Cadence Minerals Plc
Annual Report 2022

Plain-text annual report

Company Registration No: 05234262 Cadence Minerals PLC Annual Report and Accounts For the year ended 31 December 2022 CADENCE MINERALS PLC COMPANY INFORMATION For the year ended 31 December 2022 Company registration number: 05234262 Registered office: Directors: c/o Hill Dickinson LLP The Broadgate Tower Primrose Street London EC2A 2EW Andrew Suckling (Non-Executive Chairman) Kiran Morzaria (Chief Executive Officer) Donald Strang (Executive Finance Director) Adrian Fairbourn (Non-executive Director) Secretary: Donald 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 PKF Littlejohn LLP, Statutory Auditor 15 Westferry Circus London E14 4HD CADENCE MINERALS PLC CONTENTS For the year ended 31 December 2022 OUR BUSINESS AND INVESTMENT STRATEGY......................................................................................................... 1 CHAIRMAN’S STATEMENT ...................................................................................................................................... 2 CHIEF EXECUTIVE OFFICER’S COMMENTARY .......................................................................................................... 4 INVESTMENT REVIEW ............................................................................................................................................. 6 FINANCIAL REVIEW............................................................................................................................................... 15 PRINCIPAL RISKS AND UNCERTAINTIES................................................................................................................. 15 DIRECTORS’ SECTION 172 STATEMENT ................................................................................................................. 17 REPORT OF THE DIRECTORS.................................................................................................................................. 19 DIRECTORS’ RESPONSIBILITIES STATEMENT ......................................................................................................... 22 CORPORATE GOVERNANCE .................................................................................................................................. 23 BOARD MEMBERS ................................................................................................................................................ 28 REPORT ON REMUNERATION ............................................................................................................................... 31 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CADENCE MINERALS PLC ............................................ 34 STATEMENT OF COMPREHENSIVE INCOME .......................................................................................................... 39 STATEMENT OF FINANCIAL POSITITON ................................................................................................................ 40 STATEMENT OF CHANGES IN EQUITY ................................................................................................................... 41 STATEMENT OF CASH FLOWS ............................................................................................................................... 42 PRINCIPAL ACCOUNTING POLICIES ....................................................................................................................... 43 NOTES TO THE FINANCIAL STATEMENTS .............................................................................................................. 51 Forward-looking Statement This annual report contains ‘forward-looking information’, which may include but is not limited to, statements concerning the future. This annual report contains ‘forward-looking information’, which may include but is not limited to, statements concerning the future financial and operating performance of Cadence Minerals, 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. 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 STRATEGIC REPORT For the year ended 31 December 2022 OUR BUSINESS AND INVESTMENT STRATEGY Cadence Minerals is an early-stage investment and development company in the mineral resource sector. It is quoted as an investment company on the London Stock Exchange AIM market and the Aquis Stock Exchange in London. Our strategy is to identify undervalued assets with strategic advantages that can deliver capital growth to our portfolio and, therefore, our shareholders. We invest in these assets and, where applicable, assist management in driving capital growth. To meet the long-term demand, we recognize that the metals and mining sectors require focused investment capital from knowledgeable investors who understand the significant risks involved in the mineral resource sector and know how to mitigate these risks to maximize potential returns for our investors. Our investment strategy encompasses investments in private assets, where we have adopted a private equity approach to managing these investments, and public equity investments in companies listed on stock exchanges. These investments can be actively or passively held. Active investments typically involve more significant investments where Cadence aims to positively influence the management of investee companies by providing oversight, guidance and management at the board or senior executive level to enhance value and minimize downside risk. Our private investments include mineral exploration and development projects through joint venture companies or licenses. Joint venture companies operate these projects in partnership with in-country experts with the necessary knowledge and expertise to advance the projects. In this segment of our investment portfolio, we are actively involved in the management and decision-making of our investee companies. We use legal agreements to implement negative control mechanisms to protect the company's investments. Ideally, we seek to fund private investments through earn-ins and incentivize our joint venture partners with equity in Cadence based on deliverables that add value. The Equity Investment segment comprises active and passive investments within our trading portfolio. The trading portfolio consists of investments in listed mining equities that the board considers undervalued by the market, with significant upside potential through exploration success or the development of mining projects towards commercial production. The primary objective is to achieve capital gains in the short to medium term. Investments are evaluated individually based on various criteria, focusing on mining companies listed on the TSX, ASX, AIM, or LSE. Furthermore, we aim to mitigate our risk exposure by gaining a deep fundamental understanding of each investment, including its potential economics, operating and legal environment, and management team. By conducting thorough evaluations, we can eliminate many potential investments and focus on funding projects that we believe will deliver value to our shareholders. 1 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 CHAIRMAN’S STATEMENT I am pleased to present the Company’s Annual Report and Audited Financial Statements for the year ended 31 December 2022. The global macroeconomic outlook continues to be unpredictable and difficult to navigate. The expected recovery and bounce back from pandemic-era conditions have largely been tempered by fast-rising interest rate and inflation forecasts. Coupled with an increasing focus on China's status as an adversary rather than just a competitor, the global outlook remains mixed and confusing. Over a year has passed, and the Ukraine invasion has now become an entrenched war, with many of the initial supply disruptions looking set to become semi-permanent dislocations. The Cadence Minerals portfolio is both balanced, diversified and constructed to anticipate supply and demand shocks. As such it should be well placed to weather this ongoing uncertainty. Although the above suggests caution and a degree of pessimism, there are actual positives emerging. Recent economic forecasts suggest continued stimulus and support for infrastructure projects globally. Inflation, by some metrics, may have peaked, and the transformation to an EV world is gaining even more momentum. Recent merger and acquisition activity suggests an increasing awareness among multinational companies to integrate critical and strategic materials into their respective portfolios. Market observers will be aware of an increase in the number of potential nationalisations across specific strategic industries and the resources sector. The net result is of course a greater focus on the resource sector, particularly while major resource companies continue to ramp up capital allocation into the EV material space to meet the sea change in demand for raw materials. On behalf of the Board of Directors (Board) and management, I thank all our advisors, consultants, service providers, and especially our shareholders for their support throughout the year. The Board and company have continued site visits, viewed potential investment opportunities, and attended many industry conferences. I am always reminded never to approach a marathon by counting every inch; it is a very hard way to keep and maintain perspective. Investing in the resource space really is a marathon versus a sprint. In every area, it continues to surprise how long permitting, licenses approvals, environmental studies, and raising capital can take. Many times, the Board has stated "we will look for opportunities to unlock and discover value across our portfolio." I am particularly grateful that our patience has been rewarded with the continued success and maturing of many of our portfolio companies. The successful listing on the ASX of Evergreen Lithium is a good case in point and the Board sends its congratulations to all who made that listing possible. The Board sees further potential within our private and public holdings for further listings and potential transactional activity to bolster Company returns. In the wake of such a challenging year, we send our congratulations and support to our portfolio companies for their continued success. As the Cadence investment portfolio continues to mature, we will continue our search for new, accretive investments with the same methodology and rigorous diligence as before in order to assure a continued supply of diversified growth opportunities. We have a clear path ahead for our flagship Iron Ore investment at Amapa, Brazil. The publication of initial and preliminary studies, and the DEV team’s liaison with federal, state, and local authorities, continues to unlock the potential of this project. The Board thanks our JV partner, lawyers, and consultants for their hard work in negotiations, settlements, and the operational success emanating from this investment. 2 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 CHAIRMAN’S STATEMENT (CONTINUED) The challenge of a dislocated economic recovery and the prospect of a slowing Chinese economy, highlighted by the likelihood of steel production at or below one billion tons, has proved to be a continual challenge to the Cadence share price. However, due to the likelihood of support and stimulus coupled with acquisition and investment in the resources sector, (particularly related to the EV transition), we expect the constitution of the Cadence portfolio to remain robust and focused on the strategic and critical sectors of the economy. I would like to personally thank my fellow Board members, staff, and partners, all of whom constitute the Cadence Community and, of course, all of our shareholders for their encouragement and continued confidence in the Company. Andrew Suckling Non-Executive Chairman, 22 June 2023 3 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 CHIEF EXECUTIVE OFFICER’S COMMENTARY I am pleased to present the audited results for the year ended 31 December 2022, along with the Strategic Report that provides a comprehensive review of our business activities during the year. It is important to note that these results reflect the historical position of the Company's progress and financial standing, and we have included additional information on key post-year-end events in the Strategic Report. In reviewing the performance of Cadence during the year, it would be fair to say that our two portfolios preformed quite differently despite the solid operational performance of the underlying assets and the long- term outlook of the commodities these projects intend to extract. While we delivered excellent operational results and strong investment returns within our private portfolio, our public traded portfolio decreased substantially, despite the underlying assets delivering to their goals. In our private portfolio, the Amapá iron ore project remained the primary focus for Cadence’s management. In my capacity as a director of the joint venture, Cadence was heavily involved in the operational progress we have seen to date, which cumulated in the delivery of a robust Pre-Feasibility Study (“PFS”), which confirmed the project’s strong economics. To date, our investment has been circa US$9.3 million for 30% of the Amapá iron ore project; the net present value of 100% was estimated in the PFS at US$949 million. In addition to the progress made at Amapá, the Company increased the investment returns by converting some of its passive private investments into public traded equity. These returns were achieved via two asset sales, firstly our 31.5% interests in Lithium Technology Pty Ltd and Lithium Supplies Pty Ltd ("LT and LS") were sold to Evergreen Lithium, and secondly, our 30% interest in licenses within the Yangibana Rare Earth Project ("Yangibana Project") were sold to owner/operator Hastings Technology Metals. These transactions were completed after a year-end, so the financial returns are not reflected in these financial statements. Cadence has invested approximately £1.7 million in these assets, and our sale price into the equity of the two public companies was the equivalent of £7.4 million, representing a 335% cumulative return on our investments. In contrast to these achievements, the performance of our publicly listed portfolio tracked our largest holding, European Metals Holdings (“EMH”), which was down some 49% over the year despite the excellent progress made in developing the asset. EMH’s price depreciation came off multi-year highs achieved during 2021 and followed the general trend of the AIM basic resource index, which was also down year on year, reflecting the risk-off approach we have seen with investors since mid-Aug 2021. These negative year-over-year returns contradict the fundamental drivers in our portfolio, namely the incredible growth of the lithium raw material market and the stabilisation of the iron ore market. Therefore, the driver for the lacklustre performance appears to be a weakening in equity funds flow. Investment fund flows were the weakest in eight years as investors turned their backs on UK equity funds in 2022, selling a record £8.38 billion. In summary, Investors have sold UK equity and sought the safest havens, taking refuge in cash and perceived lower-risk investments. As previously stated, the lithium market has continued to expand rapidly. The global lithium-ion battery manufacturing industry's expansion to feed the transportation sector's electrification fuelled this growth. This expansion results from a concerted shift toward decarbonisation and net zero targets set by the private sector and governments worldwide. The IEA predicts that demand for EV batteries will rise from around 340 Gigawatt hours (GWh) today to over 3,500 GWh by 2030, with the industry requiring 50 additional lithium mines by then. These macro drivers should continue to support the fundamentals behind our lithium and rare earth investments. 4 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 CHIEF EXECUTIVE OFFICER’S COMMENTARY (CONTINUED) Within the iron ore market, although we saw a softening in the first of the year, it recovered by the end of 2022, with the 62% Fe Platts closing at circa US$117 per dry metric tonne ("dmt”). Both short and longer-term prospects for iron ore are driven by China, given that the nation is the world's biggest steel producer and currently buys about 70% of global seaborne iron ore. In the coming year, we look forward to further developing the Amapa Iron Ore project, progressing the permitting pathway, and, if possible, securing a joint venture partner to co-develop the asset. With our other investments, we look forward to developments at Evergreen Lithium, which given its proximity to the Finnis project, represents the most prospective investment in our portfolio. Hastings and EMH are well advanced in their development cycle, and we look forward to seeing the construction of the beneficiation plant at Hastings in Q3 of this year and the publication of the EMH Definitive Feasibility Study in Q4 of this year. As discussed in the Investment Review, Cadence’s ambition is to mitigate the need for external capital by growing and reinvesting the profits from our assets under management. We believe we are on our way to achieving this goal with our investments over the last three years of £8.64 million being funded by £7.77 million of sales in our public portfolio and £0.87 million from equity capital. Excluding the equity funding for our investments over the last three years Cadence has raised a total net funding from external sources of £3.72 million. At the time of writing, the realised profit since inception from the current public portfolio is £5.27 million and a total unrealised and realised gain is 338%. I want to express my gratitude to the Cadence team and our investee companies, who have all worked tirelessly to bring the Company and its investment to their current position. We believe concentrating risk across a few crucial assets and commodities will pay off. Kiran Morzaria Chief Executive Officer, 22 June 2023 5 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW As outlined in the section “Our Business and Investment Strategy” in the Annual Report, Cadence operates an investment strategy in which we invest in private projects via a private equity model and public equity. In both investment classes, we take either an active or passive role. We have reported in these segments below. Overall, we achieved our goals within our private investment portfolio. Amapá delivered against its operational targets, and the publication of the PFS outlined a potential asset value well above the valuation we have been investing at. For Evergreen Lithium and our Investment in the Yangibana Rare Earth deposit, our goals were to monetise these illiquid assets at a higher valuation for re-investment in our portfolio. We reached agreements that would have achieved this during the year, delivering a 335% cumulative return on our investments. However, due to regulatory delays outside our control, the crystallisation of this value was only after the year-end. Our public portfolio followed the overall risk-off, the downward trend of the AIM basic resource index. In particular, our holding in EMH reduced in price by 49% during the year, impacting our cumulative returns and was reflected in our share price. Nonetheless, we were able to sell some of this stake to partly fund our continuing investment in Amapá; the realised return on these sales was some 174% our overall return on EMH (realised and unrealised) is some 264%. The overall ambition of the portfolio is capital growth of the assets under management which should be reflected in Cadence’s share price. We intend to fund this growth, where possible, by investing in undervalued assets, selling these investments at higher valuations, and reinvesting the proceeds. Once we reach critical mass in terms of assets under management, this investment cycle will mitigate the need for outside capital, either in new equity or debt. Over the last three years, we have been slowly achieving this with a total of £7.77 million in sales of our portfolio, which has partly funded a total of £8.64 million of new investments. At the time of writing, the realised profit from the current public portfolio is £5.27 million since inception. PRIVATE INVESTMENTS, ACTIVE The Amapá Iron Ore Project, Brazil Interest – 30% at 31/12/2022 and 30% at 31/05/2023 The Amapá Project is a large-scale iron ore mine with associated rail, port and beneficiation facilities that commenced operations in December 2007. The Project ceased operations in 2014 after the port facility suffered a geotechnical failure, which limited iron ore export. Before the cessation of operations, the Project generated an underlying profit of US$54 million in 2012 and US$120 million in 2011. Operations commenced in December 2007, and 2008, the Project produced 712 thousand tonnes of iron ore concentrate. Production steadily increased, producing 4.8 Mt and 6.1 Mt of iron ore concentrate products in 2011 and 2012, respectively. Investment In 2019 Cadence entered into a binding investment agreement to invest in and acquire up to 27% of the Amapá iron ore mine, beneficiation plant, railway and private port owned by DEV. The agreement also gave Cadence a first right of refusal to increase its stake to 49%. To acquire its 27% interest, Cadence invested US$6 million over two stages in a joint venture company. The first stage is for 20% of the JV, the consideration for which was US$2.5 million. The second stage was for a further 7% of the JV for a consideration of US$3.5 million. Both of these investments were completed in the first quarter of 2022. In October 2022, we increased this stake to 30% through the conversion of loans, management capitalisation, consultancy charges, and cash investment.Cadence’s investment in the Amapá Project at the end of the year was US$ 9.3 million for 30% of the asset. 6 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW (CONTINUED) Operations Review During the reporting period, the operational focus for the year at the Amapá Project was the completion of the Pre-Feasibility Study (“PFS”) and the progress of the permitting pathway, including the regularisation of the mining concessions, tailing storage facilities and the environmental permits. Pre-Feasibility Study As part of the PFS, the Amapá Project increased and upgraded its Mineral Resource Estimate. This resulted in a substantial crease in total Measured, Indicated and Inferred Mineral Resources to 276.24 million tonnes grading 38.33% Fe and a maiden Measured Resource of 55.33 Mt grading 39.26% Fe. The PFS was completed during the year, with the results announced in early January 2023. The PFS confirmed the potential for the Amapá Iron Ore Project to produce a high-grade iron ore concentrate and generate strong returns over its life of mine. It delivered a robust 5.28 Mtpa operation which can provide excellent cash flows and a post- tax NPV of US$949 million. The Key Highlights of the PFS are below: • • • Annual average production of 5.28 million dry metric tonnes per annum ("Mtpa") of Fe concentrate, consisting of 4.36 Mtpa at 65.4% Fe and 0.92 Mtpa at 62% Fe concentrate. Post-tax Net Present Value ("NPV") of US$949 million ("M") at a discount rate of 10%. Post-tax Internal Rate of Return of 34%, with an average annual life of mine EBITDA of US$235 M annually • Maiden Ore Reserve of 195.8 million tonnes ("Mt") at 39.34% Fe demonstrates an 85% Mineral Resource conversion. • • Free on Board ("FOB") C1 Cash Costs of US$35.53/dmt at the port of Santana. Cost and Freight ("CFR") C1 Cash Costs US$64.23/dmt in China. Pre-production capital cost estimate of US$399 million, including the improvement and rehabilitation of the processing facility and the restoration of the railway and the wholly owned port export facility • Opportunities: exploration target at the Tucano Mine to further extend initial mine life and potential capital savings at port loading facilities. Based on the positive outcome of the PFS and subsequent consultations with the key contractors, three areas of possible improvement to the Amapá Project were identified. The first was to review the historical drilling and geological data north of the Amapá mining concessions. The data has been acquired and is currently being processed to identify further iron ore resources, which, if present, would further increase the mine life. The second area of potential improvement is a change in the layout of the port at Santana by moving the railway loop further from the shore. After the year's end, a scoping study regarding this option was completed and identified a potential net capital saving to the port refurbishment costs of US$28 million. The last area of potential improvement is to investigate and review the flowsheet to improve the final product quality over and above the current 65% iron ore concentrate. Once these studies are completed, work on a Definitive Feasibility Study (“DFS”) can begin. The DFS is required to seek project debt and equity finance, which will be sought once the DFS is complete. 7 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW (CONTINUED) Permitting Pathway Although DEV owns the Mining Concessions, it does need to obtain Mine Extraction and Processing Permit to begin operations, and this is done by obtaining an Operational License ("LO") from the state environment authority. Once this has been completed, DEV will apply for Mine Extraction Permit. Since the Project was acquired by its current owners in 2022, DEV has made the required regulatory filings and embarked on studies and maintenance works to comply with the National Mineral Agency requirements. In 2022 DEV began the regularisation of the expired environmental permits. In consultation with the Amapá State Environmental Agency and the relevant state authorities, DEV has requested that the requirement for an environmental impact study be waived. This request for a waiver was on the basis that the previous LOs were granted on an operation that is substantially the same as is currently planned and remains applicable to future operations. DEV proposes that the company submits an Environmental Control Plan - "PCA" (Plano de Controle Ambiental); and Environmental Control Report - "RCA" (Relatório de Controle Ambiental). DEV has begun its proposed permit pathway for the Project based on the above requirements of a PCA and RCA. The proposed permit pathway for the Project has both legal and practical precedent and is a reasonable approach, given the Project's status and level of development. The state owns the railway line and associated land; therefore, for the Project to utilise this, it requires both the LO and a concession agreement with the State of Amapá. The previous operators of the Project were granted this concession in 2006 for 20 years under specific terms and conditions. The reinstatement of this concession to one of DEV's 100% owned subsidiaries was in December 2019 and was extended to 2046. The concession allows DEV's 100% owned subsidiary to operate the railway to primarily transport iron ore from the mine to its port in Santana. The State of Amapá owns the surface rights associated with the railway, and under the Railway Concession, DEV has been granted use over these surface rights. In addition to the LO detailed above, the company's port is regulated by the Agencia Nacional de Transportes Aquaviários ("ANTAQ"). As a result of the change of ultimate beneficiary of DEV, a change of control request was filed. This change of control was granted in November 2021. As part of the port change of control, ANTAQ agreed to cease the recommended abrogation of the port concession. DEV owns the surface rights associated with the port. Secured Bank Settlement Iron Ore Shipments As per the settlement agreement announced in December 2021 here, the net proceeds of the one shipment carried out in 2022, along with approximately half of the net proceeds from the shipments in 2021, have been used to pay the secured bank creditors. The main driver for the lack of shipment during the year resulted from the impact of the Ukraine war and the legacy of Covid on supply chains resulting in higher shipping costs and lower iron ore pricing. Other iron ore producers in the region have been able to ship because their product is of a higher grade than our stockpiled historical product (58% Iron), which typically will achieve a 10%-12% discount to 62% Fe Platts CFR. Given these unprecedented macroeconomic conditions, DEV could not meet the 2022 payment schedule per the settlement deed. Although the bank creditors have reserved their rights, the settlement deed remains in full effect with all parties in discussions to agree on a new timetable to rephase payments so these can be met in light of market conditions. 8 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW (CONTINUED) With improving iron ore prices and stability returning to shipping costs, selling the 58% iron ore concentrate stockpile is economically viable. Although DEV can recommend material shipment, the secured bank creditors must approve such a shipment. Nonetheless, assuming that the secured bank creditors act under an economic desire for their debt to be repaid, we expect shipping to recommence by the beginning of Q3 2023. Development Plan for the Amapá Project The goal is to bring this project back into production. With the PFS completed, a project would typically directly proceed to DFS, funding, and construction. Cadence and Its joint venture partners have agreed that the lowest risk and currently best commercial approach to developing this project is to bring on a highly experienced mining operator or EPCM contractor as a joint venture partner, and we are working towards this goal. We currently have three interested parties reviewing the data room in this regard. However, the above strategy does not preclude the option for our joint venture company developing the project or embarking on trade sale of the project. In our ongoing discussions with stakeholders of the Amapá Project, including shareholders of Cadence, there has been concerns expressed in relation to the timing of the development of the project as we would have originally expected to be in production at this point in time. The extension of the development timeline is primary attributable to the almost two- and half-year delay in reaching a settlement with the secured bank creditors, this was substantially more than we had all expected. Given that a representative of the secured bank creditors indicated that they would be amenable to being paid from the cashflow after operations had started. However, it transpired that the secured bank creditors were seeking payment from the iron ore stockpiles and as such alongside our joint venture partners we negotiated a substantial reduction if the amounts payable delivering substantial long term cash savings to the project. In the absence of a settlement, as per the investment agreement with our joint venture partners, Cadence did not want to risk capital in the project and therefore did not invest any substantial monies until this matter had been resolved. It was only at this point in February 2022 that investment in the project and could start in earnest. PRIVATE INVESTMENTS, PASSIVE Evergreen Lithium Limited, Australia Interest – 13.16% at 31/12/2022 and 8.74% on 31/05/2023 In July 2022, Cadence Minerals received approximately 15.8 million shares in Evergreen Lithium (“Evergreen”) when Cadence sold its 31.5% stake in Lithium Technologies and Lithium Supplies ("LT and LS") to Evergreen as announced on 27 June 2022. After the year-end, Evergreen was listed on the Australian Stock Exchange (”ASX”). Before listing, Cadence's equity stake in Evergreen was 13.16%; due to the IPO and associated fundraising, this was reduced to 8.74%. At the time of writing, the value of this stake was approximately £3.3 million; our initial investment into this asset was £0.83 million. A further AS$ 6.63 million (£3.80 million) shares in Evergreen are due to Cadence on achieving certain performance milestones by Evergreen. Further details of these milestones can be found in the Evergreen prospectus. Cadence's shares are subject to a 2-year escrow agreement as determined by the listing rules of the ASX. On acquiring LT and LS, Evergreen became the 100% owner of three exploration tenements. The Bynoe Lithium Project and Fortune Lithium Project (awaiting grant of exploration permit) are located in the Northern Territory, and the Kenny Lithium Project is in Western Australia. 9 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW (CONTINUED) The Bynoe Lithium Project is Evergreen's flagship prospect. Evergreen's primary focus is to explore and discover an economically viable lithium resource for development. The Bynoe Lithium Project is located south of Darwin in the Northern Territory, Australia. It covers the north-eastern strike extent of the lithium- and tantalum-endowed Bynoe Pegmatite Field. The Bynoe Pegmatite Field is host to Core Lithium Ltd's (ASX: CXO) ("Core Lithium" or "Core") high-grade Finniss lithium deposit, which is adjacent to Core Lithium's producing lithium mine. Core Lithium's deposit is just 1.2km from the Bynoe Lithium Project. Soil sampling conducted on the Bynoe Lithium Project has returned geochemical anomalies that indicate the lithium mineralisation continues along the trend into the Company's Bynoe Lithium Project. Based on the initial stages of soil sampling alone (which only covers approximately 10- 20% of the Bynoe Lithium Project area, an initial five target zones have been identified that contain lithium mineralisation. The Bynoe Lithium Project covers an area of 231 km2, making Evergreen one of the largest tenement holders within the central Bynoe Pegmatite Field after Core Lithium. In recent years, exploration activities within the Bynoe Field have been focused on the discovery of economic lithium mineralisation hosted in pegmatites, the most successful of which has been Evergreen's neighbour, Core Lithium, which in a very short time frame, has delineated a JORC mineral resource of 18.9mt at 1.32% Li2O at its Finniss Project. Core Lithium has achieved excellent drilling intercepts at their BP33 prospect of 107 metres at 1.70% Li2O, located within 1km of the Bynoe Lithium Project and Core Lithium's Finniss (BP33) mine. Evergreen intends to expand the geochemical soil sampling significantly. In addition, Evergreen recently completed an Ambient Noise Topography ("ANT") Survey and is currently awaiting its geophysical interpretation. Core Lithium recently used ANT (refer to ASX announcement Core Lithium, 1 August 2022, "BP33 drilling delivers outstanding results"). Core noted the results were an "outstanding success" and showed "excellent correlation" with known pegmatite bodies already identified by drilling. Once the baseline geochemical and geophysical data is collected, Evergreen plans to systematically drill the anomalies, starting with the highest priority along strike from Core Lithium's mineralised pegmatites. The Kenny Lithium Project is located within the Dundas Mineral Field of Western Australia and 50km East of Norseman in the Eastern Goldfields. It is near the Mt Dean and Mt Belches-Bald Hill pegmatite fields, and multiple significant lithium discoveries have been made near the Kenny Lithium Project. The Kenny Lithium Project covers an area of 210 km2, providing Evergreen with a large and prospective land holding within the Dundas mineral field. The Kenny Lithium Project lies at the southern end of the Norseman-Wiluna Granite Greenstone Belt within the Archaean Yilgarn Craton. This well-known lithium-producing region/mineral field is host to the significant Mount Marion, Bald Hill and Baldania mines, respectively, close to the Company's Kenny Lithium Project. Initial field mapping on the Kenny Lithium Project has confirmed the presence of substantial outcropping pegmatites, whereby an approximate 10km zone of pegmatite outcropping has been confirmed in the North- Eastern section of the Kenny Lithium Project, which significantly exceeds what has already been identified by the Government Survey of Western Australia (GSWA). Evergreen aims to explore and discover an economic lithium resource for subsequent development. As with the Company's Bynoe Lithium Project, minimal geochemical work has been undertaken within the tenure; however, historical results have proven encouraging. Evergreen has recently completed a comprehensive auger program, drilling 1,731 holes. 10 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW (CONTINUED) Since the end of the year, Evergreen, listed on the ASX, has continued to progress the development of these assets with some initial positive results from the geochemical results on both the Byone and Kenny lithium prospects. PRIVATE INVESTMENTS, PASSIVE Sonora Lithium Project, Mexico Interest – 30% on 31/12/2022 and 31/05/2023 Cadence holds an interest in the Sonora Lithium Project via 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. The Sonora Lithium Project consists of ten contiguous concessions covering 97,389 hectares. Two of the concessions (La Ventana, La Ventana 1) are owned as of the date 100% by subsidiaries of Gangfeng Lithium Co., Ltd (“Gangfeng”). El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions are owned by Mexalit S.A. de C.V. (“Mexalit”), which is owned 70% by Gangfeng and 30% by Cadence. The Sonora Project holds one of the world’s largest lithium resources and benefits from being both high-grade and scalable. The polylithionite mineralisation is hosted within shallow dipping sequences, outcropping on the surface. A Mineral Resource estimate was prepared by SRK Consulting (UK) Limited (‘SRK’) following NI 43- 101. The current lithium resources and reserves for the Sonora Lithium Project and the attributable amounts to Cadence are available here: https://www.cadenceminerals.com/projects/sonora-lithium-project/. A feasibility study report was published in January 2018, which confirmed the positive economics and favourable operating costs of a 35,000 tonnes per annum battery-grade lithium carbonate operation. The feasibility study report estimates a pre-tax project net present value of US$1.253 billion at an 8% discount rate, an Internal Rate of Return of 26.1%, and Life of Mine operating costs of US$3,910/t of lithium carbonate. It should be noted that under the published feasibility study, the concession owned by Mexalit will be mined starting in year 9 of the mine plan and cease at the end of the mine life in year 19, and as such, assuming Cadence retains its position, any net realisable economic benefit to Cadence would only accrue at this time. The full report can be found here: https://bacanoralithium.com/_userfiles/pages/files/documents/bacanorafstechnicalreport25012018_compress ed.pdf In 2021, Mexican politicians from the MORENA party tabled a draught bill to reform Mexico's energy sector, including statements that lithium would be included among the minerals considered strategic for the energy transition and that no new concessions for lithium exploitation by private companies could be granted. After the year-end, the Mexican senate elevated lithium deposits to the "strategic minerals" category, declaring lithium's exploration, exploitation, and use as the state's exclusive right. In February 2022, the Mexican government established a decree that reserved some 234,855 hectares as a lithium mining reserve, which includes the areas covered by the Sonora Lithium Project. However, the Decree also notes that the rights and obligations of the holders of current mining concessions within the lithium mining reserve area are not affected. We are constantly examining possible legislative changes. Our current view is that the Decree passed by the senate only impacts licenses, concessions, or contracts to be granted, not already those given, as is the case for the Sonora Lithium Project. Therefore, at this point, we do not believe there is a material impact on our joint venture areas. 11 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW (CONTINUED) PRIVATE INVESTMENTS, PASSIVE Yangibana Project, Australia Interest - 30% at 31/12/2022 In June 2022, Cadence entered into a binding agreement to sell its working interest in the leases in the Yangibana Project to Hastings Technology Metals (ASX: HAS) ("Hastings"), the current owner and operator of the Yangibana Rare Project. Cadence sold its 30% working interest in the Yangibana Project tenements, to Hastings, for A$9 million (£5.1 million), which has been satisfied via the issue of 2,452,650 new ordinary shares in Hastings to Cadence. These shares represent approximately 1.9% of the current issued share capital of Hastings Technology and are subject to a 12-month voluntary escrow. At the time of writing, the value of this stake was approximately £1.9 million; our initial investment into this asset was £0.91 million. Hastings is a well-managed Perth-based rare earth company primed to become the world's next producer of neodymium and praseodymium concentrate (“NdPr”). NdPr is vital in manufacturing permanent magnets used daily in advanced technology products ranging from electric vehicles to wind turbines, robotics, medical applications and digital devices. Hastings flagship Yangibana project, in the Gascoyne region of Western Australia, contains a highly valued NdPr deposit with an NdPr: TREO ratio of up to 52%. The site is permitted for long-life production and with offtake contracts signed and debt finance in an advanced stage. Hastings announced after the year's end that it had introduced a staged development programme to the Yangibana asset. This strategy will reduce upfront capital requirements and project execution risks and provide a faster pathway to cash flow by Q1 2025. Hastings will initially focus on constructing the Yangibana mine and beneficiation plant to produce rare earths concentrate (Stage 1), followed by developing a hydrometallurgical plant to produce mixed rare earth carbonate (Stage 2). This has resulted in the total project capital cost being estimated at $948m, with the Stage 1 component being $470m. The beneficiation plant construction will commence in Q3 2023, supporting the Stage 1 concentrate delivery target date of Q1 2025. As a result of this staged development programme, Stage 1 will have a post-tax NPV11 of $538m, an IRR of 27.54% and an average annual EBITDA of $174m, providing a funding source for Stage 2. PRIVATE INVESTMENTS, PASSIVE Ferro Verde Iron Ore, Brazil Interest - 1% at 31/12/2022 During the year, Cadence made a small (£0.21 million) in an advanced iron ore deposit in Brazil. The Ferro Verde Deposit is located in the southern portion of the state of Bahia, in the northeastern region of Brazil, next to the town of Urandi, some 700 km southwest of Salvador, the capital of the state of Bahia. The project is currently progressing its definitive feasibility study. It has a historic inferred resource of 284 million tonnes of iron ore at 31% Fe. The intent is to produce 4.5 Mtpa of 67% Fe. Our intended exit strategy is either when the asset is listed, or the owners carry out a trade sale. 12 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW (CONTINUED) PUBLIC EQUITY The public equity investment segment includes active and passive investments in our trading portfolio. The trading portfolio consists of investments in listed mining entities that the board believes possess attractive underlying assets. The focus is to invest in mining companies that are significantly undervalued by the market and where there is substantial upside potential through exploration success and/or the development of mining projects for commercial production. Ultimately, the aim is to make capital gains in the short to medium term. Investments are considered individually based on various criteria and are typically traded on the TSX, ASX, AIM or LSE. During the period, our public equity investments generated an unrealised loss of £4.59 million (2021: profit of £0.58 million). These unrealised losses tracked our largest holding, European Metals Holdings (“EMH”), down some 49% over the year despite the excellent progress in developing the asset. We realised a profit from sales of £0.55 million (2020: £0.59 million). Most of these profits were derived from selling European Metals Holdings shares. If we look at the portfolio performance since inception the sales made during the year represented a 174% profit above the original purchase price. Our investment in EMH is the only active investment in the public equity portfolio. The movement in public portfolio values during the year is summarised below. Portfolio value at the beginning of period of 2022 New Investments public investments during the year Disposal of public Investments during the year Realised and Unrealised loss on portfolio value for the period Portfolio value at the end of the period Commentary The majority of disposal was in EMH with proceeds reinvested into Amapá The majority of the loss driven by a reduction in EMH share price £,000 11,974 235 (1,927) (5,038) 5,244 As of 31 December 2022, our public equity stakes consisted of the following: Company European Metals Holding Ltd Charger Metals NL Macarthur Minerals Ltd Eagle Mountain Mining Ltd Mont-Royal Resources Ltd Celsius Resources Ltd Miscellaneous Total 31-Dec-22 £,000 4,882 301 - 37 19 - 5 5,244 30-Jun-22 £,000 5,357 196 103 47 39 - 5 5,747 31-Dec-21 £,000 11,287 342 181 122 35 - 7 11,974 30-Jun-21 £,000 14,180 109 327 153 - 103 6 14,878 31-Dec-20 £,000 13,426 - 329 - - - 6 13,761 13 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 INVESTMENT REVIEW (CONTINUED) PUBLIC EQUITY, ACTIVE European Metals Holdings Limited (“European Metals”) Interest – 7.0% at 31/12/2022 and 6.5% 31/05/2022 Cadence has held an investment in European Metals since June 2015. As of year-end, Cadence held 7.0% in European Metals. European Metals owns 49% of Geomet s.r.o. with 51% owned by CEZ. CEZ is a significant energy group listed on various European Exchanges. Geomet s.r.o. owns 100% of Cinovec which hosts a globally significant hard- rock lithium deposit with a total Indicated Mineral Resource of 372.4Mt at 0.45% Li2O and 0.04% Sn and an Inferred Mineral Resource of 323.5Mt at 0.39% Li2O and 0.04% Sn containing a combined 7.22 million tonnes Lithium Carbonate Equivalent and 263kt of tin, as reported to ASX on 28 November 2017 (Further Increase in Indicated Resource at Cinovec South). An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn reported on 4 July 2017 (Cinovec Maiden Ore Reserve –has been declared to cover the first 20 years’ mining at an output of 22,500tpa of battery-grade lithium carbonate reported on 11 July 2018 (Cinovec Production Modelled to Increase to 22,500tpa of Lithium Carbonate). This makes Cinovec the largest hard-rock lithium deposit in Europe, the fourth largest non-brine deposit in the world and a globally significant tin resource. For the reporting period EMH continued to manage the advancement of the Cinovec Lithium/Tin Project in Czech Republic. The macro conditions relative to the Project have been very strong for the period. Despite some recent falls, the lithium price remains at very high levels relative to historic prices, and at a level where the financial parameters of the Project are exceptionally strong. In addition to pricing, the global focus on long term security of strategic metals has increased dramatically and the Company expects this factor to play an increasingly important role in moving the Project towards production. The reporting period was highlighted by EMH’s announcement in January 2022, updating the 2019 PFS, which indicated a post-tax NPV of US$1.938Bn and a post-tax IRR of 36.3%. In addition, European Metals announced very significant developments in the optimisation of the flowsheet for the processing plant. European Metals announced that it had finalised a considerably simplified Lithium Chemical Plant (“LCP”) flowsheet with the initial six locked cycle test (“LCTs”) providing 99.99% pure Lithium Carbonate. The simplification of the central section of the LCP flowsheet reduces the number of basic chemical engineering unit processes (after the initial roast/water leach) from 15 to 7. The revised process also results in the elimination of all energy-intensive cooling processes. The Company has been advised by its principal hydrometallurgical adviser, Lithium Consultants Australasia (LCA), that the changes to the LCP noted above are expected to reduce both Capex and Opex in the LCP by 10-20%. European Metals continued progress towards finalisation of the DFS, which scheduled for completion in Q4 2023. 14 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 FINANCIAL REVIEW Total comprehensive income for the year attributable to equity holders was a loss of £5.50m (2021: £0.14m). This decrease in profitability from the previous year of approximately £5.36m is mainly due to the reduced amount of realised and unrealised profits and losses on for the year of approximately £4.04m (2021: £1.17m) relating to our share investment portfolio (listed financial investments) held during the period. Administrative expenses were down £0.34m from £1.80m to £1.46m, but foreign exchange gains were down £0.452m from £0.455m to £0.003m. Basic negative earnings per share was 3.355p (2021: 0.102p). The net assets of the Group at the end of the period were £21.32 million (2021: £22.15 million). This decrease of approximately £0.83m reflects the losses and shares issued in the year. PRINCIPAL RISKS AND UNCERTAINTIES Cadence continuously monitors its risk exposures and reports its review to the Board. The Board reviews these risks and focuses on ensuring effective systems of internal financial and non-financial controls are in place and maintained. The main business risk is considered to be investment risk. The Company faces external risks that can materially impact or influence the investment environment within which the Company operates and can include changes in commodity prices, and the numerous factors which can influence those changes, including economic recession and investor sentiment and including the current and potential effects of the coronavirus pandemic. Commodity prices have an impact on the investment performance and prospects of all our investments. The extent of the impact varies depending on a wide variety of factors but depend largely by where the investment sits on the mineral development curve. The majority of Cadence’s investments sit at the more advanced stage of the development curve. Commodity price risk is pervasive at all stages of the development curve, but other prominent risks such as exploration risk and technical and funding risks at the exploration/development stage, may be considered to be weighted higher earlier in the curve than pure commodity risk which tends to have a greater impact on producers. The Company’s investments are located in jurisdictions other than the UK and therefore carries with it country risk, regulatory/permitting risk, political risk, and environmental risk. Our investments can be at different stages of development and each stage within the mining exploration and development cycle can carry its own risks. Where possible Cadence seeks to mitigate these risks by structuring its investments in a format which the Board can influence, obtain high level oversight (often at board level) and use legal agreements to provide control mechanisms (often negative control) to protect the Company’s investments. In addition, we seek to further mitigate our risk exposure by obtaining a deep fundamental understanding of an asset, its potential economics, operating and legal environment and its management team, prior to investment. It should be noted that because the Company does not operate its project investments on a day-to-day basis, there is a risk that the operator does not meet deadlines or budgets; fails to propose or pursue the appropriate strategy; does not adhere to the legal agreements in place or does not provide accurate or sufficient information to Cadence on a timely basis. 15 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED) The equity investment segment of the Company’s investments is exposed to price risk within the market, interest rate changes, liquidity risk and volatility. Although the investment risk within the portfolio is dependent on many factors, the Group’s principal investments at the year-end are in companies with significant iron ore and lithium assets and, to some extent, dependent on the market’s view of these commodities or chemicals and/or the market’s view of the management of the companies in managing those assets. As with our private investment, the Board seeks to mitigate this by obtaining a deep fundamental understanding of an asset and its potential economics; its operating and legal environment and its management team, prior to any investment by Cadence. All countries carry political risk that can lead to interruption of activity. Politically stable countries can have enhanced environmental and social risks; risks of strikes and changes to taxation; whereas less developed countries can have, in addition, risks associated with changes to the legal framework; civil unrest and government expropriation of assets. The Company has working knowledge of the countries in which the joint venture holds exploration licences, and its local joint venture partner has experienced local operators to assist the Company in its management of its investment in order to help reduce possible political risk. 16 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 DIRECTORS’ SECTION 172 STATEMENT The following disclosure describes how the Directors have had regard to the matters set out in section 172(1)(a) to (f) and forms the Directors’ statement required under section 414CZA of The Companies Act 2006. This new reporting requirement is made in accordance with the new corporate governance requirements identified in The Companies (Miscellaneous Reporting) Regulations 2018, which apply to company reporting on financial years starting on or after 1 January 2019. The matters set out in section 172(1) (a) to (f) are that a Director must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to: • • • • • • the likely consequences of any decisions in the long-term; the interests of the Company’s employees; the need to foster the Company’s business relationships with suppliers/customers and others; the impact of the Company’s operations on the community and environment; the Company’s reputation for high standards of business conduct; and the need to act fairly between members of the Company. As set out above in the Strategic Report the Board remains focused on providing for shareholders through the long term success of the Company. The means by which this is achieved is set out further below. Likely consequences of any decisions in the long-term; The Chairman’s Statement, the Chief Executive Officer’s Commentary and the Strategic Review set out the Company’s strategy. In applying this strategy, particularly in seeking new Project Investments and strategic holdings in other public companies, the Board assesses the long term future of those companies with a view to shareholder return. The approach to general strategy and risk management strategy of the group is set out in the Statement of Compliance with the Quoted Companies Alliance (“QCA”) Corporate Governance Code (the “QCA Code”) (Principles 1 and 4) on pages [23-24]. Interest of Employees; The Group has a very limited number of employees, and all have direct access to the Executive Directors on a daily basis and to the Chairman, if necessary. The Group has a formal Employees’ Policy manual which includes process for confidential report and whistleblowing. Need to foster the Company’s business relationships with suppliers/customers and others; The nature of the Group’s business is such that the majority of its business relationships are with joint venture partners, the boards of directors of the companies in which the Group has strategic stakes to the extent that such relationships are permitted, and with suppliers for services. As the success of the business primarily depends on its relationship with its partners and investees, the Executive Directors manage these relationships on a day-to-day basis. Where possible, the Group will take a board, or similar appointment, in strategic investees to ensure that there is a close and successful ongoing dialog between the parties. Service providers are paid within their payment terms and the Group aims to keep payment periods under 30 days wherever practical. Impact of the Company’s operations on the community and environment; The Group takes its responsibility within the community and wider environment seriously. Its approach to its social responsibilities is set out in the Statement of Compliance with the QCA Code (Principle 3) on page [24]. 17 CADENCE MINERALS PLC STRATEGIC REPORT For the year ended 31 December 2022 DIRECTORS’ SECTION 172 STATEMENT (CONTINED) The desirability of the Company maintaining a reputation for high standards of business conduct; The Directors are committed to high standards of business conduct and governance and have adopted the QCA Code which is set out on pages [23 to 30]. Where there is a need to seek advice on particular issues, the Board will consult with its lawyers and nominated advisors to ensure that its reputation for good business conduct is maintained. The need to act fairly between members of the Company; The Board’s approach to shareholder communication is set out in the Statement of Compliance with the (Principle 2) on page [23]. The Company aims to keep shareholders fully informed of significant developments in the Group’s progress. Information is disseminated through Stock Exchange announcements, website updates and, where appropriate video/web casts. During the year the Company issued various RNS and videos to update shareholders. All information is made available to all shareholders at the same time and no individual shareholder, or group of shareholders, is given preferential treatment. 18 CADENCE MINERALS PLC REPORT OF THE DIRECTORS For the year ended 31 December 2022 The Directors present their annual report together with the audited financial statements of the Company for the Year Ended 31 December 2022. Principal activity The Company is an investment entity. The principal activity of the Company is that of holding assets involved in the identification, investment and development of mineral resources. 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 and Future Development The results of the Company are shown on page [39]. Results and Dividends The Directors do not recommend the payment of a dividend. A review of the performance of the Company and its future prospects is included in the Strategic Report on pages [1 to 18]. Key Performance Indicators Due to the current status of the Company, the Board has not identified any performance indicators as key other than cash management and the carrying value and return of its investments. The carrying value and returns on its investments are reviewed on pages [6 to 14]. Having sufficient cash for business operations is vital and must be managed accordingly. The Directors review and manage the Group’s cash flow on a monthly basis. The financial strategy is to ensure that, wherever possible, there are sufficient funds to cover corporate overheads and exploration expenditure for as long a period as possible. Management has confidence that financing of the Company can continue as and when required, albeit the board is keen to avoid excessive dilution and will manage the financing process with that objective in mind. Investments are closely managed and monitored; further details are included in the Chairman’s statement. The monitoring and management of the carrying value of investments are specified on pages [1 to 14]. Furthermore, the Company has ensured that where possible it has built operational flexibility in its corporate and exploration expenditure to be paused should the financing environment prove difficult and cash preservation prove essential. Principal risks and uncertainties The principal risks and uncertainties facing the Company involve are specified on pages [15 to 16]. Financial risk management objectives and policies The Company’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 is to fund the Company's operations. It is, and has been throughout the period under review, the Company’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Company’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. Further information is available in Note [12]. Liquidity risk The Company'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 [12] to the financial statements. 19 CADENCE MINERALS PLC REPORT OF THE DIRECTORS For the year ended 31 December 2022 Interest rate risk The Company only has borrowings at fixed coupon rates and therefore minimal interest rate risk, as this is deemed its only material exposure thereto. The Company seeks the highest rate of interest receivable on its cash deposits whilst minimising risk. Market risk The Company is subject to market risk in relation to its investments in listed Companies held as available for sale assets. Foreign exchange risk The Company operates foreign currency bank accounts to help mitigate the foreign currency risk, and currently has little exposure except through its investments. Political Donations and Expenditure No charitable or political contributions were made during the current or previous year. Directors The membership of the Board is set out below. All directors served throughout the period unless otherwise stated. Andrew Suckling Kiran Morzaria Donald Strang Adrian Fairbourn Substantial shareholdings Interests in excess of 3% of the issued share capital of the Company which had been notified as at 14 June 2023 were as follows: Hargreaves Lansdown (Nominees) Limited (15942) Interactive Investor Services Nominees Limited (SMKTISAS) Barclays Direct Investing Nominees Limited Hargreaves Lansdown (Nominees) Limited (VRA) Interactive Investor Services Nominees Limited (SMKTNOMS) JIM Nominees Limited HSDL Nominees Limited Hargreaves Lansdown (Nominees) Limited (HLNOM) Vidacos Nominees Limited Link Market Services Trustees (Nominees)Limited HSBC Global Custody Nominee (UK) Limited Ordinary shares held Number 21,598,345 14,853,700 13,879,310 12,643,126 11,142,703 9,880,516 9,678,320 9,405,863 6,722,461 6,380,000 5,443,479 Percentage of capital % 11.93% 8.21% 7.67% 6.99% 6.16% 5.46% 5.35% 5.20% 3.71% 3.53% 3.01% Payment to suppliers It is the Company'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 Company 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. 20 CADENCE MINERALS PLC REPORT OF THE DIRECTORS For the year ended 31 December 2022 Events after the Reporting Period Events after the Reporting Period are outlined in Note [15] to the Financial Statements. Going concern The Directors have prepared cash flow forecasts for the period ending 31 March 2025 which take account of the current cost and operational structure of the Company, as described further on page [44]. The cost structure of the Company 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 Company to operate within its available funding. These forecasts demonstrate that the Company 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. 21 CADENCE MINERALS PLC REPORT OF THE DIRECTORS For the year ended 31 December 2022 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 Company financial statements in accordance with UK adopted International Accounting Standards (IAS). 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 Company 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 Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as each of the Directors are aware: • there is no relevant audit information of which the Company'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 PKF Littlejohn 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 Chief Executive Officer, 22 June 2023 22 CADENCE MINERALS PLC CORPORATE GOVERNANCE For the year ended 31 December 2022 Introduction to Governance The Directors recognise that good corporate governance is a key foundation for the long-term success of the Company. As the Company is listed on the AIM market of the London Stock Exchange and is subject to the continuing requirements of the AIM Rules. The Board has therefore adopted the principles set out in the Corporate Governance Code for small and midsized companies published by the Quoted Companies Alliance (“QCA Code”). The principles are listed below. 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. 1. Establish a strategy and business model which promote long-term value for shareholders Our strategy is to identify undervalued assets with irreplaceable strategic advantages that will deliver capital growth to our shareholders. We invest in these assets and where required help deliver capital growth. To meet long-term demand, we believe the metals and mining sectors require focused investment capital from knowledgeable investors that understand the substantial risk of the mineral resource sector and how to mitigate these risks to maximise potential returns for our investors. A more detailed description of its Strategy and Business Model is available on page [1]. Details on the principal risks and uncertainties which the Company faces are specified on pages [15 to 16]. The Company 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. 2. Seek to understand and meet shareholder needs and expectations The Board is committed to maintaining an open dialogue with shareholders. Communication with the Board is committed to maintaining an open dialogue with shareholders. Communication with shareholders is coordinated by the CEO. Cadence encourages two-way communication with institutional and private investors. The Company’s major shareholders maintain an active dialogue and ensure that their views are communicated fully to the Board. Where voting decisions are not in line with the Company’s expectations the Board will engage with those shareholders to understand and address any issues. The Company Secretary is the main point of contact for such matters. The Company seeks out appropriate platforms to communicate to a broad audience its current activities, strategic goals and broad view of the sector and other related issues. This includes but is not limited to media interviews, website videos in -person investor presentations and written content. Communication to all stakeholders is the direct responsibility of the Senior Management team. Managers work directly with professionals to ensure all inquiries (through established channels for this specific purpose such as email or phone) are addressed in a timely matter. Managers also ensure that the Company communicates with clarity on its proprietary internet platforms. The Board routinely reviews the Company communication policy and programmes to ensure the quality communication with all stakeholders. The Board believes that the Annual Report and Accounts, and the Interim Report published at the half-year which can be found on the Company’s website, play an important part in presenting all shareholders with an assessment of the Company’s position and prospects. All reports and press releases are published under the “Investors” tab of the Company’s website. 23 CADENCE MINERALS PLC CORPORATE GOVERNANCE For the year ended 31 December 2022 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success 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 and webcasts on a regular basis, at which feedback from shareholders is sought. Regular dialogue is maintained with employees through regular discussion and updates 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. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation The Board has an established Audit Committee, a summary of its roles and responsibilities is available on the corporate governance webpage. 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 the Company’s Annual Report and Accounts 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. 5. Maintain the board as a well-functioning, balanced team led by the chair The Board is comprised of Andrew Suckling the Non-Executive Chairman, a Non-Executive Director and two Executive Directors. The CEO, Kiran Morzaria, is engaged to work a minimum of a 27-hour week and is an employee of the Company. The Finance Director, Donald Strang, is engaged to work a minimum of a 27-hour week. The Board deemed that given the stage and development of the Company, it would be more cost efficient to employ 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 5 working days per month and the Non-Executive Director 3 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. 24 CADENCE MINERALS PLC CORPORATE GOVERNANCE For the year ended 31 December 2022 Maintain the board as a well-functioning, balanced team led by the chair (continued) 5. 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 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. An Audit Committee and a Remuneration Committee support the Board. Cadence intends that the Board endeavours to hold full board meetings at least 3 times each year. The attendance of Board members for meetings during the current financial year is as follows: Andrew Suckling 10 of 11 Adrian Fairbourn 8 of 11 Kiran Morzaria Donald Strang 11 of 11 9 of 11 6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities 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 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 page [28] and the website. 25 CADENCE MINERALS PLC CORPORATE GOVERNANCE For the year ended 31 December 2022 7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement On 28 September 2018, the Company 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. Due to the current status of the Company, the Board has not identified any performance indicators as key other than cash management and the carrying value of investments. The performance of the Executive Directors is monitored and regularly reviewed by the Non-Executive Directors. Such review considers both the KPIs outlined above, The Board intends to 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. 8. Promote a corporate culture that is based on ethical values and behaviours The Company 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 • Code of conduct • Whistleblowing policy • Health and safety policy • Email and internet policy • Social media policy The Company has an anti-bribery policy and has implemented adequate procedures described by the Bribery Act 2010. The Company reports on its compliance to the Board on an annual basis. The Company has undertaken a review of its requirements under the General Data Protection Regulation, implementing appropriate policies, procedures and training to ensure it is compliant. 9. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders 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 our 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. 26 CADENCE MINERALS PLC CORPORATE GOVERNANCE For the year ended 31 December 2022 10. Maintain governance structures and processes that are fit for purpose and support good decision- making by the board Details of the Company’s corporate governance arrangements are provided within this Corporate Governance section of the Annual Report and Accounts. 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 £200,000; • 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; • Determination of 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 also 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 co-ordinate corporate finance and manage company policies regarding capital requirements, debt, taxation, equity and acquisitions as appropriate. 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. 27 CADENCE MINERALS PLC CORPORATE GOVERNANCE For the year ended 31 December 2022 BOARD MEMBERS The Board comprises of a Non-Executive Chairman, one Non-Executive Director and two Executive Directors. Andrew Suckling, Non-Executive Chairman Andrew has over 25 years’ experience in the commodity industry. He began in 1994 as a trader on the London Metal Exchange and subsequently became a founding partner, research analyst and trader with the multi- billion fund management group Ospraie. Andrew is a graduate of Brasenose College, Oxford University, earning a BA (Hons) in Modern History in 1993 and an MA in Modern History in 2000. Andrew is the chair of the Audit and Remuneration Committee. Kiran Morzaria, Chief Executive Officer Kiran holds a B.Eng. from the Camborne School of Mines and an MBA (Finance). He has over 25 years of experience in the mineral resource industry, both in operational and management roles. The first four years of his career were spent in exploration, mining, and civil engineering, after which he was involved in the acquisition, recommissioning and eventual sale of the Vatukoula Gold Mine. Kiran was appointed as CEO of Cadence in 2015, is a Non-Exec Director of European Metals Holdings and a Non-Executive Director of UK Oil & Gas Plc. Donald Strang, Finance Director Donald is a member of the Australian Institute of Chartered Accountants and has over 20 years of experience in both publicly listed and private enterprises in Australia, Europe and Africa. He has considerable corporate and international expertise, and over the past decade, has focused on mining and exploration activities. Adrian Fairbourn, Non-Executive Director Adrian began his career as an investment analyst before moving to build and manage the highly successful alternative fund-of-funds operation at the Bank of Bermuda. Adrian has co-managed a multi-family office in London, responsible for hedge fund investments, direct investments and also asset-raising for co-investment opportunities. He has successfully assisted in over $US1 billion of structuring, capital and fundraising projects for private companies and alternative funds. Adrian is a member of the Audit and Remuneration Committee. 28 CADENCE MINERALS PLC CORPORATE GOVERNANCE For the year ended 31 December 2022 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 also 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 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 once a year. The principal duties and responsibilities of the Audit Committee include: • Overseeing the Company’s financial reporting disclosure process; this includes the choice of appropriate accounting policies • Monitor the Company’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. 29 CADENCE MINERALS PLC CORPORATE GOVERNANCE For the year ended 31 December 2022 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. Internal Controls The Directors acknowledge their responsibility for the Company’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 • • environmental requirements • • political and country risks where appropriate. commodity price, interest rate, liquidity and volatility risks Insurance The Company maintains insurance in respect of its Directors and Officers against liabilities in relation to the Company. Treasury Policy The Company finances its operations through equity and holds its cash as a liquid resource to fund the obligations of the Company. 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. 30 CADENCE MINERALS PLC REPORT ON REMUNERATION For the year ended 31 December 2022 On behalf of the Board, I am pleased to present the Directors’ Remuneration Report summarising the Company’s remuneration policy and providing information on the Company’s remuneration approach and arrangements for Executive Directors, Non-Executive Directors and Senior Executive Management for the year ended 31 December 2022. This report is prepared in accordance with the QCA Remuneration Committee Guide for small and mid-sized quoted companies, revised in 2020. A summary of the Remuneration Committee’s role, membership and relevant qualifications can be found in the corporate governance section. Remuneration Committee meetings are held at least once a year with the primary focus of setting goals for the coming period and then assessing results at the end of that period. During the year, the Remuneration Committee met 1 time and; • Benchmarked the Boards Remuneration, both fixed and variable and as a whole, and compared it to AIM-listed companies of a similar market capitalisation. • Reviewed the above comparisons and established if applicable short, medium and long-term incentive schemes. As a result of this review it did not recommend any additional incentive schemes over and above the boards fixed renumeration. • Reviewed the performance of the Board against targets and awarded incentives covering the reporting period. The Board recognises that Directors' remuneration is of legitimate concern to the shareholders. The Company 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 Company'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 Company's objectives. Salary and Fees Benchmarking data indicates that at the time of the review, for Salary and Fees, Cadence is slightly above the median remuneration for an exploration and mining company between a £25 million and £50 million market capitalisation on the AIM market. During this review, the Remuneration Committee recommended an increase of seven percent in the salaries of the chief executive officer, finance director and non-executive chairman. Bonuses During the review by the Remuneration Committee and the benchmarking exercise. The Remuneration Committee recommended that no short term incentives to be granted during the period. The bonuses awarded in the previous year ending 31 December 2021 are shown on page [32]. Share Awards (Share Incentive Plan) In 2020 to incentive the Board on a medium-term basis, the Remuneration Committee recommended under the share incentive plan established in September 2014, to conditionally grant 240,000 Ordinary Shares to each of the directors. These share awards were conditional on meeting performance conditions during the award period ("2021 SIP Awards"). 2021 SIP Awards would be transferred from the Employee Benefit Trust ("EBT"), with no New Ordinary Shares being issued to satisfy the 2021 SIP Awards. 31 CADENCE MINERALS PLC REPORT ON REMUNERATION For the year ended 31 December 2022 The 2021 SIP Awards were subject to the board achieving performance conditions which were in line with market practice. One of the conditions was met in 2022 entitling each director to be awarded 80,000 shares from EBT. With this award two of the three performance conditions were met during the period and no further awards will be made in relation 2021 SIP Awards. The award of these shares has been expensed in 2022. Pensions The Company only operates a basic pension scheme for its directors and employees as required by UK legislation. The Company made the following pension contributions in the year: K Morzaria £4,403 (2021: £1,832) and D Strang £2,201 (2021: £1,832). Benefits in kind No benefits in kind were paid during the year to 31 December 2022 or the year ended 31 December 2021. Notice periods Andrew Suckling, Kiran Morzaria, Donald Strang and Adrian Fairbourn each have a 12 month rolling notice period. Share option incentives At 31 December 2022 each Director held 1,800,000 options which are exercisable at any time before 30 April 2026. The exercise price is 29p (31 December 2021: 1,800,000). No options were exercised by Directors during the period (2021: None). The remuneration of the Directors was as follows: A Fairbourn A Suckling K Morzaria D Strang £ £ £ £ Total £ Year to 31 December 2022 Salary and fees (1) Cost of shares awarded (2) 48,000 19,680 120,000 19,680 230,000 44,477 120,000 38,304 412,000 122,141 Total 67,680 139,680 274,477 158,304 640,141 Year to 31 December 2021 Salary and fees Bonus Share option charges (2) Total 48,000 100,000 49,311 112,000 100,000 49,311 140,000 150,000 49,311 112,000 100,000 49,311 412,000 450,000 197,244 197,311 261,311 339,311 261,311 1,059,244 (1) The chief executive officer salary was increased by 7% during the period, the difference between this value (£150,000) and the salary this year is a reflection of the chief executives role as a Director of the joint venture that manages the Amapa investment. (2) The cost of shares awarded represents the value of the shares awarded to the Directors under the 2021 SIP Awards and were conditional on meeting performance conditions during the award period. One of the conditions was met in 2022 entitling each director to be awarded 80,000 shares from the EBT. The award of these shares has been expensed in 2022. (3) Share option charges represent a Black and Scholes valuation of the incentive options granted to the Directors during 2021. Options are used to incentivise Directors and are a non-cash form of remuneration. 32 CADENCE MINERALS PLC REPORT ON REMUNERATION For the year ended 31 December 2022 At 31 December 2022 £Nil was outstanding in bonuses to directors (2021: £450,000). The high and low share price for the year were 31.225p and 8.5p respectively (year ended 31 December 2021: 31.1p and 14.5p). The share price at 31 December 2022 was 11.35p (31 December 2021: 28.0p). Andrew Suckling Non-Executive Chairman, 22 June 2023 33 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CADENCE MINERALS PLC Opinion We have audited the financial statements of Cadence Minerals Plc (the ‘company’) for the year ended 31 December 2022 which comprises: the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, Statements of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards as applied in accordance with the provisions of the Companies Act 2006. In our opinion, the financial statements: • give a true and fair view of the state of the company’s affairs as at 31 December 2022 and of its loss for the year then ended; • have been properly prepared in accordance with UK-adopted international accounting standards; and • 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 company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included a review of budgets for 22 months from the sign off date including checking the mathematical accuracy of the budgets and discussion of significant assumptions used by the management and comparing these with current year and post year end performance. We have also reviewed the latest available post year general ledgers, bank statements, regulatory announcements, board minutes and assessed any external industry wide factors which might affect the company. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Our application of materiality The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the financial statements was set at £319,000 (2021: £329,000), with performance materiality set at £223,300 (2021: £230,270. Materiality has been calculated as 1.5% of the benchmark of net assets, which we have determined, in our professional judgement, to be one of the principal benchmarks within the financial statements relevant to members of the Company in assessing financial performance. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £15,950 (2021: £16,450). 34 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CADENCE MINERALS PLC We applied the concept of materiality both in planning and performing the audit, and in evaluating the effect of misstatement. Our approach to the audit In designing our audit, we determined materiality, as above, and assessed the risk of material misstatement in the financial statements. We addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represents a risk of material misstatement due to fraud. In particular we looked at areas involving significant accounting estimates and judgements by the directors and considered future events that are inherently uncertain, such as the fair value of unquoted investments and the value of the share options scheme. In addition, we focused our audit on the significant risk areas including the Key Audit Matter as outlined below. A full scope audit was performed on the complete financial information of the Company. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter Carrying value of Financial Assets (Refer to note 6) The Company held investments with a value of £17.5m as at 31 December 2022. These are valued in accordance with IFRS 13 and the fair value hierarchy; and classified as per IFRS 9. There is the risk that these investments have not been valued in accordance with IFRS 13 and IFRS 9 and require impairment. Investments which fall under Tier 3 of the fair value hierarchy are subject to significant management estimate and judgment, which increases the risk of material misstatement. The group has also invested in level 1 listed investments, which are not subject to management judgement or estimation, and are valued at their year-end share price per the relevant exchange. Given the value of the investments is material at the year end and significant judgement needed when valuing level 3 investment we have assessed valuation of investments as a Key audit matter How our scope addressed this matter Our audit work will include:  Reviewing and challenging the valuation methodology for the investments held and ensuring that the carrying values are supported by sufficient and appropriate audit evidence.  Ensuring that all asset types are categorised according to IFRS, including the accounting disclosures as required under IFRS 9;  Reviewing the movement in investments to ensure they are accounted for and disclosed correctly in line with IFRS 9;  Reviewing disclosures in relation to said assets;  Ensuring that Cadence Minerals Plc has full title to the investments held;  Ensuring that appropriate disclosures surrounding the estimates made in respect of any valuations are included in the financial statements; and  Considering whether the transactions have been accounted for correctly within the financial statements. 35 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CADENCE MINERALS PLC Carrying value and classification of loans receivable (refer to note 7) There is a risk that the loan amounts are not recoverable given that no repayments were made by the debtors for the loans outstanding and in addition to the existing loans another loan was extended. There is also a risk that the loans have not been accounted for in accordance with IFRS 9. Risk has been assessed as a Key Audit Matter due to the level of estimation and judgement management have made in assessing the recoverability of £3.9 million in loans from REM Mexico. Based on the work performed, we are satisfied that the carrying value of the financial assets is materially correct and adequately disclosed. Our audit work will include:  Obtaining and reviewing the loan agreements to ascertain the key terms of the loan agreements.  Ensuring that the loans have been classified and disclosed correctly in accordance with IFRS 9;  Discussing with Management to ascertain their justification for no IFRS 9 ECL charge being recognised in the year. Challenge management's key assumptions and consider whether the loans are fully recoverable or whether an IFRS 9 ECL charge is required; and  Ensuring that the loans are correctly classified as current or non-current in accordance with the payment terms per the loan agreements. Based on the work performed, we are satisfied that the carrying value and classification of the loan receivable is materially correct. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 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. 36 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CADENCE MINERALS PLC Matters on which we are required to report by exception. In the light of the knowledge and understanding of the 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, or returns adequate for our audit have not been received from branches not visited by us; or • • the 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 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 company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: • We obtained an understanding of the Company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management and application of cumulative audit knowledge and experience of the sector. • We determined the principal laws and regulations relevant to the Company in this regard to be those arising from Companies Act 2006, AIM listing rules, GDPR, QCA compliance, International Financial Reporting Standards (in compliance with the Companies Act 2006) and tax legislation within the United Kingdom. 37 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CADENCE MINERALS PLC • We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the Company with those laws and regulations. These procedures included, but were not limited to: o Review of board minutes o Review of legal and professional expenditure Independent confirmation from legal advisors o • We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that the potential for management bias was in the valuation of investments. We addressed the risk by challenging the assumptions and judgements made by management when auditing that significant accounting estimate. • We addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. 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. Zahir Khaki (Senior Statutory Auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor 22 June 2023 15 Westferry Circus Canary Wharf London E14 4HD 38 CADENCE MINERALS PLC STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2022 Note Year ended 31 December 2022 £’000 Year ended 31 December 2021 £’000 Income Unrealised (loss)/profit on financial investments Realised profit on financial investments Share based payments Other administrative expenses Total administrative expenses Operating loss Finance income Finance cost Foreign exchange gain Loss before taxation Taxation Loss attributable to the equity holders of the Company Total comprehensive earnings for the year, attributable to the equity holders of the company Earnings per ordinary share Basic earnings per share (pence) Diluted earnings per share (pence) 6 6 1 3 4 5 5 (4,593) 552 (4,041) (13) (1,443) (1,456) (5,497) - (3) 3 (5,497) - 577 593 1,170 (197) (1,604) (1,801) (631) 35 (3) 455 (144) - (5,497) (144) (5,497) (144) (3.355) n/a (0.102) n/a The accompanying principal accounting policies and notes form an integral part of these financial statements. 39 CADENCE MINERALS PLC COMPANY NUMBER 05234262 Statement of Financial Position As at 31 December 2022 ASSETS Non-current Financial Assets Current Trade and other receivables Financial Assets Cash and cash equivalents Total current assets Total assets LIABILITIES Current Trade and other payables Total current liabilities Total liabilities EQUITY Issued share capital Share premium Share based payment reserve Investment in own shares Retained earnings Equity attributable to equity holders of the Company Total equity and liabilities 31 December 2022 £'000 31 December 2021 £'000 Note 6 7 6 8 10 10 11,365 11,365 3,957 6,206 110 10,273 21,638 317 317 317 2,144 37,612 252 (64) (18,623) 21,321 5,660 5,660 5,048 11,974 324 17,346 23,006 853 853 853 1,903 33,207 249 (70) (13,136) 22,153 21,638 23,006 The financial statements were approved by the Board on 22 June 2023, and signed on their behalf by; Kiran Morzaria Director Company number 05234262 Donald Strang Director The accompanying principal accounting policies and notes form an integral part of these financial statements. 40 CADENCE MINERALS PLC STATEMENT OF CHANGES IN EQUITY As at 31 December 2022 Share capital Share premium Investment in own shares Share based payment reserve Retained earnings Total equity £'000 £'000 £'000 £'000 £'000 £'000 1,896 33,159 - - - - 7 7 - - - - - - 50 (2) 48 - - - - - - (70) - - (70) - - 39 197 22 (9) - - - 210 - - (13,001) 22,093 - - 9 - - - 9 197 22 - (70) 57 (2) 204 (144) (144) (144) (144) 1,903 33,207 (70) 249 (13,136) 22,153 - - - 241 - 241 - - - - 6 4,775 (376) 4,405 - - - - 6 - - 6 - - 13 (10) - - - 3 - - - 10 - - - 10 13 - 12 5,016 (376) 4,665 (5,497) (5,497) (5,497) (5,497) 2,144 37,612 (64) 252 (18,623) 21,321 Balance at 31 December 2020 Share based payments Payments made through issue of warrants Transfer on exercise of options Adjustment for shares held in Trust Share issue Share issue costs Transactions with owners Loss for the period Total comprehensive earnings for the period Balance at 31 December 2021 Share based payments Transfer on exercise of warrants Issue of shares held in Trust Share issue Share issue costs Transactions with owners Loss for the period Total comprehensive earnings for the period Balance at 31 December 2022 The accompanying principal accounting policies and notes form an integral part of these financial statements. 41 CADENCE MINERALS PLC STATEMENT OF CASH FLOWS For the year ended 31 December 2022 Cash flow from operating activities Continuing operations Operating loss Gain/(loss) on financial investments Equity settled share based payments Adjustment for issue of own shares Payments made through issue of warrants Decrease in trade and other receivables (Decrease)/increase in trade and other payables Net cash outflow from operating activities from continuing operations Cash flows from investing activities Payments for non-current financial investments Payments for investments in current financial investments Receipts on sale of current investments Net cash inflow from investing activities Cash flows from financing activities Proceeds from issue of share capital Share issue costs Net borrowings Net finance cost Net cash inflow from financing activities Net change in cash and cash equivalents Foreign exchange movements on cash and cash equivalents Cash and cash equivalents at beginning of period Year ended 31 December 2022 £'000 Year ended 31 December 2021 £'000 (5,497) 4,041 13 - - 24 (536) (1,955) (4,600) (235) 1,926 (2,909) 5,016 (376) - (3) 4,637 (227) 13 324 (631) (1,170) 197 (70) 22 346 555 (751) (2,275) (830) 3,787 182 57 (2) (220) (3) (168) (737) 465 596 Cash and cash equivalents at end of period 110 324 Material non-cash transactions During the year the Company disposed of its 31.5% stake in in Lithium Technologies and Lithium Supplies, (non-current financial investments) for initial proceeds of £1,810,000 which were settled in shares of Evergreen PTY Ltd (non-current investment). Additionally, at 31 December 2021 the Company had a loan outstanding of £514,000 from Amapá and a balance of £554,000 held in a trust account (trade and other receivables) which were converted into its investment in Amapá (non-current investment). There were no material non-cash transactions in the year ended 31 December 2021. The accompanying principal accounting policies and notes form an integral part of these financial statements. 42 CADENCE MINERALS PLC PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2022 GENERAL INFORMATION Cadence Minerals plc is a company incorporated and domiciled in the United Kingdom. The Company's shares are listed on the AIM market of the London Stock Exchange, and on the AQUIS Growth Market as operated by AQUIS Stock Exchange (“AQUIS”). The Financial Statements are for the year ended 31 December 2022 and have been prepared under the historical cost convention, except for the measurement to fair value of financial assets, and in accordance with UK adopted International Accounting Standards (IAS) in conformity with the requirements of the Companies Act 2006. These Financial Statements (the "Financial Statements") have been prepared and approved by the Directors on 22 June 2023 and signed on their behalf by Donald Strang and Kiran Morzaria. Employee Benefit Trusts (“EBTs”) are accounted for under IFRS 10 and are consolidated on the basis that the parent has control, thus the assets and liabilities of the EBT are included on the Company balance sheet and shares held by the EBT in the Company are presented as a deduction from equity. 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 is an investment entity. 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. 43 CADENCE MINERALS PLC PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2022 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. GOING CONCERN The Directors have prepared cash flow forecasts for the period ending 31 March 2025 which take account of the current cost and operational structure of the Company. The cost structure of the Company 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 Company to operate within its available funding. During 2022, the Company received net proceeds of £4,640,000 through share issues and £1,691,000 in net receipts, from sales less purchases, of listed investments. These forecasts demonstrate that the Company 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 Company remains a going concern. At 31 December 2022 the Company had cash and cash equivalents of £110,000, current financial assets of £6,206,000 and no borrowings. The Company 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. With overheads of £1,443,000 in 2022, and creditors of £317,000 at 31 December 2022 the Company would still be able to meet its obligations, without the requirement to cut costs, should the value of the current listed financial assets be reduced by 65%. For these reasons the Directors adopt the going concern basis in the preparation of the Financial Statements. STATEMENT OF COMPLIANCE WITH IAS The Company’s financial statements have been prepared under the historical cost convention except for the measurement to fair value of financial assets as described in the accounting policy below, and the financial statements have been prepared in accordance with UK adopted International Accounting Standards (IAS) in conformity with the provisions of the Companies Act 2006. The principal accounting policies adopted by the Company are set out below. 44 CADENCE MINERALS PLC PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2022 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, which 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 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 Company 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 Company's financial assets include cash, other receivables and financial 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 9, 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. 45 CADENCE MINERALS PLC PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2022 FINANCIAL ASSETS (CONTINUED) 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 Company’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 Company 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 Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. FAIR VALUE MEASUREMENT IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the Company uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the Company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards. 46 CADENCE MINERALS PLC PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2022 FINANCIAL INVESTMENTS Non-derivative financial assets comprising the Company’s strategic financial investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. These assets are classified as financial assets at fair value through profit or loss. They are carried at fair value with changes in fair value recognised through the income statement. Where there is a significant or prolonged decline in the fair value of a financial investment (which constitutes objective evidence of impairment), the full amount of the impairment is recognised in the income statement. Due to the nature of these assets being unlisted investments or held for the longer term, the investment period is likely to be greater than 12 months and therefore these financial assets are shown as non-current assets in the Statement of financial position, unless their disposal is likely to occur within the forthcoming year. Listed investments are valued at closing bid price on 31 December 2021. For measurement purposes, financial investments are designated at fair value through income statement. Gains and losses on the realisation of financial investments are recognised in the income statement for the period. The difference between the market value of financial instruments and book value to the Company is shown as a gain or loss in the income statement for the period. 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 Company's cash management. 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. Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income. OPERATING LEASES The Company does not have any leases within the scope of IFRS 16 in the current or prior year. Payments, including prepayments, made under low value or short-term operating leases of less than 12 months (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. 47 CADENCE MINERALS PLC PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2022 FOREIGN CURRENCIES The financial statements are presented in Sterling, which is also the functional currency of the Company. In the financial statements of the Company, foreign currency transactions are translated into the functional currency of the Company 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. SHARE BASED PAYMENTS The Company 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 Company's estimate of the shares that will eventually vest. Fair value is measured using the Black-Scholes model, as the options have no market related conditions. 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. Warrants The Group has also issued equity settled share-based payments in respect of services provided by external consultants in the form of warrants. The share-based payment is measured at fair value of the services provided at the grant date, or if the fair value of the services cannot be reliably measured using the Black- Scholes model. The expense is allocated over the vesting period. FINANCIAL LIABILITIES The Company’s financial liabilities include trade and other payables. Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Company 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. 48 CADENCE MINERALS PLC PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2022 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Sources of Estimation and Key Judgements The preparation of the Financial Statements requires the Company to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Directors base their estimates on historic experience and various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 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 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. Unlisted investments The Company is required to make judgments over the carrying value of investments in unquoted companies where fair values cannot be readily established and evaluate the size of any impairment required. It is important to recognise that the carrying value of such investments cannot always be substantiated by comparison with independent markets and, in many cases, may not be capable of being realised immediately. Management’s significant judgement in this regard is that the value of their investment represents their cost less previous impairment. Management reviews each unquoted investment at each reporting date for indications of impairment. Management concluded that no impairment was necessary in the current or prior year. • Management has made the following judgement that has the most significant effect on the amounts recognised in the financial statements. Sonora Lithium Project License As stated in the strategic report, Mexican politicians from the MORENA party tabled a draught bill to reform Mexico's energy sector, including statements that lithium would be included among the minerals considered strategic for the energy transition and that no new concessions for lithium exploitation by private companies 49 CADENCE MINERALS PLC PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2022 Sonora Lithium Project License (continued) could be granted. Subsequent to the year-end, the Mexican senate elevated lithium deposits to the category of "strategic minerals", declaring lithium's exploration, exploitation, and use as the state's exclusive right. Management’s current view is that the Decree passed by the senate only impacts licenses, concessions, or contracts to be granted, NOT those already granted, as is the case for the Sonora Lithium Project. Therefore, at this point, management have concluded that there is no material impact on Cadence’s joint venture areas. Please see the strategic report for more details. Management will continue to review Adoption of New or Amended IFRS New standards, amendments and interpretations adopted by the Company The company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2022: • Amendments to IFRS 3: References to the Conceptual Framework • Amendments to IAS 16: Proceeds before intended use • Amendments to IAS 37: Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) IFRS 1, IFRS 9, IFRS 16 and IAS 41: Annual Improvements to IFRS Standards 2018-2020 Cycle - 1 January 2022 The adoption of the above has not had any material impact on the disclosures or amounts reported in the financial statements. New standards, amendments and interpretations not yet adopted There are no IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company. Segment reporting Segmental analysis is not applicable as there is only one operating segment of the continuing business – investment activities. 50 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 1. PROFIT BEFORE TAXATION AND SEGMENTAL INFORMATION Profit before taxation - continuing operations The loss before taxation is attributable to the principal activities of the Company. The loss before taxation is stated after charging: Year ended 31 December 2022 Year ended 31 December 2021 £'000 £'000 Share based payment charge Directors’ fees and consulting (see Note [2]) Fees payable to the Company’s auditor for the audit of the financial statements 13 518 40 197 412 36 Segment reporting The Company operates a single primary activity to invest in businesses so as to generate a return for the shareholders. The performance and position are therefore as stated in the primary statements. Unrealised (loss)/profit on financial investments Realised profit on financial investments Year ended 31 December 2022 Year ended 31 December 2021 £'000 £'000 (4,593) 552 (4,041) 577 593 1,170 51 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 2. EMPLOYEE REMUNERATION Employee benefits expense The expense recognised for employee benefits, including Directors’ emoluments, is analysed below: Short-term benefits Wages, salaries and consulting fees Bonus payments Employers NI Shares awarded Other long-term benefits Share based payments Year ended 31 December 2022 £'000 Year ended 31 December 2021 £'000 623 - 66 122 - 811 512 450 95 - 197 1,237 The average number of employees (including directors) employed by the Company during the period was: Directors Other 2022 No. 4 2 6 2021 No. 4 2 6 Included within the above are amounts in respect of Directors, who are considered to be the key management personnel, as follows: Year ended 31 December 2022 £'000 Year ended 31 December 2021 £'000 Short-term benefits Wages, salaries and consulting fees Bonus payments Shares awarded Other long-term benefits Share based payments charge on issue of options 518 - 122 - 640 Details of Directors' emoluments are included in the Report on Remuneration on pages [31 to 33]. 412 450 - 197 1,059 52 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 3. FINANCE INCOME & COSTS Loan interest received Loan interest Finance Fees 4. TAXATION Year ended 31 December 2022 £'000 Year ended 31 December 2021 £'000 - - 35 35 Year ended 31 December 2022 £'000 Year ended 31 December 2021 £'000 - 3 3 3 3 The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows: Year ended Year ended 31 December 2022 2022 31 December 2021 2021 £'000 % £'000 % (Loss)/profit before taxation (5,497) (144) (Loss)/profit multiplied by standard rate of corporation tax in the UK Effect of: Deferred tax asset not recognised Remeasurement of deferred tax for changes in tax rates Other permanent differences Chargeable gains Income not taxable Expenses not deductible for tax purposes Total tax charge for year (1,044) 19 (27) 19 43 - - 229 (105) 877 - 1,760 (1,573) (1) 12 (222) 51 - The Company has tax losses in the UK of £26.22m (2021: £25.97m), subject to His Majesty's Revenue and Customs approval, available for offset against future operating profits. The Company has not recognised any deferred tax asset in respect of these losses, due to there being insufficient certainty regarding its recovery. The unrecognised deferred tax asset is £6.56m (2021: £6.50m). Changes in tax laws and rates may affect tax assets and liabilities and our effective tax rate in the future. The main corporation tax rate in the UK is due to increase to 25% from 19% on 1 April 2023. 53 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 5. EARNINGS PER SHARE The calculation of the basic earnings 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. The weighted average number of shares excludes shares held by an Employee Benefit Trust (see Note [10]) and has been adjusted for the issue/purchase of shares during the period. (Loss) attributable to owners of the Company Weighted average number of shares in issue Less: shares held by the Employee Benefit Trust (weighted average) Weighted average number of shares for calculating basic earnings per share Share options and warrants exercisable Weighted average number of shares for calculating diluted earnings per share Basic earnings per share Diluted earnings per share Year ended 31 December 2022 £’000 (5,497) Year ended 31 December 2021 £’000 (144) 2022 Number 170,208,788 2021 Number 148,535,664 (6,380,000) (7,020,000) 163,828,788 141,515,644 n/a n/a 2022 Pence (3.355) n/a n/a n/a 2021 Pence (0.102) n/a The impact of the share options is considered anti-dilutive when the Company’s result for a period is a loss. 54 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 6. FINANCIAL INVESTMENTS Financial assets at fair value through profit or loss: £'000 Level 1 £'000 Level 2 £'000 Level 3 £'000 Total Fair value at 31 December 2020 Additions Fair value changes Gains on disposals Disposal Fair value at 31 December 2021 Additions Fair value changes (Loss)/Gains on disposals Disposal Fair value at 31 December 2022 Gains on investments held at fair value through profit or loss Fair value gain on investments Realised gain/(loss) on disposal of investments Net gain on investments held at fair value through profit or loss Financial assets Non-current Current 13,761 830 577 593 (3,787) 11,974 235 (4,593) (446) (1,926) 5,244 (4,593) (446) (5,039) £'000 Level 1 - 5,244 5,244 - - - - - - - - - - - - - - 2,885 2,775 - - - 5,660 7,479 - 998 (1,810) 12,327 16,646 3,605 577 593 (3,787) 17,634 7,714 (4,593) 552 (3,736) 17,571 - 998 (4,593) 552 998 (4,041) £'000 Level 2 - - - £'000 Level 3 11,365 962 12,327 £'000 Total 11,365 6,206 17,571 Level 1 represents those assets, which are measured using unadjusted quoted prices for identical assets. Level 2 applies inputs other than quoted prices that are observable for the assets either directly (as prices) or indirectly (derived from prices). Level 3 applies inputs, which are not based on observable market data. Level 1 assets comprise investments in listed securities which are traded on stock markets throughout the world and are held by the Company as a mix of strategic and short term investments. These are classified as current assets by virtue of their liquidity. The listed investments have been valued at bid price, as quoted on their respective Stock Exchanges, at 31 December 2022. During the year ended 31 December 2022 the company disposed of a variety of its shareholdings. Level 3 assets comprise of investment in exploration costs where licences are not 100% owned by the Company, and investments in other companies. The Directors carried out an impairment review as at 31 December 2022, and determined that no impairment was necessary. With the exception of the investment in Mojito of £962,000 these are considered to be non-current assets due to their lack of liquidity. As the Yangibana Project Tenements owned by Mojito were disposed of in 2023, this has been classified as a current asset at 31 December 2022. During 2022, £5,669,000 was invested in exploration costs by the Company (2021: £2,775,000). 55 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 7. TRADE AND OTHER RECEIVABLES Current Trade receivables Other receivables Amounts owed by subsidiaries Prepayments and accrued income 31 December 2022 £'000 27 3,883 47 3,957 31 December 2021 £'000 1,094 3,883 71 5,048 There is no impairment of receivables, and no amounts are past due at 31 December 2022 or 31 December 2021. The fair value of these financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value. 8. TRADE AND OTHER PAYABLES Trade payables Tax and social security Other payables Accruals and deferred income 31 December 2022 £'000 31 December 2021 £'000 246 - 1 70 317 254 - 8 591 853 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. 9. BORROWINGS The Company had no borrowings at 31 December 2022 or 31 December 2021 During the year ended 31 December 2021, £3,000 (USD$4,000) interest and finance charges were charged in the period, £223,000 (USD$303,000) was repaid, and £1,000 of foreign exchange was recognised in respect of borrowings. 56 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 10. SHARE CAPITAL Allotted, issued and fully paid 173,619,050 deferred shares of 0.24p 172,719,813 ordinary shares of 1p (31 December 2021: 148,649,098 ordinary shares of 1p) 31 December 2022 31 December 2021 £'000 £'000 417 1,727 2,144 417 1,486 1,903 Allotted and issued At 1 January 2021 Issue of shares during the year Share issue costs At 31 December 2021 Issue of shares during the year Reissue of shares held in trust Share issue costs At 31 December 2022 Ordinary shares No. Ordinary Share Capital £'000 147,949,098 700,000 - 148,649,098 24,070,715 - - 172,719,813 1,479 7 - 1,486 241 - - 1,727 Share Premium £'000 33,159 50 (2) 33,207 4,775 6 (376) 37,612 During the year ended 31 December 2022 the following shares were issued: On 3 February 2022, 19,512,180 placing and 487,805 subscription shares were issued for proceeds of £4,100,000. On 21 February 2022, 3,634,825 shares were issued through an open offer for proceeds of £745,000. On 8 April 2022, 435,905 shares were issued on exercise of warrants for proceeds of £65,000. Investment in Own Shares At 31 December 2022, the Company held in Trust 6,380,000 (2021: 7,020,000) of its own shares with a nominal value of £63,800 (2021: £70,200). The Trust has waived any entitlement to the receipt of dividends in respect of its holding of the Company’s ordinary shares. The market value of these shares at 31 December was £0.72m (2021: £1.75m). In the current period nil were repurchased (2021: nil) and nil were transferred into the Trust (2021: nil), with 640,000 reissued on award of shares to directors. The deferred shares have no voting rights and are not eligible for dividends. 57 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 11. SHARE BASED PAYMENTS Share Options The Company 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. During the year ended 31 December 2022 nil, (2021: 7,200,000) options were issued to Directors. Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the period are as follows: 31 December 2022 31 December 2021 Number Outstanding at the beginning of the year 7,200,000 Issued Exercised Outstanding at the end of the year Exercisable at year end - - 7,200,000 7,200,000 WAEP £ 0.290 - - 0.290 Number 100,000 7,200,000 (100,000) 7,200,000 7,200,000 WAEP £ 0.060 0.290 (0.060) 0.290 The share options outstanding at the end of the period have a weighted average remaining contractual life of 3.33 years (31 December 2021: 4.33 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 2022 31 December 2021 £ £ Number Number 30 April 2021 30 April 2021 0.29 0.02742 7,200,000 7,200,000 7,200,000 7,200,000 At 31 December 2022 7,200,000 options were exercisable (31 December 2021: 7,200,000). 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 share based payments recognised in the current and prior year were as follows: 30 April 2021 Risk free rate 0.19% Share price volatility 21.6% Expected life 5 years Share price at date of grant £0.2375 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. 58 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 11. SHARE BASED PAYMENTS (CONTINUED) Warrants Details of the number of warrants and the weighted average exercise price (WAEP) outstanding during the period are as follows: Outstanding at the beginning of the year Issued Exercised Outstanding at the end of the year Exercisable at year end 31 December 2022 31 December 2021 Number 1,798,405 1,157,350 (435,905) 2,519,850 2,519,850 WAEP £ 0.16147 0.20500 (0.015) 0.18345 Number 1,598,405 800,000 (600,000) 1,798,405 1,798,405 WAEP £ 0.11348 0.20000 (0.085) 0.16147 The warrants outstanding at the end of the period have a weighted average remaining contractual life of 1.67 years (31 December 2021: 1.78 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 31 December 2022 31 December 2021 01 January 2020 06 May 2020 20 August 2020 01 January 2020 06 May 2020 20 August 2020 28 September 2021 25 February 2022 28 September 2021 25 February 2022 £ Number Number 0.15 0.06 0.12 0.20 0.205 41,667 520,833 800,000 1,157,350 2,519,850 435,905 41,667 520,833 800,000 - 1,798,405 For those 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 share based payments recognised in the current and prior year were as follows: 28 September 2021 25 February 2022 Risk free rate 0.19% 1.03% Share price volatility 28.4% 14.9% Expected life 3 years 3 years Share price at date of grant £0.1825 £0.1825 The Company recognised total expenses of £13,000 (year ended 31 December 2021: £197,000) relating to equity-settled share-based payment transactions during the period. 59 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 12. FINANCIAL INSTRUMENTS The Company 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 Company's risk management and focuses on actively securing the Company's short to medium term cash flows. Long term financial investments are managed to generate lasting returns. The Company 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 Company is exposed are described below: a Credit risk The Company's credit risk will be primarily attributable to its trade receivables. At 31 December 2022 and 31 December 2021, the Company had no trade receivables and therefore minimal risk arises. Generally, the Company’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: Investments (carried at fair value) £’000 6,206 11,365 - - - Loans and receivables (carried at amortised cost) £’000 - - 27 3,883 47 110 Investments (carried at fair value) Other long term financial assets Other receivables Receivables from investee companies Prepayments and accrued income Cash and cash equivalents Total 17,571 4,067 Derivative financial assets 31 December 2022 Statement of Financial position total £’000 £’000 Investments (carried at fair value) £’000 Loans and receivables (carried at amortised cost) £’000 31 December 2021 Derivative financial assets Statement of financial position total £’000 £’000 - - - - - - - 6,206 11,974 11,365 5,660 27 3,883 47 110 - - - - - 1,094 3,883 71 324 21,638 17,634 5,372 - - - - - - - 11,974 5,660 1,094 3,883 71 324 23,006 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). 60 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 12. FINANCIAL INSTRUMENTS (CONTINUED) 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 Company’s investment in shares in Listed Companies are included as a financial investment and has been classified as Level 1, as market prices are available, and the market is considered an active, liquid market. The Company’s investment in exploration costs where licences are not 100% owned by the Company, and investments in other companies are classified as non-current Level 3. The credit risk on liquid funds is limited because the Company only places deposits with leading financial institutions in the United Kingdom. a Liquidity risk The Company 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. b Market risk The amount and quality of minerals available and the related costs of extraction and production represent a significant risk to the Company. The Company is exposed to fluctuating commodity prices in respect of the underlying assets. The Company seeks to manage this risk by carrying out appropriate due diligence in respect of the projects in which it invests. The Company 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 Company manages this risk through constant monitoring of its investments share prices and news information but does not hedge against these investments. c Interest rate risk The Company only has borrowings at fixed coupon rates and therefore minimal interest rate risk, as this is deemed its only material exposure thereto. d Foreign exchange risk The Company had no borrowings at 31 December 2022 or 31 December 2021. The Company operates foreign currency bank accounts to help mitigate the foreign currency risk. 61 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 12. FINANCIAL INSTRUMENTS (CONTINUED) e Financial liabilities The Company's financial liabilities are classified as follows: 31 December 2022 31 December 2021 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 Other payables Borrowings Total 246 - 1 - 247 - 70 - - 70 246 70 1 - 317 254 - 8 - 262 - 591 - - 591 254 591 8 - 853 Maturity of financial liabilities All financial liabilities at 31 December 2022 and 31 December 2021 mature in less than one year. Borrowing facilities for the period ended 31 December 2022 The Company had no committed borrowing facilities at 31 December 2022 (31 December 2021: £Nil). The Company had no committed undrawn facilities at 31 December 2022 or 31 December 2021. f Capital risk management The Company's objectives when managing capital are: - - - to safeguard the Company's ability to continue as a going concern, so that it continues to provide returns and benefits for the shareholders; to support the Company's stability and growth; and to provide capital for the purpose of strengthening the Company's risk management capability. The Company 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 Company 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. 62 CADENCE MINERALS PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 13. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES There was no financing activity in the year ended 31 December 2022. 1 January 2021 Cash-flows: - Interest charged - Realised foreign exchange - Repayments 31 December 2021 14. RELATED PARTY TRANSACTIONS Short-term borrowings 219 3 1 (223) - Total 219 3 1 (223) - The Company was charged rent totalling £19,931 to Gunsynd Plc, a company of which Don Strang is a director (2021: £19,200 accrued). Of this £9,500 was accrued and £131 was unpaid at 31 December 2022. Andrew Suckling is a director of Macarthur Minerals Limited. During the year the Company purchased 600,000 shares in Macarthur Minerals and sold 1,616,000 shares in Macarthur Minerals for net proceeds of £24,426 (2021: 286,000 shares disposed of for proceeds of £50,581). At the year end the company held nil shares in Macarthur Minerals (2021: 1,016,000). Key Management Personnel are considered to be the Company Directors only, and their fees and remuneration are disclosed in the Directors Remuneration on pages [31 to 33], and within Note [2] to the financial statements. 15. EVENTS AFTER THE END OF THE REPORTING PERIOD On 25 January 2023, the Company announced that it had completed the sale of its working interests in the Yangibana Rare Earths project ("Yangibana Project") tenements to Hastings Technology Metals (ASX: HAS) ("Hastings"). The Company received 2,452,650 shares of Hastings valued at AUD $9m. On 26 January 2023, the Company announced that Evergreen Lithium Limited ("Evergreen") has filed its admission Prospectus with Australian Securities & Investments Commission and the Australian Stock Exchange ("ASX"). Cadence owns approximately 15.8 million Evergreen shares which are anticipated to represent 8.7% of the issued share capital of Evergreen on admission. At the offer price the Company’s interest is valued at AUD $3.96m. On 13 April 2023, the Company announced that Evergreen was listed on ASX on 11 April 2023, and that Cadence is the largest shareholder, holding 8.74% of the issued share capital. 16. ULTIMATE CONTROLLING PARTY In the opinion of the directors there is no controlling party. 63 

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