Registered number: 1570939
GEORGIAN MINING CORPORATION
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2018
GEORGIAN MINING CORPORATION
CONTENTS
Company Information
Chairman’s Report
Directors’ Report
Statement of Directors’ Responsibilities
Corporate Governance Report
Independent Auditor’s Report
Consolidated Statement of Financial Position
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Shareholders’ Equity
Consolidated Statement of Cash flows
Notes to the Financial Statements
Page
2
3
5
9
10
15
18
19
20
21
22
GEORGIAN MINING CORPORATION
COMPANY INFORMATION
Directors
Registered Office
Neil O’Brien (Non-Executive Chairman)
Michael Struthers (Chief Executive Officer)
Gregory Kuenzel (Finance Director)
Laurence Mutch (Non-Executive Director)
Peter Damouni (Non-Executive Director)
Craigmuir Chambers
PO Box 71
Road Town
Tortola
British Virgin Islands
VG1110
Company Number
1570939
Bankers
Nominated Adviser and Broker
Independent Auditor
Solicitors
Solicitors (BVI)
HSBC Bank plc
70 Pall Mall
London
SW1Y 5EZ
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
PKF Littlejohn LLP
Registered Auditor
1 Westferry Circus
Canary Wharf
London
E14 4HD
Hill Dickinson LLP
105 Jermyn Street
St James's
London
SW1Y 6EE
Harney Westwood & Riegels
Craigmuir Chambers
PO Box 71
Road Town, Tortola
British Virgin Islands
VG1110
2
GEORGIAN MINING CORPORATION
CHAIRMAN’S REPORT
Key Achievements
The last twelve months have undoubtedly been a challenging period for the Company as we have continued to try to resolve
the delay in being granted the exploration permit extension within our 30-year mining concession in Georgia. This application
has been in the hands of government since June 2018. A number of governmental changes have occurred which have
hindered resolving the application, including a change in the Prime Minister and cabinet in mid-2018, delays in some new
ministers commencing their roles, and the Presidential elections later in the year. But regardless we continue to be successful
in regularly engaging with senior levels of government, and in raising the profile of the Company in the wider business
community in Georgia.
As a result of these continued delays, the Directors have concluded that the Georgian exploration assets no longer fully meet
the capitalisation criteria under IFRS 6 and have recognised an impairment provision against these assets until the
good standing of the exploration permits is resolved. This impairment will be reversed once the permits have been renewed.
The team in Georgia have continued to add value through desktop work, initially focussed on the Kvemo Bolnisi East (“KBE”)
and West (“KBW”) projects, then moving on to Dambludi and Tsitel Sopeli, and also stepping out to confirm regional datasets
and regional models for more specific drill targeting.
The KBE desktop work was a complete review and revision of the sample data to confirm there were no issues for the data
to be used as the final drill planning dataset and that the final drill plan as proposed was the best infill program to confirm the
new geological model. Wireframes were also revised, focusing on the lithology and metal distributions within the lithologies
and structures. An important aspect is the supergene mineralization and the complex interaction of the various copper species,
and the resulting detailed understanding now provides the highest confidence for resource sign-off.
The KBE work then expanded into a KBW review which assisted the infrastructure study so that early mining of KBE would
not inadvertently sterilize the potential to expand the general Kvemo Bolnisi area prospects. This work led to further remote
sensing geophysics which developed drill targets immediately adjacent to KBE and which, if successful in generating an
expanded resource, would be quickly incorporated into a KBW mining plan in parallel with KBE.
An important aspect of all of the above was integrating the Georgian staff into the detailed technical planning and including
the professional use of software in planning, confirming and presenting data for ground truthing and drill planning.
Work on Tsitel Sopeli focussed on database verification and a detailed line-by-line review of all Soviet and post-Soviet data,
which will be the base for the maiden JORC-compliant resource. This is ongoing as at the date of reporting.
The Dambludi work extended the same data verification reviews to geological modelling, given the combination of available
drilling and underground development assays and geology mapping data. The resulting detailed geological model is a
significant improvement over earlier work, and provided the basis for then investigating how metal distribution is related to
detailed geology, and hence definition of the best value drilling programme going forwards.
Financial Results
During the year, as a result of renegotiating of certain terms within the Joint Venture agreement, including board composition
of the JV company, for accounting purposes the Company was no longer considered to control the JV and as a result the JV
company is no longer consolidated.
As an exploration and development group which has no revenue we are reporting a loss for the twelve months ended 31
December 2018 of £8,785,533 (31 December 2017: loss of £2,382,476). The increase in the loss is largely as a result of the
impairment charge on the Georgian projects and on loans made to the JV of £4,185,028 (2017: £Nil) and a share of loss from
Joint Venture of £3,994,585 (2017: £Nil) in relation to the Georgian assets.
The Group’s cash position at the date of signing this report is £420,000.
Outlook
Beyond the obvious priority of resolving the extraordinary delay in awarding the exploration permit extension, the Company’s
strategy is essentially unchanged, that is:
1. To press ahead with the continued development of the KBE Project through the execution of the detailed work
programme.
2.
In parallel, to validate historical data and further progress target testing and resource development work on the Tsitel
Sopeli and Dambludi projects, and to test other targets in the wider license area. There are over a dozen known targets
with significant resource potential, and we have an excellent opportunity for developing a pipeline of gold-copper projects
all within reach of established processing facilities.
3. Acquiring new assets – The Company has continued to examine other opportunities both in Georgia and within the
regional Tethyan Belt.
3
GEORGIAN MINING CORPORATION
CHAIRMAN’S REPORT
Preliminary plans have been prepared for the development of the KBE, Tsitel Sopeli and Dambludi projects which indicate
the potential to create three new mines in the region within 5-6 years. We are particularly excited about the potential at Tsitel
Sopeli which has the potential to be a world-class gold project, yet historical drilling did not test the highest-grade “bonanza”
gold zones at depth that characterise this type of low-sulphidation epithermal gold system.
Other key elements in the future work programme are the advancement of environmental studies for the KBE project, and
executing a robust CSR programme with local communities and stakeholders.
I would like to thank our Shareholders for their support as well as the Board and Advisors for all their hard work and
commitment during what has been a challenging year. We are excited by the opportunity for Georgian Mining to play a key
role in developing the highly prospective mineral potential of Georgia to the benefit of our Shareholders and the country.
Neil O’Brien
Non-Executive Chairman
28 June 2019
4
GEORGIAN MINING CORPORATION
DIRECTOR’S REPORT
The Directors present their Report, together with the Group Financial Statements and Independent Auditor’s Report, for the
year ended 31 December 2018.
Principal Activities and Business Review
The principal activity of the Group is to implement its mineral exploration strategy to advance projects towards defining a
sufficient in-situ mineral resource to support a detailed feasibility study towards mine development and production.
A detailed review of the business of the Group during the year and an indication of likely future developments may be found
in the Chairman’s Report on pages 3 and 4.
Principal risks and uncertainties are discussed on pages 6 to 9.
Results and Dividends
The loss of the Group for the year ended 31 December 2018 before taxation amounts to £8,785,533 (31 December 2017:
loss of £2,382,476). The increase in the loss is largely as a result of the impairment charge of £4,185,028 (31 December
2017: £Nil) and a share of loss from JV of £3,994,585 (2017: £Nil) in relation to the Georgian assets (Refer Note 9).
The Directors do not recommend the payment of a dividend for the year (31 December 2017: £nil).
Directors & Directors’ Interests
The Directors who served during the year ended 31 December 2018 had the following beneficial interests in the shares of the
Company at year end and as at the date of this Report:
31 December 2018
31 December 2017
Director
Ordinary Shares
Options
Ordinary Shares
Gregory Kuenzel
Martyn Churchouse 1
Peter Damouni
Neil O’Brien
Laurence Mutch
Michael Struthers 2
1 Resigned 17 January 2018
2 Appointed 17 January 2018
597,467
2,500,000
-
407,500
1,650,000
150,000
350,000
-
2,000,000
800,000
1,150,000
2,000,000
347,467
2,600,000
187,500
1,400,000
-
n/a
Options
2,500,000
-
2,000,000
800,000
1,150,000
n/a
Further details on options can be found in Note 15 to the Financial Statements.
Key Performance Indicators (“KPIs”)
The Board monitors the activities and performance of the Group on a regular basis. The Board uses financial indicators based
on budget versus actual to assess the performance of the Group. Until such a time as the Georgian exploration license issue
is resolved, the KPI of most significance to the Group is cash. The indicators set out below will be used by the Board to assess
performance over the period following the settlement of the license issue.
The three main KPIs for the Group are as follows. These allow the Board to monitor costs and plan future exploration and
development activities:
Cash and cash equivalents
Administrative expenses as a percentage of total assets
Exploration costs capitalised
2018
£525,354
202.82%
£287,245
2017
£2,569,997
14.06%
£2,189,076
The reason for the significant increase in the administrative costs as a percentage of total assets is due to the reduced assets
following the impairment of the Group exploration assets in Georgia and relate investment balances. The actual administrative
expense as a total has reduced from the prior year.
This is the sixth complete year of corporate and exploration activity.
5
GEORGIAN MINING CORPORATION
DIRECTOR’S REPORT
Corporate Responsibility
Environmental
Georgian Mining undertakes its exploration activities in a manner that minimises or eliminates negative environmental impacts
and maximises positive impacts of an environmental nature. At present, Georgian Mining is a mineral explorer and developer,
not a mining company. Hence, the environmental impact associated with its activities is minimal. To ensure proper
environmental stewardship on its projects, Georgian Mining conducts certified baseline studies prior to all drill programmes
and ensures that areas explored are properly maintained and conserved.
Health and safety
Georgian Mining operates a comprehensive health and safety programme to ensure the wellbeing and security of its
employees. The control and eventual elimination of all work related hazards requires a dedicated team effort involving the
active participation of all employees. A comprehensive health and safety programme is the primary means for delivering best
practices in health and safety management. This programme is regularly updated to incorporate employee suggestions,
lessons learned from past incidents and new guidelines related to new projects with the aim of identifying areas for further
improvement of health and safety management. This results in continuous improvement of the health and safety programme.
Employee involvement is recognised as fundamental in recognising and reporting unsafe conditions and avoiding events that
may result in injuries and accidents.
The Group has established and published robust corporate health, safety, environmental and community relations policies,
and at the operations level have put into place clear safe operating procedures covering a variety of the Group’s activities.
The active participation of all staff in the development, implementation and further development of these procedures is actively
encouraged.
Principal Risks and Uncertainties
The management of the business and the execution of the Group’s strategy are subject to a number of risks. The principal
business risks affecting the Group are set out below.
Risks are formally reviewed by the Board, and appropriate processes are put in place to monitor and mitigate them. If more
than one event occurs, it is possible that the overall effect of such events would compound the possible adverse effects on
the Group.
Environmental risk
In relation to the Group’s existing projects the environmental impact to date is limited to activities associated with exploration.
The ultimate development of any project into a mining operation will inevitably impact considerably on the local landscape
and communities. These projects sit in an area of considerable natural beauty and therefore there is likely to be opposition to
mining by some parties. This may impact on the cost and/or Group’s ability to sell or move these projects into production.
While the Group believes that its operations and future projects are currently, and will be, in substantial compliance with all
relevant material environmental and health and safety laws and regulations, including relevant international standards, there
can be no assurance that new laws and regulations, or amendments to, or stringent enforcement of, existing laws and
regulations will not be introduced.
Nevertheless, the Group will continue to vigorously apply international standards to the design and execution of any and all
of its activities, including engagement and consultation with local communities, and non-governmental and Governmental
organisations to ensure any impacts of current and future activities are minimised and appropriately managed. The Group
has established a comprehensive suite of health, safety, environmental and community policies which will underpin all future
activities.
Exploration and mining risks
Whilst the Directors endeavour to apply what they consider to be the latest technology to assess potential projects, the
business of exploration for and identification of minerals and metals, in particular gold, is speculative and involves a high
degree of risk. The mineral and metal deposits of any projects acquired by the Group may not contain economically
recoverable volumes of minerals, base metals, precious metals or hydrocarbons of sufficient quality or quantity. Even if there
are economically recoverable deposits, delays in the construction and commissioning of mining projects, risks of non-renewal
or extensions of the licences or other technical difficulties may make the deposits difficult to exploit.
The exploration and development of any project may be disrupted, damaged or delayed by a variety of risks and hazards
which are beyond the control of the Group. These include (without limitation) geological, geotechnical and seismic factors,
environmental hazards, technical failures, adverse weather conditions, acts of God and government regulations or delays.
6
GEORGIAN MINING CORPORATION
DIRECTOR’S REPORT
Exploration is also subject to general industrial operating risks, such as equipment failure, explosions, fires and industrial
accidents, which may result in potential delays or liabilities, loss of life, injury, environmental damage, damage to or destruction
of property and regulatory investigations. The Group may also be liable for the mining activities of previous miners and
previous exploration works. Although the Group intends, itself or through its operators, to maintain insurance in accordance
with industry practice, no assurance can be given that the Group or the operator of an exploration project will be able to obtain
insurance coverage at reasonable rates (or at all), or that any coverage it obtains will be adequate and available to cover any
such claims. The Group may elect not to become insured because of high premium costs or may incur a liability to third parties
(in excess of any insurance cover) arising from pollution or other damage or injury.
Reserve and resource estimates
The Group’s reported reserves and resources are only estimates. No assurance can be given that the estimated reserves
and resources will be recovered or that they will be recovered at the rates estimated. Mineral and metal reserve and resource
estimates are based on limited sampling and, consequently, are uncertain because the samples may not be representative.
Mineral and metal reserve and resource estimates may require revision (either up or down) based on actual production
experience.
Any future reserve and/or resource figures will be estimates and there can be no assurance that the minerals are present, will
be recovered or can be brought into profitable production. Furthermore, a decline in the market price for natural resources
that the Group may discover or invest in could render reserves containing relatively lower grades of these resources
uneconomic to recover.
In the preparations of resources and reserves the Group uses recognised international estimation methods and reporting
standards, such as the Australian JORC Code (2012), or that of the Canadian Institute of Mining standard (CIM, 2010).
Volatility of gold, copper and other commodity prices
Historically, commodity prices (including in particular the price of gold and copper) have fluctuated and are affected by
numerous factors beyond the Group’s control, including global demand and supply, international economic trends, currency
exchange fluctuations, expectations for inflation, speculative activity, consumption patterns and global or regional political
events. The aggregate effect of these factors is impossible to predict. Fluctuations in commodity prices, over the long term,
may adversely impact the returns of the Group’s exploration projects.
A significant reduction in global demand for gold, leading to a fall in gold or copper prices, could lead to a significant fall in the
cash flow of the Group and/or a delay in exploration and production or even abandonment of a project should it prove
uneconomical to develop, which may have a material adverse impact on the operating results and financial condition of the
Group.
Financing
The successful exploration or exploitation of natural resources on any project will require significant capital investment. The
only sources of financing currently available to the Group are through the issue of additional equity capital in the Company or
through bringing in partners to fund exploration and development costs. The Group’s ability to raise further funds will depend
on the success of their investment strategy and acquired operations. The Group may not be successful in procuring the
requisite funds on terms which are acceptable to it (or at all) and, if such funding is unavailable, the Group may be required
to reduce the scope of its investments or anticipated expansion.
Political, economic and regulatory regime
The licences and operations of the Group are in jurisdictions outside the United Kingdom and accordingly there will be a
number of risks which the Group will be unable to control. Whilst the Group will make every effort to ensure it has robust
commercial agreements covering its activities, there is a risk that the Group’s activities will be adversely affected by economic
and political factors such as the imposition of additional taxes and charges, cancellation or suspension of licences and
changes to the laws governing mineral exploration and operations.
The Group’s activities will be dependent upon the grant of appropriate licences, concessions, leases, permits, and regulatory
consents that may be withdrawn or made subject to limitations. There can be no assurance that they will be granted or
renewed or if so, on what terms. There is also the possibility that the terms of any licence may be changed other than as
represented or expected.
Georgia, the current focus of the Group’s activity, offers a stable political framework and actively supports foreign investment.
The country has a well-developed exploration and mining code and proactive support for foreign companies. Through a
programme of proactive engagement with Government at all levels the Group is able to partially mitigate these risks by
establishing professional working relationships.
7
GEORGIAN MINING CORPORATION
DIRECTOR’S REPORT
Dependence on key personnel
The Group is dependent upon its executive management team and various technical consultants. Whilst it has entered into
contractual agreements with the aim of securing the services of these personnel, the retention of their services cannot be
guaranteed. The development and success of the Group depends on its ability to recruit and retain high quality and
experienced staff. The loss of the service of key personnel or the inability to attract additional qualified personnel as the Group
grows could have an adverse effect on future business and financial conditions.
Nevertheless, through programmes of incentivising staff, appropriate succession planning, and good management these risks
can be largely mitigated.
Dependence on JV Partner
The Group’s short term production plans are based on utilising its JV Partner’s existing plant and other infrastructure. The
ability of the Group to move into production in the short term is dependent on being granted access to this infrastructure and
entering into a production and processing agreement with the JV Partner.
Financial Risk Management
The Group’s operations expose it to a variety of financial risks that include the effect of changes in foreign currency exchange
rates, funding risk, credit risk, liquidity risk and interest rate risk. The Group has a risk management programme in place that
seeks to limit the adverse effects on the financial performance of the Group. The Group does not use derivative financial
instruments to manage foreign currency risk and, as such, no hedge accounting is applied.
Details of the Group’s financial risk management policies are set out in Note 3 to the Financial Statements.
Internal Controls
The Board recognises the importance of both financial and non-financial controls and has reviewed the Group’s control
environment and any related shortfalls during the year. Since the Group was established, the Directors are satisfied that,
given the current size and activities of the Group, adequate internal controls have been implemented. Whilst they are aware
that no system can provide absolute assurance against material misstatement or loss, in light of the current activity and
proposed future development of the Group, continuing reviews of internal controls will be undertaken to ensure that they are
adequate and effective.
Going Concern
To continue as a going concern, the Group is reliant on future cash resources. The Directors have a reasonable expectation
that the Group has and will have future access to adequate resources to continue in operational existence for the foreseeable
future and, therefore, continue to adopt the going concern basis in preparing the Annual Report and Financial Statements.
Further details on their assumptions and their conclusion thereon are included in the statement on going concern in Note 0 of
the Financial Statements.
Directors’ and Officers’ Indemnity Insurance
The Group has made qualifying third-party indemnity provisions for the benefit of its Directors and Officers. These were made
during the period and remain in force at the date of this report.
Provision of Information to Auditor
So far as each of the Directors is aware at the time this report is approved:
•
•
there is no relevant audit information of which the Company's auditor is unaware; and
the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that information.
Auditor
PKF Littlejohn LLP has signified its willingness to continue in office as auditor.
This report was approved by the Board on 28 June 2019 and signed on its behalf.
Michael Struthers
Chief Executive Officer
8
GEORGIAN MINING CORPORATION
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with the applicable
law and regulations including the AIM Rules for Companies.
The Directors are required to prepare financial statements for each financial year. The Directors have elected to prepare the
Group’s Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The Directors must not approve the Financial Statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these Financial
Statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material
departures disclosed and explained in the Financial Statements;
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group. They are also responsible
for safeguarding the assets of the Group, and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Group’s website, www.georgianmining.com. The Group is compliant with AIM Rule 26 regarding the Group’s website.
The Directors confirm that they have complied with the above requirements in preparing the Financial Statements.
9
GEORGIAN MINING CORPORATION
CORPORATE GOVERNANCE REPORT
The Board of Georgian Mining Corporation have adopted the QCA Corporate Governance Code (“the Code”) as its code of
corporate governance. The Code is published by the Quoted Companies Alliance (“QCA”) and is available at
www.theqca.com.
The key governance related matters that occurred during the financial year ended 31 December 2018 was the formal adoption
of the QCA code, the resignation of Martyn Churchouse as a Director and the appointment of Michael Struthers as Chief
Executive Officer.
Corporate Governance Report
The QCA Code sets out 10 principles that should be applied. These are listed below together with a short explanation of how
the Group and Company applies each of the principles:
Principle One
Business Model and Strategy
The Board has concluded that the highest medium and long term value can be delivered to its shareholders by the adoption
of a single strategy for the Group . The Group’s strategy is continue to progress the development of its existing projects in
Georgia and on an ongoing basis to evaluate existing and new mineral resource opportunities with a view to potential joint
venture arrangements and/or other corporate activities. The Board implements this by focusing investment into the exploration
of world-class mineralised domains, establishing strict criteria for project selection, utilising industry recognised methods of
exploration and resource development, applying a results-driven approach, actively monitoring operational and financial
performance, measured against deliverable targets and budgets and considering alternative commercial options for projects
which no longer meet the established criteria of the Group.
Principle Two
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The
Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the
opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are
encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the
Company though its website, www.georgianmining.com, and via Michael Struthers, CEO who is available to answer investor
relations enquiries.
Principle Three
Considering wider stakeholder and social responsibilities
The Board recognises that the long term success of the Company is reliant upon the efforts of the employees of the Company
and its contractors, suppliers, regulators and other stakeholders. The Board has put in place a range of processes and
systems to ensure that there is close oversight and contact with its key resources and relationships. For example, all
employees of the Company participate in a structured Company-wide annual assessment process which is designed to ensure
that there is an open and confidential dialogue with each person in the Company to help ensure successful two way
communication with agreement on goals, targets and aspirations of the employee and the Company. These feedback
processes help to ensure that the Company can respond to new issues and opportunities that arise to further the success of
employees and the Company. The Company has close ongoing relationships with a broad range of its stakeholders and
provides them with the opportunity to raise issues and provide feedback to the Company.
Principle Four
Risk Management
In addition to its other roles and responsibilities, the Audit Committee is responsible to the Board for ensuring that procedures
are in place and are being implemented effectively to identify, evaluate and manage the significant risks faced by the
Company. The risk assessment matrix below sets out those risks, and identifies their ownership and the controls that are in
place. This matrix is updated as changes arise in the nature of risks or the controls that are implemented to mitigate them.
The Audit Committee reviews the risk matrix and the effectiveness of scenario testing on a regular basis. The following
principal risks and controls to mitigate them, have been identified:
Activity
Environmental Risk
Risk
Negative environmental
impact of operations
Impact
The ultimate
development of any
project into a mining
operation will inevitably
impact considerably on
the local landscape and
communities
Control(s)
Vigorously apply
international standards to
the design and execution of
any and all of its activities,
including engagement and
consultation with local
communities, and non-
governmental and
Governmental
organisations to ensure any
10
GEORGIAN MINING CORPORATION
CORPORATE GOVERNANCE REPORT
Exploration and Mining
Risk
The ongoing economic
viability of the Company
The mineral and metal
deposits of any projects
acquired by the Group
may not contain
economically recoverable
volumes of minerals,
base metals, precious
metals or hydrocarbons
of sufficient quality or
quantity.
Exploration Permit
Renewal
The Company’s
Exploration permits are
not renewed
Reserve and resource
estimates
Volatility of gold,
copper and other
commodity prices
Mineral and metal
reserve and resource
estimates are based on
limited sampling and,
consequently, are
uncertain because the
samples may not be
representative.
Fluctuations in
commodity prices, over
the long term, may
adversely impact the
returns of the Group’s
exploration projects.
Strategic
Market downturn
The loss of the right to
explore the key assets
could affect the ability of
the Group to continue as
a going concern
Any future reserve and/or
resource figures will be
estimates and there can
be no assurance that the
minerals are present, will
be recovered or can be
brought into profitable
production.
A significant reduction in
global demand for gold,
leading to a fall in gold or
copper prices, could lead
to a significant fall in the
cash flow of the Group
and/or a delay in
exploration and
production or even
abandonment of a
project should it prove
uneconomical to
develop, which may have
a material adverse
impact on the operating
results and financial
condition of the Group.
Change in Macro
economic conditions
impacts of current and
future activities are
minimised and
appropriately managed.
Ongoing monitoring of
results, assessment by
independent experts on
recoverable volumes,
geological, geotechnical
and seismic factors,
environmental hazards,
technical failures, adverse
weather conditions, acts of
God and government
regulations or delays
Proactive engagement with
Government at all levels
In the preparations of
resources and reserves the
Group uses recognised
international estimation
methods and reporting
standards, such as the
Australian JORC Code
(2012) and CIM (2010).
Ongoing monitoring of
economic events and
markets.
Ongoing monitoring of
economic events and
markets.
Financial
Failure to deliver
commerciality
Misappropriation of
Funds
Inability to secure offtake
agreements
Fraudulent activity and
loss of funds
Active marketing and
experienced management
Robust financial controls
and split of duties.
IT Security
Loss of critical financial
data
Regular back up of data
online and locally.
Ability to raise further
capital
The Group may be
required to reduce the
scope of its investments
or anticipated expansion
Ongoing monitoring of
economic events and
markets.
11
GEORGIAN MINING CORPORATION
CORPORATE GOVERNANCE REPORT
Political, economic and
regulatory regime
The licences and
operations of the Group
are in jurisdictions
outside the United
Kingdom and accordingly
there will be a number of
risks which the Group will
be unable to control.
The Group’s activities will
be adversely affected by
economic and political
factors such as the
imposition of additional
taxes and charges,
cancellation or
suspension of licences
and changes to the laws
governing mineral
exploration and
operations.
Proactive engagement with
Government at all levels
The Directors have established procedures, as represented by this statement, for the purpose of providing a system of internal
control. An internal audit function is not considered necessary or practical due to the size of the Company and the close day
to day control exercised by the executive directors. However, the Board will continue to monitor the need for an internal audit
function. The Board works closely with and has regular ongoing dialogue with the Finance Director and the outsourced finance
function and has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems.
Principle Five
A Well Functioning Board of Directors
As at the date hereof the Board comprised, the CEO Michael Struthers, Chairman Neil O’Brien, Finance Director Gregory
Kuenzel and two Non-Executive Directors, Laurence Mutch and Peter Damouni. Details of the current Directors are set out
within Principle Six below. Executive and Non-Executive Directors are subject to re-election at intervals of no more than three
years. The letters of appointment of all Directors are available for inspection at the Company’s registered office during normal
business hours.
The Board meets at least twice per annum. It has established an Audit Committee, Remuneration Committee and AIM
Compliance Committee, particulars of which appear hereafter. The Board has agreed that appointments to the Board are
made by the Board as a whole and so has not created a Nominations Committee. The Board considers that this is appropriate
given the Company’s current stage of operations. It shall continue to monitor the need to match resources to its operational
performance and costs and the matter will be kept under review going forward. Peter Damouni, Neil O’Brien and Laurence
Mutch are considered to be Independent Directors. The Board shall review further appointments as scale and complexity
grows.
The Company shall report annually on the number of Board and committee meetings held during the year and the attendance
record of individual Directors. To date in the current financial year the Directors have a 100% record of attendance at such
meetings. In order to be efficient, the Directors meet formally and informally both in person and by telephone. To date there
have been at least bi-monthly meetings of the Board, and the volume and frequency of such meetings is expected to continue
at this rate.
Michael Struthers
Neil O’Brien
Gregory Kuenzel
Laurence Mutch
Peter Damouni
Meetings Attended
3
3
3
3
3
Meetings eligible to
attend
3
3
3
3
3
Principle Six
Appropriate Skills and Experience of the Directors
The Board currently consists of five Directors and, in addition, the Company has employed the services of Gregory Kuenzel
to act as the Company Secretary. The Company is satisfied that given its size and stage of development, between the
Directors, it has an effective and appropriate balance of skills and experience across technical, commercial and financial
disciplines. The Director’s experience and skills are listed on the Company’s website, www.georgianmining.com.
The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal
or informal.
12
GEORGIAN MINING CORPORATION
CORPORATE GOVERNANCE REPORT
Michael Struthers
Chief Executive Officer
Neil O’Brien
Non-executive Chairman
Member of the Audit, Remuneration and AIM Compliance Committees.
Gregory Kuenzel
Finance Director and Company Secretary
Laurence Mutch
Non-executive Director
Chairman of the Audit Committee and member of the Remuneration Committee and the AIM Compliance Committee.
Peter Damouni
Non-executive Director
Chairman of the Remuneration Committee and the AIM Compliance Committee, member of the Audit Committee.
Principle Seven
Evaluation of Board Performance
Internal evaluation of the Board, the Committees and individual Directors is to be undertaken on an annual basis in the form
of peer appraisal and discussions to determine the effectiveness and performance of the various governance components,
as well as the Directors’ continued independence.
The results and recommendations that come out of the appraisals for the directors shall identify the key corporate and financial
targets that are relevant to each Director and their personal targets in terms of career development and training. Progress
against previous targets shall also be assessed where relevant.
Principle Eight
Corporate Culture
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Company as a
whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the
Board will greatly impact all aspects of the Company as a whole and the way that employees behave. The corporate
governance arrangements that the Board has adopted are designed to ensure that the Company delivers long term value to
its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a
manner that encourages open dialogue with the Board. A large part of the Company’s activities are centred upon what needs
to be an open and respectful dialogue with employees, clients and other stakeholders.
Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully
achieve its corporate objectives. The Board places great import on this aspect of corporate life and seeks to ensure that this
flows through all that the Company does. The directors consider that at present the Company has an open culture facilitating
comprehensive dialogue and feedback and enabling positive and constructive challenge. The Company has adopted, with
effect from the date on which its shares were admitted to AIM, a code for Directors’ and employees’ dealings in securities
which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the
Market Abuse Regulation which came into effect in 2016.
Principle Nine
Maintenance of Governance Structures and Processes
Ultimate authority for all aspects of the Company’s activities rests with the Board, the respective responsibilities of the
Chairman and Chief Executive Officer arising as a consequence of delegation by the Board. The Board has adopted
appropriate delegations of authority which set out matters which are reserved to the Board. The Chairman is responsible for
the effectiveness of the Board, while management of the Company’s business and primary contact with shareholders has
been delegated by the Board to the Chief Executive Officer.
Audit Committee
The Audit Committee comprises Neil O’Brien and Peter Damouni, and Laurence Mutch chairs this committee. This committee
has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the
Company is properly measured and reported. It receives reports from the executive management and auditors relating to the
interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit
Committee shall meet not less than twice in each financial year and it has unrestricted access to the Company’s auditors.
There was 2 Audit Committee meetings held during the year with all committee members in attendance.
13
GEORGIAN MINING CORPORATION
CORPORATE GOVERNANCE REPORT
Remuneration Committee
The Remuneration Committee comprises Neil O’Brien and Laurence Mutch, and Peter Damouni chairs this committee. The
Remuneration Committee reviews the performance of the executive directors and employees and makes recommendations
to the Board on matters relating to their remuneration and terms of employment. The Remuneration Committee also considers
and approves the granting of share options pursuant to the share option plan and the award of shares in lieu of bonuses
pursuant to the Company’s Remuneration Policy.
There was 2 Remuneration Committee meetings held during the year with all committee members in attendance.
AIM Compliance Committee
The AIM Compliance Committee comprises Neil O’Brien and Laurence Mutch, and Peter Damouni chairs this committee. The
AIM Compliance Committee is responsible for the coordinating and monitoring the Company’s regulatory responsibilities
including liaising with the Nomad and the London Stock Exchange as necessary. The purpose of the AIM compliance
committee is to designate responsibility of ensuring best practice and application of the defined corporate governance
procedures. No AIM Compliance Committee meetings were held during the year.
Nominations Committee
The Board has agreed that appointments to the Board will be made by the Board as a whole and so has not created a
Nominations Committee.
Non-Executive Directors
The Board has adopted guidelines for the appointment of Non-Executive Directors which have been in place and which have
been observed throughout the year. These provide for the orderly and constructive succession and rotation of the Chairman
and non-executive directors insofar as both the Chairman and non-executive directors will be appointed for an initial term of
three years and may, at the Board’s discretion believing it to be in the best interests of the Company, be appointed for
subsequent terms. The Chairman may serve as a Non-Executive Director before commencing a first term as Chairman.
In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the
success of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence;
a duty to avoid conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a
proposed transaction or arrangement.
Principle Ten
Shareholder Communication
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The
Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the
opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are
encouraged to attend the Company’s Annual General Meeting.
Investors also have access to current information on the Company though its website, www.georgianmining.com, and via
Michael Struthers, CEO, who is available to answer investor relations enquiries.
The Company shall include, when relevant, in its annual report, any matters of note arising from the audit or remuneration
committees.
Peter Damouni
Non-Executive Director
28 June 2019
14
GEORGIAN MINING CORPORATION
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GEORGIAN MINING CORPORATION
Independent Auditor’s Report to the Members of Georgian Mining Corporation
Opinion
We have audited the group financial statements of Georgian Mining Corporation (the ‘group’) for the year ended 31 December
2018 which comprise the Consolidated Statement of Financial Position, the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Changes in Shareholders’ Equity, the Consolidated Cash Flow Statement and notes
to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
In our opinion, the group financial statements:
•
•
give a true and fair view of the state of the group’s affairs as at 31 December 2018 and of its loss for the year then
ended; and
have been properly prepared in accordance with IFRSs as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard 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.
Material uncertainty relating to going concern
We draw attention to Note 2.4 in the financial statements, which states that the group continues negotiations with the Georgian
authorities with regards to the ongoing good standing of the exploration permits held within the 30 year Mining Licence. This
has resulted in an impairment to the carrying value of the Georgian exploration asset of £4,185,028 and a share of loss from
JV of £3,994,585. Whilst the directors have indicated their confidence in retaining the licenses in good standing, if it is not
approved, it will have a serious impact on the group’s ability to raise future funds, which will be required in the short to medium
term. It may also restrict the ability of the group to undertake further exploration activity in Georgia. As stated in Note 2.4,
these events or conditions, along with the other matters as set forth in Note 9, indicate that a material uncertainty exists that
may cast significant doubt over the group’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Our application of materiality
Group
materiality
2018
Group
materiality
2017
£110k
£230k
Basis for materiality
10% of loss before tax (2017:
2% of net assets)
The benchmark for our calculation of materiality has changed from that applied in 2017. We now consider loss before tax to
be the most significant determinant of the group’s financial position and performance used by shareholders as opposed to
net assets. This is due to the significant impairment made to the assets of the Group in the year and their derecognition from
a previously controlled subsidiary to a joint arrangement.
The group was audited to a level of materiality of £110k, with performance materiality being £88k. We apply the concept of
materiality both in planning and performing our audit, and in evaluating the effect of misstatements. At the planning stage,
materiality is used to determine the financial statement areas that are included within the scope of our audit and the extent of
sample sizes during the audit. This is updated accordingly during fieldwork and completion dependent on adjustments made
during the audit.
An overview of the scope of our audit
In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular we looked at areas involving significant accounting estimates and judgements by the directors and considered
future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including
among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement
due to fraud.
15
GEORGIAN MINING CORPORATION
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GEORGIAN MINING CORPORATION
Of the 5 reporting components of the group, a full scope audit was performed on the complete financial information of 2
components and, for the other components, a limited scope review was performed because they were not material to the
group.
The audit of the 5 reporting components of the group was principally performed in London, conducted by PKF Littlejohn LLP
using a team with relevant experience of auditing exploration and publicly listed entities.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Key Audit Matters
How the scope of our audit responded to the key audit matter
Carrying value of investments, IFRS 6 related
assets
carried in the consolidated balance sheet (See
note 9)
We have discussed the local audited financial statements of
Georgian Copper and Gold JSC with the local auditors and their
audit opinion thereon. The local auditors have fully impaired the
exploration assets in GCG.
There is a risk that the carrying value of the
Georgian exploration assets within the Joint
Venture, including all IFRS 6 related assets held
by its parent may be permanent if the good
standing of the licenses are not resolved
We have recalculated the share of loss from the joint venture to
ensure this is accurately reflected in the Group financial statements.
The financial statements show an impairment charge of £4,185k
and a share of loss from JV of £3,995k as a result of the uncertainty
around the good standing of the licenses as discussed below.
the Group’s
In addition, the underlying value of the
investment in the subsidiary that owns the joint
venture is directly related as any recoverability
is directly
of
dependent on the exploration assets and
ongoing activities within the Georgian Joint
Venture that is owned by one of the Group’s
subsidiaries.
investment
The underlying assets of the investments are exploration assets
under IFRS 6. We have obtained and reviewed the directors’
impairment assessment of intangible assets which considered the
areas listed as indicators of impairment under IFRS 6. Our work
included the following:
• Discussed the current position of the ongoing license
negotiations in Georgia;
• Reviewing key external
impairment;
reports
for
indicators of
• Considering the group’s future plans for the exploration
projects to ensure further activity and expenditure thereto
was planned; and
• Considering whether there were any indicators that the
carrying amount of capitalised expenditure was not
recoverable.
During our review of the 30-year mining licence (which is still held
by GCG), and from discussions with management, it was noted that
within this overall licence exists a requirement for separate staged
approvals for continued exploration at named deposits and within
the wider licence area. A number of the exploration permits within
the group’s licence area have now expired and the group, along
with its JV partner, Caucasian Mining Group, continue a process of
negotiating extensions to these exploration periods with the Mining
Agency, within the Ministry of Economics and Sustainable
Development in Georgia. There has been no progress on this
negotiation since the 2017 Annual Report and at the date of this
report it is still unclear as to whether the license renewal will be
granted. The Group has suspended exploration activity as agreed
with the Georgian Mining Agency. Further details are disclosed in
Note 9.
Due to the high degree of uncertainty of the extensions being
approved, and the drawn-out period of negotiations, the Directors’
have concluded that the Georgian exploration assets no longer fully
meet the capitalisation criteria under IFRS 6 and have recognised
an impairment provision against these assets until the good
standing of the exploration permits is resolved.
16
GEORGIAN MINING CORPORATION
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GEORGIAN MINING CORPORATION
Other connected Georgian related IFRS 6 assets
We have obtained and reviewed
impairment
assessment of the carrying value of these assets and have
discussed with management the basis for impairment.
the Directors
The Group’s investment in GMC Investments Limited, together with
the carrying value of the intangible IFRS 6 assets and all related
assets, have also been fully impaired by the Directors as their
recoverability is dependent on the success of the Georgian
exploration assets which have been impaired as noted above. If the
Good Standing of the exploration permits is not resolved, this
impairment is likely to be permanent.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information. Our opinion on the group financial statements
does not cover the other information and 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 statement of directors’ responsibilities, the directors are responsible for the preparation of the
group financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the group financial statements, the directors are responsible for assessing the group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the entity’s members, as a body, in accordance with our engagement letter dated 18 April 2018.
Our audit work has been undertaken so that we might state to the entity’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 entity and the entity's members as a body, for our audit work, for this report, or for the
opinions we have formed.
Zahir Khaki (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Registered Auditor
28 June 2019
17
1 Westferry Circus
Canary Wharf
London E14 4HD
GEORGIAN MINING CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2018
Non-Current Assets
Property, plant and equipment
Investment in joint venture
Intangible assets
Current Assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Current Liabilities
Trade and other payables
Total Liabilities
Net Assets
Equity attributable to owners of the Parent
Share capital
Share premium
Reverse acquisition reserve
Other reserves
Retained losses
Total equity attributable to owners of the Parent
Non-controlling interest
Total Equity
Note
8
22
9
10
11
12
13
13
13
Group
2018
£
34,042
-
-
34,042
141,105
525,354
666,459
700,501
242,701
242,701
242,701
457,800
2017
£
162,535
-
10,472,718
10,635,253
381,555
2,569,997
2,951,552
13,586,805
413,080
413,080
413,080
13,173,725
-
-
38,904,337
38,880,612
(18,845,147)
(18,845,147)
136,020
384,099
(19,737,410)
(11,033,204)
457,800
-
9,386,360
3,787,365
457,800
13,173,725
The Financial Statements were approved and authorised for issue by the Board of Directors on 28 June 2019 and were signed
on its behalf by:
Gregory Kuenzel
Finance Director
18
GEORGIAN MINING CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
As at 31 December 2018
Continuing Operations
Revenue
Cost of sales
Gross profit
Administration expenses
Loss on deconsolidation of subsidiary
Other gains / (losses)
Impairment of intangible assets and amounts due from joint
venture
Operating Loss
Finance income
Share of net loss of joint venture accounted for using equity
method
Loss before Taxation
Income tax
Loss for the year
Loss attributable to:
- owners of the Parent
- non-controlling interests
Loss for the year
Other Comprehensive Income:
Note
6
7
23
15
9,10
18
22
19
Group
Year ended 31
December 2018
Year ended 31
December 2017
£
£
213,265
-
213,265
(1,420,729)
(265,094)
866,638
(4,185,028)
-
-
-
(1,909,711)
(472,870)
-
(4,790,948)
(2,382,581)
-
(3,994,585)
105
-
(8,785,533)
(2,382,476)
-
-
(8,785,533)
(2,382,476)
(8,774,021)
(11,512)
(2,260,603)
(121,873)
(8,785,533)
(2,382,476)
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations
448,800
(345,659)
Total Comprehensive Income
Attributable to:
- owners of the Parent
- non-controlling interests
Total Comprehensive Income
(8,336,733)
(2,728,135)
(8,542,591)
(2,875,242)
205,858
147,107
(8,336,733)
(2,728,135)
Earnings per share (pence) from continuing operations
attributable to owners of the Parent – Basic & Diluted
20
(7.647)
(2.232)
The Notes on pages 22 to 42 form part of these Financial Statements.
19
GEORGIAN MINING CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31 December 2018
Share
premium
£
33,653,27
3
-
-
-
5,463,941
(236,602)
-
5,227,339
38,880,61
2
38,880,61
2
-
-
-
As at 1 January 2017
Loss for the year
Other comprehensive
income
Exchange differences on
translating foreign
operations
Total comprehensive
income for the year
Transactions with owners
Issue of ordinary shares
Issue costs
Share Option charge
Total transactions with
owners
As at 31 December 2017
As at 1 January 2018
Loss for the year
Other comprehensive
income
Exchange differences on
translating foreign
operations
Total comprehensive
income for the year
Transactions with owners
Issue of ordinary shares
23,725
Share Option charge
Expiry of share options
Deconsolidation of Georgian
Copper and Gold
Total transactions with
owners
As at 31 December 2018
-
-
-
23,725
38,904,33
7
Attributable to Equity Shareholders
Reverse
acquisition
reserve
Other
reserves
£
£
Retained
losses
£
Non-
controllin
g interest
£
Total
£
(18,845,147)
838,470
(8,772,601)
6,873,995
3,640,258
(2,260,603)
(2,260,603)
(121,873)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(614,639)
-
(614,639)
268,980
(345,659)
(614,639)
(2,260,603)
(2,875,242)
147,107
-
-
160,268
160,268
-
-
-
-
5,463,941
(236,602)
160,268
5,387,607
-
-
-
-
(18,845,147)
384,099
(11,033,204)
9,386,360
3,787,365
(18,845,147)
384,099
(11,033,204)
9,386,360
3,787,365
-
(8,774,021)
(8,774,021)
(11,512)
231,430
-
231,430
217,370
448,800
231,430
(8,774,021)
(8,542,591)
205,858
-
(12,634)
(69,647)
-
168
69,647
23,725
(12,466)
-
-
-
-
(397,228)
-
(397,228)
(3,993,223)
-
(479,509)
69,815
(385,969)
(3,993,223)
(18,845,147)
136,020
(19,737,410)
457,800
-
457,800
Total
equity
£
10,514,25
3
(2,382,476
)
(2,728,135
)
5,463,941
(236,602)
160,268
5,387,607
13,173,72
5
13,173,72
5
(8,785,533
)
(8,336,733
)
23,725
(12,466)
-
(4,390,451
)
(4,379,192
)
The Notes on pages 22 to 42 form part of these Financial Statements.
20
Note
Group
2018
£
2017
£
(8,785,533)
(2,382,476)
12,446
-
3,994,585
265,094
23,092
4,185,028
90,845
141,058
(889,814)
160,268
57,061
-
-
35,593
-
34,650
106,960
(12,176)
(963,199)
(2,000,120)
-
(801,929)
(2,815)
(287,245)
(13,180)
-
(70,400)
(2,189,076)
-
(1,105,169)
(2,259,476)
23,725
-
23,725
(2,044,643)
2,569,997
525,354
5,406,881
(236,602)
5,170,279
910,683
1,659,314
2,569,997
GEORGIAN MINING CORPORATION
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2017
Cash flows from operating activities
Loss before taxation
Adjustments for:
Share option expenses
Share based payments
Share of loss on joint venture
Loss on deconsolidation of Georgian Copper & Gold
Depreciation
Impairment of intangible asset
Decrease/ (increase) in trade and other receivables
Increase in trade and other payables
Foreign exchange
Net cash used in operating activities
Cash flows from investing activities
Interest received
Loans granted to joint venture partners
Purchase of property, plant & equipment
Additions to exploration and evaluation intangible
Decrease in cash on deconsolidation
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of share issue
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
11
The Notes on pages 22 to 42 form part of these Financial Statements.
21
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
ACCOUNTING POLICIES
1. General Information
The principal activity of Georgian Mining Corporation (“the Company”) and its subsidiaries (together “the Group”) is to
implement its mineral exploration strategy to advance projects towards defining a sufficient in-situ mineral resource to support
a detailed feasibility study towards mine development and production.
The Company’s shares are traded on AIM, a market operated by the London Stock Exchange. The Company is incorporated
in the British Virgin Islands and domiciled in the United Kingdom.
The address of its registered office is Craigmuir Chambers, PO Box 71, Road Town, Tortola, BVI.
2. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these Financial Statements are set out below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
2.1 Basis of Preparation of Financial Statements
The Group Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union applicable to companies
under IFRS. The Group Financial Statements have been prepared under the historical cost convention.
The Financial Statements are presented in UK Pounds Sterling rounded to the nearest pound.
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Group’s Accounting Policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
Financial Statements, are disclosed in Note 0.
2.2 Changes in accounting policy and disclosures
(a) New and amended standards mandatory for the first time for the financial periods beginning on or after 1 January 2018
As of 1 January 2018 the Group has adopted IFRS 9 and IFRS 15.
The Group adopted IFRS 9, Financial Instruments (‘IFRS 9’), which replaced IAS 39, Financial Instruments: Recognition and
Measurement. IFRS 9 addresses the classification, measurement and recognition of financial assets and liabilities.
The Group reviewed the financial assets and liabilities reported on its Statement of Financial Position and completed an
assessment between IAS 39 and IFRS 9 to identify any accounting changes. The financial assets subject to this review were
trade and other receivables and financial assets held at fair value through profit or loss. The financial liabilities subject to this
review were the trade and other payables. Based on this assessment of the classification and measurement model, there
were no changes to classification and measurement other than changes in terminology.
IFRS 15 requires an expected quantitative impact of the application of IFRS 15 to be included within the financial statements.
Management service income recognition is not considered to change as a result of the transition to IFRS 15. The Group has
no other revenue sources.
Of the other IFRSs and IFRICs adopted in 2018, none have had a material effect on future Groups Financial Statements.
(b) New standards, amendments and Interpretations in issue but not yet effective or not yet endorsed and not early adopted
22
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
Standards, amendments and interpretations that are not yet effective and have not been early adopted are as follows:
Standard
IFRS 16
IFRS 9 (Amendments)
IAS 28 (Amendments)
2015-2017 Cycle
IFRS 3 (Amendments)
Impact on initial application
Leases
Prepayment features with negative
compensation
Long term interests in associates and joint
ventures
Annual improvements to IFRS Standards
Business combinations
Effective date
1 January 2019
1 January 2019
1 January 2019
1 January 2019
*1 January 2020
*subject to EU endorsement
Of the other IFRSs and IFRICs, none are expected to have a material effect on future Group financial statements.
2.3 Basis of Consolidation
The Group Financial Statements consolidate the Financial Statements of Georgian Mining Corporation and the financial
statements of all of its subsidiary undertakings made up to 31 December 2018.
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. Where an entity does not have returns, the Group’s power over the investee is assessed as to whether control
is held. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated
from the date that control ceases. Below is a summary of subsidiaries of the Group:
Name of subsidiary
Place of
business
Parent company
Registered capital
Share capital
held
Principal activities
Kibe Investments No.2
Limited
British Virgin
Islands
Georgian Mining
Corporation
Ordinary shares
US$12
100%
Dormant
Noricum Gold AT
GmbH
GMC Investments
Limited
European Mining
Services Limited
Austria
Kibe Investments
No.2 Limited
Ordinary shares
€35,000
100%
Exploration
British Virgin
Islands
Georgian Mining
Corporation
Ordinary shares
US$1
100%
Dormant
United
Kingdom
Georgian Mining
Corporation
Ordinary shares
£1
100%
Mining Services
Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated.
Profits and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
On 18 March 2018, the Group entered into a Deed of Variation with its joint venture partner Georgian Copper & Gold. As a
result, the Company lost control of Georgian Copper & Gold and it was deconsolidated from the financial statements as at
the date of the Deed of Variation.
The Directors remain confident that this exploration permit extension will be granted in due course however, as a result of this
process having been ongoing now for over 12 months, the Directors have taken the decision that in order to comply with the
requirements of IFRS 6, Exploration for and Evaluation of Mineral Resources, to fully impair the carrying value of the Georgian
exploration assets as at 31 December 2018. IFRS 6 includes certain triggers that prima facie, indicate that an impairment
should be considered. One of these triggers is “The period for which the entity has the right to explore in the specific area has
expired during the period, or will expire in the near future, and is not expected to be renewed.” While the Directors are still
confident that the renewal will be forthcoming, it has been deemed that the prudent and conservative approach given the
extended delay, is to fully impair the carried forward exploration and evaluation asset. This has resulted in an impairment
charge of approximately £4.2 million and a share of loss from JV of £4 million for the financial year ended 31 December 2018.
23
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
2.4 Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are
set out in the Chairman’s Report from page 3. In addition, Note 3 to the Financial Statements includes the Group’s objectives,
policies and processes for managing its capital; its financial risk management objectives; and details of its exposure to credit
and liquidity risk.
The Financial Statements have been prepared on a going concern basis. Although the Group’s assets are not generating
steady revenue streams, an operating loss has been reported and an operating loss is expected in the 12 months subsequent
to 31 December 2018, the Directors believe that the Group has sufficient funds to meet its immediate working capital
requirements and undertake its targeted operating activities over the next 12 months from the date of approval of these
Financial Statements. Whilst the negotiations to extend the exploration permits are ongoing, the Group has ceased exploration
work in Georgia and reduced expenditure to preserve cash in the short term.
The Group has financial resources which, the Directors believe, will be sufficient to fund the Group’s committed expenditure
both operationally and on specific exploration projects for the next 12 months. However, in order to complete other exploration
work, including additional exploration and development subsequent to the expected renewal of the exploration permit, as well
as additional work over the life of existing projects and also to meet minimum spend requirements for existing projects after
12 months from the date of approval of these Financial Statements, additional funding will be required. In addition, the Group
has significantly reduced its working capital requirements and has ceased expenditure on exploration as existing funds are
not sufficient. The amount of funding required cannot be reliably estimated at the point of approval of these Financial
Statements and the Group will need to raise additional funds either via an issue of equity or through the issuance of debt. The
auditors have included a ‘Material Uncertainty’ paragraph in their audit report as a result of this uncertainty.
The Directors have, in the light of all the above circumstances, a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis
of accounting in preparing the Group Financial Statements.
2.5 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Board of Directors that makes strategic decisions.
Segment results, include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
2.6 Foreign Currencies
(a) Functional and presentation currency
Items included in the Financial Statements of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the ‘functional currency’). The functional currency of the Company is Sterling, the
functional currency of the BVI subsidiaries is US Dollars and the functional currency of the Austrian subsidiary is Euros. The
Financial Statements are presented in Pounds Sterling, rounded to the nearest pound, which is the Company’s functional and
the Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Income Statement.
(c) Group companies
The results and financial position of all the Group’s entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
•
assets and liabilities for each statement of financial position presented are translated at the closing rate at the date
of that statement of financial position;
•
income and expenses for each statement of comprehensive income presented are translated at average exchange
rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions); and
•
all resulting exchange differences are recognised in other comprehensive income where material.
24
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary
items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future,
are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the
income statement as part of the gain or loss on sale.
2.7 Intangible Assets
Exploration and evaluation assets
The Group recognises expenditure as exploration and evaluation assets when it determines that those assets will be
successful in finding specific mineral resources. Expenditure included in the initial measurement of exploration and evaluation
assets and which are classified as intangible assets, relate to the acquisition of rights to explore, topographical, geological,
geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical
feasibility and commercial viability of extracting a mineral resource. Capitalisation of pre-production expenditure ceases when
the mining property is capable of commercial production.
Exploration and evaluation assets are recorded and held at cost.
Exploration and evaluation assets are assessed for impairment annually or when facts and circumstances suggest that the
carrying amount of an asset may exceed its recoverable amount. The assessment is carried out by allocating exploration and
evaluation assets to cash generating units, which are based on specific projects or geographical areas. IFRS 6 permits
impairments of exploration and evaluation expenditure to be reversed should the conditions which led to the impairment
improve. The Group continually monitors the position of the projects capitalised.
Whenever the exploration for and evaluation of mineral resources in cash generating units does not lead to the discovery of
commercially viable quantities of mineral resources and the Group has decided to discontinue such activities of that unit, the
associated expenditures are written off to the Income Statement.
2.8 Property, Plant and Equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment
losses. Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of
each asset over its expected useful economic life on a straight-line basis at the following annual rates:
Computer equipment – 20 to 50% straight line
Field equipment - 20 to 50% straight line
Vehicles – 20% straight line
All assets are subject to annual impairment reviews. An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. The carrying amount of the replacement part is derecognised. All other repairs and maintenance are
charged to the Income Statement during the financial period in which they are incurred.
The asset’s residual value and useful economic lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within
‘Other net gains / (losses)’ in the income statement.
2.9 Impairment of non-financial assets
Assets that have an indefinite useful life, for example, intangible assets not ready to use, are not subject to amortisation and
are tested annually for impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash generating units).
Non-financial assets that suffered impairment (except goodwill) are reviewed for possible reversal of the impairment at each
reporting date.
25
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
2.10 Financial Assets
(a) Classification
The Group classifies its financial assets in the following categories: at amortised cost including trade receivables and other
financial assets at amortised cost, The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at initial recognition.
(b) Recognition and measurement
Amortised cost
Trade and other receivables are recognised initially at the amount of consideration that is unconditional, unless they contain
significant financing components, in which case they are recognised at fair value. The group holds the trade and other
receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently at amortised
cost using the effective interest method.
The group classifies its financial assets as at amortised cost only if both of the following criteria are met:
•
•
the asset is held within a business model whose objective is to collect the contractual cash flows; and
the contractual terms give rise to cash flows that are solely payments of principle and interest.
(c) Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and
all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash
flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual
terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective
of the timing of the default (a lifetime ECL).
For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Group applies
the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group does not track changes in credit
risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases,
the Group may also consider a financial asset to be in default when internal or external information indicates that the Group
is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by
the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows
and usually occurs when past due for more than one year and not subject to enforcement activity.
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial
asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.
(d)
Derecognition
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and
the sum of the consideration received and receivable is recognised in profit or loss. This is the same treatment for a financial
asset measured at FVTPL.
2.11 Financial Liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and
borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial
liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable
transaction costs. The Group’s financial liabilities include trade and other payables.
26
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Trade and other payables
After initial recognition, trade and other payables are subsequently measured at amortised cost using the EIR method. Gains
and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are
derecognised, as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other
comprehensive income.
Derecognition
A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit
or loss and other comprehensive income.
2.12 Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and in hand.
2.13 Taxation
Tax for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that
it relates to items recognised directly in equity. In this case the tax is also recognised directly in other comprehensive income
or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that,
at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted, or substantially enacted, by the end of the reporting period and are expected to
apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries,
associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary
difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.
Generally the group is unable to control the reversal of the temporary difference for associates. Only where there is an
agreement in place that gives the group the ability to control the reversal of the temporary difference not recognised.
Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries,
associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and
there is sufficient taxable profit available against which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the
same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances
on a net basis.
27
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
There has been no tax credit or expense for the period relating to current or deferred tax.
2.14 Share Capital, share premium and other reserves
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity, as a deduction, net of tax, from the proceeds provided there is sufficient premium available. Should sufficient
premium not be available placing costs are recognised in the Income Statement.
Other reserves consists of the share option reserve and the foreign exchange translation reserve.
2.15 Reverse acquisition reserve
The reverse acquisition reserve arose on the acquisition of Kibe Investments No. 2 Limited in 2010. There has been no
movement in the reserve since that date.
2.16 Share Based Payments
The Group operates a number of equity-settled share-based schemes, under which the entity receives services from
employees or third party suppliers as consideration for equity instruments (shares, options and warrants) of the Group. The
Group may also issue warrants to share subscribers as part of a share placing. The fair value of the equity-settled share
based payments is recognised as an expense in the income statement or charged to equity depending on the nature of the
service provided or instrument issued. The total amount to be expensed or charged in the case of options is determined by
reference to the fair value of the options or warrants granted:
•
•
•
including any market performance conditions;
excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales
growth targets, or remaining an employee of the entity over a specified time period); and
including the impact of any non-vesting conditions (for example, the requirement for employees to save).
In the case of shares and warrants the amount charged to the share premium account is determined by reference to the fair
value of the services received if available. If the fair value of the services received is not determinable the shares are valued
by reference to the market price and the warrants are valued by reference to the fair value of the warrants granted as described
previously.
Non-market vesting conditions are included in assumptions about the number of options or warrants that are expected to vest.
The total expense or charge is recognised over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options
that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original
estimates, if any, in the income statement or equity as appropriate, with a corresponding adjustment to another reserve in
equity.
When the warrants or options are exercised, the Company issues new shares. The proceeds received, net of any directly
attributable transaction costs, are credited to share capital (nominal value) and share premium when the warrants or options
are exercised.
2.17 Operating Leases
Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor
are classified as operating leases. Operating lease payments are charged to the income statement on a straight-line basis
over the period of the respective leases.
2.18 Revenue Recognition
Revenue is recognised in respect of amounts recharged to project strategic partners in accordance with their contractual
terms. Revenue is also generated from management and consulting services to third parties.
The Group derives revenue from the transfer of services overtime and at a point in time in the service lines detailed below.
Revenues from external customers come from consulting services.
The Group provides management services to subsidiary undertakings for a fixed monthly fee. Revenue from providing
services is recognised in the accounting period in which the services are rendered. Efforts to satisfy the performance obligation
are expended evenly throughout the performance period and so the performance obligation is considered to be satisfied
evenly over time.
28
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
2.19 Finance Income
Finance income consists of bank interest on cash and cash equivalents which is recognised using the effective interest rate
method.
3. Financial Risk Management
3.1 Financial Risk Factors
The Group’s activities expose it to a variety of financial risks being market risk (including, interest rate risk, currency risk and
price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
Market Risk
(a) Foreign currency risks
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the USD and Euros against the UK pound. Foreign exchange risk arises from future commercial transactions,
recognised assets and liabilities and net investments in foreign operations. The Group negotiates all material contracts for
activities in relation to its subsidiary in USD and Euros. The Directors will continue to assess the effect of movements in
exchange rates on the Group’s financial operations and initiate suitable risk management measures where necessary.
(b) Price risk
The Group is not exposed to commodity price risk as a result of its operations, which are still in the exploration phase. Other
than insignificant consulting revenue, the only revenue relates to revenue charged to the joint venture JSC Georgian Copper
& Gold. The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature.
The Group has no exposure to equity securities price risk, as it has no listed equity investments.
(c) Interest rate risk
As the Group has no borrowings, it is not exposed to interest rate risk on financial liabilities. The Group’s interest rate risk
arises from its cash held on short-term deposit, which is not significant.
Credit Risk
Credit risk arises from cash and cash equivalents as well as outstanding receivables. Management does not expect any
losses from non-performance of these receivables.
The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board. No credit limits
were exceeded during the reporting period, and management does not expect any losses from non-performance by these
counterparties.
The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.
Liquidity Risk
In keeping with similar sized mineral exploration groups, the Group’s continued future operations depend on the ability to
raise sufficient working capital through the issue of equity share capital. The Directors are confident that adequate funding
will be forthcoming with which to finance operations. Controls over expenditure are carefully managed. In May 2019, the
Company raised £380,000 which will fund the Group for the next 12 months. Controls over expenditure are carefully managed.
3.2 Capital Risk Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, in order
to provide returns for shareholders and to enable the Group to continue its exploration and evaluation activities. The Group
has no debt at 31 December 2018 and defines capital based on the total equity of the Company being £943,052. The Group
monitors its level of cash resources available against future planned exploration and evaluation activities and may issue new
shares in order to raise further funds from time to time.
29
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Critical Accounting Estimates and Judgements
The preparation of the Group Financial Statements in conformity with IFRSs requires Management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of expenses during the year. Actual results may vary from the
estimates used to produce these Financial Statements.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
Significant items subject to such estimates and assumptions include, but are not limited to:
Impairment of exploration and evaluation costs
Exploration and evaluation costs have a carrying value at 31 December 2018 of £Nil (2017: £10,472,718): refer to Note 9 for
more information. The Group has a right to renew exploration permits and the asset is only depreciated once extraction of the
resource commences. Management tests annually whether exploration projects have future economic value in accordance
with the accounting policy stated in Note 2.7. Each exploration project is subject to an annual review by either a consultant or
senior company geologist to determine if the exploration results returned during the year warrant further exploration
expenditure and have the potential to result in an economic discovery. This review takes into consideration the expected
costs of extraction, long term metal prices, anticipated resource volumes and supply and demand outlook. In the event that
a project does not represent an economic exploration target and results indicate there is no additional upside, a decision will
be made to discontinue exploration.
The Directors have reviewed the estimated value of each project prepared by management and have concluded that the
project in Georgia be impaired to £Nil. The Georgian exploration asset was impaired in full due to the ongoing exploration
licence negotiations. The Group applied for an extension to this licence on 10 October 2017 however are still awaiting an
outcome. As a result of the uncertainty the Directors have determined its appropriate to impair the asset to £Nil until further
notice.
Share based payment transactions
The Group has made awards of options and warrants over its unissued share capital to certain Directors and employees as
part of their remuneration package. Certain warrants have also been issued to shareholders as part of their subscription for
shares and to suppliers for various services received.
The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future
dividend yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in
Note 15.
Control of Georgian Copper and Gold
Judgement is required to determine whether the Group has control over its subsidiaries. Georgian Copper and Gold is 50%
owned but management are of the opinion that they no longer have control of the entity. On 18 March 2018, the Company
entered into a Deed of Variation with its joint venture partner in Georgian Copper & Gold (“GCG”) in relation to the ongoing
operations of the operating company, future work programmes and budgets. As a result, both shareholders now have equal
representation on the board of GCG and therefore, from that date, the subsidiary was derecognised and the ongoing 50%
ownership accounted for as a joint venture in accordance with IFRS 11.
Carrying value of investment in joint ventures
As above, during the year the Group lost control of GCG and accounted for the joint arrangement relationship as an investment
in joint venture. On initial recognition on the 18 March 2018, the carrying value of the investment in joint venture was
£3,994,585. The equity accounting for the joint venture meant that the share of loss of the joint venture was in excess of the
carrying value and as such the amount was written down to £Nil. No liability has been recognised for the loss in excess of the
carrying value as the Group does not have an obligation to pay for these losses.
5. Segmental Information
As at 31 December 2018, the Group operates in three geographical areas, the UK, Austria and Georgia. The Parent Company
operates in one geographical area, the UK. Activities in the UK are mainly administrative in nature whilst activities in Austria
relate to exploration and evaluation work. As from 18 March 2018, the Group no longer has control of Georgian Copper and
Gold (refer to note 4) and as a result the below segmental information only includes information from this entity up until this
date. The reports used by the chief operating decision maker are based on these geographical segments.
The Group generated revenue of £213,265 during the year ended 31 December 2018 (2017: £nil).
30
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
2018
Revenue
Administrative expenses
Other gains/(losses)
Impairment of intangible assets
Loss on deconsolidation of subsidiary
Share of loss from Georgian Copper and
Gold
Loss from operations per reportable segment
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
Georgia
£
-
(36,518)
800,241
(3,706,915)
(265,094)
(3,994,585)
(7,202,871)
-
1
-
UK
£
213,265
(1,383,331)
66,397
Total
£
213,265
(1,420,729)
866,638
(478,113)
(4,185,028)
Austria
£
-
(880)
-
-
-
-
-
(880)
-
8,626
5,246
(1,581,782)
2,815
691,874
237,455
(265,094)
(3,994,585)
(8,785,533)
2,815
700,501
242,701
Total
£
-
(1,909,711)
(472,870)
(2,382,581)
2,259,476
13,586,805
413,080
Segment assets and liabilities are allocated based on geographical location.
2017
Revenue
Administrative expenses
Other gains/(losses)
Georgia
£
-
(271,422)
(312,742)
Austria
£
-
(45,101)
-
UK
£
-
(1,593,188)
(160,128)
Loss from operations per reportable segment
(584,164)
(45,101)
(1,753,316)
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
2,023,197
10,488,140
35,792
-
11,740
9,225
236,386
3,086,925
368,063
A reconciliation of adjusted loss from operations per reportable segment to loss before tax is provided as follows:
Loss from operation per reportable segment
- Finance income
Loss for the year before taxation
6. Revenue
Operational services
Geological consulting services
2018
£
2017
£
(8,785,533)
(2,382,581)
-
105
(8,785,533)
(2,382,476)
2018
£
207,575
5,690
213,265
2017
£
-
-
-
Operational services are services are recharged by European Mining Services which include salaries, sample preparation
and assay costs and consulting fees. All operational services were invoiced to Georgian Copper and Gold JSC and as of 18
March 2018 they are no longer eliminated on consolidation.
31
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
7. Expenses by Nature
Directors’ fees
Employee salaries
Fees payable to the Company’s auditors for the audit of the Parent
Company and group financial statements
Professional, legal and consulting fees
Accounting related services
Insurance
Office and administrative expenses
Depreciation
Travel and subsistence
AIM related costs including investor relations
Share option expense
Operations related costs (Georgia)
Other expenses
Total administrative expenses
8. Property, Plant and Equipment
Cost
As at 1 January 2017
Additions
Exchange differences
As at 31 December 2017
Additions
Disposals
Disposals on deconsolidation
Exchange differences
As at 31 December 2018
Depreciation
As at 1 January 2017
Charge for the year
Exchange differences
As at 31 December 2017
Charge for the year
Disposals
Disposals on deconsolidation
Exchange differences
As at 31 December 2018
Net book value as at 31 December 2017
Net book value as at 31 December 2018
32
2018
£
100,323
48,273
40,000
294,841
11,147
35,057
85,822
23,092
80,019
191,167
12,446
400,760
97,782
2017
£
142,750
139,135
42,325
531,744
37,369
31,734
82,027
35,593
184,528
236,662
160,268
213,096
72,480
1,420,729
1,909,711
Motor
Vehicles
£
Field
equipment
£
Computer
equipment
£
Total
£
46,942
14,763
(3,035)
58,670
-
66,253
47,461
45,378
158,573
8,176
70,400
-
(1,656)
(4,691)
113,714
51,898
224,282
-
2,815
2,815
(5,312)
(5,312)
(60,082)
(48,604)
(24,430)
(133,116)
1,412
-
1,143
66,253
574
3,129
25,545
91,798
4,798
9,086
(310)
13,574
1,652
11,032
17,913
-
28,945
14,748
10,775
8,594
(141)
26,605
35,593
(451)
19,228
61,747
6,692
23,092
(15,553)
(6,271)
(5,810)
(27,634)
327
-
45,096
-
112
37,534
84,769
28,719
112
551
20,222
57,756
32,670
162,535
5,323
34,042
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
9. Intangible Assets
Exploration & Evaluation Assets at Cost and Net Book Value
Balance as at 1 January
Additions
Disposal on deconsolidation
Impairment
Foreign currency differences
As at 31 December
2018
£
10,472,718
287,245
(7,857,313)
(3,125,702)
223,052
2017
£
8,612,883
2,189,076
-
(329,241)
-
10,472,718
As part of the acquisition of GMC Investments Limited, the Group entered into a Shareholder Agreement with Caucasian
Mining Group Limited (“CMG”), the partner in JSC Georgian Copper and Gold. The details of the agreement were such that
CMG would transfer the exploration and mining licenses for the Georgian sites into Georgian Copper and Gold, which were
considered to have a fair value of US$6m, while the Group would commit to paying the expenditure requirements on the
operations over a two year period from the date of the licence transfer date of December 2015, which is also US$6m. As a
result, the Group recognised the fair value of the licenses of US$6m, which translated to £4.2m, as an exploration and
evaluation asset.
Exploration projects Georgia are at an early stage of development and as at 31 December 2018, although a JORC (Joint Ore
Reserves Committee) compliant resource estimate is available at Kvemo Bolnisi East, much of the licence area is still subject
to further early stage exploration. The Directors therefore undertook an assessment of the following areas and circumstances
which could indicate the existence of impairment:
• The Group’s right to explore in an area has expired, or will expire in the near future without renewal.
• No further exploration or evaluation is planned or budgeted for.
• A decision has been taken by the Board to discontinue exploration and evaluation in an area due to the absence of a
commercial level of reserves.
• Sufficient data exists to indicate that the book value m not be fully recovered from future development and production.
The application for the extension to the current exploration permit within the 30 year Mining Licence held by Georgian Copper
and Gold JSC, was submitted in June 2018 and the renewal still pending. The Group, along with its JV partner Caucasian
Mining Group, have continued to try to resolve the delay in being granted the exploration permit extension within our 30-year
mining concession in Georgia. This application has been in the hands of government since June 2018. A number of
governmental changes have occurred which have hindered resolving the application, including a change in the Prime Minister
and cabinet in mid-2018, delays in some new ministers commencing their roles, and the Presidential elections later in the
year.
As a result of these continued delays, the Directors have concluded that the Georgian exploration assets no longer fully meet
the capitalisation criteria under IFRS 6 and have recognised an impairment provision against these assets until the good
standing of the exploration permits is resolved.
As the Group is still awaiting an outcome on the exploration extension, the Directors determined it was reasonable to impair
the asset in full until further notice.
33
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
10. Trade and Other Receivables
Trade receivables
VAT receivable
Prepayments
Other receivables
2018
£
39,748
9,610
36,569
55,178
141,105
2017
£
-
180,376
57,287
143,892
381,555
Trade and other receivables are all due within one year. The fair value of all receivables is the same as their carrying values
stated above. These assets, excluding prepayments, are the only form of financial asset within the Group, together with cash
and cash equivalents.
Other receivables relate to amounts owing from the issue of shares.
Following the directors assessment of the Gerogian exploration assets and subsequent impairment, the amount due by the
Group from its joint venture, GCG, of £975,679 was impaired to £nil.
The carrying amounts of the Group‘s trade and other receivables are denominated in the following currencies:
UK Pounds
Euros
Georgian Lari
2018
£
138,811
2,294
-
141,105
2017
£
227,855
1,820
151,880
381,555
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
The Group does not hold any collateral as security.
11. Cash and Cash Equivalents
Cash at bank and in hand
All of the Group’s cash at bank is held with institutions with an AA credit rating.
2018
£
2017
£
525,354
2,569,997
34
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
12. Trade and Other Payables
Trade payables
Other payables
Accrued expenses
Share Capital and Share Premium
2018
£
110,205
2,682
129,814
242,701
2017
£
278,457
9,040
125,583
413,080
On 15 December 2010 the shareholders approved the removal of the Company’s authorised share capital and so there is no
limit on the number of shares the Company is authorised to issue. On that date the shareholders also approved the removal
of the nominal value of the shares, as permitted under local company legislation. As such all amounts raised are considered
to be share premium.
Issued share capital
Group
At 1 January 2017
Issue of new shares – 23 May 2017 (1)
At 31 December 2017
Exercise of warrants – 26 January 2018
At 31 December 2018
(1) Includes issue costs of £236,602
Number of shares
Ordinary
shares
80,424,853
34,149,638
114,574,491
182,500
114,756,991
£
-
-
-
-
-
Share
premium
£
Total
£
33,653,273 33,653,273
5,227,339
5,227,339
38,880,612 38,880,612
23,725
23,725
38,904,337 38,904,337
On 26 January 2018 the Company issued and allotted 182,500 new Ordinary Shares at a price of 13 pence per share following
an exercise of warrants.
13. Other reserves
Foreign currency translation reserve
Share option Reserve
2018
£
(225,384)
361,404
136,020
2017
£
(34,673)
418,772
384,009
Foreign currency translation reserve – the foreign currency translation reserve represents the effect of changes in exchange
rates arising from translating the financial statements of subsidiary undertakings into the Company’s presentation currency.
Share option reserve – the share option reserve represents the fair value of share options and warrants in issue. The amounts
included are recycled to share premium on exercise or recycled to retained earnings on expiry.
35
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
14. Share Based Payments
Warrants and options outstanding at 31 December 2018 have the following expiry dates and exercise prices:
Shares
Grant date
Expiry date
28 January 2016
21 January 2018
1 July 2016
20 July 2016
1 July 2018
20 July 2021
15 November 2016
16 November 2018
30 January 2017
3 March 2022
22 June 2017
30 July 2018
30 July 2018
21 July 2022
26 July 2023
26 July 2023
Exercise
price in £
per share
0.1300
0.1800
0.1400
0.1000
0.1200
0.1825
0.1400
0.2000
2018
2017
-
-
182,500
55,866
5,000,000
5,000,000
-
170,000
1,900,000
1,900,000
3,300,000
3,300,000
1,000,000
1,000,000
-
-
12,200,000 10,608,366
2017 Warrants
2017 Warrants
2018 Warrants
22/06/2017
5 years
17.7p
0.57%
34.43%
-
18.25p
20%
140,043
30/07/2018
5 years
9.35p
0.75%
27.06%
-
14p
20%
8,872
Granted on:
Life (years)
Share price on grant date
Risk free rate
Expected volatility
Expected dividend yield
Exercise price
Marketability discount
Total fair value (£)
Granted on:
Life (years)
Share price on grant date
Risk free rate
Expected volatility
Expected dividend yield
Exercise price
Marketability discount
Total fair value (£)
30/01/2017
5.2 years
8.8p
0.57%
27.06%
-
12p
20%
20,225
2018 Warrants
30/07/2018
5 years
9.35p
0.75%
27.06%
-
20p
20%
3,575
The risk free rate of return is based on zero yield government bonds for a term consistent with the warrant and option life.
36
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
The movement of options and warrants for the year to 31 December 2018 is shown below:
As at 1 January
Granted
Exercised
Expired
Outstanding as at 31 December
Exercisable at 31 December
2018
2018
2017
Weighted
average
exercise
price (£)
0.15
0.17
0.13
0.18
0.15
0.15
Number
10,608,366
2,000,000
(182,500)
(225,866)
12,200,000
12,200,000
Weighted
average
exercise
price (£)
0.14
0.16
-
-
0.15
0.15
Number
5,408,366
5,200,000
-
-
10,608,366
10,608,366
2017
Weighted
average
exercise
price (£)
Number of
shares
Weighted
average
remaining
life
expected
(years)
Weighted
average
remaining
life
contracted
(years)
Weighted
average
exercise
price (£)
Number of
shares
Weighted
average
remaining
life
expected
(years)
Weighted
average
remaining
life
contracted
(years)
0.15
12,200,000
3.252
3.252
0.15
10,608,366
3.923
3.923
Range of
exercise
prices (£)
0.1 - 0.2
The total fair value charged to the statement of comprehensive income for the year ended 31 December 2018 and included
in administrative expenses was £12,446 (2017: £ 160,268).
15. Other (losses)/gains - Net
Net foreign exchange gains / (losses)
Deconsolidation of Georgian Copper and Gold
Other gains/losses
16. Employees
Staff costs (excluding Directors)
Salaries and wages
Social security costs
Pensions
The average monthly number of employees during the year was 4 (2017: 23).
37
Group
2018
£
468,850
397,228
2017
£
(451,125)
-
560
(21,745)
866,638
(472,870)
Group
2018
£
181,251
12,367
1,154
2017
£
139,136
41,091
924
194,772
181,151
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
17. Directors' Remuneration
Executive Directors
Gregory Kuenzel
Martyn Churchouse
Michael Struthers
Non-executive Directors
Neil O’Brien
Peter Damouni
Laurence Mutch
Executive Directors
Gregory Kuenzel
Martyn Churchouse
Non-executive Directors
Michael Hutchinson
Roderick McIllree
Neil O’Brien
Peter Damouni
Laurence Mutch
Tony Frizelle
For the year ended 31 December 2018
Short term
benefits
£
Post Employment
benefits
£
Share based
payment
£
Total
£
30,618
3,730
66,935
33,500
8,333
10,000
153,116
350
14
-
-
82
-
446
-
-
12,447
-
-
-
30,968
3,744
79,382
33,500
8,415
10,000
12,447
166,009
For the year ended 31 December 2017
Short term
benefits
£
Post Employment
benefits
£
Share based
payment
£
Total
£
70,000
125,000
4,166
8,333
21,250
20,000
20,000
9,000
277,749
314
386
-
24
-
141
91
-
956
63,656
-
133,970
125,386
-
-
21,219
42,437
20,190
10,645
4,166
8,357
42,469
62,578
40,281
19,645
158,147
436,852
Of the above director fees, £53,000 (2017: £135,000) has been capitalised in accordance with IAS 38 as exploration and
evaluation related costs and are shown as an intangible addition in the year.
18. Finance Income
Finance income – bank interest
Group
2018
£
-
2017
£
105
38
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
19. Taxation
The tax on the Group’s loss differs from the theoretical amount that would arise using the weighted average tax rate applicable
to the losses of the consolidated entities as follows:
Loss before tax
Tax at the weighted average rate of 9.05% (2017: 19.78%)
Expenditure not deductible for tax purposes
Net tax effect of losses carried forward on which no deferred tax asset
is recognised
Income tax for the year
No charge to taxation arises due to the losses incurred.
Group
2018
£
2017
£
(8,785,533)
(2,382,476)
(795,091)
410,573
(471,254)
23,141
384,518
448,112
-
-
The weighted average applicable tax rate of 9.05% (2017: 19.78%) used is a combination of the 19% standard rate of
corporation tax in the UK, 25% Austrian corporation tax and 0% BVI corporation tax.
The Group has accumulated tax losses of approximately £3,789,000 (2017: £3,404,000) available to carry forward against
future taxable profits. A deferred tax asset has not been recognised because of uncertainty over future taxable profits against
which the losses may be utilised.
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2017 (on 6 September 2016).
These include reductions to the standard rate to reduce the rate to 17% from 1 April 2020.
20. Earnings per Share
The calculation of the total basic loss per share of 7.647 pence (2017: loss 2.232 pence) is based on the loss attributable to
equity owners of the group of £8,774,021 (2017: £2,260,603) and on the weighted average number of ordinary shares of
114,744,492 (2017: 101,288,979) in issue during the period.
In accordance with IAS 33, basic and diluted earnings per share are identical as the effect of the exercise of share options or
warrants would be to decrease the loss per share.
21. Commitments
(a) Work programme commitment
As a result of the continued delay in the renewal of the exploration permit, no work programme has been agreed by the Joint
Venture partners. The Company is committed to funding 50% of the ongoing administrative expenditure of Georgia Copper
and Gold which currently totals approximately $10,000 per month.
(b) Royalty agreements
As part of the contractual arrangement with Kibe No.1 Investments Limited the Group has agreed to pay a royalty on revenue
from gold sales arising from gold mines developed by Noricum Gold AT GmbH and covered by licenses acquired by Kibe
No.1 Investments Limited. Under the terms of the Royalty Agreement between Kibe No.1 Investments Limited and Noricum
Gold AT GmbH, the Group shall pay royalties, based on total ounces of gold sold, equal to US$1 for every US$250 of the
sale price per ounce.
22. Investment in Joint Venture
On 15 March 2018, the Company entered into a Deed of Variation with its joint venture partner in Georgian Copper & Gold in
relation to the ongoing operations of the operating company, future work programmes and budgets. As a result, both
shareholders now have equal representation on the board of GCG and therefore, from that date, the subsidiary was
derecognised and the ongoing 50% ownership accounted for as a joint venture.
39
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
The carrying value of the investment in the joint venture is determined as follows:
Opening balance
Recognised on deconsolidation of subsidiary
Share of loss in joint venture
Forex
As at 31
December 2018
$
-
3,994,585
(3,994,585)
-
-
The joint venture listed below has share capital consisting solely of ordinary shares, which are held by the Group and their
joint venture partner Caucasian Mining Group.
Name of entity
Georgian Copper &
Gold JSC
Address of the registered
office
SI 2017/980
6 Saakadze Descent, 2nd Fl.
Tbilisi 0171, Georgia
% of
ownership
interest
50
Nature of
relationship
Measurement
method
As above
Equity
Commitments and contingent liabilities in respect of joint ventures
The share of loss of the joint venture was £3,994,585. This has been capped at the total value of the investment previously
recognised. The Group has no obligation or commitments to contribute to any losses in excess of the carrying value of the
investment.
Summarised financial information of joint venture
Property, plant and equipment
Cash
Intangibles
Other receivables
Total assets
Trade and other payables
Loan with GMC Investments Limited
Total liabilities
31 December
2018
£
89,371
18,589
4,030
81,537
193,527
82,773
975,679
1,058,452
The joint venture did not generate any revenue in the year. Total costs of £252,334 were incurred including an impairment of
exploration assets of £8,704,377.
23. Deconsolidation of subsidiary
On 18 March 2018 the Group was deemed to no longer have control of subsidiary Georgian Copper and Gold. The Groups
share of the joint venture loss is reported in the profit and loss. Financial information relating to deconsolidation for the period
to the date of disposal is set out below.
Details of deconsolidation of the subsidiary
Carrying amount of net assets upon deconsolidation (see below)
Elimination of non controlling interest
Transfer to Investment in joint venture
Loss on disposal of subsidiary
2018
£
7,722,154
(3,992,663)
(3,994,585)
(265,094)
40
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
The carrying amounts of assets and liabilities as at the date of deconsolidation (18 March 2018) were:
Property, plant and equipment
Cash
Intangibles
Other receivables
Total assets
Trade and other payables
Total liabilities
Net Assets disposed
24. Related Party Transactions
2018
£
105,482
13,180
7,857,313
7,536
7,983,511
(261,357)
(261,357)
7,722,154
Recharges between Georgian Mining Corporation and European Mining Services Limited
During the year Georgian Mining Corporation recharged administrative costs with a total value of £8,395 (2017: £161,654) to
European Mining Services Limited for services rendered to European Mining Services Limited.
Services provided by European Mining Services Limited to JSC Georgian Copper & Gold
During the year European Mining Services Limited provided geological, technical and other professional services with a total
value of £255,428 (2017: £1,040,963) to JSC Georgian Copper and Gold.
Loan from Georgian Mining Corporation to Kibe No.2 Investments Limited
As at 31 December 2018 there were amounts receivable of £4,706 (2017: £3,826) from Kibe No.2 Investments Limited. No
interest was charged on the loans.
Loan from Georgian Mining Corporation to European Mining Services Limited
As at 31 December 2018 there were amounts receivable of £525,028 (2017: £323,152) from European Mining Services
Limited.
All intra-group transactions are eliminated on consolidation.
Other Transactions
Fairholme Consulting Services Ltd, a company in which Gregory Kuenzel is a Director and beneficial owner, was paid a fee
of £26,333 (2017: £46,667) for management and corporate consulting services to the Group. No balance was outstanding at
the year-end.
Silvergate Capital Partners, a company in which Peter Damouni is a Director and beneficial owner, was paid a fee of £16,667
(2017: £33,333) for management and corporate consulting services to the Group. No balance was outstanding at the year-
end.
Laurie Mutch & Associates Ltd, a company in which Laurie Mutch is a Director and beneficial owner, was paid a fee of £15,000
(2017: £20,500) for management and corporate consulting services to the Group. No balance was outstanding at the year-
end.
Greenland Gas and Oil Limited, a company in which Greg Kuenzel is a Director, was paid a fee £nil (2017: £18,600) for
geological information systems consulting services to the Group. No balance was outstanding at the year-end.
Heytesbury Corporate LLP, an entity in which Fairholme Consulting Services Ltd is an officer, and Gregory Kuenzel is a
partner, was paid a fee of £62,440 (2017: £62,740) for accounting services to the Group. At the year-end there was an
outstanding balance of £6,042 (2017: £6,449).
41
GEORGIAN MINING CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
25. Ultimate Controlling Party
The Directors believe there to be no ultimate controlling party.
26. Events after the Reporting Date
On 23 May 2019, the Company raised £380,000 by way of placing and subscription of 19,000,000 new ordinary shares of no
par value at a price of 2p per share.
On 23 May 2019, Peter Damouni subscribed for 500,000 placing shares at 2p per share.
On 23 May 2019, Neil O’Brien, Gregory Kuenzel, Laurence Mutch and Peter Damouni have agreed to completely write off
the their accrued compensation for the past 12 months. Michael Struthers, has agreed to write off part of his compensation
for the past 12 months, The total amount of the write off totals approximately £275,000.
42