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2023 ReportRegistered number: 05389216 BLUEJAY MINING PLC ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 BLUEJAY MINING PLC CONTENTS Company Information Chairman’s Report Strategic Report Directors’ Report Statement of Directors’ Responsibilities Corporate Governance Report Independent Auditor’s Report Statements of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Statements of Cash Flows Notes to the Financial Statements Page 2 3 5 8 11 12 17 22 23 24 25 26 27 28 BLUEJAY MINING PLC COMPANY INFORMATION Directors Michael Hutchinson (Non-Executive Chairman) Peter Waugh (Non-Executive Director) Roderick McIllree (Chief Executive Officer) Ian Henderson (Non-Executive Director) Bo Stensgaard (Executive Director) – appointed 13 August 2019 Company Secretary Heytesbury Corporate LLP Registered Office 2nd Floor 7-9 Swallow Street London W1B 4DE Company Number 05389216 Bankers Nominated Adviser Broker Independent Auditor Solicitors HSBC Bank plc 129 New Bond Street London W1J 2JA S.P. Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London W1S 2PP Hannam & Partners (Advisory) LLP 2 Park Street London W1K 2HX PKF Littlejohn LLP Statutory Auditor 15 Westferry Circus Canary Wharf London E14 4HD Hill Dickinson LLP The Broadgate Tower 20 Primrose Street London EC2A 2EW 2 BLUEJAY MINING PLC CHAIRMAN’S REPORT In light of these unprecedented times and the subsequent challenging economic climate, I would like to begin my report by sending my well wishes to all and thanking the entire Bluejay Mining plc (‘Bluejay’ or the ‘Group’) team for remaining as focused as ever. Bluejay continues to be steadfast in holding a world class strategic portfolio of value accretive assets and I am pleased to say that the breadth and potential of our portfolio is considerable; from our emergent grassroots operations in Greenland and Finland, all the way through to our more established, near term target production assets in Greenland that include the world’s highest grade ilmenite sand project. We have built a portfolio that spans the full value chain and offers shareholders significant uplift potential. To deliver on this potential, Bluejay’s primary focus is commencing production at our flagship asset, the Dundas Ilmenite Project, which currently possesses a JORC compliant Mineral Resource of 117Mt at 6.1% ilmenite in situ. For Bluejay and our stakeholders worldwide, Dundas represents significant near-term value potential thanks to the incredibly high grades of ilmenite in-situ and the sheer size of the deposit. As a result, we have been able to secure a number of highly strategic commercial agreements with significant industry leaders; our ongoing working agreement with Rio Tinto Iron and Titanium Canada Inc. (‘RTIT’) has enabled us to complete our first major bulk sample export for processing in Quebec, Canada, and a confidential MOU with a multinational trading firm in the global titanium feedstock market with offtake potential for up to 200tkpa ilmenite and possible project financing, creates significant opportunity. Alongside this, we continue to engage with a number of other leading industry players with a view to securing additional commercial offtake agreements. The bulk sample for RTIT was produced at our pilot plant in Quebec, which commenced operation in February 2020 and had been running at full capacity for several weeks until COVID-19 outbreak. Whilst the plant is now on care and maintenance in line with the Quebec’s government guidance that all non-essential businesses should close, we are poised to recommence activity once it is safe and sensible to do so and we look forward to RTIT smelter testing the sample in 2021, which will be a key milestone for finalising our future engagement with them. Whilst we are in a fortunate position that we have a provisional licence that enables us to ship the requisite material for the RTIT bulk sample, a key point in any project’s commercialisation is its licencing. Over the past year great progress has been made regarding the Exploitation Licence; we have successfully submitted the Environmental Impact Assessment and Social Impact Assessment, both of which have been confirmed compliant for the Public Consultation phase, which are currently being completed. We remain confident that the fantastic support Dundas’ has consistently received from the local communities and authorities will enable us to conclude the Public Consultation swiftly, as we now work closely with the government to finalise a way in which to satisfy this licencing requirement whilst adhering to COVID-19 restrictions. Whilst Bluejay’s operational focus remains concentrated on the continued de-risking and development of Dundas into a commercially viable operation, our other promising Greenlandic assets remain at the forefront of future development plans. Earlier in 2019 the team turned its attention to expanding the Disko-Nuussuaq (‘Disko’) Magmatic Massive Sulphide nickel- copper-platinum-cobalt project in Greenland, a vast, highly prospective and strategically located project with proven potential to host similar mineralisation to the world’s most sizeable nickel-copper sulphide mine, Norilsk-Talnakh, in Siberia. Large scale systematic sampling surveys were undertaken during the period which returned encouraging results supporting the presence of a nickel-copper bearing mineralisation, thus paving the way for further refining of drill site targets over the licence area. Testament to our confidence in the discovery potential of Disko, we extended the licence in February 2020 by 76 km2 to 2,897 km2, which was also paired with acquiring a new licence holding over the area. Unfortunately, the planned 2020 advanced exploration and maiden drilling campaign scheduled at Disko and simultaneously at our Kangerluarsuk Sed-Ex lead-zinc-silver project (‘Kangerluarsuk’) in southwest Greenland has been postponed as a result of COVID-19. However, extensive desktop analysis to define drill targets and assess future opportunities for these programmes has been completed during the lockdown period, enabling the team to hit the ground running should restrictions be lifted early enough to recommence operations this 2020 field season. At Kangerluarsuk, drilling will target known zinc, lead, silver and copper occurrences that have correlations with the neighbouring former Black Angel zinc-lead-silver mine. Mapping suggests these occurrences could be up to 40m thick and as a result of our confidence in the licence’s prospectivity, post-period-end in January 2020 we increased the project area by more than five-fold to 692km2. These licence expansions together with a purchase in the second quarter of this year of two new exploration licences in south Greenland focussing on base metals and gold, known as the Thunderstone Project (‘Thunderstone’) totalling 2,025km2 resulted in Bluejay becoming the single largest operational landholder in Greenland. This prestigious position underpins our confidence in the quality and discovery potential together with the overall commitment Bluejay has to the region. Crucially, it is not just Bluejay that has such strong confidence in the value potential of Greenland. In November 2019, the Company was delighted to raise £11.5m at 10p per share. This was a significant achievement, in challenging markets. We were able to attract institutional support from German, Danish, UK and Irish investors while also securing investment from Greenlandic and Danish Government investment funds, thus demonstrating a solid endorsement of Bluejay's in-country activities. More recently an equal portion from both of the Danish and Greenlandic holdings was transferred to SISA, the Greenlandic Pension Fund, resulting in all three entities holding equal thirds. To maximise these funds and ensure the longevity of our company given the current COVID-19 backdrop we implemented a cost saving programme in April 2020 to reduce corporate overheads. For this I would like to give my thanks to the entire Bluejay team for supporting our company in this endeavour by agreeing to a 30% reduction in all staff pay, including directors. I would also like to give my thanks and commend the Greenlandic authorities for the support they have shown Greenland’s 3 BLUEJAY MINING PLC CHAIRMAN’S REPORT mining industry by waiving Exploration Licence commitments for 2020, thereby removing the associated financial responsibilities. This responsible approach is testament to the quality of the jurisdiction in which we operate. The team is also pleased to maintain a portfolio of Finnish assets; the Hammaslahti copper-zinc-gold-silver project, the Enonkoski nickel-copper-cobalt-PGM project and the Outokumpu copper-nickel-cobalt-cold project. This portfolio continues to be cost-sustainable whilst we determine the best plan for future development. Outlook Bluejay’s investment model is based on five key sources of value – high grade, scalable deposits, low capex, simple processing routes and a supportive jurisdiction. Using our strategy of ‘discover, develop and deliver’, the team endeavours to ensure that we recognise and capitalise upon these signature features across all of our projects to maximise value creation. In the course of this year we have firmly followed this approach, increasing our land holding to encompass assets that meet our stringent investment criteria, and implementing targeted development campaigns to advance our portfolio and realise value. Our most advanced asset and with an internationally renowned status, Dundas, hosts a vast deposit that is proven to be the highest grade globally and requires a simple mining operation with minimal processing. Furthermore, Bluejay has experienced strong demand for its end product, where the export markets and routes are well established. The next major hurdle is to secure the requisite Exploitation Licence, and given the incredibly strong support that Bluejay and the project has consistently received from both the government and local community, we remain positive that this is a near term deliverable. To this end I am grateful to all of the communities in which we operate, our strategic partners, stakeholders, advisors and the entire Bluejay team for their continued support and tireless work. Whilst the immediate global outlook continues to be dominated by the extensive reach of COVID-19, we are confident of a promising future beyond this, and look forward to a productive and promising 2020/2021. In the meantime, we hope everyone continues to stay safe and well and we look forward to providing further updates on our ongoing desktop studies, licencing and commercial discussions as soon as we are in a position to do so. Michael Hutchinson Chairman 20 May 2020 4 BLUEJAY MINING PLC STRATEGIC REPORT The Directors of the Company present their Strategic Report on the Group for the year ended 31 December 2019. Strategic approach The Group’s aim is to create value for shareholders through the discovery and development of economic mineral deposits. The Group’s strategy is to continue to progress the development of its existing projects in Greenland and to evaluate its existing and new mineral resource opportunities with a view to potential joint venture arrangements and/or other corporate activities. Organisation overview The Group’s business is directed by the Board and is managed on a day-to-day basis by the Chief Executive Officer. The Board monitors compliance with objectives and policies of the Group through monthly performance reporting, budget updates and periodic operational reviews. The Board comprises of two Executive Director and three Non-Executive Directors. The Corporate Head Office of the Group is located in London, UK, and provides corporate support services to the overseas operations. Overseas operations are managed out of the Group’s office in Outokumpu, Finland and Nuuk, Greenland. Review of business Throughout the year, the Dundas ilmenite project continued to be the primary focus of the Group. In May 2019, Bluejay entered into an agreement with Rio Tinto Iron and Titanium Canada Inc. ('RTIT') to further analyse the Ilmenite from its Dundas project. In the 2019 field season at Dundas, the main focus was the preparation of a 42,000 ton high grade ilmenite bulk sample. The bulk-sample material was used to produce a 5,000 tons heavy metal concentrate (‘HMC’) sample to be delivered to RTIT Sorel-Tracy plant in Quebec, Canada, for further beneficiation (magnetic separation) and subsequent smelter sample test. Further work streams included the finalization of the pre-feasibility studies which were positively validated by the advisors to the Government of Greenland and the completion and construction of a wet-gravity separation pilot processing plant which is used to produce the HMC. Finally, the application for the Dundas exploitation licence has been submitted. Alongside Dundas, the Group has a wider portfolio of prospective assets situated in the Finland and Disko area of Greenland. At Disko, the Nickel, Copper, Cobalt & Platinum Project in West Greenland, the field season focussed on leveraging pre-existing data and knowledge. It refined both new and previously defined drill targets by the reprocessing and validating historical data as well as the acquisition of new geophysical and geochemical data. In Finland, the Group owns 100% of a portfolio of copper, zinc and nickel projects; the Hammaslahti Copper-Gold-Zinc Project, the Outokumpu Copper Project and the Kelkka Nickel Project. Looking forward, due to the COVID-19 pandemic, the UK, Greenland, Finland and Canadian governments have all imposed restrictions on air travel and non-essential work. Bluejay have postponed all 2020 field work on recommendation of the governments and in order to ensure the safety of its employees, contractors and supply chain. In Greenland, the Government have advised that they will be relieving all spending commitments associated with exploration licences in 2020. Financial performance review The loss of the Group for the year ended 31 December 2019 before taxation amounts to £1,806,941 (31 December 2018: £10,776,686). The Board monitors the activities and performance of the Group on a regular basis. The Board uses financial indicators based on budget versus actual to assess the performance of the Group. The indicators set out below will continue to be used by the Board to assess performance over the period to 31 December 2019. The three main KPIs for the Group are as follows. These allow the Group to monitor costs and plan future exploration and development activities: KPI Cash and cash equivalents Administrative expenses as a percentage of total assets Exploration costs capitalised during the period 2019 2018 £10,314,701 £8,843,709 6.00% 6.37% £7,841,020 £6,251,969 5 BLUEJAY MINING PLC STRATEGIC REPORT Cash has been used to fund the Group’s operations and facilitate its investment activities (refer to the Statements of Cash Flows on page 27). Administrative expenses are the expenses related to the Group’s ability to run the corporate functions to ensure they can perform their operational commitments. Exploration costs capitalised during the period consist of exploration expenditure on the Group’s exploration licences net of foreign exchange rate movements. Principal risks and uncertainties The management of the business and the execution of the Group’s strategy are subject to a number of risks. The key business risks affecting the Group are set out below. Risks are formally reviewed by the Board, and appropriate processes are put in place to monitor and mitigate them. If more than one event occurs, it is possible that the overall effect of such events would compound the possible adverse effects on the Group. Exploration risks The exploration and mining business is controlled by a number of global factors, principally supply and demand which in turn is a key driver of global mineral prices; these factors are beyond the control of the Group. Exploration is a high-risk business and there can be no guarantee that any mineralisation discovered will result in proven and probable reserves or go on to be an operating mine. At every stage of the exploration process the projects are rigorously reviewed to determine if the results justify the next stage of exploration expenditure ensuring that funds are only applied to high priority targets. The principal assets of the Group comprising the mineral exploration licences are subject to certain financial and legal commitments. If these commitments are not fulfilled the licences could be revoked. They are also subject to legislation defined by the Government; if this legislation is changed it could adversely affect the value of the Group’s assets. Dependence on key personnel The Group and Company is dependent upon its executive management team and various technical consultants. Whilst it has entered into contractual agreements with the aim of securing the services of these personnel, the retention of their services cannot be guaranteed. The development and success of the Group depends on its ability to recruit and retain high quality and experienced staff. The loss of the service of key personnel or the inability to attract additional qualified personnel as the Group grows could have an adverse effect on future business and financial conditions. Uninsured risk The Group, as a participant in exploration and development programmes, may become subject to liability for hazards that cannot be insured against or third party claims that exceed the insurance cover. The Group may also be disrupted by a variety of risks and hazards that are beyond control, including geological, geotechnical and seismic factors, environmental hazards, industrial accidents, occupational and health hazards and weather conditions or other acts of God. Funding risk The only sources of funding currently available to the Group are through the issue of additional equity capital in the parent company or through bringing in partners to fund exploration and development costs. The Company’s ability to raise further funds will depend on the success of the Group’s exploration activities and its investment strategy. The Company may not be successful in procuring funds on terms which are attractive and, if such funding is unavailable, the Group may be required to reduce the scope of its exploration activities or relinquish some of the exploration licences held for which it may incur fines or penalties. Financial risks The Group’s operations expose it to a variety of financial risks that can include market risk (including foreign currency, price and interest rate risk), credit risk, and liquidity risk. The Group has a risk management programme in place that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and the related finance costs. The Group does not use derivative financial instruments to manage interest rate costs and, as such, no hedge accounting is applied. 6 BLUEJAY MINING PLC STRATEGIC REPORT COVID-19 The outbreak of the recent global COVID-19 virus has resulted in business disruption and stock market volatility. The extent of the effect of the virus, including its long-term impact, remains uncertain. The Group has implemented extensive business continuity procedures and contingency arrangements to ensure that they are able to continue to operate. Details of the Group’s financial risk management policies are set out in Note 3 to the Financial Statements. Section 172(1) Statement - Promotion of the Company for the benefit of the members as a whole The Directors believe they have acted in the way most likely to promote the success of the Company for the benefit of its members as a whole, as required by s172 of the Companies Act 2006. The requirements of s172 are for the Directors to: • Consider the likely consequences of any decision in the long term, • Act fairly between the members of the Company, • Maintain a reputation for high standards of business conduct, • Consider the interests of the Company’s employees, • • Consider the impact of the Company’s operations on the community and the environment. Foster the Company’s relationships with suppliers, customers and others, and The Company continues to progress the development of its existing projects in Greenland, which is inherently speculative in nature and, without regular income, is dependent upon fund-raising for its continued operation. The pre-revenue nature of the business is important to the understanding of the Company by its members, employees and suppliers, and the Directors are as transparent about the cash position and funding requirements as is allowed under AIM Rules for Companies. The application of the s172 requirements can be demonstrated in relation to the some of the key decisions made during 2019: Finalising the pre-feasibility studies as part of the exploitation licence process; • Continuing evaluation of existing license areas and assessment of targets; • • Expanding the licensed land area; • • • Continued assessment of corporate overheads, expenditure levels and wider market conditions. Identifying and refining both new and previously defined drill targets; Further identification of drill targets and preparation for a percussion drill program; As a mining exploration Group operating in Greenland and Finland, the Board takes seriously its ethical responsibilities to the communities and environment in which it works. We abide by the local and relevant UK laws on anti-corruption & bribery. Wherever possible, local communities are engaged in the geological operations & support functions required for field operations, providing much needed employment and wider economic benefits to the local communities. In addition, we follow international best practise on environmental aspects of our work. Our goal is to meet or exceed standards, in order to ensure we maintain our social licence to operate from the communities with which we interact. The interests of our employees are a primary consideration for the Board. Personal development opportunities are supported and a health and security support network is in place to assist with any issues that may arise on field expeditions. The Group Strategic Report was approved by the Board on 20 May 2020. Roderick McIllree CEO 7 BLUEJAY MINING PLC DIRECTORS’ REPORT The Directors present their Annual Report on the affairs of Bluejay Mining plc together with the Financial Statements for the year ended 31 December 2019. Dividends The Directors do not recommend the payment of a dividend for the year (31 December 2018: £nil). Directors & Directors’ interests The Directors who served during the year ended 31 December 2019 are shown below and had, at that time the following beneficial interests in the shares of the Company: Roderick McIllree Peter Waugh Michael Hutchinson Garth Palmer (1) Ian Henderson Bo Stensgaard (3) 31 December 2019 31 December 2018 Ordinary Shares 94,677,778 Options - 94,677,778 - 140,224 1,950,000 74,127 1,950,000 - n/a - - 1,800,000 - 1,800,000 n/a - 4,100,000 633,831 - N/A - - N/A (1) Garth Plamer resigned on 12 December 2019. (2) Bo Stensgaard was appointed on 13 August 2019. Further details on options can be found in Note 17 to the Financial Statements. Substantial shareholders The substantial shareholders with more than a 3% shareholding at 20 May 2020 are shown below: Sandgrove Capital Management LLP M&G Plc Roderick McIllree HSBC Bank Plc Gregory Kuenzel Jeremy Whybrow Corporate responsibility 20 May 2020 Holding Percentage 163,963,751 132,136,364 94,677,778 86,664,804 39,238,715 38,530,019 16.90% 13.62% 9.76% 8.93% 4.05% 3.97% Environmental Bluejay undertakes its exploration activities in a manner that minimises or eliminates negative environmental impacts and maximises positive impacts of an environmental nature. Bluejay is a mineral explorer, not a mining company. Hence, the environmental impact associated with its activities is minimal. To ensure proper environmental stewardship on its projects, Bluejay conducts certified baseline studies prior to all drill programmes and ensures that areas explored are properly maintained and conserved. Health and safety Bluejay operates a comprehensive health and safety programme to ensure the wellness and security of its employees. The control and eventual elimination of all work related hazards requires a dedicated team effort involving the active participation of all employees. A comprehensive health and safety programme is the primary means for delivering best practices in health and safety management. This programme is regularly updated to incorporate employee suggestions, lessons learned from past incidents and new guidelines related to new projects with the aim of identifying areas for further improvement of health and safety management. This results in continuous improvement of the health and safety programme. Employee involvement is regarded as fundamental in recognising and reporting unsafe conditions and avoiding events that may result in injuries and accidents. 8 BLUEJAY MINING PLC DIRECTORS’ REPORT Internal controls The Board recognises the importance of both financial and non-financial controls and has reviewed the Group’s control environment and any related shortfalls during the period. Since the Group was established, the Directors are satisfied that, given the current size and activities of the Group, adequate internal controls have been implemented. Whilst they are aware that no system can provide absolute assurance against material misstatement or loss, in light of the current activity and proposed future development of the Group, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective. Further details of corporate governance can be found in the Corporate Governance Report on page 12. Supplier payment policy The Group's current policy concerning the payment of trade creditors is to follow the CBI's Prompt Payers Code (copies are available from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU). The Group's current policy concerning the payment of trade creditors is to: • • • settle the terms of payment with suppliers when agreeing the terms of each transaction; ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and pay in accordance with the Group's contractual and other legal obligations. Going concern As described in Note 30, the Group is managing the impact of the COVID-19 pandemic on its business and the uncertainty it creates. The Group has taken swift pre-emptive action to ensure the safety of its employees, contractors and supply chain. This includes a full financial and strategic review designed to safeguard and ensure the stability and longevity of Bluejay activities for the benefit for all its stakeholders and as a result the Group has postponed all fieldwork until the UK, Greeland and Finland Governments confirm it is safe to do so. The Consolidated Financial Statements have been prepared on a going concern basis. Although the Group’s assets are not generating revenues and an operating loss has been reported, the Directors are of the view that the Group has sufficient funds to meet all committed and contractual expenditure within the next 12 months and to maintain good title to the exploration licences. This will ensure they will still be in a strong financial position once they are able to re-commence exploration activity. The Group’s business activities together with the additional factors likely to affect its future development, performance and position are set out in the Chairman’s Report on pages 3-5. In addition, Note 3 to the Consolidated Financial Statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to market, credit and liquidity risk. The Directors have a reasonable expectation that the Group and Company have sufficient resources to continue in the current economic climate with the COVID-19 pandemic and for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the Group and Company Financial Statements. Directors’ and Officers’ indemnity insurance The Group has made qualifying third-party indemnity provisions for the benefit of its Directors and Officers. These were made during the period and remain in force at the date of this report. Financial Risk Management Objectives The Group has disclosed the financial risk management objectives within Note 3 to these Financial Statements. Events after the reporting period Events after the reporting period are set out in Note 30 to the Financial Statements. Future developments Details of future developments for the Group are disclosed in the Chairman’s Report on page 3. COVID-19 Since March 2020, the Group has made preparations to mitigate the impact of COVID-19 on the business through several action plans and mitigation strategies. These will continue to be monitored and updated as required. Brexit In March 2017, the UK officially triggered Article 50 and notified the EU of its intention of leaving the EU following the UK’s June 2016 referendum vote to leave the EU (commonly known as Brexit). The UK ratified its withdrawal from the EU effective 9 BLUEJAY MINING PLC DIRECTORS’ REPORT 31 January 2020 with a transitional period scheduled to end 1 January 2021. The effect of the withdrawal remain unknown until further information is available on the nature of the UK-EU relationship after the completion of the transitional period. Provision of information to Auditor So far as each of the Directors is aware at the time this report is approved: • • there is no relevant audit information of which the Company's auditor is unaware; and the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. Auditor PKF Littlejohn LLP has signified its willingness to continue in office as auditor. This report was approved by the Board on 20 May 2020 and signed on its behalf. Roderick McIllree Director 10 BLUEJAY MINING PLC STATEMENT OF DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Parent Company 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 of the Group and Company, and of the profit or loss of the Group for that period. In preparing these Financial Statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and accounting estimates that are reasonable and prudent; • state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the Financial Statements; and • prepare the Financial Statements on a going concern basis unless it is inappropriate to presume 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 Group and Company, 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 Group and Company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the Financial Statements may differ from legislation in other jurisdictions. The Company is compliant with AIM Rule 26 regarding the Company’s website. The Directors confirm that they have complied with the above requirements in preparing the Financial Statements. 11 BLUEJAY MINING PLC CORPORATE GOVERNANCE REPORT The Board of Bluejay Mining plc had adopted the QCA Corporate Governance Code (‘the Code’) as its code of corporate goverance. The Code is published by the Quoted Companies Allicance (‘QCA’) and is available at www.theqca.com. The key governance related matter that occurred during the financial year ended 31 December 2019 was the completion and submission of the Environmental Impact Assessment and Social Impact Assessment reports at the Dundas project, both of which have been confirmed compliant for the Public Consultation phase. Corporate Governance Report The QCA Code sets out 10 principles that should be applied. These are listed below together with a short explanation of how the Company applies each of the principles: Principle One Business Model and Strategy The Board has concluded that the highest medium and long term value can be delivered to its shareholders by the adoption of a single strategy for the Company. The principal activity of the Group is the exploration and development of precious and base metals and the aim is to create value for shareholders through the discovery and development of economic resource deposits. The Board implements this strategy by focusing investment into the exploration of world-class mineralised domains, establishing a strict criteria for project selection, utilising industry recognised methods of exploration, developing a results- driven exploration approach, actively monitoring operational and financial performance, measured against deliverable targets and budgets and considering alternative commercial options for projects which no longer meet the established criteria of the Group. This can be summarised as follows: • Continued development of the Dundas ilmenite project in Greenland toward commercialisation. Key milestones recently achieved include completion of pre-feasibility study, production of bulk sample which has been shipped to Canada and set up of the pilot plant in Quebec. Further detail is included in the Chairman’s Report on pages 3-5. • Exploration of Disko-Nuussuaq and Kangerluarsuk projects also in Greenland. Expanded licence holding and identified drill targets. • Maintenance of Finnish projects in order to determine the best way to continue their development and realise value for shareholders. Principle Two Understanding Shareholder Needs and Expectations The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the Company though its website, www.bluejaymining.com, and via Kevin Shiel, Head of Investor Relations or the Company’s PR advisors, St Brides Partners Limited who are available to answer investor relations enquiries. Principle Three Considering Wider Stakeholder and Social Responsibilities The Board recognises that the long term success of the Company is reliant upon the efforts of the employees of the Company and its contractors, suppliers, regulators and other stakeholders. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships. For example, all employees of the Company participate in a structured Company-wide annual assessment process which is designed to ensure that there is an open and confidential dialogue with each person in the Company to help ensure successful two way communication with agreement on goals, targets and aspirations of the employee and the Company. These feedback processes help to ensure that the Company can respond to new issues and opportunities that arise to further the success of employees and the Company. The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company. As part of the pre-feasibility studies at the Group’s Dundas Titanium project in Greenland, a detailed social impact assessment study was undertaken. This involved completing a white paper, which included a public stakeholder consultation process. The results of this public consultation and engagement process were overwhelmingly positive and a high degree of support was received from the relevant stakeholders Principle Four Risk Management In addition to its other roles and responsibilities, the Audit Committee is responsible to the Board for ensuring that procedures are in place and are being implemented effectively to identify, evaluate and manage the significant risks faced by the Company. The risk assessment matrix below sets out those risks, and identifies their ownership and the controls that are in 12 BLUEJAY MINING PLC CORPORATE GOVERNANCE REPORT place. This matrix is updated as changes arise in the nature of risks or the controls that are implemented to mitigate them. The Audit Committee reviews the risk matrix and the effectiveness of scenario testing on a regular basis. The following principal risks and controls to mitigate them, have been identified: Activity Operation Risk Injury to staff Regulatory adherence Breach of rules Strategic Market downturn Failure to deliver commerciality Impact Control(s) Injury to staff whilst operating heavy machinery in remote location Censure or withdrawal of authorisation Change in Macro economic conditions Creating a safe working environment through strict procedures and regular training Strong compliance regime instilled at all levels of the Company Ongoing monitoring of economic events and markets. Inability to secure offtake agreements Active marketing and experienced management Financial Misappropriation of Funds Fraudulent activity and loss of funds Robust financial controls and split of duties IT Security Loss of critical financial data Regular back up of data online and locally The Directors have established procedures, as represented by this statement, for the purpose of providing a system of internal control. An internal audit function is not considered necessary or practical due to the size of the Company and the close day to day control exercised by the executive Directors. However, the Board will continue to monitor the need for an internal audit function. The Board works closely with and has regular ongoing dialogue with the outsourced finance function and has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems. The outbreak of the recent global COVID-19 virus has resulted in increased risks within the global economy. The extent of the effect of the virus, including its long-term impact, remains uncertain and the Company continues to monitor the situation. Principle Five A Well Functioning Board of Directors As at the date hereof the Board comprised, the CEO Roderick McIllree, the Chairman Michael Hutchinson, the General Manager Bo Stensgaard and two Non-Executive Directors, Peter Waugh and Ian Henderson. Biographical details of the current Directors are set out within Principle Six below. Executive and Non-Executive Directors are subject to re-election at intervals of no more than three years. The letters of appointment of all Directors are available for inspection at the Company’s registered office during normal business hours. The Board meets at least four times per annum. It has established an Audit Committee, Remuneration Committee and AIM Compliance Committee, particulars of which appear hereafter. The Board has agreed that appointments to the Board are made by the Board as a whole and so has not created a Nominations Committee. The Non-Executive Directors are considered to be part time but are expected to provide as much time to the Company as is required. The Board considers that this is appropriate given the Company’s current stage of operations. It shall continue to monitor the need to match resources to its operational performance and costs and the matter will be kept under review going forward. Michael Hutchinson, Peter Waugh and Ian Henderson are considered to be Independent Directors. The Company shall report annually on the number of Board and committee meetings held during the year and the attendance record of individual Directors. In order to be efficient, the Directors meet formally and informally both in person and by telephone. To date there have been at least quarterly meetings of the Board, and the volume and frequency of such meetings is expected to continue at this rate. 13 BLUEJAY MINING PLC CORPORATE GOVERNANCE REPORT Details of the Directors’ attendance at the Board meetings are set out below: Roderick McIllree Michael Hutchinson Peter Waugh Garth Palmer (1) Ian Henderson Bo Stensgaard (1) Garth Plamer resigned on 12 December 2019. Principle Six Appropriate Skills and Experience of the Directors Meetings Attended 4 4 4 4 4 2 Meetings eligible to attend 4 4 4 4 4 2 The Board currently consists of five Directors and, in addition, the Company has employed the services of Heytesbury Corporate LLP to act as the Company Secretary. The Company is satisfied that given its size and stage of development, between the Directors, it has an effective and appropriate balance of skills and experience across technical, commercial and financial disciplines. The Director’s experience and skills are listed on the companies website, www.bluejaymining.com, The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or informal. Roderick McIllree Chief Executive Officer Bo Stensgaard General Manager Micheal Hutchinson Chairman and Non-Executive Director Member of the Audit Committee, Remuneration Committee and AIM Compliance Committee. Peter Waugh Independent Non-Executive Director Chairman of the Remuneration Committee, AIM Compliance Committee and member of the Audit committee. Ian Henderson Independent Non-Executive Director Chairman of the Audit Committee and member of the Remuneration Committee. Where necessary the Board has engaged external professional consultants on an ongoing basis to ensure the Company is meeting it’s strategies. The key advisers to the Company are SP Angel Corporate Finance LLP, H&P Advisory Ltd, St Brides Partners Ltd and Hill Dickinson. The Board engages external geologists, environmental speciailists and a number of other specialised consultants to produce the required surverys and reports for the Environmental Impact Assessment, Social Impact Assessment and Pre-Feasibility Study. The key advisers to the Group were SRK Exploration, Orbicon A/S, KeypointE Pty Ltd, Quedtech Pty Ltd, Wood Canada Ltd and Titanium Industry Global Advisory. The Board have ensured that the all external advisers are knowledgable and provide the required skillset. Principle Seven Evaluation of Board Performance Internal evaluation of the Board, the Committees and individual Directors is to be undertaken on an annual basis and on a three-yearly cycle the evaluations may be facilitated by an independent evaluator. The Board has not yet had any internal reviews. The internal reviews will be in the form of peer appraisal and discussions to determine the effectiveness and performance of the various governance components, as well as the Directors’ continued independence. 14 BLUEJAY MINING PLC CORPORATE GOVERNANCE REPORT The results and recommendations that come out of the appraisals for the Directors shall identify the key corporate and financial targets that are relevant to each Director and their personal targets in terms of career development and training. Progress against previous targets shall also be assessed where relevant. Principle Eight Corporate Culture The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees behave. The corporate governance arrangements that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board. A large part of the Company’s activities are centred upon what needs to be an open and respectful dialogue with employees, clients and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does. The Directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge. The Company has adopted, with effect from the date on which its shares were admitted to AIM, a code for Directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016. Principle Nine Maintenance of Governance Structures and Processes Ultimate authority for all aspects of the Company’s activities rests with the Board, the respective responsibilities of the Chairman and Chief Executive Officer arising as a consequence of delegation by the Board. The Board has adopted appropriate delegations of authority which set out matters which are reserved to the Board. The Chairman is responsible for the effectiveness of the Board, while management of the Company’s business and primary contact with shareholders has been delegated by the Board to the Chief Executive Officer. Audit Committee The Audit Committee comprises Peter Waugh and Michael Hutchinson, and Ian Henderson chairs this committee. This committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported. It receives reports from the executive management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit and Committee shall meet not less than twice in each financial year and it has unrestricted access to the Company’s auditors. Remuneration Committee The Remuneration Committee comprises Michael Hutchinson and Ian Henderson, and Peter Waugh chairs this committee. The Remuneration Committee reviews the performance of the executive Directors and employees and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The Remuneration Committee also considers and approves the granting of share options pursuant to the share option plan and the award of shares in lieu of bonuses pursuant to the Company’s Remuneration Policy. AIM Compliance Committee The AIM Compliance Committee comprises Michael Hutchinson and Peter Waugh. Peter Waugh chairs this committee. The AIM Compliance Committee is responsible for the coordinating and monitoring the Company’s regulatory responsibilities including liaising with the Nomad and the London Stock Exchange as necessary. The purpose of the AIM compliance committee is to designate responsibility of ensuring best practice and application of the defined corporate governance procedures. Nominations Committee The Board has agreed that appointments to the Board will be made by the Board as a whole and so has not created a Nominations Committee. Non-Executive Directors The Board has adopted guidelines for the appointment of Non-Executive Directors which have been in place and which have been observed throughout the year. These provide for the orderly and constructive succession and rotation of the Chairman and non-executive Directors insofar as both the Chairman and non-executive Directors will be appointed for an initial term of three years and may, at the Board’s discretion believing it to be in the best interests of the Company, be appointed for subsequent terms. The Chairman may serve as a Non-Executive Director before commencing a first term as Chairman. In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the success of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence; 15 BLUEJAY MINING PLC CORPORATE GOVERNANCE REPORT a duty to avoid conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a proposed transaction or arrangement. Principle Ten Shareholder Communication The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the Company though its website, www.bluejaymining.com, and via Kevin Shiel, Head of Investor Relations or the Company’s PR advisors, St Brides Partners Limited who are available to answer investor relations enquiries. The Company shall include, when relevant, in its annual report, any matters of note arising from the Audit or Remuneration committees. Peter Waugh Non-Executive Director 20 May 2020 16 BLUEJAY MINING PLC INDEPENDENT AUDITORS REPORT Opinion We have audited the financial statementsFinancial statements of Bluejay Mining plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2019 which comprise the Statement of Financial Position, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity, the Statements of Cash Flows and the 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 2019 and of the group’s and parent company’s loss for the period then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in 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 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. Emphasis of matter We draw your attention to note 2.4 of the financial statements, which describes the group’s and company’s assessment of the COVID-19 impact on its ability to continue as a going concern. The group and company have explained that the events arising from the COVID-19 outbreak do not impact its use of the going concern basis of preparation nor do they cast significant doubt about the group’s and company’s ability to continue as a going concern for a period of at least twelve months from the date when the financial statements are authorised for issue. Our opinion is not modified in this respect. 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. Our application of materiality The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the financial statements as a whole was set as follows: 2019 2018 Basis for materiality Group £375,000 £550,000 1% of gross assets (2018: 2% of gross assets) Parent Company £40,000 £40,000 2% of expenses 17 BLUEJAY MINING PLC INDEPENDENT AUDITORS REPORT Our calculation of group materiality decreased from 2018 as a result of a decision to reduce the basis of calculation from 2% to 1% of gross assets because of the significant increase of gross assets in 2019. This was discussed and agreed with the audit committee. In our professional judgement, we consider gross assets to be to be one of the principal benchmarks within the financial statements relevant to members of the group in assessing financial position and performance. Whilst materiality for the group financial statements as a whole was £375,000, each significant component of the group was audited to a level of materiality ranging between £40,000 - £337,500. We agreed with the audit committee that we would report all individual audit differences identified during the course of our audit in excess of £18,750 (2018: £20,000), in addition to other audit misstatements below that threshold that we believe warrant reporting on qualitative grounds. An overview of the scope of our audit In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular we looked at areas involving significant accounting estimates and judgements by the Directors and considered future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Of the 10 components of the group, a full scope audit was performed on the complete financial information of 3 components, a limited scope review was performed on a component assessed as material and the remaining components were subject to analytical review only because they were not material to the group. Of the 10 reporting components of the group, 2 are located in Finland and audited by a component auditor operating under our instruction, 1 component is located in Greenland and audited by a network firm operating under our instruction and the audit of the remaining components were principally performed in London, conducted by PKF Littlejohn LLP using a team with specific experience of auditing mining exploration entities and publicly listed entities. The Senior Statutory Auditor interacted regularly with the component audit teams during all stages of the audit and was responsible for the scope and direction of the audit process. This, in conjunction with additional procedures performed, gave us appropriate evidence for our opinion on the group and parent company financial statements. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Carrying value of intangible assets (refer Note 7) How the scope of our audit responded to the key audit matter The group holds exploration and evaluation assets of £23,138,507 which relate to the Dundas Titanium Project in Greenland and a portfolio of copper, zinc and nickel projects in Finland. Intangible assets represent c. 61% of the group’s total assets. We have obtained and reviewed the Directors impairment review of intangible assets which considered the areas listed as indicators of impairment under IFRS 6. Our work included the following: The carrying value and recoverability of these assets are tested annually for impairment. The estimated recoverable amount of this balance is subjective due to the assessment of exploration projects. inherent uncertainty involved the in • Obtaining the exploration licenses and ensuring they remain valid; • Performing substantive testing on certain components capitalised additions; • Reviewing the responses of component auditors to our instructions and reviewing their working papers; • Reviewing key external reports for indicators of impairment; • Considering the group’s future plans for the exploration projects and that activity and expenditure thereto was planned; and • Considering whether there was an indicator that the carrying amount of capitalised expenditure was not recoverable. 18 BLUEJAY MINING PLC INDEPENDENT AUDITORS REPORT In forming our opinion on the financial statements, which is not modified, we draw to the users attention the disclosure within note 7 and within the Critical Accounting Estimates and Judgements which states that the recoverability of the projects in Finland, with a carrying value of £3,999,977, is dependent on the successful completion of a joint venture with a preferred parter. The financial statements do not include the adjustments that would result if the group was unable complete such an arrangement and to fully recover the carrying value of the intangible assets. in How the scope of our audit responded to the key audit matter investments Net intercompany receivables (refer note 9) in subsidiaries, including The parent company’s net subsidiaries is £28,179,626. investment in We have obtained and reviewed the Directors impairment review of the carrying value of the Parent company’s net investment in the subsidiaries. Our work included: investment The carrying value of the net in subsidiaries is ultimately dependent on the value of the underlying assets. Many of the underlying assets are exploration projects which are at an early stage of exploration making it difficult to determine their value. Valuations for these sites are therefore based on judgments and estimates made by the Directors - which leads to a risk of misstatement. • Reviewing the impairment indicators listed in IFRS 6 including specific consideration regarding the renewal of the exploration licenses; • Obtaining and reviewing available key external reports; • Reviewing the audit working papers of certain components to assess impairment considerations of exploration assets made by their auditors; and • Discussing with management the basis for impairment or non-impairment of investment in subsidiaries and loans receivable from subsidiaries. In forming our opinion on the financial statements, which is not modified, we draw to the users attention the disclosure within note 9 and within the Critical Accounting Estimates and Judgements which states that the loan due from FinnAust Mining Finland Oy has a carrying value of £6,764,324. This exceeds the recoverable amount of the group’s associated intangible asset by £2,764,347 which indicates the existence of a material uncertainty. The financial statements do not include the adjustments that would result if the Company was unable to fully recover the carrying value of the loan due from FinnAust Mining Finland Oy. HMRC enquiry (note 27) There is an ongoing enquiry with HMRC which will be heard at tribunal. The total value of the amount in dispute at 31 December 2019 is considered to be £843k, which can be broken into two parts: 1) £255k of input VAT reclaimed during 2012- 2015 which HMRC has already repaid and is pursuing the Company; and 2) £588k of input VAT on returns submitted 2015 – 2019 which HMRC has withheld payment, although the Company has recorded as a receivable. There is an inherent uncertainty as to the outcome of the tribunal and therefore a risk of material misstatement. How the scope of our audit responded to the key audit matter We have obtained director’s assessment of the outcome of the tribunal and therefore the likely recovery of the VAT receivable. Our work included; • Consideration of the adequacy of the disclosure made in note 27 to the financial statements and within the Critical Accounting Estimates and Judgements concerning the ongoing dispute with HMRC regarding the recovery of input VAT; • We have obtained and reviewed correspondence and documentation relating to the case for consistency with director’s assessment; • We have considered the opinions of key external advisers as to the likely outcome of the case; and • We have reviewed the the calculation of the receivable as at 31 December 2019 for accuracy. 19 BLUEJAY MINING PLC INDEPENDENT AUDITORS REPORT In forming our opinion on the financial statements, which is not modified, we draw to the users attention that the dispute will be heard at tribunal, the outcome of which is uncertain and this along with the other matters explained in note 27 to the financial statements, indicates the existence of a material uncertainty. The financial statements do not include the adjustments that would result if the Company was unsuccessful with its case at the tribunal. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • • the information given in the strategic report and the Directors’ report for the financial period 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 by exception In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report. 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 • • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the Statement of Directors’ Responsiblities, the Directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the group and parent company 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. 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. 20 BLUEJAY MINING PLC INDEPENDENT AUDITORS REPORT A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the 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. Zahir Khaki (Senior Statutory Auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor 20 May 2020 15 Westferry Circus Canary Wharf London E14 4HD 21 BLUEJAY MINING PLC STATEMENT OF FINANCIAL POSITION As at 31 December 2019 Group Company 31 December 2019 31 December 2018 31 December 2019 31 December 2018 Note £ £ £ £ 6 7 9 2,768,423 23,138,507 - 2,846,091 15,478,246 - 177,838 - 28,088,279 44,277 - 20,918,061 25,906,930 18,324,337 28,266,117 20,962,338 Non-Current Assets Property, plant and equipment Intangible assets Investment in subsidiaries Current Assets Financial assets at fair value through profit or loss Trade and other receivables Cash and cash equivalents 8 10 11 - 1,459,755 10,314,701 330,402 768,960 8,843,709 - 1,728,371 10,197,337 330,402 840,620 8,777,619 Total Assets Non-Current Liabilities Lease liabilities Deferred tax liabilities Current Liabilities Lease liabilities Trade and other payables 11,774,456 9,943,071 11,925,708 9,948,641 37,681,386 28,267,408 40,191,825 30,910,979 13 14 62,220 496,045 - 496,045 558,265 496,045 62,220 - 62,220 - - - 13 12 80,814 1,242,847 - 783,836 80,814 996,176 - 469,554 1,323,661 783,836 1,076,990 469,554 Total Liabilities 1,881,926 1,279,881 1,139,210 469,554 Net Assets 35,799,460 26,987,527 39,052,615 30,441,425 Equity attributable to owners of the Parent Share capital Share premium Other reserves Retained losses Total Equity 16 16 18 7,484,066 55,463,656 (7,604,567) (19,543,695) 7,800,237 43,739,139 (6,799,892) (17,751,957) 7,484,066 55,463,656 660,536 (24,555,643) 7,800,237 43,739,139 311,397 (21,409,348) 35,799,460 26,987,527 39,052,615 30,441,425 The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement and Statement of Comprehensive Income. The loss for the Company for the year ended 31 December 2019 was £3,161,498 (year ended 31 December 2018: £8,894,678). The Financial Statements were approved and authorised for issue by the Board of Directors on 20 May 2020 and were signed on its behalf by: Roderick McIllree Chief Executive Officer The Notes on pages 28 to 54 form part of these Financial Statements. 22 BLUEJAY MINING PLC CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2019 Continued operations Revenue Cost of sales Gross profit Administrative expenses Other gains/(losses) Foreign exchange Operating loss Impairments Finance income Other income Loss before income tax Income tax expense Year ended 31 December 2019 Year ended 31 December 2018 £ - - - £ - - - (2,259,624) 567,068 (121,891) (1,814,447) - 6,454 1,052 (1,806,941) - (1,800,851) (93,111) (23,757) (1,917,719) (8,873,585) 12,209 2,409 (10,776,686) - Note 25 22 7 21 23 Loss for the year attributable to owners of the Parent (1,806,941) (10,776,686) Basic and Diluted Earnings Per Share attributable to owners of the Parent during the period (expressed in pence per share) 24 (0.21)p (1.279)p The Notes on pages 28 to 54 form part of these Financial Statements. 23 BLUEJAY MINING PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2019 Loss for the year Other Comprehensive Income: Items that may be subsequently reclassified to profit or loss Currency translation differences Other comprehensive income for the year, net of tax Total Comprehensive Income attributable to owners of the Parent Year ended 31 December 2019 £ Year ended 31 December 2018 £ (1,806,941) (10,776,686) (1,153,814) 150,660 (1,153,814) 150,660 (2,960,755) (10,626,026) The Notes on pages 28 to 54 form part of these Financial Statements. 24 BLUEJAY MINING PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2019 Balance as at 1 January 2018 7,792,372 27,220,576 (6,949,904) (6,975,919) 21,087,125 Share capital Share premium Other reserves Retained losses Note £ £ £ £ Total £ Loss for the year Other comprehensive income for the year Items that may be subsequently reclassified to profit or loss Currency translation differences Total comprehensive income for the period - - - - - - - (10,776,686) (10,776,686) 150,660 - 150,660 150,660 (10,776,686) (10,626,026) Proceeds from share issues Issue costs Share based payments Exercised options 16 16 17 17 Total transactions with owners, recognised directly in equity 7,828 - 37 - 17,092,171 (641,071) 67,463 - 7,865 16,518,563 - - - (648) (648) - - - 648 648 17,099,999 (641,071) 67,500 - 16,526,428 Balance as at 31 December 2018 7,800,237 43,739,139 (6,799,892) (17,751,957) 26,987,527 Balance as at 1 January 2019 7,800,237 43,739,139 (6,799,892) (17,751,957) 26,987,527 Loss for the year Other comprehensive income for the year Items that may be subsequently reclassified to profit or loss Currency translation differences Total comprehensive income for the year Proceeds from share issues Issue costs Share based payments Exercised options Expired options Other equity adjustments - - - - - - 16 16 17 17 17 16 11,500 11,488,500 - 496 - - (328,167) (175,800) 411,817 - - - - (1,806,941) (1,806,941) (1,153,814) (1,153,814) - - 36,175 (13,605) (1,598) 328,167 - (1,153,814) (1,806,941) (2,960,755) - - - 13,605 1,598 - 11,500,000 (175,800) 448,488 - - - Total transactions with owners, recognised directly in equity (316,171) 11,724,517 349,139 15,203 11,772,688 Balance as at 31 December 2019 7,484,066 55,463,656 (7,604,567) (19,543,695) 35,799,460 The Notes on pages 28 to 54 form part of these Financial Statements. 25 BLUEJAY MINING PLC COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2019 Share capital Note £ Share premium £ Other reserves Retained losses Total equity £ £ £ Balance as at 1 January 2018 7,792,372 27,220,576 312,045 (12,515,318) 22,809,675 Loss for the year Total comprehensive income for the year Proceeds from share issues Issue costs Share based payments Exercised options 16 16 17 17 Total transactions with owners, recognised directly in equity - - - - 7,828 17,092,171 - 37 - (641,071) 67,463 - 7,865 16,518,563 - - - - - (648) (648) (8,894,678) (8,894,678) (8,894,678) (8,894,678) - - - 648 17,099,999 (641,071) 67,500 - 648 16,526,428 Balance as at 31 December 2018 7,800,237 43,739,139 311,397 (21,409,348) 30,441,425 Balance as at 1 January 2019 7,800,237 43,739,139 311,397 (21,409,348) 30,441,425 Loss for the year Total comprehensive income for the year Proceeds from share issues Issue costs Share based payments Issued Options Exercised options Expired Options 16 16 17 17 17 17 - - - - 11,500 11,488,500 - 496 - - (175,800) 411,817 - - - - - - - - 36,175 (13,605) (1,598) 328,167 (3,161,498) (3,161,498) (3,161,498) (3,161,498) - - - - 13,605 1,598 - 11,500,000 (175,800) 412,313 36,175 - - - Other equity adjustments (328,167) Total transactions with owners, recognised directly in equity (316,171) 11,724,517 349,139 15,203 11,772,688 Balance as at 31 December 2019 7,484,066 55,463,656 660,536 (24,555,643) 39,052,615 The Notes on pages 28 to 54 form part of these Financial Statements. 26 BLUEJAY MINING PLC STATEMENTS OF CASH FLOWS For the year ended 31 December 2019 Cash flows from operating activities Loss before income tax Adjustments for: Depreciation Loss/(gain) on financial assets at FVTPL Loss on sale of property, plant and equipment Share options expense Share based payments Intercompany management fees Net finance (income)/costs Non cash loss/(gain) Impairments Changes in working capital: (Increase)/Decrease in trade and other receivables Increase/(Decrease) in trade and other payables Net cash used in operating activities Cash flows from investing activities Purchase of property plant and equipment Sale of financial assets at FVTPL Sale of property, plant and equipment Purchase of quoted shares measured at fair value through the profit or loss Purchase of intangible assets Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issue of share capital Transaction costs of share issue Loans granted to subsidiary undertakings Interest paid Group Company Year ended Year ended 31 December 2019 31 December 2018 Year ended 31 December 2019 Year ended 31 December 2018 Note £ £ £ £ 6 8 6 17 17 21 7 10 12 6 8 6 8 7 16 16 (1,806,941) (10,776,686) (3,161,498) (8,894,678) 500,479 (668,133) 71,644 36,175 412,313 - (6,454) 96,568 250,590 96,573 - - 45,000 - (12,906) - 61,519 (668,133) - 36,175 412,313 (665,120) (458,442) 1,483,889 12,745 96,573 - - 45,000 (620,482) (303,912) - - 8,873,585 - 8,010,452 (1,156,028) (174,810) 459,847 241,867 647,777 526,623 404,782 (42,224) (2,060,530) (1,456,787) (1,784,897) (1,291,744) (543,556) (2,452,284) 998,535 165,140 - - - (426,975) (7,841,020) (6,251,969) (12,539) 998,535 - - - (48,689) - - (426,975) - 10,683 12,906 10,683 12,210 (7,210,218) (9,118,322) 996,679 (463,454) 10,925,000 17,099,999 10,925,000 17,099,999 (175,800) (641,071) (175,800) (641,071) - (4,229) - - (8,538,772) (8,746,995) (2,492) - Net cash generated from financing activities 10,744,971 16,458,928 2,207,936 7,711,933 Net decrease/(increase) in cash and cash equivalents 1,474,223 5,883,819 1,419,718 5,956,735 Cash and cash equivalents at beginning of year 8,843,709 2,901,922 8,777,619 2,820,884 Exchange gain on cash and cash equivalents (3,231) 57,968 - - Cash and cash equivalents at end of year 11 10,314,701 8,843,709 10,197,337 8,777,619 Major non-cash transactions During the year, the Company issued share capital for proceeds of £11.5m. An amount of £575,000 is unpaid at 31 December 2019. The Company has issued shares as settlement for expenses with a value of £412,313. The Notes on pages 28 to 54 form part of these Financial Statements. 27 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 1. General information The principal activity of Bluejay Mining plc (the ‘Company’) and its subsidiaries (together the ‘Group’) is the exploration and development of precious and base metals. The Company’s shares are listed on the AIM of the London Stock Exchange and the open market of the Frankfurt Stock Exchange. The Company is incorporated and domiciled in England. The address of its registered office is 7-9 Swallow Street, London, W1B 4DE. 2. Summary of significant Accounting Policies The principal Accounting Policies applied in the preparation of these Consolidated Financial Statements are set out below. These Policies have been consistently applied to all the periods presented, unless otherwise stated. 2.1. Basis of preparation of Financial Statements The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and IFRS Interpretations Committee (‘IFRS IC’) as adopted by the European Union, the Companies Act 2006 that applies to companies reporting under IFRS and IFRS IC interpretations. The Consolidated Financial Statements have also been prepared under the historical cost convention, except as modified for assets and liabilities recognised at fair value on business combination. The Financial Statements are presented in Pound Sterling rounded to the nearest pound. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in Note 4. 2.2. New and amended standards (a) New and amended standards mandatory for the first time for the financial periods beginning on or after 1 January 2019 As of 1 January 2019, the Company adopted IFRS 16 Leases, Amendments to IFRS 2 – classification and measurement of share based payments transactions, Annual improvements to IFRS Standards 2015-2017 cycle and IFRIC 23 Uncertainty over income tax treatments . IFRS 16 Adoption On 1 January 2019, the Group adopted the provisions of IFRS 16 – Leases using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019 where material. Accordingly, the comparative information presented for 2018 has not been restated. FIRS 16 has been applied to one new lease which was adopted during the financial year. In the Statement of Financial Position the right-of-use asset is recorded in non-current assets as part of property, plant and equipment and the lease liability is split between current liabilities for the portion due within 12 months and non-current liabilities for the remainder. To determine the split between principal and interest in the lease the incremental borrowing rate of the Group was applied. This method was adopted as the Group was not able to ascertain the implied interest rate in the lease. The Group has applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term when applying IFRS 16 to leases previously classified as operating leases under IAS 17. Of the other IFRSs and IFRICs, none are expected to have a material effect on future Company Financial Information. 28 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 (b) New standards, amendments and Interpretations in issue but not yet effective or not yet endorsed and not early adopted Standards, amendments and interpretations that are not yet effective and have not been early adopted are as follows: Standard IFRS 3 (Amendments) IAS 1 and IAS 8 (Amendments) IAS 1 (Amendments) *subject to EU endorsement Impact on initial application Definition of a Business Definition of material Classification of Liabilities as Current or Non- Current. Effective date *1 January 2020 1 January 2020 *1 January 2022 The Group is evaluating the impact of the new and amended standards above which are not expected to have a material impact on the Group’s results or shareholders’ funds statements. 2.3. Basis of Consolidation The Consolidated Financial Statements consolidate the financial statements of the Company and its subsidiaries made up to 31 December. Subsidiaries are entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other vote holders of the investee; • • Rights arising from other contractual arrangements; and The Group's voting rights and potential voting rights • The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Investments in subsidiaries are accounted for at cost less impairment within the parent company financial statements. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by other members of the Group. All significant intercompany transactions and balances between Group enterprises are eliminated on consolidation. 2.4. Going concern As described in Note 30, the Group is managing the impact of the COVID-19 pandemic on its business and the uncertainty it creates. The Company has taken swift pre-emptive action to ensure the safety of its employees, contractors and supply chain. This includes a full financial and strategic review designed to safeguard and ensure the stability and longevity of Bluejay activities for the benefit for all its stakeholders and as a result the Group have postponed all fieldwork until the UK and Greenland Governments confirm it is safe to do so. The Consolidated Financial Statements have been prepared on a going concern basis. Although the Group’s assets are not generating revenues and an operating loss has been reported, the Directors are of the view that the Group has sufficient funds to meet all committed and contractual expenditure within the next 12 months and to maintain good title to the exploration licences. This will ensure they will still be in a strong financial position once they are able to re-commence exploration activity. The Group’s business activities together with the additional factors likely to affect its future development, performance and position are set out in the Chairman’s Report on pages 3-5. In addition, Note 3 to the Consolidated Financial Statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to market, credit and liquidity risk. 29 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 The Directors have a reasonable expectation that the Group and Company have sufficient resources to continue in the current economic climate with the COVID-19 pandemic and for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the Group and Company Financial Statements. 2.5. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 2.6. Foreign currencies (a) Functional and presentation currency Items included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The functional currency of the UK parent entity and UK subsidiary is Pound Sterling, the functional currency of the Finnish and Austrian subsidiaries is Euros and the functional currency of the Greenlandic subsidiaries is Danish Krone. The Financial Statements are presented in Pounds Sterling which is the Company’s functional and Group’s presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. (c) Group companies The results and financial position of all the Group 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 period end date presented are translated at the period-end closing rate; • income and expenses for each Income Statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future, are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the Income Statement as part of the gain or loss on sale. 2.7. Intangible assets Exploration and evaluation assets The Group recognises expenditure as exploration and evaluation assets when it determines that those assets will be successful in finding specific mineral resources. Expenditure included in the initial measurement of exploration and evaluation assets and which are classified as intangible assets relate to the acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource. Capitalisation of pre-production expenditure ceases when the mining property is capable of commercial production. Exploration and evaluation assets are recorded and held at cost Exploration and evaluation assets are not subject to amortisation, as such at the year-end all intangibles held have an indefinite life, but are assessed annually for impairment. The assessment is carried out by allocating exploration and evaluation assets to cash generating units (‘CGU’s’), which are based on specific projects or geographical areas. The CGU’s are then assessed for impairment using a variety of methods including those specified in IFRS 6. Whenever the exploration for and evaluation of mineral resources in cash generating units does not lead to the discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue such activities of that unit, the associated expenditures are written off to the Income Statement. 30 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Exploration and evaluation assets recorded at fair-value on business combination Exploration assets which are acquired as part of a business combination are recognised at fair value in accordance with IFRS 3. When a business combination results in the acquisition of an entity whose only significant assets are its exploration asset and/or rights to explore, the Directors consider that the fair value of the exploration assets is equal to the consideration. Any excess of the consideration over the capitalised exploration asset is attributed to the fair value of the exploration asset. 2.8. Investments in subsidiaries Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less any impairment provision. 2.9. Property, plant and equipment Property, Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight line basis at the following annual rates: Office Equipment – 5 years Machinery and Equipment – 5 to 15 years Software – 2 years Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. If an impairment review is conducted following an indicator of impairment, assets which are not able to be assessed for impairment individually are assessed in combination with other assets within a cash generating unit. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other (losses)/gains’ in the Income Statement. 2.10. Impairment of non-financial assets Assets that have an indefinite useful life, for example, intangible assets not ready to use, and goodwill, are not subject to amortisation and are tested annually for impairment. Property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. 2.11. Financial assets (a) Classification The Group classifies its financial assets at amortised cost and at fair value through the profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. 31 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 (b) Recognition and measurement Amortised cost Regular purchases and sales of financial assets are recognised on the trade date at cost – the date on which the Group commits to purchasing or selling the asset. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred, and the Group has transferred substantially all of the risks and rewards of ownership. Fair value through the profit or loss Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL.The Group holds equity instruments that are classified as FVTPL as these were acquired principally for the purpose of selling in the near term. Financial assets at FTVPL, are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. Fair value is determined by using market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’): - Level 1: Quoted prices in active markets for identical items (unadjusted) - Level 2: Observable direct or indirect inputs other than Level 1 inputs - Level 3: Unobservable inputs (i.e. not derived from market data). The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur. The Group measures its investments in quoted shares using the quoted market price. (c) Impairment of financial assets The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Group applies the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity. At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Derecognition (d) The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. This is the same treatment for a financial asset measured at FVTPL. 2.12. Financial liabilities Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial 32 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables and loans. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income. Trade and other payables After initial recognition, trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income. Derecognition A financial liability is derecognised when the associated obligation is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income. Liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit and loss or other liabilities, as appropriate. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. 2.13. Leases Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: Fixed payments, less any lease incentives receivable; • • Variable lease payment that are based on an index or a rate, initially measured using the index or the rate as at the commencement date; The exercise price of a purchase option; and • • Payment of penalties for terminating the lease. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-ofuse asset in a similar economic environment with similar terms, security and conditions. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Assets obtained under finance leases are depreciated over their useful lives. The lease liabilities are shown in note 13. 33 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Rent payable under operating leases on which the short term exemption has been taken, less any lease incentives received, is charged to the income statement on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed. 2.14. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand. 2.15. Equity Equity comprises the following: • • • “Share capital” represents the nominal value of the Ordinary shares; “Share Premium” represents consideration less nominal value of issued shares and costs directly attributable to the issue of new shares; “Other reserves” represents the merger reserve, foreign currency translation reserve, redemption reserve and share option reserve where; o o o o o “Merger reserve” represents the difference between the fair value of an acquisition and the nominal value of the shares allotted in a share exchange; “Foreign currency translation reserve” represents the translation differences arising from translating the financial statement items from functional currency to presentational currency; “Reverse acquisition reserve” represents a non-distributable reserve arising on the acquisition of Finland Investments Limited; “Redemption reserve” represents a non-distributable reserve made up of share capital; “Share option reserve" represents share options awarded by the group; • “Retained earnings” represents retained losses. 2.16. Share capital, share premium and deferred shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity, as a deduction, net of tax, from the proceeds provided there is sufficient premium available. Should sufficient premium not be available placing costs are recognised in the Income Statement. Deferred shares are classified as equity. Deferred shares have no rights to receive dividends, or to attend or vote at general meetings of the Company and are only entitled to a return of capital after payment to holders of new ordinary shares of £100,000 per each share held. 2.17. Share based payments The Group operates a number of equity-settled, share-based schemes, under which the Group receives services from employees or third party suppliers as consideration for equity instruments (options and warrants) of the Group. The fair value of the third party suppliers’ services received in exchange for the grant of the options is recognised as an expense in the Income Statement or charged to equity depending on the nature of the service provided. The value of the employee services received is expensed in the Income Statement and its value is determined by reference to the fair value of the options granted: • • • including any market performance conditions; excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period); and including the impact of any non-vesting conditions (for example, the requirement for employees to save). The fair value of the share options and warrants are determined using the Black Scholes valuation model. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense or charge is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Income Statement or equity as appropriate, with a corresponding adjustment to a separate reserve in equity. When the options are exercised, the Group issues new shares. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium when the options are exercised. 2.18. Taxation No current tax is yet payable in view of the losses to date. Deferred tax is recognised for using the liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in 34 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 the computation of taxable profit. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets (including those arising from investments in subsidiaries), are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be used. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Deferred tax is calculated at the tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply to the period when the deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted. 3. Financial risk management 3.1. Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. None of these risks are hedged. Risk management is carried out by the London based management team under policies approved by the Board of Directors. Market risk (a) Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro, Danish Krone and the British Pound. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group negotiates all material contracts for activities in relation to its subsidiaries in either British Pounds, Euros or Danish Krone. The Group does not hedge against the risks of fluctuations in exchange rates. The volume of transactions is not deemed sufficient to enter into forward contracts as most of the foreign exchange movements result from the retranslation of inter company loans. The Group has not sensitised the figures for fluctuations in foreign exchange rates as the Directors are of the opinion that these fluctuations, apart from the retranslation of intercompany loans at the closing rate, would not have a significant impact on the financial statements of the Group. However, the Directors acknowledge that, at the present time, the foreign exchange retranslations have resulted in rather higher than normal fluctuations which are separately disclosed, and is predominantly due to the exceptional nature of the Euro exchange rate in the last two years in the current economic climate. The Directors will continue to assess the effect of movements in exchange rates on the Group’s financial operations and initiate suitable risk management measures where necessary. (b) Price risk The Group is not exposed to commodity price risk as a result of its operations, which are still in the exploration phase. The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature. The Group has exposure to equity securities price risk, as it holds listed equity investments. 35 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Credit risk Credit risk arises from cash and cash equivalents as well as outstanding receivables. Management does not expect any losses from non-performance of these receivables. The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board. The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. Liquidity risk In keeping with similar sized mineral exploration groups, the Group’s continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital or debt. The Directors are reasonably confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed. With exception to deferred taxation, financial liabilities are all due within one year. 3.2. Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, to enable the Group to continue its exploration and evaluation activities, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the issue of shares or sell assets to reduce debts. At 31 December 2019 the Group had borrowings of £nil (31 December 2018: £nil) and defines capital based on the total equity of the Company. The Group monitors its level of cash resources available against future planned exploration and evaluation activities and may issue new shares in order to raise further funds from time to time. Given the Group’s level of debt versus its cash at bank and cash equivalents, the gearing ratio is immaterial. 3.3. Sensitivity analysis On the assumption that all other variables were held constant, and in respect of the Group and the Company’s expenses the potential impact of a 10% increase/decrease in the UK Sterling:Euro and UK Sterling:DKK Foreign exchange rates on the Group’s loss for the period and on equity is as follows: Potential expenses: 2019 impact on Euro Loss before tax for the year ended 31 December 2019 Group Company Equity before tax for the year ended 31 December 2019 Group Company Increase/(decrease) exchange rate in foreign £ £ £ £ 10% -10% (1,815,118) (1,798,764) (3,070,151) (3,070,151) 36,212,767 35,386,153 39,143,962 39,143,962 Potential expenses: 2019 impact on DKK Loss before tax for the year ended 31 December 2019 Equity before tax for the year ended 31 December 2019 Group Company Group Company Increase/(decrease) exchange rate in foreign 10% -10% £ £ £ £ (1,854,789) (1,759,093) (3,070,151) (3,070,151) 37,595,930 34,002,990 39,143,962 39,143,962 4. Critical accounting estimates and judgements The preparation of the Financial Statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the period. Actual results may vary from the estimates used to produce these Financial Statements. Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 36 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Items subject to such estimates and assumptions, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial years, include but are not limited to: Impairment of intangible assets – exploration and evaluation costs Exploration and evaluation costs have a carrying value at 31 December 2019 of £23,138,507 (2018: £15,478,246). Such assets have an indefinite useful life as the Group has a right to renew exploration licences and the asset is only amortised once extraction of the resource commences. Management tests for impairment annually whether exploration projects have future economic value in accordance with the accounting policy stated in Note 2.7. Each exploration project is subject to an annual review by either a consultant or senior company geologist to determine if the exploration results returned during the period warrant further exploration expenditure and have the potential to result in an economic discovery. This review takes into consideration long term metal prices, anticipated resource volumes and supply and demand outlook. In the event that a project does not represent an economic exploration target and results indicate there is no additional upside a decision will be made to discontinue exploration; an impairment charge will then be recognised in the Income Statement. Included within intangible assets at 31 December 2019 is an amount of £3,999,977 (2018: £3,983,108) in respect of projects in Finland. In the previous year the Directors assessed this amount as recoverable through a new strategy of entering into a joint venture with a preferred partner. As at 31 December 2019 the Directors have not finalised and agreed binding terms with a preferred partner. The Directors have not recognised any impairment to this amount because they consider that they will be able to successfully finalise the terms and recover the carrying amount in full. If a preferred partner cannot be located, then it is likely that an impairment charge will be necessary in respect of Finish projects and this is considered a critical accounting judgement. The Directors have reviewed the estimated value of each project prepared by management and have concluded that the no impairment is to be recognised. Recoverability of the loan due from FinnAust Mining Finland Oy The Directors have assessed that there is no impairment required to the Intangible assets in respect of the projects in Finland with a carrying amount of £3,999,977. The Directors have not impaired a receivable due from FinnAust Mining Finland Oy with a carrying value of £6,764,324. The recoverability of this receivable is dependent on the success of the underlying project in Finland. Therefore, the carrying value of the receivable from FinnAust Mining Finland Oy exceeds the carrying amount of the projects in Finland by £2,764,347. The Directors consider that the receivable due from FinnAust Mining Finland Oy will be recovered in full by enterting into a joint venture with a preferred partner, however the Group has not finalised such an arrangement and therefore the recoverability of the receivable in the Company financial statements is considered to be a critical accounting estimate. VAT receivable At 31 December 2019, the Group and Company have recognised an amount of £588,302 (2018: £463,704) within trade and other receivables which relates to VAT receivable. The amount is subject to an on-going enquiry with HMRC, further details of which can be found in Note 27. The Directors believe that the amount will be recovered in full and therefore have not recognised any impairment to the carrying value of this amount. Useful economic lives of property, plant and equipment The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful economic lives and residual values of the assets, taking into account that the assets are not used throughout the whole year due to the seasonality of the licence locations. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on economic utilisation and the physical condition of the assets. See note 6 for the carrying amount of the property plant and equipment and note 2.9 for the useful economic lives for each class of assets. Share based payment transactions The Group has made awards of options and warrants over its unissued share capital to certain Directors as part of their remuneration package. Certain warrants have also been issued to shareholders as part of their subscription for shares and suppliers for various services received. No share options or warrants were issued in the current year. The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in Note 16. Recovery of other receivables Included in other receivables is an amount of £575,000 (2018: £nil) as at 31 December 2019 in respect of unpaid ordinary share capital issued on 25 November 2019. The Directors believe that the amount will be recovered in full and therefore have not recognised any impairment to the carrying value of this amount. 37 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 5. Segment information Management has determined the operating segments based on reports reviewed by the Board of Directors that are used to make strategic decisions. During the period the Group had interests in three geographical segments; the United Kingdom, Greenland and Finland. Activities in the UK are mainly administrative in nature whilst the activities in Greenland and Finland relate to exploration and evaluation work. The Group had no turnover during the period. 2019 Revenue Administrative expenses Foreign exchange Finance income Other income Loss before tax per reportable segment Additions to PP&E Additions to intangible asset Reportable segment assets 2018 Revenue Administrative expenses Foreign exchange Finance income Other income Impairment of intangible asset Loss before tax per reportable segment Additions to PP&E Additions to intangible asset Reportable segment assets Greenland £ - (610,008) (2,186) - - 478,481 531,017 7,573,396 21,840,152 Greenland £ - (499,927) (155,111) - - - 478,708 2,395,852 5,148,986 11,960,517 Finland £ - (167,185) (550) - 1,052 UK £ - (1,482,431) (119,155) 6,454 - Total £ - (2,259,624) (121,891) 6,454 1,052 81,770 1,246,690 1,806,941 - 267,624 4,092,289 12,539 - 11,748,945 543,556 7,841,020 37,681,386 Finland £ - (92,937) (63,818) - 2,409 8,873,586 8,707,376 23,548 1,102,983 4,081,746 UK £ - (1,207,987) 195,172 12,209 - Total £ - (1,800,851) (23,757) 12,209 2,409 - (8,873,586) 1,590,602 48,690 - 12,225,145 10,776,686 2,468,090 6,251,969 28,267,408 38 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 6. Property, plant and equipment Group Cost As at 1 January 2018 Exchange Differences Additions As at 31 December 2018 As at 1 January 2019 Exchange Differences IFRS 16 Adjustment Additions Disposals As at 31 December 2019 Depreciation As at 1 January 2018 Charge for the period Exchange differences As at 31 December 2018 As at 1 January 2019 Charge for the year Disposals Exchange differences Right of use assets £ - - - - - - 182,542 - - 182,542 - - - - - 40,565 - - Software £ Machinery & equipment Office equipment £ £ Total £ 12,664 - 15,806 671,011 6,204 2,414,335 11,340 - 37,949 695,015 6,204 2,468,090 28,470 3,091,550 49,289 3,169,309 28,470 - - 8,623 - 3,091,550 (164,770) - 531,017 (202,413) 49,289 (274) - 3,916 - 3,169,309 (165,044) 182,542 543,556 (202,413) 37,093 3,255,384 52,931 3,527,950 8,113 6,363 - 14,476 14,476 10,796 - - 48,292 235,935 8,667 7,556 8,292 - 63,961 250,590 8,667 292,894 15,848 323,218 292,894 436,487 (37,273) (26,719) 15,848 12,631 - (178) 323,218 500,479 (37,273) (26,897) As at 31 December 2019 40,565 25,272 665,389 28,301 759,527 Net book value as at 31 December 2018 - 13,994 2,798,656 33,441 2,846,091 Net book value as at 31 December 2019 141,977 11,821 2,589,995 24,630 2,768,423 Depreciation expense of £500,479 (31 December 2018: £250,590) for the Group has been charged in administration expenses. 39 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Company Cost As at 1 January 2018 Additions As at 31 December 2018 As at 1 January 2019 IFRS 16 Adjustment Additions As at 31 December 2019 Depreciation As at 1 January 2018 Charge for the period As at 31 December 2018 As at 1 January 2019 Charge for the year As at 31 December 2019 Right of use assets Software Office equipment £ £ Total £ £ - - - 12,664 15,806 9,033 32,883 21,697 48,689 28,470 41,916 70,386 - 182,542 - 28,470 - 8,623 41,916 - 3,916 70,386 182,542 12,539 182,542 37,093 45,832 265,467 - - - 8,113 6,363 5,251 6,382 14,476 11,633 - 40,565 14,476 10,796 11,633 10,158 13,364 12,745 26,109 26,109 61,519 40,565 25,272 21,792 87,629 Net book value as at 31 December 2018 - 13,994 30,283 44,277 Net book value as at 31 December 2019 141,977 11,821 24,040 177,838 Depreciation expense of £61,519 (31 December 2018: £12,745) for the Company has been charged in administration expenses. 7. Intangible assets Intangible assets comprise exploration and evaluation costs. Exploration and evaluation assets are all internally generated. These are measured at cost and have an indefinite asset life. Once the pre-production phase has been entered into, the exploration and evaluation assets will cease to be capitalised and commence amortisation. Group 31 December 31 December Exploration & Evaluation Assets - Cost and Net Book Value Cost As at 1 January Additions Exchange differences As at year end Provision for impairment As at 1 January Impairments As at year end Net book value 2019 £ 24,351,831 7,841,020 (180,759) 32,012,092 8,873,585 - 8,873,585 23,138,507 2018 £ 17,971,795 6,251,969 128,067 24,351,831 - 8,873,585 8,873,585 15,478,246 The Dundas project in Greenland has a current JORC compliant mineral resource of 117 million tonnes at 6.1% ilmenite (in- situ) and has been confirmed as the highest-grade mineral sand ilmenite project globally. Exploration projects in Finland and 40 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 the Disko project in Greenland are at an early stage of development and there are no JORC (Joint Ore Reserves Committee) or non-JORC compliant resource estimates available to enable value in use calculations to be prepared. The Directors therefore undertook an assessment of the following areas and circumstances that could indicate the existence of impairment: • The Group’s right to explore in an area has expired, or will expire in the near future without renewal; • No further exploration or evaluation is planned or budgeted for; • A decision has been taken by the Board to discontinue exploration and evaluation in an area due to the absence of a commercial level of reserves; or • Sufficient data exists to indicate that the book value will not be fully recovered from future development and production. In the previous year, the Directors recognised an impairment of £8,873,585 in respect of exploration projects in Finland following their impairment assessment because certain project areas were no longer considered to be prospective and no further exploration or evaluation work was planned or budgeted for. The carrying value of the remaining project areas in Finland was assessed by the Directors as recoverable through a new strategy of identifying a preferred partner to enter into a joint venture agreement. During 2019 there has been some progress in locating a preferred partner, however no binding terms have been finalised and agreed. The Directors do not consider that the Finish projects should be impaired further based on being able to finalise terms with a preferred partner in the future. Following their assessment, the Directors concluded that no impairment charge was required at 31 December 2019. 8. Financial assets measured at fair value As at 1 January Acquisition of quoted shares Disposal of quoted shares Fair value gain As at year end Group Company 31 December 2019 31 December 2018 31 December 2019 31 December 2018 £ 330,402 £ - £ 330,402 £ - - 426,975 - 426,975 (998,535) - (998,535) - 668,133 (96,573) 688,133 (96,573) - 330,402 - 330,402 These investments are held for short-term trading purposes. At the reporting date, all the shares had been sold. The assets are measured in accordance with Level 1 of the fair value hierarchy by using the quoted market price. There have been no transfers between fair value levels during the year. 9. Investments in subsidiary undertakings Shares in Group Undertakings At beginning of period Transfer of investment Impairment charge At end of period Loans to Group undertakings Total 41 Company 31 December 2019 31 December 2018 £ £ 2,000,002 9,700,002 58,340 - (1,500,000) (7,700,000) 558,342 2,000,002 27,621,284 18,918,059 28,179,626 20,918,061 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less any impairment provision. During 2019, the Group fully impaired its investment in BJ Mining Limited which had a carrying value of £1,500,000 following a transfer of legal ownership to a third party 100% owned outside the Group. Immediately prior to the transfer of legal ownership, the assets held by BJ Mining Limited were transferred to Dundas Titanium A/S. Subsidiaries Name of subsidiary Registered office address Country of incorporation and place of business Proportion of ordinary shares held by parent (%) Proportion of ordinary shares held by the Group (%) Nature of business Centurion Mining Limited 2nd Floor 7-9 Swallow Street, London, England, W1B 4DE United Kingdom Centurion Universal Limited 2nd Floor 7-9 Swallow Street, London, England, W1B 4DE United Kingdom 100% 100% Dormant 100% 100% Holding Centurion Resources GmbH Schottenring 14 /525 1010 Vienna, Austria Austria Nil 100% Exploration Finland Investments Limited 2nd Floor 7-9 Swallow Street, London, England, W1B 4DE United Kingdom 100% 100% Holding FinnAust Mining Finland Oy FinnAust Mining Northern Oy Kummunkatu 23, FI-83500 Outokumpu, Finland Finland Kummunkatu 23, FI-83500 Outokumpu, Finland Finland Disko Exploration Limited 2nd Floor 7-9 Swallow Street, London, England, W1B 4DE United Kingdom Nil Nil 100% Exploration 100% Exploration 100% 100% Exploration Dundas Titanium A/S c/o Nuna Advokater ApS, Qullilerfik 2, 6, Postboks 59, Nuuk 3900, Greenland All subsidiary undertakings are included in the consolidation. Greenland Nil 100% Exploration The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held. 10. Trade and other receivables Current Trade receivables Amounts owed by Group undertakings Prepayments VAT receivable (See note 25) Other receivables Total Group Company 31 December 2019 31 December 2018 31 December 2019 31 December 2018 £ £ £ £ 43,925 30,237 - 83,423 619,957 712,450 - 72,989 517,178 148,556 4,312 395,174 83,423 588,302 657,160 30,236 191,346 62,685 463,704 92,649 1,459,755 768,960 1,728,371 840,620 The fair value of all receivables is the same as their carrying values stated above. 42 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Included in other receivables is an amount of £575,000 (2018: £nil) as at 31 December 2019 in respect of unpaid ordinary share capital issued on 25 November 2019. At 31 December 2019 all trade and other receivables were fully performing. No ageing analysis is considered necessary as the Group has no significant trade receivable receivables which would require such an analysis to be disclosed under the requirements of IFRS 7. The carrying amounts of the Group and Company’s trade and other receivables are denominated in the following currencies: UK Pounds Euros Danish Krone Group Company 31 December 31 December 31 December 2019 £ 1,401,201 38,637 19,917 2018 £ 618,352 70,756 79,852 2019 £ 1,728,371 - - 31 December 2018 £ 809,699 - 30,921 1,459,755 768,960 1,728,371 840,620 The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security. 11. Cash and cash equivalents Group Company 31 December 31 December 31 December 31 December 2019 £ 2018 £ 2019 £ 2018 £ Cash at bank and in hand 10,314,701 8,843,709 10,197,337 8,777,619 All of the UK entities cash at bank is held with institutions with an AA- credit rating. The Finland and Greenland entities cash at bank is held with institutions whose credit rating is unknown. The carrying amounts of the Group and Company’s cash and cash equivalents are denominated in the following currencies: UK Pounds Euros Danish Krone Group Company 31 December 31 December 31 December 31 December 2019 £ 2018 £ 2019 £ 2018 £ 10,212,030 38,236 64,435 8,781,031 4,762 57,916 10,197,337 - - 8,777,619 - - 10,314,701 8,843,709 10,197,337 8,777,619 43 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 12. Trade and other payables Trade payables Other creditors Accrued expenses Group Company 31 December 31 December 31 December 31 December 2019 £ 1,015,968 98,705 128,174 2018 £ 514,490 125,671 143,675 2019 £ 932,125 248 63,803 2018 £ 326,225 13,861 129,468 1,242,847 783,836 996,176 469,554 Trade payables include amounts due of £898,395 in relation to exploration and evaluation activities. The carrying amounts of the Group and Company’s trade and other payables are denominated in the following currencies: Group Company 31 December 31 December 31 December 31 December 2019 £ 2018 £ 1,061,692 29,957 151,198 8,781,031 4,762 57,916 2019 £ 996,176 - - 2018 £ 469,554 - - 1,242,847 8,843,709 996,176 469,554 UK Pounds Euros Danish Krone 13. Lease liabilities Lease liabilities are effectively secured, as the rights to the leased asset revert to the lessor in the event of default. Lease liabilities Not later than one year Later than one year and no later than five years Later than five years Future finance charges on finance lease liabilities Present value of finance lease liabilities Group and Company 31 December 2019 31 December 2018 £ 80,814 62,220 - 143,034 3,966 147,000 £ - - - - - - For the year ended 31 December 2019, the total finance charges were £2,492. The contracted and planned lease commitments were discounted using the incremental borrowing rate of 3%. 14. Deferred tax An analysis of deferred tax liabilities is set out below. Group 2019 £ Company 2018 £ 2019 £ 2018 £ Deferred tax liabilities - Deferred tax liability after more than 12 months 496,045 496,045 Deferred tax liabilities 496,045 496,045 - - - - 44 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 The Group has additional capital losses of approximately £8,883,046 (2018: £8,873,586) and other losses of approximately £6,181,673 (2018: £5,897,843) available to carry forward against future taxable profits. No deferred tax asset has been recognised in respect of these tax losses because of uncertainty over the timing of future taxable profits against which the losses may be offset. 15. Financial Instruments by Category Group 31 December 2019 31 December 2018 Assets per Statement of Financial Performance other receivables Trade and prepayments) Financial assets at fair value through profit or loss Cash and cash equivalents (excluding Liabilities per Statement of Financial Performance Trade and other payables (excluding non-financial liabilities) Finance lease liability Company Amortised cost £ 1,376,332 - 10,314,701 11,691,033 FVTPL £ Total £ Amortised cost £ FVTPL £ Total £ - 1,376,332 695,971 - - - - 10,314,701 8,843,709 - 11,691,033 9,539,680 - 330,402 695,971 330,402 - 8,843,709 330,402 9,870,082 31 December 2019 31 December 2018 Amortised cost Total Amortised cost Total £ £ £ £ 1,242,847 1,242,847 143,034 1,385,881 1,385,881 143,034 783,836 - 783,836 783,836 - 783,836 31 December 2019 31 December 2018 Amortised cost FVTPL Total Amortised cost FVTPL Total Assets per Statement of Financial Performance £ £ £ £ £ £ Trade and other receivables (excluding prepayments) Financial assets at fair value through profit or loss Cash and cash equivalents 1,644,498 - 1,644,498 777,935 - 777,935 - 10,197,337 11,841,835 - - - 10,197,337 - 330,402 330,402 8,777,619 - 8,777,619 - 11,841,835 9,555,554 330,402 9,885,956 Liabilities per Statement of Financial Performance Trade and other payables (excluding non- financial liabilities) Finance lease liability 31 December 2019 31 December 2018 At amortised cost Total At amortised cost Total £ £ £ £ 996,176 996,176 469,554 469,554 143,034 143,034 1,139,210 1,139,210 - 469,554 - 469,554 45 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 16. Share capital and premium Group and Company Number of shares Share capital Ordinary shares Deferred shares Deferred A shares Total 31 December 2019 31 December 2018 31 December 2019 31 December 2018 969,969,397 850,007,782 96,996 85,001 558,104,193 558,104,193 558,104 588,104 68,289,656,190 71,271,328,120 6,828,966 7,127,132 69,817,729,780 72,709,440,095 7,484,066 7,800,237 Issued at 0.01 pence per share Number of Ordinary shares Share capital Share premium £ £ Total £ At 1 January 2018 771,357,866 77,136 27,220,576 27,297,712 Issue of new shares – 11 January 2018 Issue of new shares – 1 February 2018 (1) Issue of new shares – 23 May 2018 Exercise of options – 1 October 2018 Issue of new shares – 19 October 2018 As at 31 December 2018 As at 1 January 2019 Issue of new shares – 24 January 2019 Issue of new shares – 24 January 2019 Exercise of options – 2 May 2019 Exercise of options – 10 May 2019 Issue of new shares – 25 November 2019 (2) Issue of new shares – 12 December 2019 143,495 77,272,728 97,835 1,000,000 135,858 850,007,782 850,007,782 1,461,615 1,000,000 300,000 2,200,000 75,000,000 40,000,000 14 7,728 10 100 13 85,001 85,001 145 100 30 220 7,500 4,000 22,486 22,500 16,351,200 16,358,928 22,500 100,000 22,500 22,490 99,900 22,487 43,739,139 43,824,140 43,739,139 43,824,140 102,167 102,312 59,900 29,970 219,780 7,316,700 60,000 30,000 220,000 7,324,200 3,996,000 4,000,000 As at 31 December 2019 969,969,397 96,996 55,463,656 55,560,652 (1) (2) Includes issue costs of £641,071 Includes issue costs of £175,800 Deferred Shares (nominal value of 0.1 pence per share) As at 1 January 2018 As at 31 December 2018 As at 1 January 2019 Other equity adjustment As at 31 December 2019 Number of Deferred shares 588,104,193 588,104,193 588,104,193 (30,000,000) 558,104,193 Share capital £ 588,104 588,104 588,104 (30,000) 558,104 Deferred A Shares (nominal value of 0.1 pence per share) Number of Deferred A shares Share capital £ As at 1 January 2018 As at 31 December 2018 As at 1 January 2019 Other equity adjustment As at 31 December 2019 71,271,328,120 71,271,328,120 71,271,328,120 (2,981,671,930) 68,289,656,190 7,127,132 7,127,132 7,127,132 (298,167) 6,828,966 46 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 On 24 January 2019 the Company issued and allotted 1,461,615 new Ordinary Shares at a price of 7 pence per share per share as an exercise of warrants. On this same day the Company issued and allotted 1,000,000 new Ordinary Shares at a price of 6 pence per share as an exercise of warrants. On 2 May 2019 the Company issued and allotted 300,000 new Ordinary Shares at a price of 10 pence per share as an exercise of options. On 10 May 2019 the Company issued and allotted 2,200,000 new Ordinary Shares at a price of 10 pence per share as an exercise of options. On 25 November 2019 the Company raised £7,500,000 via the issue and allotment of 75,000,000 new Ordinary Shares at a price of 10 pence per share. On 12 December 2019 the Company raised £4,000,000 via the issue and allotment of 40,000,000 new Ordinary Shares at a price of 10 pence per share. The Directors have corrected an error in the number of Deferred and Deferred A shares in the year ended 31 December 2019 relating to a share repurchase in 2011 which was not recorded correctly in the financial statements. This is not material and has therefore not amounted to a prior period adjustment. The correcting entry is a recategorisation of £328,167 recorded within share capital which should have been recorded in the capital redemption reserve. The adjustment has no impact on the Company or Group’s net assets or profit or loss. There is an amount of £575,000 which has not been paid as at 31 December 2019 in respect of the ordinary share capital issued on 25 November 2019 which is recorded in other receivables. 17. Share based payments The Company has established a share option scheme for Directors, employees and consultants to the Group. Share options and warrants outstanding and exercisable at the end of the period have the following expiry dates and exercise prices: Grant Date 29 November 2013 4 March 2016 Expiry Date 29 May 2019 3 March 2019 17 December 2016 17 December 2021 9 June 2017 17 October 2017 17 October 2017 17 October 2017 23 July 2019 23 July 2019 23 July 2019 9 June 2022 17 October 2020 17 October 2020 17 October 2020 23 July 2023 23 July 2023 23 July 2023 Exercise price in £ per share Options & Warrants 31 December 2019 31 December 2018 0.10 0.06 0.07 0.165 0.20 0.25 0.30 0.10 0.15 0.20 - - 1,228,153 1,025,000 5,350,000 5,350,000 5,350,000 5,200,000 5,200,000 5,600,000 5,000,000 1,000,000 2,689,768 1,025,000 5,350,000 5,350,000 5,350,000 - - - 34,303,153 25,764,768 The Company and Group have no legal or constructive obligation to settle or repurchase the options or warrants in cash. The fair value of the share options and warrants was determined using the Black Scholes valuation model. The parameters used are detailed below: 2016 Options 2017 Options 2017 Options 2017 Options Granted on: Life (years) Share price (pence per share) Risk free rate Expected volatility Expected dividend yield Marketability discount Total fair value (£000) 17/12/2016 5 years 7p 0.81% 17.64% - 20% 17 47 9/6/2017 5 years 15.5p 0.56% 31.83% - 20% 34 17/10/2017 3 years 17.75p 0.5% 13.85% - 20% 42 17/10/2017 3 years 17.75p 0.5% 13.85% - 20% 8 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Granted on: Life (years) Share price (pence per share) Risk free rate Expected volatility Expected dividend yield Marketability discount Total fair value (£000) 2017 Options 2019 Options 2019 Options 2019 Options 17/10/2017 4 years 17.75p 0.5% 13.85% - 20% 1 23/7/2019 4 years 7.45p 0.5% 21.64% - 20% 31 23/7/2019 4 years 7.45p 0.5% 21.64% - 20% 5 23/7/2019 4 years 7.45p 0.5% 21.64% - 20% 1 The expected volatility of the 2016, 2017 and 2019 options is based on historical volatility for the six months prior to the date of granting. The risk-free rate of return is based on zero yield government bonds for a term consistent with the option life. A reconciliation of options and warrants granted over the year to 31 December 2019 is shown below: Outstanding at beginning of period Expired Exercised Granted Outstanding as at period end Exercisable at period end 2019 2018 Weighted average exercise price (£) 0.1913 - 0.085 - 0.1898 0.1898 Number 25,764,768 (2,500,000) (4,961,615) 16,000,000 34,303,153 34,303,153 Weighted average exercise price (£) 0.1879 - 0.1000 - 0.1913 0.1913 Number 26,764,768 - (1,000,000) - 25,764,768 25,764,768 2019 2018 of Range exercise prices (£) Weighted average exercise price (£) Number of shares Weighted average remaining life expected (years) Weighted average remaining life contracted (years) Weighted average exercise price (£) Number of shares Weighted average remaining life expected (years) Weighted average remaining life contracted (years) 0 – 0.05 - - 0.05 – 2.00 0.1898 34,303,153 - 3.68 - 3.68 - - 0.1913 25,764,768 - 1.65 - 1.65 During the period there was a charge of £36,175 (2018: £nil) in respect of share options. 48 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 18. Other reserves Group Foreign currency translation reserve Reverse acquisition reserve Redemption reserve £ £ £ Merger reserve £ Share option reserve £ Total £ At 31 December 2018 166,000 959,712 (8,071,001) 36,463 108,934 (6,799,892) Currency translation differences Exercised options Expired Options Issued Options Other equity adjustments - - - - - (1,153,814) - - - - - - - - - - - - - 328,167 - (13,605) (1,598) 36,175 - (1,153,814) (13,605) (1,598) 36,175 328,167 At 31 December 2019 166,000 (194,102) (8,071,001) 364,630 129,906 (7,604,567) At 31 December 2018 Exercised options Expired Options Issued Options Other equity adjustments At 31 December 2019 19. Employee benefit expense Company Merger reserve Redemption reserve Share option reserve £ £ £ Total £ 166,000 36,463 108,934 311,397 - - - - - - - 328,167 (13,605) (1,598) 36,175 - (13,605) (1,598) 36,175 328,167 166,000 364,630 129,906 660,536 Group Company Year ended 31 December 2019 Year ended 31 December 2018 Year ended 31 December 2019 Year ended 31 December 2018 Staff costs (excluding Directors) £ £ £ £ Salaries and wages Social security costs Retirement benefit costs 948,450 77,095 5,084 1,030,629 790,179 108,061 1,616 899,856 438,012 25,322 5,084 468,418 279,567 9,836 1,374 290,777 The average monthly number of employees for the Group during the year was 16 (year ended 31 December 2018:16) and the average monthly number of employees for the Company was 10 (year ended 31 December 2018: 9). Of the above Group staff costs, £763,055 (year ended 31 December 2018: £485,063) has been capitalised in accordance with IFRS 6 as exploratory related costs and are shown as an intangible addition in the year. 49 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 20. Directors' remuneration Executive Directors Roderick McIllree Bo Stensgaard (1) Non-executive Directors Ian Henderson Garth Palmer (2) Peter Waugh Michael Hutchinson Year ended 31 December 2019 Short-term benefits Post- employment benefits £ £ 57,612 113,438 50,000 22,636 24,000 25,000 1,143 - - 619 492 - 292,686 2,254 Share based payments £ - - - - - - - Total £ 58,755 113,438 50,000 23,255 24,492 25,000 294,940 Of the above Group directors’ remuneration, £44,412 (31 December 2018: £42,905) has been capitalised in accordance with IFRS 6 as exploratory related costs and are shown as an intangible addition in the year. Year ended 31 December 2018 Post- employment benefits Share based payments £ 640 5 - 330 - 315 1,290 £ - - - - - - - Short-term benefits £ 182,783 10,286 19,022 16,114 24,000 25,000 277,205 Total £ 183,423 10,291 19,022 16,444 24,000 25,315 278,495 Executive Directors Roderick McIllree Non-executive Directors Greg Kuenzel (3) Ian Henderson Garth Palmer Peter Waugh Michael Hutchinson (1) Bo Stensgaard was appointed on 13 August 2019 (2) Garth Palmer resigned on 12 December 2019 (3) Gregory Kuenzel resigned on 2 June 2018 Details of fees paid to Companies and Partnerships of which the Directors detailed above are Directors and Partners have been disclosed in Note 28. The remuneration of Directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. 21. Finance income Interest received from cash and cash equivalents Finance Income 50 Group Year ended Year ended 31 December 31 December 2019 £ 6,454 6,454 2018 £ 12,209 12,209 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 22. Other gain/(losses) Gain/(Loss) on financial assets measured at fair value through profit or loss Loss on sale of property, plant and equipment Other gains Other gain/(losses) 23. Income tax expense No charge to taxation arises due to the losses incurred. Group Year ended Year ended 31 December 31 December 2019 £ 668,133 (71,644) (29,421) 567,068 2018 £ (96,573) - 3,462 (93,111) The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the losses of the consolidated entities as follows: Loss before tax Tax at the applicable rate of 21.96% (2018: 21.82%) Effects of: Expenditure not deductible for tax purposes Depreciation in excess of/(less than) capital allowances Net tax effect of losses carried forward Tax charge Group Year ended 31 December 2019 Year ended 31 December 2018 £ £ (1,806,941) (10,776,686) (396,804) (2,187,667) 122,433 (9,460) 283,831 - 1,807,738 (450,153) 830,082 - The weighted average applicable tax rate of 21.96% (2018: 21.82%) used is a combination of the 19% standard rate of corporation tax in the UK, 20% Finnish corporation tax and 30% Greenlandic corporation tax. The Group has a potential deferred income tax asset of approximately £1,189,029 (2018: £1,179,569) due to tax losses available to carry forward against future taxable profits. The Company has tax losses of approximately £6,181,673 (2018: £5,897,843) available to carry forward against future taxable profits. No deferred tax asset has been recognised on accumulated tax losses because of uncertainty over the timing of future taxable profits against which the losses may be offset. 24. Earnings per share Group The calculation of the total basic earnings per share of (0.21) pence (31 December 2018: (1.279) pence) is based on the loss attributable to equity holders of the parent company of £1,806,941 (31 December 2018: £10,776,686) and on the weighted average number of ordinary shares of 969,969,397 (31 December 2018: 842,546,640) in issue during the year. In accordance with IAS 33, basic and diluted earnings per share are identical for the Group as the effect of the exercise of share options would be to decrease the earnings per share. Details of share options that could potentially dilute earnings per share in future periods are set out in Note 17. 51 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 25. Expenses by nature Employee expenses Establishment expenses Travel & subsistence Professional & consultancy fees IT & Software Insurance Depreciation Share Option expense Other expenses Total administrative expenses Group Year ended 31 December 2019 £ Year ended 31 December 2018 £ 437,329 105,971 130,708 897,713 17,605 76,157 500,479 36,175 57,487 281,158 91,211 141,906 930,372 9,795 54,832 250,590 - 40,987 2,259,624 1,800,851 Services provided by the Company’s auditor and its associates During the year, the Group (including overseas subsidiaries) obtained the following services from the Company’s auditors and its associates: Fees payable to the Company’s auditor and its associates for the audit of the Parent Company and Consolidated Financial Statements Fees payable to the Company’s auditor for tax compliance & other services Group Year ended 31 December Year ended 31 December 2019 £ 65,655 20,868 2018 £ 47,000 70,778 26. Commitments (a) Royalty agreements As part of the contractual arrangement with Magnus Minerals Limited (‘Magnus’) the Group has agreed to pay royalties on revenue from mineral sales arising from mines developed by the Group. Under the terms of the respective Royalty Agreements between Magnus and the Company, the Group shall pay the following: • • • • 0.5% of net smelter returns over mineral production from the Kainuu Schist Belt tenements; 1.0% of net smelter returns over mineral production from the Outokumpu Savonara Mine Belt tenements; 1.5% of net smelter returns over mineral production from the Enonoski Area tenements; and 2.5% of net smelter returns over mineral production from the Hammaslahti Area tenements. The Enonoski and Hammaslahti Royalty Agreements further provide that royalty entitlements may be extended to future rights with the respective areas of influence defined with the agreements. Additionally, under the terms of the Kainuu Schist Belt Royalty Agreement and the Outokumpu Savonara Mine Belt Royalty Agreement the Group is obligated to pay SES Finland Limited a 0.5% net smelter royalty in respect of production from the associated tenements and Western Areas Limited (“Western Areas”) 0.5% of net smelter returns over mineral production of the tenements using a biological leaching technology owned by Western Areas. 52 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 (b) License commitments Bluejay now owns 7 mineral exploration licenses in Greenland. Licence 2015/08 and 2019/114 is a part of the Dundas project and licences 2011/31, 2012/29, 2017/01, 2018/16 and 2019/116 are part of the Disko projects in Greenland. These licences include commitments to pay annual licence fees and minimum spend requirements. As at 31 December 2019 these are as follows: Group Not later than one year Later than one year and no later than five years Total Group Minimum spend requirement £ Total £ - 3,009 5,768,829 5,783,063 License fees £ 3,009 14,234 17,243 5,768,829 5,768,072 As a result of the COVID-19 pandemic, the Greenland Government has approved that there will be no mineral exploration licence spend obligations for the period 1 January 2020 until 31 December 2020. 27. Contingent liabilities The Directors are in the process of appealing an assessment made by HMRC which relates to the Company’s ability to claim input VAT because, in the view of HMRC, the Company does not technically constitute a business for the purposes of VAT and is not eligible to make such claims in connection with services it supplied to the Company’s subsidiaries. The initial assessment raised by HMRC is for an amount of £255,492 and relates to input VAT claimed and repaid by HMRC between 2012-2015. At the point the assessment was raised, HMRC ceased to repay any further claims for input VAT made by the Company. The Company has continued to submit the appropriate returns to HMRC and as a result, the Company has a receivable from HMRC of £588,302 at 31 December 2019 which is included within trade and other receivables. HMRC has made a further protective assessment for this amount, bringing the total amount of the dispute at 31 December 2019 to £843,794. The Directors strongly refute the view of HMRC that the Company does not constitute a business for VAT purposes. As at the date of of release, the case is yet to be heard in front of a Tribunal. Tribunal was scheduled for March 2020, however due to COVID-19, it has been pushed back indefinitely. The Company has engaged professional services of legal counsel who will be representing it before the Tribunal. Counsel confirms the Company has a strong case. Accordingly, the Directors believe that the amount of £843,794 will be recovered in full and therefore have not recognised any impairment to the carrying value of this amount. 28. Related party transactions Loans to Group undertakings Amounts receivable as a result of loans granted to subsidiary undertakings are as follows: Finland Investments Ltd FinnAust Mining Finland Oy Centurion Mining Limited BJ Mining Limited Dundas Titanium A/S Disko Exploration Limited At 31 December (Note 9) 53 Company 31 December 2019 £ 31 December 2018 £ - 6,764,324 345 - 19,785,147 980,121 - 6,398,621 345 1,010,623 11,112,258 396,212 27,529,937 18,918,059 BLUEJAY MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2019 Loans granted to subsidiaries have increased during the year due to additional loans being granted to the subsidiaries, and foreign exchange loss of £1,344,308, given that no loans were repaid during the year. These amounts are unsecured and repayable in Euros and Danish Krone when sufficient cash resources are available in the subsidiaries. All intra Group transactions are eliminated on consolidation. Other transactions The Group defines its key management personnel as the Directors of the Company as disclosed in the Directors’ Report. Heytesbury Corporate LLP, a limited liability partnership of which Garth Palmer is a partner, was paid a fee of £84,000 for the year ended 31 December 2019 (31 December 2018: £84,000) for the provision of corporate management, accounting and consulting services to the Company. There was a balance of £9,622 owing at year end (31 December 2018: £8,537) . RM Corporate Limited, a limited company of which Roderick McIllree is a director, was paid a fee of £221,996 for the year ended 31 December 2019 (31 December 2018: £126,996) for the provision of corporate management and consulting services to the Company. There was a balance of £12,700 owing at year end (31 December 2018: £12,700). PMW Consultancy Services, operated by Peter Waugh as a sole trader, was paid a fee of £35,664 for the year ended 31 December 2019 (31 December 2018: £52,600) for consulting services to the Company. There was a balance of £10,000 owing at year end (31 December 2018: £10,000). Greenland Gas & Oil Limited, a limited company of which Roderick McIllree is a director, was paid a fee of £nil for the year ended 31 December 2019 (31 December 2018: £9,300) for geological information systems consulting services to the Company. There was no balance outstanding at the year-end (31 December 2018: £nil). 29. Ultimate controlling party The Directors believe there is no ultimate controlling party. 30. Events after the reporting date On 11 March 2020, the World Health Organisation declared the Coronavirus outbreak to be a pandemic in recognition of its rapid spread across the globe, with over 200 countries now affected. Many governments are taking increasingly stringent steps to help contain or delay the spread of the virus and as a result there is a significant increase in economic uncertainty. For the Group’s 31 December 2019 financial statements, the Coronavirus outbreak and the related impacts are considered non-adjusting events. Consequently, there is no impact on the recognition and measurement of assets and liabilities. Due to the uncertainty of the outcome of current events, the Group cannot reasonably estimate the impact these events will have on the Group’s financial position, results of operations or cash flows in the future. 54
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