Company registration number: 10796849 (England and Wales)
KAVANGO RESOURCES PLC
(formerly KAVANGO RESOURCES LIMITED and
F2D MINERALS LIMITED)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
KAVANGO RESOURCES PLC
CONTENTS
Company Information
Strategic Report
Directors’ Report
Statement of the Directors’ Responsibilities
Independent Auditors’ Report
Consolidated Statement of Total Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flow
Company Statement of Cash Flow
Notes to the Financial Statements
Page
2
3
5
7
8
10
11
12
13
14
15
16
17
1
KAVANGO RESOURCES PLC
COMPANY INFORMATION
Directors
Michael Foster
Charles Moles
Douglas Wright
Company Secretary
John Forrest
Registered Office
46 New Broad Street
London
EC2M 1JH
United Kingdom
Company Number
10796849 (England and Wales)
Independent Auditors
PKF Littlejohn LLP
1 Westferry Circus
Canary Wharf
London
E14 4HD
United Kingdom
2
KAVANGO RESOURCES PLC
STRATEGIC REPORT
The Directors present their strategic report on the group for the year ended 31 December 2017.
Principal Activity
The Company was incorporated on 31 May 2017. On 7 December 2017, Kavango Resources Plc acquired the entire
issued share capital of Navassa Resources Ltd by way of a share for share exchange. This led to the shareholders of
Navassa Resource Ltd acquiring the controlling interest in Kavango Resources Plc. As a result, Navassa Resource Ltd is
considered to be the legal acquirer and the transaction has been accounted for using the reverse acquisition accounting
method. 2017 financial statements are those of Kavango Resources Plc group and prior year financial statements are
those of Navassa Resources Ltd and its subsidiary.
Following acquisition of Navassa Resources Ltd the principal activity of the Group is nickel exploration in Botswana.
The Group is at the early exploration stage and is yet to identify mineral deposits in the areas for which it holds licenses.
Under the terms of the acquisition, the Group shares should be admitted to trading on London Stock Exchange by a set
pre-defined date. Should this not happen, former Navassa shareholders hold option to repurchase their Navassa shares for
an aggregate amount of $4. These options will lapse on admission.
Business risk review
The Directors have identified the following principal risks in regards to the Group’s future. The relative importance of
risks faced by the Group can, and is likely to, change as the Group executes its strategy and as the external business
environment evolves.
Strategic
Strategy risk
The Group’s strategy may not deliver the results expected by shareholders. The Directors regularly monitor the
appropriateness of the strategy, taking into account both internal and external factors, together with progress in
implementing the strategy, and modify the strategy as may be required based on developments. Key elements of this
process are the Group’s monthly reporting and regular Board meetings.
Concentration risk
The Group has one core asset being the Kalahari Suture Zone (KSZ) Project. This is a very large area, approximately
7000km2 , which mitigates against this risk. Nevertheless the Board understands the importance of regularly reviewing
its strategy of focusing on one area and of regularly assessing other opportunities in the Botswana market.
Operational
Exploration risk
The KSZ Project may not result in exploration success. There is no certainty of success from the existing portfolio of
licences. The Group seeks to mitigate the exploration risk through the experience and expertise of the Group’s specialists.
Other business risks
In addition to the current principal risks identified above and those disclosed in Note 3a, the Group’s business is subject
to risks relating to the financial markets and the metals markets. The buoyancy of both the aforementioned markets can
affect the ability of the Group to raise funds in future. The Group has identified certain risks pertinent to its business
including:
Strategic and Economic
• Business environment changes
• Limited diversification
Operational
• Difficulty in obtaining, maintaining or renewing
Licences/ Approvals
Failure to maximise value from KSZ
Commercial
•
• Loss of interest in key assets
• Regulatory compliance and legal
Human Resources and Management Processes
•
Failure to recruit and retain key personnel
• Human error or deliberate negative action
•
Inadequate management processes
Financial
• Restrictions in capital markets impacting available
financial resources
• Cost escalation and budget overruns
•
Fraud and corruption
3
KAVANGO RESOURCES PLC
STRATEGIC REPORT (CONTINUED)
The Directors regularly monitor such risks, using information obtained or developed from external and internal sources,
and will take actions as appropriate to mitigate these. Effective risk mitigation may be critical to the Group in achieving
its strategic objectives and protecting its assets, personnel and reputation. The Group assesses its risk on an ongoing basis
to ensure it identifies key business risks and takes measures to mitigate these. Other steps include regular Board review
of the business, monthly management reporting, financial operating procedures and anti-bribery management systems.
The Group reviews its business risks and management systems on a regular basis.
Business review
Following acquisition of Navassa Resources Ltd, the Group raised US$306,000 through a private placement. Through
Navassa, the Group is pursuing exploration projects in Botswana.
Key performance indicators
The key performance indicators in assessing the completion of this activity that are monitored on a regular basis are:
•
•
Progress of bankable feasibility study, monitoring licence commitments and environmental compliance;
Cash management – sufficient to meet its obligations as they fall due.
The Group cash at 31 December 2017 was US$386,000 (2016: US$19,000).
On behalf of the Board:
__________________
Michael Foster
Director
2 July 2018
4
KAVANGO RESOURCES PLC
DIRECTORS’ REPORT
The Directors are pleased to present their report and the audited financial statements of the Group and the Company for
the year ended 31 December 2017. Certain information required by the Companies Act 2006 relating to the information
to be provided in the Directors’ Report is set out in the Strategic Report and includes the principal activity, business
review, principal risks and uncertainties.
General Information
The Company was incorporated as F2D Minerals Limited on 21 May 2017 in England & Wales where it is domiciled.
On 7 December 2017, the Company successfully completed the acquisition of Navassa Resources Limited which resulted
in F2D becoming the holding company for an early stage nickel exploration group with operations in Botswana.
Following the acquisition, the Company changed its name to Kavango Resources Limited on 28 December 2017 and then
re-registered to a public limited company on 24 January 2018.
The principal activity of the Group is described in the Strategic Report.
Dividends
The Directors do not recommend payment of dividends (2016: US$Nil).
Directors
The Directors of the Company during the year ended 31 December 2017 were:
Michael Foster
John Forrest (resigned on 6 February 2018)
The Directors of the Group and the Company at the date of this report and their interests in the ordinary share capital of the
Company were:
Director
Michael Foster*
Charles Moles
Douglas Wright**
John Forrest (resigned on 6 February 2018)
31 December 2017
6,785,001
12,092,500
8,245,001
7,064,998
* Includes 1,000,000 ordinary shares held by Teresa Foster, Michael Foster’s wife.
** Includes 730,000 ordinary shares held by Lesley Wright, Douglas Wright’s wife.
The Group remunerates the Board at a level commensurate with the size of the Group and the experience of its Directors.
The Remuneration Committee has reviewed the Directors’ remuneration and believes it upholds the objectives of the
Group with regard to this issue. Details of Directors’ emoluments are set out in Note 6 to the Financial Statements.
Directors’ Indemnity
The Company has provided qualifying third-party indemnities for the benefit of its Directors. These were provided
during the year and remain in force at the date of this report.
Financial risk management
Note 17 of the financial statements details the financial risk factors affecting the Group and summarises the Group’s
policies for mitigating such risks through holding and issuing financial instruments. These policies have been followed
during the current and prior year.
5
KAVANGO RESOURCES PLC
DIRECTORS’ REPORT (CONTINUED)
Going concern
The Group has prepared cashflow forecasts for 12 months from the date of signing the Financial Statements. The Directors
have a reasonable expectation that the Group has adequate resources to continue in operational existence though 31
December 2018, as projected. However, there can be no assurance that the Group’s projects will be fully developed in
accordance with current plans or completed on time or to budget. Future work on the development of these projects, the
levels of production and financial returns arising therefrom, may be adversely affected by factors outside the control of the
Group.
The financial statements have therefore been prepared on a going concern basis and do not include the adjustments that
would result if the Group and Company were unable to continue in operation.
Post reporting date events
Details of post reporting date events are disclosed in Note 21 of the financial statements.
Future Developments
To comply with the terms of the acquisition of Navassa Resources Ltd, the Directors are preparing to list the Company at
the London Stock Exchange.
Funds raised privately in December 2017 have enabled the Group to carry out geophysical work on KSZ area which enabled
the Directors to narrow the focus of future evaluation activities. The Group also plans to drill at the Ditau licence site (KSZ
Project PL169/2012) where previous surveys carried out by Kavango Minerals have already identified targets for further
investigation.
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
The Directors review the terms of reference for the auditor and obtain written confirmation that the firm has complied
with its ethical code on ensuring independence. The level of fees charged is reviewed by the Board to ensure they remain
competitive and to ensure no conflicts of interest arise.
Annual general meeting
This report and the Financial Statements will be presented to shareholders for their approval at the Company’s Annual
General Meeting (“AGM”). The Notice of the AGM will be distributed to shareholders together with the Annual Report.
PKF Littlejohn LLP has signified its willingness to continue in office as auditor.
This report was approved by the Board on 2 July 2018 and signed on its behalf by
__________________
Michael Foster
Director
6
KAVANGO RESOURCES PLC
STATEMENT OF THE 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 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 judgements and accounting estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to
any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are
also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website.
Financial statements are published on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The
Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
__________________
Michael Foster
Director
2 July 2018
7
KAVANGO RESOURCES PLC
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF KAVANGO RESOURCES PLC
Opinion
We have audited the financial statements of Kavango Resources Plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 31 December 2017 which comprise the Consolidated Statement of Total Comprehensive
Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of
Changes in Equity, the Consolidated and Company Statements of Cash Flows and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union
and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act
2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as
at 31 December 2017 and of the group’s and parent company’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
EU 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, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty in relation to Going Concern
We draw attention to note 2e) in the financial statements which identifies conditions that may cast doubt on the Group’s
ability to continue as a going concern. The Group incurred a net profit of US$5,945, had net current assets of US$222,041
and is not expected to generate any revenue and positive cashflows from operations in the 12 months from the date at which
the financial statements were signed.
The financial statements have been prepared on the going concern basis. The ability of the Group to meets its expenditure
requirements and develop its projects is dependent on successfully raising funds on the open market.
As stated in note 2e), these events or conditions along with other matters set forth, indicate that a material uncertainty exists
that may cast significant doubt on the ability of the Group and Company to continue as a going concern. Our opinion is not
modified in this respect.
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.
8
KAVANGO RESOURCES PLC
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF KAVANGO RESOURCES PLC (continued)
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 year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report 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 directors’ responsibilities statement, 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit
work, for this report, or for the opinions we have formed.
Joseph Archer (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
2 July 2018
1 Westferry Circus
Canary Wharf
London E14 4HD
9
KAVANGO RESOURCES PLC
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
Continuing operations
Administrative expenses
Other income
Foreign exchange gain
Profit/(Loss) before taxation
Notes
4, 6
2017
US$
(44,242)
50,000
187
5,945
Taxation
8
-
2016
US$
(7,800)
-
-
(7,800)
-
Profit/(Loss) for the year attributable to owners of the
parent
5,945
(7,800)
Other comprehensive income:
Items that may be subsequently reclassified to profit or
loss
Currency translation difference
121,010
6,966
Total comprehensive income for the year attributable to
owners of the parent
126,955
(834)
Earnings per share
Basic and diluted (cents)
9
0.01
(0.03)
The accompanying notes form part of these financial statements.
10
KAVANGO RESOURCES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT YEAR ENDED 31 DECEMBER 2017
Non-current assets
Intangible assets
Fixed assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Notes
31 Dec
2017
US$
31 Dec
2016
US$
10
12
13
2,359,425
1,610
2,005,953
2,221
2,361,035
2,008,174
142,256
386,417
528,673
42,711
18,748
61,459
Total assets
2,889,708
2,069,633
Current liabilities
Trade and other payables
Amounts due to shareholders
Total liabilities
13
18, 20
146,241
160,391
306,632
6,593
763,343
769,936
Net current assets/(liabilities)
222,031
(708,477)
Net assets
2,583,076
1,299,697
Equity
Called up share capital
Share premium
Foreign Currency Exchange Reserve
Reorganisation reserve
Retained earnings
15
15
11
100,063
3,760,890
189,522
(1,590,777)
123,378
1,200,000
-
(17,736)
-
117,433
Total equity
2,583,076
1,299,697
This report was approved by the board and authorised for issue on 2 July 2018 and signed on its behalf by:
……………………
Michael Foster
Director
11
KAVANGO RESOURCES PLC
COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2017
Company registration number: 10796849 (England and Wales)
Non-current assets
Investment in subsidiaries
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Amounts due to shareholders
Total liabilities
Net current assets
Net assets
Equity
Called up share capital
Share premium
Retained earnings
Total equity
31 Dec
2017
US$
Notes
11
3,500,000
12
13
14
18, 20
15
15
3,500,000
135,505
348,653
484,158
3,984,158
133,603
23,143
156,746
327,412
3,827,412
100,063
3,760,890
(33,541)
3,827,412
Kavango Resources Plc has used the exemption grated under s408 of the Companies Act 2006 that allows for the
non-disclosure of the Income Statement of the parent company. The after tax loss attributable to Kavango Resources
Plc for the period ended 31 December 2017 was US$33,541.
This report was approved by the board and authorised for issue on 2 July 2018 and signed on its behalf by:
……………………
Michael Foster
Director
The accompanying notes form part of these financial statements.
12
KAVANGO RESOURCES PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Share
Capital
Share
Premium
Reverse
Acquisition
Reserve
Foreign
Exchange
Reserve
Retained
Earnings
US$
US$
US$
US$
US$
Total
US$
As at 1 January 2016
1,000,000
Loss for the year
Other Comprehensive Income for the
year - foreign currency exchange
difference
Total comprehensive income for the year
-
-
-
Shares issued net of costs
200,000
Total transactions with owners
recognised directly in equity
As at 31 December 2016
Profit for the year
Other Comprehensive Income for the
year - foreign currency exchange
difference
Total comprehensive income for the year
Shares issued net of costs
Group reorganisation
200,000
1,200,000
-
-
-
709,223
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(24,702)
125,233
1,100,531
-
(7,800)
(7,800)
6,966
6,966
-
(7,800)
-
-
-
-
6,966
(834)
200,000
200,000
(17,736)
117,433
1,299,697
-
5,945
5,945
121,010
121,010
-
5,945
-
-
-
-
-
-
-
-
121,010
126,955
709,223
34,345
326,608
1,070,176
(1,815,423) 3,440,545
(1,590,777)
Issue of shares net of issue costs
6,263
320,345
-
Total transactions with owners
recognised directly in equity
(1,099,937) 3,760,890
(1,590,777)
As at 31 December 2017
100,063 3,760,890
(1,590,777)
103,274
123,378
2,496,828
Share Capital:
Share Premium:
Amount subscribed for share capital at nominal value
Amount subscribed for share capital in excess of nominal value
Reorganisation Reserve:
Reserve created on issue of shares on acquisition of subsidiaries
Foreign Exchange differences:
Retained Earnings:
Cumulative translation differences
Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
The accompanying notes form part of these financial statements.
13
KAVANGO RESOURCES PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Loss for the year
Total comprehensive loss for the year
Issue of shares net of costs
Shares issued as a consideration in the reverse
merger, net of costs (Note 11)
Issue of shares net of costs
Share
Capital
US$
Share
Premium
US$
-
-
30,344
59,456
6,263
-
-
-
3,440,544
320,345
Total transactions with owners recognised directly
in equity
79,963
3,760,890
Retained
Earnings
US$
(33,541)
(33,541)
-
-
-
-
Total
US$
(33,541)
(33,541)
30,344
3,500,000
326,608
3,840,853
As at 31 December 2017
100,063
3,760,890
(33,541)
3,827,412
Share Capital:
Share Premium:
Merger Reserve:
Amount subscribed for share capital at nominal value
Amount subscribed for share capital in excess of nominal value
Reserve created on issue of shares on acquisition of subsidiaries
Foreign Exchange differences:
Retained Earnings:
Cumulative translation differences
Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
The accompanying notes form part of these financial statements.
14
KAVANGO RESOURCES PLC
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2017
Cash flows from operating activities
Profit / (Loss) before taxation
Foreign exchange gain
Net cash flows generated from operating activities before
changes in working capital
Increase in trade and other receivables
Increase in trade and other payables
Notes
2017
US$
5,945
122,872
2016
US$
(7,800)
14,868
128,817
7,068
(66,226)
59,677
(5,635)
1,700
Net cash outflow from operating activities
(790)
(11,735)
Investing activities
Purchase of intangible assets
10
(125,130)
(161,731)
Net cash used in investing activities
(125,130)
(161,731)
Financing activities
Loans
Proceeds from issue of shares net of issue costs
18
15
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
43,921
326,609
370,530
367,669
(25,000)
150,000
125,000
(33,601)
Cash and cash equivalents at beginning of year
18,748
52,349
Cash and cash equivalents at end of year
13
386,417
18,748
The accompanying notes form part of these financial statements.
15
KAVANGO RESOURCES PLC
COMPANY STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes
Cash flows from operating activities
Loss before taxation
Foreign exchange
Net cash flows generated from operating activities before
changes in working capital
Increase in trade and other receivables
Increase in trade and other payables
Net cash outflow from operating activities
Financing activities
Loans
Proceeds from issue of shares net of issue costs
17
15
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
2017
US$
(33,541)
(187)
(33,728)
(100,974)
133,603
(1,099)
23,143
326,609
349,752
348,6583
-
Cash and cash equivalents at end of year
13
348,653
The accompanying notes form part of these financial statements.
16
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. Corporate information
Kavango Resources PLC (“the Company”) was incorporated on 21 May 2017. It is domiciled in the United Kingdom
at 46 New Broad Street London United Kingdom EC2M 1JH.
The Company is a holding company of Navassa Resources Ltd (“Navassa”) which has a wholly-owned subsidiary
Kavango Minerals (Pty) Ltd. Navassa is registered and domiciled in Mauritius while Kavango Minerals (Pty) Ltd is
registered and domiciled in Botswana.
The principal activity of the Company and its subsidiaries (the “Group”) is the exploration for nickel in Botswana.
2. Significant Accounting policies
a) Statement of compliance
The financial information has been prepared in accordance with IFRS as adopted by the European Union. The
preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and reported amounts in the financial statements.
The financial information is presented in UD Dollars (“US$”), which is the Group’s presentational currency and has
been prepared under the historical cost convention.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statement are disclosed in note 3.
b) New accounting standards and interpretations in issue but not applied in the financial statements
At 31 December 2017, the following standards and interpretations relevant to the Group, were in issue but not
effective, and have not been early adopted by the Group:
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
*Not yet endorsed for use in the EU
Effective date
1 January 2018
1 January 2018
1 January 2019
•
IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial
liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.
The new impairment model requires the recognition of impairment provisions based on expected credit
losses (ECL) rather than only incurred credit losses as is the case under IAS 39. However, given the
nature of the Group’s receivables, these are not expected to have a significant impact in the financial
statements. The Group does not expect any impact on the accounting for financial liabilities, as the new
requirements of IFRS 9 only affect the accounting for financial liabilities that are designated at fair value
through profit or loss and the Group does not have any such liabilities.
17
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
2. Significant Accounting policies (continued)
•
IFRS15 ‘Revenue from Contracts with Customers’ sets out new revenue recognition criteria that will be
applicable from 1 January 2018. The Group does not expect that the adoption of IFRS 15 will result in a
change to the accounting policy as the performance obligation and timing of recognition are consistent
with those identified under IAS 18.
•
IFRS 16 'Leases'. IFRS 16 requires lessees to recognise a lease liability reflecting future lease payments
and a 'right of use asset' for virtually all lease contracts. This is effective for the period beginning on 1
January 2019. The impact of this standard has not yet been addressed.
Of the other IFRSs and IFRICs, none are expected to have a material effect on future company financial statements.
There was no impact in respect of any new or revised standards adopted by the Group and as such they have not been
disclosed.
c) Basis of consolidation
The consolidated financial statements incorporate those of Kavango Resources Plc and all of its subsidiaries (ie
entities that the group controls when the group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity).
All financial statements are made up to 31 December 2017. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used into line with those used by other members of the
group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated
on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated
from the date on which control ceases.
The Group re-assess whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the elements of control.
d) Business Combination
Acquisition of Navassa Resources Limited
The company was incorporated on 31 May 2017 and entered into an agreement to acquire the entire issued share
capital of Navassa Resources Limited on 7 December 2017. The acquisition was effected by way of issue of shares.
Due to the relative size of the companies, Navassa Resources Limited’s shareholders became the majority
shareholders in the enlarged capital of the Company. The transaction fell outside of IFRS 3 (“Business
Combinations”) and as such has been treated as a group reconstruction.
18
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
2. Significant Accounting policies (continued)
b) Business Combination (continued)
Therefore, although the Group reconstruction did not become unconditional until 7 December 2017, these
consolidated financial statements are presented as if the Group structure has always been in place, including the
activity from incorporation of the Group’s subsidiaries.
Furthermore, as Kavango Resources Plc was incorporated on 31 May 2017, while the enlarged group began trading
on 7 December 2017, the Statement of Comprehensive Income and consolidated Statement of Changes in Equity and
consolidated Cash Flow Statements are presented as though the Group was in existence for the whole year. On this
basis, the Directors have decided that it is appropriate the reflect the combination using merger accounting principles
as a group reconstruction under FRS 6 – Acquisitions and mergers in order to give a true and fair view. No fair value
adjustments have been made as a result of the combination.
The comparative information presented for the Group is that of Navassa Resources Limited and its subsidiary.
e) Going concern
The financial information is presented on a going concern basis. In forming this opinion, the Directors have
considered all of the information available to them. This includes management prepared forecasts, due
consideration of the ability to raise funds on the open market in respect of the proposed listing on the Standard
Segment of the London Stock Exchange, the timing as to when such funds will be received and the minimum spend
requirements for the licences held. Based on their consideration of these matters the Directors believe the Group
and Company to be a going concern.
These financial statements do not include adjustments relating to the recoverability and classification of recorded
asset amounts nor to the amounts and classification of liabilities that might be necessary should the group not
continue as a going concern. The auditors have made reference to going concern by way of a material uncertainty in
their audit opinion.
19
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
2. Significant Accounting policies (continued)
f)
Intangible Assets
Exploration and evaluation costs
The Group capitalises expenditure in relation to exploration and evaluation of mineral assets when the legal rights are
obtained. 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.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying
amount of an asset may exceed its recoverable amount. The assessment is carried out by allocating exploration and
evaluation assets to cash generating units, which are based on specific projects or geographical areas. Whenever the
exploration for and evaluation of mineral resources does not lead to the discovery of commercially viable quantities
of mineral resources or the Group has decided to discontinue such activities of that unit, the associated expenditures
are written off to profit or loss.
g) Taxation and deferred tax
Income tax expense represents the sum of the current tax and deferred tax charge for the year.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
information and the corresponding tax bases, and is accounted for using the balance sheet liability method.
Deferred tax is calculated at the tax rates that have been enacted or substantively enacted and are expected to apply
in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to the statement of
comprehensive income, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Judgement is applied in making assumptions about future taxable income, including nickel prices, production,
rehabilitation costs and expenditure to determine the extent to which the Group recognises deferred tax assets, as well
as the anticipated timing of the utilisation of the losses.
h) Foreign currencies
The functional currency for the Company, being the currency of the primary economic environment in which the
Company operates, is the US$. The individual financial statements of each of the Company’s wholly owned
subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional
currency).
The financial statements of the subsidiaries have been translated in to US$ in accordance with IAS 21 The Effects of
Changes in Foreign Exchange Rates. This standard requires that assets and liabilities be translated using the exchange
rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the
exchange rates at the dates of the transactions (i.e. the average rate for the period). The foreign exchange differences
on translation of subsidiaries are recognized in other comprehensive income (loss).
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the
dates of the transactions. 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 profit and loss.
i) Other income
Other income represents monies received in respect of an option agreement. Amounts are recognised when the right
to receive the payment is established.
20
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
2. Significant Accounting policies (continued)
j) Borrowings
Borrowings are recorded initially at fair value, net of attributable transaction costs. Borrowings are subsequently
carried at their amortised cost and finance charges, including any premium payable on settlement or redemption, are
recognised in the profit or loss over the term of the instrument using the effective rate of interest.
k) Financial instruments
Financial instruments are recognised when the Company becomes party to the contractual provisions of the
instrument.
Financial assets and liabilities are offset, with the net amounts presented in the Financial Information, when there is
a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to
realise the asset and settle the liability simultaneously.
Loans and receivables
All financial assets fall into the loans and receivables category.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. Financial assets included in loans and receivables are recognised initially at fair value. Subsequent
to initial recognition they are measured at amortised cost using the effective interest rate method, less any impairment
losses.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting date.
A provision for impairment is made when there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the loss event has an impact on the estimated future cash
flows of the financial asset.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the financial asset’s original effective interest rate.
Impaired debts are derecognised when they are assessed as uncollectible.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are
settled, or when Kavango transfers the financial asset and substantially all the risks and rewards of ownership to
another entity, or if some significant risks and rewards of ownership are retained but control of the asset has
transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities
All financial liabilities fall into the other financial liabilities category.
Other financial liabilities
Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction
costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest
method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.
Derecognition of other financial liabilities
Financial liabilities are derecognised when contractual obligations expire or are discharged or cancelled.
21
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
2. Significant Accounting policies (continued)
l) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities.
m) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of a company after deducting all
of its liabilities. Equity instruments issued are recorded at the proceeds received net of direct issue costs.
Share capital represents the amount subscribed for shares at nominal value.
Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income,
less dividends paid to the owners of the parent.
3. Critical accounting estimates and judgements in applying accounting policies
In the application of accounting policies the directors are required to make judgements, estimates and assumptions
which affect reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. The
estimates and associated assumptions are based on historical experience, expectations of future events and other
factors that are believed to be reasonable under the circumstances. Actual results in the future could differ from such
estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting
estimates are recognised in the period.
a) Valuation of exploration, evaluation and development expenditure
The value of the Group’s exploration, evaluation and development expenditure will be dependent upon the success
of the Group in discovering economic and recoverable mineral resources, especially in the countries of operation
where political, economic, legal, regulatory and social uncertainties are potential risk factors. The future revenue
flows relating to these assets is uncertain and will also be affected by competition, relative exchange rates and
potential new legislation and related environmental requirements. The Group’s ability to continue its exploration
programs and develop its projects is dependent on future fundraisings the outcome of which is uncertain. The ability
of the Group to continue operating within Botswana is dependent on a stable political environment which is uncertain
based on the history of the country. This may also impact the Group’s legal title to assets held which would affect the
valuation of such assets. There have been no changes made to any past assumptions.
b) Share-based payments
In accounting for the fair value of warrants, the Company makes assumptions regarding share price volatility, risk
free rate, and expected life in order to determine the amount of associated expense to recognise.
22
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
4. Segmental disclosures
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segment and that make strategic decisions, has been identified as the Board of Directors.
No revenue was generated during the period.
The Group has two reportable segments, exploration and corporate, which are the Group’s strategic divisions, for
each of the strategic divisions, the Board reviews internal management reports on a regular basis. The Group’s
reportable segments are:
Exploration: the exploration operating segment is presented as an aggregate of all Botswana licences held.
Expenditure on exploration activities for each licence is used to measure agreed upon expenditure targets for each
licence to ensure the licence clauses are met.
Corporate: the corporate segment includes the holding and intermediate holding companies costs in respect of
managing the Group.
Segment result
Continuing operations
Exploration
Corporate
Profit/(loss) before tax
Income tax
Profit/(loss) after tax
31-Dec
2017
US$
-
(5,945)
5,945
-
5,945
31-Dec
2016
US$
-
(7,800)
(7,800)
-
(7,800)
No profit and loss items were incurred in respect of the exploration activities as all relevant costs, in accordance with
IFRS 6 (Exploration for and Evaluation of Mineral Resources), were capitalised to Intangible Assets for all of the
periods presented.
Segment assets and liabilities
Exploration (Botswana)
Corporate (London and Mauritius)
Total of all segments
Exploration (Botswana)
Corporate (London and Mauritius)
Total of all segments
Non-Current Assets
31-Dec
2016
US$
2,005,953
31-Dec
2017
US$
2,359,425
-
-
2,359,425
2,005,953
Total Assets
31-Dec
2017
US$
2,229,980
31-Dec
2016
US$
2,028,020
Non-Current Liabilities
31-Dec
2016
US$
-
31-Dec
2017
US$
-
-
-
-
-
Total Liabilities
31-Dec
2017
US$
10,088
31-Dec
2016
US$
738,391
534,319
41,613
2,764,299
2,069,633
194,171
204,259
31,545
769,936
23
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
5. Other income
Other income relates to the payment received by the Group under an earn in agreement which was terminated in 2018.
6. Expenses by nature
Profit/(Loss) from operations is stated after charging:
Group
Fees payable to the Company’s auditor:
For the audit of the annual accounts
-
- Non audit services – corporate finance seervices
7. Employees
Employment costs consist of:
Group
2017
US$
15,728
18,000
2016
US$
-
-
2017
US$
2016
US$
Wages and salaries including any Social security costs
8,660
26,385
The amounts detailed above were capitalised in intangible assets in all of the periods stated.
There were no employment costs incurred in the Company.
The directors remuneration for the year is nil (2016: nil).
The average monthly number of employees during the period was:
Group
Directors
Employees
Company
Directors
Employees
8,660
26,385
2017
2016
7
7
9
2
7
9
2017
2
-
2
24
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
8. Taxation
Current taxation
Deferred taxation
Profit / (loss) before tax
Tax at the applicable rate of 19.2%
Effect of different tax rates in other jurisdictions
Tax losses carried forward
Current tax
2017
US$
-
-
-
2016
US$
-
-
-
5,945
(7,800)
1,142
(1,660)
518
-
(1,170)
-
1,170
-
Deferred tax has not been recognised in accordance with IAS 12 due to uncertainty as to when profits will be
recognised against which the losses can be relieved. The Group has approximately US$2,700 (2016: US$2,200) of
tax losses available to carry forward against future taxable profits. A deferred tax asset has not been recognised
because of uncertainty over future taxable profits against which the lowers may be used.
9. Earnings per share
Earnings/(losses) per Share (basic) - cents
31-Dec
2017
0.01
31-Dec
2016
(0.03)
The basic loss per share is derived by dividing the loss for the period attributable to ordinary shareholders by the
weighted average number of shares in issue. The weighted average number of shares is adjusted for the impact of the
reverse acquisition as follows:
-
Prior to the reverse acquisition, the number of shares is based on Navassa Resources Ltd, adjusted using the
share exchange ratio arising on the reverse acquisition; and
From the date of the reverse acquisition, the number of share is based on the Company.
-
Profit/(Loss) for the year from continuing operations (used in calculation of
basic EPS from continuing operations) (US$)
Weighted average number of Ordinary shares in issue
There are no potential dilutive shares in issue.
31-Dec
2017
5,945
31-Dec
2016
(7,800)
39,905,457
26,894,060
25
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
10. Intangible assets
Group
Evaluation and Exploration Assets – Cost and net book value
At period start (1 January)
Additions
Translation difference
At period end (31 December)
31-Dec
2017
US$
2,005,953
204,868
148,604
2,359,425
31-Dec
2016
US$
1,638,222
297,031
70,700
2,005,953
The Group’s intangible assets comprise wholly of Evaluation and Exploration assets in respect of the licences in
Botswana.
In 2017 shareholders financed US$ 79,000 (2016: US$128,000) of exploration expenses capitalised by the Group.
The Directors have undertaken a review to assess whether circumstances exist which could indicate the existence of
impairment as follows:
• The Group no longer has title to mineral leases.
• A decision has been taken by the Board to discontinue exploration due to the absence of a commercial level
•
of reserves.
Sufficient data exists to indicate that the costs incurred will not be fully recovered from future development
and participation.
The directors also taken into consideration the content of the Competent Person’s report which is available at the
Group’s website.
Following their assessment, the Directors recognised that no impairment charge is necessary.
11. Investments in subsidiaries
Company
At incorporation
Additions
At period end (31 December)
2017
US$
-
3,500,000
3,500,000
2016
US$
-
-
-
Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid.
On 7 December 2017 the Company has acquired all of the issued capital of Navassa Resources Limited for a
consideration of US$3,500,000 which was settled by issuing 4,370,000 Ordinary Shares in the Company.
On the same date the Company and the former Navassa shareholders entered into option agreements whereby Navassa
shareholders were permitted to repurchase their Navassa shares for an aggregate amount of $4 should the Company’s
shares fail to be admitted to trade on London Stock Exchange by a set pre-defined date. These options will lapse on
admission.
Principal subsidiaries
Name
Country of
incorporation
and residence
Nature of business
Proportion of equity shares
held by Company
Nevassa Resources Ltd
Kavango Resources (Pty) Ltd
Mauritius
Botswana
Holding
Nickel exploration
100%
100% via Navassa
These subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary
undertaking held directly by the Parent Company does not differ from the proportion of ordinary shares held.
26
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
12. Trade and other receivables
Group
31-Dec
2017
US$
31-Dec
2016
US$
Company
31-Dec
2017
US$
31-Dec
2016
US$
Other receivables and prepayments
142,256
42,711
135,505
142,256
42,711
135,505
-
-
Carrying amounts of trade and other payables approximate their fair value.
13. Cash and cash equivalents
Group
31-Dec
2017
US$
31-Dec
2016
US$
Company
31-Dec
2017
US$
31-Dec
2016
US$
Cash and cash equivalents
386,417
18,748
348,653
386,417
18,748
348,653
-
-
Cash and cash equivalents consist of balances in bank accounts used for normal operational activities. The bank
account is held within institutions with a credit rating of A-1.
27
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
14. Trade and other payables
Group
Company
31-Dec
2017
US$
31-Dec
2016
US$
31-Dec
2017
US$
31-Dec
2016
US$
Other payables
146,241
6,593
133,603
Carrying amounts of trade and other payables approximate their fair value.
146,241
6,593
133,603
15. Share capital
Issued and fully paid
Number of
shares
Share capital Share premium
US$
US$
As at 1 January 2016
1,000,000
1,000,000
Issue of shares at par
As at 31 December 2016/
1 January 2017
Issue of shares at par
200,000
200,000
1,200,000
1,200,000
709,223
709,223
Group reorganisation
23,720,777
(1,874,879)
-
-
-
-
-
-
-
Total
US$
1,000,000
200,000
1,200,000
709,223
(1,874,879)
Shares issued as consideration for
reverse merger
Issue of shares at US$0.06
Issue costs
As at 31 December 2017
44,370,000
59,456
3,440,544
3,500,000
4,169,996
-
6,263
-
330,942
(10,596)
337,205
(10,596)
74,169,996
100,063
3,760,890
3,860,953
On 7 December 2017 the Company acquired Navassa Resources Ltd for a purchase price of US$3.5 million (£2.6
million) through the issue 44,370,000 new ordinary shares of £0.001 and became the legal parent of the Group.
Due to the facts stated in note 2b) the Group is considered to have always existed. For 2015 and 2016 the figures
represent those of Navassa Limited and for 2017 those of Kavango Resources Plc are stated.
Navassa Resources Limited shares are US$1.
Kavango Resources Plc shares are GBP 0.001.
In 2016 US$50,000 of intangible assets additions were settled through the issuing of 50,000 shares.
On 21 December 2017 4,169,996 shares were allotted and issued at a price of GBP0.06 (US$0.08) per Ordinary Share.
28
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
16. Share based payments
Warrants
During the share placement that completed on 21 December 2017 the Company issued 4,169,996 warrants to each of
the subscribers. Each warrant entitles the warrant holder to subscribe for one ordinary share at a price of 12p
(US$0.16) with a further warrant attached for each two ordinary shares subscribed for under those warrants, the new
warrants entitling the warrant holder to subscribe for one further ordinary share for each such new warrant at a price
of 24p (US$0.32). These warrants have not been recognised in the financial statements as their fair value is not
material.
The fair value of the warrants granted was calculated using the Black-Scholes pricing model. The inputs in the model
are as follows:
Fair value of 1 warrant (US cents)
Share price at the date of grant (US$)
Exercise price (US$)
Dividend yield
Expected life, years
Annual risk-free interest rate
Volatility
12p warrants
0.12s
0.081
0.16
0%
2.5
0.47%
31%
The volatility measured at the standard deviation of continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for lack of marketability. Should volatility be higher
by 10%, fair value of the warrants would increase by US$14,000.
The warrants outstanding at the year end are:
Exercise price
US$
Number
exercisable
Number
outstanding
Weighted average
remaining
contractual life
Years
Weighted average
exercise price
US$
0.16
-
4,169,996
2.5
0.16
17. Financial instruments
The Board of Directors determine, as required, the degree to which it is appropriate to use financial instruments or
other hedging contracts or techniques to mitigate risk. The main risk affecting such instruments is foreign currency
risk which is discussed below.
There is no material difference between the book value and fair value of the Group cash balances, and the short-term
receivables and payables because of their short maturities.
Credit risk
Credit risk is the risk that a customer may default or not meet its obligations to the Group on a timely basis, leading
to financial losses to the Group. Credit risk arises from cash and deposits kept with banks, advances paid and other
receivables.
Financial assets which potentially subject the holder to concentrations of credit risk consist principally of cash
balances. These balances are all held at a recognised financial institution. The maximum exposure to credit risk is
US$386,417 (2016: US$18,748). The Company and Group does not hold any collateral as security.
29
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
17. Financial instruments (continued)
Market risk
Interest rate risk
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest
rates. The exposure to this risk is not considered, for the time being, to be material and as such no arrangements have
been put in place to mitigate this risk.
Currency risk
Currency risk is the risk that the financial results of the Group will be adversely affected by changes in exchange rates
to which the Group is exposed. The Group undertakes certain transactions denominated in foreign currencies. The
majority of the Group’s expenditure are denominated in Pound Sterling, while its exploration expenses are incurred
in Botswana Pula, accordingly, the result for the year are adversely impacted by appreciation of the Pound Sterling
against the US$ while the Group’s assets are adversely impacted by appreciation of the Botswana Pula against the
US$. Currency risk is monitored on a regular basis by performing a sensitivity analysis of foreign currency positions
in order to verify that potential losses are at an acceptable level.
The carrying amounts of monetary assets and liabilities denominated in foreign currencies other than the functional
currencies of the individual Company entities were as follows:
Assets
GBP
Liabilities
GBP
Net exposure
Group and Company
31-Dec
2017
US$
484,157
133,615
350,542
31-Dec
2016
US$
-
-
-
A 10% increase / decrease in the USD:GBP exchange rate would result in a loss / profit of US$35,054.
Liquidity risk
Liquidity risk arises from the possibility that the Group and its subsidiaries might encounter difficulty in settling its
debts or otherwise meeting its obligations related to financial liabilities. In addition to equity funding, additional
borrowings have been secured to finance operations. The Company manages this risk by monitoring its financial
resources and carefully planning its expenditure programmes.
Capital
The Group considers its capital to comprise its ordinary share capital and retained deficit. In managing its capital,
the director’s primary objective is to maintain a sufficient funding base to enable the Group to meet its working capital
and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, through new
share issues, the Group considers not only their short-term position but also their long term operational and strategic
objectives.
30
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
18. Change in liabilities arising from financing activities
Group
Amounts due to
shareholders (Note 20)
Company
1 January
2017
US$
Cash
flows
US$
Non cash movements
Foreign
exchange
gain
US$
Converted
into shares
US$
Capitalised
exploration
costs
US$
31 December
2017
US$
763,343
43,921
(16,777)
(709,223)
79,127
160,391
1 January
2017
US$
Cash
flows
US$
31 December
2017
US$
Amounts due to shareholders (Note 20)
-
23,143
23,143
19. Commitments
The Group’s license expenditure commitments are:
Within 1 year
Within 2-5 years
20. Related party transactions
Related Party Transactions include:
Group
31-Dec
2017
US$
873,890
771,850
1,645,740
31-Dec
2016
US$
170,000
642,780
812,780
• Rent, utilities and other administrative costs incurred by Kavango Minerals (Pty) ltd were partially paid by
3D Exploration Limited, a company owned by Hillary Gumbo, a Director of Navassa Resources Ltd and
billed to Kavango Minerals (Pty) Ltd;
• Amounts billed to Kavango Minerals (Pty) Ltd for services rendered by each of Charles Michael Moles and
Hillary Gumbo, both Directors of Navassa Resources Ltd.
• Technical and consulting services provided by 3D Exploration Limited;
• An advance made to Navassa Resources Ltd by Charles Michael Moles, a Director
The following table summarises related party transactions by year:
Group
Currency
2017
US$
2016
US$
Included in capitalised exploration costs:
Costs billed by 3D Exploration (Hillary Gumbo)
Consulting Services billed by Charles Moles
Consulting Services billed by Hillary Gumbo
Botswana Pula
USD
USD
58,715
-
168,377
227,092
77,612
22,102
184,115
283,829
31
KAVANGO RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2017
20. Related party transactions (continued)
Balances with the related parties are:
Included in other payables:
Other related parties
Included in amounts due to shareholders:
Charles Moles
Hillary Gumbo
3D Exploration
Michael Foster
John Forrest
Included in other receivables:
3D Exploration
Michael Foster
Charles Moles
Directors fees
Group
2017
US$
Company
2017
US$
2016
US$
52,129
52,129
34,690
175
102,383
19,912
3,231
160,391
4,008
11,063
11,063
26,134
-
-
34,006
161
729,176
-
-
763,343
2,363
-
-
2,363
52,129
52,129
-
-
-
19,912
3,231
23,143
-
11,063
11,063
22,126
No Directors Fees were paid in any of the periods shown and as such none are disclosed.
There are no balances or transactions with the related parties in the Company.
21. Events after the reporting date
On 24 January 2018 the Company re-registered as a Public Limited company.
32