Beowulf Mining plc Annual Report 2014

Plain-text annual report

Beowulf Mining plc GROUP OF COMPANIES Annual Report and Consolidated Financial Statements 2014 Company Information Directors Mr B Metcalf Mr K R Budge Dr Jan-Ola Larsson Secretary Mr L O’Donoghue Registered Number 02330496 (England and Wales) Registered Office Beowulf Mining plc 201 Temple Chambers 3-7 Temple Avenue London EC4Y 0DT Swedish Office Jokkmokk Iron Mines AB Umevägen 1 921 45 LYCKSELE Sweden Registrars Neville Registrars Limited Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA Auditors BDO LLP 55 Baker Street London W1U 7EU Nominated Adviser & Broker Cantor Fitzgerald Europe 1 Churchill Place Level 20 Canary Wharf London E14 5RB Solicitors Spearing Waite LLP 41 Friar Lane Leicester LE1 5RB UK Bank The Royal Bank of Scotland Piccadilly Circus Branch 48 Haymarket London SW1Y 4SE Public Relations Blytheweigh 4-5 Castle Court London EC3V 9DL Swedish Custodian Bank Skandinaviska Banken AB SEB Securities Services 106 40 Stockholm Sweden Website www.beowulfmining.com 2 Beowulf Mining plc Annual Report 2014 Beowulf Mining plc Annual Report 2014 Contents Company Profile Company Strategy Chairman’s Statement Review of Operations and Activities Board of Directors Strategic Report Report of the Directors Remuneration Report Corporate Governance Report Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Other Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash flows Notes to the Consolidated Financial Statements 2 3 4 6 16 17 18 20 22 24 26 27 28 29 30 32 34 35 36 1 Beowulf Mining plc Annual Report 2014Company Profile Beowulf Mining plc (“Beowulf” or the “Company”) is listed on London’s Alternative Investment Market (“AIM”) (Ticker: BEM) and Stockholm’s AktieTorget (Ticker: BEO). The Company’s principal project is the delivery of their iron ore material to the Kallak North iron ore deposit located Atlantic harbour at Narvik (Norway) about 40 kilometres (“km”) west of the or to the Botnian Sea harbour at Luleå Jokkmokk municipality centre in the (Sweden). Norrbotten County in Northern Sweden. Local infrastructure around the project is excellent, with all-weather gravel roads passing through the project area, and all parts easily reached by well used forestry tracks. A major hydroelectric power station with associated electric power-lines is located only a few kilometres to the south east. The nearest railway (the ‘Inland Railway Line’) passes approximately 40km to the east. This railway line is connected at Gällivare with the ‘Ore Railway Line’, used by Luossavaara-Kiirunavaara (“LKAB” ) for Other portfolio assets include the Ballek Joint Venture project in the Norrbotten County in Northern Sweden where the Company has a JORC Code compliant Inferred Resource for the Lulepotten copper-gold deposit of 5.4 million tonnes (“Mt”), grading 0.8 per cent copper and 0.3 grammes per tonne (“g/t”) gold; the Nautijaure licence with potential for iron oxide copper gold (“IOCG”); the Grundträsk gold project; and the Munka molybdenum project. 2 Beowulf Mining plc Annual Report 2014Company Strategy Beowulf’s strategy is to build a sustainable Scandinavian based mining company, which creates shareholder value, while remaining opportunistic for mergers and acquisitions; preserving the Company’s low sovereign risk profile and rewarding its investors in London and Stockholm. The development of Kallak North is In addition to Kallak North, Beowulf is at a point now where the Company focusing its efforts on the potential of its is considering the introduction of wider exploration portfolio, which offers a strategic partner and associated commodity diversification in copper, gold investment; a partner who understands and molybdenum. the value of Kallak North as a high quality producing asset within 5 years, supplying high grade concentrate over 69 per cent iron content with very low levels of phosphorous and sulphur, lending itself to pelletization and consumption in Direct Reduction Iron (“DRI”) facilities in Europe and the Middle East. The leadership team is also looking beyond the Company for value creation opportunities in Finland, Norway and Sweden. 3 3 Beowulf Mining plc Annual Report 2014Chairman’s Statement I am pleased to be able to present my first Chairman’s Statement to shareholders and stakeholders of the Company. I joined the Company in September 2014 together with Kurt Budge, as a Non-Executive Director. Since then Kurt has taken over the role of Chief Executive Officer and I have taken on the role of Non-Executive Chairman. I would also like to take this opportunity to thank the directors of the Company (“Directors”) who left during the year for their contribution to the development of the Company. With the change in leadership, Beowulf has re-established itself, strengthened its financial controls and governance procedures, re-focused the Company’s strategy and aligned its interests with those of its shareholders. The management team is working hard to strengthen relationships with key stakeholders, encapsulating the Company’s new approach in the following three mission statements: “Showing respect to all our stakeholders” “Visar respekt för alla intressenter” “Becoming a local partner” “Vill samverka lokalt” “Delivering responsible development” “Står för ansvarsfull utveckling” Iron ore market AIM1 2014 will be remembered for the severity Equity proceeds of approximately £245 and speed of commodity price falls - million (“M”) were raised by AIM’s junior particularly iron ore - that very quickly miners in 2014 – an increase of 80 per cent rendered higher-cost producers vulnerable. on 2013, but from a very low base, and The 62 per cent iron CFR China benchmark some 82 per cent short of 2007’s peak. price nearly halved in 2014, and in the first Only £5M of the 2014 total was raised from quarter of 2015 the price has continued new issues, with IPOs remaining firmly to fall. The fall in the benchmark price is off the agenda. The dominance of the due to a combination of factors, including mining sector on AIM has lessened, with weakening demand especially from China, mining shares ending the year with just a and significant growth in output from third of their value when compared with the big producers. Nonetheless, we are the prior year. Despite these difficulties encouraged by the 7 per cent recovery in the Company undertook a fundraising the benchmark pricing since its recent low in August/September 2014 to raise gross in April 2015. £1.74M and in March 2015 raised a further Beowulf is not seeking to compete in gross £350,000. the seaborne iron ore trade into China. Kallak Iron Ore Project (“Kallak”) Kallak North should be a high quality producing asset within 5 years, supplying high grade concentrate over 69 per cent iron with very low levels of phosphorous and sulphur, lending itself to pelletization and consumption in Direct Reduction Iron (“DRI”) facilities in Europe and the Middle East at premium prices. As a comparison, the 65 per cent iron pellet price has been on average $40 per tonne (“t”) higher than the 62 per cent iron price in 2014. Excellent progress has been made during the year at Kallak. The known orebodies now cover an area approximately 3,700 metres (“m”) in length and 350m in width. In December we reported an upgraded resource for Kallak North and a maiden resource for Kallak South – a 34 per cent increase in indicated resource to 118.5Mt at 27.5 per cent iron from 88.3Mt at 27.7 per cent iron in the 2013 resource statement. 1 EY Mining Eye Q4 2014; London Stock Exchange Statistics 4 Beowulf Mining plc Annual Report 2014We also reported a total inferred resource consequences, that mining and reindeer £0.85M in equity rate swap agreements. of 33.8Mt at 26.2 per cent iron, and an husbandry can coexist. The amount receivable under these exploration target of 90-100Mt at 22-30 per cent iron representing potential ore below the pit shells and in the gap between drilling defined Kallak South mineralized zones. The exploration target together with the drilling completed to date gives us confidence that there is substantially more iron ore at Kallak than previously defined. The Company continues to engage with key stakeholders at the local and county levels, focus on strengthening relationships and addressing all outstanding concerns. The north of Sweden is seeking ways to stimulate economic growth, create jobs and slowdown population decline and a mine at Kallak North is seen as part of the However, rather than continue to drill, solution for achieving those goals. It is we are focusing our efforts on obtaining the Company’s belief that the Exploitation the Exploitation Concession for Kallak Concession application satisfies all the North. In February 2015 the Chief Mining requirements of the Swedish regulations Inspectorate found that the prerequisites and that there should be no obstacle for an for an Exploitation Concession had been early and positive decision by the Swedish fulfilled, but left the Government to make a Government in favour of granting the agreements was linked to the Company’s share price performance. Unfortunately, due to the fall in the share price, exacerbated by difficult market conditions for mining and exploration companies, the expected settlements fell significantly. The Directors mutually agreed with Lanstead to accelerate all outstanding settlements in consideration of a final settlement of £150,000. The Directors consulted with Cantor Fitzgerald Europe, the Company’s nominated adviser, who agreed that the terms of the accelerated settlement were fair and reasonable insofar as shareholders were concerned. decision regarding Chapters 3 and 4 of the Exploitation Concession for Kallak North. The Company also gave shareholders Environmental Code. Before the Mining Inspectorate’s decision and further to the County Administrative Boards (“CAB’s”) response in October 2014, the Company took the opportunity to make a further written submission to the Mining Inspectorate on issues identified by CAB regarding transport. In that submission, the Company stated that it will not be proposing transport routes that pass in a north/north-easterly direction through the Jelka-Rimakåbbå Natura 2000 area, ensuring that future transport routes will Other projects in the portfolio The management team has spent time reviewing the Company’s other projects, including the Ballek Joint Venture located in Norrbotten County in northern Sweden, where the Company has a JORC Code compliant Inferred Resource for the Lulepotten copper-gold deposit of 5.4Mt, grading 0.8 per cent copper and 0.3g/t gold; the Nautijaure licence with potential for iron oxide copper gold (“IOCG”); the Grundträsk gold project; and the Munka not lead to a significant impact on reindeer molybdenum project. husbandry. With regard to reindeer husbandry, the Company proposed precautionary and protective measures which resulted from analysis undertaken as part of its environmental impact assessment; these measures will be developed further in consultation with concerned Sami villages as part of the Company’s application for an Environmental Permit. The Company also intends to establish a framework for compensatory measures and economic compensation in the event that there are residual consequences for neighbouring communities. It is the Company’s firm belief that having put in place systems to manage its future operations, and frameworks to address residual The 2015 exploration programme will involve reassessing the significant historical data that exists on each of the projects, supplemented with fieldwork, before finalising plans for further drilling. The Board of the Company (“Board”) has received approaches to joint venture on assets within the portfolio, and will continue to review the attractiveness of each proposal when received. Corporate The Company undertook a fundraising in August/September 2014 to raise gross proceeds of £1.74M. This included a capital raise of £1M from Lanstead Capital L.P. (“Lanstead”), the Company’s largest shareholder, which involved investing the opportunity to subscribe for new shares through an open offer in the September fundraising and I want to take this opportunity to thank all those who participated. The loss for the year is £3.1M (2013: loss of £2.2M) with a basic loss per share of 1.00p (2013: loss of 0.91p). The increase in the loss over 2013 is due primarily to losses on the derivative financial assets. Approximately £0.2M in cash was held at the year end, before receipt in early January 2015 of £150,000 from the Accelerated Settlement of the Equity Swap Agreements and the completion of the March 2015 fundraising which raised gross £350,000. The Company appointed Liam O‘Donoghue as Company Secretary on 8 May 2015. Liam is a qualified corporate lawyer and director of the AIM specialist advisory and administration firm, CMS Advisory Group Limited. The Board and Executive have sought to align themselves with shareholder interests, by setting basic pay and fees at market levels, thereafter seeking to conserve cash by electing to salary sacrifice a third of compensation, which will be converted into shares. The salary sacrifice has continued since October 2014, but due to close periods the Directors have been unable to convert this into shares. The Board will continue to 5 Beowulf Mining plc Annual Report 2014ensure that the Directors and executives is still focused on creating value for I would like to thank our employees, are appropriately incentivised and that shareholders, by first seeking an early consultants, contractors, advisers, their interests remain aligned to those of and positive decision by the Swedish shareholders and other stakeholders for the Company’s shareholders. Government on the application for an their valued support during the year. Outlook While the short term fundamentals for commodities look challenging and the economic outlook remains uncertain, the management team of Beowulf Exploitation Concession for Kallak North, and secondly by attracting the right partner for Kallak by demonstrating the quality of the orebody and its market potential as a high grade premium concentrate. Bevan Metcalf Non-Executive Chairman 29 May 2015 Review of Operations and Activities Introduction Beowulf has been active in northern exploration and development work in Sweden for more than 10 years, focusing recent years. its activities on areas with high exploration potential for iron, copper, gold and molybdenum in the Norrbotten and Västerbotten counties. The Kallak project in the Norrbotten County has been the principal focus of the Group’s The application for exploration permits and exploitation concessions are governed by the Swedish Minerals Act (1991:45) (the “Act”), which was subject to amendments in 1993, 1998 and Sweden continues to be a prominent mining jurisdiction and the largest iron ore (mostly magnetite) producer in the EU. It provides modern, efficient and well-established infrastructure, excellent power accessibility and affordability, a highly skilled mining and exploration workforce, extremely low sovereign risk and a very strong mining culture. Almost all current iron ore production is located in the Norrbotten County of northern Sweden at the Kiruna and Malmberget deep underground mines owned by the state owned company, LKAB. 6 Beowulf Mining plc Annual Report 20141999. The Act accords that an exploration to four years on special grounds and, on permit fee cost per hectare is increased. permit is granted for an initial period of exceptional grounds, a further maximum An exploitation concession is granted for three years from the date of issue and of five years. The longest possible period a period of twenty-five years and can be can be subsequently extended for up to of validity for any one permit is therefore extended by ten years at a time without a further three years by way of annual fifteen years, after which an application application if regular exploitation is in extensions. The period of validity of the for an exploitation concession must be progress when the period of validity expires. permit can be further extended by up made. After each three year period the Current exploration permits Beowulf, via its subsidiaries, currently holds 13 exploration permits, together with one registered application for an exploitation concession (Kallak North), all in northern Sweden, as set out in the table below: Permit Name/Mineral(s) Permit ID Area (km2) Date Valid From Date Valid Until Arjeplog Region: Ballek nr2 (Copper-Gold)* Ballek nr6 (Copper-Gold)* Munka nr10 (Molybdenum)^ Jokkmokk Region: Parkijaure nr3 (Iron)** Parkijaure nr2 (Iron)** Kallak nr1 (Iron)**µ Kallak nr2 (Iron)** Kallak nr3 (Iron)** Parkijaure nr4 (Copper)**+ Parkijaure nr5 (Iron)** Nautijaur nr1 (IOCG)**+ Ågåsjiegge nr2 (Iron)**+ Malå Mining District: 2005:69 2015:143 2009:178 2011:135 2008:20 2006:197 2011:97 2012:100 2012:59 2013:36 2012:57 2014:10 5.57 3.15 8.00 4.17 2.85 5.00 22.19 5.56 7.59 12.97 8.80 11.14 Lodged 31/03/2015 Awaiting grant of licence 23/03/2015 03/11/2009 23/03/2018 03/11/2015 11/08/2011 18/01/2008 28/06/2006 22/06/2011 09/08/2012 04/05/2012 04/03/2013 04/05/2012 24/02/2014 11/08/2017 18/01/2016 28/06/2016 22/06/2017 09/08/2015 Awaiting grant of licence 04/03/2016 Awaiting grant of licence 24/02/2017 Grundträsk nr6 (Gold)^ 2010:161 15.53 04/11/2010 04/11/2016 TOTAL: 112.52 Notes: * the Ballek permits are held by Wayland Sweden AB which is a wholly owned subsidiary of Wayland Copper Limited (“Wayland Copper”). Beowulf has a 65.25 per cent ownership interest in Wayland Copper, which is a subsidiary of Beowulf, and is the operator of the Ballek project. **held by the Company’s wholly owned subsidiary, Jokkmokk Iron Mines AB (“JIMAB”). + area recently reduced. ^ held by the Company’s wholly owned subsidiary, Norrbotten Mining AB (“Norrbotten Mining”). µ an application for an exploitation concession was originally lodged on 25 April 2013 (Mines Inspector Official Diary nr 559/2013) and an updated, revised and expanded application was submitted in April 2014. The Chief Mining Inspectorate has found that the prerequisites for an Exploitation Concession are fulfilled, but leaves the Government to make a decision regarding Chapters 3 and 4 of the Environmental Code. 7 Beowulf Mining plc Annual Report 2014 An overview of Beowulf’s principal projects and exploration activities is provided below. Kallak Iron Ore Project Introduction Kallak is located in the Jokkmokk municipality north of the Arctic Circle, approximately 40km west of Jokkmokk city centre and 80km south west of the major iron ore mining centre of Malmberget in the Norrbotten County in northern Sweden. LKAB’s Kiruna iron ore mine, the world’s second largest underground mine, is located approximately 120km to the north east. Iron mineralization was first discovered in the Kallak area by the Swedish Geological Survey (“SGU”) in 1947/48. Between 1968 and 1970, detailed ground geophysical surveys were carried out by the SGU over the entire area of interest including closely grid spaced magnetic, gravimetric and electromagnetic measurements. Some limited diamond drilling was also carried out. Two iron ore deposits were discovered, separated by only a few hundred metres in distance. Located in the same geological structures, the deposits may well be connected at depth and have been defined by the Company as the Kallak North and Kallak South deposits, respectively. Data from these surveys has now been compiled and interpreted. A composite of the magnetic field, resulting from these ground surveys and airborne surveys is shown in Figure 1. Kallak is located within the Svecofennian shield, consisting of metamorphic, sedimentary and volcanic rocks that are commonly between 1900 and 1870 million years old. The area around Kallak and the villages of Björkholmen and Randijaur is dominated by mafic to intermediary volcanites and metavolcanites as well as gabbro, diorite, diabase, ultramafic rocks and their metamorphic equivalents. The bedrock of the area is thus dominantly mafic. Only smaller areas with felsic rocks are found in the north east, north west and south west. These areas consist of granites, syenites and their metamorphic equivalents, pegmatites and other felsic to intermediary rocks. 8 Figure 1: Magnetic field anomaly map for the Kallak area. Composite from airborne and ground surveys. The outlines of Kallak North and South marked with green. The deposits are outcropping and consist more than 300m at both deposits. The of so called “quartz banded magnetite iron ore type”, comprised of fine grained mineralised structures at both Kallak North and Kallak South are almost vertically banded magnetite and minor hematite, dipping, generally covered by only shallow interlayered with quartz, feldspar and some (<2m) glacial overburden and, as such, are hornblende. The dominant host rock is a highly amenable to potential open pit grey, altered volcanite. The deposits occur in mining. Some sections of the central part a north-south oriented syncline of altered of Kallak South have, however, been found sediments and felsic volcanic rocks of early to be covered by more extensive glacial Proterozoic age within granitic gneisses. The overburden covering the outcropping deposits are up to 300m wide at surface mineralised structures. outcrop and located on topographically high ground. The northern deposit has a confirmed length extension of more than one kilometre and the southern deposit has a total length of more than two kilometres. Drilling has confirmed, in single drillholes, mineralised vertical depth extensions to With one new licence area registered in February 2014, Ågåsjiegge nr2, the project now covers a total area of approximately 80km2, comprising nine separate licences (Kallak nr1, Kallak nr2, Kallak nr3, Parkijaure nr2, Parkijaure nr3, Parkijaure nr4, Parkijaure nr5, Nautijaur nr1 and Ågåsjiegge nr2). Beowulf Mining plc Annual Report 2014Figure 2: Current exploration licenses (blue line) and the outcropping area of Kallak North and Kallak South (red line). Kallak North and South drilling operations in 2014 Kallak South A total of 5,051m of drilling was completed in the 2014 winter campaign, covering 16 holes all inclined at 45 or 60 degrees and directed towards the west. Iron mineralization was encountered in most holes. High grades and thicknesses of iron mineralization were encountered at depth in drillhole KS 14016. This hole returned an average grade of 52.87 per cent iron over an intersection of 36.35m, including a 16.68m section of 55.65 per cent iron. This high grade section is centrally located within an 89.32m long section of 42.09 per cent iron between 300.08m and 390.40m along the drillcore or vertically approximately 245m below surface. The iron mineralization is mostly comprised of massive hematite. Drillhole KS 14016, which was the last hole drilled in the 2014 Kallak South campaign, was collared at the most easterly position on the drill tested east west profile. From iron mineralization encountered earlier in other holes further west in this profile, it is clear that the mineralization remains open to the south east and at depth. The results of KS 14016 are by far the most interesting of the received assays with the highest grades of iron over the longest intersections encountered in all Area description and accessibility Local infrastructure is excellent, with all- of the Kallak drilling campaigns. Further Kallak comprises forested, low hilly ground close to a main paved road between Kvikkjokk and Jokkmokk. The principal land use is forestry, with the majority of the ground area being owned by a large local forestry company. Regional vegetation is generally comprised of mature pine, birch and spruce trees. The ground elevation varies between 300m and 450m above sea level in an area of undulating forested or logged ground forming a peninsula surrounded by Lake Parkijaure. The highest point is the Råvvåive hill at 481m located in the south east part of the project area. weather gravel roads passing through the to the north of drillhole KS 14016, iron project area and all parts easily reached mineralization was also noted in drillholes by well used forestry tracks. A major KAL 13055 and KAL 13056. This gives a 350m hydroelectric power station with associated drill confirmed extension of mineralization electric power-lines is located only a few in north to south strike length, with dip kilometres to the south east. There are no towards the south and south east. The full settlements within the project area, with extension towards the south and south east the closest villages being Björkholmen, remains open at depth. approximately two kilometres to the north west, and Randijaur approximately three kilometres to the east. The nearest railway (the ‘Inland Railway Line’) passes approximately 40km to the east. This railway line is connected at Gällivare with the ‘Ore Railway Line’, which is used by LKAB for delivery of their ore material to the Atlantic harbour at Narvik (Norway) or to the Botnian Sea harbour at Luleå (Sweden). The results of drillholes KS 14009, KS 14011 and KS 14013 indicated that these holes have been drilled somewhat east of the main ore zone. It may also be possible that this mineralization does not continue at depth and therefore further sections of mineralization were not encountered. In the southern part of the Kallak South 9 Beowulf Mining plc Annual Report 2014deposit the focus has been to extend the iron mineralization to the north from KAL 10054 where it was confirmed over significant width during the 2010 drilling campaign. Assays received from the 2014 drill campaign show that the iron mineralization, although weak, is intersected 200m north in KS 14012 and a further 100m north in KS 14008 and KS 14014. Thus, the iron mineralization at KAL 10054 is extending to KS 14014, with a confirmed length in north south direction of more than 300m, remaining open both to north and south and at depth. The results confirm that there is a close correlation between the extension of the iron mineralization at Kallak South as obtained by drilling, and the results of detailed ground geophysical, gravimetric and magnetic exploration. These pronounced geophysical anomalies extend on surface more than 2,000m and as defined by drill intersections are more than 200m in width. Kallak North A total of 3,156.3m of drilling was completed in the 2014 campaign for Kallak North, comprised of 10 drillholes mainly targeted on the southern and central part of the deposit. The assay results from KAL 14004 and KAL 14007, both collared in the central part of the Kallak North deposit, were very encouraging with significantly long intercepts of iron mineralization encountered in both holes, with similarities in grades and mineral character to earlier reported holes. Drillhole KAL 14004, inclined at 60 degrees, returned an intersection of 232.61m with an iron average grade of 26.36 per cent iron, between 146.54m and 379.15m. Some longer parts of this section displayed grades of more than 35 per cent iron. Likewise drillhole KAL 14007, which was inclined at 60 degrees, also showed a remarkably long intersection of 298.36m, starting almost at bedrock surface and extending to 309.36m, with an average grade of 26.35 10 Figure 3: Dry (top) and wet (bottom) pictures taken of the logged drill core box before shipment to ALS Piteå for cutting and sample preparation for assay. per cent iron. A 10.4m section of this tested through open pit optimization hole ran at a higher grade of 41.18 per using Whittle software. cent iron. This hole delivered the longest intersection of iron mineralization so far received of all drillholes at the Kallak North deposit since drilling commenced in 2010. JORC Compliant Resource Statement for Kallak North and South deposits GeoVista AB was commissioned in October 2014 to provide an independent, updated resource statement for Kallak North, as well as a maiden resource for Kallak South. The mineral resource for Kallak North had previously been reported in March 2013, by GeoVista AB. The mineral resource estimate for Kallak North and South is based on drilling The resource statement provided an increase of 34 per cent in indicated resource to 118.5Mt at 27.5 per cent iron from 88.3Mt at 27.7 per cent iron in the 2013 resource statement. A total inferred resource of 33.8Mt at 26.2 per cent iron, and an exploration target of 90-100Mt at 22-30 per cent iron representing potential ore below the pit shells and in the gap between drilling defined Kallak South mineralized zones was also reported. Kallak, as defined by drilling, is approximately 3,700m in length and 350m in width. Kallak North remains open to the north and at depth, and Kallak South remains open both to north conducted between 2010-2014, a total of and south and at depth. 27,895m drilled, including 131 drillholes. A significantly lower price of $90/t 62 per cent iron, as compared to $150/t 62 per cent iron in the 2013 resource statement was used, with the potential for eventual open pit extraction being Beowulf Mining plc Annual Report 2014Kallak Resource Statement Kallak North Kallak South Global Notes: Category Indicated Inferred Indicated Inferred Indicated Inferred Tonnage Mt 105.9 17.0 12.5 16.8 118.5 33.8 Iron % 27.9 28.1 24.3 24.3 27.5 26.2 P % 0.035 0.037 0.041 0.044 0.036 0.040 S % 0.001 0.001 0.003 0.005 0.001 0.003 1. The effective date of the Mineral Resource Estimate is 28 November 2014. 2. Resources have been classified as Indicated or Inferred, following the guidelines of the JORC Code, 2012 edition. 3. Cut-off grade of 15 per cent iron has been used. 4. Mineral Resources which are not Mineral Reserves have no demonstrated economic viability. Figure 4: Isometric view of Kallak North and South. Background grid 250m. Red = Hematite dominated, Blue = Magnetite dominated with >95 per cent magnetite, Brown = Magnetite dominated with 5-10 per cent hematite. For Kallak North, a total of 14 mineralized lenses (domains) have been interpreted and modeled, delineating principally the distribution of magnetite versus hematite. For the northern part of Kallak South, a total of 17 domains have been modelled, and for the southern part of Kallak South, a total of 9 domains are interpreted. An overview of the interpreted mineralization is shown in Figure 4. The mineralized area at Kallak North is shallower, at 150-200m below surface. approximately 1,100m long and at its However, in the northern part there are no widest part, in the center, approximately barren holes below the intercepts and so 350m wide. The deepest drillhole intercept the mineralization is open at depth. is 350m below surface in the central part of the mineralization. In the southern and northern parts the intercepts are Exploration of Kallak South has been divided in two parts, the northern and 11 Beowulf Mining plc Annual Report 2014 southern ends, respectively. In the northern part, the mineralization is approximately 750m long and is up to 350m in width. The deepest drillhole intercept is 350m below surface. In the southern part, the mineralization is approximately 500m long and is up to 300m in width. The deepest drillhole intercept is 200m-250m below surface. Approximately 800m in between the southern and northern parts of Kallak South has not been investigated by systematic drilling. However, as can be seen in Figure 1, the magnetic anomalous area is of equal or even bigger extension to that defined by drilling. The exploration potential is therefore considered high in this area and included within an exploration target reported with the resource statement made in November 2014. Further to the south of Kallak, within other exploration permits controlled by JIMAB, there are further known magnetite occurrences, but the current level of investigation does not permit the estimation of additional mineral resource. 12 Figure 5: Mineral resource classification. Green = Indicated, Red = Inferred. Metallurgical test work on Kallak North material Metallurgical bench scale tests, including Davis Tube Recovery (DTR) tests were completed in 2010 by MINPRO AB (“MINPRO”) of Strassa, Sweden (www.minpro.se) on ore grade material from drillholes on the Kallak North deposit. The tests were directed towards the production of a high grade magnetite pellet feed product. as bench scale grinding and magnetic separation, on composite samples extracted from six separate sections across the Kallak North deposit guided by advice from Micon. The main scope of the test work was to establish a variability pattern in the mineral processing versus standardised test work, with the results obtained used to plan for JIMAB’s test mining and sampling programme in 2013 and the subsequent mineral processing tests, Traditional treatment of the ore material laboratory and pilot scale, conducted in by fine grinding and wet magnetic early 2014. separation resulted in a clean magnetite pellet feed product containing 68.0 per cent iron corresponding to a recovery of 85.1 per cent. The head grade ore material contained 39.8 per cent iron, 33.1 per cent silica (SiO2), 0.57 per cent manganese (MnO), 0.09 per cent phosphorous (P2O5), 0.10 per cent titanium (TiO2) and 0.007 per cent sulphur. Further testing by MINPRO, using flotation techniques combined with wet magnetic separation, resulted in a final, high grade pellet feed product containing 70.4 per cent iron with low levels of contaminants such as phosphorous, manganese, sulphur and titanium. In 2012, JIMAB commissioned MINPRO to perform further DTR tests, as well The 2012 DTR tests, grinding to liberation and using wet low intensity magnetic separation techniques (“WLIMS”) produced high grade concentrate 68.9-70.3 per cent iron suitable for pelletization. Pilot scale test work on Kallak North material In late 2013, approximately 500t of ore from the test mining sampling programme completed on a defined area of the Kallak North deposit in summer 2013 was transported to a test facility in Outokumpu City, owned by GTK. The main portion of the material was a general composite bulk sample, representing all of the test mined sections at Kallak North in proportion to Beowulf Mining plc Annual Report 2014their respective occurrence. of dry magnetite concentrate produced for maximise the hematite recovery, without GTK’s initial report in respect of its test work was received in Q1 2014. Approximately 60 tonnes of the general composite bulk sample was tested during a two-week pilot campaign, primarily focusing on establishing recovery and product quality parameters for the magnetite content. Average iron content for the submitted sample was 29.5 per cent. The proportion of downstream test work was approximately fully reaching optimised levels. The best 2.7 tonnes, grading at 69.4 per cent iron beneficiation result was achieved using a at a magnetite recovery of approximately combination of spiral separators, supported 95 per cent. Average silica content in the by SLon HGIMS (“High-Gradient Intensity final product was 4.2 per cent and the Magnetic Separator”), recovery remained levels of sulphur and phosphorous were at below 30 per cent. The short test work insignificant, being below 0.01 per cent. programme did not enable optimisation The end product fineness was 80 per cent of the hematite beneficiation section. passing 25 microns. Process mineralogy studies proved that the hematite losses were mostly occurring in the very fine particle sizes. magnetite to hematite in the sample was The secondary objective, to produce a established to be approximately 3.4:1. concentrate of the hematite content, The magnetite beneficiation circuit was conventional and straightforward, consisting of rod milling with rougher- scavenger cobbing LIMS (“Low Intensity Magnetic Separation”) pre-concentration, followed by ball mill re-grinding together with six cleaner LIMS stages to achieve the final magnetite product. The grade and recovery levels were excellent. The amount was successful in respect of the quality In April 2015, bench scale test work has been aspect. A sample of 0.36t of dry hematite resumed at GTK to identify opportunities to iron concentrate was produced, at an produce a “super” high grade concentrate average grade of 66.6 per cent iron, lending itself to pelletization and containing 3.3 per cent silica, 0.03 per consumption in DRI facilities in Europe cent phosphorous and less than 0.02 per and the Middle East, and commanding a cent sulphur. The fineness was 80 per significant price premium; the work will cent passing 175 microns. Several different also generate critical design data for pre- flow sheet options were tested in order to feasibility studies. 13 13 Beowulf Mining plc Annual Report 2014Application for an Exploitation Concession for Kallak North In April 2013, JIMAB a subsidiary of Beowulf submitted an application to the Swedish Mining Inspectorate for an Exploitation Concession for Kallak North located in the Kallak nr1 permit area. Further to the Swedish Mining Inspectorate’s consultation process, in late November 2013 CAB raised a number of queries and additional information requests on certain aspects of the Environmental Impact Assessment (“EIA”) component of JIMAB’s application. In April 2014, an updated and enhanced application dealing with CAB’s queries was submitted. In a letter to the Chief Mining Inspector, dated 1 October 2014, CAB expressed the belief that the effects of the possible transport routes, from the future mine through areas used for reindeer husbandry could be detrimental and that the Exploitation Concession should In February 2015, the Chief Mining Specifically to reindeer husbandry, the Inspector found that the prerequisites Company proposed precautionary and for an Exploitation Concession had been protective measures which resulted fulfilled, but left the Government to from analysis undertaken as part of make a decision regarding Chapters 3 its environmental impact assessment; and 4 of the Environmental Code. these measures will be developed The Mining Inspectorate stated in their findings that: • The Exploitation Concession which has been applied for covers an area which is deemed suitable in light of the discovery, purpose, and other circumstances; • The Company has shown that a further in consultation with concerned Sami villages as part of the Company’s application for an Environmental Permit. The Company also intends to establish a framework for compensatory measures and economic compensation in the event there are residual consequences for neighbouring communities. It is the Company’s view that having put in place systems to manage its future operations, discovery of iron has been found, and is and frameworks to address residual likely to be commercially viable; consequences, that mining and reindeer • In the Chief Mining Inspector’s opinion, the environmental impact study, with the supplements which have been made, meets the requirements set husbandry can coexist. The Company continues to engage with key stakeholders at the local and county levels, focus on strengthening forth in Chapter 6 of the Environmental relationships and addressing all Code; and outstanding concerns. The north of Sweden is seeking ways to stimulate economic growth, create jobs and slowdown population decline and a mine at Kallak North is seen as part of the solution for achieving those goals. It is the Company’s belief that the Exploitation Concession application satisfies all the requirements of the Swedish regulations and there should be no obstacle for an early and positive decision by the Swedish Government in favour of granting the concession for Kallak North. therefore not be granted by the Mining • In the view of the Chief Mining Inspector, as CAB has not developed their arguments sufficiently regarding the scope of the encroachment on reindeer herding which will be caused by the concession area, the Chief Mining Inspector has decided to refer the issue to the Government. Before the Mining Inspectorate’s decision and further to CAB’s response in October 2014 to the Company’s application, the Company took the opportunity to make a further written submission to the Mining Inspectorate on issues identified by CAB regarding transport. In that submission the Company stated that it will not be proposing transport routes that pass in a north/north-easterly direction through the Jelka-Rimakåbbå Natura 2000 area, ensuring that future transport routes will not lead to a significant impact on reindeer husbandry as feared by the CAB. Inspectorate at this time. 14 Beowulf Mining plc Annual Report 2014Other Projects Grundträsk Gold Project deposit may be significantly larger. Ballek Copper-Gold Project The Grundträsk Project, focused solely on In 2015, a desktop review will be undertaken gold, is located in the Skellefte Mining together with fieldwork prior to the licence District of northern Sweden. There is little renewal in November 2015. The Ballek project, where Beowulf acts as operator is in the Arjeplog municipality in northern Sweden. The Group increased its interest from 50 per cent to 65.25 per cent in Wayland Copper Limited (“Wayland”), in accordance with the terms of a joint venture agreement with Energy Ventures Limited. Energy Ventures chose not to pro- rata fund in the most recent exploration campaign. The Company took control of the project during the year and Wayland became a subsidiary on 1 October 2014. The project area contains the Lulepotten deposit on which a maiden independent JORC Code compliant Inferred Resource estimate was compiled and reported in September 2008 of 5.4Mt, grading at 0.8 per cent copper and 0.3g/t gold, representing a total of 43,000t of contained copper metal and 52,000 ounces of contained gold at a cut-off value of 0.3 per cent for copper. The latest drill programme commenced in December 2013 and a total of 2,039m of drilling across eight holes was completed by April 2014. The programme was sole located within one of the selected targets showed abundant mostly fracture type copper mineralization present in quartz veins at relatively shallow levels with assays ranging up to 3.70 per cent copper over a 1m section and 0.5 per cent copper over a 13.2m section. The copper mineralization identified at this target is located on the Lulepotten trend less than 3km to the north east directly along strike and with similar geological structures as those of the Lulepotten deposit. outcrop and the land is currently used for forestry. There is good infrastructure in place, with the area being served by a network of forest roads, including the paved main road from Skellefte to Malå, which passes through the licence area. Water and electricity supplies are both available locally. Grundträsk has potential for a shallow depth gold resource, with gold bearing sulphide mineralization starting at depths of less than 12m, suggesting that any deposit will most likely be amenable to open pit mining. Exploration results to date indicate the presence of sigmoidal gold bearing structures in a mineralised corridor over a strike length of 800m. Historic drilling from 20 holes has returned gold grades of up to 5.2m at 4.28g/t, 4.62m at 2.8g/t, 5.7m at 2.53g/t and 16.9m at 1.86g/t. The focus in 2015 is a desktop review of historic data and fieldwork. The Company will also consider the potential for joint venturing. Nautijaure IOCG Project Nautijaure lies directly north and adjacent to Kallak. Based on regional geological and geophysical evidence, Nautijaur shows exploration potential for sulphides; the hypothesis being that in a large IOCG system, at the time of forming from worldwide references, there are a number of different metals (iron, sulphide metals, rare earths etc.) entering the sea water/floor in volcanic fluids, which deposit themselves at the interface. We have defined the large volumes of iron present at Kallak, and there could be associated metal deposits in close proximity. Fieldwork during 2014 season identified several copper sulphide rich boulders. Ågåsjiegge Iron Ore Project Ågåsjiegge lies in close proximity to the north east of Kallak, and shows exploration potential to host the same geological structures for iron mineralization as those seen at Kallak. The SGU has a historic resource estimate of 74-75Mt of magnetite, grade 30 per cent iron and almost free of The Munka molybdenum deposit is impurities. Historic logs on two holes show located in the municipality of Arjeplog mineralization in hole 72601 (west position) approximately 40km north west of the from depth at 16m, and in the 72602 hole Ballek project area. The deposit has (east position) from depth at 8.5m. Logging been confirmed from historic drilling to extend over 800m in length, with parallel files show mostly classification QFA_MIF, Quartz-Feldspar-Amphibole_Magnetite iron mineralised lenses of varying width in formation, and QF_MIF, intersected with excess of 20m. Between 1973 and 1977, pegmatite, PEG. The holes are 202.5m and a total of 67 holes were drilled by the 214m in length respectively. SGU for approximately 10,000m. Based on the results of this historic drilling, the SGU estimated a resource, up to 100m funded by the Company. Five drillholes all Munka Molybdenum Project The focus for Ballek in 2015 is on expanding depth, to be 1.7Mt grading at 0.156 per the defined resource, initially through cent molybdenum. This historic estimate reassessing the significant geophysical does not comply with current JORC Code work that has been undertaken to date, or 43-101 international standards. At the before embarking on further drilling. estimated tonnage, the Munka deposit represents the largest molybdenum deposit in Sweden. Recent finds of high grade glacial boulders of unknown, non-drill tested, bedrock sources indicate that the 15 Beowulf Mining plc Annual Report 2014Board of Directors Bevan Metcalf BMS ACA (NZ) - Non-Executive Chairman, Age 57 Mr Metcalf served as the Chief Financial Officer of Afferro Mining Inc. (“Afferro”) from January 2008, initially in a part time capacity, but becoming full time in November 2011. He left Afferro in December 2013 following the sale of the company. He joined African Eagle Resources plc in July 2004 and served as Part-time Finance Director from November 2004 to November 2011 and its Company Secretary from March 2005 to November 2011. He left African Eagle to take up a full time position with Afferro. He has 30+ years of financial management experience with international companies, such as ICI, SmithKline Beecham and Orion Corporation. He was granted ACA membership of the Institute of Chartered Accountants of New Zealand in 1986. Mr. Metcalf graduated with a Bachelor of Management Studies degree from Waikato University in New Zealand. Mr Metcalf was appointed a Non-Executive Director of Beowulf on 22 September 2014, became Senior Non-Executive Director on 1 December and Non-Executive Chairman on 8 May 2015. Kurt Budge MBA MEng ARSM - Chief Executive Officer, Age 45 Mr Budge holds an M.Eng (Hons) in Mining Engineering from The Royal School of Mines, Imperial College London and an MBA from London Business School. His career in the mining sector spans over 20 years. Most recently he has been an independent advisor to junior mining companies on acquisitions and project development. Prior to this he was General Manager Business Development for African Minerals Limited, where he developed options for growing the company’s iron ore production and identified M&A opportunities. Prior to African Minerals he worked as a mining analyst in investment research, and before that was Vice President of Pala Investments AG (“Pala”), a mining focused private equity firm based in Switzerland. Before joining Pala, he spent five years as a Business Development Executive in Rio Tinto’s Business Evaluation Department, where he was engaged in M&A, divestments and evaluated capital project investments. During the earlier part of his career he held several senior operations and planning roles in the UK coal industry with RJB Mining (now UK Coal plc) and worked as a Venture Capital Executive with Schroder Ventures. Mr Budge was appointed a Non-Executive Director of Beowulf on 22 September 2014 and became Chief Executive Officer on 24 October 2014. Dr Jan-Ola Larsson Fil. Kand PhD DIC – Chief Operating Officer, Age 73 Dr Larsson holds a geology degree (Fil. Kand) from Uppsala University and a PhD in geochemistry from Imperial College London. He has over 40 years of varied exploration experience in base metals and diamonds in the Republic of Ireland, Canada, Brazil, Angola, Finland and Sweden. Previously he held positions including Head of Geochemistry at Geological Survey of Sweden, Head Geochemist of LKAB Exploration Company, Stockholm and Barringer Research Ltd., Toronto and Exploration Manager for Tetron Mineracao S/A, Cuiaba, Brazil and North Star Diamonds AB, Stockholm. He has been a director with Beowulf Mining plc since the start of the Company in 2002. 16 Beowulf Mining plc Annual Report 2014Strategic Report The Directors present their strategic report for the year ended 31 December 2014. Principal Activity Review Of The Business The principal activities of the Group in The results of the Group for the year the year under review were exploration are set out in the consolidated income and development for iron, copper and statement and show a loss after gold in Sweden. The Group is controlled, taxation attributable to the owners of financed and administered within the the parent for the year of £3,060,482 United Kingdom which remains the (2013: £2,186,514 loss). A comprehensive principal place of business. review of the business is given under the Chairman’s Statement and Review of Operations and Activities. Principal Risks And Uncertainties The principal risks and uncertainties faced by the Group are as follows: • the ability to raise sufficient funds to continue with its principal activities. • long-term adverse changes in commodity prices could affect the viability of exploration and extraction projects. • the operations of the Group are in a foreign jurisdiction where there may be a number of associated risks over which it will have no control. These may include economic, social or political instability or change, taxation, rates of exchange, exchange controls and exploration licensing. • licences may be subject to conditions which, if not satisfied, may lead to the revocation of the licences. • the exploration for and development of mineral deposits involves significant risks which even a combination of careful evaluation, experience and knowledge may not eliminate. Few properties which undergo exploration are ultimately developed into producing mines. There can be no guarantee that the estimates of quantities of minerals disclosed will be available to extract. With all mining operations there is uncertainty and hence risk, associated with operating parameters and costs resulting from the scaling up of extraction methods tested in pilot conditions. ON BEHALF OF THE BOARD: Mr B Metcalf Director 29 May 2015 17 Beowulf Mining plc Annual Report 2014Report of the Directors Directors The Directors who served during the year under review were: Mr B Metcalf Mr K R Budge Dr Jan-Ola Larsson Appointed 22 September 2014 Appointed 22 September 2014 Mr C Sinclair-Poulton Resigned 27 November 2014 Resigned 14 October 2014 Resigned 22 September 2014 Resigned 22 September 2014 Mr F Boman Mr A C R Scutt Mr E Taylor Dividends No dividends will be distributed for the year ended 31 December 2014 (2013: £nil). Going Concern In common with many exploration companies, the Company raises funds for its operations in discrete tranches, as and when required. The Group does not incur commitments or liabilities which cannot reasonably be met from available funds. While the Company has been successful in the past in raising funds, there is no assurance that it will continue to raise funds in the future. However, the Directors are confident that they will secure additional funding to meet corporate overheads and exploration-related costs for the foreseeable future and therefore believe that the going concern basis is appropriate for the preparation of the financial statements. Substantial Shareholdings The Directors are aware of the following who were interested, directly or indirectly, in 3 per cent or more of the Group’s ordinary shares on 28 May 2015: Shareholders Lanstead Capital LP Shares 78,415,251 TD Direct Investing Nominees (Europe) Limited 32,449,355 Barclayshare Nominees Limited HSDL Nominees Limited SVS (Nominees) Limited HSBC Client Holdings Nominee (UK) Limited Sunvest Corporation Limited 21,601,171 17,524,035 16,505,843 15,005,378 11,250,000 % 20.94 8.67 5.77 4.68 4.41 4.01 3.00 18 Beowulf Mining plc Annual Report 2014 AUTHORITY TO ISSUE SHARES the Directors must not approve the accordance with legislation in the United financial statements unless they are Kingdom governing the preparation and satisfied that they give a true and fair dissemination of financial statements, view of the state of affairs of the Group which may vary from legislation in other cash up to an aggregate nominal value In preparing these financial statements, of £530,991. the Directors are required to: SIGNIFICANT AGREEMENTS • select suitable accounting policies and Information relating to events since the and by the European Union, subject to any the steps that he ought to have taken material departures disclosed and as a Director in order to make himself explained in the financial statements; aware of any relevant audit information Each year at the AGM the Directors seek authority to allot shares. The authority, when granted, lasts until the next AGM (unless renewed, varied or revoked by the Company prior to or on such date). Subsequent to last year’s AGM held on 11 July 2014, a General Meeting was held on 22 September 2014. At that Meeting shareholders gave authority for the Directors to allot equity securities for The Companies Act 2006 requires the Company to disclose any significant agreements which take effect, alter or terminate upon a change of control of the Company. The Company is not aware of, or party to, any such agreement. EVENTS AFTER THE REPORTING PERIOD end of the year is given in note 25 to the financial statements. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Financial risk management policies and objectives for capital management are provided within note 22. DIRECTORS’ RESPONSIBILITIES STATEMENT The Directors are responsible for preparing the strategic report, 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 and Company and of the profit or loss of the Group for that year. 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. then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted • 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 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. The Company has a new website which went live on 31 March 2015. www.beowulfmining.com STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS So far as the Directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Group’s auditors are unaware, and each Director has taken all and to establish that the Group’s auditors are aware of that information. AUDITOR The auditor for the Company was changed during the year. BDO LLP has extensive experience of working with AIM companies in the Natural Resources sector. BDO LLP have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the Group’s forthcoming Annual General Meeting. requirements of the Companies Act ANNUAL GENERAL MEETING 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps The Group’s Annual General Meeting will be held at 10.30 a.m. (BST) on 29 June for the prevention and detection of fraud 2015 and full details of the proposed and other irregularities. Website Publication resolutions at that meeting will be posted to shareholders and will appear on the Company’s website. the Group and Company financial The Directors are responsible for statements in accordance with ensuring the annual report and the ON BEHALF OF THE BOARD: International Financial Reporting financial statements are made available Standards (IFRSs) as adopted by the on a website. Financial statements are European Union. Under company law published on the Company’s website in Mr B Metcalf Director 29 May 2015 19 Beowulf Mining plc Annual Report 2014Remuneration Report Executive Directors’ terms of engagement Remuneration in equity rather than cash There are two Executive Directors of the The current Board agreed to forgo one Company. Mr Budge was appointed Chief third of their salary and fees (after tax Executive Officer, on 24 October 2014 and and national insurance for UK resident Dr Larsson is the Chief Operating Officer Directors) for equity in the Company. This Compensation for loss of office In line with their letters of appointment no compensation was paid to Mr Boman when he resigned as an Executive Director on 14 October 2014 nor to Mr Taylor and Mr Scutt who resigned as and has been with the Company for will be reviewed on a quarterly basis and Non-Executive Directors of the Company more than ten years. is dependent on the financial resources on 22 September 2014. of the Company. Shares have not been acquired to-date as the Company is in a close period. Up to the end of December 2014 the amount set aside for shares is approximately £14,000. Reconstruction, merger, takeover and change of control At the 16 December 2014 Board Meeting it was agreed a change of control clause would be included in Compensation was paid to Mr Sinclair- Poulton under a settlement agreement, when he stepped down from the Board on 27 November 2014. The compensation was significantly less than what Mr Sinclair-Poulton was entitled to under his consultancy and service agreements. The sum of £30,000 was paid under his service agreement in two equal instalments of £15,000 in December 2014 and January 2015. Under his consultancy the Director’s contracts. In the event agreement a payment of £20,000 is of a reconstruction, merger, takeover, contingent on the Company’s cumulative acquisition, change of control of the Company, whereby a Directors fundraising since his departure from the Company reaching £500,000 (£350,000 agreement is terminated or they are has been raised to-date). asked to resign without being offered a similar position in the existing Company or any new company on terms and conditions no less favourable than the terms of this agreement, then they will be paid a prescribed fee equivalent to either: (i) two times their annual entitlement to salary, fees and bonus if they hold, at the least, two years tenure as a Director; or (ii) their annual entitlement to salary, fees and bonus if they hold less than two years tenure as a Director. Mr Budge is on an annual salary of £120,000 which is currently benchmarked in the lowest quartile for AIM companies of similar market capitalization and in the pre-revenue category. Mr Budge has a notice period of 12 months. Dr Larsson receives annual fees of SEK 991,200 (equivalent to £81,480 at the year-end exchange rate). These fees are invoiced through his business, Geoexperten and are subject to VAT, which is reclaimable by the Company. Non-Executive directors’ terms of engagement The Non-Executive Directors have specific terms of engagement under a letter of appointment. Their remuneration is determined by the Board. In the event that a Non-Executive Director undertakes additional assignments or work for the Company, this will be covered under a separate consultancy agreement. Under Mr Metcalf’s letter of appointment he is paid a fee of £35,000 per annum. Mr Metcalf has a consultancy agreement with the Company for financial and administrative advice and guidance as the Company does not yet have a Finance Director. Mr Metcalf has a one month notice period under his letter of appointment. 20 Beowulf Mining plc Annual Report 2014Aggregate Directors’ Remuneration The remuneration paid to the Directors in accordance with their agreements, during the years ended 31 December 2014 and 31 December 2013 was as follows: Executive/ Non-Executive Salary & Fees1 £ Termination Payments £ Share- based Payments2 £ 2014 Total £ 2013 Total £ Mr B Metcalf Mr K R Budge Dr Jan-Ola Larsson3 Non-Executive Executive Executive Mr C Sinclair-Poulton4 Executive 21,579 30,102 87,817 152,713 111,418 20,378 - - - 30,000 - - - 779 779 - - - - - 22,358 30,881 87,817 182,713 111,418 20,378 30,000 - - 108,990 174,996 153,162 28,000 40,000 Executive Non-Executive Non-Executive 30,000 Mr F Boman5 Mr A C R Scutt6 Mr E Taylor7 Notes: 1. Does not include expenses reimbursed to the Directors. 2. In relation to options granted in 2014. 3. Fees of £87,817 for Dr Larsson were paid through Geoexperten a business owned by Dr Larsson. 4. Fees of £125,113 for Mr Sinclair-Poulton were paid through Merchant Adventurers Company Limited. Mr Sinclair-Poulton resigned from the Company and as a Director on 27 November 2014. 5. Fees of £111,418 for Mr Boman were paid through FHB AB, a Swedish company of which Mr Boman is a director and shareholder. Mr Boman resigned from the Company and as a Director on 14 October 2014. 6. Mr Scutt resigned from the Company and as a Non-Executive Director on 22 September 2014. 7. Fees of £30,000 for Mr Taylor were paid through Tearne Foulsham Limited of which Mr Taylor is a director and shareholder of this company. Mr Taylor resigned as a Non-Executive Director on 22 September 2014. Each Director is also paid all reasonable expenses incurred wholly, necessarily and exclusively in the proper performance of his duties. The Group does not operate a pension scheme and has not paid any contributions to any pension scheme for Directors or employees. The beneficial and other interests of the Directors holding office on 31 December 2014 in the issued share capital of the Company were as follows: Ordinary Shares 31 December 2014 31December 2013 Mr B Metcalf Mr K R Budge 333,333 333,333 - - Dr Jan-Ola Larsson 650,000 650,000 Mr Metcalf and Mr Budge were each awarded 500,000 options on 9 October 2014. These options have a vesting period of one year. Ordinary Shares Under Option Mr B Metcalf Mr K R Budge Number 500,000 500,000 Exercise Price Expiry Date 4 pence 9 October 2019 4 pence 9 October 2019 Dr Jan-Ola Larsson 700,000 30 pence 7 December 2016 21 Beowulf Mining plc Annual Report 2014 Corporate Governance Report Corporate Governance and Board composition The Board acknowledges the importance of the guidelines set out in the UK Corporate Governance Code and the Quoted Companies Alliance (QCA) published Corporate Governance Guidelines and complies with these so far as is appropriate having regard to the size and nature of the Company. Corporate governance is a key value driver for investors and an important determinant of investment decision- making. For this reason, minority shareholders must be able to rely on appropriate corporate governance structures, risk management systems and Board processes to safeguard their interests and ultimately enhance shareholder value. Some basic safeguards that help reduce investment risk include confidence that the board and management will: (1) release timely and reliable information about the Company, so as to allow shareholders to react to changing circumstances; (2) deliver on the stated strategy and performance targets; (3) take decisions in the interests of all investors – in other words, without favouring insiders and controlling shareholders; (4) ensure that share holdings will not be significantly and unexpectedly diluted through non-pre-emptive issues; and (5) guard against shareholder value being destroyed through significant transactions or material related-party transactions that investors have not had a chance to evaluate and approve. Clearly, corporate governance alone will Remuneration Committee not make an investment attractive if the business model itself is not convincing. But all other things being positive, particularly the business acumen and experience of the management team, investor attention will turn to the calibre, expertise and integrity of the Non-Executive Directors, and therefore their ability to oversee, challenge and advise the management in order both to drive value creation and to protect the interests of shareholders at all times. Audit Committee The Remuneration Committee’s role is to assist the Board of Directors to discharge its responsibilities in relation to remuneration of the Company’s Executive Directors, Non-Executive Directors and senior executives including share and benefit plans and make recommendations as and when it considers it appropriate. The Remuneration Committee meets as and when required. As the Company currently only has one Non-Executive Director the duties of the The overall purpose of the Audit Committee are discharged by the Board Committee is: in consultation with the nominated (1) To ensure that the Company’s management has designed and Nominations Committee adviser. implemented an effective system of internal financial controls; The Board has not established a Nominations Committee as the Board (2) To review and report on the integrity considers that a separately established of the consolidated financial statements of the Company and related financial information; and (3) To review the Company’s compliance with regulatory and statutory requirements as they relate to financial statements, taxation matters and disclosure of financial information. In performing its duties, the Committee will maintain effective working relationships with the Board of Directors, management, and the external auditors and monitor the independence of those auditors. To perform his or her role effectively, each committee member will obtain an understanding of the responsibilities of committee membership as well as the Company’s business, operations and risks. The Audit Committee meets at least four times a year. As the Company currently only has one Non-Executive Director the duties of the Committee are discharged by the Board. committee is not yet necessary as its functions and responsibilities can be adequately and efficiently discharged by the Board as a whole. The Board assesses the experience, knowledge and expertise of potential Directors before any appointment is made and adheres to the principle of establishing a Board comprising Directors with a blend of skills, experience and attributes appropriate to the Group and its business. The main criterion for the appointment of Directors is an ability to add value to the Group and its business. All Directors appointed by the Board are subject to election by shareholders at the next Annual General Meeting of the Company following their appointment. The Board will review the need for a Nominations Committee as the Company evolves and one will be established if and when considered appropriate. 22 Beowulf Mining plc Annual Report 2014Share Dealing The Group has adopted a code which establishes rules governing dealings by the Directors of the Company, certain employees and persons connected with them. The Directors will comply with Rule 21 of the AIM Rules for Companies relating to Directors’ dealings and will take all reasonable steps to ensure compliance. The purpose of the dealing restrictions is to ensure that Directors, persons connected with them and certain employees do not abuse, and do not place themselves under suspicion of abusing, price-sensitive information that they may have or be thought to have, especially in periods leading up to an announcement of results. to the highest standards of personal violations, including those relating to and professional ethical behaviour. This accounting, internal accounting controls, must be reflected in every aspect of questionable accounting or auditing the way in which we operate. We take matters, securities law, the laws and a zero-tolerance approach to bribery regulations of any jurisdiction in which and corruption and we are committed the Company operates, in accordance to act professionally, fairly and with with its Whistleblower Policy. integrity in all our business dealings. Any breach of this policy will be regarded as a serious matter by the Company and is likely to result in disciplinary action and potentially the involvement of the police. Whistleblower Policy Relations with Shareholders The Board recognises that it is accountable to shareholders for the performance and activities of the Group. Beowulf communicates with its shareholders principally through its In order to discourage illegal activity website at www.beowulfmining.com and unethical business conduct and the interim and Annual Reports. in the Company, the Board has Shareholders can also sign up to receive developed a Whistleblower Policy. It news releases directly from the Group is the responsibility of all Directors, by email. Annual General Meetings of Anti-Bribery Policy officers and employees (including the Company give the Directors the The Company has in place appropriate guidance, training and implementation of procedures to ensure with the UK Bribery Act. The Company is committed contract employees and consultants), opportunity to report to shareholders to comply with the law and the on current and proposed operations and Company’s policies, and to report any enable shareholders to express their wrongdoing or violations or suspected views on the Group’s business activities. 23 23 Beowulf Mining plc Annual Report 2014Independent Auditor’s Report We have audited the financial permitted by law, we do not accept or auditscopeukprivate. statements of Beowulf Mining plc for assume responsibility to anyone other the year ended 31 December 2014 which than the Company and the Company’s comprise the consolidated income members as a body, for our audit work, statement, the consolidated statement for this report, or for the opinions we and other comprehensive income, the have formed. Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the Group’s and the parent company’s affairs as at 31 December 2014 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; Respective responsibilities of Directors and auditors As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the • the parent company financial financial statements in accordance statements have been properly with applicable law and International prepared in accordance with IFRSs as Standards on Auditing (UK and Ireland). adopted by the European Union and Those standards require us to comply as applied in accordance with the with the Financial Reporting Council’s provisions of the Companies Act 2006; (FRC’s) Ethical Standards for Auditors. and Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/ • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. consolidated and company statements of financial position, the consolidated and company statements of changes in equity, the consolidated and company statements of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the 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 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 24 24 Beowulf Mining plc Annual Report 2014Emphasis of Matter – Going concern In forming our opinion, which is not modified, we have considered the adequacy of disclosures made in Note 1 to the financial statements concerning the Group and Company’s ability to Opinion on other matters prescribed by the Companies Act 2006 • certain disclosures of Directors’ remuneration specified by law are not In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which made; or • we have not received all the information and explanations we the financial statements are prepared is require for our audit. continue as a going concern. The Group consistent with the financial statements. has identified a requirement to raise additional funds before the end of 2015 to meet corporate overheads and exploration-related costs. The Board has a reasonable expectation that the required, new funds will be secured from existing or potential investors. However, these conditions, along with the other matters explained in Note 1 to the financial statements indicate the existence of a material uncertainty which may cast significant doubt about the Group and Company’s ability to continue as a going concern. The Matters on which we are required to report by exception We have nothing to report in respect of the following matters where 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 Stuart Barnsdall (senior statutory auditor) For and on behalf of BDO LLP, statutory auditor London United Kingdom 29 May 2015 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). financial statements do not include the • the parent company financial adjustments that would result if the Group and the Company was unable to continue as a going concern. statements are not in agreement with the accounting records and returns; or 25 25 Beowulf Mining plc Annual Report 2014Consolidated Income Statement CONTINUING OPERATIONS Administrative expenses OPERATING LOSS Share of post-tax losses of equity accounted joint venture Finance costs Finance income LOSS BEFORE INCOME TAX Income tax expense LOSS FOR THE YEAR Loss attributable to: Owners of the parent Non-controlling interests Loss per share attributable to the ordinary equity holder of the parent: Basic and diluted (pence) Note 3 3 4 5 7 2014 2013 as restated £ £ (1,032,355) (1,115,988) (1,032,355) (1,115,988) (2,552) (4,559) (2,032,835) (1,109,028) 6,397 43,061 (3,061,345) (2,186,514) - - (3,061,345) (2,186,514) (3,060,482) (2,186,514) (863) - (3,061,345) (2,186,514) (1.00) (0.91) The notes form part of these financial statements 26 Beowulf Mining plc Annual Report 2014 Consolidated Statement Of Other Comprehensive Income 2014 2013 as restated £ £ LOSS FOR THE YEAR (3,061,345) (2,186,514) OTHER COMPREHENSIVE INCOME Items that will not be reclassified to profit or loss: Revaluation of listed investments Item that may be reclassified subsequently to profit or loss: Exchange losses arising on translation of foreign operations Share of other comprehensive income of equity accounted joint venture 986 986 (5,785) (5,785) (758,807) (134,984) (8,021) - (766,828) (134,984) OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX (765,842) (140,769) TOTAL COMPREHENSIVE INCOME (3,827,187) (2,327,283) Total comprehensive income attributable to: Owners of the parent Non-controlling interests (3,819,849) (2,327,283) (7,338) - (3,827,187) (2,327,283) The notes form part of these financial statements 27 Beowulf Mining plc Annual Report 2014 Consolidated Statement of Financial Position Note 2014 2013 1 January 2013 as restated as restated £ £ £ ASSETS NON-CURRENT ASSETS Intangible assets Property, plant and equipment Investment in equity accounted Joint ventures Investments Loans and other financial assets Derivative financial assets CURRENT ASSETS Trade and other receivables Derivative financial assets Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Share capital Share premium Revaluation reserve Capital contribution reserve Share option reserve Translation reserve Accumulated losses Non-controlling interests TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES 9 10 11 11 12 14 13 14 15 18 20 20 20 20 20 20 16 6,538,752 4,948,978 3,101,402 42,394 1,990 769 - 20,550 53,262 - 206,935 19,564 258,339 635,603 211,494 25,349 306,722 - 6,654,958 6,071,409 3,645,736 42,445 150,000 186,889 261,612 150,695 1,010,007 - 1,983,616 3,697,771 379,334 3,255,235 3,848,466 7,034,292 9,326,644 7,494,202 3,452,598 2,828,273 2,104,273 15,009,812 14,078,466 10,858,905 (9,450) 46,451 69,318 (10,436) 46,451 67,760 (4,651) 46,451 67,760 (927,835) (167,482) (32,498) (11,025,834) (7,965,352) (5,778,838) 6,615,060 8,877,680 7,261,402 129,134 - - 6,744,194 8,877,680 7,261,402 21 290,098 448,964 232,800 290,098 448,964 232,800 TOTAL EQUITY AND LIABILITIES 7,034,292 9,326,644 7,494,202 The financial statements were approved and authorised for issue by the Board of Directors on 29 May 2015 and were signed on its behalf by: Mr B Metcalf - Director Company Number 02330496 28 The notes form part of these financial statements Beowulf Mining plc Annual Report 2014 Company Statement of Financial Position ASSETS NON-CURRENT ASSETS Property, plant and equipment Investments Loans and other financial assets Derivative financial assets CURRENT ASSETS Trade and other receivables Derivative financial assets Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Share capital Share premium Revaluation reserve Capital contribution reserve Share option reserve Accumulated losses TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES Note 2014 2013 1 January 2013 as restated as restated £ £ £ 10 11 12 14 13 14 15 18 20 20 20 20 20 1,493 1,990 769 255,254 254,268 260,053 7,486,994 5,654,029 3,839,063 - 635,603 - 7,743,741 6,545,890 4,099,885 39,012 150,000 165,398 354,410 107,733 101,393 1,010,007 1,725,171 2,842,911 - 3,340,218 3,441,611 8,098,151 9,388,801 7,541,496 3,452,598 2,828,273 2,104,273 15,009,812 14,078,466 10,858,905 (35,114) (36,100) 46,451 69,318 46,451 67,760 (30,315) 46,451 67,760 (10,622,412) (7,646,354) (5,566,059) 7,920,653 9,338,496 7,481,015 21 177,498 50,305 60,481 177,498 50,305 60,481 TOTAL EQUITY AND LIABILITIES 8,098,151 9,388,801 7,541,496 These financial statements were approved and authorised for issue by the Board of Directors on 29 May 2015 and were signed on its behalf by: Mr B Metcalf - Director Company Number 02330496 The notes form part of these financial statements 29 Beowulf Mining plc Annual Report 2014 Consolidated Statement of Changes in Equity Share capital Share premium Revaluation reserve £ £ £ Capital contribution reserve £ Share option reserve £ Translation reserve Accumulated losses Total £ £ £ Non- controlling interest £ Balance at 1 January 2013 as restated 2,104,273 10,858,905 (4,651) 46,451 67,760 (32,498) (5,778,838) 7,261,402 Loss for the year Foreign exchange translation Revaluation of listed investments Total comprehensive income Transactions with owners Issue of share capital Costs associated with the issue of new shares - - - - - - - - 724,000 - 3,801,000 (581,439) - - (5,785) (5,785) - - - - - - - - - - - - - - - (2,186,514) (134,984) - - - (2,186,514) (134,984) (5,785) (134,984) (2,186,514) (2,327,283) - - - - 4,525,000 (581,439) Balance at 31 December 2013 as restated 2,828,273 14,078,466 (10,436) 46,451 67,760 (167,482) (7,965,352) 8,877,680 - - - - - - - - Loss for the year Foreign exchange translation Revaluation of listed investments Total comprehensive income Transactions with owners Issue of share capital Costs associated with the issue of new shares Equity-settled share-based payment transactions Acquisition of subsidiary - - - - - - - - 624,325 - - - 1,248,650 (317,304) - - - - 986 986 - - - - - - - - - - - - - - - - - - 1,558 - - (3,060,482) (760,353) - - - (3,060,482) (760,353) 986 (863) (6,475) - (760,353) (3,060,482) (3,819,849) (7,338) (3,827,187) - - - - - - - - 1,872,975 (317,304) 1,558 - - - - 136,472 1,872,975 (317,304) 1,558 136,472 Total equity £ 7,261,402 (2,186,514) (134,984) (5,785) (2,327,283) 4,525,000 (581,439) 8,877,680 (3,061,345) (766,828) 986 Balance at 31 December 2014 3,452,598 15,009,812 (9,450) 46,451 69,318 (927,835) (11,025,834) 6,615,060 129,134 6,744,194 The notes form part of these financial statements 30 31 Beowulf Mining plc Annual Report 2014Beowulf Mining plc Annual Report 2014 Company Statement of Changes in Equity Share capital £ Share premium Revaluation reserve £ £ Capital contribution reserve £ Share option reserve £ Accumulated losses £ Total equity £ Balance at 1 January 2013 as restated 2,104,273 10,858,905 (30,315) 46,451 67,760 (5,566,059) 7,481,015 Loss for year Revaluation of listed investments Total comprehensive income Transactions with owners Issue of share capital Costs associated with the issue of new shares - - - - - - 724,000 - 3,801,000 (581,439) - (5,785) (5,785) - - - - - - - - - - - - (2,080,295) - (2,080,295) (5,785) (2,080,295) (2,086,080) - - 4,525,000 (581,439) Balance at 31 December 2013 as restated 2,828,273 14,078,466 (36,100) 46,451 67,760 (7,646,354) 9,338,496 Loss for year Revaluation of listed investments Total comprehensive income Transactions with owners Issue of share capital Costs associated with the issue of new shares Equity-settled share-based payment transactions - - - - - - 624,325 - - 1,248,650 (317,304) - - 986 986 - - - - - - - - - - - - - - 1,558 (2,976,058) - (2,976,058) 986 (2,976,058) (2,975,072) - - - 1,872,975 (317,304) 1,558 Balance at 31 December 2014 3,452,598 15,009,812 (35,114) 46,451 69,318 (10,622,412) 7,920,653 The notes form part of these financial statements 32 33 Beowulf Mining plc Annual Report 2014Beowulf Mining plc Annual Report 2014 Consolidated Statement of Cash Flows Cash flows from operating activities Loss before income tax Depreciation charges Equity-settled share-based transactions Impairment of exploration costs Impairment of related party loan Share of post-tax losses of equity accounted joint venture Gain on asset acquisition arising on reclassifying joint venture as a subsidiary Finance costs Finance income Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Net cash used in operating activities Cash flows from investing activities Purchase of intangible assets Purchase of property, plant and equipment Purchase of investments Sale of investments Funding of joint venture Acquisition of subsidiary cash Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Payment of share issue costs Settlement of derivative financial asset Net cash from financing activities Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at end of year The notes form part of these financial statements 34 2014 2013 as restated £ £ (3,061,345) (2,186,514) 8,227 1,558 3,187 - 2,552 (59,891) 664 - - 184,558 4,559 - 2,032,835 1,109,028 (6,397) (43,061) (1,079,274) (930,766) 200,747 (242,953) (141,351) 103,684 (1,121,480) (968,433) (1,375,121) (1,867,054) (48,631) - 49,205 (1,885) (57,023) - (294,639) (29,966) 1,168 6,397 - 23,611 (1,661,621) (1,932,317) 887,975 (182,304) 312,775 800,000 (56,439) 445,362 1,018,446 1,188,923 (1,764,655) (1,711,827) 1,983,616 3,697,771 (32,072) (2,328) 186,889 1,983,616 Beowulf Mining plc Annual Report 2014 Company Statement of Cash Flows Cash flows from operating activities Loss before income tax Depreciation charges Equity-settled share-based transactions Impairment of related party loan Finance costs Finance income Decrease/(increase) in trade and other receivables Increase/(decrease) in trade and other payables Net cash used in operating activities Cash flows from investing activities Purchase of property, plant and equipment Loans to subsidiaries Funding of joint venture Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Payment of share issue costs Settlement of derivative financial asset Net cash from financing activities Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year The notes form part of these financial statements 2014 2013 as restated £ £ (2,976,058) (2,080,295) 497 1,558 664 - - 184,558 2,032,835 1,109,028 (6,031) (42,188) (947,199) (828,233) 68,721 127,193 (36,448) (10,176) (751,285) (874,857) - (1,885) (1,525,253) (1,920,000) (307,712) 6,031 (29,966) 22,738 (1,826,934) (1,929,113) 887,975 (182,304) 312,775 800,000 (56,439) 445,362 1,018,446 1,188,923 (1,559,773) (1,615,047) 1,725,171 3,340,218 165,398 1,725,171 35 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 1. ACCOUNTING POLICIES Nature of operations Beowulf Mining plc (the “Company”) is a company registered in England and Wales. The address of the Company’s registered office is 201 Temple Chambers, 3-7 Temple Avenue, London, EC4Y 0DT.The Group is engaged in the acquisition, exploration and evaluation of natural resources assets and has not yet generated revenues. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below: Going concern The Group is engaged in the acquisition, exploration and evaluation of natural resources assets and has not yet generated revenues. During the year the Company incurred a loss of £3,061,345. In common with many exploration companies, the group raises finance for its working capital, acquisition, exploration and evaluation activities in discrete tranches and further funding will be required before the end of 2015. Based on current discussions the Directors have a reasonable expectation that the required, new funds will be secured from existing or potential investors. On this basis the Directors have therefore concluded it is appropriate to prepare the financial statements on a going concern basis. However, whilst the Directors are confident that they are taking all the necessary steps to ensure that the required finance will be available, there can be no certainty that this will be the case. These conditions indicate the existence of a material uncertainty which may cast significant doubt over the Group’s and the Company’s ability to continue as a going concern and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments that may be necessary should the Company be unsuccessful in raising the required finance. Basis of preparation The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards as adopted by the European Union (“IFRS”) and with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS as adopted by the European Union. The financial statements are presented in GB Pounds Sterling. They are prepared on the historical cost basis or the fair value basis where the fair valuing of relevant assets and liabilities has been applied. New standards and interpretations applied In preparing these financial statements the Company has reviewed all new standards and interpretations. New standards, interpretations and amendments effective from 1 January 2014 The Group adopted all relevant new standards, interpretations and amendments effective from 1 January 2014. One new standard adopted had an impact on the financial statements. The nature and effect of the new standard and amendment adopted by the Group is detailed below. No other standards, interpretations or amendments had an effect on the financial statements for the year ended 31 December 2014. IFRS 11 – Joint arrangements During the year ended 31 December 2014, the Group adopted IFRS 11 ‘Joint Arrangements’ which was effective for periods beginning on 1 January 2014. The Directors have considered the factors specified within IFRS 11 and classified the interest in the jointly controlled entity, Wayland Copper Limited as a joint venture. Under the requirements of IFRS 11, joint ventures are accounted for using the equity accounting method. Joint ventures are initially recognised at cost and subsequently adjusted for the Group’s share of the profit or loss and other comprehensive income in the joint venture. The accounting policy adopted prior to the implementation of IFRS 11 followed the requirements of IAS 31 ‘Financial reporting of Interests in Joint Ventures’ under which the Group had accounted for the interest in the jointly controlled entity using the proportional consolidation method. 36 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements The Group has retrospectively restated the 2013 figures to reflect this change in accounting policy. New standards, interpretations and amendments issued not yet effective The Group has not adopted any standards, interpretations and amendments issued, but which are not yet effective, in advance of their effective date. None of those issued are expected to have a material effect on the Group’s future financial statements. Significant accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for income and expenses during the year and the amounts reported for assets and liabilities at the balance sheet date. However, the nature of estimation means that the actual outcomes could differ from those estimates. The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement of any impairment of intangible assets, the estimation of share-based payment costs, treatment of Wayland Copper Limited and its copper-gold project and valuation of derivative financial assets. In respect of these items: (i) (ii) (iii) (iv) The Group determines whether there are any indicators of impairment of intangible assets on an annual basis. The estimation of share-based payment costs requires the selection of an appropriate model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest. The Company has placed shares with Lanstead Capital L.P. and at the same time entered into equity swap and interest rate swap agreements in respect of the subscriptions for which consideration will be received monthly over 12 and 24 month periods as disclosed in the notes to these financial statements. The amount receivable each month is dependent on the Company’s share price performance. The Directors have made assumptions in the financial statements about funds receivable at the year end. However, there is significant uncertainty underlying these assumptions due to the unpredictable nature of the Company’s share price. During the year Beowulf Mining plc sole-funded exploration work undertaken on the Ballek copper-gold project through the joint venture entity Wayland Copper Limited and its subsidiary Wayland Sweden AB. In the view of the Directors, Beowulf Mining plc has the ability to control the joint venture entity and has therefore consolidated the results of the joint venture entity within the results of the Group from 1 October 2014. Basis of consolidation (i) Subsidiaries and acquisitions The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair value at the date of acquisition. Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If the cost of the acquisition is less than the fair value of net assets of the subsidiary acquired, the difference is recognised directly in profit or loss. The results of subsidiaries acquired or disposed of during the year are included in the statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Non-controlling interests in subsidiaries are presented separately from the equity attributable to equity owners of the parent company. When changes in ownership in a subsidiary do not result in a loss of control, the non-controlling shareholders’ interests are initially measured at the non-controlling interests’ proportionate share of the subsidiaries net assets. Subsequent to this, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non- controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. 37 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements (ii) Transactions eliminated on consolidation Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Intangible assets - exploration costs All costs incurred prior to the application for the legal right to undertake exploration and evaluation activities on a project are expensed as incurred. Exploration and evaluation costs arising following the application for the legal right are capitalised on a project-by-project basis, pending determination of the technical feasibility and commercial viability of the project. Costs incurred include appropriate technical and administrative overheads. Exploration and evaluation activity includes: • researching and analysing historical exploration data; • gathering exploration data through topographical, geochemical and geophysical studies; • exploratory drilling, trenching and sampling; • determining and examining the volume and grade of the resource; • surveying transportation and infrastructure requirements; and • conducting market and finance studies. Administration costs that are not directly attributable to a specific exploration area are expensed as incurred. Deferred exploration costs are carried at historical cost less any impairment losses recognised. When a project is deemed to no longer have commercially viable prospects to the Group, deferred exploration costs in respect of that project are deemed to be impaired and written off to the statement of comprehensive income. Impairment Whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable an asset is reviewed for impairment. An asset’s carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset’s carrying amount. Impairment reviews for deferred exploration and evaluation expenditure are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise such as: (i) (ii) (iii) (iv) (v) unexpected geological occurrences that render the resource uneconomic; title to the asset is compromised; variations in mineral prices that render the project uneconomic; substantive expenditure on further exploration and evaluation of mineral resources is neither budgeted nor planned; and the period for which the Group has the right to explore has expired and is not expected to be renewed. Property, plant and equipment Items of property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life. Plant and machinery - 25% on reducing balance The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. 38 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements Investments Investments in listed companies are stated at fair value. The revaluation adjustment is taken to the revaluation reserve and any impairments are shown in the income statement for the year. Investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recognised at cost less any provision for impairment. Fixed asset investments in subsidiary undertakings and joint venture interests are stated at cost less provision for any impairment in value. Financial instruments The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and liabilities are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument. Trade and other receivables Trade and other receivables are recorded at their nominal amount less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. Bad debts are written off when identified. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short term highly liquid investments with original maturities of three months or less. Trade payables Trade payables are stated at amortised cost using the effective interest method. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Where equity instruments are issued as part of an acquisition they are recorded at their fair value on the date of acquisition. Financial assets and liabilities at fair value through profit or loss Financial assets and liabilities at fair value through profit or loss comprise derivative financial instruments. Subsequent to initial recognition financial assets at fair value through profit or loss are stated at fair value. Movements in fair values are recognised in profit or loss, unless they relate to derivatives designated and effective as hedging instruments, in which event, the timing of the recognition in profit or loss depends on the nature of the hedging relationship. The Group does not currently have any such hedging instruments. Taxation Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of the Group’s assets and liabilities and their tax base. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits, within the same jurisdiction, in the foreseeable future against which the deductible temporary difference can be utilised. 39 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Current and deferred tax is recognised in the profit or loss, except when the tax relates to items charged or credited directly in equity, in which case the tax is also recognised directly in equity. 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 entity are expressed in GB Pounds Sterling which is the presentation currency for the Group and Company financial statements. The functional currency of the Company is the GB Pounds Sterling. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items is included in the statement of comprehensive income for the period. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are expressed in GB Pounds Sterling using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as other comprehensive income and are transferred to the Group’s translation reserve. Foreign currency movements arising from the Group’s net investment, which comprises equity and long-term debt, in subsidiary companies whose functional currency is not the GB Pounds Sterling are recognised in the translation reserve, included within equity until such time as the relevant subsidiary company is sold, whereupon the net cumulative foreign exchange difference relating to the disposal is transferred to profit and loss. Share-based payment transactions Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of all options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period. Where equity instruments are granted to persons other than employees, the income statement or share premium account if appropriate, are charged with the fair value of goods and services received. 40 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 2. EMPLOYEES AND DIRECTORS Wages and salaries Social security costs The average monthly number of employees and Directors during the year was as follows: Directors 2014 £ 99,659 10,361 2013 £ 86,000 9,744 110,020 95,744 Number Number 5 5 Wages and salaries excludes amounts paid to third parties in respect of director’s services during the year which amounted to £354,348 (2013: £419,148). Including these amounts, the Directors’ fees are as follows: Salaries and fees Compensation to director for the loss of office Equity-settled share-based payments 2014 £ 2013 £ 454,007 505,148 30,000 1,558 - - 485,565 505,148 The remuneration of the highest paid director during the year was £182,713 (2013: £174,996). No contributions were made by the Company to money purchase pension schemes. During the year, no Directors were entitled to accrue retirement benefits under money purchase pension schemes. 3. FINANCE INCOME AND COSTS Finance Income: Deposit account interest Other interest Finance Costs: 2014 £ 6,397 - 2013 £ 23,611 19,450 6,397 43,061 Fair value loss on derivative financial assets 2,032,835 1,109,028 41 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 4. LOSS BEFORE TAX AND AUDITORS REMUNERATION a. The loss before tax is stated after charging/(crediting): Depreciation - owned assets (note 10) Foreign exchange differences Impairment of exploration costs (note 9) Impairment of convertible loan (note 12) Impairment of accrued interest receivable 2014 £ 8,227 14,941 3,187 - - 2013 £ 664 (3,707) - 135,000 49,558 Fair value loss on derivative financial assets (note 14) 2,032,835 1,109,028 b. Auditor’s remuneration Fees payable to the Group’s auditor for the audit of the consolidated financial statements (2013: Price Bailey LLP) Fees payable to the Group auditor for other services: - audit of subsidiaries pursuant to legislation 2014 £ 2013 £ 21,250 18,670 3,750 3,335 25,000 22,005 During the year ended 31 December 2014 the Group changed its auditor. The amount shown as a comparative for 2013 was paid to the Group’s former auditor, Price Bailey LLP. 5. INCOME TAX Analysis of tax expense No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2014 or for the year ended 31 December 2013. Factors affecting the tax expense The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below: 2014 £ 2013 £ Loss on ordinary activities before income tax (3,061,345) (2,186,514) Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 21.50% (2013 - 23.25%) Effects of: (658,189) (508,365) Potential tax losses carried forward on tax adjusted loss for the year 627,524 452,281 Provision against convertible loan Losses of overseas subsidiaries Loss arising in joint venture 42 - 30,665 - - 31,388 23,636 1,060 - Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements The main rate of UK corporation tax changed from 24% to 23% on 1 April 2013 and from 23% to 21% on 1 April 2014 giving an effective rate for the year of 21.50% (2013: 23.25%). The Group has estimated UK losses of £8,861,064 (2013: £5,882,694) and foreign losses of £437,225 (2013: £297,084) available to carry forward against future trading profits. The value of unrecognised deferred tax assets in respect of the UK losses amounts to £1,905,059 (2013: £1,367,595). The Directors believe that it would not be prudent to recognise such tax assets before such time as the Group generates taxable income. 6. LOSS OF PARENT COMPANY As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these financial statements. The parent company’s loss for the financial year was £2,976,058 (2013: £2,080,295 loss). 7. LOSS PER SHARE Basic loss per share The calculation of basic loss per share at 31 December 2014 was based on the loss attributable to ordinary shareholders of £3,060,482 (2013: £2,186,514) and a weighted average number of Ordinary Shares outstanding during the period ended 31 December 2014 of 304,755,824 (2013: 241,137,381) calculated as follows: Loss attributable to ordinary shareholders 2014 £ 2013 as restated £ Loss attributable to ordinary shareholders 3,060,482 2,186,514 Weighted average number of ordinary shares Number of shares in issue at beginning of year Effect of shares issued during year Weighted average number of ordinary shares in issue for the year 2014 Number 2013 Number 282,827,365 210,427,365 21,928,459 30,710,016 304,755,824 241,137,381 There is no difference between the basic and diluted loss per share. 8. PRIOR YEAR ADJUSTMENT During the year the interpretation of IFRS 11 Joint Arrangements has been reviewed and amended. Previously, joint arrangements were accounted for using proportional consolidation but under the new interpretation joint arrangements are accounted for using equity accounting. The effect of the new interpretation is presentational affecting the consolidated income statement and consolidated statement of financial position. The amendment is shown as a prior year adjustment within these financial statements. 43 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements Extracts of the financial statements of Wayland Copper Limited and its subsidiary Wayland Sweden AB previously used for the proportional consolidation within these consolidated statements are as follows: STATEMENT OF PROFIT OR LOSS CONTINUING OPERATIONS Administrative expenses OPERATING LOSS Finance costs Finance income LOSS BEFORE INCOME TAX Income tax expense LOSS FOR THE YEAR STATEMENT OF FINANCIAL POSITION ASSETS NON-CURRENT ASSETS Intangible assets TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Share capital Share premium Translation reserve Accumulated losses TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES 2013 £ 2012 £ (9,118) (23,830) (9,118) (23,830) - - - - (9,118) (23,830) - - (9,118) (23,830) 2013 1 January 2013 £ £ 576,324 548,333 576,324 548,333 100 100 449,900 449,900 (4) - (36,129) (27,011) 413,867 422,989 162,457 125,344 162,457 125,344 576,324 548,333 Under proportional consolidation, 50% of these figures were previously consolidated within the Group financial statements. In 2012 a full provision was made in the Revaluation Reserve in respect of a £95,000 investment in Agricola Resources Plc following its de-listing from the PLUS market. A prior year adjustment has been made to transfer this impairment in value of the investment from Revaluation Reserve to Accumulated Losses to reflect the permanent diminution of value following the de- listing. 44 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 9. INTANGIBLE ASSETS - Group COST At 1 January 2013 as restated Additions for the year Foreign exchange movements At 31 December 2013 as restated At 1 January 2014 as restated Additions for the year Acquisition of subsidiary (note 16) Impairments recognised Foreign exchange movements At 31 December 2014 NET BOOK VALUE At 31 December 2014 At 31 December 2013 At 1 January 2013 Exploration costs £ 3,101,402 1,867,054 (19,478) 4,948,978 4,948,978 1,375,499 838,216 (3,187) (620,754) 6,538,752 6,538,752 4,948,978 3,101,402 The net book value of exploration costs is comprised of expenditure on the following projects: Kallak Grundtrask Majves Munka Norrbotten Ballek 2014 £ 2013 £ 5,416,587 4,610,704 285,543 325,762 - 6,836 - 829,786 2,875 7,804 763 1,070 6,538,752 4,948,978 Total Group exploration costs of £6,538,752 are currently carried at cost in the financial statements. The Group will need to raise funds and/or bring in joint venture partners to further advance exploration and development work and take it through to development. If insufficient funds are raised then some of the assets may require impairment. During the year an impairment provision of £3,187 (2013: £nil) was made against costs incurred on Majves and Norrbotten on the basis that no further exploration would be carried out on those sites. The impairment is charged as an expense and included within the consolidated income statement. 45 Beowulf Mining plc Annual Report 2014 Group £ Company £ 3,636 1,885 3,636 1,885 5,521 5,521 5,521 48,631 5,521 - 54,152 5,521 2,867 664 2,867 664 3,531 3,531 3,531 8,227 3,531 497 11,758 4,028 42,394 1,493 1,990 1,990 769 769 Notes to the consolidated financial statements 10. PROPERTY, PLANT AND EQUIPMENT COST At 1 January 2013 Additions At 31 December 2013 At 1 January 2014 Additions At 31 December 2014 DEPRECIATION At 1 January 2013 Charge for year At 31 December 2013 At 1 January 2014 Charge for year At 31 December 2014 NET BOOK VALUE At 31 December 2014 At 31 December 2013 At 1 January 2013 46 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 11. INVESTMENTS - Group COST OR VALUATION At 1 January 2013 Share of post-tax losses of equity accounted joint venture Interest in joint venture as restated £ 211,494 (4,559) Listed investments £ Total £ 25,349 236,843 - (4,559) (5,785) Revaluation of listed investment - (5,785) At 31 December 2013 206,935 19,564 226,499 At 1 January 2014 Share of post-tax losses of equity accounted joint venture Revaluation of listed investment Exchange differences Reclassification as subsidiary 206,935 (2,552) - (8,021) (196,362) 19,564 - 986 - - 226,499 (2,552) 986 (8,021) (196,362) At 31 December 2014 - 20,550 20,550 Interest in joint venture The Group’s share of joint ventures is as follows: Non-current assets Current assets Share of gross assets Share of non-current liabilities Share of current liabilities Share of net assets Administrative expenses Loss before income tax Loss for the year 2014 £ - - - - - - - - - 2013 as restated £ 288,163 66,045 354,208 - (147,273) 206,935 (4,559) (4,559) (4,559) During the year ended 31 December 2014 the Company sole funded exploration work in the joint venture. In line with the joint venture arrangement, the Company’s interest in Wayland Copper Limited was adjusted such that the Company took control. Further details are provided in note 17. 47 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 11. INVESTMENTS - Company Shares in group undertakings £ Interest in joint venture £ Listed investments £ Totals £ COST OR VALUATION At 1 January 2013 Revaluation of listed investments 9,704 225,000 - - 25,349 (5,785) 260,053 (5,785) At 31 December 2013 9,704 225,000 19,564 254,268 At 1 January 2014 Revaluation of listed investment Reclassification as subsidiary 9,704 225,000 19,564 254,268 - - 225,000 (225,000) 986 - 986 - At 31 December 2014 234,704 - 20,550 255,254 The Group consists of the following subsidiary undertakings: Name Incorporated Activity 2014 % holding 2013 % holding Iron of Sweden Limited Jokkmokk Iron Mines AB Norrbotten Mining AB Wayland Copper Limited Wayland Sweden AB (1) indirectly held (2) effective interest UK Sweden Sweden UK Sweden Dormant Mineral exploration Mineral exploration Holding company Mineral exploration 100% 100% 100% 65.25% (1)(2)65.25% 100% 100% 100% 50% - Details on the non-controlling interest in subsidiaries is given in note 16. Other investments The Group and the Company have an investment in the mining company Agricola Resources Plc (“Agricola”). Agricola’s shares were withdrawn from PLUS markets on 1 November 2012 to ensure that its shareholders were properly protected whilst the company reviews its operations and future plans. Because of the current uncertainty over the future of Agricola, the Directors have re-valued the investment to £nil (2013: £nil). 48 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 12. LOANS AND OTHER FINANCIAL ASSETS - Group At 1 January 2013 Advances made in the year Additions in the year Impairment of loan Foreign exchange movements At 31 December 2013 At 1 January 2014 Advances made in the year Disposals in the year Loans to Joint ventures £ 111,785 29,966 - - - 141,751 141,751 307,712 - Reclassification as intra-group loan following acquisition (449,463) Foreign exchange movements At 31 December 2014 - - Other loans £ Financial assets £ 135,000 59,937 - - 57,023 Totals £ 306,722 29,966 57,023 (135,000) - (135,000) - - - - - - - - (372) (372) 116,588 258,339 116,588 - (49,205) - (14,121) 258,339 307,712 (49,205) (449,463) (14,121) 53,262 53,262 Beowulf Mining plc has loaned £20,000 to Agricola Resources Plc under terms set out in a convertible loan note, whereby the loan accrues interest at 3 per cent above the Bank of England Base Rate. Beowulf Mining plc has also loaned £250,000 to Agricola Resources Plc under terms set out in convertible loan notes, whereby the loan accrues interest at 7 per cent above the Bank of England Base Rate and is convertible into ordinary shares of Agricola at par until 30 June 2017. The convertible loan notes are repayable on 30 June 2017 or, at Beowulf’s option, immediately upon a fundraising of more than £400,000 being completed by Agricola, or any time thereafter. At Agricola’s option, the convertible loan notes were redeemable early without penalty on 30 June 2012 or at six monthly intervals thereafter. Beowulf is entitled at its sole discretion to convert all or part of the £250,000 loan into new ordinary shares in Agricola at a conversion price of 1 pence per ordinary share at any time. The notes are transferable subject to certain limited restrictions. In addition, Beowulf was granted warrants to subscribe for up to 21,000,000 additional new ordinary shares in Agricola at an exercise price of 1 pence per new Agricola ordinary share at any time prior to 30 June 2014. These options were fair valued at the date of grant using a Black-Scholes model and have now expired unexercised. Following Agricola de-listing from the PLUS markets on 1 November 2012, the Directors consider the recovery of the above loans to be in doubt and a full impairment provision has been made in previous years against the loans of £270,000 and accrued interest of £49,558. No provision has been made for interest accrued during the year (2013: £19,450). During the year loans of £307,712 (2013: £29,996) were made to the Wayland Copper Limited Group to fund further exploration. At the balance sheet date the total loans made to the Wayland Copper Limited Group amounted to £449,463 (2013: £141,751). On 1 October 2014 the Group’s interest in Wayland Copper Limited changed from that of a joint venture to a subsidiary undertaking and the loans have been reclassified accordingly. Further details are provided in note 17. 49 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 12. LOANS AND OTHER FINANCIAL ASSETS - Company Loans to group undertakings £ Loans to joint ventures £ 3,589,494 1,920,000 111,785 29,966 Other loans £ Financial assets £ 135,000 2,784 - - - Totals £ 3,839,063 1,949,966 (135,000) - - (135,000) At 1 January 2013 Advances made in the year Impairment of loans At 31 December 2013 5,509,494 141,751 At 1 January 2014 Advances made in the year Reclassification as intra-group loan following acquisition 5,509,494 1,525,253 141,751 307,712 449,463 (449,463) At 31 December 2014 7,484,210 - - - - - - 2,784 5,654,029 2,784 - - 5,654,029 1,832,965 - 2,784 7,486,994 Further details of the transactions in the year are shown within related parties disclosure note 23. 13. TRADE AND OTHER RECEIVABLES Current: Other receivables VAT Prepayments and accrued income 14. DERIVATIVE FINANCIAL ASSETS Group Company 2014 £ 2013 as restated £ 992 17,846 23,607 124,338 123,130 14,144 2014 2013 £ - 15,405 23,607 £ 35,500 58,089 14,144 42,445 261,612 39,012 107,733 In July 2013, as part of a two stage subscription to raise, in aggregate, £4.125m (before expenses) from certain new shareholders, the Company issued 28,694,000 new ordinary shares of 1p each in the capital of the Company (“Ordinary Shares”) at a price of 6.25p per share to Lanstead Capital L.P. (“Lanstead”) for £1,793,375. The Company simultaneously entered into an equity swap with Lanstead for 75 per cent of these shares with a reference price of 8.3333p per share (the “Reference Price”). The equity swap is for a 24 month period. All 28,694,000 Ordinary Shares were allotted with full rights on the date of the transaction. In August 2013, following the receipt of shareholders’ approval at a duly convened general meeting, the Company issued a further 35,306,000 new Ordinary Shares at a price of 6.25p per share to Lanstead for £2,206,625. The Company entered into a further equity swap on the same basis and with the same Reference Price as that outlined above. All 35,306,000 shares were allotted with full rights on the date of the transaction. 50 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements Accordingly, pursuant to the above arrangements, of the aggregate subscription proceeds of £4m received from Lanstead, £3.2m (80 per cent) was invested by the Company in the equity swap agreements with the remaining £0.8m (20 per cent) available for general working capital purposes. To the extent that the Company’s share price was greater or lower than the Reference Price at each swap settlement, the Company received greater or lower consideration calculated on a pro-rata basis. The valuation for each settlement was determined to be the volume weighted average share price for the preceding 5 trading days up to the relevant settlement date. As the amount of the effective consideration receivable by the Company from Lanstead under the swap agreements was variable subject to the movement in the Company’s share price and settled in the future, the receivable is treated for accounting purposes as a derivative financial asset and has been designated at fair value through profit or loss. The Company also issued, in aggregate, a further 6,400,000 Ordinary Shares to Lanstead as a value payment in connection with the equity swap agreements. The fair value of the derivative financial assets entered into in 2013 as at 31 December 2014 has been determined by reference to the Company’s then prevailing share price and has been estimated as follows: Notional number of shares outstanding Share price Fair value £ Value recognised on inception (notional) Consideration received to 31 December 2013 Loss on revaluation of derivative financial asset at 31 December 2013 8.3333p 48,000,000 3,200,000 (8,896,690) (445,362) (1,109,028) Value of derivative financial asset at 31 December 2013 5.8750p 39,103,310 1,645,610 Consideration received in the year Loss on revaluation of derivative financial asset recognised in the year (10,000,000) (298,608) (1,402,754) Value of derivative financial asset at 31 December 2014 1.4750p 29,103,310 (55,752) 51 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements The settlements scheduled for June 2014 under the equity swap agreements were not completed, and the Company and Lanstead have mutually agreed to defer all further settlements until the completion of a new 12 month equity swap agreement entered into in August 2014. In August 2014, as part of a two stage subscription to raise, in aggregate, £1.738m (before expenses) from certain new shareholders, the Company issued 17,924,000 Ordinary Shares at a price of 3p per share to Lanstead with a value of £537,720. The Company simultaneously entered into an equity swap price mechanism with Lanstead for 75 per cent of these shares with a reference price of 4p per share. All 17,924,000 Ordinary Shares were allotted with full rights on the date of the transaction. In September 2014, following the receipt of shareholders’ approval at a duly convened general meeting, the Company issued a further 15,409,333 Ordinary Shares at a price of 3p per share to Lanstead with a value of £462,280. The Company entered into an equity swap price mechanism on the same basis as in August 2014. All 15,409,333 shares were allotted with full rights on the date of the transaction. Accordingly, pursuant to the above arrangements, of the aggregate subscription proceeds of £1m received from Lanstead, £850,000 (85 per cent) was invested by the Company in the equity swap agreements with the remaining £150,000 (15 per cent) available for general working capital purposes. The Company also issued, in aggregate, a further 4,500,000 Ordinary Shares to Lanstead as a value payment in connection with the equity swap agreements. The fair value of the derivative financial assets entered into in 2014 as at 31 December 2014 has been determined by reference to the Company’s then prevailing share price and has been estimated as follows: Notional number of shares outstanding Share price Value recognised on inception (notional) Consideration received in the year 4.0000p 25,000,000 (1,120,250) Loss on revaluation of derivative financial asset recognised in the year Fair value £ 850,000 (14,167) (626,884) Value of derivative financial asset at 31 December 2014 1.4750p 23,879,750 208,949 On 7 January 2015, it was mutually agreed to accelerate all settlements under the Equity Swap Agreements between Lanstead and the Company for an amount of £150,000 which equated to the approximate total fair value of the derivative financial asset at 31 December 2014 as shown in the table below: Fair value of derivative financial assets Derivative financial asset issued 2013 Derivative financial asset issued 2014 Value of derivative financial asset at 31 December 2014 £ (55,752) 208,948 153,196 52 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements The fair value loss on derivative financial assets shown in the Consolidated Income Statement for the year amounted to £2,032,835 (2013: £1,109,028). The carrying value of the derivative financial assets at 31 December 2014 in the Statement of Financial Position is £150,000 (2013: £1,645,610). Due within one year Due after more than one year 15. CASH AND CASH EQUIVALENTS Cash in hand Bank deposit account Bank accounts 16. NON-CONTROLLING INTERESTS 2014 £ 2013 £ 150,000 1,010,007 - 635,603 150,000 1,645,610 Group Company 2014 £ 2013 £ 2014 £ - 250 - 2013 £ 250 146,106 1,713,101 146,106 1,713,101 40,783 270,265 19,292 11,820 186,889 1,983,616 165,398 1,725,171 Wayland Copper Limited, a 65.25% owned subsidiary of the Company that has material non-controlling interests (NCI). Summarised financial information reflecting 100% of the underlying subsidiary’s relevant figures is set out below: For the period ended 31 December 2014 Administrative expenses Profit after tax Profit/(loss) allocated to NCI Other comprehensive income allocated to NCI Total comprehensive income allocated to NCI As at 31 December 2014 Non-current assets Current assets Current liabilities Net assets £ (2,485) (2,485) (864) (6,475) (7,339) £ 829,786 2,067 (460,245) 371,608 53 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 17. ACQUISITIONS During the year ended 31 December 2014, Beowulf Mining plc sole funded exploration work undertaken on the Ballek copper- gold project through the joint venture entity, Wayland Copper Limited and its subsidiary, Wayland Sweden AB. Under the terms of the joint venture agreement, following this contribution to the joint venture, Beowulf Mining plc had the right to change the composition of the Board from the point that the funding was made and also took over the role of operator for the project. The controlling interest held by each of the joint venture partners has been adjusted to represent their effective contributions. As a result, Beowulf Mining plc increased its effective control in the joint venture, Wayland Copper Limited, to 65.25% from 1 October 2014. In the view of the Directors, Beowulf Mining plc has the ability to control the joint venture entity and has therefore consolidated the results of the joint venture entity within the results of the Group from 1 October 2014. The acquisition of Wayland Copper Limited has been treated within the financial statements as an asset acquisition and not as a business combination under IFRS 3 Business Combinations (“IFRS 3”). At 1 October 2014, the assets and liabilities of Wayland Copper Limited and its subsidiary Wayland Sweden AB were: Non-current assets Current assets Current liabilities Net assets 18. SHARE CAPITAL £ 838,216 1,865 (447,356) 392,725 2014 2013 Number £ Number £ Allotted, called up and fully paid At 1 January Issued during the year 282,827,365 2,828,273 210,427,365 2,104,273 62,432,484 624,325 72,400,000 724,000 At 31 December 345,259,849 3,452,598 282,827,365 2,828,273 The Company has removed the limit on the number of shares that it is authorised to issue in accordance with the Companies Act 2006. Shares issued in 2014 In August 2014 the Company raised £1,600,000 before fees and expenses by way of a subscription of 53,333,333 new Ordinary Shares of 1p each at a premium of 2p per share. £850,000 of the proceeds was satisfied by the issue of derivative financial instruments with the balance of £750,000 being issued for cash. In August 2014 the Company issued 4,500,000 new Ordinary Shares of 1p each allotted as fully paid at a premium of 2p per share, in settlement of fees in respect of the above subscription. In September 2014 the Company raised £137,974 before fees and expenses by way of a subscription of 4,599,151 new Ordinary Shares of 1p each allotted as fully paid for cash at a premium of 2p per share. 54 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements Shares issued in 2013 In July and August 2013, the Company raised £4,000,000 before fees and expenses by way of a subscription of 64,000,000 new Ordinary Shares of 1p each at a premium of 5.25p per share. £3,200,000 of the consideration was satisfied by the issue of derivative financial instruments with the balance of £800,000 being issued for cash. In July and August 2013, the Company issued 6,400,000 new Ordinary Shares of 1p each allotted as fully paid at a premium of 5.25p per share, in settlement of fees in respect of the above subscription. In August 2013, the Company issued 2,000,000 new Ordinary Shares of 1p each allotted as fully paid for cash at a premium of 5.25p per share. 19. SHARE-BASED PAYMENTS The Group has a share option scheme for employees that entitles the holders to purchase shares in the Company with the options exercisable at the price determined at the date of grant. The terms and conditions of the grants are as follows; all options are to be settled by the issue of shares, with the 2014 options having a 12 month vesting period before they can be exercised. The number and weighted average exercise prices of share options are as follows: 2014 2013 Weighted average exercise Number of options price Weighted average exercise price Number of options Outstanding at 1 January Granted during the year 27.2531p 4,054,222 27.2531p 4,054,222 4.0000p 1,000,000 - - Outstanding at 31 December 22.6523p 5,054,222 27.2531p 4,054,222 Exercisable at 31 December 27,2531p 4,054,222 27,2531p 4,054,222 During the year 1,000,000 (2013: nil) options were granted to acquire ordinary shares at an exercise price of 4p per share. The options expire after five years and have a vesting period of one year. The options outstanding at 31 December 2014 have an exercise price in the range of 4p to 45p (2013: 7p to 45p) and a weighted average remaining contractual life of 2.374 years (2013: 2.781 years). The fair value of services received during the year in return for share options granted is based on the fair value of share options granted, measured using the Black-Scholes model, with the following inputs: Fair value at grant date Share price Exercise price Expected volatility Option life Risk-free interest rate 0.677p 2.45p 4.00p 48.01% 5 years 0.46% The expected volatility was determined by reviewing the actual volatility of the Company’s share price since its listing on AIM to the date of granting the option. In calculating the fair value, consideration was given to the market trends at the grant date of the option. There is an expense of £1,558 (2013: £nil) for the year in respect of equity-settled share-based payment transactions. 55 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 20. RESERVES The following is a description of each of the reserve accounts that comprise equity shareholders’ funds: Share capital Share premium The share capital comprises the issued ordinary shares of the Company at par. The share premium comprises the excess value recognised from the issue of ordinary shares at par. Revaluation reserve Gains/losses arising on the revaluation of the Group’s listed investments. Capital contribution reserve Share scheme reserve Translation reserve Accumulated losses The capital contribution reserve represents historic non-cash contributions to the Company from equity holders. Cumulative fair value of options charged to the consolidated income statement net of transfers to the profit or loss reserve on exercised and cancelled/lapsed options. Cumulative gains and losses on translating the net assets of overseas operations to the presentation currency. Accumulated losses comprise the Group’s cumulative accounting profits and losses since inception. 21. TRADE AND OTHER PAYABLES Current: Trade payables Amounts owed to participating interests re Ballek Joint Venture Social security and other taxes Other payables Accruals and deferred income Group 2014 £ 2013 as restated £ Company 2014 2013 £ £ 173,686 285,992 96,123 16,990 9,658 11,608 40,594 54,552 - 1,903 855 160,214 - 7,716 29,642 44,017 - 1,809 955 30,551 290,098 448,964 177,498 50,305 56 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements 22. FINANCIAL INSTRUMENTS The Group and Company’s financial instruments comprise cash and cash equivalents, loans and investments, derivative financial assets, trade receivables and trade payables that arise directly from its operations. The Group and Company’s derivative financial assets relate to equity swap and interest rate swap agreements entered into in respect of share subscriptions for which the consideration is receivable over 12 and 24 months. The Group and Company hold the following financial instruments: Fair value through profit or loss £ Group Held at amortised cost £ Fair value through profit or loss £ Total £ Company Held at amortised cost £ Total £ At 31 December 2014 Financial assets Cash and cash equivalents Trade and other receivables Loans to group undertakings Derivative financial assets 150,000 150,000 150,000 Other financial assets - 53,262 53,262 - 186,889 186,889 174,599 174,559 - - - - - - 165,398 23,607 165,398 23,607 7,484,210 7,484,210 - 2,784 150,000 2,784 150,000 414,750 564,750 150,000 7,675,999 7,825,999 Financial liabilities Trade and other payables - 278,490 278,490 - 169,782 169,782 At 31 December 2013 Financial assets Cash and cash equivalents Trade and other receivables Loans to group undertakings Loans to joint ventures Fair value through profit or loss £ Group Held at amortised cost £ Fair value through profit or loss £ Total £ Company Held at amortised cost £ Total £ 1,983,616 1,983,616 138,482 138,482 - - - - - - - - - 1,725,171 1,725,171 49,644 49,644 5,509,494 5,509,494 141,751 141,751 Derivative financial assets 1,645,610 1,645,610 1,645,610 - 1,645,610 Other financial assets - 116,588 116,588 - 2,784 2,784 1,645,610 2,238,686 3,884,296 1,645,610 7,428,844 9,074,454 Financial liabilities Trade and other payables - 447,061 447,061 - 48,496 48,496 57 - - - - - - - Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements The main purpose of these financial instruments is to finance the Group’s and Company’s operations. The Board regularly reviews and agrees policies for managing the level of risk arising from the Group’s financial instruments as summarised below. a) Market Risk Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates, interest rates and equity prices will affect the Group’s and Company’s income or the value of its holdings in financial instruments. i) Foreign Exchange Risk The Group operates internationally and is exposed to currency risk arising on cash and cash equivalents, receivables and payables denominated in a currency other than the respective functional currencies of the Group entities, which are primarily Swedish Kroner and Sterling. The Group’s and Company’s net exposure to foreign currency risk at the reporting date is as follows: Net foreign currency financial assets/(liabilities) Swedish Kroner Total net exposure Sensitivity analysis Group Company 2014 £ 2013 £ 2014 £ 2013 £ (72,634) (296,405) 917 15,042 (72,634) (296,405) 917 15,042 A 10 per cent strengthening of sterling against the Swedish Kroner at 31 December 2014 would have increased/(decreased) equity and profit or loss by the amounts shown below: Group Swedish Kroner Company Profit or loss Equity 2014 £ 2013 £ 2014 £ 2013 £ 7,263 29,641 7,263 29,641 Profit or loss Equity 2014 £ 2013 £ 2014 £ 2013 £ Swedish Kroner (92) (1,504) (92) (1,504) A 10 per cent weakening of sterling against the Swedish Kroner at 31 December 2014 would have an equal but opposite effect on the amounts shown above. ii) Commodity Price Risk The principal activity of the Group is the exploration for iron, copper and gold in Sweden, and the principal market risk facing the Group is an adverse movement in the price of such commodities. Any long term adverse movement in the commodity prices would affect the commercial viability of the Group’s various projects. 58 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements iii) Interest Rate Risk The Group’s and Company’s policy is to retain its surplus funds on the most advantageous term of deposit available up to twelve month’s maximum duration. Given that the Directors do not consider that interest income is significant in respect of the Group’s and Company’s operations no sensitivity analysis has been provided in respect of any potential fluctuations in interest rates. b) Credit Risk The Group’s principal financial assets are the cash and cash equivalents, derivative financial assets, loans and receivables, as recognised in the statement of financial position, and which represent the Group’s maximum exposure to credit risk in relation to financial assets. The Group and Company policy for managing its exposure to credit risk with cash and cash equivalents is to only deposit surplus cash with financial institutions that hold acceptable credit ratings. The Company has made unsecured interest-free loans to its subsidiaries. Although they are repayable on demand, they are unlikely to be repaid until the projects becomes successful and the subsidiaries start to generate revenues. Details of bad debts and amounts written off are provided in Note 12. Jokkmokk Iron Mines AB Norrbotten Mining AB Wayland Copper Limited and its subsidiary Wayland Sweden AB 2014 £ 2013 £ 6,699,971 5,174,718 334,776 334,776 449,463 -(1) 7,484,210 5,509,494 (1) Loans of £141,751 were made prior to Wayland Copper Limited becoming a subsidiary c) Liquidity Risk To date the Group and Company have relied on shareholder funding to finance its operations. As the Group and Company have finite cash resources and no material income, the liquidity risk is significant and is managed by controls over expenditure and cash resources. In addition, the Group and Company do not have any borrowings and only have trade and other payables with a maturity of less than one year. d) Classes of Financial Instruments The Group measures the fair value of its financial assets and liabilities in the statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels: Level 1: Level 2: Quoted prices (unadjusted) in active markets for identical assets and liabilities; Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). 59 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements Level 2 fair value measurement of derivative financial assets at 31 December 2014: At 1 January 2014 Value recognised on inception (notional) Consideration received Loss on revaluation of derivative financial asset 2014 £ 1,645,610 2013 £ - 850,000 3,200,000 (312,775) (445,362) (2,032,835) (1,109,028) 150,000 1,645,610 As the consideration is variable depending upon the Company’s share price, the derivative financial asset is revalued through the income statement with reference to the Company’s closing share price. The valuation methodology and inputs are described in note 16. Capital Management The Company’s capital consists wholly of ordinary shares. The Board’s policy is to preserve a strong capital base in order to maintain investor, creditor and market confidence and to safeguard the future development of the business, whilst balancing these objectives with the efficient use of capital. 23. RELATED PARTY DISCLOSURES Transactions with subsidiaries During the year, cash advances of £1,525,253 (2013: £1,920,000) were made to Jokkmokk Iron Mines AB. The advances are held on an interest free inter-group loan which has no terms for repayment. At the year end the inter-group loan amounted to £6,699,971 (2013: £5,174,718). The Company has previously transacted with Norrbotten Mining AB creating an interest fee inter-group loan which has no terms for repayment. At the year end the inter-group loan amounted to £334,776 (2013: £334,776). During the year, cash advances of £307,712 (2013: £29,996) were made to Wayland Copper Group, formerly a joint venture entity but becoming a subsidiary on 1 October 2014. The advances are held on an interest free inter-group loan which has no terms for repayment. At the year end the inter-group loan amounted to £449,463 (2013: £141,751). Transactions with other related parties During the year, the Company was charged fees and expenses amounting to £41,719 (2013: £41,155) by Tearne Foulsham Limited, a company of which Mr E Taylor is a director and shareholder. Expenses of £579 (2013: £330) were outstanding at the year end. During the year, the Company was charged fees and expenses of £97,396 (2013: £108,990) by Geoexperten in respect of the director’s services of Dr Jan-Ola Larsson. Fees of £4,746 (2013: nil) were outstanding at the year end. During the year, the Company was charged fees and expenses of £127,212 (2013: £119,421) by Merchant Adventurers Company Limited, a company of which Mr C Sinclair-Poulton is a director and shareholder, in respect of the director’s services of Mr C Sinclair-Poulton. Fees of £7,283 (2013: nil) were outstanding at the year end. During the year, the Company was charged consultancy fees of £112,334 (2013: £153,162) to FHB AB, a Swedish company of which Mr Fred Boman is a director and shareholder. Fees of £6,165 (2013: £12,167) were outstanding at the year end. 60 Beowulf Mining plc Annual Report 2014 Notes to the consolidated financial statements Beowulf Mining plc holds Convertible loan notes of £20,000 and £250,000 issued by Agricola Resources plc accruing interest at 3 per cent and 7 per cent above Bank of England Base Rate respectively. Following Agricola de-listing from the PLUS markets on 1 November 2012, the Directors consider the recovery of the above loans to be in doubt and a full impairment provision has been made in previous years against the loans of £270,000 and accrued interest of £49,558. No provision has been made for interest accrued during the year (2013: £19,450). Key management personnel compensation The key management personnel of the Company during the year were the Directors. The aggregate compensation paid to key management personnel of the Company is set out below: Short-term employee benefits (including employers’ national insurance contributions) Termination benefits Share-based payment expense 2014 £ 2013 as restated £ 464,368 514,892 30,000 1,558 - - 495,926 514,892 In addition, aggregate consideration paid to third parties in respect of director’s services during the year was £354,348 (2013: £419,148). In respect of the termination benefits, £15,000 was paid during the year and the balance of £15,000 is included in other payables and has been paid since the year end. 24. CONTINGENT LIABILTIES Under the terms of the Settlement agreement entered into with Clive Sinclair-Poulton, a former director of the Company, and Merchant Adventurers Company Limited, the Company is required to pay a consultancy termination fee of £20,000 contingent on the Company’s cumulative fundraising since his departure from the Company reaching £500,000. To date £350,000 has been raised by the Company. 25. EVENTS AFTER THE REPORTING DATE On 7 January 2015, it was mutually agreed to accelerate all settlements under the Equity Swap Agreements between Lanstead and the Company for an amount of £150,000 which equated to the approximate total fair value of the derivative financial asset at 31 December 2014 as described in note 14. On 10 March 2015 the company undertook a placing of 29,166,666 new ordinary shares of 1 pence each at a placing price of 1.2 pence per share, raising £350,000 before expenses. 61 Beowulf Mining plc Annual Report 2014 Beowulf Mining plc GROUP OF COMPANIES www.beowulfmining.com

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