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2023 Report258091 Keras Resources Cover.qxp 24/02/2020 11:11 Page 1 Registered number: 07353748 KERAS RESOURCES PLC ANNUAL REPORT 2019 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 1 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 2019 .......................................................................23 Consolidated Statement of Changes in Equity – 30 September 2018 .......................................................................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 .....................................................................................................29-53 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 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 2 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 broker: Solicitor: Auditor: Registrars: 27/28 Eastcastle Street London W1W 8DH SP Angel Corporate Finance LLP 35-39 Maddox Street London W1S 2PP Shard Capital Partners LLP 23rd Floor 20 Fenchurch Street London EC3M 3BY Memery Crystal LLP 165 Fleet Street London EC2A 2DY PKF Littlejohn LLP Statutory Auditor 15 Westferry Circus Canary Wharf London E14 4HD Share Registrars Limited The Courtyard, 17 West Street Farnham, Surrey, GU9 7DR 2 KERAS RESOURCES PLC 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 3 Chairman’s Statement It gives me great pleasure to report on the substantial progress made since my last report to transform the Company into a cash generative mining company. Manganese production/Togo The primary focus of Keras during the year has once again been to progress the Nayega manganese project in Togo. Keras has held an 85% shareholding in the company owning the exploration licence, Société Générale de Mine SARL (“SGM”). As required for the grant of an exploitation licence, SGM has been converted from a SARL to a SA. Additionally, the Republic of Togo is entitled to a carried interest of 10% in SGM after the issue of the exploitation licence, which will have the effect of diluting Keras’ 85% interest. The bulk sampling metallurgical testwork programme at Nayega, announced in July 2018, was completed during the year. Approximately 10,000 tonnes of manganese ore (‘Mn’) was mined, beneficiated and shipped to 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 results of the testwork were very encouraging, as they not only demonstrated the suitability of the concentrate for sale in international markets, but also showed a higher manganese percentage than had been predicted. The work programme was fully funded by the end-user, including capital costs and management fees to Keras, with the result that a surplus over direct costs is shown in the Income Statement. The plant remains on site at Nayega, so that the Group 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. However, the intention is to upgrade the plant to increase production shortly after the exploitation licence has been signed. It is intended that this plant upgrade will be funded primarily through offtake finance rather than new equity. On the exploitation licence itself, a decree was published from a meeting of the Council of Ministers of the Republic of Togo held on 18 October 2019, permitting SGM to undertake large scale mining at the Nayega manganese project. In preparation for the issue of the licence, as set out above, SGM has been converted to a Societe Anonyme, and the formal grant of the licence is expected in time to commence production in the current quarter, to 31 March 2020. In order to be committed wholly to the mining of manganese at Nayega, we have decided to relinquish our five cobalt and nickel exploration licences, and the costs previously incurred have been written off. Calidus Resources Limited During the year Calidus Resources Limited (“Calidus”) successfully completed and published a positive pre- feasibility study, which demonstrated that the Klondyke Project is commercially viable. As a result, the final tranche of Performance Shares in Calidus was converted to Ordinary Shares. The escrow period expired in June 2019 so that, at 30 September 2019, Keras owned 723,750,000 Calidus Shares. The stated intention of the Directors had always been to demerge those Calidus Shares to Keras shareholders when they were out of escrow, and to do so in the most tax efficient way available. This required the Company to apply for tax clearances in both Australia and the United Kingdom. The timescales for obtaining such clearances meant that it was not possible to complete the demerger before 30 September 2019, but it has been completed subsequently by way of a capital reduction scheme which required approval by the High Court as well as shareholder approval. The circular to shareholders was posted on 27 September 2019 and the demerger was approved by shareholders on 14 October 2019. Following the second High Court hearing, the Calidus shares were transferred to Keras shareholders on the register at 6.00pm on 19 November 2019. Previous statements had indicated that some Calidus shares might be realised by Keras to provide working capital, and, in particular, the costs associated with the demerger. In the event, tax implications in Australia meant that this option was not pursued, and all of the Calidus shares were transferred to Keras shareholders. All of the costs of the demerger have been borne by Keras. The Calidus Shares are included with current assets in the financial statements at fair value, as further set out in Note 18. KERAS RESOURCES PLC 3 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 4 Chairman’s Statement continued Management changes While there have been no changes in the membership of the main board during the year, management at the subsidiary level has been strengthened by the appointment of Graham Stacey as Chief Operating Officer. Graham will take operational control of the Nayega mine when commercial production commences. Financial review The Income Statement for the year shows a loss of £471,000 (2018 – loss £584,000). This result includes the positive surplus from the bulk sample, but also reflects the build up of costs in anticipation of commercial production, the legal and other costs in connection with the application for the exploitation licence, and substantial costs in relation to the capital reduction and demerger. There was no revenue from trading in the year, but income from the production of manganese in Togo is expected to commence in the current year. Cash conservation remains a priority until commercial mining commences. While it has been agreed that the fees payable to the non-executive directors will increase to more commercial amounts from 1 April 2019, cash payments to me are continuing to be restricted to some 50% of my previously contracted entitlements, and Dave Reeves has capitalised the whole of his entitlement. Outlook Keras is now in a position to operate Nayega as a producing mine as soon as the exploitation licence is finalised, and the decree promulgated by the Council of Ministers of the Republic of Togo means that commercial production should be achieved shortly. 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 21 February 2020 4 KERAS RESOURCES PLC 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 5 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 on two main areas: 1. 2. Demerging its shares in Calidus Resources Limited to shareholders by way of a capital reduction scheme. This was finalised after the end of the financial year, in November 2019. Progressing the Nayega manganese project in Togo and preparing for commercial production. In this context the Group extracted and shipped for testing a 10,000 tonne sample of beneficiated manganese ore. The Council of Ministers of the Republic of Togo has issued a decree granting the Group the right to mine manganese at Nayega and, 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. 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 further increased their holdings in the Company and currently hold approximately 26% 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 raisings. As the Group’s projects become more advanced, the Board will seek mining and/or offtake finance, and may also investigate 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, but commercial sales are expected to commence in the current year. The results of the Group are set out in detail in the financial statements. The Group reports a loss for the year of £471,000 (2018: loss £584,000). The financial statements show that, at 30 September 2019, the Group had total assets of £11.5 million (2018: £13.2 million), and net assets of £11.2 million (2018: £12.4 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. The capital reduction and demerger of Calidus shares, which became effective after the year end, results in a reduction in both gross and net assets of £9.9 million, as well as eliminating the deficit on distributable reserves. Fixed assets total £1.4 million (2018: £1.4 million) which now includes plant at the Nayega mine totalling £331,000 (2018: £230,000) as well as exploration, evaluation and development expenditure on the Group’s projects in Togo. 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 no impairment has been deemed necessary. KERAS RESOURCES PLC 5 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 6 Strategic Report continued 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. When the Group receives a mining permit for the Nayega Manganese project, activities at this project will increase substantially from the current reporting period, to include production forecasts and mine plans. Togo – Nayega Manganese Project (85% owned) Keras currently holds an 85% interest in the Nayega manganese project, which covers 92,390 hectares in northern Togo, held through Societe Generale des Mines SARL. As part of the process to convert the exploration licence to an exploitation licence, the Government of Togo will be granted a carried equity interest of 10%, so diluting the interest of Keras. 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 Council of Ministers of the Republic of Togo has decreed that the Group has the right to mine manganese at Nayega, but the Group continues to await the award of the licence itself, and consequently we have been unable to undertake commercial mining activities during the year. Progress on this is described above and in the Chairman’s Statement. Test sampling of the material produced as part of the bulk sample process 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, and to increase production capacity using offtake finance. The Group had previously discontinued and disposed of all its other African projects. 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 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 7 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. 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. KERAS RESOURCES PLC 7 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 8 Strategic Report continued 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 had knowledge of the committing 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. 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 8 KERAS RESOURCES PLC 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 9 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 now operates solely in Togo, where it recruits locally as many of its 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 the United Kingdom ceased to be a member of EU on 31 January 2020, 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 21 February 2020. Russell Lamming Director KERAS RESOURCES PLC 9 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 10 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 CEO of Calidus Resources Limited and non-executive Chairman of ASX and AIM listed European Metals Holdings. 10 KERAS RESOURCES PLC 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 11 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 were needed when the Code was adopted, which was for the year ended 30 September 2018. 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. Since 30 September 2019 the Company’s shares in Calidus have been demerged and transferred to the Company’s shareholders by way of a capital reduction. The demerger has permitted the Board to concentrate on the primary remaining project, the Nayega manganese project in Togo. Following the production of a 10,000 tonne bulk sample, fully funded by the end user, during the year under review. The Company intends to expand production at Nayega, using offtake related finance, and is also investigating the use of manganese from Nayega for battery metal purposes. 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 previous projects non-viable, both of which had 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 will only begin to earn material income during the current year. 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. 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 KERAS RESOURCES PLC 11 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 12 Corporate Governance Statement continued 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 drawn to half of the contracted amount, to £15,000 per annum for Brian Moritz and £12,000 per annum for Dave Reeves. It is intended that fees will be increased to £42,000 per annum for Brian Moritz and £24,000 per annum for Dave Reeves, with effect from 1 April 2019, to be paid as soon as cash flow permits. These levels reflect the time commitments and efforts of the non-executive directors, and more in line with industry norms. 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 and mining. Russell Lamming is a qualified geologist and Dave Reeves is a qualified mining engineer, each 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. As the Company moves into mining rather than exploration the management team has been strengthened by the appointment of Graham Stacey as Chief Operating Officer. Graham has wide experience of mining in Africa, and has previously been an executive director of an AIM listed mining company. 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, floating them on the ASX and demerging the resulting shares by distributing them to Keras shareholders Progressing the Nayega project in Togo from exploration through the production of a 10,000 tonne bulk sample to commercial mining. The Board continues to seek other projects which can be operated in conjunction with Nayega. 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 to reflect its progress from exploration to mining and when new projects are brought in to the Company. 12 KERAS RESOURCES PLC 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 13 Principle 8: Promote a corporate culture that is based on ethical values and behaviours. So far as possible the Company recruits locally for staff. The contractor for its mining operations is a local company, which is also responsible for transportation of the product from the mine to the port of Lome. The Board is conscious of the fact that parts of Africa may be viewed as corrupt areas in which to operate. Nevertheless, the Company has adopted a proper anti-corruption and whistle blowing policy which is strictly applied. The Board utilises an ethical policy which respects local cultural and tribal sensitivities at the Nayega mine in Togo. This policy takes account of religious beliefs of the local people. 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 normally 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 remuneration committee meets on an ad hoc basis when required. Fees paid to the non-executive directors are settled by the Chief Executive Officer, as both non-executive directors comprise the remuneration committee. Brian Moritz Chairman 21 February 2020 KERAS RESOURCES PLC 13 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 14 Directors’ Report The Directors present their report together with the audited financial statements of the Group for the year ended 30 September 2019. 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 £471,000 (2018: loss £584,000). Major events after the balance sheet date Since the end of the year the Company’s interest in Calidus Resources Limited has been demerged by way of a capital reduction and transferred to shareholders in the Company. The capital reduction was approved at a general meeting held on 14 October 2019 and became effective on 19 November 2019 following approval by the High Court. Dividends The Directors do not recommend payment of a dividend for the year ended 30 September 2019 (2018: £nil). Political donations There were no political donations during the year (2018: £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 D Reeves and B Moritz and which is chaired by D Reeves, 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 intended to be held at least twice a year, but while the only executive director is the CEO, R Lamming, meetings are only held when required. 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 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 15 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 2019 in the issued share capital of the Company were as follows: B Moritz D Reeves1,2 R Lamming3 30 September 2019 30 September 2018 Number of ordinary shares of 0.01p each 102,960,512 470,400,491 69,157,461 Percentage of issued ordinary share capital 4.13% 18.88% 2.78% 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% 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 14,275,517 ordinary shares were held by Parallel Resources Ltd., a company wholly owned by Mr and Mrs Lamming. Since the year end: • • On 3 October 2019, D Reeves purchased 19,157,093 ordinary shares of 0.1p each. On 17 January 2020 R Lamming was allotted 73,110,423 ordinary shares in compensation for his loss caused by his agreeing not to exercise the rights under his share appreciation rights (“SARs”), calculated to be £119,828, as set out in Note 28. 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 Remuneration £’000 29 18 149 196 2019 Total £’000 29 18 149 196 2018 Total £’000 15 12 82 109 Of the remuneration payable to Mr Moritz and Mr Lamming, £14,000 and £12,000 remains unpaid respectively. The Company had established a share appreciation rights scheme to incentivise Directors and senior management. Further details of this scheme can be found in note 24. Following the demerger of Calidus shares, this scheme was discontinued on 17 January 2020, and replaced by a share option scheme. KERAS RESOURCES PLC 15 258091 Keras Resources pp01-pp16.qxp 24/02/2020 11:11 Page 16 Directors’ Report continued Statement of Directors’ responsibilities The Directors are responsible for preparing the strategic report, the directors’ report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have 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 21 February 2020 16 KERAS RESOURCES PLC 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 17 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 2019 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 2019 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). The parent company has no trading activity and materiality was £28,000 based upon gross assets (excluding investments). For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. KERAS RESOURCES PLC 17 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 18 Independent Auditor’s Report to the Members of Keras Resources Plc continued An overview of the scope of our audit As part of 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. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Of the reporting components of the Group, we selected 2 components covering entities which represent the principal business activities within the Group. Of the 2 components selected, 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 intangible assets of £1.051 million as at September 2019, comprising prospecting and exploration rights, which is tested annually for impairment. Where value in use is applicable, the estimated recoverable amount is subjective due to inherent uncertainty involved in forecasting and discounting future cashflows. 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 exist. Where applicable, we reviewed management’s value in use calculations to include the key assumptions therein. We performed sensitivity analysis on the headroom to probable changes in key assumptions. The exploration and evaluation assets in 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 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 19 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 directors’ responsibilities statement, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. KERAS RESOURCES PLC 19 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 20 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: 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 21 February 2020 15 Westferry Circus Canary Wharf London E14 4HD 20 KERAS RESOURCES PLC 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 21 Consolidated statement of comprehensive income for the year ended 30 September 2019 Continuing operations Revenue Cost of sales Gross profit Recovery of costs of bulk sample 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 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 Items that will not be reclassified to profit or loss Change in fair value of equity investments at fair value through other comprehensive income Total comprehensive loss for the year Loss attributable to: Owners of the Company Non-controlling interests Loss for the year Total comprehensive loss attributable to: Owners of the Company Non-controlling interests Total comprehensive loss for the year Earnings per share from continuing and discontinued operations Basic and diluted loss per share (pence) From continuing operations Basic and diluted loss per share (pence) From discontinued operations Basic and diluted loss per share (pence) Notes 9 13 14 8 23 23 23 2019 £’000 – – – 681 (1,147) (466) (5) (5) (471) – (471) – (471) 32 – (1,604) (2,043) (514) 43 (471) (2,091) 48 (2,043) 2018 £’000 – – – – (411) (411) – – (411) – (411) (173) (584) 10 (8,852) – (9,426) (576) (8) (584) (9,419) (7) (9,426) (0.022) (0.025) (0.022) (0.018) (0.000) (0.007) The notes on pages 29 to 53 are an integral part of these consolidated financial statements. KERAS RESOURCES PLC 21 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 22 Consolidated statement of financial position as at 30 September 2019 Assets Property, plant and equipment Intangible assets 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 20 21 22 25 2019 £’000 332 1,051 1,383 9,923 35 184 10,142 11,525 7,266 10,938 3,426 (10,310) 11,320 (76) 11,244 281 281 281 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 11,525 13,185 The financial statements were approved by the Board of Directors and authorised for issue on 21 February 2020. They were signed on its behalf by: Brian Moritz Director The notes on pages 29 to 53 are an integral part of these consolidated financial statements. 22 KERAS RESOURCES PLC 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 23 Consolidated statement of changes in equity for the year ended 30 September 2019 l a t o T 0 0 0 £ ’ y t i u q e 7 2 4 2 1 , ) 1 7 4 ( ) 2 7 5 1 ( , ) 3 4 0 2 ( , ) 7 2 ( 9 0 8 – 8 7 0 6 8 ) 4 2 1 ( 0 0 0 £ ’ - n o N s t s e r e t n i g n i l l o r t n o c l a t o T 0 0 0 £ ’ 0 0 0 £ ’ t i c fi e d d e n i a t e R 1 5 5 2 1 , ) 6 0 0 0 1 ( , 5 3 4 8 4 – – – – – ) 4 1 5 ( ) 7 7 5 1 ( , ) 1 9 0 2 ( , ) 7 2 ( 9 0 8 – 8 7 0 6 8 4 2 ) 4 1 5 ( ) 0 9 4 ( – – – 6 8 1 6 8 1 0 0 0 £ ’ I C O V F 3 6 0 5 , – ) 4 0 6 1 ( , ) 4 0 6 1 ( , l a i c n a n i F t a s t e s s a – – – – – – 3 3 – – – – – 4 4 2 1 1 , ) 6 7 ( 0 2 3 1 1 , ) 0 1 3 0 1 ( , 9 5 4 3 , ) 3 3 ( – – – – – 8 7 ) 6 8 1 ( – ) 8 0 1 ( – – – ) 7 2 ( 7 0 6 – – – – – – – – 2 0 2 d e s p a l s t n a r r a w f o t c e p s e r n i e v r e s e r r e f s n a r T s n o i t c a s n a r t t n e m y a p d e s a b - e r a h S r a e y e h t r o f s s o l e v i s n e h e r p m o c l a t o T i s e r a h s y r a n d r o f o e u s s I e u s s i e r a h s f o s t s o C e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f s s o L 8 1 0 2 r e b o t c O 1 t a e c n a l a B 0 8 5 8 3 9 0 1 , 2 0 2 6 6 2 7 , y t i u q e n i y l t c e r i d d e s i n g o c e r , s r e n w o h t i w s n o i t c a s n a r T 9 1 0 2 r e b m e t p e S 0 3 t a e c n a l a B y n a p m o C e h t f o s r e n w o o t e l b a t u b i r t t A ) 6 3 ( 0 0 0 £ ’ e v r e s e r e g n a h c x E e r a h S / n o i t p o t n a r r a w e v r e s e r 0 0 0 £ ’ 8 0 1 0 0 0 £ ’ e r a h S i m u m e r p 8 5 3 0 1 , e r a h S l a t i p a c 0 0 0 £ ’ 4 6 0 7 , . 9 S R F I f o n o i t p o d a n o I C O V F t a s t e s s a l a i c n a n fi o t d e fi i s s a l c e r n e e b s a h 8 1 0 2 r e b m e t p e S 0 3 t a e v r e s e r s t e s s a e l a s l r o f e b a l i a v a e h T The notes on pages 29 to 53 are an integral part of these consolidated financial statements. KERAS RESOURCES PLC 23 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 24 Consolidated statement of changes in equity for the year ended 30 September 2018 l a t o T 0 0 0 £ ’ y t i u q e 3 9 2 1 2 , ) 4 8 5 ( ) 2 4 8 8 ( , ) 6 2 4 9 ( , ) 7 ( 2 4 2 5 3 3 7 1 0 6 5 ) 7 1 1 ( 0 0 0 £ ’ - n o N s t s e r e t n i g n i l l o r t n o c 0 1 4 1 2 , ) 6 4 4 9 ( , 5 1 9 3 1 , ) 2 0 2 ( 6 6 l a t o T 0 0 0 £ ’ 0 0 0 £ ’ t i c fi e d d e n i a t e R 0 0 0 £ ’ s t e s s a e l a s r o f e l b a l i a v A 0 0 0 £ ’ e v r e s e r e g n a h c x E e r a h S n o i t p o e v r e s e r 0 0 0 £ ’ y n a p m o C e h t f o s r e n w o o t e l b a t u b i r t t A 0 0 0 £ ’ e r a h S i m u m e r p 7 0 1 0 1 , e r a h S l a t i p a c 0 0 0 £ ’ 0 7 9 6 , ) 8 ( 1 ) 7 ( – – – – – ) 7 ( 2 4 2 5 3 3 7 1 0 6 5 – – – – – – – – – – ) 6 7 5 ( ) 3 4 8 8 ( , ) 9 1 4 9 ( , 6 1 ) 6 7 5 ( ) 0 6 5 ( – ) 2 5 8 8 ( , ) 2 5 8 8 ( , – ) 7 ( ) 7 ( – – – 3 7 1 ) 6 3 ( 3 7 1 – – – – – – 2 4 2 4 8 0 1 – – – ) 7 ( 8 5 2 – – 1 5 2 – – – – – – 4 9 4 9 r a e y e h t r o f s s o l e v i s n e h e r p m o c l a t o T s e i t i v i t c a d e u n i t n o c s i d g n d r a g e r i r e f s n a r T s n o i t c a s n a r t t n e m y a p d e s a b - e r a h S , s r e n w o h t i w s n o i t c a s n a r t l a t o T y t i u q e n i y l t c e r i d d e s i n g o c e r i s e r a h s y r a n d r o f o e u s s I e u s s i e r a h s f o s t s o C e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f s s o L 7 1 0 2 r e b o t c O 1 t a e c n a l a B 7 2 4 2 1 , ) 4 2 1 ( 1 5 5 2 1 , ) 6 0 0 0 1 ( , 3 6 0 5 , 8 5 3 0 1 , 4 6 0 7 , 8 1 0 2 r e b m e t p e S 0 3 t a e c n a l a B The notes on pages 29 to 53 are an integral part of these consolidated financial statements. 24 KERAS RESOURCES PLC 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 25 Consolidated statement of cash flows for the year ended 30 September 2019 Cash flows from operating activities Loss from operating activities Loss from discontinued operating activities Adjustments for: Depreciation and amortisation Equity-settled share-based payments Impairment Foreign exchange differences Changes in: – 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 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 Net cash flows from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at 30 September Note 8 2019 £’000 (471) – 28 78 155 36 (174) (19) (18) (211) – – (211) (127) (18) (145) 323 323 (33) 217 184 2018 £’000 (411) (173) 4 42 – 174 (364) 15 514 165 – – 165 (230) (20) (250) 242 242 157 60 217 The notes on pages 29 to 53 are an integral part of these consolidated financial statements. KERAS RESOURCES PLC 25 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 26 Company statement of financial position as at 30 September 2019 Assets Property, plant and equipment 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 19 20 21 22 25 2019 £’000 – – – 9,923 1,379 34 175 11,511 11,511 7,266 10,938 3,459 (10,401) 11,262 249 249 249 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 11,511 13,464 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 £711,000 (2018: loss of £354,000). The financial statements of Keras Resources PLC, company number 07353748, were approved by the Board of Directors and authorised for issue on 21 February 2020. They were signed on its behalf by: Brian Moritz Director The notes on pages 29 to 53 are an integral part of these consolidated financial statements. 26 KERAS RESOURCES PLC 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 27 Company statement of changes in equity for the year ended 30 September 2019 6 3 5 1 2 , ) 2 2 5 9 ( , 5 1 9 3 1 , 6 6 l a t o T 0 0 0 £ ’ y t i u q e 0 0 0 £ ’ t i c fi e d d e n i a t e R 0 0 0 £ ’ I C O V F l a i c n a n i F t a s t e s s a 0 0 0 £ ’ e r a h S / n o i t p o e v r e s e r / t n a r r a w 0 0 0 £ ’ e r a h S i m u m e r p 7 0 1 0 1 , e r a h S l a t i p a c 0 0 0 £ ’ 0 7 9 6 , ) 4 5 3 ( ) 2 5 8 8 ( , ) 6 0 2 9 ( , ) 7 ( 2 4 2 5 3 7 8 3 – ) 4 5 3 ( ) 4 5 3 ( – - – – – – – – – ) 2 5 8 8 ( , ) 2 5 8 8 ( , 7 1 7 2 1 , ) 6 7 8 9 ( , 3 6 0 5 , 7 1 7 2 1 , ) 6 7 8 9 ( , 3 6 0 5 , ) 1 1 7 ( ) 4 0 6 1 ( , ) 5 1 3 2 ( , ) 7 2 ( 9 0 8 – 8 7 0 6 8 – ) 1 1 7 ( ) 1 1 7 ( – – – 6 8 1 6 8 1 – – – – – – ) 4 0 6 1 ( , ) 4 0 6 1 ( , – – – - – 2 4 2 4 8 0 1 8 0 1 – – – – – 8 7 ) 6 8 1 ( ) 8 0 1 ( – – – ) 7 ( – 8 5 2 1 5 2 – – – – – 4 9 4 9 8 5 3 0 1 , 4 6 0 7 , 8 5 3 0 1 , 4 6 0 7 , – – – ) 7 2 ( 7 0 6 – – 0 8 5 – – – – – – 2 0 2 2 0 2 2 6 2 1 1 , ) 1 0 4 0 1 ( , 9 5 4 3 , – 8 3 9 0 1 , 6 6 2 7 , y t i u q e n i y l t c e r i d d e s i n g o c e r , s r e n w o h t i w s n o i t c a s n a r T 8 1 0 2 r e b m e t p e S 0 3 t a e c n a l a B y t i u q e n i y l t c e r i d d e s i n g o c e r , s r e n w o h t i w s n o i t c a s n a r T d e s p a l s t n a r r a w f o t c e p s e r n i s e v r e s e r r e f s n a r T s n o i t c a s n a r t t n e m y a p d e s a b - e r a h S 9 1 0 2 r e b m e t p e S 0 3 t a e c n a l a B r a e y e h t r o f s s o l e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f s s o L 8 1 0 2 r e b o t c O 1 t a e c n a l a B i s e r a h s y r a n d r o f o e u s s I e u s s i e r a h s f o s t s o C r a e y e h t r o f s s o l e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f s s o L 7 1 0 2 r e b o t c O 1 t a e c n a l a B s n o i t c a s n a r t t n e m y a p d e s a b - e r a h S i s e r a h s y r a n d r o f o e u s s I e u s s i e r a h s f o s t s o C The notes on pages 29 to 53 are an integral part of these consolidated financial statements. KERAS RESOURCES PLC 27 258091 Keras Resources pp17-pp28.qxp 24/02/2020 11:11 Page 28 Company statement of cash flows for the year ended 30 September 2019 Cash flows from operating activities Loss from operating activities Adjustments for: Depreciation Impairment of loan 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 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 2019 £’000 (711) – 159 78 (19) (39) (532) – (532) – – 323 176 499 (33) 208 175 2018 £’000 (354) – – 42 15 515 218 – 218 (230) (230) 242 (70) 172 160 48 208 The notes on pages 29 to 53 are an integral part of these consolidated financial statements. 28 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 29 Notes to the Consolidated Financial Statements for the year ended 30 September 2019 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. As disclosed in the Chairman’s Statement, a decree was published from a meeting of the Council of Ministers of the Republic of Togo held on 18 October 2019, permitting the Group to undertake large scale mining at the Nayega manganese project. The formal grant and receipt of the exploitation licence is expected in time to commence production in the quarter ending 31 March 2020, but the licence has not yet been received. With effect from the receipt of the licence, and on the basis of the mining plan and cash flow forecasts, the Directors expect mining at Nayega to produce positive cash flow for the Group. Capital expenditure to expand production and working capital will be primarily provided in the short term by a loan in association with an offtake agreement. In the event of a delay in commencement of mining at Nayega, the Company will institute cost cutting and austerity measures. Notwithstanding such measures, further equity funding would be required in the absence of cash flow from production. 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. KERAS RESOURCES PLC 29 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 30 Notes to the Consolidated Financial Statements continued 3. Basis of preparation continued (d) Use of estimates and judgements (continued) 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. 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. 30 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 31 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. 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. Financial instruments (c) The Group has adopted IFRS 9 from 1 October 2018. The standard introduced new classification and measurement models for financial assets. Financial assets (i) The Group’s financial assets measured at amortised cost comprise trade and other receivables, cash and cash equivalents and financial assets at fair value through other comprehensive income in the consolidated statement of financial position. Trade receivables and intra group balances are initially recognised at fair value. New impairment requirements use an expected credit loss model to recognise an allowance. For receivables a simplified approach to measure expected credit losses during a lifetime expected loss allowance is available and has been adopted by the Group. During this process the probability of non-payment of the receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being reported within the consolidated statement of comprehensive income. On confirmation that the trade and intra group receivable will not be collectable, the gross carrying value of the asset is written off against the provision. Financial assets at fair value through other comprehensive income 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, any related balance within the FVOCI reserve is reclassified to retained earnings. (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. KERAS RESOURCES PLC 31 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 32 Notes to the Consolidated Financial Statements continued 4. Significant accounting policies continued 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 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 33 (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 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 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 34 Notes to the Consolidated Financial Statements continued 4. Significant accounting policies continued Financial assets at fair value through other comprehensive income (2018: Available-for-sale financial assets) Impairment losses on financial assets at FVOCI 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 FVOCI 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. (g) Employee benefits 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 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 35 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) The Group has adopted IFRS 15 from 1 October 2018. Revenue from the sale of processed products is recognised when ownership of the product passes to the purchaser in accordance with the relevant sales contract. Product mined and processed in the Republic of Togo is shipped for smelting elsewhere, and ownership is likely to pass when the ship reaches international waters. It is normal for the price to be based on the metal content and the moisture content of the product as well as the weight. Both are tested prior to shipment to determine the price, but further adjustments may be made when the product is tested once more on arrival. This adjustment is included in the sale price recognised in the financial statements. 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. KERAS RESOURCES PLC 35 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 36 Notes to the Consolidated Financial Statements continued 4. Significant accounting policies continued 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. (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 2019 and have changed the Group’s accounting policies: IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers Effect of changes in accounting policies: IFRS15 provides a single comprehensive standard in accounting for revenue arising from contracts with customers. IFRS 15 supersedes all previous revenue guidance. The Group has adopted IFRS15 for the year ended 30 September 2019 and has made no transitional adjustments to the accounting treatment of revenue, however, additional disclosures have been made. The Group has applied IFRS 9 from 1 October 2018 and has made no transitional adjustments to the accounting treatment of financial instruments, however, additional disclosures have been made. IFRS 9 introduced a new classification and measurement model of financial assets reducing the categories of assets from previous standards. There are now three categories of financial assets recognised from being measured at: – – – fair value through profit of loss; fair value through other comprehensive income; or amortised cost The Group’s financial assets measured at amortised cost comprise trade and other receivables, and cash and cash equivalents in the consolidated statement of financial position. Hence there are no reclassification or accounting changes required. Under IFRS 9 the major change is on impairments which are recognised on an expected basis rather than incurred loss. The Group will always account for expected credit losses and changes in those expected losses are reviewed at each year end. The Group measures expected losses on a collective basis, trade receivables are grouped on ageing. The expected losses are based on the Group’s historical credit losses and consideration of economic factors. The new impairment model has no impact on the Group results. 36 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 37 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 2019 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 16 Leases – Effective 1 January 2019 IFRS 16 replaces existing lease guidance. Leases will have the impact of increasing both creditors and fixed assets on the balance sheet by similar amounts that will depend on the operating leases that the Group is party to during the year ended 30 September 2020. There will be no material impact to the financial statements on adoption of IFRS 16. 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. 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. KERAS RESOURCES PLC 37 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 38 Notes to the Consolidated Financial Statements continued 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. Information about reportable segments 2019 Discontinued Gold £’000 Discontinued Iron Ore £’000 Manganese/ cobalt £’000 Other operations £’000 External revenue Interest expense Depreciation, amortisation and impairment (Loss)/profit before tax Assets Exploration and capital expenditure Liabilities – – – – – – – – – – – – – – – – 183 134 1,050 145 28 – – – (605) 10,475 – 253 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 Total £’000 – – 183 (471) 11,525 145 281 Total £’000 – – 4 (584) 13,185 250 758 The Group was awarded exploration licenses during 2017 in West Africa on ground containing previously discovered cobalt and nickel mineralisation. These in the year to 30 September 2019. licences have been impaired 38 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 39 Information about geographical segments 2019 Discontinued Australia £’000 Discontinued South Africa £’000 External revenue Interest expense Depreciation, amortisation and impairment (Loss)/profit before tax Assets Exploration and capital expenditure Liabilities – – – – – – – – – – – – – – 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) – – – West Africa £’000 – – 183 134 1,050 145 28 West Africa £’000 – – 4 (52) 870 250 10 Other £’000 – – – (605) 10,475 – 253 Other £’000 – – – (359) 12,315 – 748 Total £’000 – – 183 (471) 11,525 145 281 Total £’000 – – 4 (584) 13,185 250 758 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. 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. 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. 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) from discontinued operations, net of tax 2019 £’000 – – – – – – – 2018 £’000 – (173) (173) – (173) – (173) The discontinued operations did not have a tax impact. 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 (loss) per share (pence) (Note 23) – (0.007) KERAS RESOURCES PLC 39 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 40 Notes to the Consolidated Financial Statements continued 9. Surplus on production of bulk sample Amounts received for bulk sample Direct production costs of bulk sample 10. Expenses Expenses include: Depreciation and amortisation expense Impairment of nickel and cobalt licence Costs associated with the capital reduction satisfied by the Calidus share distribution Auditor’s remuneration – Audit fee – Tax advisory services Foreign exchange differences 2019 £’000 1,495 (814) 681 2019 £’000 28 155 100 21 20 28 Auditor’s remuneration in respect of the Company amounted to £10,000 (2018: £10,000). 11. Personnel expenses Wages and salaries Fees Equity-settled share-based payments (see note 24) 2019 £’000 135 149 78 362 2018 £’000 – – – 2018 £’000 4 – – 25 – 18 2018 £’000 155 11 (106) 60 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: Directors Key management personnel Other 2019 2018 3 – 3 6 3 – 3 6 40 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 41 12. Directors’ emoluments 2019 Wages and salaries (incl. fees) 2018 Wages and salaries (incl. fees) Executive directors £’000 Non-executive directors £’000 149 149 47 47 Executive directors £’000 Non-executive directors £’000 82 82 27 27 These amounts are disclosed by director in the Directors’ report on page 19. Emoluments disclosed above include the following amounts payable to the highest paid director: Emoluments for qualifying services 2019 £’000 149 Total £’000 196 196 Total £’000 109 109 2018 £’000 82 Key management personnel Included in note 11 are emoluments paid to key management personnel in the year which amounted to £nil (2018: £5,000). 13. Finance costs Recognised in loss for period Interest on loans Other 2019 £’000 – 5 5 2018 £’000 – – – KERAS RESOURCES PLC 41 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 42 Notes to the Consolidated Financial Statements continued 14. Taxation Current tax Tax recognised in profit or loss Current tax Current period Deferred tax Origination and reversal of temporary differences Total tax Reconciliation of effective tax rate Loss before tax (continuing operations) Tax using the Company’s domestic tax rate of 19.0% (2018: 19.0%) Effects of: Expenses not deductible for tax purposes Overseas (profits)/losses Equity-settled share-based payments Tax losses carried forward not recognised as a deferred tax asset 2019 £’000 2018 £’000 – – – 2019 £’000 (471) (89) 35 (15) 15 54 – – – – 2018 £’000 (411) (78) – 10 10 58 – 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 £5,097,000 (2018: £4,813,000). A deferred tax asset has not been recognised in respect of such losses due to uncertainty of future profit streams. 42 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 43 15. Property, plant and equipment Group Cost Balance at 1 October 2017 Additions Disposals Effect of movements in exchange rates Balance at 30 September 2018 Balance at 1 October 2018 Additions Disposals Effect of movements in exchange rates Balance at 30 September 2019 Depreciation and impairment provisions Balance at 1 October 2017 Depreciation for the year Depreciation on disposals Effect of movements in exchange rates Balance at 30 September 2018 Balance at 1 October 2018 Depreciation for the year Depreciation on disposals Effect of movements in exchange rates Balance at 30 September 2019 Carrying amounts At 30 September 2017 At 30 September 2018 At 30 September 2019 Plant and equipment £’000 Office and computer equipment £’000 Motor vehicles £’000 Total £’000 2 230 – – 232 232 127 – 1 360 2 – – – 2 2 27 – – 29 – 230 331 40 – (9) – 31 31 – – – 31 34 4 (9) – 29 29 1 – – 30 6 2 1 26 – – – 26 26 – (7) – 19 26 – – – 26 26 – (7) – 19 – – – 68 230 (9) – 289 289 127 (7) 1 410 62 4 (9) – 57 57 28 (7) – 78 6 232 332 KERAS RESOURCES PLC 43 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 44 Notes to the Consolidated Financial Statements continued 15. Property, plant and equipment continued Company Cost Balance at 1 October 2017 Additions Balance at 30 September 2018 Balance at 1 October 2018 Transfers Balance at 30 September 2019 Depreciation and impairment provisions Balance at 1 October 2017 Depreciation for the year Balance at 30 September 2018 Balance at 1 October 2018 Depreciation for the year Balance at 30 September 2019 Carrying amounts At 30 September 2017 At 30 September 2018 At 30 September 2019 Plant and equipment £’000 Computer equipment £’000 – 230 230 230 (230) – – – – – – – – 230 – 5 – 5 5 – 5 5 – 5 5 – 5 – – – Total £’000 5 230 235 235 (230) 5 5 – 5 5 – 5 – 230 – 44 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 45 16. Intangible assets Cost Balance at 1 October 2017 Additions Disposals Effect of movement in exchange rates Balance at 30 September 2018 Balance at 1 October 2018 Additions Disposals Effect of movements in exchange rates Balance at 30 September 2019 Amortisation and impairment losses Balance at 1 October 2017 Impairment Amortisation Disposals Effect of movements in exchange rates Balance at 30 September 2018 Balance at 1 October 2018 Impairment Amortisation Disposals Effect of movements in exchange rates Balance at 30 September 2019 Carrying amounts Balance at 30 September 2017 Balance at 30 September 2018 Balance at 30 September 2019 Prospecting and exploration rights £000 1,551 20 (387) 9 1,193 1,193 18 – (5) 1,206 387 – – (387) – – – 155 – – – 155 1,164 1,193 1,051 The carrying value of the prospecting and exploration rights is supported by the estimated resource and current market values. KERAS RESOURCES PLC 45 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 46 Notes to the Consolidated Financial Statements continued 17. Investment in subsidiaries Company Equity investments Balance at beginning of period Additions Disposals Balance at 30 September Directly Keras West Africa Limited Southern Iron Limited Indirectly Société Générale des Mines Kamnico SARL 2019 £’000 2018 £’000 – – – – – – – – Activity Country of incorporation Ownership interest 2019 2018 Investment Investment United Kingdom Guernsey Exploration Exploration Togo Togo 100% 100% 85% 100% 100% 100% 85% 100% 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 des Mines, 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 – financial assets at fair value through other comprehensive income At 1 October Value adjustment recognised in equity At 30 September 2019 £’000 11,527 (1,604) 9,923 2018 £’000 20,379 (8,852) 11,527 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 were held in escrow until June 2019. Financial assets at FVOCI are denominated in Australian dollars. These shares were reclassified to current assets in the previous year. As disclosed in Note 28, the equity securities were demerged subsequent to the year-end by way of a capital reduction scheme. In the prior financial year, the Group and Company had designated equity investments as available for sale. These were reclassified to financial assets at fair value through other comprehensive income on adoption of IFRS 9. 46 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 47 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 2019 £’000 1,484 230 (335) – 1,379 2019 £’000 25 10 35 2019 £’000 24 10 34 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 2019 £’000 184 184 2019 £’000 175 175 There is no material difference between the fair value of cash and cash equivalents and their book value. 2018 £’000 1,414 74 (4) – 1,484 2018 £’000 16 – 16 2018 £’000 15 – 15 2018 £’000 217 217 2018 £’000 208 208 KERAS RESOURCES PLC 47 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 48 Notes to the Consolidated Financial Statements continued 22. Capital and reserves Share capital In issue at beginning of year Issued for cash Issued in settlement of debt 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 2019 2018 2,289,133,439 87,500,000 114,725,000 2,195,133,438 66,666,667 27,333,334 2,491,358,439 2,289,133,439 Number of deferred shares of £0.004 each 2019 2018 1,193,794,390 1,193,794,390 1,193,794,390 1,193,794,390 Ordinary and deferred share capital 2019 £’000 2018 £’000 7,064 202 7,266 6,970 94 7,064 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. The deferred shares were cancelled after the year end. Issue of ordinary shares On 27 August 2019, 87,500,000 ordinary shares were issued for cash at £0.004 per share. Additionally on that date D Reeves and B Moritz agreed to convert loans due to them of £458,900 into new ordinary shares at the same price, thus 114,725,000 were issued at £0.004 per share. Warrants 2019 2018 Average exercise price 0.48p 0.5p 0.46p – – 0.36p Number 142,257,023 (75,714,280) (59,542,743) – – 7,000,000 Average exercise price 0.49p 0.5p – 0.36p – 0.48p Number 208,859,590 (73,602,567) – 7,000,000 – 142,257,023 In issue at beginning of year Lapsed in year Lapsed in year Issued in year Exercised in year In issue at 30 September 48 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 49 On 24 May 2018 7,000,000 warrants were issued. These warrants are exercisable at price of 0.36p within a 5-year exercise period, and were exercised on 12 November 2019. The weighted average remaining contractual life of the warrants outstanding is 3 years 235 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 2019 is based on the following (loss)/profit attributable to ordinary shareholders and a weighted average number of ordinary shares in issue. Loss attributable to ordinary shareholders (£) Continuing operations Discontinued operations Loss 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 2019 (514,000) – (514,000) 2018 (403,000) (173,000) (576,000) 2019 2018 2,289,133,439 18,837,397 2,195,133,438 67,408,220 2,307,970,836 2,262,541,658 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. On 12 March 2018, 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 2019 for these further rights which is included in administrative and exploration expenses amounted to £78,000 (2018 : £42,000). The scheme was cancelled on 17 January 2020 and further details can be found in note 28. KERAS RESOURCES PLC 49 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 50 Notes to the Consolidated Financial Statements continued 25. Trade and other payables Group Trade payables Accrued expenses Other payables Company Trade payables Accrued expenses Other payables 2019 £’000 108 155 18 281 2019 £’000 94 155 – 249 2018 £’000 66 40 652 758 2018 £’000 65 40 642 747 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. 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. 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 50 KERAS RESOURCES PLC Financial assets at amortised cost Carrying amount 2019 £’000 35 184 219 2018 £’000 16 217 233 Financial assets at amortised cost Carrying amount 2019 £’000 1,379 34 175 1,588 2018 £’000 1,484 15 208 1,707 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 51 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 2019 Non-derivative financial liabilities Trade and other payables Group 2018 Non-derivative financial liabilities Trade and other payables Company 2019 Non-derivative financial liabilities Trade and other payables Company 2018 Non-derivative financial liabilities Trade and other payables Carrying amount £’000 Contractual cash flows £’000 2 months or less £’000 2-12 months £’000 281 281 (281) (281) (47) (47) (234) (234) 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 £’000 249 249 (249) (249) (42) (42) (207) (207) Carrying amount £’000 Contractual cash flows £’000 2 months or less £’000 2-12 months £’000 747 747 (747) (747) (124) (124) (623) (623) 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. KERAS RESOURCES PLC 51 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 52 Notes to the Consolidated Financial Statements continued 26. Financial instruments continued 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 2019 for the Group totalled £11,320,000 (2018: £12,551,000) and for the Company totalled £11,262,000 (2018: £12,717,000). 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. In November and December 2018 D Reeves advanced £200,000 and B Moritz advanced £100,000 to the Company by way of loans. These loans were unsecured and interest free and had no fixed repayment date, but carried a premium of 4% when repaid. In April 2019 D Reeves advanced a further £100,000 on the same terms. In August 2019 the loans and premium, totalling £416,000, were capitalised by the issue of ordinary shares at 0.4p per share, as detailed in note 22. At the same time ordinary shares were issued at 0.4p per share to D Reeves in satisfaction of an amount of £25,900 loaned to the company in the previous year, and £21,000 in respect of unpaid director’s fees. On 17 January 2020, the Company cancelled its existing share appreciation rights scheme and R Lamming was compensated for this. Full details can be found in note 28. Of the remuneration payable to Mr Moritz, £14,000 remains unpaid as at 30 September 2019. Of the fees payable to Mr Lamming, £12,000 remains unpaid as at 30 September 2019 and due to Parallel Resources Limited, a company owned and controlled by Mr Lamming. 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) 2019 £’000 1,379 – 2018 £’000 1,331 153 Southern Iron Limited had the following related party balances from financing activities: Société Générale de Mine SARL – Loans and receivables (interest free) 1,574 1,582 52 KERAS RESOURCES PLC 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 53 28. Subsequent events Demerger and capital reduction On 19 November 2019 the High Court confirmed a capital reconstruction and demerger approved by shareholders on 14 October 2019 by which: • • • The Company’s share premium account was cancelled and extinguished Part of the Company’s share capital was cancelled and repaid to shareholders on the register at 6.00pm on 19 November 2019, comprising (i) (ii) all issued Deferred Shares in the capital of the Company; and 0.09p of the capital paid up on each issued Ordinary Share in the capital of the Company by the reduction in the nominal value of each such Ordinary Share from 0.1p to 0.01p. the Company satisfied its liability to repay such capital by transferring its holding of Calidus Shares to shareholders on the Company’s register of members at 6.00pm on 19 November 2019. Share appreciation rights On 17 January 2020, the Company cancelled its existing share appreciation rights (“SAR”) scheme, following the demerger of its holding of Calidus Shares, which resulted in a fundamental change to the business and the underlying value of its assets. Russell Lamming, a director of the company, held all of the 60,000,000 SARs which had vested prior to the demerger, and which he was requested by the Board not to exercise during the period prior to the approval of the demerger by the High Court. To compensate Mr Lamming for his loss caused by his agreeing not to exercise, calculated to be £119,828, he was allotted 73,110,423 Ordinary Shares credited as fully paid at the 30-day Volume Weighted Average Price at the close of business on 16 January 2020 of 0.1639 pence per share. Share issue On 28 January 2020 the Company issued 213,333,320 new ordinary shares of 0.01p at 0.15p per share. Of these shares, 206,666,660 were issued for cash to raise £310,000, and 6,666,660 were issued in settlement of advisory fees of £10,000. KERAS RESOURCES PLC 53 258091 Keras Resources pp29-imprint.qxp 24/02/2020 11:11 Page 54 Perivan 258091
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