More annual reports from Eurasia Mining Plc:
2021 ReportAnnual Report and Accounts 2016 PGM PRODUCER Highlights 1 2 8 Chairman’s Statement Operations Update Strategic Report 10 Directors’ Biographies 11 14 15 22 45 Directors’ Report Independent Auditor’s Report Financial Statements Notes to the Financial Statements Company Information 2016 Highlights West Kytlim (cid:0) Project successfully advanced from development to production (cid:0) Trial mining season produced platinum concentrate with gold and other PGM credits (cid:0) Full season of production commenced for 2017 Monchetundra/Kola Peninsula (cid:0) Definition of maiden Reserves at two open pit targets (cid:0) Reserves report and Feasibility study approved at state level (cid:0) EPC contract in place with Sinosteel Semenovsky Tailings Project (cid:0) Definition of maiden reserves (cid:0) Approval of feasibility study and reserves report (cid:0) Metallurgical study refined processing scheme Chairman’s Statement Dear Shareholder It is my pleasure to report to you this year as a new mining company. Eurasia has worked for some time towards production and this has now been achieved at our Platinum Group Minerals (”PGM”) and gold operation at West Kytlim in the Urals. In parallel, we have also made significant progress and had feasibility study and reserves approved by the state at our Monchetundra Project. Firstly, to the mine. West Kytlim is an alluvial mining operation with seasonal (spring through autumn) production in the Ural Mountains, several hundred kilometres north of our regional office in Ekaterinburg. We started production initially using Eurasia’s own washplant, while the main production unit was being commissioned. Ultimately this was achieved later in the season and by September 2016 platinum had been produced; indeed the grades of in-situ metal exceeded those in our calculated reserves. We look forward to a full season of production in 2017, with the main washplant operating from the outset – at the time of writing all systems were in place to commence gravel washing. If permitting of a second area at Kluchiki goes to schedule then it is possible a second plant will be established before the end of the field season. Meanwhile at Monchetundra, a major compilation effort, combined with new hydrogeological and metallurgical work, culminated in a feasibility study being lodged in December 2016 as an application for the approval of reserves under the Russian classification system. At the time of writing, this study had been approved and the Company is awaiting the formal registration of these reserves. The next step is the application for a Discovery Certificate and then a production licence for a 25-year term. This will allow us to complete a development plan for the two deposits discovered by our exploration work. Eurasia completed our due diligence work at the Semenovsky tailings project and confirmed robust economics using a straightforward cyanide leach circuit. The Company is evaluating several project finance options for this operation and continues to work with the owner under exclusivity. As with West Kytlim, the Company aims to achieve production without issuing further equity, indeed minimising shareholder dilution has remained a key concern for the board throughout the past year, and through what we hope has been the final year of the recent downturn in the sector. During May 2017, the company designed a financing package of around US$2 million to refinance existing debt and integrate with cashflow from the West Kytlim mine. This gives us confidence in achieving our 2017 objectives. This is my last report to you as Chairman. I will be retiring at this year’s AGM on 29 June 2017 at which time it is intended, subject to election, that Christian Schaffalitzky take over as Executive Chairman and acting CEO. I consider that this is an appropriate time to retire. Not only has the Company achieved its aim of becoming a producer of precious metals with the successful commissioning of the plant at West Kytlim but also I have reached and passed the age of 70; an age which I have long believed appropriate for Directors to hand over to younger minds. Before leaving I would like to express my appreciation and admiration of our staff in both London and Russia but most particularly to the field and administrative staff in Russia who have successfully worked through adverse field conditions and repeated and frustrating delays in the approval process without which we could have achieved production four or five years ago. A personal thank you to all of you. Finally, a thank you to our shareholders who have stuck with us through a very long and expensive process and to those senior staff and Directors who have equally shown confidence in the future of Eurasia by foregoing cash and accepting remuneration at par in shares. Michael Martineau Chairman ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 1 Operations update W E S T K Y T L I M Preparatory work for the first season of mining at West Kytlim began in June and continued through July 2016. The necessary infrastructure for the mine site was constructed, including a tailings water pond, process water pond, field camp and field laboratory for upgrade of metal- bearing concentrates. Meanwhile, a wash-plant, its main component being two vibrating screens in series, was commissioned by Eurasia’s mining contractor, ‘SKRS Region Metal (’SKRS’) and shipped to site for assembly in August 2016. In addition, a second wash-plant, owned by Eurasia and previously used to process a bulk sample was refurbished and commissioned to operate alongside the main plant. Work at site continued into the first week in November, when cold weather conditions began to effect metal recoveries on the sluice and the decision was made to resume operations in the spring of 2017. Ultimately 11kg of platinum was produced and shipped to a refinery in Ekaterinburg during this initial trial mining season. The main washplant has been modified and reinstalled for use in the 2017 season. Reserves upgrade drilling work began in April and mining blocks were prepared as we awaited warmer conditions and running water later in spring. Ultimately gravel washing began in the last weeks of May in what promises to be the first full season of mining in our projected 12 year Life of Mine. Background Various processing schemes for washing the platinum and gold bearing gravels at West Kytlim were investigated throughout 2016. A full-time Mining Engineer with experience operating on platinum mines in the Ural Mountains joined the company and has proven a key decision maker both on site and off. In alluvial mining, trial mining is often the only way to gain sufficient knowledge about the precise nature of the material to be processed. Of the available options, a vibrating screen offered the best potential of reliable and cost effective gravel washing. A vibrating screen is effective at washing gravel known to contain a significant quantity of flat or platy boulders while simultaneously separating the material by size class. Oversize is ‘scalped’ off as the material passes through a series of ever finer sieves, and is washed constantly by pressurized jets of water. The screens are contained in two units each six meters long by three meters wide. Electric powered motors vibrate the screens constantly and the pitch on each screen is such that the material proceeds by gravity through the system. The sub 6mm fraction passes on to a 5-track sluice. Heavy minerals, such as the precious metals platinum and gold, and nuggets formed of precious metal and native iron, collect in mats in the base of the sluice which are emptied when filled. This material is termed a Sluice Concentrate and is delivered directly to the laboratory on site for upgrade to saleable product. On arrival at the laboratory material is initially washed and again screened, the oversize fraction is then checked manually for nuggets while the smaller fraction, suspended in water, passes to a concentration table. This riffled and oscillating surface again uses the greater density of precious metals to separate them from gangue. MALAYA SOSNOVKA PRODUCTION FOR 2017 COMMENCED IN THE FIRST WEEKS OF MAY IN WHAT PROMISES TO BE THE FIRST FULL SEASON OF MINING IN OUR PROJECTED 12 YEAR LIFE OF MINE. 2 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Operations update continued Malaya Sosnovka Mine Site Mining in 2016 commenced at the Malaya Sosnovka Area. Material is excavated and trucked a distance of several hundred meters to the washplant. In excavating the tailings dam and process water pond a previously unknown extension to an orebody was discovered. This material was stockpiled and later processed along with ore from the known ore blocks. In all a total of 22,000m3 of gravels were processed. The vibrating screens had downtime for repairs and the decision was made to modify the washplant for the 2017 mining season. More and larger platy, boulder (>100mm) size material was encountered than had been anticipated and the vibrating screens have now been modified to deal with this material. MALAYA SOSNOVKA AREA - MINE LAYOUT yl a i e r T R iv 410 420 425 4 1 5 3 4 1 0 4 1 5 Reserves Blocks 1-5 4 2 0 2 4 2 5 1 430 5 4 Washplant site 4 2 0 4 2 5 4 3 0 4 3 5 442,5 Tailings Dam Bolshaya Sosnovka Process water pond 4 3 0 4 3 5 442,5 Z(cid:605)(cid:618)(cid:607)(cid:603)(cid:615)(cid:633)=443,5 4 4 0 0 100m N Basecamp W ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 3 pond Malaya Sosnovka Area (100kg Pt Reserve) Omutoshnaya N 0 Approved Reserves (cid:586) Resources 1 km Tylai Levy Operations update continued Grades were higher than anticipated. Mining grade for the season averaged 449 g/m3, 120% of the expected average grade as measured for reserves blocks. A total of 11.3kg raw platinum was produced through the season, with some credits from Palladium, Iridium, Rhodium and Gold. In early November, it became difficult to operate the sluice due to freezing conditions and the decision was made to resume the operations in spring. Credit is due to the professional approach of our contractor in ensuring there were no accidents or injuries to personnel in the 2016 Mining season. Exploration and future development of the West Kytlim Reserves and Resources A key provision of our agreement with the mining contractor is that SKRS pay all third party costs relating to exploration and reserves upgrade drilling. Significant resources exist within the license area and these will be upgraded to reserve status ahead of mining. There is also the potential for the discovery of further ore bodies, and extensions to known ore bodies as mining progresses through the license; and this has been well demonstrated by the discovery of ore bodies during excavations of the tailings dam and process water pond during 2016. SKRS have committed to funding the 5 year exploration program which will upgrade all known resource blocks to reserves ahead of mining. Resource drilling commenced in April of 2016. Samples collected are assayed at the mine site, using the same lab facility described above. Eurasia coordinate this exploration process, and, as holders of the mining right and license are the chief authors of the reserves statements and other reporting to the Ministry for Subsoil use. Current approved reserves stand at 2,283Kg raw platinum (73,000 oz) with a further 1,856 Kg (60,000 oz) as known resources on the license. In order to maintain their exclusive right to contract mining at West Kytlim, SKRS are obliged to meet the volumes of an agreed mining schedule which includes all reserves and resources over the 12 year Life of Mine. The volumes are such that an additional washplant and associated machinery will need to be deployed every year until 2020 when the mine reaches full capacity. M O N C H E T U N D R A Feasibility study approved at PGM, Nickel and Copper project 2016 was arguably the most important year to date in the 10 year exploration and development phase of this PGM and base metals project on Kola Peninsula, North West Russia. A feasibility report, incorporating a reserves calculation, was filed for government approvals in late December 2016. This report, in seven books with associated appendices; calculations, maps and cross sections, was subject to scrutiny by a panel of experts and was successfully defended by Eurasia and then approved by the state Reserves Commission. The reserves are officially assigned to the state balance when approved by Rosnedra, the Russian Ministry for Subsoil use. An application for issue of a Discovery Certificate is being filed, this permits the holder to apply for a Mining License to develop the project to mining. In addition, An EPC (Engineering, Procurement and Construction) contract was signed with Sinosteel, a major Chinese company experienced in large mining projects. This EPC contract is agreed with an associated financing structure providing 85% of the contract value of $176 million. West Nittis and Loipishnune Deposits Two open pit PGM-base metal deposits have been identified on the license, located approximately 3km apart. The proposed processing plant would treat ore from both pits and be located to the north of the larger Loipishnune Pit. Three metallurgical samples, two from drill core at West Nittis and one from drill core at Loipishnune were studied as part of the 2016 feasibility report. Excellent recoveries were demonstrated using a gravity floatation scheme. Platinum, Palladium, Gold, Copper and Nickel are recovered to a mixed commodity concentrate which may be refined locally in Monchegorsk or further afield. 4 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Operations update continued (cid:85) (cid:85) (cid:85) (cid:85) PK (cid:85) NKT massif M O N C H E G O R S K C I T Y West Nittis Open Pit Exploration License Monchepluton massif Monchetundra massif Loipishnune Open Pit 0 1 2km West Nittis contains narrow and higher grade late stage mineralization dominated by sulphidic veins with surrounding hydrothermal alteration, referred to as ‘Hanging Wall’ mineralization. Beneath the Hanging Wall zone, further sulphidic mineralization with elevated PGM occurs over wider intervals but of lower grade. Both zones are planned to be extracted at West Nittis. The PGM Mineralization here correlates well with Sulphur, Nickel and Copper mineralization. At Loipishnune, the ore bodies are sub-vertical and stratiform. Loipishnune is considered low sulphide PGM mineralization, finely disseminated and associated with the thinly layered upper part of a norite intrusion. Two ore bodies, termed upper and lower, have been outlined within the pit. At Loipishnune the Pd:Pt ratio ranges 1.5-2.5, averaging 2.1, and is generally uniform on strike and down dip. The open pit at Loipishnune progresses to 350m, beneath which further reserves may be extracted by underground mining methods. Engineering, Procurement and Construction contract – EPC Signed in early October of 2016, this contract was the culmination of almost two years of discussions, site visits and due diligence exercises by Sinosteel, a Chinese state owned group operating in mining, trading, and the engineering and manufacture of mining and mineral processing equipment. The contract value totals US$176,000,000 with an associated loan covering 85% of the contract value. Financing terms are included in the EPC Contract as a 10 year loan with early repayment permitted, at an indicative interest rate at 6 months LIBOR plus 3.5%. Sinosteel carries the loan on its balance sheet until the plant is commissioned, an incentive for Sinosteel to complete on time and within budget, whereupon the loan is assigned to Eurasia’s local subsidiary Terskaya Mining Company. Government approval of reserves was a stated condition of the EPC contract which has now been all but achieved. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 5 Operations update continued SEMENOVSKY WORK THROUGH 2016 WAS IN A JOINT VENTURE WITH METAL TIGER WHO HAVE ELECTED NOT TO PARTICIPATE, THEREBY INCREASING EURASIA’S POTENTIAL OPTION FROM 33% TO 67%. 6 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Operations update continued S E M E N O V S K Y TA I L I N G S P R O J E C T Pre-feasibility gold and silver tailings Project, Bashkiria Russia Eurasia have been working on this project since late 2015 and holds an exclusive right to acquire up to 67%. Work through 2016 was in a Joint Venture with Metal Tiger who have elected not to participate, thereby increasing Eurasia’s potential option from 33% to 67%. Progress has been steady over the course of the 18 months since signing the initial memorandum of understanding. Maiden Reserves were approved at Semenovsky in late August 2016 – Reserves had not previously been approved due to an absence of metallurgical work. 2.99 million tonnes of ore grading 1.18g/t Gold and 16.44g/t Silver for 3.5 tonnes of gold and 49.3 tonnes of silver are now approved as Russian standard C2 category reserves. A metallurgical study was undertaken during 2016. Eurasia drilled five new drill holes in April 2016, with samples taken at metre intervals and sent to SGS labs in Chita where gold and silver assays returned values in line with previous workers’ estimates. A suite of bottle roll cyanide tests on unground material were then attempted at various leach times, liquid to solid ratios and cyanide concentrations. Fine grinding studies were undertaken on composite samples as well as qualitative and quantitative mineralogy. Ultimately the results suggested a recovery of circa 40% using a simple cyanide circuit. The proposed circuit has been modified to replace a Merrill Crowe circuit with a resin column array. In this scenario gold is won from the pregnant leach liquor and loaded to a manufactured resin. This resin is a consumable and may be burned off as waste in a local refinery as part of the gold and silver smelting process. The Company is focused on evaluating several project finance options and strongly favours options which will not involve significant shareholder dilution. Christian Schaffalitzky Managing Director ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 7 Strategic report Eurasia Mining plc Company No. 3010091 Eurasia Mining Plc (“Eurasia” or the “Company”) is a public limited company incorporated and domiciled in Great Britain with its registered office and principal place of business at 2nd Floor, 85-87 Borough High Street, London SE1 1NH. The Company’s shares are quoted on AIM, a market operated by the London Stock Exchange Group plc. The principal activities of the Company and its subsidiaries (the “Group”) are related to the exploration for and development of platinum group metals (the “PGM”), gold and other minerals. The Group is currently developing two licences – West Kytlim in the Central Urals and Monchetundra on the Kola Peninsula in Russia, while continuing to assess the potential of near to production gold projects in other regions in Russia and other countries of the former Soviet Union. At West Kytlim, the Group made several PGM discoveries of resources suitable for commercial mining and was granted the mining licence in 2015. Pilot mining operations were carried out at the end of 2016 mining season before closing for winter. Production resumed in May 2017. On the Kola Peninsula the Group discovered the PGM mineralisation within the Monchetundra area, which was further explored in 2016. Following the exploration work the Group initiated the procedure of obtaining the mining licence. As a part of the process feasibility study was approved by the authorities in April 2017. More details on both projects are in the Operations update. The Group also maintains an active interest in non-core, innovative mining solutions including the Kamushanovsky Uranium Project in Kyrgyzstan. The Company’s aim is to deliver value to its shareholders by leveraging the significant experience of its directors and management team to advance our licences and to acquire new projects. Key performance indicators At this stage of the Group’s business activities the Directors think it appropriate to limit the Key Performance Indicators (KPIs) used to monitor progress in the delivery of the Group’s strategic objectives, to assess actual performance against targets and to aid management of the business, other than the monitoring of licences and stages of exploration. The Board monitors relevant KPIs which it considers appropriate for a company at Eurasia’s stage of development. The KPIs for the Group are as follows: Financial KPIs Results for the year – The Group has made a profit of £613,400 for the year ended 31 December 2016 (2015: loss of £1,294,150). The profit of 2016 resulted from the operational currency fluctuations. Foreign exchange profit of £1,959,358 caused mainly by strengthening of Russian Rouble and weakening of British Pound (2015 foreign exchange loss of £1,019,838 due to weakening of the Russian Rouble). Shareholder return – the performance of the share price. The Company’s shares are quoted on AIM and the shares have traded at 0.43-1.3p (2015: 0.45-2.15p) during the year under review. Exploration expenditure – funding and development costs. The availability of sufficient cash to facilitate continued investment and funding of exploration programmes and project development is essential. The Group monitors the availability of sufficient cash to fund work. At 31 December 2016 the Group had a cash balance of £154,674 (2015: £104,925) to allow it to continue its core project development, limited to desktop studies. This reserve was insufficient for the Group to carry on and the Group raised additional funds through the loan entered into by the Group in December 2016. Drawdowns made after the year-end are disclosed in the Note 28. Non financial KPIs Environment management – the Group has environmental policies in place. Performance against environmental policies is continuously monitored. The Company did minimum required field work in 2016, which would have any environmental impact. The Directors consider that this has served to minimize any negative impact of current exploration activities on the environment. Health and Safety - the Group has occupational health and safety policies and procedures in place ensuring that all efforts are made to minimise adverse personal and corporate outcomes, through best practice training, implementation and monitoring. Operational – the number of additional exploration licences and exploration successes. There has been limited exploration activity in the year, and the Directors are encouraged by the prospectivity of the Group’s exploration licenses and by the exploration results obtained to date. During the year the Group was granted the mining licence for a platinum mine at West Kytlim area in the Central Urals region in Russia. The Directors consider that performance against all KPIs in 2016 was acceptable. 8 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Strategic report continued Eurasia Mining plc Company No. 3010091 prevent the development or expansion of the Group’s properties in Russia. The Group closely monitors all regulatory requirements and changes to the laws, rules and regulation taking steps whenever necessary to comply with regulation. Commodity risk A potential fall in commodity prices which could lead to it becoming uneconomic for the Group to mine its assets. The Group closely monitors the markets for the platinum group metals, changes in demand and supply and effect they have on the metal prices with a view to take necessary measures in response to such changes, this may include stockpiling when prices are low, price hedging when prices rise above expectation. Loss of key personnel risk The loss of the key person consists of the departure (voluntary or otherwise) of an important employee which will, in all likelihood, result in a financial loss or increased expense to the small business. The expenses may be of a temporary or a permanent nature. These increased expenses relate to the search and hiring of a new employee. Training costs for the new hire, possible “signing” bonus and ·higher remuneration packages. These types of risks cannot be avoided. While the iGroup can take measures to motivate and retain existing employees it has limited powers in dealing with departures by natural or legislative reasons. Financing risk This is the risk of running out of working and investment capital. The Group has been relying primarily on the issue of share capital and other financial arrangements, which due to the risk factor require high returns to the investors at the Group expense. The Group maintains tight financial and budgetary control to keep its operations cost effective. Forward planning helps ensure it is adequately funded to reach its objectives. By order of the Board M J de Villiers Secretary 26 May 2017 Principal risks and uncertainties The risks inherent in an exploration business are kept under constant review by the Board and the Executive Committee. The going concern risk and the key financial risks affecting the Group and the Company are set out respectively in the Directors’ report and Notes 2 and 28 to the financial statements and the principal operating risks affecting the Group are detailed below: Exploration and project development risks Inherent risks associated with the failure to discover or develop an economically recoverable ore reserve, to conclude a definitive feasibility study, and to obtain the necessary consents and approvals for the conduct of exploration and mining. The Group engages in close discussion with respective government departments to have better understanding of the requirements and to make sure all requirements are implemented and duly reported to boost the prospects of the grant of permits and licences. The Group made significant progress successfully applying for the mining licence, which minimised the risk of non-granting the licence in future. Political risk The Group’s assets are located in Russia which is still undergoing a substantial transformation from a centrally controlled command economy to a market-driven economy. In addition, in view of the legal and regulatory regime in Russia and sanctions imposed to certain individuals and companies in Russian over Ukraine in 2014, legal and economic inconsistencies may arise. There has been no impact on the Group’s activity but the Group closely monitors all regulatory requirements and changes to the laws, rules and regulation taking steps whenever necessary to comply with regulation. Environmental issues The Group’s operations are subject to environmental regulation, including environmental impact assessments and permitting. Russian environmental legislation comprises numerous federal and regional regulations which are not fully harmonised and may not be consistently interpreted. The Group makes assessment of the environmental impact at the time it applies for permits and licences which are subject to such assessment. There is no immediate risk to the Group’s operation arising from environmental issues but the Group monitors environmental regulation, to assess potential impact. The regulatory environment The Group’s activities are subject to extensive federal and regional laws and regulations governing various matters, including licensing, production, taxes, mine safety, labour standards, occupational health and safety and environmental protections. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation or interpretation of these laws and regulations can have a material adverse impact on the Group and/or delay or ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 9 Directors’ Biographies Eurasia Mining plc Company No. 3010091 MICHAEL MARTINEAU GARY FITZGERALD Michael Martineau, MA, D.Phil, FIMMM, age 72, is Gary Fitzgerald, age 63, is a Non-Executive Director. Non-Executive Chairman. Following a First Class He was previously a Director of Framlington Investment Honours degree and a Doctorate in Geology from Management Limited and has over 30 years experience Oxford University, he has had 45 years experience in in investment management. He has diverse experience the mining and minerals industry. He was in charge of of emerging markets including the launch of the first global exploration for BP Minerals International, later fund for investing in Russia in the early 1990’s. becoming Exploration Director of its Australian listed subsidiary, Seltrust. In 1987, he joined Cluff Resources PLC, as Director Minerals and Managing Director of DMITRY SUSCHOV Cluff Mineral Exploration Limited. In 1989 he cofounded Dmitry Suschov, age 39, is a Non-Executive Director Samax Resources, which listed on the Toronto Stock and also a major shareholder of Eurasia. Dmitry is a Exchange in 1996 and which was acquired by Ashanti commodities trading veteran (primarily various grades Goldfields in 1998. He was formerly a Director of First of metallurgical and thermal coals) and has successfully Quantum Minerals. built a major Pulverized Coal Injection (PCI) franchise throughout Asia, Europe and America with an annual turnover of up to $100 million, thus accumulating CHRISTIAN SCHAFFALITZKY Christian Schaffalitzky, BA(Mod), FIMMM, PGeo, CEng, around 2.5% of the global PCI market share. He is also an investment banker with extensive experience in the age 63, is Managing Director. With over 40 years Russian resources industry and has previously worked experience in minerals exploration, Christian with IG Capital, MDM Bank, PricewaterhouseCoopers Schaffalitzky was a founder of Ivernia West PLC, where and Ernst&Young as mining & metals leader in corporate he led the exploration, discovery and development finance for Russia and CIS. of the Lisheen world class zinc deposit in Ireland. More recently, he was Managing Director of Ennex International PLC, an Irish quoted mineral exploration company, focused on zinc development projects. He has also been engaged in precious and base metals minerals exploration and development in Russia and the former Soviet Union. He is Chairman of Kibo Mining plc and on the board of two other listed companies. 10 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Directors’ report Directors The Directors who served during the period were: The Board has utilised authority to allot shares and issue warrants as follows: Michael Martineau Non-Executive Chairman Christian Schaffalitzky Managing Director Gary FitzGerald Non-Executive Director Dmitry Suschov Non-Executive Director Company Secretary Michael de Villiers Directors’ interests Date Transaction No of shares issued/ Nominal value £ warrants granted 01 Aug 2016 20 Sept 2016 Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements 28,181,818 28,182 1,538,462 1,538 20 Sept 2016 Issue of ordinary shares by way of placing 20,629,231 20,629 20 Sept 2016 Issue of ordinary shares in lieu of financing commission 2,153,846 2,154 Share interests The Directors of the Company held the following beneficial interests (including interests held by spouses and minor children) in the ordinary shares of the Company: M. Martineau C. Schaffalitzky G. FitzGerald D. Suschov Total 31 Dec 2016 No. of shares 17,831,403 49,696,674 18,608,387 284,877,066 31 Dec 2015 No. of shares 15,049,185 33,134,300 16,909,286 281,558,049 371,013,530 346,650,820 Share options No share options were held by the Directors of the Company at 31 December 2016 (31 December 2015 – nil). 26 Oct 2016 18 Nov 2016 20 Dec 2016 29 Dec 2016 03 Feb 2017 21 Feb 2017 27 Mar 2017 No share options were exercised during 2016 (2015 – nil). 26 Apr 2017 Share capital Issued capital of the Company as at 31 December 2016 was: Number of shares Fully paid ordinary shares at 0.1 pence Deferred shares 4.9 pence 1,509,787,583 143,377,203 Nominal value £ 1,509,788 7,025,483 Section 561 of the Companies Act 2006 (the “Act”) provides that any shares being issued for cash must in general be issued to all existing shareholders pro-rata to their holding. However, where Directors had a general authority to allot shares, they may be authorised by the Articles or by a special resolution to allot shares pursuant to the authority as if the statutory pre-emption rights did not exist. At the General Meeting, held on 30 June 2016, the Board was given authority for the purposes of section 551 of the Act to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £1,000,000, such authority to expire on the date of the next Annual General Meeting. Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of warrants under term of financing arrangements Issue of warrants under term of financing arrangements Issue of warrants under term of financing arrangements 1,534,465 1,534 4,800,000 4,800 33,581,731 33,582 12,413,793 12,414 15,652,174 15,652 2,727,273 2,727 2,857,173 2,857 1,500,000 1,500 10,526,316 10,526 80,749,333 80,749 20,000,000 20,000 10,000,000 10,000 19 May 2017 19 May 2017 22 May 2017 23 May 2017 Total 248,845,615 248,844 The Board has not utilised authority to purchase the Company’s own shares. It will be proposed at the Annual General Meeting as an ordinary resolution to renew the Directors’ general authority to issue relevant securities up to an aggregate nominal amount of £1,000,000. It will also be proposed at the Annual General Meeting as a special resolution for the renewal of the Directors’ authority to allot relevant securities for cash, without first offering them to shareholders pro rata to their holdings, pursuant to section 561 of the Company Act 2006 up to an aggregate nominal amount of £1,000,000. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 11 Directors’ report continued Risk Management The Directors consider that assessing and monitoring the inherent risks in the exploration business, as well as other financial risks, is crucial for the success of the Group. Risk assessment is essential in the Group’s planning processes. The Board regularly reviews the performance of projects against plans and forecasts. Further detail on management of financial risks which includes foreign currency, interest rate, credit, liquidity and capital risks are set out in note 27. Going Concern At 31 December 2016 the Group’s net current liabilities amounted to £148,544 (2015: net current assets £1,782). At the same time the Group had a cash balance of £154,674 (2015: £104,925) and undrawn £350,000 under the loan facility entered into in December 2016 (note 19). £350,000 was fully drawn in after the year end which is disclosed in the note 28. All these reserves were insufficient to meet the Group’s demands for the working capital and the loan repayment due in May 2017. Directors have taken further measures to preserve cash and secure additional finance. Within May 2017 the Company raised around $2m to refinance existing debts and to have funds for general working capital purposes (note 28). During the year the Group finalised exploration work at Kola and initiated the procedure of applying for the mining licence, going forward cash demand to run Kola project will be limited to desktop works aiming to support licence application process. West Kytlim mining operations restarted in May 2017. The Group expects sufficient revenues from the mining operations to satisfy funding requirement to run the project company and carry works done towards extending platinum reserve base. The Group has further implemented plans to minimise its cash outflows by reducing its fixed costs and overheads and by subletting part of the office premises. The Directors took personal steps in conserving the Group’s cash by taking their remuneration in the Company’s shares. The Directors are confident that the existing projects in the Group’s control are attractive to enable the Group to secure new finance whenever required and the Group has demonstrated a consistent ability to do so. The Directors have concluded that the combination of these circumstances represents a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts. By order of the Board M J de Villiers Secretary 26 May 2017 12 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Statement of Directors’ responsibilities The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that so far as each Director is aware: • 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 as directors in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors’ report continued Corporate Governance The Board of Directors The Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness. The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company’s objectives. Any such system of internal financial control can only provide reasonable but not absolute assurance against material misstatement or loss. Full Board meetings are held quarterly to review Group strategy, direction and financial performance. The executive Directors meet regularly to review operational reports from all the Group’s areas of operations. The process is used to identify major business risks and evaluate their financial implications and ensure an appropriate control environment. Certain control over expenditure is delegated to on site project managers subject to Board control by means of monthly budgetary reports. Internal financial control procedures include:- • preparation and regular review of operating budgets and forecasts • prior approval of all capital expenditure • review and debate of treasury policy • unrestricted access of non-executive Directors to all members of senior management. The Board, in conjunction with members of the Audit Committee, has reviewed the effectiveness of the system of internal control for the period from 1st January 2016 to the date of this report. Audit Committee The Chairman of the Audit Committee is Gary FitzGerald. The Audit Committee may examine any matters relating to the financial affairs of the Group and the Group’s audits, this includes reviews of the annual financial statements and announcements, internal control procedures, accounting procedures, accounting policies, the appointment, independence, objectivity, terms of reference and fees of external auditors and such other related functions as the Board may require. The membership of the Audit Committee comprises two non-executive Directors, Michael Martineau and Gary FitzGerald. The external auditors have direct access to the members of the Committee, without the presence of the executive Directors, for independent discussions. Remuneration Committee The Chairman of the Remuneration Committee is Michael Martineau. The committee comprises two non-executive Directors, Michael Martineau and Gary FitzGerald. It determines the terms and conditions of employment and annual remuneration of the Executive Directors. It consults with the Managing Director, takes into consideration external data and comparative third party remuneration and has access to professional advice outside the Company. The key policy objectives of the Remuneration Committee in respect of the Company’s executive Directors and other senior executives are:– a) to ensure that individuals are fairly rewarded for their personal contribution to the Company’s overall performance, and b) to act as an independent committee ensuring that due regard is given to the interests of the Company’s Shareholders and to the financial and commercial health of the Company. Remuneration of executive Directors normally comprises basic salary, under circumstances it may include discretionary bonuses, participation in the Company’s share option scheme and other benefits. The Company’s remuneration policy with regard to options is to maintain an amount of not more than 10% of the issued share capital in options for the Company’s management and employees which may include the issue of new options in line with any new share issues. Total Directors’ emoluments are disclosed in notes 8 and 23 to the financial statements and the Directors’ options are disclosed above. During 2016 no options were granted to the Directors (2015: nil). Dividends and profit retention No dividend is proposed in respect of the year (2015: £nil) and the retained loss for the year attributable to the equity holders of the parent of £740,265 (2015 loss of £1,372,466) has been taken to reserves. Research and future development The Group’s activities during the year continued to be concentrated principally on mineral exploration programmes and the improvement of mining techniques and metallurgical processes. While developing its core projects disclosed in the Operations update the Group will continue studying and searching for new “near production” project in the geographical areas it gained its experience in. Auditors Grant Thornton UK LLP are willing to continue in office and a resolution proposing their re-appointment as auditors of the Company and a resolution authorising the Directors to agree their remuneration will be put to shareholders at the Annual General Meeting. By order of the Board M J de Villiers Secretary 26 May 2017 ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 13 Opinion on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. • the Strategic Report and Directors' Report has been prepared in accordance with applicable legal requirements. Matter on which we are required to report under the Companies Act 2006 In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report and Directors' Report. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors' remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Nicholas Page Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London 26 May 2017 Independent Auditor’s Report INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EURASIA MINING PLC We have audited the financial statements of Eurasia Mining Plc for the year ended 31 December 2016 which comprise the consolidated and parent company statements of financial position, the consolidated statement of profit or loss and other comprehensive income, the consolidated and parent company statements of cash flow, the consolidated and parent company statements of changes in equity and the related notes. 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 and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors' Responsibilities Statement set out on page 12, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2016 and of the group's profit for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accord - ance with the requirements of the Companies Act 2006. 14 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Consolidated statement of profit or loss and Eurasia Mining plc Company No. 3010091 other comprehensive income For the year ended 31 December 2016 Sales Cost of sales Gross profit Administrative costs Finance cost Other gains and losses Profit/(loss) before tax Income tax expense Profit/(loss) for the period Other comprehensive income: Items that will not be reclassified subsequently to profit and loss: NCI share of foreign exchange differences on translation of foreign operations Items that will be reclassified subsequently to profit and loss: Parent’s share of foreign exchange differences on translation of foreign operations Other comprehensive income for the period, net of tax Total comprehensive profit/(loss) for the period Profit/(loss) for the period attributable to: Equity holders of the parent Non-controlling interest Total comprehensive profit/(loss) for the period attributable to: Equity holders of the parent Non-controlling interest Profit/(loss) per share attributable to equity holders of the parent: Basic profit/(loss) (pence per share) Diluted profit/(loss) (pence per share) Year to 31 December 2016 £ Year to 31 December 2015 £ Note 139,862 (130,688) 9,174 (654,263) (224,814) 1,864,143 994,240 - - - - (667,970) - (1,019,838) (1,687,808) - 994,240 (1,687,808) (132,190) 110,925 (248,650) 282,733 (380,840) 393,658 613,400 (1,294,150) 740,265 253,975 (1,372,466) (315,342) 994,240 (1,687,808) 491,615 121,785 (1,089,733) (204,417) 613,400 (1,294,150) 0.05 0.05 (0.11) - 9 10 13 13 21 21 In accordance with section 408(3) of the Companies Act 2006, Eurasia Mining plc is exempt from the requirement to present its own income statement. The amount of loss for the financial year recorded within the financial statements of Eurasia Mining plc is £655,352 (2015: loss of £522,174). ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 15 Consolidated statement of financial position Eurasia Mining plc Company No. 3010091 As at 31 December 2016 ASSETS Non-current assets Property, plant and equipment Assets in the course of construction Intangible assets Investments in joint operations Other financial assets Total non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets EQUITY Issued capital Other reserves Accumulated losses Equity attributable to equity holders of the parent Non-controlling interest Total equity LIABILITIES Current liabilities Borrowings Trade and other payables Total current liabilities Total liabilities Total equity and liabilities 31 December 2016 £ 31 December 2015 £ Note 11 12 14 15 16 18 13 19 20 4,402,272 39,216 813,135 44,131 489,312 24,375 - 3,200,726 - 406,702 5,788,066 3,631,803 23,844 149,146 154,674 327,664 218 210,795 104,925 315,938 6,115,730 3,947,741 25,577,993 3,281,842 (22,544,900) 24,185,436 3,530,492 (23,285,165) 6,314,935 (675,393) 4,430,763 (797,178) 5,639,542 3,633,585 318,314 157,874 476,188 476,188 - 314,156 314,156 314,156 6,115,730 3,947,741 These financial statements were approved by the board on 26 May 2017 and were signed on its behalf by: C. Schaffalitzky Managing Director 16 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Company statement of financial position Eurasia Mining plc Company No. 3010091 As at 31 December 2016 ASSETS Non-current assets Property, plant and equipment Investments in subsidiaries Investments in joint operations Other financial assets Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets EQUITY Issued capital Other reserves Accumulated losses Total equity LIABILITIES Current liabilities Borrowings Trade and other payables Total current liabilities Total liabilities Total equity and liabilities Note 11 13 14, 23 15 16 18 19 20 31 December 2016 £ 31 December 2015 £ 238 1,277,489 44,131 5,765,654 705 1,277,489 - 4,915,081 7,087,512 6,193,275 80,040 116,428 70,921 83,444 196,468 154,365 7,283,980 6,347,640 25,577,993 3,542,694 (22,462,468) 24,185,436 3,542,694 (21,807,116) 6,658,219 5,921,014 318,314 307,447 625,761 625,761 - 426,626 426,626 426,626 7,283,980 6,347,640 These financial statements were approved by the board on 26 May 2017 and were signed on its behalf by: C. Schaffalitzky Managing Director ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 17 Consolidated statement of changes in equity For the year ended 31 December 2016 Eurasia Mining plc Company No. 3010091 Share capital £ Share premium £ Deferred shares £ Note Capital redemption and other reserves £ Foreign currency translation reserve £ Accumulated losses £ Total attributable to owners of parent £ Non- controlling interest £ Total £ Balance at 1 January 2015 Issue of ordinary share capital for cash Share issue costs Reversals due to expired options Recognition of share-based payments 21 1,108,220 15,046,077 868,358 (23,525) - - 160,823 - - - 7,025,483 - - - - 3,939,141 - - (399,235) 2,788 (294,935) - - - - (22,311,934) - - 399,235 - 4,512,052 1,029,181 (23,525) - 2,788 (592,761) - - - - 3,919,291 1,029,181 (23,525) - 2,788 Transactions with owners 160,823 844,833 - (396,447) Loss for the period Exchange differences on translation of foreign operations Total comprehensive income - - - - - - - - - - - - - - 399,235 1,008,444 - 1,008,444 (1,372,466) (1,372,466) (315,342) (1,687,808) 282,733 - 282,733 110,925 393,658 282,733 (1,372,466) (1,089,733) (204,417) (1,294,150) Balance at 31 December 2015 1,269,043 15,890,910 7,025,483 3,542,694 (12,202) (23,285,165) 4,430,763 (797,178) 3,633,585 1,269,043 15,890,910 7,025,483 3,542,694 Balance at 1 January 2016 Issue of ordinary share capital for cash Shares issued in lieu of loan note interest 13 Issue of shares for professional services Share issue cost 145,350 90,458 4,937 723,207 458,542 20,063 (50,000) Transactions with owners 240,745 1,151,812 Profit for the period Exchange differences on translation of foreign operations Total comprehensive income - - - - - - - - - - - - - - - - - - - - - - (12,202) (23,285,165) 4,430,763 868,557 549,000 25,000 (50,000) - - - - - - - - (797,178) 3,633,585 868,557 549,000 25,000 (50,000) - - - - - - - 1,392,557 - 1,392,557 740,265 740,265 253,975 994,240 (248,650) - (248,650) (132,190) 380,840 (248,650) 740,265 491,615 121,785 613,400 Balance at 31 December 2016 1,509,788 17,042,722 7,025,483 3,542,694 (260,852) (22,544,900) 6,314,935 (675,393) 5,639,542 18 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Company statement of changes in equity For the year ended 31 December 2016 Eurasia Mining plc Company No. 3010091 Balance at 1 January 2015 Issue of ordinary share capital for cash Share issue costs Reversals due to expired options Recognition of share-based payments Note 21 Share capital £ Share premium £ Deferred shares £ Other reserves £ Retained loss £ Total £ 1,108,220 160,823 - - - 15,046,077 868,358 (23,525) - - 7,025,483 - - - - 3,939,141 - - (399,235) 2,788 (21,684,177) - - 399,235 - 5,434,744 1,029,181 (23,525) - 2,788 Transactions with owners 160,823 844,833 Loss and total comprehensive income - - - - (396,447) 399,235 1,008,444 - (522,174) (522,174) Balance at 31 December 2015 1,269,043 15,890,910 7,025,483 3,542,694 (21,807,116) 5,921,014 Balance at 1 January 2016 Issue of ordinary share capital for cash Shares issued in lieu of loan note interest Issue of shares for professional services Share issue cost 13 1,269,043 145,350 90,458 4,937 - 15,890,910 723,207 458,542 20,063 (50,000) 7,025,483 - - - - 3,542,694 (21,807,116) - - - - - - - - 5,921,014 868,557 549,000 25,000 (50,000) Transactions with owners 240,745 1,151,812 Profit and total comprehensive income - - - - - - - 1,392,557 (655,352) (655,352) Balance at 31 December 2016 1,509,788 17,042,722 7,025,483 3,542,694 (22,462,468) 6,658,219 ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 19 Consolidated statement of cash flows For the year ended 31 December 2016 Eurasia Mining plc Company No. 3010091 Year to 31 December 2016 £ Year to 31 December 2015 £ Note Cash flows from operating activities Profit/(loss) for the period Adjustments for: Depreciation of non-current assets Amortisation of intangible assets Finance costs recognised in profit or loss Impairment loss recognised on trade and other receivables Net foreign exchange (profit)/loss Expense recognised in income statement in respect of equity-settled share-based payment 994,240 (1,687,808) 1,923 15,712 224,814 95,215 (1,959,358) 25,000 1,936 - - - 1,019,838 2,788 (602,454) (663,246) (23,530) 46,371 (203,036) 25 (65,515) 150,180 (782,649) (578,556) - (782,649) - (578,556) 11 12 (44,131) (3,578) (39,216) (620,416) - (633) - (516,701) (707,341) (517,334) 818,557 892,500 (250,000) 1,005,626 - - 1,461,057 1,005,656 (28,933) 78,682 104,925 (90,234) (29,704) 224,863 154,674 104,925 Movement in working capital (Increase)/decrease in inventories Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Cash outflow from operations Income tax paid Net cash used in operating activities Cash flows from investing activities Contributed to joint operations Purchase of property, plant and equipment Invested into assets under construction Payment for intangible assets Net cash used in investing activities Cash flows from financing activities Proceeds from issue of equity shares Proceeds from borrowings Repayment of borrowings Net cash proceeds from financing activities Net decrease in cash and cash equivalents Effects of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 20 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Company statement of cash flows For the year ended 31 December 2016 Eurasia Mining plc Company No. 3010091 Year to 31 December 2016 £ Year to 31 December 2015 £ Note Cash flows from operating activities (Loss)/profit for the period Adjustments for: Depreciation of non-current assets Finance costs recognised in profit or loss Net foreign exchange loss Expense recognised in income statement in respect of equity-settled share-based payment Movement in working capital Decrease in trade and other receivables (Decrease)/increase in trade and other payables Cash outflow from operations Income tax paid Net cash used in operating activities Cash flows from investing activities Contributed to joint operations Purchase of property, plant and equipment Amounts advanced to related party Net cash used in investing activities Cash flows from financing activities Proceeds from issue of equity shares Proceeds from borrowings Repayment of borrowings Net cash proceeds from financing activities Net decrease in cash and cash equivalents Effects of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (655,352) (522,174) 467 224,814 1,818 25,000 1,013 - (564) 2,788 (403,253) (518,937) (9,119) (121,762) (534,134) - (534,134) (5,739) 85,782 (438,894) - (438,894) 11 (44,131) - (850,573) - (633) (694,607) (894,704) (695,240) 818,557 892,500 (250,000) 1,005,656 - - 1,461,057 1,005,656 32,219 765 83,444 116,428 (128,478) 1,762 210,160 83,444 ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 21 Notes to the consolidated financial statements For the year ended 31 December 2016 1 General information Eurasia Mining Plc (the “Company”) is a public limited company incorporated and domiciled in Great Britain with its registered office and principal place of business at 2nd Floor, 85-87 Borough High Street, London SE1 1NH. The Company’s shares are listed on the AIM Market of the London Stock Exchange plc. The principal activities of the Company and its subsidiaries (the “Group”) are related to the exploration for and development of platinum group metals, gold and other minerals in Russia. Eurasia Mining Plc’s consolidated financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company. 2 Going concern The Directors have a reasonable expectation based on a review of the Group's budgets, plans, cash flow forecasts and the ability to flex their forecast spending to suit prevailing circumstances, that the Group is a going concern for a period of at least 12 months from the date of signing the financial statements. At 31 December 2016 the Group’s net current liabilities amounted to £148,544 (2015: net current assets £1,782). At the same time the Group had a cash balance of £154,674 (2015: £104,925) and undrawn £350,000 under the loan facility entered into in December 2016 (note 19). £350,000 was fully drawn in after the year end which is disclosed in the note 28. All these reserves were insufficient to meet the Group’s demands for the working capital and the loan repayment due in May 2017. Directors have taken further measures to preserve cash and secure additional finance. Within May 2017 the Company raised around $2m to refinance existing debts and to have funds for general working capital purposes (note 28). During the year the Group finalised exploration work at Kola and initiated the procedure of applying for the mining licence, going forward cash demand to run Kola project will be limited to desktop works aiming to support licence application process. West Kytlim mining operations restarted in May 2017. The Group expects sufficient revenues from the mining operations to satisfy funding requirement to run the project company and carry works done towards extending platinum reserve base. The Group has further implemented plans to minimise its cash outflows by reducing its fixed costs and overheads and by subletting part of the office premises. The Directors took personal steps in conserving the Group’s cash by taking their remuneration in the Company’s shares. The Directors are confident that the existing projects in the Group’s control are attractive to enable the Group to secure new finance whenever required and the Group has demonstrated a consistent ability to do so. The Directors have concluded that the combination of these circumstances represents a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts. 3 Changes in accounting policies 3.1 New and revised relevant standards that are effective for annual periods commencing on or after 1 January 2016 Amendments to IFRS 10, IFRS 12 and IAS 28 - Investment entities: Applying the consolidation exception (effective 1 January 2016) Amendments made to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in associates and joint ventures clarify that: • The exception from preparing consolidated financial statements is also available to intermediate parent entities which are subsidiaries of investment entities. • An investment entity should consolidate a subsidiary which is not an investment entity and whose main purpose and activity is to provide services in support of the investment entity’s investment activities. • Entities which are not investment entities but have an interest in an associate or joint venture which is an investment entity have a policy choice when applying the equity method of accounting. The fair value measurement applied by the investment entity associate or joint venture can either be retained, or a consolidation may be performed at the level of the associate or joint venture, which would then unwind the fair value measurement. Amendments to IFRS 11 Joint Arrangements (effective 1 January 2016) • These amendments provide guidance on the accounting for acquisitions of interests in joint operations constituting a business. The amendments require all such transactions to be accounted for using the principles on business combinations accounting in IFRS 3 ‘Business Combinations’ and other IFRSs except where those principles conflict with IFRS 11. Acquisitions of interests in joint ventures are not impacted by this new guidance. Amendments to IAS 1-Disclosure Initiative (effective 1 January 2016) The amendments to IAS 1 Presentation of Financial Statements are made in the context of the IASB’s Disclosure Initiative, which explores how financial statement disclosures can be improved. The amendments provide clarifications on a number of issues, including: • Materiality – an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance. • Disaggregation and subtotals – line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity’s financial position or performance. There is also new guidance on the use of subtotals. 22 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 • Notes – confirmation that the notes do not need to be presented in a particular order. • OCI arising from investments accounted for under the equity method – the share of OCI arising from equity- accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income. Amendments to IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation (effective 1 January 2016) The IASB has amended IAS 16 Property, Plant and Equipment to clarify that a revenue-based method should not be used to calculate the depreciation of items of property, plant and equipment. IAS 38 Intangible Assets now includes a rebuttable presumption that the amortisation of intangible assets based on revenue is inappropriate. This presumption can be overcome if either • The intangible asset is expressed as a measure of revenue (ie where a measure of revenue is the limiting factor on the value that can be derived from the asset), or • It can be shown that revenue and the consumption of economic benefits generated by the asset are highly correlated. Amendments to IAS 27 - Equity method in separate financial statements (effective 1 January 2016) The IASB has made amendments to IAS 27 Separate Financial Statements which will allow entities to use the equity method in their separate financial statements to measure investments in subsidiaries, joint ventures and associates. IAS 27 currently allows entities to measure their investments in subsidiaries, joint ventures and associates either at cost or as a financial asset in their separate financial statements. The amendments introduce the equity method as a third option. The election can be made independently for each category of investment (subsidiaries, joint ventures and associates). Entities wishing to change to the equity method must do so retrospectively. Amendments to IFRS 10 and IAS 28 - Sale or contribution of assets between an investor and its associate or joint venture (effective 1 January 2016) The IASB has made limited scope amendments to IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and joint ventures, which clarify the accounting treatment for sales or contribution of assets between an investor and its associates or joint ventures. They confirm that the accounting treatment depends on whether the non- monetary assets sold or contributed to an associate or joint venture constitutes a ‘business’ (as defined in IFRS 3 Business Combinations). Where the non-monetary assets constitute a business, the investor will recognise the full gain or loss on the sale or contribution of assets. If the assets do not meet the definition of a business, the gain or loss is recognised by the investor only to the extent of the other investor’s investors in the associate or joint venture. The amendments apply prospectively. Annual Improvements to IFRSs 2012-2014 cycle (effective 1 January 2016) The latest annual improvements clarify: • IFRS 5 – when an asset (or disposal group) is reclassified from ‘held for sale’ to ‘held for distribution’ or vice versa, this does not constitute a change to a plan of sale or distribution and does not have to be accounted for as such • IFRS 7 – specific guidance for transferred financial assets to help management determine whether the terms of a servicing arrangement constitute ‘continuing involvement’ and, therefore, whether the asset qualifies for derecognition • IFRS 7 – that the additional disclosures relating to the offsetting of financial assets and financial liabilities only need to be included in interim reports if required by IAS 34 • IAS 19 – that when determining the discount rate for post-employment benefit obligations, it is the currency that the liabilities are denominated in that is important and not the country where they arise • IAS 34 – what is meant by the reference in the standard to ‘information disclosed elsewhere in the interim financial report’ and adds a requirement to cross- reference from the interim financial statements to the location of that information The adoption of these Standards and Interpretations has had no material impact on the financial statements of the Group. 3.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective, and have not been adopted early by the Group. Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group’s financial statements. IFRS 9 Financial Instruments (effective 1 January 2018) IFRS 9 represents the completion of its project to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. The new standard introduces extensive changes to IAS 39’s guidance on the classification and measurement of financial assets and introduces a new ‘expected credit loss’ model for the impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 23 Notes to the consolidated financial statements continued For the year ended 31 December 2016 IFRS 15 Revenue from contracts with customers (effective 1 January 2017) The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. IFRS 16 Leases (effective 1 January 2019) IASB released IFRS 16 'Leases', which will require lessees to account for leases 'on-balance sheet' by recognising a 'right-of-use' asset and a lease liability. IFRS 16 also: • changes the definition of a lease; • sets requirements on how to account for the asset and liability, including complexities such as non-lease elements, variable lease payments and option periods; • provides exemptions for short-term leases and leases of low value assets; • changes the accounting for sale and leaseback arrangements; • largely retains IAS 17's approach to lessor accounting; • introduces new disclosure requirements. Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions (effective 1 January 2018) The amendments clarify the following: 1. In estimating the fair value of a cash-settled share-based payment, the accounting for the effects of vesting and non-vesting conditions should follow the same approach as for equity-settled share-based payments. 2. Where tax law or regulation requires an entity to withhold a specified number of equity instruments equal to the monetary value of the employee’s tax obligation to meet the employee’s tax liability which is then remitted to the tax authority, i.e. the share-based payment arrangement has a ‘net settlement feature’, such an arrangement should be classified as equity-settled in its entirety, provided that the share-based payment would have been classified as equity-settled had it not included the net settlement feature. 3. A modification of a share-based payment that changes the transaction from cash-settled to equity-settled should be accounted for as follows: Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective on or after the date to be determined) The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture. Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method, are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognised in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture. Amendments to IAS 7 Disclosure Initiative (effective 1 January 2017) The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses (effective 1 January 2017) The amendments clarify the following: 1. Decreases below cost in the carrying amount of a fixed- rate debt instrument measured at fair value for which the tax base remains at cost give rise to a deductible temporary difference, irrespective of whether the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use, or whether it is probable that the issuer will pay all the contractual cash flows; 2. When an entity assesses whether taxable profits will be available against which it can utilise a deductible temporary difference, and the tax law restricts the utilisation of losses to deduction against income of a specific type (e.g. capital losses can only be set off against capital gains), an entity assesses a deductible temporary difference in combination with other deductible temporary differences of that type, but separately from other types of deductible temporary differences; 3. The estimate of probable future taxable profit may include the recovery of some of an entity’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the entity will achieve this; and • i.the original liability is derecognised; • the equity-settled share-based payment is recognised at the modification date fair value of the equity instrument granted to the extent that services have been rendered up to the modification date; and • any difference between the carrying amount of the liability at the modification date and the amount recognised in equity should be recognised in profit or loss immediately. 4. In evaluating whether sufficient future taxable profits are available, an entity should compare the deductible temporary differences with future taxable profits excluding tax deductions resulting from the reversal of those deductible temporary differences. The directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group's consolidated financial statements. 24 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 4 Summary of significant accounting policies 4.1 Basis of preparation The consolidated financial statements of the Group and the Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as adopted by the EU. These financial statements have been prepared under the historical cost convention. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these consolidated financial statements. 4.2 Presentation of financial statements The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements. The Group has elected to present the “Statement of comprehensive income” in one statement. 4.3 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has all of the following: • Power over investee; • Exposure, or rights, to variable returns from its involvement with the investee; • The ability to use its power over the investee to affect the amount of investor’s returns. The results of subsidiaries acquired or disposed of are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling party’s share of changes in equity since the date of the combination. 4.4 Business combinations The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (ie gain on a bargain purchase) is recognised as a profit or loss immediately. In a business combination achieved in stages, the Group remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss or other comprehensive income, as appropriate. 4.5 Interests in joint arrangements A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint controls are similar to those necessary to determine control over subsidiaries. The Group reports its interests in jointly controlled entities using the equity method of accounting, except when the investment is classified as held for sale. Under the equity method, investments in joint ventures are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the joint venture, less any impairment in the value of individual investments. Losses of a joint venture in excess of the Group’s interest in that joint venture are not recognised, unless the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture. Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the joint venture recognised at the date of acquisition is recognised as goodwill. The goodwill, if any is included within the carrying amount of the investment and is assessed annually for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately as a profit or loss. Unrealised gains on transactions between the Group and its joint venture are eliminated to the extent of the Group’s interest in the joint venture. Unrealised losses are also ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 25 Notes to the consolidated financial statements continued For the year ended 31 December 2016 eliminated unless the transaction provides evidence of an impairment of the asset transferred. the date the entity obtains the goods or the counterparty renders the service. 4.6 Foreign currencies Functional and presentation currency The individual financial statements of each group entity are prepared in the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in GBP, which is the functional and the presentation currency of the Company. Transaction and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Group companies The results and financial position of all the group 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 income statement 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 rate on the dates of the transactions); and • all resulting exchange differences are recognised as a separate component of other comprehensive income. 4.7 Share-based payments Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of Black Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non- transferability, exercise restrictions and behavioural considerations. The fair value determined at the grant date of the equity- settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at All equity-settled share-based payments are ultimately recognised as an expense in the profit or loss with a corresponding credit to “Share-based payments reserve". Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting or if the share options vest but are not exercised. When share options lapse or are forfeited the respective amount recognised in the Share-based payment reserve is reversed and credited to accumulated profit and loss reserve. 4.8 Revenue Goods sold Revenue is measured at the fair value of the consideration received or receivable (excluding VAT), net of returns, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. For sales of the platinum group and other metals, the transfer usually occurs upon receipt by the customer. Services Revenue comprises project management services to external customers (excluding VAT). Consideration receivable from customers is only recorded as revenue to the extent that the Company has performed its contractual obligations in respect of that consideration. 4.9 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date. 26 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 Deferred tax Deferred income tax is provided in full, 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 income tax is not accounted for if it arises from initial recognition of goodwill, 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 substantively enacted by the statement of financial position date 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 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 is provided on temporary differences arising on investments in subsidiaries and associates, except 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. 4.10 Property, plant and equipment Mining assets Mining assets are stated at cost less accumulated depreciation. Mining assets include the cost of acquiring and developing mining assets and mineral rights, buildings, vehicles, plant and machinery and other equipment located on mine sites and used in the mining operations. Mining assets, where economic benefits from the asset are consumed in a pattern which is linked to the production level, are depreciated using a units of production method based on the volume of ore reserves. This results in a depreciation charge proportional to the depletion of reserves. Where the mining plan anticipates future capital expenditure to support the mining activity over the life of the mine, the depreciable amount is adjusted for such estimated future expenditure. Other assets Freehold properties held for administrative purposes, are stated in the statement of financial position at cost. Fixtures and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. The estimated useful lives are as follows: Property Office equipment Furniture and fittings 30 years 3 years 5 years The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 4.11 Intangible assets Exploration and evaluation of mineral resources Exploration and evaluation expenditure comprises costs that are directly attributable to: • researching and analysing existing exploration data; • conducting geological studies, exploratory drilling and sampling; • examining and testing extraction and treatment methods; and/or • compiling prefeasibility and feasibility studies. Exploration expenditure relates to the initial search for deposits with economic potential. Evaluation expenditure arises from a detailed assessment of deposits that have been identified as having economic potential. Such capitalised evaluation expenditure is reviewed for impairment at each statement of financial position date. The review is based on a status report regarding the Group’s intentions for development of the undeveloped property. Subsequent recovery of the resulting carrying value depends on successful development of the area of interest or sale of the project. If a project does not prove viable, all irrecoverable costs associated with the project net of any related impairment provisions are written off. 4.12 Impairment testing intangible assets and property, plant and equipment At each statement of financial position date, the Group reviews the carrying amounts of the assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 27 Notes to the consolidated financial statements continued For the year ended 31 December 2016 If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash- generating unit) in prior years. A reversal of an impairment loss of the assets is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 4.13 Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first- in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. 4.14 Financial instruments Financial assets and liabilities are recognised on the group’s statement of financial position when the group has become a party to the contractual provisions of the instrument. Financial assets Loans and receivables Trade receivables, loans, cash and cash equivalents, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured initially fair value plus transaction costs and subsiquently at amortised cost using the effective interest method less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and on deposit with banks. Impairment of financial assets Financial assets are assessed for indicators of impairment at each statement of financial position date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment losses recognised previously on debt securities are reversed through the income statement when the increase can be related objectively to an event occurring after the impairment loss was recognised in the income statement. Revision in timing of cash flows Where there is a change in the planned timing of repayment of loans or receivables the carrying amount of these financial assets or liabilities are adjusted to reflect the revised estimated cash flows. The present value of the estimated future cash flows is computed by reference to the effective interest rate of the item, the adjustment is recognised in profit or loss as income or expense. Financial liabilities and equity instruments issued by the Group Classification as debt or equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual liabilities of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities, and are presented as such in the statement of financial position. Finance costs and gains or losses relating to financial liabilities are included in the income statement. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability. Where the contractual terms of share capital do not have any features meeting the definition of a financial liability then such capital is classed as an equity instrument. 28 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 5.2.2 Recoverability of other financial assets The majority of other financial assets represent loans provided to subsidiary and joint venture, which are associated with funding of mineral exploration and development projects. The recoverability of such loans is dependent upon the discovery of economically recoverable reserves, obtaining of regulatory approval for the extraction of such reserves, the ability of the Company to maintain necessary financing to complete the development of reserves and future profitable production or proceeds from the disposition thereof. 6 Segmental information During the year under review management identified the group as one operating segment being investing in exploration for and development of platinum group metals, gold and other minerals in Russia. This one segment is monitored and strategic decisions are made based upon it and other non-financial data collated from the on-going exploration activities. The formats of financial reports that are reported to the Chief Operating Decision Maker are consistent with those presented in the annual financial statements. Dividends and distributions relating to equity instruments are debited direct to equity. Other financial liabilities Other financial liabilities, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. 4.15 Segmental 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 executive directors of the Group that make the operating decisions. 5 Critical accounting judgements and key sources of estimation uncertainty 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. 5.1 Investments in subsidiaries The Company has a holding of 48.33% in the BVI registered company Energy Resources Asia Limited (the “ERA”). Directors consider the ERA to be a subsidiary of the Company despite holding less than 50% of the voting power of the entity based on the fact that the Company has the ability to use its power over the investee to affect the amount of the investor’s returns. 5.2 Key sources of estimation uncertainty The following are the key assumptions / uncertainties at the statement of financial position date, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 5.2.1 Share-based payments The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own shares, the probable life of options granted and the time of exercise of those options. The model used by the Group is the Black-Scholes valuation model. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 29 Notes to the consolidated financial statements continued For the year ended 31 December 2016 7 Employees Average number of staff (excluding non-executive directors) employed throughout the year was as follows: By the Company By the Group 8 Profit/(loss) for the year Profit/(loss) for the year has been arrived at after charging: Staff benefits expense: Wages, salaries and directors fees (note 22 ) Social security costs Other short term benefits Audit fees payable to the company’s auditor for the audit of the Group’s annual accounts 9 Other gains and losses VAT written off Net foreign exchange (loss)/profit 10 Income taxes (Loss)/profit before tax Current tax at 20% (2015: 20%) Adjusted for the effect of: Expenses not deductible for tax purposes Profits not subject to tax 2016 4 19 2015 5 19 Year to 31 December 2016 Company £ Group £ Year to 31 December 2015 Company £ Group £ 250,644 24,848 18,500 180,724 7,476 18,500 293,992 206,700 314,432 26,429 16,141 357,002 249,651 10,425 16,141 276,217 33,553 33,553 33,553 33,553 28,487 28,487 31,424 31,424 Year to 31 December 2016 Company £ Group £ Year to 31 December 2015 Company £ Group £ (95,215) 1,959,358 - (1,818) - (1,019,838) - 564 1,864,143 (1,818) (1,019,838) (183,209) Year to 31 December 2016 Company £ Group £ Year to 31 December 2015 Company £ Group £ 994,240 198,848 (655,352) (131,070) (1,687,808) (337,562) (522,174) (104,435) - - - - - - - - Tax losses utilised/(carried forward) 194,848 (131,070) (337,562) (104,435) Tax liability - - - - There was no tax payable for the year ended 31 December 2016 (2015: £nil) due to the Group and the Company having taxable losses. The Group’s business operations currently comprise mining projects in Russia, which are either at an exploration stage or entering into active production stage. The Group has tax losses of £15,679,161 (2015: £15,024,814) carried forward on which no deferred tax asset is recognised. These losses may affect the future tax position by way of offset against profits as and when mining projects reach a full scale production stage. The deferred asset arising from the accumulated tax losses has not been recognised due to insufficient evidence of timing of suitable taxable profits against which it can be recovered. 30 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 11 Property, plant and equipment a) Group property, plant and equipment Mining asset Property £ Plant and machinery £ Office fixture and fittings £ - - - - - - 4,388,797 - - 4,388,797 - - - - - (15,712) - (15,712) 24,109 - - (1,461) 22,648 - - - 2,707 25,355 (404) - (82) 78 (408) - (117) (180) (705) 4,373,085 - 24,650 22,240 72,484 - - (13,910) 58,574 2,888 - - 25,765 87,227 (70,569) - (805) 13,543 (57,831) - (1,207) (25,438) (84,476) 2,751 743 Cost Balance at 1 January 2015 Additions Disposals Exchange differences Balance at 31 December 2015 Additions Transfer from intangible assets Disposals Exchange differences Balance at 31 December 2016 Depreciation Balance at 1 December 2015 Disposals Depreciation expense Exchange differences Balance at 31 December 2015 Disposals Depreciation expense Exchange differences Balance at 31 December 2016 Carrying amount: at 31 December 2016 at 31 December 2015 b) Assets in the course of construction Cost Balance at 1 January Additions Balance at 31 December Total £ 151,449 633 (1,162) (18,160) 132,760 3,578 4,388,797 - 33,584 54,856 633 (1,162) (2,789) 51,538 690 - - 5,112 57,340 4,558,719 (52,877) 1,162 (1,049) 2,618 (123,850) 1,162 (1,936) 16,239 (50,146) (108,385) (599) (4,809) (17,635) (30,427) (55,554) (156,447) 1,786 4,402,272 1,392 24,375 2016 £ - 39,216 39,216 2015 £ - - - Assets in the course of construction represent the group investment in the powerline to deliver electricity to the West Kytlim mining site. At 31 December 2016 the power line had not been commissioned yet. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 31 Notes to the consolidated financial statements continued For the year ended 31 December 2016 11 Property, plant and equipment (continued) c) Company’s office fixture and fittings Cost Balance at 1 January Additions Disposal Balance at 31 December Depreciation Balance at 1 January Depreciation expense Disposals Balance at 31 December Carrying amount 2016 £ 39,918 - - 39,918 (39,213) (467) - (39,680) 238 2015 £ 40,447 633 (1,162) 39,918 (39,362) (1,013) 1,162 (39,213) 705 The Group’s and Company's property, plant and equipment are free from any mortgage or charge. 12 Intangible assets In 2016 intangible assets represented only capitalised costs associated with the Group’s exploration, evaluation and development of mineral resources. Cost Balance at 1 January Additions Transferred to mining asset Exchange differences Balance at 31 December 2016 £ 2015 £ 3,200,726 620,416 (4,388,797) 1,380,790 3,276,976 516,701 - (592,951) 813,135 3,200,726 The Company did not directly own any intangible assets at 31 December 2016 (2015 – nil) 13 Subsidiaries Details of the Company's subsidiaries at 31 December 2016 are as follows: Name of subsidiary Urals Alluvial Platinum Limited ZAO Eurasia Mining Service ZAO Kosvinsky Kamen ZAO Terskaya Mining Company ZAO Yuksporskaya Mining Company Eurasia Mining (UK) Limited Place of incorporation Proportion of ordinary shares held Cyprus Russia Russia Russia Russia UK 100% 100% 75% 80% 100% 100% Principal activity Holding Company Holding Company Mineral Evaluation Mineral Evaluation Mineral Evaluation Holding Company * In 2011 the Group signed the Memorandum of Understanding (the “MOU") to acquire an interest in the Kamushanovsky uranium project in Kyrgyzstan. To facilitate the MOU, the Group has nominated Energy Resources Asia Limited (the “ERA”), a British Virgin Islands registered company. During 2011 the Group raised $486,000 (£299,960) net of expenses on the market to fund acquisition and during the same period the Group invested $602,000 (£389,392) (note 14 ) towards the acquisition of an interest in the company holding the Kamushanovsky licence. Following this investment work has continued on completing a feasibility study for the mining of this project. The legal holder of the Kamushanovsky licence is negotiating a sale of all or part of the deposit and it is expected that the investment made by the Group will be refunded to the Group at profit. The Directors consider ERA to be a subsidiary of the Company despite holding only 48.33% of the voting power of the entity based on the fact that the Company has the ability to use its power over the investee to affect the amount of the Company’s returns. 32 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 13 Significant subsidiaries (continued) The Company’s investments in subsidiaries presented on the basis of direct equity interest and represent the following: Investment in subsidiaries (i) Investment in joint operations (ii) 2016 £ 2015 £ 1,277,489 44,131 1,277,489 - 1,321,620 1,277,489 (i) Investment in subsidiaries represents the Company investments made into its 100% subsidiary Urals Alluvial Platinum (the “UAP”), which in turn controls other subsidiaries within the Group. (ii) In 2015 the Group entered into the agreement to participate in the Semenovsky Tailings Project in Russia. The ultimate legal structure of the arrangements is subject to the results of studies and due diligence work carried out by the parties and until then the investment is treated as an investment in joint operations. Work has largely been funded by one of the participating partners and the Group contribution by the end of 2016 totalled to £44,131 (2015- nil). Subsidiary with material non-controlling interests (“NCI”) Summary of non-controlling interest As at 1 January NCI arising on the acquisition of subsidiary Profit/(loss) attributable to NCI Exchange differences As at 31 December Non controlling interest on subsidiary basis Energy Resources Asia Limited ZAO Kosvinsky Kamen ZAO Terskaya Mining Company Energy Resources Asia Limited Non-current assets Current assets Total assets Current liabilities Total liabilities Net assets Equity attributable to owners of the parent Non-controlling interests Loss for the year attributable to owners of the parent Loss for the year attributable to NCI Loss for the year Total comprehensive income for the year attributable to owners of the parent Total comprehensive income for the year attributable to NCI Total comprehensive income for the year 2016 £ (797,178) - 253,975 (132,190) 2015 £ (592,761) (315,342) 110,925 (675,393) (797,178) 2016 £ 326,194 (436,518) (565,069) 2015 £ 286,558 (494,610) (589,126) (675,393) (797,178) 2016 £ 489,312 - 489,312 (3,545) (3,545) 485,767 159,573 326,194 - - - 42,375 39,636 82,011 2015 £ 406,702 - 406,702 (2,946) (2,946) 403,756 117,198 286,558 (657) (613) (1,270) 9,133 8,545 17,678 ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 33 Notes to the consolidated financial statements continued For the year ended 31 December 2016 13 Significant subsidiaries (continued) ZAO Kosvinsky Kamen Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Net assets Equity attributable to owners of the parent Non-controlling interests Profit/(loss) for the year attributable to owners of the parent Profit/(loss) for the year attributable to NCI Profit/(loss)for the year Total comprehensive income for the year attributable to owners of the parent Total comprehensive income for the year attributable to NCI Total comprehensive income for the year ZAO Terskaya Mining Company Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Net assets Equity attributable to owners of the parent Non-controlling interests Profit/(loss) for the year attributable to owners of the parent Profit/(loss)for the year attributable to NCI Profit/(loss) for the year Total comprehensive income for the year attributable to owners of the parent Total comprehensive income for the year attributable to NCI Total comprehensive income for the year 2016 £ 2015 £ 4,001,272 71,104 2,655,286 133,514 4,072,376 2,788,800 5,824,503 15,602 (4,781,766) (7,133) 5,840,105 (4,788,899) (1,767,729) (1,331,211) (436,518) (2,000,099) (1,505,489) (494,610) 682,134 227,378 (923,317) (307,773) 909,512 (1,231,090) 85,093 58,092 (578,203) (210,123) 143,185 (788,326) 2016 £ 760,534 58,534 2015 £ 280,526 41,710 819,068 322,236 708,917 86,091 (299,920) (118,541) 795,008 (418,461) 24,060 589,129 (565,069) (96,225) 499,901 (589,126) 106,388 26,597 132,985 193,378 24,057 217,435 (27,824) (6,956) (34,780) (63,822) (2,839) (66,661) 34 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 14 Other financial assets Loans to subsidiaries Advanced to acquire interest in uranium project 2016 Group £ Company £ - 489,312 5,765,654 - Group £ - 406,702 2015 Company £ 4,915,081 - 489,312 5,765,654 406,702 4,915,081 The monies advanced to the subsidiary enterprises by the Company are repayable on damand. As such these amounts represent a net investment in the other members of the Group and are recognised at their full value as there are no indications of impairment. In prior years the Group advanced $602,000 with the intention to acquire an interest in the Kyrgyzstan company holding the Kamushanovsky uranium exploration licences (note 13 ). This amount is equivalent to £489,312 using the prevailing rate of exchange at the year end (2015: £406,702). The maximum exposure to credit risk at the reporting date is the carrying value of each class of assets mentioned above. Recoverability of the loans is dependent on the borrower’s ability to (i) transform them into cash generating units through discovery of economically recoverable reserves and their development into profitable production or (ii) to complete a sale of all or part of the deposit, which is currently being negotiated. 15 Trade and other receivables Trade receivables Other receivables Prepayments Due from subsidiaries 2016 Group £ Company £ - 105,016 44,130 17,243 149,146 - 21,073 41,724 - 80,040 Group £ - 178,554 32,241 38,913 210,795 2015 Company £ - 14,711 17,297 - 70,921 The fair value of trade and other receivables is not materially different to the carrying values presented. None of the receivables are secured or past due. 16 Issued capital Issued and fully paid ordinary shares with a nominal value of 0.1p Number Nominal value(£) Issued and fully paid deferred shares with a nominal value of 4.9p Number Nominal value (£) Share premium Value (£) Total issued capital (£) 2016 2015 1,509,787,583 1,269,042,780 1,269,043 1,509,788 143,377,203 7,025,483 143,377,203 7,025,483 17,042,782 15,890,910 25,577,993 24,185,436 Fully paid ordinary shares carry one vote per share and carry the right to dividends. Deferred shares have attached to them the following rights and restrictions: - they do not entitle the holders to receive any dividends and distributions; - they do not entitle the holders to receive notice or to attend or vote at General Meetings of the Company; - on return of capital on a winding up the holders of the deferred shares are only entitled to receive the amount paid up on such shares after the holders of the ordinary shares have received the sum of 0.1p for each ordinary share held by them and do not have any other right to participate in the assets of the Company. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 35 Notes to the consolidated financial statements continued For the year ended 31 December 2016 16 Issued capital (continued) Issue of ordinary share capital in 2016 Price in pence per share Number Nominal value £ As at 1 January 2016 23 February 2016 05 April 2016 12 May 2016 31 May 2016 01 August 2016 20 September 2016 26 October 2016 26 October 2016 18 November 2016 20 December 2016 20 December 2016 29 December 2016 As at 31 December 2016 17 Contingent shares 0.550 0.770 0.550 0.550 0.550 0.650 0.875 0.550 0.625 0.650 0.800 0.725 1,269,042,780 22,523,357 13,388,100 90,909,091 9,090,909 28,181,818 24,321,539 1,142,857 391,608 4,800,000 30,769,231 2,812,500 12,413,793 1,269,043 22,523 13,388 90,909 9,091 28,182 24,322 1,143 392 4,800 30,769 2,812 12,414 240,744,803 240,745 1,509,787,583 1,509,788 Share options and warrants outstanding at the end of the year have the following expiry date and exercise prices: Expiry date Share options 21 December 2017 Weighted average exercise price Warrants 11 July 2017 12 November 2018 Weighted average exercise price Exercise price in pence per share Number of options as at 31 December 2016 Number of options as at 31 December 2015 7.00 250,000 250,000 7.00 250,000 250,000 7.00 1.50 0.57 500,000 950,000 500,000 950,000 1,450,000 1,450,000 0.89 0.89 Total contingently issuable shares at 31 December 1,700,000 1,700,000 All listed options and warrants were exercisable as at 31 December 2016 and 2015 respectively. 36 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 18 Other reserves Capital redemption reserve Foreign currency translation reserve: At 1 January Recognised in the period At 31 December Share-based payments reserve: At 1 January Recognised in the period Lapsed in the period (note 21 ) At 31 December 2016 Group £ Company £ 2015 Group £ Company £ 3,539,906 3,539,906 3,539,906 3,539,906 (12,202) (248,650) (260,852) - - - (294,935) 282,733 (12,202) - - - 2,788 - - 2,788 2,788 - - 2,788 399,235 2,788 (399,235) 399,235 2,788 (399,235) 2,788 2,788 3,281,842 3,542,694 3,530,492 3,542,694 The capital redemption reserve was created as a result of a share capital restructure in earlier years. The foreign currency translation reserve represents exchange differences relating to the translation from the functional currencies of the Group’s foreign subsidiaries into GBP. The share-based payments reserve represents (i) reserve arisen on the grant of share options to employees under the employee share option plan and (ii) reserve arisen on the grant of warrants under terms of professional service agreements. 19 Borrowings Unsecured loan 2016 Group £ Company £ 2015 Group £ Company £ 318,314 318,314 318,314 318,314 - - - - In 2016 the Company entered into three consecutive short term unsecured loan facilities with Sanderson Capital Partners Limited. Under the terms of the facilities the funds were made available in monthly intervals, loan interest prepaid in shares and due for issue on signature of the loan, drawdown fees payable on each drawdown and payable in shares. Loan 1 – The Company entered into the loan facility for the total of £250,000 in February 2016. The loan was drawn in February 2016 and repaid in full in May 2016. Loan 2 - The Company entered into the loan facility for the total of £500,000 in August 2016. The loan was drawn in monthly instalments from August through November 2016. The loan was due for repayment in January 2017 but in December the Company agreed with the lender to roll over the loan 2 into to loan 3 on its maturity date in January 2017. Loan 3 - The Company entered into the loan facility for a total of £1,000,000 in December 2016. This comprised £500,000 to be drawn in five monthly instalments starting from December 2016 and another £500,000 to be rolled over from Loan 2 in January 2017 on the Loan 2 maturity of date. Fees of £75,000 were paid in shares on the roll over date. The Loan 3 matures in May 2017. (note 28). Combined movement of the three loans: Loan proceeds Arrangement fees Interest accrued Payments made in shares Payments made in cash Balance at 31 December 2016 2016 £ 900,000 (7,500) 224,814 (549,250) (250,000) 318,314 ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 37 Notes to the consolidated financial statements continued For the year ended 31 December 2016 20 Trade and other payables Accruals Social security and other taxes Other payables Due to related party 2016 2015 Group £ 65,832 12,375 79,666 - Company £ 60,467 5,064 43,333 198,583 157,874 307,447 Group £ 79,620 5,188 229,348 - 314,156 Company £ 72,932 1,785 153,326 198,583 426,626 The fair value of trade and other payables is not materially different to the carrying values presented. The above listed payables were all unsecured. 21 Share-based payments Share options No share options had been granted by the Group in 2016 (2015: nil). Movement in number of share options and their related weighted average exercise prices are as follows: (Price expressed in pence per share) Share options At 1 January Lapsed At 31 December 2016 2015 Average exercise price 7.00 - 7.00 No. of options 250,000 - 250,000 Average exercise price No. of options 1.38 1.33 7.00 31,750,000 (31,500,000) 250,000 The exercise price of all outstanding options at 31 December 2016 was 7p. Other than those options which either expired or were forfeited during the year all options were exercisable as at 31 December 2016 and 2015 respectively. Warrants No warrants were granted by the Group in 2016 (2015: 950,000). Movement in number of warrants outstanding and their related weighted average exercise prices are as follows: (Price expressed in pence per share) Warrants At 1 January Granted Exercised Exercised At 31 December 2016 2015 Average exercise price 0.89 - - - 0.89 No. of warrants 1,450,000 - - - 1,450,000 Average exercise price 0.90 0.57 0.63 1.00 0.89 No. of warrants 42,568,358 950,000 (12,068,358) (30,000,000) 1,450,000 All listed warrants were exercisable as at 31 December 2016 and 2015 respectively. 38 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 22 Profit per share Basic profit/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year. Profit/(loss) attributable to equity holders of the company Weighted average number of ordinary shares in issue Basic profit/(loss) per share (pence) 2016 £ 2015 £ 740,265 (1,372,466) 1,382,366,350 1,216,456,798 0.05 (0.11) Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. 2016 £ 2015 £ Profit/(loss) attributable to equity holders of the company Weighted average number of ordinary shares in issue Share options and warrants Weighted average number of ordinary shares for diluted earnings per share 740,265 (1,372,466) 1,382,366,350 1,216,456,798 - 1,384,066,350 1,216,456,798 1,700,000 Diluted profit per share (pence) 0.05 (0.11) There was no dilutive effect of share options or warrants in 2015. 23 Related party transactions Transactions with subsidiaries and joint venture In the normal course of business, the Company provides funding to its subsidiaries for reinvestment into exploration projects and manages funds received from partners in joint venture. Receivables from subsidiaries Loans provided to subsidiaries Payables to subsidiaries Service charges to subsidiary 2016 £ 2015 £ 17,243 5,765,654 (198,583) 38,913 4,915,081 (198,583) 120,000 120,000 The amounts owed by subsidiaries are unsecured and receivable on demand but are not expected to be fully received within the next twelve months but when the project reaches such an advanced stage of development that it can be repaid out of the proceeds of either the project’s cash flow or through the direct or indirect disposal to a third party of an interest in the project. Transactions with key management personnel The Group considers that the key management personnel are the directors of the Company. The following amounts were paid and accrued to the directors of the Company who held office at 31 December 2016: Short-term benefits 2016 £ 153,512 153,512 2015 £ 151,149 151,149 The remuneration of the directors is determined by the remuneration committee having regard to the performance of individuals and market trends. No pension contribution has been made for the directors in 2016 (2015: nil). ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 39 Notes to the consolidated financial statements continued For the year ended 31 December 2016 23 Related party transactions (continued) An analysis of remuneration for each director of the company in the current financial year: Salaries and allowances Directors fees Name Position M. Martineau C. Schaffalitzky G. FitzGerald D. Suschov Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director £ - 103,512 - - 103,512 Amounts of directors remuneration and allowances accrued and remaining unpaid/(overpaid) at 31 December 2016 Name Position M. Martineau C. Schaffalitzky G. FitzGerald D. Suschov Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director 2016 £ 11,341 (247) 1,990 3,595 16,679 £ 20,000 - 15,000 15,000 50,000 2015 £ 21,658 29,784 12,500 14,194 78,136 24 Operating lease arrangements Operating leases relate to the office premises with lease terms up to one year. The Group does not have an option to purchase the leased asset at the expiry of the lease period. Payments recognised as an expense: Minimum lease payments Non-cancellable operating lease commitments: No longer than one year Longer than one year and not longer than five years Longer than five years 2016 Group £ Company £ 2015 Group £ Company £ 14,701 9,625 17,586 11,417 33,457 36,333 - 69,790 27,250 36,333 - 63,583 33,011 63,583 - 96,594 27,250 90,833 - 118,083 The minimum lease payment was adjusted for the office premises sub-lease receipts received by the Company in 2016. The operating lease commitments represent full commitment by the Company under office lease arrangements. The expected sub-lease receipts are not included and hence do not reduce the amount of the Company’s commitments. 25 Commitments The Group is committed to issue 20m warrants of the Company shares exercisable at 1p to Sanderson Capital Partners Limited on the loan repayment date due in May 2017 with an expiry date of 3 years from such date. The Group has no other material commitments. 26 Contingent liabilities and contingent assets The Group has no material contingent liabilities and assets (2015 - £nil). 40 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Notes to the consolidated financial statements continued For the year ended 31 December 2016 27 Risk management objectives and policies Financial risk management objectives The Group’s operations are limited at present to investing in entities that undertake mineral exploration. All investments in exploration are capitalised on project basis, which are funded by shareholders funds, fixed rate borrowings and contributions from the partners in joint ventures. The Group’s activities expose it to a variety of financial risks including currency, fair value and liquidity risk. The Group seeks to minimise the effect of these risks on daily basis, though due to its limited activities the Group has not applied policy of using any financial instruments to a hedge these risks exposures. Risk management is carried out by the Company under close board supervision. Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollars and Russian Roubles. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group’s policy is not to enter into currency hedging transactions. The following significant exchange rates have been applied during the year: GBP USD RUB Average rate Reporting date spot rate 2016 1,364 92,132 2015 1.528 93.392 2016 1.230 75,347 2015 1.480 108.489 Sensitivity analysis A reasonably possible strengthening (weakening) of the USD and RUB, as indicated below, against GBP at 31 December would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss before taxes by the amounts shown below. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. 31 December 2016 USD (5% movement) RUB (5% movement) 31 December 2015 USD (5% movement) RUB (5% movement)* Strengthening Weakening Equity USD Profit or loss USD Equity USD Profit or loss USD 106,294 (87,336) 38,858 54,278 (96,169) 79,012 (35,158) (49,109) (6,303) (107,421) 12,642 (67,601) 5,702 97,193 (11,436) 61,162 Interest rate risk As the Group has no significant interest-bearing assets, the group’s operating cash flows are substantially independent of changes in market interest rates. Fair values In the opinion of the directors, there is no significant difference between the fair values of the Group’s and the Company’s assets and liabilities and their carrying values. Credit risk The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the statement of financial position date, as summarised below: Non-current Non-current loans and advances Trade and other receivables Cash and cash equivalents 2016 Group £ Company £ 489,312 149,146 154,674 5,765,654 80,040 116,428 Group £ 406,702 210,795 104,925 2015 Company £ 4,915,081 70,921 83,444 793,132 5,962,122 722,422 5,069,446 The Group’s risk is on cash at bank is mitigated by holding of majority of funds at “A” rated bank. No significant amounts are held at banks rated less than “B”. Cash is held either on current account or on short-term deposit at floating rate. Interest determined by the relevant prevailing base rate. The fair value of cash and cash equivalents at 31 December 2016 are not materially different from its carrying value. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 41 Notes to the consolidated financial statements continued For the year ended 31 December 2016 27 Risk management objectives and policies (continued) Recoverability of the loans is dependent on the borrower’s ability to transform them into cash generating units through discovery of economically recoverable reserves and their development into profitable production. The Company continuously monitors defaults by the counterparties, identified either individually or by group, and incorporates this information into its credit risk control. Management considers that all of the above financial assets that are not impaired are of good credit quality. Liquidity risk Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, borrowing facilities, cash and cash equivalent by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. 2016 Borrowings Trade and other payables 2015 Trade and other payables within 6 months £ 318,314 157,874 476,188 314,156 314,156 Current Non-current 6 to 12 months £ 1 to 5 years £ later than 5 years £ - - - - - - - - - - - - - - - The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities. 2016 Borrowings Trade and other payables 2015 Trade and other payables Current Non-current within 6 months £ 318,314 105,864 424,178 228,043 228,043 6 to 12 months £ - 198,583 198,583 198,583 198,583 1 to 5 years £ later than 5 years £ - - - - - - - - - - The tables above have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. The contractual maturities reflect the gross cash flows, which may differ to the carrying values of the liabilities at the statement of financial position date. Capital risk At present the Group’s capital management objective is to ensure the Group’s ability to continue as a going concern. Capital is monitored on the basis of its carrying amount and summarised as follows: Total borrowings Less cash and cash equivalents Net debt Total equity Total capital Gearing 42 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 2016 2015 Group £ 318,314 (154,674) Company £ 318,314 (116,428) 163,640 6,314,935 201,886 6,658,219 6,478,575 3% 6,860,105 3% Group £ - (104,925) - 4,430,763 4,430,763 0% Company £ - (83,444) - 5,921,014 5,921,014 0% Notes to the consolidated financial statements continued For the year ended 31 December 2016 27 Risk management objectives and policies (continued) Capital structure is managed depending on economic conditions and risk characteristics of underlying assets. In order to maintain or adjust capital structure, the Group may issue new shares and debt financial instruments or sell assets to reduce debt. 28 Events after the statement of financial position date Subsequent to the reporting date the following transactions took place: a) Issue of shares Date Transaction 03 February 2017 21 February 2017 27 March 2017 26 April 2017 19 May 2017 Total Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements Issue of ordinary shares under term of financing arrangements b) Proceeds from the loan available at 31 December 2016 Date Transaction 19 January 2017 21 February 2017 19 March 2017 20 April 2017 Drawn under the terms of financing arrangements Drawn under the terms of financing arrangements Drawn under the terms of financing arrangements Drawn under the terms of financing arrangements No of shares Nominal value issued 15,652,174 2,727,273 2,857,173 1,500,000 10,526,316 33,262,936 £ 15,652 2,727 2,857 1,500 10,526 33,262 £ 100,000 100,000 100,000 50,000 c) New loan facilities entered into after 31 December 2016 i) On 17 May 2017 the Company repaid £750,000 of the £1,000,000 loan entered into with Sanderson Capital Partners Limited in December 2017. The balance of £250,000 was transferred to a new loan facility entered into with Sanderson Capital Partners Limited on 10 May 2017. Under the terms the total fees of 20% of the principle amount is payable to the lender in advance at the inception. No interest to be accrued on the principle. ii) On 15 May 2017 the Company entered into a loan agreement with YA II PN Limited for US$1,250,000, with a repayment date of 15 May 2018 although this can be extended, by mutual agreement, for a further 6 months for a fee of 6% of the then outstanding principal. Interest applies on the loan at a rate of 14% although with a three-month repayment holiday on both interest and principal. An implementation fee of US$100,000 is immediately deductible from the principal amount on transfer of funds. The lender may elect, at its discretion, to convert all or part of the loan repayments (interest and principal) into shares in the Company, at, the lower of a share price of 0.6p and, 90% of the Company's lowest daily volume weighted average price('VWAP') during the five days prior to conversion. In addition, the agreement includes the issue of Warrants to the lender at 50% cover of the principal amount, and at a 20% premium to the VWAP in the 30 days preceding the agreement. Consequently the Company today issued 80,749,333 warrants at an exercise price of 0.6p per warrant. The warrants issued shall have a subscription period of three years. iii) On 24 May 2017 the Company entered into a loan agreement with Deloan Investments Limited, a company controlled by Dmitry Suschov, a non-executive director of the Company for a convertible loan of up to US$500,000. The loan is convertible at any time into Ordinary Shares in the Company, at a price of 0.475p per Ordinary Share. Under the terms of the agreement interest accrues on the loan at a rate of 15% which is to be satisfied by either cash payments or shares in the Company at a price of 0.475p per ordinary share. In addition, the lender will be issued with a warrant to subscribe for 10,000,000 Ordinary Shares in the Company at any time for the next three years at an exercise price of 1p. The purpose of the loans from i to iii above is to refinance existing loan and to use for general working capital purposes. No other adjusting or significant non-adjusting events have occurred between the statement of financial position date and the date of authorisation of the financial statements. ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 43 44 E U R A S I A M I N I N G P L C ANNUAL REPORT & ACCOUNTS 2016 Company Information Directors M. Martineau (Non-Executive Chairman) C. Schaffalitzky (Managing Director) G. FitzGerald (Non-Executive Director) D. Suschov (Non-Executive Director) Company Secretary M. J. de Villiers Head Office and Registered Office 2nd Floor, 85-87 Borough High Street London SE1 1NH Telephone: +44 (0) 20 7932 0418 E-mail: info@eurasiamining.co.uk www.eurasiamining.co.uk Russian Office 194 Lunacharsky Street Ekaterinburg Russia Telephone: +7 3432 615187 Facsimile: +7 3432 615924 Company Number 3010091 ADVISERS Registrars Capita Registrars Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Auditors Grant Thornton UK LLP Grant Thornton House Melton Street Euston Square London NW1 2EP Bankers Barclays Bank plc Town Gate House Church Street East Woking, Surrey GU21 6AE Solicitors Gowling WLG (UK) LLP 4 More London Riverside London SE1 2AU Nominated Adviser and Stockbrokers WH Ireland Limited 24 Martin Lane London EC4R 0DR and 11 St. James’s Square Manchester M2 6WH Financial Advisers Loeb Aron & Company Ltd Georgian House 63 Coleman Street London EC2R 5BB and Beaufort Securities Ltd 131 Finsbury Pavement London EC2A 1NT ANNUAL REPORT & ACCOUNTS 2016 E U R A S I A M I N I N G P L C 45 2nd Floor, 85-87 Borough High Street London SE1 1NH Telephone: +44 (0)20 7932 0418 E-mail: info@eurasiamining.co.uk www.eurasiamining.co.uk
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