CADENCE MINERALS PLC
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 2018
Company No 05234262
CADENCE MINERALS PLC
COMPANY INFORMATION
For the year ended 31 December 2018
___________________________________________________________________________________
Company registration number:
05234262
Registered office:
Directors:
Suite 3B Princes House
38 Jermyn Street
London
SW1Y 6DN
Andrew Suckling (Non-Executive Chairman)
Kiran Morzaria (Chief Executive Officer)
Don Strang (Executive Finance Director)
Adrian Fairbourn (Non-executive Director)
Secretary:
Don Strang
Nominated adviser and
Nominated broker:
Registrars:
Bankers:
Solicitors:
Auditors:
W. H. Ireland Limited
24 Martin Lane
London
EC4R 0DR
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Barclays Bank Plc
1 Churchill Place
London
E14 5HP
Hill Dickinson LLP
The Broadgate Tower
20 Primrose Street
London
EC2A 2EW
Chapman Davis LLP
Registered Auditor
Chartered Accountants
2 Chapel Court
London
SE1 1HH
CADENCE MINERALS PLC
CONTENTS
For the year ended 31 December 2018
___________________________________________________________________________________
Chairman's Statement .................................................................................................................................................... 1
Strategic Report ............................................................................................................................................................ 2
Report of the Directors ................................................................................................................................................ 10
Corporate Governance ................................................................................................................................................ 13
Report on remuneration .............................................................................................................................................. 23
Independent Auditors report to the members of Cadence Minerals PLC .................................................................... 25
Consolidated Statement of Comprehensive Income ................................................................................................... 29
Consolidated and Company Statement of Financial Posititon .................................................................................... 30
Consolidated and Company Statement of Changes in Equity ..................................................................................... 32
Consolidated and Company Statement of Cash Flows................................................................................................ 34
Company Statement of Cash Flows ............................................................................................................................ 35
Principal Accountung Policies .................................................................................................................................... 36
Notes to the Financial Statements ............................................................................................................................... 45
Forward-looking Statement
This annual report contains ‘forward-looking information’, which may include, but is not limited to, statements with respect to the future
financial and operating performance of Cadence Minerals, its subsidiaries, investment assets and affiliated companies, the estimation of mineral
resources, the realisation of mineral resource estimates, costs of production, capital and exploration expenditures, costs and timing of the
development of new deposits, requirements for additional capital, governmental regulation of mining operations and exploration operations,
timing and receipt of approvals, licenses, environmental risks, title disputes or claims.
Often, but not always, forward-looking statements can be identified by the use of words such as ‘plans’, ‘expects’, ‘is expected’, ‘budget’,
‘scheduled’, ‘estimates’, ‘forecasts’, ‘intends’, ‘anticipates’ or ‘believes’, or variations (including negative variations) of such words and
phrases, or state that certain actions, events or results ‘may’, ‘could’, ‘would’, ‘might’ or ‘will’ be taken, occur or be achieved. Forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements
of Cadence and/or its subsidiaries, investment assets and/or its affiliated companies to be materially different from any future results,
performance, or achievements expressed or implied by the forward-looking statements.
Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current
exploration activities; conclusions of economic evaluations and studies; fluctuations in the value of UK Pounds Sterling relative to the United
States Dollar, and other foreign currencies; changes in project parameters as plans continue to be refined; future prices of products; possible
variations of ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other
risks of the mining industry; political instability, adverse weather conditions, insurrection or war; delays in obtaining governmental approvals
or financing or in the completion of development or construction activities.
Although Cadence has attempted to identify important factors that could cause actual actions, events or results to differ materially from those
described in forward-looking statements, there may well be other factors that cause actions, events or results to differ from those currently
anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date of this annual report and Cadence disclaims any obligation to update any
forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that
forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.
Nothing in this annual report should be construed as a profit forecast.
CADENCE MINERALS PLC
CHAIRMAN'S STATEMENT
For the year ended 31 December 2018
___________________________________________________________________________________
The year for Cadence can be characterized by consolidation and cost cutting. The board has continued to support our
investee companies whilst also identify new opportunities. This approach has been both a course of prudence and
patiently waiting for the right opportunity. Cadence has continued to review and evaluate a number of projects globally
whilst continuing to focus on our existing investments.
There has been increasing downward pressure on the Lithium price and therefore the global sector, mostly due to
expectations that supply is increasing. We are waiting to see this actually play out, and Cadence still subscribes to the
belief in an increase globally in electric vehicle demand and electric storage. This will underpin the demand for
lithium, cobalt, nickel and rare earth elements.
The recent announcement of Cadence involvement in The Amapa Iron Ore project (“Amapa”) fits precisely with the
company’s strategy of searching for stakes in assets that are currently unlisted but can provide excellent returns. We
plan to divert and re deploy some of the profits from earlier stakes into bigger stakes just like this one. Cadence
believes the Amapa Iron Ore opportunity to be transformational at a critical time in the Iron Ore market.
The introduction of the American Mineral Act in May 2019 by US Senator Murkowski highlights the increasing focus
on the sectors Cadence specializes in. Our principal investments in Yangibana North project , Clancy and San Luis
Argentina fit this vision of strategic metals perfectly.
We have continued to witness consolidation in the Industry and Cadence congratulates Bacanora Lithium Plc
(“Bacanora”) on the recent interest and involvement of Gangfeng. This will support and hopefully accelerate the route
to operation and eventual production. Whilst our equity stake is lower our JV interest just became increasingly
valuable.
The Board of Cadence have increasing confidence in the potential for Macarthur Minerals (“MMS”) and European
Metal Holdings (“EMH”) to accelerate in the coming months and provide significant returns. The news of an off take
arrangement with Glencore for MMS was a significant milestone to production. EMH continue on a careful and
considered path to operation and success.
Cadence fully believes are prospects are growing and we have weathered a very difficult period and are embarking on
an exciting phase with the investment into the Iron Ore market. Whilst witnessing real progress at our investee
companies.
We continue to view the opportunities Cadence is focused upon with confidence and excitement. We will support
projects to production and continue to evaluate new projects. However there will be a real focus on the huge potential
we see in Amapa Iron Ore.
The directors would like to thank our shareholders, staff and consultants for their continued support.
Andrew Suckling
Non Executive Chairman
29 May 2019
Page 1
CADENCE MINERALS PLC
STRATEGIC REPORT
For the year ended 31 December 2018
___________________________________________________________________________________
CHIEF EXECUTIVE OFFICER’S REVIEW
Cadence’s portfolio of investments is well spread along the development curve from early exploration to pre-
construction and, by our assessment, these investments have the right cost structure and scale to potentially be
significant contributors to their respective supply chains and represent a substantial return on investment.
One of the investments identified in the middle of 2018 and consummated in May 2019 was a non-binding heads of
terms to invest in and acquire up to a 27% (for US$6 million) interest in the former Anglo American plc and Cliffs
Natural Resources Amapá iron ore mine, beneficiation plant, railway and private port.
Prior to its sale in 2012 Anglo American valued its 70% stake in the Amapá Project at US$866 million (100% 1.2
billion) and after impairment at US$462m in its 2012 Annual Report ( 100% US$600m) and during its operation the
mine generated an annual operating profit of up to U$171 million (100%).
It is rare in our industry to have the opportunity to be able to invest in such a project and we believe this project
provides us with a potentially transformative asset for our Company. The Amapá Project gives Cadence the potential
for an exceptional return on investment (ROI) in the run-up to full production and an opportunity to become a
significant shareholder in a mid-tier iron ore producer.
Of our other investments of note, was the progress that European Metals Holdings have made during the year. It has
improved roast recoveries in their lab test work, received approvals to carry out both geotechnical drilling and
definitive feasibility study drilling. Also, European Metals Holdings commenced a revised pre-feasibility study to
produce lithium hydroxide. Given the pricing and demand for this compound, we would hope to see an improvement
in the economics of the projects.
During the year Macarthur Minerals Limited focused its efforts on the early exploration of its gold, nickel and lithium
projects in Western Australia. However, at the end of the year and after the year-end Macarthur Minerals Limited
focused on its substantial Iron Ore Projects in the Yilgarn Region of Australia securing Glencore International as an
offtake and funding partner of the project.
At projects level Bacanora Lithium Plc continued to make progress during the year. However, as a result of market
volatility in the lithium markets, Bacanora decided not to proceed with the equity portion of its project financing. It is
continuing the front-end engineering design of the project and has drawn down US$25 million of its US$150 million
debt facility. After the year-end Bacanora announced that it had entered non-binding heads of terms with Ganfeng
Lithium Co., Ltd, the world third largest lithium compounds producer. The heads terms included the subscription for
a 29.99% interest in Bacanora, in addition to an initial 22.5% direct interest in the Sonora Lithium Project with an
option to increase up to 50% of the Project. In also included an additional long-term offtake for the project.
Strategy
Cadences’ strategy has evolved significantly since 2014. Its focus during this year is to invest in earlier stage
exploration projects or assets that are in distressed situations. This is typically where the largest return is obtained for
relatively low levels of investment capital. The risk associated with investing in any resource projects at these stages
is high, therefore, and to mitigate this risk, our goal from the outset is to obtain a deep fundamental understanding of
the asset, its potential economics, operating and legal environment and its management team.
By doing so, we can eliminate many of the potential investments that we review during the year and fund projects that
we believe will deliver value to our shareholders. We look to fund projects via earning in, at solely our option, and if
possible, look to incentivise our joint venture partners via equity in Cadence against deliverables that will add value.
Importantly we also take an active approach to our investments by being part of the management team and enshrining
our minority shareholder protections in joint venture agreements.
During the 12 months, we reviewed numerous projects and completed two after the year-end. The first was adding
several prospective lithium assets (exploration licenses) via our investment in Lithium Supplies and Lithium
Technologies and the second was our heads of terms to acquire 27% of the Amapá iron ore mine, beneficiation plant,
railway and private port.
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CADENCE MINERALS PLC
Outlook
The future remains very exciting for the Company. Our key investments, European Metals Holdings, Macarthur
Minerals, the Amapa project and Bacanora have all started the current financial year well and appear to be progressing
towards production. We will continue to review our investments in our investee companies, with regular meetings
with management. Importantly we will continue to examine the market perception of lithium and if required, ensure
we limit our exposure to further downside in our equity positions.
LITHIUM MARKET REVIEW
In the early part of 2018, we saw several negative forecasts for pricing, based erroneously on the “wave” of supply
from current expansion and several other assets forecast to come online; these analysts still fail to understand the
industry. In making this forecast, they have applied some of the most optimistic factors to construction and
commissioning and applied a linear approach to growth curves, which for a disruptive technology such as EV’s, is
inappropriate.
Our forecast suggests that there could be up to 800kt lithium compound demand by 2025. The big caveat to this is
that supply comes online in time and projects gets financed. It is the latter point that Cadence sees as the largest
constraint to EV adoption. In essence, there is a pipeline of projects which would allow the penetration of EV’s of
25%. However the vast majority of these do not have financing in place, by our estimates there is some US$15 billion
to be invested to hit production targets and in addition given the timelines to production it seems unlikely that there
will be enough supply to deliver 800kt of lithium per annum by 2025, which will mean continued supply constraints.
We continue to see plenty of evidence demand growth; Benchmark Mineral Intelligence is now tracking 49 battery
mega-factories, up from just 2 back in 2014. The combined planned capacity of these plants is 658 GWh. To put that
into perspective the total lithium-ion cell demand in 2017 was estimated at 100 GWh.
By most of the measures in supply and demand dynamics, whether it be constrained supply chains, strong product
pricing or build out capacity for the product, the long-term outlook for lithium and lithium compounds remains strong.
When we look at pricing over the period, several detractors will point to the drop in the price of Lithium compounds
in China. The reality is that Chinese pricing was influenced in part by brine projects in China needing to sell below
battery grade lithium carbonate to fund operations. To us, the most representative pricing of battery grade lithium
carbonate is from South America where pricing continued to increase over the year and currently trades between
US$13,000 and US$15,000 per tonne of battery grade lithium carbonate.
INVESTMENT REVIEW
The lithium sector 2018 was marked by some analysts forecasting a wave of supply of lithium compounds and a long
term softening in the lithium price. These forecasts, which we fundamentally disagree with, has meant the market
performance of many lithium stocks has been poor.
The lithium market has softened considerably during the year with the Global X lithium ETF dropping by 30% over
the twelve months to December 2018, with some lithium developers and producers dropping up to 71% over the same
period.
Our investments were not immune to this softening, and our principle two investments in Bacanora Lithium and
European Lithium reduced in price by 77% and 56% respectively. This, in turn, was reflected in our share price
performance, which reduced by 62% over the period.
Table 1: Absolute Return Figures
Original Purchase (Book Value)
(GB£ ,000)
(GB£ ,000)
Tech Returns (%)
Mark to Market Equity Value
Absolute Return on Equity (%)
Global X Lithium & Battery
31/12/2017
11,345
24,869
30/06/2018
11,104
14,005
119%
51%
26%
27%
31/12/2018
9,648
7,131
-26%
7.1%
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CADENCE MINERALS PLC
European Metals Holdings Limited (“European Metals”)
Cadence has been investing in European Metals since June 2015. As of the date of this document, Cadence holds
approximately 19% in the Cinovec deposit in the Czech Republic through a direct holding in the share capital of
European Metals that owns 100 per cent of the exploration rights to the Cinovec lithium/tin deposit. The Cinovec
lithium and tin deposit is located in the Krusne Hory mountain range. The deposit that straddles the border between
Germany and the Czech Republic and in Germany, it is known as the Zinnwald deposit (50% owned by Bacanora
Lithium Plc ). The district has an extensive mining history, with various metals having been extracted since the 14th
Century.
Summary of Activities
At an operational level, there were substantial progress made in the development of the Cinovec Lithium Project. Of
particular note was the improvement in lithium recoveries announced in March, which was increased to 95%. In
addition, European Metals continued to work on the pilot scale beneficiation work, this work along with the improved
lithium recoveries meant European Metals was able to report increased lithium production from 20,800 tpa to 22,500
tonnes per annum. This is likely to improve cash margins on the project by approximately 10%.
European Metals also reported that the optimised reagent mix developed during the test work as compared to that
reported in the PFS resulted in the elimination of all high-cost inputs to the roast predicted previously. The use of low-
cost waste gypsum from local power plants as a roasting reagent not only enhances the economics of the project but
is a significant positive environmental outcome for the region.
Moreover, European Metals has commenced work on an update of the Preliminary Feasibility Study (“PFS”) to model
the production of higher value lithium hydroxide due to its increasing use in lithium-ion batteries. The updated PFS
included a process flowsheet whereby battery grade lithium hydroxide may be precipitated directly from the roast and
water leach steps.
•
•
Further advancements made in the development of the Cinovec Project and reported at that time include:
•
•
•
A total of 13 drill holes for a total drilled length of 3,386 metres had been permitted.
The first four geotechnical drill holes at the proposed site of the mine portal had been completed.
Testing of the revised lithium hydroxide product flowsheet had commenced on schedule.
In November 2018, European Metals provided a project update highlighting further significant
advancements to the Cinovec Project, including the following highlights:
•
•
•
•
The planned diamond drilling resource campaign has commenced.
A total of eight resource drill holes will be completed during this campaign with the first hole
already completed.
Geophysical logging of the first four geotechnical drill holes at the proposed mine portal site has
been completed.
A further five geotechnical drill holes are planned once resource drilling has been completed
Macarthur Minerals Limited (“Macarthur”)
In March 2016 Cadence made a strategic investment in Macarthur (TSX-V: MMS) which was followed up by further
investments in October 2016 and May 2017. As of the date of this document, Cadence holds approximately 9.8% of
Macarthur.
Summary of Activities
•
Macarthur made progress across several of its projects during the year; however, after the year-end, it
became clear that Macarthur's focus would be its iron ore assets in Australia. Hence is announced an option
agreement over its lithium and gold tenement in the Pilbara Region of Western Australia allowing Fe Limited to
earn in up to 75% of these projects over three years, for consideration and earn in value of A$4.6 million.
•
Western Australian Iron Ore Projects
Although during the reporting period much of the focus was on the rest of Macarthur Minerals’ portfolio, it became
clear that after the year-end Macarthur was focusing on the development of its iron ore projects.
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CADENCE MINERALS PLC
In March 2019 they announced a US$ 6 million private placing to complete the Moonshine Magnetite and Ularring
Haematite Iron Ore Bankable Feasibility Study (“BFS”) in Western Australia.
Macarthur owns 100% of the Moonshine Magnetite Project, with an Inferred and Indicated Mineral Resource Estimate
consisting of 1,316 million tonnes (Mt) @ 30.1% Iron (Fe). Initial metallurgical test work from core at Moonshine
indicated that a very high-grade iron ore product ranging from 68.5%-69.1% Fe, can be achieved as an export quality
target.
The Inferred Mineral Resource estimate for the Moonshine Magnetite Project was initially prepared by CSA Global
Pty Ltd (NI43-101 Technical Report filed December 17, 2009, titled “NI43-101 Technical Report on Lake Giles Iron
Ore Project: Western Australia”) and was updated by Snowden Mining Industry Consultants (NI43-101 Technical
Report filed March 25, 2011, titled “Macarthur Minerals Limited: Moonshine and Moonshine North Prospects, Lake
Giles Iron Project, Western Australia, NI43-101 Technical Report – Preliminary Assessment”).
After the year end Macarthur has rapidly progressed the development of these iron ore assets, including the entering
a ten year Iron Ore Off-Take Agreement for the Lake Giles project with Glencore Internation A.G. Glencore also
agreed to participate in the US$6 million private placing, via a convertible loan note of US$2 million.
Bacanora Lithium Plc (“Bacanora”)
Cadence, as of the date of this document holds an interest in Bacanora through a direct equity holding of approximately
1.7%, and a 30% stake in the joint venture interests in each of Mexalit S.A. de CV ("Mexalit") and Megalit S.A. de
CV ("Megalit"). Mexalit forms part of the Sonora Lithium Project. Bacanora is a London-listed lithium asset developer
and explorer (AIM: BCN).
Bacanora’s has two key projects under development. The first is the Sonora Lithium Project in Northern Mexico and
the second is the Zinnwald Lithium Project in southern Saxony, Germany.
Sonora Lithium Project
The Sonora Lithium Project consists of ten contiguous concessions covering 97,389 hectares. Two of the concessions
(La Ventana, La Ventana 1) are owned 100% by Bacanora through its wholly-owned subsidiary Minera Sonora Borax
S.A de C.V. (“MSB”). El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions are owned by, Mexilit S.A. de
C.V. (“Mexilit”) (which is owned 70% by Bacanora and 30% by Cadence). These concessions are located
approximately 190 kilometres northeast of the city of Hermosillo, in Sonora State, Mexico. They are roughly 170
kilometres south of the border with Arizona, USA. The San Gabriel and Buenavista concessions are owned by Minera
Megalit S.A. de C.V. (“Megalit”) (which is owned 70% by Bacanora and 30% by Cadence). The asset has Measured
plus Indicated Mineral Resource estimate of over 5 million tonnes (‘Mt’) (comprising 1.9 Mt of Measured Resources
and 3.1Mt of Indicated Resources) of lithium carbonate equivalent (‘LCE’) and an additional Inferred Mineral
Resource of 3.7 Mt of LCE, Sonora is regarded as one of the world’s larger known clay lithium deposits.
Key Operational Highlights on the Sonora Project are as follows:
Published its Feasibility Study (“FS”) on the project. The FS targeted a two-stage open-pit operation,
reaching 35,000 tonnes (t) of lithium carbonate (Li2CO3) per annum (“tpa”) in year four.
o
o
The FS has a pre-tax NPV of US$1.25 billion and an IRR of 26%. The capital and working capital
costs of the first stage of production (17,500 t of Li2CO3 per annum) is estimated to be US$460
million.
Under our estimation, The FS mine plan currently has some 12% of the plant feed being mined
from the 30% joint venture areas owned by Mexalit.
US$240 million secured as part of the Sonora Lithium Project financing package to construct an initial
17,500tpa lithium carbonate operation
o US$150 million senior debt facility with RK Mine Finance, a leading provider of finance for
o
resources companies,
US$65 million conditional equity commitment from the State General Reserve Fund of Oman
("SGRF"),
o US$25 million conditional equity commitment from Bacanora's offtake partner, Hanwa Co., LTD
("Hanwa").
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CADENCE MINERALS PLC
In July Bacanora elected not to proceed with a further US$100 equity placing, citing current volatility in
global commodities markets.
Subsequent to the year-end Bacanora secured a proposed strategic investment by Ganfeng Lithium Co., Ltd, the world
third largest lithium compounds producer, highlights of the proposed investment include:
Proposed cornerstone strategic investment at both the corporate and Sonora Lithium Project level,
Includes subscription for a 29.99% interest in Bacanora, in addition to an initial 22.5% direct interest in the
Sonora Lithium Project with an option to increase up to 50% of the Project,
Additional long-term offtake for both Stage 1 and Stage 2 lithium production,
Gangfeng Lithium would assist Bacanora in the finalisation of the EPC engineering design and the
subsequent construction and commissioning of Sonora Lithium Project,
The strategy would be in place to ensure project timetable of the first production in 2021.
Zinnwald Lithium Project
On 21 February 2017 Bacanora announced the acquisition of a 50% interest in, and joint operational control of, the
Zinnwald Lithium Project (“Zinnwald”) in southern Saxony, Germany from SolarWorld AG (“SolarWorld”).
Bacanora holds 50% interest in a jointly controlled entity, Deutsche Lithium GmbH, which operates the Zinnwald
Project located in southern Saxony, Germany, adjacent to the border of the Czech Republic and within 5 kilometres
of the towns of Altenberg and Freiberg. The Company acquired its interest in February 2017 for a cash consideration
of €5 million and an undertaking to contribute up to €5 million toward the costs of completion of a feasibility study,
which is anticipated to be completed during the second quarter of 2019.
Bacanora has an option to acquire the remaining 50% of the jointly controlled entity, alone or together with any
reasonably acceptable third party within 24 months for €30 million. If Bacanora does not exercise this right within the
above-stated timeframe, then SolarWorld has the right but not the obligation to purchase the Company’s 50% interest
for €1.
Key Operational Highlights on the Zinnwald Project are as follows:
Ongoing work towards a Feasibility Study ('FS') into a battery grade lithium product operation at Zinnwald
on track for completion in Q2 2019,
· NI 43-101 compliant upgraded measured and indicated resource of 124,974 tonnes of contained
lithium for Zinnwald issued in.
September 2018. This is a 30% increase from the previous measured and indicated PERC resource estimate
of 96,200 tonnes,
·
First production of lithium fluoride ('LiF') samples with over 99% purity from concentrates at
Zinnwald - provides proof of concep,t
That battery grade lithium products can be produced.
Details of Cadence's ownership
Cadence owns approximately 1.7% of Bacanora. The Sonora Lithium Project is comprised of the following lithium
properties.
La Ventana, La Ventana 1, and Megalit concessions, which are 100 per cent owned by Minera Sonora Borax
S.A. de C.V.("MSB"), a wholly-owned subsidiary of Bacanora; Cadence, through its approximate direct
interest of 1.7% of Bacanora, has an indirect interest in these concessions of 1.7%.
El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions, which are held by Mexilit S.A. de C.V.
("Mexilit"). Cadence has a 30% direct interest in Mexalit through its Joint Venture with Bacanora, and when
combined with Cadence’s direct interest of approximately 1.7% in Bacanora, has a total economic interest in
Mexalit of 30%.
Cadence also owns a 30% direct interest in The Megalit, Buenavista, and San Gabriel concessions, which are held by
Megalit S.A de C.V (“Megalit”) which when combined with Cadences’ direct interest of approximately 1.7% in
Bacanora, has a total economic interest in Megalit of 30%.These areas are not part of the mining plans of the Sonora
Lithium Project and have not been assessed in sufficient detail to provide a 43-101 compliant Mineral Resource
Estimate.
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CADENCE MINERALS PLC
Lithium Technologies Pty Ltd & Lithium Supplies Pty Ltd (“LT” & “LS)
In December 2017 Cadence announced that it had executed binding investment agreements to acquire up to 100% of
six prospective hard rock lithium assets in Argentina via LT & LS.
These projects are collectively known as the San Luis Project and Consist of claims over 55,773 hectares for six
exploration permits within the known spodumene bearing pegmatite fields in San Luis Province, Central Argentina.
The pegmatite fields of San Luis have an important record of producing mica, beryl, spodumene, tantalite (tantalum
oxide), columbite (niobium oxide), and recently potassium feldspar, albite and quartz. Historic mines outside of the
claims have produced lithium oxide ("Li2O") at grades ranging from 4.5% to 6.5%.
During the period under review the investee's geology team, utilising a range of remote sensing and geographical
information system (GIS) tools, have completed several desktop studies which identify highly prospective areas for
lithium mineralisation in known spodumene bearing pegmatite bodies. Encouragingly, there are multiple indicators
that confirm the presence of spodumene bearing pegmatite bodies, including geological structural features, aero-
magnetic radiometric data analysis, satellite imagery and differentiation in granitic bodies.
The net result is that out of the 55,773 hectares, comprising the six assets total area, the geology team have identified
10,049 hectares as high-priority areas for the next phase of the exploration programme.
Finalised Environmental Impact Assessments have been submitted to the mining regulator for these high priority
areas, with applications for drilling permits to follow. At the end of the period, we were still awaiting approval of the
necessary exploration permits to be granted.
Given the delay of the grant of these permits after the year-end Cadence and LT and LS agreed to vary it binding
agreement to acquire three highly prospective assets in Australia that are in regions with proven high-grade lithium
mineralisation.
The acquisition covered three projects - Picasso (Western Australia - WA), Litchfield (Northern Territories - NT) and
Alcoota (NT) all of which are in regions with proven lithium mineralisation and supportive mining infrastructure.
The Picasso project (license granted) is near Alliance Mineral Assets' (ASX: A40; SGX: 40F; "AMA") high-profile
Bald Hill Mine in WA (note: AMA recently completed a 50:50 A$400m+ merger with delisted Tawawa Resources
[ASX: TAW] & raised $40M to develop the asset base). Demonstrating exploration upside for Picasso, the Bald Hill
Mine is producing a spodumene concentrate and has a JORC (2012) compliant mineral resource of 26.5Mt @ 0.96%
Li2O; probable ore reserves at 11.3Mt @ 1.01% Li2O
The Litchfield project (license granted), located near Darwin (NT), is contiguous to Core Lithium's (ASX: CXO)
ground and has a JORC compliant mineral resource of 8.55Mt @ 1.33% Li2O for its Finnis project (for all six deposits)
Finally, the Alcoota project (license to be granted) is circa 145km NE of Alice Springs (NT) and has seen
comparatively limited exploration, though significant geochemistry samples from 10km south of the project returned
assays of 10.2% & 9.6% Li2O, with evidence suggesting there is a pegmatite zone within tenure prospective for
lithium mineralisation
The variation resulted in LT & LS acquiring between them 100% of Synergy Prospecting Ltd ("Synergy"), which
owns the three lithium projects in Australia. As two of Synergy's assets are granted, Cadence agreed to move forward
with increasing is ownership in LT & LS form 4% to 31.5% via:
Issuing 373,544,298 million Cadence shares to the founding shareholders of LT & LS valued at £400,000
(based on 14-day VWAP of £0.0107) to acquire a further 20% stake, which is in line with the terms of the
original agreements; and
Invest £300,000 to earn an incremental 7.5% stake, with the funds earmarked to commence developing
Synergy's lithium assets in Australia.
The result of the variation would mean no change to the £ consideration to be paid for of LS and LT, however
additional shares would be issued as a result of the change in the share price in Cadence between November 2017 and
March 2019.
As of the date of this document, Cadence owns 24% of LT & LS and consequently of the Australian and Argentinian
lithium prospects.
Page 7
CADENCE MINERALS PLC
Yangibana Project, Australia
On 1 December 2011, Cadence announced that it had acquired a 30% free carried interest to Bankable Feasibility
Study of the Yangibana North Rare Earth Deposit. The exploration costs until the commencement of the BFS are
therefore borne solely by Hastings (70% owners and operator). The same terms agreed and announced on 1 December
2012 also apply to Gossan, Hook, Kanes Gossan, Lions Ear and Bald Hill North.
Probable Ore Reserves of some 2.1 million tonnes at 1.66% total rare earth elements are contained within 30% owned
joint venture
tenements. Further details of these reserves and pre-feasibility study can be found at
http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=2688632.
Summary of Activities
Hastings Technology Metals Ltd ("Hastings"), which is the operator of the Project and the owner of the remaining
70% in the Yangibana North Project, made considerable progress during the year to date. This included:
Probable Ore Reserves increased to 10.35 million tonnes at 1.22%TREO including 0.43%Nd2O3+Pr6O11,
Updated Ore Reserves confirm >10-year mine life ,
Total JORC Resources increased to 21.67 million tonnes at 1.17%TREO including 0.39%Nd2O3+Pr6O11
of which 62% are in the Measured and Indicated categories,
Successful completion of the second beneficiation pilot plant operation test. Upgrading of the
Nd2O3+Pr6O11 head grade by 20 times from 0.43% to 8.6% was achieved,
KfW IPEX-Bank provided indicative terms for senior debt of up to A$250 million for the project (conditional
upon UFK Cover being obtained).
Auroch Minerals Ltd (“Auroch”)
As of the date of this document, Cadence owns 6.5% in Auroch. Auroch Minerals’ primary focus was drilling and
exploration programmes at the Arden and Bonaventura Projects.
The Arden project consists of a Sedex type potential deposit. The Sedex potential was initially discovered by
Kennecott (Rio Tinto Group) between 1966 and 1972, identifying anomalous Sedex-style zinc mineralisation up to
40m wide and with a potential for over 10km of the strike. However, since 1980 the area has been the focus of regional
diamond exploration, and as such the Sedex horizon at the Ragless Range Target had not been explored.
In late July 2018, Auroch was granted environmental approval for its drilling programme at the Arden Project with
work beginning on the first drill-hole in early August. First results were reported in November 2018, with base-
metal mineralisation intersected in all 10 drill-holes.
At the Ragless Range Prospect, all eight drill-holes successfully intersected the SEDEX zinc horizon previously
identified by Kennecott, confirming a strike length of more than 3km and a vertical depth of at least 220m. The drilling
also intersected two new mineralised zinc horizons, increasing the potential scale of the SEDEX base-metal system at
Arden. Importantly, all three horizons remain open in all directions.
In December, Auroch announced that it had completed drilling at its Bonaventura Project with the first drill-hole at
the Dewrang Prospect intersecting significant zinc-lead mineralisation. The mineralised interval correlated very well
with the previously identified geophysical IP anomaly which is up to 1.5km-long and had never previously been drill-
tested and demonstrated excellent correlation between the mineralised interval in the drill-hole and the high
chargeability anomaly bound by interpreted major reverse faults.
A single drill-hole was completed at the Grainger Prospect targeting the down-dip extensions of an historic artisanal
working. The drilling intersected significant vein sets of zinc-lead mineralisation in fresh rock at shallow depths.
Page 8
CADENCE MINERALS PLC
Greenland Rare Earth Projects
During the year Cadence retained it exposure to 1 license in Greenland, of which it owns 100%. This licenses abuts
the northern and eastern boundaries of Greenland Minerals and Energy Limited’s ‘GGG’ licences that encompass the
world-class Kvanefjeld, Sørenson, Zone 3 and Steenstrupfjeld Rare Earth Element (REE) deposits.
An extensive exploration programme was carried out on all of Cadence’s exploration licences in south Greenland
from June to August 2014. We will continue to review the cost / benefit analysis of this license on an annual basis,
and will monitor the progress that GGG makes over the coming year as it progresses the Kvanefjeld REE deposits.
Clancy Exploration Limited (“Clancy Exploration”)
Through a compensation agreement in relation to preceding claims over the the historical Nockelberg and Leogang
mines, Cadence were issued 140 million fully paid ordinary shares in Clancy as compensation for the discovery of
third party priority over the 28 overlapping licenses (including the historical Nockelberg and Leogang mines). As of
the date of this document Cadence holds approximately 3.9% of Clancy
FINANCIAL REVIEW
Total comprehensive loss for the year attributable to equity holders was £11.92m loss (2017: £1.88m profit). This
decrease in profit from the previous year of approximately £13.79m is mainly due to realised and unrealised losses of
approximately £9.41m relating to our share investment portfolio (available for resale assets) held during the period
(2017: there was a gain of £4.47m).
Diluted loss per share was 0.145p (2017 : 0.013p profit per share).
The net assets of the Group at the end of period was £14.40 million (2017: £26.72 million). This decrease of
approximately £12.32m was mainly driven by the reduction in value of available for resale assets during the period.
Kiran Morzaria
Chief Executive Officer
29 May 2019
Page 9
CADENCE MINERALS PLC
REPORT OF THE DIRECTORS
For the year ended 31 December 2018
___________________________________________________________________________________
The Directors present their annual report together with the audited consolidated financial statements of the Group and
the Company for the Year Ended 31 December 2018.
Principal activity
The principal activity of the Group and the Company is that of the identification, investment and development of
Lithium and rare earth assets. The Group is also exploring other mining related opportunities.
Domicile and principal place of business
Cadence Minerals plc is domiciled in the United Kingdom, which is also its principal place of business.
Business review
The results of the Group are shown on page 29. The directors do not recommend the payment of a dividend.
A review of the performance of the Group and its future prospects is included in the Chairman's Statement and the
Strategic Report on pages 1 to 9.
Key Performance Indicators
Due to the current status of the Group, the Board has not identified any performance indicators as key.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group involve the ability to raise funding in order to finance the
acquisition and exploitation of mining opportunities and the exposure to fluctuating commodity prices.
In addition, the amount and quality of minerals available and the related costs of extraction and production represent
a significant risk to the group.
Financial risk management objectives and policies
The Group’s principal financial instruments are available for sale assets, trade receivables, trade payables, loans and
cash at bank. The main purpose of these financial instruments are to fund the Group's operations.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall
be undertaken. The main risks arising from the Group’s financial instruments are liquidity risk and interest rate risk.
The board reviews and agrees policies for managing each of these risks and they are summarised below.
Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of equity
and its cash resources. Further details of this are provided in the principal accounting policies, headed 'going concern'
and note 17 to the financial statements.
Interest rate risk
The Group only has borrowings at a fixed coupon rate of 12% and therefore minimal interest rate risk, as this is
deemed its only material exposure thereto. The Group seeks the highest rate of interest receivable on its cash deposits
whilst minimising risk.
Market risk
The Group is subject to market risk in relation to its investments in listed Companies held as available for sale
assets.
Page 10
CADENCE MINERALS PLC
REPORT OF THE DIRECTORS
For the year ended 31 December 2018
___________________________________________________________________________________
Directors
The membership of the Board is set out below. All directors served throughout the period unless otherwise stated.
Andrew Suckling
Kiran Morzaria
Don Strang
Adrian Fairbourn
Substantial shareholdings
Interests in excess of 3% of the issued share capital of the Company which had been notified as at 24 May 2019
were as follows:
Hargreaves Lansdown (Nominees) Limited Des:15942
Ordinary
shares held
Number
923,927,736
Percentage of
capital
%
10.2
Barclays Direct Investing Nominees Limited Des: CLIENT1
865,520,074
Interactive Investor Services Nominees Limited Des:SMKTNOMS
653,623,934
Hargreaves Lansdown (Nominees) Limited Des:VRA
613,882,115
Interactive Investor Services Nominees Limited Des:SMKTISAS
602,050,509
HSDL Nominees Limited Des:MAXI
Hargreaves Lansdown (Nominees) Limited Des:HLNOM
HSDL Nominees Limited
HSBC Client Holdings Nominee (UK) Limited Des: 731504
Forest Nominees Limited
Payment to suppliers
477,711,684
434,549,780
365,460,084
289,552,893
276,371,000
9.5
7.2
6.8
6.6
5.3
4.8
4.0
3.2
3.0
It is the Group's policy to agree appropriate terms and conditions for its transactions with suppliers by means ranging
from standard terms and conditions to individually negotiated contracts and to pay suppliers according to agreed terms
and conditions, provided that the supplier meets those terms and conditions. The Group does not have a standard or
code dealing specifically with the payment of suppliers.
Trade payables at the year end all relate to sundry administrative overheads and disclosure of the number of days
purchases represented by year end payables is therefore not meaningful.
Events after the Reporting Period
Events after the Reporting Period are outlined in Note 21 to the Financial Statements.
Going concern
The Directors have prepared cash flow forecasts for the period ending 31 May 2020 which take account of the current
cost and operational structure of the Group.
The cost structure of the Group comprises a high proportion of discretionary spend and therefore in the event that cash
flows become constrained, costs can be quickly reduced to enable the Group to operate within its available funding.
These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for
a period of at least twelve months from the date of approval of these financial statements. Accordingly, the financial
statements have been prepared on a going concern basis.
Page 11
CADENCE MINERALS PLC
REPORT OF THE DIRECTORS
For the year ended 31 December 2018
___________________________________________________________________________________
Directors’ responsibilities statement
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 financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs). 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 and profit or loss
of the group for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
-
- make judgements and estimates that are reasonable and prudent;
-
state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in
the financial statements;
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
In so far as each of the Directors are aware:
there is no relevant audit information of which the Group's auditors are unaware; and
the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Auditors
Chapman Davis LLP, offer themselves for re-appointment as auditor in accordance with Section 489 of the Companies
Act 2006.
ON BEHALF OF THE BOARD
Kiran Morzaria
Director
Date: 29 May 2019
Page 12
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Changes to corporate governance regime
The board of Cadence Minerals Plc are committed to the principles of good corporate governance and believe in the
importance and value of robust corporate governance and in our accountability to our shareholders and stakeholders.
The AIM Rules for companies, updated in early 2018, required AIM companies to apply a recognised corporate
governance code from 28 September 2018. Cadence has chosen to adhere to the Quoted Company Alliance’s
Corporate Governance Code for Small and Mid-Size Quoted Companies (the “QCA Code”) and listed below are the
10 broad principles of the QCA Code and the Company’s disclosure with respect to each point.
The Board is committed to maintaining high standards of corporate governance and complies with the provisions of
the Quoted Companies Alliance Corporate Governance Code for small and mid-size quoted companies (“QCA code”).
While building a strong governance framework we also try to ensure that we take a proportionate approach and that
our processes remain fit for purpose as well as embedded within the culture of our organisation. We continue to evolve
our approach and make ongoing improvements as part of building a successful and sustainable company.
The Board
The Board comprises of a non-executive Chairman, one non-executive director and two executive directors.
Board Members
Board Member
Board Title
Audit
Title
Committee
Remuneration
Committee Title
Andrew Suckling
Non-Executive Chairman
Member
Member
Adrian Fairbourn
Non-Executive Director
Chairman
Chairman
Kiran Morzaria
Chief Executive Officer
Donald Strang
Finance Director
The Board is responsible for formulating, reviewing and approving the Company’s strategy, financial activities and
operating performance. Day-to-day management is devolved to the executive directors, who are charged with
consulting the Board on all significant financial and operational matters. The Board retains ultimate accountability for
governance and is responsible for monitoring the activities of the executive team.
The roles of Chairman and Chief Executive Officer are split in accordance with best practice. The Chairman has the
responsibility of ensuring that the Board discharges its responsibilities. The Chairman is responsible for the leadership
and effective working of the Board, for setting the Board agenda, and ensuring that Directors receive accurate, timely
and clear information. No one individual has unfettered powers of decision.
The two Executive Directors are comprised of a Chief Executive Officer (“CEO”) and Finance Director. The CEO
has the overall responsibility for creating, planning, implementing, and integrating the strategic direction of the
Company. This includes responsibility for all components and departments of a business. The CEO to ensures that the
organisation’s leadership maintains constant awareness of both the external and internal competitive landscape,
opportunities for expansion, customer base, markets, new industry developments and standards.
Page 13
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
The non-executive directors are not considered independent under the Financial Reporting Council’s Corporate
Governance Code (April 2016) (“FRC Code”) as they both have options in the Company. However, the board
considers that both non-executives are independent of management under all other measures and able to exercise
independence of judgement.
The Committees
Audit Committee
The audit committee consists of two non-executive members of the board and meet at least twice a year.
The principal duties and responsibilities of the Audit Committee include:
Overseeing the Group’s financial reporting disclosure process; this includes the choice of appropriate
accounting policies
Monitor the Group’s internal financial controls and assess their adequacy
Review key estimates, judgements and assumptions applied by management in preparing published financial
statements
Assess annually the auditor’s independence and objectivity
Make recommendations in relation to the appointment, re-appointment and removal of the company’s
external auditor
Remuneration committee
The remuneration committee consists of two non-executive members of the board and meet at least once a year.
The principal duties and responsibilities of the Remuneration Committee include:
Setting the remuneration policy for all Executive Directors
Recommending and monitoring the level and structure of remuneration for senior management
Approving the design of, and determining targets for, performance related pay schemes operated by the
company and approve the total annual payments made under such schemes
Reviewing the design of all share incentive plans for approval by the board and shareholders
None of the Committee members have any personal financial interest (other than as shareholders and option
holders), conflicts of interest arising from cross-directorships or day-to-day involvement in the running of
the business. No director plays a part in any financial decision about his or her own remuneration.
Principle and Approach of the Board
Cadence is committed to achieve and maintain high standards of governance. As such, the Board has chosen to adopt
the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies 2018 (“the
QCA Code”). Detailed below is how the Board applies the 10 principles of Corporate Governance, which form part
of the QCA code.
Page 14
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Principle
Application
Compliance
Establish a
strategy and
business model
which promote
long-term value
for shareholders
The board must be able to express
a shared view of the company’s
purpose, business model and
strategy. It should go beyond the
simple description of products and
corporate structures and set out
how the company intends to
deliver shareholder value in the
medium to long-term.
It should demonstrate that the
delivery of long-term growth is
underpinned by a clear set of
values aimed at protecting the
company from unnecessary risk
and securing its long-term future.
Seek to
understand and
meet
shareholder
needs and
expectations
Directors must develop a good
understanding of the needs and
expectations of all elements of the
company’s shareholder base.
The board must manage
shareholders’ expectations and
should seek to understand the
motivations behind shareholder
voting decisions.
Cadence is a unique early investment strategy &
development firm, within the mineral resource sector. We
identify undervalued assets, with irreplaceable strategic
advantages. We invest in them and help turn them into
powerhouses. Lithium and other technology minerals must
get to market in order to achieve the global green
revolution. We uncover new ways and places to extract and
process these minerals, so that burgeoning demand is met;
and our tomorrow is better.
A more detailed description of its Strategy and Business
Model is available on page 2 of the Annual Report and
Accounts for the year ended 31 December 2017 HERE and
on the About Page HERE on this website.
Please refer to page 10 of the Annual Report and Accounts
for the year ended 31 December 2017 HERE and the
Corporate Governance section of the website HERE for
further details on the principal risks and uncertainties
which the Company faces.
It seeks to share this vision and details of the
implementation of its strategy through internal dialogue
with employees as well as external communications by way
of public announcements and dissemination of information
through this website and the annual report and accounts
The Board is committed to maintaining an open dialogue
with shareholders. Communication with shareholders and
is coordinated by the CEO.
Throughout the year, the Board maintains a regular
dialogue with investors, providing them with such
information on the Company’s progress as is permitted
within the guidelines of the AIM rules, MAR and
requirements of the relevant legislation. We also use these
communications to obtain feedback from shareholders and
to assess the effectiveness of our communications. Based on
this feedback the Board has determined that this
engagement has been, to date, successful.
The Board believes that the Annual Report and Accounts,
and the Interim Report published at the half-year which can
be found HERE, play an important part in presenting all
shareholders with an assessment of the Group’s position
and prospects. All reports and press releases are published
under the “Investors” tab of the Group’s website.
Page 15
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Principle
Application
Compliance
Take into account
wider stakeholder
and social
responsibilities
and their
implications for
long-term success
Embed effective
risk management,
considering both
opportunities and
threats,
throughout the
organisation
Long-term success relies upon good
relations with a range of different
stakeholder groups both internal
(workforce) and external (suppliers,
customers, regulators and others).
The board needs to identify the
company’s stakeholders and
understand their needs, interests and
expectations.
Where matters that relate to the
company’s impact on society, the
communities within which it
operates, or the environment have
the potential to affect the company’s
ability to deliver shareholder value
over the medium to long-term, then
those matters must be integrated
into the company’s strategy and
business model. Feedback is an
essential part of all control
mechanisms. Systems need to be in
place to solicit, consider and act on
feedback from all stakeholder
groups.
The board needs to ensure that the
company’s risk management
framework identifies and addresses
all relevant risks in order to execute
and deliver strategy; companies
need to consider their extended
business, including the company’s
supply chain, from key suppliers to
end-customer.
Setting strategy includes
determining the extent of exposure
to the identified risks that the
company is able to bear and willing
to take (risk tolerance and risk
appetite).
The Board recognises its prime responsibility under UK
corporate law is to promote the success of the Company for the
benefit of its members as a whole.
The Board also understands that it has a responsibility
towards employees, partners, customers, suppliers and to the
community and environment it operates in as a whole.
Communication with and feedback from these various groups
is achieved in a variety of ways. The executive directors hold
investor roadshows once a year and quarterly webcast, at
which feedback from shareholders is sought.
Regular dialogue is maintained with employees through
monthly updates and quarterly briefings given by the executive
directors.
The nature of the Cadence’s business as an investment
company means that although it has no direct effect on the
working environments and communities of the companies it
invests in, it nonetheless liaises with the management of its
investee companies to understand their approach to
stakeholder engagement and their policies, which will form
part of its investment criteria.
The Board has an established Audit Committee, a summary of
it roles a responsibilities is available on the corporate
governance webpage HERE which is set out above.
The Committee is specifically charged with ensuring that
Cadence as a whole has the appropriate policies and
processes in place to identify the risks which the Company is
exposed to and to proactively mitigate those risks as
appropriate.
The Company maintains a register of risks and publishes an
overview of significant risks and uncertainties in its Annual
Report.
Please refer to page 10 of the Annual Report and Accounts for
the year ended 31 December 2017 HERE for further details on
the principal risks and uncertainties which the Company faces.
The Company receives regular feedback from its external
auditors on the state of its internal controls. The Board
maintains a register of risks and publishes an annual summary
of the significant risks and uncertainties in the Annual Report.
Page 16
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Principle
Application
Compliance
Maintain the
board as a well-
functioning,
balanced team
led by the chair
The board members have a
collective responsibility and legal
obligation to promote the interests
of the company and are collectively
responsible for defining corporate
governance arrangements. Ultimate
responsibility for the quality of, and
approach to, corporate governance
lies with the chair of the board. The
board (and any committees) should
be provided with high-quality
information in a timely manner to
facilitate proper assessment of the
matters requiring a decision or
insight.
The board should have an
appropriate balance between
executive and non-executive
directors and should have at least
two independent non-executive
directors. Independence is a board
judgement. The board should be
supported by committees (e.g. audit,
remuneration, nomination) that
have the necessary skills and
knowledge to discharge their duties
and responsibilities effectively.
Directors must commit the time
necessary to fulfil their roles.
The Board is comprised of a non-executive Chairman a non-
executive director and two executive directors.
The CEO is engaged to work a minimum of a 39 hour week
and is an employee of the Company. The Finance Directors is
employed part-time for a minimum of 28 hours a week. The
board deemed that given the stage and development of the
Company, it would be more cost efficient to employee a full-
time accountant which along with the finance director ensure
that Company’s financial systems are robust. compliant and
support current activities and future growth.
The service agreements of the non-executive directors
anticipate that the non-executive Chairman should spend 3
working days per month and the non-executive director 2
working days per month. All directors dedicate such time as
required to effectively perform their roles.
The roles of the Chairman and CEO are clearly separated.
The directors ensure the skills required to undertake their
roles are kept current through training and consultation with
subject matter experts as required.
The CEO is responsible for the operational management of the
business of Cadence and for the implementation of strategy
and policies as agreed by the Board. The non-executive
Chairman is responsible for the leadership and effective
working of the Board, for setting the Board agenda, and
ensuring that Directors receive accurate, timely and clear
information.
The non-executive directors are not considered independent
under the FRC Code as they hold options in the Company.
However, the board considers that the non-executive directors
are independent of management under all other measures and
are able to exercise independence of judgement. Whilst
conflicts of interest are fully disclosed and understood, as
appropriate non-executive directors exercise independence of
judgement. No director is involved in discussions or decisions
where he has a conflict of interest.
The Board is supported by an Audit Committee and a
Remuneration Committee.
Cadence has committed that the Board should hold full board
meetings at least 4 times each year. The attendance of Board
members for meetings during the current financial year is as
follows:
· Andrew Suckling 3 of 3
· Adrian Fairbourn 3 of 3
· Kiran Morzaria 3 of 3
· Donald Strang 3 of 3
Page 17
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Principle
Application
Compliance
Ensure that
between them the
directors have the
necessary up-to-
date experience,
skills and
capabilities
The board must have an appropriate
balance of sector, financial and
public markets skills and experience,
as well as an appropriate balance of
personal qualities and capabilities.
The board should understand and
challenge its own diversity,
including gender balance, as part of
its composition.
The board should not be dominated
by one person or a group of people.
Strong personal bonds can be
important but can also divide a
board. As companies evolve, the mix
of skills and experience required on
the board will change, and board
composition will need to evolve to
reflect this change.
Evaluate board
performance
based on clear
and relevant
objectives,
seeking
continuous
improvement
The board should regularly review
the effectiveness of its performance
as a unit, as well as that of its
committees and the individual
directors. The board performance
review may be carried out internally
or, ideally, externally facilitated
from time to time.
The review should identify
development or mentoring needs of
individual directors or the wider
senior management team. It is
healthy for membership of the board
to be periodically refreshed.
Succession planning is a vital task
for boards. No member of the board
should become indispensable.
Directors who have been appointed to the Company have been
chosen because of the skills and experience they offer. The
Board continually strives to ensure that it has the right balance
of knowledge, skills, experience and contacts across the
sectors in which it operates. This is evaluated in line with
Cadence’s business model as it changes.
It is of primary importance that the Board’s knowledge is kept
to up to date in a rapidly changing mining and metals
marketplace. This is achieved by maintaining a broad network
of contacts across the industry and ensuring regular dialogue
is held and feedback obtained by both the executive and non-
executive directors as appropriate.
As necessary directors receive externally provided refresher
and update training specific to their individual roles.
The Company Secretary advises the Board members on their
legal and corporate responsibilities and matters of corporate
governance.
Biographical details of each of the Directors are given on the
‘Who We Are’ page of this website HERE. Going forward the
Directors biographical details will be included in the Annual
Report and Accounts.
On the 28 September 2018, Cadence adopted the QCA Code.
Prior to this point given the nature and the development of the
company it did not set Key Performance Indicators.
The Company now measures its performance, and therefore
inherently the performance of the Board as a unit, against Key
Performance Indicators. The primary KPI is are absolute
equity return on investments. Detail will be disclosed in the
Annual Report Accounts for 2019, to be published by the end
of June 2019.
The performance of the executive directors is monitored and
regularly reviewed by the non-executive directors. Such review
considers both the KPIs outlined above and measures such as
an annual staff satisfaction survey. In 2019, the Board will
introduce qualitative performance measurements for the
executive directors to ensure that the right degree of focus is
applied to the strategic direction as well as the current
financial performance of the business.
The Board periodically considers the need to refresh its
membership.
Page 18
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Principle
Application
Compliance
Promote a
corporate
culture that is
based on ethical
values and
behaviours
The board should embody and
promote a corporate culture that
is based on sound ethical values
and behaviours and use it as an
asset and a source of competitive
advantage.
The policy set by the board should
be visible in the actions and
decisions of the chief executive
and the rest of the management
team. Corporate values should
guide the objectives and strategy
of the company.
The culture should be visible in
every aspect of the business,
including recruitment,
nominations, training and
engagement. The performance and
reward system should endorse the
desired ethical behaviours across
all levels of the company. The
corporate culture should be
recognisable throughout the
disclosures in the annual report,
website and any other statements
issued by the company.
Cadence has a strong ethical culture, which is promoted by
the actions of the board and executive team.
These include the following key policies which govern its
ethical culture.
· Equal opportunities policy
· Dignity at work policy
· Code of conduct
· Whistleblowing policy
· Health and safety policy
· Email and internet policy
· Social media policy
The Group has an anti-bribery policy and has implemented
adequate procedures described by the Bribery Act 2010.
The Group reports on its compliance to the board on an
annual basis.
The Group has undertaken a review of its requirements
under the General Data Protection Regulation,
implementing appropriate policies, procedures and
training to ensure it is compliant.
Page 19
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Principle
Application
Compliance
Maintain
governance
structures and
processes that are
fit for purpose
and support good
decision-making
by the board
The company should maintain
governance structures and processes
in line with its corporate culture and
appropriate to its:
· size and complexity; and
· capacity, appetite and
tolerance for risk.
The governance structures should
evolve over time in parallel with its
objectives, strategy and business
model to reflect the development of
the company.
Details of the Company’s corporate governance arrangements
are provided within this Corporate Governance section of this
website. The Board considers the appropriateness of these
arrangements against the size and complexity of the Company
as it evolves over time.
The Chairman leads the Board and is responsible for ensuring
its effectiveness in all aspects of its role. The Chairman
promotes a culture of openness and debate, in particular by
ensuring the non-executive directors provide constructive
challenge to the executive directors.
The matters reserved for the board are:
· Definition of the strategic goals for the Company, sets
corporate objectives to enable the goals to be met, and
measures performance against those objectives;
· Ensuring that the necessary financial and human
resources are in place to both meet its obligations to all
stakeholders and to provide a platform for profitable growth;
· Recommending any interim and final dividends;
· Approving all mergers and acquisitions and all capital
expenditure greater than £100,000;
· Receiving recommendations from the Audit Committee
in relation to the reporting requirements and the appropriate
accounting policies for the Company, the appointment of
auditors and their remuneration, and the identification and
management of risk;
· Receives recommendations from the Appointments
Committee concerning the appointment of executive directors,
and from the Remuneration Committee concerning the
remuneration of the executive directors;
· Determines the fees paid to the non-executive directors.
The CEO has the overall responsibility for creating, planning,
implementing, and integrating the strategic direction of the
Company. This includes responsibility for all components and
departments of a business. The CEO to ensures that the
organisation’s leadership maintains constant awareness of
both the external and internal competitive landscape,
opportunities for expansion, customer base, markets, new
industry developments and standards.
The Finance Director works alongside the CEO and has
overall control and responsibility for all financial aspects of
company strategy. The Finance Director takes overall
responsibility of the Company’s accounting function and
ensures that Company’s financial systems are robust,
compliant and support current activities and future growth.
The Finance Director will coordinate corporate finance and
manage company policies regarding capital requirements,
debt, taxation, equity and acquisitions as appropriate.
Page 20
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Principle
Application
Compliance
The Board is supported by two committees being the Audit
Committee and Remuneration Committee. The Audit
Committee advises the Board on the reporting requirements
and the appropriate accounting policies for the Company, the
appointment of auditors and their remuneration, and the
identification and management of risk. The Remuneration
Committee advises the Board on all matters pertaining to the
remuneration of the executive directors;
The Company encourages two-way communication with
both its institutional and private investors and responds
quickly to all significant queries received.
The “Investors” tab of this website section of this website
contains all required regulatory information together with
other information which shareholders may find useful.
The AGM is an important forum for shareholder
engagement, and the directors are always available
immediately after the AGM to listen to the views of any
shareholders in attendance and to provide them with an
update on the business.
All votes at the most recent AGM held on 28 August 2018
were passed. The proxy votes were in excess of 85% in
favour of all resolutions.
Currently there is no Remuneration or Audit Committee
report provided in the Annual report but the Board will
consider the provision of this in the next Annual report
together with other information which shareholders may
find useful.
Communicate
how the company
is governed and
is performing by
maintaining a
dialogue with
shareholders and
other relevant
stakeholders
A healthy dialogue should exist
between the board and all of its
stakeholders, including
shareholders, to enable all
interested parties to come to
informed decisions about the
company. In particular,
appropriate communication and
reporting structures should exist
between the board and all
constituent parts of its shareholder
base. This will assist:
· the communication of
shareholders’ views to the board;
and
· the shareholders’
understanding of the unique
circumstances and constraints
faced by the company.
It should be clear where these
communication practices are
described (annual report or
website).
Page 21
CADENCE MINERALS PLC
CORPORATE GOVERNANCE
For the year ended 31 December 2018
___________________________________________________________________________________
Internal Controls
The Directors acknowledge their responsibility for the Group’s systems of internal controls and for reviewing their
effectiveness. These internal controls are designed to safeguard the assets of the Company and to ensure the reliability
of financial information for both internal use and external publication. While they are aware that no system can provide
absolute assurance against material misstatement or loss, in light of increased activity and further development of the
Company, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective.
Risk Management
The Board considers risk assessment to be important in achieving its strategic objectives. There is a process of
evaluation of performance targets through regular reviews by Senior Management to forecasts. Project milestones and
timelines are reviewed regularly.
Business Risk
The Board regularly evaluates and reviews any business risks when reviewing project timelines. The types of risks
reviewed include:
regulatory and compliance obligations
occupational health, safety and environmental requirements
legal risks relating to contracts, licences and agreements
insurance risks
political risks where appropriate.
Insurance
The Group maintains insurance in respect of its Directors and Officers against liabilities in relation to the Company.
Treasury Policy
The Group finances its operations through equity and holds its cash as a liquid resource to fund the obligations of the
Group. Decisions regarding the management of these assets are approved by the Board.
Securities Trading
The Board has adopted a Share Dealing Code that applies to Directors, Senior Management and any employee who is
in possession of ‘inside information’. All such persons are prohibited from trading in the Company’s securities if they
are in possession of ‘inside information’. Subject to this condition and trading prohibitions applying to certain periods,
trading can occur provided the individual has received the appropriate prescribed clearance.
Page 22
CADENCE MINERALS PLC
REPORT ON REMUNERATION
For the year ended 31 December 2018
___________________________________________________________________________________
Directors' remuneration
The Board recognises that Directors' remuneration is of legitimate concern to the shareholders. The Group operates
within a competitive environment, performance depends on the individual contributions of the Directors and
employees and it believes in rewarding vision and innovation.
Policy on executive Directors' remuneration
The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain
Directors of the calibre necessary to maintain the Group's position and to reward them for enhancing shareholder value
and return. It aims to provide sufficient levels of remuneration to do this, but to avoid paying more than is necessary.
The remuneration will also reflect the Directors' responsibilities and contain incentives to deliver the Group's
objectives.
The remuneration of the Directors was as follows:
A Fairbourn
£
A Suckling
£
K Morzaria
£
D Strang
£
Total
£
Short-term
employment
benefits:
Year to 31
December
2018
Salary and
fees
Share based
payments (1)
Total
Year to 31
December
2017
Salary and
fees
Share based
payments (1)
Total
52,250
112,500
127,500
127,500
419,750
850
1,962
1,962
1,962
6,736
53,100
114,462
129,462
129,462
426,486
85,000
150,000
150,000
150,000
535,000
283
654
654
654
2,245
85,283
150,654
150,654
150,654
537,245
(1)
Share based payments represent a Black and Scholes valuation of the incentive options granted to the
directors during 2017. Options are used to incentivise directors and are a non-cash form of remuneration.
At 31 December 2018 the following amounts were outstanding in fees to directors; £115,500 (2017: £138,000).
Pensions
The Company only operates a basic pension scheme for its directors and employees as required by UK legislation.
Page 23
CADENCE MINERALS PLC
Benefits in kind
No benefits in kind were paid during the year to 31 December 2018 or the year ended 31 December 2017.
Bonuses
No amounts were payable for bonuses in respect of the Year ended 31 December 2018 or the year ended 31 December
2017.
Notice periods
Andrew Suckling, Kiran Morzaria, Don Strang and Adrian Fairbourn, each have a 12 month rolling notice period.
Share option incentives
At 31 December 2018 the following options were held by the Directors:
Date of grant
Exercise price
Number of options
Note
K Morzaria
K Morzaria
K Morzaria
K Morzaria
A Fairbourn
A Fairbourn
A Fairbourn
A Fairbourn
A Fairbourn
D Strang
D Strang
D Strang
D Strang
A Suckling
A Suckling
A Suckling
21 May 2014
29 August 2017
29 August 2017
29 August 2017
13 December 2012
21 May 2014
29 August 2017
29 August 2017
29 August 2017
21 May 2014
29 August 2017
29 August 2017
29 August 2017
29 August 2017
29 August 2017
29 August 2017
0.48p
0p
0p
0p
0.06p
0.48p
0p
0p
0p
0.48p
0p
0p
0p
0p
0p
0p
60,000,000
6,032,608
7,994,506
33,302,753
107,329,867
20,000,000
40,000,000
5,570,652
7,760,989
32,522,936
105,854,577
60,000,000
6,032,608
7,994,506
33,302,753
107,329,867
11,250,000
15,576,923
65,229,358
92,056,281
1
2
3
1
2
3
1
2
3
1
2
3
Note 1 - Only vest if VWAP is greater or equal to 0.92p on vesting date
Note 2 - Only vest if VWAP is greater or equal to 1.82p on vesting date
Note 3 - Only vest if VWAP is greater or equal to 2.18p on vesting date
Additionally the Option Holder must have made market purchases of ordinary shares equal to a total of
one third of the Option Holders's annual salary or particpated in a Company share purchase programme
for a period of at least six months prior to the grant date. The options granted in August 2017, have
now expired in March 2019, as a result of the failure to meet the VWAP price targets.
All options are exercisable between 18 months and ten years from the date of grant.
The high and low share price for the year were 0.37p and 0.118p respectively (year ended 31 December 2017: 0.60p
and 0.249p). The share price at 31 December 2018 was 0.118p (31 December 2017: 0.315p).
Page 24
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF
CADENCE MINERALS PLC
_____________________________________________________________________________________________
OPINION
We have audited the financial statements of Cadence Minerals Plc (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 31 December 2018 which comprise the consolidated statement of comprehensive income,
the consolidated and company statements of financial position, the consolidated and company statements of changes
in equity, the consolidated and company statements of cash flows and notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the company financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
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 2018 and of the Group’s losses for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We are independent of the Group 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,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report
to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s or the parent company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are authorised for
issue.
Page 25
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF
CADENCE MINERALS PLC
_____________________________________________________________________________________________
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. These matters included 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. This is not a complete list of all risks identified
by our audit. Our audit procedures in relation to these matters were designed in the context of our audit opinion as a
whole. They were not designed to enable us to express an opinion on these matters individually and we express no
such opinion.
We have determined the matters described below to be the key audit matters to be communicated in our report.
CARRYING VALUE OF INVESTMENTS IN ASSOCIATES
The Group’s Investment in Associate assets (‘Associates’) represents one of the most significant asset on its statement
of financial position totalling £12.5m as at 31 December 2018, which includes listed and unlisted investments.
The carrying value of associates represents significant assets of the Group and Parent Company, and assessing whether
facts or circumstances exist to suggest that impairment indicators were present, and if present, whether the carrying
amount of these asset may exceed its recoverable amount was considered key to the audit. This assessment involves
significant judgement applied by management to the Group and Parent Company’s listed and unlisted assoicate
investments.
We considered it necessary to assess whether facts and circumstances existed to suggest that impairment indicators
were present, and if present, whether the carrying amount of these assets may exceed its recoverable amount.
How the Matter was addressed in the Audit
The procedures included, but were not limited to, assessing and evaluating management's assessment of whether any
impairment indicators have been identified across the Group and Parent Company’s associate assets, the indicators
being:
• Expiring, or imminently expiring, rights to licences or assets held by the investee Companies.
• A lack of flow of information in regards to the investee companies exploration activities and/or production, trading
or strategic advancement.
• Discontinuation of, or a plan to discontinue, exploration activities in the areas, or cessation or delays in trading of
interest by the Investee Companies.
• Sufficient data exists to suggest carrying value of exploration and evaluation assets is unlikely be recovered in full
through successful development or sale by the Investee Companies.
• Updates on trading activities by Investee Companies.
• Review available share prices of the listed investments, both during the year and after the year end.
We also reviewed Stock Exchange RNS announcements and Board meeting minutes for the year and subsequent to
year end for activity to identify any indicators of impairment.
We also assessed the disclosures included in the financial statements.
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could
reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the impact of misstatements identified. Based on professional
judgement, we determined overall materiality for the financial statements as a whole to be £182,500, based on a 1%
percentage consideration of the Group’s total assets, with a lower materiaity set at £100,000 for Investments in
Associate.
Page 26
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF
CADENCE MINERALS PLC
_____________________________________________________________________________________________
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and returns; or
•
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities statement, 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 and 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 Parent Company or to cease
operations, or have no realistic alternative but to do so.
Page 27
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF
CADENCE MINERALS PLC
_____________________________________________________________________________________________
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
USE OF OUR REPORT
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
Rowan Palmer
(Senior Statutory Auditor)
For and on behalf of Chapman Davis LLP, Statutory Auditor
London
Chapman Davis LLP is a limited liability partnership registered in England and Wales (with registered number
OC306037).
29 May 2019
Page 28
CADENCE MINERALS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2018
Note
Year ended
31 December
2018
£’000
Year ended
31 December
2017
£’000
Income
Unrealised (loss)/profit on available for sale assets
Realised (loss)/profit on available for sale assets
Other income
Share based payments
Impairment of intangibles
Other administrative expenses
Total administrative expenses
Operating (loss)/profit
Share of associates losses
Finance cost
(Loss)/profit before taxation
Taxation
(Loss)/profit attributable to the equity holders of the
Company
Other comprehensive income
Foreign exchange
Other comprehensive income for the period, net of tax
Total comprehensive (loss)/profit for the year,
attributable to the equity holders of the company
(Loss)/Profit per ordinary share
Basic (loss)/profit per share (pence)
Diluted (loss)/profit per share (pence)
9
9
1
6
1
8
3
4
5
5
(7,440)
(1,967)
140
(9,267)
(7)
-
(1,559)
(1,566)
(10,833)
(555)
(377)
(11,765)
-
1,353
3,118
145
4,616
(2)
(300)
(1,800)
(2,102)
2,514
(339)
(986)
1,189
-
(11,765)
1,189
(150)
(150)
686
686
(11,915)
1,875
(0.150)
(0.145)
0.015
0.013
The accompanying principal accounting policies and notes form an integral part of these financial statements.
Page 29
CADENCE MINERALS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITITON
As at 31 December 2018
___________________________________________________________________________________
ASSETS
Non-current
Intangible assets
Investment in associate
Current
Trade and other receivables
Available for resale asset
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES
Current
Trade and other payables
Borrowings
Total current liabilities
Total liabilities
EQUITY
Issued share capital
Share premium
Share based premium reserve
Equity loan and exchange reserve
Retained earnings
Note
6
8
10
9
11
12
13
31 December
2018
£'000
31 December
2017
£'000
2,172
12,483
1,887
12,988
14,655
315
2,895
468
3,678
18,333
223
3,706
3,929
3,929
1,202
27,552
1,392
(225)
(15,517)
14,875
722
13,534
2,037
16,293
31,168
262
4,182
4,444
4,444
1,202
27,552
3,178
337
(5,545)
Equity attributable
to equity holders of the Company
14,404
26,724
Total equity and liabilities
18,333
31,168
The consolidated financial statements were approved by the Board on 29 May 2019, and signed on their behalf by;
Kiran Morzaria
Director
Company number 05234262
Don Strang
Director
The accompanying principal accounting policies and notes form an integral part of these financial statements.
Page 30
CADENCE MINERALS PLC
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2018
___________________________________________________________________________________
31 December 2018
31 December 2017
ASSETS
Non-current
Intangible assets
Investment in associates
Investment in subsidiaries
Current
Trade and other receivables
Available for resale asset
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES
Current
Trade and other payables
Borrowings
Total current liabilities
Total liabilities
EQUITY
Issued share capital
Share premium
Share based premium reserve
Equity loan and exchange reserve
Retained earnings
Equity attributable
to equity holders of the Company
Note
£'000
6
8
7
10
9
11
12
13
325
9,794
906
11,025
4,515
2,895
468
7,878
18,903
223
3,706
3,929
3,929
1,202
27,552
1,392
(116)
(15,056)
14,974
£'000
-
10,292
906
11,198
4,921
13,534
2,037
20,492
31,690
262
4,182
4,444
4,444
1,202
27,552
3,178
406
(5,092)
27,246
Total equity and liabilities
18,903
31,690
The Company financial statements were approved by the Board on 29 May 2019, and signed on their behalf by;
Kiran Morzaria
Director
Company number 05234262
Don Strang
Director
The accompanying principal accounting policies and notes form an integral part of these financial statements.
Page 31
CADENCE MINERALS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 31 December 2018
___________________________________________________________________________________
Share
capital
Share
premium
Share
based
payment
reserves
Equity
loan
component
and
exchange
reserve
Retained
earnings
Total
equity
£'000
£'000
£'000
£'000
£'000
£'000
1,192
27,145
4,410
(254)
(7,968)
24,525
-
-
-
-
-
-
-
-
-
-
10
407
2
(681)
(553)
-
-
-
10
-
-
-
407
-
-
-
(1,232)
-
-
-
-
-
-
412
(507)
-
(95)
686
-
681
553
-
-
-
1,234
-
2
-
-
412
(507)
417
324
686
-
1,189
1,189
686
1,189
1,875
1,202
27,552
3,178
337
(5,545)
26,724
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7
(1,793)
-
-
-
(1,786)
-
-
-
-
-
-
(412)
-
(412)
(150)
-
1,793
-
-
-
1,793
-
7
-
-
(412)
-
)
405
(
(150)
-
(11,765)
(11,765)
(150)
(11,765)
(11,915)
1,202
27,552
1,392
(225)
(15,517)
14,404
Balance at 31 December
2016
Share based payments
Transfer on lapse of
warrants
Transfer on cancellation of
options
On issue of loan notes
On settlement of loan
notes
Share issue
Transactions with
owners
Foreign exchange
Profit for the period
Total comprehensive
profit for the period
Balance at 31 December
2017
Share based payments
Transfer on lapse of
warrants
On issue of loan notes
On settlement of loan
notes
Share issue
Transactions with
owners
Foreign exchange
Loss for the period
Total comprehensive loss
for the period
Balance at 31 December
2018
The accompanying principal accounting policies and notes form an integral part of these financial statements.
Page 32
CADENCE MINERALS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
As at 31 December 2018
___________________________________________________________________________________
Share issue
10
407
Share
capital
Share
premium
Share
based
payment
reserves
Equity
loan and
exchange
reserve
Retained
earnings
Total
equity
£'000
£'000
£'000
£'000
£'000
£'000
1,192
27,145
4,410
(178)
(7,502)
25,067
-
-
-
-
-
-
-
-
-
-
2
(681)
(553)
-
-
-
10
-
-
-
407
-
(1,232)
-
-
-
-
-
-
-
-
412
(507)
-
(95)
679
-
681
553
-
-
-
1,234
-
2
-
-
412
(507)
417
324
679
-
1,176
1,176
679
1,176
1,855
1,202
27,552
3,178
406
(5,092)
27,246
-
-
-
-
-
0
-
-
-
-
-
-
-
7
(1,793)
-
-
-
0
(1,786)
-
-
-
-
-
-
0
(412)
-
(412)
(110)
-
1,793
-
-
-
1,793
-
7
-
-
(412)
-
(405)
(110)
-
(11,757)
(11,757)
-
-
-
(110)
(11,757)
(11,867)
1,202
27,552
1,392
(116)
(15,056)
14,974
Balance at 31 December
2016
Share based payments
Warrants issued
Transfer on lapse of options
Transfer on exercise of
options
On issue of loan notes
Transactions with owners
Foreign exchange
Profit for the period
Total comprehensive profit
for the period
Balance at 31 December
2017
Share based payments
Transfer on lapse of
warrants
On issue of loan notes
On settlement of loan notes
Share issue
Transactions with owners
Foreign exchange
Loss for the period
Total comprehensive loss
for the period
Balance at 31 December
2018
The accompanying principal accounting policies and notes form an integral part of these financial statements.
Page 33
CADENCE MINERALS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
___________________________________________________________________________________
Cash flow from operating activities
Continuing operations
Operating (loss)/profit
Net realised/unrealised loss/(profit) on AFSA
Impairment of intangible assets
Equity settled share-based payments
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
Net cash outflow from operating activities from
continuing operations
Cash flows from investing activities
Investment in exploration costs
Payments for investments in associates
Payments for investments in AFS assets
Receipts on sale of AFS assets
Net cash inflow from investing activities
Cash flows from financing activities
Net borrowings
Finance cost
Net cash outflow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Year ended
31 December
2018
£'000
Year ended
31 December
2017
£'000
(10,833)
9,407
-
7
407
(39)
(1,051)
(325)
(50)
(523)
1,755
857
(998)
(377)
(1,375)
(1,569)
2,037
468
2,514
(4,471)
300
2
(320)
(83)
(2,058)
(270)
(345)
(214)
7,118
6,289
(5,400)
(986)
(6,386)
(2,155)
4,192
2,037
The accompanying principal accounting policies and notes form an integral part of these financial statements.
Page 34
CADENCE MINERALS PLC
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
___________________________________________________________________________________
Cash flow from operating activities
Continuing operations
Operating (loss)/profit
Loss/(profit) on AFSA
Equity settled share-based payments
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
Net cash outflow from operating activities from
continuing operations
Cash flows from investing activities
Payments for investments in associates
Payments for intangibles
Payments for investments in AFS assets
Receipts on sale of AFS assets
Net cash inflow from investing activities
Cash flows from financing activities
Net borrowings
Finance cost
Net cash outflow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Year ended
31 December
2018
£'000
Year ended
31 December
2017
£'000
(10,832)
9,407
7
406
(39)
(1,051)
(50)
(325)
(523)
1,755
857
(998)
(377)
(1,375)
(1,569)
2,037
468
2,513
(4,471)
2
(289)
(83)
(2,328)
(345)
-
(214)
7,118
6,559
(5,400)
(986)
(6,386)
(2,155)
4,192
2,037
The accompanying principal accounting policies and notes form an integral part of these financial statements.
Page 35
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTUNG POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
GENERAL INFORMATION
Cadence Minerals plc is a company incorporated in the United Kingdom. The Company's shares are listed on the AIM
market of the London Stock Exchange, and on the NEX Exchange Growth Market as operated by NEX Exchange
Limited (“NEX”).
The Financial Statements are for the year ended 31 December 2018 and have been prepared under the historical cost
convention and in accordance with International Financial Reporting Standards as adopted by the EU ("adopted
IFRS"). These Financial Statements (the "Financial Statements") have been prepared and approved by the Directors
on 29 May 2019 and signed on their behalf by Donald Strang and Kiran Morzaria.
The accounting policies have been applied consistently throughout the preparation of these Financial Statements, and
the financial report is presented in Pound Sterling (£) and all values are rounded to the nearest thousand pounds
(£‘000) unless otherwise stated.
INVESTING POLICY
The Company’s investing policy, which was approved at a General Meeting on 29 November 2010, is to acquire a
diverse portfolio of direct and indirect interests in exploration and producing rare earth minerals and/or other metals
projects and assets (‘Investing Policy’). In light of the nature of the assets and projects that will be the focus of the
Investing Policy, the Company will consider investment opportunities anywhere in the world.
The Directors have considerable investment experience, both in structuring and executing deals and in raising funds.
Further details of the Directors’ expertise are set out on the Company website. The Directors will use this experience
to identify and investigate investment opportunities, and to negotiate acquisitions. Wherever necessary, the Company
will engage suitably qualified technical personnel to carry out specialist due diligence prior to making an acquisition
or an investment. For the acquisitions that they expect the Company to make, the Directors may adopt earn-out
structures with specific performance targets being set for the sellers of the businesses acquired and with suitable
metrics applied.
The Company may invest by way of outright acquisition or by the acquisition of assets – including the intellectual
property – of a relevant business, partnership or joint venture arrangement. Such investments may result in the
Company acquiring the whole or part of a company or project (which, in the case of an investment in a company, may
be private or listed on a stock exchange, and which may be pre-revenue), and such investments may constitute a
minority stake in the company or project in question. The Company’s investments may take the form of equity, joint
venture, debt, convertible documents, licence rights, or other financial instruments such as the Directors deem
appropriate.
The Company may be both an active and a passive investor depending on the nature of the individual investments in
its portfolio. Although the Company intends to be a long-term investor, the Directors will place no minimum or
maximum limit on the length of time that any investment may be held.
There is no limit on the number of projects into which the Company may invest, or on the proportion of the Company’s
gross assets that any investment may represent at any time, and the Company will consider possible opportunities
anywhere in the world.
The Directors may offer new ordinary shares in the capital of the Company by way of consideration as well as cash,
thereby helping to preserve the Company’s cash for working capital and as a reserve against unforeseen contingencies
including, by way of example and without limit, delays in collecting accounts receivable, unexpected changes in the
economic environment and unforeseen operational problems. The Company may, in appropriate circumstances, issue
debt securities or otherwise borrow money to complete an investment. There are no borrowing limits in the Articles
of Association of the Company. The Directors do not intend to acquire any cross-holdings in other corporate entities
that have an interest in the ordinary shares.
Page 36
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
GOING CONCERN
The Directors have prepared cash flow forecasts for the period ending 31 May 2020 which take account of the current
cost and operational structure of the Group.
The cost structure of the Group comprises a high proportion of discretionary spend and therefore in the event that
cash flows become constrained, costs can be quickly reduced to enable the Group to operate within its available
funding.
These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for
a period of at least twelve months from the date of approval of these financial statements. Accordingly, the financial
statements have been prepared on a going concern basis.
It is the prime responsibility of the Board to ensure the Group and Company remains a going concern. At 31 December
2018 the Company had cash and cash equivalents of £468,000 and borrowings of £3,706,000. The Group has minimal
contractual expenditure commitments and the Board considers the present funds sufficient to maintain the working
capital of the Company for a period of at least 12 months from the date of signing the Annual Report and Financial
Statements. For these reasons the Directors adopt the going concern basis in the preparation of the Financial
Statements.
STATEMENT OF COMPLIANCE WITH IFRS
The Group and the Company’s financial statements have been prepared under the historical cost convention and the
financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The
principal accounting policies adopted by the Group and Company are set out below.
BASIS OF CONSOLIDATION
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to
the balance sheet date. Subsidiaries are entities over which the Company has the power to control, directly or
indirectly, the financial and operating policies so as to obtain benefits from their activities. The Company obtains and
exercises control through voting rights. Subsidiaries are fully consolidated from the date at which control is transferred
to the Company. They are deconsolidated from the date that control ceases.
Unrealised gains on transactions between the Company and its subsidiaries are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in
the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition method. The acquisition method involves the recognition
at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition
date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition.
On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their
fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting
policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of
acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the
date of acquisition. Acquisition costs are written off as incurred.
Investments in associates are initially recognised at cost and subsequently accounted for using the equity method. Any
goodwill or fair value adjustment attributable to the Group’s share in the associate is not recognised separately and is
included in the amount recognised as investment in associate. The carrying amount of the investment in associates is
increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the
associate, adjusted where necessary to ensure consistency with the accounting policies of the Group. Unrealised gains
and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in
those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
Page 37
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
REVENUE
Other income represents the total value, excluding VAT of income receivable from professional services. Income is
recognised as the services are provided. IFRS 15 ‘Revenue from Contracts with Customers’ has been adopted. To
determine whether to recognise revenue, the Group follows a 5-step process:
1 Identifying the contract with a customer
2 Identifying the performance obligations
3 Determining the transaction price
4 Allocating the transaction price to the performance obligations
5 Recognising revenue when/as performance obligation(s) are satisfied.
The realised and unrealised gains and losses on Available For Sale Assets which are quoted investments are taken
into income, less any related costs of purchase or sale.
TAXATION
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to
the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the
tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the period.
All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the
comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their
respective tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the
Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is
probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided
they are enacted or substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement.
Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged
directly to equity are charged or credited directly to equity.
FINANCIAL ASSETS
The Group's financial assets include cash, other receivables and available for sale assets. Except for those trade
receivables that do not contain a significant financing component and are measured at the transaction price in
accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified
into the following categories:
• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
In the periods presented the corporation does not have any financial assets categorised as FVOCI.
The classification is determined by both:
• the entity’s business model for managing the financial asset
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance
costs, finance income or other financial items, except for impairment of trade receivables which is presented within
other expenses.
Page 38
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as
FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash
flows
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is
omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other
receivables fall into this category of financial instruments.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’
are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose
contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative
financial instruments fall into this category, except for those designated and effective as hedging instruments, for
which the hedge accounting requirements would apply.
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of
financial assets in this category are determined by reference to active market transactions or using a valuation
technique where no active market exists.
Impairment of financial assets
The Group considers trade and other receivables individually in accounting for trade and other receivables as well as
contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in
contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In
calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate
the expected credit losses using a provision matrix.
AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do
not qualify for inclusion in any of the other categories of financial assets. The Group’s available-for-sale financial
assets include listed and unlisted securities. These available-for-sale financial assets are measured at fair value. Gains
and losses are recognised in the statement of comprehensive income as revenue. Interest calculated using the effective
interest method and dividends are recognised in profit or loss within finance income. Reversals of impairment losses
are recognised in other comprehensive income.
Page 39
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
INTANGIBLE ASSETS – LICENCES
Licences are recognised as an intangible asset at historical cost and are carried at cost less accumulated amortisation
and accumulated impairment losses. The licences have a finite life and no residual value and are amortised over the
life of the licence.
EXPLORATION OF MINERAL RESOURCES
Acquired intangible assets, which consist of mining rights, are valued at cost less accumulated amortisation.
The Group applies the full cost method of accounting for exploration and evaluation costs, having regard to the
requirements of IFRS 6 'Exploration for and Evaluation of Mineral Resources'. All costs associated with mining
development and investment are capitalised on a project by project basis pending determination of the feasibility of
the project. Such expenditure comprises appropriate technical and administrative expenses but not general overheads.
Such exploration and evaluation costs are capitalised provided that the Group's rights to tenure are current and one of
the following conditions is met:
(i)
(ii)
such costs are expected to be recouped through successful development and exploitation of the area of interest
or alternatively by its sale; or
the activities have not reached a stage which permits a reasonable assessment of whether or not economically
recoverable resources exist; or
(iii) active and significant operations in relation to the area are continuing.
When an area of interest is abandoned or the directors decide that it is not commercial, any exploration and evaluation
costs previously capitalised in respect of that area are written off to profit or loss.
Amortisation does not take place until production commences in these areas. Once production commences,
amortisation is calculated on the unit of production method, over the remaining life of the mine. Impairment
assessments are carried out regularly by the directors. Exploration and evaluation assets are assessed for impairment
when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. Such indicators
include the point at which a determination is made as to whether or not commercial reserves exist.
The asset's residual value and useful lives are reviewed and adjusted if appropriate, at each reporting date. An assets'
carrying value is written down immediately to its recoverable value if the assets carrying amount is greater than its
listed recoverable amount.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and in hand, bank deposits repayable on demand, and other short
term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value, less advances from banks repayable within three months from the date of
advance if the advance forms part of the Group's cash management.
GOODWILL
Goodwill representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable
net assets acquired is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated
impairment losses. Negative goodwill is recognised immediately after acquisition in profit or loss.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
Page 40
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
IMPAIRMENT TESTING OF GOODWILL AND OTHER INTANGIBLE ASSETS
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and
some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected
to benefit from synergies of the related business combination and represent the lowest level within the Group at which
management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that include goodwill and other intangible assets with an
indefinite useful life are tested for impairment at least annually.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less
costs to sell, and value in use. Impairment losses recognised for cash-generating units, to which goodwill has been
allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro
rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously recognised may no longer exist.
EQUITY
Share capital is determined using the nominal value of shares that have been issued.
The share premium account represents premiums received on the initial issuing of the share capital. Any transaction
costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.
The share based payment reserve represents the cumulative amount which has been expensed in the income statement
in connection with share based payments, less any amounts transferred to retained earnings on the exercise of share
options.
The equity loan and exchange reserve represents the equity component of the issued convertible loan notes, and
currency translation movements in foreign exchange.
Retained earnings include all current and prior period results as disclosed in the income statement.
OPERATING LEASES
The Group has chosen not to early adopt IFRS 16 – Leases. Leases in which substantially all the risks and rewards of
ownership are retained by the lessor are classified as operating leases.
Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are
charged to the statement of comprehensive income on a straight-line basis over the period of the lease.
FOREIGN CURRENCIES
The financial statements are presented in Sterling, which is also the functional currency of the parent Company.
In the individual financial statements of the consolidated entities, foreign currency transactions are translated into the
functional currency of the individual entity 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 of monetary
assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in profit or loss.
In the consolidated financial statements, the financial statements of subsidiaries, originally presented in a functional
currency, have been translated into Sterling. Assets and liabilities have been translated into Sterling at the exchange
rates ruling at the balance sheet date. Profit and losses have been translated at an average monthly rate for the period.
Any differences arising from this procedure are taken to the foreign exchange reserve. Goodwill and fair value
adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities to the foreign entity
and translated into Sterling at the closing rates.
Page 41
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
SHARE BASED PAYMENTS
The Group issues equity-settled share-based payments to certain employees (including directors). Equity-settled
share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of
the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, together with a
corresponding increase in equity, based upon the Group's estimate of the shares that will eventually vest.
Fair value is measured using the Black-Scholes model. The expected life used in the model has been adjusted, based
on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural
considerations.
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.
No adjustment is made to the expense or share issue cost recognised in prior periods if fewer share options are,
ultimately exercised than originally estimated. Upon exercise of share options, the proceeds received net of any
directly attributable transaction costs up to the nominal value of shares issued are allocated to share capital with any
excess being recorded as share premium.
FINANCIAL LIABILITIES
The Group’s financial liabilities include trade and other payables. Financial liabilities are obligations to pay cash or
other financial assets and are recognised when the Group becomes a party to the contractual provisions of the
instrument.
All financial liabilities are recognised initially at fair value, net of direct issue costs, and are subsequently recorded at
amortised cost using the effective interest method with interest related charges recognised as an expense in the income
statement.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Significant judgments and estimates
The preparation of financial statements requires management to make estimates and judgments that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of income and expenditure during the reported period. The estimates and associated
judgments are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities
that are not readily apparent from other sources.
The estimates and underlying judgments are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
In the preparation of these consolidated financial statements, estimates and judgments have been made by
management concerning calculating the fair values of the assets acquired on business combinations, and the
assumptions used in the calculation of the fair value of the share options. Actual amounts could differ from
those estimates.
Management has made the following estimates that have the most significant effect on the amounts
recognised in the financial statements.
Page 42
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Impairment of goodwill
The basis of review of the carrying value of goodwill is as detailed in note 6. The carrying value of goodwill is
£598,000 at the balance sheet date. Management do not consider that any reasonably foreseeable changes in the key
assumptions would result in an impairment. Further details of management's assessment of the goodwill for
impairment are included in note 6.
Business combinations
On initial recognition, the assets and liabilities of the acquired business and the consideration paid for them are
included in the consolidated financial statements at their fair values. In measuring fair value, management uses
estimates of future cash flows. Any subsequent change in these estimates would affect the amount of goodwill if the
change qualifies as a measurement period adjustment. Any other change would be recognised in the income statement
in the subsequent period.
Share-based payments
The Group measures the cost of the equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The charge for the period ended 31 December 2018 of £7,000
(2017: £2,000) is determined using a Black-Scholes Valuation model, using the assumptions detailed in note 14.
Treatment of exploration and evaluation costs
IFRS 6 "Exploration for and Evaluation of Mineral Resources" requires an entity to consistently apply a policy to
account for expenditure on exploration and evaluation of a mineral resource. The directors have set out their policy
in respect of the treatment of these costs in the accounting policies. Amounts capitalised in the year to 31 December
2018 were £325,000 (2017: £270,000). Additionally £nil of costs previously capitalised have been impaired in the
year to 31 December 2018 (2017: £300,000).
Treatment of licenses
The Company purchased the entire share capital of Mojito Resources Limited during the period ended 31 December
2011. Mojito Resources Limited is the beneficial owner of a 30% interest in the Tenements in the Yangibana Rare
Earth Project. These have been treated in the accounting records of Mojito Resources Limited and on consolidation
as an intangible asset. The directors consider the fair value of the tenements to be equal to the book value in Mojito
Resources Limited at the date of acquisition as the interest in the tenements were purchased during the financial
period. In addition Mojito Resources Limited has entered into an Agreement with GTI Resources Limited and
Gascoyne Metals Pty Limited in respect of the Yangibana Project. Mojito Resources is not however liable for any of
the exploration costs in the initial sole funding period until a Feasibility Report is produced by the operators (GTI
Resources Limited). At this stage therefore the directors have treated the licenses as an intangible asset. Following
the completion of the Feasibility report the directors will review the accounting treatment going forward giving
consideration to their respective responsibilities for the development of the project.
Page 43
CADENCE MINERALS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2018
___________________________________________________________________________________
ADOPTION OF NEW OR AMENDED IFRS
New standards, amendments and interpretations adopted by the Company
The Company has applied IFRS 9 - Financial Instruments and IFRS 15 – Revenue from contracts with customers
Their effect has not been material to the Company.
New standards, amendments and interpretations not yet adopted
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not
been applied in these financial statements, were in issue but not yet effective for the year presented:
IFRS 16 in respect of Leases which will be effective for accounting periods beginning on or after 1 January 2019.
IFRS 17 in respect of Insurance Contracts will be effective for accounting periods beginning on or after 1 January
2021.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material
impact on the Company.
Page 44
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
___________________________________________________________________________________
1. PROFIT BEFORE TAXATION AND SEGMENTAL INFORMATION
Profit before taxation - continuing operations
The loss before taxation is attributable to the principal activities of the Group.
The loss before taxation is stated after charging:
Year ended 31
December 2018
£'000
Year ended 31
December 2017
£'000
7
-
105
420
204
18
-
2
300
(155)
535
206
18
-
Share based payment charge
Impairment of intangibles
Foreign exchange loss/(gain)
Directors fees and consulting (see note 2)
Operating lease rentals: land and buildings
Fees payable to the Company’s auditor for the audit of the
financial statements
Fees payable to the Company’s auditor and its associates for
other services:
Other services relating to taxation compliance
Segmental information
An operating segment is a distinguishable component of the Group that engages in business activities from which it
may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating
decision maker to make decisions about the allocation of resources and assessment of performance and about which
discrete financial information is available.
The chief operating decision maker has defined that the Group’s only reportable operating segment during the period
is the investment in and development of lithium and rare earth assets.
Subject to further acquisitions the Group expects to further review its segmental information during the forthcoming
financial year.
The Group generated revenues from external customers totalling £139,000 (2017: £145,000) during the period.
In respect of the total assets, £783,000 (2017: £2,759,000) arise in the UK, and £317,000 (2017: £317,000) arise in
Greenland, £5,553,000 arise in Mexico (2017: £15,684,000), £10,808,000 (2017: £10,931,000) arise in Australia,
£100,000 (2017: £Nil) arise in Brazil, £225,000 (2017: £Nil) arise in Argentina and £547,000 arise in Canada (2017:
£1,477,000).
Page 45
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
2. EMPLOYEE REMUNERATION
Employee benefits expense
The expense recognised for employee benefits, including Directors’ emoluments, is analysed below:
Year ended
31 December
2018
£'000
Year ended
31 December
2017
£'000
Wages, salaries and consulting fees
456
583
Employers NI
Share based payments
21
28
7
2
484
613
The average number of employees (including directors) employed by the Group during the period was:
Directors
Other
2018
No.
4
1
5
2017
No.
4
1
5
Included within the above are amounts in respect of Directors, who are considered to be the key management
personnel, as follows:
Wages, salaries and consulting fees
Share based payments
Group
Year ended
31 December
2018
£'000
Year ended
31 December
2017
£'000
420
535
7
427
2
537
Details of Directors' emoluments are included in the Report on Remuneration on pages 23 to 24.
Page 46
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
3. FINANCE COSTS
Other interest & penalties
Loan interest
Finance Fees
4. TAXATION
Year ended
31 December
2018
£'000
-
220
157
377
Year ended
31 December
2017
£'000
9
421
556
986
The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows:
Year ended
31 December
2018
£'000 %
2018
Year ended
31 December
2017
£'000
2017
%
(Loss)/profit before taxation
(11,765)
1,189
(Loss)/profit multiplied by standard rate
of corporation tax in the UK
(2,235)
19
229 19.3
Effect of:
Offset against losses/deferred tax asset not recognised
Expenses not deductible for tax purposes
Total tax charge for year
2,123
112
-
(431)
202
-
The Group has tax losses in the UK, subject to Her Majesty's Revenue and Customs approval, available for offset
against future operating profits. The Group has not recognised any deferred tax asset in respect of these losses, due
to there being insufficient certainty regarding its recovery.
Page 47
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
5.
(LOSS)/PROFIT PER SHARE
The calculation of the basic (loss)/profit per share is calculated by dividing the consolidated profit attributable to
the equity holders of the Company by the weighted average number of ordinary shares in issue during the period.
(Loss)/profit attributable to owners of the Company
Year ended
31 December
2018
£’000
(11,765)
Year ended
31 December
2017
£’000
1,189
2018
Number
2017
Number
Weighted average number of shares for calculating basic
(loss)/profit per share
Share options and warrants exercisable
Weighted average number of shares for calculating diluted
(loss) profit per share
7,851,440,338
7,811,370,698
280,000,000
1,664,564,973
8,131,440,338
9,475,935,671
Basic (loss)/profit per share
Diluted (loss)/profit per share
2018
Pence
(0.150)
(0.145)
2017
Pence
0.015
0.013
The impact of the share options are considered anti-dilutive when the group’s result for a period is a loss.
Page 48
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
6. INTANGIBLE ASSETS
Group Intangible Assets
Cost
At 1 January 2017
Additions
Exchange Difference
At 31 December 2017
Additions
Exchange Difference
At 31 December 2018
Amortisation and impairment
At 1 January 2017
Amortisation charge in the year
Impairment
At 31 December 2017
Amortisation charge in the year
Impairment
At 31 December 2018
Exploration
costs
£'000
Goodwill
£'000
Licences
£'000
Total
£'000
1,279
270
-
1,549
325
-
1,874
630
-
8
638
-
(40)
598
174
-
-
174
-
-
174
2,083
270
8
2,361
325
(40)
2,646
-
-
-
-
(300)
(300)
-
-
(300)
-
-
-
-
-
(174)
-
-
(174)
-
-
(174)
(174)
-
(300)
(474)
-
-
(474)
Net book value at 31 December
2018
Net book value at 31 December 2017
Net book value at 1 January 2017
1,574
1,249
1,279
598
638
630
-
-
-
2,172
1,887
1,909
In the year to 31 December 2018 £Nil (2017: £270,000) was invested in Exploration costs by REM Mexico Ltd and
£nil (2017: £Nil) invested in Exploration costs by Rare Earth Resources Ltd. The Exploration costs in Rare Earth
Resources Ltd were impaired by £300,000 in the year to 31 December 2017. During 2018, £325,000 was invest in
exploration costs by the parent company (2017: £nil).
Goodwill of £692,000 arose on the acquisition of Mojito Resources Limited, the licences being the only asset held
within that company. The directors are continuing to review their provisional assessment of the fair value of the
licences acquired although do not expect any material adjustment. The directors have therefore identified only one
cash generating unit to which the goodwill is allocated. As set out in the accounting policies Goodwill is reviewed
annually or in the event of an indication of impairment. The recoverable amount of goodwill has been determined by
the fair value less costs to sell. The directors consider that there have been no changes in circumstances between
acquisition on 1 December 2013 and 31 December 2018 that would give rise to an impairment charge.
At this stage the Feasibility Study has not been completed to fully assess the potential future cash flows of developing
the area under licence. The directors, however, having given consideration to the past exploration of the Project which
has identified nine individual occurrences of rare earth elements known to occur within the Project areas consider that
the goodwill is not impaired. Management's review of the recoverable amount is most sensitive to changes in the
commodity prices of the underlying minerals and the existence of the rare earth elements within the Project Area.
Since the acquisition date there has been no significant fluctuation in the commodity prices of the underlying minerals
or any material changes to the Project Area. The directors consider that no impairment is required at 31 December
2018.
Page 49
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
6. INTANGIBLE ASSETS CONTINUED
Company only Intangible Assets
Cost
At 1 January 2017
Additions
At 31 December 2017
Additions
At 31 December 2018
Amortisation and impairment
At 1 January 2017
Amortisation charge in the year
At 31 December 2017
Amortisation charge in the year
At 31 December 2018
Exploration
costs
£'000
Licences
£'000
Total
£'000
-
-
33
33
-
-
-
325
33
33
-
325
325
33
358
-
-
-
-
-
(33)
-
(33)
-
(33)
(33)
-
(33)
-
(33)
Net book value at 31 December 2018
325
Net book value at 31 December 2017
Net book value at 1 January 2017
-
-
-
-
-
325
-
-
7. INVESTMENTS IN SUBSIDIARIES – COMPANY
Investment in
group
undertakings
£'000
Cost and carrying value
At 31 December 2018 and 31 December 2017
906
Subsidiary
Proportion of ordinary
share capital held
Nature of
business
Country of
incorporation
Mojito Resources Ltd
REM Mexico Limited
Rare Earth Resources Limited
100%
100%
100%
Mining
Mining
Mining
British Virgin
Islands
UK
UK
All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary
undertaking held directly by the parent company do not differ from the proportion of the ordinary shares held. The
following companies are taking an exception from the audit of the financial statements as per S479A of the Companies
Act; REM Mexico Ltd (08022329), Rare Earth Resources Ltd (08390571).
Page 50
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
8. INVESTMENT IN ASSOCIATES
Group
31 December
2018
£’000
31 December
2017
£’000
Changes in equity accounted investment
Carrying value at beginning of year
Equity purchases
Share of retained (losses) attributable to the
group
Investment carrying value as at year end
12,988
12,982
50
345
(555)
12,483
(339)
12,988
The Group’s two Mexican associate companies have a reporting date of 30 June. These shares are not publicly listed
on a stock exchange and hence published results are not available. Therefore the fair value of the Group’s investment
equates to the carrying book value of £2,689,000 (31 December 2017: £2,696,000).
EMH is listed on the ASX and on AIM. The market value of the shareholding at 31 December 2018 was £4,495,000
(2017: £10,747,000), with a carrying value of £9,794,000 (2017: £10,292,000). During the year ended 31 December
2018 the company acquired a further 250,000 CDIs in European Metal Holdings Inc.
The Group’s share of results of its associates, which are unlisted, and their aggregated assets and liabilities, are as
follows:
Name
Country of
incorporation Assets
Liabilities Revenues
Profit/(Loss)
% interest
held
As at 31 December 2018 Year to 31 December 2018
£’000
£’000
£’000
£’000
Mexilit S.A. de
C.V.
Minera Megalit
S.A. de C.V.
European Metals
Holding Ltd (1)
Mexico
Mexico
BVI
Company
1,772
1,442
440
7,624
274
341
-
-
(13)
(11)
30%
30%
362
(2,780)
19.73%
31 December
2018
£’000
31 December
2017
£’000
Changes in equity accounted investment
Carrying value at beginning of year
Equity purchases
Share of retained (losses) attributable to the
group
Investment carrying value as at year end
10,292
10,297
50
345
(548)
9,794
(350)
10,292
Page 51
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
9. AVAILABLE FOR SALE INVESTMENTS
Available for sale assets
Current Assets - Listed Investments
Valuation at 1 January
Additions at cost
Disposal proceeds
Realised (loss)/profit on disposal
Change in fair value recognised in income statement
Valuation at 31 December
31 December
2018
£'000
31 December
2017
£'000
13,534
523
(1,755)
(1,967)
(7,440)
2,895
15,967
214
(7,118)
3,118
1,353
13,534
During the year ended 31 December 2018 the company disposed of a variety of its shareholdings, including part
of its holding in Bacanora Minerals Limited.
Available-for-sale assets comprise investments in listed securities which are traded on stock markets throughout
the world, and are held by the Group as a mix of strategic and short term investments.
10. TRADE AND OTHER RECEIVABLES
Group
31
December
2018
£'000
31 December
2017
£'000
43
154
-
118
315
48
133
-
541
722
Current
Trade receivables
Other receivables
Amounts owed by subsidiaries
Prepayments and accrued income
Company
31
December
2018
£'000
31 December
2017
£'000
48
133
43
154
4,200
4,199
118
541
4,515
4,921
There is no impairment of receivables and no amounts are past due at 31 December 2018 or 31 December 2017.
The fair value of these financial assets is not individually determined as the carrying amount is a reasonable
approximation of fair value.
Page 52
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
11. TRADE AND OTHER PAYABLES
Group
31
December
2018
£'000
31 December
2017
£'000
Company
31
December
2018
£'000
31 December
2017
£'000
Trade payables
78
98
78
98
Accruals and deferred income
145
164
145
164
223
262
223
262
The fair value of trade and other payables has not been disclosed as, due to their short duration, management considers
the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value.
12. BORROWINGS
Current liabilities
Loan Notes
Interest accrued
31 December
2018
£'000
31 December
2017
£'000
3,672
4,130
34
52
3,706
4,182
On 8 August 2016, the Company agreed a $15million Convertible Loan Facility with Iskandar Mineral Asset Fund.
The Convertible Loan was secured by a pledge over the assets of the Company, and had an interest rate of 5%. The
principle is convertible at 0.65 pence which represented a premium of 5 % over the closing price on 8 August 2016.
The noteholders had the right to convert the Convertible Loan into shares of REM on the earlier of: (i) the 12 month
anniversary of the date the Convertible Note was issued to the noteholders; and (ii) the achievement by REM of certain
performance measures, including the volume weighted average price of REM shares being above the 0.65 pence for
90 consecutive days or relating to potential future investments. In addition, each US$1 of the Convertible Loan had
forty warrants attached with the right to subscribe to forty new ordinary shares at a price of 0.8 pence per share for a
period of 2 years. The warrant exercise price is a 23% premium to the closing price on the 8 August 2016. The Loan
Note was redeemable at the Company's option prior to conversion.
The full $15million was drawn down during the year ended 31 December 2016 and 600million warrants were issued.
During the year ended 31 December 2016 $1,850,000 of the capital was converted into 229,063,331 ordinary shares
of 0.01p, leaving the balance outstanding of $13,150,000 plus interest accrued. The Loan Note was initially recognised
as a liability of £10,672,000 (USD$14,286,000) and an equity element of £534,000 (USD$714,000).
On 31 January 2017, a further US$200,000 of the convertible loan was converted into 24,529,629 new ordinary shares
in the Company at a price of 0.65 pence per share, reducing the balance to $12,950,000. On 1 November 2017 the
Company announced that the remaining loan had been restructured, with approximately 50% plus the accrued interest
being repaid in cash. The outstanding balance of $6,130,034 at that date was restructured into two loans as follows:
Page 53
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
12. BORROWINGS CONTINUED
Loan 1 for $2,365,017 has an interest rate of 10%, a principle and interest rate repayment holiday until January 2018,
after which the principle and interest will be paid via equal instalments over a nine-month period. The loan notes are
convertible at any time during this period at 0.473 pence, being a 46% premium to the closing mid-market price as at
31 October 2017.
Loan 2 for $3,765,017 carries zero interest rate and the principle will be repaid in September 2018. The loan notes
are convertible at any time during this period at 0.364 pence, being a 12% premium to the closing mid-market price
as at 31 October 2017.
Both Convertible Loans were secured by a pledge over the assets of the Company.
Loan Note 1 was initially recognised as a liability of £1,591,000 (USD$2,150,000) and an equity element of £159,000
(USD$215,000). Loan Note 2 was initially recognised as a liability of £2,523,000 (USD$3,423,000) and an equity
element of £253,000 (USD$342,000).
During the year ended 31 December 2018, Loan Note 1 was repaid in full and new loans were entered into in
September 2018 totalling £3,713,000 (USD$4,875,000) to repay Loan Note 2 and future interest payments. The new
loans carry an interest rate of 12% and had a principle repayment holiday until 1 January 2019. After which the loans
will be repaid via 12 equal monthly instalments with both the principle and interest being fully repaid by 1 December
2019. The loans are secured over the Company’s assets. The loan notes are only convertible should the Group default
on repayments, in which case the lendor can opt to convert the outstanding balance at 85% of the WWAV for the 15
working days prior to the conversion.
13. SHARE CAPITAL
Allotted, issued and fully paid
173,619,050 deferred shares of 0.24p
7,851,440,338 ordinary shares of 0.01p (31 December 2017:
7,851,440,338)
Allotted and issued
At 1 January 2017
Issue of shares during the year
At 31 December 2017 and 31 December 2018
31 December
2018
£'000
31 December
2017
£'000
417
785
1,202
417
785
1,202
Ordinary shares
No.
£'000
7,753,160,709
98,279,629
7,851,440,338
775
10
785
On 31 January 2017, $200,000 of the loan was converted into 24,529,629 Ordinary Shares of 0.01p. On 7 July 2017,
73,750,000 Ordinary Shares of 0.01p were issued in respect of acquiring an interest in the Leogang Project which has
yet to be concluded. During year ended 31 December 2017 a total of 98,279,629 shares were issued.
During the year ended 31 December 2018, no shares were issued.
The deferred shares have no voting rights and are not eligible for dividends.
Page 54
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
13. SHARE CAPITAL CONTINUED
Warrants issued
Each warrant issued is governed by the provisions of warrant instruments representing the warrants which have been
adopted by the Company. The rights conferred by the warrants are transferable in whole or in part subject to and in
accordance with the transfer provisions set out in the Articles. The holders of warrants have no voting rights, pre-
emptive rights or other rights attaching to Ordinary Shares. All warrants issued vest in full. Warrants fall outside the
scope of IFRS2 if they have been issued to shareholders in their capacity as shareholders and have therefore not been
treated as share based payments. During the years ended 31 December 2018 (31 December 2017: Nil) no warrants
were issued, and all outstanding warrants lapsed.
The following table shows details of the warrants during the year:
31 December 2018
31 December 2017
Outstanding at the beginning of the
year
Lapsed
Outstanding at the end of the year
Exercisable at year end
-
14. SHARE BASED PAYMENTS
Number
WAEP
£
Number
1,084,564,973
0.00828
1,158,283,823
(1,084,564,973)
-
0.00828
-
(73,718,850)
1,084,564,973
1,084,564,973
WAEP
£
0.00855
0.0126
0.00828
Share Options
The Group operates share option schemes for certain employees (including directors). Options are exercisable at the
option price agreed at the date of grant. The options are settled in equity once exercised. The expected life of the
options varies between 1 and 6 years. All options issued in the prior years vested immediately, with no vesting
requirements. . The options which were issued during the year ended 31 December 2017 have vesting conditions
attached thereto, and these are detailed on the subsequent disclosures within this note. No options were issued during
the year ended 31 December 2018.
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the period
are as follows:
Outstanding at the beginning of the
year
Granted
Replaced
Outstanding at the end of the year
Exercisable at year end
31 December 2018
31 December 2017
Number
WAEP
£
Number
WAEP
£
512,570,592
0.00437
580,000,000
0.00457
-
-
512,570,592
280,000,000
-
-
0.00437
232,570,592
(300,000,000)
512,570,592
280,000,000
-
0.0044
0.00437
Page 55
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
14. SHARE BASED PAYMENTS CONTINUED
The share options outstanding at the end of the period have a weighted average remaining contractual life of 1.15
years (31 December 2017: 2.15 years) and have the following exercise prices and fair values at the date of grant:
First exercise date
(when vesting
conditions are met)
Grant date
Exercise
price
Fair value
31 December
2018
31 December 2017
£
£
Number
Number
28 January 2013
13 December 2012
28 June 2013
21 May 2014
23 May 2014
1 March 2019
1 March 2019
1 March 2019
28 January 2010
13 December
2012
28 June 2013
21 May 2014
23 May 2014
29 August 2017
29 August 2017
29 August 2017
0.0004
10,000,000
10,000,000
0.0006
0.00055
20,000,000
20,000,000
0.0006
0.000371
0.0048
0.004711
0.0058
0.005574
-
-
-
0.00415
0.00415
0.00415
10,000,000
200,000,000
40,000,000
28,885,868
39,326,924
10,000,000
200,000,000
40,000,000
28,885,868
39,326,924
164,357,800
164,357,800
512,570,592
512,570,592
The share options issued on 29 August 2017 can only be exercised 18 months after issue if the share price meets
certain targets and the director makes purchases of shares into the company as detailed in the Report on Remuneration
on pages 23 to 24 (These options expired in March 2019, as a result of the failure to meet these targets). All other
options can be exercised up to seven years after the date first exercisable.
At 31 December 2018 280,000,000 options were exercisable (31 December 2017: 280,000,000).
Share Warrants
No warrants were issued during the year to 31 December 2018 (2017: nil).
First exercise date (when
vesting conditions are met)
Grant date
Exercise
price
31 December
2018
31 December
2017
£
Number
Number
29 June 2015
29 July 2015
02 October 2015
23 October 2015
16 November 2015
20 November 2015
29 February 2016
09 August 2016
29 June 2015
29 July 2015
02 October 2015
23 October 2015
16 November 2015
20 November 2015
29 February 2016
09 August 2016
1.20
1.13
0.96
0.95
0.84
0.79
0.80
0.80
-
-
-
-
-
-
-
-
-
33,574,598
17,656,007
34,341,188
34,366,078
19,647,535
40,993,945
303,985,622
600,000,000
1,084,564,973
Page 56
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
14. SHARE BASED PAYMENTS CONTINUED
For those options and warrants granted where IFRS 2 "Share-Based Payment" is applicable, the fair values were
calculated using the Black-Scholes model. The inputs into the model for the current and prior year were as follows:
29 August 2017
n/a
n/a 18 months
Risk free rate
Share price
volatility
Expected life
Share price at
date of grant
£0.00415
Expected volatility was determined by calculating the historical volatility of the Company's share price for 12 months
prior to the date of grant. The expected life used in the model has been adjusted, based on management's best estimate,
for the effects of non-transferability, exercise restrictions and behavioural considerations.
The options granted on 29 August 2017, had a zero exercise price and therefore the value was the share price at the
time of issue of 0.415p, irrespective of the interest rate and volatility.
All of the options are exercisable 18 months after the grant date provided that the share price has met a certain price.
Should the share price not be achieved the options will lapse.
28,885,868 options only vest if VWAP is greater or equal to 0.92p on vesting date
39,226,924 options only vest if VWAP is greater or equal to 1.82p on vesting date
164,357,800 options only vest if VWAP is greater or equal to 2.18p on vesting date
Additionally the option holder must have made market purchases of ordinary shares equal to a total of one third of
the Option Holders's annual salary or participated in a Company share purchase programme for a period of at least
six months prior to the grant date.
It has been assumed that the likelihood on the options of the three sets of options vesting is 60%, 20% and 10%
respectively, and the share option has been calculated accordingly.
Of the 232,570,592 options issued during the year ended 31 December 2017, 223,632,074 were replacement options
for the 300,000,000 options issued in July 2016, which were cancelled at the time the new options were issued. The
charge in respect of these would have been £163,000, but as £716,000 had already been charged in respect of the 2016
options no charge has been made. The remaining 8,938,518 new options issued during the year ended 31 December
2017, carry a charge of £10,000 which has been spread over the 18 month vesting period.
The Group therefore recognised total expenses of £7,000 (year ended 31 December 2017: £2,000) relating to equity-
settled share-based payment transactions during the period.
15. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2018 or 31 December 2017.
16. CAPITAL COMMITMENTS
There were no capital commitments at 31 December 2018 or 31 December 2017.
Page 57
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
17. LEASE COMMITMENTS
There were the following commitments under non-cancellable operating leases.
Amounts due within one year
Amounts due within two to five years
18. FINANCIAL INSTRUMENTS
31 December
2018
£'000
31 December
2017
£'000
168
251
419
168
420
588
The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The
Board is responsible for co-ordinating the Group's risk management and focuses on actively securing the Group's short
to medium term cash flows. Long term financial investments are managed to generate lasting returns.
The Group has purchased shares in Companies which are listed on public trading exchanges such as the LSE, TSX
and ASX, and these shares are held as an available-for-sale asset. The most significant risks to which the Group is
exposed are described below:
a Credit risk
The Group's credit risk will be primarily attributable to its trade receivables. At 31 December 2018, the Group had
minimal trade receivables and therefore minimal risk arises.
Generally, the Group's maximum exposure to credit risk is limited to the carrying amount of the financial assets
recognised at the balance sheet date, as summarised below:
31 December 2018
31 December 2017
AFS
(carried
at fair
value
Loans and
receivables
Derivative
financial
assets
Statement
of
Financial
position
total
AFS
(carried
at fair
value)
Loans and
receivables
Derivative
financial
assets
Statement of
financial
position
total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Available-for-
sale financial
asset
Other long
term financial
assets
Trade
receivables
Other
receivables
Prepayments
and accrued
income
Cash and cash
equivalents
2,895
2,895
-
-
-
-
Total
2,895
-
-
43
154
118
468
783
-
2,895
13,534
-
2,895
13,534
-
-
-
-
13,534
13,534
-
-
-
-
43
154
118
468
-
-
-
-
-
3,678 13,534
48
-
133
541
2,037
2,759
-
-
-
-
48
133
541
2,037
16,293
Page 58
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
18. FINANCIAL INSTRUMENTS CONTINUED
Financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based
on the degree to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such
cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to
the fair value measurement. Management’s assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgement, and considers factors specific to the investment.
Investments
The Group’s investment in shares in Listed Companies are included as an available-for-sale asset has been classified
as Level 1, as market prices are available and the market is considered an active, liquid market.
The credit risk on liquid funds is limited because the Group only places deposits with leading financial institutions
in the United Kingdom.
b Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and
to invest cash assets safely and profitably. The Directors prepare rolling cash flow forecasts and seek to raise
additional equity funding whenever a shortfall in funding is forecast. Details of the going concern basis of preparing
the financial statements are included in the principal accounting policies.
c Market risk
The amount and quality of minerals available and the related costs of extraction and production represent a significant
risk to the group. The group is exposed to fluctuating commodity prices in respect of the underlying assets. The Group
seeks to manage this risk by carrying out appropriate due diligence in respect of the projects in which it invests.
The Group is exposed to the volatility of the stock markets around the world, on which it holds shares in various listed
entities, and the fluctuation of share prices of these underlying companies. The Group manages this risk through
constant monitoring of its investments share prices and news information, but does not hedge against these
investments.
Interest rate risk
The Group only has borrowings at a fixed coupon rate of 10% and therefore minimal interest rate risk, as this is
deemed its only material exposure thereto.
Page 59
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
18. FINANCIAL INSTRUMENTS CONTINUED
d Financial liabilities
The group's financial liabilities are classified as follows:
31 December 2018
31 December 2017
Other
financial
liabilities
at
amortised
cost
£'000
Liabilities
not within
the scope
of IAS 39
Total
£'000
£'000
Other
financial
liabilities
at
amortised
cost
£'000
Liabilities
not within
the scope
of IAS 39
Total
£'000
£'000
Trade
payables
Accruals and
deferred
income
78
-
-
78
145
145
98
-
-
98
164
164
Borrowings
3,706
-
3,706
4,182
-
4,182
Total
3,784
145
3,929
4,280
164
4,444
Maturity of financial liabilities
All financial liabilities at 31 December 2018 and 31 December 2017 mature in less than one year.
Borrowing facilities for the period ended 31 December 2018
The Group has committed borrowing facilities at 31 December 2018 of £3,706,000 (31 December 2017: £4,182,000).
See Note 12 for details.
e Capital risk management
The Group's objectives when managing capital are:
-
-
-
to safeguard the Group's ability to continue as a going concern, so that it continues to provide returns and benefits
for the shareholders;
to support the Group's stability and 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 and capital efficiency,
prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected
strategic investment opportunities. Management regards total equity as capital and reserves, for capital management
purposes.
Page 60
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
19. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
1 January 2018
Cash-flows:
- Proceeds
- Interest charged
- Realised foreign exchange
- Repayments
Non-cash:
- Loans converted
- Transfer from equity
- Transfer to equity
- Unrealised Foreign exchange movement
Short-term
borrowings
Total
4,182
4,182
3,713
220
97
(5,034)
-
412
-
116
3,713
220
97
(5,034)
-
412
-
116
31 December 2018
3,706
3,706
Short-term
borrowings
Total
10,324
10,324
421
(198)
(5,623)
(158)
507
(412)
(679)
4,182
421
(198)
(5,623)
(158)
507
(412)
(679)
4,182
1 January 2017
Cash-flows:
- Interest charged
- Realised fx
- Repayments
Non-cash:
- Loans converted
- Transfer from equity
- Transfer to equity
- Unrealised Foreign exchange movement
31 December 2017
20. RELATED PARTY TRANSACTIONS
There are no related party transactions to disclose.
Key Management Personnel are considered to be the Company Directors only, and their fees and remuneration are
disclosed in the Directors Remuneration on pages 23 to 24, and within Note 2 to the financial statements.
Page 61
CADENCE MINERALS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
21. EVENTS AFTER THE END OF THE REPORTING PERIOD
On 4 March 2019, the Company announced that it had agreed to acquire three highly prospective assets in Australia
that are in regions with proven high-grade lithium mineralisation. The mechanism to facilitate this acquisition is via
varying binding investment agreements in place with Lithium Technologies Pty Ltd ("LT") and Lithium Supplies Pty
Ltd ("LS") that Cadence entered on 11 December 2017 to acquire up to 100% of six prospective hard rock lithium
assets in Argentina. Cadence has agreed a variation to the agreements with LT and LS. As previously announced,
Cadence can acquire 100% of Lithium Technologies Pty Ltd and Lithium Supplies Pty.
The variation will result in LT & LS acquiring between them 100% of Synergy Prospecting Ltd ("Synergy"), which
owns the three lithium projects in Australia. As two of Synergy's assets are granted, Cadence has agreed to move
forward with increasing is ownership in LT & LS form 4% to 31.5% via:
a
b
Issuing 373,544,298 million Cadence shares to the founding shareholders of LT & LS valued at £400,000
(based on 14-day VWAP of £0.0107) to acquire a further 20% stake, which is in line with the terms of
the original agreements; and
Invest £300,000 to earn an incremental 7.5% stake, with the funds earmarked to commence developing
Synergy's lithium assets in Australia
The result of the variation would mean no change to the £ consideration to be paid for of LS and LT, however
additional shares would be issued as a result of the change in the share price in Cadence between November 2017 and
March 2019.
On 26 March 2019, the Company announced that it had raised £1.3 million through a placing ("Placing") of
866,666,663 new ordinary shares ("Placing Shares") in the capital of the Company with new and existing investors.
The Placing is being made at an issue price of 0.15 pence per share ("Placing Price"), representing approximately
21% discount to closing price of the Company's ordinary shares on the business day prior to this announcement.
On 21 May 2019, the Company announced that it had entered into a non-binding Heads of Terms ("HOT") with
IndoSino Pte Ltd. ("IndoSino") to invest in and acquire up to a 27% interest in the former Anglo American plc ("Anglo
American") and Cliffs Natural Resources ("Cliffs") Amapá iron ore mine, beneficiation plant, railway and private
port ("Amapá Project") owned by DEV Mineração S.A. ("Amapá"). The Amapá Project is a large-scale iron open pit
ore mine with associated rail, port and beneficiation facilities and commenced operations in December
2007.Production increased to 4.8 Mt and 6.1 Mt of iron ore concentrate product in 2011 and 2012 respectively. The
HOT stipulates that Cadence, upon entering into a binding investment agreement, will have the right to acquire 27%
of the Amapá Project by investing a total of US$6 million over two stages into a joint venture company, Pedra Branca
Alliance Pte Ltd. ("PBA"). Cadence's investment is conditional, amongst other matters, on the approval of a judicial
restructuring plan ("JRP") submitted by Cadence and IndoSino to the Sao Paulo Commercial Court in Brazil, the
transfer of 99.9% of the issued share capital of Amapá to PBA and Cadence raising the required finance. Cadence is
in discussions with potential strategic investors to fund all or part of this investment via equity. Cadence is currently
finalising the terms of the binding investment agreement, which is expected to be entered into shortly.
22. ULTIMATE CONTROLLING PARTY
In the opinion of the directors there is no controlling party.
23. PROFIT AND LOSS ACCOUNT OF THE PARENT COMPANY
As permitted by section 408 of the Companies Act 2006, the profit and loss account of the parent company has not
been separately presented in these accounts. The parent company loss for the year was £11,757,000 (2017: profit
£1,176,000).
Page 62