Annual Report and Accounts 2018
An established
and producing
mining company
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10
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18
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Highlights
Chairman’s Statement
Operations Update
Strategic Report
Directors’ Biographies
Directors’ Report
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
Notice of Annual General Meeting
Company Information
2018 Highlights
Monchetundra
(cid:0) Mining permit issued in
November 2018
(cid:0) 1.9 million ounce, 80% owned,
state-approved reserves +
resources (Palladium + Platinum)
(cid:0) Au, Cu & Ni add significantly
to revenue
(cid:0) EPCF (EPC+Finance) in place
with Sinosteel
(cid:43)
Pd
Pt
Palladium
Platinum
Cu
Copper
Ni
Nickel
Au
Gold
MOSCOW
(cid:43)
(cid:43)
EKATERINBURG
Semenovsky
(cid:0) Gold and silver tailings project
in pre-production stage with
feasibility approved.
Ag
Silver
Au
Gold
West Kytlim
(cid:0) Total mine revenue for 2018
was £2.57 million.
(cid:0) Second largest, 68% owned,
global alluvial PGM mine in
production in Ural Mountains
(cid:0) Capacity expected in 2019
Pd
Pt
Palladium
Platinum
Rh
Rhodium
Ir
Iridium
Au
Gold
C
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
1
The market for
Platinum Group Minerals
(‘PGM’)
Eurasia’s main metal revenues are currently from the sale of platinum at the West Kytlim
mine (see the operational summary), and are strengthened with marginal sales of
Palladium, Rhodium, Iridium and Gold. The now fully permitted flag ship Monchetundra
project is being developed towards mining as a palladium led PGM project with major
credits in nickel and copper.
Platinum has long traded at a premium to palladium owing to the former’s favour in the
jewelry industry and its better catalytic, thermophilic and other physical properties
which make it more widely applicable in the auto-industry, in fuel refining and indeed
the pharmaceuticals industry. Both metals’ markets are small compared to base metals
or gold, and palladium has historically been slightly larger1 – total Platinum supply of
6.1M oz in 2018 versus total palladium supply of 6.8Moz1.
Despite platinum’s wider applications, the platinum to palladium price ratio has been in
steady decline since late 2009. The long-established premium paid for platinum was
eroded in late 2017 and early 2018, as the palladium price finally overtook platinum, in
part spurred by the Volkswagen Emissions scandal2. In mid-2018 palladium began a
remarkable rally from around $900/oz to top out at $1,600 in March 2019.
For many industrial uses the two metals can be substituted, however a cost is incurred
at original equipment manufacturers for retooling and recalibration. This, amongst other
reasons, suggests the two metals’ prices are likely to remain locked in a symbiotic cycle.
PGM continue to find new industrial applications and with a continuing role in
transportation technology, backed up by jewelry and investment demand, long term price
forecasts3 contribute to a strong investment case for a PGM focused mining Company.
5 year Palladium
High 1583 Low 467
1600
1400
1200
1000
800
600
400
300
e
c
n
u
o
r
e
p
$
S
U
May 2014
2015
2016
2017
2018
June 2019
1 Johnson Matthey PGM Market report February 2019 – https://matthey.com/-/media/files/pgm-market-report-february-2019.pdf
2 https://en.wikipedia.org/wiki/Volkswagen_emissions_scandal
3 CIBC Global Mining Group Consensus Commodity Price Forecast March 2019.
Platinum (long term) $1,026/ oz; Palladium, $1,077/oz; Rhodium, $1,941
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E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Chairman’s Statement
2018 was a key year for the Company’s development. Eurasia
recorded a maiden gross profit and obtained a mining licence
on its flagship Monchetundra Project. At the time of writing,
production is ramping up for the year to full scale at West
Kytlim and the Directors now regard Eurasia as an
established mining company.
The Company’s strategy, as outlined since 2015/16 was to develop the West Kytlim Mine to
production, and to generate sufficient revenues to allow the Company to pursue development of
its further interests, while minimising possible dilution of the shareholder base.
As a standalone unit, the mine at West Kytlim demonstrated excellent profit margins during 2018
and contributed to the gross profit at group level. The economics of this style of operation – with
limited overheads and capital expenditure are assured, however expanding the mine at West
Kytlim to multiple operating sites is now a key objective for the Company. The Directors’ look
forward to continued successful production at West Kytlim and believe the Company can grow its
West Kytlim operation to become the largest alluvial platinum mine globally. The Directors’ believe
West Kytlim mine cash flows, from a single operating and contracted washplant, notwithstanding
considerable final settlements of loans through 2018 (which made the Company debt free) are now
sufficient to make significant contributions to the running of the Company at Group level.
The issue of the mining license at the Company’s flagship Monchetundra Project in December 2018
was a further welcome addition to an already successful year. The reserves comprise palladium plus
platinum, gold and base metals. The Company’s plans for the project’s development with Eurasia’s
working partners at Sinosteel (one of the largest corporations in China) and the Central Kola
Expedition, the key contractor in the region for both Russian and international companies, can now
be progressed. The project is a more considerable undertaking than West Kytlim and could be
transformational for the Company. The Company continues to keep all options for this major
project’s development on the table and are further encouraged by the potential to add further to
the reserve and resource base directly adjacent the project.
Finally, the Directors would like to thank Eurasia’s shareholders, old and new, for their continued
support -and look forward to delivering further tangible shareholder value in the coming years.
Also, the Directors would like to thank all management and staff for delivering on the Company’s
goals in recent years but particularly through the transformational year that was 2018. With the
mine at West Kytlim now well established and the Monchetundra Project fully permitted, the
Director’s believe they have established a firm base on which to build a strong and diversified
exploration and development Company
ChristianSchaffalitzky
Executive Chairman
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
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Operations update
W E S T K Y T L I M
(cid:0) Total production for the season – 165 kg raw platinum
(cid:0) Total mine revenue – £2.57 million
grade expected from resource calculations, a
situation which is not unexpected for this style of
deposit and the alluvial mining industry generally.
The mine product is sold under contract to the
Ekaterinburg Non-ferrous Metal Refinery (the
‘Refinery’) with both refining costs and metal price
paid, expressed in the contract as a percentage of
London Metals Exchange (the ‘LME’) prices. These
are reviewed and agreed for every batch of mine
product shipped.
In summary the total mine revenue for 2018, was
£2.57 million which is composed of the following
revenues:
Grams
Chemically Pure
112,597
5,416
418
654
994
Platinum
Iridium
Palladium
Rhodium
Gold
£
2,294,267
30,101
12,798
40,055
196,108
£2,573,329
No accidents or corporate social responsibility
issues occurred during the 2018 mining season.
2018 Summary
2018 saw the first full season of mining at the
West Kytlim PGM and gold mine – production
at this alluvial mining operation commenced in
May 2018 and ran through to November. The
contract to operate the mine was assigned
in March, just ahead of the mining season.
The gross mine revenues were initially split
65%/35% in favour of Eurasia’s contractor,
Techstroy. These were changed in the course
of the year to 70%/30% in favor of Eurasia’s
contractor, Techstroy, with Eurasia managing
the metal sales contract and revenue distribution.
Techstroy brought the necessary alluvial mining
experience to the project, as well as a new fleet
of machinery including excavators and haulage
trucks which were in place by late April 2018.
Mining commenced at the Malaya Sosnovka work
site within the West Kytlim Mine and progressed
in September 2018 to the larger Kluchiki work
site. In both cases, the method employed was an
industry standard trommel and scrubber washing
system with collection of platinum concentrates
on a sluice for later upgrade in an onsite
laboratory. Platinum occurs as fine and coarser
isoferroplatinum nuggets (“raw platinum”) which
contain on average 70% chemically pure Platinum
in addition to a total of 5% in other recoverable
PGM (iridium, palladium and rhodium), and Gold
(base on recovered metal grades).
Total production for the season reached 165 kg
raw platinum, with average daily production of
1.146 kg raw platinum per production day, and
an amount of 6.9kg standing as a record total
produced in a single day of washing. The mine is
currently the second largest alluvial platinum mine
globally (Kondyor operated by Russian Platinum
in Russia Far East produced 275kg raw platinum
in 20181). Grades at West Kytlim ran 3-5 times the
1 http://russian-platinum.ru/press/news
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ANNUAL REPORT & ACCOUNTS 2018
Operations update continued
(cid:0) Reserves upgrade drilling commenced at Bolshaya Sosnovka
(cid:0) Final approval expected for Kluchiki revised reserve by Q3
2019 Summary to date
In January 2019 a further contract for mine
development was agreed with the directors
and operational staff at Techstroy, who for reasons
of VAT efficiency underwent a name change to
Uralmetmash. The terms of the contract were
ostensibly unchanged from the previous year
and will represent 35%/65% top line sales split
with 65% paid to the contractor for covering
production costs. A further contract was also
agreed at the Refinery, with a substantially
improved sales margin (refining cost) for platinum
which was reduced from 3% of LME to 1.5%.
Forest clearance on ore blocks at the Kluchiki
work site was undertaken in February 2019 and
lasted two weeks. Machinery was moved to site
in several convoys in late March and early April
ahead of gravel washing, which is due to
commence in the middle of May 2019.
Improvements to the washing circuit, aimed at
improving washing efficiency and metal recovery
were implemented for the 2019 mining season.
A jig (a fluid-based gravity separation device)
has been added to the overflow of the sluice to
attempt to capture the finest portion of platinum
bearing nuggets which during 2018 were lost to
mine tailings. The expected improvements to the
circuit are difficult to measure currently and will be
more accurate over longer time scales. Should the
increased recovery prove significant, the 2018
mine tailings will then become a target for a
simple jig based reprocessing circuit.
Reporting and Reserve/Resource base
A reserve upgrade drilling program at the Kluchiki
area was undertaken in 2017 and 2018 and was
submitted to Uralnedra. As per due process,
further clarifications were sought by Uralnedra
and were answered by the Company in March
2019. A final approval is therefore expected
within Q2 or Q3 of 2019.
Reserves upgrade drilling commenced at the
Bolshaya Sosnovka Area in April 2019. 350m
of standard diameter (198mm reducing at depth
to 172mm) drilling is scheduled for the 2019
season. These results will be compiled to produce
a reserve statement for submission to Uralnedra
aimed at bringing all of the ore at this location
to mineable reserves status in line with the
Company’s objective to operate multiple
washplants concurrently.
Work is also ongoing on defining an exploration
strategy for the considerable ‘Flanks area’
surrounding the West Kytlim deposit. This
single 71km2 exploration license surrounding
the approved resources and reserves at West
Kytlim was approved in December 2018 and
was applied for under exclusive rights granted
for new applications adjacent to a company’s
own existing mining rights. The additional area
has the potential for considerable further
discovery of PGM bearing gravels known to be
continuous beyond the contours of the current
mining license. It is the Company’s intention to
submit a plan for the new area’s development for
approval at Uralnedra before the end of the year.
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
5
Operations update continued
M O N C H E T U N D R A
(cid:0) Mining license received in November 2018
(cid:0) Contract agreed with Sinosteel for the development of the mine
2018 Summary
Final approvals for the Monchetundra mining
permit were received in November 2018, thus
successfully concluding the process of converting
Eurasia’s other major discovery credit to a mining
license. The Monchetundra Project is Eurasia’s
future flagship project and comprises 1.9 million
ounces of palladium-led reserves and resources
with platinum, gold, copper and nickel credits in
two open pittable deposits near the town of
Monchegorsk on Kola Peninsula, Northwest
Russia.
A contract for engineering, procurement
construction (‘EPC’) and financing is in place with
Chinese group Sinosteel for the development of
the mine. Sinosteel are a diversified industrial
metals enterprise and a major importer of iron ore
to China and have built chrome and nickel
operations in South Africa, China, Indonesia and
Australia. The Sinosteel EPC financing covers 85%
(or US$149.6M) of a total contract value of
US$176M. A US$50M sub-contract is specified
within the contract and is assigned to Eurasia's
80% subsidiary ZAO Terskaya Mining Company, or
a sub-contractor of its choosing, for engineering
and pit development works in advance of mining.
A one-off royalty payment was calculated by the
Federal Reserves Commission on award of the
mining license. 20% of this payment was due
immediately and was subsequently paid in
December of 2018, with the remaining 80%, or
Rub16.68 mln (approximately £200,000) to be
paid by November 2023.
Reserve and Resource for West Nittis and Loipishune
at 0.8g/t Pd equivalent cut off grade
Palladium equivalent 2 PGM + gold
1.9m oz
Nickel
Copper
28,124 t
62m lb
30,410t
67m lb
>2g/t
0.11%
0.10%
(cid:85)
(cid:85)
(cid:85)
(cid:85)
(cid:85)
PK
6
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
NKT
massif
massif
M
massif
Operations update continued
(cid:0) Contract awarded to Central Kola Expedition for a Detailed Project Report
(cid:0) Applications for further adjacent exploration licenses in progress
2019 Summary
Following site visits and meetings in Monchegorsk
in January of 2019, a contract was awarded to
the Central Kola Expedition, Eurasia’s exploration
programme co-ordinator, who has also worked
with B2Gold, Norilsk Nickel and Barrick, for the
design of a Detailed Project Report; a statutory
reporting requirement to be submitted within
a year of the issue of the mining license. Land
surveying to mineable detail is planned for later
in the year – this is an essential item necessary for
mine site planning. Provisional tailings storage and
waste rock dump locations have been identified
at the project which benefits from near ideal
infrastructure, being located within 10km of the
major mining town of Monchegorsk, host to a
host to a smelting facility owned by Norilsk Nickel.
Flanks areas applications
As is the case with Eurasia's operating mine at
West Kytlim in the Ural Mountains, the holder of
a mining license has, under Russian legislation,
the right to apply for further ground adjacent
to an identified deposit, and within 5km of an
approved reserve. Work is now ongoing compiling
the considerable database of information available
for potential exploration license applications on
this ground. A complete set of the internationally
recognised deposit types found in basic and ultra-
basic layered massifs occur adjacent the
Monchetundra license including potential targets
in nickel, cobalt, chromite as well as in additional
palladium led PGM projects.
Some of these targets show potential for
development in the context of a PGM-base metal
operation with toll treatment over distances of 2
to 8km. These potential applications are now
being reviewed in detail by Eurasia, TGK and CKE,
with applications to be made within three years of
the issue of the mining permit.
Christian Schaffalitzky
Executive Chairman
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
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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 at International House, 142 Cromwell
Road, London, SW7 4EF, United Kingdom and principal place
of business at Clubhouse Bank, 1 Angel Court, EC2R 7HJ,
United Kingdom. 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 production of platinum group metals
(the “PGM”), gold and other minerals.
The purpose of the Strategic Report is to inform members of
the Company and help them to assess how the directors have
performed their duties under section 172 of the Companies Act
2006 (duty to promote the success of the Company).
The Group currently has two key operations in Russia – (1) West
Kytlim, which is an operating platinum group metals and gold
mine in the Central Urals and (2) the Monchetundra Project on
the Kola Peninsula in Russia, for which a mining licence was
granted in 2018. At the same time the Group continues to
assess the potential of resource projects in various commodities
in other regions in Russia and other countries of the former
Soviet Union.
At West Kytlim, the Group made several PGM discoveries of
resources and reserves suitable for commercial mining and
secured a mining licence in 2015. The Group carried out a pilot
mining operation in 2016 and had been running a commercial
operation from 2017.
West Kytlim mine is directly owned by a subsidiary ZAO
Kosvinsky Kamen, the Group now controls 68% of this
subsidiary after selling a 7% stake in January 2018 (75%
controlled at 31 December 2017) (note 13).
On the Kola Peninsula the Group discovered PGM
mineralisation in the Monchetundra area and following the
exploration work completed in 2016 the Group initiated the
procedure of obtaining a mining licence, which was granted
in 2018.
Monchetundra project is owned by a subsidiary ZAO Terskaya
Mining Company, the Group controls 80% of the subsidiary
(80% at 31 December 2017) (note 13).
More details on both projects are contained in the Operations
update.
The Group also maintains an active interest in non-core,
innovative mining solutions including the Kamushanovsky
Uranium Project in Kyrgyzstan and the Semenovsky Tailings
Project in the Republic of Bashkiria, Russia. Due to uncertainties
surrounding the ultimate recovery of these interests, these have
been written off in 2018 and 2017 respectively.
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
believe 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 and
development.
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 loss of £3,241,941
for the year ended 31 December 2018 (2017: a loss of
£2,139,130). The main drivers for the higher loss in 2018
compared to 2017 are substantially higher foreign exchange
losses on the revaluation of intercompany loans at subsidiaries
level due to writing off Kamushanovsky project (notes 13, 14)
high volatility of the Russian Rouble and recognition of share
options awarded to the management, employees and
consultants, which was valued using Black Scholes valuation
model.
The Groups operating mine at West Kytlim outperformed
expectations, due to better than anticipated production
volumes and metal grades in reserves. Total production
revenue reached £2.57mln against a total of £0.18mln in 2017.
Shareholder return – the performance of the share price.
The Company’s shares are quoted on AIM and the shares have
traded at 0.225-0.815p (2017: 0.2-0.738p ) during the year
under review.
Exploration expenditure – funding and development costs.
The group has incurred £83,069 (2017: £175,737) of
development costs at West Kytlim, which were required to
carry out additional drilling works under the programme of
upgrading resources to reserves.
In 2018 the Group raised gross funds of £500,000 from the
equity markets. £370,269 was raised through the exercise of
the warrants attached to the convertible loan facility entered
into with YA II PN Ltd. Significant cash was conserved by
conversion of the convertible loans (i) in the amount of
£400,918 by YA II PN Ltd and (ii) in the amount of £250,000
by Sanderson Capital Partners.
During the course of 2018 the directors contributed to the
preservation of cash reserves by converting fees owed to them
into the Company’s shares.
At 31 December 2018 the Group had a cash balance of
£452,676 (2017: £89,819) which allowed it to continue its
Monchetundra project development, and to prepare for the
2019 Mining season at West Kytlim.
At 31 December 2018 the Company was debt free. On the
Group level there was a small outstanding loan provided by the
contractor doing mining work at West Kytlim in 2017 to carry
out additional exploration work.
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E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Strategic report continued
Eurasia Mining plc Company No. 3010091
The Group was maintained by 2018 West Kytlim mine revenues
through the latter half of 2018. A further £500,000 was raised
through equity markets in April of 2019, to ensure sufficient
capital was available to realise the 2019 mining season at
West Kytlim, and to part fund the development program
at Monchetundra. Directors do not anticipate further equity
raises in the near term.
The Company is assessing other means of increasing cash
reserves, including increasing West Kytlim mine revenues. This
was demonstrated in the appointment of a new contractor to
the mining operation in early 2018, whose services the Group
will again be utilising in the 2019 mining season. For more
details see the operations update herewith. Substantial
increases to mine revenue at West Kytlim may be achieved by
increasing the mines output by the addition of additional wash-
plants – the Group continues to assess options in this regard.
Non-financial KPIs
Environment management – the Group has environmental
policies in place. Performance against environmental policies
is continuously monitored. The Company had done no fieldwork
in 2018 in the Monchetundra area, due to the then ongoing
production licence application process. At West Kytlim
commitment for the technical re-cultivation of disturbed areas
is assumed by the mining contractor, who has power and
necessary equipment to bring the work site back to the required
ecological condition thus minimising any environmental impact.
The Groups commitment is limited to biological re-cultivation,
which represent a minor part of overall environmental
recultivation. The directors consider that this has served to
minimise any negative impact of current exploration and
operational 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 Group has had exploration success with
additional exploration and production licences granted. An
exploration license surrounding the West Kytlim Mine was
granted during 2018. Physical exploration activity on the
ground during the year has been limited as management
concentrated its efforts on obtaining a production permit for
the PGM and base metals mine at Monchetundra in the Kola
Peninsula in Russia, which culminated in the granting of the
licence by Russian authorities in November 2018.
At West Kytlim, the Group started 2018 with a newly appointed
contractor, who brought new equipment and alluvial mining
experience, and was able to plan work and utilise the limited
mining season to develop full scale mining activity and achieve
results, which exceeded management expectations, hitting the
record of 6.9kg (221 oz) per 1 day. Details are in the operations
update section above.
Key personnel continue to assess opportunities in a range of
commodities in Russia and globally, as potential exploration
and development projects.
Principal risks and uncertainties
The risks inherent in an exploration and development business
are kept under constant review by the Board and the Executive
Committee. The risks affecting the Group and the Company are
set out respectively in the directors’ report and Notes 2 and 27
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 engaged in close discussion with respective
government departments to have a 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, culminating in
the grant of the Monchetundra mining permit.
Run of mine risks
The Group relies on a contractor to perform mining operations
for a share of revenue. Contractor performance including
noncompliance with agreed mining and production schedules,
machinery break down and others risks have significant impact
on the Group’s performance. The directors believe these risks
have been considerably mitigated by the appointment of a
contractor to the West Kytlim Mine in January 2018 operating
brand-new Komatsu equipment and a new processing plant.
These risks are also mitigated by the Contractors direct
commercial interest in the projects effective and efficient
management.
Political risk
The Group’s assets are located in Russia, in view of sanctions
imposed to certain individuals and companies in Russia from
2014 until present time, 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 an
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.
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
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Strategic report continued
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 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.
The Group recognises positive steps taken at state level
through 2018 to energise the exploration sector and resource
sector, for example by promoting the exploration potential of
Russia at such industry events as PDAC where VIMS, the
largest state-owned Russian exploration research institute has
established a permanent presence. A forum for discussion for
all industry stakeholders has also been established as the
Subsurface, Exploration and Mining Conference, sponsored
by Rosnedra (State subsoil licensing agency). The Group was
represented at this conference held at the Moscow Geological
Research institute in Moscow, April 1st and 2nd 2019.
Commodity risk
A potential fall in commodity prices could lead to it becoming
uneconomic for the Group to mine its assets. The Group
closely monitors the markets for platinum group metals,
changes in their demand and supply, and the effect they
have on metal prices with a view to taking necessary measures
in response to such changes. This may include stockpiling
when prices are low, price hedging when prices rise above
expectation, and commodity diversification. Also, it is
important to note the Group’s cost of production is at the
lower end of the global cost curve as opposed to South
Africa that produces approximately 70% of global platinum
production.
Demand for platinum-group metals from their No.1 use –
autocatalysts, which reduce harmful engine emissions – looks
robust for the next 15 years even as sales of electric vehicles
grow. More than 85% of new passenger cars sold in 2030 "are
expected to have internal combustion engines with [catalytic]
converters," because all-electric cars won't sell as strongly as
hybrid vehicles using both technologies.
(source https://www.bullionvault.com/gold-news/platinum-
supply-demand-111420183)
Loss of key personnel risk
The loss of key personnel 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
a small business. The expenses may be of a temporary or a
permanent nature. These increased expenses relate to the
search for 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
Group can take measures to motivate and retain existing
employees, it has limited powers in dealing with departures
by natural or legislative reasons. However, the Group is using
outsourcing to professional contractors to mitigate this risk.
Financing risk
This is the risk of running out of working and investment
capital. The Group has historically relied primarily on the issue
of share capital and other financial arrangements, which due
to the risk factor require high returns to the creditors at the
Group’s expense. Mine Revenue from the operating West
Kytlim Mine is now a significant contributor to the Group’s
working capital, and directors are confident of this source of
capital continuing in 2019 and increasing in subsequent years
due to increased capacity at the mine site. 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. Launch of full-scale
platinum and gold production from 2018 also helped to
mitigate financing risk.
The Board considers risk assessment to be important in
achieving its strategic objectives. Further details of the Group’s
financial risk management policies can be found in note 27.
Research and future development
The Group’s activities during the year continued to be
concentrated principally on mine development and 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” projects in the geographical areas it gained its
experience in.
By order of the Board
Keith Byrne
Company Secretary
14 May 2019
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ANNUAL REPORT & ACCOUNTS 2018
Directors’ Biographies
CHRISTIAN SCHAFFALITZKY
Christian Schaffalitzky, BA(Mod), FIMMM, PGeo, CEng, age 65,
is Managing Director. With over 40 years experience in minerals
exploration, Christian Schaffalitzky was a founder of Ivernia West
PLC, where he led the exploration, discovery and development
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.
GARY FITZGERALD
Gary Fitzgerald, age 65, is a Non-Executive Director. He was
previously a Director of Framlington Investment Management
Limited and has over 30 years experience in investment
management. He has diverse experience of emerging markets
including the launch of the first fund for investing in Russia in
the early 1990’s.
DMITRY SUSCHOV
Dmitry Suschov, age 41, is a Non-Executive Director and also a
major shareholder of Eurasia. Dmitry is a commodities trading
veteran (primarily various grades of metallurgical and thermal
coals) and has successfully built a major Pulverized Coal Injection
(PCI) franchise throughout Asia, Europe and America with an
annual turnover of up to $100 million, thus accumulating around
2.5% of the global PCI market share. He is also an investment
banker with extensive experience in the Russian resources
industry and has previously worked with IG Capital, MDM Bank,
PricewaterhouseCoopers and Ernst&Young as mining & metals
leader in corporate finance for Russia and CIS.
ANNUAL REPORT & ACCOUNTS 2018
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11
Directors’ report
Eurasia Mining plc Company No. 3010091
Directors
The directors who served during the period were:
Christian Schaffalitzky Executive Chairman
Gary FitzGerald Non-Executive Director
Dmitry Suschov Non-Executive Director
Company Secretary
Keith Byrne
Directors’ interests
Share interests
The active Directors of the Company held the following
beneficial interests (including interests held by spouses and
minor children) in the ordinary shares of the Company:
C. Schaffalitzky
D. Suschov
G. FitzGerald
Total
Share options and warrants
Options
C. Schaffalitzky
D. Suschov
G. FitzGerald
Warrants
D. Suschov
Total
31 Dec 2018
No. of shares
81,069,517
455,727,496
23,378,445
31 Dec 2017
No. of shares
68,475,270
435,357,129
20,394,101
560,175,458
524,226,500
31 Dec 2018
No. of shares
31 Dec 2017
No. of shares
20,000000
20,000000
5,000,000
45,000,000
-
-
-
-
30,000,000
30,000,000
75,000,000
30,000,000
30,000,000 options out of 45,000,000 granted to the directors
vested by 31 December 2018.
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 24 July 2018, 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.
The Board has utilised authority to allot shares and issue
warrants as follows:
Date
Transaction
No of shares issued/ Nominal
warrants granted
value £
Shares issued:
01-Aug-2018
14-Aug-2018
17-Sep-2018
19-Sep-2018
02-Nov-2018
02-Nov-2018
18-Dec-2018
18-Apr-2019
Issue of ordinary shares
under terms of a loan
conversion
Issue of ordinary shares
on exercise of warrants
52,631,579
52,632
109,196,618
109,197
Issue of warrants subscribe
for ordinary shares
11,098,289
11,098
Issue of ordinary shares
under terms of a loan
conversion
Issue of ordinary shares
by way of placing
Issue of options to
subscribe for ordinary
shares (net of options
exercised by reporting date)
Issue of ordinary shares on
exercise of options
Issue of ordinary shares by
way of placing
117,917,182
117,917
25,146,609
25,147
192,257,748
192,257
1,742,252
1,742
90,909,091
90,909
600,899,368
600,899
No share options were exercised by the directors during 2018
(2017 – nil).
Total
Dividends and profit retention
No dividend is proposed in respect of the year (2017: £nil) and
the retained loss for the year attributable to the equity holders
of the parent of £ 2,190,937 (2017: loss of £2,119,657) has
been taken to reserves.
Share capital
Issued capital of the Company as at 31 December 2018 was:
Number
of shares
Nominal
value
Share
premium
account
Fully paid ordinary shares
at 0.1 pence
2,371,569,430
2,371,569
19,407,761
Deferred shares 4.9 pence
143,377,203
7,025,483
-
9,397,052
19,407,761
The Board has not utilised authority to purchase the
Company’s own shares.
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
As outlined above, the Group was successful in raising
proceeds of £0.5 million in May 2018. At 31 December 2018
the Group’s net current assets amounted to £196,413 (2018:
Net current liability of £861,629). At the same time the Group
had a cash balance of £452,676 (2017: £89,819). The Group
had settled all expensive loan facilities by a mixture of cash
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ANNUAL REPORT & ACCOUNTS 2018
Directors’ report continued
repayments and the issue of shares following conversion of
debt at lenders discretion. The Group had a stand by facility
arranged by a director D. Suschov in 2018, which the directors
decided not to utilise applying careful cash flow planning and
an ability to bring excess funds generated from the West
Kytlim operations.
Since going into production at West Kytlim, the Group has
received considerable industry interest, especially locally.
However, the Board believes this asset should continue to be
developed by the Company while the excellent relationship
between the contractor and local management team
demonstrates much higher rates of return than anticipated.
A more thorough reassessment of the project’s value will be
undertaken in due course in light of actual production
information and grades in ore. Furthermore, a discussion on
potential capital expansion including the addition of a second
wash-plant funded by our partner Uralmetmash, or
alternatively by the Group is ongoing.
The Group has implemented tighter controls 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
Company shares in lieu of payment for their remuneration
and costs.
In April 2019 the Group has raised £0.5 million from the equity
market by way of placing shares for cash.
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.
Directors’ responsibilities statement
The directors are responsible for preparing the Strategic report
and the directors’ report.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
must prepare the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. 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 IFRS, as adopted by the European
Union, have been followed, subject to any material
departures disclosed and explained in the financial
statements;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the 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:
• 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 the steps that they ought to
have taken as directors in order to make themselves aware
of any relevant audit information and to establish that the
Company’s auditor is 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.
Corporate Governance
Eurasia Mining has adopted the QCA Code as a Corporate
Governance framework to ensure adequate corporate
governance standards as befits the nature of the Company’s
business and the stage attained in the continuing evolution
of the Company, and in-line with its corporate strategy and
business goals. The QCA Code sets out ten principles by
which the code may be applied to any company. These
principles are outlined below as a demonstration of how the
Company meets these requirements.
Delivering Growth
Eurasia has established a strategy designed to promote long
term value and a return on investment for its shareholders,
a strategy which also aims to build the Company to an
increasingly profitable enterprise while maintaining good
corporate governance and social and environmental
responsibility standards. The Company’s aim is to achieve
these goals through self-funded exploration for marketable
resource projects in various commodities, by developing
these projects to operating mines, or by joint venturing or
straightforward sale of these assets to realise a return on
investment.
Principle 1
The Company is currently focused on developing two key
assets; The West Kytlim mine produces Platinum group
minerals (‘PGM’) and gold in the Ural Mountains, Russia,
while the Monchetundra Project is being developed towards
production of PGM, gold and base metals near the town of
Monchegorsk, on the Kola Peninsula, Russia. Further non-core
assets are also being progressed and the Company remains
active in identifying further opportunities across a range of
commodities and jurisdictions. The Company intends to
achieve these goals while maintaining corporate governance
principles in line with those outlined in the QCA Code. The
key challenges in achieving this are set out below.
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Directors’ report continued
Principle 2
Eurasia seek to maintain open, direct and two-way
communication with its shareholders through various channels
including the Company website, twitter feed, company
presentations, investor events, video blogs filmed on site at
the Company’s projects, live and recorded video and audio
interviews, and lastly direct communication by phone and email
through the Company’s contact information. The Company
employs sub-contracted public relations professionals and
maintains several third-party contracts to better disseminate
Company newsflow. Through shareholder feedback the
Company ensures that it remains in touch with the information
requirements of our shareholders, their expectations regarding
their investment, and the motivation behind their voting
decisions. Director’s consider shareholder’s motivations and
expectations to be broadly correlated with that of the
Company and the Company’s strategy. Shareholders
information requirements can therefore be summarised as
either operational in nature, or commercial. The Company aims
to update on key events within these categories frequently, and
in a timely manner as events materialise. Directors recognise
that shareholders require complete and timely information as
a necessary input to their investment decisions. Shareholders
make regular contact through the Company’s main office
contact details where their calls or emails are dealt with in a
timely manner by a member of staff sufficiently senior to
comment on technical and commercial matters.
Principle 3
Experienced and knowledgeable long-standing employees are
a recognised key asset within the Company and our Corporate
Governance principles seek to cultivate a productive and
fulfilling working environment within the Company.
The Company’s mining operation is a further key asset and
attention is paid to its impact on society and the various
stakeholders important to the project’s continuous success.
These include sub-contractors to the Company, and officials
within the Russian sub-soil licensing and other agencies.
The mining operation is in a remote area and where possible
employs local persons but does not otherwise impact on a
local population. The Company is devoted to maintaining the
strictest environmental policies as required by the Russian
sub-soil licensing agencies.
Key personnel from the Company’s subsidiary maintain
communication with representatives from the nearest village
to the mining operation, the town of Kytlim in order to ensure
feedback on potential issues. The mining community in this
area of the Urals is relatively small and there is general
communication between companies operating nearby mines,
and with all suppliers to the industry generally. Communication
with officials from sub-soil licensing agencies and their sub-
contractors is generally more formal, and within the reporting
structures designed by those agencies to protect the
environment, the country’s natural resources and the rights
of local populations. Any issue arising from any stakeholder
will immediately be dealt with or communicated to the required
level to allow for action to be taken. No such events have
occurred in the history of the mining operation and where
an issue may arise it is reported in full to senior management
and Directors.
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ANNUAL REPORT & ACCOUNTS 2018
Managing relationships within the Company’s workforce, and its
outward interactions with local communities, service providers,
and the environment, all have the potential to impact on the
Company’s ability to achieve its medium to long term goals –
managing these relationships is considered a fundamental facet
of good Corporate Governance.
Principle 4
The leading risks at the operational level relate to the reliability
of our resource and reserve estimations and our ability to
manage the mining operation to achieve its goals. These
risks are mitigated by ensuring we employ qualified and
knowledgeable personnel who are adequately resourced and
supported by effective management. Resource exploration
involves inherent risks stemming from the fact that information
relating to the mineralisation is not immediately available and
is expensive to obtain. Recognising this risk and then managing
it effectively is a critical aspect of a successful exploration
geology business.
The Company’s annual audit provides an opportunity to
reassess the chief risks facing the business at both a corporate
and operational level. These are agreed by directors and
delineated and audited on an annual basis, thus ensuring
adequate recognition and articulation of each risk category.
Maintaining a dynamic management framework
Principle 5
The board comprises an executive chairman and managing
director, and two non-executive directors. One retirement,
that of Michael Martineau as non-executive Chairman occurred
in the 2017 calendar year and the board are now active in
replacing that appointment. Gary Fitzgerald is an independent
non-executive director while non-executive director Dmitry
Suschov is a significant shareholder in the Company.
The board meets when an executive decision requires board
approval, and in any event no less than once per six-week
period. Board members are regularly consulted on executive
decisions which would benefit from specific input relevant
to a board members area of expertise. All board members
are aware of and comfortable with the time and resource
requirements associated with their position. Relevant
information relating to a board discussion is carefully prepared
and circulated in advance of board meetings. Minutes are kept
and then circulated directly after all board meetings. Minutes
are noted on a prescribed form, which includes heading
information such as attendance. An attendance record for
each director is also maintained and annualised for distribution
within the board.
The attendance of the board at meetings within the last 12
months (9 meetings inclusive of AGM and all board meetings
conducted remotely) is as follows:
Christian Schaffalitzky – 100% attendance
Dmitry Suschov – 100% attendance
Gary Fitzgerald – 100% attendance
Directors’ report continued
Two non-executive directors, Dmitry Suschov and Gary
Fitzgerald form the remuneration committee and determine the
conditions of employment and annual remuneration of the
executive directors. The audit committee is comprised of the
same two non-executive directors and is chaired by Gary
Fitzgerald. The committee meets annually before and after the
Company’s annual audit.
Principle 6
The board has an effective combination of commercial and
technical experience, being led by a chair with a strong
background in geology, and in developing successful resource
projects and companies, with support from non-executive
directors with strong experience in commercial functions in a
range of markets, commodities and jurisdictions. A further
appointment, of an individual with a background in mining is
now underway as a response to the Company’s recent change
of focus – from pure exploration to development and mining.
Board members retire on a rota and declare themselves eligible
for reappointment at the Company’s AGM.
The current board members are listed below;
Christian Schaffalitzky
Executive Chairman and Managing Director
EurGeol, FIMMM, PGeo, CEng. 40 years’ experience in mineral
exploration. Founder of CSA international. Numerous discovery
credits including Lisheen zinc deposit in Ireland. Also, chairman
at Kibo Mining Plc and non-executive director of Two Shields
Investments and MetalNRG.
Dmitry Suschov
Non-Executive Director
Commodities trading veteran (primarily various grades of
metallurgical and thermal coals) who has successfully built a
major Pulverized Coal Injection (PCI) franchise throughout Asia,
Europe and America with an annual turnover of up to $100
million, thereby accumulating around 2.5% of the global PCI
market share. He is also an investment banker with extensive
experience in the Russian resources industry having previously
worked with IG Capital, MDM Bank, PricewaterhouseCoopers
and Ernst&Young as mining & metals leader in corporate
finance for Russia and CIS.
Gary Fitzgerald
Non-Executive Director
30 years’ experience in investment management and prior
director of Framlington Investment Management.
The board considers the skill sets currently within the board to
be sufficient for the successful running of the business, and the
delivery of the stated corporate strategy and goals for the
benefit of shareholders through the medium to long term,
however, it is recognised that a further appointment would
benefit the board in having a greater breadth of experience,
particularly with respect to mining, and mine engineering. In
this light a further appointment is currently being actively
pursued. In addition, where more specialised skills are required,
the board has access to a network of individuals and
organisations with whom it can consult for further information.
This can include input to operational decisions relating to the
Company’s operating mine, or advice of a commercial nature.
Each board members long standing career in the industry is
invaluable in this regard.
Continuing Professional Development (‘CPD’) and membership
of institutions which promote best practice in industry is
encouraged in all board members, though not compulsory to
board membership. As an example, the professional
accreditations PGeo (‘Professional Geologist’, Institute of
Geologists of Ireland) and EurGeol (‘European Geologist’,
European Federation of Geologists), attained by the Executive
Chairman, are maintained by strict adherence to a program
of quantitative and qualitative CPD activities. Likewise, the
Company secretary and financial controller maintains
membership of the Association of Chartered and Certified
Accountants by following a prescribed CPD program. All board
members regularly attend industry events and conferences to
keep abreast of developments in their area of expertise. Board
members, especially Dmitry Sushov, also speak at and chair
discussions at mining industry conferences.
No one board member, or group of board members,
dominates decision making within the board. Non-executive
director Dmitry Suschov is a major shareholder in the business
however individual shareholdings are recognised by all board
members as separate to and distinct from rights and
responsibilities as effective board members.
Principle 7
The remuneration committee is responsible for evaluating the
performance of the executive directors. As mentioned above
board members retire on a fixed rota, and efforts are made with
regard to succession planning and appointment of new board
members as required.
New appointments to the board may be suggested by current
board members or persons external to the Company. The
appointment process involves; assessment of suitability based
on qualifications and work history, due diligence by the
Company and its Nomad, a series of meetings with board
members and key personnel, and ultimately contract
negotiation and appointment.
Board evaluations are internal to the Company and on an ad-
hoc basis, as befits the small scale of the Company currently,
but not less than once per year at the time of the Company
AGM. Adhering to the Company’s strategy, achieving the
Company’s goals, and maintaining good corporate governance
standards are the three most prominent identifiers by which
board effectiveness is evaluated. Board evaluation procedures
are considered appropriate for the size and scale of the
business currently and the board recognises that these
procedures should be subject to review as and when the board
and the Company grow. Board evaluations are not currently
made public and it is the Company's intention to reconsider
this position and ensure continued compliancy with the code
as the Company transitions from an exploration Company to
a mining Company.
Principle 8
The Company is founded on a culture of following and
promoting the highest ethical standards with regard to its
commercial transactions, business practices, strategy, internal
employee relations and outward-facing stakeholder and
community relationships. The Company operates chiefly in the
Russian Federation though it is incorporated in the UK and
governed by the laws of England and Wales. The corporate
culture and values extend from the corporate level throughout
the organisation irrespective of jurisdiction. An ability to
ANNUAL REPORT & ACCOUNTS 2018
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15
Directors’ report continued
recognise and promote good ethical values and behaviours is
seen throughout the organisation as an excellent behavioural
asset to an employee or potential employee or indeed board
member. The current board members have been chosen with
this awareness of the corporate culture and the Company’s
ethical standards in mind - new board appointments are also
considered in this light. Corporate culture, and high ethical
standards with regard to business practices are considered a
critical element in attaining the Company’s strategy and goals.
These standards are reinforced through the appraisal process.
High standards of ethics are considered to create a
competitive advantage for the Company and are a core
element of the Company’s business model, as they ensure
the Company’s long-term sustainability. Eurasia is an equal
opportunities employer.
Principle 9
Maintaining governance structures that are fit for use as the
Company evolves in size and complexity is an essential
element of good corporate governance. Maintenance of the
corporate governance code is the sole remit of the chair, who
instigates changes in policy, and ensures the code is applied
throughout the organisation. Currently the role of chairman is
shared with that of chief executive director, a situation which
has persisted since the retirement of the Company’s non-
executive director in 2017. This situation is regarded as
temporary, and a departure from compliancy with the code,
but given the size and complexity of the organisation a fully
independent chairman is not seen as essential to the proper
functioning of the board or the fulfilment of the roles of chair
and chief executive. The Company is committed to splitting
these roles going forward.
Two non-executive directors are appointed and participate
in all board level decisions and also provide scrutiny and
oversight of the executive director’s roles. The board’s non-
executive directors are each skilled in different aspects of
commercial finance, with a combined breath of experience
across various markets, commodities and jurisdictions.
They communicate regularly with the chair and executive
directors and provide reliable advice in their areas of expertise.
The terms and functions of the audit and remunerations
committees are set out below.
The Company secretary role is pivotal within the organisation
ensuring regulatory compliance and application of good
corporate governance principles. The secretary is available
to non-executive directors to support their information
requirements and decision making and reports directly to
the chief executive.
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.
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The membership of the Audit Committee comprises two non-
executive Directors, Dmitry Suschov and Gary Fitzgerald. The
external Auditors have direct access to the members of the
committee, without presence of the executive Directors, for
independent discussions. Two Audit Committee meetings
were held during the year; to approve 2017 Annual Financial
Statements and later the 2018 Interim report. The Audit
Committee reported that the accounts were in compliance
with International Financial Reporting Standards.
Remuneration Committee
The Chairman of the Remuneration Committee is Gary
Fitzgerald. The committee comprises two non-executive
Directors, Dmitry Suschov and Gary Fitzgerald. It determines
the terms and conditions of employment and annual
remuneration of the executive Directors. It consults with the
Executive Chairman, 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:
• to ensure that individuals are fairly rewarded for their
personal contribution to the Company’s overall
performance, and
• 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 comprises basic salary,
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. Matters which are reserved strictly for the
consideration of the board include, but are not limited to,
discussions and decision on Company strategy, major
investment decisions in new business development,
commercial arrangements including funding requirements,
high-level decisions on distribution of funds, and recruitment
or dismissal of senior personnel and board members.
The above outline of the Company’s corporate governance
framework befits the current scale of the Company but will be
subject to appropriate modifications as the Company grows in
line with its stated strategy. An annual review of the corporate
governance framework is undertaken at the board meeting
preceding or directly following the Company’s AGM. Changes
considered to the current corporate governance framework, to
be assessed in due course, include further appointments to
the board, and establishing independent bodies to review and
assess board performance.
Total directors’ emoluments are disclosed in notes 8 and 23
to the financial statements and the directors’ options are
disclosed in the director’s report above. During 2018
45,000,000 options were granted to the directors (2017: nil).
Directors’ report continued
Build trust
Principle 10
The board seeks to maintain both direct and two-way
communication with its shareholders through various channels
including the Company website, Twitter feed, Company
Presentations, Investor Events, Video Blogs filmed on site at
the Company’s projects, Live and recorded video and audio
interviews, and lastly direct communication by phone and
email through the Company’s contact information. Phone calls
to the company’s office are screened and communicated to
board members as appropriate. All shareholders may at their
discretion chose to attend the company AGM and speak
directly to the board and management.
The Company employs Public Relations professionals and
maintains several third-party contracts to better disseminate
Company news-flow. Through shareholder feedback the
Company ensures that the boards communication of the
company’s progress is thorough and well understood.
A clear statement on the outcomes of board resolutions is
communicated immediately after the Company’s AGM by
RNS and posted to the Company's website at
www.eurasiamining.co.uk. This includes a summary of votes
for and against the resolutions put before the shareholders,
and where a significant number of votes is cast against a
resolution this is clearly stated, with an explanation as to
possible explanations and remediations regarding that voting.
A catalogue of historical annual reports and AGM notices is
maintained at an appropriate location on the Company’s
website.
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. No
serious incidents occurred in the past year.
UK Code on takeover and mergers
Eurasia Mining is subject to the UK City code on takeovers
and mergers, which was revised and extended to apply to all
companies listed on the AIM market in October 2013.
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
Keith Byrne
Company Secretary
14 May 2019
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
17
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to
continue to adopt the going concern basis of accounting for
a period of at least twelve months from the date when the
financial statements are authorised for issue.
Overview of our audit approach
• Overall group materiality: £109,000, which represents 2%
of the group’s total assets;
• Key audit matters were identified as the recoverability of
Mining Assets and exploration and evaluation of mineral
resources as well as improper revenue recognition; and
• We performed full scope audit procedures on Eurasia
Mining Plc, targeted audit procedures on Urals Alluvial
Platinum Limited, Eurasia Resources Asia Ltd, ZAO Terskaya
Mining Company, ZAO Kosvinskiy Kamen, ZAO Eurasia
Mining Service and ZAO Yuksporskaya Mining Company;
analytical audit procedures on Eurasia Mining (UK) Limited.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most
significant assessed risks of material misstatement (whether, or
not, due to fraud) that we identified. These matters included
those that had the greatest effect on the overall audit strategy,
the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the
context of our audit of the financial statements and in forming
our opinion thereon, and we do not provide a separate opinion
on these matters.
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF EURASIA MINING PLC
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Eurasia Mining Plc
(the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 31 December 2018 which comprise the consolidated
statement of profit or loss and other comprehensive income, the
consolidated and parent company statements of financial
position, the consolidated and parent company statements of
changes in equity, the consolidated and parent company
statements of cash flows and notes to the financial statements,
including a summary of significant accounting policies. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as
regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
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 2018 and of the group’s loss 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;
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the
group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
18
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ANNUAL REPORT & ACCOUNTS 2018
Independent Auditor’s Report continued
Key Audit Matter - Parent and Group
How the matter was addressed in the audit – Parent and Group
Recoverability of Mining Assets and
exploration and evaluation of mineral
resources
The group currently has interests in
2 projects:
• West Kytlim which has become fully
operational during the current
financial year which, due to freezing
over in the winter months, is only
available for extraction activities
during the summer months. The
carrying value of the mining assets
for this project is £3,606,013 (2017:
£4,339,633); and
Our audit work included, but was not restricted to:
• Challenging management’s assertions relating to indicators of impairment for the
mining and exploration and evaluation assets.
• We corroborated management’s considerations on assets where there was no
indicator for impairment, by obtaining mining licenses, reserve & resource reports.
• For the mining assets where indicators were present, we examined the value in use
calculation performed by management:
- We performed arithmetical checks on the calculation.
- We challenged the appropriateness of managements’ key assumptions which
included – discount rate, recovery rate and ore quantity used in the model
- We performed sensitivity analysis on these assumptions, including commodity
prices, production levels, discount rate and grade of extracted materials
- We assessed cash flows to current production reports, which were considered more
relevant than historical production rates due to the issues incurred
- We agreed the amounts of Ore production, recovery and quantity to third party
• Monchetundra which is still in its
reserve reports and into the cash flow forecast.
exploration and evaluation stage.
The carrying value of the Exploration
and Evaluation costs capitalised is
£802,661 (2017: £840,793).
The risks associated with the above is
that the carrying values may not be fully
recoverable, indicating a potential
impairment to be recognised.
The group's accounting policy on recoverability of mining assets is shown in note 4 to
the financial statements and related disclosures are included in notes 11 and 12.
Sensitivities have been disclosed in note 5.2.4
Key observations
Our testing did not identify any impairment of mining or exploration and
evaluation assets.
Key Audit Matter - Parent and Group
How the matter was addressed in the audit – Parent and Group
Improper revenue recognition
Our audit work included, but was not restricted to:
Under ISA 240 (UK) there is a presumed
risk that revenue may be misstated due
to fraud within the recognition of
revenue.
Revenue for the year-ended
31 December 2018 was £2,573,329
(2017: £183,998).
This is also the first full year that the
West Kytlim mine is operating at
capacity. This, coupled with the
implementation of the new Accounting
Standard, IFRS 15, indicates the risk of
material misstatement to the financial
statements.
• Reviewing and testing the revenue recognition policy for the group including any
impacts relating to the adoption of IFRS 15; and
• Vouching 100% of revenue transactions to supporting documentation, including
contracts, settlement reports and cash collection.
• Verifying that the revenue transactions vouched above have been recorded in
accordance with our review per the first point above.
The group’s accounting policy on revenue recognition is shown in note 4 to the
financial statements and related disclosures are included in note 6.
Key observations
Our testing did not identify any material misstatements in the recognition of revenue.
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
19
Independent Auditor’s Report continued
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature,
timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
MATERIALITY MEASURE
GROUP
PARENT
Financial statements as a whole
£109,000 which is 2% of total assets.
This benchmark is considered the most
appropriate because of the importance
of the mining assets to the current and
future level of activity, and the overall
success, of the entity. Therefore, the key
metric and focus area for this entity is
their assets under control.
£98,000 which is 90% of group
materiality. This benchmark is
considered the most appropriate
because we performed our audit in
combination with the audit of the
group, so any misstatements
identified in the parent have been
considered in unison with the
materiality of the group. As such, we
consider there to be minimal risk of
a combined material misstatement.
Performance materiality used to
drive the extent of our testing
75% of financial statement materiality.
75% of financial statement materiality.
Communication of misstatements to
the audit committee
£5,450 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£4,900 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on
a thorough understanding of the group’s business, its
environment and risk profile and in particular included:
• evaluation by the group audit team of identified
components to assess the significance of that component
and to determine the planned audit response based on
a measure of materiality. Significance was determined by
a percentage of the group’s total assets;
• We performed full scope audit procedures on Eurasia
Mining Plc, targeted audit procedures on Urals Alluvial
Platinum Limited, Eurasia Resources Asia Ltd, ZAO Terskaya
Mining Company, ZAO Kosvinskiy Kamen, ZAO Eurasia
Mining Service and ZAO Yuksporskaya Mining Company;
analytical audit procedures on Eurasia Mining (UK) Limited.
• As part of the planning process, assessing the group’s
internal processes and control environment. Eurasia Mining
Plc has centralised processes and controls over the key areas
of our audit focus. Group management are responsible for
all judgements and significant risk areas. For the Russian
subsidiaries, local finance teams perform accounting
processes and we tailored our audit response accordingly,
using component auditors to perform targeted audit
procedures on these entities. Group instructions were issued
to the component auditor and a full review of their work
was completed;
• The total percentage coverage of full scope or targeted
procedures over group revenue was 100%;
• The total percentage coverage of full scope or targeted
procedures over total assets was 98%;
Our audit approach was fully substantive in nature and
consistent with the 2017 approach.
Other information
The directors are responsible for the other information.
The other information comprises the information included
in the annual report other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial
statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that
20
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Independent Auditor’s Report continued
there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of
the audit:
• the information given in the strategic report and the
directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
• the strategic report and the directors’ report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report under
the Companies Act 2006
In the light of the knowledge and understanding of the group
and the parent company and its environment obtained in the
course of the audit, we have not identified material
misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in
relation to which 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
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the 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.
Christopher Raab, ACA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
• certain disclosures of directors’ remuneration specified by
law are not made; or
14 May 2019
• we have not received all the information and explanations
we require for our audit.
Responsibilities of directors for the financial
statements
As explained more fully in the directors’ responsibilities
statement set out on page 14, the directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
21
Consolidated statement of profit or loss and
Eurasia Mining plc
Company No. 3010091
other comprehensive income
For the year ended 31 December 2018
Sales
Cost of sales
Gross profit/(loss)
Administrative costs
Investment income
Finance cost
Other gains
Other losses
Loss before tax
Income tax expense
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 loss for the period
Loss for the period attributable to:
Equity holders of the parent
Non-controlling interest
Total comprehensive loss for the period attributable to:
Equity holders of the parent
Non-controlling interest
Year to
31 December
2018
£
Year to
31 December
2017
£
Note
2,573,329
(2,280,559)
183,998
(217,540)
292,770
(33,542)
(1,609,068)
5,821
(623,779)
107,083
(1,414,768)
(1,022,664)
-
(1,113,318)
243,951
(213,557)
(3,241,941)
-
(2,139,130)
-
(3,241,941)
(2,139,130)
9
9
10
69,894
(13,768)
258,351
(79,996)
328,247
(93,764)
(2,913,694)
(2,232,894)
(2,573,231)
(668,710)
(2,119,657)
(19,473)
13
(3,241,941)
(2,139,130)
(2,314,878)
(598,816)
(2,199,653)
(33,241)
13
(2,913,694)
(2,232,894)
(Loss)/profit per share attributable to equity holders of the parent:
Basic and diluted loss (pence per share)
22
(0.12)
(0.14)
The accompanying notes are an integral part of these financial statements.
22
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Consolidated statement of financial position
Eurasia Mining plc
Company No. 3010091
As at 31 December 2018
ASSETS
Non-current assets
Property, plant and equipment
Assets in the course of construction
Intangible assets
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
Other financial liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2018
£
31 December
2017
£
Note
11
11
12
14
15
16
18
13
19
20
21
3,660,614
33,193
802,661
-
4,370,475
37,814
840,793
445,596
4,496,468
5,694,678
1,495
49,046
452,676
5,605
93,387
89,819
503,217
188,811
4,999,685
5,883,489
28,803,321
3,941,115
(26,632,516)
26,623,034
3,403,368
(24,484,719)
6,111,920
(1,419,039)
5,541,683
(708,634)
4,692,881
4,833,049
43,586
263,218
-
588,810
236,630
225,000
306,804
1,050,440
306,804
1,050,440
4,999,685
5,883,489
These financial statements were approved by the board on 14 May 2019 and were signed on its behalf by:
C. Schaffalitzky
Executive Chairman
The accompanying notes are an integral part of these financial statements.
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
23
Company statement of financial position
As at 31 December 2018
Eurasia Mining plc
Company No. 3010091
ASSETS
Non-current assets
Company statement of financial position
Property, plant and equipment
Investments in subsidiaries
Total non-current assets
Current assets
Trade and other receivables
Other financial assets
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
Other financial liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2018
£
31 December
2017
£
Note
11
13
1,009
1,132,246
44
1,277,489
1,133,255
1,277,533
15
14
36,940
6,252,506
170,690
46,703
6,306,204
61,500
6,460,136
6,414,407
7,593,391
7,691,940
16
18
28,803,321
4,023,610
(25,517,698)
26,623,034
3,744,216
(23,763,393)
7,309,233
6,603,857
19
20
21
-
284,158
-
539,156
323,927
225,000
284,158
1,088,083
284,158
1,088,083
7,593,391
7,691,940
In accordance with section 408(3) of the Companies Act 2006, Eurasia Mining plc is exempt from the requirement to present its own
statement of profit or loss. The amount of loss for the financial year recorded within the financial statements of Eurasia Mining plc is
£1,831,378 (2017: loss of £1,480,763).
These financial statements were approved by the board on 14 May 2019 and were signed on its behalf by:
C. Schaffalitzky
Executive Chairman
The accompanying notes are an integral part of these financial statements.
24
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Consolidated statement of changes in equity
For the year ended 31 December 2018
Eurasia Mining plc
Company No. 3010091
Note
Share
capital
£
Share
premium
£
Deferred
shares
£
Capital
redemption
and other
reserves
£
Foreign
currency
translation
reserve
£
Total
attributable
to owners
of parent
£
Non-
controlling
interest
£
Accumulated
losses
£
Total
£
1,509,788 17,042,722
248,471
458,511
140,951
197,108
7,025,483 3,542,694
-
-
-
-
(260,852)
-
-
(22,544,900)
-
-
6,314,935
389,422
655,619
(675,393) 5,639,542
389,422
655,619
-
-
Balance at 1 January 2017
Issue of ordinary share capital for cash
Shares issued in lieu of loan note interest
Recognition of warrants issued with
convertible loan notes
De-recognition of warrants due to
restructure of convertible loan notes
Recognition of equity element of
convertible loan notes
-
-
-
-
-
-
Transactions with owners
338,059
706,982
Loss for the period
Exchange differences on translation of
foreign operations
Total comprehensive income
-
-
-
-
-
-
-
-
-
-
-
-
-
307,075
(179,838)
74,285
201,522
-
-
-
-
-
-
-
-
-
307,075
179,838
-
-
74,285
-
-
-
307,075
-
74,285
179,838
1,426,401
- 1,426,401
(2,119,657)
(2,119,657)
(19,473)
(2,139,130)
(79,996)
-
(79,996)
(13,768)
(93,764)
(79,996)
(2,119,657)
(2,199,653)
(33,241)
(2,232,894)
Balance at 31 December 2017
1,847,847 17,749,704 7,025,483 3,744,216 (340,848) (24,484,719) 5,541,683 (708,634) 4,833,049
1,847,847 17,749,704
578,303
(29,580)
221,713
-
7,025,483 3,744,216
-
-
-
-
(340,848)
-
-
(24,484,719)
-
-
5,541,683
800,016
(29,580)
(708,634) 4,833,049
800,016
(29,580)
-
-
Balance at 1 January 2018
Issue of ordinary share capital for cash
Share issue cost
Issue of ordinary shares on exercise
of warrants
Shares issued in lieu of loan note interest
Conversion of loan notes
Recognition of options under employee
share option plan
Recognition of warrants issued for
professional services
Issue of shares under employee share
option plan
Reversal on cancellation of options
De-recognition of equity element of
convertible loan notes
Non-controlling interests arising on
reduction of interest in subsidiary
Gain on changes in parent’s ownership
interest in a subsidiary
109,197
20,522
170,549
370,826
88,253
639,075
-
-
-
-
1,742
-
9,688
-
-
-
-
-
-
-
13
-
-
-
-
-
-
-
-
-
-
(112,868)
-
-
455,028
14,307
-
(2,788)
(74,285)
-
-
Transactions with owners
523,722 1,656,565
- 279,394
Loss for the period
Exchange differences on translation of
foreign operations
Total comprehensive income
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,788
74,285
-
367,155
108,775
809,624
455,028
14,307
11,430
-
-
-
-
-
-
-
-
-
-
-
367,155
108,775
809,624
455,028
14,307
11,430
-
-
(111,589)
(111,589)
348,361
348,361
-
348,361
425,434 2,885,115
(111,589) 2,773,526
(2,573,231)
(2,573,231)
(668,710)
(3,241,941)
258,353
-
258,353
69,894
328,247
-
258,353
(2,573,231)
(2,314,878)
(598,816)
(2,913,694)
Balance at 31 December 2018
2,371,569 19,406,269 7,025,483 4,023,610
(82,495)
(26,632,516) 6,111,920 (1,419,039) 4,692,881
The accompanying notes are an integral part of these financial statements.
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
25
Company statement of changes in equity
For the year ended 31 December 2018
Eurasia Mining plc
Company No. 3010091
Balance at 1 January 2017
Issue of ordinary share capital for cash
Shares issued under terms of the loan agreements
Recognition of warrants issued with convertible
loan notes
De-recognition of warrants due to restructure of
convertible loan notes
Recognition of equity element of convertible
loan notes
Share
capital
£
Share
premium
£
Deferred
shares
£
Other
reserves
£
Retained
loss
£
Total
£
1,509,788
140,951
197,108
17,042,722
248,471
458,511
7,025,483
-
-
3,542,694
-
-
(22,462,468)
-
-
6,658,219
389,422
655,619
-
-
-
-
-
-
-
-
-
-
-
307,075
-
307,075
(179,838)
179,838
-
74,285
-
74,285
201,522
179,838
1,426,401
-
(1,480,763)
(1,480,763)
Transactions with owners
338,059
706,982
Loss and total comprehensive income
-
-
Balance at 31 December 2017
1,847,847
17,749,704
7,025,483
3,744,216 (23,763,393)
6,603,857
Balance at 1 January 2018
Issue of ordinary share capital for cash
Issue of ordinary shares on exercise of warrants
Shares issued in lieu of loan note interest
Conversion of loan notes
Issue of shares under employee share option plan
Share issue cost
Reversal on cancellation of options
Recognition of options under employee share
option plan
Recognition of warrants issued for professional
services
Derecognition of warrants on restructure of
convertible loan notes
1,847,847 17,749,704
578,303
370,826
88,253
639,075
9,688
(29,580)
-
221,713
109,197
20,522
170,549
1,742
-
-
7,025,483
-
-
-
-
-
-
-
3,744,216 (23,763,393)
-
-
-
-
-
-
2,788
-
(112,868)
-
-
-
-
(2,788)
6,603,857
800,016
365,664
108,775
809,624
12,922
(29,580)
-
-
-
-
-
-
-
-
-
-
-
455,028
14,307
-
-
562,912
14,307
(74,285)
74,285
-
279,394
77,073
2,536,754
(1,831,378)
(1,831,378)
Transactions with owners
523,722
1,656,565
Loss and total comprehensive income
Balance at 31 December 2018
2,371,569 19,406,269
7,025,483
4,023,610
(25,517,698)
7,309,233
The accompanying notes are an integral part of these financial statements.
26
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Consolidated statement of cash flows
For the year ended 31 December 2018
Eurasia Mining plc
Company No. 3010091
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation of non-current assets
Finance costs recognised in profit or loss
Investment revenue recognised in profit or loss
Loss on disposal of investment in joint operations
Loss on impairment of financial assets
Gain on valuation of derivative financial instrument
Loss/(gain) on a loan settlement
Net foreign exchange loss
Expense recognised in respect of warrants issued for professional services
Expense recognised in respect of options under employee share option plan
Movement in working capital
Decrease in inventories
Decrease in trade and other receivables
Increase in trade and other payables
Cash outflow from operations
Income tax paid
Net cash used in operating activities
Cash flows from investing activities
Interest received
Contributed to joint operations
Purchase of property, plant and equipment
Payment for exploration and evaluation assets
Net cash generated from/(used) in investing activities
Cash flows from financing activities
Proceeds from sale of non-controlling interest
Proceeds from issue of equity shares, net of issue costs
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
The accompanying notes are an integral part of these financial statements.
Note
11
19
9
9
9
9
11
12
16
19
19
Year to
31 December
2018
£
Year to
31 December
2017
£
(3,241,941)
(2,139,130)
367,173
623,779
(5,821)
-
450,936
(107,083)
60,405
903,427
14,307
455,028
15,413
1,113,318
-
44,495
-
(76,863)
(167,088)
169,062
-
-
(479,790)
(1,040,793)
3,425
36,522
37,324
17,387
52,567
81,117
(402,519)
(889,722)
-
(402,519)
-
(889,722)
5,821
-
(113,198)
(49,164)
-
(364)
(179,873)
(69,290)
156,541
(249,527)
236,772
1,149,022
-
(447,440)
-
389,422
1,664,157
(960,550)
938,354
1,093,029
379,294
(16,473)
89,819
(46,220)
(18,635)
154,674
452,676
89,819
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
27
Company statement of cash flows
For the year ended 31 December 2018
Eurasia Mining plc
Company No. 3010091
Year to
31 December
2018
£
Year to
31 December
2017
£
Note
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation of non-current assets
Finance costs recognised in profit or loss
Investment revenue recognised in profit or loss
Gain on valuation of derivative financial instrument
Gain on debt settlement
Loss on impairment of investments
Loss on disposal of investment in joint operations
Net foreign exchange (gain)/loss
Expense recognised in respect of warrants issued for professional services
Expense recognised in respect of options under employee share option plan
19
9
9
9
9
Movement in working capital
(Decrease)/increase in trade and other receivables
Increase /(decrease) in trade and other payables
Cash outflow from operations
Income tax paid
Net cash used in operating activities
Cash flows from investing activities
Interest received
Contributed to joint operations
Proceeds from repayment of related party loan
Amounts advanced to related party
Purchase of property, plant and equipment
(1,831,378)
(1,480,763)
102
623,779
(2,062)
(107,083)
60,405
147,794
-
24,611
14,307
455,028
194
1,113,234
-
(76,863)
(167,088)
-
44,495
(32,047)
-
-
(614,497)
(598,838)
7,211
(39,769)
(647,055)
-
(647,055)
2,062
-
275,275
(221,577)
(1,067)
33,337
10,480
(549,021)
-
(549,021)
-
(364)
-
(540,550)
-
Net cash generated from/(used) in investing activities
54,693
(540,914)
Cash flows from financing activities
Proceeds from issue of equity shares, net of issue costs
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
The accompanying notes are an integral part of these financial statements.
16
19
19
1,149,022
-
(447,440)
389,422
1,610,663
(956,630)
701,582
1,043,455
109,220
(46,480)
(30)
61,500
(8,448)
116,428
170,690
61,500
28
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements
For the year ended 31 December 2018
1 General information
3 Changes in accounting policies
Eurasia Mining Plc (the “Company”) is a public limited
company incorporated and domiciled in Great Britain with its
registered office at International House, 142 Cromwell Road,
London SW7 4EF, United Kingdom and principal place of
business at Clubhouse Bank, 1 Angel Court, EC2R 7HJ, United
Kingdom. 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
At 31 December 2018 the Group’s net current assets
amounted to £196,413 (2018: Net current liability of £861,629).
At the same time the Group had a cash balance of £452,676
(2017: £89,819). The Group had settled all expensive loan
facilities by a mixture of cash repayments and the issue of
shares following conversion of debt at lenders discretion. The
Group had a stand by facility arranged by a director D. Suschov
in 2018, which the directors decided not to utilise applying
careful cash flow planning and an ability to bring excess funds
generated from the West Kytlim operations.
Since going into production at West Kytlim, the Group has
received considerable industry interest, especially locally.
However, the Board believes this asset should continue to be
developed by the Company while the excellent relationship
between the contractor and local management team
demonstrates much higher rates of return than anticipated.
A more thorough reassessment of the project’s value will
be undertaken in due course in light of actual production
information and grades in ore. Furthermore, a discussion on
potential capital expansion including the addition of a second
wash-plant funded by our partner Uralmetmash, or alternatively
by the Group is ongoing.
The Group has implemented tighter controls 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
Company shares in lieu of payment for their remuneration
and costs.
In April 2019 the Group has raised £0.5 million from the equity
market by way of placing shares for cash.
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.
3.1 New and revised relevant standards that are effective for
annual periods commencing on or after 1 January 2018
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.
IFRS 15 Revenue from contracts with customers
(effective 1 January 2018)
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.
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:
• 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.
The adoption of these Standards and Interpretations has had
no material impact on the financial statements of the Group
ANNUAL REPORT & ACCOUNTS 2018
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 2018
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 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 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;
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 “Consolidated Statement
of Profit or Loss” 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
• changes the accounting for sale and leaseback
with the investee;
arrangements;
• largely retains IAS 17's approach to lessor accounting;
• introduces new disclosure requirements.
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 re-measurement 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.
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.
• 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 Statement of Profit or Loss 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 in
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.
30
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
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
re-measure 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
eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
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 Statement of Profit or Loss
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 the date the entity
obtains the goods or the counterparty renders the service.
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".
ANNUAL REPORT & ACCOUNTS 2018
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 2018
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
To determine whether to recognise revenue, the Group follows
a 5-step process:
Identifying the contract with a customer;
Identifying the performance obligations;
1
2
3 Determining the transaction price;
4 Allocating the transaction price to the performance
obligations;
5 Recognising revenue when/as performance obligation(s)
are satisfied.
The Group earns its revenues primarily from the sale of platinum
group metals from the West Kytlim mine. The company enters
into a contract with its main customer to deliver all mined
metals extracted from the mine. There is one performance
obligation under the sales contract, and that is the delivery of
metals. As such, the entire price under the contract is allocated
to the single performance obligation. Revenue is recognised
when control over the metals passes to the customer.
The Group has determined that it is the principal in the sales
transactions as the Group holds the mining license and has the
rights to the underlying resources. The Group controls the sales
process, from selecting the customer to determining sales
price. The group uses a contractor to perform extraction
services and an agreed upon portion of sales proceeds are
paid to the contractor for their services.
The group will also perform consultancy and management
services. Revenue is recognised as performance conditions
under contracts are satisfied. During the year, there were no
revenues from services.
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.
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 unit of production method based on
the volume of ore reserves. This results in a depreciation charge
proportional to the depletion of reserves
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 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.
32
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
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.
In assessing whether an impairment is required, the carrying
value of the asset is compared with its recoverable amount.
The recoverable amount is the higher of the fair value less costs
of disposal (FVLCD) and value in use (VIU). The FVLCD is
estimated based on future discounted cash flows expected to
be generated from the continued use of the asset, including
any expansion prospects and eventual disposal, using market-
based commodity prices, exchange assumptions, estimated
quantities of recoverable minerals, production levels, operating
costs and capital requirements based on the latest Life of mine
plans. These cash flows were discounted using a real post-tax
discount rate that reflect the current market assessments of
time value of money.
Value in use is determined as the present value of the
estimated cash flows expected to arse from continued use in
its current form and eventual disposal. Value in use cannot take
into consideration future development. The assumptions used
in the calculation are often different than those used in a
FVLCD and therefore is likely to yield a different result.
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
Recognition and derecognition
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of
the financial instrument.
Financial assets are derecognised when the contractual rights
to the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are
transferred.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a
significant financing component and are measured at the
transaction price in accordance with IFRS 15, all financial assets
are initially measured at fair value adjusted for transaction costs
(where applicable).
ANNUAL REPORT & ACCOUNTS 2018
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33
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
Financial instruments, other than those designated and
effective as hedging instruments, are classified into the
following categories:
• the contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on
the principal amount outstanding.
• amortised cost
•
• fair value through other comprehensive income (FVOCI).
fair value through profit or loss (FVTPL)
The classification is determined by both:
• the entity’s business model for managing the financial asset
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are
recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment
of trade receivables which is presented within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions (and are not designated as
FVTPL):
• they are held within a business model whose objective is
to hold the financial assets and collect its contractual cash
flows
• the contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on
the principal amount outstanding After initial recognition,
these are measured at amortised cost using the effective
interest method.
Discounting is omitted where the effect of discounting is
immaterial. The Group’s cash and cash equivalents, trade and
most other receivables fall into this category of financial
instruments as well as listed bonds that were previously
classified as held-to-maturity under IAS 39.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model
other than ‘hold to collect’ or ‘hold to collect and sell’ are
categorised at fair value through profit and loss. Further,
irrespective of business model financial assets whose
contractual cash flows are not solely payments of principal and
interest are accounted for at FVTPL. All derivative financial
instruments fall into this category, except for those designated
and effective as hedging instruments, for which the hedge
accounting requirements apply. The category also contains an
equity investment. Assets in this category are measured at fair
value with gains or losses recognised in profit or loss.
The fair values of financial assets in this category are
determined by reference to active market transactions or using
a valuation technique where no active market exists.
Financial assets at fair value through other comprehensive
income (FVOCI)
The Group accounts for financial assets at FVOCI if the assets
meet the following conditions:
• they are held under a business model whose objective it is
“hold to collect” the associated cash flows and sell and
Any gains or losses recognised in other comprehensive income
(OCI) will be recycled upon derecognition of the asset.
Impairment of financial assets
IFRS 9’s impairment requirements use more forward-looking
information to recognise expected credit losses – the ‘expected
credit loss (ECL) model’. This replaces IAS 39’s ‘incurred loss
model’.
Instruments within the scope of the new requirements included
loans and other debt-type financial assets measured at
amortised cost and FVOCI, trade receivables, contract assets
recognised and measured under IFRS 15 and loan
commitments and some financial guarantee contracts (for the
issuer) that are not measured at fair value through profit or loss.
Recognition of credit losses is no longer dependent on the
Group first identifying a credit loss event. Instead the Group
considers a broader range of information when assessing credit
risk and measuring expected credit losses, including past
events, current conditions, reasonable and supportable
forecasts that affect the expected collectability of the future
cash flows of the instrument.
In applying this forward-looking approach, a distinction is made
between:
•
•
financial instruments that have not deteriorated significantly
in credit quality since initial recognition or that have low
credit risk (‘Stage 1’) and
financial instruments that have deteriorated significantly in
credit quality since initial recognition and whose credit risk
is not low (‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective
evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first
category while ‘lifetime expected credit losses’ are recognised
for the second category.
Measurement of the expected credit losses is determined by
a probability-weighted estimate of credit losses over the
expected life of the financial instrument.
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting
for trade and other receivables as well as contract assets and
records the loss allowance as lifetime expected credit losses.
These are the expected shortfalls in contractual cash flows,
considering the potential for default at any point during the life
of the financial instrument. In calculating, the Group uses its
historical experience, external indicators and forward-looking
information to calculate the expected credit losses using a
provision matrix.
The Group assess impairment of trade receivables on a
collective basis as they possess shared credit risk characteristics
they have been grouped based on the days past due.
34
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ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
Derivative financial instruments and hedge accounting
Derivative financial instruments are accounted for at fair
value through profit and loss (FVTPL) except for derivatives
designated as hedging instruments in cash flow hedge
relationships, which require a specific accounting treatment.
To qualify for hedge accounting, the hedging relationship
must meet all of the following requirements:
• there is an economic relationship between the hedged
item and the hedging instrument
• the effect of credit risk does not dominate the value
changes that result from that economic relationship
• the hedge ratio of the hedging relationship is the same
as that resulting from the quantity of the hedged item that
the entity actually hedges and the quantity of the hedging
instrument that the entity actually uses to hedge that
quantity of hedged item.
All derivative financial instruments used for hedge accounting
are recognised initially at fair value and reported subsequently
at fair value in the statement of financial position.
To the extent that the hedge is effective, changes in the fair
value of derivatives designated as hedging instruments in cash
flow hedges are recognised in other comprehensive income
and included within the cash flow hedge reserve in equity.
Any ineffectiveness in the hedge relationship is recognised
immediately in profit or loss.
At the time the hedged item affects profit or loss, any gain or
loss previously recognised in other comprehensive income is
reclassified from equity to profit or loss and presented as a
reclassification adjustment within other comprehensive income.
However, if a non-financial asset or liability is recognised as a
result of the hedged transaction, the gains and losses
previously recognised in other comprehensive income are
included in the initial measurement of the hedged item.
If a forecast transaction is no longer expected to occur, any
related gain or loss recognised in other comprehensive income
is transferred immediately to profit or loss. If the hedging
relationship ceases to meet the effectiveness conditions, hedge
accounting is discontinued, and the related gain or loss is held
in the equity reserve until the forecast transaction occurs.
Borrowings
Amounts borrowed from third parties are recorded initially at
fair value, being the amount received under the agreements
less issuance costs, and subsequently measure at amortised
cost using an effective interest rate. There are times when
there are conversion options included in the group’s borrowing
agreements. The conversion options are analysed under IAS 32
– Financial Instruments: presentation to determine the proper
classification. If the option is determined to be equity, the fair
value of the conversion option is included in other reserves,
with the fair value of the liability portion being recorded as a
liability with interest accruing under the effective interest rate.
If the conversion option is determined to be a liability, it is
treated as a derivative financial instrument measured at fair
value through profit or loss.
When a conversion option is exercised, the fair value of the
shares issued is recorded in share capital and share premium.
The amortised carrying value of the liability portion is
extinguished. If the conversion option is an equity instrument,
this is closed to retained earnings. If the conversion option is a
liability component, it is extinguished. Any difference between
the carrying value of the liability and the conversion option and
the fair value of share issued is taken to the profit and loss as
gain or loss on extinguishment.
If debt agreements are modified, any difference between the
fair value of the original debt and the modified debt is included
as a gain or loss on modification. If the modification is
significant, this is considered an extinguishment of the old
debt and recognition of new debt.
Warrants
The Company will issue warrants in association with debt and
equity issuances and as compensation to suppliers or vendors
in exchange for services. These are determined to be equity
instruments. When warrants are issued with debt or as
compensation to suppliers or vendors, the value of the warrants
are included within the share-based payments reserve, that sits
within the other reserve. When warrants are issued together
with equity issuances any fair value associated with these are
recognised when the warrants are exercised within share
premium. On exercise of the warrants, the value of the warrants
will be transferred from other reserves to share premium as
applicable.
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.
ANNUAL REPORT & ACCOUNTS 2018
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 2018
5.2.5 Non-recognition of an environmental liability provision
No contaminant is used in an alluvial operation; therefore,
environmental liability is limited to restoring of the landscape.
No provision for an environmental liability in respect of the
West Kytlim running mine has been recognised yet as at the
current stage of the operations. The contractor has assumed
commitment for technical rehabilitation which covers
restoration of the landscape, flooding pits to the certain level,
setting a root layer of the soil and other measures to enable
vegetation growth.
The Group is only responsible for the biological rehabilitation
i.e. ploughing and grass seeding.
In 2018 the mining work was done on the Malaya Sosnovka site
of West Kytlim area. The contractor carried out partial technical
rehabilitation of the site as tailings are still due for reprocessing,
therefore no biological rehabilitation has taken place. The
Group estimated the cost of the biological rehabilitation of the
Malaya Sosnovka in the region of Rub 628,924 (£7,500).
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.
5.2.2 Valuation of derivative embedded into convertible
loan note
The estimation of embedded derivative (conversion options
embedded into US dollar denominated loan) – 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 Group used the Monte Carlo valuation
model to fair value the options.
5.2.3 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.
5.2.4 Impairment review of the mining assets
The impairment assessment of the West Kytlim mining asset
was based on lower of a book value and the value in use.
Projected cash flows from 2019 to 2029 were used to assess
the value in use. The chosen period is consistent with the
quantity of the approved reserves and resources and available
for mining operations. No impairment has been recognised.
Assumptions used:
Gross revenues from the West Kytlim mine is split with the
contractor on a 65/35 basis in favour of the contractor.
Pt grade 0.85g/tonne
Process recovery 70%
Platinum/Gold price $871/oz / $1,221/oz
Pre-tax discount rate 9.6%
Management has performed a sensitivity analysis on the key
variable, such as platinum and production levels and the model
is robust up to 12% on platinum and gold price and 71 % on
production level.
36
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
6 Segmental information
During the year under review management identified the Group consisting of separate segments operating mainly in mining and
exploration for and development of platinum group metals, gold and other minerals in Russia. These segments are monitored, and
strategic decisions are made based upon it and other non-financial data collated from the on-going mining and exploration activities.
The Company is developing two key assets, West Kytlim and Monchetundra, their geography outlined in the following table. Further
non-core interests include the Semenovsky Project in the Republic of Bashkiria in the Southern Ural Mountains, Southwest Russia, and
the Kamushanovsky Uranium Project in northern Kyrgyzstan.
Geographical location
Activity
2018
Non-current assets
Revenue
2017
Non-current assets
Revenue
West Kytlim
Monchetundra
Corporate and
other segments
Urals Mountains,
Russia
Kola Peninsula,
Russia
-
Operating mine and
revenue generating unit
Licenced mining
project
Management and
investment
£
3,322,969
2,573,329
£
4,023,018
177,022
£
752,126
-
£
803,703
-
£
421,373
-
£
867,957
6,976
All revenue recognised in 2018 and 2017 relate to the sale of PGM from West Kytlim. West Kytlim revenue generated from sale of
platinum and other precious metals to a single customer “Ekaterinburg Non-ferrous Metals Refinery”, being the only regional refinery,
processing platinum group metals and being duly licenced by the Russian governmental to deal with precious metals.
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 23)
Social security costs
Value of options issued to employees
Value of options issued to non-employees
Other short-term benefits
Depreciation
Mineral extraction tax
Other share-based payment expense
Audit fees payable to the Company’s auditor for the
audit of the Group’s annual accounts
2018
2
23
2017
2
23
Year to 31 December 2018
Group
£
Company
£
Year to 31 December 2017
Company
£
Group
£
500,145
72,656
250,078
204,950
16,685
268,910
3,706
166,110
288,918
16,685
421,950
73,631
-
-
18,951
189,287
3,266
-
-
18,500
1,044,514
744,329
514,532
211,053
367,173
151,614
14,307
74
-
14,307
15,413
(9,851)
-
194
-
-
40,000
40,000
36,000
36,000
ANNUAL REPORT & ACCOUNTS 2018
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 2018
9 Other gains and losses
Gains
Change in fair value of derivative instrument
Gain on debt settlement
Losses
Impairment of investments
Loss on disposal of investment in joint operations
Loss on debt settlement
Net foreign exchange loss
10 Income taxes
(Loss)/profit before tax
Current tax at 19% (2017: 19%)
Adjusted for the effect of:
Expenses not deductible for tax purposes
Profits not subject to tax
Unrecognised tax losses carried forward
Tax liability
Year to
Year to
31 December
31 December
2018
Group
£
2017
Group
£
107,083
-
76,863
167,088
107,083
243,951
(450,936)
-
(60,405)
(903,427)
-
(44,495)
-
(169,062)
(1,307,685)
(213,557)
Year to
Year to
31 December
31 December
2018
Group
2017
Group
£
(3,241,941)
£
(2,139,130)
(615,968)
(407,752)
-
-
-
-
(615,968)
(407,752)
-
-
There was no tax payable for the year ended 31 December 2018 (2017: £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 in an active
production stage. The Group has tax losses of £20,841,457.22 (2017: £19,290,391) 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.
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.
38
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
Balance at 31 December 2018
3,993,607
23,994
106,550
18,853
4,143,004
11 Property, plant and equipment
a) Group property, plant and equipment
Cost
Balance at 1 January 2017
Additions
Disposals
Exchange differences
Balance at 31 December 2017
Additions
Disposals
Exchange differences
Depreciation
Balance at 1 January 2017
Disposals
Depreciation expense
Exchange differences
Balance at 31 December 2017
Disposals
Depreciation expense
Exchange differences
Balance at 31 December 2018
Carrying amount:
at 31 December 2018
at 31 December 2017
(b) Assets in the course of construction
Cost
Balance at 1 January
Exchange differences
Balance at 31 December
Mining
asset
4,388,797
175,737
Property
£
25,355
Plant and
machinery
£
Office fixture
and fittings
£
87,227
4,136
Total
£
4,558,719
179,873
(953)
(200,429)
4,537,210
113,198
(35,897)
(471,507)
57,340
0
(953)
(624)
55,763
1,039
(35,897)
(2,052)
(196,371)
(317)
(3,117)
4,368,163
83,069
-
(457,625)
25,038
(1,044)
88,246
29,090
-
(10,786)
(15,712)
(705)
(84,476)
(13,379)
561
(28,530)
(362,551)
3,487
(387,594)
(114)
26
(793)
(203)
97
(899)
(55,554)
953
(418)
567
0
(156,447)
(15,413)
4,172
(1,502)
3,018
(82,960)
(54,452)
(166,735)
-
(4,148)
10,140
35,897
(271)
1,897
35,897
(367,173)
15,621
(76,968)
(16,929)
(482,390)
3,606,013
4,339,633
23,095
24,245
29,582
5,286
1,924
0
3,660,614
1,311
4,370,475
2018
£
37,814
(4,621)
33,193
2017
£
39,216
(1,402)
37,814
Assets in the course of construction represent the Group’s investment in the powerline to deliver electricity to the West Kytlim mining
site. At 31 December 2018 the power line had not been commissioned yet.
(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
2018
£
39,918
1,039
(35,897)
4,107
(39,874)
(74)
35,897
2017
£
39,918
-
-
39,918
(39,680)
(194)
-
(3,098)
(39,874)
1,009
44
The Group’s and Company's property, plant and equipment are free from any mortgage or charge.
ANNUAL REPORT & ACCOUNTS 2018
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 2018
12 Intangible assets
In 2017 intangible assets represented only capitalised costs associated with the Group’s exploration, evaluation and development of
mineral resources.
Cost
Balance at 1 January
Additions
Exchange differences
Balance at 31 December
2018
£
840,793
49,164
(87,296)
2017
£
813,135
69,290
(41,632)
802,661
840,793
At 31 December 2018 and 31 December 2017, the intangible assets were represented by the cost capitalised in respect of
Monchetundra project.
The Company did not directly own any intangible assets at 31 December 2018 (2017: nil)
13 Subsidiaries
Details of the Company's subsidiaries at 31 December 2018 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
Energy Resources Asia limited**
Place of
incorporation
Proportion of
ordinary shares held
Cyprus
Russia
Russia
Russia
Russia
UK
BVI
100%
100%
68%
80%
100%
100%
48.33%
Principal activity
Holding Company
Holding Company
Mineral Evaluation
Mineral Evaluation
Mineral Evaluation
Holding Company
Holding Company
* In January 2018 the Group sold 7% of its shareholding in ZAO Kosvinsky Kamen, as a result of this transaction proportion of
ordinary shares held by the Group was reduced from 75% to 68%. Change in an ownership interest in a subsidiary did not result in
the parent losing control of the subsidiary and gain of £348,267 was recognised in the equity.
** 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) 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 various options including (i) a sale of all or part of the deposit
and (ii) creating of business combinations to allow for the deposit to transfer into operating mine. Due to uncertain timing for
realisation of the options and difficulty to asses sustainability of the value of asset recognised by the Group in respect of the
Kamushanovsky project it was decided to write it off the books.
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.
The Company’s investments in subsidiaries presented on the basis of direct equity interest and represent the following:
Investment in subsidiaries (i)
2018
£
1,132,246
2017
£
1,277,489
1,132,246
1,277,489
Investment in subsidiaries represents the Company investments made into its 100% subsidiary Urals Alluvial Platinum Limited (the
“UAP”), which in turn controls other subsidiaries within the Group.
40
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
13 Subsidiaries (continued)
Subsidiaries with material non-controlling interests (“NCI”)
Summary of non-controlling interest
As at 1 January
NCI arising on reduction of interest in subsidiary
(Loss)/profit 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
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
(Loss)/profit for the year attributable to owners of the parent
(Loss)/profit for the year attributable to NCI
(Loss)/profit 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
2018
£
(708,634)
(111,589)
(668,710)
69,894
2017
£
(675,393)
-
(19,473)
(13,768)
(1,419,039)
(708,634)
£
£
-
(818,257)
(600,782)
305,219
(430,353)
(583,500)
(1,419,039)
(708,634)
£
-
-
-
-
-
-
-
-
(124,960)
(322,710)
(447,670)
£
445,596
-
445,596
(3,228)
(3,228)
442,368
137,149
305,219
-
-
-
(137,149)
(305,219)
(22,424)
(20,975)
(442,368)
(43,399)
£
3,322,969
305,235
£
4,023,018
75,501
3,628,204
4,098,519
(5,650,038)
(412,702)
(5,682,491)
(122,770)
(6,062,740)
(5,805,261)
(2,434,536)
(1,706,742)
(1,616,279)
(818,257)
(768,345)
(301,537)
(1,276,389)
(430,353)
(1,709)
(570)
(1,069,882)
(2,279)
(482,981)
(276,315)
310,586
59,710
6,165
65,875
ANNUAL REPORT & ACCOUNTS 2018
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 2018
13 Subsidiaries (continued)
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
(Loss)/profit for the year attributable to owners of the parent
(Loss)/profit for the year attributable to NCI
(Loss)/profit 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
2018
£
752,126
2,530
2017
£
803,703
7,510
754,656
811,213
(925,089)
(69,912)
(797,793)
(81,215)
(995,001)
(879,008)
(240,345)
(67,795)
360,437
(600,782)
515,705
(583,500)
(147,940)
(44,463)
(75,613)
(18,903)
(192,403)
(94,516)
(192,747)
(17,282)
(78,749)
(18,431)
(210,029)
(97,180)
14 Other financial assets
Non-current
Advanced to acquire interest in
uranium project
Current
Loans to subsidiaries
2018
Group
£
Company
£
2017
Group
£
Company
£
-
-
-
-
445,596
-
6,252,506
-
6,306,204
6,252,506
445,596
6,306,204
The monies advanced to the subsidiary enterprises by the Company are repayable on demand.
In prior years the Group advanced $602,000 (£445,596 at 31 December 2017)) with the intention to acquire an interest in the
Kyrgyzstan company holding the Kamushanovsky uranium exploration licences (note 13 ). Due to uncertain timing for realisation of
the options and difficulty to asses sustainability of the value of asset recognised by the Group in respect of the Kamushanovsky
project it was decided to write it off the books (note 13).
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 to subsidiary is dependent on the borrower’s ability to (i) transform them into cash generating units
through development of sufficient economically recoverable reserves into profitable production or (ii) to complete a sale of all or part
of the deposit. The Group has assessed the estimated credit losses of these loans and given the effective interest rate of the loans is
0%, there would be an immaterial loss expected on these loans.
42
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
15 Trade and other receivables
Trade receivables
Prepayments
Other receivables
Due from subsidiaries
Group
£
-
13,374
35,672
-
49,046
2018
Company
£
-
11,568
8,156
17,216
36,940
Group
£
254
22,917
70,216
-
93,387
2017
Company
£
-
21,238
11,124
14,341
46,703
The fair value of trade and other receivables is not materially different to the carrying values presented. None of the receivables are
provided as security 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 (£)
2018
2017
2,371,569,430 1,847,847,150
1,847,847
2,371,569
143,377,203
7,025,483
143,377,203
7,025,483
19,406,269
17,749,704
28,803,321
26,623,034
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.
Issue of ordinary share capital in 2018:
Price in pence
per share
Number
Nominal value
£
As at 1 January 2018
28 February 2018
10 May 2018
18 July 2018
01 August 2018
14 August 2018
19 September 2018
02 November 2018
18 December 2018
As at 31 December 2018
0.34
0.3
0.73
0.475
0.34
0.34
0.42
0.42
1,847,847,150
10,522,058
172,216,666
34,349,316
52,631,579
109,196,618
117,917,182
25,146,609
1,742,252
1,847,847
10,522
172,217
34,349
52,631
109,197
117,917
25,147
1,742
523,722,280
523,722
2,371,569,430
2,371,569
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
43
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
17 Share based payments
Share options and warrants outstanding at the end of the year have the following expiry date and exercise prices:
Expiry date
Share options
02 November 2022
02 November 2022
02 November 2022
Weighted average exercise price
Warrants
12 November 2018 (expired)
15 May 2020 (exercised)
15 May 2020
16 May 2020
16 May 2020
17 September 2021
17 September 2021
17 September 2021
Weighted average exercise price
Total contingently issuable shares at 31 December
Exercise
price in
pence per
share
Number of
options as at
31 December
2018
Number of
options as at
31 December
2017
0.42
0.60
0.90
70,257,748
53,000,000
48,000,000
171,257,748
-
-
-
-
-
0.57
-
0.34
20,000,000
1.00
1.00
10,000,000
0.60 166,666,666
6,053,612
0.41
3,026,806
0.83
2,017,871
1.24
950,000
109,196,618
20,000,000
10,000,000
-
-
-
-
207,764,955
140,146,618
0.66
0.49
379,022,703
140,146,618
Out of 171,257,748 options available at 31 December 2018 123,257,748 were exercisable.
All listed warrants were exercisable as at 31 December 2017 and 2016 respectively.
Share options
Movement in number of share options outstanding and their related weighted average exercise prices are as follows:
(Price expressed in pence per share)
Share options
At 1 January
Granted*
Exercised
At 31 December
2018
2017
Average
No. of
Average
No. of
exercise price
share options
exercise price
share options
-
-
0.61 173,000,000
(1,742,252)
0.42
0.61 171,257,748
-
-
-
-
-
-
-
-
173,000,000 options had been granted by the Group in 2018 (2017: nil) to the directors, Group employees and consultants to the
Group and further 21,000,000 options have been authorised to be granted later. No amounts are paid or payable by the recipient on
receipt of the option. The options carry neither right to dividends nor voting rights. Options may be exercised at any time from the
vesting date to the date of their expiry. The Group has no legal or constructive obligation to repurchase or settle the options in cash.
Out of 173,000,000 options granted by the Group in 2018:
- 72,000,000 options issued with exercise price of 0.42p and vested on the issue date.
- 53,000,000 options issued with exercise price of 0.6p and were due to vest at the date when VWAP has been 0.6 p or above for
consecutive 10 days, or at the latest 31 December 2018. Options vested on 22 November 2018.
- 48,000,000 options issued with exercise price of 0.9p and vest at the date when VWAP has been 0.9 p or above for consecutive 10
days, or at the latest 30 June 2019. Options had not been vested on 31 December 2018.
All options granted in 2018 expire on 02 November 2022.
44
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
Options were priced using Black-Scholes valuation model. Expected volatility is based on the historical share price volatility for the
number of years equal to the period from vesting until expiry date of the respective options.
Inputs in the model were:
(Price expressed in pence per share)
Date of grant/vesting
No of options
Years until expiry
Grant date share price
Exercise price
Expected volatility
Estimated option life
Risk-free interest rate
Dividend yield
02 November 2018
72,000,000
4
0.466
0.42
96%
2 years
0.75%
0%
Warrants
207,764,955 warrants were granted by the Group in 2018 (2017: 139,196,618).
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
Expired
At 31 December
2018
2017
Average
exercise price
No. of
warrants
Average
exercise price
No. of
warrants
0.49 140,146,618
0.6 177,764,955
0.34 (109,196,618)
(950,000)
0.57
0.89
0.48
1.50
-
1,450,000
139,196,618
(500,000)
-
0.66 207,764,955
0.49
140,146,618
All listed warrants were exercisable as at 31 December 2018 and 2017 respectively.
18 Other reserves
Capital redemption reserve
3,539,906
3,539,906
3,539,906
3,539,906
2018
Group
£
Company
£
2017
Group
£
Company
£
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
Utilised on exercise of warrants
De-recognised in the period
At 31 December
Equity component of convertible loan notes:
At 1 January
Recognised in the period
Utilised on conversion of loan notes
At 31 December
(340,848)
258,353
(82,495)
-
-
-
130,025
470,826
(114,359)
(2,788)
130,025
470,826
(114,359)
(2,788)
(260,852)
(79,996)
(340,848)
2,788
307,075
-
(179,838)
-
-
-
2,788
307,075
-
(179,838)
483,704
483,704
130,025
130,025
74,285
-
(74,285)
74,285
-
(74,285)
-
-
-
74,285
-
74,285
-
74,285
-
74,285
3,941,115
4,023,610
3,403,368
3,744,216
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
45
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
18 Other reserves (continued)
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 and/or issued under terms
of financing arrangements.
The equity component of convertible loan notes reserve represents a value of the lenders option to convert loan note into shares in
accordance with the terms of the convertible loan agreement.
19 Borrowings
Convertible loan notes
Unsecured loan
Group
£
-
43,586
43,586
2018
Company
£
-
-
-
Group
£
539,156
49,654
2017
Company
£
539,156
-
588,810
539,156
i) On 10 May 2017 the Company entered into a convertible loan facility with Sanderson Capital Partners Limited to borrow
£250,000. Under the terms of the agreement the total fees of 20% of the principal amount was payable to the lender at the
inception. Fees payment was satisfied by the issue of shares. No interest to be accrued on the principal. The loan maturity date
was 10 May 2018, which was later extended to 30 September 2018 and restructure fee of 20,000 was incurred. The loan was fully
converted by the lender into the Company shares on 01 August 2018.
ii) On 15 May 2017 the Company entered into a loan agreement with YA II PN Ltd to borrow US$1,250,000. An implementation fee
of US$112,900 was deducted from the principal amount on transfer of funds. Interest applies on the loan at the rate of 14%.
The loan was repayable in 10 instalments with the final due on 15 May 2018.
Loan was amended during 2018 extending maturity date to 11 September 2018 and final terms stipulated that:
-
the lender, at its discretion, could to convert all or part of the loan, including accrued interest, into shares in the Company, at a
price being the lower of 0.34p per share and 90% of the Company's lowest daily VWAP during the five days prior to conversion;
- 80,749,333 warrants at an exercise price of 0.6p per warrant issued to the lender representing 50% cover of the principal amount.
The warrants issued had a subscription period of three years;
- The Company also incurred a restructure fee of $99,500 being 10% of the then outstanding principal, payable at maturity date.
Warrants were exercised by the lender on 14 August 2018 and the loan was fully converted into the Company shares at final
maturity date.
iii) On 3 February 2017 the Group entered into unsecured loan facility to borrow up to 57 million Russian Rubbles (RR) at 14% per
annum, from Region Metal, the then contractor and the West Kytlim mine operator. The Group had drawn RR 4.18 million and
repaid RR0.3 million in 2017. As the contractor’s arrangements had been discontinued the Group has no intention to utilise any
more funds from this facility. The loan maturity date is 31 December 2019.
46
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
Combined movement of the loans:
Balance at 1 January
Loan proceeds
Arrangement fees
Fair value of warrants attached
Fair value of embedded conversion options
Interest accrued
Payments made in shares
Payments made in cash
Loss/(gain) on loans restructure and settlement
Cost of redeeming of a loan
Exchange differences
Less:
Equity component of convertible loan notes
Add back:
Loan arrangement fees allocated to warrants and
embedded conversion options
Balance at 31 December
20 Trade and other payables
Trade payables
Accruals
Social security and other taxes
Other payables
Due to related party
Group
£
588,810
-
623,779
-
-
-
(759,693)
(447,440)
60,405
-
18,513
2018
Company
£
539,156
-
623,779
-
-
-
(759,693)
(447,440)
60,405
-
24,581
2017
Group
£
Company
£
318,314
1,751,070
(136,913)
(216,177)
(576,245)
1,113,318
(605,618)
(960,550)
(156,842)
118,080
(40,500)
318,314
1,697,576
(136,913)
(216,177)
(576,245)
1,113,234
(605,618)
(956,630)
(156,842)
118,080
(40,496)
(40,788)
(40,788)
(74,285)
(74,285)
-
43,586
-
-
55,158
55,158
588,810
539,156
2018
Group
£
Company
£
24,463
71,743
145,180
21,832
198,583
-
57,765
3,436
24,374
-
2017
Company
£
-
61,620
3,825
59,899
Group
£
109,425
74,832
19,862
32,511
198,583
263,218
284,158
236,630
323,927
-
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 Other financial liabilities
Embedded conversion options into a convertible loan note
denominated in US dollars (note 28)
2018
Group
£
Company
£
2017
Group
£
Company
£
-
-
-
-
225,000
225,000
225,000
225,000
Embedded conversion options represent the fair value of the conversion options attached to $1,250,000 convertible loan note (notes
19 and 28).
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
47
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
22 Loss per share
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the year.
(Loss)/profit attributable to equity holders of the Company
Weighted average number of ordinary shares in issue
Basic loss per share (pence)
Potential number of shares that could be issued following exercise of share options or warrants:
Number of exercisable instruments:
Share options
Warrants
2018
£
2017
£
(2,573,231)
(2,119,657)
2,085,508,722 1,562,952,662
(0.12)
(0.14)
2018
£
2017
£
171,257,748
207,764,955
-
140,146,618
379,022,703
140,146,618
There is no dilutive effect of share options or warrants (2017: Nil) as the group was in a loss position.
23 Related party transactions
Transactions with subsidiaries
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
2018
£
2017
£
17,216
6,252,506
(198,583)
14,341
6,306,204
(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/or accrued to the directors of the Company who held office at 31 December 2018:
Short-term benefits
Value of the options issued in 2018
2018
£
238,758
114,676
2017
£
151,537
-
353,434
151,537
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 2018 (2016: nil).
48
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
An analysis of remuneration for each director of the Company in the current financial year:
Name
Position
C. Schaffalitzky
G. FitzGerald
D. Suschov
Executive Chairman
Non-Executive Director
Non-Executive Director
Salaries and
allowances
£
101,008
-
-
101,008
Value of the
Value of the
options issued
shares issued
Directors
and vested
for the extra
fees
£
-
15,000
15,000
30,000
in 2018
£
51,435
11,806
51,435
work
£
-
-
107,750
114,676
107,750
In 2018 the Company issued 15,000,000 options, valued at £39,628 to Alexander Suschov, consultant metallurgist and mining
engineer, for the services provided to the Group. He is considered as a related party being the father of Dmitry Suschov, a director of
the Company.
Reconciliation of the directors’ accounts
At 1 January Salaries and
Directors Fees for the
Paid in
Paid in
by director/
PAYE/
December
Name
£
£
£
£
2018
allowances
fees
extra work
C. Schaffalitzky
G. FitzGerald
D. Suschov
25,668
6,150
-
101,008
-
-
15,000
15,000
-
-
107,750
cash
£
(39,840)
-
shares
(by company)
£
(76,252)
(16,250)
(121,864)
£
545
(1,240)
NIC
£
-
(11,468)
-
2018
£
11,129
(6,568)
(354)
Settlements
At 31
31,818
101,008
30,000
107,750
(39,840)
(214,366)
(695)
(11,468)
4,207
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
2018
Group
£
Company
£
2017
Group
£
Company
£
26,339
13,625
40,863
10,625
21,031
-
-
21,031
9,083
-
-
9,083
40,863
9,083
-
49,946
27,250
9,083
-
36,333
The minimum lease payment was adjusted for the office premises sub-lease receipts received by the Company in 2018 of £13,625
(2017: £16,625).
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
At the time of the award of the Monchetundra mining license a royalty payment was calculated by the Russian Federal Reserves
Commission. 20% of this payment was paid in December of 2018 and the remaining 80%, or Rub16.68 mln (approximately £200,000)
to be paid by November 2023.
The Group has no other material commitments.
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
49
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
26 Contingent liabilities and contingent assets
The Group has identified a contingent liability should the mining contractor at West Kytlim fail to perform on its commitment for
technical rehabilitation which covers restoration of the landscape, flooding pits to the certain level, setting a root layer of the soil and
other measures to enable vegetation growth. The commitment was assumed by the contractor under terms of the agreement entered
into in 2018 and renewed for 2019 mining season.
In 2018 the mining work was done on the Malaya Sosnovka site of West Kytlim area. The contractor carried out just a partial technical
rehabilitation of the site as tailings are considered for reprocessing. The total cost of the technical rehabilitation was estimated at Rub
5,806,024 (£69,120), up to 50% of which has been completed.
The Group had no material contingent liabilities and assets in 2017.
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 a daily basis, though due to its limited activities the Group has not applied policy of
using any financial instruments to 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
2018
1.335
83.66
2017
1.289
75.230
2018
1.277
89.02
2017
1.351
78.140
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 2018
USD (5% movement)
RUB (5% movement)
31 December 2017
USD (5% movement)
RUB (5% movement)
Strengthening
Weakening
Equity
Profit or loss
Equity
Profit or loss
£
£
£
£
51,619
(113,866)
(15,334)
(56,980)
(57,052)
125,854
16,951
62,977
70,509
(89,286)
(26,661)
(6,142)
(63,791)
80,785
24,120
5,557
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.
The Group had significant interest-bearing loans disclosed in the note 19. All loans are at a fixed rate of interest.
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ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
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 consolidated statement of
financial position date, as summarised below:
Non-current loans and advances
Current loans and advances
Trade and other receivables
Cash and cash equivalents
2018
Group
£
Company
£
-
-
49,046
452,676
-
6,252,506
36,940
170,690
Group
£
445,596
-
93,387
89,819
2017
Company
£
-
6,306,204
46,703
61,500
501,722
6,460,136
628,802
6,414,407
The Group’s risk on cash at bank is mitigated by holding of the 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 is determined by the relevant prevailing base rate. The fair value of cash and cash equivalents at 31 December
2018 are not materially different from its carrying value.
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.
2018
Borrowings
Trade and other payables
2017
Borrowings
Trade and other payables
Current
Non-current
within
6 months
£
-
263,218
6 to 12
months
£
43,586
-
263,218
43,586
588,810
236,630
825,440
-
-
-
1 to 5
years
later than
5 years
£
-
-
-
-
-
-
£
-
-
-
-
-
-
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
51
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
27 Risk management objectives and policies (continued)
The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities.
2018
Borrowings
Trade and other payables
2017
Borrowings
Trade and other payables
Current
Non-current
within
6 months
£
-
82,139
6 to 12
months
£
-
198,583
82,139
198,583
539,156
125,344
-
198,583
664,500
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 consolidated
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
2018
2017
Group
£
43,586
(452,676)
-
6,111,920
6,111,920
0%
Company
£
-
(170,690)
-
7,309,233
7,309,233
0%
Group
£
588,810
(89,819)
498,991
5,541,683
6,040,674
8%
Company
£
539,156
(61,500)
477,656
6,603,857
7,081,513
7%
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 Fair value measurement
Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of
fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
• Level 3: inputs for the asset or liability that are not based on observable market data.
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ANNUAL REPORT & ACCOUNTS 2018
Notes to the consolidated financial statements continued
For the year ended 31 December 2018
The following table shows the levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis
at each period end:
Level 2
Embedded conversion options into a convertible loan note
denominated in US dollars
Total liability
2018
Group
£
Company
£
2017
Group
£
Company
£
-
-
-
-
225,000
225,000
225,000
225,000
Measurement of fair value of financial instruments
Management performs valuations of financial items for financial reporting purposes, including Level 2 fair values. Valuation techniques
are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based
information.
The valuation techniques used for instruments categorised in Level 2 are described below.
Embedded conversion options (Level 2)
The Group entered into debt agreements to borrow $1,250,000 and $500,000 by issue of the convertible loan notes that had
embedded conversion options that met the criteria for derivative instruments. See note 19. These options have been fair valued using
observable inputs such as volatility, risk fee rates and the Group’s share price using a Monte Carlo pricing model. The effects of non-
observable inputs are not significant for these options.
29 Events after the consolidated statement of financial position date
Subsequent to the reporting date the Company raised £500,000 in April 2019 from the equity market by way of placing
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
53
PLEASE NOTE THAT THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE IN
ANY DOUBT AS TO THE ACTION TO BE TAKEN, PLEASE CONSULT AN INDEPENDENT ADVISER IMMEDIATELY.
Company No. 3010091
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Eurasia Mining Plc (the "Company”) will be held
at The East India Club, 16 St James’s Square, London SW1Y 4LH on 20 June 2019 at 11:00am to consider the
below resolutions.
You will not receive a form of proxy for the Annual General Meeting in the post. Instead, you will receive
instructions to enable you to vote electronically and how to register to do so. You will still be able to vote in
person at the Annual General Meeting, and may request a hard copy proxy form directly from the registrars, Link
Asset Services, 34 Beckenham Road, Beckenham BR3 4TU (Telephone: 0871 664 0300).
Ordinary Resolutions
To consider and, if thought fit, pass the following resolutions as ordinary resolutions:
1. To receive and consider the audited accounts for the period ended 31 December 2018 together with the
Directors’ and the auditors’ reports thereon.
2. To re-appoint Grant Thornton UK LLP as auditors of the Company to hold office until the conclusion of the
next general meeting at which accounts are laid before the Company.
3. To authorise the Directors to determine the remuneration of the auditors of the Company.
4. To re-appoint as a Director Gary Fitzgerald, who is required under the Articles of Association of the Company
to retire by rotation and who is eligible for re-election.
5. That, in accordance with section 551 of the Companies Act 2006, the Directors be generally and unconditionally
authorised to allot shares in the Company or grant rights to subscribe for or to convert any security into shares
in the Company (“Rights”) up to an aggregate nominal amount of £1,000,000 provided that this authority shall,
unless renewed, varied or revoked by the Company, expire at the end of the next Annual General Meeting of
the Company to be held after the date on which this resolution is passed, save that the Company may, before
such expiry, make an offer or agreement which would or might require shares to be allotted or Rights to be
granted and the Directors may allot shares or grant Rights in pursuance of such offer or agreement
notwithstanding that the authority conferred by this resolution has expired. This authority is in substitution for
all previous authorities conferred on the Directors in accordance with section 551 of the 2006 Act.
Special Resolution
To consider and, if thought fit, pass the following resolution as a special resolution:
6. THAT, subject to the passing of resolution 5, the Directors be given the general power to allot equity
securities (as defined by section 560 of the 2006 Act) for cash, either pursuant to the authority conferred by
resolution 6or by way of a sale of treasury shares, as if section 561(1) of the 2006 Act did not apply to any
such allotment, provided that this power shall be limited to:
54
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
a. the allotment of equity securities in connection with an offer by way of a rights issue to the holders of
ordinary shares in proportion (as nearly as may be practicable) to their respective holdings but subject to
such exclusions or other arrangements as the Board may deem necessary or expedient in relation to
treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws of
any territory or the requirements of any regulatory body or stock exchange; and
b.
the allotment (otherwise than pursuant to paragraph (a) above) of equity securities up to an aggregate
nominal amount of £1,000,000.
The power granted by this resolution will expire on the conclusion of the Company’s next annual general
meeting (unless renewed, varied or revoked by the Company prior to or on such date) save that the Company
may, before such expiry make offers or agreements which would or might require equity securities to be allotted
after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement
notwithstanding that the power conferred by this resolution has expired.
This resolution revokes and replaces all unexercised powers previously granted to the Directors to allot equity
securities as section 561(1) of the 2006 Act did not apply but without prejudice to any allotment of equity
securities already made or agreed to be made pursuant to such authorities.
The authority conferred by this resolution shall expire at the conclusion of the Company's next annual general
meeting save that the Company may, before the expiry of the authority granted by this resolution, enter into
a contract to purchase ordinary shares which will or may be executed wholly or partly after the expiry of such
authority.
Dated 15 May 2019
BY ORDER OF THE BOARD
Keith Byrne
Secretary
Notes
1. To be entitled to attend and vote at the Meeting (and for the purpose
of the determination by the Company of the number of votes they may
cast), shareholders must be registered in the Register of Members of
the Company at close of trading on 19 June 2019. Changes to the
Register of Members after the relevant deadline shall be disregarded in
determining the rights of any person to attend and vote at the Meeting.
2. Shareholders, or their proxies, intending to attend the Meeting in
person are requested, if possible, to arrive at the Meeting venue at least
20 minutes prior to the commencement of the Meeting at 11:00am (UK
time) on 20 June 2019 so that their shareholding may be checked
against the Company’s Register of Members and attendances recorded.
3. Shareholders are entitled to appoint another person as a proxy to
exercise all or part of their rights to attend and to speak and vote on
their behalf at the Meeting. A shareholder may appoint more than one
proxy in relation to the Meeting provided that each proxy is appointed
to exercise the rights attached to a different ordinary share or ordinary
shares held by that shareholder. A proxy need not be a shareholder of
the Company.
4.
In the case of joint holders, where more than one of the joint holders
purports to appoint a proxy, only the appointment submitted by the
most senior holder will be accepted. Seniority is determined by the
order in which the names of the joint holders appear in the Company’s
Register of Members in respect of the joint holding (the first named
being the most senior).
5. A vote withheld is not a vote in law, which means that the vote will not
be counted in the calculation of votes for or against the resolution. If no
voting indication is given, your proxy will vote or abstain from voting at
his or her discretion. Your proxy will vote (or abstain from voting) as he
or she thinks fit in relation to any other matter which is put before the
Meeting.
6. You can vote either:
• by logging on to www.signalshares.com and following the instructions;
• You may request a hard copy form of proxy directly from the registrars,
Link Asset Services (previously called Capita), on Tel: 0371 664 0300.
Calls cost 12p per minute plus your phone company’s access charge.
Calls outside the United Kingdom will be charged at the applicable
international rate. Lines are open between 09:00 - 17:30, Monday to
Friday excluding public holidays in England and Wales.
• in the case of CREST members, by utilising the CREST electronic
proxy appointment service in accordance with the procedures set
out below.
In order for a proxy appointment to be valid a form of proxy must be
completed. In each case the form of proxy must be received by Link
Asset Services at 34 Beckenham Road, Beckenham, Kent, BR3 4ZF
by close of business on 18 June 2019.
7.
If you return more than one proxy appointment, either by paper
or electronic communication, the appointment received last by the
Registrar before the latest time for the receipt of proxies will take
precedence. You are advised to read the terms and conditions of
use carefully. Electronic communication facilities are open to all
shareholders and those who use them will not be disadvantaged.
8. The return of a completed form of proxy, electronic filing or any
CREST Proxy Instruction (as described in note 11 below) will not
prevent a shareholder from attending the Meeting and voting in
person if he/she wishes to do so.
9. CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so for
the Meeting (and any adjournment of the Meeting) by using the
procedures described in the CREST Manual (available from
www.euroclear.com/site/public/EUI). CREST Personal Members or
other CREST sponsored members, and those CREST members who
have appointed a service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
10. In order for a proxy appointment or instruction made by means of
CREST to be valid, the appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated in accordance with
Euroclear UK & Ireland Limited’s specifications and must contain the
information required for such instructions, as described in the CREST
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
55
Manual. The message must be transmitted so as to be received by the
issuer’s agent (ID RA10) by close of business on 18 June 2019. For this
purpose, the time of receipt will be taken to mean the time (as
determined by the timestamp applied to the message by the CREST
application host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST.
After this time, any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means.
11. CREST members and, where applicable, their CREST sponsors or voting
service providers should note that Euroclear UK & Ireland Limited does
not make available special procedures in CREST for any particular
message. Normal system timings and limitations will, therefore, apply
in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the
CREST member is a CREST personal member, or sponsored member,
or has appointed a voting service provider(s), to procure that his CREST
sponsor or voting service provider(s) take(s)) such action as shall be
necessary to ensure that a message is transmitted by means of the
CREST system by any particular time. In this connection, CREST
members and, where applicable, their CREST sponsors or voting system
providers are referred, in particular, tothose sections of the CREST
Manual concerning practical limitations of the CREST system and
timings. The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
12. Any corporation which is a shareholder can appoint one or more
corporate representatives who may exercise on its behalf all of its
powers as a shareholder provided that no more than one corporate
representative exercises powers in relation to the same shares.
13. As at 14 May 2019 (being the latest practicable business day prior to
the publication of this Notice), the Company’s ordinary issued share
capital consists of 2,462,478,521 ordinary shares, carrying one vote
each. Therefore, the total voting rights in the Company as at 14 May
2019 are 2,462,478,521.
14. Under Section 527 of the Companies Act 2006, shareholders meeting
the threshold requirements set out in that section have the right to
require the Company to publish on a website a statement setting out
any matter relating to: (i) the audit of the Company’s financial statements
(including the Auditor’s Report and the conduct of the audit) that are to
be laid before the Meeting; or (ii) any circumstances connected with an
auditor of the Company ceasing to hold office since the previous
meeting at which annual financial statements and reports were laid in
accordance with Section 437 of the Companies Act 2006 (in each case)
that the shareholders propose to raise at the relevant meeting. The
Company may not require the shareholders requesting any such website
publication to pay its expenses in complying with Sections 527 or 528
of the Companies Act 2006. Where the Company is required to place a
statement on a website under Section 527 of the Companies Act 2006,
it must forward the statement to the Company’s auditor not later than
the time when it makes the statement available on the website. The
business which may be dealt with at the Meeting for the relevant
financial year includes any statement that the Company has been
required under Section 527 of the Companies Act 2006 to publish
on a website.
15. Any shareholder attending the Meeting has the right to ask questions.
The Company must cause to be answered any such question relating to
the business being dealt with at the Meeting but no such answer need
be given if: (a) to do so would interfere unduly with the preparation for
the Meeting or involve the disclosure of confidential information; (b) the
answer has already been given on a website in the form of an answer to
a question; or (c) it is undesirable in the interests of the Company or the
good order of the Meeting that the question be answered.
16. The following documents are available for inspection during normal
business hours at the Company’s business address at Clubhouse Bank,
1 Angel Court, EC2R 7HJ, United Kingdom on any business day from
the date of this Notice until the time of the Meeting and may also be
inspected at the Meeting venue, as specified in this Notice, from 10am
on the day of the Meeting until the conclusion of the Meeting.
17. You may not use any electronic address (within the meaning of Section
333(4) of the Companies Act 2006) provided in either this Notice or any
related documents (including the form of proxy) to communicate with
the Company for any purposes other than those expressly stated.
A copy of this Notice, and other information required by Section 311A of the Companies Act 2006, can be found on the Company’s
website at www.eurasiamining.co.uk
56
E U R A S I A M I N I N G P L C
ANNUAL REPORT & ACCOUNTS 2018
Company Information
Directors
C. Schaffalitzky (Executive Chairman)
G. FitzGerald (Non-Executive Director)
D. Suschov (Non-Executive Director)
Company Secretary
Keith Byrne
Head Office
Clubhouse Bank
1 Angel Court
London EC2R 7HJ
United Kingdom
Telephone: +44 (0) 20 7932 0418
E-mail: info@eurasiamining.co.uk
www.eurasiamining.co.uk
Registered Office
International House
142 Cromwell Road
London SW7 4EF
United Kingdom
Russian Office
194 Lunacharsky Street
Ekaterinburg
Russia
Telephone: +7 3432 615187
Facsimile: +7 3432 615924
Company Number 3010091
ADVISERS
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Auditors
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
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
First Equity Ltd
Salisbury House
London Wall
London EC2M 5QQ
ANNUAL REPORT & ACCOUNTS 2018
E U R A S I A M I N I N G P L C
57
Clubhouse Bank
1 Angel Court
London EC2R 7HJ
Telephone: +44 (0)20 7932 0418
E-mail: info@eurasiamining.co.uk
www.eurasiamining.co.uk