) For the year ended 31 December 2017 Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluation the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as whole. Group materiality in 2017 was set at £50,000 (2016: £75,000) and parent company materiality set at £40,000 in 2017 (2016: £37,500) We consider total assets to be the financial metric of the most interest to shareholders and other users of the financial statements, given the Group’s status as an investment entity in natural resources development and therefore consider this to be an appropriate basis for materiality. Performance materiality is the application of materiality at the individual account or balance level set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. Performance materiality was set at 75% (2016: 75%) of the above materiality levels, at the higher end of the threshold due to the low risk of aggregation of misstatements within the group. Whilst materiality for the financial statements as a whole was set, each component of the Group was audited to a lower level of materiality, being 1.5% of total assets of the component, limited to 90% of group materiality. The same approach to performance materiality has been applied as discussed above. We agreed with the audit committee that we would report to the committee all individual audit differences identified during the course of our audit in excess of £2,500 (2016: £2,500). We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds. An overview of the scope of our audit Armadale Capital PLC is a company registered in the UK and listed on the Alternative Investment Market Exchange. In approaching the audit, we considered how the Group is organised and managed. We assessed the business as being principally an investment entity comprising of the exploration licence in Tanzania and other investments. Our Group audit focused on the Group’s two significant components. These were subject to full scope audits and insignificant components were covered using analytical procedures. All audit work was performed by BDO LLP. We set out above the risks that had the greatest impact on our audit strategy and scope. 23 | P a g e Armadale Capital Plc Independent Auditor’s Report to the Shareholders of Armadale Capital Plc (continued) For the year ended 31 December 2017 Other information The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate • for our audit have not been received from branches not visited, by us; or the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. 24 | P a g e Armadale Capital Plc Independent Auditor’s Report to the Shareholders of Armadale Capital Plc (continued) For the year ended 31 December 2017 Responsibilities of directors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Jack Draycott (senior statutory auditor) For and on behalf of BDO LLP, statutory auditor London, W1U YEU 22 May 2018 BDO LLP is a limited liability partnership registered in England and Wales (with registered number 0C305127). 25 | P a g e Consolidated Statement of Comprehensive Income For the year ended 31 December 2017 Other administrative expenses Impairment of investments Profit on disposal of investments Operating loss Finance costs Loss before taxation Taxation Armadale Capital Plc Note 13 13 6 9 2017 £ (399,938) - - 2016 £ (538,763) (301,047) 82,064 (399,938) (909,693) (44,478) (444,416) - (11,982) (921,675) - Loss for the year from continuing operations (444,416) (921,675) Loss from discontinued operations, net of tax 15 (5,917,411) (151,947) Loss after taxation (6,177,014) (921,675) Other comprehensive income Items that may be reclassified to profit or loss: Exchange differences on translating foreign entities (771,989) 1,016,566 Total comprehensive (loss) / income attributable to the equity holders of the parent company (6,949,003) 94,891 Loss per share attributable to the equity holders of the parent company Basic and diluted total loss per share Basic and diluted loss per share from continuing operations 10 10 Pence (2.58) (0.19) Pence (0.62) (0.52) The notes on pages 33 to 61 form part of the financial statements. 26 | P a g e Consolidated Statement of Financial Position At 31 December 2017 Assets Non-current assets Exploration and evaluation assets Property, plant and equipment Investments Current assets Trade and other receivables Cash and cash equivalents Non-current assets classified as held for sale Total assets Equity and liabilities Equity Share capital Share premium Shares to be issued Share option reserve Loan note reserve Foreign exchange reserve Retained earnings Total equity Current liabilities Trade and other payables Loan notes Liabilities directly associated with non-current assets classified as held for sale Non-current liabilities Long term borrowings Total Liabilities Armadale Capital Plc Note 2017 £ 2016 £ 11 12 13 14 15 19 21 21 21 21 21 21 16 17 15 18 2,384,036 - 6,705 2,390,741 54,563 65,163 119,726 322,412 442,138 8,778,645 16,437 6,705 8,801,787 160,279 115,861 276,140 - 276,140 2,832,879 9,077,927 2,980,211 19,720,193 286,000 94,884 - 337,845 (21,481,920) 1,937,213 133,619 431,406 565,025 128,011 2,946,587 19,009,592 286,000 85,850 37,500 1,109,834 (15,342,406) 8,132,957 494,733 450,237 944,970 - 693,036 944,970 202,630 895,666 - 944,970 Total equity and liabilities 2,832,879 9,077,927 The notes on page 33 to 61 form part of the financial statements. Approved by the Board and authorised for issue on 22 May 2018 Signed on behalf of the Board ES Mahede Director 27 | P a g e N Johansen Director Company Statement of Financial Position At 31 December 2017 Assets Non-current assets Investments Other receivables Current assets Investments held for disposal Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Equity Share capital Share premium Shares to be issued Share option reserve Loan note reserve Retained earnings Total equity Current liabilities Trade and other payables Loan notes Non-Current liabilities Long term borrowings Total liabilities Armadale Capital Plc Note 2017 £ 2016 £ 13 14 13 14 19 21 21 21 21 21 16 17 18 1,606,705 972,544 2,579,249 4,451,914 3,358,091 7,810,005 194,401 43,750 10,809 248,960 - 6,856 100,879 107,735 2,828,209 7,917,740 2,980,211 19,720,193 286,000 94,884 - (20,953,744) 2,127,544 2,946,587 19,009,592 286,000 85,850 37,500 (14,984,733) 7,380,796 66,629 431,406 498,035 202,630 700,665 86,707 450,237 536,944 - 536,944 Total equity and liabilities 2,828,209 7,917,740 The Company has taken advantage of the exemption conferred by section 408 of Companies Act 2006 from presenting its own statement of comprehensive income. A loss after taxation of £6,006,511 (2016: £769,368) has been included in the financial statements of the parent company. The notes on pages 33 to 61 form part of the financial statements. Approved by the Board and authorised for issue on 22 May 2018 Signed on behalf of the Board ES Mahede Director 28 | P a g e N Johansen Director Company Registration No. 5541602 Armadale Capital Plc Consolidated Statement of Changes in Equity For the year ended 31 December 2017 At 1 January 2016 Loss for the year Other comprehensive income Total comprehensive income for the year Issue of shares Expenses of issue Share based payment charges Transfer on expiry of options Equity element of convertible loan notes issued Total other movements Share Capital Share Premium £ 2,823,582 - - - £ 16,585,413 - - - Shares to be issued £ 286,000 - - - 2,540,790 (116,611) - - 123,005 - - - - Share Option Reserve £ 182,000 - - - - - 33,850 (130,000) Loan Note Reserve £ - - - - - - 37,500 123,005 2,424,179 - (96,150) 37,500 Foreign Exchange Reserve £ 93,278 - 1,016,566 1,016,566 - - - Retained Earnings Total £ (14,550,731) (921,675) - (921,675) - - 130,000 £ 5,419,542 (921,675) 1,016,566 94,891 2,663,795 (116,611) 33,850 - - 37,500 130,000 2,618,534 At 31 December 2016 2,946,587 19,009,592 286,000 85,850 37,500 1,109,844 (15,342,406) 8,132,957 Loss for the year Other comprehensive loss Total comprehensive loss for the year Issue of shares Expenses of issue Share based payment charges Transfer on conversion of loan notes Total other movements - - - - - - 33,624 - - - 771,501 (60,900) - - 33,624 710,601 - - - - - - - - - - - - - 9,034 - - - - - - - (37,500) 9,034 (37,500) - (6,177,014) (6,177,014) (771,989) - (771,989) (771,989) (6,177,014) (6,949,008) - - - - - - - - 37,500 37,500 802,125 (60,900) 9,034 - 753,259 At 31 December 2017 2,980,211 19,720,193 286,000 94,884 - 337,845 (21,481,920) 1,937,213 The notes on pages 33 to 61 form part of the financial statements. The following describes the nature and purpose of each reserve within owners’ equity: Reserve Share capital Share premium Shares to be issued Share option reserve Loan note reserve Foreign exchange reserve Retained earnings 29 | P a g e Description and purpose amount subscribed for share capital at nominal value amount subscribed for share capital in excess of nominal value, net of allowable expenses share capital to be issued in connection with the acquisition of Netcom cumulative charge recognised under IFRS 2 in respect of share-based payment awards equity element of convertible loan notes gains/losses arising on re-translating the net assets of overseas operations into sterling cumulative net gains and losses recognised in the statement of comprehensive income Armadale Capital Plc Company Statement of Changes in Equity For the year ended 31 December 2017 Share Capital Share Premium Shares to be issued £ 2,823,582 - £ 16,585,413 - £ 286,000 - - 123,005 - 2,540,790 (116,611) - - - - 123,005 2,424,179 - - - - - - - Share Option Reserve £ 182,000 - - - - 33,850 (130,000) - (96,150) Loan Note Reserve Retained Earnings Total £ (14,345,365) (769,368) (769,368) £ 5,531,630 (769,368) (369,368) - - 2,663,795 (116,611) 130,000 33,850 - - - - - - - 37,500 37,500 - 37,500 130,000 2,618,534 2,946,587 - 19,009,592 - 286,000 - 85,850 - 37,500 - (14,984,733) (6,006,511) 7,380,796 (6,006,511) - 33,624 - - 771,601 (60,900) - - - - 33,624 710,601 - - - - - - - - - 9,034 - - - - (6,006,511) (6,006,511) - - - 805,125 (60,900) 9,034 - (37,500) 37,500 - 9,034 (37,500) 37,500 753,259 At 1 January 2016 Loss for the year Total comprehensive loss for the year Issue of shares Expenses of issue Share based payment charges Transfer on expiry of options Equity element of convertible loan notes issued Total other movements At 31 December 2016 Loss for the year Total comprehensive loss for the year Issue of shares Expenses of share issue Share based payment charges Transfer on conversion of loan notes Total other movements At 31 December 2017 2,980,211 19,720,193 286,000 94,884 - (20,953,744) 2,127,544 The notes on pages 33 to 61 form part of the financial statements. The following describes the nature and purpose of each reserve within owners’ equity: Description and purpose amount subscribed for share capital at nominal value amount subscribed for share capital in excess of nominal value, net of allowable expenses share capital to be issued in connection with the acquisition of Netcom cumulative charge recognised under IFRS 2 in respect of share-based equity element of convertible loan notes cumulative net gains and losses recognised in the statement of comprehensive income Reserve Share capital Share premium Shares to be issued Share option reserve payment awards Loan note reserve Retained earnings 30 | P a g e Armadale Capital Plc 2017 £ 2016 £ (6,177,014) (921,675) 1,806 - 5,726,445 9,034 67,500 44,478 (327,751) (36,133) 72,101 (287,577) 11,929 (82,064) 301,047 33,850 327,050 11,982 (317,881) 21,951 155,247 (140,683) (548,766) - (548,766) (1,046,408) 153,625 (892,783) 650,753 (60,900) 200,000 789,851 (50,698) 115,861 65,163 1,105,000 (116,611) - 988,389 (45,077) 160,938 115,861 Consolidated Statement of Cash Flows For the year ended 31 December 2017 Cash flows from operating activities Loss before taxation Adjustment for: Depreciation Profit on sale of investments Impairment charge Share based payment charge Shares issued in settlement of liabilities Finance costs Changes in working capital Receivables Payables Net cash used in operating activities Cash flows from investing activities Expenditure on exploration and evaluation assets Sale of listed investments Net cash used in investing activities Cash flows from financing activities Proceeds from share placement Issue costs Proceeds from loan (Note 18) Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December The notes on pages 33 to 61 form part of the financial statements. 31 | P a g e Armadale Capital Plc 2017 £ 2016 £ (6,006,511) (769,368) 9,034 - 5,730,587 67,500 44,478 (154,912) (36,894) (20,078) (211,884) 33,850 (82,064) 301,047 327,050 11,982 (177,503) 38,300 596 138,607 (668,037) - (668,037) (1,028,339) 153,625 (874,714) 650,751 (60,900) 200,000 789,851 (90,070) 100,879 10,809 1,105,000 (116,611) - 988,389 (24,932) 125,811 100,879 Company Statement of Cash Flows For the year ended 31 December 2017 Cash flows from operating activities Loss before taxation Adjustment for: Share based payment charge Profit on sale of investments Impairment charge Shares issued in settlement of liabilities Finance costs Changes in working capital Receivables Payables Net cash used in operating activities Cash flows from investing activities Advances to subsidiaries Sale of listed investments Net cash used in investing activities Cash flows from financing activities Proceeds from share placement Issue costs Proceeds from loan (Note 18) Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December The notes on pages 33 to 61 form part of the financial statements. 32 | P a g e Armadale Capital Plc Notes to the financial statements For the year ended 31 December 2017 1. Country of incorporation The Company was incorporated in the United Kingdom as Watermark Global Plc, a Public Limited Company, on 19 August 2005. The name of the Company was changed to Armadale Capital Plc on 2 July 2013. Its registered office is 1 Arbrook Lane, Esher, Surrey, KT10 9EG. The Company is domiciled in the UK. 2. Accounting policies 2.1. Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The principal accounting policies are set out below. 2.2. Going Concern The financial statements have been prepared on the going concern basis as, in the opinion of the directors, there is a reasonable expectation that the Group and the Company will continue in operational existence for the foreseeable future. At 31 December 2017, the Group had cash of £65,163 and borrowings of £634,036, comprising convertible loan notes of £431,406 due July 2018 and a loan of £202,630 due October 2019. The Noteholders have confirmed their willingness to extend the Notes for a further period of 12 months on the same terms. Since the end of the year, the Company has continued its appraisal operations at its Mahenge Liandu graphite project. In order to fund this exploration and evaluation expenditure together with Group overheads, the Company raised £963,500 through a share placing. At 18 May 2018, the Company had cash of approximately £560,000 and an available loan facility of £200,000. The directors have prepared a cash flow forecast for the next twelve months which shows that the cash in hand is sufficient to meet current commitments in respect of exploration expenditure and corporate overheads for a period of approximately seven months. The Company’s ability to continue as a going concern and to achieve its long term strategy of developing its exploration projects is dependent on the extension and/or conversion of the loan notes and further fundraising. As described above, the Directors expect to be able to convert or extend the existing loan notes, and against the background of the encouraging initial results from the Mahenge Liandu graphite project and the Company’s history of raising funds through the issue of equity, the directors also consider that the Company is likely to be able to raise the required capital. However, there are currently no binding agreements in place. Should the Directors be unable to raise sufficient funds and extend or convert the loan notes, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business. 33 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 2. Accounting policies (continued) 2.2 Going Concern (continued) These factors indicate the existence of a significant material uncertainty which may cast doubt over the Group’s and Company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group or Company were unable to continue as a going concern. 2.3. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation. 2.4 Acquisitions of exploration licences The acquisition of Netcom, Kisenge and Graphite Advancement, were principally the acquisition of mining licences effected through non-operating corporate structures. As the structure does not represent a business, it is considered that the transactions do not meet the definition of a business combination. Accordingly each transaction is accounted for as the acquisition of an asset. Future consideration for shares is contingent and is recognised as an asset or liability based on the valuation of the shares as at the date of acquisition. Contingent future consideration for shares is not subsequently revalued and is derecognised on disposal of the asset to which it relates. 2.5. Foreign currencies The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group entity are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements. 34 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 2. Accounting policies (continued) 2.5. Foreign currencies (continued) Transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which they arise. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are expressed in Pounds using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income. 2.6. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, with a maturity date of less than three months from inception. 2.7. Share-based payments IFRS 2 ‘Share-based Payment’ requires the recognition of equity-settled share-based payments at fair value at the date of grant and the recognition of liabilities for cash-settled share based payments at the current fair value at each reporting date. The Group provides benefits to employees and service providers (including senior executives) of the Group in the form of share based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). Where the equity-settled transactions are share options their cost is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than market conditions linked to the price of the shares of the Company, 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 other service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). 35 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 2. Accounting polices (continued) 2.7. Share-based payments (continued) The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (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 profit and loss account charge or credit for a period represents the movements in cumulative expense recognised as at the beginning and end of that period. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. Share based payments in respect of third party services are measured by reference to the value of services provided and share price at the relevant date. 2.8. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current Tax The tax currently payable is based on taxable profit for the year. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. 36 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 2. Accounting polices (continued) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax and current tax assets and liabilities are offset when there is a legally enforceable right to set off when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination. 2.9. Exploration and evaluation costs Once an exploration licence or an option to acquire an exploration licence has been obtained, all costs associated with exploration and evaluation are capitalised on a project-by-project basis pending determination of the feasibility of the project. Costs incurred include appropriate technical and administrative expenses and a pro-rata share of the Group’s finance costs but not general overheads. If a mining property development project is successful, the related expenditures will be amortised over the estimated life of the commercial ore reserves on a unit of production basis. Where a licence is relinquished, a project is abandoned, or is considered to be of no further commercial value to the Company, the related costs will be written off to the statement of comprehensive income in the period the impairment is identified. Unevaluated mineral properties are assessed at reporting date for impairment in accordance with the policy set out below. If commercial reserves are developed, the related deferred development and exploration costs are then reclassified as development and production assets within property, plant and equipment. 37 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 2. Accounting polices (continued) 2.10. Investments Investments in the individual company accounts, including those in subsidiary companies, are stated at cost less any provision for impairment, which is recognised as an expense in the statement of comprehensive income in the period the impairment is identified. In the Group accounts, equity investments are included on the balance sheet as assets available for sale at fair value with value changes being recognised in other comprehensive income unless an impairment is considered to be permanent in which case it is recognised in the statement of comprehensive income. Associates in the Group accounts are recognised at cost less the Group’s share of profits or losses of the associate. 2.11. Joint Arrangements The group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries. The group classifies its interests in joint arrangements as either: (a) Joint ventures: where the group has rights to only the net assets of the joint arrangement; (b) Joint operations: where the group has both the rights to assets and obligations for the liabilities of the joint arrangement. In assessing the classification of interests in joint arrangements, the Group considers: (a) The structure of the joint arrangement; (b) The legal form of joint arrangements structured through a separate vehicle; (c) The contractual terms of the joint arrangement agreement; and (d) Any other facts and circumstances (including any other contractual arrangements). The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations. 2.12. Plant, equipment and vehicles Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives and residual values are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. 38 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 2. Accounting polices (continued) Plant, equipment and vehicles 3-10 years on a straight line basis The depreciation cost relating to assets used in the development of mineral deposits is capitalised until the deposit is bought into production. 2.13. Impairment of assets At the end of each reporting period, the Directors review the carrying amounts of assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash- generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the 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 for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, whereby impairment is first allocated to the revaluation reserve, to the extent that it has been previously revalued, with any excess taken to the statement of comprehensive income. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash- generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in other comprehensive income, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 39 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 2.14. Non-current assets held for sale and disposal groups Non-current assets and disposal groups are classified as held for sale when: • They are available for immediate sale • Management is committed to a plan to sell • It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn • An active programme to locate a buyer has been initiated • The asset or disposal group is being marketed at a reasonable price in relation to its fair value, and • A sale is expected to complete within 12 months from the date of classification. Non-current assets and disposal groups classified as held for sale are measured at the lower of: • Their carrying amount immediately prior to being classified as held for sale in accordance with the group's accounting policy; and • Fair value less costs of disposal. Following their classification as held for sale, non-current assets (including those in a disposal group) are not depreciated. The results of operations disposed during the year are included in the consolidated statement of comprehensive income up to the date of disposal. A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the criteria to be classified as held for sale. Discontinued operations are presented in the consolidated statement of comprehensive income as a single line which comprises the post-tax profit or loss of the discontinued operation along with the post-tax gain or loss recognised on the re-measurement to fair value less costs to sell or on disposal of the assets or disposal groups constituting discontinued operations. 2.15. Financial assets Loans and receivables are recognised when the Company and Group become party to the contractual provisions of the financial instrument. Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. 40 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 2.16. Financial liabilities and equity instruments issued by the Group Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Financial assets Financial assets comprise debtors and other investments. Financial liabilities Financial liabilities are recognised when the Company and Group become party to a financial liability. Financial liabilities represent trade payables and borrowings. Convertible loan notes As detailed in note 17, the loan notes are classified as a compound financial instrument in accordance with the requirements of IAS 32. The debt element is calculated as the present value of future cash flows assuming the loan notes are redeemed at the redemption date, discounted at the market rate for an equivalent debt instrument with no option to convert to equity. The difference between the total proceeds and the present value of the debt element is recognised in equity. The discount is charged over the life of the loan notes to the statement of comprehensive income and included within finance expenses. When conversion occurs the associated equity element is released directly to retained earnings. 2. Accounting polices (continued) 2.17. Changes in accounting standards The standards which applied for the first time this year have been adopted and have not had a material impact. The International Accounting Standards Board (IASB) has issued the following new and revised standards, amendments and interpretations to existing standards that are not effective for the financial year ending 31 December 2017 and have not been adopted early. The Group is currently 41 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 Armadale Capital Plc assessing the impact of these standards and based on the Group’s current operations do not expect them to have a material impact on the financial statements. New Standards IFRS 15 Revenue from Contracts with Customers IFRS 9 Financial Instruments IFRS 16 Leases IFRS 17 Insurance Contracts Amendments to Existing Standards Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2) IFRIC 22 Foreign Currency Transactions and Advance Consideration Annual Improvements to IFRSs (2014-2016 Cycle) IFRIC 23 Uncertainty over Income Tax Treatments* Annual Improvements to IFRSs (2015-2017 Cycle)* * Not yet adopted by European Union Effective Date 01-Jan-18 01-Jan-18 01-Jan-19 01-Jan-21 01-Jan-18 01-Jan-18 01-Jan-18 01-Jan-19 01-Jan-19 IFRS 9 replaces the incurred loss model of IAS 39 with a model based on expected credit losses or losses on loans. The standard requires entities to use an expected credit loss model for impairment of financial assets. Under the new standard, the loss allowance for a financial instrument will be calculated at an amount equal to 12 month expected credit losses or lifetime expected credit losses if there has been a significant increase in credit risk of the financial instrument. The Company has a loan to the 100% owned subsidiary that is the license holder of the assets. Management are still undertaking a full assessment but do not expect there to be any material impact as in line with the work the Company completed to test whether the intangible assets should be impaired, it has determined that there currently is no reason to expect a loss from this loan. The Group is not revenue generating thus there is no impact of IFRS 15 as there are no revenue contracts in place currently. There is no impact of IFRS 16 as there are no lease agreements in place currently. The Group will adopt the above Standards at the time stipulated by that Standard. The Group does not currently anticipate voluntary early adoption of any of the Standards. 42 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 3. Significant judgements and sources of estimation uncertainty Armadale Capital Plc In preparing the annual financial statements of the Group, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. The directors consider that the only significant source of estimation uncertainty relates to the value of the Group’s exploration assets. The principal significant estimates and judgements are: Going concern The financial statements have been prepared on the going concern basis as, in the opinion of the directors, there is a reasonable expectation that the Group will continue in operational existence for the foreseeable future, as explained more fully in note 2.2. Investment and debtors At 31 December 2017 the Company held approximately 26% of the issued share capital of MRI, a South African listed company. In the judgement of the Directors, the Company does not have significant influence over MRI as it does not have any representation on the Board, nor does it have the power to appoint anyone to the Board. MRI is therefore held as an investment. Trading in the shares of MRI has been suspended and the company is not trading. Accordingly, in the opinion of the directors, the market value of the shares is nil and full provision for impairment was made in 2016. Exploration and evaluation assets These represent the accumulated costs, including capitalised finance costs, to the Group of its mineral projects. Their commercial realisation is dependent upon the successful economic development of the gold and graphite deposits and should the development not be achieved, an impairment of these assets would arise. At the year end, the directors were of the opinion that there was an indicator of impairment in respect of the Mpokoto project, where sales negotiations are in progress at a price significantly below the carrying value of the relevant net assets. In the opinion of the directors, the price under negotiation best represents the value of the project. In arriving at the sale price for this purpose, the directors have excluded those elements that are contingent on production being achieved, which is regarded as uncertain. See Note 15 for details of the accounting treatment of the Mpokoto project. 43 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 3. Significant judgements and sources of estimation uncertainty (continued) Impairment of investment in subsidiaries Investments in subsidiaries represent the accumulated costs that the parent Company has invested in its subsidiaries to fund the mineral projects. The recovery of these investments is dependent upon the successful economic development of the gold and graphite deposits and should the development not be achieved, an impairment of these investments would arise. At the year end the directors were of the opinion that there was an impairment to the Mpokoto gold project E&E asset and the Company’s intercompany debtor, as described above. See Note 15 for details of the accounting treatment of the Mpokoto project. 4. Financial Risk Management Policy The Group and Company regularly monitor the cash position to ensure liabilities can be met. Financial risk factors The risk in relation to financial assets is considered to be minimal and is managed on a day-to-day basis. The Group and Company is exposed to liquidity risk, currency risk and capital risk management arising from the financial instruments it holds. The Company has receivables from its subsidiaries as disclosed in note 14. The recovery of these receivables is dependent on whether the mining projects are successful and they are not expected to be recovered in the short term. The risk management policies employed by the Group and Company to manage these risks are discussed below: Liquidity Risk Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. The Group and Company manages liquidity risk by maintaining adequate reserves and banking facilities, by monitoring cash flows and managing the maturity profiles of financial assets and liabilities within the bounds of contractual obligations. The Group’s loan notes as described in note 17, stated at their gross, contractual and undiscounted amount of £431,406 were issued on 11 July 2016 with a conversion/payment date of 11 July 2017. The Group’s long term debt facility stated at its gross, contractual and undiscounted amount of £202,630 as described in note 18 is repayable on 11 October 2019. 44 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 Currency Risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a foreign currency that is not the relevant company’s functional currency. The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the South African Rand and the US Dollar. The Group’s management monitors the exchange rate fluctuations on a continuous basis. The Group’s loans are denominated in GBP as disclosed in note 17. The effect of a 10% strengthening of AUD in 2017 would result in a £21k reduction (2016: £21k) of the Group’s net assets. 4. Financial Risk Management (continued) Capital Risk Management The Group and Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. This is done through the monitoring of cash flows. The capital structure of the Group and Company consists of cash and cash equivalents, equity attributable to equity holders of the parent, (comprising issued capital and reserves less accumulated losses) and loan notes. Commodity risk The value of the Group’s exploration and evaluation assets is principally exposed to two commodities, gold and graphite. The value of the projects is vulnerable to fluctuations in the prevailing market price of these commodities. Fair value estimation The fair values of the Group’s and Company’s financial assets and liabilities approximate to their carrying amounts at the reporting date. Non-current asset investments (excluding investments in subsidiaries at the Company level) are measured at fair value. The fair value is based upon observable inputs and the level of the fair value hierarchy within the measurement is categorised as Level 1. Current asset investments are measured at fair value and are categorised as Level 2. There were no transfers between Level 1 and Level 2 for the year. 45 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 Financial Instruments by Category The Group’s financial instruments consist of cash and cash equivalents, trade and other receivables, borrowings, trade payables and accruals, loan term borrowings and convertible loan notes. Financial instruments are initially recognized at fair value with subsequent measurement depending on classification as described below. Classification of financial instruments depends on the purpose for which the financial instruments were acquired or issued, their characteristics, and the Company’s designation of such instruments. The Group’s and Company’s financial instruments are all subsequently recognised at amortised cost. 5. Segmental Information Costs incurred in developing the Group’s exploration projects are capitalised in full, accordingly, the expenses reported in the Consolidated Statement of Comprehensive Income solely represent central Group overheads and impairments. In terms of assets and liabilities, the only material items are the exploration and evaluation assets relating to the Group’s projects in the Democratic Republic of Congo (“DRC”) and Tanzania. Following a review by the directors, it has been determined that the value of the DRC project has been impaired and accordingly a provision has been made to reduce its net carrying value to estimated realisable value. The assets, net of impairment provision, attributable to each project are as follows: DRC (reported as assets held for disposal, Note 15) Tanzania (reported as exploration and evaluations assets) 2017 £ 322,412 2,384,036 2,706,448 2016 £ 5,820,128 1,998,838 7,818,966 46 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 6. Loss before tax This is stated after charging: Directors’ emoluments - fees Directors’ emoluments - compensation for loss of office Depreciation Auditors’ remuneration: Fees payable to the Company’s auditors for the audit of the Group and Company financial statements Fees payable to the Company’s auditors for taxation compliance services Gain on disposal of investments Share based payment charge Impairment of PPE Impairment of exploration and evaluation assets Impairment of investments 7. Employees The average monthly number of persons (including Directors) employed by the Group during the year was: Armadale Capital Plc 2017 £ 67,000 - 1,806 2016 £ 150,000 123,000 11,929 32,000 30,000 2,500 - 9,034 13,206 5,713,239 - 2,450 (82,064) 33,850 - - 301,047 2017 2016 Group – management Group – staff Company-management Employment costs Group Wages and salaries (including directors) Payments in lieu of notice Social security costs Company Wages and salaries (including directors) Payments in lieu of notice 47 | P a g e 3 - 3 3 3 9 12 3 £ £ 78,500 - - 301,224 123,000 22,511 78,500 446,735 78,500 - 78,500 150,000 123,000 273,000 Notes to the financial statements (continued) For the year ended 31 December 2017 Armadale Capital Plc The exploration and evaluation work on the Group’s projects is undertaken by third party consultants. 8. Remuneration of Directors of the Company Aggregate emoluments 67,000 273,000 Emoluments of the Highest Paid Director 30,000 96,000 All Directors of the Group and Company are considered to be the key management personnel. 9. Taxation Continuing operations Current Tax 2017 £ 2016 £ Current tax on loss for the year - - Continuing operations Factors affecting the tax charge for the year Loss on ordinary activities before taxation Loss on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 19.25% (2016: 20%) Effects of : Temporary carried recognised as a deferred tax asset difference forward not Expenses disallowed UK Corporation tax 2017 £ 2016 £ (6,177,014) (921,675) (1,189,075) (184,335) 5,811,440 177,565 (4,622,365) - 6,770 - A deferred tax asset of approximately £1,419,000 (2016: £1,334,000) has not been recognised owing to the uncertainty over the timing of future recoverability. 48 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 10. Loss per share The calculation of total loss per share is based on a loss of £6,177,014 (2016: £921,675), and on 239,228,310 ordinary shares (2016: 148,922,833), being the weighted average number of shares in issue during the year. The calculation of loss per share from continuing activities is based on a loss of £444,416 (2016: £769,728), and on 239,228,310 ordinary shares (2016: 148,922,833), being the weighted average number of shares in issue during the year. There is no difference between basic loss per share and diluted loss per share as the potential ordinary shares are anti-dilutive. The company has issued options over ordinary shares which could potentially dilute basic earnings per share in the future. 11. Exploration and evaluation assets Group Cost At 1 January Exchange movements Acquisition of licence in Tanzania (note 13) Additions Impairment and transfer to assets held for disposal At 31 December 2017 £ 2016 £ 8,778,645 (751,721) - 695,825 (6,338,713) 2,384,036 4,923,190 959,679 1,607,736 1,288,040 - 8,778,645 Included in additions are capitalised finance costs of £13,018 (2016: £25,542). As production has not commenced, no amortisation was charged during the year, in accordance with the Group’s accounting policy. 49 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 12. Property, plant and equipment Group PPE is solely allocated to the DRC operating segment, see note 5. Group Cost At 1 January 2016 Exchange Movements At 31 December 2016 Exchange movements Impairment (note 15) At 31 December 2017 Depreciation At 1 January 2016 Exchange Movements Charge for the year At 31 December 2016 Exchange Movements Charge for the year Impairment (note 15) At December 2017 Net book value At 31 December 2017 At 31 December 2016 Plant £ 12,565 2,477 15,042 (1,304) 13,738 - Equipment £ 10,539 2,078 12,617 (1,094) 11,523 - Vehicles £ 16,153 3,184 19,337 (1,677) 17,660 - 373 73 - 446 (39) 125 (532) - 6,018 1,186 5,387 12,591 (1,092) 24 (11,523) - 9,172 1,808 6,542 17,522 (1,519) 1,657 (17,660) - Total £ 39,257 7,739 46,996 (4,075) 42,921 - 15,563 3,067 11,929 30,559 (2,650) 1,806 (29,715) - - 14,596 - 26 - 1,815 - 16,437 An impairment loss of £13,206 has been recognised in the comprehensive statement of income in order to impair the carrying value of the Groups PPE to £Nil, as management are of the opinion that the assets are obsolete. 50 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 13. Investments Non-current asset investments - Group Cost At 1 January 2016 Disposals At 31 December 2016 Additions/(Disposals) At 31 December 2017 Impairment At 1 January 2016 Impairment (release) At 31 December 2016 Additions/(Disposals) At 31 December 2017 Net book value At 31 December 2017 At 31 December 2016 Listed investments £ 84,605 (77,900) 6,705 - 6,705 28,000 (28,000) - - - 6,705 6,705 Non-current asset investments - Company Cost At 1 January 2016 Additions Disposals At 31 December 2016 Impairment Transfer to investments held for disposal At 31 December 2017 Subsidiaries £ 2,845,209 1,600,000 - 4,445,209 (2,650,808) (194,401) 1,600,000 Listed Investments £ 84,605 - (77,900) 6,705 - - 6,705 Total £ 2,929,814 1,600,000 (77,900) 4,451,914 (2,650,808) (194,401) 1,606,705 An impairment has been recognised for the value of £2,650,808. Comparison of the carrying value of the investment in the Mpokoto gold project with the potential selling price indicates that an impairment in the value of the investment has occurred and, accordingly, an impairment has been recognised by reference to the potential selling price taking account only of those elements of the selling price that would be receivable regardless of the future outcome of the project, on the grounds that the future outcome is uncertain. 51 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 13. Investments (continued) Armadale Capital Plc Current asset investments – Group and Company 2017 £ 2016 £ At 1 January Disposals Impairment charge for year Valuation at 31 December - - - - 322,708 (21,661) (301,047) - The Group has an interest of approximately 26% in MRI, a company involved in the processing of coal fines. As there is an intention to sell the investment in MRI, in 2016 it was classified as a current asset investment. Trading in MRI’s shares has been suspended and the company is inactive. In the opinion of the directors, the market value of the shares is nil and accordingly an impairment charge has been recorded to reduce the value of the investment to nil. Investments held for disposal Company As explained in note 15, the board has determined that the value of the Mpokoto gold project has been impaired. Accordingly the value of the Company’s holdings in shares of Netcom Global Inc. and Kisenge Limited has similarly been impaired. As the intention is to dispose of these shares, they have been transferred from non-current to current assets, as follows Transferred from non-current investments Impairment Carrying value 2017 £ 2016 £ 2,845,209 (2,650,808) 194,401 - - - 52 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 13. Investments (continued) The subsidiary companies are: Name and nature of business Registered Office Netcom Global Inc. (intermediate holding company) Kisenge Limited (intermediate holding company) Cluff Mining Congo, SARL* (mining project operator) Mines D’Or de Kisenge, SARL* (mining licence holder) Pty Graphite Advancements (intermediate holding company) Graphite Advancements (Tanzania) Limited† (mining project operator) Water Utilities Limited (in process of dissolution) 555 Hunkins Waterfront Plaza, Charleston, Nevis 171 Main Street, Road Town, British Virgin Islands 34 Avenue de la Liberte, Lubumbashi Democratic Republic of Congo 34 Avenue de la Liberte, Lubumbashi, Democratic Republic of Congo 3 Queens Grove, Mount Claremont, Ltd Western Australia 40010 PO Box 105589, Dar es Salaam, Tanzania 171 Main Street, Road Town, British Virgin Islands Class of shares Ordinary % held 100 Ordinary 100 Ordinary 100 Ordinary 80 Ordinary 100 Ordinary 100 Ordinary 100 *Held through Kisenge Limited † Held through Graphite Advancements Pty Ltd The interest of 20% in Mines d’Or de Kisenge, SARL not held by the Group is held by Entreprise Miniere de Kisenge- Manganese SARL (“KMC”) a Congolese Government entity. KMC is entitled to participate in future revenues from the project. As KMC was not required to contribute to its share of exploration and evaluation costs and no revenues have yet been generated, there is no non-controlling interest to report in these financial statements. 53 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 13. Investments (continued) Armadale Capital Plc Under the terms of acquisition of Netcom Global Inc, completed on 15 November 2013, further ordinary shares in the company were potentially to be issued to the vendors as follows: i. 350 million (now 2.333 million*) Ordinary Shares issued upon the grant of Exploration Licences for the Mpokoto Project to the Company (the “Further Consideration Shares”). The Further Consideration Shares, valued at 0.26p per share, were included as part of the cost of the investment in Netcom. ii. up to 220 million (now 1.467 million*) Ordinary Shares were to be issued upon the completion of three key milestones (the “Milestone Shares”): • 60 million (now 0.4 million*) Ordinary Shares upon completion of a pre-feasibility study; • 60 million (now 0.4 million*) Ordinary Shares upon the delineation of a JORC reserve of at least 120,000 ounces of gold; and • 100 million (now 0.667 million*) Ordinary Shares upon the production of the first 5,000 ounces of gold from the project. The directors assessed a 100% likelihood of the first two milestones being achieved and a 50% likelihood of the third milestone being achieved. The value of the milestone shares was included as part of the cost of the investment in Netcom, valued at 0.26p per share. During 2014, the conditions applying to the Further Consideration Shares and the first tranche of Milestone Shares were fulfilled and accordingly 410 million (now 2.733 million*) Ordinary Shares in the Company were issued to the vendors. The conditions applying to the second and third tranche of Milestone Shares have not yet been fulfilled. *refer to note 19 for more details on share consolidation and restructure 54 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 14. Trade and other receivables Group Other debtors and prepayments Total current receivables Company Amounts owed by group undertakings Provision Total net non-current receivables Other receivables Total current receivables Armadale Capital Plc 2017 £ 2016 £ 54,563 54,563 160,279 160,279 4,052,323 (3,079,779) 972,544 3,358,091 - 3,358,091 43,750 43,750 6,856 6,856 The provision is required to provide in full against amounts due from subsidiaries associated with the Mpokoto gold project. In view of the impairment in the value of the project (see note 15) these amounts are considered to be wholly irrecoverable. The company is also owed a debt of £998,000 secured on shares in MRI. In the opinion of the directors, the ability of the debtor to repay the debt is seriously in doubt and accordingly the amount has been provided against in full in previous years, there has been no movement in the provision in 2017. 15. Disposal group classified as held for sale On 12 January 2018 the board announced that it had entered into a heads of agreement (“HOA”) with Weghsteen Capital Advice SA (“WCA”) to sell its interest in the Mpokoto gold project for total potential consideration of US$562,500 plus future royalty provisions. At the date of approval of these financial statements the potential sale has not become subject to unconditional agreement, but the directors have determined that the project should be sold and that, accordingly, should the sale to WCA not be concluded, an alternative buyer will be sought. Comparison of the carrying value of the assets relating to the Mpokoto gold project with the potential selling price indicates that an impairment in the value of those assets has occurred and, accordingly, an impairment has been recognised by reference to the potential selling price taking account only of those elements of the selling price that would be receivable regardless of the future outcome of the project, on the grounds that the future outcome is uncertain such that the value of the contingent consideration is estimated at nil. 55 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 15. Disposal group classified as held for sale (continued) The resulting assets and liabilities are as follows: Assets held for sale Exploration and evaluation assets Cash Liabilities held for sale Provision Armadale Capital Plc 2017 £ 2016 £ 320,902 1,510 322,412 128,011 - - - - In the statement of comprehensive income the following loss has been recognised: Loss from discontinued operations Impairment charge (PPE) Impairment charge (E&E asset) Other expenses 12 11 Basic and diluted loss per share from discontinuing operations 2017 £ 2016 £ 13,206 5,713,239 29,537 5,917,411 - - 151,947 151,947 2.39 0.1 An impairment loss of £13,206 has been recognised in the comprehensive statement of income in order to impair the carrying value of the Groups PPE to £0, as management are of the opinion that the assets are obsolete. Subsequently an impairment loss of £5,713,239 on the measurement of the disposal group to fair value less cost to sell has been recognised and is included in the statement of comprehensive income as a discontinued operation, in line with IFRS 5, as the project represents a major line of business and a geographical area of operation, see below. The fair value measurement is based on the heads of agreement and are categorised as a level 3 non-recurring fair value measurement. The calculation of loss per share from discontinued activities is based on a loss of £5,917,411 (2016: £151,947), and on 239,228,310 ordinary shares (2016: 148,922,833), being the weighted average number of shares in issue during the year. The statement of cash flows includes the following amounts relating to discontinued operations: 56 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 Operating activities Financing activities Investing activities Net cash from discontinued operations 16. Trade and other payables Group Trade payables Other creditors and accruals Company Trade payables Other creditors and accruals Armadale Capital Plc 2017 £ 2016 £ (4,347) - - (4,347) (140,018) (896,938) - (1,036,956) 2017 £ 54,697 78,922 133,619 2016 £ 144,366 350,367 494,733 7,581 59,048 66,629 27,795 58,912 86,707 All trade and other payables are due within three months. 17. Loan notes (current) Group and Company Balance 1 January Issued Transfer to loan note reserve Accrued interest Accretion of liability Converted Balance 31 December 2017 10% Notes £ 450,237 - - 48,184 19,859 (86,874) 431,406 2016 10% Notes £ - 450,000 (37,500) 20,096 17,641 - 450,237 2016 12% Notes £ 45,337 - - 906 - (46,243) - The 10% Loan Notes were issued on 11 July 2016 as part of the consideration for the acquisition of Graphite Advancements Pty Ltd (see note 13). The Loan Notes are unsecured, pay interest at 10% per annum, and are convertible at the option of the company into Ordinary Shares at 2p per Ordinary Share, together with any interest owing. The Loan Notes convert 12 months from issue, or earlier at the option of the Company, provided such conversion does not result in the holders owning more than 29.9% of the issue share capital of the Company. 57 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 On 11 July 2017 the 2017 loan notes matured, 4,343,724 shares of nominal value 0.1p were issued at a share price of 2p. All other loan notes were extended by the holders for a period of 12 months. The 12% loan notes were issued on 8 June 2015 to fund the repayment of the convertible loan notes. The notes accrued interest at 12 per cent per annum and were repayable six months from the date of issue. The remaining notes together with accrued interest were repaid in full on 29 February 2016 by conversion into Ordinary Shares in the Company (see note 19). 18. Loan (non-current) Group and Company At 1 January Advances in year Accrued interest 2017 £ - 200,000 2,630 202,630 2016 £ - - - - The loan was advanced under the terms of a £400,000 facility contracted on 11 October 2017. The loan bears interest at 10% per annum and is payable by 11 October 2019. The balance of the facility may be drawn by the company at any time in tranches of not less than £50,000. 58 | P a g e Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 19. Share capital Ordinary Shares of 0.01p/0.1p each* £ Number Deferred Shares of 0.14p each Deferred Shares of 1.4p each Number £ Number £ At 1 January 2016 Issue of shares: For cash In part consideration of acquisition of subsidiary On conversion of loan notes To settle liabilities At 31 December 2016 Issue of shares: For cash On conversion of loan notes To settle liabilities At 31 December 2017 88,010,533 88,011 1,531,374,350 2,143,923 42,260,533 591,648 45,000,000 57,500,000 1,541,434 18,964,343 211,016,310 26,030,000 4,343,724 3,250,000 244,640,034 45,000 57,500 - - - - - - - - 1,541 18,964 211,016 - - - - 1,531,374,350 2,143,923 - - - - 42,260,533 591,648 26,030 4,344 3,250 244,640 - - - - - - 1,531,374,350 2,143,923 - - - - - - 42,260,533 591,648 *The nominal value of each Ordinary Share was 0.01p until the consolidation and reorganisation of the share capital on 22 June 2015 and 0.1p thereafter 59 | P a g e Notes to the financial statements (continued) For the year ended 31 December 2017 20. Share based payment arrangements Armadale Capital Plc No options over Ordinary Shares in the Company were granted during the year (2016, 3,000,000). A summary of outstanding options is as follows: Exercise price Held at 1 January 2016 Granted Expired Expired Held at 1 January 2017 Held at 31 December 2017 Directors PA Marks Granted 01.10.13 15p Granted 19.11.14 15p JLG Lewis Granted 01.10.13 15p Granted 19.11.14 15p W Frewen Granted 21.07.16 Granted 21.07.16 ES Mahede Granted 10.08.16 Granted 10.08.16 N Johansen Granted 16.10.16 Granted 16.10.16 Consultants Granted 01.10.13 15p Granted 19.11.14 15p 2p 4p 2p 4p 2p 4p 333,333 333,333 333,333 666,667 - - - - - 1,000,000 - 1,000,000 - - - - 250,000 250,000 250,000 250,000 (333,333) (333,333) - - - - (333,333) (666,667) - - 1,000,000 1,000,000 - - - - (1,000,000) (1,000,000) - - - - - - - - - - 250,000 250,000 250,000 250,000 - - - - 250,000 250,000 250,000 250,000 266,667 400,000 - - 2,333,333 3,000,000 266,667 - 400,000 - (1,666,666) 3,666,667 (200,000) (100,000) (2,300,000) 66,667 300,000 1,366,667* The number of options and their exercise prices have been adjusted for the effects of the share capital sub-division on 28 June 2013 and the share capital consolidation and reorganisation on 22 June 2015 *representing 0.56% of the issued share capital of the company All of the outstanding options held at year end were exercisable at a weighted average exercise price of 6p (2016:5p). The Mahede and Johannsen options have a life of four years from the date of grant. The consultant options have a life of 10 years. All options are time based with no other conditions. The average contractual life of options held is 74 months (2016: 87 months) Page | 60 Armadale Capital Plc Notes to the financial statements (continued) For the year ended 31 December 2017 21. Reserves A description of the nature of each Reserve and a summary of movements are shown in the Statements of Changes in Equity on pages 29 and 30. 22. Related party transactions In respect of the Company, amounts, net of provisions, due from subsidiary undertakings were £972,544 (2016 - £3,358,091), the movement being amounts lent to the subsidiaries. 23. Ultimate controlling party There was no ultimate controlling party during the year. 24. Subsequent events On 9 April 2018, the Company placed 58,393,941 Ordinary Shares of 0.1p at a price of 1.65p to raise £963,500 before expenses. 25. Notes to the group and company statement of cash flows As at January 1, 2017 Cash flows from/(used in) financing activities Non-cash flows Interest charged Unwinding Conversion of loan notes As at December 31, 2017 Loan Notes £ 450,237 - 48,184 19,859 (86,874) 431,406 Long Term Borrowings £ - 200,000 2,630 - - 202,630 Total £ 450,237 200,000 50,814 19,859 (86,874) 634,036 Page | 61 Notice of Annual General Meeting Armadale Capital Plc ARMADALE CAPITAL PLC 1 Arbrook Lane, Esher, Surrey, KT10 9EG Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of Armadale Capital Plc (‘the Company’) will be held at 3 St Michael’s Alley, London EC3V 9DS on 21 June 2018 at 3.00 pm for the purpose of considering and, if thought fit, passing the following Resolutions which will be proposed as ordinary resolutions in the cases of Resolutions 1 to 4 and as a special resolution in the case of Resolution 5. ORDINARY BUSINESS 1. To receive the report of the Directors and the audited financial statements of the Company for the year ended 31 December 2017. 2. To reappoint Emmanuel S Mahede as a Director of the Company, who resigns by rotation and offers himself for reappointment under the Articles of Association of the Company. 3. To reappoint BDO LLP as auditors of the Company to act until the conclusion of the next Annual General Meeting and to authorise the Directors to determine the remuneration of the auditors. SPECIAL BUSINESS ORDINARY RESOLUTION 4. That in substitution for all existing and unexercised authorities, the directors of the Company be and they are hereby generally and unconditionally authorised for the purpose of section 551 of the Companies Act 2006 (‘the Act’) to exercise all or any of the powers of the Company to allot Relevant Securities (as defined in this Resolution) up to a maximum nominal amount of £150,000 provided that this authority shall, unless previously revoked or varied by the company in general meeting, expire on the earlier of the conclusion of the next Annual General Meeting of the Company or 15 months after the passing of this Resolution, unless renewed or extended prior to such time except that the directors of the Company may before the expiry of such period make an offer or agreement which would or might require Relevant Securities to be allotted after the expiry of such period and the directors of the Company may allot Relevant Securities in pursuance of such offer or agreement as if the authority conferred hereby had not expired. In this Resolution, “Relevant Securities” means any shares in the capital of the Company and the grant of any right to subscribe for, or to convert any security into, shares in the capital of the Company (“Shares”) but does not include the allotment of Shares or the grant of a right to subscribe for Shares in pursuance of an employee’s share scheme or the allotment of Shares pursuant to any right to subscribe for, or to convert any security into, Shares. SPECIAL RESOLUTION 5. That in substitution for all existing and unexercised authorities and subject to the passing of the preceding Resolution, the directors of the Company be and they are hereby empowered pursuant to section 570 of the Act to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the authority conferred upon them by the preceding Resolution as if section Page | 62 Armadale Capital Plc 561(1) of the Act did not apply to any such allotment provided that the power conferred by this Resolution, unless previously revoked or varied by special resolution of the Company in general meeting, shall be limited to: (a) (b) the allotment of ordinary shares of 0.1p each in the capital of the Company arising from the exercise of options and warrants outstanding at the date of this Resolution; the allotment of equity securities in connection with a rights issue in favour of ordinary shareholders where the equity securities respectively attributable to the interest of all such shareholders are proportionate (as nearly as may be) to the respective numbers of the ordinary shares held by them subject only to such exclusions or other arrangements as the directors of the Company may consider appropriate to deal with fractional entitlements or legal and practical difficulties under the laws of, or the requirements of any recognised regulatory body in, any territory; and (c) the allotment (otherwise than pursuant to subparagraphs (a) and (b) above) of equity securities up to an aggregate nominal amount of £150,000; and shall expire on the earlier of the date of the next Annual General Meeting of the Company or 15 months from the date of the passing of this Resolution save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. Registered Office: 1 Arbrook Lane Esher, Surrey, KT10 9EG 22 May 2018 By order of the Board Timothy Jones Company Secretary Notes to the Notice of Annual General Meeting Entitlement to attend and vote 1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the Company’s register of members 48 hours before the time of the Meeting shall be entitled to attend and vote at the Meeting. Appointment of proxies 2. If you are a member of the Company at the time set out in note 1 above, whether or not you are able to attend the meeting, you may use the enclosed form of proxy to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. 3. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them. 4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact the registrars of the Company, Share Registrars Limited on 01252 821 390. 5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain Page | 63 Armadale Capital Plc from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting. Appointment of proxy using hard copy proxy form 6. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. To appoint a proxy using the proxy form, the form must be: completed and signed; sent or delivered to Share Registrars Limited at The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR or by facsimile transmission to 01252 719 232; and received by Share Registrars Limited no later than 48 hours (excluding nonbusiness days) prior to the Meeting. In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the Company or an attorney for the Company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form. Appointment of proxy by joint members 7. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the firstnamed being the most senior). Changing proxy instructions 8. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut- off time will be disregarded. Where you have appointed a proxy using the hardcopy proxy form and would like to change the instructions using another hardcopy proxy form, please contact Share Registrars Limited on 01252 821 390. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. Termination of proxy appointments 9. In order to revoke a proxy instruction you will need to inform the Company using one of the following methods: By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Share Registrars Limited at The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR or by facsimile transmission to 01252 719 232. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the Company or an attorney for the Company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. In either case, the revocation notice must be received by Share Registrars Limited no later than 48 hours (excluding nonbusiness days) prior to the Meeting. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Page | 64 Armadale Capital Plc Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated. Issued shares and total voting rights 10. At 18 May 2018 the Company’s issued share capital comprised 303,033,975 Ordinary Shares. Each Ordinary Share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company as at 18 May 2017 is 303,033,975 Communications with the Company 11. Except as provided above, members who have general queries about the Meeting should email the Company Secretary, Timothy Jones, on tim@timothyjones.co.uk (no other methods of communication will be accepted). You may not use any other electronic address provided either in this notice of general meeting; or any related documents (including the chairman’s letter and proxy form), to communicate with the Company for any purposes other than those expressly stated. CREST 12. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the General Meeting and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required (available via euroclear.com/CREST). instructions, as described the CREST Manual for such in The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID: 7RA36) by the latest time(s) for receipt of proxy appointments specified above. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of CREST by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. Page | 65 Armadale Capital Plc Form of Proxy Form of Proxy for use at the Annual General Meeting ARMADALE CAPITAL PLC (Registered in England and Wales with company number 5541602) I, a Member of ARMADALE CAPITAL PLC (hereinafter referred to as ‘the Company’) and entitled to vote, hereby appoint the Chairman, or _________________ as my proxy to attend and vote for me and on my behalf at the Annual General Meeting of the Company to be held on 21 June 2018 at 3.00 pm and at any adjournment thereof. (Please indicate below how you wish your votes to be cast. If the Form of Proxy is returned without any indication as to how the proxy should vote on any particular matter, the proxy will vote as they think fit.) Ordinary Resolutions FOR AGAINST ABSTAIN 1. To receive the report of the Directors and the audited financial statements of the Company for the year ended 31 December 2017. 2. To re-elect Emmanuel S Mahede as a Director. 3. To re-appoint BDO LLP as auditors of the Company and to authorise the Directors to determine their remuneration. Special Business Ordinary Resolution 4. To authorise the Directors to allot relevant securities up to a maximum nominal amount of £150,000. Special Resolution 5. To authorise the Directors to allot relevant securities up to a maximum nominal amount of £150,000. Signature Date Full Name Address Page | 66 Armadale Capital Plc Armadale Capital Plc NOTES 1. Only holders of Ordinary Shares, or their duly appointed representatives, are entitled to attend and vote at the Meeting. A member so entitled may appoint (a) proxy(ies), who need not be (a) member(s), to attend and vote on his/her behalf. 2. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact the registrars of the Company, Share Registrars Limited on 01252 821 390. 3. If you wish to appoint someone other than the Chairman of the Meeting as your proxy, please insert his/her name and delete “the Chairman of the Meeting or”. 4. Please indicate how you wish your proxy to vote by deleting either for or against. Unless otherwise instructed the person appointed a proxy will exercise his/her discretion as to how he/she votes or whether he/she abstains from voting on any particular resolution as he/she thinks fit. 5. A corporation must seal this Form of Proxy or have it signed by an officer or attorney or other person authorised to sign on its behalf. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with this Proxy Form. 6. In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders. For this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the joint holding. 7. Pursuant to regulation 41 of The Uncertificated Securities Regulations 2001, members will be entitled to attend and vote at the meeting if they are registered on the Company’s register of members 48 hours before the time appointed for the meeting or any adjournment thereof. 8. To be valid this Form of Proxy must reach Share Registrars Limited, The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR or by facsimile transmission to 01252 719 232 not later than 48 hours (excluding non- business days) before the time of the Meeting. Lodgement of a Form of Proxy does not preclude a member from attending the Meeting and voting in person. Page | 67 

Continue reading text version or see original annual report in PDF format above