Annual Report and Consolidated Financial Statements 2015 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc Contents Chairman’s Statement Company Information Report of the Directors Directors’ Responsibilities Statement Corporate Governance Statement Independent Auditors’ Report Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Company Cash Flow Statement Notes to the Financial Statements 1 4 5 9 10 11 13 14 15 15 16 17 18 19 20 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 1 Chairman’s Statement Clontibret: Proposed Gold Mine The Clontibret gold target, on which your Company proposes to bring in its first gold mine includes high grade Lodes and a Stockwork. In addition antimony is present. The mining plan envisages a conventional surface open pit mine, with a Phase 1 starter pit followed by a Phase 2 extension with a combined period for Phases 1 and 2 of approximately 10 years, to be followed by underground mining and/or further surface pits. The Phase 1 starter pit at your Company’s proposed gold development at Clontibret will concentrate on a high grade, densely drilled portion of the resource and should result in accelerated total project capital payback within year 2 of the operation and a positive cash flow. Current metallurgical testwork is indicating very favourable flotation and downstream processing characteristics which together with favourable infrastructure and logistical support will be important in reducing the project’s capital and operating costs. An infill drilling programme at Clontibret has shown grades of 20.05g/t gold over 1 metre and 14.10g/t gold over 2.5 metres. Gold has also been intercepted at 340.5 metres in the Stockwork zone – the deepest intersection of gold to date at Clontibret. Stockwork intersections included a 12.5 metre intersection at 2.6g/t Au which included 7.5 metres at 3g/t Au. These recent drilling results have provided further evidence of continuity of gold at depth at Clontibret and have enabled the existing goldbody model to be confirmed and the gold mineralisation zone to be extended. For the underground mining option there are favourable grades and widths at depth that have been identified by drilling. This ore could be accessed by a spiral ramp at the base of the Phase 1 pit and mined by a high volume method such as sublevel block caving. Elevated antimony contents are present in gold flotation concentrate from Clontibret. Metallurgical testwork has indicated that these are potentially economic quantities of antimony. It is therefore planned that antimony will be mined at Clontibret in addition to gold. Antimony is specified by the European Commission as a critical raw material and a large supply deficit is also forecast by the European Commission. The product is used primarily in the production of flame retardants. Work has been conducted to identify flowsheet options to allow for the extraction of the antimony from the gold bearing concentrate. Several process options have been identified and future metallurgical testwork will include testing these options and optimising extraction to provide a saleable antimony product. The potentially economic quantities of the strategically important mineral antimony, in addition to gold which is intended to be mined at Clontibret, is a very welcome further development as your Company moves forward with its mining plans for Clontibret. Exploration Your Company’s Clay Lake gold target in County Armagh is greater in surface area than the Clontibret gold target. Geologically the Clay Lake gold target appears to be a black carbonaceous shale hosted deposit. Wide gold zones have been encountered during trenching and drilling and the deposit could well contain very high gold content and tonnage. Professor Richard Conroy Chairman I have pleasure in presenting your Company’s Annual Report and Consolidated Financial Statements for the financial year ending 31 May 2015. Moving forward with your Company’s proposed development of a goldmine at Clontibret, in County Monaghan, has been the main focus of your Company’s activities during the financial year. There was also further excellent progress with your Company’s exploration programme particularly at the Clay Lake gold target in Co Armagh and the Slieve Glah gold target in County Cavan together with the discovery of a new gold target at Rockcorry in County Monaghan. In addition exploration licences were granted to your Company in the highly prospective gold district of Sodanklya in Finland. 2 Drilling at Clontibret. At Slieve Glah in County Cavan an independent Structural Study by Dr. Francis Murphy and Dr. David Coller has been carried out which has highlighted the potential for a concentration of gold mineralised faults and of gold target zones within the gold-in-soil anomalies defined by your Company. These gold- in-soil anomalies are approximately 3km (1.8miles) in length. A major geological structure, the Orlock Bridge Fault, undergoes a significant strike swing, or bend, at Slieve Glah. This has led to the development of a dilation zone which could hold significant mineral potential. At Rockcorry, in County Monaghan, an extensive (700 metres by 300 metres) gold-in-soil anomaly has been discovered. The anomaly lies about 14 km to the south west of Clontibret and confirms the gold potential of the area lying between the Glenish and Clontibret gold targets and the Slieve Glah gold target to the south. Further targets along the thirty mile gold trend in the Longford-Down Massif have been identified using High Resolution Satellite Imagery (Rapid Eye Imagery) in conjunction with geological and airborne geophysical data sets. A number of significant gold discoveries have been made in Finland in recent years. The Sodanklya region in which your Company has been granted exploration licences appears highly prospective. Finance The loss after taxation for the financial year ended 31 May 2015 was €315,314 (2014: €380,305) and the net assets as at 31 May 2015 were €15,321,650 (2014: €14,290,931). During the financial year, on 8 October 2014, the Company raised £750,000 (prior to expenses) by issuing 75,000,000 new ordinary shares by way of a placing and, on 21 November 2014, I converted £273,500 of convertible debt into ordinary shares at 2.65p per share. Details of the share issues are in Note 15 to the accounts. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc Chairman’s Statement continued 3 Analysis of drill core by XRF spectrophotometry. As in previous years, I have supported the working capital requirements of the Company. The balance of the loans due to me at the period end was €191,022. The loans have been made on normal commercial terms. The other directors consider, having consulted with the Company’s Nominated Adviser and the Company’s ESM Adviser, which the terms of the loans are fair and reasonable in so far as the Company’s shareholders are concerned. Auditors I would like to take this opportunity to thank the partners and staff of Deloitte for their services to your Company during the course of the financial year. Directors I would like to express my deep appreciation of the support and dedication of all of the directors, consultants and staff, which has made possible the continued progress and success, which your Company has achieved. Future Outlook Your Company made further excellent progress in the financial year to 31 May 2015 and this has continued into the current financial year. We continue to progress from the purely exploration phase into the development phase with our primary focus on bringing a gold and antimony mine at Clontibret into production. Examining drill core. Professor Richard Conroy Chairman 20 November 2015 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 4 Company Information Nominated Adviser Sanlam Securities UK Limited 10 King William Street London, EC4N 7TW, UK Broker Hybridan LLP 20 Ironmonger Lane London EC2V 8EP, UK ESM Adviser IBI Corporate Finance 2 Burlington Plaza Burlington Road Dublin 2 Statutory Audit Firm Deloitte Chartered Accountants Deloitte House Charlotte Quay Limerick Principal Banker AIB 1-4 Lower Baggot Street Dublin 2 Registrars Capita Asset Services Shareholder Solutions (Ireland) 2 Grand Canal Square Dublin 2 www.capitaassetservices.ie Legal Advisers William Fry Solicitors 2 Grand Canal Square Dublin 2 Head Office Conroy Gold and Natural Resources plc 9 Merrion Square North Dublin 2 EO2 WN50 For further information visit the Company’s website at: www.conroygoldandnaturalresources.com Lothbury Financial Services 17 St Swithins Lane London EC4N 8AL U.K. Tel: +44 20 3290 0707 Directors Professor Richard Conroy Chairman* Seamus P. FitzPatrick Deputy Chairman Non-Executive Director*+§ Maureen T.A. Jones Managing Director* James P. Jones FCA Finance Director* Dr. Sorċa C. Conroy Non-Executive Director Louis J. Maguire Non-Executive Director*+§ Michael E. Power Non-Executive Director*§ Henry H. Rennison Non-Executive Director* C. David Wathen Non-Executive Director+ * Member of the Executive Committee + Member of the Remuneration Committee § Member of the Audit Committee Company Secretary and Registered Office James P. Jones FCA 9 Merrion Square North Dublin 2 EO2 WN50 Ireland Standing, left-right: Louis J. Maguire, Non-Executive Director; C. David Wathen, Non-Executive Director; Seamus P. FitzPatrick, Deputy Chairman; Dr Sorċa Conroy, Non-Executive Director; Michael E. Power, Non-Executive Director. Seated, left-right: Maureen T.A. Jones, Managing Director; Professor Richard Conroy, Chairman; James P. Jones, Finance Director; Henry H. Rennison, Non-Executive Director. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 5 Report of the Directors The Directors present their annual report, together with the audited consolidated financial statements of Conroy Gold and Natural Resources plc for the financial year ended 31 May 2015. Principal Activities and Business Review The company’s exploration programme in Ireland is focused on the Longford- Down Massif. The company is engaged in active exploration there, which has already led to the discovery of a series of gold targets along a 30 mile (50 km) area stretching from County Armagh across Counties Monaghan and Cavan. At the most advanced of these targets, Clontibret in County Monaghan, a Scoping Study prepared by independent consultants Tetra Tech Wardrop demonstrated that the project was technically and financially viable with a mine life of 11.2 years, a payback of 2 years, a net present value of US$72.3m using a discount rate of 8%, and an internal rate of return of 49.4% at a gold price of US$1,372. The study was completed on an area representing less than 20% of the target. Drilling on the remaining 80% of the Clontibret anomaly is expected to further increase this resource. The group has also acquired licences in Finland’s Central Lapland Greenstone Belt, which it believes to be highly prospective for gold and has an ongoing exploration programme there. Further information concerning the activities of the group and its future prospects is contained in the Chairman’s Statement. Future Development of the Business It is the intention of the Directors to continue to develop the activities of the company. Further strategic opportunities in mineral resources, both in Ireland and abroad, will be sought by the group. Risks and Uncertainties The company’s activities are directed towards the discovery, evaluation and development of mineral deposits. Exploration for and development of mineral deposits is speculative. Whilst the rewards can be substantial, there is no guarantee that exploration on the company’s properties will lead to the discovery of commercially extractable mineral deposits. The directors recognise that the future realisation of exploration and evaluation assets is dependent on the successful further development and ultimate production of the mineral reserves and the availability of sufficient finance to bring the reserves to economic maturity and profitability. Going Concern The group and company made a loss of €315,314 (2014: €380,305) for the financial year ended 31 May 2015 and had net current liabilities of €2,067,149 and €1,785,951 respectively (2014: €1,234,257 and €1,234,259) at that date. The directors have confirmed that they will not seek repayment of amounts owed to them by the group and the company of €1,564,868 within 12 months of the date of approval of the financial statements, unless the group has sufficient funds to repay. In addition, Karelian Diamond Resources Plc have confirmed that it does not intend to seek repayment of amounts owed to it at 31 May 2015 by the group and the company of €370,720 within 12 months of the date of approval of the financial statements, unless the group has sufficient funds to repay. In addition, the group’s principal shareholder has advanced funds amounting to €170,000 to the group and the company since the financial year end. The directors have reviewed the proposed work programme for exploration and evaluation assets and on the basis of the equity raised during the financial year, the funds received from the principal shareholder after the financial year end, the results obtained from the exploration programme and the prospects for raising additional funds as required, consider it appropriate to prepare the financial statements on the going concern basis. Key Performance Indicator Currently the group’s main key performance indicator is in relation to the estimated resource potential on the discovery and development of economic deposits of gold in Ireland and Finland. The details are set out in the Chairman’s Statement. In addition, the company reviews expenditure incurred on exploration projects together with maintaining review of ongoing operating costs. Results for the Financial Year and State of Affairs at 31 May 2015 The statement of financial position as at 31 May 2015 and the income statement for the financial year are set out on pages 14 and 15. The group and the company recorded a loss for the financial year of €315,314 (2014: €380,305) which was transferred to retained deficit. Taking account of the current financial year loss and the share capital issued during the year, equity increased to €15,321,650 at 31 May 2015 from €14,290,931 at 31 May 2014. Post Statement of Financial Position Events For events which have occurred since financial year end, refer to Note 21 of the financial statements. Directors The Directors who served during the financial year are as follows: Prof. Richard Conroy Mr. Séamus Fitzpatrick Mr. Louis Maguire Mr. James Jones Miss Maureen Jones Mr. Michael Power Mr. Henry Rennison Mr. C. David Wathen Dr. Sorca Conroy Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 6 Report of the Directors continued In accordance with the company’s Articles of Association, Mr. James Jones, Mr Henry Rennison and Mr. Séamus FitzPatrick will retire by rotation and, being eligible, will offer themselves for re-election at the Annual General Meeting. Details of Directors Professor Richard Conroy, Chairman of the Board, has been involved in natural resources for many years. He established Trans-International Oil, which was primarily involved in Irish offshore oil exploration, and initiated the Deminex Consortium (which included Deminex, Mobil, Amoco and DSM). Trans-International Oil was merged with Aran Energy in 1979 (which was later acquired by Statoil). Professor Conroy founded Conroy Petroleum and Natural Resources which (as well as being involved in oil production and exploration) in 1986 discovered the Galmoy zinc deposit in Ireland. Conroy Petroleum was also a founding member of the Stone Boy consortium, an exploration group which discovered the Pogo gold deposit in Alaska, now a major producing gold mine. Conroy Petroleum acquired Atlantic Resources in 1992 and was renamed ARCON International Resources. Professor Conroy was Chairman and Chief Executive of Conroy Petroleum/ARCON from 1980 to 1994 before founding Conroy Gold and Natural Resources Plc in 1995. An Emeritus Professor of Physiology in the Royal College of Surgeons in Ireland, Professor Conroy served in the Irish Parliament as a Member of the Senate and was at various times front bench spokesman for the government party in the Upper House on Energy, Industry and Commerce; Foreign Affairs; and Northern Ireland. Mr. Séamus Fitzpatrick, Deputy Chairman, has worked in both corporate finance and private equity in London and New York with Morgan Stanley, JP Morgan and Banker’s Trust. In 1999 he co-founded CapVest of which he is Managing Partner (which has raised funds in excess of £2.0 billion). He is Chairman of the Mater Private Hospital and of Valeo Foods and is a board member of Scandza A.S. He is also a director of Karelian Diamond Resources Plc. Miss Maureen Jones, Managing Director, has over 20 years’ experience at senior level in the natural resource sector. She has been Managing Director of Conroy Gold since 1998 and was a founding director of the company. Also a director of Karelian Diamond Resources Plc, she joined Conroy Petroleum and Natural Resources Plc on its foundation in 1980 and was a director and board member of Conroy Petroleum/ARCON from 1986 to 1994. Ms. Jones has a medical background and specialised in the radiographic aspects of Nuclear Medicine before becoming a manager with International Medical Corporation in 1977. Mr. James Jones, Finance Director, has been associated with the natural resources industry for many years. A Chartered Accountant, he was finance director of Conroy Petroleum and Natural Resources/ARCON from its formation until 1994. He was a founding director of Conroy Gold and Natural Resources and has served as Finance Director and secretary of the company since its inception. He is also a director of Karelian Diamond Resources Plc. Dr. Sorċa Conroy, Non-executive Director, was recruited to ING Bank in 2006 and whilst there was ranked second in the Extel Survey for Biotechnology Specialist Sales. She had previously been specialist sales for life sciences and institutional equities at Canaccord Adams (2005-2006), where she ranked fourth in the 2006 Extel survey and Hoodless Brennan (2004-2005). A medical graduate of The Royal College of Surgeons in Ireland, she held a number of clinical positions in between her graduation in 1995 and joining Hoodless Brennan. Mr. Louis Maguire, Non-executive Director, is an Auctioneer by profession and land valuation expert with particular expertise in the purchase of mineral rights and in land acquisition for mining. He is a founding director of the company. Mr. Michael Power, Non-executive Director, is a professional engineer and Chartered Financial Analyst with over 40 years experience in the mining industry in Canada and internationally. He was formerly Vice President of Corporate Development at Hemlo Gold Mines Inc. (now Newmont Gold Corporation). Mr. Henry Rennison, Non-executive Director, is a geologist. He worked with Burmah Oil for 30 years and later as a consultant with the International Petroleum Consultancy firm De Golyer and McNaughton. He was a director of Conroy Petroleum and Natural Resources and its subsidiaries including ARCON Mines Ltd for a number of years. He is a founding director of Conroy Gold and Natural Resources Plc. Mr. David Wathen, Non-executive Director, has been involved in business and finance throughout his career, most recently as a stockbroker managing private client portfolios for Redmayne- Bentley Stockbrokers Sheffield. Recently appointed as an independent Chairman of the Skipton Business Improvement District, he has also previously served as a director of several quoted and private companies in the UK, Ireland and the United States, including a number of natural resources companies. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc Report of the Directors continued 7 Directors’ and Secretary’s Shareholdings and Other Interests The interests of the Directors and Secretary, all of which were beneficially held, in the ordinary share capital of the company at 31 May 2015 and 1 June 2014 were as follows: At 31 May 2015 At 1 June 2014 Ordinary Shares of €0.01 each Options Warrants Ordinary Shares of €0.03 each Options Warrants Professor R.T.W.L. Conroy 96,496,188 M.T.A. Jones J.P. Jones H.H. Rennison S.P. Fitzpatrick L.J. Maguire M.E. Power C.D. Wathen 5,896,991 1,250,010 1,330,010 7,730,484 310,010 175,000 500,000 Dr. S.C. Conroy 2,066,942 – – – – – – – – – 34,934,765 86,175,433 22,507,028 13,188,420 2,457,288 359,593 2,457,288 1,307,893 507,641 5,896,991 1,250,010 1,330,010 7,730,484 310,010 175,000 500,000 – 2,066,942 – – – – – – – – – 34,934,765 22,507,028 13,188,420 2,457,288 359,593 2,457,288 1,307,893 507,641 – * Of the 96,496,188 (2014: 86,175,433) ordinary shares beneficially held by Professor Richard Conroy, 19,294,286 (2014: 19,294,286) are held by Conroy Plc, a company in which Professor Conroy has a controlling interest. Details of warrants, all of which are exercisable currently, are as follows: Directors At 31 May 2015 Granted During Financial Year At 1 June 2014 Professor R.T.W.L. Conroy Professor R.T.W.L. Conroy M.T.A. Jones M.T.A. Jones J.P. Jones J.P. Jones H.H. Rennison H.H. Rennison S. P. Fitzpatrick L.J. Maguire L.J. Maguire M.E. Power M.E. Power C. D. Wathen 22,814,920 12,119,845 13,839,858 8,667,170 8,058,129 5,130,291 1,450,427 1,006,861 359,593 1,450,427 1,006,861 301,032 1,006,861 507,641 – – – – – – – – – – – – – – 22,814,920 12,119,845 13,839,858 8,667,170 8,058,129 5,130,291 1,450,427 1,006,861 359,593 1,450,427 1,006,861 301,032 1,006,861 507,641 Price € 0.037 0.0433 0.037 0.0433 0.037 0.0433 0.037 0.0433 0.0433 0.037 0.0433 0.037 0.0433 0.0433 Expiry Date 15 November 2020 16 November 2022 15 November 2020 16 November 2022 15 November 2020 16 November 2022 15 November 2020 16 November 2022 16 November 2022 15 November 2020 16 November 2022 15 November 2020 16 November 2022 16 November 2022 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 8 Report of the Directors continued Except as disclosed above, neither the Directors nor their families had any beneficial interest in the share capital of the parent company. Apart from loans from shareholders, who are also directors (see Note 14 to the financial statements), and convertible debt, there have been no contracts or arrangements entered into during the financial year in which a Director of the parent company had a material interest and which were significant in relation to the group’s business. Substantial Shareholdings So far as the Board is aware, no person or company, other than the Directors’ interests disclosed and the shareholders listed below, held 3% or more of the issued ordinary share capital of the parent company at 31 May 2015. Name Professor Conroy Mr. Patrick O’Sullivan Number of Ordinary Shares 96,496,188* 50,714,546 % 22.07 11.60 * Of the 96,496,188 (2014: 86,175,433) ordinary shares held by Professor R.T.W.L. Conroy, 19,294,286 (2014: 19,294,286) are held by Conroy Plc, a company in which Professor Conroy has a controlling interest. Political Donations No political donations were made during the financial year. Accounting Records The measures that the directors have taken to secure compliance with the requirements of sections 281 to 285 of the Companies Act 2014 with regard to the keeping of accounting records, are the employment of appropriately qualified accounting personnel and the maintenance of computerised accounting systems. The company’s accounting records are maintained at the company’s registered office at 9 Merrion Square North, Dublin 2. Auditor The auditors, Deloitte, Chartered Accountants and Statutory Audit Firm, continue in office in accordance with Section 383 (2) of the Companies Act 2014. Approved by the Board and signed on its behalf by Richard Conroy Director Maureen Jones Director Date: 20 November 2015 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc Directors’ Responsibilities Statement 9 The directors are responsible for ensuring that the company keeps or causes to be kept adequate accounting records which correctly explain and record the transactions of the company, enable at any time the assets, liabilities, financial position and profit or loss of the company to be determined with reasonable accuracy, enable them to ensure that the financial statements and directors’ report comply with the Companies Act, 2014 and enable the financial statements to be audited. 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. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. The directors’ are responsible for preparing the directors’ report and the financial statements in accordance with the Companies Act, 2014 and the applicable regulations. Irish company law requires the directors to prepare financial statements for each financial year. Under the law, the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (“relevant financial reporting framework”). 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 assets, liabilities and financial position of the company as at the financial year end date and of the profit or loss of the company for the financial year and otherwise comply with the Companies Act, 2014. In preparing those financial statements, the directors are required to: n select suitable accounting policies for the Parent Company and the Group Financial Statements and then apply them consistently; n make judgements and estimates that are reasonable and prudent; n state whether the financial statements have been prepared in accordance with the applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and n prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 10 Corporate Governance Statement Introduction The Board of Directors is accountable to the company’s shareholders for good corporate governance. Board of Directors The board supports standards in corporate governance and endeavours to implement such standards constructively and in a sensible and pragmatic fashion with the objective of enhancing and protecting shareholder value. Regular board meetings are scheduled to take place throughout the financial year. During the financial year five meetings were held. All major policies are approved by the board. All directors are subject to re-election. A Directors’ Responsibilities Statement in relation to the annual financial statements is set out at page 9. Remuneration Committee The remuneration committee comprises Mr. Louis Maguire, Mr. Séamus Fitzpatrick and Mr. David Wathen. It is responsible for making recommendations to the board on the company’s executive remuneration. The committee determines any contract terms, remuneration and other benefits, including share options, for each of the executive directors. The board itself determines the remuneration of the non-executive directors. Audit Committee The committee’s terms of reference have been approved by the board. The audit committee comprises Mr. Louis Maguire, Mr. Michael Power and Mr. Séamus Fitzpatrick. The audit committee reviews the interim and annual financial statements before they are presented to the board, focusing in particular on accounting policies and areas of management judgement and estimation. The committee is responsible for monitoring the controls which are in force to ensure the information reported to the shareholders is accurate and complete. The committee considers internal control issues and contributes to the board’s review of the effectiveness of the company’s internal control and risk management systems. It also considers the need for an internal audit function, which it believes is not required at present because of the group’s limited operations. The members of the committee have agreed to make themselves available should any member of staff wish to make representations to them about the conduct of the affairs of the group. The committee advises the board on the appointment of external auditors and on their remuneration and discusses the nature and scope of the audit with the external auditors. It meets formally at least once per financial year with the group’s external auditors. An analysis of the fees payable to the external audit firm in respect of audit services during the year is set out in Note 5 to the financial statements. The audit committee also undertakes a review of any non-audit services provided to the group; and a discussion with the auditors of all relationships with the group and any other parties that could affect independence or the perception of independence. Executive Committee The Executive Committee comprises of Professor Richard Conroy, Miss Maureen Jones, Mr. James P. Jones, Mr. H. H. Rennison, Mr. Louis Maguire and Mr. Michael Power. Its purpose is to support the Managing Director in carrying out the duties delegated to her by the board. It also ensures that regular financial reports are presented to the board, that effective internal controls are in place and functioning, and that there is an effective risk management process in operation throughout the group. Internal Control The board of directors is responsible for, and annually reviews, the company’s systems of internal control, financial and otherwise. Such systems provide reasonable but not absolute assurance of the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information. There are inherent limitations in any system of internal control and, accordingly, even the most effective system can provide only reasonable and not absolute assurance with respect to the preparation of financial information and the safeguarding of assets. Communication with Shareholders Extensive information about the company and its activities is given in the annual report and financial statements. Further information is available on the company’s website, www.conroygoldandnaturalresources.com, which is promptly updated whenever announcements or press releases are made. The company encourages communication with private shareholders throughout the financial year and welcomes their participation at general meetings. All Board members attend the Annual General Meeting and are available to answer questions. Separate resolutions are proposed on substantially different issues and the agenda of business to be conducted at the Annual General Meeting includes a resolution to receive and consider the Annual Report and financial statements. The chairmen of the Board’s committees will also be available at the Annual General Meeting. The Board regards the Annual General Meeting as a particularly important opportunity for shareholders, directors and management to meet and exchange views. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 11 Independent Auditors’ Report To the Members of Conroy Gold and Natural Resources plc We have audited the financial statements of Conroy Gold and Natural Resources plc for the financial year ended 31 May 2015 which comprise the Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity, the Consolidated Cash Flow Statement, the Company Cash Flow Statement and the related notes 1 to 23. The relevant financial reporting framework that has been applied in the preparation of the financial statements is the Companies Act, 2014 and International Financial Reporting Standards (IFRS) as adopted by the European Union (“relevant financial reporting framework”). This report is made solely to the company’s members, as a body, in accordance with Section 391 of the Companies Act, 2014. 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 auditors’ 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. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and otherwise comply with the Companies Act, 2014. Our responsibility is to audit and express an opinion on the financial statements in accordance with the Companies Act, 2014 and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Consolidated Financial Statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: n the group and parent company financial statements give a true and fair view of the assets, liabilities and financial position of the group and parent company as at 31 May 2015 and of the loss of the group for the financial year then ended; and n the group and parent company financial statements have been properly prepared in accordance with the relevant financial reporting framework and, in particular, with the requirements of the Companies Act, 2014. Emphasis of Matter - Realisation of Intangible Assets, Recoverability of Amounts Owed from Group Companies and Going Concern In forming our opinion on the financial statements, which is not modified we draw your attention to: n The disclosures made in Note 2, Note 9 and Note 12 to the financial statements concerning the realisation of exploration and evaluation assets included as intangible assets of €17,561,838 in the Consolidated Statement of Financial Position, and €17,280,638 in the Company Statement of Financial Position and amounts owed from group companies of €281,200 in the Company Statement of Financial Position at the financial year end 31 May 2015. The realisation of intangible assets by the group and company and the amounts owed by group companies to the company, is dependent on the further successful development and ultimate production of the mineral reserves and the availability of sufficient finance to bring the reserves to economic maturity and profitability. The financial statements do not include any adjustments in relation to these uncertainties and the ultimate outcome cannot at present be determined. n The disclosures in Note 2 and Note 13 to the financial statements which indicate that the group and the company incurred a loss of €315,314 for the financial year ended 31 May 2015 and, at that date, had net current liabilities of €2,067,149 and €1,785,951 respectively. The directors have confirmed that they will not seek repayment of amounts owed to them by the group and the company of €1,564,868 within 12 months of the date of approval of the financial statements unless, the group has sufficient funds to repay. In addition, Karelian Diamond Resources Plc has Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 12 Independent Auditors’ Report continued confirmed that it does not intend to seek repayment of amounts owed to it at 31 May 2015 by the group and the company of €370,720 within 12 months of the date of approval of the financial statements, unless the group has sufficient funds to repay . In addition, the group’s principal shareholder, has advanced funds amounting to €170,000 to the group and the company since the financial year end. The directors have reviewed the proposed work programme for exploration and evaluation assets and on the basis of the equity raised during the financial year, the funds received from the principal shareholder after the financial year end, the results obtained from the exploration programme and the prospects for raising additional funds as required, they consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include any adjustments to the carrying amount, or classification of assets and liabilities that would be necessary if the group was unable to continue as a going concern. Matters on which we are required to report by the Companies Act, 2014 n We have obtained all the information and explanations which we consider necessary for the purposes of our audit. n In our opinion the accounting records of the company were sufficient to permit the financial statements to be readily and properly audited. n The parent company statement of financial position is in agreement with the accounting records. n In our opinion the information given in the directors’ report is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the provisions in the Companies Act, 2014 which require us to report to you if, in our opinion, the disclosures of directors’ remuneration and transactions specified by law are not made. Gerard Casey For and on behalf of Deloitte Chartered Accountants and Statutory Audit Firm, Limerick Date: 20 November 2015 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc Consolidated Statement of Financial Position As at 31 May 2015 13 Note 2015 € 2014 € ASSETS Non-current Assets Intangible assets Property, plant and equipment Current Assets Trade and other receivables Cash and cash equivalents Total Assets EQUITY AND LIABILITIES Capital and Reserves Called up share capital presented as equity Called up deferred share capital Share premium Capital conversion reserve fund Share based payments reserve Retained losses Total Equity Non-current Liabilities Convertible Loan Financial Liabilities Total non-current liabilities Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Total Equity and Liabilities 9 11 12 15 15 15 15 14 14 13 17,561,838 16,033,308 17,983 7,854 17,579,821 16,041,162 63,586 23,480 87,066 59,360 78,372 137,732 17,666,887 16,178,894 4,373,208 6,135,597 8,855,525 30,617 1,120,009 (5,193,306) 3,520,000 6,135,597 8,447,949 30,617 1,034,760 (4,877,992) 15,321,650 14,290,931 – 191,022 191,022 2,154,215 2,154,215 2,345,237 324,952 191,022 515,974 1,371,989 1,371,989 1,887,963 17,666,887 16,178,894 The financial statements were approved by the Board of Directors on 20 November 2015 and authorised for issue on 20 November 2015. They were signed on its behalf by: Richard Conroy Director Maureen Jones Director Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 14 Company Statement of Financial Position As at 31 May 2015 Note 2015 € 2014 € ASSETS Non-current Assets Intangible assets Investment in subsidiary Property, plant and equipment Current Assets Trade and other receivables Cash and cash equivalents Total Assets EQUITY AND LIABILITIES Capital and Reserves Called up share capital presented as equity Called up deferred share capital Share premium Capital conversion reserve fund Share based payments reserve Retained losses Total Equity Non-current Liabilities Convertible Loan Financial Liabilities Total non-current liabilities Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Total Equity and Liabilities 9 10 11 12 15 15 15 15 14 14 13 17,280,638 16,033,308 2 17,983 2 7,854 17,298,623 16,041,164 344,784 23,480 368,264 59,358 78,372 137,730 17,666,887 16,178,894 4,373,208 6,135,597 8,855,525 30,617 1,120,009 (5,193,306) 3,520,000 6,135,597 8,447,949 30,617 1,034,760 (4,877,992) 15,321,650 14,290,931 – 191,022 191,022 2,154,215 2,154,215 2,345,237 324,952 191,022 515,974 1,371,989 1,371,989 1,887,963 17,666,887 16,178,894 The financial statements were approved by the Board of Directors on 20 November 2015 and authorised for issue on 20 November 2015. They were signed on its behalf by: Richard Conroy Director Maureen Jones Director Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc Consolidated Income Statement For the financial year ended 31 May 2015 15 OPERATING EXPENSES Finance income – bank interest receivable Finance costs – interest on shareholder loan LOSS BEFORE TAXATION Income tax expense LOSS FOR THE FINANCIAL YEAR Basic and diluted loss per share Note 4 14 5 7 8 2015 € 2014 € (315,314) (374,323) – – – (5,982) (315,314) (380,305) – – (315,314) (380,305) (€0.0008) (€0.0012) Consolidated Statement of Comprehensive Income For the financial year ended 31 May 2015 LOSS FOR THE FINANCIAL YEAR 2015 € 2014 € (315,314) (380,305) Total income and expense recognised in other comprehensive income – – TOTAL COMPREHENSIVE EXPENSE FOR THE FINANCIAL YEAR (315,314) (380,305) Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 16 Consolidated Statement of Changes in Equity For the financial year ended 31 May 2015 Share capital € Share Premium € Capital Conversion reserve fund € Share-based Payment Reserve € Retained Earnings/ (Deficit) € Total Equity € 8,737,547 7,917,717 30,617 969,735 (4,581,687) 13,073,929 918,050 – – – – – 530,232 – – – – – – – – – – 149,025 – – – 918,050 530,232 149,025 – (380,305) (380,305) (84,000) 84,000 – At 1 June 2013 Share issue Share premium Share-based payments Loss for the financial year Transfer from share-based payment reserve to retained earnings/(deficit) At 31 May 2014 9,655,597 8,447,949 30,617 1,034,760 (4,877,992) 14,290,931 At 1 June 2014 Share issue Share premium Share-based payments Loss for the financial year Transfer from share-based payment reserve to retained earnings/(deficit) 9,655,597 8,447,949 30,617 1,034,760 (4,877,992) 14,290,931 853,208 - - – – - 407,576 - – – - - - – – - - 85,249 – – - - - 853,208 407,576 85,249 (315,314) (315,314) – – At 31 May 2015 10,508,805 8,855,525 30,617 1,120,009 (5,193,306) 15,321,650 Share Capital The share capital comprises of the nominal value share capital issued for cash and non-cash consideration. On 26 February 2014, the issued share capital at that date, €9,203,395, was restructured into ordinary share capital of €3,067,798 and deferred share capital of €6,135,597. Share Premium The share premium reserve comprises of the excess consideration received in respect of share capital over the nominal value of share issued. Capital Conversion Reserve Fund The ordinary shares of the parent company were renominalised from €0.03174435 each to €0.03 each in 2001 and the amount by which the issued share capital of the parent company was reduced and transferred to capital conversion reserve fund. Share Based Payment Reserve The share based payment reserve represents the amount expensed to the income statement and the amount capitalised as part of intangible assets of share-based payments granted which are not yet exercised and issued as shares. Retained Earnings/(Deficit) This reserve represents the accumulated losses absorbed by the group to the Statement of Financial Position date. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 17 Company Statement of Changes in Equity For the financial year ended 31 May 2015 Share capital € Share Premium € Capital Conversion reserve fund € Share-based Payment Reserve € Retained Earnings/ (Deficit) € Total Equity € 8,737,547 7,917,717 30,617 969,735 (4,581,687) 13,073,929 918,050 – – – - – 530,232 – – - – – – – - – – 149,025 – – – 918,050 530,232 149,025 – (380,305) (380,305) (84,000) 84,000 - At 1 June 2013 Share issue Share premium Share-based payments Loss for the financial year Transfer from share-based payment reserve to retained earnings/(deficit) At 31 May 2014 9,655,597 8,447,949 30,617 1,034,760 (4,877,992) 14,290,931 At 1 June 2014 Share issue Share premium Share-based payments Loss for the financial year Transfer from share-based payment reserve to retained earnings/(deficit) 9,655,597 8,447,949 30,617 1,034,760 (4,877,992) 14,290,931 853,208 - - – – - 407,576 - – – - - - – – - - 85,249 – – - - - 853,208 407,576 85,249 (315,314) (315,314) – – At 31 May 2015 10,508,805 8,855,525 30,617 1,120,009 (5,193,306) 15,321,650 Share Capital The share capital comprises of the nominal value share capital issued for cash and non-cash consideration. On 26 February 2014, the issued share capital at that date, €9,203,395, was restructured into ordinary share capital of €3,067,798 and deferred share capital of €6,135,597. Share Premium The share premium reserve comprises of the excess consideration received in respect of share capital over the nominal value of share issued. Capital Conversion Reserve Fund The ordinary shares of the parent company were renominalised from €0.03174435 each to €0.03 each in 2001 and the amount by which the issued share capital of the parent company was reduced and transferred to capital conversion reserve fund. Share Based Payment Reserve The share based payment reserve represents the amount expensed to the income statement and the amount capitalised as part of intangible assets of share-based payments granted which are not yet exercised and issued as shares. Retained Earnings/(Deficit) This reserve represents the accumulated losses absorbed by the parent company to the Statement of Financial Position date. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 18 Consolidated Cash Flow Statement For the financial year ended 31 May 2015 Cash flows from operating activities Cash generated by operations Net cash generated by operating activities Cash flows from investing activities Investment in exploration and evaluation Payments to acquire property, plant and equipment Net cash used in investing activities Cash flows from financing activities Issue of share capital Interest paid on shareholder loan Advances from shareholders Amounts repaid to shareholders Advances from Related Parties Net cash generated from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year Notes 16 2015 € 2014 € 147,396 147,396 152,953 152,953 (1,459,440) (1,064,003) (15,673) (4,740) (1,475,113) (1,068,743) 935,832 – – – 336,993 1,272,825 (54,892) 78,372 23,480 812,621 (14,450) 205,000 (114,600) 33,727 922,298 6,508 71,864 78,372 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc Company Cash Flow Statement For the financial year ended 31 May 2015 19 Cash flows from operating activities Cash generated by operations Net cash generated by operating activities Cash flows from investing activities Investment in exploration and evaluation Payments to acquire property, plant and equipment Net cash used in investing activities Cash flows from financing activities Issue of share capital Interest paid on shareholder loan Advances from shareholders Amounts repaid to shareholders Advance made to group company Advances from Related Parties Net cash generated from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year Notes 16 2015 € 2014 € 147,396 147,396 152,953 152,953 (1,178,240) (1,064,003) (15,673) (4,740) (1,193,913) (1,068,743) 935,832 – – – (281,200) 336,993 991,625 (54,892) 78,372 23,480 812,621 (14,450) 205,000 (114,600) – 33,727 922,298 6,508 71,864 78,372 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 20 Notes to the Consolidated Financial Statements For the financial year ended 31 May 2015 1. ACCOUNTING POLICIES The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and interpretations adopted by the International Accounting Standards Board. These financial statements have also been prepared in accordance with the Companies Acts, 2014. The financial statements are prepared under the historical cost convention. Adoption of New and Revised Standards Standards and Interpretations not affecting the reported results nor the financial position In the current financial year, the following new and revised Standards have been adopted. Their adoption has not had any material impact on the amounts reported in these financial statements but they may affect the accounting for future transactions and arrangements. The adoption of these Standards has not led to any changes in the group’s accounting policies. Amendments to IAS 39 (June 2013) Novation of Derivatives and Continuation of Hedge Accounting (effective for accounting periods beginning on or after 1 January 2014). Amendments to IAS 36 (May 2013) Recoverable Amount Disclosures for Non-Financial Assets (effective for accounting periods beginning on or after 1 January 2014). Amendments to IFRS 10, IFRS 12 and IAS 27 (October 2012) Investment Entities (effective for accounting periods beginning on or after 1 January 2014). Amendments to IAS 32 (December 2011) Offsetting Financial Assets and Financial Liabilities (effective for accounting periods beginning on or after 1 January 2014). IFRS 12 Disclosure of Interests in Other Entities (effective for accounting periods beginning on or after 1 January 2014). IFRS 11 Joint Arrangements (effective for accounting periods beginning on or after 1 January 2014). IFRS 10 Consolidated Financial Statements (effective for accounting periods beginning on or after 1 January 2014). IAS 28 (revised May 2011) Investments in Associates and Joint Ventures (effective for accounting periods beginning on or after 1 January 2014). IAS 27 (revised May 2011) Separate Financial Statements (effective for accounting periods beginning on or after 1 January 2014). Standards and Interpretations in Issue Not Yet Effective At the date of authorisation of these financial statements, other than the Standards and Interpretations adopted by the group in advance of their effective dates, the following Standards were in issue but not yet effective and in some cases had not been adopted by the European Union: Amendments to IFRS 10, IFRS 12 and IAS 28 (December 2015) Investment Entities: Applying the consolidation exception (effective date to be confirmed) Amendments to IAS 27 (August 2014) Equity Method in Separate Financial Statements (effective date to be confirmed) IFRS 9 Financial Instruments (effective date to be confirmed) Amendments to IAS 16 and IAS 41 (June 2014) Agriculture: Bearer Plants (effective date to be confirmed) IFRS 15 Revenue from Contracts with Customers (effective date to be confirmed) Amendments to IFRS 10 and IAS 28 (September 2014) Sale or contribution of assets between an investor and its Associate or Joint Venture (effective date to be confirmed) Amendments to IAS1 (December 2015) Disclosure Initiative (effective date to be confirmed) Amendments to IAS 16 and IAS 38 (May 2014) Clarification of Acceptable Methods of Depreciation and Amortisation (effective date to be confirmed) Amendments to IFRS 11 (May 2014) Accounting for Acquisitions of Interests in Joint Operations (effective date to be confirmed) IFRS 14 Regulatory Deferral Accounts (effective date to be confirmed) Amendments to IAS 19 (November 2013) Defined Benefit Plans: Employee Contributions (1 February 2015) IFRIC 21 Levies (effective for accounting periods beginning on or after 17 June 2014) Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 21 1. ACCOUNTING POLICIES continued Annual Improvements to IFRSs: 2012-2014 Cycle (September 2014): Annual Improvements to IFRSs: 2012-2014 Cycle (effective date to be confirmed) Annual Improvements to IFRSs: 2011-2013 Cycle (December 2013): Annual Improvements to IFRSs: 2011-2013 Cycle (1 January 2015) Annual Improvements to IFRSs: 2010-2012 Cycle (December 2013): Annual Improvements to IFRSs: 2010-2012 Cycle (1 February 2015) A. Intangible Assets The company accounts for mineral expenditure in accordance with IFRS 6 – Exploration For and Evaluation of Mineral Resources. (i) Capitalisation Certain costs (other than payments to acquire the legal rights to explore) incurred prior to acquiring the rights to explore are charged directly to the income statement. Exploration, appraisal and development expenditure incurred on exploring, and testing exploration prospects are accumulated and capitalised as intangible exploration and evaluation (E&E) assets. Capitalised costs include geological and geophysical costs, and other direct costs of exploration (drilling, trenching, sampling and technical feasibility and commercial viability activities). In addition, capitalised costs includes an allocation from operating expenses, including share based payments, all such costs are directly related to exploration and evaluation activities. E&E costs are not amortised prior to the conclusion of appraisal activities. At completion of appraisal activities if technical feasibility is demonstrated and commercial reserves are discovered, then the carrying amount of the relevant E&E asset will be reclassified as a development and production asset, once the carrying value of the asset has been assessed for impairment. If following completion of appraisal activities in an area, it is not possible to determine technical feasibility and commercial viability, or if the right to explore expires, then the costs of such unsuccessful exploration and evaluation is written off to the income statement in the period in which the event occurred. (ii) Impairment If facts and circumstances indicate that the carrying value of an E&E asset may exceed its recoverable amount, an impairment review is performed. The following are considered to be the key indicators of impairment. n The right to explore in an area has expired, or will expire in the near future, without renewal. n No further exploration or evaluation is planned or budgeted for. n A decision has been made to discontinue exploration and evaluation in an area, because of the absence of commercial reserves. n Sufficient data exists to indicate that the book value will not be fully recovered from future development and production. For E&E assets, where the above indicators exist, an impairment test is carried out. The E&E assets are categorised into Cash Generating Units (“CGU”). The carrying value of the CGU is compared to its recoverable amount and the resulting impairment loss is written off to the income statement. The recoverable amount of the CGU is assessed as the higher of its fair value, less costs to sell, and its value in use. B. Transaction Costs Transactions costs arising on the issue of equity securities are accounted for as a deduction from equity, against the share premium account. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 22 Notes to the Financial Statements continued 1. ACCOUNTING POLICIES continued C. Property, Plant and Equipment Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is provided on a straight line basis to write off the cost less estimated residual value of the assets over their estimated useful lives as follows: Motor vehicles Plant and office equipment 5 years 10 years D. Taxation The tax expense represents the sum of the current and deferred tax charge. The tax currently payable is based on taxable profits for the financial year. Taxable profit differs from net profit or loss as reported in the income statement because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit and is accounted for using the balance sheet liabilities method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also taken directly to equity. E. Share Based Payments For equity-settled share based payment transactions (i.e. the granting of share options and share warrants), the parent company measures the services and the corresponding increase in equity at fair value at the measurement date (which is the grant date) using a recognised valuation methodology for the pricing of financial instruments (Binomial Lattice Model). Given that the share options, and warrants granted do not vest until the completion of a specified period of service the fair value is determined on the basis that the services to be rendered by employees as consideration for the granting of share options and warrants will be received over the vesting period, which is assessed as the grant date. 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, based on the parent company’s estimate of equity instruments that will eventually vest. F. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. G. Trade and other receivables and payables Trade and other receivables and payables are measured at initial recognition at fair value, and subsequently measured at amortised cost. H. Cash and cash equivalents Cash and cash equivalents consist of cash at bank held by the group and short term bank deposits with a maturity of three months or less. Cash and cash equivalents are held for the purpose of meeting short term cash commitments. I. Pension costs The group provides for certain employees through defined contribution pension schemes. The amounts charged to the income statement and statement of financial position is the contribution payable in that financial year. Any difference between amounts charged and contributions paid to the pension scheme is included in receivables or payables in the statement of financial position. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 23 1. ACCOUNTING POLICIES continued J. Foreign Currencies Transactions denominated in foreign currencies relating to revenues, costs and non-monetary assets are translated into Euro at the rates of exchange ruling on the dates on which the transactions occurred. Monetary assets and liabilities denominated in foreign currencies are translated into Euro at the rate of exchange ruling at the statement of financial position date. The resulting profits or losses are dealt with in the income statement. K. Shareholder Loan The shareholder loan is initially measured at fair value, net of transaction costs and subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount of initial recognition. L. Critical accounting judgements and key sources of estimation uncertainty Critical judgements in applying the group’s accounting policies In the process of applying the group’s accounting policies above, management has identified the judgemental areas that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations), which are dealt with below: Exploration and evaluation assets The assessment of whether general administration costs and salary costs are capitalised or expensed involves judgement. Management consider the nature of each cost incurred and whether it is deemed appropriate to capitalise it within exploration and evaluation assets. Given that the activity of management and the resultant operating costs are primarily focused on the group’s gold prospects, the directors consider it appropriate to capitalise a portion of such costs. Impairment of intangible assets As outlined in the Intangible Assets accounting policy, the exploration and evaluation assets need to be allocated into Cash Generating Units (“CGU”). The determination of what constitutes a cash generating unit requires judgement. Once this is decided, the carrying value of each cash generating unit is compared to its recoverable amount. The recoverable amount of the CGU is assessed as the higher of its fair value less costs to sell and its value in use. The determination of value in use requires the following judgements: n Estimation of future cash flows expected to be derived from the asset. n Expectation about possible variations in the amount or timing of the future cash flows. n The determination of an appropriate discount rate. Going concern The preparation of financial statements requires an assessment on the validity of the going concern assumption. The validity of the going concern assumption is dependent on the successful further development and ultimate production of the mineral reserves and the availability of sufficient finance to bring the reserves to economic maturity and profitability. The realisation of intangible assets depends on the successful discovery and development of economic reserves. The directors have reviewed the proposed programme for exploration and evaluation assets and on the basis the equity raised during the financial year, the funds received since the financial year end, the very encouraging results from the exploration programme and the prospects for raising additional funds as required, consider it appropriate to prepare the financial statements on the going concern basis. Should the going concern basis not be appropriate, adjustments would have to be made to reduce the value of the company’s assets, in particular the intangible assets, to their realisable values. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 24 Notes to the Financial Statements continued 1. ACCOUNTING POLICIES continued Key sources of estimation uncertainty The preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the financial year. The nature of estimation means that actual outcomes could differ from those estimates. The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Share-based payments The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The company has made estimates as to the volatility of its own shares, the probable life of options granted and the time of exercise of those options. The model used by the company is the Binomial Lattice Model. In addition, the directors consider that 80% of their activity is primarily focused on the company’s gold prospects and therefore, the directors consider it appropriate to capitalise 80% of such costs to exploration and evaluation assets. Deferred tax No deferred tax asset has been recognised in respect of tax losses as it cannot be considered probable that future taxable profit will be available against which the related temporary differences can be utilised. 2. GOING CONCERN Exploration and evaluation costs capitalised as intangible assets in the Consolidated Statement of Financial Position amounted to €17,561,838 (2014: €16,033,308) and €17,280,638 (2014: €16,033,308) in the Company Statement of Financial Position as at 31 May 2015 (Note 9). Amounts owed from group companies amounted to €281,200 (2014: €Nil) in the Company Statement of Financial Position. The directors recognise that the future realisation of intangible assets is dependent on the further successful development and ultimate production of the mineral reserves and the availability of sufficient finance to bring the reserves to economic maturity and profitability. The group and the company made a loss of €315,314 (2014: €380,305) for the financial year ended 31 May 2015, and, at that date, had net current liabilities of €2,067,149 and €1,785,951 respectively (2014: €1,234,257 and €1,234,259 respectively). The directors have confirmed that they will not seek repayment of amounts owed to them by the group of €1,564,868 within 12 months of the date of approval of the financial statements, unless the group has sufficient funds to repay. In addition, Karelian Diamond Resources Plc has confirmed that it does not intend to seek repayment of amounts owed to it at 31 May 2015 by the group and company of €370,720 within 12 months of the date of approval of the financial statements, unless the group has sufficient funds to repay. In addition, the group’s principal shareholder, has advanced funds amounting to €170,000 to the group and the company since the financial year end. The directors have reviewed the proposed work programme for exploration and evaluation assets and on the basis of the equity raised during the financial year, the funds received from the principal shareholder after the financial year end, the results obtained from the exploration programme and the prospects for raising additional funds as required, they consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include any adjustments to the carrying amount, or classification of assets and liabilities that would be necessary if the company was unable to continue as a going concern. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 25 3. SEGMENTAL REPORTING Operating segments have been identified on the basis of internal reports about components of the group that are regularly reviewed by the Chief Operating Decision Maker, being the Board of Directors, in order to allocate resources to segments and to assess their performance. The group has one class of business, gold exploration and operates in two geographical markets, Ireland and Finland. Costs that are directly attributable to Ireland and Finland have been capitalised to exploration and evaluation assets (Note 9). All remaining operating expenses have been expensed through the Income Statement. 4. OPERATING EXPENSES (a) Analysis of operating expenses Operating expenses Transfer to intangible assets (Note 9) Operating expenses are analysed as follows: Wages and salaries Share based payments Depreciation Auditor remuneration Other operating expenses 2015 € 899,376 (584,062) 315,314 2015 € 522,797 85,249 5,544 17,500 268,286 899,376 2014 € 1,039,432 (665,109) 374,323 2014 € 558,180 149,026 4,024 15,000 313,202 1,039,432 Of the above costs a total of €584,062 (2014: €665,109) is capitalised to intangible assets based on a review of the nature and quantum of the underlying cost and the exercise of appropriate measurement across each cost category. (b) Wages and salaries cost as disclosed above is analysed as follows: Wages and salaries Social welfare costs Pension costs The average number of employees during the financial year was 8 (2014: 9). 2015 € 482,420 5,377 35,000 522,797 2014 € 515,906 7,274 35,000 558,180 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 26 Notes to the Financial Statements continued 4. OPERATING EXPENSES continued (c) Directors’ remuneration An analysis of remuneration for each director of the parent company in the current financial year (prior to amounts transferred to intangible assets) is as follows: Professor R.T.W.L. Conroy M.T.A. Jones J.P. Jones H.H. Rennison L.J. Maguire S.P. Fitzpatrick M.E. Power C.D. Wathen Dr. S.C. Conroy Fees € 22,220 9,523 9,523 9,523 9,523 9,523 9,523 9,523 9,523 Salary € 179,720 114,720 71,527 – – – – – – Share based payment € Pension contributions € 17,835 11,694 6,865 1,291 1,291 239 799 338 – – 22,000 13,000 – – – – – – Total € 219,775 157,937 100,915 10,814 10,814 9,762 10,322 9,861 9,523 98,404 365,967 40,352 35,000 539,723 An analysis of remuneration for each director of the parent company in the prior financial year (prior to amounts transferred to intangible assets) is as follows: Professor R.T.W.L. Conroy M.T.A. Jones J.P. Jones H.H. Rennison L.J. Maguire S.P. Fitzpatrick M.E. Power C.D. Wathen Dr. S.C. Conroy Fees € 22,220 9,523 9,523 9,523 9,523 9,523 9,523 9,523 9,523 Salary € 178,378 113,350 70,250 – – – – – – Share based payment € Pension contributions € 63,597 41,893 24,919 4,079 4,079 661 2,313 933 – – 22,000 13,000 – – – – – – Total € 264,19 186,766 117,692 13,602 13,602 10,184 11,836 10,456 9,523 98,404 361,978 142,474 35,000 637,856 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 27 4. OPERATING EXPENSES continued The total share based payment charge of €85,249 (2014: €149,026) is accounted for as shown below: Share based payment charge expensed to income statement Share based payment charge transferred to intangible assets 2015 € 16,159 69,090 85,249 2014 € 28,494 120,532 149,026 In the opinion of the directors, eighty per cent of the share based payment charge is directly related to exploration and evaluation activities, and has been capitalised within intangible assets. 5. LOSS BEFORE TAXATION The loss before taxation is arrived at after charging the following items, which are stated at amounts prior to the transfer to intangible assets: Depreciation Auditor’s remuneration – Audit of accounts – Other assurance services – Tax advisory services – Other non-audit services 6. DIRECTORS’ REMUNERATION 2015 € 5,544 2014 € 4,024 17,500 15,000 – – – – – – 2015 € 2014 € Aggregate emoluments paid to or receivable by directors in respect of qualifying services 464,371 460,382 Aggregate amount of money or value of other assets including shares, but excluding share options, paid to or receivable by the directors under long term incentive schemes in respect of qualifying services - - Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 28 Notes to the Financial Statements continued 6. DIRECTORS’ REMUNERATION continued 2015 Number of Directors 2015 € 2014 Number of Directors 2014 € Aggregate contributions paid, treated as paid, or payable during the financial year to a retirement benefit scheme in respect of qualifying services of directors: – Defined contribution schemes – Defined benefit schemes 2 – 35,000 – Compensation paid, or payable, or other termination payments, in respect of loss of office to directors of the parent company in the financial year: – Office of director of the company – Other offices Total Amounts paid or payable to past directors of the parent company or its holding undertaking: – For retirement benefits in relation to services as directors – For other retirement benefits Total for retirement benefits Compensation paid or payable for loss of office or other termination benefits: – Office of director – Other offices Total 2 – 2015 € – – – 35,000 – 2014 € – – – 2015 € 2014 € – – – – – – 2015 € 2014 € – – – – – – Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 29 7. INCOME TAX EXPENSE No taxation charge arises in the current or prior financial year due to losses incurred. Factors affecting the tax charge for the financial year: The total tax charge for the financial year is different to the standard rate of Irish corporation tax. This is due to the following: Loss on ordinary activities before tax Loss on ordinary activities multiplied by the standard rate of Irish corporation tax of 12½% (2014: 12½%) Effects of: Losses carried forward for future utilisation Tax charge for the financial year 2015 € 2014 € (315,314) (380,305) (39,414) (47,538) 39,414 – 47,538 – No deferred tax asset has been recognised on accumulated tax losses as it cannot be considered probable that future taxable profit will be available against which the deferred tax asset can be utilised. The deferred tax asset not recognised amounts to €507,632 (2014: €468,218). 8. LOSS PER SHARE The calculation of the basic and diluted loss per share of €0.0008 (2014: €0.0012) is based on the loss for the financial year of €315,314 (2014: €380,305) and the weighted average number of ordinary shares in issue during the financial year of 405,603,539 (2014: 309,922,413). The effect of share options and warrants is anti-dilutive. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 30 Notes to the Financial Statements continued 9. INTANGIBLE ASSETS Exploration and evaluation assets Company: Cost At 1 June Expenditure during the financial year – licence and appraisal costs – other operating expenses (Note 4) – equity settled share based payments (Note 4) – loan interest (Note 14) At 31 May Group: Cost At 1 June Expenditure during the financial year – licence and appraisal costs – other operating expenses (Note 4) – equity settled share based payments (Note 4) – loan interest (Note 14) 2015 € 2014 € 16,033,308 14,824,846 663,268 514,972 69,090 – 519,425 544,577 120,532 23,928 17,280,638 16,033,308 16,033,308 14,824,846 944,468 514,972 69,090 – 519,425 544,577 120,532 23,928 At 31 May 17,561,838 16,033,308 Exploration and evaluation assets relate to expenditure incurred in the development of mineral exploration opportunities. The directors have considered the proposed work programmes for the underlying mineral reserves. They are satisfied that there are no indications of impairment, but nonetheless recognise that the realisation of the intangible assets, is dependent on further successful development and ultimate production of the mineral reserves and the availability of sufficient finance to bring the resources to economic maturity and profitability. Mineral interests are categorised as follows: Company Ireland Cost At 1 June Expenditure during the financial year – licence and appraisal costs – other operating expenses – equity settled share based payments – loan interest At 31 May 2015 € 2014 € 14,165,862 13,069,449 634,706 437,726 62,181 – 508,247 459,347 108,479 20,340 15,300,475 14,165,862 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 9. INTANGIBLE ASSETS continued Company Finland Cost At 1 June Expenditure during the financial year – licence and appraisal costs – other operating expenses – equity settled share based payments – loan interest At 31 May Group Ireland Cost At 1 June Expenditure during the financial year – licence and appraisal costs – other operating expenses – equity settled share based payments – loan interest At 31 May Group Finland Cost At 1 June Expenditure during the financial year – licence and appraisal costs – other operating expenses – equity settled share based payments – loan interest At 31 May 31 2015 € 2014 € 1,867,446 1,755,397 28,562 77,246 6,909 – 11,178 85,230 12,053 3,588 1,980,163 1,867,446 2015 € 2014 € 14,165,862 13,069,449 915,906 437,726 62,181 – 508,247 459,347 108,479 20,340 15,581,675 14,165,862 2015 € 2014 € 1,867,446 1,755,397 28,562 77,246 6,909 – 11,178 85,230 12,053 3,588 1,980,163 1,867,446 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 32 Notes to the Financial Statements continued 10. INVESTMENT IN SUBSIDIARY Company: Shares in subsidiary company (Unlisted shares) at cost: Conroy Gold Limited Trans International Mineral Exploration Limited % Owned 100% 100% 2015 € 2014 € - 2 - 2 The registered office of the above non-trading subsidiaries is 9 Merrion Square North, Dublin 2. In accordance with S304 (2) of the Companies Act, 2014 the parent company is availing of the exemption from presenting its individual income statement. The parent company’s loss for the financial year determined in accordance with IFRS is €315,314 (2014: €380,305). 11. PROPERTY, PLANT AND EQUIPMENT Group and Company Cost At 1 June 2014 Additions At 31 May 2015 Accumulated Depreciation At 1 June 2014 Charge for the financial year At 31 May 2015 At 31 May 2015 In respect of previous financial year: Cost At 1 June 2013 Additions At 31 May 2014 Accumulated Depreciation At 1 June 2013 Charge for the financial year At 31 May 2014 At 31 May 2014 Motor Vehicles € Plant & Office Equipment € 17,754 – 17,754 14,166 3,550 17,716 38 117,807 15,673 133,480 113,541 1,994 115,535 17,945 Motor Vehicles € Plant & Office Equipment € 17,754 – 17,754 10,616 3,550 14,166 3,588 113,067 4,740 117,807 113,067 474 113,541 4,266 Total € 135,561 15,673 151,234 127,707 5,544 133,251 17,983 Total € 130,821 4,740 135,561 123,683 4,024 127,707 7,854 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 12. TRADE AND OTHER RECEIVABLES Company VAT receivable Other debtors Amounts owed from group company 33 2015 € 54,318 9,266 281,200 344,784 2014 € 49,764 9,594 – 59,358 The realisation of amounts owed by group companies is dependent on the further successful development and ultimate production of the mineral reserves and the availability of sufficient finance to bring the reserves to economic maturity and profitability. Group VAT receivable Other debtors 13. TRADE AND OTHER PAYABLES Group and Company Amounts falling due within one year Accrued directors’ remuneration – fees and other emoluments – pension contributions Other accruals Amounts owed to related party 2015 € 54,318 9,268 63,586 2014 € 49,764 9,596 59,360 2015 € 2014 € 1,442,693 122,175 218,627 370,720 975,310 87,175 275,777 33,727 2,154,215 1,371,989 It is the group’s normal practice to agree terms of transactions, including payment terms, with suppliers and provided suppliers perform in accordance with the agreed terms, it is the group’s policy that payment is made according to the agreed terms. The group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. The carrying value of the trade and other payables approximates to their fair value. The directors have confirmed that they will not seek repayment of amounts owed to them by the group and the company of €1,564,868 within 12 months of the date of approval of the financial statements, unless the group has sufficient funds to repay. In addition to this Karelian Diamond Resources Plc has confirmed that it will not seek repayment of amounts owed to it by the group and the company at 31 May 2015, of €370,720 within 12 months of the date of approval of the financial statements, unless the group has sufficient funds to repay. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 34 Notes to the Financial Statements continued 14. NON CURRENT FINANCIAL LIABILITIES Group and Company (a) Shareholder loan Opening balance Advanced during financial year Conversion to share capital Conversion to convertible loan(b) Loan interest paid Loan amount repaid Interest charge for the financial year Closing balance (b) Convertible Loan Conversion from shareholder loan (a) Subscription Conversion At 31 May 2015 R.T.W.L. Conroy 2015 € 191,022 – – – – – – 191,022 2014 € 1,045,775 205,000 – (960,613) (14,450) (114,600) 29,910 191,022 2015 € 2014 € 324,952 – (324,952) – 960,613 17,816 (653,477) 324,952 On 30 September 2013 €960,613 of the shareholder loan was converted to a convertible loan. On that date, Dr. S.C. Conroy subscribed for convertible debt of €17,816. The debt is convertible at the parent company’s discretion into ordinary shares at the higher of 2.65 pence sterling or the prevailing market price at the time of conversion. The debt is unsecured and does not accrue interest. On 3 February 2014 £235,000 of the convertible debt (Prof. R.T.W.L. Conroy £110,000, Miss. M. Jones £110,000, Dr. S.C. Conroy £15,000) was converted at 2.65p into 8,867,925 ordinary shares and on 26 February 2014 a further £315,000 (Prof. R.T.W.L. Conroy £300,000, Miss M. Jones £15,000) was converted into 11,886,792 ordinary shares of €0.01 each. The balance at 31 May 2014 relates to amounts subscribed for by Prof. R.T.W.L. Conroy and was converted into 10,320,755 ordinary shares on 21 November 2014. 15. CALLED UP SHARE CAPITAL AND SHARE PREMIUM - GROUP AND COMPANY Authorised: 1,636,440,312 ordinary shares of €0.01 each 306,779,844 deferred shares of €0.02 each 2015 € 2014 € 16,364,403 16,364,403 6,135,597 6,135,597 22,500,000 22,500,000 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 35 15. CALLED UP SHARE CAPITAL AND SHARE PREMIUM - GROUP AND COMPANYcontinued Following approval at an Extraordinary General Meeting held on 26 February 2014, the parent company reorganised its share capital by subdividing and reclassifying each issued ordinary share of €0.03 as one ordinary share of €0.01 each and one deferred share of €0.02 each. The deferred shares do not entitle the holder to receive a dividend or other distribution, do not entitle the shareholder to receive notice of or vote at any general meeting of the parent company, and effectively do not entitle the shareholder to any proceeds on a return of capital or winding up of the parent company. Issued and Fully Paid – Current Financial Year Number Share capital € Capital conversion reserve fund € Called up deferred share capital € Share premium € Start of financial year 351,999,972 3,520,000 30,617 6,135,597 8,447,949 Share issue (a) Share issue (b) Issue expenses 75,000,000 10,320,755 – 750,000 103,208 – – – – – – – 204,750 242,022 (39,196) End of financial year 437,320,727 4,373,208 30,617 6,135,597 8,855,525 (a) On 7 October 2014 75,000,000 ordinary shares of €0.01 each were issued at 1p sterling realising €0.01273 per share resulting in a premium of €0.00273 per share. (b) On 21 November 2014, £273,500 of convertible debt was converted into 10,320,755 ordinary shares of €0.01 each at 2.65p sterling (€0.03345) per share resulting in a premium of €0.02345 per share. (c) At 31 May 2015 and 31 May 2014 warrants over 49,064,188 shares exercisable at €0.037 per share at any time up to 15 November 2020 were outstanding. These warrants had previously been exercisable at any time up to 30 November 2015. (d) At 31 May 2015 1,500,000 options are outstanding exercisable at prices ranging from €0.048 to €0.0633 and expire between 13 April 2016 and 14 January 2018. (e) At 31 May 2015 and 31 May 2014 warrants over 29,805,123 shares exercisable at €0.0433 per share at any time up to 16 November 2023 were outstanding. These warrants had previously been exercisable at any time up to 30 November 2017. (f) The share price at 31 May 2015 was 0.725p sterling. During the financial year the price ranged from 0.625p to 1.55p sterling. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 36 Notes to the Financial Statements continued 15. CALLED UP SHARE CAPITAL AND SHARE PREMIUM continued Issued and Fully Paid – Prior Financial Year Share capital € Capital conversion reserve fund € Share premium € Number Start of financial year 291,251,542 8,737,547 30,617 7,917,717 Share issue (a) Share issue (b) Share issue (c) Issue expenses 6,660,377 8,867,925 45,220,128 – 199,811 266,038 452,201 – – – – – 10,312 18,662 535,603 (34,345) End of financial year 351,999,972 9,655,597 30,617 8,447,949 (a) On 30 September 2013, 6,660,377 ordinary shares of €0.03 each were issued at 2.65p sterling realising €0.031548 per share resulting in a premium of €0.001548 per share. (b) On 3 February 2014, £225,000 of the convertible debt was converted into 6,660,377 ordinary shares of €0.03 each at 2.65p sterling (€0.0321) per share resulting in a premium of €0.0021 per share. (c) On 26 February 2014, 33,333,336 ordinary shares of €0.01 each were issued at 1.5p sterling realising €0.01818 per share resulting in a premium of €0.000818 per share and a further £315,000 of the convertible debt was converted into 11,886,712 ordinary shares of €0.01 each at 2.65p sterling (€0.03212) per share resulting in a premium of €0.02212 per share. (d) At 31 May 2014 and 31 May 2013 warrants over 49,064,188 shares exercisable at €0.037 per share at any time up to 15 November 2015 were outstanding. (e) At 31 May 2013 options had been issued over 2,960,000 shares. On 30 November 2013 options over 1,460,000 shares exercisable at €0.08 lapsed. At 31 May 2014 the remaining 1,500,000 options are outstanding exercisable at prices ranging from €0.048 to €0.0633 and expire between 13 April 2016 and 14 January 2018. (f) At 31 May 2014 and 31 May 2013 warrants over 29,805,123 shares exercisable at €0.0433 per share at any time up to 16 November 2017 were outstanding. (g) The share price at 31 May 2014 was 1.55p sterling. During the financial year the price ranged from 1.55p to 2.92p sterling. 16. NOTES TO THE CASH FLOW STATEMENT - GROUP AND COMPANY Reconciliation of Operating Loss to Net Cash used in Operations: Operating loss Depreciation Expense recognised in income statement in respect of equity settled share based payments Increase in creditors (Increase)/decrease in debtors Cash generated by operations 2015 € (315,314) 5,544 16,159 445,233 (4,226) 147,396 2014 € (374,323) 4,024 28,494 390,977 103,781 152,953 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 37 17. COMMITMENTS AND CONTINGENCIES Obligations under Mineral Interests The group has received prospecting licences under the Republic of Ireland Mineral Development Acts 1940 to 1995 for areas in Monaghan and Cavan. It has also received licences in Northern Ireland for areas in Armagh in accordance with the Mineral Development Act (Northern Ireland) 1969. The group has certain commitments in respect of these licences at financial year end which comprise total expenditure commitments as follows: Commitments for expenditure: – due within one financial year – due between two and five financial years 2015 € 2014 € 150,000 500,000 650,000 150,000 500,000 650,000 18. RELATED PARTY TRANSACTIONS a) Details as to shareholder loans and share capital transactions with Prof. R.T.W.L. Conroy are outlined in Notes 13 and 14 to the financial statements. b) For the financial year ended 31 May 2015, Conroy Gold and Natural Resources plc incurred costs totalling €301,992 (2014: €205,768) on behalf of Karelian Diamond Resources plc., which has certain common shareholders and directors. These costs were recharged to Karelian Diamond Resources plc. These costs are analysed as follows: Office salaries Rent and rates Travel and subsistence Legal and professional Other operating expenses Exploration costs 2015 € 26,823 21,843 43,587 25,902 69,298 114,539 301,992 2014 € 28,713 13,463 17,805 40,906 42,329 62,552 205,768 At 31 May 2015, Conroy Gold and Natural Resources plc owed €370,720 to Karelian Diamond Resources plc (2014: €33,727). Amounts owed to Karelian Diamond Resources plc are included within Trade and other Payables in the current and previous financial years. At 31 May 2015 Conroy plc owed €5,000 to Conroy Gold and Natural Resources plc. (2014: €5,000). Amounts owed by Conroy plc are included in “Other debtors” within Trade and other Receivables. c) Details of key management compensation which comprises directors remuneration including short term employee benefits €464,371 (2014: €460,382), post employment benefits €35,000 (2014: €35,000), other long term benefits €Nil (2014: €Nil), share based payment €40,352 (2014: €142,474) and termination benefits €Nil (2014: €Nil) are outlined in Note 6 to the financial statements. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 38 Notes to the Financial Statements continued 18. RELATED PARTY TRANSACTIONS continued d) During the financial year, the date of expiry of warrants originally granted to directors on 15 November 2005 and 16 November 2007 which were due to expire on 15 November 2015 and 16 November 2017 were extended to 15 November 2020 and 16 November 2022 respectively. The extension was approved at the company’s Annual General Meeting on 15 December 2014. The number of warrants for which the date of expiry was extended for each director is as follows: R.T.W.L. Conroy M.T.A. Jones J.P. Jones H.H. Rennison S.P. Fitzpatrick L.J. Maguire M.E. Power C.D. Wathen Number of Warrants Granted 15 Nov. 2005 Number of Warrants Granted 16 Nov. 2007 22,814,920 13,839,858 8,058,129 1,450,427 - 1,450,427 301,032 - 12,119,845 8,667,170 5,130,291 1,006,861 359,593 1,006,861 1,006,861 507,641 As a result of the foregoing, an additional charge has been recognised in the financial statements of €15,241, of which €12,193, has been included in the share based payment charge transferred to intangible assets and €3,048 included in the income statement. 19. SHARE BASED PAYMENTS The parent company operates a share option scheme for employees who devote a substantial amount of their time to the business of the parent company. Options granted generally have a vesting period of ten years. An amount of €Nil (2014: €84,000) was transferred from share- based payment reserve to retained earnings/(deficit) as the options to which the initial charge relevant had lapsed. Details of the share options outstanding during the financial year are as follows: 2015 2014 No. of Share Options Weighted Average Exercise Price € No. of Share Options Weighted Average Exercise Price € At 1 June 1,600,000 0.666 2,960,000 0.774 Granted during financial year Exercised during financial year Lapsed during financial year – – – – – – – – (1,360,000) – – – At 31 May 1,600,000 0.666 1,600,000 0.666 Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 39 19. SHARE BASED PAYMENTS continued Warrants granted generally have a vesting period of ten years. Details of the warrants outstanding during the financial year are as follows: 2015 2014 No. of Share Warrants Weighted Average Exercise Price € No. of Share Warrants Weighted Average Exercise Price € At 1 June 78,869,311 0.03944 78,869,311 0.03944 Granted during financial year Exercised during financial year Lapsed during financial year – – – – – – – – – – – – At 31 May 78,869,311 0.03944 78,869,311 0.03944 The company estimated the fair value of employee stock options and warrants awards using the Binomial Lattice Model. The determination of the fair value of share based payment awards on the date of grant using the Binomial Lattice Model is affected by Conroy Gold and Natural Resources plc stock price as well as assumptions regarding a number of subjective variables. During the financial year the date of expiry of warrants originally granted to the directors on 15 November 2005 and 16 November 2007 which were due to expire on 15 November 2015 and 16 November 2017 were extended to 15 November 2020 and 16 November 2022 respectively. The extensions were approved at the company’s Annual General Meeting on 15 December 2014 These variables include the expected term of the awards, the expected stock price volatility over the term of the awards, the risk free interest rate associated with the expected term of the awards and the expected dividends. The parent company’s Binomial Lattice Model included the following weighted average assumptions for the parent company’s employee stock option and warrants. Dividend yield Expected volatility Risk free interest rate Expected life (in years) 2015 Stock Options 2015 Stock Warrants 2014 Stock Options 2014 Stock Warrants 0% 90% 4% 10 0% 90% 3.2% 10 0% 90% 4% 10 0% 90% 3.2% 10 This calculation results in a share based payments reserve movement of €85,249 (of which €15,241 relates to the extension of the date of expiry of warrants) (2014: €149,026). 20. SUBSTANTIAL SHAREHOLDINGS So far as the Board is aware, no person or company, other than the Directors’ interests disclosed and the shareholders listed below, held 3% or more of the issued ordinary share capital of the parent company at 31 May 2015. Name Professor Conroy Mr. Patrick O’Sullivan Number of ordinary shares 96,496,188* 50,714,546 % 22.07 11.60 * Of the 96,496,188 Ordinary Shares beneficially held by Professor Conroy, 19,294,286 are held by Conroy Plc, a company in which Professor Conroy has a controlling interest. Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 40 Notes to the Financial Statements continued 21. SUBSEQUENT EVENTS There are no important events since financial year end which need to be disclosed within these financial statements. 22. FINANCIAL INSTRUMENTS The company’s and group’s financial assets and liabilities stated at carrying amount and fair value are as follows at 31 May 2015: Company: Trade and other receivables Cash and cash equivalents Carrying Amount 2015 € Fair Value 2015 € Carrying Amount/ Fair Value 2014 € 344,784 23,480 344,784 23,480 59,358 78,372 Trade and other payables and financial liabilities 2,345,237 2,345,237 1,887,963 Group: Trade and other receivables Cash and cash equivalents Carrying Amount 2015 € Fair Value 2015 € Carrying Amount/ Fair Value 2014 € 63,586 23,480 63,586 23,480 59,360 78,372 Trade and other payables and financial liabilities 2,345,237 2,345,237 1,887,963 The following sets out the methods and assumptions used in estimating the fair value of financial assets and liabilities. Trade and Other Receivables/Payables and Financial Liabilities As both trade and other receivables and trade and other payables have a remaining life of less than one financial year, the carrying value is deemed to reflect fair value. The group has received confirmation that payment of the shareholder loan will not be demanded for a period of 12 months from the date of approval of the financial statements. The directors consider that its carrying value reflects its fair value. Cash and Cash Equivalents As cash and cash equivalents have a remaining maturity of less than three months, the nominal amount is deemed to reflect the fair value. Risk Management The group is exposed to a variety of financial risks as a result of its activities. These risks include credit risk, liquidity risk and market risk (including interest rate risk). Credit Risk Credit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The group has a policy of dealing only with credit worthy counterparties. The group’s exposure to credit risk relates to the carrying value of cash and cash equivalents and trade and other receivables which at 31 May 2015 amounted to €87,066 (2014: €137,732). The parent company’s exposure to credit risk relates to the carrying value of cash and cash equivalents and trade and other receivables which at 31 May 2015 amounted to €368,264 (2014: €137,730). Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc Annual Report and Consolidated Financial Statements 2015 Conroy Gold and Natural Resources plc 41 22. FINANCIAL INSTRUMENTS continued At 31 May 2015 and 31 May 2014 all trade and other receivables were not past due. Liquidity Risk Liquidity risk is the risk that the group will not be able to meet its obligations as they fall due. The group’s policy is to monitor cash flow and consider whether available cash resources are sufficient to meet its ongoing exploration programme. The nature of the group’s activities can result in differences between actual and expected cash flows. This risk was managed by the directors during the financial year by way of raising sufficient finance so that the group has sufficient resources to carry out its forthcoming work programme. Market Risk – Interest Rate Risk The group’s exposure to changes in interest rates relates primarily to the shareholder loan balance. If the interest rate rose by 1%, the group’s loss would increase by €1,910 (2014: €5,546). A decrease in the interest rate would result in a corresponding decrease in the same amount. 23. APPROVAL OF FINANCIAL STATEMENTS These financial statements were approved by the board on 20 November 2015.. Annual Report and Consolidated Financial Statements 2015