Registered number: 07353748
KERAS RESOURCES PLC
ANNUAL REPORT 2018
Contents
Pages
Company Information ...........................................................................................................................................................2
Chairman’s Statement ...........................................................................................................................................................3
Strategic Report .....................................................................................................................................................................5
The Board ..............................................................................................................................................................................10
Corporate Governance Statement....................................................................................................................................11
Directors’ Report..................................................................................................................................................................14
Independent Auditor’s Report to the Members of Keras Resources PLC..................................................................17
Consolidated Statement of Comprehensive Income ....................................................................................................21
Consolidated Statement of Financial Position................................................................................................................22
Consolidated Statement of Changes in Equity – 30 September 2018 .......................................................................23
Consolidated Statement of Changes in Equity – 30 September 2017 .......................................................................24
Consolidated Statement of Cash Flows ...........................................................................................................................25
Company Statement of Financial Position ......................................................................................................................26
Company Statement of Changes in Equity......................................................................................................................27
Company Statement of Cash Flows..................................................................................................................................28
Notes to the Consolidated Financial Statements...........................................................................................................29
Throughout this document ‘Keras’, ‘Keras Resources’ or ‘the Company’ means Keras Resources PLC and
‘the Group’ means the Company and its subsidiaries.
KERAS RESOURCES PLC 1
Company information
Directors:
B Moritz (Non-executive chairman)
R Lamming (Chief executive officer)
D Reeves (Non-executive director)
Company secretary:
Cargil Management Services Limited
Company number:
07353748
Registered office:
Nominated advisor
and joint broker:
Joint brokers:
Solicitor:
Auditor:
27/28 Eastcastle Street
London W1W 8DH
SP Angel Corporate Finance LLP
35 – 39 Maddox Street
London W1S 2PP
SVS Securities Plc
20 Ropemaker Street
London EC2Y 9AR
Memery Crystal LLP
165 Fleet Street
London EC2A 2DY
PKF Littlejohn LLP
Statutory Auditor
1 Westferry Circus
Canary Wharf
London E14 4HD
2 KERAS RESOURCES PLC
Chairman’s Statement
It gives me great pleasure to report on the substantial progress made in the last year to transform the Company
from an exploration company which, by its nature, requires regular injections of cash, to a cash generative
mining company.
Manganese production/Togo
The primary focus of Keras during the year, in particular since the appointment of Russell Lamming as CEO, has
been to make progress on the Nayega manganese project in Togo, in which we have an 85% interest.
In July 2018 Keras announced that, as a critical step in the Exploitation Permit approval process, it had been
granted permission to undertake a bulk sampling metallurgical testwork programme at Nayega. This included
the production of 10,000 tonnes of beneficiated manganese ore (‘Mn’), for processing by a major producer of
manganese-based alloys, for large scale metallurgical testwork, to assess the suitability of the ore in their
Mn smelting facilities. The work programme, which is estimated to cost US$1.5 million, is being fully funded by
the end-user. Cost includes the capital equipment, as well as operating and logistics costs and management
fees to Keras. The bespoke plant has been designed and constructed in South Africa and subsequently shipped
to Togo, where it has been erected and is operating at its design capacity. Mining is being undertaken through
a Togolese contractor, with whom Keras has established an excellent working relationship. It follows that the
Company is in a position to continue producing beneficiated manganese ore at a rate of up to some 75,000
tonnes per annum without requiring further capital expenditure, subject to receiving appropriate approvals
from the Togolese authorities.
The bulk sample has been delivered to the port of Lome for shipment by the end user. Of the end user funding,
$750,000 was received on signature of the contract, and a further $750,000 is now due. To cover the mismatch
between the date of payments and receipts, Dave Reeves and I advanced a total of £300,000 to Keras as a short
term, interest free, unsecured loan, repayable by the end of March 2019.
As part of our commitment to mining in Togo, we also obtained five exploration licences, covering 854.3 square
kilometres of ground in Togo that cover previously discovered cobalt and nickel mineralisation. Initial exploration
on the licences has been undertaken.
Calidus Resources Limited
The previous year saw the successful capitalisation of the Company’s Australian gold interests as Calidus
Resources Limited (“Calidus”), and the listing of Calidus on the Australian Stock Exchange (‘ASX’). Under the
rules of the ASX the Company’s ordinary shares in Calidus (‘Calidus Shares’) are held in escrow for a two year
period which ends in June 2019, and it remains the intention of the Directors is to distribute those Calidus
Shares’ to Keras shareholders when they are out of escrow, subject to any Calidus Shares which may be realised
to provide working capital. The Company’s legal advisers, Memery Crystal, have been retained to prepare the
required documentation on a tax efficient basis.
Keras currently holds 475,000,000 Calidus Shares, and, in addition, 275,000,000 Performance Shares to be
converted into the same number of Calidus Shares upon the announcement, by June 2020, of a positive
pre-feasibility study (‘PFS’), which demonstrates the Klondyke Project is commercially viable. Calidus has stated
that it is targeting the release of the PFS in Q3 of 2019. The Directors consider that the best interests of
shareholders will be served by making the distribution when the Performance Shares have been converted,
rather than immediately at the end of the escrow period.
3.5% of these shares will be transferred to Keras’ financial advisers in respect of fees relating to the transaction,
leaving 96.5% owned by Keras. After conversion of the Performance Shares, therefore, Keras expects that it
will own 723,750,000 Calidus Shares.
KERAS RESOURCES PLC 3
Chairman’s Statement
continued
The Calidus Shares are included in the financial statements at fair value, as further set out in Note 18. While the
Calidus share price has suffered a reduction during the year, in common with many ASX listed junior gold mining
companies, the shares are included in the Consolidated Statement of Financial Position at a value of
£11.5 million, which represents approximately 0.5p per Keras ordinary share. As the escrow period ends in
June 2019, the investment is now included within current assets.
Board changes
While there have been no changes in the membership of the board during the year, there have been significant
changes in the roles of the directors. In March 2018 Russell Lamming was appointed as CEO, and tasked with
developing the Group’s assets in Togo, as well as seeking other potential ventures for Keras. Progress in Togo
is set out above. At the same time Dave Reeves relinquished executive responsibilities and remains a
non-executive director.
Financial review
The Income Statement for the year shows a loss of £584,000 (2017 – profit £3,895,000). However, the two
periods are not comparable as the prior year profit results from the transfer of Keras’ Australian gold assets to
Calidus, and not from trading. There was no revenue from trading in either year, but income from the production
of manganese in Togo is expected to commence in the current year.
The Group structure has been further simplified in the year under review. The remaining subsidiaries in Australia
and South Africa have been disposed of for nominal consideration, having been fully impaired in prior periods.
As well as removing cost, this simplification allows Keras to concentrate on realising the potential of our
manganese assets.
Cash conservation remains a priority until commercial mining can commence, and the non-executive directors
are continuing to be remunerated at some 50% of their entitlements.
Outlook
Keras is now in a position to operate Nayega as a producing mine as soon as the exploitation licence is issued,
and is well placed to pursue other manganese related projects elsewhere in Africa. The 10,000 tonne bulk sample
has been funded by the purchaser, and the plant installed for this purpose will allow commercial production to
go ahead without delay or further capital expenditure. As announced on 16 January 2019, sample tests on the
product indicated average manganese grades of more than 40%, exceeding our expectations and increasing
potential profits at Nayega. The cobalt/nickel exploration licences are being evaluated as part of the general
strategy in Togo.
The directors have been actively negotiating other manganese related opportunities and look forward to
providing shareholders with further updates as appropriate.
Finally, I would like to take this opportunity to thank the rest of the board and our management team for their
hard work, and shareholders for their continuing support.
Brian Moritz
Chairman
11 March 2019
4 KERAS RESOURCES PLC
Strategic Report
Strategy and Business Plan
The Group’s strategy is to target projects that increase shareholder value by taking projects through the life
cycle from feasibility to development.
The Group’s business model has established the Company as an efficient and low cost explorer/developer.
During the reporting period the Group was focussed primarily on progressing the Nayega manganese project
in Togo, and preparing for the extraction of the contracted 10,000 tonne sample of manganese ore. As and
when an exploitation licence is obtained the Group intends to mine commercially at Nayega with the minimum
of delay, initially using the facilities built for the bulk sample. A definitive feasibility study previously completed
for Nayega indicates that the project represents significant value potential for the Group.
Further opportunities in the sphere of manganese are under negotiation elsewhere in Africa.
In exploring and developing mineral deposits, the Group accepts that not all its exploration will be successful
but also that the rewards for success can be high. It therefore expects that its shareholders will be invested for
potential capital growth, taking a long-term view of management’s good track record in mineral discovery and
development. The Directors have increased their holdings in the Company by 112,210,952 shares and currently
hold approximately 23% of the issued shares in Keras. We believe this stake provides further evidence of the
Board’s belief in and commitment to its strategy.
To date, the Group has financed its activities through equity and debt raisings. As the Group’s projects become
more advanced, the Board will seek mining finance, as well as investigating strategic opportunities to obtain
funding for projects from future customers via production sharing, royalty and other marketing arrangements.
Financial and Performance Review
There was no turnover in the year under review.
The results of the Group are set out in detail in the financial statements. The Group reports a loss for the year
of £584,000 (2017: profit £3.9 million), the prior year profit arising from the gain on sale of the Australian
gold assets.
The financial statements show that, at 30 September 2018, the Group had total assets of £13.1 million
(2017: £21.6 million), and net assets of £12.4 million (2017: £21.3 million). The reduction is primarily due to the
reduction in the quoted price of Calidus shares. The basis of valuation is set out in note 18 to the financial
statements. Intangible assets total £1.2 million (2017: £1.2 million) which now comprises exploration, evaluation
and development expenditure on the Group’s projects in Togo. In addition, the Group has made payments of
£0.2 million in respect of plant under construction for Nayega.
Expenditure such as pre-licence and reconnaissance costs is expensed in profit or loss as incurred.
The Directors have assessed the carrying value of the Nayega manganese project and other exploration projects
in Togo, and no impairment has been deemed necessary. Other African assets have been disposed of.
Key Performance Indicators (KPIs)
During the year the Board monitored the following KPIs:
•
Cash flow and working capital:
o
o
Short (<3 months) and long term cashflow models are prepared to monitor and forecast the Group’s
funding needs;
Management accounts prepared on a monthly basis for the Group’s key subsidiaries and quarterly
on a consolidated basis; and
o Weekly reporting of the Group’s working capital position.
KERAS RESOURCES PLC 5
Strategic Report
continued
Should the Group receive a mining permit for the Nayega Manganese project, activities at this project could
increase substantially from the current reporting period, to include production forecasts and mine plans.
African Assets
Togo – Nayega Manganese Project (85% owned)
Keras holds an 85% interest in the Nayega manganese project, which covers 92,390 hectares in northern Togo,
held through Societe Generale des Mines SARL. The project is 30km from a main road, which has direct access
to the regionally important deep-water port of Lome 600km away that has >800,000t per annum back loading
capabilities.
Having defined a JORC (2012) Code compliant Indicated and Measured Resource of 11.0Mt @ 13.1%
manganese, the Group has completed the majority of the Phase 1 Definitive Feasibility Study (“DFS”) to develop
an initial open-pit, 250,000tpa manganese operation. To support commercial mining at Nayega, we have applied
for an Exploitation Licence. The Group continues to await the award of this, and consequently we have been
unable to undertake commercial mining activities during the year. However, we would like to assure shareholders
that we have all the relevant documents, government assurances and local support in place. We have received
permission from the Togolese authorities to extract and process a 10,000 tonne bulk sample, which is being
fully funded by the end user. Progress on this is described above and in the Chairman’s Statement. Test sampling
of the material produced as part of the bulk sample has indicated a manganese content in excess of 40% rather
than the 35% envisaged in the DFS referred to above. As soon as the Exploitation Permit is granted, therefore,
the directors intend to commence commercial production at the rate of approximately 75,000tpa without the
requirement for further capital expenditure.
With the manganese price performing well this year and the higher grade of manganese identified in product
samples, our view that Nayega offers significant value for Keras has been reinforced.
Initial reconnaissance work at the cobalt licences has been undertaken and results are being assessed. Until
movement in the granting of the manganese licence is observed, operations are being kept to a minimum.
South Africa – Leinster Manganese
The Group had previously discontinued this project and the cost has been fully impaired in previous years. It has
now been disposed of.
Risk Management
The Board regularly reviews the risks to which the Group is exposed and ensures through its meetings and
regular reporting that these risks are minimised as far as possible.
The principal risks and uncertainties facing the Group at this stage in its development are:
Exploration Risk
The Group’s business has been primarily mineral exploration and evaluation which are speculative activities and
whilst the Directors are satisfied that good progress is being made, there is no certainty that the Group will be
successful in the definition of economic mineral deposits, or that it will proceed to the development of any of
its projects or otherwise realise their value.
The Group aims to mitigate this risk when evaluating new business opportunities by targeting areas of potential
where there is at least some historical drilling or geological data available.
6 KERAS RESOURCES PLC
Resource Risk
All mineral projects have risk associated with defined grade and continuity. Mineral reserves and resources are
calculated by the Group in accordance with accepted industry standards and codes but are always subject to
uncertainties in the underlying assumptions which include geological projection and commodity price
assumptions.
The Group reports mineral resources and reserves in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves (‘the JORC Code’). The JORC Code is a professional
code of practice that sets minimum standards for public reporting of mineral exploration results, mineral
resources and ore reserves. Further information on the JORC Code can be found at www.jorc.org.
Development Risk
Delays in permitting, financing and commissioning a project may result in delays to the Group meeting
production targets. Changes in commodity prices can affect the economic viability of mining projects and affect
decisions on continuing exploration activity.
Mining and Processing Technical Risk
Notwithstanding the completion of metallurgical testwork, test mining and pilot studies indicating the technical
viability of a mining operation, variations in mineralogy, mineral continuity, ground stability, ground water
conditions and other geological conditions may still render a mining and processing operation economically or
technically non-viable.
The Group has a small team of mining professionals experienced in geological evaluation, exploration, financing
and development of mining projects. To mitigate development risk, the Group supplements this from time to
time with engagement of external expert consultants and contractors.
Environmental Risk
Exploration and development of a project can be adversely affected by environmental legislation and the
unforeseen results of environmental studies carried out during evaluation of a project. Once a project is in
production unforeseen events can give rise to environmental liabilities.
The Group is currently in the exploration stage. Any disturbance to the environment during this phase is minimal
and is rehabilitated in accordance with the prevailing regulations of the countries in which we operate.
Financing & Liquidity Risk
The Group has an ongoing requirement to fund its activities through the equity markets and in future to obtain
finance for project development. There is no certainty such funds will be available when needed. To date, Keras
has managed to raise funds primarily through equity and debt placements despite the very difficult markets
that currently exist for raising funding in the junior mining industry.
Political Risk
All countries carry political risk that can lead to interruption of activity. Politically stable countries can have
enhanced environmental and social permitting risks, risks of strikes and changes to taxation whereas less
developed countries can have in addition, risks associated with changes to the legal framework, civil unrest and
government expropriation of assets.
KERAS RESOURCES PLC 7
Strategic Report
continued
Partner Risk
Whilst there has been no past evidence of this, the Group can be adversely affected if joint venture partners
are unable or unwilling to perform their obligations or fund their share of future developments.
The Group aims to mitigate this risk by 1) holding significant majority shareholdings in our projects that we can
commit to funding our minority partners until production and positive cash flow and 2) endeavouring to enter
into joint venture funding arrangements with large and credible counterparties.
Bribery Risk
The Group has adopted an anti corruption policy and whistle blowing policy under the Bribery Act 2010.
Notwithstanding this, the Group may be held liable for offences under that Act committed by its employees or
subcontractors whether or not the Group or the Directors have knowledge of the commission of such offences.
Financial Instruments
Details of risks associated with the Group’s financial instruments are given in Note 26 to the financial statements.
Given the nature of the Group’s activities, Keras does not utilise any complex or derivative financial instruments.
Insurance Coverage
The Group maintains a suite of insurance coverage that is appropriate for the Group and Company. This is
arranged via a specialist mining insurance broker and coverage includes public and products liability, travel,
property and medical coverage and assistance while Group employees and consultants are travelling on Group
business. This is reviewed at least annually and adapted as the Group’s scale and nature of activities changes.
Internal Controls and Risk Management
The Directors are responsible for the Group’s system of internal financial control. Although no system of internal
financial control can provide absolute assurance against material misstatement or loss, the Group’s system is
designed to provide reasonable assurance that problems are identified on a timely basis and dealt with
appropriately.
In carrying out their responsibilities, the Directors have put in place a framework of controls to ensure as far as
possible that ongoing financial performance is monitored in a timely manner, that corrective action is taken and
that risk is identified as early as practically possible. The Directors review the effectiveness of internal financial
control at least annually.
The Board, subject to delegated authority, reviews capital investment, property sales and purchases, additional
borrowing facilities, guarantees and insurance arrangements.
The Board takes account of the significance of social, environmental and ethical matters affecting the business of
the Group. At this stage in the Group’s development the Board has not adopted a specific policy on Corporate Social
Responsibility as it has a limited pool of stakeholders other than its shareholders. Rather, the Board seeks to protect
the interests of Keras’ stakeholders through individual policies and through ethical and transparent actions.
The Group has adopted an anti-corruption and bribery policy and a whistle blowing policy.
Shareholders
The Directors are always prepared, where practicable, to enter into dialogue with shareholders to promote a
mutual understanding of objectives. The Annual General Meeting provides the Board with an opportunity to
informally meet and communicate directly with investors.
8 KERAS RESOURCES PLC
Environment
The Board recognises that its principal activities, mineral exploration and mining, have potential to impact on
the local environment. To date, activities at the various projects have been limited to mining and drilling activities
and the Group does comply with local regulatory requirements with regard to environmental compliance and
rehabilitation. The impact on the environment of the Group’s activities has the potential to increase should our
projects move into a development or production phase. This is currently assessed through baseline
environmental studies that are being undertaken and identifying resources needed to manage environmental
compliance in the future.
Given the Group’s size and scale it is not considered practical or cost effective to collect and report data on
carbon emissions.
Employees
The Group engages its employees to understand all aspects of the Group’s business and seeks to remunerate
its employees fairly, being flexible where practicable. The Group gives full and fair consideration to applications
for employment received regardless of age, gender, colour, ethnicity, disability, nationality, religious beliefs,
transgender status or sexual orientation. The Group takes account of employees’ interests when making
decisions and welcomes suggestions from employees aimed at improving the Group’s performance.
The Group has previously operated projects in South Africa, Gabon and Togo, and Australia. We have recruited
locally as many of our employees and contractors as practicable.
Suppliers and Contractors
The Group recognises that the goodwill of its contractors, consultants and suppliers is important to its business
success and seeks to build and maintain this goodwill through fair dealings. The Group has a prompt payment
policy and seeks to settle all agreed liabilities within the terms agreed with suppliers. There have been occasions
during the reporting period where this has been extended beyond normal terms as the Group has managed
cash flow during the year during current difficult market conditions.
Health and Safety
The Board recognises that it has a responsibility to provide strategic leadership and direction in the development
of the Group’s health and safety strategy in order to protect all of its stakeholders. The Group does not have a
formal health and safety policy at this time. This is re-evaluated as and when the Group’s nature and scale of
activities change.
Brexit
Although Article 50 of the European Treaty to leave the EU has been invoked and the impact of foreign exchange
fluctuations has been evident, the threats and opportunities of ‘Brexit’ are still largely unknown. Despite no
immediately foreseeable impact on the Group, the Directors are monitoring developments.
This Strategic Report was approved by the Board of Directors on 11 March 2019.
Russell Lamming
Director
KERAS RESOURCES PLC 9
The Board
BRIAN MORITZ
Non-executive Chairman
Brian is a Chartered Accountant and former Senior Partner of Grant Thornton, London. He formed Grant
Thornton’s Capital Markets Team which floated over 100 companies on AIM under his chairmanship. In 2004 he
retired from Grant Thornton to concentrate on bringing new companies to the market as a director.
He concentrates on mining companies, primarily in Africa, and was formerly chairman of African Platinum PLC
(Afplats) and Metal Bulletin PLC as well as currently being chairman of several junior mining companies.
RUSSELL LAMMING
Chief Executive Officer
Russell Lamming is a qualified geologist with an honours degree in geology from the University of the
Witwatersrand and a Bachelor of Commerce in Economics from the University of Natal. Russell has a broad range
of experience including directorship of a South African mining consultancy and precious metals analyst for a leading
international broker and was the CEO of AIM listed Chromex Mining and Goldplat Plc. He has strong relationships
in London and internationally and has raised considerable funds for resource companies over the years.
DAVE REEVES
Non-Executive Director
Dave holds a first class honours degree in mining engineering from the University of New South Wales,
a graduate diploma in applied finance and investment from the Securities Institute of Australia, and a Western
Australian first class mine managers certificate of competency. He has over 25 years’ experience and has
operated in Australia, Africa and Europe in gold, precious metals, mineral sands, bulks and copper. He is non-
executive Chairman of ASX and AIM listed European Metals Holdings.
10 KERAS RESOURCES PLC
Corporate Governance Statement
To the extent applicable, and to the extent able (given the current size and structure of the Company and the
Board), the Company has adopted the Quoted Companies Alliance Corporate Governance Code. Details of how
the Company complies with the Code, and the reasons for any non-compliance, are set out in the table below,
together with the principles contained in the Code.
Prior to the formal adoption of the Code, the Company has, for a number of years, operated in compliance with
recommendations of the QCA, in so far as the size of the Company and its Board permitted. For that reason no
significant changes in governance related matters have been needed. No key governance matters have arisen
since the publication of the last Annual Report.
In light of the Company’s size and nature, the Board considers that the current Board is a cost effective and
practical method of directing and managing the Company. As the Company’s activities develop in size, nature
and scope, the size of the Board and the implementation of additional corporate governance policies and
structures will be reviewed. Further disclosures under the Code are included on the Company’s website.
Principle 1: Establish a strategy and business model which promote long term value for shareholders.
The Company’s strategy is to identify mineral deposits which can be developed into mines to create value and
income for shareholders. In June 2017 this strategy was successfully demonstrated when the Company’s
Australian gold exploration assets were floated on the Australian Securities Exchange (ASX) with the name
Calidus Resources Limited.
The Company’s primary remaining project, the Nayega manganese project in Togo, has also made progress.
An agreement has been concluded for the production of a 10,000 tonne bulk sample, fully funded by the end
user, and production is under way. Completion of this bulk sample is expected to lead to the grant of an
exploitation licence by the Togolese Government, and a joint venture agreement with the funder of the bulk
sample for Nayega and other manganese projects.
The Company continues to seek other natural resource projects, primarily, but not exclusively, in Africa.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the
organisation.
The risks facing the Company are detailed in the Strategic Report. The Board seeks to mitigate such risks so far
as it is able to do, but certain important risks cannot be controlled by the Board.
In particular, the products the Company is seeking to identify and ultimately mine are traded globally at prices
reflecting supply and demand rather than the cost of production. So far as the Company is concerned, the
substantial decline in the price of iron ore rendered two of its projects non-viable, both of which previously
appeared to have substantial value on a discounted cash flow basis, and they were abandoned.
While the Company will only invest in projects where there is a legal right to convert an initial exploration licence
to a mining licence, in practice it may be difficult to obtain such conversion for political reasons. There is no legal
way that the Company can protect itself against this possibility.
Principle 5: Maintain the Board as well-functioning, balanced team led by the chair.
The Company is not earning material income at this stage of its development. For cost reasons the Board has
been reduced to three directors. All of the directors have demonstrated their commitment to the Company by
supporting fund raisings, with the result that they own, in aggregate, more that 20% of the ordinary issued
share capital, and each director owns more than 3% of the share capital. It follows that none of the directors is
considered to be independent.
KERAS RESOURCES PLC 11
Corporate Governance Statement
continued
Russell Lamming, the CEO, works full time for the Company. The other directors, Brian Moritz (the Chairman)
and Dave Reeves, are non-executive directors. As Dave Reeves is resident in Australia, physical Board meetings
are held when he is in the United Kingdom and on an ad hoc basis. Where required at other times, Board
meetings are normally conducted with Dave Reeves present by telephone.
The CEO holds frequent informal discussions with the non-executive directors. Throughout the year such
discussions average approximately two per week. Discussions with Brian Moritz are normally held in the
Company’s offices in Cobham, Surrey, while those with Dave Reeves are normally held by telephone.
Non-executive directors are committed to devote 30 days per annum to the Company, but in fact exceed that
required time commitment. Notwithstanding that, each of the non-executive directors has reduced his fees to
half of the contracted amount, to £15,000 per annum for Brian Moritz and £12,000 per annum for Dave Reeves,
until such time as the Company is cash flow positive.
Principle 6: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.
CVs of the directors are disclosed elsewhere in this Annual Report.
Each of the directors maintains up to date skills by a combination of technical journals and courses.
As an exploration and mining Company the main skills required by the Board are in the area of geology. Both
Russell Lamming and Dave Reeves are qualified geologists with a long history of achievement in this area.
Importantly, each of them has also been in charge of the construction and operation of mines.
Brian Moritz is a Chartered Accountant. In addition to his financial skills he has been registered as a Nominated
Adviser and has wide experience of corporate transactions.
The advice of Wilkins Kennedy, a top 20 accounting firm, is sought on technical accounting matters, in particular
in relation to compliance with IFRS.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.
The Board has successfully achieved major objectives by:
•
•
Capitalising the value of its Australian exploration assets by floating them on the ASX; and
Commencing production of a 10,000 tonne bulk sample at the Nayega manganese mine in Togo.
The Board continues to seek conversion of its exploration licence in Togo to an exploitation licence and to seek
other projects.
Given the current state of the Company’s development the directors believe that the Board operates efficiently
and cost effectively and that the cost of an external review process is not justified. Nevertheless, it is intended
that the Board will be strengthened in due course when new projects are brought in to the Company.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours.
So far as possible the Company will recruit locally for staff and subcontractors on its mining operations.
The Board is conscious of the fact that francophone Africa may be viewed as a corrupt area in which to operate.
Nevertheless, the Company has adopted a proper anti-corruption and whistle blowing policy which is
strictly applied.
The Board intends to utilise an ethical policy which respects local cultural and tribal sensitivities when full mining
commences in Togo. Such a policy has been applied to the bulk sample, also taking account of religious beliefs
of the local people.
12 KERAS RESOURCES PLC
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders.
The Board communicates with its stakeholders through social media and webcasts, as well as at general
meetings and by announcements on RNS.
The audit committee meets twice per annum, on its own to consider and approve the interim results, and with
the auditors to consider the annual report and matters raised by the auditors based on their audit. So far as
possible recommendations by the auditors are immediately implemented. As the CEO is also present as an
observer at such meetings, no further report is submitted to the Board.
The only matter requiring consideration by the remuneration committee during the year was the appointment
of Russell Lamming as CEO, and the terms of his employment. As all Board members were involved, no further
report was submitted to the Board.
KERAS RESOURCES PLC 13
Directors’ Report
The Directors present their report together with the audited financial statements of the Group for the year
ended 30 September 2018.
The Group’s projects are set out in the Strategic Report.
Review of business and financial performance
Further details on the financial position and development of the Group are set out in the Chairman’s Statement,
the Strategic Report and the annexed financial statements.
Results
The Group reports a loss for the year of £584,000 (2017: profit £3,895,000).
Major events after the balance sheet date
Since the end of the year D Reeves has advanced £200,000 and B Moritz has advanced £100,000 to the Company
by way of unsecured interest free loans, repayable from income by the end of March 2019. The loan from
D Reeves of £25,900 set out in Note 27 has been fully repaid.
Dividends
The Directors do not recommend payment of a dividend for the year ended 30 September 2018 (2017: £nil).
Political donations
There were no political donations during the year (2017: £nil).
Going concern
The Directors continue to adopt the going concern basis in preparing the financial statements as further
explained in Note 2 to the financial statements.
Directors’ indemnities
The Group maintains Directors and Officers liability insurance providing appropriate cover for any legal action
brought against its Directors and/or officers.
Audit Committee
The Audit Committee, which comprises R Lamming and B Moritz, and is chaired by B Moritz, is responsible for
ensuring the financial performance, position and prospects of the Group are properly monitored and reported
on and for meeting the auditors and reviewing their reports relating to accounts and internal controls. Meetings
of the Audit Committee are held at least twice a year, at appropriate times in the reporting and audit cycle.
The Audit Committee is required to report formally to the Board on its proceedings after each meeting on all
matters for which it has responsibility. The members of the Audit Committee are re-elected annually by the
Board.
Remuneration Committee
The Remuneration Committee, which comprises R Lamming and B Moritz and which is chaired by R Lamming,
reviews the performance of the executive directors and sets their remuneration, determines the payment of
bonuses to executive directors and considers the future allocation of share options and other equity incentives
pursuant to any share option scheme or equity incentive scheme in operation from time to time to Directors
and employees. Meetings of the Remuneration Committee are required to be held at least twice a year.
The Remuneration Committee is required to report formally to the Board on its proceedings after each meeting
on all matters for which it has responsibility. The members of the Remuneration Committee are re-elected
annually by the Board.
14 KERAS RESOURCES PLC
Directors
The following Directors held office during the period:
B Moritz
D Reeves
R Lamming
Directors’ interests
The beneficial interests of the Directors holding office on 30 September 2018 in the issued share capital of the
Company were as follows:
B Moritz
D Reeves1,2
R Lamming3
30 September 2018
30 September 2017
Number of
ordinary
shares of
0.01p each
76,960,512
381,675,491
68,219,961
Percentage
of issued
ordinary
share capital
3.36%
16.67%
2.98%
Number of
ordinary
shares of
0.01p each
25,833,333
332,591,718
56,219,961
Percentage
of issued
ordinary
share capital
1.18%
15.15%
2.56%
1 370,078,268 ordinary shares are held by the Elwani Trust whose beneficiaries are the spouse and children of David Reeves. David Reeves
is a trustee of the Elwani Trust.
2 11,597,223 ordinary shares are held in the Bodmin Super Fund whose trustees and beneficiaries are David and Eleanor Reeves.
3 These ordinary shares are held by Clearwater Trust whose beneficiaries are members of Russell Lamming’s family.
Since 30 September 2018:
There have been no changes in these interests.
Directors’ remuneration and service contracts
Details of remuneration payable to Directors are disclosed in note 12 to these financial statements:
B Moritz
D Reeves
R Lamming
P Hepburn-Brown
Remuneration
£’000
15
12
82
–
109
2017
Total
£’000
15
12
82
–
109
2016
Total
£’000
28
98
26
9
161
The Company has established a share appreciation rights scheme to incentivise Directors and senior
management. Further details of this scheme can be found in note 24.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the strategic report, the directors’ report and the financial
statements in accordance with applicable law and regulations.
KERAS RESOURCES PLC 15
Directors’ Report
continued
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 (‘IFRS’) 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 Parent Company and of the profit or loss of the Group and Parent
Company 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 estimates that are reasonable and prudent;
state whether the financial statements comply with IFRS as adopted by the European Union, subject to
any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position
of the Company and the Group and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Company is compliant with AIM Rule 26 regarding the Company’s website.
Statement of disclosure to auditor
Each Director at the date of approval of this report confirms that;
So far as they are aware,
•
•
there is no relevant audit information of which the Company’s auditor is unaware; and
they 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
A resolution to re-appoint PKF Littlejohn LLP as auditor will be proposed at the Annual General Meeting.
PKF Littlejohn LLP has indicated its willingness to continue in office.
By order of the Board
Brian Moritz
Director
11 March 2019
16 KERAS RESOURCES PLC
Independent Auditor’s Report to the Members of Keras
Resources Plc
Opinion
We have audited the financial statements of Keras Resources Plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 30 September 2018 which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the
Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent Company
Statements of Cash Flows and notes to the financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and as regards the parent
company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 30 September 2018 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 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.
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. Group materiality was £35,000 based upon gross assets (excluding investments) and the result
before tax and discontinued operations. The parent company has no trading activity and materiality was £33,000
based upon gross assets (excluding investments) and the result before tax. For each component in the scope
of our group audit, we allocated a materiality that was less than our overall group materiality.
KERAS RESOURCES PLC 17
Independent Auditor’s Report to the Members of Keras
Resources Plc
continued
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 judgement by the
directors and considered future events that are inherently uncertain. As in all our audits, we also addressed the
risk of management override of 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 reporting components
of the Group, we selected 2 components covering entities which represented the principal business activities
within the Group, and which accounted for the majority of intangible assets. Of the 2 components selected,
which did not require an individual entity audit, we performed audit procedures on significant areas based on
size or risk profile, or in response to potential risks of material misstatement to the Group.
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.
Key Audit Matter
Recoverability of intangible assets
The Group has reported
intangible assets of
£1.193 million in its Statement of Financial Position as
at 30 September 2018, comprising prospecting and
exploration rights. The carrying value of these
intangible assets is tested annually for impairment.
Refer to note 3(d) and 16.
Where value in use is appropriate, the estimated
recoverable amount is subjective due to inherent
uncertainty involved in forecasting and discounting
future cash flows.
How the scope of our audit responded to the key audit
matter
We confirmed the Group held good title to the
underlying exploration
licenses, and assessed
whether any indicators of impairment existed which
required an impairment charge to be recognised in
profit or loss.
in use calculations to
Where appropriate, we reviewed management’s
include the key
value
assumptions therein. We performed sensitivity
analysis on the headroom to probable changes in key
assumptions.
The remaining early stage exploration and evaluation
assets were assessed with reference to the criteria
listed within IFRS 6, to include whether:
•
•
•
The licence is not expected to be renewed upon
expiry;
Substantive expenditure on further exploration
and evaluation is not budgeted or planned; and
Exploration and evaluation work to date
indicates that the carrying amount is unlikely to
be recovered from further development or sale.
18 KERAS RESOURCES PLC
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 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 statement of directors’ responsibilities, 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.
KERAS RESOURCES PLC 19
Independent Auditor’s Report to the Members of Keras
Resources Plc
continued
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
Use of our report
This report is made solely to the 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.
David Thompson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
11 March 2019
1 Westferry Circus
Canary Wharf
London E14 4HD
20 KERAS RESOURCES PLC
Consolidated statement of comprehensive income
for the year ended 30 September 2018
Continuing operations
Revenue
Cost of sales
Gross loss
Administrative and exploration expenses
Loss from operating activities
Finance costs
Net finance costs
Results from operating activities after finance costs
Tax
Loss for the year from continuing operations
Discontinued operations
(Loss)/profit from discontinued operation, net of tax
(Loss)/profit for the year
Other comprehensive income – items that may be
subsequently reclassified to profit or loss
Exchange translation on foreign operations
Change in fair value of available-for–sale financial assets
Total comprehensive (loss)/income for the year
(Loss)/profit attributable to:
Owners of the Company
Non-controlling interests
(Loss)/profit for the year
Total comprehensive (loss)/income attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive (loss)/income for the year
Earnings per share from continuing and discontinued operations
Basic and diluted (loss)/earnings per share (pence)
From continuing operations
Basic and diluted loss per share (pence)
From discontinued operations
Basic and diluted earnings/(loss) per share (pence)
Notes
9
13
14
8
23
23
23
2018
£’000
–
–
–
(411)
(411)
–
–
(411)
–
(411)
(173)
(584)
10
(8,852)
(9,426)
(576)
(8)
(584)
(9,419)
(7)
(9,426)
2017
£’000
–
–
–
(938)
(938)
(309)
(309)
(1,247)
–
(1,247)
5,142
3,895
(160)
13,915
17,650
3,300
595
3,895
17,055
595
17,650
(0.025)
0.183
(0.018)
(0.103)
(0.007)
0.286)
The notes on pages 29 to 52 are an integral part of these consolidated financial statements.
KERAS RESOURCES PLC 21
Consolidated statement of financial position
as at 30 September 2018
Assets
Property, plant and equipment
Intangible assets
Other investments
Non-current assets
Other investments
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Other reserves
Retained deficit
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Liabilities
Trade and other payables
Current liabilities
Total liabilities
Total equity and liabilities
Notes
15
16
18
18
20
21
22
25
2018
£’000
232
1,193
–
1,425
11,527
16
217
11,760
13,185
7,064
10,358
5,135
(10,006)
12,551
(124)
12,427
758
758
758
2017
£’000
6
1,164
20,379
21,549
–
31
60
91
21,640
6,970
10,107
13,779
(9,446)
21,410
(117)
21,293
347
347
347
13,185
21,640
The financial statements were approved by the Board of Directors and authorised for issue on 11 March 2019.
They were signed on its behalf by:
Brian Moritz
Director
The notes on pages 29 to 52 are an integral part of these consolidated financial statements.
22 KERAS RESOURCES PLC
Consolidated statement of changes in equity
for the year ended 30 September 2018
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KERAS RESOURCES PLC 23
Consolidated statement of changes in equity
for the year ended 30 September 2017
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24 KERAS RESOURCES PLC
Consolidated statement of cash flows
for the year ended 30 September 2018
Cash flows from operating activities
Loss from operating activities
Loss from discontinued operating activities
Adjustments for:
Equity-settled share-based payments
Depreciation and amortisation
Impairment
Foreign exchange differences
Changes in:
– inventories
– trade and other receivables
– trade and other payables
Cash generated by/(used in) operating activities
Finance costs
Taxes paid
Net cash generated by/(used in) operating activities
Cash flows from investing activities
Cash disposed of with subsidiary
Acquisition of property, plant and equipment
Exploration and licence expenditure
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issue of share capital
Proceeds from short term borrowings
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at 30 September
Note
8
2018
£’000
(411)
(173)
42
4
–
174
(191)
–
15
514
165
–
–
165
–
(230)
(20)
(250)
242
–
242
157
60
217
2017
£’000
(938)
(504)
–
4
1,119
(490)
(809)
558
184
(307)
(374)
(21)
(118)
(513)
(11)
(2)
(1,511)
(1,524)
1,130
833
1,963
(74)
134
60
The notes on pages 29 to 52 are an integral part of these consolidated financial statements.
KERAS RESOURCES PLC 25
Company statement of financial position
as at 30 September 2018
Assets
Property, plant and equipment
Investments
Other investments
Non-current assets
Other investments
Loans
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Other reserves
Retained deficit
Total equity attributable to owners of the Company
Liabilities
Trade and other payables
Current liabilities
Total liabilities
Total equity and liabilities
Notes
15
17
18
18
19
20
21
22
25
2018
£’000
230
–
–
230
11,527
1,484
15
208
13,234
13,464
7,064
10,358
5,171
(9,876)
12,717
747
747
747
2017
£’000
–
–
20,379
20,379
–
1,414
30
48
1,492
21,871
6,970
10,107
13,981
(9,522)
21,536
335
335
335
13,464
21,871
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting
the Parent Company profit and loss account. The Parent Company loss for the period was £354,000 (2017: profit
of £2,951,000).
The financial statements of Keras Resources PLC, company number 07353748, were approved by the Board of
Directors and authorised for issue on 11 March 2019. They were signed on its behalf by:
Brian Moritz
Director
The notes on pages 29 to 52 are an integral part of these consolidated financial statements.
26 KERAS RESOURCES PLC
Company statement of changes in equity
for the year ended 30 September 2018
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The notes on pages 29 to 52 are an integral part of these consolidated financial statements.
KERAS RESOURCES PLC 27
Company statement of cash flows
for the year ended 30 September 2018
Cash flows from operating activities
Loss from operating activities
Adjustments for:
Equity-settled share-based payments
Changes in:
– trade and other receivables
– trade and other payables
Cash generated by/(used in) operating activities
Finance costs
Net cash generated by (used in) operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issue of share capital
Proceeds from short term borrowing
Loans (to)/repaid by subsidiaries
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at 30 September
2018
£’000
2017
£’000
(354)
(4,222)
42
15
515
218
–
218
(230)
(230)
242
–
(70)
172
160
48
208
–
201
248
(3,773)
(308)
(4,081)
–
–
1,130
833
2,084
4,047
(34)
82
48
The notes on pages 29 to 52 are an integral part of these consolidated financial statements.
28 KERAS RESOURCES PLC
Notes to the Consolidated Financial Statements
for the year ended 30 September 2018
1. Reporting entity
Keras Resources PLC is a company domiciled in England and Wales. The address of the Company’s registered
office is 27/28 Eastcastle Street, London, W1W 8DH. The Group currently operates as an explorer and developer.
2. Going concern
The Directors have adopted the going concern basis in preparing the Group and Company financial statements.
The Group’s and Company’s business activities together with the factors likely to affect its future development,
performance and position are set out in the Chairman’s Statement and Strategic Report. In addition, note 26 to
the Financial Statements includes the Group’s policies and processes for managing its financial risk
management objectives.
Proceeds from the bulk sample of 10,000 tonnes of manganese concentrate due for delivery in March 2019 are
estimated to produce sufficient cash to cover all costs up to that date, and to repay the advances of £300,000
from Directors. Subsequently the Directors expect mining at Nayega to produce positive cash flow for the Group.
In the event that the Exploitation Licence is not granted in the short term, the directors intend to cover the
shortfall by sale of a portion of the Calidus shares, which will be released from escrow by the ASX in June 2019.
On this basis, the Directors have a reasonable expectation that the Group and Company have adequate resources
to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern
basis of accounting.
3. Basis of preparation
Statement of compliance
(a)
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”) and as adopted by the
European Union, and the Companies Act 2006 as applicable to entities reporting in accordance with IFRS.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis unless otherwise stated.
Functional and presentation currency
(c)
These consolidated financial statements are presented in Pounds Sterling (‘GBP’ or ‘£’), which is the Group’s
functional currency and is considered by the Directors to be the most appropriate presentation currency to
assist the users of the financial statements. All financial information presented in GBP has been rounded to the
nearest thousand, except when otherwise indicated.
(d) Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRS, as adopted by the EU, requires
management to make judgements, estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised if the revision affects only that period, or in the
period of revision and future periods of the revision if it affects both current and future periods.
KERAS RESOURCES PLC 29
Notes to the Consolidated Financial Statements
continued
3. Basis of preparation continued
Critical estimates and assumptions that have the most significant effect on the amounts recognised in the
consolidated financial statements and/or have a significant risk of resulting in a material adjustment within the
next financial year are as follows:
•
•
•
Carrying value of intangible assets
– Notes 4(e)(i) and 16
Intercompany receivables (Company only)
– Note 19
Fair value of shares acquired following
disposal of subsidiary and of performance shares
– Note 4(c)(i), 6(v) and 18
4. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by Group entities.
(a) Basis of consolidation
Business combinations
(i)
The Group accounts for business combinations using the acquisition method when control is transferred to the
Group. The consideration transferred in the acquisition is generally measured at fair value, as are identifiable
net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase
is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the
issue of debt or equity securities. The consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss.
Subsidiaries
(ii)
Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases. On disposal of subsidiaries,
any amounts previously recognised in other comprehensive income in respect of that entity are accounted for
as if the Group had directly disposed of the related assets or liabilities. This might mean that amounts previously
recognised in other comprehensive income are reclassified to profit or loss.
(iii) Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at
the date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are
accounted for as equity transactions.
Loss of control
(iv)
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and
any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised
in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation
(v)
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
Foreign currency
(b)
Transactions in foreign currencies are translated into the respective functional currencies of Group entities at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the reporting date.
30 KERAS RESOURCES PLC
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value in a foreign
currency are translated to the functional currency at the exchange rate when the fair value was determined.
Non-monetary items that are measured based on historical cost in a foreign currency are translated at the
exchange rate at the date of the transaction.
Foreign operations
(i)
The assets and liabilities of foreign operations, including goodwill and the fair value adjustments arising on
acquisition, are translated to GBP at exchange rates at the reporting date. The income and expenses of foreign
operations are translated to GBP at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income and accumulated in the translation
reserve except to the extent that the translation difference is allocated to non-controlling interests. When a
foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control
is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit
or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but
retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling
interests. When the Group disposes of only part of an associate or joint venture while retaining significant
influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
(c)
Financial instruments
Non-derivative financial assets
(i)
The Group initially recognises loans and receivables on the date that they are originated. All other financial
assets are recognised initially on the trade date, which is the date that the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks
and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets
that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities
are offset and the net amount presented in the statement of financial position when, and only when, the Group
currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis
or to realise the asset and settle the liability simultaneously.
The Group’s non-derivative financial assets comprise loans and receivables and available-for-sale financial assets.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective
interest method, less any impairment losses (see note 4(f)(i)).
Loans and receivables comprise trade and other receivables.
Available-for-sale financial assets
These assets are initially measured at fair value. Subsequent to initial recognition, they are measured at fair
value and changes therein, other than impairment losses and interest income, are recognised in OCI and
accumulated in the fair value reserve. When these assets are derecognised, the gain or loss accumulated in
equity is reclassified to profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from
the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the
Group in the management of its short-term commitments.
KERAS RESOURCES PLC 31
Notes to the Consolidated Financial Statements
continued
4. Significant accounting policies continued
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities are recognised initially on the trade date, which is the date that the Group
becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest method.
Other financial liabilities comprise trade and other payables.
Share capital
(iii)
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
are recognised as a deduction from equity, net of any tax effects.
(d) Property, plant and equipment
Recognition and measurement
(i)
Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated
impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between
the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
Subsequent expenditure
(ii)
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated
with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred.
(iii) Depreciation
Items of property, plant and equipment are depreciated on a straight-line basis in the statement of
comprehensive income over the estimated useful lives of each component.
Items of property, plant and equipment are depreciated from the date that they are installed and are ready for
use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.
The estimated useful lives of significant items of property, plant and equipment are as follows:
•
•
•
•
plant and equipment
10 years
office equipment
computer equipment
motor vehicles
2 years
2 years
5 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
(e)
Intangible assets
Prospecting and exploration rights
(i)
Rights acquired with subsidiaries are recognised at fair value at the date of acquisition. Other rights acquired
and evaluation expenditure are recognised at cost.
32 KERAS RESOURCES PLC
(ii) Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less
accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure
(iii)
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill
and brands, is recognised in profit or loss as incurred.
(iv) Amortisation
Intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from
the date that they are available for use.
The estimated useful lives are as follows:
•
Prospecting and exploration rights
Life of mine based on units of production
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
Amortisation is included within administrative expenses (discontinued operations) in the statement of
comprehensive income.
(f)
Impairment
Non-derivative financial assets
(i)
A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective
evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset,
and had an impact on the estimated future cash flows from that asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring
of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor
or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic
conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for
an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective
evidence of impairment.
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial assets measured at amortised cost (loans and
receivables) at both a specific asset and collective level. All individually significant assets are assessed for specific
impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that
has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for
impairment by grouping together assets with similar risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of
recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current
economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by
historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s
original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance against loans
and receivables. Interest on the impaired asset continues to be recognised. When an event occurring after the
impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss
is reversed through profit or loss.
KERAS RESOURCES PLC 33
Notes to the Consolidated Financial Statements
continued
4. Significant accounting policies continued
Available-for-sale financial assets
Impairment losses on available for sale financial assets are recognised by reclassifying the losses accumulated
in the fair value reserve to profit or loss. The amount reclassified is the difference between the acquisition cost
(net of any principal repayment and amortisation) and the current fair value, less any impairment previously
recognised in profit or loss. Impairment losses recognised in profit or loss for an investment in an equity
instrument classified as available-for-sale are not reversed through profit or loss.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is
estimated. Indefinite-lived intangible assets are tested annually for impairment or when there is an indication
of impairment. An impairment loss is recognised if the carrying amount of an asset or Cash Generating Unit
(‘CGU’) exceeds its recoverable amount.
The recoverable amount of an asset of CGU is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset or CGU. For the purpose of impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other
assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are
aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill
is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups
of CGUs that are expected to benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated
first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce
the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no impairment loss had
been recognised.
Employee benefits
(g)
Share-based payments
The grant-date fair value of share-based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees become unconditionally
entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for
which the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number of awards that meet the related service and non-
market performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and
there is no adjustment for differences between expected and actual outcomes.
(h) Discontinued operations
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can
be clearly distinguished from the rest of the Group and which:
–
–
–
Represents a separate major line of business or geographic area of operations;
Is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of
operations; or
Is a subsidiary acquired exclusively with a view to re-sale.
34 KERAS RESOURCES PLC
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the
criteria to be classified as held-for-sale.
When an operation is classified as a discontinued operation, the comparative statements of profit or loss is re-
presented as if the operation had been discontinued from the start of the comparative year.
Revenue
(i)
Revenue from the sale of precious metals is recognised in the statement of comprehensive income when the
significant risks and rewards of ownership have been transferred to the buyer excluding sales taxes.
Finance income and finance costs
(j)
Finance income comprises interest income on bank funds. Interest income is recognised as it accrues in profit
or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings. Borrowing costs are recognised in profit or loss in the
period in which they are incurred.
Taxation
(k)
Tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss except
to the extent that it relates to a business combination, or items recognised directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous
years. Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognised for:
•
•
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent
that it is probable that they will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different
tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and
liabilities will be realised simultaneously.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which they can
be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised; such reductions are reversed when the probability
of future taxable profits improves.
Segment reporting
(l)
Segment results that are reported to management include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
KERAS RESOURCES PLC 35
Notes to the Consolidated Financial Statements
continued
4. Significant accounting policies continued
(m) Equity reserves
Share premium includes any premiums received on issue of share capital. Any transaction costs associated with
the issue of shares are deducted from share premium.
The share option/warrant reserve is used to recognise the fair value of equity-settled share based
payment transactions.
The exchange reserve is used to record exchange differences arising from the translation of foreign subsidiaries
into the presentation currency.
The available for sale assets reserve is used to record unrealised accumulated changes in fair value on available
for sale financial assets.
5. New standards and interpretations
Amendments to the following International Financial Reporting Standards (IFRS) and International Accounting
Standards (IAS) have been implemented by the Group in the period ended 30 September 2018:
Amendments to IAS 7 Statement of Cash Flows
Standards, Amendments to published Standards and Interpretations issued but not yet effective
Certain standards, amendments to published standards and interpretations have been issued that are
mandatory for accounting periods beginning after 1 October 2018 or later periods, but which the Group has
not early adopted.
At the reporting date of these financial statements, the following were in issue but not yet effective:
IFRS 9 Financial Instruments
Effective 1 January 2018
IFRS 15 Revenue from Contracts with Customers
Effective 1 January 2018
IFRS 16 Leases
Effective 1 January 2019
Amendments to IFRS 2 Share-based Payment
Effective 1 January 2018
Annual Improvements to IFRS Standards 2014-2016 Cycle
Effective 1 January 2018
Annual Improvements to IFRS Standards 2015-2017 Cycle
No date yet determined
Investments in equity investments within the scope of IFRS 9 are measured at fair value through profit or loss,
unless the Group and Company elect to designate the investment as fair value through other comprehensive
income. If the election is made, under IFRS 9 any cumulative gains or losses previously recognised in other
comprehensive income are not reclassified to profit or loss when the asset is disposed of.
There are no other standards that are not yet effective and that would be expected to have a material impact
on the Group and Company based upon current activities.
6. Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both
financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. When applicable further information about the
assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
36 KERAS RESOURCES PLC
Property, plant and equipment
(i)
The fair value of property, plant and equipment recognised as a result of a business combination is the estimated
amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing
seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably.
The fair value of items of plant and equipment is based on the market approach and cost approaches using
quoted market prices for similar items when available and depreciated replacement cost when appropriate.
Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic
obsolescence.
Intangible assets
(ii)
The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the
use and eventual sale of the assets.
(iii) Trade and other receivables
The fair value of trade and other receivables is estimated at the present value of future cash flows, discounted
at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes or
when such assets are acquired in a business combination.
(iv) Share-based payments
The fair value of the employee share options is measured using the Black-Scholes formula. Measurement inputs
include the share price on the measurement date, the exercise price of the instrument, expected volatility (based
on an evaluation of the Company’s historic volatility, particularly over the historic period commensurate with
the expected term), expected term of the instruments (based on historical experience and general option holder
behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and
non-market performance conditions attached to the transactions are not taken into account in determining
fair value.
Investments – other
(v)
When one is available, the Group measures the fair value of an instrument using the quoted price in an active
market for that instrument. A market is regarded as active if transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information on an ongoing basis. A discount is applied to
the value of any Performance shares to reflect the possibility that the milestones for conversion into ordinary
shares may not be met.
7. Operating segments
The Group considers that it now operates in one distinct business area, being that of manganese and cobalt
exploration in West Africa. This business area forms the basis of the Group’s operating segments. For each
segment, the Group’s Managing Director (the chief operating decision maker) reviews internal management
reports on at least a quarterly basis.
Other operations relate to the Group’s administrative functions conducted at its head office and by its
intermediate holding company together with consolidation adjustments.
Information regarding the results of each reportable segment is included below. Performance is measured
based on segment result before tax, as included in the internal management reports that are reviewed by the
Group’s Managing Director. Segment results are used to measure performance as management believes that
such information is the most relevant in evaluating the performance of certain segments relative to other
entities that operate within the exploration industry.
KERAS RESOURCES PLC 37
Notes to the Consolidated Financial Statements
continued
7. Operating segments continued
Information about reportable segments
2018
Discontinued
Gold
£’000
Discontinued
Iron Ore
£’000
Manganese/
cobalt
£’000
Other
operations
£’000
External revenue
Interest expense
Depreciation, amortisation
and impairment
Loss before tax
Assets
Exploration and capital expenditure
Liabilities
–
–
–
(72)
–
–
–
–
–
–
(101)
–
–
–
–
–
4
(52)
870
250
10
–
–
–
(359)
12,315
-
748
2017
Discontinued
Gold
£’000
Discontinued
Iron Ore
£’000
Manganese/
cobalt
£’000
Other
operations
£’000
External revenue
Interest expense
Depreciation, amortisation
and impairment
Loss before tax
Assets
Exploration and capital expenditure
Liabilities
1,008
(5)
(390)
(472)
–
1,961
–
–
–
–
(32)
–
–
–
–
–
(2)
(66)
853
171
10
–
(309)
–
(1,181)
20,787
–
337
Total
£’000
–
–
4
(584)
13,185
250
758
Total
£’000
1,008
(314)
(392)
(1,751)
21,640
2,132
347
The Group was awarded exploration licenses during 2017 in West Africa on ground containing previously
discovered cobalt and nickel mineralisation.
Information about geographical segments
2018
Discontinued
Australia
£’000
Discontinued
South Africa
£’000
External revenue
Interest expense
Depreciation, amortisation
and impairment
Loss before tax
Assets
Exploration and capital expenditure
Liabilities
–
–
–
(72)
–
–
–
–
–
–
(101)
–
–
–
2017
Discontinued
Australia
£’000
Discontinued
South Africa
£’000
External revenue
Interest expense
Depreciation, amortisation
and impairment
Loss before tax
Assets
Exploration and capital expenditure
Liabilities
1,008
(5)
(390)
(472)
–
1,961
–
–
–
–
(8)
–
–
–
West
Africa
£’000
–
–
4
(52)
870
250
10
West
Africa*
£’000
–
–
(2)
(80)
853
171
10
Other
£’000
–
–
–
(359)
12,315
–
748
Other
£’000
–
(309)
–
(1,191)
20,787
–
337
Total
£’000
–
–
4
(584)
13,185
250
758
Total
£’000
1,008
(314)
(392)
(1,751)
21,640
2,132
347
*Information regarding West Africa includes £14,000 loss before tax and £nil segment assets relating to discontinued activities.
38 KERAS RESOURCES PLC
8. Discontinued operations
On 17 February 2017 the Group applied to deregister its South African subsidiary, Moongate 218 (Pty) Limited.
Its immediate parent undertaking, Ferrex Manganese Limited, was dissolved at the same time. On 25 September
2018, Southern Mn (Pty) Ltd, having been dormant throughout the year, was sold for ZAR 1. On 6 January 2017,
the Group disposed of its entire 78.3% interest in Ressource Equatoriales SARL for nil consideration. These
actions were taken by the Group as either the licences had expired or it was considered that the operations
were no longer viable for the Group. The Group no longer holds iron ore assets. On 31 May 2017 the decision
was taken to fully impair the subsidiary Keras Australia Pty Limited as its research and development activities
have ceased and on 17 September 2018, with the company having been dormant throughout the year, the
company was sold for AUD1.
On 8 May 2017 the Company announced that ASX quoted Pharmanet Limited (‘Pharmanet’) lodged a prospectus
with the Australian Securities and Investments Commission (the “Prospectus”) on 5 May 2017. The Prospectus
was lodged in order to raise A$7.9 million (approximately £4.6 million) as part of the proposed acquisition by
Pharmanet of 100% of the issued share capital of the Company’s wholly owned subsidiary Keras Gold Australia
Pty Limited, incorporating Keras (Pilbara) Gold Pty Limited. Pharmanet relisted as Calidus Resources Limited
(‘Calidus’) in June 2017. On 13 June 2017 the Ordinary and Performance shares in Calidus were allotted to the
Company.
Analysis of the result of discontinued operations is as follows:
Revenue (external)
Expenses
Results from operating activities
Income tax
Results from operating activities, net of tax
Gain on sale of discontinued operation
(Loss)/profit from discontinued operations, net of tax
The discontinued operations did not have a tax impact.
Note
2018
£’000
–
(173)
(173)
–
(173)
–
(173)
2017
£’000
1,008
(1,512)
(504)
–
(504)
5,646
5,142
In 2018 the discontinued activities relate to the recycling of the exchange reserve in respect of the subsidiary
undertakings disposed of during the year.
Earnings/(loss) per share
Basic and diluted earnings/(loss) per share (pence)
23
(0.007)
0.286
9. Revenue
Discontinued activities (see note 8)
Sales of precious metals – Mining and exploration
2018
£’000
–
–
2017
£’000
1,008
1,008
KERAS RESOURCES PLC 39
Notes to the Consolidated Financial Statements
continued
10. Expenses
Expenses include:
Depreciation and amortisation expense
Auditor’s remuneration
– Audit fee
– Other services
Foreign exchange differences
2018
£’000
4
25
–
18
Auditor’s remuneration in respect of the Company amounted to £10,000 (2017: £10,000).
11. Personnel expenses
Wages and salaries
Fees
Equity-settled share-based payments (see note 24)
2018
£’000
155
11
(106)
60
2017
£’000
3
25
–
289
2017
£’000
65
201
70
336
Fees in respect of the services of D Reeves are payable to a third party, Wilgus Investments (Pty) Limited.
Fees in respect of the services of R Lamming are payable to a third party, Parallel Resources Limited for part of
the period.
The average number of employees (including directors) during the period was:
2018
2017
Directors
Key management personnel
Other
12. Directors’ emoluments
2018
Wages and salaries (incl. fees)
2017
Wages and salaries (incl. fees)
3
–
3
6
Executive
directors
£’000
Non-executive
directors
£’000
82
82
27
27
Executive
directors
£’000
Non-executive
directors
£’000
107
107
54
54
These amounts are disclosed by director in the Directors’ report on page 15.
Emoluments disclosed above include the following amounts payable to the highest paid director:
Emoluments for qualifying services
2018
£’000
82
4
1
3
8
Total
£’000
109
109
Total
£’000
161
161
2017
£’000
98
Key management personnel
Included in note 11 are emoluments paid to key management personnel in the year which amounted to £5,000
(2017: £71,000).
40 KERAS RESOURCES PLC
13. Finance costs
Recognised in loss for period
Interest on loans
Other
Finance costs
14. Taxation
Current tax expense
Tax recognised in profit or loss
Current tax expense
Current period
Deferred tax expense
Origination and reversal of temporary differences
Total tax expense
Reconciliation of effective tax rate
Loss before tax (continuing operations)
Tax using the Company’s domestic tax rate of 19.0% (2017: 19.5%)
Effects of:
Overseas losses
Equity-settled share-based payments
Tax losses carried forward not recognised as a deferred tax asset
2018
£’000
–
–
–
2017
£’000
20
289
309
2018
£’000
2017
£’000
–
–
–
2018
£’000
(411)
(78)
10
10
58
–
–
–
–
2017
£’000
(1,247)
(243)
15
14
214
–
None of the components of other comprehensive income have a tax impact.
Factors that may affect future tax charges
At the year end, the Group had unused tax losses available for offset against suitable future profits of
approximately £4,813,000 (2017: £4,508,000). A deferred tax asset has not been recognised in respect of such
losses due to uncertainty of future profit streams.
KERAS RESOURCES PLC 41
Notes to the Consolidated Financial Statements
continued
15. Property, plant and equipment
Group
Cost
Balance at 1 October 2016
Additions
Disposals
Effect of movements in exchange rates
Balance at 30 September 2017
Balance at 1 October 2017
Additions
Disposals
Effect of movements in exchange rates
Balance at 30 September 2018
Depreciation and impairment provisions
Balance at 1 October 2016
Depreciation for the year
Depreciation on disposals
Effect of movements in exchange rates
Balance at 30 September 2017
Balance at 1 October 2017
Depreciation for the year
Depreciation on disposals
Effect of movements in exchange rates
Balance at 30 September 2018
Carrying amounts
At 30 September 2016
At 30 September 2017
At 30 September 2018
Plant and
equipment
£’000
Office and
computer
equipment
£’000
Motor
vehicles
£’000
Total
£’000
52
9
(60)
1
2
2
230
–
–
232
18
–
(16)
–
2
2
–
–
–
2
34
–
230
62
1
(23)
–
40
40
–
(9)
–
31
45
3
(14)
–
34
34
4
(9)
–
29
17
6
2
25
–
–
1
26
26
–
–
–
26
25
–
–
1
26
26
–
–
–
26
–
–
–
139
10
(83)
2
68
68
230
(9)
–
289
88
3
(30)
1
62
62
4
(9)
–
57
51
6
232
42 KERAS RESOURCES PLC
Company
Cost
Balance at 1 October 2016
Additions
Balance at 30 September 2017
Balance at 1 October 2017
Additions
Balance at 30 September 2018
Depreciation and impairment provisions
Balance at 1 October 2016
Depreciation for the year
Balance at 30 September 2017
Balance at 1 October 2017
Depreciation for the year
Balance at 30 September 2018
Carrying amounts
At 30 September 2016
At 30 September 2017
At 30 September 2018
Plant and
equipment
£’000
Computer
equipment
£’000
–
–
–
–
230
230
–
–
–
–
–
–
–
–
230
5
–
5
5
–
5
5
–
5
5
–
5
–
–
–
Total
£’000
5
–
5
5
230
235
5
–
5
5
–
5
–
–
230
Plant and equipment consists of plant under construction, which is not depreciated until it is brought into use.
KERAS RESOURCES PLC 43
Notes to the Consolidated Financial Statements
continued
16. Intangible assets
Cost
Balance at 1 October 2016
Additions
Disposals
Effect of movement in exchange rates
Balance at 30 September 2017
Balance at 1 October 2017
Additions
Disposals
Effect of movements in exchange rates
Balance at 30 September 2018
Amortisation and impairment losses
Balance at 1 October 2016
Impairment
Amortisation
Disposals
Effect of movements in exchange rates
Balance at 30 September 2017
Balance at 1 October 2017
Impairment
Amortisation
Disposals
Effect of movements in exchange rates
Balance at 30 September 2018
Carrying amounts
Balance at 30 September 2016
Balance at 30 September 2017
Balance at 30 September 2018
Prospecting
and
exploration
rights
£000
6,686
2,122
(7,293)
36
1,551
1,551
20
(387)
9
1,193
4,645
389
–
(4,643)
(4)
387
387
–
–
(387)
–
–
2,041
1,164
1,193
The carrying value of the prospecting and exploration rights is supported by the estimated resource and current
market values.
44 KERAS RESOURCES PLC
17. Investment in subsidiaries
Company
Equity investments
Balance at beginning of period
Additions
Disposals
Balance at 30 September
Directly
Keras West Africa Limited
Ferrex Manganese Limited
Southern Iron Limited
Keras Australia Pty Limited
Indirectly
Southern MN (Pty) Limited
Société Générale de Mine
Kamnico SARL
2018
£’000
–
–
–
–
2017
£’000
465
–
(465)
–
Activity
Investment
Investment
Investment
Exploration
Exploration
Exploration
Exploration
Country of
incorporation
Ownership interest
2018
2017
United Kingdom
United Kingdom
Guernsey
Australia
South Africa
Togo
Togo
100%
–
100%
–
–
85%
100%
100%
100%
100%
100%
74%
85%
100%
Ferrex Manganese Limited was dissolved on 3 July 2018 and the loan from the parent company of £4k was
written off.
Registered offices of subsidiary companies are:
Keras West Africa Limited, 27/28 Eastcastle Street, London W1W 8DH
Southern Iron Limited, 1st Floor, Elizabeth House, Les Ruettes Brayes, St Peter Port, Guernsey
Société Générale de Mine, Quartier Adidogome Apedokoe 02, BP 20022, Lome, Togo
Kamnico SARL, Quartier Agoenyive-Atchanve, BP 2936, Lome, Togo.
18. Other investments
Group and company
Equity securities – available for sale
At 1 October
Shares acquired on disposal of subsidiary
Value adjustment recognised in equity
2018
£’000
20,379
–
(8,852)
11,527
2017
£’000
–
6,661
13,718
20,379
Equity securities represent ordinary and performance shares in Calidus Resources Limited (“Calidus”), a company
listed on the Australian Securities Exchange (“ASX”). These shares have been re-measured to fair value through
other comprehensive income. Fair value is the mid-market price of Calidus ordinary shares on the ASX,
discounted in the case of performance shares to reflect the possibility that the milestones for conversion to
ordinary shares will not be achieved. Under ASX rules, these shares are held in escrow. Available for sale assets
are denominated in Australian dollars. These shares were reclassified to current assets in the year as they will
come out of escrow in June 2019.
KERAS RESOURCES PLC 45
Notes to the Consolidated Financial Statements
continued
19. Loans
Company
Balance at beginning of period
Funds advanced to subsidiaries
Repaid/impaired
Provisions against loans
Balance at 30 September
All loans are currently unsecured and interest free and repayable on demand.
20. Trade and other receivables
Group
Other receivables
Prepayments
Company
Other receivables
Prepayments
2018
£’000
1,414
74
(4)
–
1,484
2018
£’000
16
–
16
2018
£’000
15
–
15
Other receivables are stated at their nominal value less allowances for non-recoverability.
The Group and Company’s exposure to credit and currency risk is disclosed in note 26.
21. Cash and cash equivalents
Group
Bank balances
Cash and cash equivalents
Company
Bank balances
Cash and cash equivalents
2018
£’000
217
217
2018
£’000
208
208
2017
£’000
2,434
2,171
(3,191)
–
1,414
2017
£’000
3
28
31
2017
£’000
2
28
30
2017
£’000
60
60
2017
£’000
48
48
There is no material difference between the fair value of cash and cash equivalents and their book value.
46 KERAS RESOURCES PLC
22. Capital and reserves
Share capital
In issue at beginning of year
Issued for cash
Issued in settlement of debt
Issued in connection with the acquisition of Klondyke
In issue at 30 September – fully paid
In issue at beginning of year
In issue at 30 September – fully paid
Balance at beginning of year
Share issues
Balance at 30 September
Number of ordinary shares
of £0.001 each
2018
2017
2,195,133,438
66,666,667
27,333,334
–
1,347,969,623
322,857,131
424,306,684
100,000,000
2,289,133,439
2,195,133,438
Number of deferred shares
of £0.004 each
2018
2017
1,193,794,390
1,193,794,390
1,193,794,390
1,193,794,390
Ordinary and deferred
share capital
2018
£’000
2017
£’000
6,970
94
7,064
6,123
847
6,9703
All ordinary shares rank equally with regard to the Company’s residual assets.
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled
to one vote per share at meetings of the Company.
The deferred shares do not entitle the holders thereof to receive notice of or attend and vote at any general
meeting of the Company or to receive dividends or other distributions. As regards any return on capital on a
winding up or other return of capital (otherwise than on conversion or redemption or purchase by the Company
of any of its shares) the holders of the deferred shares shall be entitled to receive the amount paid up on their
shares after holders of the ordinary shares the amount of £1,000 in respect of each ordinary share held by
them respectively.
Issue of ordinary shares
On 23 October 2017, 66,666,667 ordinary shares were issued for cash at £0.00375 per share.
On 26 July 2018, 27,333,334 ordinary shares were issued to B Moritz in lieu of unpaid fees of £102,500 for the
period of 41 months to 30 September 2016. The shares were issued at a price £0.00375 per share.
Warrants
2018 2017
In issue at beginning of year
Lapsed in year
Issued in year
Issued in year
Exercised in year
In issue at 30 September
Average
exercise
price
0.49p
0.5p
–
–
–
0.48p
Number
208,859,590
(73,602,567)
–
–
–
135,257,023
Average
exercise
price
0.5p
–
0.46p
0.5p
–
0.49p
Number
73,602,567
–
59,542,743
75,714,280
–
208,859,590
KERAS RESOURCES PLC 47
Notes to the Consolidated Financial Statements
continued
22. Capital and reserves continued
On 3 October 2016, in connection with the finance agreement set up to acquire the Klondyke Gold Project,
59,542,743 warrants were granted at a strike price of £0.8501. These are valid for two years from the date of
issue. On 16 June 2017, when the finance facility was repaid, the warrants were repriced at £0.0046.
On 24 May 2017 75,714,280 warrants were issued. These warrants are exercisable at price of 0.5p within a 2-year
exercise period.
The weighted average remaining contractual life of the warrants outstanding is 134 days.
Other reserves
Share option/warrant reserve
The share option/warrant reserve comprises the cumulative entries made to the consolidated statement of
comprehensive income in respect of the equity-settled share-based payments and cumulative entries made to
the liability for loan notes with an 8% redemption in respect of warrants issued with the notes as adjusted for
share options cancelled and warrants exercised.
Exchange reserve
The exchange reserve comprises all foreign currency differences arising from the translation of the financial
statements of foreign operations.
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets
until the assets are derecognised or impaired.
23. Earnings per share
Basic and diluted earnings/(loss) per share
The calculation of basic earnings/(loss) per share at 30 September 2018 is based on the following (loss)/profit
attributable to ordinary shareholders and a weighted average number of ordinary shares in issue.
(Loss)/profit attributable to ordinary shareholders (£)
Continuing operations
Discontinued operations
Loss/(profit) attributable to ordinary shareholders
Weighted average number of ordinary shares
Issued ordinary shares at beginning of year
Effect of shares issued
Weighted average number of ordinary shares
2018
(403,000)
(173,000)
(576,000)
2017
(1,842,000)
5,142,000
3,300,000
2018
2017
2,195,133,438
67,408,220
1,347,969,623
447,744,087
2,262,541,658
1,795,713,710
The warrants in issue are considered to be antidilutive and as a result, basic and diluted loss per share are the same.
24. Share-based payments
On 28 April 2016, the Company established a Share Appreciation Right Scheme to incentivise Directors and
senior executives. Shares granted under the scheme at that date total 97,500,000 at 1.0674p per share with
64,500,000 vesting on 31 December 2016 and the balance, 33,000,000, vesting on 31 December 2017. Share
Appreciation Rights have a vesting period of 3 years and the aggregate number of shares which may be allocated
under the Scheme will not exceed 15% of the Company’s issued share capital from time to time.
48 KERAS RESOURCES PLC
The Black Scholes pricing model was used to calculate the share based payment charge incorporating an annual
volatility rate of 60%. The charge for the year ended 30 September 2018 for these rights which is included in
administrative and exploration expenses amounted to £8,000 (2017: £74,000). At the year end the value of
these rights was considered to be nil and the charges in respect of these which amounted to £156,000 were
reversed through profit or loss.
On 12 March 2018, a further 90,000,000 Shares were granted at 0.36p per share with 30,000,000 vesting
immediately, 30,000,000 vesting on 12 March 2019 and 30,000,000 vesting on 12 March 2020.
The Black Scholes pricing model was used to calculate the share based payment charge incorporating an annual
volatility rate of 60%, expected life of 2.5 years and risk free investment rate of 0.72%. The charge for the year
ended 30 September 2018 for these further rights which is included in administrative and exploration expenses
amounted to £42,000 (2017 : £nil).
25. Trade and other payables
Group
Trade payables
Accrued expenses
Other payables
Company
Trade payables
Accrued expenses
Other payables
2018
£’000
66
40
652
758
2018
£’000
65
40
642
747
2017
£’000
1
138
208
347
2017
£’000
–
138
197
355
There is no material difference between the fair value of trade and other payables and accruals and their book
value. The Group’s and Company’s exposure to currency and liquidity risk related to trade and other payables is
disclosed in note 26. Included in other payables is a deposit received from a customer with regard to the bulk
sampling metallurgical testwork contract amounting to £571,000 (2017: £nil).
26. Financial instruments
Financial risk management
The Group’s operations expose it to a variety of financial risks that include liquidity risk. The Group has in place
a risk management programme that seeks to limit the adverse effect of such risks on its financial performance.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails
to meet its contractual obligations.
KERAS RESOURCES PLC 49
Notes to the Consolidated Financial Statements
continued
26. Financial instruments continued
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date was as follows.
Group
Trade and other receivables
Cash and cash equivalents
Company
Loans
Trade and other receivables
Cash and cash equivalents
Loans and receivables
Carrying amount
2018
£’000
16
217
233
2017
£’000
31
60
91
Loans and receivables
Carrying amount
2018
£’000
1,414
15
208
1,707
2017
£’000
1,414
30
48
1,492
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset.
The Group reviews its facilities regularly to ensure it has adequate funds for operations and expansion plans.
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements.
Group
2018
Non-derivative financial liabilities
Trade and other payables
Group
2017
Non-derivative financial liabilities
Trade and other payables
50 KERAS RESOURCES PLC
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£’000
2-12 months
£’000
758
758
(758)
(758)
(126)
(126)
(632)
(632)
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£’000
2-12 months
£’000
347
347
(347)
(347)
(58)
(58)
(289)
(289)
Company
2018
Non-derivative financial liabilities
Trade and other payables
Company
2017
Non-derivative financial liabilities
Trade and other payables
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£’000
2-12 months
£’000
747
747
(747)
(747)
(124)
(124)
(623)
(623)
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£’000
2-12 months
£’000
335
335
(335)
(335)
(56)
(56)
(279)
(279)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return.
The Group’s holding in Calidus Resources Limited, which is listed on the Australian Securities Exchange is affected
by both foreign exchange risk and equity price risk.
Currency risk
The Group is exposed to foreign currency risk on purchases that are denominated in currencies other than GBP.
The currency giving rise to this risk is primarily the CFA Franc. The Group is also exposed to foreign currency risk
on its equity securities held in Australian Dollars.
Fair values
The fair values of financial instruments such as trade and other receivables/payables are substantially equivalent
to carrying amounts reflected in the balance sheet.
Capital management
The Group’s objective when managing capital is to safeguard its accumulated capital in order to provide an
adequate return to shareholders by maintaining a sufficient level of funds, in order to support continued
operations.
The Group considers its capital to be total shareholders’ equity which at 30 September 2018 for the Group
totalled £12,551,000 (2017: £21,410,000) and for the Company totalled £12,717,000 (2017: £21,536,000).
KERAS RESOURCES PLC 51
Notes to the Consolidated Financial Statements
continued
27. Related parties
The Group’s related parties include its key management personnel and others as described below.
No guarantees have been given or received and all outstanding balances are usually settled in cash.
D Reeves advanced £25,900 to the Group in the year. The total amount due to D Reeves at the year end was
£25,900 (2017: £nil).
As detailed in note 22, on 26 July 2018, 27,333,334 ordinary shares were issued to B Moritz in lieu of unpaid
fees of £102,500 for the period of 41 months to 30 September 2016. The shares were issued at a price £0.00375
per share.
Other related party transactions
Transactions with Group companies
The Company had the following related party balances from financing activities:
Southern Iron Limited
– Loans and receivables (interest free)
Keras West Africa
– Loans and receivables (interest free)
Ferrex Manganese Limited
– Loans and receivables (interest free)
2018
£’000
2017
£’000
1,331
1,261
153
–
149
4
Southern Iron Limited had the following related party balances from financing activities:
Société Générale de Mine SARL
– Loans and receivables (interest free)
1,582
1,524
28. Subsequent events
Since the end of the year D Reeves has advanced £200,000 and B Moritz has advanced £100,000 to the Company
by way of unsecured interest free loans, repayable from income by the end of March 2019. The loan from
D Reeves of £25,900 set out in Note 27 has been fully repaid.
52 KERAS RESOURCES PLC
Perivan Financial Print 253266