Conroy Gold and Natural Resources plc
Annual Report 2020

Plain-text annual report

Annual Report and Consolidated Financial Statements 2020 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 1 Contents Chairman’s Statement Company Information Board of Directors Directors’ Report 2 5 6 8 Independent Auditors’ Report 16 Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash Flows Notes to and forming part of the consolidated and company financial statements 22 23 24 25 26 27 28 29 30 2 Chairman’s Statement Professor Richard Conroy Chairman Dear Shareholder, I have great pleasure in presenting the Company’s Annual Report and Consolidated Financial Statements for the year ended 31 May 2020. praised the Irish mineral sector and the contribution it makes to the economy, pointing out that “Relying on distant resources (for minerals) is becoming untenable”. This attitude is echoed in Finland where the Company has promising exploration acreage for both gold and copper. Heads of Terms with Anglo Asian Mining plc Post year end the Company entered into a non-binding Heads of Terms for an agreement regarding a proposed joint venture between the Company and AAZ. The joint venture’s proposed goal is the development of a gold mine and further exploration of the series of gold targets along the trend that the Company has discovered in the Longford-Down Massif. Under the HoT, it is proposed that AAZ will acquire an initial 17.5% working interest in a joint venture for committing to spend a minimum of €2 million on a Primary Expenditure Programme. AAZ will have an option to increase its working interest to 25% by spending an additional €2 million to complete the Primary Expenditure Programme, with a combined minimum of €4 million. Under the HoT, AAZ has the option to acquire a total 55% working interest in exchange for committing to meet the necessary expenditures of the Secondary Expenditure Programme including drilling and other technical requirements, environmental studies, final feasibility studies, planning application and permission and mining permitting, land acquisition in order to advance the Clontibret Gold Deposit to mine construction ready status, and a further €3 million on exploration across the Company’s other licences. Excellent progress continued on the 65 km (40 mile) new district scale gold trend which the Company has discovered along the Orlock Bridge Fault Zone in north eastern Ireland. These excellent technical results were mirrored by the industry interest in the project shown at the Prospector’s and Developers Association Conference (“PDAC”) in Toronto, in March and, post year end, by the signing of Heads of Terms (“HoT”) for a proposed Joint Venture with Anglo Asian Mining plc (“AAZ”). Business Development The Company’s objective of making a major economic mineral discovery is, with the discovery of a new district scale mineral resource, its recognition in the industry and the signing of HoT for the development of the first gold mine, well on its way to achievement. The first gold mine planned, at Clontibret in Co Monaghan, is likely to be followed by a series of other gold mines along the trend as a number of other gold targets, some of them with a gold-in-soil footprint greater than Clontibret’s, have already been discovered along the trend. The Company’s licences cover an area of over 800km2 and give exclusive rights to Conroy to apply for a mining lease or licence. Ireland is a mining friendly country with an established mining tradition and a favourable business climate. There is security of tenure combined with a fiscal framework and excellent infrastructure and technical services. The then Irish Minister for Mines, Mr Seán Canney T.D., attended both the 2019 and the 2020 PDAC Conference and visited the Company’s booth accompanied by members of his Department. Minister Canney confirmed the positive attitude of successive Irish Governments towards mining and Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc3 Field Team in Longford-Down Massif. Clontibret Mineralised Core 7.0m @ 9.3 g/t Au incl. 2.5m @ 25 g/t Au. 325,000 warrants to acquire ordinary shares in Conroy Gold at 16p were issued to AAZ with additional warrants proposed to be issued upon completion of the final Joint Venture Agreement. The initial 325,000 warrants were exercised by AAZ, as announced by the Company in November 2020. The proposed joint venture remains subject to, inter alia, the completion of due diligence and the entering into of definitive documentation including the final joint venture agreement. In addition, the proposed joint venture, should it proceed on the basis anticipated under the HoT, will be subject to the Company seeking shareholder approval. Conroy and AAZ continue to work towards the goal of entering into a definitive, final joint venture agreement however the COVID-19 pandemic and related restrictions has resulted in progress being slower than expected. The Company will provide further update announcements at the appropriate time. Exploration Results Exploration on the Company’s licences in the Longford-Down Massif continued to yield excellent results during the year. The results included gold antimony results from Clontibret, new gold mineralisation at Glenish and gold-in- bedrock at Slieve Glah. Results from a new geophysical survey are likely to be of particular value in relation to controls on high grade gold grades at Clontibret. COVID-19 The onset of the COVID-19 pandemic impacted the Company’s activities in the last quarter of the financial year. In accordance with the Irish Governments COVID-19 related public health measures and public health advice staff worked remotely. Since the outbreak of the COVID-19 pandemic, the Company has taken necessary measures in accordance with Government guidelines to protect the health, safety and wellbeing of its employees, contractors and partners in Ireland and Finland. COVID-19 continues to limit field and laboratory work given the restrictions on operations and movement and other work also continues in relation to the Company’s exploration and development programme. Directors and executives took a 50% reduction in fees and salaries while technical and field staff took a 25% reduction in salaries. Financials The loss after taxation for the financial year ended 31 May 2020 was €677,380 (2019: €557,569) and the net assets as at 31 May 2020 were €17,645,315 (2019: €17,873,326). During the year the Company raised €350,000 through the issue of Convertible Loan Notes and a further £302,500 through a placing and subscription of new ordinary shares in the Company. Full details are set out at Notes 13 and 14 in the Consolidated Financial Statements. Post year end the Company’s cash resources have been supplemented by a placing and subscription of new ordinary shares to raise £800,000 at 25 pence per share, as announced by the Company in August 2020, and warrant exercises which have resulted in further funds of £455,333 being received between July 2020 and November 2020. The funds are being used to support activities in relation to the AAZ joint venture, to advance the Company’s gold exploration activities in Finland and for general working capital purposes. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc4 PDAC Booth. Minister for Mines, Mr Seán Canney T.D. visits booth. Drilling at Slieve Glah. Directors and Staff I would like to express my deep appreciation of the support and dedication of all the directors, consultants and staff which has made possible the continued progress and success which the Company has achieved. I am particularly pleased to welcome Howard M. Bird, a very distinguished geoscientist who, post year end, joined the Board as a Non-Executive Director. Future Outlook We are approaching a new era and I look forward to the Company continuing with its record of success in exploration and to the successful development of its first gold mine on the new district-scale gold trend which it has discovered in Ireland. Professor Richard Conroy Chairman 30 November 2020 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources PlcCompany Information 5 Directors Professor Richard Conroy Chairman Maureen T.A. Jones Managing Director Howard M. Bird§ Non-Executive Director (Appointed 28 July 2020) Professor Garth Earls§ Non-Executive Director Brendan McMorrow§ Non-Executive Director § Member of the Audit Committee Company Registration Number 232059 Nominated Adviser (Nomad) Allenby Capital Limited 5 St. Helen’s Place 5th Floor London, EC3A 6AB, UK www.allenbycapital.com Company Secretary and Registered Office Maureen T.A. Jones 3300 Lake Drive Citywest Business Campus Dublin 24, D24 TD21, Ireland Brokers Brandon Hill Capital Ltd 1 Tudor Street London, EC4Y 0AH, UK First Equity Ltd Salisbury House London Wall London, EC2M 5QQ, UK Statutory Audit Firm Deloitte Ireland LLP Chartered Accountants and Statutory Audit Firm 6 Lapp’s Quay Cork, T12 VY7W, Ireland Banker AIB 1-4 Lower Baggot Street Dublin 2, D02 X342, Ireland Registrars Link Registrars Limited 2 Grand Canal Square Grand Canal Harbour Dublin 2, D02 A342, Ireland www.linkassetservices.com enquiries@linkgroup.ie Legal Advisers William Fry Solicitors 2 Grand Canal Square Dublin 2, D02 A342, Ireland Roschier, Attorneys Ltd. Kasarmikatu 21A FL-00130, Helsinki Finland Head Office Conroy Gold and Natural Resources plc 3300 Lake Drive Citywest Business Campus Dublin 24, D24 TD21, Ireland For further information visit the Company’s website at: www.conroygold.com or contact: Lothbury Financial Services Floor 6, 131 Cannon Street London, EC4N 5AX, UK Tel: +44 20 3290 0707 or Hall Communications 1 Northumberland Road Dublin 4, D04 F578 Ireland Tel: + 353 1 6609377 London Stock Exchange AIM Symbol: CGNR SEDOL: BZ4W18 ISIN number: IE00BZ4BTZ13 Professor Richard Conroy Chairman Maureen T.A. Jones Managing Director Professor Garth Earls Non-Executive Director Brendan McMorrow Non-Executive Director Howard M. Bird Non-Executive Director Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc6 Board of Directors Maureen T.A. Jones joined Conroy Petroleum and Natural Resources P.L.C. on its foundation in 1980 and was a Director and member of the Board of Directors of Conroy Petroleum/ARCON from 1986 to 1994. Maureen T.A. Jones has a medical background and specialised in the radiographic aspects of nuclear medicine before becoming a manager of International Medical Corporation in 1977. Professor Garth Earls Non-executive Director Professor Garth Earls provides technical advice and guidance to the Company in relation to the exploration and resource development matters. Experience Professor Garth Earls is Consulting Economic Geologist and Professor in the Department of Geology, University College Cork. He has been a Member of the Board of Directors and Managing Director of both AIM and TSX listed companies and has worked globally on a wide range of gold and base metal projects. In the 1980s he was part of the team that discovered the Curraghinalt gold deposit in Co. Tyrone. Professor Garth Earls is a former Director of the Geological Survey of Northern Ireland and former Chairman of the Geosciences Committee of the Royal Irish Academy. Professor Richard Conroy Chairman of the Board of Directors Professor Richard Conroy is responsible for leading the Board and ensuring it operates in an effective manner whilst promoting communication with shareholders. He has over 40 years’ experience of founding and growing companies in the natural resources industry with a track record in making discoveries of global significance. Experience Professor Richard Conroy has been involved in natural resources for many years. He established Trans- International Oil, which was primarily involved in Irish offshore oil exploration. Trans-International Oil initiated the Deminex Consortium which included Deminex, Mobil, Amoco and DSM. Trans-International Oil was merged with Aran Energy P.L.C. in 1979, which was later acquired by Statoil. Professor Richard Conroy founded Conroy Petroleum and Natural Resources P.L.C. (“Conroy Petroleum”). Conroy Petroleum was involved in both onshore and offshore oil production and exploration and also in mineral exploration. Conroy Petroleum, in 1986, made the significant discovery of the Galmoy zinc deposits in County Kilkenny later developed as a major zinc mine. The discovery at Galmoy led to the revival of the Irish base metal industry and to Ireland becoming an international zinc province. Conroy Petroleum was also a founding member of the Stoneboy consortium, which included Sumitomo Metal Mining Co. Ltd., an exploration Group which discovered the world class Pogo gold deposit in Alaska, now in production as a major gold mine. Conroy Petroleum acquired Atlantic Resources P.L.C. in 1992 and subsequently changed its name to ARCON International Resources P.L.C. (“ARCON”). The oil and gas interests in ARCON were transferred to form Providence Resources P.L.C. ARCON was later acquired by Lundin Mining Corporation. Professor Richard Conroy was Chairman and Chief Executive of Conroy Petroleum/ ARCON from 1980 to 1994. He founded Conroy Gold and Natural Resources P.L.C. in 1995. Professor Richard Conroy served in the Irish Parliament as a Member of the Senate. He 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. Professor Richard Conroy is Emeritus Professor of Physiology in the Royal College of Surgeons in Ireland. Professor Richard Conroy’s research included pioneering work on jet lag, shift working and decision making in business after intercontinental flights. He co-authored the first textbook on human circadian rhythms. Maureen T.A. Jones Managing Director Maureen T.A. Jones oversees all of the Company’s business and is responsible for formulating the Company’s objectives and strategy. She is also the Company Secretary for the Company. Experience Maureen T.A. Jones has over twenty years’ experience at senior level in the natural resource sector. She has been Managing Director of Conroy Gold and Natural Resources P.L.C. since 1998. Maureen T.A. Jones is also a Director of Karelian Diamond Resources P.L.C. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc7 Howard M. Bird Non-executive Director Howard M. Bird brings a broad range of knowledge gained through holding senior positions in a variety of different roles in the natural resources sector. He was appointed to the Board on 28 July 2020. Experience Howard M. Bird is an internationally experienced Professional Geoscientist (diamonds, gold, platinum and base metals) and has over 30 years’ diverse junior and senior mining company exploration, development and mining experience, including over 15 years at senior executive management level. He also has a strong background in both European and North American marketing, capital financings, mergers and acquisitions, and joint ventures. Brendan McMorrow Non-executive Director Brendan McMorrow was appointed to the Board on 28 August 2017. He brings a broad range of knowledge gained through holding senior financial roles in a variety of listed public companies in the natural resources sector. Experience Brendan McMorrow has over 25 years’ experience in a number of public companies in the oil and gas and base metals mining sectors listed in London, Toronto and Dublin where he held senior executive finance roles. He is currently Finance Director of Dunraven Resources P.L.C., an oil and gas exploration and development company. Prior to that he was Chief Financial Officer of Circle Oil P.L.C. from 2005 to 2015, an AIM listed oil and gas exploration, development and production company, with operations in North Africa and the Middle East. Brendan is a Fellow of the Chartered Association of Certified Accountants. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc8 Directors’ Report On 28 July 2020, the Company appointed Howard M. Bird as a non-executive Director. Please refer to previous page for further details. On 31 July 2020, the Company received a notice to exercise warrants to subscribe for 1,358,333 ordinary shares of €0.001 each at a price of 16 pence per ordinary share for which funds of €241,013 (£217,333) have been received. On 11 August 2020, the Company raised €887,164 (£800,000) through a placing of 3,200,000 ordinary shares of €0.001 in the capital of the Company at a price of £0.25 sterling per placing share. On 17 August 2020, the Company received a notice to exercise warrants to subscribe for 100,000 ordinary shares of €0.001 each at a price of 16 pence per ordinary share for which funds of €17,743 (£16,000) have been received. In November 2020, before the signing date, the Company announced that it has received a notice to exercise warrants over a total of 1,387,500 ordinary shares of €0.001 each at an exercise price of 16 pence per ordinary share, for which funds of €247,800 (£222,000) have been received by the Company. COVID-19 continues to limit field and laboratory work given the restrictions on operations and movement and other work also continues in relation to the Company’s exploration and development programme. There were no other events after the reporting year requiring adjustment to or disclosure in, these audited consolidated financial statements. The Board of Directors submit their annual report together with the audited consolidated financial statements of Conroy Gold and Natural Resources P.L.C. (the “Company”) and its subsidiaries (“Conroy Gold”, or the “Group”) and the separate financial statements of the Company for the financial year ended 31 May 2020. Principal activities, business review and future developments Information with respect to the Group’s principal activities and the review of the business and future developments as required by Section 327 of the Companies Act 2014 is contained in the Chairman’s statement on pages 2 to 4. The Company is a mineral exploration and development company whose objective is to discover and develop world class ore bodies in order to create value for its shareholders. The Company’s strategy is to explore in politically stable and geographically attractive countries such as Ireland and Finland. The challenges facing the Company in achieving this strategy are world commodity prices and general economic activity, ensuring compliance with governmental and environmental legislation and meeting work commitments under exploration permits and licences sufficient to maintain the Company’s interest therein. To accomplish its strategy and manage the challenges involved, the Company employs experienced individuals with a track record of success of discovering world class ore bodies together with suitably qualified technical personnel and consultants, experienced drilling and geophysical and other contractors and uses accredited international laboratories and technology to interpret and assay technical results. Additionally, the Company ensures as far as possible to obtain adequate working capital to carry out its work obligations and commitments. By co-ordinating all of the above, this should result in a satisfactory return and value for shareholders. Results for the year and state of affairs at 31 May 2020 The consolidated income statement for the financial year ended 31 May 2020 and the consolidated statement of financial position at that date are set out on pages 22 and 24. The loss for the financial year amounted to €677,380 (2019: a loss of €557,569) and net assets at 31 May 2020 were €17,645,315 (2019: €17,873,326). No interim or final dividends have been or are recommended by the Board of Directors. The Group is not yet in a production stage and so has no income. Consequently, the Group is not expected to report profits until it disposes of or is able to profitably develop or otherwise turn to account its exploration projects. The Directors monitor the activities and performance of the Group on a regular basis and use both financial and non- financial indicators to assess the Group’s performance. Important events since the year-end On 20 July 2020, the Company entered into a non-binding Heads of Terms regarding a proposed joint venture between the Company and Anglo Asian Mining plc. The joint venture’s goal is the development of a gold mine and further exploration and development of a series of gold targets along the 65km (40 mile) district scale gold trend that the Company has discovered in the Longford- Down Massif in Ireland. Concurrent with the signing, the Company issued to Anglo Asian warrants to subscribe for 325,000 ordinary shares of €0.001 each in the capital of the Company at an exercise price of 16 pence per ordinary share with an initial exercise period of 6 months from the date of the signing. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc9 Directors Please refer to pages 5, 6 and 7 for a listing of Directors and further details. Except as disclosed in the tables below, neither the Directors nor their families had any beneficial interest in the share capital of the Company. Apart from Directors remuneration (detailed in Note 4), loans from Directors (detailed in Note 12) and professional services provided by Professor Garth Earls and Brendan McMorrow (detailed in Note 16 (g)), there have been no contracts or arrangements entered into during the financial year ended 31 May 2020 in which a Director of the Company had a material interest. Refer to Note 16 for further details. Company Secretary Maureen T.A. Jones served as Company Secretary throughout the year. Directors’ shareholdings and other interests The interests of the Directors and their spouses and children in the share capital of the Company were as follows: Director Date of signing financial statements Ordinary Shares of €0.001 each Date of signing financial statements Warrants 31 May 2020 31 May 2020 1 June 2019 1 June 2019 Ordinary Shares of €0.001 each Warrants Ordinary Shares of €0.001 each Professor Richard Conroy 2,795,521* 121,198 2,795,521* 349,347 2,795,521* Maureen T.A. Jones 329,239 86,671 329,239 225,069 329,239 Professor Garth Earls Brendan McMorrow Howard M. Bird** – – – – – – – – – – – – – – – * Of the 2,795,521 (2018: 2,795,521) ordinary shares beneficially held by Professor Richard Conroy, 192,942 (2018: 192,942) are held by Conroy P.L.C., a company in which Professor Richard Conroy has a controlling interest. ** Appointed on 28 July 2020 as an non-executive Director. Details of warrants are as follows: Director Date of signing financial statements Date of signing financial statements 31 May 2020 31 May 2020 1 June 2019 1 June 2019 Expiry Date Warrants Price € Warrants Price € Warrants Price € Professor Richard Conroy – – 228,149 Professor Richard Conroy 121,198 4.33 121,198 Maureen T.A. Jones Maureen T.A. Jones – – 138,398 86,671 4.33 86,671 3.70 4.33 3.70 4.33 28,149 3.70 15 November 2020 121,198 4.33 16 November 2022 138,398 3.70 15 November 2020 86,671 4.33 16 November 2022 Warrants 349,347 225,069 – – – Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc10 Directors’ Report continued Substantial shareholdings So far as the Board of Directors are aware, no person or company, other than the shareholders listed below, held 3% or more of the issued ordinary share capital of the Company. Shareholder Mr. Patrick O’Sullivan Professor Richard Conroy Mr. Philip Hannigan Paul and Marial Johnson Date of signing financial statements Ordinary Shares of €0.001 each 3,000,000 2,795,521* 2,011,577 1,686,255 Sanderson Capital Partners – Date of signing financial statements 31 May 2020 31 May 2020 31 May 2019 31 May 2019 % 9.30 8.67 6.24 5.23 – Ordinary Shares of €0.001 each 3,000,000 2,795,521* 2,011,577 1,686,255 833,333 % Ordinary Shares of €0.001 each 11.44 10.66 7.67 6.43 3.18 3,000,000 2,795,521* 801,962 1,210,973 – % 12.66 11.80 3.38 5.11 – * Of the 2,795,521 (2019: 2,795,521) ordinary shares beneficially held by Professor Richard Conroy, 192,942 (2019: 192,942) are held by Conroy P.L.C., a company in which Professor Richard Conroy has a controlling interest. Compliance policy statement of Conroy Gold and Natural Resources P.L.C. The Directors, in accordance with Section 225(2) of the Companies Act 2014, acknowledge that they are responsible for securing the Company’s compliance with certain obligations specified in that section (‘relevant obligations’). The Directors confirm that: n a compliance policy statement has been drawn up setting out the Company’s policies that in their opinion are appropriate with regard to compliance with relevant obligations; n appropriate arrangements and structures have been put in place that, in their opinion, are designed to provide reasonable assurance of compliance in all material respects with those relevant obligations; and n a review has been conducted, during the financial year, of those arrangements and structures. It is the policy of the Group to review during the course of each financial year the arrangements and structures referred to above which have been implemented with a view to determining if they provide a reasonable assurance of compliance in all material respects with relevant obligations. Statement of Directors’ responsibilities in respect of the annual report and the consolidated financial statements The Directors are responsible for preparing the annual report, including 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 that law, they have elected to prepare the consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the EU and applicable law and the Company financial statements in accordance with Financial Reporting Standard 101: Reduced Disclosure Framework (“FRS101”), issued by the Financial Reporting Council. Under company law, the Directors must not approve the Consolidated and Company financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Group and Company and of the Group’s profit or loss for that financial year and otherwise comply with the Companies Act 2014. In preparing these financial statements, the Directors are required to: n select suitable accounting policies for the Group and Company 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 reason for any material departure from these standards; and n prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc11 The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities, financial position and profit or loss of the Company and which enable them to ensure that the financial statements of the Company and the Group are prepared in accordance with the relevant accounting framework and comply with the provisions of the Companies Act 2014. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company and to prevent and detect fraud and other irregularities. The Directors are also responsible for preparing a Directors’ report that complies with the requirements of the Companies Act 2014. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Going concern The Group and the Company incurred a loss of €677,380 (2019: a loss of €557,569) for the financial year ended 31 May 2020. The Group and the Company had net assets of €17,645,315 (2019: €17,873,326) at that date. The Group had net current liabilities of €4,338,318 (2019: €3,910,066) and the Company had net current liabilities of €3,981,670 (2019: €3,560,948) at that date. The Group and the Company had cash and cash equivalents of €117,270 for both at 31 May 2020 (2019: €77,299). The Directors, namely Professor Richard Conroy, Maureen T.A. Jones, Professor Garth Earls and Brendan McMorrow, and former Directors, namely James P. Jones, Séamus P. Fitzpatrick, C. David Wathen, Louis J. Maguire, Dr. Sorċa C. Conroy and Michael E. Power, have confirmed that they will not seek repayment of amounts owed to them by the Group and the Company of €3,197,755 (2019: €2,917,454) for a minimum period of 12 months from the date of approval of the financial statements, unless the Group has sufficient funds to repay. Subsequent to the year-end, the Company raised a total of €887,164 (£800,000) through a placing of ordinary shares in the Company. Full details were announced on 11 August 2020 and are set out in Note 19 in the consolidated financial statements. The Company also received €241,013 (£217,333) and €17,743 (£16,000) by the Company’s warrants exercise (see Note 19 for further details). In November 2020, before the signing date, the Company announced that it has received a notice to exercise warrants over a total of 1,387,500 ordinary shares of €0.001 each at an exercise price of 16 pence per ordinary share, for which funds of €247,800 (£222,000) have been received by the Company. In addition, Karelian Diamond Resources P.L.C. has confirmed that it does not intend to seek repayment of amounts owed to it at 31 May 2020 by the Group and the Company of €58,469 (2019: €54,241) for a minimum period of 12 months from the date of approval of the financial statements, unless the Group has sufficient funds to repay. The Board of Directors have considered carefully the financial position of the Group and the Company and in that context, have prepared and reviewed cash flow forecasts for the period to 30 November 2021. As set out in the Chairman’s statement, the Group and the Company expects to incur capital expenditure in 2021, consistent with its strategy as an exploration company. In reviewing the proposed work programme for exploration and evaluation assets and on the basis of the funds received after the financial year end, the results obtained from the exploration programme and the prospects for raising additional funds as required, the Board of Directors are satisfied that it is appropriate to prepare the Group and the Company financial statements on a going concern basis. Corporate governance The Board has adopted the QCA Corporate Governance Code (“QCA Code”), which is derived from the 2018 UK Corporate Governance Code and the Guidance on Board Effectiveness (the “Code”) but adapted to the needs of smaller quoted companies. The Company agrees that good governance contributes to sustainable success and recognises the renewed emphasis on business building trust by forging strong relationships with key stakeholders. The Company understands the importance of a corporate culture that is aligned with the Company’s purpose and business strategy, and which promotes integrity and includes diversity. The Company conducts its business with integrity, honesty and fairness and requires its partners, contractors and suppliers to meet similar ethical standards. It is an objective of the Company that all individuals are aware of their responsibilities in applying and maintaining these standards in all their actions. The Board ensures that support is available in the form of staff training and updating its employee handbook such that staff members understand what is expected of them. The Company’s Statement of Compliance with the QCA code is available on the Company’s website: www.conroygold.com. Board of Directors The Board of Directors is made up of two executive and three non-executive Directors. One of non-executive directors was appointed on 28 July 2020. Biographies of each of the Directors are set out on pages 6 and 7. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc12 Directors’ Report continued The Board of Directors agrees a schedule of regular meetings to be held in each calendar year and also meets on other occasions as necessary. Meetings are usually held at the head office in 3300 Lake Drive, Citywest Business Campus, Dublin 24, D24 TD21, Ireland. Board of Directors’ meetings were held on 8 occasions from 1 June 2019 to 31 May 2020 and attendance is set out in the table below. An agenda and supporting documentation were circulated in advance of each meeting. Meetings held during the year Professor Richard Conroy Maureen T.A. Jones Professor Garth Earls Brendan McMorrow Board 8 8 8 8 8 There is an agreed list of matters which the Board of Directors has formally reserved to itself for decision, such as approval of the Group’s commercial strategy, trading and capital budgets, financial statements, Board of Directors’ membership, major capital expenditure and risk management policies. Responsibility for certain matters is delegated to Board of Directors’ committees. Executive Directors spend as much time on Group matters as is necessary for the proper performance of their duties. Non-executive Directors are expected to spend a minimum of one day a month on Group activities in addition to preparation for and attendance at Board and sub-committee meetings. There is an agreed procedure for Directors to take independent legal advice. The Company Secretary is responsible for ensuring that Board of Directors procedures are followed, and all Directors have direct access to the Company Secretary. All Directors receive regular reports and full Board of Directors’ papers are sent to each Director in sufficient time before Board of Directors’ meetings, and any further supporting papers and information are readily available to all Directors on request. The Board of Directors’ papers include the minutes of the Audit committee of the Board of Directors which have been held since the previous Board of Directors’ meeting, and, the Chairman of each committee is available to give a report on the committee’s proceedings at Board of Directors’ meetings if appropriate. The Board of Directors has a process whereby each year every Director may meet the Chairman to review the conduct of Board of Directors’ meetings and the general corporate governance of the Group. The non-executive Directors (other than Professor Garth Earls) are regarded as independent and have no material interest or other relationships with the Group. The Board, having fully considered the corporate needs of the Group, is satisfied that it has an appropriate balance of experience and skills to carry out its duties. The Chairman of the Company oversees this process and reviews the Board composition to ensure it has the necessary experience, skills and capabilities. The current non-executive Directors have a wide range of financial and technical skills based on both qualifications and experience including significant fundraisings, financial management, technical expertise and the discovery and bringing into production of operating mines. Each board member keeps their skills up to date through a combination of courses, continuing professional development through professional bodies and reading. The Company Secretary provides Directors with updates on key developments relating to the Company, the sector in which the Company operates, legal and governance matters including advice from the Company’s brokers, lawyers and advisors. Board performance The Board, through its Chairman, will in the coming year evaluate its ongoing performance, based on the requirements of the business and corporate governance standards. It is envisaged that the review process will include the use of internal reviews and periodic external facilitation. The results of such reviews will be used to determine whether any alterations are needed at either a board or senior management level or whether any additional training would be beneficial. It is intended that with effect from the end of the next financial year, these evaluations will be undertaken annually, after the end of each financial year but prior to the publication of the respective annual report and accounts. Director’s performance will be measured by way of such matters as: n Commitment; n Independence; n Relevant experience; n Impartiality; n Specialist knowledge; and n Effectiveness on the Board. As set out in the Constitution of the Company, each year, one third (or the number nearest to one third) of the Directors with the exception of the Chairman and the Managing Director, retire from the Board of Directors by rotation. Effectively, therefore, each such Director will retire by rotation within a two-year period. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc13 Ethical values and behaviours The Board of Directors is committed to high standards of corporate governance and integrity in all its activities and operations and promotes a culture of good ethical values and behaviour. The Group conducts its business with integrity, honesty and fairness and requires its partners, contractors and suppliers to meet similar ethical standards. Individual staff members must ensure that they apply and maintain these standards in all their actions. The Chairman of the Board of Directors regularly monitors and reviews the Group’s ethical standards and cultural environment and where necessary takes appropriate action to ensure proper standards are maintained. Due to the size and available resources of the Company, the Chairman of the Board of Directors carries out executive functions. The Group is fully committed to complying with all relevant health, safety and environment rules and regulations as these apply to its operations. It is an objective of the Group that all individuals are aware of their responsibilities in providing a safe and secure working environment. Board Committees The Board of Directors has implemented an effective committee structure to assist in the discharge of its responsibilities. Membership of the Audit Committee, constituted in accordance with Section 1097 of the Companies Act 2014, is comprised exclusively of independent non-executive Directors. The Company is currently reconstituting the Executive Committee and the Remuneration Committee. It is intended that the Remuneration Committee will be established in accordance with the QCA Remuneration Committee Guide for Small and Mid-Size Quoted Companies before the publication of next year’s annual report and accounts and following the completion of the Board evaluation process outlined earlier. Remuneration Committee In the absence of a Remuneration Committee during the year, the Board as a whole took on the functions of the Remuneration Committee. As such, the Board monitors the performance of each of the Company’s executive Directors and senior executives to ensure they are rewarded fairly for their contribution to the Group. The executive Directors are excused from the meetings to determine their remuneration. It also sets the remuneration and terms and conditions of appointment for the non-executive Directors. In determining remuneration levels, the Board takes into consideration the practices of other companies of similar scope and size to ensure that senior executives and Board members are properly rewarded and motivated to perform in the best interests of the shareholders. Audit Committee The Audit Committee’s terms of reference have been approved by the Board of Directors. The Audit Committee, constituted in accordance with Section 1097 of the Companies Act 2014, comprises of the three non-executive Directors and is chaired by Brendan McMorrow. Attendance at the Audit Committee meetings is set out below: Meetings held during the year Brendan McMorrow Professor Garth Earls Audit Committee 3 3 3 The Audit Committee reviews the accounting principles, policies and practices adopted, and areas of management judgement and estimation during the preparation of the interim and annual financial statements and discusses with the Group’s Auditors the results and scope of the audit. The external auditors have the opportunity to meet with the members of the Audit Committee alone at least once a year. The Audit Committee advises the Board of Directors on the appointment of external auditors and on their remuneration and discusses the nature and scope of the audit with the external auditors. An analysis of the fees payable to the external audit firm in respect of audit services during the financial year is set out in Note 3 to the consolidated 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. The Audit Committee is responsible for monitoring the controls which are in force to ensure the information reported to the shareholders is accurate and complete. The Audit Committee also reviews internal controls and contributes to the review of the effectiveness of the Group’s internal controls and risk management systems. It also considers the need for an internal audit function, which it believes is not primarily required at present because of the size of the Group’s operations. The members of the Audit 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. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc14 Directors’ Report continued Internal control The Directors have overall responsibility for the Group’s system of internal control to safeguard shareholders’ investments and the Group assets. They operate a system of financial controls which enable the Board of Directors to meet its responsibilities for the integrity and accuracy of the Group’s accounting records. Among the processes applied in reviewing the effectiveness of the system of internal controls are the following: n The Board of Directors establishes risk policies as appropriate, for implementation by executive management; n All commitments for expenditure and payments are subject to approval by personnel designated by the Board of Directors; and n Regular management meetings take place to review financial and operational activities. The Board of Directors has considered the requirement for an internal audit function. Based on the scale of the Group’s operations and close involvement of the Board of Directors, the Directors have concluded that an internal audit function is not currently required. Risks and uncertainties The Group is subject to a number of potential risks and uncertainties, which could have a material impact on the long-term performance of the Group and could cause actual results to differ materially from expectation. The management of risk is the collective responsibility of the Board of Directors. An ongoing process for identifying, evaluating and managing or mitigating the principal risks faced by the Group has been in place throughout the financial year and has remained in place up to the approval date of the report and accounts. The Board intends to keep its risk control procedures under constant review, particularly with regard to the need to embed internal control and risk management procedures further into the operations of the business and to deal with areas of improvement which come to management’s and the Board’s attention. As might be expected in a group of this size, a key control procedure is the day- to-day supervision of the business by the Executive Directors, supported by the senior managers with responsibility for key operations. The Board has considered the impact of the values and culture of the Group and ensures that, through staff communication and training, the Board’s expectations and attitude to risk and internal control are embedded in the business. The Board of Directors consider the following risks to be the principal risks affecting the business. General Industry Risk The Group’s business may be affected by the general risks associated with all companies in the gold exploration industry. These risks (the list of which is not exhaustive) include: general economic activity, the world gold prices, government and environmental regulations, permits and licenses, fluctuating metal prices, the requirement and ability to raise additional capital through future financings and price volatility of publicly traded securities. As such there is no guarantee that future market conditions will permit the raising of the necessary funds by way of issue of new equity, debt financing or farming out of interests. To mitigate this risk, the Board regularly reviews Group cash flow projections and considers different sources of funds. Environmental Risk Environmental and safety legislation may change in a manner that may require stricter or additional standards than those now in effect. These could result in heightened responsibilities for the Group and could cause additional expense, capital expenditures, restrictions and delays in the activities of the Group, the extent of which cannot be predicted. The Group employs staff experienced in the requirements of the relevant environmental authorities and seeks, through their experience, to mitigate the risk of non-compliance with accepted best practice. Exploration Risk All drilling to establish productive gold resources is inherently speculative and, therefore, a considerable amount of professional judgement is involved in the selection of any prospect for drilling. In addition, in the event drilling successfully encounters gold, unforeseeable operating problems may arise which render it uneconomic to exploit such finds. Estimates of potential resources include substantial proportions which are undeveloped. These resources require further capital expenditure in order to bring them into production. No guarantee can be given as to the success of drilling programmes in which the Group has an interest. The Group employs highly competent experienced staff and uses a range of techniques to minimise risk prior to drilling and utilises independent experts to assess the results of exploration activity. Financial Risk Refer to Note 18 in relation to the use of financial instruments by the Group, the financial risk management objectives of the Group and the Group’s exposure to interest rate risk, foreign currency risk, liquidity risk and credit risk. Management is authorised to achieve best available rates in respect of each forecast currency requirement. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc15 Auditors Deloitte Ireland LLP will continue in office in accordance with Section 383 (2) of the Companies Act 2014. Shareholders will be asked to authorise the Directors to fix their remuneration. On behalf of the Directors: Professor Richard Conroy Chairman Maureen T.A. Jones Managing Director 30 November 2020 Accounting records The Board of Directors are responsible for ensuring adequate accounting records, as outlined in Section 281 to 285 of the Companies Act 2014, are kept by the Company. The Board of Directors, through the use of appropriate procedures and systems and the employment of competent persons have ensured that measures are in place to secure compliance with these requirements. The accounting records are maintained at the Company’s business address, 3300 Lake Drive, Citywest Business Campus, Dublin 24, D24 TD21, Ireland. Disclosure of information to auditors So far as each of the Directors in office at the date of approval of the financial statements is aware: n There is no relevant audit information of which the Company’s auditors are unaware; and n The Directors have taken all steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. This information is given and should be interpreted in accordance with the provisions of Section 330 of the Companies Act 2014. Pandemic Risk The onset of the COVID-19 pandemic impacted on Company activities in the last quarter of the financial year. In accordance with the Irish Governments COVID-19 related public health measures and public health advice staff worked remotely. Since the outbreak of the COVID-19 pandemic, the Company has taken necessary measures in accordance with Government guidelines to protect the health, safety and wellbeing of its employees, contractors and partners in Ireland and Finland. COVID-19 continues to limit field and laboratory work given the restrictions on operations and movement and other work also continues in relation to the Company’s exploration and development programme. Communication with shareholders The Group gives high priority to communication with both shareholders and all other stakeholder groups. This is achieved through publications such as the annual and interim report, and news releases on the Company’s website www.conroygold.com, which is regularly updated. The Company encourages shareholders to attend the Annual General Meeting (AGM) to meet, exchange views and discuss the progress of the Group. The Directors are available after the conclusion of the formal business of the AGM to meet, listen to shareholders and discuss any relevant matters arising. Political donations There were no political donations during the financial year (2019: €Nil). Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc16 Independent Auditors’ Report to the Members of Conroy Gold and Natural Resources Plc Independent auditor’s report to the members of Conroy Gold and Natural Resources Plc Report on the audit of the financial statements Opinion on the financial statements of Conroy Gold and Natural Resources Plc (the ‘Company’) In our opinion 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 2020 and of the loss of the Group for the financial year then ended; and have been properly prepared in accordance with the relevant financial reporting framework and, in particular, with the requirements of the Companies Act 2014. The financial statements we have audited comprise: • • • • • • • • • • • The Group financial statements: the Consolidated income statement; the Consolidated statement of comprehensive income; the Consolidated statement of financial position; the Consolidated statement of changes in equity; the Consolidated statement of cash flows; and the related notes 1 to 21, including a summary of significant accounting policies as set out in note 1. The Parent Company financial statements: the Company statement of financial position; the Company statement of changes in equity; the Company statement of cash flows; and the related notes 1 to 21, including a summary of significant accounting policies as set out in note 1. The relevant financial reporting framework that has been applied in their preparation is the Companies Act 2014 and International Financial Reporting Standards (IFRS) as adopted by the European Union (“the relevant financial reporting framework”). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities under those standards are described below in the “Auditor's responsibilities for the audit of the financial statements” section of our report. We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority, as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Summary of our audit approach Key audit matters The key audit matters that we identified in the current year were: • Going concern (see material uncertainty related to going concern section) • Valuation of intangible assets and recoverability of amounts owed by Group companies. Within this report, any new key audit matters are identified with and any key audit matters which are the same as the prior year identified with . Materiality Scoping The materiality that we used in the current year was €529,000 which was determined on the basis of approximately 3% of Shareholders Equity. We identified one significant component, which was the Parent Company, Conroy Gold and Natural Resources Plc. Significant changes in our approach There were no significant changes in our approach. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 17 Material uncertainty related to going concern We draw your attention to Note 1 in the financial statements, which indicates that the Group incurred a loss in the financial year ended 31 May 2020 of €677,380 and, as of that date, the Group and Parent Company had net current liabilities of €4,338,318 and €3,981,670 respectively. In response to this, we: • Obtained an understanding of the Group’s and Company’s controls over the preparation of cash flow forecasts and approval of the projections and assumptions used in cash flow forecasts to support the going concern assumption, and assessed the design and determined the implementation of these controls; Evaluated the Directors’ plans and their feasibility by challenging the key assumptions used in the cash flow forecast provided by agreeing the inputs to expenditure commitments and other supporting documentation; • • Obtained an understanding of Directors’ plans to enable the Group and Parent Company to raise the • • funds required to meet the expenditure commitments of the Group and Parent Company; Inspected confirmations received by the Group and Parent Company from the Directors and former Directors that they will not seek repayment of amounts owed to them by the Group and Parent Company within 12 months of the date of approval of the financial statements, unless the Group has sufficient funds to repay; Inspected the confirmation received from Karelian Diamond Resources Plc that it does not intend to seek repayment of amounts owed by the Group and Parent Company within 12 months of the date of approval of the financial statements, unless the Group has sufficient funds to repay; Assessed the mechanical accuracy of the cash flow forecast model; Assessed the adequacy of the disclosures made in the financial statements. • • • We obtained evidence of the post year end share issues supporting the cash flow projections for the Group and Parent Company. As stated in Note 1, these events or conditions along with other matters as set forth in Note 1 indicate that a material uncertainty exists that may cast significant doubt on Group’s and Parent Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current financial year and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the material uncertainty relating to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Valuation of Intangible Assets and Recoverability of Amounts Owed by Group Companies Key audit matter description At 31 May 2020, the carrying value of Exploration and Evaluation Assets included in Intangible assets in the Consolidated Statement of Financial Position and Company Statement of Financial Position amounted to €22,330,743 and €21,974,093 respectively. At 31 May 2020, the carrying value of amounts owed by Group companies in the Company Statement of Financial Position amounted to €356,648. We draw your attention to the disclosures made in Note 1, 8 and 10 to the financial statements concerning the realisation of intangible assets held and recoverability of amounts owed by Group companies. 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 resources and the availability of sufficient finance to bring the resources to economic maturity and profitability. The realisation of intangible assets in the Consolidated Statement of Financial Position and Company Statement of Financial Position was assessed as a significant risk. The recoverability of amounts owed by Group Companies in the Consolidated Statement of Financial Position and Company Statement of Financial Position was assessed as a higher risk. These areas were therefore considered to be key audit matters. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 18 Independent Auditors’ Report continued How the scope of our audit responded to the key audit matter We performed the following procedures: • We evaluated the Directors’ procedures for assessing indicators of impairment of intangible assets in line with the accounting policies; • We evaluated the design and determined the implementation of controls in place over capitalisation and subsequent valuation of Intangible assets. • We inspected documentation in respect of licences held and considered and challenged the Directors’ assessment of indicators of impairment in relation to exploration and evaluation assets in both Ireland and Finland; • We performed a review of proposed exploration programme in respect of the Group and the Company’s assets in Ireland and Finland; including: - discussing and challenging the allocation of capitalised costs used for their reasonableness, assessing the reasonableness of the assets capitalised in the current year, and reviewing and considering indicators of impairment. - - • We obtained a listing of Intangible asset additions in the financial year and selected a sample of additions to ensure the capitalisation was in line with accounting policies. • We performed a review of Board of Directors Meeting Minutes and press releases issued by the Group in relation to the status of exploration and evaluation assets; • We performed a review of budgeted expenditure for the next 12 months; • We assessed the financial position of related parties from which balances are due to Conroy Gold & Natural Resources to ensure there are no indicators of impairment; and • We also considered the adequacy of the disclosure in the financial statements. Key observations A significant uncertainty exists in relation to the ability of the Group and Company to realise the exploration and evaluation assets capitalised to intangible assets and in relation to the ability of the Company to realise amounts owed by Group companies. As noted above, we draw your attention to the disclosures made in Note 1, 8 and 10 to the financial statements concerning the realisation of intangible assets and recoverability of amounts owed by Group companies. 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 resources and the availability of sufficient finance to bring the resources 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. Our opinion is not modified in respect of this matter. Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks described above, and we do not express an opinion on these individual matters. Our application of materiality We define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. We determined materiality for the Group and Parent Company to be €529,000 which is approximately 3% of Shareholders Equity. We have considered Shareholders Equity to be the critical component for determining materiality as we determined the Shareholders Equity to be of most importance to the principal external users of the financial statements. Raising equity funding is of key importance to the Group and Parent Company in continuing it current operations and is reflective of the current business life cycle of the Group and Parent Company. We have considered quantitative and qualitative factors such as understanding the entity and its environment, history of misstatements, complexity of the Group and Parent Company and reliabity of control environment . Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 19 Shareholders Equity €17.6M Shareholders Equity Materiality Materialty €529,000 Audit Committe Reporting Threshold €26,450 We agreed with the Audit Committee that we would report to them any audit differences in excess of €26,450, as well as differences below that threshold which, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment and assessing the risks of material misstatement at the Group level. Based on that assessment, we focused our Group audit scope primarily on the audit work in one significant component, which was the Parent Company. This component was subject to a full scope audit and accounts for approximately 98% of the Group’s intangible assets and 100% of the Group’s net assets. The remaining non-significant components were subject to specified audit procedures where the extent of our testing was based on our asssessment of the risks of material misstatement to the Group Financial Statements. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of directors As explained more fully in the Directors’ Report, 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, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and Parent Company or to cease operations, or have no realistic alternative but to do so. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 20 Independent Auditors’ Report continued Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs (Ireland), we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and Parent Company’s internal control. • • • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause the entity (or where relevant, the Group) to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within the Group to express an opinion on the (consolidated) financial statements. The Group auditor is responsible for the direction, supervision and performance of the Group audit. The Group auditor remains solely responsible for the audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that the auditor identifies during the audit. For listed entities and public interest entities, the auditor also provides those charged with governance with a statement that the auditor has complied with relevant ethical requirements regarding independence, including the Ethical Standard for Auditors (Ireland), and communicates with them all relationships and other matters that may reasonably be thought to bear on the auditor’s independence, and where applicable, related safeguards. Where the auditor is required to report on key audit matters, from the matters communicated with those charged with governance, the auditor determines those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. The auditor describes these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, the auditor determines that a matter should not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 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 auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 21 Report on other legal and regulatory requirements Opinion on other matters prescribed by the Companies Act 2014 Based solely on the work undertaken in the course of the audit, we report that: • We have obtained all the information and explanations which we consider necessary for the purposes of • • • our audit. In our opinion the accounting records of the parent Company were sufficient to permit the financial statements to be readily and properly audited. The parent Company balance sheet is in agreement with the accounting records. In our opinion the information given in the directors’ report is consistent with the financial statements and the directors’ report has been prepared in accordance with the Companies Act 2014. Matters on which we are required to report by exception Matters on which we are required to report by exception Based on the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' Based on the knowledge and understanding of the Group and the Parent Company and its environment report. obtained in the course of the audit, we have not identified material misstatements in the directors' report. We have nothing to report in respect of the provisions in the Companies Act 2014 which require us to We have nothing to report in respect of the provisions in the Companies Act 2014 which require us to report to report to you if, in our opinion, the disclosures of directors’ remuneration and transactions specified by you if, in our opinion, the disclosures of directors’ remuneration and transactions specified by law are not law are not made. made. Kevin Butler Kevin Butler For and on behalf of Deloitte Ireland LLP For and on behalf of Deloitte Ireland LLP Chartered Accountants and Statutory Audit Firm Chartered Accountants and Statutory Audit Firm 6 Lapp’s Quay 6 Lapp’s Quay Cork Cork Date: 30 November 2020 30 November 2020 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 22 Conroy Gold and Natural Resources P.L.C. Consolidated income statement for the financial year ended 31 May 2020 Continuing operations Operating expenses Finance income – interest Loss before taxation Income tax expense Loss for the financial year Loss per share Basic loss per share Diluted loss per share Note 2 3 5 6 6 2020 € (677,380) - (677,380) - 2019 € (557,573) 4 (557,569) - (677,380) (557,569) (0.0278) (0.0278) (0.0244) (0.0244) The total loss for the financial year is entirely attributable to equity holders of the Company. _____________________ ___________________ Professor Richard Conroy Chairman Maureen T.A. Jones Managing Director 22 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Consolidated statement of comprehensive income for the financial year ended 31 May 2020 23 2020 € 2019 € Loss for the financial year (677,380) (557,569) Income recognised in other comprehensive income - - Total comprehensive loss for the financial year (677,380) (557,569) The total comprehensive loss for the financial year is entirely attributable to equity holders of the Company. 23 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 24 Conroy Gold and Natural Resources P.L.C. Consolidated statement of financial position as at 31 May 2020 Assets Non-current assets Intangible assets Property, plant and equipment Total non-current assets Current assets Cash and cash equivalents Other receivables Total current assets Total assets Equity Capital and reserves Share capital presented as equity Share premium Capital conversion reserve fund Share-based payments reserve Other reserve Retained deficit Total equity Liabilities Non-current liabilities Convertible loans Total non-current liabilities Current liabilities Trade and other payables Related party loans Total current liabilities Note 31 May 2020 € 31 May 2019 As restated € 31 May 2018 As restated € 8 9 11 10 14 14 14 17 13 12 12 22,330,743 10,692 22,341,435 21,772,045 11,347 21,783,392 21,000,286 13,232 21,013,518 117,270 89,948 207,218 77,299 106,181 183,480 233,161 72,298 305,459 22,548,653 21,966,872 21,318,977 10,530,645 13,084,647 30,617 574,875 8,333 (6,583,802) 17,645,315 10,528,124 12,727,194 30,617 751,293 - (6,163,902) 17,873,326 10,524,488 12,174,285 30,617 995,489 - (5,850,529) 17,874,350 357,802 357,802 - - - - 3,885,704 659,832 4,545,536 3,541,714 551,832 4,093,546 3,259,284 185,343 3,444,627 Total liabilities 4,903,338 4,093,546 3,444,627 Total equity and liabilities 22,548,653 21,966,872 21,318,977 The financial statements were approved by the Board of Directors on 30 November 2020 and authorised for issue on 30 November 2020. They are signed on its behalf by: _____________________ Professor Richard Conroy Chairman _________________ Maureen T.A. Jones Managing Director 24 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc25 Conroy Gold and Natural Resources P.L.C. Company statement of financial position as at 31 May 2020 Assets Non-current assets Intangible assets Investment in subsidiary Property, plant and equipment Total non-current assets Current assets Cash and cash equivalents Other receivables Total current assets Total assets Equity Capital and reserves Called up share capital presented as equity Share premium Capital conversion reserve fund Share-based payments reserve Other reserve Retained deficit Total equity Liabilities Non-current liabilities Convertible loans Total non-current liabilities Current liabilities Trade and other payables Related party loans Total current liabilities Note 8 7 9 11 10 14 14 14 17 13 12 12 31 May 2020 € 21,974,093 2 10,692 21,984,787 31 May 2019 As restated € 21,422,925 2 11,347 21,434,274 31 May 2018 As restated € 20,654,326 2 13,232 20,667,560 117,270 446,596 563,866 77,299 455,299 532,598 233,161 418,256 651,417 22,548,653 21,966,872 21,318,977 10,530,645 13,084,647 30,617 574,875 8,333 (6,583,802) 17,645,315 10,528,124 12,727,194 30,617 751,293 - (6,163,902) 17,873,326 10,524,488 12,174,285 30,617 995,489 - (5,850,529) 17,874,350 357,802 357,802 - - - - 3,885,704 659,832 4,545,536 3,541,714 551,832 4,093,546 3,259,284 185,343 3,444,627 Total liabilities 4,903,338 4,093,546 3,444,627 Total equity and liabilities 22,548,653 21,966,872 21,318,977 The loss for the financial year was €677,380 (2019: a loss of €557,569). The financial statements were approved by the Board of Directors on 30 November 2020 and authorised for issue on 30 November 2020. They are signed on its behalf by: _____________________ _________________ Maureen T.A. Jones Professor Richard Conroy Managing Director Chairman 25 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 26 Conroy Gold and Natural Resources P.L.C. Consolidated statement of changes in equity for the financial year ended 31 May 2020 Share capital Share premium € € Capital conversion reserve fund € Share- based payment reserve € 10,528,124 12,727,194 30,617 751,293 Balance at 1 June 2019 Share issue (see Note 14) Share issue costs Share based payments Conversion feature (convertible loans) Transfer from share- based payment reserve to retained deficit Loss for the financial year Balance at 31 May 2020 2,521 - - 357,453 - - - - - - - - - - - - - - Other reserve Retained deficit Total equity € - - - - € € (6,163,902) 17,873,326 - (16,420) - 359,974 (16,420) 97,482 - - 97,482 - 8,333 - 8,333 (273,900) - - - 273,900 - (677,380) (677,380) 10,530,645 13,084,647 30,617 574,875 8,333 (6,583,802) 17,645,315 Share capital Share premium € € Capital conversion reserve fund € Share- based payment reserve € Balance at 1 June 2018 Share issue (see Note 14) Transfer from share- based payment reserve to retained deficit Loss for the financial year 10,524,488 12,174,285 30,617 995,489 3,636 552,909 - - - - - - - - (244,196) - Balance at 31 May 2019 10,528,124 12,727,194 30,617 751,293 Other reserve Retained deficit Total equity € - - - - - € € (5,850,529) 17,874,350 - 556,545 244,196 - (557,569) (557,569) (6,163,902) 17,873,326 Share capital The share capital comprises of the nominal value share capital issued for cash and non-cash consideration. The share capital also comprises deferred share capital. The deferred share capital arose through the restructuring of share capital which was approved at Extraordinary General Meetings held on 26 February 2015 and 14 December 2015. A detailed breakdown of the share capital figure is included in Note 14. 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 Company were re-nominalised from €0.03174435 each to €0.03 each in 2001 and the amount by which the issued share capital of the Company was reduced, was transferred to the capital conversion reserve fund. Share-based payment reserve The share-based payment reserve comprises of the fair value of all share options and warrants which have been charged over the vesting period, net of amounts relating to share options and warrants forfeited, exercised or lapsed during the year, which are reclassified to retained deficit. Other reserve The other reserve comprises of the equity portion of convertible loans. Retained deficit This reserve represents the accumulated losses absorbed by the Group to the consolidated statement of financial position date. 26 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Company statement of changes in equity for the financial year ended 31 May 2020 27 Other reserve Retained deficit Total equity Share capital Share premium € € Capital conversion reserve fund € Share- based payment reserve € 10,528,124 12,727,194 30,617 751,293 € - - - - € € (6,163,902) 17,873,326 - (16,420) 359,974 (16,420) - - 97,482 8,333 - - 97,482 - 8,333 (273,900) - - - 273,900 - (677,380) (677,380) 2,521 - 357,453 - - - - - - - - - - - - - - - Balance at 1 June 2019 Share issue (see Note 14) Share issue costs Share based payment Conversion feature (convertible loans) Transfer from share-based payment reserve to retained deficit Loss for the financial year Balance at 31 May 2020 10,530,645 13,084,647 30,617 574,875 8,333 (6,583,802) 17,645,315 Share capital Share premium € € Capital conversion reserve fund € Share- based payment reserve € Balance at 1 June 2018 Share issue (see Note 14) Transfer from share-based payment reserve to retained deficit Loss for the financial year Balance at 31 May 2019 10,524,488 12,174,285 30,617 995,489 3,636 552,909 - - - - - - - - (244,196) - 10,528,124 12,727,194 30,617 751,293 Other reserve Retained deficit Total equity € - - - - - € € (5,850,529) 17,874,350 - 556,545 244,196 - (557,569) (557,569) (6,163,902) 17,873,326 27 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 28 Conroy Gold and Natural Resources P.L.C. Consolidated statement of cash flows for the financial year ended 31 May 2020 Cash flows from operating activities Loss for the financial year Adjustments for: Depreciation Share based payment Interest expense Increase in payables Decrease/(increase) in receivables Net cash used in operating activities Cash flows from investing activities Expenditure on intangible assets Purchase of property, plant and equipment Cash used in investing activities Cash flows from financing activities Issue of share capital Share issue costs Proceeds from convertible loans issue Advances from Karelian Diamond Resources P.L.C. Payments to Karelian Diamond Resources P.L.C. Advances from related parties Net cash provided by financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 2020 € (677,380) 1,884 97,482 16,135 (561,879) 339,762 16,233 (205,884) (558,698) (1,229) (559,927) 359,974 (16,420) 350,000 45,046 (40,818) 108,000 805,782 39,971 77,299 117,270 2019 € (557,569) 1,885 - - (555,684) 341,326 (33,883) (248,241) (771,759) - (771,759) 556,545 - - 89,397 (148,293) 366,489 864,138 (155,862) 233,161 77,299 28 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Company statement of cash flows for the financial year ended 31 May 2020 29 Cash flows from operating activities Loss for the financial year Adjustments for: Depreciation Share based payment Interest expense Increase in payables Decrease/(increase) in receivables Net cash used in operating activities Cash flows from investing activities Expenditure on intangible assets Payments to acquire property, plant and equipment Cash used in investing activities Cash flows from financing activities Issue of share capital Share issue costs Proceeds from convertible loans issue Advances from Karelian Diamond Resources P.L.C. Payments to Karelian Diamond Resources P.L.C. Advances from related parties Net cash provided by financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 2020 € (677,380) 1,884 97,482 16,135 (561,879) 339,762 8,703 (213,414) (551,168) (1,229) (552,397) 359,974 (16,420) 350,000 45,046 (40,818) 108,000 805,782 39,971 77,299 117,270 2019 € (557,569) 1,885 - - (555,684) 341,326 (37,043) (251,401) (768,599) - (768,599) 556,545 - - 89,397 (148,293) 366,489 864,138 (155,862) 233,161 77,299 29 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 30 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 1 Accounting policies Reporting entity Conroy Gold and Natural Resources P.L.C. (the “Company”) is a company domiciled in Ireland. The consolidated financial statements of the Company for the financial year ended 31 May 2020 comprise the financial statements of the Company and its subsidiaries (together referred to as the “Group”). The Company is a public limited company incorporated in Ireland under registration number 232059. The registered office is located at 3300 Lake Drive, Citywest Business Campus, Dublin 24, D24 TD21, Ireland. Basis of preparation The consolidated financial statements are presented in Euro (“€”). The € is the functional currency of the Company. The consolidated financial statements are prepared under the historical cost basis except for derivative financial instruments, where applicable, which are measured at fair value at each reporting date. The preparation of consolidated financial statements requires the Board of Directors and management to use judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Details of critical judgements are disclosed in the accounting policies. The consolidated financial statements were authorised for issue by the Board of Directors on 30 November 2020. Going Concern The Group and the Company incurred a loss of €677,380 (2019: a loss of €557,569) for the financial year ended 31 May 2020. The Group and the Company had net assets of €17,645,315 (2019: €17,873,326) at that date. The Group had net current liabilities of €4,338,318 (2019: €3,910,066) and the Company had net current liabilities of €3,981,670 (2019: €3,560,948) at that date. The Group and the Company had cash and cash equivalents of €117,270 at 31 May 2020 (2019: €77,299). The Directors, namely Professor Richard Conroy, Maureen T.A. Jones, Professor Garth Earls and Brendan McMorrow and former Directors, namely, James P. Jones, Séamus P. Fitzpatrick, C. David Wathen, Louis J. Maguire, Dr. Sorċa Conroy and Michael E. Power, have confirmed that they will not seek repayment of amounts owed to them by the Group and the Company of €3,197,755 (2019: €2,917,454) 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 P.L.C. has confirmed that it does not intend to seek repayment of amounts owed to it at 31 May 2020 by the Group and the Company of €58,469 (2019: €54,241) within 12 months of the date of approval of the consolidated financial statements, unless the Group has sufficient funds to repay. Subsequent to the year-end, on 31 July 2020, the Company received a notice to exercise warrants to subscribe for 1,358,333 ordinary shares of €0.001 each at a price of 16 pence per Ordinary Share for which funds of €241,013 (£217,333) have been received. On 11 August 2020, the Company raised €887,164 (£800,000) through a placing of 3,200,000 ordinary shares of €0.001 in the capital of the Company at a price of £0.25 sterling per placing share. On 17 August 2020, the Company received a notice to exercise warrants to subscribe for 100,000 ordinary shares of €0.001 each at a price of 16 pence per Ordinary Share for which funds of €17,743 (£16,000) have been received. In November 2020, before the signing date, the Company announced that it has received a notice to exercise warrants over a total of 1,387,500 ordinary shares of €0.001 each at an exercise price of 16 pence per Ordinary Share, for which funds of €247,800 (£222,000) have been received by the Company. The Board of Directors have considered carefully the financial position of the Group and the Company and in that context, have prepared and reviewed cash flow forecasts for the period until November 2021. As set out in the Chairman’s statement, the Group and the Company expects to incur capital expenditure in 2021, consistent with its strategy. 30 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 31 1 Accounting policies (continued) Going Concern (continued) The Directors recognise that net current liabilities of €4,338,318 is a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. In reviewing the proposed work programme for exploration and evaluation of assets and on the basis of the funds raised since the year-end date, the results obtained from the exploration programme and the prospects for raising additional funds as required, the Board of Directors are satisfied that it is appropriate to prepare the financial statements on a going concern basis. The consolidated and the Company’s financial statements do not include any adjustments to the carrying value and classification of assets and liabilities that would arise if the Group and the Company were unable to continue as going concern. Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”). The Company’s financial statements have been prepared in accordance with Financial Reporting Standard 101: Reduced Disclosure Framework (“FRS101”). Recent accounting pronouncements The following new standards, amendments to standards and interpretations adopted and endorsed by the EU have been issued to date and are not yet effective for the financial year from 1 June 2019: • Amendments to references to the Conceptual Framework in IFRS Standards – Effective date 1 January 2020 • Amendments to IFRS 3 Business Combinations – Definition of a Business – Effective date 1 January 2020 • Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform – Effective date 1 January 2020 • Amendment to IFRS 16 about providing lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification – Effective date 1 June 2020 The adoption of the above amendments to standards and interpretations is not expected to have a significant impact on the consolidated financial statements either due to being not applicable or immaterial. The following new standards and amendments to standards have been issued by the International Accounting Standards Board but have not yet been endorsed by the EU, accordingly none of these standards have been applied in the current year. The Board of Directors are currently assessing whether these standards once endorsed by the EU will have any impact or a material impact on the consolidated financial statements. • Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint • venture – postponed indefinitely IFRS 1 amendments resulting from Annual Improvements to IFRS Standards 2018–2020 (subsidiary as a first- time adopter) – Effective date 1 January 2022 IFRS 3 amendments updating a reference to the Conceptual Framework – Effective date 1 January 2022 IFRS 4 amendments regarding the expiry date of the deferral approach – Effective date 1 January 2023 • • • Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16, and IAS 39 regarding replacement issues in the context of the • • • • IBOR reform – Effective date 1 January 2021 IFRS 17: Insurance contracts – Effective date deferred to 1 January 2023 IAS 1 amendments regarding the classification of liabilities - Effective date 1 January 2023 IAS 16 amendments prohibiting a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use – Effective date 1 January 2022 IAS 37 amendments regarding the costs to include when assessing whether a contract is onerous – Effective date 1 January 2022 31 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 32 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 1 Accounting policies (continued) Basis of consolidation The consolidated financial statements include the financial statements of Conroy Gold and Natural Resources P.L.C. and its subsidiaries. Subsidiaries are entities controlled by the Company. Control exists when the Group is exposed to or has the right to variable returns from its involvement with the entity and has the ability to affect those returns through its control over the entity. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-Group balances, and any unrealised income and expenses arising from intra-Group transactions are eliminated in preparing the consolidated financial statements. The Company recognises investment in subsidiaries at cost less impairment. (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 consolidated 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. E&E 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, E&E capitalised costs include an allocation from operating expenses, including share-based payments. All such costs are necessary for exploration and evaluation activities. E&E capitalised costs are not amortised prior to the conclusion of appraisal activities. At completion of appraisal activities if technical feasibility is demonstrated and commercial resources 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 consolidated income statement in the period in which the event occurred. Impairment (ii) 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 key indicators of impairment in relation to E&E assets: • The period for which the entity has the right to explore in the specific area has expired or will expire in the near future and is not expected to be renewed. • Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. • Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area. • Sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. For E&E assets, where the above indicators exist or on an annual basis, an impairment test is carried out. The E&E assets are categorised into Cash Generating Units (“CGU”) on a country-by-country basis (31 May 2020: Finland and Ireland). The carrying value of the CGU is compared to its recoverable amount and any resulting impairment loss is written off to the consolidated 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. 32 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 33 1 Accounting policies (continued) (b) 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 (c) Income taxation expense Income tax expense comprises current and deferred tax. Income tax expense is recognised in the consolidated income statement except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in the consolidated statement of comprehensive income. Current tax is the expected tax payable on the taxable income for the financial year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities on a net basis or their tax assets and liabilities will be settled simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (d) Share-based payments For equity-settled share-based payment transactions (i.e. the granting of share options and share warrants), the Group 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). As the exercise prices for warrants are denominated in sterling, the risk-free rate assumption is based on a sterling gilts zero-coupon yield curve at the date of issue. 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 at 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 Company’s estimate of equity instruments that will eventually vest. (e) Earnings per share The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all potentially dilutive ordinary shares. (f) 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. 33 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 34 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 1 Accounting policies (continued) (g) Trade and other receivables and payables Trade and other receivables are measured at transaction price. Trade payables are measured at initial recognition at fair value, and subsequently measured at amortised cost. (h) Pension costs The Group provides for pensions for certain employees through a defined contribution pension scheme. The amounts are charged to the consolidated income statement. Any difference between amounts charged and contributions paid to the pension scheme is included in receivables or payables in the consolidated statement of financial position. (i) Foreign currencies Transactions denominated in foreign currencies relating to costs and non-monetary assets are translated into € 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 € at the rate of exchange ruling at the consolidated statement of financial position date. The resulting profits or losses are dealt with in the consolidated income statement. (j) Loans The Directors’ loans are 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 the effective interest rate method. 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 that exactly discounts estimated future cash payments through the expected life of the financial liability. As the convertible loans are made up of both equity and liability components, they are considered to be compound financial instruments. At initial recognition, the carrying amount of a compound financial instrument is allocated to its equity and liability components. The fair value of the conversion feature is taken directly to equity. The fair value of the liability, which is the difference between the transaction price and the fair value of the conversion feature, is recognised as a liability in the consolidated statement of financial position. The liability is subsequently measured at amortised cost. The Company accounts for the interest expense of the convertible loan notes at the effective interest rate. The difference between the effective interest rate and interest rate attached to the convertible loan increases the carrying amount of the liability so that, on maturity, the carrying amount is equal to the capital cash repayment that the Company may be required to pay. (k) Ordinary shares Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from retained earnings, net of any tax effects. Impairment – financial assets measured at amortised cost (l) Financial assets measured at amortised cost are reviewed for impairment loss at each reporting date. The Company applies the simplified approach in accordance with IFRS 9. The Company measures the loss allowance at an amount equal to the lifetime expected credit losses as required under a simplified approach for trade receivables that do not contain a financing component. The Company’s approach to expected credit losses (“ECL”) reflects a probability-weighted outcome, the time value of money and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. Significant financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy or financial re-organisation and default in payments are all considered indicators for increases in credit risks. If the credit risk increases to the point that it is considered to be credit impaired, interest income will be calculated based on the gross carrying amount adjusted for the loss allowance. Any contractual payment which is more than 90 days past due is considered credit impaired. 34 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 35 1 Accounting policies (continued) (m) Significant accounting judgements and key sources of estimation uncertainty Significant judgements in applying the Group’s accounting policies The preparation of the consolidated financial statements requires the Board of Directors to make judgements and estimates and form assumptions that affect the amounts of assets, liabilities, contingent liabilities, revenues and expenses reported in the consolidated financial statements. On an ongoing basis, the Board of Directors evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. The Board of Directors bases its judgements and estimates on historical experience and on other factors it believes to be reasonable under the circumstances, the results of which form the basis of the reported amounts that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. In the process of applying the Group’s accounting policies above, the Board of Directors have identified the judgemental areas that have the most significant impact on the amounts recognised in the consolidated financial statements (apart from those involving estimations), which are dealt with as follows: Exploration and evaluation assets The assessment of whether general administration costs and salary costs are capitalised exploration and evaluation costs or expensed involves judgement. The Board of Directors 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 administration and salary costs are primarily focused on the Group’s gold prospects, the Board of Directors consider it appropriate to capitalise a portion of such costs. These costs are reviewed on a line by line basis with the resultant calculation of the amount to be capitalised being specific to the activities of the Company in any given year. The carrying value of exploration and evaluation assets in the consolidated statement of financial positions was €22,330,743 (2019: €21,772,045) at 31 May 2020 (Note 8). The Board of Directors carried out an assessment, in accordance with IFRS 6: Exploration for and Evaluation of Mineral Resources relating to the remaining licence or claim terms, likelihood of renewal, likelihood of further expenditure, possible discontinuation of activities over specific claims and available data which may suggest that the recoverable value of an exploration and evaluation asset is less than its carrying amount. Based on this assessment the Board of Directors is satisfied as to the carrying value of these assets and is satisfied that these are recoverable, acknowledging however that their recoverability is dependent on future successful exploration efforts. Going concern The preparation of consolidated 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 resources and the availability of sufficient finance to bring the resources to economic maturity and profitability. The Directors recognise that described above are material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. However, the Board of Directors, having reviewed the proposed programme for exploration and evaluation assets, the funds received post year end, the results from the exploration programme and the prospects for raising additional funds as required, are satisfied that it is appropriate to prepare the financial statements on the going concern basis. Refer to page 30 for further details. Deferred tax No deferred tax asset has been recognised in respect of tax losses as it is not considered probable that future taxable profit will be available against which the related temporary differences can be utilised. 35 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 36 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 1 Accounting policies (continued) (m) Significant accounting judgements and key sources of estimation uncertainty (continued) Key sources of estimation uncertainty The preparation of the consolidated financial statements requires the Board of Directors to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the consolidated statement of financial position date and the amounts reported for revenues and expenses during the financial year. 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. Cash Generating Units (“CGUs”) As outlined in the Intangible assets accounting policy, the exploration and evaluation assets should be allocated to CGU. The determination of what constitutes a CGU requires judgement. The carrying value of each CGU 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: • • • Estimation of future cash flows expected to be derived from the asset; Expectation about possible variations in the amount or timing of the future cash flows; and The determination of an appropriate discount rate. Employee benefits - Share-based payment transactions The Company had equity-settled share-based payment arrangements with non-market performance conditions which fall within the scope of and are accounted for under the provisions of IFRS 2: Share-based Payment. Accordingly, the grant date fair value of the options under these schemes is recognised as a personnel expense with a corresponding increase in the “Share-based payment reserve”, within equity, over the vesting period. 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. The fair value of these options is measured using an appropriate option pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest, except where forfeiture is only due to share prices not achieving the threshold for vesting. (n) Segmental reporting Operating segment information is presented in the consolidated financial statements in respect of the Group’s geographical segments which represent the financial basis by which the Group manages its business. The Group has one class of business, Gold Exploration. The Group has two principal reportable segments as follows: • • Irish exploration assets: gold exploration assets in Ireland; and Finnish exploration assets: gold exploration assets in Finland. Group assets and liabilities include cash resources held by the Group. Corporate expenses include other operational expenditure incurred by the Group. These are not within the definition of an operating segment. Performance is measured based on segment result and total asset value as included in the internal management reports that are reviewed by the Group’s Board of Directors. There are no significant inter segment transactions. Costs that are directly attributable to Ireland and Finland have been capitalised to exploration and evaluation assets as appropriate (Note 8). The Group did not earn any revenue in the current or comparative financial year. 36 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 37 2 Operating expenses (a) Analysis of operating expenses Operating expenses Transfer to intangible assets 2020 € 1,046,487 (369,107) 677,380 2019 € 948,938 (391,365) 557,573 Operating expenses are analysed as follows: Wages, salaries and related costs Other operating expenses Auditor’s remuneration Depreciation 565,744 357,809 23,500 1,885 948,938 Of the above costs, a total of €369,107 (2019: €391,365) is capitalised to intangible assets based on a review of the nature and quantum of the underlying costs. The costs capitalised to intangible assets mainly relate to salaries of geological and on-site staff together with an appropriate portion of executive management salaries. 479,953 536,285 28,365 1,884 1,046,487 (b) Wages, salaries and related costs as disclosed above is analysed as follows: Wages and salaries Social insurance costs Retirement benefit costs 463,603 16,350 - 479,953 2020 € 2019 € 525,134 18,609 22,001 565,744 The amount of wages, salaries and related costs capitalised as intangible assets during the financial year was €319,804 (2019: €351,456). The average number of persons employed during the financial year (including executive Directors) by activity was as follows: Exploration and evaluation Corporate management and administration 2019 5 3 8 The Group contributes to an externally funded defined contribution scheme to satisfy the pension arrangements in respect of certain management personnel. 2020 6 2 8 The total pension cost charged for the financial year was €Nil (2019: €22,001). 37 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 38 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 2 Operating expenses (continued) An analysis of remuneration for each Director of the Company in the current financial year (prior to amounts transferred to intangible assets) is as follows: Professor Richard Conroy Maureen T.A. Jones Professor Garth Earls Brendan McMorrow Fees € 19,443 8,333 8,332 8,333 44,441 Salary € 153,125 96,250 - - 249,375 Share-based payment charge € - - - - - Pension contributions € - - - - - Total € 172,568 104,583 8,332 8,333 293,816 An analysis of remuneration for each Director of the Company in the prior financial year (prior to amounts transferred to intangible assets) is as follows: Professor Richard Conroy Maureen T.A. Jones Professor Garth Earls Brendan McMorrow Dr. Karl D. Keegan (resigned on 7 December 2018) James P. Jones (resigned on 4 August 2017) Fees € 22,220 9,523 9,523 9,523 5,555 - 56,344 Salary € 179,250 114,251 - - - 12,346* 305,847 Share-based payment charge € - - - - Pension contributions € - 22,001 - - Total € 201,470 145,775 9,523 9,523 - - - - 5,555 - 22,001 12,346 384,192 *These payments relate to VHI charges. At 31 May 2020, the total share-based payment charge was €Nil (2019: €Nil). 3 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 - Group The analysis of the auditor’s remuneration is as follows: • Audit of financial statements Auditor’s remuneration - Company The analysis of the auditor’s remuneration is as follows: • Audit of financial statements 2020 € 1,884 2019 € 1,885 28,365 23,500 27,365 20,000 No fees were incurred for other assurance, tax advisory or other non-audit services in respect of the current or prior financial years. Included within the Group audit fee (above) is the amount incurred by the Company. 38 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 39 4 Directors’ remuneration Aggregate emoluments paid to or receivable by Directors in respect of qualifying services Aggregate amount of gains by Directors on exercise of share options during the financial year 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 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 scheme – for 1 Director (2019: 1) Defined benefit scheme Compensation paid, or payable, or other termination payments in respect of loss of office to Directors of the Company in the financial year: • • Officer or Director of the Company Other offices 2020 € 2019 € 293,816 362,191 - - - - - - - - 22,001 - - - No amounts have been paid to past Directors of the Company or its holding undertakings (2019: €Nil). During the year ended 31 May 2019, VHI charges of €12,346 were paid by the Company for the former Director of the Company, James P. Jones. No compensation has been paid for the loss of office or other termination benefit in respect of the loss of office of Director or other offices (2019: €Nil). 5 Income tax expense No taxation charge arose 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 Irish standard tax rate Tax credit at the Irish standard rate Effects of: Expenses not deductible for tax purposes Losses carried forward for future utilisation Tax charge for the financial year 2020 € (677,380) 12.5% (84,673) - 84,673 - 2019 € (557,569) 12.5% (69,696) - 69,696 - 39 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 40 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 5 Income tax expense (continued) 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. Unutilised losses may be carried forward from the date of the origination of the losses but may only be offset against taxable profits earned from the same trade. Unutilised losses carried forward amounted to EUR22,027,103 at 31 May 2019. 6 Loss per share Loss for the financial year attributable to equity holder of the Company Basic earnings per share Number of ordinary shares at start of financial year Number of ordinary shares issued during the financial year Number of ordinary shares at end of financial year Weighted average number of ordinary shares for the purposes of basic earnings per share Basic loss per ordinary share Diluted loss per share 2020 € (677,380) 2019 € (557,569) No. of shares No. of shares 23,693,039 2,520,833 26,213,872 20,056,674 3,636,365 23,693,039 24,404,398 22,875,878 (0.0278) (0.0244) Weighted average number of diluted ordinary shares for the purposes of diluted loss per share Diluted loss per ordinary share 24,404,398 22,875,878 (0.0278) (0.0244) As at 31 May 2020, Nil options and 3,424,109 warrants (2019: Nil options and 788,692 warrants), were excluded from the computation of the dilutive loss per share as their strike price was greater than the average share price in the respective years. However, as the Company incurred the loss for the financial year ended 31 May 2020, the warrants were not included in the calculation. 7 Subsidiaries % Owned Shares in subsidiary companies (Unlisted shares) at cost: Conroy Gold Limited Trans International Mineral Exploration Limited 100% 100% 31 May 2020 € - 2 31 May 2019 € - 2 The registered office of the above non-trading subsidiaries is 3300 Lake Drive, Citywest Business Campus, Dublin 24, D24 TD21, Ireland. 40 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 41 8 Intangible assets Exploration and evaluation assets Group: Cost At 1 June Expenditure during the financial year Licence and appraisal costs • • Other operating expenses (Note 2) At 31 May Company: Cost At 1 June Expenditure during the financial year Licence and appraisal costs • • Other operating expenses (Note 2) At 31 May 31 May 2020 € 21,772,045 189,591 369,107 22,330,743 31 May 2020 € 21,422,925 182,061 369,107 21,974,093 31 May 2019 € 21,000,286 380,394 391,365 21,772,045 31 May 2019 € 20,654,326 377,234 391,365 21,422,925 Exploration and evaluation assets relate to expenditure incurred in the development of mineral exploration opportunities. These assets are carried at historical cost and have been assessed for impairment in particular with regard to the requirements of IFRS 6: Exploration for and Evaluation of Mineral Resources relating to remaining licence or claim terms, likelihood of renewal, likelihood of further expenditure, possible discontinuation of activities over specific claims and available data which may suggest that the recoverable value of an exploration and evaluation asset is less than its carrying amount. The Board of Directors have considered the proposed work programmes for the underlying mineral resources. They are satisfied that there are no indications of impairment. The Board of Directors note that the realisation of the intangible assets is dependent on further successful development and ultimate production of the mineral resources and the availability of sufficient finance to bring the resources to economic maturity and profitability. 41 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 42 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 8 Intangible assets (continued) Mineral interests are categorised as follows: Group: Ireland Cost At 1 June Expenditure during the financial year • Licence and appraisal costs • Other operating expenses • At 31 May Equity settled share-based payments Group: Finland Cost At 1 June Expenditure during the financial year • Licence and appraisal costs • Other operating expenses • At 31 May Equity settled share-based payments Company: Ireland Cost At 1 June Expenditure during the financial year • Licence and appraisal costs • Other operating expenses • At 31 May Equity settled share-based payments Company: Finland Cost At 1 June Expenditure during the financial year • Licence and appraisal costs • Other operating expenses • At 31 May Equity settled share-based payments 42 31 May 2020 € 19,426,207 180,265 313,741 - 19,920,213 31 May 2020 € 2,345,838 9,326 55,366 - 2,410,530 31 May 2020 € 19,077,087 172,735 313,741 - 19,563,563 31 May 2020 € 2,345,838 9,326 55,366 - 2,410,530 31 May 2019 € 18,713,795 379,752 332,660 - 19,426,207 31 May 2019 € 2,286,491 642 58,705 - 2,345,838 31 May 2019 € 18,367,835 376,592 332,660 - 19,077,087 31 May 2019 € 2,286,491 642 58,705 - 2,345,838 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 43 9 Property, plant and equipment In respect of the current financial year: Group and Company Cost At 1 June 2019 Additions At 31 May 2020 Accumulated depreciation At 1 June 2019 Charge for the financial year At 31 May 2020 Motor Vehicles € Plant & Office Equipment € 17,754 - 17,754 17,754 - 17,754 136,225 1,229 137,454 124,878 1,884 126,762 Total € 153,979 1,229 155,208 142,632 1,884 144,516 Net book value at 31 May 2020 - 10,692 10,692 In respect of the previous financial year: Group and Company Cost At 1 June 2018 Additions At 31 May 2019 Accumulated depreciation At 1 June 2018 Charge for the financial year At 31 May 2019 Motor Vehicles € Plant & Office Equipment € 17,754 - 17,754 17,754 - 17,754 136,225 - 136,225 122,993 1,885 124,878 Total € 153,979 - 153,979 140,747 1,885 142,632 Net book value at 31 May 2019 - 11,347 11,347 43 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 44 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 10 Other receivables Group Other debtors Vat receivable Company Other debtors Vat receivable Amounts owed from Conroy Gold Limited 31 May 2020 € 71,219 18,729 89,948 31 May 2020 € 71,219 18,729 356,648 446,596 31 May 2019 € 52,208 53,973 106,181 31 May 2019 € 52,208 53,973 349,118 455,299 The realisation of amounts owed by Group companies to the Company is dependent on the further successful development and ultimate production of the mineral resources and the availability of sufficient finance to bring the resources to economic maturity and profitability. However, as these amounts are receivable from the Group companies, the Directors are confident that the probability of default is close to zero. 11 Cash and cash equivalents Group and Company Cash held in bank accounts 12 Current liabilities – as restated Trade and other payables Group and Company Amounts falling due within one year Accrued Directors’ remuneration Fees and other emoluments Pension contributions Accrued former Directors’ remuneration 31 May 2020 € 117,270 117,270 31 May 2020 € 2,324,218 164,675 31 May 2019 € 77,299 77,299 31 May 2019 € 2,043,099 164,675 Fees and other emoluments Pension contributions Other creditors and accruals Amounts owed to Karelian Diamond Resources P.L.C. 643,294 79,083 557,322 54,241 3,541,714 It is the Group’s practice to agree terms of transactions, including payment terms with suppliers. It is the Group’s policy that payment is made according to the agreed terms. The carrying value of the trade and other payables approximates to their fair value. 642,476 79,083 616,783 58,469 3,885,704 44 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 45 12 Current liabilities – as restated (continued) Trade and other payables (continued) The Directors, namely Professor Richard Conroy, Maureen T.A. Jones, Professor Garth Earls and Brendan McMorrow and former Directors, namely James P. Jones, Séamus P. Fitzpatrick, C. David Wathen, Louis J. Maguire, Dr. Sorċa Conroy and Michael E. Power, have confirmed that they will not seek repayment of amounts owed to them by the Group and the Company of €3,197,755 (2019: €2,917,454) for a minimum period of 12 months from the date of approval of the consolidated financial statements, unless the Group has sufficient funds to repay. In addition, please refer to Note 16(c) in relation to amounts payable by Karelian Diamond Resources P.L.C. Related party loans – Group and Company Related party loans Opening balance 1 June Loan advance Loan repayment Closing balance 31 May 31 May 2020 € 551,832 108,000 - 659,832 31 May 2019 € 185,343 366,489 - 551,832 The related party loans amounts relate to monies owed to Professor Richard Conroy amounting to €315,918 (2019: €282,918), Maureen T.A. Jones amounting to €49,425 (2019: €49,425), Séamus P. Fitzpatrick (former Director) amounting to €69,489 (2019: €69,489) and Dr. Sorċa Conroy (former Director) amounting to €225,000 (2019: €150,000). The Directors’ and former Directors’ have confirmed that they will not seek repayment of amounts owed to it by the Group and Company at 31 May 2020 within 12 months of the date of approval of the consolidated financial statements, unless the Group has sufficient funds to repay. There is no interest payable in respect of these loans, no security has been attached to these loans and there is no repayment or maturity terms. Dr. Sorċa Conroy and Séamus P. Fitzpatrick are both former directors in the Company having left the board in August 2017 (and are shareholders of the Company owning less than 3% of the issued share capital of the Company). Neither Dr. Sorċa Conroy, nor Séamus P. Fitzpatrick are classified as related parties under the AIM Rules for Companies. 13 Non-current liabilities – as restated Convertible loan notes The Company raised €350,000 through the issue of two unsecured convertible loan notes (“Convertible Loan Notes”) to Hard Metal Machine Tools Limited (the “Lender”). Both Convertible Loan Notes have a term of three years and attract interest at a rate of 5% per annum which is payable on the redemption or conversion of the Convertible Loan Notes. The Convertible Loan Notes are unsecured. The first Convertible Loan Note has a monetary amount of €250,000 and was issued on 15 July 2019. This Convertible Loan Note, including the total amount of accrued but unpaid interest, is convertible at the conversion price of £0.07 at any time. Interest incurred on this Convertible Loan Note is €12,785 for the period. The second Convertible Loan Note has a monetary amount of €100,000 and was issued on 30 October 2019. This Convertible Loan Note, including the total amount of accrued but unpaid interest, is convertible at the conversion price of £0.06 at any time. Interest incurred on this Convertible Loan Note is €3,350 for the period. 45 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 46 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 14 Called up share capital and share premium – Group and Company Authorised: 11,995,569,057 ordinary shares of €0.001 each 306,779,844 deferred shares of €0.02 each 437,320,727 deferred shares of €0.00999 each 31 May 2020 € 11,995,569 6,135,597 4,368,834 22,500,000 31 May 2019 € 11,995,569 6,135,597 4,368,834 22,500,000 The deferred shares do not entitle the holder to receive a dividend or other distribution. Furthermore, the deferred shares do not entitle the shareholder to receive notice of or vote at any general meeting of the Company, and do not entitle the shareholder to any proceeds on a return of capital or winding up of the Company. Issued and fully paid – Current financial year Number of ordinary shares Called up share capital € Capital conversion reserve fund € Called up deferred share capital € Share premium € Start of financial year Share issue (b) 23,693,039 2,520,833 End of financial year 26,213,872 23,693 2,521 26,214 30,617 - 10,504,431 - 12,727,194 357,453 30,617 10,504,431 13,084,647 Issued and fully paid – Prior financial year Number of ordinary shares Called up share capital € Capital conversion reserve fund € Called up deferred share capital € Share premium € Start of financial year Share issue (a) 20,056,674 3,636,365 End of financial year 23,693,039 20,057 3,636 23,693 30,617 - 10,504,431 - 12,174,285 552,909 30,617 10,504,431 12,727,194 (a) On 24 August 2018, the Company raised (€556,545) £500,000, through a placing of 3,636,365 ordinary shares of €0.001 in the capital of the Company at a price of £0.1375 per share. (b) On 22 May 2020, the Company raised (€359,974) £302,500, through a placing of 2,520,833 ordinary shares €0.001 in the capital of the Company at a price of £0.1200 per share. (c) At 31 May 2020, warrants over 3,424,109 (2019: 8,631,830) shares exercisable at prices from £0.16 (2019: £0.25) sterling to €4.33 (2019: €4.33) per share, with various exercisable dates up to 16 November 2022 (2019: 16 November 2022) were outstanding. Refer to Note 17 for further details. (d) The share price at 31 May 2020 was £0.11000 (2019: £0.05375). During the financial year, the price ranged from £0.04100 to £0.17500 (2019: from £0.05375 to £0.175000). 46 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 47 15 Commitments and contingencies Exploration and evaluation activities 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. At 31 May 2020, the Group had work commitments of €388,000 (2019: €275,000) for the forthcoming financial year, in respect of prospecting licences held. 16 Related party transactions (a) Details as to shareholders and Directors’ loans and share capital transactions with Professor Richard Conroy, Maureen T.A. Jones, Séamus P. Fitzpatrick (former Director) and Dr. Sorċa Conroy (former Director) are outlined in in Note 12 of the consolidated financial statements. (b) For the financial year ended 31 May 2020, the Company incurred costs totalling €40,818 (2019: €148,293) on behalf of Karelian Diamond Resources P.L.C., which has certain common shareholders and Directors. These costs were recharged to Karelian Diamond Resources P.L.C. These costs are analysed as follows: Office salaries Other operating expenses Rent and rates 2020 € 80,144 9,851 (49,177)* 40,818 2019 € 108,541 12,397 27,355 148,293 *This amount is rechargeable from Karelian Diamond Resources P.L.C. (c) At 31 May 2020, the Company owed €58,469 to Karelian Diamond Resources P.L.C. (2019: €54,241). Amounts owed to Karelian Diamond Resources P.L.C. are included within “Trade and other payables” in the current and previous financial year statements. During the financial year ended 31 May 2020, €45,046 (2019: €89,397) was paid by Karelian Diamond Resources P.L.C. to the Company. During the financial year ended the Company charged Karelian Diamond Resources P.L.C. €40,818 (2019: €148,293) in respect of the allocation of certain costs as detailed in (b) above. Karelian Diamond Resources P.L.C. has confirmed that it will not seek repayment of amounts owed to it by the Group and the Company within 12 months of the date of approval of the consolidated financial statements, unless the Group has sufficient funds to repay. (d) At 31 May 2020, Conroy Gold Limited owed €356,648 (2019: €349,118) to the Company. The movement in the balance relates to a payment of expenses for an amount of €7,530 incurred in the name of Conroy Gold Limited by the Company. The Company has confirmed that it will not seek repayment of amounts owed for a minimum period of 12 months from the date of approval of the financial statements, unless Conroy Gold Limited has sufficient funds to repay such amounts. (e) At 31 May 2020, the Company was owed €8,970 (2019: €8,970) by Trans-International Oil Exploration Limited. Professor Richard Conroy and Maureen T.A. Jones are directors of Trans-International Oil Exploration Limited. Professor Richard Conroy holds 50.7% of the share capital of this company. A further €15,866 (2019: €15,866) is owed by Conroy P.L.C., a company in which Professor Richard Conroy has a controlling interest. Amounts totalling €5,290 (2019: €5,288) were owed by companies in which Professor Richard Conroy and Maureen T.A. Jones hold a 50% interest each. €Nil (2019: €2,891) is owed by Archaean Gold P.L.C., a company in which Professor Richard Conroy and Maureen T.A. Jones are Directors. The amounts owed by the various companies are included within “Other receivables” in the current and previous financial year’s consolidated statement of financial position and company’s statement of financial position. 47 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 48 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 16 Related party transactions (continued) (f) Details of key management compensation which comprises Directors’ remuneration are outlined below. An analysis of remuneration for each Director of the Company in the current financial year (prior to amounts transferred to intangible assets) is as follows: Professor Richard Conroy Maureen T.A. Jones Professor Garth Earls Brendan McMorrow Fees € 19,443 8,333 8,332 8,333 44,441 Salary € 153,125 96,250 - - 249,375 Share-based payment charge € - - - - - Pension contributions € - - - - - Total € 172,568 104,583 8,332 8,333 293,816 An analysis of remuneration for each Director of the Company in the prior financial year (prior to amounts transferred to intangible assets) is as follows: Professor Richard Conroy Maureen T.A. Jones Professor Garth Earls Brendan McMorrow Dr. Karl D. Keegan (resigned on 7 December 2018) James P. Jones (resigned on 4 August 2017) Fees € 22,220 9,523 9,523 9,523 5,555 - 56,344 Salary € 179,250 114,251 - - - 12,346* 305,847 Share-based payment charge € - - - - Pension contributions € - 22,001 - - Total € 201,470 145,775 9,523 9,523 - - - - 5,555 - 22,001 12,346 384,192 *These payments relate to VHI charges. (g) Professor Garth Earls invoiced the Group for €29,192 (2019: €44,654) during the financial year for professional services rendered to the Group. At 31 May 2020, Professor Garth Earls was owed €23,808 (2019: €32,527) in respect of these services. Brendan McMorrow invoiced the Group for €7,727 (2019: €16,200) during the financial year for professional services rendered to the Group. At 31 May 2020, Brendan McMorrow was owed €24,998 (2019: €16,200) in respect of these services. (h) The Company raised €350,000 through the issue of two unsecured Convertible Loan Notes to Hard Metal Machine Tools Limited (the “Lender”). The Lender is a company 99% owned by an existing shareholder of the Company. Refer to Note 13 for further details. 17 Share-based payments The Company has an equity-settled share-based payment arrangement with non-market performance conditions. Options granted generally had a vesting period of ten years. At 31 May 2020, there were no share options outstanding (2019: €Nil). 48 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 49 17 Share-based payments (continued) Warrants granted generally have a vesting period of two years. Warrants granted during the financial year vested immediately. Details of the warrants outstanding during the financial year are below. At 1 June Lapsed during the financial year (Note 14) Exercised during the financial year (Note 14) Granted during the financial year (Note 14) At 31 May 2020 No. of share warrants 8,631,830 2020 Weighted average exercise price € 0.620 2019 No. of share warrants 13,718,315 2019 Weighted average exercise price € 0.552 (7,843,137) 0.245 (5,086,485) - 2,635,416 3,424,109 - 0.178 1.139 - - 8,631,830 0.417 - - 0.620 The Company estimated the fair value of 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 the Company’s stock price as well as assumptions regarding a number of subjective variables. 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 Company’s Binomial Lattice Model included the following weighted average assumptions for the Company’s employee stock option and warrants: Dividend yield Expected volatility Risk free interest rate Expected life (in years) 2020 Stock options N/a N/a N/a N/a 2020 Stock warrants 0% 95% 0.4% 0.75 2019 Stock options N/a N/a N/a N/a 2019 Stock warrants 0% 90% 0.4% 2 This calculation results in a share-based payment reserves payment of €97,482 (2019: €Nil). Amounts relating to warrants which lapsed during the year and which are reclassified to retained earnings were €273,900 (2019: €244,196). 18 Financial instruments Financial risk management objectives, policies and processes The Group has exposure to the following risks from its use of financial instruments: (a) Interest rate risk; (b) Foreign currency risk; (c) Liquidity risk; and (d) Credit risk. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. 49 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 50 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 18 Financial instruments (continued) Financial risk management objectives, policies and processes (continued) The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and framework in relation to the risks faced. (a) Interest rate risk The Group currently finances its operations through shareholders’ funds. Short term cash funds are invested, if appropriate, in short-term interest-bearing bank deposits. There were no short-term interest-bearing bank deposits at 31 May 2020 or 2019. The Group did not enter into any hedging transactions with respect to interest rate risk. (b) Foreign currency risk The Group is exposed to currency risk on purchases, loans and bank deposits that are denominated in a currency other than the functional currency of the entities of the Group. It is Group policy to ensure that foreign currency risk is managed wherever possible by matching foreign currency income and expenditure. During the financial years ended 31 May 2020 and 31 May 2019, the Group did not utilise foreign currency forward contracts or other derivatives to manage foreign currency risk. The Group’s foreign currency risk exposure in respect of the principal foreign currencies in which the Group operates was as follows at 31 May 2020: Other debtors Cash and cash equivalents Trade and other payables Related party loans Convertible loans Total exposure Sterling exposure denominated in € - 56,986 (148,701) - (357,802) (449,517) Not at risk € 71,219 60,284 (3,725,641) (659,832) - (4,253,970) Total € 71,219 117,270 (3,874,342) (659,832) (357,802) (4,703,487) The Group’s foreign currency risk exposure in respect of the principal foreign currencies in which the Group operates was as follows at 31 May 2019: Other debtors Cash and cash equivalents Trade and other payables Related party loans Total exposure Sterling exposure denominated in € - 11,099 (139,047) - (127,948) Not at risk € 52,208 66,200 (3,394,203) (551,832) (3,827,627) The following are the significant exchange rates that applied against €1 during the financial year: GBP Average rate 2020 0.875 Average rate 2019 0.881 Spot rate 31 May 2020 0.899 Total € 52,208 77,299 (3,533,250) (551,832) (3,955,575) Spot rate 31 May 2019 0.887 Sensitivity analysis A 10% strengthening of Euro against Sterling, based on outstanding financial assets and liabilities at 31 May 2020 would have decreased the reported loss by €44,952 (2019: decreased the reported loss by €12,795) as a consequence of the retranslation of foreign currency denominated financial assets and liabilities at those dates. A weakening of 10% of the Euro against Sterling would have had an equal and opposite effect. It is assumed that all other variables, especially interest rates, remain constant in the analysis. 50 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 51 18 Financial instruments (continued) Financial risk management objectives, policies and processes (continued) (c) Liquidity risk Liquidity is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and adverse conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages liquidity risk by regularly monitoring cash flow projections. The nature of the Group’s exploration and appraisal activities can result in significant differences between expected and actual cash flows. Contractual maturities of financial liabilities as at 31 May 2020 were as follows: Item Trade and other payables (including related party loans) Convertible loans Carrying amount € Contractual cash flows € 6 months or less € 6 -12 months € 1-2 years € 2-5 years € 4,545,536 4,545,536 616,783* 3,928,753** - - 357,802 402,500 - - - 357,802*** 4,903,338 4,948,036 616,783* 3,928,753** - 357,802*** Contractual maturities of financial liabilities as at 31 May 2019 were as follows: Item Trade and other payables (including related party loans) Carrying amount € Contractual cash flows € 6 months or less € 6 -12 months € 1-2 years € 2-5 years € 4,093,546 4,093,546 557,322* 3,536,224** - - *The amount of €616,783 (2019: €557,322) relates to other trade payables. **The Directors, namely Professor Richard Conroy, Maureen T.A. Jones, Professor Garth Earls and Brendan McMorrow and former Directors, namely James P. Jones, Séamus P. Fitzpatrick, C. David Wathen, Louis J. Maguire, Dr. Sorċa Conroy and Michael E. Power, have confirmed that they will not seek repayment of amounts owed to them by the Group and the Company of €3,197,755 (2019: €2,917,454) 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 P.L.C. has confirmed that it will not seek repayment of amounts owed to it by the Group and the Company at 31 May 2020 of €58,469 (2019: €54,241) within 12 months of the date of approval of the consolidated financial statements, unless the Group has sufficient funds to repay. **The related party loans amounts relate to monies owed to Professor Richard Conroy amounting to €315,918 (2019: €282,918), Maureen T.A. Jones amounting to €49,425 (2019: €49,425), Séamus P. Fitzpatrick (former Director) amounting to €69,489 (2019: €69,489) and Dr. Sorċa Conroy (former Director) amounting to €225,000 (2019: €150,000). ***More information about convertible loans is detailed in Note 13. The Group had cash and cash equivalents of €117,270 at 31 May 2020 (2019: €77,299). 51 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 52 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 18 Financial instruments (continued) Financial risk management objectives, policies and processes (continued) (d) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge on obligation. Credit risk is the risk of financial loss to the Group if a cash deposit is not recovered. Group deposits are placed only with banks with appropriate credit ratings. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 May 2020 and 31 May 2019 was: Cash and cash equivalents Other debtors 31 May 2020 € 117,270 71,219 188,489 31 May 2019 € 77,299 52,208 129,507 The Group’s cash and cash equivalents are held at AIB Bank which has a credit rating of “BBB” as determined by Fitch, and Bank of Ireland which a credit rating of “BBB“ as determined by Fitch. Expected credit loss The Group measures credit risk and expected credit losses on financial assets measured at amortised cost using probability of default, exposure at default and loss given default. Management consider both historical analysis and forward-looking information in determining any expected credit loss. At 31 May 2020 and 31 May 2019, all cash is accessible on demand and held with counterparties with a credit rating of BBB or higher. Management consider the probability of default to be close to zero as these instruments have a low risk of default and the counterparties have a strong capacity to meet their contractual obligations in the near term. The amount receivable from Conroy Gold Limited which relates mainly to the cash advances and payment of expenses incurred in the name of Conroy Gold Limited, is a receivable at the Company level but not at the Group level and therefore is not subject to expected credit losses at the Group level. See Note 10 for further details. However, as these amounts are receivable from the Group companies, the Directors of the Company are confident that the probability of default is close to zero. As a result of the above, no loss allowance has been recognised based on lifetime expected credit losses as any such impairment would be wholly insignificant to the Company. (e) Fair values versus carrying amounts Due to the short-term nature of the Group’s current financial assets and liabilities at 31 May 2020 and 31 May 2019, the fair value equals the carrying amount in each case. The carrying value of non-current financial assets and liabilities is a reasonable approximation of fair value. (f) Capital management The Group’s objective is to discover and develop world class ore bodies in order to create value for its shareholders. The Group’s strategy is to explore in politically stable and geographically attractive countries such as Ireland and Finland. The Group ensures as far as possible to obtain adequate working capital to carry out its work obligations and commitments. The Group’s overall strategy remains unchanged from the prior period. 52 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 53 18 Financial instruments (continued) (f) Capital management (continued) The Group has historically funded its activities through share issues and placings and loans. The Group’s capital structure is kept under review by the Board of Directors and it is committed to capital discipline and continues to maintain flexibility for future growth. The capital structure of the Group consists of equity of the Group (refer to the statement of changes in equity and Note 14). The Group is not subject to any externally imposed capital requirements. 19 Post balance sheet events On 20 July 2020, the Company entered into a non-binding Heads of Terms regarding a proposed joint venture between the Company and Anglo Asian Mining plc. The joint venture’s goal is the development of a gold mine and further exploration and development of a series of gold targets along the 65km (40 mile) district scale gold trend that the Company has discovered in the Longford – Down Massif in Ireland. Concurrent with the signing, the Company issued to Anglo Asian warrants to subscribe for 325,000 ordinary shares of €0.001 each in the capital of the Company at an exercise price of 16 pence per Ordinary Share with an initial exercise period of 6 months from the date of the signing. On 28 July 2020, the Company appointed Howard Bird as a non-executive Director. On 31 July 2020, the Company received a notice to exercise warrants to subscribe for 1,358,333 ordinary shares of €0.001 each at a price of 16 pence per Ordinary Share for which funds of €241,013 (£217,333) have been received. On 11 August 2020, the Company raised €887,164 (£800,000) through a placing of 3,200,000 ordinary shares of €0.001 in the capital of the Company at a price of £0.25 sterling per placing share. On 17 August 2020, the Company received a notice to exercise warrants to subscribe for 100,000 ordinary shares of €0.001 each at a price of 16 pence per Ordinary Share for which funds of €17,743 (£16,000) have been received. In November 2020, before the signing date, the Company announced that it has received a notice to exercise warrants over a total of 1,387,500 ordinary shares of €0.001 each at an exercise price of 16 pence per Ordinary Share, for which funds of €247,800 (£222,000) have been received by the Company. COVID-19 continues to limit field and laboratory work given the restrictions on operations and movement and other work also continues in relation to the Company’s exploration and development programme. There were no other events after the reporting year requiring adjustment to or disclosure in, these audited consolidated financial statements. There were no other events after the reporting year requiring adjustment to or disclosure in these audited consolidated financial statements. 53 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 54 Conroy Gold and Natural Resources P.L.C. Notes to and forming part of the consolidated and company financial statements for the financial year ended 31 May 2020 (continued) 20 Prior year adjustment The Company and Consolidated Statement of Financial Position as at 31 May 2019 previously presented related party loans amounting to €551,832 within non-current liabilities. Following a review of the applicable terms and conditions, the Directors determined that these amounts should, more appropriately, be classified within current liabilities. The Company and Consolidated Statements of Financial Position as at 31 May 2019 have therefore been adjusted to reflect the impact of this reclassification. In line with the requirements of IAS 8 Accounting policies, changes in accounting estimates and errors, the comparative figures for the year ended 31 May 2019 have been restated as follows: Balance Sheet Non-current liabilities Related party loans Total non-current liabilities Current liabilities Trade and other payables Related party loans Total current liabilities As previously stated 31 May 2019 € Effect of restatement 31 May 2019 € As restated 31 May 2019 € 551,832 551,832 (551,832) (551,832) - - 3,541,714 - 3,541,714 - 551,832 551,832 3,541,714 551,832 4,093,546 There is no impact on Net Assets, Total equity and liabilities or the Company and Consolidated Statements of Comprehensive Income. 21 Approval of the audited consolidated financial statements for the financial year ended 31 May 2020 These audited consolidated financial statements were approved by the Board of Directors on 30 November 2020. A copy of the audited consolidated financial statements will be available on the Company’s website www.conroygoldandnaturalresources.com and will be available from the Company’s registered office at 3300 Lake Drive, Citywest Business Campus, Dublin 24, D24 TD21, Ireland. 54 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc 55 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc56 Annual Report and Consolidated Financial Statements 2020 Conroy Gold and Natural Resources Plc

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