Annual Report
2019
Joutsijärvi
Merivaara
Kallak
FINLAND
Polvela
Pitkäjärvi
(Aitolampi)
Rääpysjärvi
Karhunmäki
Tammijärvi
SWEDEN
Åtvidaberg
Beowulf
Mining
projects
Mitrovica
KOSOVO
Viti
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Contents
Company Profile
Company Strategy
Chairman’s Statement
Review of Operations and Activities
Board of Directors and Senior Management
Strategic Report
Report of the Directors
Remuneration Report
Corporate Governance Report
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of 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
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Notes to the Consolidated and Company Financial Statements
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Company Information
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2019 Beowulf Mining plc Annual Report Company Profile
Beowulf Mining plc (“Beowulf” or the
“Company”) is listed on London’s Alternative
Investment Market (“AIM”) (Ticker: BEM) and
Stockholm’s Spotlight exchange (Ticker: BEO).
The Company has a portfolio of assets in Kosovo, Finland and Sweden,
all at different stages of development. Beowulf’s strategy is to build a
sustainable and innovative mining company which creates shareholder value
by developing mining assets, delivering production and generating cashflow,
and, in doing so, meet society’s ongoing need for minerals and metals.
PORTFOLIO OF ASSETS IN
KOSOVO
FINLAND
SWEDEN
42.2% stake in
Vardar Minerals Ltd
RESOURCES
Aitolampi
(Graphite)
Kallak
(Iron Ore)
EXPLORATION PERMITS
Mitrovica
(Pb, Zn, Cu, Ag, Au)
Rääpysjärvi
(Graphite)
Åtvidaberg
(Pb, Zn, Cu, Ag)
Viti
(Cu, Au, Li)
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At the signing date of this report the Company
has a 42.2 per cent interest in Vardar Minerals Ltd
(“Vardar”). Vardar is a UK registered exploration
company with a focus on the mineral endowed
Balkan region and is one of the first companies to
be awarded exploration licences in Kosovo. In 2019,
the Company obtained control of Vardar and, as
such, the Vardar Group is now consolidated into the
Company and subject to the same financial controls
and scrutiny.
Vardar has two exploration licences located on
the Tethyan Belt, a major orogenic metallogenic
province for gold and base metals which extends
from the Alps (Carpathians/Balkans) to Turkey, Iran
and Indochina, and contains several world class
discoveries. The Tethyan Belt of south-east Europe
can be regarded as Europe’s chief copper-gold
(lead-zinc-silver) province. Vardar’s Mitrovica and
Viti licences are highly prospective for base and
precious metals, with early indications suggesting
the potential for porphyry style mineralisation.
Through its 100 per cent owned subsidiary Oy
Fennoscandian Resources AB (“Fennoscandian”),
the Company has a portfolio of graphite
exploration prospects in Finland. During 2019,
the Fennoscandian team produced an upgraded
Mineral Resource Estimate (“MRE”) for the Aitolampi
project, with a global Indicated and Inferred Mineral
Resource of 26.7 million tonnes (“Mt”) at 4.8 per cent
Total Graphitic Carbon (“TGC”) for 1,275,000 tonnes
of contained graphite, reported in accordance with
the JORC Code, 2012 edition.
Fennoscandian is pursuing a strategy of developing
a ‘resource footprint’ of natural flake graphite
prospects that can provide transparent ‘security of
supply’ and enable Finland to achieve its ambition
of self-sufficiency in battery manufacturing.
The Company is also developing its knowledge
in processing and manufacturing value-added
graphite products, including anode material for
lithium-ion batteries.
The Company’s most advanced project is the Kallak
magnetite iron ore deposit located approximately 40
kilometres (“km”) west of Jokkmokk in the County of
Norrbotten, Northern Sweden, 80 km southwest of
the major iron ore mining centre of Malmberget, and
approximately 120 km to the southwest of LKAB’s
Kiruna iron ore mine.
The first exploration licence for Kallak was awarded
by the Mining Inspectorate of Sweden in 2006. A
MRE for Kallak North and South, based on drilling
conducted between 2010-2014, a total of 131 holes
and 27,895 metres was finalised on 28 November
2014. Following the guidelines of the JORC Code,
2012 edition, an Indicated Resource of 118.5 Mt
at 27.5 per cent iron content (“Fe”) and Inferred
Resource of 33.8 Mt at 26.2 per cent Fe was defined.
Also, there is an additional exploration target of 90-
100 Mt at 22-30 per cent Fe.
Testwork on Kallak ore has shown that a ‘super’
high grade magnetite concentrate can be
produced, yielding over 71 per cent iron content,
with low levels of deleterious elements, including
phosphorous and sulphur, lending itself to
pelletisation and consumption in Direct Reduction
Iron (“DRI”) facilities in Europe and the Middle East,
and attracting a potential price premium.
In April 2013, the Company applied for an
Exploitation Concession for Kallak North (the
“Concession”) and in October 2015, the Mining
Inspectorate recommended to the Swedish
Government that the Concession be awarded. The
Company is still waiting on the Swedish Government
to take a decision.
In southern Sweden, the Company has its
Åtvidaberg nr 1 (“Åtvidaberg”) exploration licence,
which is prospective for polymetallic discoveries,
mainly copper and zinc.
The Company’s approach is to develop mining
projects working in partnership with local
communities and key stakeholders, and is
encapsulated in the following mission statements:
“Visar respekt fôr alla intressenter”
“Vill samverka lokalt”
“Står fôr ansvarsfull utveckling”
“Kunnioittaa kaikkia sidosryhmiä”
“Toimia yhteistyössä paikallisten kanssa”
“Vastuullisuus”
“Showing respect to all our stakeholders”
“Becoming a local partner”
“Delivering responsible development”
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2019 Beowulf Mining plc Annual Report Company Strategy
Beowulf’s strategy is to build a sustainable
and innovative mining company which creates
shareholder value by developing mining assets,
delivering production and generating cashflow,
and, in doing so, meet society’s ongoing need for
minerals and metals.
value-added graphite products, including anode
material for lithium-ion batteries.
Beowulf is focused on gaining an Exploitation
Concession for Kallak North, and thereafter
completing a Scoping Study on the project. The
Company considers the introduction of a strategic
partner/investor, who understands the value of
Kallak as a high-quality iron ore asset, as an
important step which could expedite Kallak’s
development towards a production start within
four to five years. This does not preclude the
Company from continuing to de-risk and add value
to Kallak in the meantime.
Beowulf is developing a high-quality asset base,
which is diversified by geography and commodity,
enabling it to simultaneously advance several
projects up the mining value curve and create
shareholder value.
Additionally, the Board of Directors continues
to look beyond the Company for value creation
opportunities.
The investment of Vardar is one such example.
Vardar adds exploration capability in the highly
prospective Tethyan Belt which has seen both
significant discoveries and M&A activity.
Fennoscandian is pursuing a strategy of
developing a ‘resource footprint’ of natural flake
graphite prospects that can provide transparent
‘security of supply’ and enable Finland to
achieve its ambition of self-sufficiency in battery
manufacturing. The Company is a recipient of
Business Finland funding, which is supporting
Fennoscandian to move downstream, and develop
its knowledge in processing and manufacturing
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Chairman’s Statement
Introduction
In 2019, while our frustrations continued with Kallak
and still no decision from the Swedish Government,
the Company continued to advance projects in
Kosovo and Finland.
In Kosovo, the Company increased its investment in
Vardar Minerals, funding exploration programmes
across two base and precious metals licences
situated in the attractive Tethyan Belt, and, in
Finland, the Fennoscandian Resources’ team
produced an upgraded Mineral Resource Estimate
(“MRE”) for the Aitolampi graphite project and
continued to play an important role in Finland’s
emerging battery sector.
Despite the formation of a new Swedish
Government in January 2019, no progress with
regards to the Exploitation Concession for Kallak
was made during the year. While the Minister
talked of transparency and predictability, neither of
these were evident in the handling of the Company’s
application, nor it being prioritised, as suggested by
the Government and talk of a ‘forthcoming decision’
did not materialise.
Kallak provides the foundation asset of the
Company, but with Vardar Minerals and
Fennoscandian Resources, Beowulf has a diversified
portfolio of assets, each business area displaying
strong prospects and offering investors optionality.
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Vardar Minerals
(“Vardar”)
During 2019, significant progress was made in
Kosovo. The Vardar team delivered ‘big company’
geoscience on a junior’s budget. Exploration results
developed our understanding of the copper-gold
porphyry potential at both the Mitrovica and Viti
projects. Porphyry deposits are exceptionally large,
low grade, polymetallic systems, that typically
contain copper along with other metals, such as gold,
silver, zinc and lead.
On 1 April, the Company announced that it had
increased its ownership in Vardar to approximately
37.6 per cent for the consideration of £750,000,
satisfied in cash, funding exploration activities
in 2019. As a result, the Company obtained
control over the Vardar Group and consolidated
it into the Company’s financials. Later in the year,
Beowulf followed its money, investing two further
instalments, £115,000 announced on 14 October
and £100,000 announced on 6 November taking the
Company’s ownership to 41.5 per cent.
At Mitrovica, located immediately to the west and
northwest of the world class Stan Terg lead-zinc-
silver mine, potential not only exists for the discovery
of additional lead-zinc-silver deposits, but also for
the discovery of high-level epithermal gold deposits
and for copper-zinc deposits. Vardar believes all
the targets are related to a potentially much larger
porphyry style mineralised system.
At Viti, initial stratigraphic holes, intersected the
correct alteration type, returning gold and visible
copper mineralisation, and indicating potential for the
discovery of a mineralised copper-gold porphyry in a
hitherto unexplored area.
In February 2020, Vardar identified an additional
copper-zinc exploration target at Mitrovica, and
Beowulf invested a further £50,000, increasing
the Company’s ownership to 42.2 per cent. Then,
in March, Beowulf co-invested another £30,000,
alongside existing and founding shareholders, as part
of a £70,000 total fundraise for soil sampling over
the gold target at Majdan Peak, part of the Mitrovica
licence.
In June 2020, results from the soil sampling
programme completed across Majdan Peak were
announced. An extensive gold anomaly has been
identified over an area approximately 1400 metres x
700 metres, with individual soil samples returning up
to 0.36 grammes per tonne (“g/t”) gold. Furthermore,
a new lead-zinc-copper-gold target has been
identified to the south of Majdan Peak, of significance
given its proximity to the Stan Terg mine.
Fennoscandian
Resources
(“Fennoscandian”)
Fennoscandian had another strong year.
Further drilling at Aitolampi supporting an
upgraded MRE, with an 81 per cent increase
in contained graphite (compared to the
2018 MRE) for the higher-grade western
zone, and an updated global Indicated and
Inferred Mineral Resource of 26.7 million
tonnes (“Mt”) at 4.8 per cent Total Graphitic
Carbon (“TGC”) for 1,275,000 tonnes of
contained graphite.
Fennoscandian continues to develop a
‘resource footprint’ of natural flake graphite
to provide ‘security of supply’ to Finland’s
emerging battery sector and to benefit from
Business Finland funding, as it seeks to
establish its battery grade anode material
credentials.
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Throughout 2019, Beowulf continued to push for a decision from the Swedish Government on its application for an
Exploitation Concession for Kallak. The Company continued to work with the Mayor in Jokkmokk, Norrbotten Regional
Council Members and Norrbotten Members of Parliament to lobby the Government.
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In May 2019, I and the CEO
met with Mr. Emil Högberg,
State Secretary to the Minister,
to again make a case for the
Concession being awarded.
The State Secretary closed the
meeting acknowledging the
importance of the Kallak project
to Jokkmokk. After the summer,
the Company followed up again
with the State Secretary to
ensure the Government had all
the information it needed with
respect to our application.
In late January 2019, Kurt Budge
CEO delivered a presentation
titled ‘Sustainability in the heart -
partnership, the lifecycle of mining
projects, balancing the interest
of stakeholders’ at the Future
Mine and Mineral Conference in
Stockholm.
The CEO spoke of the damage
the permitting process for Kallak
and other mining cases is having
on Sweden’s reputation as a
destination for mining investors.
The CEO presented Beowulf’s
approach to sustainable mining
and outlined how the Company
can play its part in ensuring that
Sweden continues to lead in this
area, by developing a modern
and sustainable mining operation
at Kallak in partnership with the
community in Jokkmokk, which
includes Sami reindeer herders.
Beowulf continued to support
the OECD’s work in Sweden,
attending the launch of the report
on its Rural Policy Review ‘Linking
the Indigenous Sami People
with Regional Development
in Sweden’, having previously
participated in the OECD’s land-
use workshop in early 2018.
Later in the year, the CEO
attended the third OECD
Meeting for Mining Regions
and Cities, organised to enable
knowledge sharing, with a
focus on developing policy
recommendations and standards
that can help maximise the
benefits that mining can bring to
a region or city.
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In April 2019, I wrote to Minister
Baylan, Minister for Business,
Industry, and Innovation for
The Government of Sweden
regarding the Kallak application.
I reminded the Minister that since
the Company first submitted its
application in 2013, the case
has been sent back and forth
between Swedish authorities, and
still the Government, finds itself
unable to award an Exploitation
Concession for one of Europe’s
largest drill defined iron ore
deposits, a potential global
resource of 250 million tonnes.
The first exploration permit for
Kallak was granted by the Mining
Inspectorate in 2006, and, since
that time, Swedish authorities
have permitted the Company to
invest over SEK 80 million. While
the Kallak project suffers delay
after delay, LKAB, the state iron
ore company, warned in October
2018 that the ore in the Kiruna
mine will be depleted earlier than
expected. This placed the media
spotlight on the future of LKAB’s
operations and the strategic
importance of iron ore to Sweden.
Further highlighting the absurdity
of the situation with Kallak.
In communication with the
Government, it was confirmed
that the Kallak application
was being prioritised and
acknowledged that the Company
had been waiting an excessive
period of time for a decision.
On this basis, the Company
reasonably expected that a
decision would be taken by the
Government before the summer
of 2019.
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Following Almedalen in July, the Company
outlined its immediate three-step plan
for advancing the Kallak project, in the
event the Swedish Government awards the
Concession:
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Scoping Study - completion
within 12 months of the
Concession being awarded
- and in parallel develop a
roadmap for environmental
permitting.
Formation of a ‘Development
Taskforce’ with Jokkmokks
Kommun and other key partners
with an interest in Kallak,
such that the development of
Kallak and the opportunity to
regenerate Jokkmokk can be
fully coordinated.
To advance discussions with
the Sami reindeer herding
communities, to listen to
their concerns, find solutions
together to problems that
might exist, working towards
reaching mutually beneficial
agreements that ensure Sami
reindeer herding, livelihoods and
culture are protected, and that
Sami communities benefit from
the development of a mine at
Kallak.
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In December, the CEO wrote
again to Minister Baylan. The CEO
requested that the Government
provide Beowulf with details on
when the Company can expect
the decision on Kallak to be taken.
A response to the CEO’s letter
arrived in February 2020, in which
the State Secretary stated that
the Government was not able to
comment on when a decision is
expected to be taken, however,
the Government had taken careful
note of information provided.
In September 2019, the CEO
wrote to Minister Baylan,
following meetings with advisors,
including legal advisors, and
the new CEO at SveMin, asking
for clarity on the process and
timeline to a decision by the
Government. In response, Minister
Baylan explained that the CEO’s
request for a meeting “concerns a
forthcoming Government decision
- a dossier that is currently
under preparation”, and that the
Government is unable to meet
or comment with regard to its
“ongoing review”.
Also, the Company engaged
legal firm Mannheimer Swartling
to work with Fröberg &
Lundholm to review its Kallak
application. Specifically, to
review statements by the County
Administrative Board for the
County of Norrbotten (“CAB”),
including the CAB’s statement
made in November 2017, and
the Company’s comments to
the Government criticising that
statement. The findings of the
legal analysis were unequivocal,
that the Company has robustly
argued its case for a Concession
to be awarded.
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In November 2019, the Company
submitted a concluding statement
(the “Statement”) for Kallak,
prepared by Mannheimer Swartling
and Fröberg & Lundholm, to the
Government. The Statement
stressed that, as has previously been
demonstrated by the Company,
and acknowledged by the CAB, the
establishment of a mine at Kallak
would have significant positive
effects on the local economy:
creating jobs, generating tax
revenues for Jokkmokk municipality,
and stimulating and diversifying the
business sector in Jokkmokk. In so
doing, Kallak would help solve the
problems Jokkmokk is facing, a lack
of investment in new enterprise and
job creation, and a declining and
ageing population, which is placing
a financial burden on Jokkmokks
Kommun that it cannot afford to
bear.
The Statement noted that neither the
Company’s Reindeer Herding Impact
Assessment, nor the Environmental
Impact Assessment have concluded
that mining operations at Kallak
would threaten the existence and
livelihoods of local Sami reindeer
herding communities. Furthermore,
the Statement highlighted the
similarities between Kallak and
available case law, which support
the approval of the Concession.
The Statement did not contain
new facts in the Kallak case, as
all necessary and relevant facts
have already been established as
part of the application process,
now lasting over 7 years. Rather,
the Statement summarised the
circumstances relevant to a judicial
review of whether Beowulf should be
awarded the Exploitation Concession
for Kallak, concluding that the
Concession should be awarded.
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In February 2020, the CEO
participated in a meeting
discussing the ‘Mining industry
and indigenous peoples:
regulations, best practice and
social innovation’. On this
subject, the inclusion of Sami in
regional development in Sweden,
permitting, sustainable mining,
supply chain transparency, the
Green Economy and the Fossil
Free Economy, Beowulf is an
active participant and contributor
to the debate.
In May 2020, the Company
awarded a drilling contract for up
to 1,650 metres diamond drilling,
targeting additional potential
iron ore mineralisation at Kallak
South. The work programme
will determine if a 3D seismic
model can be constructed,
using the established seismic
characteristics of the Kallak
deposit. If successful, the set-
up could then be applied to
the Parkijaure nr 6 Exploration
Licence, awarded by the Mining
Inspectorate in October 2019.
In June 2020, the CEO wrote
again to Minister Baylan, after
a Parliamentary Question had
been put to the Minister by a
member of Parliament asking
when a decision will be taken
on Kallak. The CEO reminded
Minister Baylan, that when the
Minister spoke at the Mining
Nordic Day in Toronto in early
March, he saved his biggest
welcome for investors and said
that the CEO was welcome to do
business in Sweden. In the letter,
the CEO stated that Beowulf is
unable to do business in Sweden,
because the Company cannot
get a decision on Kallak from the
Government.
The Swedish Geological Survey (“SGU”) a
Government Office, which first discovered Kallak
in the 1940s, designated it an Area of National
Interest in 2013, produced its latest study in
May 2020, headlined ‘New light on iron ore at
Kallak’. Kallak has been on the SGU’s radar for 80
years! The Mining Inspectorate, part of the SGU,
recommended to the Government in October 2015,
that the Concession for Kallak should be awarded,
and last October awarded an Exploration Permit for
Parkijaure nr 6.
On the evidence, the authorities are happy for
Beowulf to continue to invest in iron ore exploration,
which in the context of LKAB’s announcement, in
October 2018, on diminishing reserves at Kiruna
and the need to replenish, recent seismic activity
disrupting production at Kiruna, while thankfully
sparing lives, and Government statements on a
sustainable mining industry, makes sense. Yet,
over 4.5 years after the Mining Inspectorate
recommended to the Government that the
Concession for Kallak be awarded, with the
application sitting on the Government’s desk for
the last 3 years and Beowulf planning to drill the
90-100 million tonnes Exploration Target at Kallak
South, the Company still has no decision.
In the CEO’s letter, Minster Baylan was reminded,
that Beowulf has several thousand Swedish
shareholders, who own over 67 per cent of the
Company. Shareholders have witnessed the
Government’s unacceptable mishandling of
the Kallak application and false promises, the
opportunity cost of which is incalculable, and they
opportunity cost of which is incalculable, and they
are demanding the Government be fully transparent
are demanding the Government be fully transparent
now and remove all uncertainty as to when a
now and remove all uncertainty as to when a
decision on Kallak will be taken.
With benchmark iron ore prices above US$100 per
With benchmark iron ore prices above US$100 per
tonne, investors with cash are looking for investment
tonne, investors with cash are looking for investment
opportunities, such as Kallak, and towards mining
opportunities, such as Kallak, and towards mining
jurisdictions that function effectively.
Jokkmokk’s need for investment and jobs is acute,
Jokkmokk’s need for investment and jobs is acute,
and, with the added pressure of COVID-19, it would
and, with the added pressure of COVID-19, it would
seem logical that a project such as Kallak, which has
seem logical that a project such as Kallak, which has
the potential to bring billions of SEK in investment
the potential to bring billions of SEK in investment
and hundreds of jobs to northern Sweden, should
and hundreds of jobs to northern Sweden, should
finally gain approval. The CEO has not received a
finally gain approval. The CEO has not received a
response from the Minister to his latest letter.
response from the Minister to his latest letter.
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Shareholder Base
Beowulf is over 98 per cent owned by retail
shareholders in Sweden and the UK. The
proportion of shares owned by Swedish
shareholders continued to grow during the year.
At 31 May 2020, there were 403,904,279 Swedish
Depository Receipts representing 67.07 per cent
of the issued share capital of the Company. The
remaining issued share capital of the Company is
held in the UK.
The Group is dependent on further equity
fundraising to operate as a going concern for at
least twelve months from the date of approval of
the financial statements. Although the Group has
had past success in fundraising and continues to
attract interest from investors, making the Board
confident that such fundraising will be available
to provide the required capital, there can be no
guarantee that such fundraising will be available
and as such this constitutes a material uncertainty
over going concern.
I would like to thank our existing and new
shareholders for their steadfast support.
Raising Finance
Maintaining sufficient funding to sustain the
business is a significant challenge for an
exploration and development company in the
natural resources sector.
During the year, the Company raised £2.0 million
before expenses, through subscriptions for new
ordinary shares of £0.01 each, with funds being
invested in Vardar Minerals, Fennoscandian
Resources and for working capital purposes.
The Board continues to adopt the going
concern basis to the preparation of the financial
statements and is confident of the Company
continuing to operate into the foreseeable future.
This assessment has been arrived at after
the Board has considered various alternative
operating strategies should these be necessary
in the light of the current macro-economic
conditions, and is satisfied that such revised
operating strategies could be adopted, if and
when necessary. Specific attention needs to be
drawn to the comments made in respect of the
impact the COVID-19 pandemic on going concern
and the approaches being taken by the Group to
manage and mitigate the additional operational
and financial challenges being faced at present.
The financial statements at 31 December 2019
show that the Group generated an operating loss
for the year of £428,707 (2018: £1,374,584); with
cash used in operating activities of £959,742
(2018: £653,832) and a net decrease in cash and
cash equivalents of £404,099 in the year (2018:
decrease of £56,021). The Group balance sheet
showed cash reserves at 31 December 2019 of
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£1,124,062 (2018: £1,533,232).
2019 Financial Performance
As of 1 April 2019, following an increase in
Beowulf’s investment in Vardar and ownership
from 14.1% to 31.3% the Company obtained
control of the Vardar Group and as result of this
control the Vardar Group has been consolidated
into the Company effective of this date.
At the year-end, further investments in Vardar
increased the Company’s holding to 41.5% with a
resulting carrying value gain to 31 December 2019
of £563,431.
The consolidated loss fell in the year from
£1,374,58 to £428,707. This decrease is primarily
attributable to a £563,431 fair value gain on the
investment in Vardar and lower impairment charge
on Sala (£10,720) compared to the impairment
charges in the prior year (£571,456).
A further contribution to the decrease was a
lower share-based payment charge relating to
employees and Directors options of £119,720 for
the year compared to £194,460 incurred in the
year to 31 December 2018.
The administration expenses increased in the year
from £598,391 to £904,666, due largely to the
inclusion of Vardar’s administration expenses from
1 April 2019 to 31 December 2019 of £247,493.
Consolidated basic and diluted loss per share for
the 12 months ended 31 December 2019 was 0.04
pence (2018: loss of 0.25 pence).
The cash held at the year-end was £1,124,062
(2018: £2,071,748).
The translation reserve losses attributable to the
owners of the parent increased from £520,257 at
31 December 2018 to £1,287,678 at 31 December
2019. Much of the Company’s exploration costs
are in Swedish Krona which has weakened further
against the pound since 31 December 2018.
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The Government has had the Kallak application
on its desk for the last 3 years. Minister Baylan
wrote last September of a ‘forthcoming decision’,
yet another 10 months has passed and the
Company is still waiting for a decision. Minister
Baylan speaks of transparency and predictability
in permitting processes, but the Company has
no information on what process the Government
is following or when a decision will be made. If
Minister Baylan is genuine in welcoming investors
to Sweden, then needs to act now and end the
12-year drought for a new mine being permitted
in Sweden. How else can exploration companies
consider Sweden a low-risk mining jurisdiction,
if after investing and finding resources, you are
stopped from advancing a project.
I would like to take this opportunity to highlight
that, although we are being frustrated in Sweden
and facing difficult times with COVID-19,
fundamentally, as a business, Beowulf is in a
strong position. We have a diversified asset base,
supportive shareholders, in both Sweden and the
UK, and excellent liquidity in the trading of the
Company’s shares.
Kallak remains the foundation asset of the
Company, on which we are building an exciting
future. The Mining Journal ran the headline
‘Tethyan Belt a strong draw at PDAC’ and so our
investments in Vardar’s developing potential over
the last 18-months seem to have been well-timed
and Fennoscandian is well-positioned in Finland’s
emerging battery sector as a local supplier of
natural flake graphite.
Göran Färm
Non-Executive Chairman
28 July 2020
Corporate
The Company announced, on 14 January 2019,
that options were granted to Directors and
a senior manager over a total of 8,000,000
ordinary shares of £0.01 each in the capital of the
Company, representing approximately 1.41 per
cent of the issued share capital of the Company.
Options were last awarded to Kurt Budge in July
2015, and to Christopher Davies and Rasmus
Blomqvist in January 2017.
The Share Options are exercisable at a price of
7.35 pence per share, being a 30 per cent premium
to the closing mid-price of 5.65 pence per share
on 11 January 2019. The Share Options fully
vest one year from the date of grant or fully vest
immediately if the individual leaves the Company.
The Share Options are valid for five years from the
date of grant.
Staff and Employees
On behalf of the Board, I would like to express
my sincere thanks to our staff and employees in
Sweden and Finland, and also to the staff and
employees of Vardar, for their significant efforts
throughout the past 12 months to drive our
Company forwards.
Outlook
The Company has acted to face the ongoing threat
posed by COVID-19, as best we can, including 30
percent salary cuts for the CEO and Board, and
sought to maintain a ‘business as usual’ attitude.
Despite the economic shock, mines in the Nordic
region have continued to operate and Vardar has
been able to work in Kosovo.
As governments bring COVID-19 under control,
their focus should shift to restarting economies
and enabling investment, job creation and
supporting communities. A mine at Kallak has the
potential to generate hundreds of jobs in northern
Sweden and deliver an economic resurgence in
Jokkmokk.
13
12
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2019 Beowulf Mining plc Annual Report
Vardar Minerals
Limited (“Vardar”)
Operations
and Activities
During the year, Beowulf increased its ownership
in Vardar Minerals Limited (“Vardar”), a UK
registered private exploration company with
exploration licences in Kosovo, to 41.5 per
cent. The Company funded Vardar’s 2019
works programme including diamond drilling,
geophysical surveys, and other activities. Results
helped develop our understanding of the copper
and gold porphyry potential at both the Mitrovica
and Viti projects.
O Review of
V
O
S
O
deposits. K
Porphyry deposits are exceptionally large, low
grade, polymetallic systems, that typically contain
copper along with other metals, such as gold,
silver, zinc, and lead. Examples in the region
include the Kiseljak deposit in Serbia (Inferred
Resource: 459 million tonnes at 0.22 per cent
copper, 0.2 grammes per tonne gold. Source:
Dunav Resources’ announcement, June 2014) and
the Skouries high grade gold-copper deposit in
Greece (Measured and Indicated Resource: 289
million tonnes at 0.43 per cent copper and 0.58
grammes per tonne gold. Inferred Resource: 170
million tonnes at 0.34 per cent copper and 0.31
grammes per tonne gold. Source: Eldorado Gold).
In April, the Company announced that it had
exercised its option to increase its ownership in
Vardar to approximately 37.6 per cent for the
consideration of £750,000, satisfied in cash,
funding exploration activities at the Mitrovica
and Viti projects. Then later in the year, Beowulf
followed its money, investing a further £215,000,
taking the Company’s ownership to 41.5 per cent.
At Mitrovica, located near to the world class Stan
Terg lead-zinc-silver mine, potential not only exists
for the discovery of additional lead-zinc-silver
deposits, but also for the discovery of high-level
deposits, but also for the discovery of high-level
deposits, but also for the discovery of high-level
epithermal gold deposits and for copper-zinc
epithermal gold deposits and for copper-zinc
epithermal gold deposits and for copper-zinc
14
14
It is simplistic to think of these targets, which
occur along a seven-kilometre trend, in isolation.
However, Vardar believes the targets are all
related to a potentially much larger porphyry
style mineralised system, based on meticulous
geological mapping of hydrothermal alteration and
interpretation of trench, drill and soil geochemical
exploration data.
At Viti, initial stratigraphic holes, drilled in
2019, intersected the correct alteration type,
returning gold and visible copper mineralisation,
that indicates potential for the discovery of a
mineralised copper-gold porphyry in a hitherto
unexplored area.
Exploration Overview
Both Mitrovica and Viti projects are located within the Tethyan Belt, a major orogenic metallogenic
province for gold and base metals which extends from the Alps (Carpathians/Balkans) to Turkey,
Iran and Indochina, and contains several world class discoveries.
The Tethyan Belt of south-east Europe can be regarded as Europe’s chief copper-gold (lead-zinc-
silver) province. Mitrovica and Viti occur within calc-alkaline magmatic arc(s) which developed
during the closure of the Neotethys Ocean, primarily targeting epithermal gold, lead-zinc-silver
replacement deposits and porphyry related copper-gold mineralisation.
The lack of modern-day exploration in the Balkans presents a real opportunity for new
discoveries.
Mitrovica
The Mitrovica project is situated in northern
Kosovo, covers 55 square kilometres (“km2”), and
lies immediately to the west and northwest of the
Stan Terg lead-zinc-silver mine which dates back
to the 1930s (historical production records: 34 Mt
at 3.45 per cent lead, 2.30 per cent zinc and 80 g/t
silver).
The licence is prospective for a range of porphyry-
related mineralisation types, including the Majdan
Peak high-sulphidation epithermal gold target, the
Wolf Mountain low-sulphidation lead-zinc-silver
target and primary porphyry copper mineralisation
target and primary porphyry copper mineralisation
target and primary porphyry copper mineralisation
in the southern part of the licence area.
in the southern part of the licence area.
in the southern part of the licence area.
On a regional scale, the area is located within
the late Alpine Tethyan Orogenic Belt and more
specifically within the External Vardar Sub-zone
of the Vardar Zone. The basement is comprised
of ophiolites and a metasedimentary mélange
affected by a polymetamorphic overprint (not
exceeding greenschist facies conditions). A
series of felsic to intermediate sub-volcanic and
pyroclastic rocks of Oligocene to Early Miocene
age represents the cover sequence.
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2019 Beowulf Mining plc Annual Report
15
Wolf Mountain
The Wolf Mountain target forms a prominent
outcropping feature, with strike length of more
than 4 km and width ranging from almost 20
metres (“m”) to greater than 300 m. It represents
a hydrothermal breccia zone with stockworks,
which outcrop as a gossan, with iron-manganese
oxides and hydroxides. The peripheral parts of
the zone are characterised by intense silicification
corresponding to fold structures which control the
development of the hydrothermal breccia.
The mineralisation is structurally controlled, and
for most of the target mineralisation is developed
in the basement, broadly following a tectonic
contact between ultramafic rocks and phyllite,
with the bulk of mineralisation developed within
the ultramafic units. Mineralisation is likely vein/
replacement-type related to Oligocene magmatic
activity responsible for the hydrothermal systems
mapped in the southern portion of the licence area.
In June, the Company reported that in the northern
part of Wolf Mountain, Vardar had completed
651 m of drilling and a total of 278.5 m of
trenching, carried out over outcropping stockwork
and hydrothermal breccia mineralisation. In the
southern part of the licence, a soil sampling
programme was undertaken.
Exploration results were reported in September
2019. Drilling and trenching results confirmed
extensive lead-zinc-silver mineralisation over an
area of 800 m in length and 400 m in width in its
northern part, with significant potential for high-
grade feeder structures.
Vardar is planning to conduct Direct Current -
Induced Polarisation (“DC-IP”) surveys, the results
of which, when combined with detailed magnetic
data, will be used for targeting high-grade
sulphide-dominant lead-zinc-silver mineralisation
associated with both mineralised breccia and
feeder structures
Trenching highlights include:
• Trench WM-T01
returned 1.43 per cent lead, 1.87 per cent zinc and 11 g/t silver over 51.0 m, including 2.01 per
cent lead, 3.17 per cent zinc and 18 g/t silver over 12.5 m; and
• Trench WM-T02
returned 2.7 per cent lead, 0.55 per cent zinc and 10 g/t silver over 18.0 m and 3.6 per cent lead,
0.64 per cent zinc and 14 g/t silver over 8 m.
• WM-T01, T02 and T03
all returned anomalously high lead-zinc-silver concentrations for intersected zones.
Drilling highlights include:
• Hole WM001 returned 1.2 per cent lead, 0.36 per cent zinc and 10 g/t silver over 14.1 m;
• Hole WM003 returned 1.4 per cent zinc over 4.15 m;
• Hole WM004 returned 1.27 per cent lead, 0.91 per cent zinc and 8 g/t silver over 8.9 m; and 1.4
per cent zinc over 20.9 m;
• Hole WM006 returned 1.38 per cent zinc over 19.3 m;
• Hole WM007 returned 2.69 per cent lead, 0.4 per cent zinc and 16 g/t silver, over 4.3 m;
• Hole WM009 returned 1.29 per cent lead over 3.0 m;
• Hole WM010 returned 2.45 per cent zinc over 2.0 m; and
• Hole WM014 returned 2.14 per cent zinc over 1.0 m.
16
Mitrovica South
Viti
Soil sampling results for the southern half of
Mitrovica have identified three target areas:
• Mitrovica South exhibits potential for a large
mineralised system - soil sampling results
have identified distinctive zinc, copper, lead,
silver, and gold anomalies in the southern part
of the license, extending laterally from known
mineralisation, suggesting that the system may
be larger than indicated by initial geological
mapping.
• Majdan Peak Gold target - anomalous gold and
silver assays have been returned for the eastern
margin of the license, corresponding with
previously mapped advanced argillic alteration,
identified historic gold workings/pits and
anomalous rock chip samples (up to 7.2 g/t gold).
• Majdan Peak Lower Slopes - displays elevated
copper, zinc and silver in soil results possibly
correlating with structurally controlled
mineralisation.
Vardar is planning to conduct DC-IP surveys, the
results of which, when combined with detailed
magnetic data, will be used for defining drill
targets.
The Viti project is situated in south-eastern Kosovo
and is made up of three adjacent licences covering
213 km2. The licences encompass an interpreted
circular intrusive, indicated by regional airborne
magnetic data. There is evidence of intense
alteration typically associated with porphyry
systems, with several copper occurrences
and stream sample anomalies in proximity to,
and within the project area. In addition, Viti is
prospective for lithium-boron mineralisation, with
a geological setting similar to Rio Tinto’s Jadar
deposit in Serbia.
During the year, orientation drilling at Viti
intersected the upper part of a copper-gold
porphyry system. Drilling also identified highly
altered trachyte porphyry dykes with associated
copper and gold mineralisation.
Drill testing was designed to test the extent and
type of alteration associated with an extensive
three-kilometre gossanous outcrop, which had
previously returned anomalous copper and gold
concentrations in rock grab samples. In addition,
soil samples were collected to determine the
extent of possible anomalous metal concentrations
over the target area.
Future work will focus on copper-gold target
delineation using a combination of detailed
magnetic and DC-IP surveys, and with new
targets drilling should follow.
Post-Year End
In February 2020, Vardar identified an additional copper-zinc exploration target at Mitrovica, and
Beowulf invested a further £50,000, increasing the Company’s ownership to 42.2 per cent. Then,
in March, Beowulf co-invested alongside existing and founding shareholders another £30,000, as
part of a £70,000 total fundraise for soil sampling over the gold target at Majdan Peak.
June 2020, results from the soil sampling programme completed across the Majdan Peak
gold target at Mitrovica were announced, an extensive gold anomaly, identified over an area
approximately 1400 metres x 700 metres, with individual soil samples returning up to 0.36
g/t gold. Furthermore, a new lead-zinc-copper-gold target has been identified to the south of
Majdan Peak, of significance given its situation, approximately 3 kilometres from the Stan Terg
mine.
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2019 Beowulf Mining plc Annual Report
17
17
Finnish
Exploration Permits
Beowulf, via its wholly owned subsidiary, Fennoscandian, currently holds
two exploration permits, although one approval is being appealed at the
time of writing and has applied for a further two exploration permits.
The Company also holds three Claims Reservations, Merivaara 1,
Tammijärvi 1 and Polvela 1, on which it is allowed to conduct basic
prospecting work in advance of an application for an exploration permit.
Permit Name
Permit ID Area (km2) Valid from
Valid until
Approved Exploration Permits
Pitkäjärvi 1
2016:0040
10.00
07/12/2016
10/01/2021
Rääpysjärvi 1
2017:0104
7.16
25/04/2019
See note (1)
Applied for Exploration Permits
Joutsjärvi 1
2017:0122
5.79
Applied for 16/10/2017
Karhunmäki 1
2019:0113
10.00
Applied for 31/12/2019
Notes:
(1) Application approved by TUKES 25/04/2019. Administrative Court of Eastern Finland rejected an appeal
on 27/03/20. Further appeal now lodged with Supreme Administrative Court.
D
N
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18
Aitolampi
(Pitkäjärvi 1 Exploration Permit) - Graphite
Introduction
The Aitolampi and Pitkäjärvi graphite prospects,
located in eastern Finland approximately 40km
southwest of the well-established mining town
of Outokumpu, were discovered in 2016 and
are areas of graphitic schists on a fold limb,
coincidental with an extensive electro-magnetic
(“EM”) anomaly. Many of the EM zones are
obscured by glacial till, but graphite observations
in road cuttings and outcrops are also associated
with abundant EM anomalies.
2019 Summary
During the year, the Company made significant
progress with Fennoscandian, specifically with its
Aitolampi project, part of the Company’s 100 per
cent owned Exploration Permit, Pitkäjärvi 1.
In June, drilling at Aitolampi extended the higher-
grade Western Zone, and, in October 2019,
Beowulf announced an upgraded MRE for the
project.
Additionally, the drilling programme generated
sample material to support baseline
environmental studies, for graphite purification
and spheroidization test work, and the further
assessment of Aitolampi graphite for battery
applications as part of the Business Finland
funded BATCircle Project.
Highlights of the upgraded
MRE are as follows:
Other
Developments
• An 81 per cent increase in contained graphite
(compared to the 2018 MRE) for the higher-
grade western zone with an Indicated and
Inferred Mineral Resource of 17.2 Mt at 5.2 per
cent TGC containing 887,000 t of contained
graphite.
• An unchanged Indicated and Inferred Mineral
Resource of 9.5 Mt at 4.1 per cent TGC for
388,000 t of contained graphite for the eastern
lens.
• Updated global Indicated and Inferred Mineral
Resource of 26.7 Mt at 4.8 per cent Total
Graphitic Carbon TGC for 1,275,000 t of
contained graphite. All material is contained
within eastern and western graphite mineralised
lenses, interpreted above a nominal three per
cent TGC cut-off grade.
• An augmented global Indicated and Inferred
Mineral Resource of 11.1 Mt at 5.7 per cent TGC
for 630,000 t of contained graphite, reporting
above a five per cent TGC cut-off, based on the
grade-tonnage curve for the resource.
In March, the Company announced that
In March, the Company announced that
Fennoscandian received additional funding from
Fennoscandian received additional funding from
Business Finland, a 50 per cent contribution to
Business Finland, a 50 per cent contribution to
a budget of Euros 224,900. The funds will be
a budget of Euros 224,900. The funds will be
used for graphite purification and spheroidization
used for graphite purification and spheroidization
test work, and the further assessment of
test work, and the further assessment of
Fennoscandian’s graphite for battery applications.
Fennoscandian’s graphite for battery applications.
Business Finland has been granted Euros 10
Business Finland has been granted Euros 10
million funding for a project titled “BATCircle -
million funding for a project titled “BATCircle -
the development of a Finland-based Circular
the development of a Finland-based Circular
the development of a Finland-based Circular
the development of a Finland-based Circular
Ecosystem of Battery Metals”. BATCircle is part
Ecosystem of Battery Metals”. BATCircle is part
of the European Union (“EU”) Strategic Energy
of the European Union (“EU”) Strategic Energy
Technology Programme, where Finland, under the
Technology Programme, where Finland, under the
leadership of Aalto University and Outotec, will
leadership of Aalto University and Outotec, will
coordinate research into battery recycling. The
coordinate research into battery recycling. The
national BATCircle consortium includes a total
national BATCircle consortium includes a total
of 22 companies, four universities, two research
of 22 companies, four universities, two research
institutes and two cities.
18
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2019 Beowulf Mining plc Annual Report
2019 Beowulf Mining plc Annual Report
19
19
Permits
Beowulf, via its subsidiaries, currently holds five exploration permits,
together with one registered application for an Exploitation Concession, as
set out in the table below:
Permit Name
/Minerals
Permit ID Area (km2)
Valid from
Valid until
Åtvidaberg
nr1 (Pb,Zn,Cu, Ag)2 2016:51
125.32
30/05/2016
30/05/2019
Ågåsjiegge
nr2 (Fe)1,4
Kallak
nr1 (Fe)1,3
Parkijaure
nr2 (Fe)1
Parkijaure
nr6 (Fe)1
2014:10
11.14
24/02/2014
24/02/2020
2006:197 5.00
28/06/2006
28/06/2021
2008:20
2.85
18/01/2008
18/01/2023
2019:81
2.85
10/10/2019
10/10/2022
Notes:
(1) held by the Company’s wholly owned subsidiary, Jokkmokk Iron Mines AB (“JIMAB”).
(2) held by the Company’s wholly owned subsidiary, Beowulf Mining Sweden AB.
(3) an application for the Exploitation Concession was lodged on 25 April 2013 (Mines Inspector Official
Diary nr 559/2013) and an updated, revised and expanded application was submitted in April 2014. On
21 September 2016, the Company submitted a letter to the Mining Inspectorate of Sweden, revising its
application boundary to encompass both the Concession Area, delineated by the Kallak North orebody,
and the activities necessary to support a modern and sustainable mining operation.
(4) Renewal application submitted.
N
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S
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20
Introduction
The Company’s most advanced project is
the Kallak magnetite iron ore deposit located
approximately 40 km west of Jokkmokk in the
County of Norrbotten, Northern Sweden, 80 km
southwest of the major iron ore mining centre of
Malmberget, and approximately 120 km to the
southwest of LKAB’s Kiruna iron ore mine.
The Company is currently going through the
process of obtaining an Exploitation Concession
for Kallak North (the “Exploitation Concession”).
Testwork on Kallak ore has showed that a
‘super’ high grade magnetite concentrate can be
produced, yielding over 71 per cent iron content,
with low levels of deleterious elements, including
phosphorous and sulphur, lending itself to
pelletisation and consumption in DRI facilities
in Europe and the Middle East, and attracting a
in Europe and the Middle East, and attracting a
potential price premium.
Local infrastructure is excellent. A major
hydroelectric power station with associated
hydroelectric power station with associated
electric powerlines is located only a few kilometres
electric powerlines is located only a few kilometres
to the south east of the project area. The nearest
to the south east of the project area. The nearest
railway (the Inlandsbanan or ‘Inland Railway
railway (the Inlandsbanan or ‘Inland Railway
Line’) passes approximately 40 km to the east.
Line’) passes approximately 40 km to the east.
This railway line is connected at Gällivare with the
This railway line is connected at Gällivare with the
‘Ore Railway Line’, used by LKAB for delivery of its
‘Ore Railway Line’, used by LKAB for delivery of its
iron ore material to the Atlantic harbour at Narvik
iron ore material to the Atlantic harbour at Narvik
(Norway) or to the Botnian Sea harbour at Luleå
(Norway) or to the Botnian Sea harbour at Luleå
(Sweden).
Kallak Resource
The Kallak North and Kallak South orebodies are centrally located and cover an area approximately
3,700 m in length and 350 m in width, as defined by drilling. The mineral resource estimate for Kallak
North and South is based on drilling conducted between 2010-2014, a total of 131 holes and 27,895m.
North and South is based on drilling conducted between 2010-2014, a total of 131 holes and 27,895m.
A resource statement for the Kallak project was finalised on 28 November 2014, following the guidelines
of the JORC Code 2012 edition, summary as follows:
Project
Category
Tonnage
Mt
105.9
17.0
12.5
16.8
118.5
33.8
Kallak North
Indicated
Inferred
Kallak South
Indicated
Inferred
Indicated
Inferred
Global
Notes:
Fe
%
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 Fe has been used.
(4) Mineral Resource, which is not Mineral Reserves, has no demonstrated economic viability.
(5) An exploration target of 90-100 Mt at 22-30 per cent Fe represents potential ore below the pit shells modelled for this resource
statement, and in the gap between drilling-defined Kallak South mineralised zones.
(6) The resource statement has been prepared and categorised for reporting purposes by Mr. Thomas Lindholm, of GeoVista AB,
Fellow of the MAusIMM, following the guidelines of the JORC Code, 2012 edition.
20
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2019 Beowulf Mining plc Annual Report
21
An overview of the interpreted
mineralisation is shown in the
diagram below.
The mineralised area at Kallak North is
approximately 1,100 m long, from south to
north, and, at its widest part in the centre, is
approximately 350 m wide.
The deepest drill hole intercept is located some
350 m below the surface in the central part of
the mineralisation. In the southern and northern
parts, the intercepts are shallower at 150-200 m.
However, in the northern part, there are no barren
holes below them, so the mineralisation could
continue at depth.
The investigations at Kallak South have been
divided into two parts, the northern and southern
ends, respectively. In the northern part the
mineralisation extends approximately 750 m
from north to south and has an accumulated
width of 350 m. The deepest drill hole intercept
is located some 350 m below the surface in the
southern-most part of the mineralisation. In
the southern part, the mineralisation extends
approximately 500 m from north to south and has
a maximum width of just over 300 m. The deepest
drill hole intercept is located some 200 m to 250
m below the surface in the central part of the
mineralisation.
Approximately 800 m in between the southern
and northern parts of Kallak South has not been
investigated by systematic drilling. An exploration
target of 90 Mt to 100 Mt at 22-30 per cent iron
has been assigned to the area between the
southern and northern parts.
22
2019 Update
Throughout 2019, Beowulf continued to push
for a decision from the Swedish Government on
its application for an Exploitation Concession,
while demonstrating its approach to developing
an innovative, modern, and sustainable mining
operation at Kallak. We continued to work with the
Mayor in Jokkmokk, Norrbotten Regional Council
Members and Norrbotten Members of Parliament
to lobby the Government.
In late January, Kurt Budge CEO delivered a
presentation titled ‘Sustainability in the heart
- partnership, the lifecycle of mining projects,
balancing the interest of stakeholders’ at the
Future Mine and Mineral Conference in Stockholm.
The CEO spoke of the damage Kallak and other
mining cases are having on Sweden’s reputation
as a destination for mining investors. On a more
positive note, the CEO presented Beowulf’s
approach to sustainable mining and outlined
how the Company can play its part in ensuring
that Sweden continues to lead in this area, by
developing a modern and sustainable mining
operation at Kallak in partnership with the
community in Jokkmokk.
Beowulf continued to support the OECD’s work in
Sweden, attending the launch of the report on its
Rural Policy Review ‘Linking the Indigenous Sami
People with Regional Development in Sweden’,
having previously participated in the OECD’s land-
use workshop in early 2018.
Later in the year, the CEO attended the third
OECD Meeting for Mining Regions and Cities,
organised to enable knowledge sharing, with a
focus on developing policy recommendations and
standards that can help maximise the benefits
that mining can bring to a region or city.
At the meeting, learnings from past situations
and experiences, what works and what does not
work, and ongoing challenges, such as gaining
acceptance by communities when it comes to
mining development and the importance of
engaging with indigenous communities, were
discussed. In addition, global trends were
presented, including the ‘Circular Economy’ and
the adoption of ‘Clean Energy’, and the impacts
that these could have on the future demand for
minerals and metals.
In the context of all these ideas, the Company’s
Kallak project is an ideal candidate for bringing
together the best of thinking into the development
of a modern and sustainable mining project, that
could transform a community and a region, while
could transform a community and a region, while
leveraging the mining heritage and harnessing the
leveraging the mining heritage and harnessing the
innovation that Norrbotten and Sweden possess.
innovation that Norrbotten and Sweden possess.
Following Almedalen in July, the Company outlined
its immediate three-step plan for advancing
the Kallak project, in the event the Swedish
Government awards the Concession:
1
2
3
Scoping Study - completion
within 12 months of the
Concession being awarded - and
in parallel develop a roadmap for
environmental permitting.
Formation of a ‘Development
Taskforce’ with Jokkmokks
Kommun and other key partners
with an interest in Kallak,
such that the development of
Kallak and the opportunity to
regenerate Jokkmokk can be fully
coordinated.
To advance discussions with
the Sami reindeer herding
communities, to listen to their
concerns, find solutions together
to problems that might exist,
working towards reaching
mutually beneficial agreements
that ensure Sami reindeer
herding, livelihoods and culture
are protected, and that Sami
communities benefit from the
development of a mine at Kallak.
During the year, Beowulf continued to support
SME development in Jokkmokk and, in the event
that the Concession for Kallak is awarded,
has pledged an additional SEK 300,000 to the
Collaboration Agreement (the “Agreement”) it
has with Jokkmokks Allmänning (“Allmänning”).
Beowulf has previously invested SEK 500,000 in
the partnership Agreement with Allmänning and is
pleased to continue to support SME development
in Jokkmokk.
The main purpose of the existing Agreement is
to invest funds and support the development
of SMEs in Jokkmokk. The funds will match
Allmänning’s investment in Jokkmokks Log, a
sustainable construction company, which uses
Allmänning timber production for wooden building
construction. Jokkmokks Log, which is adding
value to locally produced raw materials, could
provide opportunities for training local apprentices,
and thereafter employment as its business grows.
Exploring Iron Ore Potential
at Parkijaure
Beowulf is a partner in the European Union (“EU”)
funded PACIFIC Project (“PACIFIC”), launched
in June 2018. The project has received €3.2
million from the EU’s Horizon 2020 research and
innovation programme and has a 36-month
programme of activities being coordinated by
Université Grenoble Alpes.
The aim of PACIFIC is to develop a new low-cost
and environmentally friendly tool for exploring
for sub-surface mineral deposits. The PACIFIC
consortium is conducting fundamental and
applied research to develop two radically new and
complementary mineral exploration techniques,
both based on passive seismic imagery.
Kallak, including Kallak North, Kallak South and
the Parkijaure licence, has been chosen as one of
two PACIFIC test sites.
In September, Phase 1 work was carried out at
Kallak, which included testing the multi-array
method, using an array of receivers at surface,
over the known magnetite ore at Kallak South to
provide background data, the seismic properties
for the iron ore and to correlate findings with the
geological model for Kallak.
In Autumn 2020, Phase 2 work will commence
testing the multi-array method in parallel with
drilling at Kallak South, with noise from drilling
providing a passive seismic source. Testwork
will determine if a 3D seismic model can be
constructed, using the established seismic
characteristics of the Kallak deposit, and whether
the 3D model can be used to identify previously
undiscovered magnetite mineralisation for the
Kallak South Exploration Target areas and for
Parkijaure. The Company would then consider
further drilling.
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23
In October, the Company was awarded an
Exploration Licence for Parkijaure nr 6, covering
almost 1,000 hectares immediately to the south of
the Kallak deposits, and similarly prospective for
magnetite iron ore.
Communications with the
Swedish Government
During the year, the Company communicated with
the government on numerous occasions, regarding
the Company’s application for an Exploitation
Concession.
In April, Göran Färm Chairman wrote to Minister
Baylan regarding the Kallak application. The
letter reminded the Minister that since the
Company first submitted its application in 2013,
the case has been sent back and forth between
Swedish authorities and the Government, finding
themselves unable to award an Exploitation
Concession for Europe’s largest drill defined iron
ore deposit, a potential global resource of 250
million tonnes of iron ore.
The first exploration permit for Kallak was granted
by the Mining Inspectorate in 2006, and, since
that time, Swedish authorities have permitted the
Company to invest over SEK 80 million to date.
While the Kallak project suffers delay after delay,
LKAB, the state iron ore company, warned in
October 2018 that the ore in the Kiruna mine will
be depleted earlier than expected. This placed the
media spotlight on the future of LKAB’s operations
and the strategic importance of iron ore to
Sweden. Further highlighting the absurdity of the
Kallak situation.
In communication with the Government, it was
confirmed that the Kallak application was being
prioritised and acknowledged that the Company
had been waiting an excessive period of time for a
decision. On this basis, the Company reasonably
expected, that a decision would be taken, by the
Government, before the summer or 2019.
In May, the Chairman and the CEO met with Mr.
Emil Högberg, State Secretary to the Minister,
to again make a case for the Concession being
awarded. The State Secretary closed the
meeting acknowledging the importance of the
Kallak project to Jokkmokk. After the summer,
the Chairman followed up again with the State
Secretary to ensure the Government had all
the information it needed with respect to our
application.
In September, the CEO wrote to Minister Baylan,
following meetings with advisors, including legal
advisors, and the new CEO at SveMin, asking for
a meeting and clarity on the process and timeline
to a decision by the Government. In response,
Minister Baylan explained that the CEO’s request
for a meeting at the time “concerns a forthcoming
Government decision - a dossier that is currently
under preparation”, and that the Government is
unable to meet or comment with regard to its
“ongoing review”.
The Company engaged legal firm Mannheimer
Swartling to work with Fröberg & Lundholm to
review its Kallak application. Specifically, to review
statements by the County Administrative Board
for the County of Norrbotten (“CAB”), including the
CAB’s statement made in November 2017, and the
Company’s comments to the Swedish Government
criticising that statement. The findings of the legal
analysis were unequivocal, that the Company has
robustly argued its case for a Concession to be
awarded.
In November, the Company submitted a
concluding statement (the “Statement”) for
Kallak, prepared by Mannheimer Swartling and
Fröberg & Lundholm, to the Government. The
Statement stressed that, as has previously
been demonstrated by the Company, and
acknowledged by the CAB, the establishment of
a mine at Kallak would have significant positive
effects on the local economy: creating jobs,
generating tax revenues for Jokkmokk municipality,
and stimulating and diversifying the business
sector in Jokkmokk. In so doing, Kallak would help
solve the problems Jokkmokk is facing, a lack of
investment in new enterprise and job creation,
and a declining and ageing population, which is
placing a financial burden on Jokkmokks Kommun
that it cannot afford to bear.
The Statement notes that neither the
Reindeer Herding Impact Assessment, nor the
Environmental Impact Assessment have concluded
that mining operations at Kallak would threaten
the existence and livelihoods of local Sami reindeer
herding communities. Furthermore, the Statement
highlights the similarities between Kallak and
24
In May 2020, the Company awarded a drilling
contract for up to 1,650 metres diamond
drilling, targeting additional potential iron
ore mineralisation at Kallak South. The work
programme will determine if a 3D seismic model
can be constructed, using the established seismic
characteristics of the Kallak deposit. The work is
being undertaken as part of the European Union
funded PACIFIC Project.
In June 2020, the CEO wrote again to Minister
Baylan, after a Parliamentary Question had been
put to the Minister by a member of Parliament,
asking when a decision will be taken on Kallak.
The CEO reminded Minister Baylan, that when the
Minister spoke at the Mining Nordic Day in Toronto
in early March, he saved his biggest welcome for
investors and said that the CEO was welcome
to do business in Sweden. In the letter, the CEO
stated that Beowulf is unable to do business in
Sweden, because the Company cannot get a
decision on Kallak from the Government.
The SGU, a Government Office, first discovered
Kallak in the 1940s, designated it an Area of
National Interest in 2013 and produced its latest
study, headlined ‘New light on iron ore at Kallak’, in
study, headlined ‘New light on iron ore at Kallak’, in
May 2020. Kallak has been on the SGU’s radar for
May 2020. Kallak has been on the SGU’s radar for
80 years! Bergsstaten (the “Mining Inspectorate”),
80 years! Bergsstaten (the “Mining Inspectorate”),
part of the SGU, recommended to the Government
part of the SGU, recommended to the Government
in October 2015, that the Concession for Kallak
should be awarded, and last October awarded an
should be awarded, and last October awarded an
Exploration Permit for Parkijaure nr 6.
available case law, which support the approval of
the Concession.
In December, the CEO wrote again to Minister
to Minister Baylan. The CEO requested that the
Government provide Beowulf with details on when
the Company can expect the decision on Kallak
to be taken. No response was received before the
year-end.
Post-Year end
In January 2020, the CEO contributed to a
‘Roundtable on mining in northern Sweden’
hosted by Länsstyrelsen Norrbotten, Länsstyrelsen
Västerbotten, Boliden and LKAB. At the meeting
in Luleå, the Government was represented by
the State Secretary, who was unable to shed
any light on the handling of the Company’s
application by the Government, nor the timing
of a decision. At the meeting, the CEO made the
Company’s viewpoint clear, that any review by the
Government of Swedish legislation should have no
impact on permit applications in the system that
have been waiting years for a decision.
A response to the CEO’s letter sent in December
2019 to Minister Baylan arrived in February 2020,
in which the State Secretary stated that the
Government was not able to comment on when
a decision is expected to be taken, however, the
Government had taken careful note of information
provided.
During the month, the CEO participated in a
meeting discussing the ‘Mining industry and
indigenous peoples: regulations, best practice and
social innovation’. On this subject, the inclusion
of Sami in regional development in Sweden,
permitting, sustainable mining, supply chain
transparency, the Green Economy and the Fossil
Free Economy, Beowulf is an active participant
and contributor to the debate
Also, the Board met in Stockholm to discuss the
continuing and unacceptable delays in getting a
decision form the Swedish Government for Kallak.
The Board was already in receipt of a paper
detailing options, prepared by the Company’s
lawyers, and actively considering ring-fencing
funds for legal action. All options to take legal
action remain under active consideration.
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25
25
Board of Directors
Göran Färm - Non-Executive Chairman
Mr Färm joined Beowulf as Non-Executive Chairman in October 2017.
Göran, born in 1949, was an elected Member of European Parliament (“MEP”) from 1999 to 2004 and,
then again, from 2007 to 2014. Göran was also Deputy Mayor of Norrköping during the 1990s.
Göran has experience in industrial policy as a former Head of the Swedish Trade Union Confederation’s
unit for economic policy and investigation, as head of business issues in the City of Norrköping and as
former MEP of the Committee of Industry, Research, and Energy of the European Parliament.
Göran has extensive experience in communications as a former journalist, Director of Information at
Riksbyggen, and as a public affairs advisor.
In 2015, Göran was elected as Chairman of Kommuninvest, a public development bank owned by
Swedish municipalities, cities, and regions.
Kurt Budge - Chief Executive Officer
MBA MEng ARSM
Mr Budge was appointed Chief Executive Officer of Beowulf Mining in October 2014 after joining the
Company as a Non-Executive Director in September 2014.
Kurt has over 20 years’ experience in the mining sector, during which he spent five years as a Business
Development Executive in Rio Tinto’s Business Evaluation Department. Here he was engaged in mergers
and acquisitions, divestments and evaluated capital investments. He has also been an independent
advisor to junior mining companies on acquisitions and project development as well as a General
Manager of Business Development, where he developed strategic growth and merger and acquisition
options for iron ore assets.
Kurt was Vice President of Pala Investments AG, a mining focused private equity firm based in
Switzerland, and has worked as a mining analyst in investment research.
During the earlier part of his career he held several senior operations and planning roles in the UK
coal industry with RJB Mining (UK Coal plc) and worked as a Venture Capital Executive with Schroder
Ventures.
Kurt holds an M. Eng (Hons) degree in Mining Engineering from The Royal School of Mines, Imperial
College London, and an MBA from London Business School.
Christopher Davies - Non-Executive Director
BSc Hons Geology, MSc DIC Mineral Exploration
Mr Davies joined the board of Beowulf as a Non-Executive Director in April 2016. Chris, who is a Fellow
of the Australasian Institute of Mining and Metallurgy, is an exploration/economic geologist with more
than 30 years’ experience in the mining industry. He has substantial knowledge of graphite and base
metals, a particular skill set which will be complimentary to Beowulf’s existing team. He was Manager
for the exploration and development of a graphite deposit in Tanzania and has been involved with due
diligence studies on graphite deposits in East Africa and Sri Lanka.
Chris has worked as a geologist in many different parts of the world including Africa, Australia, Yemen,
Indonesia, and Eastern Europe. His most recent role was as a Consultant to an Australian Group seeking
copper-gold assets in Africa where he carried out technical due diligence and negotiated commercial
terms for joint venture partnerships. Chris was Operations Director of African Eagle until March 2012
and Country Manager for SAMAX Resources in Tanzania, which was acquired by Ashanti Goldfields in
1998 for US$135 million.
26
Senior Management
Liam O’Donoghue - Company Secretary
Mr O’Donoghue is a qualified corporate lawyer and director of the AIM specialist advisory and
administration firm, ONE Advisory Group Limited.
Rasmus Blomqvist - Exploration Manager
Mr. Blomqvist, the founder of Fennoscandian, was appointed Exploration Manager in January 2016. Mr.
Blomqvist has been working in exploration and mining geology for over 11 years and holds an MSc in
Geology and Mineralogy from Åbo Akademi University, Turku Finland.
Since 2012, Mr. Blomqvist has been exploring for flake graphite within the Fennoscandian shield and
is one of the most experienced graphite geologists in the Nordic region. Prior to Fennoscandian, Mr.
Blomqvist was Chief Geologist for Nussir ASA, managing its exploration team and achieving significant
exploration success for the company.
Prior to Nussir, Mr. Blomqvist worked as an independent consultant for several international mining
companies including Mawson Resources, Tasman Metals and Agnico Eagle and has experience in
graphite, gold, base metals and iron ore, within the Nordic region.
Mr Blomqvist is a member of the Australasian Institute of Mining and Metallurgy (“AusIMM”). The
Directors present their strategic report for the year ended 31 December 2019.
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Strategic Report
Principal Activity
Review Of The Business
The principal activities of the Group are the
exploration and development for iron ore, graphite
and other prospective minerals in the Nordic
Region and Kosovo. A detailed review of the mining
activities can be found under Review of Operations
and Activities. The Group is registered in and
controlled from the United Kingdom.
The results of the Group for the year are set out
in the consolidated income statement and show
a loss after taxation attributable to the owners of
the parent for the year of £249,192 (2018: Loss
of £1,373,936). A comprehensive 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 facing the Group are detailed below:
Description
Not obtaining an Exploitation Concession at Kallak North
Risk
The Company does not meet the requirements of the prescribed
process for an Exploitation Concession
HIGH
In July 2015, the CAB supported the Company’s application, and in October 2015 the
Mining Inspectorate recommended that the concession be awarded. In its November
2017 statement, the CAB recommended that a Concession is not awarded, but failed
to use the socio-economic assessment criteria set out in the Environmental Code for
applications such as ours, which put emphasis on safeguarding investment and job
creation, and giving consideration for the municipalities’ financial health. The CAB also
contradicted its July 2015 position, when it supported the economic case for Kallak. It is
the Board’s opinion that the Company has fully met the requirements of the prescribed
application process, Swedish Minerals Act and Environmental Code. The Company has
the support of the Mayor of Jokkmokk, landowners’ association and local entrepreneurs
who have lobbied the Government for the award of the Concession. Kallak would have
a positive transformational economic effect on Jokkmokk, the importance of which the
Government has acknowledged.
MEDIUM
Risk rating
pre-mitigation
Mitigating action
Risk rating
post-mitigation
28
Description
Risk
Risk rating
pre-mitigation
Mitigating action
Risk rating
post-mitigation
Description
Risk
Risk rating
pre-mitigation
Mitigating action
Risk rating
post-mitigation
Description
Risk
Risk rating
pre-mitigation
Mitigating action
Risk rating
post-mitigation
Revocation of licences
Licences are subject to conditions which, if not satisfied,
may lead to the revocation of the licence
MEDIUM
The Company diligently manages its licences to ensure full compliance.
A monthly status report is generated for monitoring purposes and action.
LOW
Non-operator of subsidiary
Lack of control and oversight on entity spend
LOW
Budgets are provided by the entity on request. Funds invested are designated
for specific project use. Company CEO holds position as a director.
LOW
Unable to raise sufficient funds
Unable to raise sufficient funds to invest in
project portfolio and cover corporate costs
MEDIUM
Effectively communicate to the market. Raise capital in a timely manner, as record of
accomplishment shows. Ensure forecasting is accurate, and expenditure controls are
in place to optimise cash resources.
MEDIUM
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29
Long term adverse changes in Commodity prices
Prices for iron ore, graphite, and other commodities may affect the viability of the
Company’s projects
MEDIUM
The Company identifies and invests in high quality projects that are attractive to the
market. The Company will manage capital and operating expenditures to maximise
shareholder returns. In the Nordic region, COVID-19 has not had a material effect on
the mining sector, with mines continuing to operate. In Kosovo, Vardar has continued
with exploration activities. The economic slowdown caused by the pandemic is
anticipated to reverse, once COVID-19 is brought under control. In June 2020,
benchmark iron ore prices rose to over $100/tonne.
MEDIUM
Not discovering an economic mineral deposit
Very few projects go through to be developed into mines
HIGH
Early studies and testwork give confidence that the Company is allocating capital
appropriately. In Kallak and Aitolampi we have potential quality resources, benefitted
by excellent local infrastructure, and established low-risk mining countries.
MEDIUM TO LOW
Description
Risk
Risk rating
pre-mitigation
Mitigating action
Risk rating
post-mitigation
Description
Risk
Risk rating
pre-mitigation
Mitigating action
Risk rating
post-mitigation
30
Performance Measurement
The ongoing performance of the Company is
managed and monitored using a number of key
financial and non-financial indicators (“KPIs”) on a
monthly basis:
Financial:
i. Administration Expenses
Overheads are managed versus budget and
forecast on a monthly basis. The Company has
a history of tightly managing its expenses. The
underlying group overhead expenses increased
in the year to £1,024,386 (2018: £794,851), the
increase was largely attributable to the inclusion
of £248,836 losses of Vardar being consolidated
for the first time.
ii. Cash position
Cash is vital for an exploration company and
it must be managed accordingly. Monthly, the
Company, analyses the expenditure of each
subsidiary. It also manages monthly cash flow
for the Group versus budget and forecast.
The financial strategy is to ensure that the
Company at a minimum has sufficient funds to
undertake it’s committed expenditure and meet
its financial obligations. The Group demonstrates
a commitment to financial stability as shown by
a year-end cash position of £1.12 million (2018:
£1.53 million).
iii. Exploration expenditure by project
The Company controls its exploration spend
by project versus budget and in relation to
its available cash resources. If the results of
exploration do not meet expectations, then
budgeted activities are re-evaluated or even
cancelled. Evaluation of early stage projects is
approached in a cost-effective way. The Group
determines whether there are any indicators of
impairment of its exploration assets on an annual
basis. This approach is best evidenced through the
oversight at a board level and reporting level of
operations where the Company is not the operator
decision to impair several an early stage project in
the current year, in order to preserve resources.
Non-financial:
iv. Licence renewal compliance
It is important from a risk management
perspective that the Company monitors the expiry
dates of its exploration permits. This is managed
internally for its Finnish graphite permits while, in
Sweden, the Company uses an external service
provider to report on the status of its permits and
assist with renewal applications, and in Kosovo,
works closely with Vardar management to ensure
that licences are maintained in good standing.
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31
S172 Statement
The Board of Beowulf is aware that the decisions
we make may affect the lives of many people.
The Board makes a conscious effort to try and
understand the interests of our stakeholders, and
to reflect them in the choices we make in creating
long-term sustainable success for the business.
The Board views engagement with our
shareholders and wider stakeholder groups as
essential work. We are aware that we need
to listen to each stakeholder group, so that we
can understand specific interests, and foster
effective and mutually beneficial relationships. By
understanding our stakeholders, we can build their
needs into the decisions we take.
Throughout this Annual Report, we provide
examples of how we:
- Consider the likely consequences of long-term
decisions;
- Foster relationships with stakeholders;
- Understand our impact on our local community
and the environment; and
- Demonstrate the importance of behaving
responsibly.
This section serves as our section 172 statement
and should be read in conjunction with the
Strategic Report and the Company’s Corporate
Governance Statement. Section 172 of the
Companies Act 2006 requires Directors to act in a
way that they consider, in good faith, would most
likely promote the success of the Company for
the benefit of its members as a whole, taking into
account the factors listed in s172. The Directors
continue to have regard to the interests of the
Company’s employees and other stakeholders,
including the impact of its activities on the
community, the environment and the Company’s
reputation, when making decisions. Acting in
good faith and fairly between members, the
Directors consider what is most likely to promote
the success of the Company for its members in the
long term.
The Board regularly reviews our principal
stakeholders and how we engage with them. The
stakeholder voice is brought into the boardroom
throughout the annual cycle through information
provided by management and also by direct
engagement with stakeholders themselves. The
relevance of each stakeholder group may increase
or decrease depending on the matter or issue in
question, so the Board seeks to consider the needs
and priorities of each stakeholder group during its
discussions and as part of its decision making.
The following table acts as our s172(1) statement
by setting out the key stakeholder groups, their
interests and how Beowulf has engaged with
them over the reporting period. However, given
the importance of stakeholder focus, long-term
strategy and reputation, these themes are also
discussed throughout this Annual Report.
32
32
Stakeholder
Their interests
How we engage
Investors
• Business sustainability
• High standard of governance
• Comprehensive review of
financial performance of the
business
• Success of the business
• Ethical behaviour
• Awareness of long-term
strategy and direction
• Improving market perception of
the business
• Delivering long term value to
shareholders
• Interim and Annual Report
• Investor Relations section on the Company
website
• RNS announcements
• Trading updates
• Option to receive news releases directly from
Beowulf by email
• Shareholder circulars
• AGM
• Stock exchange announcements
• Press releases
• Board encourages open dialogue with the
Company’s investors
• Key contact on the Board for shareholder liaison
Regulatory
bodies
• Compliance with regulations
• Worker pay and conditions
• Health and Safety
• Brand reputation
• Waste and environment
• Insurance
• Environmental protection
Environment
• Sustainability
• Energy usage
• Recycling
• Waste Management
Community
• Community outreach
• Human Rights
• Sustainability
• Company website
• Stock exchange announcements
• Annual Report
• Direct contact with regulators
• Compliance updates at Board Meetings
• Consistent risk review
• Ongoing communication with the Swedish
Government
• Engagement with the Mining Inspectorate of
Sweden
• Monthly KPI’s on licence renewal compliance
• Oversight of corporate responsibility plans
• Adhere to Local Minerals Acts and Environmental
Codes
• Participation in the OECD’s ‘Linking the Indigenous
Sami People with Regional Development in
Sweden’ project
• Engagement with the Sami reindeer herder
representatives
• Communication with Sametinget members
• Meeting with key community representatives
• Partnering with the communities in which we
operate - sharing plans/ideas for discussion
Contractors
• Terms and conditions of contract
• Health and safety
• Human rights and modern slavery
• Anti-Bribery Policy
• Whistle-blower Policy
ON BEHALF OF THE BOARD:
Mr K Budge, Director
28 July 2020
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33
Report of the Directors
Management is closely monitoring commercial
and technical aspects of the Group’s operations
to mitigate risk and believes the Group will have
access to sufficient working capital to continue
operations for the foreseeable future.
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 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 would result if the Company was
unable to continue as a going concern.
Directors’ and Officers’
Indemnity Insurance
The Group has made qualifying third-party
indemnity provisions for the benefit of its Directors
and Officers. These were made during the period
and remain in force at the date of this report.
Further details of these agreements can be found
in the Remuneration Report on page 37.
Significant Shareholdings
The Directors are aware of the following interests,
directly or indirectly, in three per cent or more of the
Group’s ordinary shares on 31 December 2019:
Shareholders
Shares
%
Interactive
Investor Services
Nominees Limited
- A/C SMKTNOMS
30,164,253
5.00
HSDL (Nominees) Limited 22,972,532
3.81
Hargreaves Lansdown
(Nominees) Limited
Interactive Investor
Services Nominees Limited
- A/C SMKTISAS
20,329,020
3.38
19,588,043
3.25
Directors
Since 1 January 2019, the following Directors
have held office:
Mr K R Budge
Mr C Davies
Mr G Färm
Dividends
No dividends will be distributed for the year ended
31 December 2019 (2018: Nil).
Going Concern
At 31 December 2019, the Group had a cash
balance of £1.12 million (2018: £1.53 million)
Management have prepared cash flow forecasts
which indicate that although there is no immediate
funding requirement, the Group will need to raise
further funds in the next 12 months for corporate
overheads and to advance its projects.
The Directors are confident they are taking all
necessary steps to ensure that the required finance
will be available, and they have successfully raised
equity finance in the past. They have therefore
concluded that it is appropriate to prepare the
financial statements on a going concern basis.
However, while they are confident of being able
to raise the new funds as they are required, there
are currently no agreements in place, and there
can be no certainty that they will be successful in
raising the required funds within the appropriate
timeframe.
Management has implemented logistical and
organisational changes to underpin the Group’s
resilience to the impact felt by the COVID-19
pandemic, with the key focus being protecting all
personnel, minimising the impact on critical work
streams and ensuring business continuity. The
effect on the economy may impact in the Group in
varying ways, which could lead to a direct bearing
on the Group’s ability to generate future cash flows
for working capital purposes. The inability to gauge
the length of such disruption further adds to this
uncertainty. For these reasons, the generation
of sufficient operating cash flows remain a risk.
34
Authority to Issue Shares
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). At the AGM
held on 29 June 2019, shareholders gave authority
for the Directors to allot equity securities for cash up
to an aggregate nominal value of £1,471,598 (2018:
£1,340,768).
Significant Agreements
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
Information relating to events since the end of the
year is given in Note 24 to the financial statements.
Financial Risk Management
Objectives and Policies
Financial risk management policies and objectives
for capital management are provided within Note 21
to the financial statements.
Future Developments Within
the Business
Beowulf’s strategy is to build a sustainable
and innovative mining company, which creates
shareholder value by developing mining assets,
delivering production, and generating cash flow,
and in so doing meets society’s ongoing need for
minerals, metals and economic prosperity.
Beowulf is developing a high-quality asset base,
which is diversified by geography and commodity,
enabling it to simultaneously advance several
projects up the mining value curve and create
shareholder value.
Additionally, the Board of Directors continues
to look beyond the Company for value creation
opportunities.
The Company’s first priority remains the award
of the Exploitation Concession for Kallak North,
and thereafter completing the Scoping Study. The
introduction of a strategic partner/investor who
understands the value of Kallak as a high-quality
asset, which could be in production within four to
five years, is an ongoing consideration, but does not
preclude the Company from continuing to add value
to Kallak in the meantime.
Fennoscandian, the Company’s graphite business,
is pursuing a strategy to develop a ‘resource
footprint’ of natural flake graphite prospects that
can provide ‘security of supply’ and enable Finland
to achieve its ambition of self-sufficiency in battery
manufacturing. The Company is a recipient of
Business Finland funding, which is supporting
Fennoscandian to move downstream, and develop
its know-how in processing and manufacturing
value-added graphite products.
The Company’s investment in Vardar Minerals
provides diversification, in geography and
commodity exposure, to prospective exploration
opportunities in the Balkan region in Kosovo.
Mitrovica and Viti projects are both located within
the Tethyan Belt, a major orogenic metallogenic
province for gold and base metals which extends
from the Alps (Carpathians/Balkans) to Turkey, Iran
and Indochina, and contains several world class
discoveries. The Tethyan Belt of south-east Europe
can be regarded as Europe’s chief copper-gold
(lead-zinc-silver) province.
The Company’s investment priorities across its
portfolio remain subject to funding being available.
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
requirements of the Companies Act 2006. They are
also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
34
35
2019 Beowulf Mining plc Annual Report
• prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Company will continue in
business.
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 the steps that they ought to have taken
as a Director in order to make themselves aware of
any relevant audit information and to establish that
the Group’s auditors are aware of that information.
Auditor
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.
Annual General Meeting
The Notice of Meeting including details of the
proposed resolutions will be posted to shareholders
in due course and will appear on the Company’s
website.
ON BEHALF OF THE BOARD:
Mr K Budge
Director
28 July 2020
Website Publication
The Directors are responsible for ensuring the
annual report and financial statements are made
available on a website. Financial statements are
published on the Company’s website in accordance
with legislation in the United Kingdom governing
the preparation and dissemination of financial
statements, which may vary from legislation in
other jurisdictions. The maintenance and integrity
of the Company’s website is the responsibility of the
Directors. The Directors’ responsibility also extends
to the ongoing integrity of the financial statements
contained therein.
Directors’ Responsibilities
Statement
The Directors are responsible for preparing the
strategic report, annual report and the financial
statements in accordance with applicable laws and
regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under
that law the Directors have elected to prepare
the Group and Company financial statements in
accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the European
Union. Under company law the Directors must not
approve the financial statements unless they are
satisfied that they give a true and fair view of the
state of affairs of the Group and Company and of
the profit or loss of the Group 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 AIM and the rules of the Spotlight
Exchange in Sweden.
In preparing these financial statements, the
Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that
are reasonable and prudent;
• state whether they have been prepared in
accordance with IFRSs as adopted by the
European Union, subject to any material
departures disclosed and explained in the financial
statements; and
36
Remuneration Report
The Directors have chosen to voluntarily present
an unaudited remuneration report although is
not required by the Companies Act 2006. Details
of the Remuneration Committee’s composition
and responsibilities are set out in the Corporate
Governance Report on page 39 and its terms of
reference can be found on the Group’s website:
beowulfmining.com
Executive Directors’ terms of
engagement
Mr Budge is the sole Executive Director and Chief
Executive Officer. His annual salary was increased
from £138,000 to £150,000 on 1 January 2019. Mr
Budge has a notice period of 12 months.
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 is covered under a separate consultancy
agreement.
Mr Davies annual fee is £30,000 per annum. Mr
Davies has a consultancy agreement with the
Company for the provision of exploration advice
over and above his Non-Executive duties. Mr
Davies has a one month notice period under his
letter of appointment.
Mr Färm was appointed as Non-Executive
Chairman on 30 October 2017. Under Mr Färm’s
letter of appointment, he is paid an equivalent fee
in Swedish Krona of £33,975 per annum. Mr Färm
has a one month notice period under his letter of
appointment.
Indemnity Agreements
Pursuant to the Companies Act 2006 and the
Company’s articles of association, the Board
may exercise the powers of the Company to
indemnify its Directors against certain liabilities,
and to provide its Directors with funds to meet
expenditure incurred, or to be incurred, in defending
certain legal proceedings or in connection with
certain applications to the court. In exercise of that
power, and by resolution of the Board on 26 July
2016, the Company has agreed to enter into this
Deed of Indemnity with each Director.
36
2019 Beowulf Mining plc Annual Report
2019 Beowulf Mining plc Annual Report
37
Aggregate Directors’ Remuneration
The remuneration paid to the Directors in accordance with their agreements, during the years ended 31
December 2019 and 31 December 2018, was as follows:
Name
Position
Salary
& Fees1
Share-
based
Payments2
£
£
Share Benefits4 Pension5
settled
expense3
£
2019
Total
2018
Total
(audited) (audited)
£
£
£
£
Mr K R Budge Chief Executive
Officer
151,000
40,208
10,417
809
13,000 215,434 144,387
Mr C Davies Non-Executive
Director
40,750
36,195
Mr G Färm
Non-Executive
Chairman
49,596
-
-
-
-
76,945 140,561
-
49,596 27,351
Total
241,346
76,403
10,417
809
13,000 341,975 312,299
Notes:
(1) Does not include expenses reimbursed to the
(4) Personal life insurance policy
Directors.
(2) In relation to options granted in year ended 31
December 2019 and 31 December 2017
(5) Employer contributions to personal pension.
Each Director is also paid all reasonable expenses
incurred wholly, necessarily, and exclusively in the
(3) In relation to shares awarded 31 October 2019 in
proper performance of his duties.
lieu of option exercise (refer note 23).
The beneficial and other interests of the Directors holding office on 31 December 2019 in the issued share
capital of the Company were as follows:
Ordinary Shares
31 December 2019
31 December 2018
Mr K R Budge
2,416,426
2,249,759
As 31 December 2019, all options have vested.
ORDINARY SHARES
UNDER OPTION
Mr K R Budge
Mr K R Budge
Mr C Davies
Mr C Davies
NUMBER
9,000,000
3,500,000
2,500,000
2,500,000
EXERCISE
PRICE
1.66 pence
7.35 pence
12 pence
7.35 pence
EXPIRY DATE
17 July 2020
14 January 2024
26 January 2022
14 January 2024
ON BEHALF OF THE REMUNERATION COMMITTEE
Göran Färm
Non-Executive Chairman
28 July 2020
38
Corporate Governance
Report
It is the responsibility as Chairman of the Board
of Directors of the Company to ensure that the
Group has both sound corporate governance
and an effective Board. The Chairman’s principal
responsibilities are to ensure that the Group
and the Board are acting in the best interests of
shareholders, and by making sure that the Board
discharges its responsibilities appropriately. This
includes creating the right Board dynamic and
ensuring that all important matters, strategic
decisions, receive adequate time and attention at
Board meetings.
The Company formally adopted the Quoted
Companies Alliance Corporate Governance (“QCA
Code”) in September 2018. This report follows the
QCA Code guidelines and explains how we have
applied the guidance. The Board considers that
the Group complies with the QCA Code so far as
it is practicable having regard to the size, nature
and current stage of development of the Company.
The Board recognises that the Company does not
fully comply with the 10 principles and general
provisions of the QCA Code but does use it as a
benchmark in assessing its corporate governance
standards. Areas of non-compliance are disclosed
in the text below. Details of the Company’s
compliance with the QCA code can be found below
and in the Corporate Governance section of the
Company’s website.
The Board believes that application of the QCA
Code supports the Company’s medium to long-
term development whilst managing risks, as
well as providing an underlying framework of
commitment and transparent communications
with stakeholders. It also seeks to develop the
knowledge shared between the Company and its
stakeholders.
Strategy, Risk Management
and Responsibility
A description of the Company’s business model
and strategy can be found on page 4, and the
key challenges in their execution can be found on
pages 29 to 30.
The Board is responsible for the monitoring of
financial performance against budget and forecast
and the formulation of the Group’s risk appetite
including the identification, assessment and
monitoring of the Company’s principal risks. The
Audit Committee (see page 41) has delegated
responsibility for the oversight of the Company’s
risk management and internal controls and
procedures and for determining the adequacy and
efficiency of internal control and risk management
systems. The Board continuously monitors and
upgrades its internal control procedures and risk
management mechanisms and conducts an annual
review, when it assesses both for effectiveness.
This process enables the Board to determine if the
risk exposure has changed during the year and
these disclosures are included on pages 29 to 30.
In setting and implementing the Company’s
strategies, the Board, having identified the risks,
seeks to limit the extent of the Company’s exposure
to them having regard to both its risk tolerance and
risk appetite.
Directors
The Board comprises the Independent Non-
Executive Chairman, Göran Färm; the CEO, Kurt
Budge; and Independent Non- Executive Director,
Chris Davies.
Chris Davies holds no Ordinary Shares and holds
5,000,000 options over Ordinary Shares. Chris
Davies has a consultancy agreement in place with
the Company. Neither Chris Davies nor the other
Directors believe his options are significant in
assessing his independence.
All Directors are encouraged to challenge and
to bring independent judgement to bear on
all matters, both strategic and operational.
Biographical details of the Directors can be found
on the Group’s website www.beowulfmining.com.
As a Non-executive Director, Chris Davies commits
approximately between two to four days per
month.
As the Independent Non-Executive Chair, Göran
Färm dedicates approximately between two and
four days per month.
38
39
2019 Beowulf Mining plc Annual Report The Board is satisfied that each of the Directors are able to allocate sufficient time to the Group to discharge
their responsibilities effectively. The number of meetings of the Board and its Committees are outlined below:
Attendance
by Directors
Board
(5 meetings held)
Audit
(1 meeting held)
Mr K R Budge
Mr C Davies
Mr G Färm
5
5
5
1
1
1
Advisers
ONE Advisory Limited has been contracted by
the Company to act as Company Secretary and
has been given the responsibility for ensuring
that Board procedures are followed and that
the Company complies with all applicable rules,
regulations and obligations governing its operation,
including assistance with Board and shareholder
meetings and Market Abuse Regulations (“MAR”)
compliance. ONE Advisory Limited also supports
the Board in its development of the Company’s
corporate governance responsibilities, assisting with
the Company’s application of the QCA Code and
amendments in relation to AIM Rule 26.
The Company’s Nomad is consulted on all matters
and all Directors have access to independent
professional advice, if required.
Neither the Board nor its Committees have sought
external advice on a significant matter.
The Directors believe that the Board, as a whole,
has a broad range of commercial and professional
skills, enabling it to discharge its duties and
responsibilities effectively and that the Non-
Executive Directors have a sufficient range of
experience and skills to enable them to provide
the necessary guidance, oversight and advice for
the Board to operate effectively. All Directors are
encouraged to use their independent judgement
and to challenge all matters, whether strategic or
operational.
The Board annually reviews the appropriateness
and opportunity for continuing professional
development, whether formal or informal. The
Directors also endeavour to ensure that their
knowledge of best practices and regulatory
developments is continually up to date by attending
relevant seminars and conferences.
The Directors consider that the Company and
Board are not yet of a sufficient size for a full Board
evaluation to make commercial and practical sense.
Therefore, the Board accepts that the Company
does not comply with this aspect of the QCA Code,
although in the frequent Board meetings/calls, the
Directors can discuss any areas where they feel a
change would be beneficial for the Company, and
the Company Secretary remains on hand to provide
impartial advice. As the Company grows, it intends
to expand the Board and, with expansion, re-
consider the need for a formal Board evaluation.
40
Culture
The Board recognises that its decisions regarding
strategy and risk will impact the corporate culture
of the Company as a whole and that this will
impact the performance of the Company. The
Board is aware that the tone and culture set by
the Board will greatly impact all aspects of the
Company as a whole. The corporate governance
arrangements that the Board has adopted are
designed to ensure that the Company delivers
long-term value to its shareholders, and that
shareholders have the opportunity to express
their views and expectations for the Company in
a manner that encourages open dialogue with the
Board.
A large part of the Company’s activities is centred
upon an open and respectful dialogue with
shareholders, contractors, regulators and other
stakeholders. Therefore, the importance of sound
ethical values and behaviours is crucial to the
ability of the Company to successfully achieve
its corporate objectives. The Board places great
importance on this aspect of corporate life and
seeks to ensure that this flows through all that the
Company does.
The Directors consider that at present the
Company has an open culture facilitating
comprehensive dialogue and feedback and
enabling positive and constructive challenge.
In addition, the Company makes a point of meeting
with local communities including local tribes and
adjacent landowners.
Audit Committee
Audit Committee comprises Chris Davies and
Göran Färm, who chairs the committee. The Audit
Committee is responsible for ensuring that the
financial performance, position and prospects of
the Group are properly monitored and reported on
and for meeting the auditor and reviewing audit
reports relating to the accounts. Meetings of the
Audit Committee are held at least once a year, at
appropriate times in the reporting and audit cycle.
The Audit Committee is required to report formally
to the Board on its proceedings after each meeting
on all matters for which it has responsibility.
The Board notes that additional information
supplied by the Audit Committee has been
disseminated across the whole of this Annual
Report, rather than included as separate
Committee Reports.
Remuneration Committee
The Remuneration Committee comprises Chris
Davies and Göran Färm, who chairs the committee,
and meets as required. The Committee is
responsible for the review and recommendation of
the scale and structure of remuneration for senior
management, including any bonus arrangements
or the award of share options with due regard to
the interests of shareholders and the performance
of the Company. A Remuneration Committee
Report is included on page 37.
40
2019 Beowulf Mining plc Annual Report
2019 Beowulf Mining plc Annual Report
2019 Beowulf Mining plc Annual Report
41
Independent Auditor’s Report
Opinion
We have audited the financial statements of
Beowulf Mining Plc (the ‘Parent Company’) and
its subsidiaries (the ‘Group’) for the year ended 31
December 2019 which comprise the consolidated
income statement, the consolidated statement
of comprehensive income, the 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 notes to the
financial statements including a summary of
significant accounting policies.
The financial reporting framework that has
been applied in the preparation of the financial
statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the Parent
Company financial statements, as applied in
accordance with the provisions of the Companies
Act 2006.
In our opinion:
• the financial statements give a true and fair view
of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2019 and
of the Group’s loss for the year then ended;
• the Group financial statements have been
properly prepared in accordance with IFRSs as
adopted by the European Union;
• the Parent Company financial statements have
been properly prepared in accordance with
IFRSs as adopted by the European Union and as
applied in accordance with the provisions of the
Companies Act 2006; and
• the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in
the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are
independent of the Group and the Parent Company
in accordance with the ethical requirements that
are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance
with these requirements. We believe that the
audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material uncertainty related to
going concern
We draw attention to note 1 to the financial
statement which explains that the Group and the
Parent Company’s ability to continue as a going
concern is dependent on the ability to raise further
funds in the next twelve months to enable the
Group and Parent Company to meet its working
capital requirements and project commitments. As
stated in note 1, these events or conditions indicate
that a material uncertainty exists which may
cast significant doubt over the Group and Parent
Company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
We considered going concern to be a Key Audit
Matter based on our assessment of the risk and
the effect on our audit. We performed the following
work in response to this Key Audit Matter:
• We critically assessed Management’s financial
forecasts and the underlying key assumptions,
including operating and capital expenditure.
In doing so, we considered factors such as
commitments under licenses and whether the
forecast operating expenditure is reasonable in
light of historic spend.
• We reviewed the mathematical accuracy of the
going concern model prepared by Management
and the underlying calculations used within it.
42
• We made enquiries of Management as to the
future financing options and ability to raise
funding in the near future and considered these in
light of Management’s previous ability to secure
financing for the Group.
• We evaluated Management’s assessment of
the potential impact of Covid-19, including their
assessment of risks and uncertainties associated
with the impact of the pandemic on the Group’s
ability to raise finance to fund its operations. In
performing our evaluation, we formed our own
view of the impact of the pandemic on the Group
based on our understanding of the business
and the exploration industry and compared it
to management’s assessment to determine the
reasonableness thereof.
• We evaluated the adequacy of disclosure made
in the financial statements in respect of going
concern.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current year and include the most
significant assessed risks of material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. In addition to
the matter referred to in the Material uncertainty related to going concern section above, the
following key audit matters were identified:
42
43
2019 Beowulf Mining plc Annual Report Key Audit
Matter
Carrying value of exploration assets (notes 1 & 7)
The Group’s exploration assets are a material balance on the Group’s balance sheet,
totalling £10m as at 31 December 2019 (2018: £8.3m). Of this balance, £6.7m
(2018: £7.1m) relates to the Kallak North project, for which the application for the
exploitation concession is currently being reviewed by the Swedish Government.
As explained in note 1 of the financial statements the assessment of whether there
are indicators of impairment in relation to the exploration assets requires the exercise
of significant judgement by Management and the Directors.
Given the significance of the carrying value of exploration assets and in particular
the delays in the grant of the exploitation concession for the Kallak North project,
the assessment of whether there are indicators of impairment for exploration assets
represented a key area of focus for our audit.
In the current year an impairment provision of £10,720, was made against the Sala
asset on the basis of no further exploration work would be performed on this project.
The Directors have concluded that there were no other indicators of impairment,
which would result in a further impairment of the exploration assets being required.
Refer to note 1 for further details regarding their assessment.
How we
addressed the
key audit matter
We have reviewed Managements’ assessment of whether there
were any other indicators of impairment.
Our work in connection with the indicators of impairment included the following:
• We challenged Management’s assessment and consideration of the evidence to
support the grant of the exploitation concession for the Kallak North project by
the government in light of the decision by the Swedish Authorities not to support
the grant of the concession. This included review of correspondence with various
Swedish Authorities and an assessment of their views and conclusions, review of
their points raised during the application process and Management’s response and
actions thereof and a critical assessment of Management’s views on the Swedish
Authorities decision to not support the award of the concession.
• We reviewed RNS announcements, Board minutes, press releases and held
a number of discussions with Management and have not identified any other
information or factors which may indicate potential triggers for impairment.
• In identifying and assessing indicators of impairment for all licences held we
assessed the validity of licences by obtaining confirmation from licensing
authorities. We also assessed planned expenditure on each project, in light of the
actual outcomes of previously planned expenditure, and Management’s intention to
continue exploration work on each licence area.
• We evaluated the adequacy and appropriateness of the disclosures provided within
the financial statements.
Key observations:
Based on the work undertaken, we consider Management’s assessment and the
Directors’ conclusions that there are no indicators of impairment which would result
in an impairment of the exploration assets being required to be reasonable.
44
Key Audit
Matter
Accounting treatment and consolidation of
Vardar Minerals Limited (notes 1 & 9)
On 1 April 2019 the Group announced the acquisition of Vardar Minerals Limited
(“Vardar”), an entity in which the Group held a non-controlling interest. A further
£500,000 investment was made on 1 April 2019 to increase the Group’s shareholding
from 14.5% to 31.3% at which point in time Management considered control to
have been obtained. Post 1 April 2019 the Group made further investments totalling
£465,000 in Vardar during the remainder of the reporting year.
As explained in note 1 of the financial statements the acquisition of Vardar was
treated as a business combination under IFRS 3. The accounting treatment of a
business combination is considered to be judgemental and complex, especially given
the acquisition was achieved in steps therefore this represented a key area of focus
for our audit.
The acquisition resulted in a fair value gain of £563,431 recognised in the income
statement and intangible assets additions of £1,203,685.
Management determined the fair value of Vardar at acquisition date and accounted
for this under IFRS 3. They also accounted for all subsequent events post acquisition
through equity and consolidated Vardar from the date control was obtained, being
1 April 2019. Refer to notes 1 & 9 for further details regarding the accounting for the
acquisition and consolidation of Vardar.
How we
addressed the
key audit matter
We reviewed the accounting treatment and consolidation of Vardar
and ensured that it was reflected appropriately in the financial
statements and was not materially misstated.
Our work in connection with the above included the following:
• We reviewed Management’s assessment of the accounting treatment of the
transaction as a step up acquisition in line with IFRS 3.
• We obtained the sale and purchase agreement and relevant documentation,
determined the nature of the investment and evaluated the extent of the Group’s
control over Vardar. The key focus of our assessment was the Group’s role as
Investor Director on the Board of Vardar, a role which provides for a casting vote.
• We assessed the appropriateness of the fair value gain recognised on the step up
at acquisition. As part of our audit work in this regard we assessed the fair value
attributed to Vardar by Management at acquisition date, considered whether
the underlying methodology used was reasonable and determined whether
we considered it to be materially misstated. We reviewed publically available
information on the assets held by Vardar, internal technical reporting on the assets,
the timeline of studies undertaken on the assets and the net assets of the Vardar
Group at each step up date.
• We undertook a full scope audit of Vardar to ensure that opening balances, income
statement and statement of financial position were not materially misstated.
• We evaluated the adequacy and appropriateness of the disclosures provided within
the financial statements.
Key observations:
Based on the work undertaken, we consider the accounting treatment and
consolidation of Vardar to be materially correct.
44
45
2019 Beowulf Mining plc Annual Report Our application of materiality
We apply the concept of materiality both in
planning and performing our audit, and in
evaluating the effect of misstatements, including
omissions, which could influence the economic
decisions of reasonable users that are taken on the
basis of the financial statements. In order to reduce
to an appropriately low level the probability that
any misstatements exceed materiality,
we use a lower level materiality, performance
materiality, to determine the extent of testing
needed. Importantly, misstatements below
these levels will not necessarily be evaluated as
immaterial as we also take account of the nature
of identified misstatements, and the particular
circumstances of their occurrence, when evaluating
their effect on the financial statements as a whole.
Materiality for the financial statements as a whole
was set at £171,000 (2018: £150,000) using a
benchmark of total assets excluding intercompany
balances. We considered this to be the most
significant determinant of the Group’s financial
performance used by shareholders, as the Group is
engaged in exploration activities and the principal
focus of the users is likely to be the Group’s
gross assets excluding intercompany balances.
The percentage and benchmark for calculating
materiality has remained consistent with the prior
year.
Each significant component of the Group, excluding
the Parent Company, had an individual materiality
set at a level lower than Group. This materiality
was set between the range of £55,000 and
£110,000.
The Parent Company materiality was set at
£132,000 (2018: £100,000) based on 1.5% of total
assets and reduced to 75% of Group materiality.
Performance materiality is the application
of materiality at the individual account or
balance level set at an amount to reduce to
an appropriately low level the probability that
the aggregate of uncorrected and undetected
misstatements exceed materiality. Performance
materiality was set at 75% (2018: 75%) of the
above materiality levels. These materiality levels
were used to determine the financial statement
areas that were included within the scope of our
audit work and the extent of sample sizes during
the audit.
We agreed at the planning stage with the Audit
Committee that we would report to the committee
all individual audit differences identified during
the course of our audit in excess of £3,200 (2018:
£7,500). We also agreed to report differences
below these thresholds that, in our view, warranted
report on qualitative grounds.
No revisions were made to materiality levels during
the course of the audit.
46
Other information
The Directors are responsible for the other
information. The other information comprises the
information included in the annual report, other
than the financial statements and our auditor’s
report thereon. Our opinion on the financial
statements does not cover the other information
and, except to the extent otherwise explicitly
stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other
information and, in doing so, consider whether
the other information is materially inconsistent
with the financial statements or our knowledge
obtained in the audit or otherwise appears to
be materially misstated. If we identify such
material inconsistencies or apparent material
misstatements, we are required to determine
whether there is a material misstatement in the
financial statements or a material misstatement
of the other information. If, based on the work
we have performed, we conclude that there is a
material misstatement of this other information, we
are required to report that fact. We have nothing to
report in this regard.
An overview of the scope of
our audit
Our Group audit scope focussed on the Group’s
principal operating locations and legal structure.
The Group has operating entities in the UK,
Sweden, Finland and it further invested in entities
in Kosovo during the year. Alongside the audit
of the Group, we assessed there to be three
significant components in the current year being
the Parent Company, Beowulf Mining Plc, with
operations in the UK, Jokkmokk Iron Mines AB with
operations in Sweden and Vardar Minerals Limited
with operations in Kosovo.
The Group, Parent Company and Vardar Minerals
Limited were subject to a full scope audit by BDO
LLP, in the UK.
A full scope audit for Group reporting purposes
was performed by a non-BDO network firm on
the significant component in Sweden, Jokkmokk
Iron Mines AB. We reviewed the audit files of
the component auditor on site in Sweden and
discussed the findings with the component auditor.
Specific procedures were completed by a non-BDO
network firm in Finland on Oy Fennoscandian
Resources AB, which holds the material Finnish
assets. We reviewed the audit testing performed
in respect of Oy Fennoscandian Resources AB and
discussed the findings with the component auditor.
We provided Group reporting instructions, which
included detailed instructions for the testing
of significant areas, to each of the component
auditors. In addition, as the Group auditor we
also performed additional audit procedures over
the significant risk areas of the components. The
remaining non-significant components of the
Group were subject to analytical review procedures
performed by BDO LLP
46
47
2019 Beowulf Mining plc Annual Report Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the Strategic Report and
the Directors’ Report for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and
• the strategic report and the Directors’ Report
have been prepared in accordance with
applicable legal requirements.
Matters on which we are
required to report by exception
In the light of the knowledge and understanding
of the Group and the Parent Company and its
environment obtained in the course of the audit, we
have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report to you if,
in our opinion:
• adequate accounting records have not been kept
by the Parent Company, or returns adequate for
our audit have not been received from branches
not visited by us; or
• the Parent Company financial statements are not
in agreement with the accounting records and
returns; or
• certain disclosures of Directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’
Responsibilities Statement, within the Report of
the Directors’ set out on page 36, the Directors
are responsible for the preparation of the financial
statements and for being satisfied that they give a
true and fair view, and for such internal control as
the Directors determine is necessary to enable the
preparation of financial statements that are free
from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Directors
are responsible for assessing the Group’s and the
Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related
to going concern and using the going concern basis
of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to
cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities
for the audit of the financial
statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement
when it exists.
Misstatements can arise from fraud or error and
are considered material if, individually or in the
aggregate, they could reasonably be expected to
influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the
audit of the financial statements is located on the
Financial Reporting Council’s website at: www.
frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report
48
Use of our report
This report is made solely to the Parent Company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might
state to the Parent Company’s members those
matters we are required to state to them in an
auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than
the Parent Company and the Parent Company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.
Anne Sayers (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
28 July
2020
BDO LLP is a limited liability partnership registered
in England and Wales (with registered number
OC305127).
48
2019 Beowulf Mining plc Annual Report
49
49
2019 Beowulf Mining plc Annual Report Consolidated Income Statement
CONTINUING OPERATIONS
Administrative expenses
Impairment of exploration costs
Share based payment expense
Share of loss in associates
Gain on step acquisition
OPERATING LOSS
Finance costs
Finance income
Grant income
LOSS BEFORE INCOME TAX
Income tax expense
LOSS FOR THE YEAR
Loss attributable to:
Owners of the parent
Non-controlling interests
Note
2019
£
2018
£
9
3
3
5
(904,666)
(598,391)
(10,720)
(571,456)
(119,720)
(196,460)
-
(19,880)
563,431
-
(471,675)
(1,386,187)
(410)
6,298
37,080
-
11,603
-
(428,707)
(1,374,584)
-
-
(428,707)
(1,374,584)
(267,000)
(1,373,936)
(161,707)
(648)
(428,707)
(1,374,584)
Loss per share attributable to the ordinary equity holder of the parent:
Basic and diluted (pence)
(0.04)
(0.25)
The notes on pages 60 to 95 form part of these financial statements
50
Consolidated Statement Of Comprehensive Income
LOSS FOR THE YEAR
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Note
2019
£
2018
£
(428,707)
(1,374,584)
Exchange losses arising on translation of foreign operations
(794,299)
(123,265)
TOTAL COMPREHENSIVE LOSS
(1,223,006)
(1,497,849)
(794,299)
(123,265)
Total comprehensive loss attributable to:
Owners of the parent
Non-controlling interests
(1,037,811)
(1,497,133)
14
(185,195)
(716)
(1,223,006)
(1,497,849)
50
51
The notes on pages 60 to 95 form part of these financial statements
2019 Beowulf Mining plc Annual Report
Consolidated Statement of Financial Position
ASSETS
NON-CURRENT ASSETS
Intangible assets
Property, plant and equipment
Investment in associate
Loans and other financial assets
Right-of-use asset
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
SHAREHOLDERS’ EQUITY
Share capital
Share premium
Capital contribution reserve
Share based payment reserve
Merger reserve
Translation reserve
Accumulated losses
Note
2019
£
2018
£
7
8
9
10
11
12
13
15
17
17
17
17
17
17
10,011,494
86,998
-
5,212
7,324
8,285,547
16,083
230,120
5,462
-
10,111,028
8,537,212
167,261
1,124,062
62,956
1,533,232
1,291,323
1,596,188
11,402,351 10,133,400
6,022,446
5,663,072
20,824,009 19,266,271
46,451
46,451
732,185
612,465
137,700
137,700
(520,257)
(1,291,068)
(15,781,161) (15,311,933)
10,690,562
9,893,769
Non-controlling interests
14
326,555
(160,587)
TOTAL EQUITY
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Grant Income
Lease liability
TOTAL LIABILITIES
11,017,117
9,733,182
18
19
242,885
134,877
7,472
208,013
192,205
-
385,234
400,218
TOTAL EQUITY AND LIABILITIES
11,402,351 10,133,400
The financial statements were approved and authorised for issue by the Board of Directors on 28 July 2020
and were signed on its behalf by: Mr K Budge - Director Company Number 02330496
The notes on pages 60 to 95 form part of these financial statements
52
Company Statement of Financial Position
ASSETS
NON-CURRENT ASSETS
Investments
Loans and other financial assets
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
SHAREHOLDERS’ EQUITY
Share capital
Share premium
Capital contribution reserve
Share based payment reserve
Merger reserve
Accumulated losses
TOTAL EQUITY
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Deferred income
TOTAL LIABILITIES
Note
2019
£
2018
£
9
10
12
13
15
17
17
17
17
17
18
19
1,697,988
732,988
8,989,451
8,222,217
10,687,439
8,955,205
23,260
24,401
978,514
1,470,087
1,001,774
1,494,488
11,689,213
10,449,693
6,022,446
5,663,072
20,824,009
19,266,271
46,451
732,185
137,700
46,451
612,465
137,700
(16,298,859) (15,535,429)
11,463,932
10,190,530
90,404
66,958
134,877
192,205
225,281
259,163
TOTAL EQUITY AND LIABILITIES
11,689,213
10,449,693
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 £763,430
(2018: Loss £771,039).
These financial statements were approved and authorised for issue by the Board of Directors on 28 July 2020 and
were signed on its behalf by:
Mr K Budge - Director
Company Number 02330496
The notes on pages 60 to 95 form part of these financial statements
52
53
2019 Beowulf Mining plc Annual Report
Consolidated Statement of Changes in Equity
Note
Share
capital
Share
premium
Merger
reserve
£
£
£
Capital
contribution
reserve
£
Share based
Translation
Accumulated
Totals
Non-
Totals
payments
reserve
losses
reserve
£
£
£
£
controlling
interest
£
£
AT 1 JANUARY 2018
5,342,072
18,141,271
137,700
46,451
575,078
(397,060)
(14,079,747)
9,765,765
(159,871)
9,605,894
Loss for the year
Foreign exchange translation
Total comprehensive income
TRANSACTIONS WITH OWNERS
-
-
-
-
-
-
Issue of share capital
300,000
1,200,000
Cost of issue
Share based payment expense
Issues of shares
-
-
21,000
(75,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AT 31 DECEMBER 2018
5,663,072
19,266,271
137,700
46,451
Loss for the year
Foreign exchange translation
Total comprehensive income
-
-
-
-
-
-
TRANSACTIONS WITH OWNERS
Issue of share capital
Cost of issue
15
15
Share based payment expense
Step acquisition of Subsidiary
357,707
1,642,293
-
1,667
-
(93,305)
8,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
196,460
(159,073)
612,465
-
-
-
-
-
119,720
-
-
-
(123,197)
(1,373,936)
(1,373,936)
(1,497,133)
(648)
(716)
(1,374,584)
(1,497,849)
-
-
-
-
-
-
-
141,750
1,500,000
(75,000)
196,460
3,677
-
-
-
-
1,500,000
(75,000)
196,460
3,677
(520,257)
(15,311,933)
9,893,769
(160,587)
9,733,182
-
(267,000)
-
(267,000)
(770,811)
(161,707)
(428,707)
(23,488)
(794,299)
(267,000)
(1,037,811)
(185,195)
(1,223,006)
(770,811)
(770,811)
-
-
-
-
-
-
-
2,000,000
(93,305)
130,137
-
-
-
(202,228)
(202,228)
672,337
2,000,000
(93,305)
130,137
470,109
AT 31 DECEMBER 2019
6,022,446
20,824,009
137,700
46,451
732,185
(1,291,068)
(15,781,161)
10,690,562
326,555
11,017,117
The notes on pages 60 to 95 form part of these financial statements
54
55
Company Statement of Changes in Equity
Note
Share
capital
£
Share
premium
£
Merger
reserve
£
Capital
contribution
reserve
£
Share based
payments
Accumulated
Totals
losses
£
£
£
AT 1 JANUARY 2018
5,342,072
18,141,271
137,700
46,451
575,078
(14,906,137)
9,336,435
Loss for the year
Total comprehensive income
-
-
-
-
TRANSACTIONS WITH OWNERS
Issue of share capital
Cost of issue
Share based payment expense
Issue of shares
AT 31 DECEMBER 2018
Loss for the year
Total comprehensive income
TRANSACTIONS WITH OWNERS
Issue of share capital
Cost of issue
Share based payment expense
AT 31 DECEMBER 2019
15
15
16
15
15
16
300,000
-
-
21,000
5,663,072
1,200,000
(75,000)
-
-
19,266,271
-
-
357,707
-
1,667
6,022,446
1,642,293
(93,305)
8,750
20,824,009
-
-
-
-
-
-
-
-
-
-
-
-
137,700
46,451
-
-
-
-
-
-
-
-
137,700
46,451
-
-
-
-
196,460
(159,073)
612,465
-
-
-
119,720
732,185
(771,042)
(771,042)
(771,042)
(771,042)
-
-
-
141,750
1,500,000
(75,000)
196,460
3,677
(15,535,429)
10,190,530
(763,430)
(763,430)
(763,430)
(763,430)
-
-
-
2,000,000
(93,305)
130,137
(16,298,859)
11,463,932
The notes on pages 60 to 95 form part of these financial statements
56
57
57
Consolidated Statement of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before income tax
Depreciation charges
Share based payment expense
Impairment of exploration costs
Finance income
Finance cost
Grant income
Gain on step acquisition
Amortisation of right -of -use asset
Share of loss in associate
(Increase) / decrease in trade and other receivables
Decrease / (increase) in trade and other payables
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangible assets
Purchase of property, plant and equipment
Sale of investments
Acquisition of subsidiary / associate
Cash acquired with subsidiary
Grant receipt
Interest received
Note
2019
£
2018
£
4
4
3
3
(428,707)
20,971
130,137
10,720
(6,298)
410
(37,080)
(563,431)
4,615
-
(1,374,584)
14,696
196,460
571,456
(11,603)
-
-
-
-
19,880
(868,663)
(583,695)
(106,009)
14,930
2,603
(72,740)
(959,742)
(653,832)
7
8
9
9
(1,304,896)
(77,615)
7
(500,000)
530,031
-
6,298
(778,495)
(2,515)
13
(250,000)
-
192,205
11,603
Net cash used in investing activities
(1,346,175)
(827,189)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Payment of share issue costs
Lease principal and interest paid
15
15
2,000,000
(93,305)
(4,877)
1,500,000
(75,000)
-
Net cash from financing activities
1,901,818
1,425,000
DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
(404,099)
1,533,232
(5,071)
(56,021)
1,589,897
(644)
CASH AND CASH EQUIVALENTS AT END OF YEAR
1,124,062
1,533,232
The notes on pages 60 to 95 form part of these financial statements
58
Company Statement of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before income tax
Expected credit losses
Share based payment expense
Finance income
Grant income
Decrease in trade and other receivables
Decrease in trade and other payables
Note
2019
£
2018
£
10
3
21
(763,430)
158,005
130,137
(6,298)
(1,425)
(771,042)
161,856
196,460
(11,603)
-
(483,011)
(424,329)
1,141
23,443
15,700
135,883
Net cash used in operating activities
(458,427)
(272,746)
CASH FLOWS FROM INVESTING ACTIVITIES
Loans to subsidiaries
Acquisition of associate / subsidiary
Interest received
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Payment of share issue costs
Financing of subsidiary
Net cash from financing activities
DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
9
15
15
9
(981,139)
(500,000)
6,298
(952,091)
(250,000)
11,603
(1,939,841)
(1,190,488)
2,000,000
(93,305)
(465,000)
1,500,000
(75,000)
-
1,906,695
1,425,000
(491,573)
1,470,087
(38,234)
1,508,321
CASH AND CASH EQUIVALENTS AT END OF YEAR
978,514
1,470,087
58
59
The notes on pages 60 to 95 form part of these financial statements
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
1.
ACCOUNTING POLICIES
Nature of operations
Beowulf Mining plc (the “Company”) is domiciled in England. The Company’s registered office is 201 Temple
Chambers, 3-7 Temple Avenue, London, EC4Y 0DT. These consolidated financial statements comprise the
Company and its subsidiaries (collectively the ‘Group’ and individually ‘Group companies’). 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
At 31 December 2019, the Group had a cash balance of £1.12 million and the Company had a cash balance
of £0.98 million. Subsequent to year end, the Company has raised £2.0 million (before expenses) cumulatively
through a series of successful subscriptions.
Management have prepared cash flow forecasts which indicate that although there is no immediate funding
requirement, the Group will need to raise further funds in the next twelve months for corporate overheads
and to advance its projects.
The Directors are confident they are taking all necessary steps to ensure that the required finance is
available, and they have successfully raised equity finance subsequent to year end. They have therefore
concluded that it is appropriate to prepare the financial statements on a going concern basis. However,
while they are confident of being able to raise the new funds as they are required, there are currently no
agreements in place, and there can be no certainty that they will be successful in raising the required funds
within the appropriate timeframe.
Management has implemented logistical and organisational changes to underpin the Group’s resilience to
the impact felt by the COVID-19 pandemic, with the key focus being protecting all personnel, minimising the
impact on critical work streams and ensuring business continuity. The effect on the economy may impact the
Group in varying ways, which could lead to a direct bearing on the Group’s ability to generate future cash
flows for working capital purposes. The inability to gauge the length of such disruption further adds to this
uncertainty. For these reasons, the generation of sufficient operating cash flows remain a risk. Management
is closely monitoring commercial and technical aspects of the Group’s operations to mitigate risk and believes
the Group will have access to sufficient working capital to continue operations for the foreseeable future.
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 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 would result if the Group and Company were unable to continue as a going concern.
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.
Merger relief under s612 of the Companies Act 2006 removes the requirement to credit the share premium
account and where the conditions are met, the relief must be applied. However, it allows the investment to
be accounted for at the nominal value of the shares issued or the fair value of the consideration. Where the
investment is to be recorded at fair value, then the credit will be to the merger relief reserve.
60
The conditions to qualify for merger relief are:
• the consideration for shares in another company includes issued shares;
• on completion of the transaction, the company issuing the shares will have secured at least a 90% equity
holding in the other company.
Merger relief was required to be applied in acquisition of Fennoscandian Resources, in which the Company
obtained 100% of the share capital of Fennoscandian for shares issued by the Company. Further details of
this acquisition are outlined in note 9.
New standards, amendments and interpretations
As of 1 January 2019, the Company adopted IFRS 16 Leases, Amendments to IFRS 2 – classification and
measurement of share-based payments transactions, Annual improvements to IFRS Standards 2015-2017
cycle and IFRIC 23 Uncertainty over income tax treatments.
IFRS 16 Adoption
On 1 January 2019, the Group adopted the provisions of IFRS 16 – Leases using the modified retrospective
approach, under which the cumulative effect of initial application is recognised in retained earnings at 1
January 2019 where material.
Accordingly, the comparative information presented for 2018 has not been restated. IFRS 16 has been
applied to one new lease which was adopted during the financial year. In the Statement of Financial Position
the right-of-use asset is recorded in non-current assets as part of property, plant and equipment and
the lease liability is split between current liabilities for the portion due within 12 months and non-current
liabilities for the remainder. To determine the split between principal and interest in the lease the incremental
borrowing rate of the Group was applied. This method was adopted as the Group was not able to ascertain
the implied interest rate in the lease. The Group has applied the exemption not to recognise right-of-use
assets and liabilities for leases with less than 12 months of lease term when applying IFRS 16 to leases
previously classified as operating leases under IAS 17. Of the other IFRSs and IFRICs, none are expected to
have a material effect on future Company Financial Information.
There are several standards, amendments to standards, and interpretations which have been issued by the
IASB that are effective in future accounting periods that the group has decided not to adopt early. The most
significant of these are as follows, which are all effective for the period beginning 1 January 2020:
• IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors (Amendment – Definition of Material)
• IFRS 3 Business Combinations (Amendment – Definition of Business)
• Revised Conceptual Framework for Financial Reporting
• Interest Rate Benchmark Reform (IBOR) reform Phase 1 (Amendments to IFRS 9, IAS 39 and IFRS 7)
The Directors have assessed there to be no material impact of these new accounting standards on the Group
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.
60
61
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
The principal source of risk and judgement is that the Exploitation Concession (the “Concession”) for Kallak
North will not be awarded. Management maintains that its application for the Concession has satisfied the
requirements of the Swedish Minerals Act and Environmental Code. In October 2015, the Mining Inspectorate
recommended to the Swedish Government that the Concession be awarded.
In late 2019, the Company engaged Mannheimer Swartling to work with its existing lawyers Fröberg &
Lundholm to prepare a concluding statement (the “Statement”). The Statement was sent to the Government
on 8 November 2019. The Statement did not include any new facts in the Kallak case, as all necessary
and relevant facts have already been established as part of the application process. Rather, the Statement
summarises the circumstances relevant to a judicial review of whether the Company should be awarded the
Concession for Kallak. The Statement concludes that the Company should be awarded the Concession.
It is management’s judgement that it is appropriate to remain optimistic about the Government, the decision
maker in the application process, awarding a Concession, and therefore Kallak has not been impaired.
Management’s judgement is based on several factors: if the Government were to say ‘no’ they would have
said ‘no’ before now; the Minister for Business, Industry and Innovation, Mr. Ibrahim Baylan is under pressure
to take decisions from politicians in his own and other political parties; Sweden’s reputation as a mining
investment destination is being significantly damaged.
In addition, announcements made in October 2018 by LKAB the state iron ore company about its dwindling
reserves at Kiruna, created a lot of interest about the importance of mining to Sweden, how it creates jobs
and supports the economy, and the importance of iron ore. The industry association SveMin continues to
lobby the Government to act, when it comes to the delays being experienced by mining companies applying
for permits.
The Åtvidaberg licence is located in the Bergslagen area, southern Sweden. It was renewed during 2019 and
now expires on 30 May 2022. Bergslagen is one of Europe’s oldest mining districts and yielded a substantial
portion of Sweden’s mineral wealth in the 1800-1900s, with several large mines and hundreds of smaller
mines producing copper, zinc, lead, gold, silver, and iron ore. Current operating mines in the area include
Boliden’s Garpenberg and Lundin Mining’s Zinkgruvan. Most of southern Bergslagen has seen little modern
exploration, yet it hosts Bersbo, one of Sweden’s largest early copper mines, and Zinkgruvan, Sweden’s most
important zinc mine. During the year, no fieldwork was undertaken, as the Company’s exploration focus
moved to Finland and Kosovo. However, the Company is now considering partners to continue with the next
stage of work on the licence and this work is ongoing.
The board has considered the impairment indicators as outlined in the Company’s accounting policies and
having done so is of the opinion that the present situations for the Company’s main assets, Kallak, Aitolampi,
Mitrovica and Åtvidaberg, do not qualify as impairment indicators and therefore no impairment provisions are
required for these assets (see note 7).
The other key areas of judgement and 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 is
the judgment exercised in assessing the control of the Vardar Group and in respect of the Parent Company
the recoverability of the loans made to subsidiary undertakings.
The Company was assessed to have control on the 1 April 2019 as the Company was able to exercise
power over Vardar through the appointment of Kurt Budge as Investor Director. The investment agreement
conveyed substantive rights to the Investor Director and through the combination of the increased
shareholding and these rights the Company was able to affect the overall returns of the investee.
The Parent Company, in applying the ECL model under IFRS 9, must make assumptions when implementing
the forward-looking ECL model. This model is required to be used to assess the intercompany loans
receivable from subsidiaries for impairment.
62
Estimations were made regarding the credit risk of the counterparty and the underlying probability of default
in each of the credit loss scenarios. The scenarios identified by management included Production, Divestment,
Fire-sale and Failure. These scenarios considered technical data, necessary licences to be awarded, the
Company’s ability to raise finance, and ability to sell the project. A reasonable change in the probability
weightings of 3% would result in further impairment of £552,193.
Basis of consolidation
(i) Subsidiaries and acquisitions
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (and its subsidiaries) made up to 31 December each year. Control is recognised
where an investor is exposed, or has rights, to variable returns from its investment with the investee, and has
the ability to affect these returns through its power over the investee.
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.
(ii) Equity accounted investees
Associates
Associates are entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but not the ability to
control or jointly control those policies. Investments in Associates are accounted for using the equity method
of accounting.
Equity method of accounting – Associates
Under the equity method of accounting, interests in Associates are initially recognised at cost. The Group’s
share of Associates post acquisition profit / loss after tax and other comprehensive income/ loss are
presented as the ‘Share of results of Equity accounted investees’ in the Group income statement and Group
Statement of other comprehensive income respectively. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment less any impairment in value. Where indicators of
impairment arise, the carrying amount of the Associate is tested for impairment by comparing its recoverable
amount against its carrying value. Unrealised gains arising from transactions with Associates are eliminated
to the extent of the Group’s interest in the entity. Unrealised losses are similarly eliminated to the extent that
they do not provide evidence of impairment of a transferred asset. When the Group’s share of losses in an
Associate equal or exceeds its interest in the Associate, the Group does not recognise further losses unless
the Group has incurred obligations or made payments on behalf of the Associate. When the Group ceases
to have or significant influence, any retained interest in the entity is re-measured to its fair value at the date
62
63
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
when or significant influence is lost with the change in carrying amount recognised in the income statement.
The Group also reclassifies any movements previously recognised in other comprehensive income to the
income statement.
(iii) 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.
Business combinations
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 aggregate of the acquisition-date fair value of the
consideration transferred and the amount recognised for the non-controlling interest (and where the business
combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity
interest in the acquiree) is lower than the fair value of the assets, liabilities and contingent liabilities and the
fair value of any pre-existing interest held in the business acquired, the difference is recognised in profit and
loss.
Intangible assets – deferred 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. Each asset is evaluated annually at 31 December, to determine
whether there are any indications that impairment exists.
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 employee costs and costs pertaining to technical and
administrative overheads.
Exploration and evaluation activity include:
•
•
•
•
•
•
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.
Once the decision for investment is taken, the assets will be assessed for impairment and to the extent that
these are not impaired, will be classified as development assets. At the point that production commences
these assets will be depreciated.
64
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) unexpected geological occurrences that render the resource uneconomic;
(ii) title to the asset is compromised;
(iii) variations in mineral prices that render the project uneconomic;
(iv) substantive expenditure on further exploration and evaluation of mineral resources is neither
budgeted nor planned; and
(v) 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.
Office equipment
Motor Vehicles
- 25 per cent on reducing balance
- 20 per cent on reducing balance
Machinery and equipment
- 20 to 25 per cent on reducing balance
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet
date.
Leased assets
When entering into a contract the Group assesses whether or not a lease exists. A lease exists if a contract
conveys a right to control the use of an identified asset under a period of time in exchange for consideration.
Leases of low value items and short-term leases (leases of less than 12 months at the commencement date)
are charged to the profit or loss on a straight-line basis over the lease term in administrative expenses.
The Group recognises right-of-use assets at cost and lease liabilities at the lease commencement date based
on the present value of future lease payments. The right-of-use assets are amortised on a straight-line basis
over the length of the lease term. The lease liabilities are recognised at amortised cost using the effective
interest rate method. Discount rates used reflect the incremental borrowing rate specific to the lease.
Investments in subsidiaries
Investments in subsidiary undertakings are stated at cost less provision for any impairment in value.
64
65
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
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.
Financial assets
The Group classifies all of its financial assets at amortised cost. Management determines the classification of
its financial assets at initial recognition.
Amortised cost
The Group’s financial assets held at amortised cost comprise trade and other receivables and cash and cash
equivalents in the consolidated statement of financial position.
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They arise principally through the provision of goods and services to customers (e.g. trade
receivables), but also incorporate other types of financial assets where the objective is to hold their assets in
order to collect contractual cash flows and the contractual cash flows are solely payments of the principal
and interest. They are initially recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate
method, less provision for impairment.
Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS
9 using the lifetime ECLs. During this process the probability of the non-payment of the trade receivables
is assessed. This probability is then multiplied by the amount of the expected loss arising from default to
determine the lifetime ECL for the trade receivables. For trade receivables, which are reported net; such
provisions are recorded in a separate provision account with the loss being recognised within administrative
expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable
will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Expected credit loss provisions for other receivables are recognised based a forward-looking expected credit
loss model. The methodology used to determine the amount of the provision is based on whether there
has been a significant increase in credit risk since initial recognition of the financial asset. For those where
the credit risk has not increased significantly since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with the gross interest income are recognised.
For those that are determined to be credit impaired, lifetime expected credit losses along with interest income
on a net basis are recognised.
Financial liabilities
The Group’s financial liabilities include trade and other payables. All financial liabilities are recognised initially
at fair value, net of transaction costs incurred, and are subsequently stated at amortised cost, using the
effective interest method.
Unless otherwise indicated, the carrying values of the Group’s financial liabilities measured at amortised cost
represents a reasonable approximation of their fair values.
66
Fair value
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements
are categorised within the fair value hierarchy. The fair value hierarchy prioritises the inputs to valuation
techniques used to measure fair value. The Group uses the following hierarchy for determining and disclosing
the fair value of financial instruments and other assets and liabilities for which the fair value was used:
- level 1: quoted prices in active markets for identical assets or liabilities;
- level 2: inputs other than quoted prices included in level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices); and
- level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
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.
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.
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 substantively 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.
66
67
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items
are 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.
Government grant
Government grants received on capital expenditure are generally deducted in arriving at the carrying amount
of the asset purchased. Grants for revenue expenditure are recorded gross in the Group income statement.
Where retention of a government grant is dependent on the Group satisfying certain criteria, it is initially
recognised as deferred income. When the criteria for retention have been satisfied, the deferred income
balance is released to the consolidated statement of comprehensive income or netted against the asset
purchased.
68
2.
EMPLOYEES AND DIRECTORS
Group
Company
2019
£
2018
£
2019
£
2018
£
Wages and salaries
464,889
352,816
225,270
189,435
Bonus
Social security costs
Other benefits
2,193
70,152
19,180
3,903
29,111
18,843
-
24,547
13,809
-
20,149
13,720
556,414
404,673
263,626
223,304
Directors’ remuneration is as follows:
Directors emoluments, including salary and fees
Shares settled expenses
Social security costs
Share-based payments
2019
£
2018
£
255,155
203,155
10,417
24,547
-
20,149
76,403
109,144
366,522
332,448
Further details pertaining to Directors remuneration can be found in the Directors’ Remuneration Report on
page 37.
The remuneration of the highest paid Director who served during the year was £151,000 (2018: £130,667)
The average monthly number of employees and Directors during the year was as follows:
2019
Group
2018
Group
2019
2018
Company
Company
Number
Number
Number
Number
Directors
Employees
3
5
3
3
3
-
3
-
68
69
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
3.
FINANCE INCOME AND COSTS
Finance income:
Deposit account interest
Finance costs:
Interest on lease liabilities
4.
LOSS BEFORE TAX AND AUDITOR’S REMUNERATION
a. The loss before tax is stated after charging:
Depreciation (note 8)
Amortisation of right-of-use assets (note 11)
Foreign exchange differences
Impairment of exploration costs (note 7)
b. Auditor’s remuneration
Fees payable to the Group’s auditor for the audit
of the consolidated financial statements
Fees payable to the Group auditor for other services:
- audit of subsidiaries pursuant to legislation
- review of quarterly financial statements
- tax compliance services
2019
£
6,298
6,298
410
410
2019
£
20,971
4,615
2,015
10,720
2019
£
2018
£
11,603
11,603
-
-
2018
£
14,696
-
2,088
571,456
2018
£
36,025
28,970
6,000
2,135
5,300
49,460
5,000
2,076
5,300
41,346
70
5.
INCOME TAX
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2019 or for the
year ended 31 December 2018.
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:
2019
2018
£
£
Loss on ordinary activities before income tax
(428,707) (1,374,584)
Tax thereon at a UK corporation tax rate
of 19% (2018 – 19%)
Effects of:
Expenses not deductible for tax purposes
Non-assessable fair value gain
Tax losses not recognised
Share of loss of associates
(81,454)
(261,171)
25,400
145,903
(107,052)
-
108,710
80,841
-
3,777
Losses of overseas subsidiaries to be carried forward
54,396
30,650
-
-
The main rate of UK corporation tax during the year ended 31 December 2019 was 19.00 per cent (2018:
19 per cent). The Group has estimated UK losses of £11,584,097 (2018: £10,632,410) and foreign losses
of £2,913,896 (2018: £1,522,939) available to carry forward against future trading profits. The value of
unrecognised deferred tax assets in respect of the UK losses amounts to £2,200,978 (2018: £2,020,157). The
Directors believe that due to the uncertainty over when the tax losses will be utilised it is appropriate not to
recognise a deferred tax asset at this time.
70
71
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
6.
BASIC AND DILUTED LOSS PER SHARE
The calculation of basic and diluted loss per share at 31 December 2019 was based on the loss attributable
to ordinary shareholders of £249,192 (2018: £1,373,936) and a weighted average number of Ordinary
Shares outstanding during the year ended 31 December 2019 of 585,102,740 (2018: 554,716,045) calculated
as follows:
Loss attributable to ordinary shareholders
(249,192)
(1,373,936)
2019
£
2018
£
Weighted average number of ordinary shares
2019
2018
Number
Number
Number of shares in issue at the beginning of the year
554,716,045
534,207,254
Effect of shares issued during year
30,386,695
20,508,791
Weighted average number of ordinary shares
in issue for the year
585,102,740
554,716,045
The diluted earnings per share is identical to the basic loss per share as the exercise of warrants and options
would be anti-dilutive.
72
7.
INTANGIBLE ASSETS - Group
COST
At 1 January 2018
Additions for the year
Foreign exchange movements
Impairment
At 31 December 2018
At 1 January 2019
Additions for the year
Additions arising from the step-up in interest in Vardar
Foreign exchange movements
Impairment
At 31 December 2019
NET BOOK VALUE
At 31 December 2019
At 31 December 2018
Exploration
Costs
£
8,191,232
782,437
(116,666)
(571,456)
8,285,547
8,285,547
1,304,896
1,203,685
(771,914)
(10,720)
10,011,494
10,011,494
8,285,547
The net book value of exploration costs is comprised of expenditure on the following projects:
Kallak
Åtvidaberg
Ågåsjiegge
Sala
Pitkäjärvi
Joutsijärvi
Karhunmaki
Rääpysjärvi
Mervivaara
Polvela
Tammijärvi
Mitrovica
Viti
2019
£
2018
£
6,675,124 7,079,806
345,978
303,565
15,568
-
17,121
8,444
1,058,078
817,986
19,095
24,078
39,905
17,846
31,316
24,278
1,243,194
517,034
25,002
13,685
19,938
-
-
-
-
-
10,011,494 8,285,547
72
73
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
Total Group exploration costs of £10,011,494 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. An amount of £91,231 was recorded against the projects for services provided by the
Directors during the year (2018: £139,594).
Accounting estimates and judgements are continually evaluated and are based on a number of factors,
including expectations of future events that are believed to be reasonable under the circumstances.
In accordance with its accounting policies and processes, each asset is evaluated annually at 31 December,
to determine whether there are any indications impairment exist, the Board considers the indications as
outlined in IFRS 6.
On 30 November 2017, the County Administrative Board (“CAB”) for the County of Norrbotten made the
decision to not recommend that an Exploitation Concession for Kallak North be awarded. It should be noted
that the CAB does not have the final decision, that rests with the Government. The CAB’s decision included
information not based on fact, flawed analysis, and biased conclusions that contradicted its previous
representations provided in July 2015. The key biases include:
• Operating outside their mandate with respect to assessing transport matters at this stage of
permitting and suggesting the need for State investment should Kallak be built. The Company has
never stated that State support would be needed. The CAB ignored infrastructure projects that are
already under consideration e.g. Inlandsbanan Railway, the Ore Railway and the Port of Luleå, all
of which will bring additional capacity to regional infrastructure, which could be utilised by Kallak.
• Disregarding Kallak’s designation as an Area of National Interest (“ANI”) awarded by the SGU in
February 2013.
• Disregarding the strong economic case for Kallak that the CAB presented in July 2015, that a mine
would have local, regional and national benefits.
The Directors considered that the CAB’s November 2017 statement was not an impairment indicator,
as the comments and findings of the CAB represent a recommendation to Government that should have
limited to no persuasive impact due to the inaccuracies, flawed analysis and biased conclusions the CAB
has presented. At the date of approval of the financial statements the Government’s consideration of the
application was ongoing.
The most significant risk is that an Exploitation Concession is declined for Kallak North. The Directors have
considered the impairment indicators as outlined in the Company’s accounting policies and having done
so are of the opinion that the current situation does not qualify as an impairment indicator and hence no
impairment provision is required for the Kallak permitting situation. In addition, no other impairment indicators
per IFRS 6 have been identified.
Kallak is included in the financial statements as at 31 December 2019 as an intangible exploration licence
with a carrying value of £6,675,124. Management are required to consider whether there are events
or changes in circumstances that indicate that the carrying value of this asset may not be recoverable.
Management have considered the status of the application for the Exploitation Concession and in their
judgement, they believe it is appropriate to be optimistic about the chances of being awarded the Exploitation
Concession and thus have not impaired the project.
During 2019, the Fennoscandian team produced an upgraded MRE for the Aitolampi project in Finland, with
a global Indicated and Inferred Mineral Resource of 26.7 Mt at 4.8 per cent TGC for 1,275,000 tonnes of
contained graphite, reported in accordance with the JORC Code, 2012 edition.
74
Fennoscandian is pursuing a strategy of developing a ‘resource footprint’ of natural flake graphite prospects
that can provide transparent ‘security of supply’ and enable Finland to achieve its ambition of self-sufficiency
in battery manufacturing. The Company is also developing its knowledge in processing and manufacturing
value-added graphite products, including anode material for lithium-ion batteries, in part supported
financially by Business Finland.
The Åtvidaberg licence is located in the Bergslagen area, southern Sweden. It was renewed during 2019 and
now expires on 30 May 2022. Bergslagen is one of Europe’s oldest mining districts and yielded a substantial
portion of Sweden’s mineral wealth in the 1800-1900s, with several large mines and hundreds of smaller
mines producing copper, zinc, lead, gold, silver, and iron ore. Current operating mines in the area include
Boliden’s Garpenberg and Lundin Mining’s Zinkgruvan. Most of southern Bergslagen has seen little modern
exploration, yet it hosts Bersbo, one of Sweden’s largest early copper mines, and Zinkgruvan, Sweden’s most
important zinc mine.
During the year, no fieldwork was undertaken, as the Company’s exploration focus moved to Finland and
Kosovo. However, the Company is now considering partners to continue with the next stage of work on the
licence and this work is ongoing.
At Mitrovica, in northern Kosovo, located immediately to the west and northwest of the world class Stan Terg
lead-zinc-silver mine, potential not only exists for the discovery of additional lead-zinc-silver deposits, but
also for the discovery of high-level epithermal gold deposits and for copper-zinc deposits. Vardar believes the
targets are all related to a potentially much larger porphyry style mineralised system, based on meticulous
geological mapping of hydrothermal alteration and interpretation of trench, drilling and soil geochemical
exploration data. To date, the work completed in Kosovo has yielded exciting results which warrant further
investment.
In the year, an impairment provision of £10,720 (2018: £571,456) was made against costs incurred on Sala
(2018: £8,444) on the basis that no further exploration would be carried out on those projects. In respect
of the other license areas, no impairment indicators have been identified. The impairment is charged as an
expense and included within the consolidated income statement.
74
75
2019 Beowulf Mining plc Annual Report Notes to the Consolidated Financial Statements
8.
PROPERTY, PLANT AND EQUIPMENT
GROUP
COST
Office
Equipment
Motor
Vehicles
Machinery
& equipment
Total
£
£
£
£
At 1 January 2018
Additions
Foreign exchange movements
At 31 December 2018
DEPRECIATION
At 1 January 2018
Charge for year
Foreign exchange movements
At 31 December 2018
GROUP
COST
At 1 January 2019
Additions
Foreign exchange movements
Step acquisition of subsidiary
At 31 December 2019
DEPRECIATION
At 1 January 2019
Charge for year
Foreign exchange movements
At 31 December 2019
NET BOOK VALUE
6,383
-
-
6,383
6,383
-
-
6,383
Office
Equipment
£
6,383
941
-
-
7,324
6,383
-
-
6,383
47,711
-
(287)
47,424
26,236
9,026
(221)
35,041
Motor
Vehicles
£
47,424
33,873
(3,590)
13,300
91,007
35,041
8,014
(2,964)
40,091
26,500
2,515
(380)
28,635
19,395
5,670
(130)
24,935
Machinery
& equipment
£
28,635
42,801
(2,431)
1,689
70,694
24,935
12,957
(2,339)
35,553
80,594
2,515
(667)
82,442
52,014
14,696
(351)
66,359
Total
£
82,442
77,615
(6,021)
14,989
169,025
66,359
20,971
(5,303)
82,027
At 31 December 2019
At 31 December 2018
941
-
50,916
12,383
35,141
3,700
86,998
16,083
76
PARENT
COST
At 1 January 2018
Additions
At 31 December 2018
DEPRECIATION
At 1 January 2018
Charge for year
At 31 December 2018
PARENT
COST
At 1 January 2019
Additions
At 31 December 2019
DEPRECIATION
At 1 January 2019
Charge for year
At 31 December 2019
NET BOOK VALUE
At 31 December 2019
At 31 December 2018
Office
Equipment
£
6,383
-
6,383
6,383
-
6,383
Office
Equipment
£
6,383
-
6,383
6,383
-
6,383
-
-
76
77
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
9.
INVESTMENTS
Group
Shares in
associates
Shares in
subsidiaries
Company
Shares in
associates
Total
£
£
£
£
COST
At 1 January 2018
Acquisitions
Shares of loss of associates
At 31 December 2018
-
250,000
(19,880)
230,120
At 1 January 2019
Change in control of associate
Acquisitions
At 31 December 2019
230,120
(230,120)
-
-
479,311
3,677
-
482,988
482,988
250,000
965,000
1,697,988
-
250,000
-
250,000
250,000
(250,000)
-
-
479,311
253,677
-
732,988
732,988
-
965,000
1,697,988
Investments in associates are initially recorded at cost plus any equity share of post-acquisition profit or loss
after-tax. An investment in an associate is largely determined as an associate based on voting interests and
presence on the investee’s board of directors.
Further investments in the share capital of subsidiaries of Vardar constitute additions during the year of
£965,000 to increase the Company’s shareholding in Vardar from 14.1% to 41.5%. The share capital of
Vardar was reclassified to share capital of subsidiaries following control being obtained on 1 April 2019.
The basis for control was assessed on the on the Group’s ability to exercise power over Vardar through
combination of the increased investment in Vardar and the appointment of the CEO as Investor Director,
which conveyed substantive rights to direct the actions of Vardar that would ultimately affect the returns of
the investee.
The remaining investment represents 100 per cent of the share capital of Fennoscandian, that was acquired
during the year ended 31 December 2016 and holds a portfolio of four early-stage graphite exploration
projects. At the time of acquisition, Beowulf paid for 100 per cent of the share capital of Fennoscandian by
issuing 2.55 million ordinary shares in the Company, with two further tranches of 2.1 million ordinary shares
to be issued on achievement of certain performance milestones.
The first tranche of 2.1 million ordinary shares was issued on the anniversary of 24 months from the date
of the acquisition, in accordance and Mr Blomqvist having worked for the Company as a full-time employee
during that period. The second tranche of shares will be issued on completion of a bankable feasibility study
on one of the graphite projects in the portfolio.
The total number of ordinary shares that may be issued, if all performance milestones are achieved, is 6.75
million ordinary shares. Beowulf will issue up to a further 2.1 million additional consideration shares in the
form of a share-based payment transaction to the former owner, Rasmus Blomqvist. The share-based
payments fall within the scope of IFRS 2 and are fair valued at the grant date based on the estimated
number of shares that will vest. The fair value has been prepared using a Black-Scholes pricing model
including a share price of 6.4 pence, option life of two years, volatility of 49.79 per cent and a risk-free rate of
0.698 per cent.
78
There was no consideration recognised in the financial statements for the year ended 31 December 2019,
(2018: £484,441). No further share based payment charge for the consideration shares was capitalised to
intangibles in the year ended 31 December 2019. (2018: £3,677).
Step up interest in Vardar Minerals
On 1 April 2019, following an increase in the Company’s shareholding from 14.00% to 31.3% in Vardar the
Company obtained control and consolidated Vardar and its companies into the Group. Vardar was previously
accounted for as an associate on an equity accounting basis. The Group has fair valued the holding at the
date of the change of control resulting in a cumulative fair value gain of £563,431. Further increases in the
Company’s holding in Vardar have been recognised as an increase to accumulated losses of £202,228.
The investment in Vardar gives the Company exposure to a portfolio of exploration licences situated in the
European Tertiary calc-alkaline Tethys Arc most notable for its lead-zinc-silver mining districts, as well as
recent porphyry related copper and gold discoveries. Further investments were made during the year ended
31 December 2019.
- On 15 April 2019, a further investment of £250,000 was made to increase the Company’s shareholding in
Vardar from 31.3% to 37.6%.
- On 14 October 2019, a further investment of £115,000 was made to increase the Company’s shareholding
in Vardar from 37.6% to 40.1%.
- On 6 November 2019, a further investment of £100,000 was made to increase the Company’s shareholding
in Vardar from 40.1% to 41.5%.
The note below shows the effect of the step transaction at the date of change of control of 1 April 2019.
Cash and cash equivalents
Property plant & equipment
Other receivables
Intangibles - Exploration costs
Net Identifiable assets acquired
Consideration – Cash
Fair value gain on investment
Non-controlling interests
Carry value of investment at change of control
Carrying
value
£
530,031
14,989
14,669
124,607
684,296
Fair value
adjustments
£
-
-
-
1,078,846
1,078,846
Total
£
530,031
14,989
14,669
1,203,453
1,763,142
500,000
565,157
470,111
227,874
1,763,142
The fair value adjustment recognised at the date of change of control was representative of the fair value of
the Mitrovica and Viti assets obtained. Management consider that it is these assets which will drive the future
economic returns from the Group’s investment in Vardar. The unrecorded potential value of the resources at
Mitrovica and Viti represents the gain on the acquisition of the control of the Vardar Group.
If the entity had been a fully consolidated from 1 January 2019 it would have contributed an overall loss of
£262,483 to the consolidated loss of the Group.
The entity incurred no acquisition costs relating to the step up of its interest in Vardar.
78
79
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
Name
Incorporated
Activity
% holding % holding
2019
2018
Oy Fennoscandian Resources AB Finland
Mineral exploration
Jokkmokk Iron Mines AB
Sweden
Mineral exploration
Beowulf Mining Sweden AB
Sweden
Mineral exploration
100%
100%
100%
100%
100%
100%
Wayland Copper Limited
UK
Holding company
65.25%
65.25%
Wayland Sweden AB
Sweden
Mineral exploration
(1)(2)65.25%
(1)(2)65.25%
Vardar Minerals Ltd
UK
Mineral Exploration
41.5%
Vardar Geoscience BVI Ltd
British Virgin Islands Holding company
(1)(2)41.5%
14%
14%
Vardar Geoscience Kosovo Ltd
Kosovo
Mineral exploration
(1)(2)39.4% (1(2)13%
Vardar Minerals Europe 1 EOOD
Bulgaria
Mineral exploration
(1)(2)41.5% (1)(2)14%
Vardar Minerals Europe 2 EOOD
Bulgaria
Mineral exploration
(1)(2)41.5% (1)(2)14%
Vardar Minerals Europe 3 EOOD
Bulgaria
Mineral exploration
(1)(2)41.5% (1)(2)14%
(1) Indirectly held
(2) Effective interest
The Group consists of the following subsidiary undertakings:
Name
Registered office
Oy Fennoscandian Resources AB Plåtslagarevägen 35 A 1, 20320 Turku, Finland
Jokkmokk Iron Mines AB
Storgatan 36, 921 31, Lycksele, Sweden
Beowulf Mining Sweden AB
Storgatan 36, 921 31, Lycksele, Sweden
Wayland Copper Limited
201 Temple Chambers, 3-7 Temple Avenue, London
Wayland Sweden AB
Storgatan 36, 921 31, Lycksele, Sweden
Vardar Minerals Limited
35-39 Maddox Street, London, England
Vardar Geoscience BVI Ltd
Trident Chambers, P.O. Box 146, Wickhams Cay 1 Road Town,
British Virgin Islands
Vardar Geoscience Kosovo L.L.C
Rifat Berisha 23/10, Pristina, Republic of Kosovo
Vardar Minerals Europe 1 EOOD
Sofia 1606, Krasno selo district, 30-32 Gen.E.I.Totleben Blvd, Fl 2
Vardar Minerals Europe 2 EOOD
Sofia 1606, Krasno selo district, 30-32 Gen.E.I.Totleben Blvd, Fl 2
Vardar Minerals Europe 3 EOOD
Sofia 1606, Krasno selo district, 30-32 Gen.E.I.Totleben Blvd, Fl 2
Details on the non-controlling interest in subsidiaries is given in note 14.
80
10.
LOANS AND OTHER FINANCIAL ASSETS
GROUP
At 1 January 2018
Foreign exchange movements
Disposals
At 31 December 2018
At 1 January 2019
Foreign exchange movements
Disposals
At 31 December 2019
COMPANY
At 1 January 2018
Advances made in the year
ECLs in year
At 31 December 2018
Loans to group
undertakings
£
7,429,198
952,091
(161,856)
8,219,433
Financial
assets
£
2,784
-
-
2,784
Financial
fixed
assets
£
5,530
(55)
(13)
5,462
5,462
(243)
(7)
5,212
Total
£
7,431,982
952,091
(161,856)
8,222,217
At 1 January 2019
8,219,433
2,784
8,222,217
Advances made in the year
ECLs in year
At 31 December 2019
925,239
(158,005)
8,986,667
-
-
2,784
925,239
(158,005)
8,989,451
Further details of the transactions in the year are shown within related parties disclosure note 23.
80
81
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
11.
RIGHT OF USE ASSETS
Cost
At 1 January 2019
Additions
At 31 December 2019
Amortisation
At 1 January 2019
Charge
At 31 December 2019
Net book value
At 31 December 2019
Buildings
-
7,324
7,324
-
4,615
4,615
2,709
12.
TRADE AND OTHER RECEIVABLES
Other receivables
VAT
Prepayments and accrued income
Group
2019
£
94,653
60,819
11,789
167,261
2018
£
29,437
20,210
13,309
62,956
Company
2019
£
2018
£
-
11,471
11,789
23,260
-
11,092
13,309
24,401
Included in other receivables is a deposit of £16,927 held by Finnish regulatory authorities (2018: £18,027).
13.
CASH AND CASH EQUIVALENTS
Group
2019
£
2018
£
Company
2019
£
2018
£
Bank accounts
1,124,062
1,124,062
1,533,232
1,533,232
978,514 1,470,087
978,514 1,470,087
82
14.
NON-CONTROLLING INTERESTS
The Group has material non-controlling interests arising from its subsidiaries Wayland Copper Limited and
Vardar Minerals Limited. These non-controlling interests can be summarised as follows;
Wayland Copper Limited
Vardar Minerals Limited
Total
2019
£
(161,291)
487,846
326,555
2018
£
(160,587)
-
(160,587)
Wayland Copper Limited, a 65.25 per cent owned subsidiary of the Company that has material non-
controlling interests (“NCI”).
Summarised financial information reflecting 100 per cent of the Wayland’s relevant figures is set out below:
Administrative expenses
Loss after tax
Loss allocated to NCI
Other comprehensive income allocated to NCI
Total comprehensive loss allocated to NCI
Current assets
Current liabilities
Net liabilities
NCI at 34.75 per cent
2019
£
2018
£
(1,537)
(1,537)
(1,863)
(1,863)
(534)
(169)
(703)
(648)
68
(580)
5,385
(469,531)
(464,146)
6,599
(468,718)
(462,119)
(161,291)
(160,587)
Vardar Minerals Limited, a 41.5% per cent owned subsidiary of the Company that has material
non-controlling interests (“NCI”).
82
83
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
Summarised financial information reflecting 100 per cent of the Vardar Minerals relevant figures is set out
below:
Administrative expenses
Loss after tax
Loss allocated to NCI
Other comprehensive income allocated to NC I
Total comprehensive loss allocated to NCI
Current assets
Non-Current assets
Current liabilities
Net Assets
NCI at 58.5% per cent
15.
SHARE CAPITAL
2019
£
(256,867)
(184,492)
(161,173)
(23,319)
(184,492)
118,289
746,097
(30,462)
833,924
487,846
2019
Number
2019
£
2018
Number
2018
£
Allotted, called up and fully paid
At 1 January
Issued for cash
Issued for acquisition of subsidiary
At 31 December
566,307,254
35,937,418
-
602,244,672
5,663,072
359,374
-
6,022,446
534,207,254
30,000,000
2,100,000
566,307,254
5,342,072
300,000
21,000
5,663,072
The par value of all Ordinary Shares in issue is £0.01.
The Company has removed the limit on the number of shares that it is authorised to issue in accordance with
the Companies Act 2006.
84
Shares issued in 2019
On 1 April 2019, the Company announced a subscription for 13,636,364 new ordinary shares of £0.01 each
to raise £750,000 before expenses.
On 16 April 2019, the Company announced a subscription for 8,695,652 new ordinary shares of £0.01 each
to raise £500,000 before expenses.
The Company announced, on 24 October 2019, a subscription for 9,090,909 new ordinary shares of £0.01
each to raise £500,000.
The Company announced, on 8 November 2019, a subscription for 4,347,826 new ordinary shares of £0.01
each to raise £250,000.
Shares issued in 2018
On 22 February 2018, the Company announced that it has issued 2,100,000 ordinary shares of £0.01 to
Rasmus Blomqvist, the Company’s Exploration Manager, as the first tranche of deferred considerations
pursuant to the acquisition of Oy Fennoscandian Resources AB.
On 16 May 2018, the Company announced to issue 30,000,000 new ordinary shares to raise approximately
£1.5 million at a price of £0.05 per new ordinary share.
16.
SHARE-BASED PAYMENTS
During the year ended 31 December 2019, 9,250,000 options were granted (2018: Nil). The options
outstanding as at 31 December 2019 have an exercise price in the range of 1.66 pence to 12.00 pence (2018:
1.66 pence to 12.00 pence) and a weighted average remaining contractual life of 2 years, 98 days (2018: 2
years).
The share-based payments expense for the options for the year ended 31 December 2019 was £119,720
(2018: £196,460).
The fair value of share options granted and outstanding were 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
2019
1.15p
5.65p
7.35p
51.89%
5 years
0.718%
2017
8.73p
14.28p
12.00p
70.00%
5 years
0.25%
2015
0.708p
1.25p
1.66p
170.90%
5 years
1.58%
The options issued will be settled in the equity of the Company when exercised and have a vesting period of
one year from date of grant.
84
85
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
Reconciliation of options
in issue
Number
2019
Weighted
average
exercise price
(£’s)
2019
Number
2018
Weighted
average
exercise price
(£’s)
2018
Outstanding at 1 January
14,000,000
Lapsed during the year
(500,000)
Granted during the year
9,250,000
Outstanding at 31 December 22,750,000
Exercisable at 31 December
22,750,000
0.051
0.040
0.074
0.074
0.060
14,000,000
0.051
-
-
14,000,000
11,750,000
-
-
0.051
0.037
No warrants were granted during the year (2018: Nil).
17.
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 above par value.
Capital contribution reserve
The capital contribution reserve represents historic non-cash
contributions to the Company from equity holders.
Share-based payment reserve
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.
Translation reserve
Cumulative gains and losses on translating the net assets of overseas
operations to the presentation currency.
Merger reserve
The balance on the merger reserve represents the fair value of the
consideration given in excess of the nominal value of the ordinary
shares issued in an acquisition made by the issue of shares where the
transaction qualifies for merger relief under the Companies Act 2006.
Accumulated losses
Accumulated losses comprise the Group’s cumulative accounting profits
and losses since inception.
86
18.
TRADE AND OTHER PAYABLES
Current:
Trade payables
Social security and other taxes
Other payables
Accruals
19.
DEFERRED INCOME
Group
Company
2019
£
2018
£
151,332
122,892
11,623
10,619
69,311
242,885
8,968
9,761
66,392
208,013
2019
£
19,593
8,648
100
62,063
90,404
2018
£
11,997
6,457
1,758
46,746
66,958
2019
£
2018
£
Grants
134,877
192,205
The grant held as deferred income represents the first tranche receipt of €215,619 (£192,205) received on the
30 July 2018 in accordance with the Company’s participation of Project Pacific, a component of the European
Union’s Horizon 2020 program. The funds held are to be utilised in further exploration work, training of staff
and travel costs. The grant period will end on the 31 May 2021 at which point any excess of funding over
expenses submitted will required to be refunded. In the year ended 31 December 2019, The Group released
£20,379 (2018: Nil) of the liability directly against intangible asset additions and recognised £37,080 as
income (2018: Nil).
Also, in the year ended 31 December 2019, Fennoscandian has received funds from Business Finland of
£109,687 (2018: £10,233). The funds were paid in accordance with the Groups participation in Project Green
minerals, which specified a Grant up to a total of €161,000 and had a grant period from 1 January 2018 to 31
December 2019.The amounts incurred are sought for reimbursement following the expenses being incurred,
as a result no liability has been recorded in the financial statements for unallocated funds. The amounts
outlined above have been netted against intangible asset additions.
In addition, Fennoscandian is also participating in project titled “BATCircle - the development of a Finland-
based Circular Ecosystem of Battery Metals”. BATCircle is part of the European Union (“EU”) Strategic Energy
Technology Programme. The project is being administered by Business Finland and a 50 per cent contribution
to a budget of Euros 224,900. The funds will be used for graphite purification and spheroidization test work,
and the further assessment of Fennoscandian’s graphite for battery applications. The funding is released by
the administrator as incurred and the action runs from the 1 January 2019 to 31 January 2020. In the year to
31 December 2019, £13,916 has been netted against intangible asset additions.
86
87
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
20.
LEASE LIABILITY
NATURE OF LEASING ACTIVITIES
Vardar Geoscience leases buildings located in Str. Highway Prishtina Mitrovice Village Shupkove No.2,
Kosovo.
Number of active leases
LEASE LIABILITY AT YEAR END
NON-CURRENT
Lease liability
CURRENT
Lease liability
TOTAL LEASE LIABILITY
ANALYSIS OF LEASE LIABILITY
At 1 January 2019
Additions
Interest expense
Lease payments
Foreign exchange movements
At 31 December 2019
ANALYSIS OF GROSS VALUE OF LEASE LIABILITIES
Maturity of the lease liabilities is analysed as follows:
Within 1 year
Later than 1 year and less than 5 years
After 5 years
At 31 December 2019
The total cash outflow for leases in 2019 was £4,875.
88
31 Dec
2019
No.
1
31 Dec
2019
£
1,914
1,914
5,558
5,558
7,472
Lease liability
£
-
12,144
410
(4,875)
(207)
7,472
31 Dec 2019
£
-
7,472
-
7,472
21.
FINANCIAL INSTRUMENTS
The Group and Company’s financial instruments comprise cash and cash equivalents, loans and investments,
trade receivables and trade payables that arise directly from its operations.
The Group and Company hold the following financial instruments:
At 31 December 2019
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
Loans to group undertakings
Other financial assets
FINANCIAL LIABILITIES
Trade and other payables
Lease liability
At 31 December 2018
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
Loans to group undertakings
Other financial assets
Held at
amortised
cost
£
1,124,062
94,653
-
5,212
1,223,927
Group
Total
£
1,124,062
94,653
-
5,212
1,223,927
Held at
amortised
cost
£
978,514
-
8,986,667
2,784
9,967,965
Company
Total
£
978,514
-
8,986,667
2,784
9,967,965
231,262
7,472
238,734
231,262
7,472
238,734
81,756
-
81,756
81,756
-
81,756
Held at
amortised
cost
£
1,533,232
29,437
-
5,462
1,568,131
Group
Total
£
1,533,232
29,437
-
5,462
1,568,131
Held at
amortised
cost
£
1,470,087
-
9,902,932
2,784
11,375,803
Company
Total
£
1,470,087
-
9,902,932
2,784
11,375,803
FINANCIAL LIABILITIES
Trade and other payables
199,046
199,046
60,499
60,499
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.
88
89
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
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 Krona, Euro and Sterling. The Group’s and Company’s net
exposure to foreign currency risk at the reporting date is as follows:
Group
Company
2019
£
2018
£
2019
£
2018
£
14,007
24,036
38,043
10,355
107,160
117,515
4,861
(104,723)
(98,862)
9,450
126,838
136,288
Net foreign currency financial
(liabilities)/assets:
Swedish Krona
Euro
Total net exposure
Sensitivity analysis
A 10 per cent strengthening of sterling against the Group’s primary currencies at 31 December 2019 would
have increased/(decreased) equity and profit or loss by the amounts shown below:
GROUP
Swedish Krona
Euro
Total
COMPANY
Swedish Krona
Euro
Total
Profit or Loss
Equity
2019
£
(1,401)
(22,404)
(23,805)
2018
£
(1,035)
(10,716)
(11,751)
2019
£
(1,401)
(22,404)
(23,805)
2018
£
(1,035)
(10,716)
(11,751)
Profit or Loss
Equity
2019
£
(486)
10,472
9,986
2018
£
(945)
(11,966)
(12,911)
2019
£
(486)
10,472
9,986
2018
£
(945)
(11,966)
(12,911)
A 10 per cent weakening of sterling against the Group’s primary currencies at 31 December 2019 would have
an equal but opposite effect on the amounts shown above.
Interest rate risk
ii)
The Group’s and Company’s policy is to retain its surplus funds on the most advantageous term of deposit
available up to a 12-month 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.
90
b)
Credit risk
The Group’s principal financial assets are the cash and cash equivalents and 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 a
Standard & Poor’s, BBB- rating as a minimum.
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. An assessment of the expected credit loss arising on intercompany loans is detailed in
note 10.
The amounts used by the subsidiaries are as follows:
Jokkmokk Iron Mines AB
Beowulf Sweden AB
Wayland Copper Ltd
Oy Fennoscandian Resources AB
Gross
2019
£
2018
£
7,241,375
8,349,344
361,773
361,657
-
1,383,519
8,986,667
-
1,191,931
9,902,932
Reconciliation of provisions against receivables arising from lifetime ECLs
ECLs
Total provision arising from ECLs
31
December
2018
£
1,683,499
1,683,499
Current
year
movement
£
31
December
2019
£
158,005
158,005
1,841,504
1,841,504
The Directors have also assessed the cash flow scenarios of the above considerations. Estimations were
made regarding the credit risk of the counterparty and the underlying probability of default in each of the
credit loss scenarios. The scenarios identified by management included Production, Divestment, Fire-sale
and Failure. These scenarios considered technical data, necessary licences to be awarded, the Company’s
ability to raise finance, and ability to sell the project. The ECL to the 31 December 2019 represents the 12
month expected credit loss, as underlying credit risk of the intercompany loans has not changed since initial
recognition. A reasonable change in the probability weightings of 3% would result in further impairment of
£552,193.
90
91
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
i)
Commodity price risk
The principal activity of the Group is the exploration for iron ore in Sweden, graphite in Finland and other
prospective minerals in Kosovo, and the principal market risk facing the Group is an adverse movement in
the price of such commodities/industrial minerals. Any long-term adverse movement in market prices would
affect the commercial viability of the Group’s various projects.
Liquidity risk
c)
To date the Group and Company have relied on shareholder funding to finance 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
material borrowings and primarily have trade and other payables with a maturity of less than one year, the
only exception being the lease liability per note 20. The rationale for the preparation of the accounts on a
going concern basis is detailed in the Report of the Directors.
Capital management
d)
The Groups capital structure consists of issued capital and reserves, accumulated losses and non-controlling
interest. 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.
2019
£
1,124,062
(242,885)
(134,877)
746,300
2018
£
1,533,232
(208,014)
(192,205)
1,133,013
11,219,345
9,733,182
6.65%
11.64%
NET DEBT
GROUP
Cash and cash equivalents
Trade payables
Grant income
Net cash
Total equity
Net cash to equity ratio
92
22. SEGMENT REPORTING
The Group’s only reportable segment is the exploration for, and the development of iron ore, graphite and
other mineral deposits. The Group also reports by geographical reportable segment in the countries in which
it operates. The Group’s exploration and development activities are focused on three countries, Sweden,
Finland and Kosovo, with support provided from the UK headquarters. In presenting information on the basis
of geographical reportable segments, the loss for the year, key statement of financial position data, property,
plant and equipment additions and deferred exploration additions is based on the geographical location of
the assets. The Group has adopted IFRS 8 ‘Operating Segments’. IFRS 8 requires operating segments to be
identified on the basis of internal reports that are regularly reviewed by the chief operating decision maker to
allocate resources and assets.
2019
Sweden
£
Finland
£
Kosovo
£
UK
£
Total
£
Licence and Exploration
Other non-current assets
Current assets
Liabilities
Finance Income
Finance Costs
Impairment
Expenses
Loss for the year
Total comprehensive loss
2018
Licence and Exploration
Other non-current assets
Current assets
Liabilities
Expenses
Impairment
Loss for the year
Total comprehensive loss
7,036,672
2,711
46,339
(28,453)
-
-
-
(110,224)
(109,538)
(795,503)
1,214,595
9,700
124,145
(86,702)
-
-
10,720
(55,221)
(20,252)
(89,186)
1,578,300
75,689
48,346
(29,979)
-
-
-
(167,513)
395,918
405,782
181,897
11,434
1,072,493
(240,100)
6,298
(410)
-
(702,148)
(694,835)
(744,099)
10,011,494
99,534
1,291,323
(385,234)
6,298
(410)
10,720
(1,035,106)
(428,707)
(1,223,006)
7,408,275
4,986
51,536
(50,530)
(124,908)
-
(124,908)
(258,997)
877,272
13,775
49,334
(76,188)
(607,862)
571,456
(607,862)
(597,040)
-
-
-
-
(19,880)
-
(19,880)
(19,880)
-
2,784
1,495,318
(273,500)
(633,537)
-
(621,934)
(621,934)
8,285,547
21,545
1,596,188
(400,218)
(1,386,187)
571,456
(1,374,584)
(1,497,851)
92
93
2019 Beowulf Mining plc Annual Report
Notes to the Consolidated Financial Statements
23. RELATED PARTY DISCLOSURES
Transactions with subsidiaries
During the year, cash advances of £286,045 (2018: £259,192) were made to Jokkmokk Iron Mines AB and
incurred costs of £131,948 that were paid on behalf by the Company (2018: £96,167). 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 £7,241,374 (2018: £8,352,577).
Beowulf Sweden AB received cash advances of £72,290 (2018: £88,221) and incurred costs of £5,057 (2018:
£29,901) that were paid on behalf by the Company. 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 £361,772 (2018:
£361,657).
OY Fennoscandian AB received cash advances of £479,458 (2018: £457,103) and incurred costs of £31,296
(2018: £41,275) that were paid on behalf by the Company. 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 £1,383,518
(2018: £1,199,107).
In accordance with its service agreement, Fennoscandian charges Beowulf Mining plc for time incurred by
its staff on exploration projects held by other entities in the Group. In turn Beowulf Mining plc recharges the
other entities involved.
In addition, Beowulf Mining plc charges entities in the Group for time and expenses spent by Directors
on providing services. An arm’s length margin has been included at entity level, but this is subsequently
eliminated on consolidation.
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. An assessment of the expected credit loss arising on intercompany loans is detailed in
note 21.
Transactions with other related parties
Key management personnel include all Directors and those who have authority and responsibility for
planning, directing and controlling the activities of the entity, the aggregate compensation paid to key
management personnel of the Company is set out below,
2019
£
2018
£
489,727
30,364
105,359
10,417
809
636,676
298,288
29,710
200,137
-
720
528,855
Short-term employee benefits (including employers’
national insurance contributions)
Post-retirement benefits
Share based payments
Share settled expense
Insurance
94
Mr Blomqvist incurred a charge of £22,976 with respect of remaining unvested options (2018: £87,316). Mr
Blomqvist is considered key management personnel in his role as Group’s Exploration Manager.
On 31 October 2019, 166,667 fully paid new ordinary shares of £0.01 were issued to Kurt Budge, at a
deemed price of 6.25p per share. The Share Issue is to compensate Kurt Budge for the lapse of 500,000 share
options granted to Kurt Budge, exercisable at a price of 4p per share, as announced via RNS on 10 October
2014 .Kurt Budge was unable to exercise the Share Options due to being in a closed period in respect of the
recent fundraising announced via RNS on the 24 October 2019.
In January 2020, an outbreak of a coronavirus, now classified as COVID 19, was detected in China’s Hubei
province. During the following months, COVID 19 has spread steadily throughout the World and on 11 March
2020, The World Health Organisation (“WHO”) declared the outbreak a global pandemic. In order to stem the
spread of the virus, Governments around the World are taking drastic steps which include compulsory closure
of various businesses, shops and schools and are also heavily restricting of movement of people with lock
down. There has been no impact of COVID-19 on the underlying operations at 31 December 2019, however
due to the rapid development of COVID 19, the degree of uncertainty involved and the unprecedented nature
of the challenges posed by the coronavirus situation, the Directors’ are of the opinion that it is too soon to
quantify what financial impact that the COVID 19 pandemic will be, but are monitoring the situation closely.
On 17 February 2020, Beowulf invested £50,000 in Vardar Minerals limited, increasing the Company’s
investment in Vardar from 41.5% to 42.2%.
On 25 March 2020, a made a further investment of £30,000, alongside a further £40,0000 investment by
founder shareholders. The additional investment maintains the Company’s holding in Vardar Minerals limited
at 42.2%. Funds will be used to continue exploration works in Kosovo, as permitted to do so under COVID-19
restrictions. All works will be carried out in accordance with Kosovan Government advice and Vardar’s
health, safety and emergency protocols.
On 14 July, an extension was granted on 9,000,000 share options held by Kurt Budge. The extension allowed
the options that would have otherwise expired on the 17 July 2020, are now able to be exercised up to the 17
July 2021.
94
95
2019 Beowulf Mining plc Annual Report
Company Information
Directors
Mr K R Budge
Mr Christopher Davies
Mr G Färm Davies
Secretary
Mr L O’Donoghue
Registered Number & Office
Incorporated in England
and Wales
02330496 (England & Wales)
Beowulf Mining plc
201 Temple Chambers
3-7 Temple Avenue
London EC4Y 0DT
Finnish Office
Swedish Registered Address
Registrars
Oy Fennoscandian Resources AB
Akademigatan 1,
20500 Åbo
Finland
All subsidiary companies
Storgatan 36,
921 31 LYCKSELE
Sweden
Neville Registrars Ltd
Neville House,18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Nominated Adviser & Broker
Swedish Custodian Bank
SP Angel
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
Skandinaviska Enskilda
Banken AB
ST M7
106 40 Stockholm
Sweden
UK Bank
Public Relations UK
Website
The Royal Bank of Scotland
Piccadilly Circus Branch
48 Haymarket
London
SW1Y 4SE
Blytheweigh Communications
Limited
4-5 Castle Court
London
EC3V 9DL
www.beowulfmining.com
Solicitors
BHW Solicitors
1 Smith Way
Grove Park
Enderby
Leicestershire
LE19 1SX
96
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2019 Beowulf Mining plc Annual Report
97
www.beowulfmining.com