Registered number: 1570939
EMPIRE METALS LIMITED (formerly GEORGIAN MINING CORPORATION)
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2019
EMPIRE METALS LIMITED
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
17
18
19
20
21
EMPIRE METALS LIMITED
COMPANY INFORMATION
Directors
Registered Office
Neil O’Brien (Non-Executive Chairman)
Michael Struthers (Chief Executive Officer)
Gregory Kuenzel (Finance Director)
Peter Damouni (Non-Executive Director)
David Ajemian (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
15 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
EMPIRE METALS LTD
CHAIRMAN’S REPORT
As shareholders will be aware, our progress relating to the advancement of our Bolnisi Project in Georgia towards production
was frustrated during the period under review by continuing delays by the government in Georgia regarding the extension of
the exploration permit. Some of the uncertainty relating to this was somewhat alleviated shortly after the year end, in January
2020, when the Company’s joint venture company, Georgian Copper & Gold JSC ('GCG'), in which Empire Metals Limited
(“EEE” or “Empire Metals”) holds a 50% interest, received confirmation of tenure from the National Agency of Mines ('NAM')
for two key deposits in the Bolnisi Project licence area, namely Kvemo Bolnisi East and Dambludi.
The confirmation of tenure over Kvemo Bolnisi East and Dambludi was a significant milestone in the Company’s ongoing
efforts to obtain the extension to the permit in Georgia and marked the culmination of many months of work by the team and
NAM. However, alongside this tenure confirmation, correspondence from NAM confirmed its intention to return the remainder
of the Bolnisi Project licence area, including three further deposits identified by the Company, being Kvemo Bolnisi West,
Tsitel Sopeli and Balichi, to the State. An appeal process is currently underway with the Minister of Economy and Sustainable
Development in Georgia with the objective of GCG securing its rights to the remainder of the licence area. Further updates
regarding the appeal process will be made as appropriate.
As reported in the Final Results for the year ended 31 December 2018, as a result of the previous delays to the confirmation
of tenure over the Georgian exploration assets the Board determined that they did not, at that time, fully meet the capitalisation
criteria under IFRS 6 and an impairment provision was recognised against these assets. As reported above, the confirmation
of tenure over Kvemo Bolnisi East and Dambludi was received post period end and as such, the impairment has not been
adjusted as at year end however, it is expected that a partial write back will be reflected in the Company’s interim accounts
for the half year ended 30 June 2020.
Following the confirmation of tenure over Kvemo Bolnisi East and Dambludi on 28 January 2020, the Company updated its
development schedule for these assets, particularly in respect of Kvemo Bolnisi East, the target which has been the focus of
much of the Company's investment to date. It had been the Company’s objective to re-commence activities at Kvemo Bolnisi
East as soon as possible however, partly due to the various travel and work restrictions necessitated by the COVID-19
pandemic in March 2020, any planned recommencement of work has been postponed. Also, the necessary amendments to
the licence to allow work to re-commence on these two projects are unlikely to be made whilst the current appeal process is
still underway, and this has of course been further delayed by the pandemic. The Board will continue to manage and respond
to the COVID-19 outbreak and will continue to act in the best interests of keeping its employees, contractors and the local
community safe. Further updates relating to the Company’s activities in Georgia will be announced in due course.
Outside of Georgia, the Company has made progress with its strategy to identify compelling new assets through which the
Company can add short term value. Post period end, Empire Metals raised £600,000 by way of an equity placing and
subscription of new ordinary shares with new and existing shareholders in the Company announced on 28 February 2020, to
advance this process.
The Board evaluated a large number of potential targets and narrowed its search down to a small number of opportunities
which it believed met its stringent investment criteria. Following this, on 27 April 2020, EEE announced that it had entered
into a Binding Heads of Agreement with ASX listed Artemis Resources Limited (“Artemis”) to acquire a 41% interest in the
Munni Munni Palladium Project in the West Pilbara, Western Australia and has first right of refusal on a further 29% interest
in the project.
Munni Munni comprises four granted mining leases and an exploration licence covering a 64km2 tenement area. It is the
largest unexploited primary PGE resource in Australia and contains the largest intrusion in the West Pilbara hosting a JORC-
compliant 2004 Resource of 24Mt @ 2.9 g/t Platinum Group Element (PGE) and gold (12.4Mt Measured, 9.8Mt Indicated,
and 1.4Mt Inferred), containing 1,140,000 ounces palladium, 830,000 ounces platinum, 152,000 ounces gold and 76,000
ounces rhodium. The teams at Artemis and Empire Metals are making progress toward the completion of the acquisition and
in the meantime have agreed to commence with the planned drilling programme at the project in order to take advantage of
the current drilling season. The programme is designed to extend primary reef mineralisation and test historical assay grades
from diamond drilling using RC drilling, test for the presence of a second reef below the primary PGE reef, and generate data
that may contribute to a JORC 2012 Mineral Resources Estimate in the future.
The Board is very excited about the opportunity that the Munni Munni Project offers. It satisfies Empire Metal’s objective of
de-risking the Company’s growth strategy by diversifying away from a single jurisdiction investment, combining an exceptional
project with an attractive and mature investment environment, and I look forward to updating shareholders on completion and
further plans for Munni Munni in due course.
Financial Results
As an exploration and development group which has no revenue we are reporting a loss for the twelve months ended 31
December 2019 of £675,592 (31 December 2018: loss of £8,785,533).
The Group’s cash position at the date of signing this report is £363,000.
3
EMPIRE METALS LTD
CHAIRMAN’S REPORT
Corporate
Post period end, the Company announced the appointment of David Ajemian, a prominent natural resources and growth
company investor and entrepreneur, as a Non-Executive Director. At the same time, Laurie Mutch, who had held the position
of Non-Executive Director since March 2017, stepped down from the Board in order to concentrate on his other business
interests. During his time on the Board, Laurie was a hugely supportive force behind the business and his many contributions
to the Company will be missed.
As shareholders will be aware, the Board also agreed that to reflect the Company's developing growth strategy, particularly
with regard to the investment in, and advancement of, projects in new jurisdictions outside of Georgia, a change of name
would be appropriate. The Company’s new name – Empire Metals Limited – came into effect on 10 February 2020.
The Company’s website can now be found at www.empiremetals.co.uk.
Outlook
Following the confirmation of tenure over two of the Company’s key Georgian projects in January, along with the successful
fundraising in February and the agreement to acquire a controlling interest in the Munni Munni Project in April, the Board is
positive about the future for EEE. Emerging from the difficult and frustrating year that was 2019, the Company has been
strengthened both financially and corporately in 2020 and on behalf of the Board, I am optimistic about our ability to deliver
on our key strategic aims this year. We are of course cognisant of the unprecedented global disruption which the COVID-19
pandemic is creating for communities and economies worldwide, however the Board has adopted a prudent and responsible
approach to both our financial and operational activities and we are confident that EEE is well equipped to weather the current
market downturn.
We look forward to reporting on our activities in Georgia and in new jurisdictions over the second half of 2020. I would like to
take this opportunity to thank our shareholders and my fellow directors for their continued support as we look forward to a
bright future as Empire Metals Limited.
Neil O’Brien
Non-Executive Chairman
30 June 2020
4
EMPIRE METALS LIMITED
DIRECTORS’ REPORT
The Directors present their Report, together with the Group Financial Statements and Independent Auditor’s Report, for the
year ended 31 December 2019.
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.
Section 172 of The Companies Act has been considered in the Corporate Governance report on pages 9 to 13. The Board
are committed to consideration of all stakeholders in their decision making and conduct of the Group’s business.
Results and Dividends
The loss of the Group for the year ended 31 December 2019 before taxation amounts to £675,592 (31 December 2018: loss
of £8,785,533).
The Directors do not recommend the payment of a dividend for the year (31 December 2018: £nil).
Directors & Directors’ Interests
The Directors who served during the year ended 31 December 2019 had the following beneficial interests in the shares of the
Company at year end. There were no changes in interest as at the date of this Report.
31 December 2019
31 December 2018
Ordinary Shares
Options
Ordinary Shares
597,467
907,500
1,650,000
150,000
350,000
-
2,500,000
2,000,000
800,000
1,150,000
2,000,000
-
597,467
407,500
1,650,000
150,000
350,000
-
Options
2,500,000
2,000,000
800,000
1,150,000
2,000,000
-
Director
Gregory Kuenzel
Peter Damouni
Neil O’Brien
Laurence Mutch*
Michael Struthers
David Ajemian**
*Resigned 31 January 2020
**Appointed 31 January 2020
Further details on options can be found in Note 15 to the Financial Statements. Directors’ remuneration is disclosed in Note
18.
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. 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
2019
£50,840
303.56%
-
2018
£525,354
202.82%
£287,245
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 related investment balances in the prior year and
reduced cash reserves during the year. The actual administrative expense in total has reduced from the prior year.
This is the seventh complete year of corporate and exploration activity.
5
EMPIRE METALS LIMITED
DIRECTORS’ REPORT
Corporate Responsibility
Environmental
Empire Metals undertakes its exploration activities in a manner that minimises or eliminates negative environmental impacts
and maximises positive impacts of an environmental nature. At present, Empire Metals 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, Empire Metals conducts certified baseline studies prior to all drill programmes and
ensures that areas explored are properly maintained and conserved.
Health and safety
Empire Metals 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.
Operational Risk
The outbreak of the recent global COVID-19 virus has resulted in business disruption and stock market volatility. The extent
of the effect of the virus, including its long term impact, remains uncertain. The Group has implemented extensive business
continuity procedures and contingency arrangements to ensure that they are able to continue to operate with minimal
disruptions. This is discussed further in the going concern Note in 2.4.
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.
6
EMPIRE METALS LIMITED
DIRECTORS’ REPORT
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.
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
EMPIRE METALS LIMITED
DIRECTORS’ 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 2.4
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 30 June 2020 and signed on its behalf.
Michael Struthers
Chief Executive Officer
8
EMPIRE METALS LTD
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
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.empiremetals.co.uk. 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
EMPIRE METALS LTD
CORPORATE GOVERNANCE REPORT
The Board of Empire Metals Limited 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.
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 to continue to progress the development of its existing projects in
Georgia and (as of April 2020) the Munni Munni project in Australia, 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.empiremetals.co.uk, 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
Risk
Impact
Control(s)
Environmental Risk
Negative environmental
impact of operations
The ultimate
development of any
project into a mining
operation will inevitably
impact considerably on
the local landscape and
communities
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
10
EMPIRE METALS LTD
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 all 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
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
Failure to deliver
commerciality
Inability to secure offtake
agreements
Active marketing and
experienced management
Financial
Misappropriation of
Funds
Fraudulent activity and
loss of funds
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
EMPIRE METALS LTD
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.
Operational
COVID-19 outbreak
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.
Change in Macro
economic conditions
Ability of key staff and
contractors to undertake
their duties safely and
effectively
Proactive engagement with
Government at all levels
Ongoing monitoring of
economic events and
markets.
Business continuity plans
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, David Ajemiam 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 David
Ajemian 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. 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. The formal board meetings held and attended during the year are detailed below:
Michael Struthers
Neil O’Brien
Gregory Kuenzel
Laurence Mutch (resigned on 31 January 2020)
Peter Damouni
Meetings Attended
4
4
4
5
5
Meetings eligible to
attend
4
5
4
5
5
Principle Six
Appropriate Skills and Experience of the Directors
The Board 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
12
EMPIRE METALS LTD
CORPORATE GOVERNANCE REPORT
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.empiremetals.co.uk.
The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal
or informal.
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
Peter Damouni
Non-executive Director
Chairman of the Remuneration Committee, AIM Compliance Committee and the Audit Committee.
David Ajemian
Non-executive Director
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 who 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.
13
EMPIRE METALS LTD
CORPORATE GOVERNANCE REPORT
There was one Audit Committee meetings held during the year with all committee members in attendance.
Remuneration Committee
The Remuneration Committee comprises Neil O’Brien 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 were no Remuneration Committee meetings held during the year due to the Company’s reduced spending measures.
AIM Compliance Committee
The AIM Compliance Committee comprises Neil O’Brien 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.empiremetals.co.uk., 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
30 June 2020
14
EMPIRE METALS LTD
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EMPIRE METALS LTD
Independent Auditor’s Report to the Members of Empire Metals Ltd
Opinion
We have audited the group financial statements of Empire Metals Ltd (the ‘group’) for the year ended 31 December 2019
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 2019 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 indicates that the group incurred losses of £675,592 (2018:
£8,785,533), has net current liabilities and currently has no significant sources of revenues. The group is reliant on additional
capital funding through the issue of new ordinary shares. Furthermore, the ongoing economic uncertainty of the Covid-19
pandemic could impact the ability of the group to raise new funds in a timely manner. As stated in Note 2.4, these events or
conditions, indicate that a material uncertainty exists that may cast significant doubt on 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
2019
Group
materiality
2018
£75,000
£110,000
Basis for materiality
7% of loss before tax (2018:
10% of loss before tax)
Our calculation of materiality has changed from the materiality applied in 2018. We consider 7% of loss before tax to be a
more appropriate benchmark for the group’s financial position and performance used by shareholders.
The group was audited to a level of materiality of £75,000. 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.
We looked at areas involving significant accounting estimates and judgements by the directors and considered future events
that are inherently uncertain, including the impairment assessment of the exploration assets in Georgia and Austria. 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.
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.
15
EMPIRE METALS LTD
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EMPIRE METALS LTD
The audit of the 5 reporting components of the group were principally performed in London, conducted by PKF Littlejohn LLP
using a team with specific experience of auditing mining exploration entities 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.
Except for the matter described in the ‘Material uncertainty relating to going concern’ section, we have determined that there
are no other key audit matters to communicate in our report.
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
30 June 2020
16
15 Westferry Circus
Canary Wharf
London E14 4HD
EMPIRE METALS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
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
14
Group
2019
£
2018
£
17,882
34,042
-
-
-
-
17,882
34,042
167,971
50,840
218,811
236,693
91,191
91,191
91,191
145,502
141,105
525,354
666,459
700,501
242,701
242,701
242,701
457,800
-
-
39,265,637
38,904,337
(18,845,147)
(18,845,147)
138,014
136,020
(20,413,002)
(19,737,410)
145,502
-
145,502
457,800
-
457,800
The Financial Statements were approved and authorised for issue by the Board of Directors on 30 June 2020 and were signed
on its behalf by:
Gregory Kuenzel
Finance Director
17
EMPIRE METALS LTD
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2019
Note
6
7
16
9
22
19
Continuing Operations
Revenue
Cost of sales
Gross profit
Administration expenses
Loss on deconsolidation of subsidiary
Other gains / (losses)
Impairment of intangible assets
Operating Loss
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:
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations
Total Comprehensive Income
Attributable to:
- owners of the Parent
- non-controlling interests
Total Comprehensive Income
Group
Year ended 31
December 2019
Year ended 31
December 2018
£
£
111,457
-
111,457
(718,509)
-
29,367
(97,907)
(675,592)
213,265
-
213,265
(1,420,729)
(265,094)
866,638
(4,185,028)
(4,790,948)
-
(3,994,585)
(675,592)
(8,785,533)
-
-
(675,592)
(8,785,533)
(675,592)
-
(8,774,021)
(11,512)
(675,592)
(8,785,533)
(6,298)
448,800
(681,890)
(8,336,733)
(681,890)
(8,542,591)
-
205,858
(681,890)
(8,336,733)
Earnings per share (pence) from continuing operations
attributable to owners of the Parent – Basic & Diluted
20
(0.535)
(7.647)
The Notes on pages 21 to 40 form part of these Financial Statements.
18
EMPIRE METALS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31 December 2019
Attributable to Equity Shareholders
Share
premium
Reverse
acquisition
reserve
Other
reserves
Retained
losses
£
£
£
£
Non-
controlling
interest
Total equity
£
£
Total
£
As at 1 January 2018
38,880,612
(18,845,147)
384,099
(11,033,204)
9,386,360
3,787,365
13,173,725
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
-
-
-
-
-
-
-
-
-
-
-
(8,774,021)
(8,774,021)
(11,512)
(8,785,533)
231,430
-
231,430
217,370
448,800
231,430
(8,774,021)
(8,542,591)
205,858
(8,336,733)
-
(12,634)
(69,647)
-
168
69,647
23,725
(12,466)
-
-
-
-
23,725
(12,466)
-
(397,228)
-
(397,228)
(3,993,223)
(4,390,451)
23,725
-
(479,509)
69,815
(385,969)
(3,993,223)
(4,379,192)
As at 31 December 2018
38,904,337
(18,845,147)
136,020
(19,737,410)
457,800
As at 1 January 2019
38,904,337
(18,845,147)
136,020
(19,737,410)
457,800
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
Share issue charge
Share option charge
Total transactions with
owners
-
-
-
380,000
(18,700)
-
361,300
-
-
-
-
-
-
-
-
(675,592)
(675,592)
(6,298)
-
(6,298)
(6,298)
(675,592)
(681,890)
-
-
8,292
8,292
-
-
-
-
380,000
(18,700)
8,292
369,592
As at 31 December 2019
39,265,637
(18,845,147)
138,014
(20,413,002)
145,502
-
-
-
-
-
-
-
-
-
-
457,800
457,800
(675,592)
(6,298)
(681,890)
380,000
(18,700)
8,292
369,592
145,502
The Notes on pages 21 to 40 form part of these Financial Statements.
19
Note
Group
2019
£
2018
£
(675,592)
(8,785,533)
8,292
-
-
16,160
97,907
(26,866)
(151,510)
(6,298)
(737,907)
(97,907)
-
-
-
12,446
3,994,585
265,094
23,092
4,185,028
90,845
141,058
(889,814)
(963,199)
(801,929)
(2,815)
(287,245)
(13,180)
(97,907)
(1,105,169)
380,000
(18,700)
361,300
23,725
-
23,725
(474,514)
(2,044,643)
525,354
50,840
2,569,997
525,354
EMPIRE METALS LIMITED
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2019
Cash flows from operating activities
Loss before taxation
Adjustments for:
Share option expenses
Share of loss on joint venture
Loss on deconsolidation of Georgian Copper & Gold
Depreciation
Impairment of assets
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
Loans granted to subsidiaries and joint venture partners
Purchase of property, plant & equipment
Additions to exploration and evaluation intangible asset
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 decrease 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 21 to 40 form part of these Financial Statements.
20
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
ACCOUNTING POLICIES
1. General Information
The principal activity of Empire Metals Limited (formerly 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 Company changed its name to Empire Metals Limited
on 10 February 2020.
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 4.
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 2019
As of 1 January 2019, the Company adopted IFRS 16 Leases, IFRIC 23 Uncertainty over leases, and IAS 28 (Amendments)
Long term interests in associates and joint ventures. The transition to these standards had no material impact on the Group.
There were no long term operating leases in the Group as at the transition date for IFRS 16; as such no adjustments were
made under this standard.
b) New standards, amendments and interpretations in issue but not yet effective or not yet endorsed and not early adopted
Standards, amendments and interpretations that are not yet effective and have not been early adopted are as follows:
Standard
IFRS 3 (Amendments)
IAS 1 and IAS 8 (Amendments) Definition of material
IAS 1
Effective date
*1 January 2020
1 January 2020
Classification of Liabilities as Current or Non-Current. 1 January 2022
Impact on initial application
Definition of a Business
* Subject to EU endorsement
The Group is evaluating the impact of the new and amended standards above which are not expected to have a material
impact on future Group financial statementss
21
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
2.3 Basis of Consolidation
The Group Financial Statements consolidate the Financial Statements of Empire Metals Limited and the financial statements
of all of its subsidiary undertakings made up to 31 December 2019.
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
Empire Metals
Ltd
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
Empire Metals
Ltd
Ordinary shares
US$1
100%
Dormant
United
Kingdom
Empire Metals
Ltd
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.
22
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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 2019, the Directors believe that the Group will have 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. 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 outbreak of the recent global COVID-19 virus will lead to short term market volatility and uncertain long term impacts
which may affect the Groups ability to raise further funding. The Group has implemented business continuity plans as well as
reducing working capital expenditure whilst continuing to monitor the impacts of COVID-19. The Directors’ acknowledge that
the market volatility may impact the ability of the Company to raise funds in the near future. 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.
23
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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 and impaired.
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.
24
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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.
25
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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.
There has been no tax credit or expense for the period relating to current or deferred tax.
26
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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 the short-term exemption under IFRS 16 has been taken and 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 and joint venture entities 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.
27
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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 February 2020, the
Company raised £600,000 which will fund the Group for the next 12 months. See note 2.4 for further details on going concern
and liquidity.
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 2019 and defines capital based on the total equity of the Company being £145,502. 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.
28
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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 2019 of £nil (2018: £nil): 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.
In 2018, the Directors 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. On 28 January 2020 the Company announced that it had received confirmation of tenure from the
National Agency of Mines (‘NAM’) for two key deposits in the Bolnisi Project licence area, namely Kvemo Bolnisi East and
Dambludi. However, alongside this tenure confirmation, correspondence from NAM confirmed its intention to return the
remainder of the Bolnisi Project licence area, including three further deposits identified by the Company, being Kvemo Bolnisi
West, Tsitel Sopeli and Balichi, to the State. An appeal process is currently underway with the Minister of Economy and
Sustainable Development in Georgia with the objective of GCG securing its rights to the remainder of the licence area. See
Note 9 for further update in this regard.
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 and receivables from joint ventures
As above, during 2018, the Group lost control of GCG and accounted for the joint arrangement relationship as an investment
in joint venture. On initial recognition on 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 (2018: £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.
As at 31 December 2019 £109,188 (2018: £39,748) is due from GCG for services rendered in the year. Despite the ongoing
license issues at the year end, this amount is considered fully recoverable. The joint venture partners are committed to
additional funding to repay the liability or this would be converted to equity.
29
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
5. Segmental Information
As at 31 December 2019, 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 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 £111,457 during the year ended 31 December 2019 (2018: £213,265).
Georgia
£
Austria
£
2019
Revenue
Administrative expenses
Other gains/(losses)
Loss from operations per reportable segment
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
-
-
-
-
-
-
-
Segment assets and liabilities are allocated based on geographical location.
2018
Revenue
Administrative expenses
Other gains/(losses)
Impairment of intangible assets
Loss on deconsolidation of subsidiary
Share of loss from Georgian Copper and
Gold
Georgia
£
-
(36,518)
800,241
(3,706,915)
(265,094)
(3,994,585)
Loss from operations per reportable segment
(7,202,871)
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
-
-
-
UK
£
111,457
(709,482)
(68,540)
(666,595)
-
231,962
87,383
Total
£
111,457
(718,509)
(68,540)
(675,592)
-
236,693
91,191
UK
£
213,265
(1,383,331)
66,397
Total
£
213,265
(1,420,729)
866,638
(478,113)
(4,185,028)
-
-
(265,094)
(3,994,585)
(1,581,782)
(8,785,533)
2,815
691,874
237,455
2,815
700,501
242,701
-
(9,027)
-
(9,027)
-
4,731
3,808
Austria
£
-
(880)
-
-
-
-
(880)
-
8,627
5,246
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
2019
£
(675,592)
-
2018
£
(4,790,948)
(3,994,585)
(675,592)
(8,785,533)
30
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
6. Revenue
Operational services
Geological consulting services
2019
£
111,457
-
111,457
2018
£
207,575
5,690
213,265
Operational 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 are denominated in GBP
and considered fully recoverable at year end.
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
Other expenses
Total administrative expenses
All employee costs incurred in the year and are included in ‘Operations related costs’.
2019
£
63,030
-
30,000
2018
£
100,323
48,273
40,000
134,982
294,841
14,537
37,327
82,969
16,160
41,302
101,843
8,292
178,018
10,049
718,509
11,147
35,057
85,822
23,092
80,019
191,167
12,446
400,760
97,782
1,420,729
31
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
8. Property, Plant and Equipment
Cost
As at 1 January 2018
Additions
Disposals
Disposals on deconsolidation
Exchange differences
As at 31 December 2018
As at 31 December 2019
Depreciation
As at 1 January 2018
Charge for the year
Disposals
Disposals on deconsolidation
Exchange differences
As at 31 December 2018
Charge for the year
As at 31 December 2019
Net book value as at 31 December 2018
Net book value as at 31 December 2019
9. Intangible Assets
Motor
Vehicles
£
Field
equipment
£
Computer
equipment
£
Total
£
58,670
113,714
51,898
224,282
-
-
-
-
2,815
2,815
(5,312)
(5,312)
(60,082)
(48,604)
(24,430)
(133,116)
1,412
-
-
13,574
1,652
-
1,143
66,253
66,253
28,945
14,748
-
574
3,129
25,545
25,545
91,798
91,798
19,228
6,692
-
61,747
23,092
-
(15,553)
(6,271)
(5,810)
(27,634)
327
-
-
-
-
-
112
37,534
13,250
50,784
28,719
15,469
112
551
20,222
57,756
2,910
16,160
23,132
73,916
5,323
2,413
34,042
17,882
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
2019
£
-
-
-
-
-
-
2018
£
10,472,718
287,245
(7,857,313)
(3,125,702)
223,052
-
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 as at 31 December 2019, 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.
32
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
• 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 was still pending as at 31 December 2019. 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. As a result, as at 31 December 2018, the Directors concluded
that the Georgian exploration assets no longer fully meet the capitalisation criteria under IFRS 6 and an impairment provision
was recognised against these assets.
As at 31 December 2019, given the Group was still awaiting an outcome on the exploration extension, the Directors
determined it was reasonable to impair the asset in full until further notice. Loans totalling £97,907 were forwarded to GMC
Investments during the year. These were written off as an impairment as at 31 December 2019.
On 28 January 2020 the Company announced that it had received confirmation of tenure from the National Agency of Mines
(‘NAM’) for two key deposits in the Bolnisi Project licence area, namely Kvemo Bolnisi East and Dambludi. However, alongside
this tenure confirmation, correspondence from NAM confirmed its intention to return the remainder of the Bolnisi Project
licence area, including three further deposits identified by the Company, being Kvemo Bolnisi West, Tsitel Sopeli and Balichi,
to the State. An appeal process is currently underway with the Minister of Economy and Sustainable Development in Georgia
with the objective of GCG securing its rights to the remainder of the licence area. As the confirmation of tenure over Kvemo
Bolnisi East and Dambludi was received post period end and as such, the impairment has not been adjusted as at year end
however, it is expected that a partial write back will be reflected in the Group’s interim accounts for the half year ended 30
June 2020.
10. Trade and Other Receivables
Trade receivables
VAT receivable
Prepayments
Other receivables
2019
£
109,188
25,465
21,314
12,004
167,971
2018
£
39,748
9,610
36,569
55,178
141,105
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.
The carrying amounts of the Group‘s trade and other receivables are denominated in the following currencies:
UK Pounds
Euros
Georgian Lari
2019
£
167,756
215
-
167,971
2018
£
138,811
2,294
-
141,105
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. All trade and other receivables are considered fully recoverable and
performing.
33
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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.
12. Trade and Other Payables
Trade payables
Other payables
Accrued expenses
2019
£
2018
£
50,840
525,354
2019
£
55,889
2,277
33,025
91,191
2018
£
110,205
2,682
129,814
242,701
13. Share Capital and Share Premium
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 2018
Exercise of warrants – 26 January 2018
At 31 December 2018
Issue of Ordinary Shares – 23 May 2019 1
At 31 December 2019
(1) Net of issue costs of £18,700
Number of shares Share premium
£
Total
£
114,574,491
38,880,612
38,880,612
182,500
23,725
23,725
114,756,991
38,904,337
38,904,337
19,000,000
361,300
361,300
133,756,991
39,265,637
39,265,637
On 23 May 2019 the Company issued and allotted 19,000,000 new Ordinary Shares at a price of 2 pence per share for gross
proceeds of £380,000.
14. Other reserves
Foreign currency translation reserve
Share option Reserve
2019
£
2018
£
(231,682)
(225,384)
369,696
138,014
361,404
136,020
34
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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. Note 15 outlines the share
based payments made in the year.
15. Share Based Payments
Warrants and options outstanding at 31 December 2019 have the following expiry dates and exercise prices:
Shares
Grant date
20 July 2016
Expiry date
20 July 2021
30 January 2017
3 March 2022
22 June 2017
30 July 2018
30 July 2018
1 July 2019
21 July 2022
26 July 2023
26 July 2023
30 June 2024
Exercise
price in £
per share
0.1400
0.1200
0.1825
0.1400
0.2000
0.0130
2019
2018
5,000,000
5,000,000
1,900,000
1,900,000
3,300,000
3,300,000
1,000,000
1,000,000
1,000,000
1,000,000
3,376,553
-
15,576,553 12,200,000
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 (£)
2017 Warrants
2017 Warrants
2016 Warrants
30/01/2017
5.2 years
8.8p
0.57%
27.06%
-
12p
20%
20,225
22/06/2017
5 years
17.7p
0.57%
34.43%
-
18.25p
20%
140,043
20/07/2016
5 years
16p
0.5%
23.29%
-
14p
20%
188,690
2018 Warrants
2018 Warrants
2019 Warrants
30/07/2018
30/07/2018
5 years
9.35p
0.75%
27.06%
-
20p
20%
3,575
5 years
9.35p
0.75%
27.06%
-
14p
20%
8,871
1/7/2019
5 years
1.05p
0.42%
40.97%
-
1.3p
20%
8,292
The risk free rate of return is based on zero yield government bonds for a term consistent with the warrant and option life.
35
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
The movement of options and warrants for the year to 31 December 2019 is shown below:
As at 1 January
Granted
Exercised
Expired
Outstanding as at 31 December
Exercisable at 31 December
2019
2019
2018
Weighted
average
exercise
price (£)
0.15
0.013
-
-
0.12
0.12
Number
12,200,000
3,376,553
-
-
15,576,553
15,576,533
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
2018
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)
0.12
15,576,533
2.7384
2.7384
0.15
12,200,000
3.252
3.252
Range of
exercise
prices (£)
0.013-0.2
The total fair value charged to the statement of comprehensive income for the year ended 31 December 2019 and included
in administrative expenses was £8,292 (2018: £12,446).
16. Other (losses)/gains - Net
Net foreign exchange gains / (losses)
Deconsolidation of Georgian Copper and Gold
Written off directors fees (note 18)
Other gains/losses
17. Employees
Staff costs (excluding Directors)
Salaries and wages
Social security costs
Pensions
Group
2019
£
(14,849)
-
47,313
(3,097)
29,367
2018
£
468,850
397,228
-
560
866,638
Group
2019
£
2018
£
77,489
181,251
6,769
795
12,367
1,154
85,053
194,772
The average monthly number of employees during the year was 3 (2018: 4). All employee costs were incurred in European
Mining Services. Employee costs incurred in European Mining Services are included in Operation Related Costs in Note 7.
36
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
18. Directors' Remuneration
Executive Directors
Gregory Kuenzel
Michael Struthers
Non-executive Directors
Neil O’Brien
Peter Damouni
Laurence Mutch
Executive Directors
Gregory Kuenzel
Martyn Churchouse
Michael Struthers
Non-executive Directors
Neil O’Brien
Peter Damouni
Laurence Mutch
For the year ended 31 December 2019
Short term
benefits
£
Post-Employment
benefits
£
Share based
payment
£
Total
£
-
63,030
-
-
-
-
63,030
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
63,030
-
-
-
-
63,030
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
Of the above director fees, £nil (2018: £53,000) has been capitalised in accordance with IAS 38 as exploration and evaluation
related costs and are shown as an intangible addition in the year.
For the year ended 31 December 2018, £47,313 in directors fees were accrued. During the current year the Board agreed
these accrued fees were to be written off in full and not payable by the Company. The reversal of this accrual has been
included in other gains and losses as per Note 16.
37
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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 19.08% (2018: 9.05%)
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
2019
£
2018
£
(675,592)
(8,785,533)
(128,905)
19,636
(795,091)
410,573
109,269
384,518
-
-
The weighted average applicable tax rate of 19.08% (2018: 9.05%) 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 £5,940,000 (2018: £3,789,000) 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.
20. Earnings per Share
The calculation of the total basic loss per share of 0.535 pence (2018: loss 7.647 pence) is based on the loss attributable to
equity owners of the group of £675,592 (2018: £8,774,021) and on the weighted average number of ordinary shares of
126,365,211 (2018: 114,744,492) 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 as at 31 December 2019. The Company is committed to funding 50% of the ongoing administrative
expenditure of Georgia Copper and Gold which currently totals approximately $7,000 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.
38
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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
As at 31
December 2019
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
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
2019
31 December
2018
£
53,933
2,591
4,364
53,376
114,264
210,830
955,222
89,371
18,589
4,030
81,537
193,527
82,773
975,679
1,166,052
1,058,452
The joint venture did not generate any revenue in the year. Total costs of £305,122 (2018: £7,989,170) were incurred during
the year. Total losses incurred by the joint venture entity and attributable to the Company but not recognised in the Company
profit and loss are £152,556 (2018: £3,994,585).
23. Related Party Transactions
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 £111,457 (2018: £255,428 ) to JSC Georgian Copper and Gold, the joint venture entity.
Loan from Empire Metals Ltd to Kibe No.2 Investments Limited
As at 31 December 2019 there were amounts receivable of £6,016 (2018: £4,706) from Kibe No.2 Investments Limited. No
interest was charged on the loans.
Loan from Empire Metals Ltd to European Mining Services Limited
As at 31 December 2019 there were amounts receivable of £694,186 (2018: £525,028) from European Mining Services
Limited.
All intra-group transactions are eliminated on consolidation.
39
EMPIRE METALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
Other Transactions
Heytesbury Corporate LLP, an entity in which Gregory Kuenzel is a partner, was paid a fee of £32,500 (2018: £62,440) for
accounting services to the Group. At the year-end there was an outstanding balance of £6,155 (2018: £6,449).
Michael Struthers received £63,030 (2018: £66,935) through his service company, MS Mining Consulting LDA, as disclosed
in Note 18.
24. Ultimate Controlling Party
The Directors believe there to be no ultimate controlling party.
25. Events after the Reporting Date
On 28 January 2020 the Company announced that it had received confirmation of tenure from the National Agency of Mines
(‘NAM’) for two key deposits in the Bolnisi Project licence area, namely Kvemo Bolnisi East and Dambludi. However, alongside
this tenure confirmation, correspondence from NAM confirmed its intention to return the remainder of the Bolnisi Project
licence area, including three further deposits identified by the Company, being Kvemo Bolnisi West, Tsitel Sopeli and Balichi,
to the State. An appeal process is currently underway with the Minister of Economy and Sustainable Development in Georgia
with the objective of GCG securing its rights to the remainder of the licence area.
On 28 February 2020, the Company issued and allotted 60,000,000 new Ordinary Shares at a price of 1 pence per share
raising a total of £600,000.
On 27 April 2020, the Company entered a binding heads of terms agreement with ASX-listed Artemis Resources Ltd to acquire
a 41% interest in the Munni Munni palladium project in Pilbara, Australia. Should the acquisition be completed, the Company
will pay consideration of £950,000 through the issue of 95 million shares at a price of 1p per share.
The outbreak of the coronavirus pandemic is considered to be a non-adjusting event. As outlined in Note 2.4, the Group is
continuing to report on a going concern basis, and whilst this may cause difficulty in raising further funding, has not had a
material impact on the Group. The unknown length of the outbreak is a source of uncertainty and the Board will continue to
monitor events and to provide updates as the situation develops.
40