Registered number: 07353748
KERAS RESOURCES PLC
ANNUAL REPORT
FOR THE FIFTEEN MONTHS ENDED 31 DECEMBER 2021
Contents
Pages
Company Information ...........................................................................................................................................................2
Chairman’s Statement ...........................................................................................................................................................3
Strategic Report .....................................................................................................................................................................6
The Board ..............................................................................................................................................................................12
Corporate Governance Statement....................................................................................................................................13
Directors’ Report..................................................................................................................................................................15
Independent Auditor’s Report to the Members of Keras Resources PLC..................................................................18
Consolidated Statement of Comprehensive Income ....................................................................................................24
Consolidated Statement of Financial Position................................................................................................................25
Consolidated Statement of Changes in Equity – 31 December 2021 ........................................................................26
Consolidated Statement of Changes in Equity – 30 September 2020 .......................................................................27
Consolidated Statement of Cash Flows ...........................................................................................................................28
Company Statement of Financial Position ......................................................................................................................29
Company Statement of Changes in Equity......................................................................................................................30
Company Statement of Cash Flows..................................................................................................................................31
Notes to the Consolidated Financial Statements...........................................................................................................32
Throughout this document ‘Keras’, ‘Keras Resources’ or ‘the Company’ means Keras Resources PLC and ‘the
Group’ means the Company and its subsidiaries.
KERAS RESOURCES PLC 1
Company information
Directors:
B Moritz (Non-Executive Chairman)
G Stacey (Chief Executive Officer)
R Lamming (Non-Executive Director)
D Reeves (Non-Executive Director)
Company secretary:
B Moritz
Company number:
07353748
Registered office:
Nominated advisor
and joint broker:
Joint broker:
Solicitor:
Auditor:
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2 KERAS RESOURCES PLC
Chairman’s Statement
I am pleased to provide an update on our progress since my last report and set out our outlook for the business
going forward.
The main activity of Keras is now in developing the Diamond Creek organic phosphate mine in Utah, USA, and
we announced on 30 March 2022 that Keras had increased its ownership from 51% to 100%. Subsequently,
Keras concluded a £1.95m (before costs) fund raising, underpinned by a new cornerstone investor who is
focussed on growing a portfolio of North American phosphate projects.
The Diamond Creek phosphate mine
Despite facing challenges throughout the reporting period, we continued to make significant progress with our
fully integrated mine to market operation at Diamond Creek in Utah which is believed to be one of the highest
grade organic rock phosphate deposits in the US.
The Diamond Creek phosphate mine, which is situated on an 840 acre Federal Lease, and the Spanish Fork
Processing Facility, are owned and operated by Falcon Isle Resources LLC and Falcon Isle Holdings LLC
(collectively ‘Falcon Isle’). Keras initially acquired a 51% equity interest in Falcon Isle in July 2020 for nominal
consideration by agreeing to loan a total of $2.5m to Falcon Isle in tranches. The last tranche of the loan was
advanced at the end of December 2020, so that Falcon Isle has been accounted for as a subsidiary of Keras for
2021. Post-period end, in March 2022, we were pleased to announce that Keras had agreed to acquire our
partner’s 49% equity interest in Falcon Isle, increasing our holding from 51% to 100%, for a total consideration
of US$3.2m, which includes loans repaid to the vendor totalling US $1,816,527. This agreement made Falcon
Isle a wholly owned subsidiary of Keras, allowing Graham Stacey, previously COO of Keras, to take over full
management control of the operation, and become CEO of the Group. Importantly, the agreement avoided a
lengthy and costly litigation process, operations recommenced immediately, and we continue to meet
customers’ demand for our phosphate product.
Located approximately 80km south-east of Salt Lake City, Diamond Creek is one of the highest-grade organic
phosphate deposits in the US, and our mission going forward is to build the operation into the premier organic
phosphate producer in the US. Our focus and market segment is in supporting sustainable agriculture and we
are strong advocates for the benefits of enhancing soil health. Our organic phosphate fertiliser products can
help farmers realise better crop growth and yields while reducing the soil degradation seen when farmers use
chemically manufactured fertilisers.
The mine is fully permitted, and the Spanish Fork processing plant is close to infrastructure and ideally located
to take advantage of Salt Lake City’s resources including labour, supplies, industrial engineering and financial
services. The integrated mining and processing operation has compelling economics with a low capex, simple
low-intensity seasonal mining operation and our in-house processing plant has flexibility to beneficiate a variety
of organic rock phosphate products throughout the period. The mined material only requires crushing, milling
and bagging before being sold as high-grade organic rock phosphate fertiliser – a 23% total phosphorus
pentoxide (‘P205’) premium product and importantly with minimum 12% available P205 which is significantly
higher than our competitors.
The project has a pre-stripped area with production drilling information delineating approximately 2 years of
planned production still in-situ. However, we believe there is significant scope to increase the current life of
mine at Diamond Creek with historic “surface mineable resources” representing in excess of 60 years of
production. Part of the funds raised recently will be used to establish a NI 43-101 compliant mineral resource
at Diamond Creek.
Immediately post Keras’ injection of funding into Falcon Isle, beneficiation was undertaken on a toll basis with
a key contractor. The Company subsequently took the decision to move processing in-house and construct a
new plant at Spanish Fork, 30km from Diamond Creek. This was to both increase the installed capacity and
enable flexibility to beneficiate a variety or organic phosphate products to offer across our marketing campaign.
The plant was fabricated and shipped from Shanghai, with construction commencing on site in Spanish Fork in
February 2021 and commissioning was successfully completed at the end of June, 2021.
KERAS RESOURCES PLC 3
Chairman’s Statement
continued
In November 2021 the Company announced it was in dispute with its 49% partner in Falcon Isle due to a capital
shortfall resulting in all operations at Diamond Creek being temporarily halted and Keras engaging local US legal
representatives to enforce its rights under the terms of the initial transaction. The 2021 mining season had
already been completed prior to operations being suspended and sales continued to be made from processed
material in stock over the winter period.
In 2021, 8,520 tons of phosphate were mined and delivered to the laydown area at Diamond Creek. Sales totalled
4,657 tons of phosphate from June 2020 through to May 2022. Since Keras took control of the marketing function
and with both the mining and processing facilities now operating as planned developing market share will be our
primary focus for the next two years. Production rhythm is key to the supply of both consistent quantity and
quality products which Keras’ operational control and our recent fund-raise has now enabled.
A key component of our marketing effort will be growth tests across a range of crops and soil types. This process
is planned to run for the balance of 2022 and will provide focussed market feedback to support of our product
use across crop types, regions and planting seasons.
We are now looking forward to commencing our mining season at Diamond Creek which takes place during the
summer season from July to September, while the mine site is free of snow.
Nayéga manganese mine/Togo
On the 18 October 2019 the Council of Ministers of the Republic of Togo published a decree granting the right
for large-scale exploitation of the manganese deposit at Nayéga to the Company’s subsidiary, Société Générale
des Mines (“SGM”). Since that date the Company has concentrated its efforts on obtaining the required
Exploitation Permit. The terms of the permit and associated protocols have been agreed, and SGM has been
converted from a private to a public company, as required by law and in compliance with the draft Mining
Convention. However, the exploitation permit approval has not been forthcoming.
Financial review
The Consolidated Statement of Comprehensive Income for the 15-month period shows a loss of £1,948,000
(2020 – loss £1,257,000). The results of the two periods are not strictly comparable due to the different lengths
of the periods reported on as a result of the change in year-end to 31 December. The loss for the period under
review has suffered from delays in realising the value of the Diamond Creek mine which are referred to above.
Also included is a technical loss amounting to £398,000 due to the IFRS requirement to treat the previous
minority interest in Falcon Isle as having been disposed of and the 51% majority acquired as a separate
transaction.
During the period Keras undertook two fund raisings, in December 2020 and January 2021, raising £550,000
and £1,000,000 respectively (before costs), primarily to facilitate finance for the Diamond Creek mine, and also
for working capital generally.
In May 2022 Keras raised a further £1,950,000 (before costs) at a premium to the previous share price, of which
£960,000 was subscribed by a new cornerstone investor, First Uranium Resources Ltd, a Canadian public
company active in the North American phosphate market. These funds will be used for the first tranche of
US$800,000 of the cost of acquiring the former minority interest in Falcon Isle, the establishment of a NI 43-101
compliant Mineral Resource at Diamond Creek, expansion of the Falcon Isle business into other fields of activity
and general working capital.
First Uranium initially acquired a 10.03% interest in the Company by participating in the above Capital raise and,
subsequent to this, AxCap Ventures, an associated company of First Uranium, accumulated a further 7.04%
interest in Keras through on-market trades. First Uranium’s support for the Company is part of their focus on
developing a portfolio of assets in the North American phosphate market as it sees this as a key growth
commodity within the resource sector.
4 KERAS RESOURCES PLC
Directors and Management
Graham Stacey, who has been COO since 2020, was appointed to the Board in November 2021 and assumed
responsibility for the Diamond Creek mine in March 2022. He is in the process of relocating from Johannesburg
to Utah. On 1 June 2022 Graham took over the role of Chief Executive Officer from Russell Lamming, who has
become a Non-Executive Director. I would like to welcome Graham to the Board and thank Russell for his untiring
work during his tenure as CEO.
Later in the year, on 1 September 2022, Russell will take over from me as Non-Executive Chairman. I will remain
a Non-Executive Director and Company Secretary, and I will continue to provide oversight of the Company's
finances.
Outlook
With the closing of the £1.95m capital raise and securing 100% of our high-grade organic phosphate Diamond
Creek mine, we believe the Company is excellently positioned to deliver into the growing organic agricultural
sector. This sector is underpinned by the macro-economic tailwinds of the global fertiliser markets, and we
remain bullish on our premium phosphate product and our position as we continue to build market share.
Plans for expansion to broaden our product mix are under way and we continue to negotiate new offtake
agreements with our repeat customers. The construction of a downstream granulator plant is planned for 2022
to allow us to further expand the range of our products from five sized dry products to include two sized
granulated products which will attract a price premium in markets that we are not currently supplying. Now
that we are fully in charge of operations the Directors are confident that Falcon Isle will be a profitable and
valuable asset for the Group, and we look forward to updating our shareholders on our progress as we continue
to ramp up the production profile and build our position and market share of the fast-growing US organic
phosphate market.
Finally, I would like to take this opportunity to thank my colleagues on the Board and our management team
for their hard work, and shareholders for their continuing support.
Brian Moritz
Chairman
29 June 2022
KERAS RESOURCES PLC 5
Strategic Report
Having acquired 100% control of the Diamond Creek asset, the Group’s strategy is to progressively enhance
shareholder value through building market share for its products within the North American organic fertiliser
market. At the same time ongoing value engineering initiatives will continue to streamline operations and
rationalise costs to ensure consistent product quality and volumes, all aimed at increasing margins. In the
longer-term, enhancing value of that asset will involve both organic expansion as well as identifying
value-accretive projects/businesses with natural synergies to increase scale and to add value to the Company.
Diamond Creek is one of the highest-grade organic phosphate mines in the US, and the Company’s purpose is
to build the operation into the premier organic phosphate producer in the US. Keras supports sustainable,
regenerative agriculture and is an advocate for the benefits of enhancing soil health. Diamond Creek’s organic
phosphate fertiliser products can help farmers realise better crop growth and yields, reduce soil degradation,
build and maintain soil organic matter to improve overall soil health, and ultimately reduce CO2 levels in the
atmosphere through carbon sequestration.
Organic fertilisers’ significantly lower carbon footprint relative to traditional synthetic/chemical fertilisers and
will continue to support demand and pricing for organic replacements including rock phosphate. Keras is
therefore also looking at developing opportunities around carbon sequestration and the associated carbon
credits to further augment its business and enhance shareholder value. Diamond Creek’s organic phosphate
products have the potential to tap directly into this rapidly growing market and the Company is looking at
developing and enhancing the value of this aspect of its portfolio and in-turn generate greater returns for
shareholders.
The Group’s business model has established the Company as an efficient, high-quality and low-cost producer
direct into the North American fertiliser market.
During the reporting period the Group was focussed largely on developing operations at Diamond Creek to
maximise operational efficiencies, build market share and generate cashflow. The mine is owned by Falcon Isle,
in which the Company held a 51% equity interest during the reporting period, subsequently increasing this to
100% in March 2022.
The Company is aware of a national geophysical survey being undertaken by the Togolese Ministry of Mines and
Energy and we do not expect the permitting process at our Nayéga manganese project to be concluded prior
to the survey being completed.
In exploring and developing mines to exploit 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 continued to invest in the Company and currently hold
approximately 21.3% of the issued shares in Keras, after allowing for the substantial fund raisings since the
period end. 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 pre-payments, royalties, and other marketing arrangements.
Financial and Performance Review
Turnover in the period under review comprised sales of phosphate fertilisers by Falcon Isle. Turnover of £452,000
was constrained by construction of the processing plant, which was only operational for the final six months of
the period, as well as the problems with working capital referred to previously.
The results of the Group are set out in detail in the financial statements. The Group reports a loss for the period
of £1,948,000 (2020: loss £1,257,000).
6 KERAS RESOURCES PLC
Fixed assets total £5,375,000 (2020: £1,332,000), which includes the bulk sample plant and associated
infrastructure at the Nayéga project, and the Falcon Isle processing plant totalling £544,000 (2020: £262,000).
The Directors have assessed the carrying values of Falcon Isle and SGM and no impairment has been deemed
necessary.
Key Performance Indicators (KPIs)
During the period 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.
Mining projects
North America
Keras acquired an interest in Falcon Isle, holder of the Diamond Creek phosphate mine, in July 2020, and
increased its interest to 51% in December 2020. Keras acquired the outstanding 49% post the reporting period
in March 2022. The mine is situated approximately 80km SSE of Salt Lake City, Utah. Diamond Creek is a fully
permitted, high-grade direct shipping ore (“DSO”), low capex organic phosphate mine, which has significant
historical estimated in-situ tonnage (mineral resources have not been classified according to modern
International Reporting Standards) with sufficient phosphate ore exposed in-situ to provide for the 2022 and
2023 mining seasons before any overburden stripping is required. The phosphate mineralisation is concentrated
in the shale beds of the Meade Peak Member of the Phosphoria Formation. The mineralised zone is c.3m thick
at the base of the Meade Peake Member and averages 23% total P2O5 with guaranteed available P2O5 of 12%.
Historic reports vary with "surface mineable resources" ranging from 3.10Mt to 4.60Mt. At an internally
estimated peak production rate of 23.5ktpa, the opencast resources alone represent a significant mine life.
The 2021 mining campaign was completed in October 2021 with a total of 8,520 ore tons extracted from the
mine. Beneficiation during the reporting period was undertaken through a combination of contractor toll-milling
(producing 10mesh and -50mesh products) and Falcon Isle owned milling infrastructure. A new high-pressure
rolls milling plant was successfully commissioned during June 2021 which has the capacity to produce
steady-state product of 23,500 tons per month. The plant comprises front-end feed, primary crush, milling, dust
extraction, 50lb and 1ton bagging circuits to produce a range of products including -50 mesh, -100 mesh and
-350 mesh powders in either 50lb bags or 1ton bags (totes). A granulation plant was procured and delivered to
our Spanish Fork site during September 2021 with construction and commissioning planned for the second half
of 2022 which will further broaden our product range to include high margin granulated organic phosphate.
The product has received Organic Certification by all three key certification agencies in the USA – California
(CDFA), Washington State (WSDA) and the federal Organic Materials Review Institute (OMRI). As a Direct
Shipping Ore (DSO) it requires no chemical/synthetic upgrade processes. Our rock contains low heavy metal
impurities, significantly higher available P2O5 than any other organic rock phosphate in North America, and a
calcium content of >25%.
Africa
Keras currently holds an 85% interest in the Nayéga manganese project in Togo, which covers 19,903 hectares
in northern Togo, held through Société Générale des Mines SA (SGM). As set out in the Chairman’s Statement,
SGM is still waiting for the issue of the exploitation permit.
KERAS RESOURCES PLC 7
Strategic Report
continued
Sustainability
Keras is committed to responsible mining and upholding ESG best practice across our business. We care about
all our stakeholders and are focused on looking to create value and benefits for all whilst seeking to manage and
mitigate the potential impacts that our operations may have. We are focussed on mining an essential resource
that can contribute to a more sustainable future and importantly sustainable and regenerative agriculture. With
the Diamond Creek mine we are running a simple operation with only crushing & milling requirements and will
look to maintain our low carbon footprint. We are focused on meeting our commitments across the ESG space
and will continue to be proactive in this area as we look to develop and sustain a positive legacy.
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:
Market Risk
Unlike marketing globally traded, indexed commodities into international markets, growing market share within
the niche organic fertiliser market within North America presents risk in terms of pricing and volume.
The Group has employed a head of marketing to develop and implement a marketing strategy which will be a
key focus area to build market share. The business has a range of existing customers, three of which are anchor
clients having provided commitments to purchase a pleasing base load of our planned annual production. Our
marketing strategy rollout will include presence at industry trade exhibitions and conferences, as well as regular
regional direct contact visits with a comprehensive schedule of contacts within the wholesale and distribution
segments of the organic fertiliser market. Our business model will largely be driven by uptake from co-operative
type clients with wide distribution networks, rather than selling directly to farmers themselves.
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.
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 ore reserves in accordance with internationally approved codes where
our operations/projects are located, which set minimum standards for public reporting of mineral exploration
results, mineral resources and ore reserves.
Development Risk
Delays in permitting, financing and commissioning a project may result in delays to the Group meeting
development and/or production targets. Changes in commodity prices can affect the economic viability of
mining projects and affect decisions on continuing exploration activity.
8 KERAS RESOURCES PLC
Mining and Processing Technical Risk
Notwithstanding the completion of metallurgical testwork, trial 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.
As Keras undertakes mining operations, any disturbance to the environment during this phase is required to be
rehabilitated in accordance with the prevailing regulations of the countries in which we operate as well as to
international best-practice.
Given the Group’s size and scale it is not considered practical or cost effective to collect and report data on
carbon emissions.
Financing & Liquidity Risk
The Group has had an ongoing requirement to fund its activities through the equity markets and may in future
need obtain finance for further project development. There is no certainty such funds will be available when
needed. To date, Keras has managed to raise funds primarily through equity 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 or equity
partners are unable or unwilling to perform their obligations or fund their share of future developments. Keras
no longer operates with either equity or joint venture partners having secured 100% of the Diamond Creek
project.
Bribery Risk
The Group has adopted an anti-corruption and bribery 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 commission of
such offences.
Financial Instruments
Details of risks associated with the Group’s financial instruments are given in Note 26 to the financial statements.
Keras does not utilise any complex or derivative financial instruments.
KERAS RESOURCES PLC 9
Strategic Report
continued
COVID-19
Travel and shipping restrictions in place globally during 2021 had a direct impact on timing and cost of delivery
of plant and equipment to the USA. However, given recent developments the Directors do not believe that
Covid 19 will have a material effect on the Company or its operations going forward.
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.
Keras also has Directors and Officers insurance in place.
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 as stated previously.
Shareholders
The Directors are always prepared, where practicable and subject to confidentiality under the AIM Rules, 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.
Employees
The Group operates primarily through contractors. Notwithstanding this, 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 currently operates in the USA and Togo. It recruits locally as many of its employees and contractors
as practicable.
The Company has four directors, all are male.
10 KERAS RESOURCES PLC
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. Contractors are appointed
based on a detailed assessment of their capabilities, capacity and track record.
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 expand.
Section 172 statement
The Directors believe they have acted in the way most likely to promote the success of the Company for the
benefit of its members as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
•
•
•
•
•
•
Consider the likely consequences of any decision in the long-term;
Act fairly between the members of the Company;
Maintain a reputation for high standards of business conduct;
Consider the interests of the Company’s employees;
Foster the Company’s relationships with suppliers, customers and others; and
Consider the impact of the Company’s operations on the community and the environment.
The Company’s operations and strategic aims are set out throughout the Strategic Report and in the Chairman’s
Statement, and relationships with stakeholders are also dealt with in the Corporate Governance Statement.
Graham Stacey
Director
This Strategic Report was approved by the Board of Directors on 29 June 2022
KERAS RESOURCES PLC 11
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.
GRAHAM STACEY
Chief Executive Officer – from 1 June 2022
Graham holds an honours degree in Mining Engineering from WITS University in Johannesburg (1995), and an
MBA from the WITS Business School (2004) and a Mine Manager’s Certificate of Competency (2001). Graham
has over 25 years' experience across a range of commodities in the resources sector, including direct operational
management in the coal, PGE and chrome businesses in South Africa, manganese in Togo and rock phosphate
in the USA, as well in a technical consulting role (2004-2008). He is a Competent Person and Competent Valuator
as a longstanding member of the South African Institute of Mining and Metallurgy (SAIMM), and has wide ranging
experience in mine design, project execution, operations and mineral resource management. He was previously
a director of AIM listed Chromex Mining. Following the acquisition of 100% of Falcon Isle he has been appointed
as MD of that company.
RUSSELL LAMMING
Non-Executive Director – from 1 June 2022
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
Managing Director of Calidus Resources Limited.
12 KERAS RESOURCES PLC
Corporate Governance Statement
To the extent applicable, and to the extent able (given the current size and structure of the Company and the
Board), the Company has adopted the Quoted Companies Alliance Corporate Governance Code. Details of how
the Company complies with the principles contained in the Code are set out below.
No key governance matters have arisen since the publication of the last Annual Report.
Taking account 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 mining projects which can be developed 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. In November 2019 the Company’s shares in Calidus were demerged and transferred to the Company’s
shareholders by way of a capital reduction.
The demerger has permitted the Board to examine other projects, and in particular the Diamond Creek
phosphate mine in Utah, USA, where the Company has completed the staged acquisition of a controlling 51%
equity interest in December 2020, and the balance of 49% equity interest in March 2022. This is now the
Company’s main project.
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, 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 exploration 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 period. The Board has four Directors,
who have demonstrated their commitment to the Company by supporting fund raisings, with the result that
they own, in aggregate, some 21.3% of the ordinary issued share capital. It follows that none of these directors
is considered to be independent.
Graham Stacey, the CEO since 1 June 2022, works full time for the Company, with primary responsibility for the
Diamond Creek phosphate mine in Utah, USA, which is now owned 100% by the Company. The other directors,
Brian Moritz (the Chairman), Russell Lamming (CEO until 1 June 2022) and Dave Reeves, are non-executive
directors. As directors are resident in several different time zones around the world, Board meetings are
normally conducted by video conference or by telephone.
The CEO is in constant touch with the Directors. He also holds frequent informal discussions with the
non-executive directors. Throughout the period such discussions average approximately two per week.
Non-executive directors are committed to devote 30 days per annum to the Company, but in fact exceed that
required time commitment. Prior to 1 April 2019 each of the non-executive directors has reduced his fees drawn
to half of the contracted amount, to £15,000 per annum for the Chairman, Brian Moritz, and £12,000 per annum
for Dave Reeves, non-executive director. Subsequently fees were increased to £42,000 per annum for the
KERAS RESOURCES PLC 13
Corporate Governance Statement
continued
Chairman and £24,000 per annum for each non-executive director, still below the median for AIM companies,
but more in line with the time commitments and efforts of the non-executive directors. Brian Moritz also acts
as Company Secretary.
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 and Graham Stacey are qualified mining
engineers. Each has a long history of achievement in this area. Importantly, each of them has also been in charge
of the construction and operation of mines.
Brian Moritz is a Chartered Accountant. In addition to his financial skills, he has been registered as a Nominated
Adviser and has wide experience of corporate transactions.
The advice of Azets, a top 10 UK 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 a major objective by acquiring a phosphate mine in Utah, USA, constructing
a processing plant and commencing production.
The Board will concentrate on achieving profitable production and positive cash flow from its existing projects
while continuing to seek other mining projects.
Given the current state of the Company’s development the directors believe that the Board operates efficiently
and cost effectively and that the cost of an external review process is not justified.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours.
So far as possible the Company recruits locally for staff.
In Utah, the Group’s product is a natural organic fertiliser which plays its part in reducing reliance on artificial
manufactured fertilisers.
Company has adopted a comprehensive anti-corruption and whistle blowing policy and an ethical policy which
is strictly applied.
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 by announcements
on RNS. It welcomes the ability to meet and engage with shareholders at general meetings.
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 the non-executive directors comprise the remuneration committee.
Brian Moritz
Chairman
14 KERAS RESOURCES PLC
Directors’ Report
The Directors present their report together with the audited financial statements of the Group for the 15 month
period ended 31 December 2021.
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 period of £2,014,000 (year to 30 September 2020: loss £1,242,000).
Major events after the balance sheet date
Since the end of the period the Company’s equity interest in Falcon Isle has been increased from 51% to 100%, so
that Falcon Isle is now a wholly owned subsidiary. Consideration for the acquisition of the 49% not previously owned
is payable in three annual tranches, the first of which is due on 1 July 2022. The total consideration of $ 3.2 million
includes loans from the vendor to Falcon Isle of $1,816,527, which will then be owed by Falcon Isle to the Company
Also, since the end of the period, the Company has raised £1.95 million by the issue of new Ordinary Shares as
set out in Note 27.
Dividends
The Directors do not recommend payment of a dividend for the period ended 31 December 2021 (year ended
30 September 2020: £nil).
Political donations
There were no political donations during the period (year ended 30 September 2020: £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
KERAS RESOURCES PLC 15
Directors’ Report
continued
any share option scheme or equity incentive scheme in operation from time to time to Directors and employees.
Meetings of the Remuneration Committee are held on an ad hoc basis as 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.
Directors
The following Directors held office throughout the period:
B Moritz
D Reeves
R Lamming
G Stacey (appointed 9 November 2021)
Directors’ interests
The beneficial interests of the Directors holding office on 31 December 2021 in the issued share capital of the
Company, including spouses of Directors, were as follows:
B Moritz
D Reeves1,2
R Lamming
G Stacey
31 December 2021
30 September 2020
Number of
New
Ordinary
Shares
177,582,118
861,942,616
416,184,497
43,739,000
Percentage
of issued
ordinary
share capital
2.82%
13.69%
6.61%
0.69%
Number of
Old
Ordinary
Shares
106,627,178
780,706,252
370,916,552
–
Percentage
of issued
ordinary
share capital
2.19%
16.04%
7.62%
–
1 477,960,361 New 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 New Ordinary Shares are held in the Bodmin Super Fund whose trustees and beneficiaries are David and Eleanor Reeves.
At 30 September 2020, D Reeves and R Lamming held 143,741,001 and 112,491,001 warrants entitling them
to subscribe for the same number of ordinary shares at a price of 0.24p per share. The subscription rights lapsed
on 31 August 2021. By subscribing for new ordinary shares under placings in December 2020 and January 2021,
each of B Moritz, D Reeves and R Lamming received warrants entitling them to subscribe for new ordinary
shares. The subscription rights in these warrants have also now lapsed.
On 26 April 2022 B Moritz, R Lamming and D Reeves, subscribed for 35,000,000, 45,000,000 and 120,000,000
new Ordinary Shares respectively at 0.12p per share. Each share subscribed received a warrant to subscribe for
1 new Ordinary Share at any time up to 31 May 2024, at an exercise price of 0.18p per share.
Directors’ remuneration and service contracts
Details of remuneration payable to Directors as disclosed in note 10 to these financial statements:
Remuneration
£’000
Share-based
payments
£’000
52
30
219
15
316
–
–
18
7
25
15 months to
31 December
2021
Total
£’000
Year to
30 September
2020
Total
£’000
52
30
237
22
341
42
24
318
–
384
B Moritz
D Reeves
R Lamming
G Stacey
16 KERAS RESOURCES PLC
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 accounting standards in conformity with the requirements of the Companies Act 2006. 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 international accounting standards in conformity with
the requirements of the Companies Act 2006, 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
29 June 2022
KERAS RESOURCES PLC 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 15 month period ended 31 December 2021 which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated and Parent Company Statement 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 Consolidated Financial Statements, including significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law and
international accounting standards in conformity with the requirements of the Companies Act 2006 and as
regards the parent company financial statements, as applied in accordance with the provisions of the Companies
Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 December 2021 and of the group’s loss for the period then ended;
the group financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 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
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’
assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of
accounting included reviewing cashflow forecasts covering a period of 12 months from the date of approval of
these financial statements, considering the levels of discretionary and non-discretionary expenditure forecasted,
challenging and conducting sensitivity analysis using the key inputs and assumptions underpinning said forecasts,
ascertaining the group and parent company’s current cash position and reviewing the group and parent
company’s performance since the period end. Whilst the group made a significant loss in the period and has
forecasted significant growth in revenues over the going concern period, the group and parent company has
significant cash reserves and a notable proportion of the costs forecasted are discretionary therefore if
forecasted growth targets are not met, discretionary costs could be reduced or deferred accordingly.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group's or parent company’s ability
to continue as a going concern for a period of at least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
18 KERAS RESOURCES PLC
Our application of materiality
For the purposes of determining whether the financial statements are free from material misstatement, we
define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a
reasonably knowledgeable person, relying on the financial statements, would be changed, or influenced. We
also determine a level of performance materiality which we use to assess the extent of testing needed to reduce
to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
Materiality for the group financial statements as a whole was set as £109,000 (2020: £70,000). This was
calculated based upon 2% of gross assets (2020: 2% of gross assets) due to the group’s significant capitalised
exploration costs and cash reserves being key balances of interest within the financial statements and the fact
that though generating revenues, the group is not yet profit generating. Performance materiality and the
triviality threshold for the consolidated financial statements was set at £76,300 (2020: £49,000) and £5,450
(£3,500) respectively due to the assessed risk and our accumulated knowledge of the group and parent
company.
Materiality for the parent company financial statements as a whole was set as £43,700 (2020: £40,000). This
was calculated based upon 5% of loss before tax (2020: 5% of loss before tax). Performance materiality and the
triviality threshold for the parent company was set at £30,600 (2020: £28,000) and £2,185 (2020: £2,000)
respectively due to the assessed risk and our accumulated knowledge of the parent company.
We also agreed to report to the audit committee any other audit misstatements below the triviality thresholds
established above which we believe warranted reporting on qualitative grounds.
Our approach to the audit
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.
In designing our audit, we considered areas involving significant accounting estimates and judgements by the
directors as well as future events that are inherently uncertain. These included the recoverable value of the
group’s capitalise exploration expenditure, the recoverable value of the parent company’s investment in its
subsidiary and the amounts due to the parent company by its subsidiaries. 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.
We performed an audit of the financial information of the group’s three components in order to obtain the
assurance required for the group audit opinion. All of the components were assessed as being significant due
to their results for the period, the value of their assets, liabilities and capital and reserves as at 31 December
2021 and the assessed risks in respect of their results for the period and their assets, liabilities and capital and
reserves.
Of the four reporting components of the group, two are located in the United Kingdom, one is located in the
United States of America and one is located in Togo. PKF Littlejohn LLP audited the ultimate parent company,
situated in the United Kingdom, and its subsidiaries, situated in the United Kingdom, United States of America
and Togo. The Engagement Partner conducted audit work in the United Kingdom but interacted regularly with
the Management team in the United States of America and Togo during all stages of the audit and was
responsible for the scope and direction of the audit process. This, in conjunction with additional procedures
performed, gave us appropriate evidence for our opinion on the group financial statements.
KERAS RESOURCES PLC 19
Independent Auditor’s Report to the Members of Keras
Resources Plc
continued
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
Going concern
The group made a loss for the period ended
31 December 2021 totalling £1.948m.
Given the level of cash held by the group at the
period end, there is a risk that the group may need
to raise further finance during the next 12 months
in order to maintain its going concern status and
may not be successful in raising said finance.
See note 2 for disclosure of the Directors’
justification for assessing the group as a going
concern.
Recoverability of Intangible Assets – prospecting
and exploration rights
The group has intangible assets of £4.606m million
(note 14) as at 31 December 2021, 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
and
discounting future cashflows. For these reasons,
this area required additional audit work to address
the accounting estimation and uncertainty.
forecasting
involved
in
How our scope addressed this matter
We obtained and reviewed Management’s latest
group and parent company cashflow forecasts
covering the going concern period; challenging the
key assumptions, reviewing the mathematical
accuracy of the forecast and conducting sensitivity
analysis.
We ascertained the latest group cash position and
performance post period end.
It was ascertained that the group’s forecasted net
cash outflows over the going concern period were
significantly less than the latest cash position. The
forecast and the assumptions underpinning it were
found to be reasonable.
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 were assessed
with reference to the criteria
listed within
International Financial Reporting Standard 6, to
include whether:
•
•
•
The licences are 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.
We consider Management’s assessment of impairment
is reasonable in concluding that no impairment is
required to be recognised at the period end.
20 KERAS RESOURCES PLC
Key Audit Matter
How our scope addressed this matter
Classification and accounting of investment in
Falcon Isle Resources and loan to Falcon Isle
Resources
During the period, the parent company entered
into an agreement to obtain an additional 11%
stake in Falcon Isle Resources which brought their
total shareholding to 51%, which the directors
deem to have given them control of the company.
In the prior period, it was an associate.
Therefore, there is a risk that the investment has
not been accounted for in accordance with IFRS 3,
IAS 28 and IFRS 10.
There is also a risk that the investment in Falcon
Isle and any amounts loaned to them during the
period have not been accounted for correctly and
may not be fully recoverable.
See note 15 for disclosure made in respect of the
accounting for this acquisition.
We confirmed that the parent company had gained
control over Falcon Isle Resources and that the acquisition
fell within the scope of IFRS 3.
We reviewed the step acquisition accounting, the
calculation of the loss on change of ownership and the
calculation of goodwill arising on acquisition. Following
the fair value uplift to capitalised exploration costs, no
goodwill arose on the acquisition.
We reviewed the accounting for the investment in the
parent company following the step acquisition. We
obtained Management’s investment in subsidiary and
intragroup loan receivable impairment assessment and
challenged the key assumptions made by Management.
We considered Management’s assessment of impairment,
obtained the discounted cashflow supporting their
assessments and challenged the key
inputs and
assumptions underpinning in said assessment.
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 contained
within the annual report. 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. 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 course of 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 this
gives rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial period for which
the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
KERAS RESOURCES PLC 21
Independent Auditor’s Report to the Members of Keras
Resources Plc
continued
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or
the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the
preparation of the group and parent company financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing
the group and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is
detailed below:
•
•
•
We obtained an understanding of the group and parent company and the sector in which they operate to
identify laws and regulations that could reasonably be expected to have a direct effect on the financial
statements. We obtained our understanding in this regard through discussions with management, industry
research and our cumulative audit knowledge and experience of the sector.
We determined the principal laws and regulations relevant to the group and parent company in this regard
to be those arising from UK Company Law, rules applicable to issuers on AIM, including the FCA Listing
Rules and the Disclosure Guidance and Transparency Rules.
We designed our audit procedures to ensure the audit team considered whether there were any indications
of non-compliance by the group and parent company with those laws and regulations. These procedures
included, but were not limited to:
o
Discussions with management regarding compliance with laws and regulations by the parent
company and the components;
22 KERAS RESOURCES PLC
o
o
Review of board minutes; and
Review of regulatory news announcements made throughout and post period-end.
•
•
We also identified the risks of material misstatement of the financial statements due to fraud. We
considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management
override of controls, we identified the potential for management bias was identified in relation to the
impairment of capitalised exploration expenditure l and we addressed this by challenging the assumptions
and judgements made by management when auditing that significant accounting estimate.
As in all of our audits, we addressed the risk of fraud arising from management override of controls by
performing audit procedures which included, but were not limited to: the testing of journals; reviewing
accounting estimates for evidence of bias; discussing with management as to whether there were any
instances or suspicions of fraud since 1 October 2020 within the parent company or components and
evaluating the business rationale of any significant transactions that are unusual or outside the normal
course of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including
those leading to a material misstatement in the financial statements or non-compliance with regulation. This
risk increases the more that compliance with a law or regulation is removed from the events and transactions
reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.
The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves
intentional concealment, forgery, collusion, omission or misrepresentation.
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
29 June 2022
15 Westferry Circus
Canary Wharf
London E14 4HD
KERAS RESOURCES PLC 23
Consolidated statement of comprehensive income
for the 15 months ended 31 December 2021
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative and exploration expenses
Loss from operating activities
Finance costs
Net finance costs
Share of net loss of associates accounted for using the
equity method
Loss on change of ownership
Loss before taxation
Tax
Loss for the period/year
Other comprehensive income – items that may be
subsequently reclassified to profit or loss
Exchange translation on foreign operations
Total comprehensive loss for the period/year
Loss attributable to:
Owners of the Company
Non-controlling interests
Loss for the period/year
Total comprehensive loss attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive loss for the period/year
Earnings per share
Basic and diluted loss per share (pence)
15 months
ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
Notes
11
15
12
452
(496)
(44)
(1,448)
(1492)
(43)
(43)
(116)
(363)
(2,014)
–
(2,014)
66
(1,948)
(1,729)
(285)
(2,014)
(1,670)
(278)
(1,948)
–
–
–
(1,235)
(1,235)
(3)
(3)
(4)
–
(1,242)
–
(1,242)
(15)
(1,257)
(1,181)
(61)
(1,242)
(1,194)
(63)
(1,257)
22
(0.033)
(0.040)
The notes on pages 32 to 57 are an integral part of these consolidated financial statements.
24 KERAS RESOURCES PLC
Consolidated statement of financial position
as at 31 December 2021
Assets
Property, plant and equipment
Intangible assets
Right of use asset
Investments accounted for using the equity method
Non-current assets
Inventory
Other investments
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Other reserves
Retained (deficit)/earnings
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Liabilities
Trade and other payables
Lease liabilities – current
Current liabilities
Trade and other payables
Lease liabilities – non-current
Non-current liabilities
Total liabilities
Total equity and liabilities
31 December
2021
£’000
30 September
2020
£’000
Notes
13
14
16
15
18
16
19
20
21
24
16
24
16
554
4,606
215
–
5,375
273
–
94
166
533
263
1,069
–
1,622
2,954
–
83
438
521
5,908
3,475
630
4,033
111
(1,721)
3,053
229
3,282
1,658
107
1,765
749
112
861
2,626
5,908
487
2,637
16
8
3,148
(140)
3,008
467
–
467
–
–
–
467
3,475
The financial statements were approved by the Board of Directors and authorised for issue on 29 June 2022. They
were signed on its behalf by:
Brian Moritz
Director
The notes on pages 32 to 57 are an integral part of these consolidated financial statements.
KERAS RESOURCES PLC 25
Consolidated statement of changes in equity
for the 15 months ended 31 December 2021
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26 KERAS RESOURCES PLC
Consolidated statement of changes in equity
for the year ended 30 September 2020
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The notes on pages 32 to 57 are an integral part of these consolidated financial statements.
KERAS RESOURCES PLC 27
Consolidated statement of cash flows
for the 15 months ended 31 December 2021
Cash flows from operating activities
Loss from operating activities
Adjustments for:
Depreciation and amortisation
Share of loss of equity accounted associate
Compensation on cancellation of SARS scheme
Equity-settled share-based payments
Foreign exchange differences
Changes in:
– inventory
– trade and other receivables
– trade and other payables
Cash generated by/(used in) operating activities
Finance costs
Taxes paid
Net cash generated by/(used in) operating activities
Cash flows from investing activities
Cash acquired on acquisition (note 15)
Acquisition of property, plant and equipment
Exploration and licence expenditure
Investment in associate
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 period/year
Cash and cash equivalents at 31 December/30 September
15 months
ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
(2,014)
(1,242)
172
116
–
37
73
76
4
120
63
(39)
(1,616)
(1,018)
(216)
(111)
540
(1,181)
–
–
(1,181)
158
(188)
(538)
–
(568)
1,477
1,477
(272)
438
166
–
2
278
(738)
–
–
(738)
–
(1)
(938)
(939)
1,931
1,931
254
184
438
The following significant non-cash transactions took place in the period ended 31 December 2021:
•
•
Shares were issued to settle a total of £55,000 due to creditors.
The investment in Falcon Isle became a subsidiary as detailed in note 15 and the assets and liabilities were
acquired.
The notes on pages 32 to 57 are an integral part of these consolidated financial statements.
28 KERAS RESOURCES PLC
Company statement of financial position
as at 31 December 2021
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 earnings/(deficit)
Total equity attributable to owners of the Company
Liabilities
Trade and other payables
Current liabilities
Total liabilities
Total equity and liabilities
31 December
2021
£’000
30 September
2020
£’000
Notes
13
15
16
17
19
20
21
24
2
1,959
1,961
–
2,081
20
122
2,223
4,184
630
4,033
100
(729)
4,034
150
150
150
4,184
–
1,622
1,622
–
1,534
70
428
2,032
3,654
487
2,637
63
285
3,472
182
182
182
3,654
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 £1,014,000 (year to
30 September 2020: loss of £811,000).
The financial statements of Keras Resources PLC, company number 07353748, were approved by the Board of
Directors and authorised for issue on 29 June 2022. They were signed on its behalf by:
Brian Moritz
Director
The notes on pages 32 to 57 are an integral part of these consolidated financial statements.
KERAS RESOURCES PLC 29
Company statement of changes in equity
for the period ended 31 December 2021
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B
The notes on pages 32 to 57 are an integral part of these consolidated financial statements.
30 KERAS RESOURCES PLC
Company statement of cash flows
for the period ended 31 December 2021
Cash flows from operating activities
Loss from operating activities
Adjustments for:
Depreciation
Share of loss of associate
Impairment/write off of loan
Compensation on cancellation of SARS scheme
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
Investment in associate/subsidiary
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 period/year
Cash and cash equivalents at 31 December/30 September
15 months
ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
(1,014)
(811)
1
116
–
–
37
50
23
(787)
–
(787)
(3)
(446)
(449)
1,477
(547)
930
(306)
428
122
–
4
4
120
63
14
25
(581)
–
(581)
–
(938)
(938)
1,931
(159)
1,772
253
175
428
The following significant non-cash transactions took place in the period ended 31 December 2021:
•
Shares were issued to settle a total of £55,000 due to creditors.
The notes on pages 32 to 57 are an integral part of these consolidated financial statements.
KERAS RESOURCES PLC 31
Notes to the Consolidated Financial Statements
for the 15 months ended 31 December 2021
1. Reporting entity
Keras Resources PLC is a company domiciled in England and Wales. The address of the Company’s registered
office is Coveham House, Downside Bridge Road, Cobham KT11 3EP. The Group currently operates as a miner
of and explorer for mineral resources. The accounting reference date has changed to 31 December to be
coterminous with the main trading subsidiaries.
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 25 to
the Financial Statements includes the Group’s policies and processes for managing its financial risk management
objectives.
Since the end of the period, the Company has agreed to acquire the minority 49% interest in Falcon Isle, and to
repay loans made by the vendor to Falcon Isle, for a total consideration of $3.2 million. This amount is payable
in four annual instalments of $800,000 commencing on 1 July 2022.
Also since the end of the period, the Company has raised a further £1.95 million, before costs, by the issue of
New Ordinary Shares. Part of this will be used to pay the first instalment of $800,000 to the vendor of Falcon
Isle.
The Nayéga mine in Togo is in a position to commence operations when the exploitation licence is granted.
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 which has been agreed in principle. Should the Company divest
its interest in the Nayéga mine, this is expected to be a cash flow positive transaction.
The Directors do not believe that Covid 19 has had a material effect on the Company or its operations other
than travel restrictions which have restricted the ability of management to visit operations. This has been
mitigated by increased home working and use of electronic communications. Such travel restrictions have now
been removed in most instances.
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. As such, the Directors 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 accounting
standards in conformity with the Companies Act 2006 (“IFRSs”), 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.
32 KERAS RESOURCES PLC
(d) Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are revised if the revision affects only that period, or in the
period of revision and future periods of the revision if it affects both current and future periods.
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 14
Intercompany receivables (Company only)
Carrying value of investment in associate
Fair value of share options and warrants
– Note 19
– Note 15
– Note 21
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) Associates
Investments in associates are accounted for using the equity method of accounting after initially being
recognised at cost. Loans to associates denominated in US$ are recognised in sterling in the financial statements
at the period end exchange rate.
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.
KERAS RESOURCES PLC 33
Notes to the Consolidated Financial Statements
continued
4. Significant accounting policies continued
Transactions eliminated on consolidation
(v)
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
Foreign currency
(b)
Transactions in foreign currencies are translated into the respective functional currencies of Group entities at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the reporting date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value in a foreign
currency are translated to the functional currency at the exchange rate when the fair value was determined.
Non-monetary items that are measured based on historical cost in a foreign currency are translated at the
exchange rate at the date of the transaction.
Foreign operations
(i)
The assets and liabilities of foreign operations, including goodwill and the fair value adjustments arising on
acquisition, are translated to GBP at exchange rates at the reporting date. The income and expenses of foreign
operations are translated to GBP at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income and accumulated in the translation
reserve except to the extent that the translation difference is allocated to non-controlling interests. When a
foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control
is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit
or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but
retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling
interests. When the Group disposes of only part of an associate or joint venture while retaining significant
influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
(c)
Financial instruments
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.
34 KERAS RESOURCES PLC
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities are recognised initially on the trade date, which is the date that the
Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to
initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.
Other financial liabilities comprise trade and other payables.
(iii)
Share capital
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.
KERAS RESOURCES PLC 35
Notes to the Consolidated Financial Statements
continued
4. Significant accounting policies continued
(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.
(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 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.
36 KERAS RESOURCES PLC
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.
Financial assets at fair value through other comprehensive income
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.
KERAS RESOURCES PLC 37
Notes to the Consolidated Financial Statements
continued
4. Significant accounting policies continued
(h) Revenue
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. Ownership passes either upon delivery or once the
product is collected where customers arrange delivery
Finance income and finance costs
(i)
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
(j)
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.
Leases
(k)
The Group leases certain property, plant and equipment. Leases of plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified as finance leases under IFRS 16. Finance leases
are capitalised on the lease’s commencement at the lower of the fair value of the leased assets and the present
value of the minimum lease payments. Other leases are either small in value or cover a period of less than 12
months.
38 KERAS RESOURCES PLC
The lease liability is initially measured at the present value of the lease payments that are not paid. Lease
payments generally include fixed payments less any lease incentives receivable. The lease liability is discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate. The Group estimates the incremental borrowing rate based on the lease term, collateral
assumptions, and the economic environment in which the lease is denominated. The lease liability is
subsequently measured at amortized cost using the effective interest method. The lease liability is remeasured
when the expected lease payments change as a result of new assessments of contractual options and residual
value guarantees.
The right-of-use asset is recognised at the present value of the liability at the commencement date of the lease
less any incentives received from the lessor. Added to the right-of-use asset are initial direct costs, payments
made before the commencement date, and estimated restoration costs. The right-of-use asset is subsequently
depreciated on a straight-line basis from the commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term. The right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of the lease liability.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations,
net of finance charges, are included in lease liabilities, split between current and non-current depending on
when the liabilities are due. The interest element of the finance cost is charged to the Statement of Profit and
Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period. Assets obtained under finance leases are depreciated over their useful lives. The lease
liabilities are shown in Note 6
Inventories
(l)
Inventories for processed material and ore stockpiles are valued at the lower of cost and net realisable value.
Costs allocated to processed material are based on average costs and include all costs of purchase, conversion
and other costs in bringing these inventories to their existing location and condition. Costs allocated to ore
stockpiles are based on average costs, which include an appropriate share of direct mining costs, direct labour
and material costs, mine site overhead, depreciation and amortisation. If carrying value exceeds net realisable
amount, a write down is recognised. The write down may be reversed in a subsequent period if the
circumstances which caused it no longer exist.
(m) Segment reporting
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.
Equity reserves
(n)
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 financial assets at FVOCI reserve is used to record unrealised accumulated changes in fair value on financial
assets.
KERAS RESOURCES PLC 39
Notes to the Consolidated Financial Statements
continued
5. New standards and interpretations
There are no amendments to International Financial Reporting Standards (IFRS) and International Accounting
Standards (IAS) that have been implemented by the Group in the period ended 31 December 2021 and have
changed the Group’s accounting policies.
Standards, Amendments to published Standards and Interpretations issued but not yet effective
Other new and amended standards and Interpretations issued by the IASB that will apply for the first time in
the next annual financial statements are not expected to impact the Group as they are either not relevant to
the Group’s activities or require accounting which is consistent with the Group’s current accounting policies.
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.
40 KERAS RESOURCES PLC
7. Operating segments
The Group considers that it operated during the period in two distinct business areas, being that of manganese
production and exploration in West Africa and phosphate mining in Utah, USA. These business areas form 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
15 months ended 31 December 2021
Manganese
£’000
Phosphate
£’000
External revenue
Cost of sales
Interest expense
Depreciation, amortisation and impairment
Share of associate loss to date of becoming subsidiary
(Loss)/profit before tax
Assets
Exploration and capital expenditure
Liabilities
–
–
–
43
–
(60)
1,535
1,332
360
451
495
–
143
116
(569)
4,229
3,274
2,113
Other
operations
£’000
–
–
1
–
(1,385)
144
–
155
Manganese
£’000
Phosphate
£’000
Other
operations
£’000
Year ended 30 September 2020
External revenue
Interest expense
Depreciation, amortisation and impairment
Share of associate loss
(Loss)/profit before tax
Assets
Exploration and capital expenditure
Liabilities
–
–
76
–
(405)
1,011
1
285
Information about geographical segments
15 months ended 31 December 2021
West Africa
£’000
External revenue
Cost of sales
Interest expense
Depreciation, amortisation and impairment
Share of associate loss to date of becoming subsidiary
(Loss)/profit before tax
Assets
Exploration and capital expenditure
Liabilities
–
–
–
43
–
(44)
1,541
1,332
360
–
–
–
(4)
(4)
1,622
–
–
US
£’000
451
496
–
143
(116)
(569)
4,229
3,274
2,113
–
–
–
(833)
842
–
182
Other
£’000
–
–
–
1
–
(1,385)
138
–
155
Total
£’000
451
495
–
187
116
(2,014)
5,908
4,606
2,628
Total
£’000
–
–
76
(4)
(1,242)
3,475
1
467
Total
£’000
451
496
–
187
(116)
(2,014)
5,908
4,606
2,628
KERAS RESOURCES PLC 41
Notes to the Consolidated Financial Statements
continued
7. Operating segments continued
Year ended 30 September 2020
External revenue
Interest expense
Depreciation, amortisation and impairment
Share of associate loss
(Loss)/profit before tax
Assets
Exploration and capital expenditure
Liabilities
West Africa
£’000
–
–
76
–
(405)
1,011
1
285
8. Expenses
Expenses include:
Depreciation and amortisation expense
Auditor’s remuneration
– Audit fee
Foreign exchange differences
US
£’000
–
–
–
(4)
(4)
1,622
–
–
Other
£’000
–
–
–
–
(833)
842
–
182
Total
£’000
–
–
76
(4)
(1,242)
3,475
1
467
15 months ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
44
33
12
76
23
4
Auditor’s remuneration for the period in respect of the Company amounted to £11,000 (year ended 30 September
2020: £10,000).
9. Personnel expenses
Wages and salaries
Fees
Equity-settled share-based payments (see note 23)
15 months ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
672
100
37
809
446
158
183
787
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 previous period.
The average number of employees (including directors) during the period was:
15 months ended
31 December
2021
Year ended
30 September
2020
4
–
3
7
3
1
3
7
Directors
Key management personnel
Other
42 KERAS RESOURCES PLC
10. Directors’ emoluments
15 months ended 31 December 2021
Wages and salaries (incl. fees)
Year ended 30 September 2020
Wages and salaries (incl. fees)
Compensation payment resulting from SARS cancellation
Executive
directors
£’000
Non-executive
directors
£’000
234
234
82
82
Executive
directors
£’000
Non-executive
directors
£’000
152
120
272
66
–
66
Total
£’000
316
316
Total
£’000
218
120
338
These amounts are disclosed by director in the Directors’ report on page 15.
Emoluments disclosed above include the following amounts payable to the highest paid director:
Emoluments for qualifying services
15 months ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
219
272
Key management personnel
Included in note 10 are emoluments paid to key management personnel in the period which amounted to
£70,000 (year ended 30 September 2020: £71,000).
11. Finance costs
Recognised in loss for period
Other
12. Taxation
Current tax
Tax recognised in profit or loss
Current tax
Current period
Deferred tax
Origination and reversal of temporary differences
Total tax
15 months ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
43
43
3
3
15 months ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
–
–
–
–
–
–
KERAS RESOURCES PLC 43
Notes to the Consolidated Financial Statements
continued
12. Taxation continued
Reconciliation of effective tax rate
Loss before tax (continuing operations)
15 months ended
31 December
2021
£’000
Year ended
30 September
2020
£’000
(2,014)
(1,242)
Tax using the Company’s domestic tax rate of 19.0% (2020: 19.0%)
(383)
(236)
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
2
116
7
258
–
3
93
12
128
–
None of the components of other comprehensive income have a tax impact.
Factors that may affect future tax charges
At the period end, the Group had unused tax losses available for offset against suitable future profits of
approximately £7,128,000 (year ended 30 September 2020: £5,771,000). A deferred tax asset has not been
recognised in respect of such losses due to uncertainty of future profit streams.
13. Property, plant and equipment
Plant and
equipment
£’000
Office and
computer
equipment
£’000
Motor
vehicles
£’000
Total
£’000
360
–
(39)
8
329
329
172
185
–
(25)
661
29
76
(39)
1
67
67
34
–
8
109
31
–
(6)
–
25
25
3
–
–
28
30
–
(6)
–
24
24
2
–
–
26
19
–
(19)
–
–
–
–
–
–
–
19
–
(19)
–
–
–
–
–
–
–
410
–
(64)
8
354
354
172
188
–
(25)
689
78
76
(64)
1
91
91
36
–
8
135
Group
Cost
Balance at 1 October 2019
Additions
Disposals
Effect of movements in exchange rates
Balance at 30 September 2020
Balance at 1 October 2020
Acquisition of Falcon Isle
Additions
Disposals
Effect of movements in exchange rates
Balance at 31 December 2021
Depreciation and impairment provisions
Balance at 1 October 2019
Depreciation for the year
Depreciation on disposals
Effect of movements in exchange rates
Balance at 30 September 2020
Balance at 1 October 2020
Depreciation for the period
Depreciation on disposals
Effect of movements in exchange rates
Balance at 31 December 2021
44 KERAS RESOURCES PLC
Group
Carrying amounts
At 30 September 2019
At 30 September 2020
At 31 December 2021
Company
Cost
Balance at 1 October 2019
Transfers
Balance at 30 September 2020
Balance at 1 October 2020
Additions
Balance at 31 December 2021
Depreciation and impairment provisions
Balance at 1 October 2019
Depreciation for the year
Balance at 30 September 2020
Balance at 1 October 2020
Depreciation for the period
Balance at 31 December 2021
Carrying amounts
At 30 September 2019
At 30 September 2020
At 31 December 2021
Plant and
equipment
£’000
Office and
computer
equipment
£’000
Motor
vehicles
£’000
331
262
552
1
1
2
–
–
–
Plant and
equipment
£’000
Computer
equipment
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
5
5
3
8
5
–
5
5
1
6
–
–
2
Total
£’000
332
263
554
Total
£’000
5
–
5
5
3
8
5
–
5
5
1
6
–
–
2
KERAS RESOURCES PLC 45
Notes to the Consolidated Financial Statements
continued
14. Intangible assets – Group
Cost
Balance at 1 October 2019
Additions
Disposals
Effect of movement in exchange rates
Balance at 30 September 2020
Balance at 1 October 2020
Acquisition of Falcon Isle (note 15)
Additions
Disposals
Effect of movements in exchange rates
Balance at 31 December 2021
Amortisation and impairment losses
Balance at 1 October 2019
Impairment
Amortisation
Disposals
Effect of movements in exchange rates
Balance at 30 September 2020
Balance at 1 October 2020
Impairment
Amortisation
Disposals
Effect of movements in exchange rates
Balance at 31 December 2021
Carrying amounts
Balance at 30 September 2019
Balance at 30 September 2020
Balance at 31 December 2021
Prospecting
and
exploration
rights
£’000
1,206
1
–
20
1,227
1,227
3,046
538
(158)
(10)
4,643
155
–
–
–
3
158
158
–
37
(158)
–
37
1,051
1,069
4,606
The carrying value of the prospecting and exploration rights is supported by the estimated resource and current
market values.
46 KERAS RESOURCES PLC
15. Investments in subsidiaries and associates
Company – subsidiaries
Equity investments
Balance at beginning of period
Additions – from associates
Disposals
Balance at 31 December/30 September
Directly
Southern Iron Limited
Falcon Isle Resources LLC
Indirectly
Société Générale des Mines SA
Registered offices of subsidiary companies are:
2021
£’000
–
1,959
–
1,959
2020
£’000
–
–
–
–
Activity
Investment
Mining
Country of
incorporation
Ownership interest
2021
2020
Guernsey
USA
100%
51%
100%
40%
Exploration
Togo
85%
85%
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 Falcon Isle Resources LLC, 8 The Green,
Suite B8, Dover, Kent, Delaware 19901, USA
Group and Company – associates
Accounted for using the equity method
At 1 October
Additions – including acquisition costs
Share of loss for the period
Transfer to investment in subsidiary
At 31 December/30 September
2021
£’000
1,622
453
(116)
(1,959)
–
2020
£’000
–
1,626
(4)
–
1,622
The interest in Falcon Isle was acquired for nominal consideration under a binding heads of terms dated 28 July
2020. Under this agreement the Company agreed to provide US$2.5m in loans to Falcon Isle payable in agreed
tranches. Falcon Isle is the 100% owner of the Diamond Creek phosphate mine located in in Utah (USA) which
is a fully permitted, high grade direct shipping ore organic phosphate operating mine.
At 30 September 2020 the Company had advanced US$ 1.9m to Falcon Isle, resulting in an equity interest of
40% and bringing the cost of the investment in the associate to £1,626,000.
On 31 December 2020 the Company advanced the balance of $0.6m and its equity interest has increased to a
controlling interest of 51%.
The initial acquisitions were accounted for under the equity method of accounting but upon achieving control
on 31 December 2020, the acquisition method of accounting has been applied.
Since 31 December 2021, on 29 March 2022, the Company agreed to acquire the outstanding 49% equity
interest in Falcon Isle and loans totalling $1,816,527 made by the vendor to Falcon Isle, for total consideration
of $3.2 million, payable in four annual tranches commencing on 1July 2022.
KERAS RESOURCES PLC 47
Notes to the Consolidated Financial Statements
continued
15. Investments in subsidiaries and associates continued
From the date of the acquisition on 31 December 2020 to 31 December 2021, Falcon Isle Resources recognized
revenue of £452,000 and incurred a loss of £569,000. If the acquisition had occurred on 1 October 2020 the
Group’s revenue and loss for the 15-month period ended 31 December 2021 would have been recognized
revenue of £548,000 and incurred a loss of £2,261,000 respectively.
The fair value of assets and liabilities acquired on acquisitions are as follows:
Intangibles
Fixed assets
Inventory
Receivables
Bank balances and cash
Trade and other payables
Loans
Fair value
£’000
3,046
172
57
122
158
(17)
(1,330)
2,208
The investment in associate was revalued prior to acquisition to fair value based on the price paid to acquire
the additional 11% shareholding. Under IFRS 3, on acquisition of the controlling stake, the Group remeasured
its original 40% investment in Falcon Isle. This lead to a loss on change of ownership of £363,000 being
recognised in the Consolidated Statement of Comprehensive Income.
On acquisition the non-controlling interest, valued based upon net assets at acquisition, was valued at £645,000.
No goodwill has arisen from the acquisition.
48 KERAS RESOURCES PLC
16. Leases
The following lease liabilities arose in respect of the recognition of right of use assets with a net book value of
£219,000. The Group holds one lease that it accounts for under IFRS 16.
The right of use assets are as follows:
Balance at 30 September 2020
Additions
Depreciation
Balance at 31 December 2021
The lease liability is as follows:
Balance at 30 September 2020
Addition
Principal reduction
Finance cost
Balance at 31 December 2021
Less: Current portion
Non-current portion
A maturity analysis of the undiscounted minimum lease payments due are as follows:
Lease liabilities – minimum lease payments
No later than one year
Later than one year and no later than five years
Later than five years
Total
17. Loans
Company - current
Balance at beginning of period
Funds advanced to subsidiaries
Repaid/impaired
Balance at 31 December/30 September
£000
–
314
(99)
215
£000
–
314
(105)
10
219
(107)
112
£000
116
116
–
232
2020
£’000
1,379
159
(4)
1,534
2021
£’000
1,534
547
–
2,081
All loans to subsidiaries are currently unsecured and interest free and repayable on demand. All loans are
denominated in GBP.
KERAS RESOURCES PLC 49
Notes to the Consolidated Financial Statements
continued
18. Inventories
Phosphate, including processed material held for sale
19. Trade and other receivables
Group
Trade receivables
Other receivables
Prepayments
Company
Other receivables
Prepayments
2021
£’000
273
273
2021
£’000
7
87
–
94
2021
£’000
20
–
20
2020
£’000
–
–
2020
£’000
–
71
12
83
2020
£’000
58
12
70
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 24 and 25. Trade receivables
are net of a provision for bad debts of £nil (2020: £nil).
20. Cash and cash equivalents
Group
Bank balances
Cash and cash equivalents
Company
Bank balances
Cash and cash equivalents
2021
£’000
166
166
2021
£’000
122
122
2020
£’000
438
438
2020
£’000
428
428
There is no material difference between the fair value of cash and cash equivalents and their book value.
50 KERAS RESOURCES PLC
21. Capital and reserves
Share capital
In issue at beginning of year
Issued for cash
Issued in settlement of debt
Cancelled under capital reduction
In issue at 31 December/30 September – fully paid
In issue at beginning of period
Resulting from capital reduction
Issued for cash
Issued in settlement of debt
In issue at 31 December/30 September - fully paid
In issue at beginning of year
Cancelled under capital reduction
In issue at 31 December/30 September – fully paid
Balance at beginning of year
Share issues
Deferred shares cancelled
Capital reduction
Balance at 31 December/30 September
Number of old ordinary shares
£0.001 each
31 December
2021
30 September
2020
–
–
–
–
–
2,491,358,439
7,000,000
–
(2,498,358,439)
–
Number of new ordinary shares
£0.0001 each
31 December
2021
30 September
2020
4,866,007,851
–
1,369,565,217
60,500,000
–
2,498,358,439
1,646,678,326
720,971,086
6,296,073,068
4,866,007,851
Number of deferred shares
of £0.004 each
31 December
2021
30 September
2020
–
–
–
1,193,794,390
(1,193,794,390)
–
Ordinary and deferred
share capital
31 December
2021
£‘000
30 September
2020
£‘000
487
143
–
–
630
7,266
244
(4,775)
(2,248)
487
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 general
meetings of the Company.
Issues of ordinary shares
On 18 December 2020, 400,000,000 ordinary shares were issued for cash at £0.0011 per share.
On 18 December 2020 B Moritz and D Reeves, conditionally agreed to subscribe for 36,363,636 and 63,636,364
shares each at £0.0011 per share, these were issued on 18 January 2021 following a General Meeting to grant
increased authority to issue shares.
KERAS RESOURCES PLC 51
Notes to the Consolidated Financial Statements
continued
21. Capital and reserves continued
On 18 January 2021, 869,565,217 ordinary shares were agreed to be issued at £0.00115 per share, of these, B
Moritz conditionally agreed to subscribe for 17,391,304 shares and R Lamming conditionally agreed to subscribe
for 26,086,957 shares in lieu of part of his salary. Of these shares, 600,000,000 were issued on 18 January 2021
and the balance of 269,565,217 were issued on 15 February 2021 following a General Meeting to grant increased
authority to issue shares.
On 18 January 2021, the company conditionally agreed to issue 48,000,000 ordinary shares at £0.00115 per
share in settlement of amounts owing to advisors. These were issued on 15 February 2021 following a General
Meeting to grant increased authority to issue shares.
On 8 November 2021 G Stacey agreed to convert £7,500 of his outstanding fees into 12,500,000 new ordinary
shares of 0.01p each at a price of 0.06p per share.
Warrants
31 December 2021 30 September 2020
In issue at beginning of period
Lapsed
Issued in period
Lapsed
Issued in period
Exercised in period
In issue at 31 December/30 September
Average
exercise
price
0.24p
0.24p
0.22p
0.22p
0.18p
–
0.18p
Number
984,357,334
(984,357,334)
250,000,000
(250,000,000)
434,785,608
–
434,785,608
Average
exercise
price
0.36p
–
0.24p
–
–
0.36p
0.24p
Number
7,000,000
–
984,357,334
–
–
(7,000,000)
984,357,334
On 18 December 2020 250,000,000 warrants were agreed to be issued to subscribers for the New Ordinary
Shares agreed to be issued for cash on 18 December 2020 on the basis of 1 warrant for every 2 shares
subscribed. The warrants are exercisable at price of 0.22p at any time up to 31 December 2021.
On 18 January 2021 434,785,608 warrants were agreed to be issued to subscribers for the New Ordinary Shares
agreed to be issued for cash on 18 January 2021 on the basis of 1 warrant for every 2 shares subscribed. The
warrants are exercisable at price of 0.18p at any time up to 28 February 2022.
The weighted average remaining contractual life of the warrants outstanding is 59 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 equity-settled share-based payments as adjusted for share options
cancelled.
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 comprised the cumulative net change in the fair value of available-for-sale financial assets
until the assets were derecognised or impaired.
52 KERAS RESOURCES PLC
22. Earnings per share
Basic and diluted earnings/(loss) per share
The calculation of basic earnings/(loss) per share at 31 December 2021 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
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
15 months
ended
31 December
2021
Year ended
30 September
2020
(1,948,000)
(1,181,000)
(1,948,000)
(1,181,000)
15 months
ended
31 December
2021
Year ended
30 September
2020
4,866,007,851
1,085,483,160
2,491,358,439
444,668,141
5,951,491,011
2,936,026,580
The warrants in issue are considered to be antidilutive and as a result, basic and diluted loss per share are the
same.
23. Share-based payments
The Company established an Enterprise Management Incentive Scheme to incentivise Directors and senior
executives. On 17 January 2020, 120,000,000 options were granted at £0.001639 with 10,000,000 vesting
immediately, 30,000,000 vesting on 9 March 2020, 30,000,000 vesting on 17 January 2021, 30,000,000 vesting
on 17 January 2022 and 20,000,000 vesting on 17 January 2023. The options lapse if not exercised within 5
years. Of the total, 90,000,000 options were granted to R Lamming, a Director.
The Black Scholes pricing model was used to calculate the share based payment charge incorporating an annual
volatility rate of 55%, expected life of between 2 and 5 years and risk free investment rate of between 0.23%
and 0.39%. The charge for the year ended 30 September 2020 for these rights which was included in
administrative and exploration expenses amounted to £63,000.
On 7 April 2021, 10,000,000 options were granted at £0.001183 with 3,333,333 vesting on 1 April 2022,
3,333,333 vesting on 1 April 2023 and 3,333,334 vesting on 1 April 2024. The options lapse if not exercised
within 5 years.
The Black Scholes pricing model was used to calculate the share based payment charge incorporating an annual
volatility rate of 57%, expected life of between 4 and 6 years and risk free investment rate of between 0.6%
and 0.93%. The charge for the period ended 31 December 2021 for these rights which was included in
administrative and exploration expenses amounted to £5,000.
On 27 May 2021, 15,000,000 options were granted at £0.001121 with 5,000,000 vesting on 17 May 2022,
5,000,000 vesting on 17 May 2023 and 5,000,000 vesting on 17 May 2024. The options lapse if not exercised
within 3 years of the vesting dates.
The Black Scholes pricing model was used to calculate the share based payment charge incorporating an annual
volatility rate of 57%, expected life of between 4 and 6 years and risk free investment rate of between 0.6%
and 0.93%. The charge for the period ended 31 December 2021 for these rights which was included in
administrative and exploration expenses amounted to £7,000.
KERAS RESOURCES PLC 53
Notes to the Consolidated Financial Statements
continued
24. Trade and other payables
Group - Current
Trade payables
Accrued expenses
Amounts due to Falcon Isle Resources’ minority interest
Other payables
Group – Non-Current
Amounts due to Falcon Isle Resources’ minority interest
Company - Current
Trade payables
Accrued expenses
Other payables
2021
£’000
962
93
593
11
1,658
2021
£’000
749
749
2021
£’000
46
91
13
150
2020
£’000
104
228
–
135
467
2020
£’000
–
–
2020
£’000
21
97
64
182
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 25.
25. 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
54 KERAS RESOURCES PLC
Financial assets at
amortised cost
Carrying amount
2021
£’000
94
166
260
2020
£’000
67
438
505
Company
Loans
Trade and other receivables
Cash and cash equivalents
Financial assets at
amortised cost
Carrying amount
2021
£’000
2,081
20
122
2,223
2020
£’000
1,534
56
428
2,018
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
2021
Non-derivative financial liabilities
Trade and other payables
Lease liabilities
Group
2020
Non-derivative financial liabilities
Trade and other payables
Company
2021
Non-derivative financial liabilities
Trade and other payables
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£’000
2-12 months
£’000
1,658
107
1,765
(1,658)
(107)
(1,765)
(168)
(19)
(187)
(1,490)
(88)
(1,578)
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£’000
2-12 months
£’000
467
467
(467)
(467)
(78)
(78)
(389)
(389)
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£’000
2-12 months
£’000
150
150
(150)
(150)
(25)
(25)
(125)
(125)
KERAS RESOURCES PLC 55
Notes to the Consolidated Financial Statements
continued
25. Financial instruments continued
Company
2020
Non-derivative financial liabilities
Trade and other payables
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£’000
2-12 months
£’000
182
182
(182)
(182)
(30)
(30)
(152)
(152)
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.
Currency risk
The Group is exposed to foreign currency risk on purchases that are denominated in currencies other than GBP.
The currencies giving rise to this risk are primarily the CFA Franc and the US dollar.
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 31 December 2021 for the Group
totalled £3,053,000 (30 September 2020: £3,148,000) and for the Company totalled £4,034,000 (30 September
2020: £3,472,000).
26. 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.
Of the remuneration payable to D Reeves, £25,000 remains unpaid as at 31 December 2021 (30 September
2020 £31,000).
56 KERAS RESOURCES PLC
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)
Falcon Isle Resources LLC
– Loans and receivables (interest free)
2021
£’000
2020
£’000
1,622
1,534
459
–
Southern Iron Limited had the following related party balances from financing activities:
Société Générale des Mines SA
– Loans and receivables (interest free)
27. Subsequent events
1,777
1,694
Issues of New Ordinary Shares
On 26 April 2022 the Company announced the raising of a total of £1,950,000 (before expenses) by the issue
of up to 1,625,000,000 new Ordinary Shares at a price of 0.12p per share. 1,000,000,000 new Ordinary Shares
were placed for cash consideration to raise £1,200,000 and the balance of 625,000,000 new Ordinary Shares
were issued through a Broker Option following approval at a General Meeting of the company held on 16 May
2022.
Each new Ordinary Share subscribed received a warrant to subscribe for 1 new Ordinary Share at any time up
to 31 May 2024, at an exercise price of 0.18p per share.
Falcon Isle
On 29 March 2022, the Company agreed to acquire the outstanding 49% equity interest in Falcon Isle and loans
totalling $1,816,527 made by the vendor to Falcon Isle, for total consideration of $3.2 million, payable in four
annual tranches of $800,000 commencing on 1 July 2022.
KERAS RESOURCES PLC 57