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2023 Report232803 Kodal cover 10/07/2014 16:07 Page 1 KODAL MINERALS PLC GROUP ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 1 CONTENTS Company Information Highlights CEO Report Strategic Report Report of the Directors Corporate Governance Report Report on Remuneration Report of the Independent Auditor Consolidated Statement of Comprehensive Income Consolidated and Parent Company Statements of Financial Position Consolidated Statement of Changes in Equity Parent Company Statement of Changes in Equity Consolidated and Parent Company Statements of Cash Flows Principal Accounting Policies Notes to the Financial Statements Notice of Annual General Meeting Page 2 3 4 9 13 18 19 22 23 24 25 26 27 28 35 52 Kodal Minerals Report & Accounts 2014 1 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 2 COMPANY INFORMATION DIRECTORS SECRETARY Luke Bryan Guy Eastaugh Markus Ekberg Emin Eyi David Jones Robert Wooldridge Weaver Financial Limited Stapeley House London Road Nantwich CW5 7JW COUNTRY OF INCORPORATION England and Wales REGISTERED NUMBER 07220790 REGISTERED OFFICE NOMINATED ADVISOR SOLICITORS FINANCIAL ADVISER & BROKER AUDITOR SHARE REGISTRARS FINANCIAL PR Prince Frederick House 35-39 Maddox Street London W1S 2PP Allenby Capital Limited 3 St Helen’s Place London EC3A 6AB Field Fisher Waterhouse LLP Riverbank House 2 Swan Lane London EC4R 3TT SP Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London W1S 2PP Baker Tilly UK Audit LLP 25 Farringdon Street London EC4A 4AB Share Registrars Limited Suite E, First Floor 9 Lion and Lamb Yard Farnham Surrey GU9 7LL Yellow Jersey PR Ltd 76 Great Suffolk Street London SE1 0BL Kodal Minerals Report & Accounts 2014 2 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 3 HIGHLIGHTS for the year ended 31 March 2014 This year has been a transformational period for Kodal Minerals Plc (“Kodal Minerals” or the “Company” and with its subsidiaries the “Group”) as it continues to develop a titanomagnetite and phosphate deposit in Norway, referred to as the “Kodal Project”: Operational Highlights ● In July 2013, the Group assisted in the successful application to the Norwegian Directorate of Mining to upgrade the exploration licences over the Kodal Project area to extraction licences; ● As part of its IPO process, the Group was able to declare a JORC compliant total indicated resource of 14.6Mt at 2.26% P (5.18% P2O5) and 24.12% Fe with an inferred resource of 34.3Mt at 2% P (4.59% P2O5) and 20.38% Fe; ● Consultants have been engaged and work has commenced on the baseline environmental and social studies for the Kodal Project; ● Subsequent to the year end, the Group has submitted an application to the Larvik and Andebu municipalities (the two Norwegian municipalities in which the Kodal Project lies) for a change of land use permission to allow mining activities; and ● In March 2014 the Group was granted 7 new exploration licences by the Norwegian Directorate of Mining covering an area of nearly 20 square kilometres around the Kodal Project, including an area in which a geophysical anomaly has historically been reported. Financial Highlights ● During the summer of 2013, the Group raised £0.3 million from private investors, to finance the analysis of the 918 metre test drilling undertaken in 2012 and undertake other preparatory work for the IPO; ● In December 2013, Kodal Minerals completed its IPO and admission to AIM (“Admission”) and exercised its option to acquire the licences for the Kodal Project; ● The Company raised £1.0 million from a placing of ordinary shares at the time of Admission and in January 2014 raised a further £1.25 million from a further placing; ● The consolidated results of the Group for the year to 31 March 2014 show a loss of £232,000 (2013: loss of £25,000); and ● At 31 March 2014, the Group had cash balances of £1,501,000 compared with £20,000 at 31 March 2013. Kodal Minerals Report & Accounts 2014 3 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 4 CEO REPORT for the year ended 31 March 2014 I am very pleased to present my report for the year ended 31 March 2014, which is our first set of results as a public company traded on AIM. IPO and acquisition of the Kodal Project The most significant event in the year was the successful completion of the Initial Public Offering (“IPO”) of Kodal Minerals and its admission to AIM in December 2013. The completion of the IPO also satisfied the last condition to allow the Group to exercise its option to acquire the Kodal Project licences from Tetra Minerals Oy (“Tetra”). The acquisition was completed by the issue of 250 million ordinary shares (“Shares”) in the Company to Tetra and a cash payment of €100,000. Under the terms of the acquisition, Tetra will also receive a royalty of 1.5% of revenue generated from mineral sales in connection with the Kodal Project licences. In addition Tetra has also been granted options over additional Shares which become exercisable only if the JORC indicated resource of phosphate minerals exceeds certain relatively high threshold levels, the likelihood of which the directors of the Company (“Directors”) presently consider to be remote. Description of the Kodal Project The Kodal Project is located in the Vestfold county of Norway and the boundary between the Andebu and Larvik municipalities crosses the project area. It is a phosphorus (P) and iron (Fe) project and is situated in the Lågen valley, 20 km north of Larvik. The Kodal Project forms part of the Vestfold-Ringerike Graben geological structure and is located approximately 85 km south-west of Oslo. The Kodal Project area is covered by three contiguous extraction licences issued by the Norwegian Directorate of Mining which expire in July 2023. The location of the Kodal Project extraction licences is shown below. Location map of the project concessions Kodal Minerals Report & Accounts 2014 4 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 5 The Kodal Project’s mineralised zone has been subject to two phases of historic exploration and geological modelling since the 1960s. All historic exploration was undertaken by Norsk Hydro ASA (“Norsk Hydro”), a part state owned Norwegian energy and resources group. The first phase was completed between 1960 and 1963 with 40 shallow (less than 50 metres) diamond drill holes over 20 profiles with subsequent follow-up drilling between 1974 and 1975 when an additional 20 diamond drill holes were drilled. These additional holes are deeper, with depths ranging from 110 to 550 metres. More recently, Kodal Minerals drilled seven diamond drill holes in 2012, comprising 918 metres of drilling designed to verify historical drill data. A summary of drilling undertaken on the Kodal Project is set out in Table 1 below. Years Metres Hole IDs Diameter A 1961 2062.90 m BH01 – BH39, LH01-LH02B EX 18.6 mm B 1974 4198.20 m BH41 – BH58 BQ 36.5 mm C 2012 918.40 m BH60-BH68 BQTK 40.5 mm Total 7179.5 m Table 1: Drilling undertaken on the Kodal Project. Subsequent to drilling, Kodal Minerals undertook re-logging of all available historic core in 2013 and captured geological, mineralogical, alteration and geotechnical characteristics including core preservation, sampling and core recovery. Historic data has been validated in three ways: ● CSA Global (UK) Ltd (“CSA”) has validated hard-copy grade data versus the digital data supplied by Kodal Minerals. ● Kodal Minerals has undertaken a twin drilling programme, the results of which have been assessed by CSA. ● Kodal Minerals has undertaken re-sampling and analysis of a portion of the available historic core, by current methods. This data has been assessed by CSA. Historical mineral processing and metallurgical test work has been completed on samples obtained from the Kodal Project and reported as part of historical feasibility study work completed by Norsk Hydro in the 1970s. In addition, preliminary test work was completed by Kodal Minerals in 2013 on a bulk composite sample (23kg) of drill core. Kodal Minerals Report & Accounts 2014 5 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 6 CEO REPORT (continued) for the year ended 31 March 2014 The Kodal Project has a JORC compliant total Indicated Resource of 14.6 million tonnes (Mt) at 2.26% P (5.18% P2O5) and 24.12% Fe with an Inferred Resource of 34.31 Mt at 2% P (4.59% P2O5) and 20.38% Fe. Table 2 below, sets out a summary of the Kodal Project resource by status. Category Gross Net attributable Operator Tonnes (millions) Grade P2O5 (%) Contained Metal Tonnes (millions) Fe (%) P2O5 (Mt) Fe (Mt) Grade P2O5 (%) Contained Metal Fe (%) P2O5 (Mt) Fe (Mt) Ore/Mineral reserves per asset Proved Probable Sub-total Mineral resources per asset Measured Indicated – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 14.6 – 5.18 – 24.1 – 0.76 – 3.52 – 14.6 – 5.18 – 24.1 – 0.76 – 3.52 Inferred 34.3 4.59 20.0 1.58 6.99 34.3 4.59 20.0 1.58 6.99 Sub-total 48.9 4.77 21.49 2.34 10.51 48.9 4.77 21.49 2.34 10.51 Total 48.9 4.77 21.49 2.34 10.51 48.9 4.77 21.49 2.34 10.51 Kodal Minerals Kodal Minerals Kodal Minerals Kodal Minerals Table 2: Summary resources by status Metallurgical test work In March 2014, the Company reported the results of additional metallurgical test work. The sample material for these tests was drawn from drill core but cannot be considered to be representative of the deposit. The intention of the tests was to provide samples of both phosphate and iron concentrates for further analysis and to provide a sample of tailings material for preliminary analysis. The processing route was developed in the initial test work undertaken in 2013, and utilises froth flotation and magnetic separation. The concentrate grades from these further tests were broadly in line with expectations based on the results obtained in 2013, with the phosphate concentrate grade dropping slightly while the iron ore grade improved slightly. 2013 Results 2014 Results Phosphate concentrate P2O5 41.8% P2O5 40.5% Iron concentrate Fe 62%, Ti 8.7% Fe 63.7%, Ti 5.2% Kodal Minerals Report & Accounts 2014 6 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 7 These tests indicate that the Kodal Project will produce a high-grade phosphate concentrate with both test programmes yielding a concentrate of over 40% P2O5. The increase in the iron concentrate grade is also very positive, especially in combination with the reduction in titanium. Granting of additional permits Subsequent to the IPO, the Group applied for and was granted seven new exploration licences by the Norwegian Directorate of Mining. These new licences cover a total land area of 19.795 km2 and surround the three extraction licences already held by the Group for the Kodal Project. The new licences include a reported positive magnetic and gravity anomaly identified by ground geophysics. The Company has three reports detailing geophysics in the project area dated 1973, 1976 and 1983 by various authors including the Norwegian Geological Survey (“NGU”). Kodal Minerals is currently completing geological mapping of the entire new area as well as investigating known mineralised occurrences in the region. Limited ground geophysics is planned as a follow up to the mapping. Site development At the Kodal Project site basic infrastructure has been put in place to support the field work planned to be undertaken over the summer. Environmental monitoring has also started with the installation of two automatic weather stations, one at either end of the project area. These stations will collect local weather data, which will be used to support the Environmental and Social Impact Assessment (“ESIA”) studies. The monitoring of stream flows in the Kodal Project area has also been under way since the spring thaw. The format of the ESIA document has been completed following meetings with national, regional and municipal level authorities in Norway. The expected format and content of an ESIA in Norway is somewhat specific to Norway and the Company has spent some time ensuring the planned format meets the Norwegian requirements while still adhering to the Equator Principles risk management framework. Environmental baseline studies are in progress as are studies on the potential social impact of the project. The Company has completed a concept level site layout including approximate waste rock and tailings disposal options. The concept appears to offer a very compact zone of impact and if supported by future studies it seems that the Kodal Project may be able to be operated and decommissioned leaving a very moderate physical impact on the immediate environment. Kodal Minerals has also engaged the services of various consultants to help with the project. Change of land use application Since the year end, the Group has submitted applications to the Larvik and Andebu municipalities (the two local municipalities in which the Kodal Project is located) for change of land use permission to allow mining operations to be undertaken. The two municipal planning processes operate according to different timetables and do not have defined completion dates. The Group expects that the initial decisions on area land use may be determined during the next 12 months. Kodal Minerals Report & Accounts 2014 7 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 8 CEO REPORT (continued) for the year ended 31 March 2014 Financing During the summer of 2013, the Company raised £300,000 from the issue of Shares to private investors. These funds were used to continue the assay and metallurgical work and other preparatory work for the IPO. At the time of the IPO, the Company completed a placing to institutional and professional investors to raise £1.0 million and in January 2014 completed a follow on placing raising a further £1.25 million. These funds have been used to meet the costs of the IPO and finance the ongoing development work at the Kodal Project, as well as meeting the Group’s working capital requirements. As at 31 March 2014, the Group had cash balances of £1,501,000. Outlook During the year, the Group has made significant progress towards its objective of bringing the Kodal Project into production. For the rest of the current financial year, the focus will be on progressing the change of land use applications with the municipalities and completing the environmental base line studies. We will also undertake limited exploration studies on the new exploration licences around the existing Kodal Project. Luke Bryan CEO 3 June 2014 Kodal Minerals Report & Accounts 2014 8 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 9 STRATEGIC REPORT for the year ended 31 March 2014 Group Strategy The Group is engaged in the development of the Kodal Project which is an iron ore and phosphate deposit located in Vestfold County southern Norway. The overall objective is to progress the development of the Kodal Project through to a fully producing, profitable mine providing an important source of high grade phosphate for European markets, as an essential component of fertilisers, and also iron ore for use in, for example, steel production. Once fully operational, the mine is expected to have a life of around 19 years. The development of the mine is a complex process that is expected to take several years. It will involve additional drilling to confirm the size and grade of the deposit, metallurgical work to define the processing pathway and engineering and design work to establish the optimal mine plan and plant design. Kodal Minerals is presently focussed primarily on progressing the planning and permitting process which is expected to include: ● Conducting environmental and social base line studies over the Project area to determine the environmental and social impact assessment of the Kodal Project. ● Completing a comprehensive ESIA to support the development of the Kodal Project. ● Progressing the Norwegian planning process at municipal, regional and state level to obtain the required permits to operate the mine and related processes and activities. ● Progressing the applications submitted to the Norwegian municipalities of Andebu and Larvik for changes to their respective area land use plans to allow mining operations in the Kodal Project area. ● Conducting further resource and site investigation work to advance the development of the Kodal Project. At each stage of the development process, Kodal Minerals will assess the viability and commercial feasibility of the Project. Kodal Minerals may also assess other mining projects and may make an acquisition, enter a joint venture or acquire new land if a suitable opportunity is identified. Financial and non-financial objectives of the Group The objectives of the Group are to develop the Kodal Project and ultimately bring it into commercial production in a fully environmentally compliant manner. The financial objectives of the Group are: ● to fund the technical and environmental development of the Kodal Project; and ● to operate the Kodal Project profitably. The non-financial objectives of the Group are: ● to ensure that the environmental and social impact of the Kodal Project is minimised; ● to ensure that all applicable environmental standards are maintained; and ● to seek to ensure the safety of all the Group’s employees and consultants. Kodal Minerals Report & Accounts 2014 9 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 10 STRATEGIC REPORT (continued) for the year ended 31 March 2014 Summary of the risks to achieve objectives Technical Risks As currently conceived the Kodal Project is regarded as having a low technical risk. The planned operations utilise common mining and processing technologies to produce saleable grade concentrates. Social Risks There is an element of social risk associated with the Kodal Project as it is located in the vicinity of residential housing. A small number of these houses are in the impact zone of the Kodal Project in that they will be able to see or hear the mining operations and in a smaller number of cases will be within 500 metres of the mine in its later years. These risks will be quantified in the baseline study and impacts and potential mitigation will be assessed and described in the ESIA. Political Risks Norway is regarded by the Directors as a low risk country. Norway’s political environment is stable and the country benefits from having an effective and accountable system of government. Legislation is prepared by an experienced civil service and often follows lengthy consultations with groups affected by any new laws. Legislation must then pass through parliament’s committee system, where the aim is usually to build a cross-party consensus, or at least a majority. The justice system is of high quality, while regulatory authorities are efficient and apply rules irrespective of a company’s country of origin. In accordance with Norway’s membership of the European Economic Area (EEA), foreign individuals and companies are free to purchase Norwegian property and company shares, although ownership is restricted in specific sectors (defence, energy, financial services). Norwegian law generally provides sufficient protection of all property rights, including most intellectual property. Economic Risks The economic risks to the Group are mainly limited to global economic performance. Both phosphate and iron ore are internationally traded bulk commodities with published price statistics. In both markets the Group will be a very small participant in terms of volume and value. The activities of the Group will not impact world prices. The commercial viability of the proposed mine will depend on the market prices for these commodities. Financial Risks The principal financial risk to the Group is access to additional development finance which is likely to be raised initially by way of equity finance. At later stages of development, the Kodal Project will produce a significant proportion of its revenues from the sale of very high quality phosphate rock concentrate which should be subject to an off-take agreement, and additional development finance should be available under normal market conditions. Marketing Risks The Group will be exposed to marketing risk only once the Kodal Project enters production and it needs to sell the phosphate and iron ore production. The Group regards the marketing risk associated with the sale of the phosphate concentrate to be low. The marketing risk associated with the iron concentrate is less easy to anticipate as the Group has yet to decide on what mainstream or alternative markets to enter. Legal Risk Legal risk is regarded as low. As noted above the justice system in Norway is of high quality, while regulatory authorities are efficient and apply rules irrespective of a company’s country of origin. The Group owns a number of licences all of which were first issued in 2013 or 2014. The most important licences are the extraction licences which were issued in mid-2013 and run for 10 years, thus providing the Group with over 9 years in which to bring the project into production. Kodal Minerals Report & Accounts 2014 10 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 11 Group’s approach to achieving the objectives in the context of the market outlook The two markets whose outlook will impact the development of the Kodal Project are the capital markets and the markets for the products intended to be produced at the Kodal Project. These are considered in turn. Capital markets The Kodal Project is currently anticipated to require a capital investment of approximately US$120 million. Given the early stage of engineering studies and the presence of significant variables it is probably prudent to consider the capital requirement to be in the range of US$100 – $150 million. The factors considered to be strongly supportive of the Kodal Project in terms of raising development finance are; ● Very low country risk in Norway; ● Relatively low capital expenditure requirement; ● Relatively long project life (currently 19 years, stage 1); ● Very high quality phosphate concentrate; and ● Potential access to funding in Norway. Despite the factors above, the ability of the project to attract finance will depend upon the economics of the Kodal Project which in turn are dependent mainly upon the results of engineering studies which are yet to be completed, and future commodity prices. Based upon commodity prices achieved in recent years and preliminary engineering estimates it appears the Kodal Project can be reasonably expected to achieve the required returns to continue to attract development finance. Physical markets The Kodal Project is expected to produce phosphate concentrate and an iron product. ● The phosphate concentrate specifications are fairly well known and as understood currently the Kodal Project phosphate concentrate will be one of the highest quality phosphate concentrates available on the world market at 41-42% P2O5 and a Minor Element Ratio (“MER”) of 0.022. It is expected that the annual production of approximately 200,000 tonnes will find a ready market and attract a premium price. Regardless of the quality, the price achieved will to some degree be related to the published prices for phosphate rock at the time of sale. The phosphate price displays considerable variability, from about US$46/tonne to about US$425/tonne over the last 13 years. The current price is about US$110/tonne for 33% P2O5 rock fob Morocco with a MER of 0.035. It is worth noting that the Moroccan benchmark grade has dropped to 29-31% P2O5. Worldwide high grade phosphate resources are being depleted, Morocco is investing to produce value added phosphate products and production in Florida is in decline. These factors tend to support future prices. ● The iron product is expected to be a titanomagnetite concentrate grading 62-64% Fe and 5-8% Ti (Titanium). Research to date indicates that this product can be sold in China at a discount of approximately US$30/tonne to the spot price. The Group intends to research both speciality markets for magnetite and adding value through additional processing. Both potential sales routes could offer the opportunity to sell into Europe thus avoiding the cost of shipping to China. In general the development of the project is expected to continue despite the short term fluctuations of the two relevant commodity prices. The development cycle of the Kodal Project is measured in years whilst the prices can show significant change over a single year. Unless there is a significant and seemingly permanent drop in commodity prices the Group intends to continue the development. Kodal Minerals Report & Accounts 2014 11 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 12 STRATEGIC REPORT (continued) for the year ended 31 March 2014 The Group’s business model Kodal Minerals is a mineral project development company with one project, the Kodal Project, under development. The Group is based in London and has subsidiaries in Norway. The Group’s business model is similar to that of most junior mineral development companies. Money is raised on the capital markets and invested in the development of the project. The Group seeks to increase its total value and value for shareholders via the development of the Kodal Project. Overview of the past year During the year ended 31 March 2014 Kodal Minerals has achieved a number of important milestones and ended the year in a good position, both financially and operationally, to have another successful forthcoming year. The key milestones of the year to 31 March 2014 were: ● Declared a JORC resource for the Kodal Project; ● Successfully applied for extraction licences over the Kodal Project area; ● Produced a very high grade phosphate concentrate in initial metallurgical test work; ● Completed an IPO and was admitted to AIM in 30 December 2013; ● Raised £1.0 million on IPO at a price of 0.7 pence per share; ● Completed a follow on raising of £1.25 million at 1.25 pence per share; ● Successfully applied for new exploration licences surrounding the Kodal Project area; and ● Commenced baseline environmental and social impact studies. The development plan for approvals and permitting for the mine have been discussed with the relevant Norwegian authorities. Since the year end, the Group has submitted applications to the Larvik and Andebu municipalities for change of land use permission to allow mining operations to be undertaken. Utilising key performance indicators (“KPIs”) At this stage of its development Kodal Minerals does not consider KPIs to be a relevant performance metric as the Group is moving the project through the Norwegian planning process and collecting baseline environmental data. Approved by the Board of Directors and signed on behalf of the Board on 3 June 2014. Luke Bryan CEO Kodal Minerals Report & Accounts 2014 12 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 13 REPORT OF THE DIRECTORS for the year ended 31 March 2014 The Directors present their report, together with the audited consolidated financial statements for Kodal Minerals Plc for the year ended 31 March 2014. The Company is registered in England and Wales, having been incorporated on 13 April 2010 under the Companies Act with registration number 07220790 as a private company limited by shares. On 8 April 2013 the Company changed its name to Kodal Minerals Limited from Clearphos Limited. On 19 December 2013 the Company registered as a Public Limited Company and changed its name to Kodal Minerals Plc and on 30 December 2013 its shares were admitted to trading on the AIM Market of the London Stock Exchange. Principal activity The Company was incorporated for the purposes of acquiring or discovering and developing mineral assets. Domicile and principal place of business Kodal Minerals Plc is domiciled in the United Kingdom. Its principal place of business as at 31 March 2014 was Norway. Directors The following Directors held office during the year: David Jones Luke Bryan Guy Eastaugh Markus Ekberg Emin Eyi John Mackay Robert Wooldridge Appointed 20 December 2013 Appointed 8 April 2013 Appointed 20 December 2013 Appointed 19 March 2014 Resigned on 21 November 2013 Biographical details of the Directors David Harold Jones CBE, (Chairman, Non-executive Director) David was the group chief executive of National Grid plc, which was the owner and operator of the electricity power transmission system of England and Wales from 1994 to 2010. David was involved in matters of national energy policy and he also advanced National Grid plc’s acquisitions in North America and internationally. David was chairman of UK Coal plc from 2003 to 2010 and held board positions at Teesside Power Ltd, United Utilities Group plc and Bull Information Systems Ltd. Mr Jones was formerly Chief Executive of South Wales Electricity, having previously held senior engineering, commercial and management posts on the South Western and Midlands Electricity Boards. Luke Robert Bryan, (Chief Executive Officer) Luke is a mining engineer with over 20 years of international experience. Most recently he was chief executive officer of North River Resources, an AIM quoted mineral exploration company and prior to that he worked as an independent consultant. Luke has worked in Africa, Australia, the Former Soviet Union and Europe. He holds degrees in Mining Engineering and Economics from Auckland University. Luke is based in London and is a Fellow of the Geological Society. Kodal Minerals Report & Accounts 2014 13 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 14 REPORT OF THE DIRECTORS (continued) for the year ended 31 March 2014 Guy Edward Eastaugh, (Non-executive Director) Guy began his career at PricewaterhouseCoopers International Limited in London, qualifying in 1987. Guy subsequently spent six years in investment banking before moving into industry in 1995. He worked at Enron Europe Limited, rising to vice president, before joining Hanson plc as head of corporate development in 1999. From 2003 to 2007 he was head of corporate finance and corporate director – strategy at GKN plc. In May 2007, Guy joined Invista Real Estate Investment Management Holdings plc as chief financial officer and a main board director. He remained part of the executive team that led the successful sale of the business in 2012. Guy is a qualified chartered accountant and a member of the Association of Corporate Treasurers. He holds a Masters degree in Natural Sciences from Cambridge University. Markus Ekberg, (Non-executive Director) Mr Ekberg is a director and 50% shareholder of Tetra Minerals Oy (“Tetra”) which holds 250,000,000 ordinary shares in Kodal Minerals, representing approximately 32.46% of the issued share capital, and has been appointed as a representative of Tetra. Markus has nearly 30 years’ experience in the management and construction of mines and mining projects, particularly with projects involving base metals, gold and chromium. His experience covers participation in various projects in Finland, Norway, Ireland and Australia. Since, 2009 he has been the CEO of Endomines AB, a company listed on NASDAQ OMX in Helsinki and Stockholm, which owns a producing gold mine in Finland. Emin Eyi, (Non-executive Director) Emin is currently managing director of Tri-Star Resources plc, an AIM listed integrated antimony development company. Prior to his current role, Emin was a partner of SP Angel Corporate Finance LLP where he conducted investment and advisory work for clients. He has particular experience of the mining and resource industry and is familiar with those who provide financing and who are active in the investment market for mining and resource companies. Mr. Eyi has 20 years of investment banking experience in the natural resource sector at a number of firms including Cazenove & Co, Barings, HSBC and Goldman Sachs. He is a graduate of Imperial College in London, with a Masters degree in Mining Engineering, and is a Fellow of the Geological Society. Robert Ian Wooldridge, (Non-executive Director) Robert is currently a partner at SP Angel Corporate Finance LLP. After graduating with a degree in Natural Sciences from Cambridge University, he spent eight years at PricewaterhouseCoopers International Limited, qualifying as a chartered accountant in 1989. He left in 1994 to join the international equity capital markets division of HSBC Investment Bank where he spent a further eight years and was responsible for completing a number of landmark equity transactions across Europe, India and the Middle East & Africa. In 2003 he joined an investment banking boutique, to head up its corporate finance and securities operation and was then one of the founding partners of SP Angel in 2006. SP Angel is an independent corporate finance and broking operation which focuses on advising small and mid-cap companies in the mining, oil and gas, property and technology sectors. Kodal Minerals Report & Accounts 2014 14 232803 Kodal pp01-pp22 10/07/2014 16:49 Page 15 Directors’ interests The beneficial interests in the Company’s shares and share options of the current Directors and their families, as at 31 March 2014 are as follows: Directors Ordinary shares Ordinary shares 31 March 2014 31 March 2013 Notes David Jones 7,808,000 – Luke Bryan 48,500,000 5,000,000 1 & 2 Guy Eastaugh 2,857,150 – 3 Markus Ekberg 250,000,000 – 4 Emin Eyi 30,147,997 31,232,000 Robert Wooldridge 50,081,477 30,451,200 Note 1: Held by Novoco Mine Engineering Limited (“Novoco”), a company wholly owned by Luke Bryan. Note 2: Under an option agreement between the Group and Novoco, the Group granted to Novoco options over 25,000,000 Shares (“Option Shares”) at an exercise price of 0.7 pence per share. The options become exercisable in respect of one third of the total number of Option Shares on each of the first, second and third anniversaries of 30 December 2013. The options are exercisable for a period of ten years from the date on which they vest and become exercisable. Note 3: Held by GEE Consulting Limited, a company wholly owned by Guy Eastaugh. Note 4: These shares are held by Tetra Minerals Oy, a company in which Markus Ekberg is a director and 50% shareholder. Acquisition of Kodal Phosphate AS Kodal Phosphate AS is the registered holder of the Kodal Project extraction licences. On 30 December 2013 the Group purchased Kodal Phosphate AS for consideration of £1.835 million satisfied by issuing 250,000,000 Shares at 0.7 pence per Share (i.e. Shares to a value of £1,750,000) to Tetra Minerals Oy together with a cash payment of €100,000 (£85,000). IFRS 3 (Business combinations) defines a business combination as the bringing together of separate entities or businesses into one reporting entity. A business consists of inputs and processes applied to those inputs that have the ability to create outputs. The extraction licences were the sole assets held by Kodal Phosphate AS, there being no business operation. The board of Directors (the “Board”) has therefore treated the acquisition of Kodal Phosphate AS as the acquisition of an asset and not a business combination in these consolidated financial statements. Principal risks and uncertainties The Board continually reviews the risks facing the Group. The Group is not yet revenue generating. The principal risks and uncertainties facing the Group involve the ability to raise funding in order to finance the continued development of the Group’s mining activities, obtaining necessary operating permits and licences and the exposure to fluctuating commodity prices. Financial risk management objectives and policies The Group’s principal financial instruments comprise cash and trade and other payables. It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments are liquidity risk, price risk and foreign exchange risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Kodal Minerals Report & Accounts 2014 15 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 16 REPORT OF THE DIRECTORS (continued) for the year ended 31 March 2014 Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash reserves to fund the Group’s exploration and operating activities. Management prepares and monitors forecasts of the Group’s cash flows and cash balances monthly and ensures that the Group maintains sufficient liquid funds to meet its expected future liabilities. The Group has developed plans to raise funds in discrete tranches to provide sufficient cash resources to manage the activities through to revenue generation. Price risk The Group is exposed to fluctuating commodity prices of phosphate and iron ore and the existence and quality of these commodities within the project area. The Directors will continue to review the prices of phosphate and iron ore as development of the project continues and will consider how this risk can be mitigated closer to the commencement of mining. Foreign exchange risk The Group is exposed to the Norwegian Kronor as a proportion of its operating expenses are incurred in Kronor. The Group does not have a policy of using hedging instruments but will continue to keep this under review. The Group operates foreign currency bank accounts to help mitigate the foreign currency risk. Going concern and funding The Group has not earned revenue during the year to 31 March 2014 as it is still in the exploration and development phases of its business. The operations of the Group are currently being financed from funds which the Company has raised from the issue of new Shares. As at 31 March 2014, the Group held cash balances of £1.5 million. The Directors have prepared cash flow forecasts for the period ending 30 September 2015. The forecasts include the unavoidable running costs of the Group and limited discretionary exploration and development expenditure. The forecasts demonstrate that the Group has sufficient cash resources available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements without the need for a further fund raising. However, further fund raising will be required at an appropriate time in order to complete the project plan. Accordingly, the financial statements have been prepared on a going concern basis. Directors’ and Officers’ liability insurance The Group has Directors’ and Officers’ liability insurance to cover claims up to a maximum of £1.0 million. Charitable donation During the year to 31 March 2014 the Group made a charitable donation of £1,000. Statement as to disclosure of information to auditors The Directors have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is unaware. Each, of the Directors has confirmed that he has taken all the steps that he ought to have taken as a Director, in order to make himself aware of any relevant audit information and to establish that it has been communicated to the auditor. Kodal Minerals Report & Accounts 2014 16 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 17 Directors’ responsibilities statement The Directors are responsible for preparing the Strategic Report, Directors’ Report and Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and have elected under company law to prepare the Company financial statements in accordance with IFRS as adopted by the EU. The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and the Company and the financial performance of the Group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. 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 the Company and of the profit or loss of the Group for that period. In preparing the Group and Company financial statements, the Directors are required to: ● select suitable accounting policies and then apply them consistently; ● make judgments and accounting estimates that are reasonable and prudent; ● state whether they have been prepared in accordance with IFRS as adopted by the EU; and ● prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the 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 the Company’s transactions and disclose, with reasonable accuracy at any time, the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Auditors and Annual General Meeting Baker Tilly UK Audit LLP were appointed in the year and offer themselves for reappointment as auditors in accordance with section 489(4) of the Companies Act 2006. A resolution to reappoint Baker Tilly UK Audit LLP will be proposed at the Annual General Meeting. Approved by the board of directors and signed on behalf of the board on 3 June 2014. Robert Wooldridge Director Kodal Minerals Report & Accounts 2014 17 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 18 CORPORATE GOVERNANCE for the year ended 31 March 2014 Introduction While not mandatory for an AIM company, the Directors take due regard, where practical for a company of this size and nature, of certain provisions of the principles of good governance and code of best practices under the UK Corporate Governance Code. The disclosures presented herein are limited and are not intended to constitute a corporate governance statement. Directors The Company supports the concept of an effective board leading and controlling the Group. The Board is responsible for approving Group policy and strategy. It meets on a regular basis and has a schedule of matters specifically reserved for decision. Procedures are in place for operational management to supply the Board with appropriate and timely information and the Directors are free to seek any further information they consider necessary. The Directors that served during the year are detailed on pages 13 and 14. The Non-Executive Chairman of the Board is David Jones. Relations with shareholders The Company values the views of its shareholders and recognises their interest in the Group’s strategy and performance. The Annual General Meeting will be used to communicate with private investors and they are encouraged to participate. The Directors will be available to answer questions. Separate resolutions will be proposed on each issue so that they can be given proper consideration and there will be a resolution to approve the annual report and accounts. Internal control The Board is responsible for maintaining a strong system of internal control to safeguard shareholders’ investments and the Group’s assets and for reviewing its effectiveness. The system of internal financial control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The Audit Committee comprises Guy Eastaugh and David Jones and is chaired by Guy Eastaugh. It meets at least twice a year to consider the integrity of the financial statements of the Group, including its annual and interim accounts, the effectiveness of the Group’s internal controls and risk management systems, auditor reports, and terms of appointment and remuneration for the auditors. The Remuneration Committee performs both remuneration and nomination functions and comprises David Jones and Guy Eastaugh and is chaired by David Jones. It meets as and when required. The purpose of the remuneration function is to ensure that the executive directors are fairly rewarded for their individual contributions to the overall performance of the Group, to determine all elements of the remuneration of the executive directors and to demonstrate to the Group’s shareholders that the remuneration of the executive directors is set by a Board committee whose members have no personal interest in the outcome of the committee’s decision and who will have appropriate regard to the interests of the shareholders. The purpose of the nomination function is to identify and nominate new directors to the Board as considered necessary. The Board has considered the need for an internal audit function but has decided the size and complexity of the Group does not justify it at present. However, it will keep this decision under annual review. Kodal Minerals Report & Accounts 2014 18 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 19 REPORT ON REMUNERATION for the year ended 31 March 2014 Directors’ remuneration The Board recognises that Directors’ remuneration is of legitimate concern to shareholders and is committed to following current best practice. The Group operates within a competitive environment and its performance depends on the individual contributions of the Directors. Policy on Directors’ remuneration The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain Directors of the calibre necessary to maintain the Group’s position and to reward them for enhancing shareholder value and return. It aims to provide sufficient levels of remuneration to do this, but to avoid paying more than is necessary. The remuneration will also reflect the Directors’ responsibilities and contain incentives to deliver the Group’s objectives. The amounts shown as “Share option expense” relate to a theoretical calculation of the non-cash cost to the Group of the share options granted to the directors, further details of which are provided in Note 5. These do not represent cash payments to the Directors either made in the past or due in the future. The remuneration of the Directors was as follows: Fees and Share option salary year to expense year to Total year to 31 March 2014 31 March 2014 31 March 2014 £ £ £ Luke Bryan * 12,500 15,972 28,472 Guy Eastaugh 5,000 – 5,000 Markus Ekberg 767 – 767 Emin Eyi ** 5,000 – 5,000 David Jones 7,500 – 7,500 Robert Wooldridge *** 5,000 – 5,000 John Mackay – – – 35,767 15,972 51,739 There were no payments to directors in the year to 31 March 2013. * Novoco Mine Engineering Limited, a company wholly owned by Luke Bryan, provided consultancy services to the Group during the year and received fees of £100,000 in cash plus 48,500,000 in Shares in the year ended 31 March 2014 (2013: £nil). Of these fees, £50,000 in cash and 43,500,000 in Shares were success payments that were conditional on the completion of the admission to AIM. ** The £5,000 fee paid to Emin Eyi was settled by the allotment of 672,949 Shares at a price of 0.743 pence per Share in April 2014. *** £2,500 of the £5,000 fee paid to Robert Wooldridge was settled by the allotment of 336,472 Shares at a price of 0.743 pence per Share in April 2014. Kodal Minerals Report & Accounts 2014 19 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 20 REPORT ON REMUNERATION (continued) for the year ended 31 March 2014 Directors’ service contracts Luke Bryan was appointed as a Director on 8 April 2013 but received no remuneration until the Company’s shares were admitted to trading on AIM. With effect from 30 December 2013, the Service Agreement between the Company and Luke Bryan appointed him as an executive director of the Company to hold office as Chief Executive on a salary of £50,000 per annum. His appointment will continue for an initial term of 12 months and will continue thereafter subject to six months’ notice of termination by either party. In addition, the Company is obliged to make payments to Luke Bryan on termination of his Service Contract (which are inclusive of compensation for termination of his employment): if Luke Bryan ceases to be employed as a result of wrongful dismissal, illness or retirement, he is to be paid the sum of £150,000; if he ceases to be employed for other reasons, other than his resignation, voluntary termination or dismissal for cause, he will be paid the sum of £75,000; and Luke Bryan will have no entitlement to compensation if he leaves employment by resigning or giving notice voluntary or if he is dismissed for good cause and does not have a valid claim for wrongful dismissal. Luke Bryan may also provide consultancy services to the Company. Guy Eastaugh. The letter of appointment with Guy Eastaugh is for the position of non-executive Director of the Company. The terms of this letter provide for an annual fee of £20,000 with effect from 30 December 2013. The appointment commenced on 20 December 2013 and will continue for an initial period of 12 months and thereafter be subject to 3 months’ notice of termination by either party to expire at the end of the initial 12 month period or at anytime thereafter. No compensation will be payable for loss of office and the appointment may be terminated immediately if, among other things, Guy Eastaugh is in material breach of the terms of the appointment. Markus Ekberg. Under the terms of the agreement between the Company and Tetra Minerals OY (“Tetra Minerals), there is the right for Tetra Minerals to appoint a representative to the Board of Kodal Minerals provided Tetra Minerals together with any associate retains an interest of 30% or more of the voting rights in the Company. Tetra Minerals has nominated Mr Markus Ekberg and he joined the Board on 19 March 2014. The Board agreed that Markus Ekberg receives an annual fee £20,000. Emin Eyi. The letter of appointment with Emin Eyi is for the position of non-executive Director of the Company. The terms of this letter provide for an annual fee of £20,000 with effect from 30 December 2013 which is to be satisfied in arrears by the issue of new Ordinary Shares on a quarterly basis (the first issue falling due on the date that is three months from Admission) at a price equal to the average mid-market closing price of the Ordinary Shares for the last five trading days of the period for which such shares are being issued. The appointment will continue for an initial period of 12 months from 30 December 2013 and thereafter be subject to 3 months’ notice of termination by either party to expire at the end of the initial 12 month period or at anytime thereafter. No compensation will be payable for loss of office and the appointment may be terminated immediately if, among other things, Emin Eyi is in material breach of the terms of the appointment. David Jones. The letter of appointment for David Jones is for the position of non-executive Chairman of the Company with effect from 20 December 2013. The terms of this letter provide for a monthly fee of £2,500 with effect from 30 December 2013. The appointment will continue for an initial period of 12 months and thereafter be subject to 3 months’ notice of termination by either party to expire at the end of the initial 12 month period or at anytime thereafter. No compensation will be payable for loss of office and the appointment may be terminated immediately if, among other things, Mr. Jones is in material breach of the terms of the appointment. Robert Wooldridge. The letter of appointment with Robert Wooldridge is for the position of non-executive Director of the Company. The terms of this letter provide for an annual fee of £20,000 with effect from 30 December 2013. Until 31 March 2014 50% of his fee was satisfied in arrears by the issue of new Ordinary Shares on a quarterly basis at a price equal to the average mid-market closing price of the Ordinary Shares for the last five trading days of the period for which such shares are being issued. Kodal Minerals Report & Accounts 2014 20 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 21 From 1 April 2014 Mr Woolridge’s fee will be payable wholly in cash. The appointment will continue for an initial period of 12 months and thereafter be subject to 3 months’ notice of termination by either party to expire at the end of the initial 12 month period or at anytime thereafter. No compensation will be payable for loss of office and the appointment may be terminated immediately if, among other things, Robert Wooldridge is in material breach of the terms of the appointment. Pensions The Company does not operate a pension scheme for Directors or employees. Kodal Minerals Report & Accounts 2014 21 232803 Kodal pp01-pp22 10/07/2014 16:08 Page 22 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KODAL MINERALS PLC We have audited the group and parent company financial statements (“the financial statements”) on pages 23 to 51. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. 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. Respective responsibilities of directors and auditor As more fully explained in the Directors’ Responsibilities Statement set out on page 17, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at http://www.frc.org.uk/auditscopeUKprivate. Opinion on financial statements In our opinion: ● the financial statements give a true and fair view of the state of the group’s and the parent’s affairs as at 31 March 2014 and of the group’s loss for the year then ended; ● the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; ● the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2006; and ● the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where 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. Graham Ricketts (Senior Statutory Auditor) For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor 25 Farringdon Street London EC4A 4AB 3 June 2014 Kodal Minerals Report & Accounts 2014 22 232803 Kodal pp23-pp34 10/07/2014 16:09 Page 23 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 March 2014 Note Year ended Year ended 31 March 31 March 2014 2013 £ £ Continuing operations Revenue – – Administrative expenses 2 (195,151) (18,596) Share based payments 5 (33,056) – OPERATING LOSS 2 (228,207) (18,596) Finance costs (4,500) (69) Finance income 2 – LOSS BEFORE TAX (232,705) (18,665) Taxation 6 – – LOSS FOR THE YEAR FROM CONTINUING OPERATIONS (232,705) (18,665) Discontinued operations Profit/(loss) after tax for the year from discontinued operations 16 1,238 (6,075) LOSS FOR THE YEAR (231,467) (24,740) OTHER COMPREHENSIVE INCOME Items that may be subsequently reclassified to profit and loss Currency translation loss (245) – TOTAL COMPREHENSIVE INCOME FOR THE YEAR (231,712) (24,740) Loss per share Basic and diluted – earnings per share on continued operations – pence per share 4 (0.0688) (0.0112) Basic and diluted – earnings per share on total earnings – pence per share 4 (0.0684) (0.0112) The loss for the current and prior years and the total comprehensive income for the current and the prior years are wholly attributable to equity holders of the parent company. Kodal Minerals Report & Accounts 2014 23 232803 Kodal pp23-pp34 10/07/2014 16:09 Page 24 CONSOLIDATED AND PARENT COMPANY STATEMENTS OF FINANCIAL POSITION as at 31 March 2014 Registered number: 07220790 Group Group Company Company 31 March 31 March 31 March 31 March 2014 2013 2014 2013 Note £ £ £ £ NON-CURRENT ASSETS Intangible assets 7 2,944,069 355,014 – 355,014 Property, plant and equipment 8 77,157 – – – Amounts due from subsidiary undertakings – – 2,554,211 – Investments in subsidiary undertakings 9 – – 900,010 – 3,021,226 355,014 3,454,221 355,014 CURRENT ASSETS Other receivables 10 82,994 5,476 73,330 5,476 Cash and cash equivalents 11 1,501,343 19,605 1,332,834 19,605 1,584,337 25,081 1,406,164 25,081 TOTAL ASSETS 4,605,563 380,095 4,860,385 380,095 CURRENT LIABILITIES Trade and other payables 12 (97,930) (136,955) (85,120) (136,955) TOTAL LIABILITIES (97,930) (136,955) (85,120) (136,955) NET ASSETS 4,507,633 243,140 4,775,265 243,140 EQUITY Attributable to owners of the Parent: Share capital 13 240,700 54,804 240,700 54,804 Share premium account 13 4,527,078 249,825 4,527,078 249,825 Share based payment reserve 33,056 – 33,056 – Translation reserve (245) – – – Retained deficit (292,956) (61,489) (25,569) (61,489) TOTAL EQUITY 4,507,633 243,140 4,775,265 243,140 The financial statements were approved and authorised for issue by the board of directors on 3 June 2014 and signed on its behalf by Robert Wooldridge Director Kodal Minerals Report & Accounts 2014 24 232803 Kodal pp23-pp34 10/07/2014 16:09 Page 25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2014 Attributable to the owners of the Parent Share Share based Share premium Retained payments Translation Total Note capital account deficit reserve reserve equity £ £ £ £ £ £ GROUP At 31 March 2012 48 49,995 (36,749) – – 13,294 Comprehensive income Loss for the year – – (24,740) – – (24,740) Total comprehensive income for the year – – (24,740) – – (24,740) Transactions with owners Proceeds from shares issued 13 7,813 242,188 – – – 250,001 Bonus issue of shares 13 46,800 (46,800) – – – – Shares in settlement of services 13 143 4,442 – – – 4,585 At 31 March 2013 54,804 249,825 (61,489) – – 243,140 Comprehensive income Loss for the year – – (231,467) – – (231,467) Other comprehensive income Currency translation loss – – – – (245) (245) Total comprehensive income for the year – – (231,467) – (245) (231,712) Transactions with owners Proceeds from shares issued 13 81,722 2,474,212 – – – 2,555,934 Share issue expenses 13 – (416,933) – – – (416,933) Shares issued to purchase Kodal Phosphate AS 13 78,125 1,671,875 – – – 1,750,000 Shares in settlement of services 13 26,049 548,099 – – – 574,148 Share based payment – – – 33,056 – 33,056 At 31 March 2014 240,700 4,527,078 (292,956) 33,056 (245) 4,507,633 Kodal Minerals Report & Accounts 2014 25 232803 Kodal pp23-pp34 10/07/2014 16:09 Page 26 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2014 Share Share based Share premium Retained payments Total Note capital account deficit reserve equity £ £ £ £ £ COMPANY At 31 March 2012 48 49,995 (36,749) – 13,294 Comprehensive income Loss for the year – – (24,740) – (24,740) Other comprehensive income – – – – – Total comprehensive income for the year – – (24,740) – (24,740) Transactions with owners Proceeds from shares issued 13 7,813 242,188 – – 250,001 Bonus issue of shares 13 46,800 (46,800) – – – Shares in settlement of services 143 4,442 – – 4,585 At 31 March 2013 54,804 249,825 (61,489) – 243,140 Comprehensive income Profit for the year – – 35,920 – 35,920 Total comprehensive profit for the year – – 35,920 – 35,920 Transactions with owners Proceeds from shares issued 13 81,722 2,474,212 – – 2,555,934 Share issue expenses 13 – (416,933) – – (416,933) Shares issued to purchase Kodal Phosphate AS 13 78,125 1,671,875 – – 1,750,000 Shares in settlement of services 13 26,049 548,099 – – 574,148 Share based payment – – – 33,056 33,056 At 31 March 2014 240,700 4,527,078 (25,569) 33,056 4,775,265 Kodal Minerals Report & Accounts 2014 26 232803 Kodal pp23-pp34 10/07/2014 16:09 Page 27 CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CASH FLOWS for the year ended 31 March 2014 Group Group Company Company Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March 2014 2013 2014 2013 Note £ £ £ £ Cash flows from operating activities (Loss)/profit before tax (232,705) (18,665) 35,920 (18,665) Adjustments for non-cash items: Share based payments 33,056 – 33,056 – Operating cash flow before movements in working capital (199,649) (18,665) 68,976 (18,665) Movement in working capital (Increase)/decrease in receivables (77,518) 9,524 (67,854) 9,524 (Decrease)/increase in payables (39,025) 118,806 (51,835) 118,806 Net movements in working capital (116,543) 128,330 (119,689) 128,330 Net cash outflow from operating activities (316,192) 109,665 (50,713) 109,665 Cash flows from investing activities Sale of intangible assets – – 900,000 – Purchase of property, plant and equipment (80,614) – – – Purchase of intangible assets (441,950) (343,728) (153,848) (343,728) Disposal cost for discontinued operation (3,762) – – – Investment in subsidiary undertakings – – (900,000) – Loans to subsidiary undertakings – – (804,211) – Net cash outflow from investing activities (526,326) (343,728) (958,059) (343,728) Cash flow from financing activities Loan received 900,000 – 900,000 – Loan repaid (900,000) – (900,000) – Interest received 2 – – – Interest paid (4,500) (69) (4,500) (69) Net proceeds from share issues 13 2,326,501 250,001 2,326,501 250,001 Net cash inflow from financing activities 2,322,003 249,932 2,322,001 249,932 Increase in cash and cash equivalents 1,479,485 15,869 1,313,229 15,869 Cash and cash equivalents at beginning of the year 19,605 3,736 19,605 3,736 Exchange gain on cash 2,253 – – – Cash and cash equivalents at end of the year 11 1,501,343 19,605 1,332,834 19,605 Cash and cash equivalents comprise cash on hand and bank balances. Kodal Minerals Report & Accounts 2014 27 232803 Kodal pp23-pp34 10/07/2014 16:09 Page 28 PRINCIPAL ACCOUNTING POLICIES for the year ended 31 March 2014 The Group has adopted the accounting policies set out below in preparation of the financial statements. All of these policies have been applied consistently throughout the period unless otherwise stated. Basis of preparation The consolidated financial statements of Kodal Minerals Plc are prepared in accordance with the historical cost convention and in accordance with International Financial Reporting Standards (“IFRSs”), as adopted by the European Union (“EU”) and in accordance with the provisions of the Companies Act 2006. The Company’s ordinary shares are quoted on AIM, a market operated by the London Stock Exchange. Going concern The Group has not earned revenue during the year to 31 March 2014 as it is still in the exploration and development phases of its business. The operations of the Group are currently being financed from funds which the Company has raised from the issue of new Shares. As at 31 March 2014, the Group held cash balances of £1.5 million. The Directors have prepared cash flow forecasts for the period ending 30 September 2015. The forecasts include the unavoidable running costs of the Group and limited discretionary exploration and development expenditure. The forecasts demonstrate that the Group has sufficient cash resources available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements without the need for a further fund raising. However, further fund raising will be required at an appropriate time in order to complete the project plan. Accordingly, the financial statements have been prepared on a going concern basis. Basis of consolidation The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to the statement of financial position date. Subsidiary undertakings are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group obtains and exercises control through voting rights. Unrealised gains on transactions between the Company and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Discontinued operations The Group reports the results of discontinued operations in the period in which they occur separately within the consolidated statement of income as “discontinued operations”. All prior period consolidated statements of income are adjusted to report the results of the component within discontinued operations. In the consolidated statement of cash flows the cash flows resulting from discontinued operations are presented separately from cash flows resulting from continuing operations; prior year presentation has been adjusted accordingly. Foreign currency translation Items included in the Group’s consolidated financial statements are measured using the currency of the primary economic environment in which the Group operates (“the functional currency”). The financial statements are presented in pounds sterling Kodal Minerals Report & Accounts 2014 28 232803 Kodal pp23-pp34 10/07/2014 16:10 Page 29 (“£”), which is the functional and presentational currency of the Parent Company and the presentational currency of the Group. End of year balances in the Group’s Norwegian subsidiary undertakings were converted using and end of year rate of NOK 1 : £0.099980 (2013: there were no balances to convert). Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the reporting date and the gains or losses on translation are included in profit and loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the original transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Deferred taxation Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred tax is realised or the deferred liability is settled. Deferred tax assets are recognised to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilised. Cash and cash equivalents Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand. Other receivables Other receivables are carried at original amount less provision made for impairment of these receivables. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the assets’ carrying amount and the recoverable amount. Provisions for impairment of receivables are included in the profit and loss. Trade and other payables Trade payables and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. Provisions A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in profit or loss. Kodal Minerals Report & Accounts 2014 29 232803 Kodal pp23-pp34 10/07/2014 16:10 Page 30 PRINCIPAL ACCOUNTING POLICIES (continued) for the year ended 31 March 2014 Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the costs of assets, over their estimated useful lives, using the straight line method, on the following basis: Plant and machinery Motor vehicles Fixtures, fittings and equipment 4 years 4 years 4 years Where property, plant and equipment are used in exploration and evaluation activities, the depreciation of the assets is capitalised as part of the cost of exploration and evaluation assets. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Exploration and evaluation expenditure In accordance with IFRS 6, exploration and evaluation costs incurred before the Group obtains legal rights to explore in a specific area (a “project area”) are taken to profit or loss. Upon obtaining legal rights to explore in a project area, the fair value of the consideration paid for acquiring those rights and subsequent exploration and evaluation costs are capitalised as exploration and evaluation assets. The costs of exploring for and evaluating mineral resources are accumulated with reference to appropriate cost centres being project areas or groups of project areas. Upon the technical feasibility and commercial viability of extracting the relevant mineral resources becoming demonstrable, the Group ceases further capitalisation of costs under IFRS 6. Exploration and evaluation assets are not amortised prior to the conclusion of appraisal activities, but are carried at cost less impairment, where the impairment tests are detailed below. Exploration and evaluation assets are carried forward until the existence (or otherwise) of commercial reserves is determined: ● where commercial reserves have been discovered, the carrying value of the exploration and evaluation assets are reclassified as development and production assets and amortised on an expected unit production basis; or ● where a project area is abandoned or a decision is made to perform no further work, the exploration and evaluation assets are written off in full to profit or loss. Exploration and evaluation – impairment Project areas, or groups of project areas, are determined to be cash generating units for the purposes of assessment of impairment. With reference to a project area or group of project areas, the exploration and evaluation assets (along with associated production and development assets) are assessed for impairment when such facts and circumstances suggest that the carrying amount of the assets may exceed the recoverable amount. Such indicators include, but are not limited to, those situations outlined in paragraph 20 of IFRS 6 and include the point at which a determination is made as to whether or not commercial reserves exist. Kodal Minerals Report & Accounts 2014 30 232803 Kodal pp23-pp34 10/07/2014 16:10 Page 31 The aggregate carrying value is compared against the expected recoverable amount, generally by reference to the present value of the future net cash flows expected to be derived from production of the commercial reserves. Intangible assets and impairment Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives. Amortisation is charged so as to write off the costs of intangible assets, over their estimated useful lives, using the straight line method, on the following basis: Software 3 years Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the increase of new shares or options are shown in equity as a deduction from the proceeds. Equity settled transactions The Group has issued shares as consideration for services received. Equity settled share based payments are measured at fair value at the date of issue. The Group has granted equity settled options. The cost of equity settled transactions is measured by reference to the fair value at the date on which they were granted and is recognised as an expense over the vesting period, which ends on the date the employee becomes fully entitled to the award. Fair value is determined by using the Black-Scholes option pricing model. In valuing equity settled transactions, no account is taken of any service and performance (vesting conditions), other than performance conditions linked to the price of the shares of the Parent Company (market conditions). Any other conditions which are required to be met in order for the Director and an external consultant to become fully entitled to an award are considered to be non-vesting conditions. Market performance conditions, non-vesting conditions are taken into account in determining the grant value. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or non-vesting condition, which are vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance or service conditions are satisfied. At each reporting date before vesting, the cumulative expense is calculated; representing the extent to which the vesting period has expired and management’s best estimate of the number of equity instruments that will ultimately vest. The movement in the cumulative expense since the previous reporting date is recognised in the profit and loss, with a corresponding entry in equity. Where the terms of the equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if the difference is negative. Where an equity based award is cancelled (including when a non-vesting condition within the control of the entity or employee is not met), it is treated as if it had vested on the date of the cancellation, and the cost not yet recognised in profit and loss for the Kodal Minerals Report & Accounts 2014 31 232803 Kodal pp23-pp34 10/07/2014 16:10 Page 32 PRINCIPAL ACCOUNTING POLICIES (continued) for the year ended 31 March 2014 award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense. Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors, which has been identified as the Chief Operating Decision Maker. The Board of Directors is responsible for allocating resources and assessing performance of the operating segments in line with the strategic direction of the company. Financial instruments IFRS 7 requires information to be disclosed about the impact of financial instruments on the Group’s risk profile, how the risks arising from financial instruments might affect the entity’s performance, and how these risks are being managed. Financial assets and financial liabilities are recognised on the Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. The Group’s policies include that no trading in derivative financial instruments shall be undertaken. The required disclosures have been made in Note 15 to the accounts. Critical accounting judgements and estimates The preparation of these consolidated financial statements in accordance with International Financial Reporting Standards requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. IFRSs also require management to exercise its judgement in the process of applying the Group’s accounting policies. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year are addressed below. Exploration and evaluation expenditure The Group has capitalised all expenditure incurred in relation to exploration and evaluation of the Kodal Project, a phosphate and titanomagnetite deposit in southern Norway which the Group is treating as a project area, in each period presented in the consolidated financial statements. The Company signed binding heads of terms in January 2012 to acquire the legal and beneficial ownership to licences which granted the right to explore and evaluate mineral resources in the Kodal Project area. Legal completion for this option agreement occurred in October 2012 and on 30 December 2013 the Company exercised its option to complete the licence acquisition. The Directors consider it appropriate to capitalise costs directly attributable to exploration and evaluation activities on the Kodal Project and has been doing so from January 2012 in accordance with the accounting policy for these costs. The carrying value of exploration and evaluation assets at 31 March 2014 was £2,944,069 (2013: £355,014) and the directors do not consider these assets to require impairment. Share based payments The Group has recorded charges for share based payments of £33,056 (2013: £nil). Kodal Minerals Report & Accounts 2014 32 232803 Kodal pp23-pp34 10/07/2014 16:10 Page 33 For option based share based payments, management estimate certain factors used in the option pricing model, including volatility, exercise date of options and number of options likely to be exercised. If these estimates vary from actual occurrence, this will impact on the value of the equity carried in the reserves. Further detailed analysis of the critical judgements and estimates relating to share based payments is addressed in Note 5. Going concern The Group has not earned revenue during the year to 31 March 2014 as it is still in the exploration and development phases of its business. The operations of the Group are currently being financed from funds which the Company has raised from the issue of new Shares. As at 31 March 2014, the Group held cash balances of £1.5 million. The Directors have prepared cash flow forecasts for the period ending 30 September 2015. The forecasts include the unavoidable running costs of the Group and limited discretionary exploration and development expenditure. The forecasts demonstrate that the Group has sufficient cash resources available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements without the need for a further fund raising. However, further fund raising will be required at an appropriate time in order to complete the project plan. Accordingly, the financial statements have been prepared on a going concern basis. Tetra option agreement (see note 5) An agreement between the Group and Tetra Minerals Oy (“Tetra”), granted to Tetra an option to subscribe for new Shares in the Company. The maximum number of Shares that are subject to the option is 714,285,714, corresponding to the number of Shares that would be issued for a total amount of £5 million at 0.7 pence per Share. The options vest and become exercisable only once the JORC indicated resource for phosphate minerals at the Kodal Project meets certain thresholds. Once vested, the options may be exercised by Tetra at a subscription price of 10p per Share for a period of three years after the date on which each tranche vests. If Kodal Phosphate AS relinquishes or does not renew the Kodal Project extraction licences before any of the options vest then those options will lapse. The Board has reviewed the Tetra option arrangements and determined that the fair value of the Tetra options is nil on the grounds that the option distribution is dependent on thresholds associated with the JORC phosphate mineral resources, the first of which, 90m tonnes, is well beyond the size of the current targeted ore body, which has a JORC mineral resource of 48.9m tonnes. Unless and until further exploration of the Kodal Project identifies a further potential ore body the likelihood of the thresholds being met is considered to be remote. New standards and interpretations not applied At the date of authorisation of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group. The Board anticipates that all of the pronouncements will be adopted in the Group’s accounting policy for the first period beginning after the effective date of the pronouncement. The new standards and interpretations are not expected to have a material impact on the Group’s consolidated financial statements. Kodal Minerals Report & Accounts 2014 33 232803 Kodal pp23-pp34 10/07/2014 16:10 Page 34 PRINCIPAL ACCOUNTING POLICIES (continued) for the year ended 31 March 2014 Annual periods Standard Details of amendment beginning on or after IFRS 9 Financial Instruments New standard that forms the first part of a three-part project to replace IAS 39 Financial Instruments: Recognition and Measurement. 1 January 2015 IFRIC 21 Levies Clarifies that the obligating event that gives rise to a liability is the activity (as described in the relevant legislation) that triggers the payment of the levy. 1 January 2014 IFRS 2 Share-based payment 1 July 2014 Amends the definition of “market condition” to include equity instruments of another entity in the same group. Separates the definitions of “performance condition” and “service condition” from the definition of “vesting condition”. The definition of “performance condition”; (i) confirms performance conditions can be market or non-market conditions, (ii) aligns the performance period with the service period, (iii) clarifies that the service requirement can be implicit or explicit, and (iv) defines “performance target” to include targets based on equity instruments of another entity in the same group and that relate to performance of the whole, or part of, an entity, or group. The definition of “service condition” confirms that the failure to provide service for any reason (including termination of employment) is a failure to satisfy the service condition. IFRS 3 Business Combinations IFRS 8 Operating segments Amended so all non-equity contingent consideration is measured at fair value at each reporting date with fair value changes recognised in profit or Includes consequential amendments to exclude contingent loss. consideration in a business combination from other measurement bases in IFRS 9, IAS 39 and IAS 37 1 July 2014 Requires disclosure of the judgements made in aggregating operating segments including a description of the aggregated operating segments and economic indicators assessed. Clarifies that the reconciliation of total reportable segments’ assets to the entity’s assets is only required when segment assets are regularly provided to the chief operating decision maker. 1 July 2014 IAS 16 Property, plant and equipment Permits the gross carrying amount of items measured under the revaluation model to be adjusted in a manner consistent with the revaluation of the carrying amount (e.g. by reference to market data or proportionately) with accumulated depreciation being the difference to the carrying amount after impairment losses 1 July 2014 There are other standards in issue but not yet effective, which are not likely to be relevant to the Group which have therefore not been listed. Kodal Minerals Report & Accounts 2014 34 232803 Kodal pp35-imp 10/07/2014 16:11 Page 35 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2014 1. SEGMENTAL REPORTING It is the opinion of the Directors that the operations of the Group and Company represent one segment, and are treated as such when evaluating its performance. The Group’s accounting policy is to capitalise exploration and evaluation expenditure on the Kodal Project in Norway. Consequently, the administrative expenses in the statement of comprehensive income reflect the administration costs necessary to run the Group and maintain its listing on the AIM market in the UK. 2. OPERATING LOSS The operating loss is stated after charging: Group Group Year ended Year ended 31 March 2014 31 March 2013 £ £ Audit services (Note 1) 20,000 – Legal fees 29,351 1,003 Consultants 7,140 – Other professional fees 55,030 874 Share based payment 33,056 – Directors fees (Note 3) 35,767 – Website costs 13,115 – Stock exchange fees 8,550 – Share register costs 5,184 – Sundry 21,104 16,719 228,207 18,596 Note 1: Amounts payable to Baker Tilly UK Audit LLP and its associates in respect of both audit and non-audit services are as follows: Group Group Year ended Year ended 31 March 2014 31 March 2013 £ £ Audit services – statutory audit of parent and consolidated accounts 18,000 – – statutory audit of subsidiaries 2,000 – Taxation advisory services 3,600 – Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the company or any of its associates (Note 2) 42,500 – 66,100 – Note 2: These expenses were incurred as part of the admission of the Company’s shares to trading on AIM in December 2013. Note 3: £7,500 of Director’s fees were paid in shares during April 2014. Kodal Minerals Report & Accounts 2014 35 232803 Kodal pp35-imp 10/07/2014 16:11 Page 36 NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2014 3. EMPLOYEES’ AND DIRECTORS’ REMUNERATION Apart from the Directors who are considered to be the Group’s key management personnel, there were no employees in the years to 31 March 2014 and 2013 respectively. Group Group Year ended Year ended 31 March 2014 31 March 2013 £ £ Directors’ remuneration 51,739 – Directors’ social security costs 2,996 – Total 54,735 – Directors’ salary Share based and fees payments Total year ended year ended year ended 31 March 2014 31 March 2014 31 March 2014 £ £ £ Luke Bryan (Note 1) 12,500 15,972 28,472 Guy Eastaugh 5,000 – 5,000 Markus Ekberg 767 – 767 Emin Eyi (Note 2) 5,000 – 5,000 David Jones 7,500 – 7,500 Robert Wooldridge (Note 3) 5,000 – 5,000 35,767 15,972 51,739 No remuneration was paid to the Directors in the year to 31 March 2013. Note 1: Novoco Mine Engineering Limited, a company owned by Luke Bryan, provided consultancy services to the Group during the year and received fees of £100,000 in cash plus 48,500,000 in Shares in the year ended 31 March 2014 (2013: £nil). Of these fees, £50,000 in cash and 43,500,000 in Shares were success payments that were conditional on the completion of the Company’s admission to AIM. Note 2: Note 3: The £5,000 fee paid to Emin Eyi will be settled by the issuance of 672,949 Shares at a price of 0.743 pence per Share. These Shares were not issued at the year end. £2,500 of the £5,000 fee paid to Robert Wooldridge will be settled by the issuance of 336,472 Shares at a price of 0.743 pence per Share. These Shares were not issued at the year end. Kodal Minerals Report & Accounts 2014 36 232803 Kodal pp35-imp 10/07/2014 16:11 Page 37 4. EARNINGS PER SHARE Basic loss per Share is calculated by dividing the loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. The following reflects the income and share data used in the basic EPS computations: Earnings per Share on Earnings Weighted Basic continued per Share on average number earnings per operations total earnings of Shares Share (pence) £ Year ended 31 March 2014 (232,705) – 338,258,503 0.0688 Year ended 31 March 2014 – (231,467) 338,258,503 0.0684 Year ended 31 March 2013 – (18,665) 166,542,947 0.0112 Diluted loss per Share is calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary Shares outstanding during the year plus the weighted average number of ordinary Shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary Shares. Options in issue are not considered diluting to the earnings per Share as the Group is currently loss making. Diluted loss per Share is therefore the same as the basic loss per Share. 5. SHARE BASED PAYMENTS Share-based payments The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Year ended Year ended 31 March 2014 31 March 2013 Share options outstanding £ £ Opening balance – – Issued in the period 40,000,000 – Closing balance 40,000,000 – Options issued in the period Under an option agreement between the Group and Novoco Mine Engineering Limited (“Novoco”), a company wholly owned by Luke Bryan, the Group granted to Novoco options over 25,000,000 Shares (“Option Shares”) at an exercise price of 0.7 pence per Share. The options becomes exercisable in respect of one third of the total number of Option Shares on each of the first, second and third anniversaries of 30 December 2013. The options are exercisable for a period of ten years from the date on which they vest and become exercisable. Kodal Minerals Report & Accounts 2014 37 232803 Kodal pp35-imp 10/07/2014 16:11 Page 38 NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2014 5. SHARE BASED PAYMENTS (continued) Under an option agreement between the Group and David Hakes, a consultant to the Company, the Group granted to David Hakes options over 15,000,000 Shares (“Option Shares”) at an exercise price of 0.7 pence per Share. The options becomes exercisable in respect of one third of the total number of Option Shares on each of the first, second and third anniversaries of 30 December 2013. The options are exercisable for a period of ten years from the date on which they vest and become exercisable. Details of share options outstanding at 31 March 2014: Date of grant Number of options Option price Exercisable between 30 December 2013 30 December 2013 30 December 2013 13,333,333 13,333,333 13,333,333 0.7 pence 0.7 pence 0.7 pence 30 Dec 2014 – 30 Dec 2024 30 Dec 2015 – 30 Dec 2025 30 Dec 2016 – 30 Dec 2026 Included within administration expenses is a charge for issuing share options and making share based payments of £33,056 (2013: nil) which was recognised in accordance with the Group’s accounting policies. Additional disclosure information: Weighted average exercise price of share options: ● outstanding at the beginning of the period ● granted during the period ● outstanding at the end of the period ● exercisable at the end of the period Weighted average remaining contractual life of share options outstanding at the end of the period N/A 0.7 pence 0.7 pence N/A 12.01 years The share options granted during the period were valued at £169,333 at date of grant with reference to the Black-Scholes option pricing model taking into account the input assumptions as outlined below: Dates issued Share price Exercise price Expected volatility 30 December 2013 0.7 pence 0.7 pence the options were granted on the day the Company’s Shares were admitted to trading on AIM. There is therefore no historical volatility for the Shares on the date of issue of the options. A volatility of 50% has been chosen as an approximation of the volatility for the shares of a junior mining company trading on AIM. Vesting period ranging from 30 December 2014 to 30 December 2016 Expected dividends Nil Risk free interest rate ranging from 2.897% to 3.062 A share based payment charge of £33,056 (2013: £nil) has been recognised in the profit and loss in the year in relation to these options. Kodal Minerals Report & Accounts 2014 38 232803 Kodal pp35-imp 10/07/2014 16:11 Page 39 Tetra Option Agreement The Group has granted to Tetra Minerals Oy (“Tetra”) an option to subscribe for new Shares. The maximum number of Shares that are subject to the option is 714,285,714, corresponding to the number of Shares that would be issued for a total amount of £5 million at the 0.7 pence per Share. The options vest and become exercisable only once the JORC indicated resource for phosphate minerals at the Kodal Project meet certain thresholds. These are as follows: JORC Indicated Mineral Resource threshold reached of Tonnes of phosphate minerals Proportion of maximum number Option Shares that will vest (%) 90,000,000 110,000,000 130,000,000 150,000,000 170,000,000 20 20 20 20 20 Once vested, the option may be exercised by Tetra at a subscription price of 10p per Share for a period of three years after the date on which each tranche vests. If Kodal Phosphate AS relinquishes or does not renew the Kodal Project extraction licences before any of the options vest then those options will lapse. The Board has reviewed the Tetra option arrangements and determined that the fair value of the Tetra options is nil on the grounds that the option distribution is dependent on thresholds associated with the JORC phosphate mineral resources, the first of which, 90m tonnes, is well beyond the size of the current targeted ore body, which has a JORC mineral resource of 48.9m tonnes. Unless and until further exploration of the Kodal Project identifies a further potential ore body the likelihood of the thresholds being met is considered to be remote. Kodal Minerals Report & Accounts 2014 39 232803 Kodal pp35-imp 10/07/2014 16:11 Page 40 NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2014 6. TAXATION Group Group Year ended Year ended 31 March 2014 31 March 2013 £ £ Taxation charge for the year – – Factors affecting the tax charge for the year Loss from continuing operations before income tax (232,705) (18,665) Tax at 20% (2013: 20% ) (46,541) (3,733) Expenses not deductible 53,949 2,617 Overseas rate differences (105) – Gain not taxable (53,216) Losses carried forward not deductible 40,801 1,116 Temporary differences not recognised for deferred tax 5,112 – Income tax expense – – The Group has tax losses and other deferred tax assets totalling £51,000 (2013: £16,000) which will be able to be offset against future income. No deferred tax asset has been recognised in respect of these losses as the timing of their utilisation is uncertain at this stage. 7. INTANGIBLE ASSETS Exploration and evaluation Software Total GROUP £ £ £ COST At 1 April 2013 355,014 – 355,014 Additions in the year 2,566,060 27,295 2,593,355 Effects of foreign exchange 63 – 63 At 31 March 2014 2,921,137 27,295 2,948,432 AMORTISATION At 31 March 2013 – – – Amortisation charge – 4,363 4,363 At 31 March 2014 – 4,363 4,363 NET BOOK VALUES At 31 March 2014 2,921,137 22,932 2,944,069 At 31 March 2013 355,014 – 355,014 Kodal Minerals Report & Accounts 2014 40 232803 Kodal pp35-imp 10/07/2014 16:11 Page 41 Exploration and evaluation Software Total GROUP £ £ £ COST At 1 April 2012 12,707 – 12,707 Additions in the year 342,307 – 342,307 At 31 March 2013 355,014 – 355,014 AMORTISATION At 31 March 2012 and 31 March 2013 – – – NET BOOK VALUES At 31 March 2013 355,014 – 355,014 At 31 March 2012 – – – The additions to Exploration and Evaluation category represent the costs incurred by the Group in relation to the Kodal Project including the cost of the exploration licences of £1,833,295 acquired through the purchase of Kodal Phosphate AS. Exploration and evaluation Software Total COMPANY £ £ £ COST At 1 April 2013 355,014 – 355,014 Additions in the year 1,833,295 – 1,833,295 Disposals in the year (2,188,309) – (2,188,309) At 31 March 2014 – – – AMORTISATION At 31 March 2013 and 31 March 2014 – – – NET BOOK VALUES At 31 March 2014 – – – At 31 March 2013 355,014 – 355,014 Kodal Minerals Report & Accounts 2014 41 232803 Kodal pp35-imp 10/07/2014 16:11 Page 42 NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2014 7. INTANGIBLE ASSETS (continued) Exploration and evaluation Software Total COMPANY £ £ £ COST At 1 April 2012 12,707 – 12,707 Additions in the year 342,307 – 342,307 At 31 March 2013 355,014 – 355,014 AMORTISATION At 31 March 2012 and 31 March 2013 – – – NET BOOK VALUES At 31 March 2013 355,014 – 355,014 At 31 March 2012 12,707 – 12,707 The disposal represents the sale by the Company of the Kodal Project assets to a subsidiary undertaking. 8. PROPERTY, PLANT AND EQUIPMENT Fixtures, fittings Plant and Motor and equipment machinery vehicles Total GROUP £ £ £ £ COST At 1 April 2012 and 2013 – – – – Additions in the year 41,874 15,579 23,161 80,614 Effects of foreign exchange 143 27 417 587 At 31 March 2014 42,017 15,606 23,578 81,201 DEPRECIATION At 1 April 2012 and 2013 – – – – Depreciation charge 2,837 136 1,056 4,029 Effects of foreign exchange 4 2 9 15 At 31 March 2014 2,841 138 1,065 4,044 NET BOOK VALUES At 31 March 2014 39,176 15,468 22,513 77,157 At 31 March 2012 and 31 March 2013 – – – – The Company did not have any Property, Plant and Equipment as at 31 March 2012, 2013 and 2014. Kodal Minerals Report & Accounts 2014 42 232803 Kodal pp35-imp 10/07/2014 16:11 Page 43 9. SUBSIDIARY ENTITIES The consolidated financial statements include the following subsidiary companies: Country of Equity Nature of Company Subsidiary of incorporation holding Business Kodal Norway (UK) Ltd Kodal Minerals Plc United Kingdom 100% Operating company Kodal Mining AS Kodal Norway (UK) Ltd Norway 100% Mining exploration Kodal Phosphate AS Kodal Norway (UK) Ltd Norway 100% Mining exploration Year ended Year ended Carrying value of investment in subsidiaries 31 March 2014 31 March 2013 Opening balance – – Additions 900,010 – Closing balance 900,010 – 10. OTHER RECEIVABLES Group Group Company Company 31 March 2014 31 March 2013 31 March 2014 31 March 2013 £ £ £ £ Other receivables 82,994 5,476 73,330 5,476 82,994 5,476 73,330 5,476 All receivables at each reporting date are current. No receivables are past due. The Directors consider that the carrying amount of the other receivables approximates their fair value. 11. CASH AND CASH EQUIVALENTS Group Group Company Company 31 March 2014 31 March 2013 31 March 2014 31 March 2013 £ £ £ £ Cash and cash equivalents 1,501,343 19,605 1,332,834 19,605 1,501,343 19,605 1,332,834 19,605 Kodal Minerals Report & Accounts 2014 43 232803 Kodal pp35-imp 10/07/2014 16:11 Page 44 NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2014 12. TRADE AND OTHER PAYABLES Group Group Company Company 31 March 2014 31 March 2013 31 March 2014 31 March 2013 £ £ £ £ Trade payables 70,445 52,073 57,636 52,073 Other payables 27,485 84,882 27,484 84,882 97,930 136,955 85,120 136,955 All trade and other payables at each reporting date are current. The Directors consider that the carrying amount of the trade and other payables approximates their fair value. 13. ORDINARY SHARES Allotted, issued and fully paid: Nominal Number of Value Ordinary Shares Share Capital Share Premium £ £ At 31 March 2012 £0.01 4,800 48 49,995 Bonus issue (Note 1) 4,680,000 46,800 (46,800) 4,684,800 46,848 3,195 Share split (Note 2) £0.0003125 149,913,600 46,848 3,195 Issue (Note 3) £0.0003125 25,000,000 7,813 242,188 Issue (Note 4) £0.0003125 458,542 143 4,442 At 31 March 2013 £0.0003125 175,372,142 54,804 249,825 Issue (Note 5) £0.0003125 7,500,000 2,344 72,656 Issue (Note 6) £0.0003125 18,654,500 5,828 300,105 Issue (Note 7) £0.0003125 2,750,000 859 41,041 Issue (Note 8) £0.0003125 2,821,150 882 18,866 Issue (Note 9) £0.0003125 43,500,000 13,594 236,406 Issue (Note 10) £0.0003125 26,785,715 8,371 179,129 Issue (Note 11) £0.0003125 250,000,000 78,125 1,671,875 Issue (Note 12) £0.0003125 142,857,240 44,643 955,358 Issue (Note 13) £0.0003125 100,000,000 31,250 1,218,750 Share issue costs – – (416,933) At 31 March 2014 770,240,747 240,700 4,527,078 Share issue costs have been allocated against the Share Premium reserve. Kodal Minerals Report & Accounts 2014 44 232803 Kodal pp35-imp 10/07/2014 16:11 Page 45 Note 1: On 31 July 2012, there was a bonus issue of 975 ordinary shares of £0.01 each for each ordinary share in issue on 24 July 2012. The bonus issue was funded from the share premium account. Note 2: On 31 July 2012, each ordinary share of the Company of £0.01 was split into 32 new ordinary Shares of £0.0003125 each. Note 3: On 16 October 2012, 25,000,000 Shares were issued at 1.0 pence per share. Note 4: On 28 March 2013, 458,542 Shares were issued to a supplier of the Company in settlement of services provided to the Company by that supplier. These shares were issued at 1.0 pence each. Note 5: On 8 April 2013 7,500,000 Shares were issued to two separate suppliers of the Company in settlement of their services provided to the Company by the suppliers. These shares were issued at 1.0 pence each. Note 6: Between April and July 2013 a further 18,654,500 Shares were issued at a price of 1.64 pence, raising £305,933.80 in additional capital. Note 7: On 18 July 2013 2,750,000 Shares were issued to a supplier of the Company in settlement of services provided to the Company by that supplier. 500,000 Shares were issued at 1.0 pence and 2,250,000 Shares at 1.64 pence. Note 8: On 25 November 2013, a total of 2,821,150 Shares were issued to two separate suppliers of the Company in settlement of their services provided to the Company at an issue price of 0.7 pence per Share. Note 9: Under a consultancy agreement dated 8 November 2013 between Novoco Mine Engineering Limited and the Company, 43,500,000 Shares were issued on 30 December 2013 at 0.5747 pence per Share for services provided to the Company. Note 10: Under arrangements entered into by the Company with Thomas Eggar LLP, Allenby Capital limited and SP Angel Corporate Finance LLP, a total of 26,785,715 Shares were issued on 30 December 2013 at 0.7 pence per Share for services provided in relation to the admission of the Company to trading on AIM. Note 11: Under the share acquisition agreement dated 12 October 2012 between Tetra Minerals Oy and the Company, the Company acquired all of the issued and to be issued share capital of Kodal Phosphate AS on completion of the Company’s admission to AIM for a consideration consisting of: (a) the sum of €100,000 payable in cash; (b) the sum of £1,750,000 satisfied by the issue of 250,000,000 Shares at 0.7 pence per Share. Note 12: On the 30 December 2013, 142,857,240 Shares were issued and allotted at 0.7 pence per Share in a placing at the time of the admission of the Company’s Shares to trading on AIM. Note 13: On 10 January 2014, 100,000,000 Shares were issued at 1.25 pence per Share in a placing. 14. RESERVES Reserve Share capital Share premium Share based payment reserve Description and purpose Amount of the contributions made by shareholders in return for the issue of shares. Amount subscribed for share capital in excess of nominal value. Comprises the fair value of options and share rights recognised as an expense. Upon exercise of options or share rights, any proceeds received are credited to share capital. The share-based payment reserve remains as a separate component of equity. Foreign exchange reserve Gains/losses arising on re-translating the net assets of overseas operations into sterling. Retained earnings Cumulative net gains and losses recognised in the consolidated statement of financial position. Kodal Minerals Report & Accounts 2014 45 232803 Kodal pp35-imp 10/07/2014 16:11 Page 46 NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2014 15. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT The Group’s principal financial instruments comprise cash and cash equivalents, other receivables and trade and other payables. The main purpose of cash and cash equivalents is to finance the Group’s operations. The Group’s other financial assets and liabilities such as other receivables and trade and other payables, arise directly from its operations. It has been the Group’s policy, throughout the periods presented in the consolidated financial statements, that no trading in financial instruments was to be undertaken, and no such instruments were entered in to. The main risk arising from the Group’s financial instruments is market risk. The Directors consider other risks to be more minor, and there are summarised below. The Board reviews and agrees policies for managing each of these risks. Market risk Market risk is the risk that changes in market prices, and market factors such as foreign exchange rates and interest rates will affect the Group’s income or the value of its assets and liabilities. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return. Interest rate risk The Group’s exposure to the risks of changes in market interest rates relates primarily to the Group’s cash and cash equivalents with a floating interest rate. These financial assets with variable rates expose the Group to interest rate risk. All other financial assets and liabilities in the form of receivables and payables are non-interest bearing. In regard to its interest rate risk, the Group periodically analyses its exposure. Within this analysis consideration is given to alternative investments and the mix of fixed and variable interest rates. The Group does not engage in any hedging or derivative transactions to manage interest rate risk. The Group in the year to 31 March 2014 earned only £2 in interest. The very low interest rates available in the market of between 0.10% and 0.6% on a cash balance of circa £1 million would earn the Group between £1,000 and £6,000 in a single year. The Group is therefore insensitive to any interest rate risk. Interest rate risk is measured as the value of assets and liabilities at fixed rate compared to those at variable rate. Kodal Minerals Report & Accounts 2014 46 232803 Kodal pp35-imp 10/07/2014 16:11 Page 47 Financial instruments by category Other financial Loans and liabilities at receivables amortised cost Total 31 March 2014 £ £ £ Assets Other receivables 82,994 – 82,994 Cash and cash equivalents 1,501,343 – 1,501,343 Total 1,584,337 – 1,584,337 Liabilities Trade and other payables – 97,930 97,930 Total – 97,930 97,930 31 March 2013 Assets Trade and other receivables 5,476 – 5,476 Cash and cash equivalents 19,605 – 19,605 Total 25,081 – 25,081 Liabilities Trade and other payables – 136,955 136,955 Total – 136,955 136,955 Foreign exchange risk Throughout the periods presented in the consolidated financial statements, the functional currency for the Group’s Norwegian subsidiaries has been the Norwegian Kronor. The Group incurs certain exploration costs in Norwegian Kronor on the Kodal Project, and has exposure to foreign exchange rates prevailing at the dates when Sterling funds are transferred into Norwegian Kronor. The Group has not hedged against this foreign exchange risk as the Directors do not consider that the level of exposure poses a significant risk. The Group continues to keep the matter under review as further exploration and evaluation work is performed on the Kodal Project, and will developed currency risk mitigation procedures if the significance of this risk materially increases. The Group’s consolidated financial statements are largely insensitive to a change in the Sterling to Norwegian Kroner exchange rate due to low value of assets and liabilities (principally cash balances) maintained in Norwegian Kroner. Furthermore for the next 12 months the Group is expected to incur mainly Sterling denominated expenditure. Once the Kodal Project moves into the development phase a greater proportion of expenditure is expected to be Kroner denominated which may increase the foreign exchange risk. Kodal Minerals Report & Accounts 2014 47 232803 Kodal pp35-imp 10/07/2014 16:11 Page 48 NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2014 15. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued) Financial instruments by currency GBP NOK denominated denominated Total 31 March 2014 £ £ Assets Other receivables 73,330 9,664 82,994 Cash and cash equivalents 1,332,834 168,509 1,501,343 Total 1,406,164 178,173 1,584,337 Liabilities Trade and other payables 85,121 12,809 97,930 31 March 2013 Assets Trade and other receivables 5,476 – 5,476 Cash and cash equivalents 19,605 – 19,605 Total 25,081 – 25,081 Liabilities Trade and other payables 136,955 – 136,955 Liquidity risk Liquidity risk is the risk that the entity will not be able to meet its financial obligations as they fall due. The objective of managing liquidity risk is to ensure as far as possible, that the Group will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions. The Group has established policies and processes to manage liquidity risk. These include: ● Monitoring the maturity profiles of financial assets and liabilities in order to match inflows and outflows; ● Monitoring liquidity ratios (working capital); and ● Capital management procedures, as defined below. Capital management The Group’s objective when managing capital is to ensure that adequate funding and resources are obtained to enable it to develop its projects through to profitable production, whilst in the meantime safeguarding the Group’s ability to continue as a going concern. This is to enable the Group, once projects become commercially and technically viable, to provide appropriate returns for shareholders and benefits for other stakeholders. The Group has historically relied on equity to finance its growth and exploration activity, raised through the issue of Shares. After admission to the AIM market of the London Stock Exchange the Board will utilise financing sources, be that debt or equity, that best suits the Group’s working capital requirements and taking into account the prevailing market conditions. Kodal Minerals Report & Accounts 2014 48 232803 Kodal pp35-imp 10/07/2014 16:11 Page 49 Fair value The fair value of the financial assets and financial liabilities of the Group, at each reporting date, approximates to their carrying amount as disclosed in the Statement of Financial Position and in the related notes. The fair values of the financial assets and liabilities are included at the amounts at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The cash and cash equivalents, other receivables, trade payables and other current liabilities approximate their carrying value amounts largely due to the short-term maturities of these instruments. 16. DISCONTINUED OPERATIONS During the year to 31 March 2013, the Group held a 74% shareholding in a South African subsidiary, Clear Phosphate Minerals (Pty) Limited (“CPM”). CPM was established to explore for phosphate in South Africa and all of its funding was provided by the Group. CPM incurred costs as a result of legal and consultancy work to secure an exploration licence, which was not subsequently granted. In early 2013 the Directors decided to close CPM. All balances due from CPM to the Group were written off as incurred and as at 31 March 2013 a £5,000 provision was made by the Group for closure costs of CPM. Finalisation of CPM’s tax position and the company closure process took longer than expected with CPM formally being removed from the Registrar of Companies in South Africa in December 2013. At 31 March 2013 CPM had assets of £177 comprising cash at bank. This balance was used to part settle the costs of closure. During the year to 31 March 2013 there was a charge to the accounts of Kodal Minerals Plc of £6,075 reflecting the costs of operations and closure of CPM. During the year to 31 March 2014 an amount of £1,238 was written back to profit and loss, representing the unused accrual from the original £5,000 provision to close CPM. These amounts have been shown on the consolidated statement of comprehensive income as discontinued operations in line with the Group’s accounting policy. 17. RELATED PARTY TRANSACTIONS During the year to 31 March 2014, the Company issued 5,000,000 Shares at 0.01 pence per Share and 43,500,000 Shares at a price of 0.5747 pence per Share to Novoco Mine Engineering Limited as payment for services valued at £50,000 and £250,000 respectively. Novoco Mine Engineering Limited is a company wholly owned by Luke Bryan. During the year to 31 March 2014, Robert Wooldridge, a Director, subscribed for 28,571,430 Shares in the IPO at a price of 0.7 pence per Share. During the year ended 31 March 2014, GEE Consulting Limited, a company wholly owned by Guy Eastaugh, subscribed for 2,857,150 Shares at a price of 0.7 pence per Share. Transactions with subsidiary companies Kodal Mining AS Kodal Mining AS was incorporated on 13 June 2013 in Norway as a wholly owned subsidiary of the Company. On 13 February 2014 it was sold to Kodal Norway (UK) Limited, another wholly owned subsidiary of the Company. During the year ended 31 March 2014, £223,420 (2013: Nil) was advanced as a loan to Kodal Mining AS by the Company to support ongoing activity. Kodal Minerals Report & Accounts 2014 49 232803 Kodal pp35-imp 10/07/2014 16:11 Page 50 NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2014 17. RELATED PARTY TRANSACTIONS (continued) Kodal Norway (UK) Limited Kodal Norway (UK) Limited is a wholly owned subsidiary of the Company incorporated in England. On 13 February 2014 Kodal Norway (UK) Limited acquired from the Company its two Norwegian subsidiaries, Kodal Phosphate AS and Kodal Mining AS for consideration of £1,835,369 and £5,000 respectively. The Directors consider that the consideration paid for each company was equal to the fair value of the assets and liabilities acquired. The Company recognised a profit of £nil on the sale of each company. During the year ended 31 March 2014, the Company purchased assets for a cost £47,603 (2013: £nil) on behalf of Kodal Norway (UK) Limited which it subsequently sold to Kodal Norway (UK) Limited at cost. Sale of exploration assets to Kodal Norway (UK) Limited In December 2013 Kodal Minerals Plc sold all the tangible and intangible assets relating to the Kodal Project to Kodal Norway (UK) Limited for a sum of £900,000. These assets and knowhow were the result of exploration and evaluation work undertake by Kodal Minerals Plc on the Kodal Project. Kodal Minerals Plc recorded a profit on this sale of £266,079. Kodal Norway (UK) Limited is the operating company for the Kodal Project. Kodal Phosphate AS During the year ended 31 March 2014 Kodal Mining AS incurred expenses on behalf of Kodal Phosphate AS of £895. Following the closure of Kodal Phosphate’s bank account, the balance of the bank account £2,098 was transferred to Kodal Mining AS. Kodal Minerals Plc also paid annual licence costs on behalf of Kodal Phosphate AS of £1,434 during the year ended 31 March 2014 (2013: £nil). Transactions with related parties Robert Wooldridge, a Director, is a member of SP Angel Corporate Finance LLP (“SP Angel”) which acts as Financial Adviser and Broker to the Company. During the year ended 31 March 2014 the Company issued 17,857,143 ordinary shares to SP Angel at 0.7 pence per Share as payment for advisory services and placing commission in relation to the placing and admission of the Company’s Shares to trading on AIM. In addition, during the year ended 31 March 2014, the Company has paid fees to SP Angel of £62,500 (2013: £nil) as commission for placing Shares and has paid it £6,250 (2013: £nil) for its services as broker since the admission to AIM. SP Angel was reimbursed by the Group for travel expenses in the year to 31 March 2013 of £2,493. In October 2012, SP Angel subscribed for 1,500,000 Shares at a price of 1.0 pence per Share. Furthermore in the years to 31 March 2014 and 31 March 2013 SP Angel was reimbursed by the Group £19,117 and £69,845 respectively for expenses paid by it on behalf of the Group. Novoco Mine Engineering Limited, a company wholly owned by Luke Bryan, provided consultancy services to the Group during the year and received fees of £100,000 in cash plus 48,500,000 in Shares in the year ended 31 March 2014 (2013: £nil). Of these fees, £50,000 in cash and 43,500,000 in Shares were success payments that were conditional on completion of the Company’s admission to AIM. During the year to 31 March 2014 Novoco was reimbursed £32,783 for expenses (2013: £nil). At 31 March 2014 £14,500 was owed by the group to Novoco which was paid in April 2014. Kodal Minerals Report & Accounts 2014 50 232803 Kodal pp35-imp 10/07/2014 16:11 Page 51 18. CONTROL No one party is identified as controlling the Group. 19. POST BALANCE SHEET EVENTS On 17 April 2014 the Group issued 2,358,681 Shares at a price of 0.743 pence per Share to Emin Eyi, a Director of the Group (672,949 Shares), Robert Wooldridge, a Director of the Group (336,472 Shares) both in lieu of director’s fees and a consultant to the Group (1,349,260 Shares) as part payment of services to the Company. Kodal Minerals Report & Accounts 2014 51 232803 Kodal pp35-imp 10/07/2014 16:11 Page 52 NOTICE OF ANNUAL GENERAL MEETING Kodal Minerals plc (Registered in England and Wales No. 07220790) Notice is hereby given that the Annual General Meeting of Kodal Minerals plc (the “Company”) will be held at the offices of Field Fisher Waterhouse LLP, 9th Floor, Riverbank House, 2 Swan Lane, EC4R 3TT on 6 August 2014 at 12.30 p.m. for the purposes of considering and, if thought fit, passing the following resolutions, of which Resolutions 1 to 9 (inclusive) will be proposed as ordinary resolutions and Resolutions 10 and 11 will be proposed as special resolutions: Ordinary Business 1. To receive and adopt the audited financial statements of the Company for the financial period ended 31 March 2014 and the reports of the directors of the Company (the “Directors”) and the auditors thereon. 2. To re-appoint Ismail Emin Eyi as a director of the Company, who retires in accordance with article 24.2 of the articles of association of the Company (the “Articles”) and offers himself for re-appointment. 3. To re-appoint Luke Robert Bryan as a director of the Company, who retires in accordance with article 24.2 of the Articles and offers himself for re-appointment. 4. To re-appoint Robert Ian Wooldridge as a director of the Company, who retires in accordance with article 24.2 of the Articles and offers himself for re-appointment. 5. To re-appoint Guy Edward Eastaugh as a director of the Company, who retires in accordance with article 24.2 of the Articles and offers himself for re-appointment. 6. To re-appoint David Harold Jones as a director of the Company, who retires in accordance with article 24.2 of the Articles and offers himself for re-appointment. 7. To re-appoint Karl Markus Lennart Ekberg as a director of the Company, who retires in accordance with article 24.2 of the Articles and offers himself for re-appointment. 8. To re-appoint Baker Tilly UK Audit LLP as the auditors of the Company until the next Annual General Meeting and to authorise the Directors to fix their remuneration. Special Business 9. That the Directors be and they are hereby generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 (the “Act”) to allot shares in the Company or grant rights to subscribe for or convert any security into shares in the Company (“Rights”) up to a maximum aggregate nominal amount of £242,140.45 and this authority will (unless renewed, revoked or varied by the Company in general meeting) expire at the conclusion of the Annual General Meeting of the Company to be held in 2015 but the Company may, before this authority expires, make an offer or agreement which would or might require shares to be allotted or Rights to be granted after the authority expires and the Directors may allot shares or grant Rights pursuant to such offer or agreement as if the authority conferred hereby had not expired, such authority to be in substitution for any existing authorities conferred on the Directors pursuant to section 551 of the Act. Kodal Minerals Report & Accounts 2014 52 232803 Kodal pp35-imp 10/07/2014 16:11 Page 53 10. That, conditional on the passing of Resolution 9, the Directors be and they are hereby generally empowered pursuant to section 570 of the Act to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the authority conferred by Resolution 9 above as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be in substitution for any previous powers conferred on the Directors pursuant to section 570 of the Act and shall be limited to: (a) the allotment of equity securities in connection with an issue in favour of the holders of ordinary shares of the Company in proportion (as nearly as may be) to their respective holdings of ordinary shares, subject only to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements, legal or practical problems arising in any overseas territory or the requirements of any regulatory body or stock exchange in any territory; and (b) the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate nominal amount of £121,070.22, and the power hereby granted shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2015 save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry but otherwise in accordance with the foregoing provisions of this power in which case the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. 11. That article 6.1 of the Articles be amended to read: “6.1 The share capital of the Company consists of an unlimited number of ordinary shares of £0.0003125 each (the “Ordinary Shares”).” so as to accurately reflect the correct nominal value of the Ordinary Shares of the Company. BY ORDER OF THE BOARD Weaver Financial Limited Company Secretary 14 July 2014 Registered Office: Prince Frederick House 35-39 Maddox Street London W1S 2PP Kodal Minerals Report & Accounts 2014 53 232803 Kodal pp35-imp 10/07/2014 16:11 Page 54 NOTICE OF ANNUAL GENERAL MEETING (continued) Notes: Entitlement to attend, speak and vote 1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 and paragraph 18 (c) Companies Act 2006 (Consequential Amendments) (Uncertificated Securities) Order 2009, the Company has specified that only those members entered on the register of members at 12.30 p.m. on 4 August 2014 (or in the event that this meeting is adjourned, on the register of members 48 hours excluding non-business days before the time of any adjourned meeting) shall be entitled to attend, speak and vote at the meeting in respect of the number of ordinary shares in the capital of the Company held in their name at that time. Changes to the register after 12.30 p.m. on 4 August 2014 shall be disregarded in determining the rights of any person to attend, speak and vote at the meeting. Appointment of proxies 2. Members are entitled to appoint a proxy or proxies to exercise all or any of their rights to attend, speak and vote at the meeting. A proxy need not be a shareholder of the Company. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. Please see the instructions on the enclosed Form of Proxy. 3. The completion and return of a Form of Proxy whether in hard copy form or in CREST will not preclude a member from attending in person at the meeting and voting should he or she wish to do so. Appointment of proxies using hardcopy proxy form 4. Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you) in the boxes indicated on the form. Please also indicate if the proxy instruction is one of multiple instructions being given. To appoint more than one proxy please see the instructions on the enclosed Form of Proxy. All forms must be signed and should be returned together in the same envelope. 5. To be valid, the Form of Proxy and the power of attorney or other authority (if any) under which it is signed or a certified copy of such power or authority must be lodged at the offices of the Company’s registrars, Share Registrars Limited, Suite E, First Floor, 9 Lion & Lamb Yard, Farnham, Surrey GU9 7LL by hand, or sent by post, so as to be received not less than 48 hours excluding non-business days before the time fixed for the holding of the meeting or any adjournment thereof (as the case may be). Appointment of proxies using CREST 6. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the meeting and any adjournment(s) of it by using the procedures described in the CREST Manual (available from https://www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 7. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent (ID: 7RA36) by 12.30 p.m. on 4 August 2014. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. 8. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST Personal Member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. 9. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. Corporate representatives 10. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a member provided that no more than one corporate representative exercises powers over the same share. Kodal Minerals Report & Accounts 2014 54 232803 Kodal pp35-imp 10/07/2014 16:11 Page 55 Resolutions 11. Resolution 1 – This resolution seeks approval from shareholders of the directors’ and auditors’ reports and the financial statements for the year ended 31 March 2014. 12. Resolution 2 – This resolution seeks approval from shareholders to re-appoint Ismail Emin Eyi as a director of the Company who retires and offers himself for re-appointment pursuant to Article 24.2 of the Company’s Articles of Association. 13. Resolution 3 – This resolution seeks approval from shareholders to re-appoint Luke Robert Bryan as a director of the Company who retires and offers himself for re-appointment pursuant to Article 24.2 of the Company’s Articles of Association. 14. Resolution 4 – This resolution seeks approval from shareholders to re-appoint Robert Ian Wooldridge as a director of the Company who retires and offers himself for re-appointment pursuant to Article 24.2 of the Company’s Articles of Association. 15. Resolution 5 – This resolution seeks approval from shareholders to re-appoint Guy Edward Eastaugh as a director of the Company who retires and offers himself for re-appointment pursuant to Article 24.2 of the Company’s Articles of Association. 16. Resolution 6 – This resolution seeks approval from shareholders to re-appoint David Harold Jones as a director of the Company who retires and offers himself for re-appointment pursuant to Article 24.2 of the Company’s Articles of Association. 17. Resolution 7 – This resolution seeks approval from shareholders to re-appoint Karl Markus Lennart Ekberg as a director of the Company who retires and offers himself for re-appointment pursuant to Article 24.2 of the Company’s Articles of Association. 18. Resolution 8 – This resolution seeks approval from shareholders to reappoint Baker Tilly UK Audit LLP as the auditors of the Company and to authorise the directors to fix their remuneration as they see fit. 19. Resolution 9 – This resolution, to be proposed as an ordinary resolution, relates to the grant to the Directors of the authority to allot ordinary shares and grant rights to subscribe for or convert securities into ordinary shares with such authority expiring at the conclusion of the Annual General Meeting of the Company to be held in 2015, unless the authority is renewed or revoked prior to such time. This authority is limited to the issue of a maximum of 774,849,428 ordinary shares (representing approximately 100 per cent. of the Company’s entire issued share capital as at the date of this notice). 20. Resolution 10 – The Companies Act 2006 (the “Act”) requires that, if the Directors decide to allot ordinary shares in the Company for cash, the shares proposed to be issued be first offered to existing shareholders in proportion to their existing holdings. These are known as shareholders’ pre-emption rights. However, to act in the best interests of the Company the Directors may require flexibility to allot shares for cash without regard to the provisions of Section 561(1) of the Act. Therefore this resolution, to be proposed as a special resolution, seeks authority to enable the Directors to allot equity securities for cash free of such pre-emption rights, with such authority expiring at the conclusion of the Annual General Meeting of the Company to be held in 2015. This authority is limited to the allotment of a maximum of 387,424,714 ordinary shares for cash, free of pre-emption rights (representing approximately fifty per cent. of the Company’s entire issued share capital as at the date of this notice). 21. Resolution 11 – The Company’s Articles of Association incorrectly state that the nominal value of the Company’s ordinary shares is £0.001 each. This resolution, to be proposed as a special resolution, seeks authority from the shareholders for the Company’s Articles of Association to be amended to accurately reflect the correct nominal value of £0.0003125 each. Issued shares and total voting rights 22. As at 6 p.m. on 11 July 2014, the Company’s issued share capital comprised 774,849,428 ordinary shares of £0.0003125 each fully paid. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company as at 6 p.m. on 11 July 2014 is 774,849,428. The Company does not hold any shares in treasury. Kodal Minerals Report & Accounts 2014 55 232803 Kodal pp35-imp 10/07/2014 16:11 Page 56 Perivan Financial Print 232803
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