BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements
for the year ended 31 December 2021
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Index
Page
General Information
2
Chairman's Statement
3 - 5
Strategic Report
6 - 18
Board of Directors
19
Corporate Governance
20 - 28
Directors' Report
29 - 33
Independent Auditor's Report
34 - 42
Consolidated and Company Statements of Financial Position
43
Consolidated Statement of Profit or Loss and Other Comprehensive Income
44
Consolidated Statement of Changes in Equity - Group
45
Statement of Changes in Equity - Company
46
Consolidated and Company Statements of Cash Flows
47
Accounting Policies
48 - 65
Notes to the Annual Report and Financial Statements
66 - 99
1
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
General Information
Country of Incorporation and Domicile
United Kingdom
Registration Number
08248437
Directors
MJ Houston (Executive Chairman)
DA Facey (Chief Financial Officer)
TG Leslie (Non-Executive Director)
RC Croll (Non-Executive Director)
G Teichmann (Non-Executive Director)
Registered Office
4th Floor Reading Bridge House
George Street
Reading
Berkshire
RG1 8LS
Nominated advisor and Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
Bankers
Alpha FX Group Plc
Financial Public Relations
St Brides Partners Ltd
51 Eastcheap
London
EC3M 1JP
Auditors
BDO LLP
55 Baker Street
London
United Kingdom
W1U 7EU
2
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Chairman's Statement
Dear Shareholders,
I am pleased to present our audited results for the year ended 31 December 2021.
Overview
Our main goal in 2021 was to complete the transformational new plant which is designed to increase production to 1
million tonnes per annum from c 400,000 tonnes per annum.
By the end of the year the plant was being
commissioned and beginning to demonstrate that it would be able to achieve our future production targets. Despite
the ongoing expansion works the Company achieved significantly better results than in 2020; most notably a 53%
increase in the number of carats produced and revenue more than doubling. Prices achieved in the year increased
by 59%, reflecting the recovery in the market after Covid-19, and the recovery of some significantly larger diamonds.
Operations
The major objectives for the year were: 1) to open up the KV1/KV2 main pit to reflect the upgraded Diamond
Resource at depth and area and this involved a material increase in development (waste) mining; 2) to complete the
expanded new processing plant so that it was fully commissioned before the year end; 3) to manage the ongoing
challenge of Covid-19 which was successfully done until Q4, when the Omicron version disrupted operations.
Mining
During Q1 management began to redesign its mine plan centered around the main pit. It was agreed a material
pushback was required for the mine to access the new economic depth of 120/130m versus the previous estimate of
80/100m. This entailed a step up in the strip ratio in the short term, in order to ensure predictable and secure supplies
of good quality ore as the new plant ramps up to full production. This new plan was also designed to ensure that
there was sufficient stockpile to enable the plant to operate more easily in the rainy season. The new mining plan
was delayed in its implementation due to mining equipment failure in Q3, the shut down imposed by the DMR in
November/December 2021, which led to a loss of 20 days mining as announced on 19 November 2021, and the
shutdown due to Covid-19 (Omicron) in December 2021 and January 2022, leading to a further loss of 14 days of
mining as announced on 22 December 2021, at which point the rainy season had started inhibiting the development
of the mine further. As we have reported the rainy season has extended into May 2022, hence we are some three or
four months behind schedule in the mine development. The application for the renewal of the current Mining Licence,
which expired in August 2019, has been progressing well. In accordance with South African legislation, the Group
has the right to continue mining until such time as the application has been processed
Processing and Expansion project
The challenge for the year was to complete the expansion project, whilst maximising production using the old plant
and later in the year utilising a mixture of the old plant, with the crushing circuit of the new plant.
This proved
successful although operating the two plants had an impact on costs, largely because of the requirement for a
significant amount of rehandling of material.
I am pleased to say that our expansion project was completed at the end of December 2021, after delays caused by
the Section 54 stoppage imposed by the DMR in November/December 2021, followed by the closure due to Covid-19
(Omicron) in December 2021 and early January 2022. Since the end of the year the ramp up in production has been
hindered by the excessive rain fall in Q1 and Q2 2022.
3
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Chairman's Statement
The Diamond Market
The diamond market recovered well in 2021. Average price per carat in 2021 was USD470 compared with USD295
in 2020, although prices in 2020 were significantly impacted by Covid-19 and the consequent cancellations of the
diamond auctions.
Interestingly, the 2021 average price of USD470 is 13% higher than the average for 2019 of
USD415, indicating that the market has come back stronger after the pandemic. Since the end of the year the market
was initially volatile with a big spike in prices in February largely linked to the Ukraine situation. It has since stabilised,
but at prices significantly higher than our average for 2021. We expect the supply side of quality diamonds, as those
recovered by Kareevlei, to remain tight for the foreseeable future, with the ongoing conflict in Ukraine affecting the
supply of rough diamonds.
Diamond Recoveries
The Company continued to recover an increasing number of larger stones with a value in excess of USD50,000.
During 2021 twelve larger stones were recovered for an aggregate sales value of $1,764,000. The Company
recovered a record 58 carat (previous largest mid 20 carat) reflecting the potential of the Kareevlei Diamond
Resource.
Diamond Resource ("Resource")
Kareevlei hosts five known diamondiferous kimberlite pipes with a combined Inferred and Indicated Resource of 10.4
million tonnes/516,200 carats (February 2021) and produces excellent quality diamonds with 90% of output gem
quality.
In February 2021, we announced a Resource update demonstrating a 49% increase in net tonnes to 10,368,300, a
53% increase in net carats to 516,200 and notably 19% of the Resource was upgraded from the Inferred to Indicated
category. Based on our planned production of 1mtpa, this provides a minimum 10-year life-of-mine, however, we
remain confident that the Resource will increase further once more work is completed on KV3, our largest pipe,
where at present only 40% of this pipe’s volume is included.
Financing
In March 2021 the Company raised £1.5m of equity to continue to fund the expansion project which had increased in
scope from a capacity of 750,000 tonnes to 1 million tonnes per annum. A further £1.6m (£0.94m received during
2021 and £0.66m in 2022) was raised for working capital purposes through a convertible loan note issued to
Teichmann, following the approval of a waiver from the requirements of Rule 9 of the City Code on Takeovers and
Mergers, and shareholder approval in June 2021.
As announced on 1 June 2022, the impact of the unusually high rainfall in the first five months of 2022 has severely
impacted the Group’s cash resources, leaving the Group requiring additional funding, whilst it completes its mining
development.
Discussions continue with potential funders to BlueRock and to Kareevlei which is expected to be sufficient to fund
the company through this development period. Further details will be announced as discussions progress.
Events following the end of the year
Due to the delays in implementing the new mining plan, exacerbated by the excessive rainfall, the group sought
further funding to fund the mine development costs and raised £2m through an issue of new equity in March 2022.
Unfortunately, heavy rain continued into April and May 2022.
As a result Mining development fell 36% (400,000
tonnes) compared to the budget for April and May, which has limited the mine’s access to quality kimberlite and
necessitated the use of lower grade and more difficult to handle material (high clay content) in Kareevlei‘s processing
operations. Additionally, where BlueRock had hoped to ramp up production at its new 1Mtpa processing plant, the
unforeseen days lost to rain and the lower-grade feed resulted in operations being down against budget over the
period March to May by 48% on tonnes processed, 51% on grade and 74% on carats produced.
4
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Chairman's Statement
As a result of fewer diamonds being produced and sold, as well as increasing costs, BlueRock’s cash resources have
been depleted during what continues to be a period of heavy investment in mining development. The Company has
therefore entered into discussions to obtain financing to support it through this period.
The Company continues to attract high prices for its high quality diamonds.
So far in 2022 sales prices have
averaged over USD600, an increase of 29% on 2021 prices.
Despite the advances made in 2021, there is still work to be done for Kareevlei to benefit fully from the potential of
the new plant. The fundamentals for Kareevlei remain solid and I look forward to reporting more positive news as we
move forward through the rest of the year.
I would like to thank everyone at BlueRock and Kareevlei, as well as our shareholders and key stakeholders for their
continued efforts and support.
Michael Houston
Executive Chairman
5
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Operational Statement
Overview
Our primary focus in the year was:
a)
to complete our expansion project to get to an annual throughput of 1,000,000 tonnes, although the pandemic
caused significant delays to, and had significant cost implications for the project, this was completed in
December 2021 and ramp up continues, and
b)
to ensure that the mine plan would enable us to supply good quality ore for the life of mine.
This process
started in 2021, but was hampered by mine equipment outages and the shutdowns in November 2021,
December 2021 and January 2022.
Although our focus was on development in 2021 all of our key indicators were up in 2021 compared with 2020,
although it should be noted that 2020 was affected by Covid-19. Our key indicators were considerably up on 2019 as
well, which was not affected by Covid-19.
Safety, Health and Environment
The health and safety of our employees is always paramount and in the current circumstances even more so. We
have implemented, in accordance
with South African Government guidelines, measures to ensure that we are
compliant with best practice in relation to preventing the spread of Covid-19. Dust is a major health risk to employees
and although periodical monitoring has not indicated any dust exposure exceedances, the Company is reviewing
potential changes to the dry screening plant that will improve efficiency and limit dust generation. Similarly, we are
reviewing potential application of dust suppression polymers on haul roads to decrease dust generation. Continuous
monitoring and improvement of our safety and health performance is ensured by implementing best practice
and employing competent consulting professionals to oversee core duties such as occupational health.
As part of our environmental management at the mine, we continuously monitor, review and update environmental
practises at the mine to ensure our operational expansion remains compliant and environmentally responsible. Third
party audits are conducted on a quarterly basis to measure compliance and performance. With the expanded
operations, a civil engineering company has been contracted to conduct annual fine tailings storage facility audits as
an additional layer of monitoring in priority areas. Water quality measurements have not indicated any adverse
impact on groundwater quality in boreholes at the mine. The process uses only water as an ‘additive’, which pose
negligible potential for contamination and toxic leachate from broken rock.
6
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Mining
In the first half of the year we concentrated in providing high grade, deeper ore from KV1 in order to provide optimal
feed grade to the expanded plant operation. The mine design was optimised in Q2, which required additional waste
stripping to open up deeper, better grade ore and optimal value from both pipes. Additional surface infrastructure
(haul roads, pumping infrastructure, wider ramps) was constructed during 2021 to aid in achieving mining targets in
future.
Total waste mined in 2021 was 1,450,000 tonnes up from 791,000 in 2020 reflecting the extra work required to push
back the Main Pit to design and the increased level of production.
Total ore mined in 2021 was 557,000 tonnes, up 48% on 2020 (377,000). In 2021 the main pit, which comprise KV1
and KV2, were mined and had an average strip ratio of 2.6 (2.1 in 2020). Our estimated long term strip ratio for the
main pit is 1.8.
Processing
A total of 516,000 tonnes of ore was processed during the year up 28% on the previous year’s 402,000 tonnes.
Production volumes by quarter are shown below:
Production levels were up in all quarters The management of the plant during the rainy season showed an
improvement which resulted in better performance in Q1 (’21) compared to 2020.
7
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
The primary crushing circuit of the new plant was utilised from mid Q3 and resulted in a boost in plant performance.
Recoveries
Grade and carats produced
The average grade for the year increased from 3.9 cpht to 4.6 cpht. The primary reason for the increase was due to
mining deeper areas of the pit in fresh kimberlite, compared to mining near surface material in 2020.
The grade for the first half of the year averaged 4.1 cpht whereas the grade for the second half averaged 4.9 cpht.
The grade, especially during H2, was higher than 2020 by 20%, indicative of mining fresh kimberlite ore mostly from
the high grade KV1 pipe.
Due to the grade and throughput improvements in 2021, carat production increased by 53%.
Value per carat
The market for diamonds improved in 2021, with resulting price correction after the initial impact of the Covid-19
pandemic. Q3 prices benefitted from a 58ct find, that boosted parcel value.
The Market has returned strongly in 2021 and the average price achieved in 2021 was USD470 per carat, a 59%
increase on the average 2020 price of $295 per carat.
8
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
The Resource and Life of Mine
In February 2021, following a drilling programme designed to prove greater depth of Resource and to further define
the surface area of the Resource, we announced an increase in our Resource as follows:
November
2018 ¹
January
2021 ²
Increase
Tonnes
7,700,000
Total mined tonnes to date
(735,000)
Net tonnes
6,965,000
10,368,300
49 %
Carats
367,000
-
Mined carats
(29,982)
-
Net carats
337,018
516,200
53 %
CPHT
4.83
5.00
4 %
(1) 2018 Resource statement
(2) January 2021 Resource statement
Based on our expected production run rate of 1m tonnes per annum, the current Resource estimate gives us a life of
mine of 10 years, from December 2020.
We anticipate further increases in the Resource once we start to explore KV3 further. At present only 40% of the
potential Resource is included in the Resource statement. However, a significant proportion of the remaining 60%
has similar characteristics to parts of the Main Pit which has proved to be diamond bearing.
It is planned to do
additional exploratory work on KV3 starting H2 2023, at approximately the same time that exploitation of KV3 is
projected to commence.
Operational outlook
2021 improved significantly from previous years, boosted by improved throughput, grade and price. 2022 will improve
in throughput and probably price, but due to ore mining in near surface, low grade KV2 areas, grade is now expected
to be lower for most of the year.
Mining progress is steady, although hamstrung in Q1 (’22) and Q2 (’22) by heavy rains, well above average. The pit
is being opened up to final design limits and the first permanent ramp has been installed. The high grade, fresh
kimberlite ore will be open by Q4 (’22), with fresh, but lower grade kimberlite mined in the interim.
Our plant expansion and commissioning were completed in Q1 (’22) and focus is now on reliability and automation.
Due to significant high rainfall in Q1 (’22), into Q2 (’22) and only weathered kimberlite ore of low grade and high clay
content was available, the start of this year was under severe pressure. Both grade and throughput was severely
impacted by the material available for processing. Material composition should improve from end of Q2 (’22), with
grade improvement only seen from Q4 (’22). By this time, the mining operation should have been de-risked and a
steady performance is expected to be evident.
The uptick of the diamond market since early 2022 has been encouraging as we are obtaining good prices for our
diamonds in 2022. The average so far for this year is $648 per carat which is higher than the average of USD470 for
2021.
Once the operation is in balance (grade and throughput volume) we will move to the third stage of our stated strategy
which is to look to use our experience combined with that of our partners to expand potentially into other resources
and into other countries in Sub-Saharan Africa.
Meiring Burger
Chief Executive Officer - Kareevlei
9
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Financial review
Overview
The results for the year show significant improvement despite the continuing impact of COVID-19 during the year.
Towards the end of the year we started to see increased processing volumes as the new plant came into operation
and we achieved increases in waste mined, ore mined and production volumes compared to 2020. Prices also
recovered during the year, and this is reflected in the increase in revenue of 118%.
Revenue and Loss for the Year
In 2021, the Group had revenue of £7,846,588 (2020: £3,601,819) and made a loss before tax of £1,348,897 (2020:
£2,988,808), reflecting the increased production and recovery in prices since the initial effects of the COVID-19
pandemic in 2020.
Statement of Financial Position
Borrowings increased from £1,524,506 in 2020 to £1,950,947 in 2021, as a result of the convertible loan note issued
to Teichmann Group Ltd. Property, plant and equipment have increased by £1,968,611 in the year, as investment in
the mine continues, specifically in relation to the new plant. Inventories have increased by £344,527 due to an
increase production during December 2021 compared to December 2020 . Trade and other payables have increased
by £1,502,109 due to the increase in costs related to the expansion project and increased mining activity.
Cash flows
Investments
During the year we invested £3,142,078 (2020: £1,268,083) in the purchase and upgrading of plant and equipment.
The majority of this expenditure related to our expansion project to improve processing facilities. The rehabilitation
guarantee was increased by £99,030 (2020: £101,888). This was required as the footprint of the mine has been
increased.
Financing
During 2021, the Company raised a total of £1,500,000 gross of expenses through placings and subscriptions in
March 2021. The fund raisings were largely to fund our expansion plans in order to reach our target of operating at
an annual run rate of 400,000 tonnes, as outlined in the Operational Statement. Additionally loan fees and expenses
of £582,972 were settled in shares. The Company also issued Convertible Loan Notes to Teichmann Group Ltd
amounting to £1,610,000. These were payable over 12 months and £941,147 was received during the year, with the
balance being paid post year end. Additionally, £462,500 of the Convertible Loan Notes to T Leslie and M Poole were
repaid in the year.
Cash position
At the end of the year the Group cash balance (excluding restricted cash) was £315,353 (2020: £355,463).
Additionally, the Group had diamond inventories of £346,201 (2020: £306,753).
Since the year end the Company has raised further funds amounting to £2,100,000 before expenses through a
placing in March 2022. At 31 May 2022 our cash balance was £427,995 (excluding restricted cash).
10
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Risk Management
Principal risks and uncertainties
In addition to the extra risks resulting from the COVID-19 pandemic which are discussed below, the principal risks
that relate to the Group have been set out below, categorised as follows:
- Operational risks
- Risks relating to the Group’s operations including mining
- Market risks
- Risks associated with changes in the markets in which the Group operates
- Country risks
- Risks relating to the Group's mining operations in South-Africa
- Other risks
- COVID-19 risks and Climate Change risks
- Sustainability and Climate Change risks
- Conflict in Ukraine
Operational risks
Reliability of mineral resource and reliance on historic data
The calculation of a mineral Resource involves significant assumptions and estimates that may prove inaccurate,
including assumptions of diamond prices. In calculating the Inferred and Indicated Resource at the Kareevlei
tenements, reliance has been placed upon measurements and data collected by Diamond Resources Pty Limited
(the vendor of the Kareevlei tenements) and other parties and the analysis of the results achieved by Kareevlei
Mining (Pty) Limited. There can be no guarantee that predicted grades will continue to materialise or that the
Resource will be economically viable. The Group mitigates this risk by continually assessing its production assets in
order to provide further evidence to support the Resource estimates initially set out in the Competent Person’s Report
dated August 2013 prior to expanding our production facilities, and which was updated in February 2021.
Increase in production
The future profitability of the Group is dependent upon increasing production levels in order to achieve the necessary
economies of scale.
Whilst the Group believe that it has a management team with the appropriate skills, has
developed a detailed plan and that it has sufficient Resources in order to achieve the required increase in production,
there remain significant challenges in order to achieve this and there can be no guarantees that such an increase will
be achieved neither can there be any guarantee that once achieved, such levels can continue to be achieved.
Exposure to mining hazards
Whilst the Group’s exposure is reduced due to the open cast mining technique, the Group remains exposed to a
number of risks and hazards associated with mining including pit wall failure, adverse weather and mechanical
breakdown. The Group monitors its mining operations constantly to ensure that mining risks are minimised. In
addition, the Group's production team has extensive experience operating and maintaining similar production
facilities.
11
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Security risks
Whilst the Group has implemented security procedures, there can be no guarantee that theft of plant, machinery or
diamonds will not occur. Should any theft occur, the Group may suffer adverse financial consequences. We have
mitigated this risk by ensuring that our security team is present at all times, and are in the process of improving our
security through installing additional fencing and CCTVs, and implementing new procedures. If theft is discovered or
suspected, the Company uses polygraph testing on the personnel involved, and employees who fail the tests are
immediately dismissed.
Market risks
Exposure to a decrease in rough diamond prices
As the Group has commenced diamond sales, the profitability of mining operations is directly related to the prevailing
diamond price. Historically, diamond prices for good quality stones has been relatively stable, but are affected by
numerous factors which the Group is unable to control or predict, including world production levels, international
economic trends, industrial and consumer demand, currency exchange fluctuations, seasonality, speculative activity,
synthetic diamonds and political events.
Exposure to strengthening of the South African Rand and weakening of the US Dollar
The Group realises US Dollars for its diamond sales and reports its results in Pounds Sterling. Should the South
African Rand strengthen against the Pound, the costs of the Group’s mining operations, which are largely
denominated in South African Rand, may be adversely affected. Should the US Dollar weaken against the Pound,
the Group’s revenues may be reduced.
Exposure to movements in the prices of raw materials, equipment and services
Should market prices for raw materials, services and equipment, such as diesel or mining equipment increase, the
Group’s results may be adversely affected. The Group seeks to obtain the best rate for each product or service,
taking into account price, service quality and reliability.
Country risks
Operations in South Africa
The Group’s main country of operation is South Africa. Whilst the Directors intend that the Group will carry out its
activities in accordance with all applicable laws, rules and regulations, it is possible that new laws, rules or
regulations may be enacted or that the interpretation of current laws, rules or regulations may change, either of which
may limit the ability of the Group to operate. The Group's activities and profitability may also be adversely affected by
economic or political factors outside its control.
Financial Risk Management
Details of the Group’s financial risk management is set out in note 29.
Other Risks
COVID-19 Pandemic
The COVID-19 pandemic resulted in the mine being forced to close for a period during December 2021. Although the
impact of COVID-19 has been reduced, there remains a risk, that future outbreaks could affect both production and
prices.
12
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Sustainability and Climate Change
The CEO of Kareevlei reports to the Board on any concerns over safety and environmental issues at every monthly
Board Meeting.
The Group produces an Environmental Management Programme Report, which it updates for
changes to the footprint, layout and water use amongst other things.
The Board is cognisant of the risks presented by climate change and conscious of the need to minimise emissions.
The physical risks and potential risks identified are drought, strong winds, extreme precipitation and cold or heat. Of
these, the primary risk to the operation is considered to be prolonged and extreme rainfall. To mitigate this risk, the
Group has put in place a policy of creating stockpiles during the dry season to ensure there is sufficient dry feed for
the plant during the rainy season. However, as was seen in 2022, the duration and volume of rainfall during the wet
season is difficult to predict, and the Board continues to monitor the situation closely, and will adapt its policies
accordingly.
The Group recognises its reliance on fossil fuel energy, in particular diesel. The short-term focus is on improving
energy efficiencies in our operational processes and reducing combustion-related fossil fuel use. Options are being
continually assessed in the context of the size, nature and location of the Group’s operations, the required investment
and the expectations of our main stakeholders.
Ukraine conflict
The immediate impacts of the conflict have been a significant increase in fuel prices and an increase in diamond
prices. There is a risk of further fuel price increases, supply chains may be impacted and it is not yet clear what
impact the conflict will have on supply and demand for diamonds in the longer term.
13
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Key Performance indicators
As a management team we monitor a variety of performance indicators:
Production
Tonnes processed in 2021 was 516,000 tonnes, 28% up on 2020.
Grade
The average grade for 2021 was 4.6 cpht, 20% up on 2020 grade of 3.9 cpht
Carats produced
Carats produced were 23,497, up 53% on 2020 and carats sold were 22,980, up 41% on 2020.
Value per carat
The value per carat for 2021 was USD470, 59% up on 2020 when COVID-19 impacted prices.
14
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Directors' Section 172 statement
This section serves as the Directors’ Section 172 statement and should be read in conjunction with the Strategic
Report and the Report from the Company’s Corporate Governance Committee. This disclosure describes how the
Directors have had regard to the matters set out in section 172(1)(a) to (f) and forms the Directors’ statement
required under section 414CZA of The Companies Act 2006.
The matters set out in Section 172(1) (a) to (f) are that a Director must act in the way they consider, in good faith,
which would be most likely to promote the success of the Company for the benefit of its stakeholders as a whole, and
in doing so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business relationships with suppliers, customers and others;
(d) the impact of the Company’s operations on the community and the environment;
(e) the desirability of the Company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly between members of the Company.
In the above Strategic Report section of this Annual Report, the Company has set out the short to long term strategic
priorities, and described the plans to support their achievement.
The analysis has been split into two distinct sections, the first to addresses Stakeholder engagement, which provides
information on stakeholders, issues and methods of engagement, disclosed by stakeholder group. The second
section addresses principal decisions made by the Board and focuses on how the regard for stakeholders influenced
decision-making.
Section 1. Stakeholder mapping and engagement activities within the reporting period.
The Company continuously interacts with a variety of stakeholders important to its success, such as equity investors,
business partners, workforce, government bodies, local communities, suppliers and advisors. The Company strives
to strike the right balance between engagement and communication. Furthermore, the Company works within the
limitations of what can be disclosed to the various stakeholders with regards to maintaining confidentiality of market
and/or commercially sensitive information.
15
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Who: Key Stakeholder
groups
Why: why is it important
to engage this group of
stakeholders
How: how BlueRock
engaged with the
stakeholder group
What: what came of the
engagement
Equity Investors and
Business Partners
Teichmann Company Ltd and
associated own 17%
at the
date of this report.
Access to capital has been
of vital importance to the
long-term success of our
business
to
enable
the
Group to proceed with its
expansion
plans
for
the
mine.
Teichmann provide a vital
role in the mining process,
without which the Company
cannot create value for its
shareholders by producing
diamonds and therefore a
return on the investment.
Through
our
engagement
activities, we strive to obtain
investor
buy-in
into
our
strategic
objectives
and
how we go about executing
them.
We are seeking to promote
an
investor
base
that
is
interested in a long term
holding in the Company and
will support the Company in
achieving
its
strategic
objectives.
The key mechanisms of
engagement included:
Teichmann
Teichmann
have
excercised their option to
appoint a representative to
the
board
and
Gary
Teichmann was appointed
during the period. Regular
meetings are held between
the
Board
and
management
of
Teichmann.
Prospective
and
existing
investors
The AGM and Annual and
Interim Reports.
Investor
roadshows
and
presentations.
Shareholder calls with the
Board.
Regular
news
releases
and updates
We
engaged
with
investors
on
topics
of
strategy, governance and
performance.
The
Chairman
and
CFO
presented at a number of
investor roadshows and
one-to-one meetings.
Over the course of 2021,
the
Group
raised
£1.5
million in cash, gross of
expenses,
through
new
share issues and issued
£1.61
million
of
Convertible Loan Notes
to the Teichmann Group.
As
a
result
of
Gary
Teichmann’s
appointment to the Board
there
is
a
closer
relationship
with
the
Teichmann Group.
Workforce
The Group has approximately
100
employees
including
its
Directors. Four of the Directors
are UK residents and one is a
overseas resident. The rest of
the
Company’s
workforce
is
based in South Africa
The
Group’s
long-term
success is predicated on
the
commitment
of
our
workforce to our vision and
the
demonstration
of
our
values on a daily basis.
Meetings
were
held
with
staff
to
provide
project
updates
and
ongoing
business objectives.
Efforts to focus on mine
safety
have
yielded
significant improvements in
safety
performance,
resulting in a reduction of
injuries
in
calendar
year
2021.
General Workforce:
The
Company
maintains
an
open
line
of
communication
between
its
employees,
senior
management
and
the
Board.
There
is
a
formalised
employee
induction
into
the
Company
corporate
policies and procedures.
The
Remuneration
Committee operated an
employee Bonus scheme
payable
on
achieving
certain
production
targets,
and
the
employee trust being set
up to own 5% of the
Company's
operating
subsidiary
is
close
to
being finalised.
The workforce continues
to be trained in aspects
of corporate policies and
procedures to engender
positive corporate culture
aligned
with
the
Company
code
of
conduct.
Training has been put in
place
to
develop
and
enhance the workforce.
16
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Who:
Key
Stakeholder
groups
Why: why is it important
to engage this group of
stakeholders
How:
how
BlueRock
engaged
with
the
stakeholder group
What: what came of the
engagement
Governmental bodies
The Group is regulated in South
Africa, by the Department for
Mineral
Resources
and
Energy(“DMRE”).
The Group’s mining licence
renewals require satisfying
the
requirements
of
the
DMRE,
which
include
changes to Broad - Based
Black
Economic
Empowerment
ownership
requirements.
The
Group
has
held
several meetings with the
DMRE and has ongoing
dialogue in this regard.
The
Group
has
made
significant
operational
improvements
and
is
finalising
its
amended
BBBEE
ownership
arrangements.
Community
The local communities at the
mine site in South Africa and
the surrounding area.
We need to engage with the
local
community
to
build
trust. The community’s trust
will mean it is more likely
that
any
fears
the
community
has
can
be
assuaged
and
our
plans
and
strategies
are
more
likely
to
be
accepted.
Community
engagement
will inform better decision
making.
The Group has a social and
economic
impact
on
the
local
communities
and
surrounding
area.
The
Company is committed to
ensuring sustainable growth
minimising
adverse
impacts.
The
local
communities will have an
interest in the ownership of
the
subsidiary
once
the
BBBEE
ownership
is
finalised. The majority of the
workforce is drawn from the
local communities.
The
Company
has
identified
all
key
stakeholders
within
the
local
communities,
and
has held regular meetings
with all parties.
The Group has ongoing
engagements
with
the
local communities.
Key suppliers and Advisors
Key
suppliers
have
been
identified
in
South
Africa.
Advisors include our Nomad,
brokers, lawyers, auditors and
PR consultants.
A good relationship with key
suppliers
is
essential
to
ensure timely supplies so
as to not interrupt mining
and processing.
Key advisors are essential
to ensure we maintain good
governance in all areas.
Regular
communication
takes place with all key
suppliers and advisors.
The
Group
has
not
experienced
any
problems with supplies or
corporate
governance
issues during the year.
17
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Strategic Report
Section 2, Principal decisions by the Board during the period.
We define principal decisions as both those that have long-term strategic impact and are material to the Group, but
also those that are significant to our key stakeholder groups. In making the following principal decisions, the Board
considered the outcome from its stakeholder engagement, the need to maintain a reputation for high standards of
business conduct and the need to act fairly between the members of the Group:
The Board considers that the principal decisions made in 2021 were:
a)
Fund raising in March 2021
The Board decided to raise further equity funding in March 2021, totalling £1.5 million before expenses.
b)
Issue on £1.61m Convertible Loan Notes
The Board decided to raise £1.61m through issuing Convertible Loan Notes to The Teichmann Group.
In making the above principal decisions, the Directors believe that they have considered all relevant stakeholders,
potential impact and conflicts, the Company’s business model and its long-term strategic objectives, and have acted
accordingly to promote the success of the Company for the benefit of its stakeholders as a whole. We do not believe
that any stakeholders have been affected detrimentally by these decisions.
The Strategic Report has been approved
By order of the board
Michael Houston
Executive Chairman
30 June 2022
18
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Board of Directors
Michael Houston - Executive Chairman, aged 70
Michael Houston is a mining veteran with over 30 years' experience in Africa having worked with companies
including Anglo American (Executive roles), Shanta Gold (CEO), and Zimplats Holdings (CEO/COO). He has also
worked on a consultancy basis supporting a number of companies with various project reviews and due diligence.
David Facey - Finance Director, aged 59
David is a Fellow of the Institute of Chartered Accountants of England and Wales and has over 20 years' experience
in Corporate Finance and Equity Capital Markets. After working at PwC, David spent 10 years at HSBC Investment
Bank, where he specialised in raising funds in the UK for companies all over the world, particularly in the EMEA
region.
Throughout his career David has advised governments, large corporates and smaller enterprises on public fund
raising, private fund raising, mergers and acquisitions. In addition, David was a founding partner in SP Angel, an
investment banking boutique specialising in advising SMEs on raising funds in the London market, both public and
private.
Tim Leslie - Non-Executive Director, aged 55
Tim Leslie has worked in the financial markets for over 25 years. He joined Paribas in 1986 and has since worked for
JPMorgan, HSBC and then at Donaldson Lufkin & Jenrette (“DLJ”). In 2000, DLJ was bought by Credit Suisse and
Tim left to join the hedge fund Moore Capital Management LLC as a portfolio manager.
In 2003 Tim launched a new fund at Moore Capital, the Moore Credit Fund, for which he was the Chief Investment
Officer. Tim left Moore Capital in 2008 and launched James Caird Asset Management LLP with assets under
management of US$3.6bn as at launch. In 2011, Tim founded JCAM investments Ltd to run a family office and make
longer term investments.
Rob Croll - Non-Executive Director, aged 70
Rob is a Mining Engineer with some 46 years experience in the mining industry. During this period he has held a
number of senior executive and consulting positions, both within the Corporate environment and as an Independent
Consultant. He has also had exposure to the financial markets. Rob was the Lead Independent Non-Executive
Director for Resource Generation Limited, until his resignation in Q1 2022.
Gary Teichmann - Non-Executive Director, aged 55
Gary was appointed on 20 September 2021. He is Executive Chairman of the Teichmann Group and a seasoned
professional in the mining, construction and agriculture sectors in Africa. As a co-founder of the Teichmann Group,
he has been an instrumental force in the growth of the business.
19
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
The Board of BlueRock Diamonds plc (the “Company” or “BlueRock”) fully supports good corporate governance and
recognises that it enhances its decision-making processes by improving the success of the Company and increasing
shareholder value over the medium to long-term.
BlueRock currently complies with the principles of the Quoted Companies Alliance Corporate Governance Code (the
“QCA Code”) to the extent that the Directors consider it appropriate, having regard to the Company’s size, board
structure, nature of operations and available resources.
The QCA Code identifies ten principles to be followed in order for companies to deliver growth in long term
shareholder value, encompassing and efficient, effective and dynamic management framework accompanied by
good communication to promote confidence and trust. The sections below set out the ways in which the Company
applies the ten principles of the QCA Code in support of the Company’s medium to long-term success, together with
any areas of non-compliance.
The 10 principles are as follows:
1)
establish a strategy and business model which promote long-term value for shareholders
2)
seek to understand and meet shareholder needs and expectations
3)
take into account wider stakeholder and social responsibilities and their implications for long-term success
4)
embed effective risk management, considering both opportunities and threats, throughout the organisation
5)
maintain the board as a well-functioning, balanced team led by the chair
6)
ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
7)
evaluate board performance based on clear and relevant objectives, seeking continuous improvement
8)
promote a corporate culture that is based on ethical values and behaviours
9)
maintain governance structures and processes that are fit for purpose and support good decision-making by the
board
10)
communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and
other relevant stakeholders.
Principle 1
Business Model and Strategy
Our business model is to acquire and develop under exploited mining opportunities in sub-Saharan Africa, initially in
South Africa.
Our short to medium term strategy is to concentrate on our existing asset, the Kareevlei Diamond Mine (“Kareevlei”)
in the Kimberley region of South Africa, in order to establish its long-term profitability. This will involve developing a
multi-pit mining operation to maximise volume, grade and de-risk this key aspect of the business. To date KV1 and
KV2 have been combined into one larger more effective opencast pit and test mining completed on KV5.
Management with the completion of a Resource upgrade in early 2021, will complete an “economic life of mine
assessment on all 5 pipes in 2022 with the objective to setting a long term life of mine plan to fully exploit the
Resource.
Once we have achieved our short to medium term strategy with the expansion/optimisation of our operations at
Kareevlei, we will seek other mining opportunities.
Our expertise is in open cast mining and processing and we intend to continue to concentrate our activities on open
cast mining although in the longer term, if economically advantageous, we may consider expanding our operations
beyond open cast mining. We are unlikely to expand our operation into alluvial diamond mining.
Principle 2
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communications and having a constructive dialogue with both its
institutional and private shareholders.
20
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
The Executive Chairman and Finance Director are principally responsible for shareholder liaison and have regular
dialogue with investors in order to develop an understanding of their views.
The Company encourages all shareholders to attend its Annual General Meeting where they can meet and question
the Directors and express ideas or concerns. In addition, the Company regularly invites shareholders to submit
questions to and participate in shareholder calls and video interviews via Interactive Investor, both of which are
available on the Company’s website. The Directors undertake presentations and roadshows to institutional investors
as appropriate. In addition, shareholder communication is answered, where possible or appropriate, by Directors or
the Company’s Financial PR advisors, St Brides Partners Ltd, or the Company’s Nominated Adviser and broker, SP
Angel Corporate Finance LLP.
Principle 3
Stakeholder and Social Responsibilities
The Board recognises that the Company’s continued growth and long-term success is largely reliant on its relations
with its stakeholders, both internal (employees and shareholders) and external (customers, suppliers, business
partners and advisors etc).
The Company maintains a regular dialogue with all of its stakeholders, including suppliers of key materials and
services and its regulator in South Africa, the Department for Mineral Resources and Energy.
The Company works closely with its advisors to ensure it operates in conformity of its listing regulations as well as
the social, legal, religious and cultural requirements of the countries in which it operates.
As a Company, we take our corporate social responsibilities very seriously, particularly as we operate in area of high
unemployment.
The Company employs a dedicated person to fulfil its social responsibility policies which involve
supporting facilities that improve the quality of life of the community local to our mine. The Board is fully supportive of
the assistance the Company provides to the local community.
Principle 4
Risk Management
As a business operating in an emerging market there is clearly an elevated risk which is balanced by potentially
greater rewards. The Board is mindful of and monitors both its corporate risks and mining risk which are set out in the
risk report on pages 11 to 13.
Currently, we operate only one mine but, if and when the Company opens up additional mines, it will monitor mining
risk on a mine by mine basis as each mine will present its own unique risks. Mining risks are categorised by both
probability and impact and appropriate measures identified to monitor and mitigate any potential impact are
monitored through the life cycle of the mine as existing risks change and new risks appear. Mining risks and
mitigation are a key part of regular discussions in management meetings.
The Company’s corporate risks, risk monitoring, and risk management procedures are regularly reviewed by the
Board and updated as necessary. The risk report is set out on pages 11 to 13.
21
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
Principle 5
Board Structure
The Plc Board contains a balance of Executive and Non-Executive Directors, including an Executive Chairman who
is responsible for dealing with the strategic direction and long-term success of the Company. The Board consider that
its appropriate to have an Executive Director serving as the Chair, due to the size of the company, and this will
change on the appointment of a Chief Executive Officer, when considered appropriate. The Board meets at least
every month or at any other time deemed necessary for the good management of the business and at a location
agreed between the Board members. The Board currently consists of three Non-Executive Directors and two
Executive Directors. Tim Leslie and Rob Croll are the independent Non-Executive Directors. Gary Teichmann is a
Non-Executive Director but not considered to be independent due to his interest in the Teichmann Group
shareholding. It is the Board's intention to revert to a Non-Executive Chairman when considered appropriate.
As announced on 16 May 2019, Teichmann Company Limited (“TCL”), an investment company controlled by trusts
connected with the owners of BlueRock’s strategic partner, Teichmann Group,
retains a right to appoint a non-
executive director to the Board whilst it maintains a holding over 10%. Gary Teichmann was appointed on 20
September 2021 as the TCL appointee. Gary is not considered to be an independent director.
TCL has entered into a Relationship Agreement with the Company which, among other matters, governs
Teichmann's ability to make changes to the Company's board composition.
The CEO role is currently carried out by the Executive Chairman and the Company will appoint a CEO when the
Board considers necessary.
The Executive Board members consist of the Chairman and the Finance Director.
Non-Executive Directors are required to commit to up to 4 days a month. The Executive Chairman and Finance
Director are required to commit to up to 10 days a month. The monthly commitment varies depending upon the
demands of the Company.
In 2021 the Board held 15 formal Board meetings. Attendance at these meetings were as follows:
Director
Meetings attended*
% attended
Mike Houston
15/15
100
Tim Leslie
14/15
93
David Facey
15/15
100
AT Simbanegavi
15/15
100
Rob Croll
7/8
88
Gary Teichmann
4/5
80
* The number of meetings are adjusted for Rob Croll and Gary Teichmann to indicate the number of meetings held whilst they
were serving as Directors.
The Audit Committee met twice in the period to which all committee members were in attendance. The Remuneration
Committee and Nomination Committee met twice in the year at which all committee members were present, however
given the size of the Company a number of remuneration and audit committee matters are covered in the course of
normal Board meetings.
22
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
Principle 6
Board Composition and Experience
The Company operates in a complex and challenging technological and geographical area and the Board is mindful
that in order to deal effectively with the challenges of the business and to maximise its growth opportunities it has to
incorporate a broad range of skills and diversity.
The Board considers that all Directors have the relevant professional and technical skills to ensure that they are able
to fulfil their duties. Mike Houston, Executive Chairman has extensive experience in the natural resources sector
having been Chairman and CEO of Zimplats Holdings (ASX) and CEO of Shanta Gold (AIM), Tim Leslie has
operated in the financial sector for many years and is a FCA regulated person, and David Facey is a Fellow of the
Institute of Chartered Accountants and has many years of investment banking experience. Rob Croll is a Mining
Engineer with some 46 years’ experience in the mining industry and has held a number of senior executive and
consulting positions, both within the Corporate environment and as an Independent Consultant. Gary Teichmann is
Executive Chairman of the Teichmann Group and a seasoned professional in the mining, construction and agriculture
sectors in Africa. As a co-founder of the Teichmann Group, he has been an instrumental force in the growth of the
business.
The Board is assisted by the CEO of Kareevlei. Meiring Burger is an internationally experienced mining industry
professional with more than 25 years' technical and managerial experience combined with applicable commercial
acumen and a track record of delivering value safely and responsibly. He has led major, ultra-class open pit
operations up to 150Mtpa with labour forces of in excess of 6,000 people in the Southern African region, and has
solid experience in all aspects of exploration, mining operations, mine valuation and environmental management.
Rob Croll and Tim Leslie, notwithstanding his holding of £231,250 in a loan note (see note 16), are considered to be
Independent Directors. Gary Teichmann is considered to be independent of the Executive Team.
The current composition of the Board may be found on page 19 of the Annual Report.
The Board and its Committees also seek external expertise and advice when required in particular from specialist
mining and engineering consultants.
Principle 7
Board Evaluation
The Board considers evaluation of its performance and that of its Committees and individual Directors to be an
integral part of corporate governance to ensure it has the necessary skills, experience and abilities to fulfil its
responsibilities. The goal of the Board evaluation process is to identify and address opportunities for improving the
performance of the board and to solicit honest, genuine and constructive feedback.
The Board considers the evaluation process is best carried out internally given the Company’s current size, however
the Board will keep this under review and may consider independent external evaluation reviews in due course as the
Company grows.
The last Board performance evaluation was carried out in Q3 2019, with the next evaluation scheduled to take place
in Q3 2022. No evaluation took place in 2021.
23
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
Board Evaluation:
Review
Period
Board composition in terms of skills, experience and
balance
Annually or as required
Board cohesion
Annually or as required
Board operational effectiveness and decision making
Annually
Board
meetings
conduct
and
content
and
quality
of
information
Annually or as required
The Board’s engagement with shareholders and other
stakeholders
Annually
The corporate vision and business plan
Annually
Committee Evaluation:
Board
Committees’
composition
in
terms
of
skills,
experience and balance
Annually or as required
Board Committees’ Terms of Reference
Annually
Board Committees’ effectiveness
Annually
Individual director evaluation:
Executive Director performance in executive role
Annually
Executive Director performance and contribution to the
Board
Annually
Non-Executive Director performance and contribution to
the Board
Annually
Non-Executive Director’s independence and time served
Annually
All
Directors’
attendance
at
Board
and
Committee
meetings
Annually
The Board as a whole, or in part as appropriate, undertakes the evaluation process aided by the Chairman, CEO and
independent Non-Executive Directors or external advisors, as necessary. The Chairman is responsible in ensuring
the evaluation process is ‘fit for purpose’, as well as dealing with matters raised during the process. The Chairman
will keep under review the frequency, scope and mechanisms for the evaluation process and amend the process as
required.
Where deficiencies are identified these are addressed in a constructive manner. Where necessary individual
Directors are offered mentoring and training. If deficiencies are identified within the Board as a whole, then changes
or additions to the Board will be considered in conjunction with the Nominations Committee.
The evaluation process are focused on the improvement of Board performance, through open and constructive
dialogue and the development and implementation of action plans.
Succession planning is a vital task for boards and the management of succession planning represents a key
measure of the effectiveness of the Board and a key responsibility of both the Nominations Committee and wider
Board.
Principle 8
Corporate Culture
The Board recognises that a corporate culture based on sound ethical values and behaviours is an asset and
provides competitive advantages. The Company is mindful that respect of individual cultures is critical to corporate
success and endeavours to conduct its business in an ethical, professional and responsible manner, treating our
employees, customers, suppliers and partners with equal courtesy and respect at all times. The Company is also
committed to providing a safe environment for its staff and all other parties for which the Company has a legal or
moral responsibility in this area.
24
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
In order to ensure that these values are continually applied and adopted, the Board seeks to recruit the best talent
available and create a diverse talent pool.
The Board has implemented a Code for Directors' and employees' dealings in securities which it considers to be
appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the
Market Abuse Regulation.
Principle 9
Governance Structure
The Board sets the Company’s strategic aims and ensures that necessary resources are in place in order for the
Company to meet its objectives. All members of the Board take collective responsibility for the performance of the
Company and all decisions are taken in the interests of the Company. Whilst the Plc Board has delegated the
operational management of the Company via the Operational Board to the Executive Directors and other senior
management, there are detailed specific matters subject to decision by the Plc Board of Directors. These include
acquisitions and disposals, joint ventures and investments, projects of a capital nature and all significant contracts.
The Non-Executive Directors have a particular responsibility to constructively challenge the strategy proposed by the
Executive Directors; to scrutinise and challenge performance; to ensure appropriate remuneration and that
succession planning arrangements are in place in relation to Executive Directors and other senior members of the
management team. The senior executives enjoy open access to the Non-Executive Directors.
The Chairman is responsible for leadership of the Board and ensuring its effectiveness on all aspects of its role. The
Chairman with the assistance of the Chief Executive Officer sets the Board’s agenda and ensures that adequate time
is available for discussion of all agenda items, in particular strategic issues.
The Chairman promotes a culture of openness and debate by facilitating the effective contribution of Non-Executive
Directors in particular and ensuring constructive relations between Executive and Non- Executive Directors. The
Chairman is also responsible for ensuring that the Directors receive accurate, timely and clear information.
Given the current absence of a CEO, the Chairman is also responsible for running the business, implementing the
decisions and policies of the Board and for the overall operational performance of the Company and ensuring the
Company’s communication with shareholders is timely, informative and accurate with due regard to commercial
sensitivity and regulatory requirements.
The Finance Director is responsible for the Company’s finances and the operations and technical requirements of the
Company. The role of Company Secretary is undertaken by the Finance Director. Whilst the CEO of Kareevlei is not
a member of the Board, he is invited to Board Meetings and is responsible for the day to day running of the
Company's main asset, Kareevlei.
The Non-Executive Directors are appointed not only to provide independent oversight and constructive challenge to
the Executive Directors but are also chosen to provide strategic advice and guidance. This is particularly important
given the Company operates overseas in challenging markets.
All Directors are able to allocate sufficient time to the Company to discharge their duties. There is a rigorous and
transparent procedure for the appointment of new directors to the Board. The search for Board candidates is
conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of
diversity on the Board.
The Board is responsible for ensuring that a sound system of internal control exists to safeguard shareholders’
interests and the Company’s assets. It is responsible for the regular review of the effectiveness of the systems of
internal control. Internal controls are designed to manage rather than eliminate risk and therefore even the most
effective system cannot provide assurance that each and every risk, present and future, has been addressed. The
key features of the system that operated during the year are described below.
The Board has established the following committees to assist with oversight and governance:
25
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
Audit Committee
The Audit Committee consists of Tim Leslie (chair), Rob Croll and Gary Teichmann. It oversees and reviews the
Company’s financial reporting and internal control processes, its relationship with external auditors and the conduct
of the audit process together with its process for ensuring compliance with laws, regulations and corporate
governance. It is composed entirely of Non-Executive Directors but other individuals such as the Company’s CFO,
Chairman and CEO of Kareevlei may be invited to attend all or any part of any meeting when deemed appropriate.
The Company’s external auditors are invited to attend meetings of the Committee on a regular basis.
There is currently no internal audit function in view of the size of the Company, although this is kept under annual
review.
The Audit Committee has been involved with the planning of the audit for the year ended December 2021 and has
discussed the audit findings with the Company’s external auditors.
Remuneration Committee
The Remuneration Committee consists of Tim Leslie (chair), Rob Croll and Gary Teichmann. The Remuneration
Committee is responsible for establishing a formal and transparent procedure for developing policy on executive
remuneration and to set the remuneration packages of individual Directors. This includes agreeing with the Board the
framework for remuneration of the Executive Chairman and CFO and such other members of the executive
management of the Company as it is designated to consider. It is furthermore responsible for determining the total
individual remuneration packages of each Director including, where appropriate, bonuses, incentive payments and
share options.
The Committee’s policy is to provide a remuneration package which will attract and retain Directors and Management
with the ability and experience required to manage the Company and to provide superior long-term performance. It is
the aim of the Committee to reward Directors competitively and on the broad principle that their remuneration should
be in line with the remuneration paid to Senior Management of comparable companies. In addition to paying fees in
cash, fees have been paid also in shares and share options as a method of preserving cash within the business.
Nomination Committee
The Nominations Committee comprises Tim Leslie (chairman), Rob Croll and Gary Teichmann. The Nominations
Committee leads the process for Board Appointments and is responsible for review of the board size, structure and
composition (both executive and non-executive) including any potential new applicants to ensure the Board contains
the right balance of skills, knowledge and experience to manage and grow the business. The Nominations
Committee will make recommendations to the Board on any proposed or suggested changes to the Board with a
view on the leadership needs of the business including succession planning.
Sustainability Committee
The Company does not consider it appropriate to establish a separate Sustainability Committee due to its current
size, and these matters are considered by the whole Board at Board Meetings. The Board is committed to operating
in a sustainable manner and considers how to extract responsibly, waste less, use safer processes, incorporate new
sustainable technologies, promote the improved wellbeing of local communities, curb emissions, and improve
environmental stewardship.
The Board recognises the need to promote responsibility for the environment within the organisation and
communicate and implement this policy at all levels within the workforce.
The Board has not introduced KPIs for this aspect at the present time, but this remains under consideration.
26
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
Principle 10
Stakeholder Communication
The Board is committed to maintaining good communication and having constructive dialogue with all of its
stakeholders, including shareholders, providing them with access to information to enable them to come to informed
decisions about the Company. The Investors section of the Company’s website provides all required regulatory
information as well as additional information shareholders may find helpful including: information on Board members,
advisors and significant shareholdings, a historical list of the Company’s Announcements, its corporate governance
information, the Company’s publications including historic Annual Reports and notices of Annual General Meetings,
together with share price information.
Results of shareholder meetings and details of votes cast will be publicly announced through the regulatory system
and displayed on the Company’s website with suitable explanations of any actions undertaken as a result of any
significant votes against resolutions.
Audit Committee Report
An important part of the role of the Audit Committee is its responsibility for reviewing the effectiveness of the Group’s
financial reporting, internal control policies, and procedures for the identification, assessment and reporting of risk.
The Committee devotes significant time to their review and further information on the risk management and internal
control systems is provided within the Strategic Report.
A key governance requirement of the Group’s financial statements is for the report and accounts to be fair, balanced
and understandable. The co-ordination and review of the Group-wide input into the Annual Report and Accounts is a
sizeable exercise performed within an exacting timeframe. It runs alongside the formal audit process undertaken by
external Auditors and is designed to arrive at a position where initially the Audit Committee, and then the Board, is
satisfied with the overall fairness, balance and clarity of the document underpinned by the following:
•
detailed guidance issued to contributors at operational levels;
•
a verification process dealing with the factual content of the reports;
•
thorough review undertaken at different levels that aim to ensure consistency and overall balance; and
•
a comprehensive review by the senior management team.
An essential part of the integrity of the financial statements are the key assumptions and estimates or judgements
that have to be made. The Committee reviews key judgements prior to publication of the financial statements at the
full and half year, as well as considering significant issues throughout the year. In particular, this includes reviewing
any materially subjective assumptions within the Group’s activities to enable an appropriate determination of asset
valuation and provisioning. The Committee reviewed and was satisfied that the judgements exercised by
Management on material items contained within the Annual Report were reasonable. The Committee concluded that
the estimates about future production, sales volumes, diamond prices, grades, operating costs and capital
expenditures used in the review were reasonable.
The Committee focussed on Management’s assessment of Going Concern with respect to the Group’s cash position
and its commitments for the next 12 months. The Committee considered the potential uncertainties relating the
possibility that the new funding arrangements will not be approved. The Committee looked at various scenarios to
test the management’s views and concluded that the wording contained in the Going Concern section of the
Directors’ Report was appropriate.
The Audit Committee has considered the Group’s internal control and risk management policies and systems, their
effectiveness and the requirements for an internal audit function in the context of the Group’s overall risk
management system. The Committee is satisfied that the Group does not currently require an internal audit function.
The Committee has recommended to the Board that shareholders support the re-appointment of the Auditors at the
2022 AGM.
27
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Corporate Governance
Remuneration committee report
The Remuneration Committee (“Committee”) has been engaged on all matters of corporate remuneration.
Over the past year and into 2022, the Committee has considered the following matters:
•
Executive compensation including base compensation, bonus and equity incentives;
•
Non-Executive Directors' remuneration
As a result of the Remuneration Committee’s deliberations it has been agreed that share based incentive schemes
should be reserved for the executive team only and that Non-Executive Directors should be paid a market rate for
their services which hitherto have been provided largely for no payment.
The Remuneration Committee will meet formally in Q3 2022 in order to approve remuneration for the following year.
The annual remuneration for the Directors is noted in the Directors’ report.
28
BlueRock Diamonds Plc
(Registration Number 08248437)
Consolidated and Separate Annual Financial Statements for the year ended 31 December 2021
Directors' Report
The Directors present their report for the year ended 31 December 2021.
1. Review of activities
Main business and operations
The principal activity of the Group is diamond mining in the Kimberley region of South Africa. There were no major
changes herein during the year.
The operating results and consolidated statement of financial position of the Group are fully set out in the attached
financial statements together with a review of the Group's performance and prospects contained in the chairman's
statement.
2. Going concern
The Group and parent Company have prepared forecasts covering the period to 31 December 2023. Appropriate
diligence has been applied by the Directors who believe that the forecasts are prepared on a realistic basis using the
best available information.
As announced on 1 June 2022, the impact of the unusually high rainfall in the first five months of 2022 has resulted in
a significant reduction in production compared to our forecasts, resulting in a severe impact on the Group’s cash
resources, leaving the Group and parent Company requiring additional funding in the immediate future, whilst it
completes its mining development.
Discussions are ongoing with an existing shareholder for BlueRock to issue a new Loan Note (“LN”) for £1.6m as well
as the provision of debt funding facility to Kareevlei for up to ZAR30m to be drawn as and when required. The
forecasts indicate that the combination of the LN and debt funding facility will be sufficient to meet the Group’s cash
requirements over the going concern period, however, until the LN has been issued and the debt funding facility
finalised, there remains an uncertainty that this financing will be available.
After review of the uncertainty, the Directors have a reasonable expectation, based on discussions and
correspondence with the existing shareholder, that the additional funding will be received and the Group and parent
Company will then have adequate resources to continue in operational existence for the foreseeable future, based on
its assessment of the forecasts, principal risks and uncertainties and mitigating actions considered available to the
Group and parent Company in the event of downside scenarios. Accordingly, the Directors continue to adopt the
going concern basis in preparing the financial statements.
However, at the date of approval of these financial statements, uncertainties relating to completing the issue of the
funding arrangements indicate the existence of a material uncertainty which may cast significant doubt about the
Group and parent Company's ability to continue as a going concern, and therefore it may be unable to realise its
assets and discharge its liabilities in the normal course of business.
The financial statements do not include the adjustments that would result if the Group and parent Company were
unable to continue as a going concern.
3. Events after reporting date
Refer to note 28 of the Consolidated Financial Statements for a detailed discussion of events that occurred after the
reporting date
29
BlueRock Diamonds Plc
(Registration Number 08248437)
Consolidated and Separate Annual Financial Statements for the year ended 31 December 2021
Directors' Report
4. Directors' interest in contracts
The holdings of the Directors and their related parties in the share capital of the Group are as follows:
Number of
ordinary
shares
Percentage of
share capital
Number of
ordinary
shares subject
to share
options
Percentage of
share capital
subject to
share options
T Leslie
21,274
0.10%
-
0.00%
D Facey
112,285
0.52%
181,564
0.83%
M Houston
144,285
0.66%
279,304
1.28%
AT Simbanegavi (former director)
24,285
0.11%
363,127
1.67%
RC Croll
-
0.00%
-
0.00%
G Teichmann*
-
0.00%
-
0.00%
* G Teichmann has an interest in the Company through his shareholding in the Teichmann Group.
Other than as disclosed above, none of the Directors, nor any persons connected with them, is interested in any
related financial product (as defined in the AIM Rules) whose value in whole or in part is determined directly or
indirectly by reference to the price of the ordinary shares, including a contract for difference or a fixed odds bet.
There are no outstanding loans granted or guarantees provided by any member of the Group to or for the benefit of
any of the Directors, nor are there any outstanding loans or guarantees provided by the Directors to or for the benefit
of the Group, other than what is disclosed in note 27.
Other than as disclosed in this Annual Report and Accounts, no Director has any interest, whether direct or indirect,
in any transaction which is or was unusual in its nature or conditions or significant to the business of the Group taken
as a whole and which was effected by the Group during the current or immediately preceding financial year, or during
any earlier financial year and which remains in any respect outstanding or unperformed.
In the case of those Directors or key Managers who have roles as Directors of companies which are not a part of the
Group, although there are no current conflicts of interest, it is possible that the fiduciary duties owed by those
Directors to companies of which they are Directors from time to time may give rise to conflicts of interest with the
duties owed to the Group. Except as expressly referred to in this Annual Report and Accounts, there are no potential
conflicts of interest between the duties owed by the Directors to the Group and their private duties or duties to third
parties.
5. Dividend
No dividend was declared or paid to shareholders during the year.
30
BlueRock Diamonds Plc
(Registration Number 08248437)
Consolidated and Separate Annual Financial Statements for the year ended 31 December 2021
Directors' Report
6. Directors
The Directors of the Company during the year and up to the date of this report are as follows:
Nationality
Appointment/
Resignation
date
MJ Houston (Executive Chairman)
British
4 September 2013
DA Facey (Chief Financial Officer)
British
1 December 2017
TG Leslie (Non-Executive Director)
British
2 November 2018
AT Simbanegavi (Former Chief Operating Officer)
Zimbabwean
Resignation
date:
1
March
2022
RC Croll (Non-Executive Director)
British
21 May 2021
G Teichmann (Non-Executive Director)
South African
20 September 2021
7. Financial risk management
Details of the Group's financial risk management is set out in note 29.
8. Significant shareholders as at the date of this report
Other than as set out below, the Group is not aware of any holding in the Group’s ordinary share capital which
amounts to 3 per cent or more of the Group’s issued share capital:
Holding
Shares which could be
acquired through other
financial instruments
Name
Number of
ordinary
shares
Percentage of
share capital
Number of
ordinary
shares
Percentage of
share capital
Teichmann Company Limited and associated
companies
3,641,271
16.72%
6,465,247
29.69%
Binvic (Pty) Ltd
2,682,487
12.32%
-
0.00%
Spreadex Limited
825,794
3.79%
475,700
2.18%
Edale Europe Absolute Master Fund
1,167,500
5.36%
-
0.00%
The Takeover Panel executive has opined that a concert party exists which comprises of the following members with
a current aggregate shareholding of 16.72%. Details of which are:
Holding
Name
Number of
ordinary
shares
Percentage of
share capital
Teichmann Group:
Teichmann Company Limited
2,480,262
11.39%
T-Three Drilling (Mauritius) Limited
971,624
4.46%
Gold Finger Investments Ltd
26,000
0.12%
C Holton
65,354
0.30%
B Nicolay
43,612
0.20%
A McKinney
54,419
0.25%
M Houston
144,285
0.66%
Total
3,785,556
17.38%
31
BlueRock Diamonds Plc
(Registration Number 08248437)
Consolidated and Separate Annual Financial Statements for the year ended 31 December 2021
Directors' Report
M Houston is not considered to be part of the Teichmann Group, but is considered part of the concert party.
9. Auditor
BDO LLP were the independent auditors for the year under review.
10. Annual General Meeting
The Group will send out a Notice to shareholders of its Annual General Meeting in due course.
11. Directors' and Officers' insurance
The Group maintains insurance cover for all Directors and Officers of Group Companies against liabilities which may
be incurred by them while acting as Directors and Officers.
12. Directors' remuneration
Details of the remuneration of the Directors for the financial year are set out below:
MJ Houston - received fees of £79,167 (2020: £59,500)
TG Leslie - received fees of £20,833 (2020: £19,167)
D Facey - received fees of £81,000 (2020: £59,000)
AT Simbanegavi - received fees of £30,000 (2020: £27,500)
RC Croll - received fees of £9,375 (2020: £nil)
G Teichmann - received no remuneration for the period
No new share options were granted during the financial year.
13. Directors' responsibility statement
Directors' responsibility
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the
Directors have elected to prepare the Group and Company Financial Statements in accordance with UK adopted
international accounting standards. 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 period. The Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for companies trading securities on AIM.
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 with UK adopted international accounting standards and in relation to the
Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006,
subject to any material departures disclosed and explained in the Financial Statements; and,
•
prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
32
BlueRock Diamonds Plc
(Registration Number 08248437)
Consolidated and Separate Annual Financial Statements for the year ended 31 December 2021
Directors' Report
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.
Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a
website. Financial statements are published on the Company's website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in
other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.
14. Statement of disclosure to auditor
So far, as each person who was a Director at the date of approving this report is aware, there is no relevant audit
information of which the Company’s auditor is unaware. Additionally, the Directors individually have taken all the
necessary steps that they ought to have taken as Directors in order to make themselves aware of all relevant audit
information and to establish that the Company’s auditor is aware of that information.
On behalf of the Board
Michael Houston
Executive Chairman
30 June 2022
33
Independent auditor’s report to the members of BlueRock
Diamonds plc
Opinion on the financial statements
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 2021 and of the Group’s loss for the year
then ended;
•
the Group financial statements have been properly prepared in accordance with UK
adopted international accounting standards;
•
the Parent Company financial statements have been properly prepared in accordance
with UK adopted international accounting standards 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.
We have audited the financial statements of BlueRock Diamonds plc (the ‘Parent Company’) and
its subsidiaries (the ‘Group’) for the year ended 31 December 2021 which comprise the
Consolidated and Company Statements of Financial Position, Consolidated Statement of Profit
or Loss and Other Comprehensive Income, Consolidated Statement of Changes in Equity –
Group, Statement of Changes in Equity – Company, Consolidated and Company Statements of
Cash Flows and notes to the financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable
law and UK adopted international accounting standards and, as regards the Parent Company
financial statements, as applied in accordance with the provisions 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 believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remain 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.
Material uncertainty related to going concern
We draw attention to note 1 in the financial statements which highlights that the Group and Parent
Company’s liquidity is dependent on the completion of issue of a new loan note as well as the
provision of a debt funding facility, both with an existing shareholder, to enable it to continue as a
going concern. As stated in note 1, these events or conditions, along with other matters as set
out in note 1, indicate that a material uncertainty exists that may cast significant doubt on the
Group and Parent Company’s ability to continue as a going concern. Our opinion is not modified
in respect of this matter.
In auditing the financial statements, we have concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate. We have
highlighted going concern as a key audit matter based on our assessment of risk and the effect
on our audit strategy.
34
Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to
continue to adopt the going concern basis of accounting and in response to the key audit matter
included the following testing:
As part of our site visit, we inspected and discussed the progress of the ramp up of the
new plant with the Directors and key operational Management on-site at the mine in South
Africa and the Audit Committee and their assessment of any future risks and
uncertainties.
We obtained and critically assessed the Director’s base case cash flow forecasts, which
had been approved by the Board, and challenged the Director’s assumptions in respect
of diamond process, production, operating costs and capital expenditure. In doing so, we
considered factors such as past performance, trading to date in H1 FY2022 and external
market data.
We evaluated the forecast production levels against post year end actuals and
considered the impact of recent plant upgrades on the achievability of forecasts.
We reviewed the Director’s reverse stress testing analysis to determine the point at which
liquidity breaks and considered whether such scenarios, including significant reductions
in diamond prices, sustained production interruption or delays to sale tenders, were
possible.
We inspected correspondence regarding the Heads of Terms for the proposed loan
facility from one of the Company’s shareholders. We made inquiries of Management,
Directors and the Audit Committee as to the basis upon which they anticipate such
funding being approved by the shareholders and receipt of regulatory approvals, which
may be required.
We considered the adequacy of the disclosure within the financial statements relating to
the Directors’ assessment of the going concern basis of preparation in light of our
understanding of the Group and Parent Company obtained throughout the audit.
Our responsibilities and the responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report.
Overview
Coverage
100% (2020: 100%) of Group profit before tax
100% (2020: 100%) of Group revenue
100% (2020: 100%) of Group total assets
Key audit matters
2021
2020
Going concern
Yes
Yes
Carrying value of mining
assets
Yes
Yes
Materiality
Group financial statements as a whole
£118,000 (2020: £58,000) based on 1.5% (2020: 1.5%) of
revenue.
35
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including the Group’s system of internal control, and assessing the risks of material misstatement
in the financial statements. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Whilst BlueRock Diamonds plc is a Company registered in England and listed on the Alternative
Investment Market in the UK, the Group’s principal operations are located in South Africa. In
approaching the audit, we considered how the Group is organised and managed. We assessed
there to be two significant components, being the Parent Company and Kareevlei Mining
Proprietary Limited in South Africa, which holds the Group’s mining operations. The remaining
components were considered non-significant to the Group audit and the Group audit team
performed analytical review procedures in respect of these components.
A full scope audit for Group reporting purposes were performed on the significant component
Kareevlei Mining Proprietary Limited by a local BDO member firm. The Group audit team
performed a full scope audit of the Parent Company, specific procedures over key risk areas for
the significant component including the Key Audit Matters detailed above and performed the audit
of the consolidation.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of involvement needed
in order to be able to conclude whether sufficient appropriate audit evidence has been obtained
as a basis for our opinion on the Group financial statements as a whole. Our involvement with
component auditors included the following:
We held planning meetings with the component auditors and local management at
Kareevlei Mining Proprietary Limited.
Detailed Group reporting instructions were sent to the component auditors, which
included the materiality levels, significant risks and significant areas to be covered by
their audit, and set out the information to be reported to the Group team.
We received and reviewed Group reporting submissions and performed a review of the
component auditors’ file. Our review was performed remotely using our online audit
software.
We held clearance meetings with the component auditors and local management to
discuss significant audit and accounting issues and judgements.
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 period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) that we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in
the audit, and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters. In addition to the matter described in
the Material uncertainty related to going concern section of our report, we identified the following
matter as a key audit matter.
36
Key audit matter
How the scope of our audit addressed the
key audit matter
Carrying
value of
mining
assets
Refer to
notes
3.1.5, 5,
6, and 7.
The Group’s mining assets, as
disclosed further in notes 5, 6
and 7 of the financial statements
represents the Group’s significant
assets as at 31 December 2021.
Management and the Board are
required to assess whether there
are any potential impairment
indicators which would indicate
that the carrying value of the
assets at 31 December 2021
may not be recoverable. As
detailed in note 3.1.5, there are
judgements and inherent
uncertainties involved in
assessing the mining assets for
indicators of impairment.
Management have performed an
impairment indicator review
under applicable accounting
standards and have not identified
an indicator of potential
impairment.
We determined the carrying
value of mining assets to be a
key audit matter given the
significant judgements required
in respect of the assessment of
indicators of impairment.
We reviewed and challenged Management’s
impairment indicator assessment and
confirmed it was performed in accordance
with relevant accounting standards in order to
determine whether there were any indicators
of impairment.
We obtained and reviewed Management’s life
of mine plan to confirm that significant
headroom existed over the asset carrying
value as part of our assessment of
impairment indicators. In performing our
procedures on Managements life of mine
plan:
We compared the current year
financial performance against budget
to identify potential impairment
indicators and to evaluate the
accuracy of Management forecasts.
Where performance was below
budget we considered the underlying
drivers and the extent to which they
impacted the quality of forward
estimates.
We compared the Group’s market
capitalisation at year end to its net
assets.
We reviewed the Competent
Person’s Report to support the
mineral resource included in the life
of mine plan and performed an
assessment of the independence,
objectivity and competence of the
expert.
As part of our review of the life of
mine plan, we evaluated the
appropriateness of key estimates and
assumptions used by Management,
including diamond pricing,
production, operating costs and
capital expenditure, against market
data and historical trends. We
reviewed Management’s sensitivity
analysis and performed additional
sensitivity analysis on key
assumptions such as diamond
pricing to confirm that the forecast
headroom is not sensitive to
37
reasonably possible changes in
assumptions.
Key observations:
We found Management’s judgements used in
their assessment of indicators of impairment
to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating
the effect of misstatements. We consider materiality to be the magnitude by which misstatements,
including omissions, could influence the economic decisions of reasonable users that are taken
on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed
materiality, we use a lower materiality level, 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.
Based on our professional judgement, we determined materiality for the financial statements as
a whole and performance materiality as follows:
Group financial statements
Parent company financial statements
2021
2020
2021
2020
Materiality
£118,000
£58,000
£70,800
£35,000
Basis for
determining
materiality
1.5% of
Revenue
1.5% of
Revenue
Capped at 60% of
Group materiality
Capped at 60%
of Group
materiality
Rationale for
the
benchmark
applied
We consider
revenue to be
the most
significant
determinant of
the Group’s
financial
performance
used by
shareholders
given the
expansion
project and the
Group’s
commercial
production not
yet stabilised.
We consider
revenue to be
the most
significant
determinant of
the Group’s
financial
performance
used by
shareholders
given the focus
on increasing
production.
Given the
assessment of the
components
aggregation risk.
Given the
assessment of
the
components
aggregation
risk.
Performance
materiality
£88,500
£43,500
£53,000
£26,250
Basis for
determining
performance
materiality
75% of
Materiality, set
after
considering a
75% of
Materiality, set
after
considering a
75% of Materiality,
set after
considering a number
of factors including
75% of
Materiality, set
after
considering a
38
number of
factors
including the
expected
value of known
and likely
misstatements
and
Management’s
attitude
towards
proposed
misstatements.
number of
factors
including the
expected value
of known and
likely
misstatements
and
Management’s
attitude
towards
proposed
misstatements.
the expected value of
known and likely
misstatements and
Management’s
attitude towards
proposed
misstatements.
number of
factors
including the
expected value
of known and
likely
misstatements
and
Management’s
attitude towards
proposed
misstatements.
Component materiality
We set materiality for each component of the Group based on a percentage of between 90% and
60% of Group materiality dependent on the size and our assessment of the risk of material
misstatement of that component. Component materiality ranged from £70,800 to £106,200 (2020:
£35,000 to £52,200). In the audit of each component, we further applied performance materiality
levels of 75% of the component materiality to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences
in excess of £2,400 (2020: £2,900). We also agreed to report differences below this threshold
that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the Annual Report and Financial Statements 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. Our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the
audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions
and matters as described below.
Strategic
report and
Directors’
report
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
39
the Strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and 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.
Matters on
which we are
required to
report by
exception
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’ responsibility statement, 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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is detailed below:
We obtained an understanding of the legal and regulatory frameworks that are applicable
for the Group and Parent Company and the industry in which it operates, and considered
the risk of acts by the Group and Parent Company that were contrary to applicable laws
and regulations, including fraud. We considered the significant laws and regulations to
40
be the Companies Act 2006, tax and legislation and the various Mining Regulations in
South Africa.
Based on our understanding we designed our audit procedures to identify non-
compliance with such laws and regulations impacting the Group and Parent Company.
Our procedures involved making enquiries of Management ,Directors and those charged
with governance to understand their awareness of any non-compliance of laws or
regulations, inquiring about the policies that have been established to prevent non-
compliance of laws or regulations by officers and employees for the Group and Parent
Company, inquiring about the Group and Parent Company’s methods of enforcing and
monitoring compliance with such policies and reviewing board minutes to identify any
instances of non-compliance.
We instructed the component auditors to undertake procedures in respect of the various
South African mining regulations.
We assessed the susceptibility of the Group’s financial statements to material
misstatement, including how fraud might occur by obtaining an understanding of the
controls that the Group has established to address risks identified by the entity, or that
otherwise seek to prevent, deter or detect fraud. We considered the significant fraud risk
areas to be in relation to revenue recognition and Management override of controls.
We made enquiries of Management, the Directors and the Audit Committee as to their
knowledge of any fraud, including suspected or alleged fraud.
In respect of the theft that was identified by Management post year end, as described in
note 3.1.9 we carried out the following audit procedures: we discussed the theft with
Management and obtained and reviewed Management’s assessment of the theft,
including the impact on the financial statements. In addition, we have reviewed the
disclosure in the financial statements.
We addressed the fraud risk in relation to revenue recognition, agreeing a sample of
revenue transactions to supporting documentation, including testing that revenue
transactions were recorded in the correct period.
We addressed the risk of management override of internal controls, including testing a
risk based selection of journals and evaluating whether there was evidence of bias in
Management’s estimates (Refer to the key audit matters’ section) that represented a
material misstatement due to fraud.
We also communicated relevant identified laws and regulations and potential fraud risks
to the component audit team and all engagement team members and remained alert to
any indications of fraud or non-compliance with laws and regulations throughout the audit.
In respect of the component auditors, we communicated specific procedures to be
performed in relation to testing the appropriateness of journal entries made throughout
the year by applying specific criteria to select journals which may be indicative of possible
irregularities and fraud and also by assessing the judgements made by Management
when making key accounting estimates and judgements, and challenging Management
on the appropriateness of these judgements. As part of our Group audit, we performed a
review of the component auditors’ file, which included the areas detailed above.
Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further removed non-compliance with laws
41
and regulations is from the events and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
Use of our report
This report is made solely to the 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.
Jill MacRae (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
30 June 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered
number OC305127).
42
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Consolidated and Company Statements of Financial Position
Figures in £
Notes
Group
2021
Group
2020
Company
2021
Company
2020
Assets
Non-current assets
Property, plant and equipment
5
4,312,946 `
2,344,335
-
-
Right-of-use assets
6
517,789
520,795
-
-
Mining assets
7
1,839,809
560,332
-
-
Investments in subsidiaries
8
-
-
517,867
5
Other receivables
10
492,596
425,319
12,147,002
10,360,032
Total non-current assets
7,163,140
3,850,781
12,664,869
10,360,037
Current assets
Inventories
9
802,835
458,308
-
-
Trade and other receivables
10
93,646
162,163
27,460
136,190
Cash and cash equivalents (including restricted
cash of £206,418 (2020: £214,499))
11
521,771
569,962
348,993
537,525
Total current assets
1,418,252
1,190,433
376,453
673,715
Total assets
8,581,392
5,041,214
13,041,322
11,033,752
Equity and liabilities
Equity
Share capital
12
706,050
454,333
706,050
454,333
Share premium
12
8,656,201
6,885,796
8,656,201
6,885,796
Other equity
12
94,680
-
94,680
-
Accumulated loss
(7,781,745)
(7,223,054)
(673,019)
(473,817)
Other reserves
13
3,286,179
3,393,154
2,506,862
3,081,203
Total equity attributable to owners of parent
4,961,365
3,510,229
11,290,774
9,947,515
Non-controlling interests
8
(2,223,906)
(2,261,809)
-
-
Total equity
2,737,459
1,248,420
11,290,774
9,947,515
Liabilities
Non-current liabilities
Provisions
14
544,692
454,197
-
-
Borrowings
16
1,333,345
828,300
987,658
465,601
Lease liabilities
6
564,063
551,743
-
-
Total non-current liabilities
2,442,100
1,834,240
987,658
465,601
Current liabilities
Trade and other payables
15
2,739,672
1,237,563
293,435
111,826
Borrowings
16
617,602
696,206
469,455
508,810
Lease liabilities
6
44,559
24,785
-
-
Total current liabilities
3,401,833
1,958,554
762,890
620,636
Total liabilities
5,843,933
3,792,794
1,750,548
1,086,237
Total equity and liabilities
8,581,392
5,041,214
13,041,322
11,033,752
These financial statements were approved by the Board and authorised for issue on 30 June 2022
Michael Houston
Executive Chairman
43
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Figures in £
Notes
Group
2021
Group
2020
Revenue from contracts with customers
17
7,846,588
3,601,819
Other income
8,672
1,062
Administrative expenses
(133,546)
(192,137)
Operating expenses
(7,823,169)
(5,683,454)
Other gains
18
16,488
853
Loss from operating activities
19
(84,967)
(2,271,857)
Finance income
20
31,552
24,209
Finance costs
21
(384,288)
(248,022)
Other losses
18
(911,194)
(493,138)
Loss before taxation
(1,348,897)
(2,988,808)
Income tax expense
22
-
-
Loss for the year
(1,348,897)
(2,988,808)
Loss for the year attributable to:
Owners of Parent
(1,222,590)
(2,388,532)
Non-controlling interest
(126,307)
(600,276)
(1,348,897)
(2,988,808)
Other comprehensive loss net of tax
Components of other comprehensive income that may be reclassified
to profit or loss
Gains on exchange differences on translation
631,576
397,605
Total other comprehensive income
631,576
397,605
Total comprehensive loss
(717,321)
(2,591,203)
Comprehensive loss attributable to:
Owners of parent
(755,224)
(2,094,304)
Non-controlling interests
37,903
(496,899)
(717,321)
(2,591,203)
Basic and diluted loss per share
Basic loss per share
24
(0.09)
(0.35)
As permitted by section 408 of the Companies Act 2006, the parent company’s profit and loss account has not been
included in these financial statements. The loss after taxation for the financial year for the parent company was
£863,101 (2020: Loss of £680,058).
44
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Consolidated Statement of Changes in Equity - Group
Figures in £
Share capital
Share
premium
Value of
conversion
right
Capital
redemption
reserve
Foreign
currency
translation
reserve
Share-based
payment
reserve
Accumulated
loss
Attributable
to owners of
the parent
Non-
controlling
interests
Total
Balance at 1 January 2020
162,900
4,147,980
-
2,003,010
17,723
1,097,751
(5,120,207)
2,309,157
(1,764,910)
544,247
Changes in equity
Loss for the year
-
-
-
-
-
-
(2,388,532)
(2,388,532)
(600,276)
(2,988,808)
Other comprehensive income
-
-
-
-
294,228
-
-
294,228
103,377
397,605
Total comprehensive income for the year
-
-
-
-
294,228
-
(2,388,532)
(2,094,304)
(496,899)
(2,591,203)
Issue of equity
291,433
2,870,501
-
-
-
-
-
3,161,934
-
3,161,934
Share issue expenses
-
(132,685)
-
-
-
-
-
(132,685)
-
(132,685)
Share-based payments
-
-
-
-
-
266,127
-
266,127
-
266,127
Transfer lapsed options to accumulated loss
-
-
-
-
-
(285,685)
285,685
-
-
-
Balance at 31 December 2020
454,333
6,885,796
-
2,003,010
311,951
1,078,193
(7,223,054)
3,510,229
(2,261,809)
1,248,420
Balance at 1 January 2021
454,333
6,885,796
-
2,003,010
311,951
1,078,193
(7,223,054)
3,510,229
(2,261,809)
1,248,420
Changes in equity
Loss for the year
-
-
-
-
-
-
(1,222,590)
(1,222,590)
(126,307)
(1,348,897)
Other comprehensive income
-
-
-
-
467,366
-
-
467,366
164,210
631,576
Total comprehensive income for the year
-
-
-
-
467,366
-
(1,222,590)
(755,224)
37,903
(717,321)
Issue of equity
251,717
1,831,255
-
-
-
-
-
2,082,972
-
2,082,972
Share issue expenses
-
(60,850)
-
-
-
-
-
(60,850)
-
(60,850)
Share-based payments
-
-
-
-
-
89,558
-
89,558
-
89,558
Transfer lapsed options to accumulated loss
-
-
-
-
-
(663,899)
663,899
-
-
-
Value of conversion rights-convertible notes
-
-
94,680
-
-
-
-
94,680
-
94,680
Balance at 31 December 2021
706,050
8,656,201
94,680
2,003,010
779,317
503,852
(7,781,745)
4,961,365
(2,223,906)
2,737,459
Notes
12
12
12
13
13
13
45
BlueRock Diamonds Plc
(Registration Number 08248437)
Consolidated and Separate Financial Statements for the year ended 31 December 2021
Statement of Changes in Equity - Company
Figures in £
Share capital
Share
premium
Value of
conversion
right
Capital
redemption
reserve
Share-based
payment
reserve
Accumulated
loss
Total
Balance at 1 January 2020
162,900
4,147,980
-
2,003,010
1,097,751
(79,444)
7,332,197
Changes in equity
Loss for the year
-
-
-
-
-
(680,058)
(680,058)
Total comprehensive income
-
-
-
-
-
(680,058)
(680,058)
Issue of equity
291,433
2,870,501
-
-
-
-
3,161,934
Share issue expenses
-
(132,685)
-
-
-
-
(132,685)
Share-based payments
-
-
-
-
266,127
-
266,127
Transfer of lapsed options to accumulated loss
-
-
-
-
(285,685)
285,685
-
Balance at 31 December 2020
454,333
6,885,796
-
2,003,010
1,078,193
(473,817)
9,947,515
Balance at 1 January 2021
454,333
6,885,796
-
2,003,010
1,078,193
(473,817)
9,947,515
Changes in equity
Loss for the year
-
-
-
-
-
(863,101)
(863,101)
Total comprehensive income
-
-
-
-
-
(863,101)
(863,101)
Issue of equity
251,717
1,831,255
-
-
-
-
2,082,972
Share issue expenses
-
(60,850)
-
-
-
-
(60,850)
Share-based payments
-
-
-
-
89,558
-
89,558
Transfer lapsed options to accumulated loss
-
-
-
-
(663,899)
663,899
-
Value of conversion rights-convertible notes
-
-
94,680
-
-
-
94,680
Balance at 31 December 2021
706,050
8,656,201
94,680
2,003,010
503,852
(673,019)
11,290,774
Note
12
12
12
13
13
46
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Consolidated and Company Statements of Cash Flows
Figures in £
Notes
Group
2021
Group
2020
Company
2021
Company
2020
Cash flows from / (used in) operations
Cash from/(used in) operations
26
2,405,359
(1,025,363)
(180,462)
(530,401)
Net cash flows from / (used in) operations
2,405,359
(1,025,363)
(180,462)
(530,401)
Cash flows used in investing activities
Proceeds from sales of property, plant and
equipment
5
56,572
2,889
-
-
Purchase of property, plant and equipment
5
(2,669,974)
(1,268,083)
-
-
Purchase of mining assets
7
(1,395,448)
-
-
-
Increase in loan advanced to Group Company
10
-
-
(1,831,782)
(2,030,802)
Movement in other receivables
10
(99,030)
(101,888)
-
-
Cash flows used in investing activities
(4,107,880)
(1,367,082)
(1,831,782)
(2,030,802)
Cash flows from financing activities
Proceeds from issuing shares (net of fees:
£60,850 (2020: £132,685))
1,436,527
2,895,784
1,436,527
2,895,784
Loans drawn down in the year
26
941,146
-
941,146
-
Repayments of borrowings
26
(610,125)
(245,237)
(538,798)
(156,892)
Repayments of lease liabilities
26
(87,750)
(66,380)
-
-
Increase in restricted cash
(7,082)
(8,811)
(7,082)
(8,811)
Cash flows from financing activities
1,672,716
2,575,356
1,831,793
2,730,081
Net (decrease) / increase in cash and cash
equivalents
(29,805)
182,911
(180,451)
168,878
Exchange rate changes on cash and cash
equivalents
(10,305)
6,617
-
-
Net (decrease) / increase in cash and cash
equivalents
(40,110)
189,528
(180,451)
168,878
Cash and cash equivalents at beginning of
year
355,463
165,935
323,026
154,148
Cash and cash equivalents at end of year
11
315,353
355,463
142,575
323,026
47
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Accounting Policies
1. Basis of preparation
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted
international accounting standards and, as regards the Parent Company financial statements, as applied in
accordance with the provisions of the Companies Act 2006. These Consolidated Financial Statements have been
prepared under the historical cost convention except as noted below. They are presented in British Pounds Sterling
(Pounds) which is also the functional currency of the Company.
BlueRock Diamonds Plc is incorporated in England and Wales with Company number 08248437 with registered
office, 4th Floor, Reading Bridge House, George Street, Reading, Berkshire, RG1 8LS.
The preparation of financial statements in conformity with UK adopted IAS and Companies Act 2006 requires the use
of certain critical accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated and separate financial statements are disclosed
in note 3.
Going concern
The Group and parent Company have prepared forecasts covering the period to 31 December 2023. Appropriate
diligence has been applied by the Directors who believe that the forecasts are prepared on a realistic basis using the
best available information.
As announced on 1 June 2022, the impact of the unusually high rainfall in the first five months of 2022 has resulted in
a significant reduction in production compared to our forecasts, resulting in a severe impact on the Group’s cash
resources, leaving the Group and parent Company requiring additional funding in the immediate future, whilst it
completes its mining development.
Discussions are ongoing with an existing shareholder for BlueRock to issue a new Loan Note (“LN”) for £1.6m as well
as the provision of debt funding facility to Kareevlei for up to ZAR30m to be drawn as and when required. The
forecasts indicate that the combination of the LN and debt funding facility will be sufficient to meet the Group’s cash
requirements over the going concern period, however, until the LN has been issued and the debt funding facility
finalised, there remains an uncertainty that this financing will be available.
After review of the uncertainty, the Directors have a reasonable expectation, based on discussions and
correspondence with the existing shareholder, that the additional funding will be received and the Group and parent
Company will then have adequate resources to continue in operational existence for the foreseeable future, based on
its assessment of the forecasts, principal risks and uncertainties and mitigating actions considered available to the
Group and parent Company in the event of downside scenarios. Accordingly, the Directors continue to adopt the
going concern basis in preparing the financial statements.
However, at the date of approval of these financial statements, uncertainties relating to completing the issue of the
funding arrangements indicate the existence of a material uncertainty which may cast significant doubt about the
Group and parent Company's ability to continue as a going concern, and therefore it may be unable to realise its
assets and discharge its liabilities in the normal course of business.
The financial statements do not include the adjustments that would result if the Group and parent Company were
unable to continue as a going concern.
48
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Accounting Policies
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated and separate annual financial
statements are set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
2.1 Consolidation
Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for
the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners
of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of
any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair value at the
acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of
acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been
adjusted to conform with the Group's accounting policies.
Disposal of subsidiaries
When the Group ceases to have control of a subsidiary any retained interest in the entity is remeasured to its fair
value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is
the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect
of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
2.2 Foreign currency
Functional and presentation currencies
The consolidated and separate financial statements have been presented in British Pound Sterling (Pounds), which
is also the functional currency of the Company. The functional currency of the South African subsidiaries is the South
African Rand.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
49
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Accounting Policies
Summary of significant accounting policies continued...
Group companies
The results and financial position of all the Group's entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
•
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the
reporting date;
•
Income and expenses for each statement of comprehensive income are translated at average exchange rates
(unless this average is not a reasonable approximation of the exchange rates at the dates of the transactions, in
which case income and expense items are translated at the exchange rates at the dates of the transactions);
and
•
All resulting exchange differences are recognised in other comprehensive income.
2.3 Property, plant and equipment
Recognition
Property, plant and equipment is recognised as an asset when:
•
it is probable that future economic benefits associated with the asset will flow to the entity; and
•
the cost of the asset can be measured reliably.
Initial measurement
An item of property, plant and equipment that qualifies for recognition as an asset is initially measured at its cost.
The cost of an item of property, plant and equipment includes:
•
its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts
and rebates.
•
any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of
operating in the manner intended by management.
•
the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located,
the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the
item during a particular period for purposes other than to produce inventories during that period.
Subsequent measurement - Cost model
After initial recognition, property, plant and equipment is measured at cost less any accumulated depreciation and
any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure incurred on items of property, plant and equipment is only capitalised to the extent that such
expenditure enhances the value or previous capacity of those assets. Repairs and maintenance not deemed to
enhance the economic benefit or service potential of items of property, plant and equipment are expensed as
incurred.
Where the entity replaces parts of an asset, it derecognises the part of the asset being replaced and capitalises the
new component.
Stripping costs
Costs associated with removal of waste overburden are classified as stripping costs.
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Stripping activities that are undertaken during the production phase of a surface mine may create two benefits, being
either the production of inventory or improved access to the ore to be mined in the future. Where the benefits are
realised in the form of inventory produced in the period, the production stripping costs are accounted for as part of
the cost of producing those inventories. Where production stripping costs are incurred and where the benefit is the
creation of mining flexibility and improved access to ore to be mined in the future, the costs are recognised as a non-
current asset, referred to as a ‘stripping activity asset’, if:
(a) future economic benefits (being improved access to the orebody) are probable;
(b) the component of the orebody for which access will be improved can be accurately identified; and
(c) the costs associated with the improved access can be reliably measured.
If all the criteria are not met, the production stripping costs are charged to the statement of profit or loss as operating
costs. The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to
perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly
attributable overhead costs. If incidental operations are occurring at the same time as the production stripping
activity, but are not necessary for the production stripping activity to continue as planned, these costs are not
included in the cost of the stripping activity asset. If the costs of the stripping activity asset and the inventory
produced are not separately identifiable, a relevant production measure is used to allocate the production stripping
costs between the inventory produced and the stripping activity asset. The stripping activity asset is subsequently
amortised over the expected useful life of the identified component of the orebody that became more accessible as a
result of the stripping activity.
The expected average stripping ratio over the average life of the area being mined is used to amortise the stripping
activity. As a result, the stripping activity asset is carried at cost less amortisation and any impairment losses.
The average life of area cost per tonne is calculated as the total expected costs to be incurred to mine the orebody
divided by the number of tonnes expected to be mined. The average life of area stripping ratio and the average life of
area cost per tonne are recalculated annually in light of additional knowledge and changes in estimates. Changes in
the stripping ratio are accounted for prospectively as a change in estimate.
Depreciation
Depreciation of an asset commences when it is available for use, and ceases at the earlier of the date that the asset
is classified as held for sale, or the date that the asset is derecognised.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the
item is depreciated separately.
The depreciation charge for each period is recognised in profit or loss unless the asset enhances another asset
under construction whereby it is included in the carrying amount of another asset. The depreciable amount of an
asset shall be allocated on a systematic basis over its useful life. The depreciable amount of an asset is determined
after deducting its residual value.
Residual values, useful lives and depreciation methods are reviewed at each financial year end. Where there are
significant changes in the expected pattern of economic consumption of the benefits embodied in the asset, the
relevant changes will be made to the residual values and depreciation rates, and the change will be accounted for as
a change in accounting estimate.
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The measurement base, useful life or depreciation rate as well as the depreciation method for all major classes of
assets are as follows:
Asset class
Measurement base
Method
Mine infrastructure
Cost
Units of production
Leasehold improvements
Cost
Term of lease
Plant and Machinery
Cost
3-10 years straight line
basis
Motor vehicles
Cost
5 years straight line
basis
Units of production method
When a units-of-production basis is used, applicable to deferred stripping, mining rehabilitation assets and mining
rights, the relevant assets are depreciated at a rate determined as the tonnes of ore mined (typically production
facility assets) from the relevant orebody section, divided by the Group’s estimate of ore tonnes held in Diamond
Reserves and Resources which have sufficient geological and geophysical certainty and are economically viable.
The relevant Diamond Reserves and Resources are matched to the existing assets which will be utilised for their
extraction. The assets depreciated in the units-of-production method are existing assets. Future capital expenditure is
only subject to depreciation over remaining resources once incurred. The Group depreciates its assets according to
the relevant sections of the orebody over which they will be utilised.
Impairments
Whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable
an asset is reviewed for impairment. This includes mining assets, property, plant and equipment. A review involves
determining whether the carrying amounts are in excess of their recoverable amounts. An asset’s recoverable
amount is determined as the higher of its fair value less costs of disposal and its value in use. Such reviews are
undertaken on an asset-by-asset basis, except where assets do not generate cash flows independent of other
assets, in which case the review is undertaken on a cash generating unit basis.
If the carrying amount of an asset exceeds its recoverable amount an asset’s carrying value is written down to its
estimated recoverable amount (being the higher of the fair value less cost to sell and value in use) if that is less than
the asset’s carrying amount. Any change in carrying value is recognised in the statement of comprehensive income.
Derecognition
The carrying amount of an item of property, plant and equipment is derecognised when the asset is disposed of or
when no future economic benefits are expected from its use or disposal. The gain or loss arising from the
derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised.
Gains are classified as other gains on the face of the consolidated statement of profit or loss and other
comprehensive income.
2.4 Mining rights
Mining rights are recognised at cost, including any directly attributable transaction costs. The amortisation charge for
each period is recognised on a ‘units of production’ method.
2.5 Mining rehabilitation asset
The estimated cost of environmental rehabilitation is based on current legal requirements and existing technology. A
provision is raised based on the present value of the estimated costs. These costs are included in the cost of the
related asset. The capitalised assets are depreciated in accordance with the accounting policy for property, plant and
equipment.
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2.6 Financial instruments
Financial assets and financial liabilities are recognised in the statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive
income (“FVTOCI”) or at fair value through profit or loss (“FVPL”) depending upon the business model for managing
the financial assets and the nature of the contractual cash flow characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all financial assets, other than those at FVPL or
FVTOCI, at the end of each reporting period. The Group applies a simplified approach to measure the credit loss
allowance for trade receivables using the lifetime expected credit loss provision. The lifetime expected credit loss is
evaluated for each trade receivable taking into account payment history, payments made subsequent to year end
and prior to reporting, past default experience and the impact of any other relevant and current observable data. The
Group applies a general approach on all other receivables classified as financial assets. The general approach
recognises lifetime expected credit losses when there has been a significant increase in credit risk since initial
recognition.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
party. The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or have
expired.
Other receivables
Other receivables are accounted for at amortised cost and are stated at their nominal value as reduced by
appropriate expected credit loss allowances.
Trade and other receivables
Trade receivables are initially recorded at fair value and subsequently carried at amortised cost. Trade receivables do
not carry any interest and are stated at their nominal value as reduced by appropriate expected credit loss
allowances for estimated recoverable amounts as the interest that would be recognised from discounting future cash
payments over the short payment period is not considered to be material.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes
in value. These are initially and subsequently recorded at fair value. Restricted cash represents amounts held in
escrow with the Group’s attorneys to meet any payments under the claims by a former director.
Trade and other payables
Trade and other payables are initially recorded at fair value and subsequently carried at amortised cost.
Borrowings excluding convertible loans
Borrowings are included as financial liabilities on the Group balance sheet at the amounts drawn on the particular
facilities net of the unamortised cost of financing. Interest payable on those facilities is expensed as finance cost in
the period to which it relates.
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Derivatives
Derivatives embedded in other financial instruments or other non-financial host contracts are treated as separate
derivatives when their risks and characteristics are not closely related to those of the host contract and the host
contract is not carried at fair value with unrealised gains or losses reported in profit or loss.
Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.
Convertible loan notes
The convertible loan notes are accounted for under the guidance of IAS 32, Financial Instruments: Presentation.
These can either be treated as compound instruments or stand-alone instruments with an embedded derivative
relating to the conversion feature. When the instrument is treated as a compound instrument the fair value of the
liability portion of the convertible loan notes is determined using a market interest rate on an equivalent non-
convertible loan note. This amount is recorded as a liability on an amortised cost basis until extinguished on
conversion or maturity of the loan notes. When the instrument meets the "fixed-for-fixed" test i.e. when the number of
conversion shares are determined at the issue date, the remainder of the proceeds are allocated to the conversion
option, which is recognised and included in shareholders' equity, net of tax effects and is not subsequently re-
measured. In cases where the criteria for compound instrument are not met, the host debt contract is valued initially
at fair value and the embedded derivative is separately carried at fair value through profit and loss.
A substantial modification of the terms of an existing financial liability or a part of it, are accounted for as an
extinguishment of the original financial liability and the recognition of a new financial liability. The difference between
the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party
and the consideration paid, including any non‑cash assets transferred or liabilities assumed, are recognised in profit
or loss. A substantial modification exists if the discounted present value of the cash flows under the new terms,
including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10
per cent different from the discounted present value of the remaining cash flows of the original financial liability.
2.7 Exploration and evaluation assets
During the exploration phase of operations, all costs are expensed in the consolidated statement of comprehensive
income as incurred.
A subsequent decision to develop a mine property within an area of interest is based on the exploration results, an
assessment of the commercial viability of the property, the availability of financing and the existence of markets for
the product. Once the decision to proceed to development is made, development and other expenditures relating to
the project are capitalised and carried at cost with the intention that these will be depreciated by charges against
earnings from future mining operations over the relevant life of mine on a units of production basis. Expenditure is
only capitalised provided it meets the following recognition requirements:
• completion of the project is technically feasible and the Group has the ability to and intends to complete it;
• the project is expected to generate future economic benefits;
• there are adequate technical, financial and other resources to complete the project; and
• the expenditure attributable to the development can be measured reliably.
No depreciation is charged against the property until commercial production commences. After a mine property has
been brought into commercial production, costs of any additional work on that property are capitalised as incurred.
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2.8 Inventories
Recognition
Inventories are recognised as an asset when
•
it is probable that future economic benefits associated with the item will flow to the entity; and
•
the cost of the inventories can be measured reliably.
Measurement
Inventories, which include rough diamonds, are measured at the lower of cost of production or net realisable value
using the weighted average cost method.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs
necessary to make the sale. Net realisable value also incorporates costs of processing in the case of the ore stock
piles. Changes in net realisable value are recognised in the income statement.
The cost of production includes direct labour, other direct costs and related production overheads. Consumables are
stated at the lower of cost on the weighted average basis or estimated replacement value. Work in progress are
stated at raw material cost including allocated labour and overhead costs.
2.9 Tax
Tax expense (tax income) is the aggregate amount included in the determination of profit or loss for the period in
respect of current tax and deferred tax.
Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period.
Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary
differences.
Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of:
•
deductible temporary differences;
•
the carry forward of unused tax losses; and
•
the carry forward of unused tax credits.
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. The amount already paid in
respect of current and prior periods which exceeds the amount due for those periods, is recognised as an asset.
The benefit relating to a tax loss that can be carried back to recover current tax of a previous period is recognised as
an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to
(recovered from) the taxation authorities, using the tax rates and tax laws that have been enacted or substantively
enacted by the end of the reporting period.
Current tax assets and liabilities are offset only where:
•
there is a legally enforceable right to set off the recognised amounts; and
•
there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
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Summary of significant accounting policies continued...
Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax
liability arises from:
•
the initial recognition of goodwill; or
•
the initial recognition of an asset or liability in a transaction which is not a business combination and at the time
of the transaction, affects neither accounting profit nor taxable profit (tax loss).
A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable
profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset
arises from the initial recognition of an asset or liability in a transaction that:
•
is not a business combination; and
•
at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
A deferred tax asset is recognised for the carry forward of unused tax losses and unused tax credits to the extent that
it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits
can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively
enacted by the end of the reporting period.
The measurement of deferred tax liabilities and deferred tax assets are made to reflect the tax consequences that
would follow from the manner in which it is expected, at the end of the reporting period, recovery or settlement if
temporary differences will occur.
Deferred tax assets and liabilities are offset only where:
•
there is a legally enforceable right to set off current tax assets against current tax liabilities; and
•
the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation
authority on either the same entity within the Group or different taxable entities within the Group which intend
either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Royalties
Royalties incurred by the Group comprise mineral extraction costs based on a percentage of sales paid to the local
revenue authorities. These obligations arising from royalty arrangements are recognised as current payables and
are, therefore, recognised as royalty and selling costs in the statement of profit or loss.
Royalties and revenue-based taxes are accounted for under IAS 12 when they have the characteristics of an income
tax. This is considered to be the case when they are imposed under government authority and the amount payable is
based on taxable income – rather than based on quantity produced or as a percentage of revenue. For such
arrangements, current and deferred tax is provided on the same basis as described above for other forms of taxation.
The royalties incurred by the Group are considered not to meet the criteria to be treated as part of income tax and
are, therefore, recognised in royalty and selling costs in the statement of profit or loss.
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Summary of significant accounting policies continued...
2.10 Leases
Identification of a lease
At inception of a contract, it is assessed to determine whether the contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. If the terms and conditions of a contract are changed, it is reassessed to once again
determine if the contract is still or now contains a lease.
The practical expedient allowed by IFRS16 is elected, and therefore the non-lease components are not separated
from the lease components. Each lease component and any associated non-lease component is treated as a single
lease component.
Lease term
The lease term of a lease is determined as the non-cancellable period of the lease, together with the periods covered
by an option to extend the lease where there is reasonable certainty that the option will be exercised, and periods
covered by an option to terminate the lease if there is reasonable certainty that the option will not be exercised.
The assessment of the reasonable certainty of the exercising of options to extend the lease or not exercising of
options to terminate the lease is reassessed upon the occurrence of either a significant event or a significant change
in circumstances that is within the Group's control and it affects the reasonable certainty assumptions.
The assessment of the lease term is revised if there is a change in the non-cancellable lease period.
Recognition and measurement
At inception, a right-of-use asset and a lease liability is recognised in the statement of financial position.
Right-of-use assets
Right-of-use assets are initially measured at cost, comprising the following:
•
the amount of the initial measurement of the lease liability;
•
any lease payments made at or before the commencement date, less any lease incentives received;
•
any initial direct costs incurred; and
•
an estimate of costs to be incurred in dismantling and removing the underlying asset, restoring the site
on which it is located or restoring the underlying asset to the condition required by the terms and
conditions of the lease, unless those costs are incurred to produce inventories. The obligation for those
costs are incurred either at the commencement date or as a consequence of having used the
underlying asset during a particular period.
The right of use assets are presented separately in the statement of financial position.
The right of use asset is subsequently depreciated using the straight line method from the lease commencement date
to the earlier of the useful life of the right of use asset or the end of the lease term. In addition, the Group applies IAS
36 Impairment of Assets to determine whether a right of use asset is impaired and accounts for the identified
impairment loss as described in the policy for property, plant and equipment.
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Lease liability
The lease liability is initially measured at the present value of the lease payments that are not yet paid at the
commencement date. Lease payments are discounted using the interest rate implicit in the lease, if the rate can be
readily determined, else it is based on the Group's incremental borrowing rate. The following lease payments are
included where they are not paid at the commencement date:
•
fixed payments, less any lease incentives receivable;
•
variable lease payments that depend on an index or a rate, initially measured using the index or rate as
at the commencement date;
•
amounts expected to be payable under residual value guarantees;
•
the exercise price of a purchase option if there is reasonably certainty that the option will be exercised;
and
•
payments of penalties for terminating the lease, if the lease term reflects the exercising an option to
terminate the lease.
Subsequently, the lease liability is measured by:
•
increasing the carrying amount to reflect interest on the lease liability;
•
reducing the carrying amount to reflect the lease payments made; and
•
remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect
revised in-substance fixed lease payments.
Reassessment of lease liability
Where there are changes in the lease payments, the amount of the remeasurement of the lease liability is recognised
as an adjustment to the right-of-use asset. Where the carrying amount of the right of use asset is reduced to zero,
and there is a further reduction in the measurement of the lease liability, the remaining amount of the remeasurement
is recognised in profit or loss.
Short-term leases and leases of low-value items
The Group has elected not to recognise right of use assets and lease liabilities for short term leases and leases of
low value assets. The Group recognises the lease payments associated with these leases as an expense in the
statement of profit or loss on a straight line basis over the lease term.
Variable lease payments
Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease
liability and the right of use asset. The related payments are recognised as an expense in the period in which the
event or condition that triggers those payments occurs and are included in ‘Operating expenses’ in the statement of
profit or loss as shown in note 19 to the financial statements.
2.11 Provisions and contingencies
A provision is a liability of uncertain timing or amount. A liability is a present obligation of the entity arising from past
events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic
benefits.
A contingent liability is:
•
a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or
•
a present obligation that arises from past events but is not recognised because it is not probable that an outflow
of resources embodying economic benefits will be required to settle the obligation, or the amount of the
obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
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A provision is recognised when:
•
there is a present obligation (legal or constructive) as a result of a past event;
•
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;
and
•
a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation
at the end of the reporting period. Where the effect of the time value of money is material, the amount of a provision
is the present value of the expenditures expected to be required to settle the obligation.
Contingent assets and liabilities are not recognised, but details are disclosed in the notes to the annual financial
statements.
2.12 Share-based payments
The Group operates equity-settled share-based remuneration plans for its employees. None of the Group’s plans are
cash-settled.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair
values. Where employees are rewarded using share-based payments, the fair value of employees’ services is
determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at
the grant date and excludes the impact of non-market vesting conditions.
All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to
retained earnings. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting
period, based on the best available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are expected to become
exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected
to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period.
No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different
to that estimated on vesting.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the
nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.
2.13 Revenue
Rough diamond sales are made through a competitive tender process and revenue is recognised when the customer
has a legally binding obligation to settle under the terms of the contract when the performance obligations have been
satisfied, which is once control of the goods has transferred to the buyer which occurs when the tender closes.
Polished diamond sales are recognised once control of the goods has transferred to the buyer which occurs upon
delivery to the customer.
Revenue is measured based on consideration specified in the tender award.
Where the Group makes rough diamond sales to customers and retains a vested right in the future sale of a polished
diamond, the Group will record such revenue only at the date when the polished diamond is sold (and only its interest
therein).
Revenue is shown net of value added tax.
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Interest income is recognised using the effective interest method.
2.14 Employee benefits
Employee benefits are all forms of consideration given by an entity in exchange for services rendered by employees
or for the termination of employment.
2.15 Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued.
Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the
issuing of shares are deducted from share premium, net of any related income tax benefits.
Other components of equity include the following:
• Other reserves – comprises foreign currency translation differences arising from the translation of financial
statements of the Group’s foreign entities into Sterling, the recognition of share based payment movements, the non-
distributable redemption reserve for cancelled deferred shares charge and the value of the conversion rights relating
to convertible notes.
• Retained earnings includes all current and prior period retained profits.
Non-controlling interest represents current and prior period retained profits and other comprehensive income items
attributable to the non-controlling shareholder in subsidiaries
All transactions with owners of the parent are recorded separately within equity.
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been
approved in a general meeting prior to the reporting date.
3. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
3.1 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
addressed below.
3.1.1 Ore reserves and associated Life of Mine (LoM)
There are numerous uncertainties inherent in estimating ore reserves and the associated LoM. Therefore, the Group
must make a number of assumptions in making those estimations, including assumptions as to the prices of
diamonds, exchange rates, production costs and recovery rates. Assumptions that are valid at the time of estimation
may change significantly when new information becomes available. Changes in the forecast prices of diamonds,
exchange rates, production costs or recovery rates may change the economic status of ore reserves and may,
ultimately, result in the ore reserves being restated. Where assumptions change the LoM estimates, the associated
depreciation rates, residual values, waste stripping and amortisation ratios, lease terms and environmental provisions
are reassessed to take into account the revised LoM estimate.
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Critical accounting estimates and judgements continued...
3.1.2 Valuation of embedded derivatives
There is an adjustable conversion feature within the convertible loan agreement with M Poole/T Leslie, which effects
the conversion price and the number of new ordinary shares issued. IFRS 9 requires a fair value calculation of the
embedded derivative at recognition, as it is not closely related to the host contract, and a revaluation to be performed
at each year end. The embedded derivative has been fair valued using the Monte Carlo model which requires critical
estimates, in particular the Group’s future share price volatility. At the year end the fair value of the embedded
derivative was £3,198 (2020: £21,718). Further details can be found in note 16.
3.1.3 Valuation of "fixed-for-fixed" convertible loan notes
The Group entered into "fixed-for-fixed" convertible loan notes with the Teichmann Group, whereby the number of
conversion shares were determined at the issue date. The initial fair value of the liability portion of the bond is
determined using a market interest rate for an equivalent non-convertible bond at the issue date, which requires
critical estimates, in particular the implicit interest rate. After considering industry and Group specific risk factors, the
Group determined 16.5% to be the most appropriate implicit interest rate to value the liability portion. The remainder
of the proceeds were allocated to the conversion option and recognised in shareholders’ equity (net of income tax)
and is not subsequently remeasured. Further details can be found in notes 12.2 and 16.
3.1.4 Rehabilitation provision
Estimates and assumptions are made in determining the amount attributable to the rehabilitation provision. These
deal with uncertainties such as legal and regulatory framework, timing and future costs. The carrying value of the
rehabilitation provision is disclosed in note 14. The Board use an expert to determine the existing disturbance level
and associated cost of works and estimates of inflation and risk-free discount rates are based on market data.
3.1.5 Impairment of non-current assets
Mining assets and Property, plant and equipment representing the Group’s mining assets in South Africa are
reviewed for impairment at each reporting date. The impairment test is performed using the approved Life of Mine
plan and those future cash flow estimates are discounted using asset specific discount rates and are based on
expectations about future operations. The impairment test requires estimates about future production and sales
volumes, diamond prices, grades, operating costs and capital expenditures necessary to extract resources in the
current medium term mine plan. Production forecasts include further growth from existing production levels, reflecting
plant upgrades, steps to improve mining flexibility and investment to open new mining areas. Diamond prices are
estimated with reference to recent achieved prices and the Board’s assessment of the diamond market outlook.
Changes in such estimates could impact recoverable values of these assets. Details of the carrying value of property,
plant and equipment and mining assets can be found in note 5 and 7.
The impairment test using the medium-term forecasts indicated significant headroom as at 31 December 2021 and
therefore no impairment is considered to be appropriate. However, such headroom is dependent on the upgraded
plant running at full capacity. However, the Directors consider the forecasted production levels to be achievable best
estimates. The plant is currently nearing full capacity.
The key assumptions used in the recoverable amount calculations, determined on a value-in-use basis, are listed
below:
Valuation basis
Discounted present value of future cash flows.
61
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Accounting Policies
Critical accounting estimates and judgements continued...
LoM and recoverable value of Diamond Reserves and Resources
Economically recoverable Diamond Reserves and Resources, carats recoverable and grades achievable are based
on management’s expectations of the availability of Diamond Reserves and Resources at Kareevlei and technical
studies undertaken by third-party specialists. Diamond Reserves remaining after the current LoM plan have not been
included in determining the value in use of the operations. The forecast LoM of Kareevlei, based on current
estimates, is to 2030 (2020: 2030).
Cost and inflation rate
Operating costs are determined based on management’s experience and the use of contractors over a period of time
whose costs are fairly reasonably determinable. Mining and processing costs have been based on the agreements
with the relevant contractors. Management has applied local inflation rates of 5.0% (2020: 5.0%) for operating costs.
Capital costs in the short-term has been based on management’s capital programme after which a fixed percentage
of revenue have been applied to determine the capital costs necessary to maintain current levels of operations.
Exchange rates
Exchange rates are estimated based on an assessment of current market fundamentals and long-term expectations.
The US dollar/South-African Rand (ZAR) exchange rate used, was determined with reference to the average rate for
2021 of ZAR 14.7 (31 December 2020: ZAR 16.5).
Diamond prices
The short-term diamond prices used in the impairment test have been set with reference to recent prices achieved,
recent market trends and the Group’s short-term forecast. Medium and long-term diamond price escalation reflects
the Group’s assessment of market supply/demand fundamentals.
Discount rate
A discount rate of 13.8% (2020: 10%) was used. The discount rate was calculated based on a nominal weighted cost
of capital including the effect of factors such as market risk and country risk as at the Year end.
3.1.6 Expected credit loss assessment for receivables due from subsidiaries
The Directors make judgements to assess the expected credit loss provision on the loan to the Company’s
subsidiary. This includes assessment of scenarios and the subsidiary’s ability to repay its loan under such scenarios
considering risks and uncertainties including diamond prices, future production performance, recoverable diamond
reserves, environmental legislation and other factors. No credit loss provision was raised. If the assumed factors vary
from actual occurrence, this will impact on the amount at which the loan should be carried on the Company
Statement of Financial Position. Refer to note 29.3 for further details.
The carrying value of the subsidiary loan is set out in note 10.
3.1.7 Capitalised stripping costs
Waste removal costs (stripping costs) are incurred during the development and production phases at surface mining
operations. Furthermore, during the production phase, stripping costs are incurred in the production of inventory as
well as in the creation of future benefits by improving access and mining flexibility in respect of the ore to be mined,
the latter being referred to as a ‘stripping activity asset’. Judgement is required to distinguish between these two
activities at Kareevlei. The orebody needs to be identified in its various separately identifiable components. An
identifiable component is a specific volume of the orebody that is made more accessible by the stripping activity.
Judgement is required to identify and define these components, and also to determine the expected volumes
(tonnes) of waste to be stripped and ore to be mined in each of these components. These assessments are based on
a combination of information available in the mine plans, specific characteristics of the orebody and the milestones
relating to major capital investment decisions. KV1 and KV2 are mined as a combined pit and is therefore judged to
be one separable identified component.
62
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Accounting Policies
Critical accounting estimates and judgements continued...
Judgement is also required to identify a suitable production measure that can be applied in the calculation and
allocation of production stripping costs between inventory and the stripping activity asset. The ratio of expected
volume (tonnes) of waste to be stripped for an expected volume (tonnes) of ore to be mined for a specific component
of the orebody, compared to the current period ratio of actual volume (tonnes) of waste to the volume (tonnes) of ore
is considered to determine the most suitable production measure.
These judgements and estimates are used to calculate and allocate the production stripping costs to inventory and/or
the stripping activity asset(s). Furthermore, judgements and estimates are also used to apply the stripping ratio
calculation in determining the amortisation of the stripping activity asset.
At the year end the carrying value of the capitalised stripping costs were £844,014 (2020: £nil).
3.1.8 Contingent liabilities
The Group is subject to claims by a former director and companies related to that former director totalling £222,164.
Whilst fully disputing the claims, the Group maintains liabilities to the claimants of £170,598 as disclosed in note 15.
The Group has placed £206,418 (2020: £214,499) in escrow with its attorneys to meet any payments under the
claims. The Group has taken legal advice which advises that the claims are without merit and no provision is made
for the additional claim amount. This matter has required the Board to exercise judgment in assessing both the extent
to which liabilities should be retained and the decision not to provide for the additional claim amount.
3.1.9 Theft
During January 2022, Management at the Kareevlei Mine identified a theft of concentrate from the new plant.
Management have conducted a full investigation and have passed the case onto the South African police force. At
the time of the theft the new plant was being commissioned and subsequently, more robust physical security controls
have been put in place. Management have considered the impact of the theft on the financial statements and
considering all information available, do not consider that the theft has had a material impact on the financial
statements.
3.2 Critical judgements in applying the entity's accounting policies
3.2.1 Mining Licence
An application for the renewal of the current Mining Licence has been submitted to the Department of Mineral
Resources & Energy in South Africa. As at the date of approval of this report the outcome of this application has not
yet been received. In accordance with South African legislation, the Group has the right to continue mining until such
time as the application has been processed. The Directors have applied their judgement, and have determined that
there is no reason to believe that the approval will not be obtained and have therefore based their assumptions and
estimates in the financial statements on the fact that the application will be successful.
3.2.2 Determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive
to exercise, or not to exercise, an extension option. Extension options are only included in the lease term for
instances where the Group is reasonably certain that it will extend or will not terminate the lease when the lease
expires. For all leases, the most relevant factors include:
• If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or
not terminate).
• When the lessee and the lessor each has the right to terminate the lease without permission from the other party
with no more than an insignificant penalty, the Group is typically certain to terminate.
• Otherwise, the Group considers other factors including historical lease durations, related costs and the possible
business disruption as a result of replacement of the leased asset.
63
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Accounting Policies
Critical accounting estimates and judgements continued...
The lease term is reassessed on an ongoing basis, especially when the option to extend becomes exercisable or on
occurrence of a significant event or a significant change in circumstances which affects this assessment, and that is
within the control of the Group.
Judgment is needed in determining the lease term of surface lease agreements. The lease term of surface lease
agreements are based on the approved Life of Mine (LoM) estimate.
3.2.3 Determining the incremental borrowing rate to measure lease liabilities
Interest rate implicit in leases is not available, therefore, the Group uses the relevant incremental borrowing rate
(IBR) to measure its lease liabilities. The IBR is estimated to be the interest rate that the Group would pay to borrow:
•
over a similar term
•
with similar security
•
the amount necessary to obtain an asset of a similar value to the right of use asset
•
in a similar economic environment
The IBR, therefore, is considered to be the best estimate of the incremental rate and requires management’s
judgement as there are no observable rates available.
4. Changes in accounting policies and disclosures
4.1 Standards and Interpretations effective and adopted in the current year
The Group adopted certain standards and amendments for the first time, which are effective for annual periods
beginning on or after 1 January 2021 and are listed in the table. The adoption of these new accounting
pronouncements has not had a significant impact on the consolidated financial statements of the Group nor the
accounting policies, methods of computation or presentation applied by the Group. These standards and
interpretations are listed below:
Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)
The amendment extends, by one year, the May 2020 amendment that provides lessees with an exemption from
assessing whether a COVID-19-related rent concession is a lease modification.
Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
The amendments in Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4
and IFRS 16) introduce a practical expedient for modifications required by the reform, clarify that hedge accounting is
not discontinued solely because of the IBOR reform, and introduce disclosures that allow users to understand the
nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages
those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the
entity is managing this transition.
Application of the above standards did not impact these consolidated and separate financial statements.
4.2 New standards and interpretations not yet adopted
The new standards, amendments and improvements that are issued, but not yet effective, up to the date of issuance
of the Group’s consolidated financial statements are listed in the table below. These standards, amendments and
improvements have not been early adopted and it is expected that, where applicable, these standards, amendments
and improvements will be adopted on each respective effective date. The impact of the adoption of these standards
cannot be reasonably assessed at this stage.
64
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Accounting Policies
Changes in accounting policies and disclosures continued...
Amendments and New Standards
Description
Effective date*
IFRS 17
Insurance contracts
1 January 2023
Amendments to IFRS 16
Covid 19-Related Rent Concessions beyond
30 June 2021
1 April 2021
Amendments to IAS 37
Onerous contracts – cost of fulfilling a contract 1 January 2022
Amendments to IFRS 3
Reference to the Conceptual Framework
1 January 2022
Amendments to IAS 16
Property,
plant
and
equipment
proceeds
before intended use
1 January 2022
Amendments to IAS 1
Classification of liabilities as current or non-
current
1 January 2023
Amendments to IAS 8
Definition of Accounting Estimates
1 January 2023
Amendments to IAS 1 and IFRS Practice
Statement 2
Disclosure of Accounting Policies
1 January 2023
Amendments to IAS 12
Deferred Tax related Assets and Liabilities
arising from a Single Transaction
1 January 2023
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an
Investor and its Associate or
Joint Venture
Pending
Improvement IFRS 1
Subsidiary as a first-time adopter
1 January 2022
Improvement IFRS 9
Fees in the ’10 per cent’ test for derecognition
of financial liabilities
1 January 2022
Improvement IAS 41
Agriculture
–
Taxation
in
fair
value
measurements
1 January 2022
* Annual periods beginning on or after
65
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
5. Property, plant and equipment
5.1 Balances at year end and movements for the year
Leasehold
improvements
Plant and
Machinery
Motor
vehicles
Total
Reconciliation for the year ended 31 December
2021 - Group
Balance at 1 January 2021
At cost
4,676
3,513,434
35,754
3,553,864
Accumulated depreciation
(467)
(1,197,156)
(11,906)
(1,209,529)
Net book value
4,209
2,316,278
23,848
2,344,335
Movements for the year ended 31 December
2021
Additions
-
2,669,974
-
2,669,974
Depreciation
(460)
(291,311)
(2,622)
(294,393)
Impairment loss recognised in profit or loss
-
(83,392)
-
(83,392)
Disposals
-
(40,082)
-
(40,082)
Exchange differences - Cost
(326)
(383,734)
(2,489)
(386,549)
Exchange differences - Accumulated depreciation
57
102,027
969
103,053
Property, plant and equipment at end of year
3,480
4,289,760
19,706
4,312,946
Closing balance at 31 December 2021
At cost
4,350
5,734,675
33,265
5,772,290
Accumulated depreciation
(870)
(1,444,915)
(13,559)
(1,459,344)
Net book value
3,480
4,289,760
19,706
4,312,946
Reconciliation for the year ended 31 December
2020 - Group
Balance at 1 January 2020
At cost
5,067
1,809,364
44,700
1,859,131
Accumulated depreciation
-
(1,056,986)
(23,225)
(1,080,211)
Net book value
5,067
752,378
21,475
778,920
Movements for the year ended 31 December
2020
Additions
-
1,754,985
8,047
1,763,032
Depreciation
(443)
(216,653)
(4,225)
(221,321)
Disposals
-
(439)
-
(439)
Exchange differences - Cost
(391)
(44,067)
(3,734)
(48,192)
Exchange differences - Accumulated depreciation
(24)
70,074
2,285
72,335
Property, plant and equipment at the end of the
year
4,209
2,316,278
23,848
2,344,335
Closing balance at 31 December 2020
At cost
4,676
3,513,434
35,754
3,553,864
Accumulated depreciation
(467)
(1,197,156)
(11,906)
(1,209,529)
Net book value
4,209
2,316,278
23,848
2,344,335
66
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Property, plant and equipment continued...
5.2 Additional disclosures
Assets whose title is restricted and pledged
as security
Group
2021
Group
2020
Company
2021
Company
2020
The carrying values of assets pledged as
security is as follows:
Plant and Machinery
18,339
94,103
-
-
Plant and equipment to the value of £18,339 are under security of the loan agreement with Mark Poole. The Group
cannot pledge these assets as security for other borrowings or sell them to another entity. In the event of default
Mark Poole may acquire the equipment of Kareevlei Mining Proprietory Limited for 1.00 South African Rand, see
note 16 for further detail.
5.3 Impairments
Decommissioned plant and machinery
The impairment loss of £83,392 (2020: Nil) that was recognised against Plant and Machinery relates to the
decommissioning of the old plant and machinery. The remaining components of the old plant will be sold of as scrap
metal. The Group expects to realise approximately £70,000 from the sale. The book value of the old plant was
impaired to reflect the estimated re-sale value.
5.4 Plant and Machinery
Plant and Machinery included assets under construction to the value of £4,462,552 (2020: Nil) that were
commissioned during the year.
67
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
6. Leases
6.1 Amounts recognised in the statement of financial position - Group
Right-of-use assets
Land and
buildings
Motor vehicles
Total
As at 31 December 2021
Balance at 1 January 2021
490,767
30,028
520,795
Additions
-
67,478
67,478
Decrease through net exchange differences
(30,870)
(5,011)
(35,881)
Depreciation
(61,748)
(12,797)
(74,545)
Effect of modification in lease terms
39,942
-
39,942
At 31 December 2021
438,091
79,698
517,789
Closing balance at end of year
At cost
591,252
96,851
688,103
Accumulated depreciation
(153,161)
(17,153)
(170,314)
At 31 December 2021
438,091
79,698
517,789
As at 31 December 2020
Balance at 1 January 2020
425,295
30,086
455,381
Additions
158,681
17,728
176,409
Decrease through net exchange differences
(27,725)
(2,204)
(29,929)
Depreciation
(51,716)
(3,314)
(55,030)
Effect of modification in lease terms
(13,768)
(12,268)
(26,036)
At 31 December 2020
490,767
30,028
520,795
Closing balance at end of year
At cost
592,565
35,444
628,009
Accumulated depreciation
(101,798)
(5,416)
(107,214)
At 31 December 2020
490,767
30,028
520,795
Lease liabilities
As at 31 December 2021
Balance at 1 January 2021
549,264
27,264
576,528
Additions
-
67,478
67,478
Finance costs
48,008
6,378
54,386
Effect of modification in lease terms
39,942
-
39,942
Lease payments
(68,352)
(19,398)
(87,750)
Decrease through net exchange differences
(37,155)
(4,807)
(41,962)
At 31 December 2021
531,707
76,915
608,622
Lease liabilities
Current
29,867
14,692
44,559
Non-current
501,840
62,223
564,063
At 31 December 2021
531,707
76,915
608,622
68
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Leases continued...
As at 31 December 2020
Balance at 1 January 2020
440,785
26,918
467,703
Additions
158,681
17,728
176,409
Finance costs
48,293
3,083
51,376
Effect of modification in lease terms
(14,521)
(10,233)
(24,754)
Lease payments
(58,100)
(8,280)
(66,380)
Decrease through net exchange differences
(25,874)
(1,952)
(27,826)
At 31 December 2020
549,264
27,264
576,528
Lease liabilities
Current
17,687
7,098
24,785
Non-current
531,577
20,166
551,743
At 31 December 2020
549,264
27,264
576,528
6.2 Amounts recognised in the statement of profit or loss - Group
Group
2021
Group
2020
Depreciation on right-of-use assets
74,545
55,030
Interest expense relating to lease liabilities
54,386
51,376
Short term lease expenses
570,140
395,234
6.3 Amounts recognised in the statement of cash flows
Group
2021
Group
2020
Total cash outflow for leases
87,750
66,380
6.4 Other information related to leases
The Group's leases consist mainly of leasing of buildings, land and motor vehicles. With the exception of leases of
low value underlying assets and short-term leases, each lease is reflected on the statement of financial position as a
right of use asset and a lease liability. Lease payments are fixed. Variable lease payments which do not depend on
an index or a rate are excluded from the initial measurement of the lease liability and the related right of use asset.
The Group classifies and depreciates its right of use assets in a consistent manner to its property, plant and
equipment.
69
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
7. Mining assets
7.1 Reconciliation of changes in mining assets
Mining assets
Waste
stripping
costs
Total
Reconciliation for the year ended 31 December 2021 - Group
Balance at 1 January 2021
At cost
697,980
-
697,980
Accumulated amortisation
(137,648)
-
(137,648)
Net book value
560,332
-
560,332
Movements for the year ended 31 December 2021
Mining assets
Waste
stripping
costs
Total
Additions
568,839
923,344
1,492,183
Amortisation
(67,596)
(31,707)
(99,303)
Exchange differences - Cost
(78,974)
(49,316)
(128,290)
Exchange differences - Accumulated amortisation
13,194
1,693
14,887
Mining assets at end of period
995,795
844,014
1,839,809
Closing balance at 31 December 2021
At cost
1,187,845
874,028
2,061,873
Accumulated amortisation
(192,050)
(30,014)
(222,064)
Net book value
995,795
844,014
1,839,809
Reconciliation for the year ended 31 December 2020 - Group
Mining assets
Waste
stripping
costs
Total
Balance at 1 January 2020
At cost
518,858
-
518,858
Accumulated amortisation
(112,790)
-
(112,790)
Net book value
406,068
-
406,068
Movements for the year ended 31 December 2020
Additions
207,802
-
207,802
Amortisation
(31,821)
-
(31,821)
Exchange differences - Cost
(28,681)
-
(28,681)
Exchange differences - Accumulated amortisation
6,964
-
6,964
Mining assets at end of period
560,332
-
560,332
Closing balance at 31 December 2020
Mining assets
Waste
stripping
costs
Total
At cost
697,980
-
697,980
Accumulated amortisation
(137,648)
-
(137,648)
Net book value
560,332
-
560,332
70
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Mining assets continued...
7.2 Mine infrastructure
Mine infrastructure included assets under construction to the value of £372,731 (2020: Nil) that were commissioned
during the year.
8. Investments in subsidiaries
8.1 The
amounts
included
on
the
Company
statement of financial position comprise the
following:
Company
2021
Company
2020
Investments in subsidiaries
517,867
5
Investments in subsidiaries
517,867
5
8.2 Investment in subsidiaries
8.2.1 Details of the Group's subsidiaries at the end of the reporting period are as follows:
Name of subsidiary
Principal
activity
Place of
incorporation
and business
Registered address
Kareevlei Mining Proprietory Limited
Diamond
Mining
South Africa
Wesselton Village, Off Boshoff
Road, Kimberley, South Africa
8301
Diamond Resources Proprietory Limited
Diamond
Mining
South Africa
Wesselton Village, Off Boshoff
Road, Kimberley, South Africa
8301
BlueRock Management Services Limited
Administration
and
management
United Kingdom
16 Marlborough Crescent,
London, England,W4 1HF
8.2.2 Voting rights:
Interest
2021
Carrying value
2021
Interest
2020
Carrying value
2020
Kareevlei Mining Proprietory Limited
74.00%
517,867
74.00%
517,867
Diamond Resources Proprietory Limited
100.00%
-
100.00%
-
BlueRock Management Services Limited
100.00%
-
100.00%
-
71
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Investments in subsidiaries continued...
8.2.3 Summary of Group's interest in subsidiaries
Kareevlei
Mining
Proprietory
Limited
Diamond
Resources
Proprietory
Limited
BlueRock
Management
Services
Limited
At 31 December 2021
Total assets
8,204,936
-
-
Total liabilities
(16,240,385)
-
-
Retained losses
(8,035,449)
-
-
Revenue
7,838,311
-
-
Loss after tax
(485,795)
-
-
At 31 December 2020
Total assets
4,367,212
-
-
Total liabilities
(13,066,305)
-
-
Retained losses
(7,349,515)
-
-
Revenue
3,601,819
-
-
Loss after tax
(2,308,752)
-
-
8.2.4 Details of minority
BlueRock’s subsidiary, Kareevlei Mining Proprietary Limited, is 26 per cent owned by Ghaap Mining Proprietary
Limited, a Kimberley based company. Ghaap Mining Proprietary Limited is a South African private company wholly
owned by Mr. William Alexander van Wyk who, in terms of South African legislation is considered to qualify as an
Historically Disadvantaged South African (“HDSAs”).
9. Inventories
Inventories comprise:
Group
2021
Group
2020
Company
2021
Company
2020
Consumable stores
20,912
13,820
-
-
Work in progress
435,722
137,735
-
-
Diamonds on hand
346,201
306,753
-
-
802,835
458,308
-
-
Inventory is carried at the lower of cost or net realisable value. During the year no write-downs to net realisable
value were recorded.
72
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
10. Trade and other receivables
10.1 Trade and other receivables comprise:
Group
2021
Group
2020
Company
2021
Company
2020
Current
Trade receivables
4,835
-
3,254
-
Other receivables
27,462
122,139
3,253
122,139
Prepaid expenses
17,894
9,032
9,520
2,509
Value added tax
43,455
30,992
11,433
11,542
Total current receivables
93,646
162,163
27,460
136,190
Non-Current
Other receivables (i)
492,596
425,319
654,874
575,674
Amounts due by subsidiary (ii)
-
-
11,492,128
9,784,358
Total non-current receivables
492,596
425,319
12,147,002
10,360,032
The carrying value of all trade and other receivables including the loan to a group company is considered a
reasonable approximation of fair value.
Refer to note 29.3 for the Group's expected credit loss provision assessment for receivables.
Company:
(i) Non-current other receivables represent management fees receivable from Kareevlei Mining Proprietary Limited.
(ii) The amounts due by subsidiary is a loan to Kareevlei Mining Proprietary Limited that bears interest at the
Nedbank Limited prime variable overdraft rate or unsecured loans to corporate customers.
Group:
(i) Other non-current receivables represent amounts held by financial institutions and the Department of Minerals
and Energy as guarantees in respect of environmental rehabilitation obligations in respect of the Group’s South
African mines.
73
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Trade and other receivables continued...
10.2 Items included in trade and other receivables
not classified as financial instruments
Group
2021
Group
2020
Company
2021
Company
2020
Comp
Prepaid expenses
17,894
9,032
9,520
2,509
Value added tax
43,455
30,992
11,433
11,542
Total non-financial instruments included in trade
and other receivables
61,349
40,024
20,953
14,051
Total trade and other receivables excluding non-
financial assets included in trade and other
receivables
524,893
547,458
12,153,509
10,482,171
Total trade and other receivables
586,242
587,482
12,174,462
10,496,222
10.3 Analysis of trade receivables
More than 120 days
4,835
-
3,254
-
4,835
-
3,254
-
11. Cash and cash equivalents (including restricted cash)
11.1 Cash and cash equivalents comprise:
Group
2021
Group
2020
Company
2021
Company
2020
Cash
Cash on hand
103
136
-
-
Balances with banks
521,668
569,826
348,993
537,525
Total cash
521,771
569,962
348,993
537,525
Total cash and cash equivalents included in
current assets
521,771
569,962
348,993
537,525
Cash and cash equivalents in the Consolidated Statement of Cash flows excludes restricted cash of £206,418
(2020: £214,499).
11.2 Cash and cash equivalents where availability is restricted
Bank balances to the value of £206,418 (2020: £214,499) are not available for use as it is held in trust with the
Group's attorneys. This account is held as security for the claims submitted by a former director of the Group and
may only be utilised against this claim, should it be successful. Refer to note 25 for further details.
74
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
12. Share capital
12.1 Authorised and issued share capital
Group
2021
Group
2020
Company
2021
Company
2020
Issued
14,121,002
(2020:
9,086,657)
Ordinary
shares of 5p (2020: 5p) each
706,050
454,333
706,050
454,333
Share premium
8,656,201
6,885,796
8,656,201
6,885,796
9,362,251
7,340,129
9,362,251
7,340,129
Share reconciliation
Details of issue
Date
Number of ordinary
shares
Share capital
Share
premium
£
£
Opening balance
01/01/2021
9,086,657
454,333
6,885,796
Placing and equity issue
03/03/2021
3,750,000
187,500
1,312,500
Placing and equity issue expenses
03/03/2021
-
-
(60,850)
Issue of shares as repayment of loan facility
06/04/2021
61,013
3,050
23,306
Issue of shares as repayment of payables
21/05/2021
1,223,332
61,167
495,449
Shares outstanding - closing
14,121,002
706,050
8,656,201
Details of warrants issued
Issued during 2021
There were no new warrants issued during 2021. 2,357,333 warrants with an average price of 150p lapsed during
the period.
All warrants have now lapsed and there were no more outstanding as at the reporting date.
Issued during 2020
There were no new warrants issued during 2020. 69,067 warrants with an average price of 1,500p lapsed during the
period.
12.2 Other equity
Value of conversion rights - convertible notes
94,680
-
94,680
-
94,680
-
94,680
-
The amount shown for the value of the conversion rights relate to the 14.5% convertible notes issued during the
period, details of which are shown in note 16.
75
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
13. Other Reserves
13.1 Analysis of other reserves
Capital
redemption
reserve
Foreign
currency
translation
reserve
Share-based
payment
reserve
Total
Group
Movement:
Balance 1 January 2021
2,003,010
311,951
1,078,193
3,393,154
Other comprehensive expense
-
631,576
-
631,576
Non-controlling interests
-
(164,210)
-
(164,210)
Share-based payments
-
-
89,558
89,558
Transfer lapsed options to accumulated loss
-
-
(663,899)
(663,899)
Balance 31 December 2021
2,003,010
779,317
503,852
3,286,179
Capital
redemption
reserve
Foreign
currency
translation
reserve
Share-based
payment
reserve
Total
Movement:
Balance 1 January 2020
2,003,010
17,723
1,097,751
3,118,484
Other comprehensive expense
-
397,605
-
397,605
Non-controlling interests
-
(103,377)
-
(103,377)
Share-based payments
-
-
266,127
266,127
Transfer lapsed options to accumulated loss
-
-
(285,685)
(285,685)
Balance 31 December 2020
2,003,010
311,951
1,078,193
3,393,154
Company
Movement:
Balance 1 January 2021
2,003,010
-
1,078,193
3,081,203
Share-based payments
-
-
89,558
89,558
Transfer lapsed options to accumulated loss
-
-
(663,899)
(663,899)
Balance 31 December 2021
2,003,010
-
503,852
2,506,862
Movement:
Capital
redemption
reserve
Foreign
currency
translation
reserve
Share-based
payment
reserve
Total
Balance 1 January 2020
2,003,010
-
1,097,751
3,100,761
Share-based payments
-
-
266,127
266,127
Transfer lapsed options to accumulated loss
-
-
(285,685)
(285,685)
Balance 31 December 2020
2,003,010
-
1,078,193
3,081,203
76
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Other Reserves continued...
13.2 Nature and purpose of reserves
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of
foreign entities. The South African subsidiaries’ functional currencies are different to the Group’s functional currency
of British Pound Sterling. The rates used to convert the operating functional currency into British Pound Sterling are
as follows:
Currency
2021
2020
Average rate
ZAR to GBP
21.48
21.07
Year end
ZAR to GBP
20.33
19.98
Share-based payment reserve
For details on the share-based payment equity reserve, refer to note 23.
Capital redemption reserve
During 2018 the nominal value of ordinary shares was split into 0.01p nominal share capital and 0.99p deferred
shares. These were in turn purchased by the Company using the proceeds from the issue of one additional ordinary
share and immediately cancelled. As such these are held within the capital redemption reserve.
14. Provisions
14.1 Provisions comprise:
Group
2021
Group
2020
Company
2021
Company
2020
Rehabilitation cost provision
544,692
454,197
-
-
14.2 Reconciliation of provisions
Provision for
rehabilitation
Balance at 1 January 2021 - Group
454,197
Change in estimate
96,735
Unwinding of discount rate
32,272
Exchange differences
(38,512)
Total changes
90,495
Balance at 31 December 2021
544,692
Balance at 1 January 2020 - Group
302,989
Change in estimate
137,779
Unwinding of discount rate
27,761
Exchange differences
(14,332)
Total changes
151,208
Balance as at 31 December 2020
454,197
77
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Provisions continued...
14.3 Details of provisions
Provision for rehabilitation
The provision for environmental rehabilitation closure cost was independently assessed by RS Mellett of OMI
Solutions (Pty) Ltd. The closure cost assessment reports over the Remainder of the Farm No. 113 (Skietfontein),
Portion of Portion 2 (Kareeboompan) of the Farm 142, Portion 1 (Westhoek) of the Farm 113, and Portion 2 (Klipvlei)
of the Farm 113. The financial provision was calculated in accordance with Regulation 54 of the Minerals and
Petroleum Resources Development Act 2002 (Act 28 of 2002) during March 2022.
In determining the amounts attributable to the rehabilitation provision at the Kareelvei mining area, management
used a discount rate of 7.25% (31 December 2020: 7%), estimated rehabilitation timing of 9 years (31 December
2020: 10 years) and an inflation rate of 4.63% (31 December 2020: 4.37%).
Sensitivity
A 1% decrease in the discount rate applied at 31 December 2021 would result in an increase to the closure and
rehabilitation provision of approximately £51,000, an increase in mining assets of approximately £51,000 in relation to
the operating site, with no effect on the depreciation and finance cost expenses, as the change in estimates are
made at year end.
A 1% increase in the inflation rate applied at 31 December 2021 would result in an increase to the closure and
rehabilitation provision of approximately £50,000, an increase in mining assets of approximately £50,000 in relation to
the operating site, with no effect on the depreciation and finance cost expenses, as the change in estimates are
made at year end.
Given the long-lived nature of the Group’s assets, closure activities are generally not expected to occur for a
significant period of time. A one-year reduction in the Group's forecasted LOM, in isolation, would result in an
increase to the provision of approximately £14,000, an increase in mining assets of £14,000 in relation to the
operating site, with no effect on the depreciation and finance cost expenses, as the change in estimates are made at
year end.
78
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
15. Trade and other payables
15.1 Trade and other payables comprise:
Group
2021
Group
2020
Company
2021
Company
2020
Trade payables
2,568,336
1,068,671
226,935
45,643
Accrued liabilities
151,076
147,116
66,500
66,183
Account due to former Director
20,260
21,776
-
-
Total trade and other payables
2,739,672
1,237,563
293,435
111,826
An amount of £150,339 (2020: £161,588) is included within trade payables which are subject to amounts claimed as
being due to companies related to the former Director of the Company. These amounts are historic and disputed in
full by the Company based on legal advice received. The account due to a former Director totalling £20,260 (2020:
£21,776) relates to amounts claimed but disputed in full by the Company.
15.2 Items included in trade and other payables not classified as financial liabilities
Total trade and other payables excluding
non-financial liabilities included in trade and
other payables
2,739,672
1,237,563
293,435
111,826
79
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
16. Borrowings
16.1 Carrying amount of borrowings by category
Designated at fair
value
At amortised
cost
Total
Year ended 31 December 2021 - Group
Convertible loans (i)
-
1,414,845
1,414,845
Loan facilities (ii)
-
532,904
532,904
Embedded derivative (i)
3,198
-
3,198
Components listed under borrowings on the consolidated
and company statements of financial position
3,198
1,947,749
1,950,947
Trade and other payables excluding non-financial liabilities
(Note 15)
-
2,739,672
2,739,672
Components listed separately on the consolidated and
company statements of financial position
-
2,739,672
2,739,672
3,198
4,687,421
4,690,619
Borrowings comprise the following on the consolidated
and company statements of financial position:
Current portion
3,198
614,404
617,602
Non-current portion
-
1,333,345
1,333,345
3,198
1,947,749
1,950,947
Year ended 31 December 2020 - Group
Convertible loans (i)
-
815,539
815,539
Loan facilities (ii)
-
687,249
687,249
Embedded derivative (i)
21,718
-
21,718
Components listed under borrowings on the consolidated
and company statements of financial position
21,718
1,502,788
1,524,506
Trade and other payables excluding non-financial liabilities
(Note 15)
-
1,237,563
1,237,563
Components listed separately on the consolidated and
company statements of financial position
-
1,237,563
1,237,563
21,718
2,740,351
2,762,069
Borrowings comprise the following on the consolidated
and company statements of financial position:
Designated at fair
value
At amortised
cost
Total
Current portion
6,244
689,962
696,206
Non-current portion
15,474
812,826
828,300
21,718
1,502,788
1,524,506
80
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Borrowings continued...
Designated at fair
value
At amortised
cost
Total
Year ended 31 December 2021 - Company
Convertible loans (i)
-
1,414,845
1,414,845
Loan facilities (iI)
-
39,070
39,070
Embedded derivative (i)
3,198
-
3,198
Components listed under borrowings on the consolidated
and company statements of financial position
3,198
1,453,915
1,457,113
Trade and other payables excluding non-financial liabilities
(Note 15)
-
293,434
293,434
Components listed separately on the consolidated and
company statements of financial position
-
293,434
293,434
3,198
1,747,349
1,750,547
Borrowings comprise the following on the consolidated
and company statements of financial position:
Current portion
3,198
466,257
469,455
Non-current portion
-
987,658
987,658
3,198
1,453,915
1,457,113
Year ended 31 December 2020 - Company
Designated at fair
value
At amortised
cost
Total
Convertible loans (i)
-
815,539
815,539
Loans facilities (ii)
-
137,154
137,154
Embedded derivative (i)
21,718
-
21,718
Components listed under borrowings on the consolidated
and company statements of financial position
21,718
952,693
974,411
Trade and other payables excluding non-financial liabilities
(Note 15)
-
111,826
111,826
Components listed separately on the consolidated and
company statements of financial position
-
111,826
111,826
21,718
1,064,519
1,086,237
Borrowings comprise the following on the consolidated
and company statements of financial position:
Current portion
6,244
502,566
508,810
Non-current portion
15,474
450,127
465,601
21,718
952,693
974,411
81
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Borrowings continued...
16.2 i) Convertible loans and embedded derivative
The movement on each convertible loan liability
component can be summarised as follows:
Embedded
derivative
Convertible
loans - T
Leslie and M
Poole
14.5%
Convertible
loans -
Teichmann
Group
Total
Balance 1 January 2020
10,359
776,704
-
787,063
Finance charge: unwinding of discount factor
-
38,835
-
38,835
Fair value adjustment to embedded derivative
11,359
-
-
11,359
Balance 31 December 2020
21,718
815,539
-
837,257
Drawdown
-
-
941,146
941,146
Other equity - value of conversion rights
-
-
(94,680)
(94,680)
Repayments
-
(462,500)
-
(462,500)
Finance charge: unwinding of discount factor
-
74,148
141,192
215,340
Fair value adjustment to embedded derivative
(18,520)
-
-
(18,520)
Balance 31 December 2021
3,198
427,187
987,658
1,418,043
Convertible loans - T Leslie and M Poole
At 31 December 2021 the Group had in issue convertible loan stocks of £925,000
which had an initial term until 16 October 2021. On 27 February 2020, the Company
announced that 50% of the total loan had been transferred to Mr Tim Leslie, a non-
executive Director of BlueRock Diamonds Plc. The Group had an option, at their own
discretion, to increase the initial term by a further 12 months. This option was
exercised during the current period and the balance of the loan note is now payable
on 16 October 2022.
The terms of the convertible loan note provide a mechanism for weighted conversion
price revisions should additional funds be raised below the prevailing conversion price.
Following the fund raising in March 2022, the current conversion price is 72p.
This option to convert the loan into shares has been treated as a separate financial
instrument, as an embedded derivative. This is due to a clause in the updated
convertible loan note agreement which will require the Company to issue a variable
number of shares if future fundraising over life of the convertible loan note raises
additional funds at a price per Ordinary share of less than 5p. This requires a separate
valuation as it does not relate to the host contract.
In addition if the Company sells its interest in Kareevlei Mining Proprietary Limited
("subsidiary") before the final repayment date for consideration equivalent to or greater
than 120% of the loan note outstanding then the notes will become redeemable and a
20% premium will be payable to the note holder.
Management have carried out an assessment of the terms of the convertible loan and
have judged that the instrument consists of two components:
• a loan instrument; held at amortised cost
• an embedded derivative representing the conversion option as the option fails the
fixed for fixed criteria and the embedded redemption feature.
The embedded
derivative should be recognised separately as a derivative financial instrument at fair
value through profit and loss
82
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Borrowings continued...
A fair value exercise to determine the value of the two components was undertaken by
the Directors at the date the convertible loan was initially drawn down. The fair value
of the host loan instrument (including the embedded redemption feature) has been
valued as the residual of:
• The fair value of the first draw down on 16 October 2014 was discounted at a
commercially applicable rate of 9.25%. The fair values of the draw downs on 27 May
2016 and 2 October 2016 have been discounted at a commercially applicable rate of
10.5%.
Refer to note 31 for details of the fair value of the embedded derivative.
14.5% Convertible loans - Teichmann Group
On 20 September 2021, the Group entered into an agreement to issue a total of 161
14.5% convertible notes for £1,610,000 to the Teichmann Group. £941,147 was
received during the year, with the balance being received after year end. The loan
notes are convertible into ordinary shares of the entity, at 1) the election of the
holder, 2) election of the entity if and when its shares trade in excess of £0.60 per
share, 3) on the automatic conversion dates as stipulated in the agreement or 4) on
30 November 2024, the maturity date. The loan notes are convertible into 6,465,247
ordinary shares. Interest are payable on the maturity date.
The initial fair value of the liability portion of the bond was determined using a market
interest rate for an equivalent non-convertible bond at the issue date. The liability is
subsequently recognised on an amortised cost basis until extinguished on conversion
or maturity of the bonds. The remainder of the proceeds are allocated to the
conversion option and recognised in shareholders’ equity (net of income tax), due to
the fact that it meets the "fixed for fixed" test as the number of conversion shares are
determined at the issue date. It is not subsequently remeasured. Details are shown in
note 12.2.
ii) Loan facilities
Loan
facilities
comprise
the
following:
Group
2021
Group
2020
Company
2021
Company
2020
Loan: M Poole
39,070
72,013
39,070
72,013
Loan: A Waugh
-
65,141
-
65,141
Loan: Numovista Pty Ltd
493,834
550,095
-
-
532,904
687,249
39,070
137,154
Current portion
187,217
301,610
39,070
114,214
Non-current portion
345,687
385,639
-
22,940
532,904
687,249
39,070
137,154
M Poole
In 2017 the Company entered into a loan facility agreement with Mark Poole. A 90 day interest free
period was included in the agreement from the date of the first draw down. After this point interest
accrues on the capital balance at a rate of 10% per annum, which is payable quarterly in arrears. All
capital to be repaid within 5 years from the date of the draw down on the facility.
83
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Borrowings continued...
Additionally a security over the property, plant and equipment of Kareevlei Mining (Pty) Limited is
held, see note 5 for further detail.
During the period ended 31 December 2021 an interest charge of £5,150 (2020: £9,716) was
recognised on the total capital drawn down. Outstanding at the period ended 31 December 2021 was
£33,566 capital and £5,504 interest.
Numovista Pty Ltd
During March 2020 Kareevlei Mining (Pty) Ltd entered into a sale of assets agreement with
Numovista Pty Ltd whereby mining equipment was purchased from Numovista (Pty) Ltd. Ownership
of the equipment transferred with the payment of the initial deposit. The balance of the loan is
repayable in 36 monthly instalments of £18,395. The effective interest rate is 9.75%.
84
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Borrowings continued...
16.3 Financial liability maturity analysis
The tables below analyse the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities.
The amounts disclosed in the table are the contractual undiscounted
cash flows. Balances due within 12 months equal their carrying
balances as the impact of discounting is not significant.
Between 3 months
and
1 year
Between 2
and 5 years
Over 5 years
Total
Year ended 31 December 2021 - Group
Trade
and
other
payables
excluding
non-
financial liabilities (Note 15)
2,739,672
-
-
2,739,672
Convertible loans
462,500
987,658
-
1,450,158
Loan facilities
228,861
351,198
-
580,059
Embedded derivative
3,198
-
-
3,198
Lease liabilities
89,122
348,702
338,136
775,960
3,523,353
1,687,558
338,136
5,549,047
Year ended 31 December 2020 - Group
Trade
and
other
payables
excluding
non-
financial liabilities (Note 15)
1,237,563
-
-
1,237,563
Convertible loan
388,352
427,187
-
815,539
Loan facilities
301,610
385,639
-
687,249
Embedded Derivative
6,244
15,474
-
21,718
Lease liabilities
24,785
179,889
371,854
576,528
1,958,554
1,008,189
371,854
3,338,597
Year ended 31 December 2021 - Company
Trade
and
other
payables
excluding
non-
financial liabilities (Note 15)
293,435
-
-
293,435
Convertible loans
462,500
987,658
-
1,450,158
Loan facilities
39,070
-
-
39,070
Embedded Derivative
3,198
-
-
3,198
798,203
987,658
-
1,785,861
Year ended 31 December 2020 - Company
Trade
and
other
payables
excluding
non-
financial liabilities (Note 15)
111,826
-
-
111,826
Convertible loan
388,352
427,187
-
815,539
Loan facilities
114,214
22,940
-
137,154
Embedded Derivative
6,244
15,474
-
21,718
620,636
465,601
-
1,086,237
85
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
17. Revenue from contracts with customers
17.1 Revenue comprises:
Group
2021
Group
2020
Sale of diamonds
7,846,588
3,601,819
The revenue from the sale of rough diamonds is recognised at the point in time at which control transfers. Control of
the rough diamonds are transferred to the buyer when the tender closes.
17.2 Segmental reporting
Operating segments are identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their
performance.
The Group's operations relate to the exploration for, and development of mineral deposits in the Kimberley region of
South Africa and as such the Group has only one reportable segment. The non-current assets in the Kimberley
region are £7,163,138 (2020: £3,850,781). The majority of revenue consists of sales of diamonds in South Africa
through auctions as is customary in the industry. The Group sells its diamonds through auctions run by CS
Diamonds. During the year, the Company sold polished diamonds to the value of £8,277 (2020: £nil), to buyers in
the UK.
18. Other gains and losses
Other gains and losses comprise:
Group
2021
Group
2020
Gain or loss on disposal of assets
16,488
853
Other gains - operating activities
16,488
853
Gain or loss on foreign exchange differences
(929,714)
(481,779)
Fair value (loss)/gains on derivatives
18,520
(11,359)
Other losses - non-operating activities
(911,194)
(493,138)
Total other gains and losses
(894,706)
(492,285)
86
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
19. Loss from operating activities
Loss from operating activities includes the
following separately disclosable items
Group
2021
Group
2020
Operating expenses
Operational and direct costs (excluding direct
labour costs)
5,900,547
3,049,884
Property plant and equipment
- depreciation
294,393
221,321
- impairment loss
83,392
-
Right-of-use assets
- depreciation
74,545
55,030
Mining assets
- amortisation
99,303
31,821
Inventory on hand
- Diamond stock movement
(64,234)
170,535
- Stockpiles and consumables movement
(333,439)
127,593
Share-based payments
- Equity-settled share-based payments
89,557
266,129
Staff costs
1,689,326
1,107,426
Auditor's remuneration
Audit fees - audit of financial statements
58,500
60,400
Audit fees - audit of accounts of subsidiary of
Company
17,931
32,386
76,431
92,786
Staff numbers and costs
Group
2021
Group
2020
Company
2021
Company
2020
Directors' remuneration
346,458
278,855
220,375
165,233
Staff salaries
1,342,868
828,571
25,333
20,440
1,689,326
1,107,426
245,708
185,673
Refer to note 27.3 for further details of directors' remuneration and key management personnel's remuneration.
The table above relates to the Directors remuneration, key management personnel and employees of the Group.
2021
2020
Number
Number
Directors
5
4
Administration and production
102
86
107
90
87
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
20. Finance income
Finance income comprises:
Group
2021
Group
2020
Interest received from financial institutions
31,552
24,209
21. Finance costs
Finance costs included in profit or loss:
Group
2021
Group
2020
Finance charges - trade and other payables
5,166
9,424
Finance charges - loan facilities
58,952
64,816
Finance charges - convertible loan notes
215,340
38,835
Finance charges - leases
54,386
51,376
Finance charges - provisions
32,272
27,761
Finance charges - financial institutions
18,172
55,810
Total finance costs
384,288
248,022
22. Income tax expense
22.1 Income tax recognised in profit or loss:
Group
2021
Group
2020
Deferred tax
Originating and reversing temporary differences
-
-
22.2 The income tax for the year can be reconciled
to accounting loss as follows:
Group
2021
Group
2020
Loss before tax from operations
(1,348,897)
(2,988,808)
Income tax calculated at 19% (2020: 19%)
(256,290)
(567,874)
Tax effect of
- Differences in rates (South African tax)
(43,722)
(207,788)
-
-
-
(Income)/Expenses
not
deductible
for
tax
purposes
262,799
253,132
-
253,132
Unrecognised tax losses and timing differences
37,213
522,530
-
-
Tax charge
-
-
The Group has gross tax losses carried forward of £5,263,235 (2020: £3,329,158) for which no deferred tax asset is
recorded given insufficient certainty regarding the timing of future taxable profits.
88
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
23. Share-based payments
23.1 The Company had the following share based payment agreements which are described below:
Type of arrangement
Date of grant
Number of
shares granted Contractual life
Exercise
price
Directors
share
option
plan
-
Tranche 5
19/01/2017
4,454
5 years
2,500p
Directors
share
option
plan
-
Tranche 9
16/05/2019
228,060
5 years
50p
Directors
share
option
plan
-
Tranche 10
18/02/2020
130,320
5 years
85p
Directors
share
option
plan
-
Tranche 11
18/02/2020
465,615
5 years
85p
Tranche 5 have fully vested.
Tranche 9 options are split with half vesting 1 year from the date of grant and half vesting immediately on the date of
grant. Tranche 9 options have fully vested.
Tranche 10 options vested immediately on the date of grant.
Tranche 11 options are split with half vesting 1 year from the date of grant and half vesting 2 years from the date of
grant.
23.2 Movements in the number of share options outstanding and their related weighted average exercise prices
are as follows:
Weighted
average
exercise price
in pence
2021
Options
2021
Weighted
average
exercise
price in
pence
2020
Options
2020
Outstanding at the beginning of the period
132.77
828,450
132.77
234,066
Granted during the period
-
-
85.00
595,935
Expired during the period
-
-
5,500.00
(1,551)
Outstanding at the end of the period
132.77
828,450
132.77
828,450
Exercisable at the end of the period
89.66
595,642
92.65
362,835
89
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Share-based payments continued...
23.3 Options granted during the year
Options are valued at the date of grant using the Black-Scholes option pricing model.
No new share options were granted and valued during the year.
The fair value per option of options granted during 2019 and 2020 and the assumptions used in the calculations are
shown below:
2019
2020
Tranche 9
Tranche 10
Tranche 11
Average grant date share price (p)
67.50
88.00
88.00
Average exercise price (p)
50.00
85.00
85.00
Share price volatility (p.a)
86 %
83 %
83 %
Risk-free interest rate (p.a)
0.83%
0.48%
0.48%
Dividend yield (p.a)
0 %
0 %
0 %
Average contractual life (years)
5.00
5.00
5.00
Average fair value per option (p)
48.43
57.70
57.70
23.4 Share based payment expense
The total share-based payment expense for the year ended 31 December 2021 was £89,558 (2020: £266,127) in
relation to share options.
24. Earnings per share
24.1 Basic earnings per share
Group
2021
Group
2020
Loss for the year attributable to owners of the
Company
(1,222,590)
(2,388,532)
Weighted average number of ordinary shares
12,970,498
6,753,581
12,970,498
6,753,581
Basic loss per share
(0.09)
(0.35)
(0.07)
(0.10)
24.2 Additional disclosures
Share options granted to directors and convertible loan notes issued, could potentially dilute earnings per share in
the future, but are not included in a dilutive earnings per share calculation, because they are antidilutive for the
period.
90
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
25. Contingent liabilities
Dispute with former director
Group
2021
Group
2020
Company
2021
Company
2020
Estimated financial effect
51,565
55,424
51,565
55,424
The amount payable to CB Visser and his related companies as disclosed in Note 15, is currently under dispute. CB
Visser is a former director and CEO of both Kareevlei Mining (Pty) Ltd and BlueRock Diamonds Plc. who resigned
during September 2016. The total claim submitted by him amounts to £222,164 of which £170,598 has been
accounted for under trade and other payables. The Group has given security for the amount of £206,418 in respect
of the above claim. This security is held in trust by the Group's lawyers. The Group's legal advisors are of the
opinion that based on current available information, the claims are without merit.
91
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
26. Cash used in operations
Group
2021
Group
2020
Company
2021
Company
2020
(Loss)/profit before taxation
(1,348,897)
(2,988,808)
(863,101)
(680,058)
Adjustments for non-cash items
Interest accrued on Group loan
-
-
(769,700)
(615,074)
Interest accrued on convertible
loan notes
215,340
38,835
215,340
38,835
Interest accrued on borrowings and leases
111,306
116,193
4,569
19,860
Interest on rehabilitation provision
32,272
27,761
-
-
(Increase) / decrease in inventories
(397,673)
298,127
-
-
(Increase) / decrease in trade and
other receivables
(54,565)
14,910
111,349
(57,187)
Increase in trade and other
payables
2,311,680
401,035
181,614
50,419
Depreciation and amortisation
468,241
308,172
-
-
Impairment losses recognised in
profit or loss
83,392
-
-
-
Share-based payments
89,557
266,127
89,557
266,127
Fair value movement on derivatives
(18,520)
11,359
(18,520)
11,359
Foreign exchange movements
929,714
481,779
868,430
435,318
Gains on disposal of property,
plant and equipment
(16,488)
(853)
-
-
Total non-cash adjustments
3,754,256
1,963,445
682,639
149,657
Cash used in operations
2,405,359
(1,025,363)
(180,462)
(530,401)
Reconciliation of liabilities from financing
Convertible
loan notes
Loans and
borrowings
Lease
liabilities
Total
Group:
At 1 January 2020
776,704
286,125
467,703
1,530,532
Cash flows:
Repayment
-
(245,237)
(66,380)
(311,617)
Non-cash flows:
Loans converted into share capital
-
(11,938)
-
(11,938)
Financial liabilities raised and modifications
-
593,482
151,655
745,137
Interest accruing
38,835
64,817
51,376
155,028
Decrease through net exchange differences
-
-
(27,826)
(27,826)
At 31 December 2020
815,539
687,249
576,528
2,079,316
Cash flows:
Draw down
941,146
-
-
941,146
Repayment
(462,500)
(147,625)
(87,750)
(697,875)
Non-cash flows:
Loans converted into share capital
-
(26,356)
-
(26,356)
Value of conversion option
(94,680)
-
-
(94,680)
Financial liabilities raised and modifications
-
-
107,420
107,420
Interest accruing
215,340
56,920
54,386
326,646
Decrease through net exchange differences
-
(37,284)
(41,962)
(79,246)
At 31 December 2021
1,414,845
532,904
608,622
2,556,371
92
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Cash used in operations continued...
Convertible
loan notes
Loans and
borrowings
Lease
liabilities
Total
Company:
At 1 January 2020
776,704
286,125
-
1,062,829
Cash flows:
Repayment
-
(156,892)
-
(156,892)
Non-cash flows:
Loans converted into share capital
-
(11,938)
-
(11,938)
Interest accruing
38,835
19,860
-
58,695
At 31 December 2020
815,539
137,155
-
952,694
Cash flows:
Draw down
941,146
-
-
941,146
Repayment
(462,500)
(76,298)
-
(538,798)
Non-cash flows:
Loans converted into share capital
-
(26,356)
-
(26,356)
Value of conversion option
(94,680)
-
-
(94,680)
Financial liabilities raised and modifications
-
-
-
-
Interest accruing
215,340
4,569
-
219,909
At 31 December 2021
1,414,845
39,070
-
1,453,915
All movements on derivatives were non-cash.
27. Related parties
27.1 Relationships
Name
Nature of relationship
William van Wyk
Minority interest in Kareevlei Mining (Pty) Ltd
Ghaap Mining (Pty) Ltd
William van Wyk is a majority shareholder of this company
Subsidiaries:
Kareevlei Mining Proprietory Limited
Diamond Resources Proprietory Limited
BlueRock Management Services Limited
Teichmann South Africa (Pty) Ltd
Associated company of significant shareholder in BlueRock
Diamonds Plc
Numovista Pty Ltd
Common shareholder with significant influence
93
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Related parties continued...
27.2 Related party transactions and balances
Group
2021
Group
2020
Company
2021
Company
2020
Loan account - Owing by related party
Kareevlei Mining Proprietory Limited
-
-
11,492,128
9,784,358
Management fees owing by related party
Kareevlei Mining Proprietory Limited
-
-
654,874
575,674
Trade payables due to related party
Teichmann South Africa (Pty) Ltd
1,183,055
277,436
-
-
Numovista Pty Ltd
493,833
550,095
-
-
Transactions with related parties
Kareevlei Mining Proprietory Limited
- Interest received
-
-
769,700
615,074
- Management fees received
-
-
250,315
79,200
Teichmann South Africa (Pty) Ltd
- Contractor fees paid
3,651,904
1,176,476
-
-
Numovista Pty Ltd
- Purchase of plant and equipment
-
650,000
-
-
Ghaap Mining (Pty) Ltd
- Contractor fees paid
69,673
56,655
-
-
Diamond sales
- D Facey
2,062
-
2,062
-
Diamond sales to related parties were made at market value.
William van Wyk
- Interest paid
2,598
3,083
-
-
As at 31 December 2021 the balance payable on the vehicle lease facilities entered into with William van Wyk was
£18,762 (2020: £27,264).
AT Simbanegavi
- Interest paid
2,144
-
-
-
As at 31 December 2021 the balance payable on the vehicle lease facilities entered into with AT Simbanegavi was
£33,167 (2020: £nil).
94
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Related parties continued...
Refer to note 16.2 for convertible loan note related party transactions.
27.3 Compensation paid to Directors and key management personnel
Directors:
MJ Houston - received fees of £79,167 (2020: £59,500)
TG Leslie - received fees of £20,833 (2020: £19,167)
D Facey - received fees of £81,000 (2020: £59,000)
AT Simbanegavi - received fees of £30,000 (2020: £27,500)
RC Croll - received fees of £9,375 (2020: £nil)
Key management personnel:
AT Simbanegavi - received a salary from Kareevlei Mining Proprietory Limited of £119,621 (2020: £113,622)
RC Croll - received fees from Kareevlei Mining Proprietory Limited of £6,462 (2020: £nil)
27.4 Placing and subscriptions
The Directors subscribed to the following shares and share options during the
year:
Name
Number of
ordinary
shares issued
Share options
issued
MJ Houston (Executive Chairman)
100,000
-
DA Facey (Chief Financial Officer)
50,000
-
150,000
-
28. Events after the reporting date
Fundraising
During March 2022 the Company successfully raised an aggregate before expenses of £2.100,000 via the issue of
6,000,000 ordinary shares of 5 pence each in the capital of the Company through a placing and subscription at 35
pence per new share. Additionally trade payables of £579,514 were settled through the issue of 1,655,753 shares at
35 pence per share.
The remaining balance of £668,853 of the convertible loan notes issued to the Teichmann Group during 2021, was
received after year end.
29. Financial risk management
29.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, price risk and cash
flow interest rate risk), credit risk and liquidity risk.
95
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Financial risk management continued...
29.2 Market Risk
29.2.1 Foreign exchange risk
Management has set up a policy to require Group companies to manage their foreign exchange risk against their
functional currency. To manage their foreign exchange risk arising from future commercial transactions and
recognised assets and liabilities, entities in the Group may use forward contracts. Foreign exchange risk arises
when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the
entity’s functional currency. There is no material Group exposure to foreign currency exchange risk. The Company's
exposure to foreign currency risk relating to these financial instruments are as follows:
Company
2021
Company
2020
Trade receivables
654,874
575,674
Amounts due by subsidiary
11,492,128
9,784,358
Sensitivity analysis
At 31 December 2021, if the pound sterling had weakened/strengthened by 12% against the South African Rand
with all other variables held constant, post-tax loss for the year would have been £66k lower (2020: £247k) or £52k
higher (2020: £314k), mainly as a result of foreign exchange gains or losses on translation of South African Rand
denominated trade receivables and Intragroup borrowings. The exchange rates used for conversion of South African
rand monetary items to Sterling were – 2021: 20.33 (2020: 21.07).
29.2.2 Price risk
The profitability of mining operations is directly related to the prevailing diamond price. Historically, diamond prices
have been volatile and are affected by numerous factors which the Group is unable to control or predict, including
world production levels, international economic trends, industrial and consumer demand, currency exchange
fluctuations, seasonality, speculative activity and political events.
The Group realises US Dollars for its diamond sales, and reports its results in Pounds Sterling. Should the South
African Rand strengthen against the Pound, the costs of the Group’s mining operations, which are largely
denominated in South African Rand, may be adversely affected. Should the US Dollar weaken against the Pound,
the Group’s revenues may be reduced.
Should market prices for raw materials, services and equipment, such as diesel or mining equipment increase, the
Group’s results may be adversely affected. The Group seeks to obtain the best rate for each product or service,
taking into account price, service quality and reliability.
Sensitivity analysis
An increase in the average US Dollar diamond price per carat of 10%, with all other variables held constant would
have decreased post-tax loss by £784k (2020: £360k), while a decrease would have increased post-tax losses by
£784k (2020: £360k).
29.2.3 Interest rate risk
The Group has borrowings that incur interest at fixed rates and therefore does not have significant risk relating to
movements in interest rates. The Group’s fixed rate borrowings comprise convertible loan notes and loan facilities
which incur interest at fixed interest rates of between 10% and 14.50%.
96
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Financial risk management continued...
29.2.4 Covid 19 risk
Possible further shutdown
There is a risk that the South African Government may impose further shutdowns should the spread of the infection
increase. There have been limited infections to date at the mine and the Group has taken measures to protect its
employees and has plans in place to detect and isolate cases.
29.2.5 Ukraine and Russia conflict risk
The conflict betweeen Ukraine and Russia has resulted in constraints to the global supply of rough diamonds, as
Russia accounted for 25%-30% of rough diamond supplies. The shortage in supply has resulted in an increase in
rough diamond prices achieved since the conflict started. Our expectation is that this trend will continue in the short-
to medium-term. The long-term effect of a long and drawn-out conflict is very difficult to predict. Abnormally high
diamond prices, coupled with the global increase in inflation rates, might lead to consumer demand waivering.
Management is constantly monitoring the situation in the market and prevailing trends in order to take quick and
decisive actions to mitigate any risks to the business.
The conflict has resulted in a substantial increase in fuel prices, with the expectation that this trend will continue until
the conflict is resolved. This has had a negative impact on the Group's operating costs, as fuel constitutes a large
portion of its mining and processing costs. Management mitigates this risk by negotiating favourable prices in
advance, with its long-term preferred fuel supplier.
29.3 Credit risk
Credit risk consists mainly of cash deposits and cash equivalents. The Group only deposits cash with major banks
with high quality credit standing and limits exposure to any one counter-party.
The credit risk on receivables from subsidiaries is significant and their recoverability is dependent on the discovery
and successful development of economic reserves by these subsidiaries' undertakings. Given the nature of the
Group’s business significant amounts are required to be invested in exploration activities. The Directors manage this
risk by reviewing expenditure plans and budgets in relation to projects. This review ensures that any expenditure is
value-enhancing and as a result the amounts receivable will be recoverable subject to successful discovery and
development of economic reserves. The maximum credit exposure of the Company as at 31 December 2021 was
£13,192,307 (2020: £11,033,747) of which £12,147,002 (2020: £9,784,358) is related to the subsidiary loan. The
maximum credit risk of the Group as at 31 December 2021 was £1,284,269 (2020: £732,125).
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for the subsidiary loan receivable and considered scenarios including recovery via future
production, via sale of licences and a scenario in which the loan cannot be realised.
Based on analysis of forecasts and the underlying Inferred Resource value no expected credit loss provision is
considered to apply.
29.4 Liquidity risk
The Group’s risk to liquidity is a result of the funds available to cover future commitments. The Group manages
liquidity risk through an ongoing review of future commitments and credit facilities. The maximum exposure from the
Group's financial liabilities, including borrowings, lease liabilities and trade and other payables are set out in note
16.2.
97
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
Financial risk management continued...
29.5 Capital risk management
The Group's capital management objectives are:
• to safeguard the Group's ability to continue as a going concern and provide access to adequate funding for its
exploration and development project so that it continues to provide returns and benefits to shareholders;
• to support the Group's growth; and
• to provide capital for the purpose of strengthening the Group's risk management capability.
The Group actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and
equity holder returns, taking into consideration the future capital requirements of the Group including planned
exploration work and capital efficiency, projected profitability, projected operating cash flows and projected capital
expenditures. Management regards total equity as capital and reserves, for capital management purposes If
additional equity funding should be required, the Group may issue new shares.
30. Fair value measurement of financial instruments
Financial liabilities measured at fair value in the statement of financial position are Grouped into three Levels of a fair
value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as
follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly
• Level 3: unobservable inputs for the asset or liability.
The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a
recurring basis as at each year end:
Financial liabilities held at fair value through
profit and loss:
Group
2021
Group
2020
Company
2021
Company
2020
Embedded derivative (level 3)
3,198
21,718
3,198
21,718
The Group’s management team perform valuations of financial items for financial reporting purposes, including Level
3 fair values. Valuation techniques are selected based on the characteristics of each instrument, with the overall
objective of maximising the use of market-based information.
Embedded derivative (level 3)
The derivative financial instrument is a level 3 valuation as it is not possible to observe all future additional financing
requirements for the Group to perpetuity. Therefore, the future conversion price of the convertible loan notes may be
reduced. As a result the derivative has been valued using the Monte-Carlo simulation with 5,000 iterations to
anticipate the Group share price movements to provide a valuation for the convertible loan note. Inputs included in
the Monte Carlo simulation were: the Company’s historical and current share price, the convertible loan exercise
price, the risk-free rate of return, the convertible loan grant date and vesting period.
98
BlueRock Diamonds Plc
(Registration Number 08248437)
Annual Report and Financial Statements for the year ended 31 December 2021
Notes to the Annual Report and Financial Statements
Figures in £
31. Ultimate controlling party
The Group considers that there is no ultimate controlling party.
99