KODAL MINERALS PLC GROUP ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 Registration number 07220790 (England and Wales) I K O D A L M N E R A L S P L C | G R O U P A N N U A L R E P O R T & F I N A N C I A L S T A T E M E N T S | 2 0 2 3 CONNECTING WITH THE EMERGING LITHIUM OPPORTUNITY CONTENTS Highlights Strategic Report Chairman’s Statement Operational Review Finance Review Governance Report of the Directors Corporate Governance Report Remuneration Report Independent Auditor’s Report Financial Statements 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 1 2 3 5 10 16 17 20 24 26 33 34 35 36 37 38 39 43 59 COMPANY INFORMATION DIRECTORS Bernard Aylward Charles Joseland Robert Wooldridge Steven Zaninovich Qingtao Zeng SECRETARY Weaver Financial Limited Stapeley House London Road Nantwich CW5 7JW COUNTRY OF INCORPORATION England and Wales REGISTERED NUMBER 07220790 REGISTERED OFFICE Prince Frederick House 35-39 Maddox Street London W1S 2PP NOMINATED ADVISER Allenby Capital Limited 5 St Helen’s Place London EC3A 6AB SOLICITORS Fieldfisher LLP Riverbank House 2 Swan Lane London EC4R 3TT FINANCIAL ADVISER AND JOINT BROKER SP Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London W1S 2PP JOINT BROKER Canaccord Genuity Limited 88 Wood Street London EC2V 7QR AUDITOR RSM UK Audit LLP 25 Farringdon Street London EC4A 4AB SHARE REGISTRARS Share Registrars Limited 3 The Millennium Centre Crosby Way Farnham Surrey GU9 7XX STRATEGIC REPORT HIGHLIGHTS COMPANY SNAPSHOT On track to be the first commercial lithium producer in Mali from our flagship fully licenced Bougouni project Full finance agreed for low CAPEX DMS development with first lithium production expected in 2024 Project delivers high returns with a post-tax NPV of over US$440m with an IRR of 270% and a short three month payback period. Financing package agreed together and offtake negotiations for 100% of production underway Experienced and proven management team operating in Mali together for many years Major landholding of 350km2 with extensive upside from high priority exploration prospects to continue to grow the project Côte d’Ivoire 1 GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS KODAL MINERALS PLC KODAL MINERALS PLC STRATEGIC REPORT 2 CHAIRMAN’S STATEMENT I AM PLEASED TO PRESENT THE ANNUAL REPORT OF KODAL MINERALS PLC (“KODAL” OR THE “COMPANY” AND TOGETHER WITH ITS SUBSIDIARIES, THE “GROUP”) FOR THE YEAR ENDED 31 MARCH 2023. We had two main pillars to our strategy during the year - firstly, to demonstrate that our Bougouni Lithium Project (“Bougouni Project”, “Bougouni” or the “Project”) is a high-quality asset with the requisite operational and commercial attributes to bring to production, and secondly, to agree a financing package to bring that to realisation. I am very proud to say that our team has succeeded on both counts. The Company had many parties interested in negotiating for participation in the future of the Bougouni Lithium Project. We are very pleased to have secured an excellent agreement that provides full funding for the development of a mining operation and additional support for the ongoing exploration and development of our highly prospective and extensive land position in southern Mali. The final piece of the agreement is a direct investment into Kodal Minerals Plc that provides funding for the Company to undertake significant growth and assessment of additional opportunities. Since the acquisition in 2016 of Kodal’s most advanced asset, the Bougouni Lithium Project in southern Mali, the Kodal team has worked determinedly to prove up a sizeable resource, undertake test work to confirm an attractive spodumene product for offtake partners, and position itself to be one of the first West African lithium producers by securing key permits early in the development process. This committed and multi-stranded work programme has ensured that Kodal has remained at the front of the pack. Our ambition of becoming a lithium producer in the near-term is now a reality thanks to the US$117.75 million financing agreement between the Company, Kodal Mining UK Limited (“KMUK”) and Hainan Mining Co. Limited (“Hainan”) and its wholly owned UK-incorporated subsidiary Xinmao Investment Co. Limited (“Xinmao”, and together the “Hainan Group”) as announced on 19 January 2023. Hainan is a subsidiary of Fosun International Limited (“Fosun”) and is the industrial platform for mining and resources within Fosun. Kodal has welcomed the Hainan Group as partners for the development of the Bougouni Lithium Project and we are continuing to work together to ensure conditions precedent can be satisfied. Together the parties are fully committed to the completion of the funding transaction as soon as possible. 3 KODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS 3 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTS CHAIRMAN’S STATEMENT CONTINUED Kodal and the Hainan Group have spent a lot of time working together and finalising plans for the development of the project with activities including additional metallurgical testwork, engineering planning and review and finalisation planning for the proposed Dense Media Separation (“DMS”) development. This team development will stand the project in good stead when financing is complete and the actual groundwork commences on site. As shareholders will be aware, countries and major end users around the world are seeking to diversify lithium supply chains given the critical role the mineral plays in the energy transition. Research suggests that in Europe alone, 38 new gigafactories are being developed which could total ~400-700 GWh of annual battery manufacturing capacity by the middle of this decade. To meet this ambitious target, new sources of lithium are absolutely critical. Set against this dramatic demand backdrop, lithium prices have surged over the past two years, rising tenfold, then correcting in the first half of 2023. The lithium spot price has retracted from the very rapid highs and some analyst and reporting headlines may have certainly concerned investors. Whilst a lithium price of over $6,000/t of spodumene concentrate containing up to 6% Lithium Oxide (“Li2O”) would make Bougouni even more profitable, it should be reassuring to shareholders that the Kodal team took a conservative approach to its pricing forecasts, factoring a life of mine average concentrate price for the DMS development scenario of US$2,080/t, which still delivers payback within three months. The significant upside to this should be clearly evident, particularly when, at the date of writing, the 6% Li2O spodumene concentrate price of US$3,600/t FOB is reported. It is into this strong market, which analysts believe will continue to tighten over the mid- to long-term as demand outstrips new supply, we look to bring the Bougouni Lithium Project into production. We have an ambitious schedule for production, targeting commissioning and first production in 2024. The economic fundamentals of the initial DMS development that define the phase 1 development of the project are highly compelling. However it is also important to recognise the future value uplift driven firstly by the development of the larger phase 2 spodumene flotation plant that significantly expands the spodumene concentrate production, and secondly by the focused, well-funded, exploration and expansion drilling that is supported by the financing package. Kodal is fully focused on achieving first production through our DMS operation at Bougouni. Kodal will be in a great position following completion of the financing package with our partners the Hainan Group and the Board has longer-term growth plans for the Company leveraging our West African knowledge, our technical expertise and our ability to acquire, explore and develop new exploration projects. I would like to take this opportunity to thank our shareholders for their long-term support and interest in the Company, and also to the Kodal team for their diligence, commitment and tenacity in achieving our goals. Robert Wooldridge Non-executive Chairman 5 September 2023 4 OPERATIONAL REVIEW Kodal has developed a portfolio of exploration and development assets in West Africa, including its most advanced asset, the Bougouni Lithium Project in southern Mali, and a number of gold exploration assets in Mali and Côte d’Ivoire. Kodal’s management has continued to ensure that all government compliance, reporting and fees are kept up to date and all concessions are retained in good standing. MINING LICENCE AND EXPLORATION CONCESSION REVIEW Kodal’s most advanced asset, the Bougouni Lithium Project, is located in southern Mali. Kodal was granted the Foulaboula Permis d’Exploitation number No2021-0774/PM-RM (“Mining Licence”) in November 2021. This covered the proposed open-pit mining and processing operation at Bougouni, making the project fully permitted for development and construction. The Mining Licence is valid for an initial 12-year term and renewable in ten-year blocks until all resources are depleted. The Mining Licence is granted under the 2019 Mining Code and extends over a 97.2 square km area that will be a focus for Kodal’s exploration programme to delineate further resources to prolong the Bougouni Lithium Project mine life. BOUGOUNI LITHIUM PROJECT – MINING LICENCE DETAILS: TENEMENTS COUNTRY KODAL ECONOMIC OWNERSHIP PROJECT / JOINT VENTURE VALIDITY Foulaboula Mali 100% ownership (prior to Mali State’s participation) / 10% free carried + up to 10% contributing interest Bougouni Lithium Project Mining Licence N°2021-0774/PM-RM of November 5 2021. Permit is valid for an initial 12 years, renewable in periods of 10 years until depletion of the resources As detailed above, Kodal announced the financing package with the Hainan Group on 19 January 2023. At completion of the financing package, the Hainan Group will acquire a 51% shareholding in Kodal’s newly incorporated UK subsidiary, Kodal Mining UK Limited (“KMUK”), the company formed to be the developer of the Bougouni Lithium mine through its 100% owned Malian subsidiary mining company Les Mines de Lithium de Bougouni (“LMLB”). On completion of the financing package with the Hainan Group, Kodal will have economic interest of 49% of the Foulaboula mining licence prior to Mali State’s participation. 5 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS OPERATIONAL REVIEW CONTINUED TABLE OF CONCESSIONS – KODAL LITHIUM CONCESSIONS IN MALI: TENEMENTS COUNTRY KODAL ECONOMIC OWNERSHIP PROJECT / JOINT VENTURE VALIDITY Dogobala Mali 100% economic interest Bougouni Lithium Project Sogola Nord Mali 100% economic interest Bougouni Lithium Project Fariédélé Mali 100% economic interest Bougouni Lithium Project Mafélé Ouest Mali Bougouni West Lithium 1.4% gross royalty from future revenue and right to be issued an equity carried interest of 15% in any exploitation company set up for the Concession. Licence valid and in good standing. Arrêté number 2018-1115 granted on 13 April 2018 for initial 3-year period, with option for 2 extensions of 2 years validity each Application for first renewal has been lodged and all fees paid. Renewal approval pending Licence valid and in good standing. Arrêté number 2020-0072 granted 22 January 2020 for an initial 3-year period, with option for 2 extensions of 2 years validity each. Application for first renewal has been lodged, renewal approval is pending. Licence area modified during 2020 to account for the future Foulaboula Mining Licence. Licence valid and in good standing. Arrêté number 2020-0073 granted 22 January 2020 for an initial 3-year period, with option for 2 extensions of 2 years validity each. Application for first renewal has been lodged, renewal approval is pending. Licence area modified during 2020 to account for the future Foulaboula Mining Licence. Transaction with Leo Lithium Completed Bougouni West Lithium Final transaction with Leo Lithium pending renewal of N’Kéméné Ouest concession by Mali Government N'Kéméné Ouest Mali 100% Economic interest On completion of Bougouni West transaction retained interest will be: 1.4% gross royalty from future revenue and right to be issued an equity carried interest of 15% in any exploitation company set up for the Concession. The Bougouni Lithium Project concessions surround the Foulaboula mining licence and will be explored for additional pegmatite hosted resources that can be added to the mining inventory. The concessions are all in good standing, and exploration completed to date by Kodal has indicated priority sites for additional exploration within the concessions. Kodal reached an agreement post period end to sell its Bougouni West concessions, which do not form part of the main Bougouni Project, to ASX listed Leo Lithium Ltd (“Leo Lithium”) for a total cash consideration of £2.5 million subject to all agreements being executed, with Kodal to receive £2.0 million and the original concession holder Bambara Resources SARL (“Bambara”) to receive £0.5 million. 6 TABLE OF CONCESSIONS – KODAL GOLD CONCESSIONS IN WEST AFRICA: TENEMENTS COUNTRY KODAL ECONOMIC OWNERSHIP PROJECT / JOINT VENTURE VALIDITY Boundiali Côte d’Ivoire 100% direct ownership (under application) Gold Exploration Korhogo Côte d’Ivoire 100% direct ownership Gold Exploration Dabakala Côte d’Ivoire 100% direct ownership Gold Exploration Niéllé Côte d’Ivoire 100% direct ownership Gold Exploration Tiebissou Côte d’Ivoire 100% direct ownership Gold Exploration Licence application submitted and in process. Application updated during 2020 and application remains in good standing. Licence valid and in good standing. Renewal granted on 31 March 2020 for a 3 year-term. Application for extension has been lodged. Licence valid and in good standing. Renewal granted on 31 March 2020 for a 3 year-term. Application for extension has been lodged. Licence valid and in good standing. Initial licence expired on 7 January 2017, and Renewal decree received on the 28 February 2018 for a 3 year-period. Second Renewal decree received 18 December 2020 for a 3 year-period. Licence valid and in good standing. Initial term expired 30 September 2018. An application for renewal has been lodged, fees paid and approved. Renewal decree is pending signature. M’Bahiakro Côte d’Ivoire 100% direct ownership (under application) Gold Exploration Licence application submitted and in process. Djelibani Sud Mali 100% direct ownership Gold Exploration Nangalasso Mali Sotian Mali Tiedougoubougou Mali Fininko Mali Foutière Mali Application updated during 2020 and application remains in good standing. Licence valid and in good standing. Arrêté number 2021-5133/MMEE-SG granted on 28 December 2021 for an initial 3 year-period, with option for 2 extensions of 3 years validity each. All taxes have been paid. Nangalasso arrêté completed second renewal on 4 February 2021. A new Convention application covering the same permit has been lodged with the DNGM and is awaiting approval. 100% direct ownership following completion of option payments Nangalasso Project Gold Exploration Completed option agreement and is 100% beneficial owner of concession. Kodal completed option agreement and is 100% beneficial owner of concession Nangalasso Project Gold Exploration Arrêté number 2018-1925 granted on 12 June 2018 for initial 3 years period, with option for 2 extensions of 3 years validity each Nangalasso Project Gold Exploration First renewal has been approved Arrêté number 2018-3319 granted on 4 September 2018 for initial 3 years period, with option for 2 extensions of 3 years validity each. Application for first renewal has been lodged and all fees paid. Renewal approval pending Held through option agreement giving right to acquire 100% ownership Fatou Project Gold Exploration Licence in good standing. First renewal granted by Arrêté number 2021-2876/MMEE-SG of 6 August 2021 for a period of 3 years. Held through option agreement giving right to acquire 100% ownership Fatou Project Gold Exploration Licence in good standing. Arrêté number 2017-0170/ MM-SG of 2 February 2017. Application for second three-year renewal has been lodged and all fees and taxes have been paid. Renewal approval pending. 7 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS The future expansion of Bougouni is expected to continue with the construction and commissioning of a down-stream flotation plant expected to be supported by utilising the DMS plant cashflows in order to exploit the resources at Sogola-Baoulé and Boumou, as well as longer term exploration prospects. The updated Feasibility Study for the flotation plant, announced in June 2022, confirmed a very robust project with key metric highlights including: • • • • NPV@7% of US$760M (US$567M post-tax) compared to US$293M (US$201M post tax) in the original Feasibility Study. Life of mine (8.5 years) revenue exceeding US$2.145 billion based on an average sell price of US$1,060 per tonne (FOB basis). C1* cash costs of US$362 per tonne of 6% Li2O spodumene concentrate (“SC6”), and costs of US$474 per tonne including transportation and other selling costs. Total production of 2,024,000 tonnes with an annual average production of 238,000 tonnes. • Capital cost of US$154 million. * C1 cash cost includes all mining, processing and all general and administration costs per tonne sold, and additional to that the costs of transport to port and associated selling costs OPERATIONAL REVIEW CONTINUED BOUGOUNI LITHIUM PROJECT DEVELOPMENT STATUS The Bougouni Project is now approaching construction readiness following the granting of an Environmental Permit in November 2019, a large-scale Mining Licence in November 2021 and securing a financing package (as announced on 19 January 2023). The Company is implementing a two-phase approach at Bougouni; the first comprising a DMS plant and the second, a larger flotation plant. The DMS development scenario, announced in September 2022, demonstrated highlights including: • • • Capital development cost for the DMS plant and all associated infrastructure and commencement of mining is estimated at US$65 million; Estimated NPV@7% of approximately US$557 million (US$420 million post-tax); A payback period of three months (based on full equity financing) from commencement of operations. The DMS option is based on: • • Processing material from the Ngoualana deposit feeding 1Mtpa of lithium ore to a DMS processing plant; Utilising a conventional circuit to maximise spodumene recovery of over 130,000 tonnes per annum of spodumene concentrate; and • An initial four-year mine life. The DMS operation has a revenue forecast expected to exceed US$1.05 billion in less than four years, based on prevailing broker consensus pricing averaging US$2,080 per tonne (FOB basis). The DMS operation targets production of a 5.5% Li2O spodumene concentrate product which is consistent with other producers currently active in the market. 8 BOUGOUNI LITHIUM PROJECT RESOURCE EXPANSION In March 2023, the Company launched a drilling campaign across the Boumou, Bougouni South and Ngoualana prospects with the objective of enhancing the current JORC Resource inventory and further extending the mine life of the asset. Post period end, the Company reported assay results from the drilling programme which confirmed the identification of further high-grade mineralisation and the extension of wide high-grade pegmatite zones. Highlights included the confirmation of further wide, high-grade extensions at the Boumou prospect with significant results including 24m at 1.13% Li2O from 55m (including 8m at 1.37% Li2O from 55m). The Boumou prospect has been declared as a high priority target for further drilling to extend and define the pegmatite bodies to allow a new resource estimate to be completed. Results from the Bougouni South target drilling programme also returned significant lithium mineralised intersections including 11m at 1.14% Li2O from 71m and 6m at 1.48% Li2O from 101m. This drilling confirmed extensive pegmatite veins at Bougouni South that require additional exploration including diamond drilling to determine structural controls and extent of mineralisation. At the Ngoualana prospect, diamond drill holes were completed along the strike of the orebody to obtain variability test samples and returned wide high-grade intersections up to 37m at 2.17% Li2O from 3m to end of hole in drill hole MT004. OFF-TAKE ARRANGEMENTS Kodal agreed a binding term sheet with Suay Chin in March 2017 which contemplates that the parties will negotiate an extended off-take agreement for between 80% and 100% of the spodumene product produced at Bougouni for a period of three years. The off-take term sheet sets out certain agreed off-take principles that are to be included in the off-take agreement including the parties agreeing to buy and sell the contract quantity as well as the formal agreement including a right to match any third party off-take terms agreed for a period of three years following the expiry of the formal agreement. Whilst a formal agreement has not been entered into, Suay Chin retains the first right of refusal for a period of three years from first production of product from Bougouni whereby Kodal may not enter into any agreement with a third party to sell more than 20% of future production from Bougouni without having first offered to sell the production to Suay Chin on the terms offered by the third party. As part of the financing package announced on 19 January 2023, the Company has agreed a 12-month exclusivity period during which Kodal and the Hainan Group will seek to negotiate an off-take agreement over that portion of spodumene production from Bougouni which KMUK is able to sell without breaching its prior agreement with Suay Chin or triggering any existing rights of first refusal. GOLD EXPLORATION PROJECTS The primary focus during the year under review has been advancing the technical and corporate aspects of project development at the Bougouni Lithium Project, however the Company remains committed to the future exploration and resource development of its gold properties. In particular, the Board will focus on the progression towards establishing a maiden resource in the near-term for Niéllé, in northern Côte d’Ivoire, where we have identified an anomalous trend extending over 4.5km and which remains open along strike. Intercepts from previous drilling include: 26m @ 1.95 g/t Au from 32m, and 26m @1.79 g/t Au from 108m. Of equal importance is Fatou, in southern Mali, which has a historical resource estimate of ~350 koz Au. Recent drill intercepts from Fatou include 23m @ 1.63 g/t Au from 82m, and 6m @ 1.49 g/t Au from 40m. Importantly, Kodal will be well funded to advance these gold properties without further dilution to shareholders following Hainan’s subscription for new shares in Kodal, which will deliver US$17.75 million in new capital. Some of these funds will be directed towards a comprehensive exploration programme across our priority targets in Côte d’Ivoire and Mali, as well as the assessment of new exploration and development opportunities in West Africa. A draft budget has been prepared to undertake a major exploration campaign at Fatou, Niéllé and Dabakala with the aim of defining significant new gold resources. The exploration programmes will include detailed geological review, geochemical sampling, geophysical surveys, and extensive drilling campaigns. Bernard Aylward Chief Executive Officer 5 September 2023 9 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS FINANCE REVIEW RESULTS OF OPERATIONS GOING CONCERN AND FUNDING For the year ended 31 March 2023, the Group reported a loss before other comprehensive income for the year of £1,461,000, including share-based payment costs of £517,000 (2022: £343,000), compared to a loss of £903,000 in the previous year. Administrative expenses have increased compared to last year as corporate activity has increased with negotiations surrounding the future of the Bougouni Project. The Group has continued to run the offices in Mali and Côte d’Ivoire and significant additional exploration activity for both gold and lithium was undertaken during the year. Further information is provided in the Operational Review above. During the year, the Group invested £3,227,000 (2022: £2,547,000) in exploration and evaluation expenditure on its various projects and £513,000 of expenditure on the Bougouni West project was reclassified as held for sale. As a result, the carrying value of the Group’s capitalised exploration and evaluation expenditure increased from £11,442,000 to £14,522,000 after taking account of the effects of foreign exchange. At 31 March 2023, after taking account of the effects of foreign exchange, the carrying value of the gold projects in Mali and Côte d’Ivoire was £3,306,000 (2022: £2,411,000) and of the lithium projects in Mali was £11,216,000 (2022: £9,031,000). Cash balances as at 31 March 2023 were £545,000, a decrease of £501,000 on the previous year’s level of £1,046,000. Net assets of the Group at the year-end were £14,883,000 (2022: £12,091,000). FINANCING On 4 May 2022 the Company announced that it raised £3,000,000 (before expenses) via a subscription for 130,142,857 shares and an oversubscribed placing of 941,285,712 shares at a price of 0.28 pence per Placing Share (the ‘Placing’). The funds raised supported Kodal in the continuing development and preparation for financing and construction of its flagship Bougouni Lithium Project in Mali. On 3 August 2023, the Company announced the prepayment of US$3,500,000 of the subscription agreement entered into as part of the funding package with Hainan. The prepayment is repayable or convertible into new ordinary shares of the Company should the funding package not proceed. The Company has sole discretion over the use of the funds including for general working capital. 10 The Group has not earned revenue during the year to 31 March 2023 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 ordinary shares. On 31 August 2023 the group has cash at bank amounting to £1,984,000. In January 2023 the Group signed binding agreements with Hainan to enter into a joint venture to develop the Bougouni Lithium Project. Under these agreements, Hainan will subscribe for equity in the joint venture vehicle amounting US$100 million; they will also subscribe for equity of US$17.75 million in the ordinary shares of Kodal Minerals Plc, plus the immediate repayment to the Company for historical development expenses amounting to US$5.66 million, the agreements together being the Financing Transaction. Completion of the Financing Transaction is subject to meeting various conditions precedent including Hainan receiving formal Government approval for the investment and Kodal completing a restructure of its Mali subsidiary holdings. At the date of this report, it is noted that Hainan has received all necessary approvals from the Chinese Government authorities to allow it to complete its funding and investment including “Overseas Project Investment Filing Certificates” from the Hainan Province National Development and Reform Commission (“NDRC”) and Company Overseas Investment Certificate from the Department of Commerce of Hainan Province. Kodal has continued with the restructuring of its subsidiary companies and confirms that the new mining company Les Mines de Lithium de Bougouni has been fully registered and the Mali DNGM notified that this new company will be the owner and operator of the mining licence. In addition, the Company has completed the restructure of Future Minerals SARL such that all of Kodal’s lithium assets in Mali are now 100% owned by Kodal Mining UK Limited (the joint venture vehicle for Kodal and Hainan to develop the Bougouni Lithium project). Kodal is continuing to work with the relevant authorities to finalise all regulatory matters to allow completion of the Financing Transaction. Both Hainan and the Company remain committed to the Financing Transaction and Hainan has recently advanced to the Company a US$3.5m prepayment on its subscription for ordinary shares in the Company. The long stop date for finalising the conditions precedent has been extended several times by mutual consent and the parties continue to work together to expedite the completion of the Financing Transaction at the earliest opportunity. The Group has prepared cash flow forecasts for the period ending 30 September 2024 under several scenarios, including on the basis that the Hainan transaction completion is delayed for several more months and also that the Hainan transaction does not proceed. Under both of these scenarios the Group will require further funding within the foreseeable future. The directors are confident of raising sufficient funding to cover ongoing expenditure and overheads, based on indications from Hainan that they would make further prepayments available, and/or the Group will be able to raise further equity given the quality of the Bougouni lithium project, continuing interest from potential investors and finance providers, and forecasts showing continuing strong demand and pricing for spodumene and lithium. Although the Group has been successful in the past obtaining additional funding, there is no assurance that it will be able to do so in the future or that such arrangements will be on terms advantageous to the Group. These conditions indicate the existence of a material uncertainty that may cast doubt on the Group’s ability to continue as a going concern. The consolidated statements for the year ended 31 March 2023 have been prepared on a going concern basis as the Board is of the opinion that the group will be successful in completing the Hainan transaction in the near future and/or securing further funding in order to meet its liabilities as they fall due for at least 12 months from the date of signing these accounts. Accordingly, these consolidated financial statements do not include any adjustments to the recoverability and classification of recorded assets and liabilities and related expenses that might be necessary should the Group be unable to continue as a going concern. UTILISING KEY PERFORMANCE INDICATORS (“KPIS”) The following KPIs are used by the Group to assist it in monitoring its cash position and assessing costs and exploration and development activities: KPI Cash and cash equivalents (a) Administrative expense (b) Exploration and evaluation expenditure (c) 31 March 2023 31 March 2022 £545,000 £944,000 £3,227,000 £1,046,000 £541,000 £2,547,000 The directors have provided more information on the state of the Group’s financing and operational activity above. a. b. ‘Cash and cash equivalents’ is used to measure the Group’s financial liquidity. Cash and cash equivalents have decreased by £0.5 million in the year as the Group has incurred a higher level of exploration and evaluation expenditure than in prior year. ‘Administrative expenses’ is used to measure the Group’s administrative costs and operating results. Administrative expenses for the year were £0.9 million, an increase of £0.4 million compared to the previous year. Group corporate activity has increased this year with negotiations surrounding the future of the Bougouni Project. The Group has also continued to run the offices in Mali and Côte d’Ivoire. c. ‘Exploration and evaluation expenditure’ is used to measure expenditure on the Group’s gold and lithium projects. Exploration and evaluation expenditure in the year was £0.4 million higher than prior year as additional exploration activity for both gold and lithium was undertaken during the year. 11 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS FINANCE REVIEW CONTINUED 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. Price risk The Group is exposed to fluctuating prices of commodities, including gold and lithium, and the existence and quality of these commodities within the licence and project areas. The Directors will continue to review the prices of relevant commodities as development of the projects continues and will consider how this risk can be mitigated closer to the commencement of mining. 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 intends to raise funds in discrete tranches to provide sufficient cash resources to manage the activities through to revenue generation. Foreign exchange risk The Group operates in a number of overseas jurisdictions and carries out transactions in a number of currencies including Sterling, CFA Franc, US dollars and Australian dollars. 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. 12 PRINCIPAL RISKS AND UNCERTAINTIES The Group is exposed to a number of risks which it seeks to mitigate as set out in the table below: RISK COMMENT AND MITIGATING ACTIONS Exploration and Development Risk The Group is a mineral exploration company and the success of the Company is dependent on the discovery and/or acquisition of Mineral Reserves and Mineral Resources and the successful development of mines therefrom. Significant risk exists within technical, legal and financial aspects of the exploration for and the development of mines, which may have an adverse effect on the Group’s business. Reliability of Mineral Resources and Mineral Reserves The Group has reported Mineral Resources for its Bougouni Lithium project in West Africa. Any estimates will be based on a range of assumptions, including geological, metallurgical and technical factors; there can be no assurance that the anticipated tonnages or grades will be achieved. Licensing and Title Risk The Group’s exploration and future development opportunities are dependent upon maintaining clear tenure and access to licences as well as ensuring the relevant operation licences, permits and regulatory consents are valid. The licences and regulatory permits may be withdrawn or made subject to limitations. The granting of licences and permits are a practical matter subject to the discretion of the applicable government or government office. The interpretations, amendments to existing laws and regulations, or more stringent enforcement of existing laws and regulations could have a material adverse impact on the Group’s results of operations and financial condition. A new Mining Code has passed before the Republic of Mali Assemblie Nationale. The Company’s licences have been granted under the previous Mining Code (June 21 2012 (modified)) and remain subject to these conditions. In addition, future Mining Licence applications will remain subject to the 2012 Mining code unless the Company specifically request a variation to the new code. There is no assurance that the Group’s exploration and potential future development activities will be successful, and statistically few properties that are explored are ultimately developed into profitable producing mines. The Group ensures that there is regular review of projects, expenditure and exploration activity to maintain focus on targets and ensure best possible information in the decision-making process to focus resources and expenditure upon key exploration and development targets. The Mineral Resource estimates are prepared by third party consultants who have considerable experience and are certified by appropriate bodies. Mineral Resources are reported as general indicators and should not be interpreted as assurances of minerals or the profitability of current or future operations. The Group complies with existing laws and regulations. The Group ensures that the regulatory reporting and the government compliance requirements for each licence are met. There is a risk that negotiations with a government in relation to the grant, renewal or extension of a licence may not result in the grant, renewal or extension taking effect prior to the expiry of the previous licence period, and there can be no assurance of the terms of any extension, renewal or grant. The Group regularly monitors the good standing of its licences. 13 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED COMMENT AND MITIGATING ACTIONS The Transition Government installed following the military coup of 24 May 2021 has continued to confirm proposed election timelines of February 2024 to return Mali to a democratically elected Government. A referendum held in June 2023 allowed for changes to the Mali constitution. Mali adopted a new Mining Code in August 2023 with a key element being the potential for the Government to purchase up to an additional 20% interest in a project (previously 10% interest). In general, the security risk in Mali remains high. The United Nations voted to end the peacekeeping mission in June 2023 with a phased departure of the UN forces between 1 July and 30 December 2023. The security situation in the north and east of the country remains fragile and unrest has continued in neighbouring Burkina Faso and Niger. In Côte d’Ivoire, the political situation has been calm since 2011. The election in 2015 returned the government of President Ouattara with increased popular support and on 31 October 2020 President Ouattara was returned for a further 5-year mandate. The economic situation in Côte d’Ivoire is improving dramatically with significant government expenditure on infrastructure and development activity. The Board regularly reviews the levels of discretionary spending on capital items and exploration expenditure. This includes regularly updating working capital models, reviewing actual costs against budget and assessing potential impacts on future funding requirements and performance targets. In the past, the Group has been successful in raising additional equity finance to support its ongoing activities. RISK Political Risk The Group has significant activities in Mali and Côte d’Ivoire in West Africa. The success of the Group will be influenced by the legal, political and economic situation in Mali, Côte d’Ivoire and the wider African region. Countries in the region have experienced political instability and economic uncertainty in the past government policy in the countries in which the Group operates can be unpredictable, and the institutions of government and market economy may be unstable and subject to rapid change, which may result in a material adverse effect on the Group’s operations. The renewal of exploration and exploitation licences is an area of risk given the countries in which the Group operates. Whilst the Group has in place legal titles on the assets in its portfolio, there remains a risk to the Group that changes within regimes could put the ownership of these assets at risk. The Group is also at risk of taxation reviews that may change or apply more stringently the laws and regulations of the countries in which it operates. Financial Risk The Group is an exploration company and does not generate revenue or self-sustaining funding at this stage. The Group requires funds to support ongoing exploration and future development of mineral properties. The Group’s access to funding will depend on its ability to obtain financing through the raising of equity capital, joint venture projects, debt financing, farm outs or other means. There is no assurance that the Group will be successful in obtaining the necessary financing in a timely manner on acceptable terms to complete its investment strategy. The equity markets and ability to raise finance were significantly affected by the Covid-19 pandemic but have subsequently improved. If the Group is unable to obtain additional financing as needed, some interests may be relinquished, and / or the scope of the operations reduced. 14 S172 STATEMENT The Directors of the Company have a duty to promote the success of the Company. A director of the Company must act in the way they consider, in good faith, to promote the success of the Company for the benefit of its members, and in doing so have regard (amongst other matters) to: it operates, suppliers and contractors, as well as shareholders. As the Company looks to bring the Bougouni Lithium project into development, the importance of capital equipment, suppliers, contractors, local workforce, finance providers and offtake customers will increase significantly. • • • • • the likely consequences of any decision in the long term; the interests of the Company’s employees; the need to foster the Company’s business relationships with suppliers, customers and others; the impact of the Company’s operations on the community and the environment; the desirability of the Company to maintain a reputation for high standards of business conduct; and • the need to act fairly between members of the Company. The Directors are committed to developing and maintaining a governance framework that is appropriate to the business and supports effective decision making coupled with robust oversight of risks and internal controls. The Board believes that long-term success requires good relations with a range of different stakeholder groups both internal and external. The board has identified Kodal’s stakeholders to include employees and consultants working for the Company, the local communities and governments in Mali and Cote d’Ivoire in which In the Corporate Governance Report, we explain the regular engagement with employees, communities and local governments in West Africa where we operate; and the impact assessment we have performed on the environment and local society as part of our permitting process. We also comment on the decision-making for the long-term success of the Company, its governance and culture; as well as the nature and methods of communication with all shareholders. The Group relies heavily on having suppliers and contractors with appropriate levels of experience and expertise of working successfully with junior miners in West Africa, as well as professional advice for AIM quoted companies in London. Accordingly, Kodal is committed to maintaining constructive relationships with all its suppliers and advisers and operating in line with its Corporate Code of Conduct. Signed on behalf of the Board Bernard Aylward Chief Executive Officer 5 September2023 15 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS KODAL MINERALS PLC GOVERNANCE 16 REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 MARCH 2023 THE DIRECTORS PRESENT THEIR REPORT, TOGETHER WITH THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR KODAL MINERALS PLC FOR THE YEAR ENDED 31 MARCH 2023. PRINCIPAL ACTIVITY The Company was incorporated for the purposes of exploring and developing mineral assets. The Company’s shares are traded on AIM. DOMICILE AND PRINCIPAL PLACE OF BUSINESS Kodal Minerals Plc is domiciled in the United Kingdom and has its registered office at Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. Its principal place of business as at 31 March 2023 was West Africa, and specifically Mali and Côte d’Ivoire. DIRECTOR’S INTERESTS The beneficial interests in the Company’s shares of the current Directors and their families as at 31 March 2023 are as follows: Directors Bernard Aylward Charles Joseland Robert Wooldridge Steven Zaninovich Qingtao Zeng Ordinary Shares 31 March 2023 Ordinary Shares 31 March 2022 251,364,799 221,007,656 11,250,000 6,250,000 169,973,858 153,723,858 7,142,847 – 11,392,857 6,250,000 EVENTS AFTER THE REPORTING PERIOD Events after the reporting period are outlined in note 18 to the financial statements on page 58. DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE The Group has Directors’ and Officers’ liability insurance to cover claims up to a maximum of £1.0 million. STRATEGIC REPORT The Directors have chosen, in accordance with s414(c) of the Companies Act, to include in the Strategic Report on pages 2 to 15 information on the Group’s principal activities, business review and key performance indicators which would otherwise be required to be included in the Directors’ Report and which they consider to be of strategic importance to the Company. 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. DIVIDEND The Directors do not recommend payment of a dividend. DIRECTORS’ RESPONSIBILITIES STATEMENT The Directors are responsible for preparing the Strategic Report and the Directors’ Report and the 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 for Companies of the London Stock Exchange to prepare Group financial statements in accordance with UK-adopted International Accounting Standards and have elected under company law to prepare the Company financial statements in accordance with UK-adopted International Accounting Standards and applicable law. The Group financial statements are required by law and UK-adopted International Accounting Standards 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. KODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS 17 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTS BOARD OF DIRECTORS The current membership of the board and the Directors who held office during the year are set out below: BERNARD AYLWARD (Chief Executive Officer) CHARLES JOSELAND (Independent Non-executive Director) Bernard is a geologist with over 20 years’ experience as a manager and exploration geologist in the mining and exploration industry in a variety of commodities. Bernard’s experience includes serving as the Managing Director of Taruga Gold Limited from its initial listing on the ASX, Chief Operating Officer of International Goldfields Ltd, General Manager of Azumah Resources Ltd (Ghana), and Exploration Manager for Croesus Mining NL. Bernard has been involved in the discoveries and management of the Bepkong, Julie, Collette and Kunche deposits in Ghana, as well as the Deep South gold deposit, Gladstone North deposit, St Patrick’s, Norseman Reef, and the Safari Bore gold deposit in Western Australia. Bernard has experience operating in Europe (Greece Sappes deposit), Siberia, South America and extensive experience throughout West Africa. He brings significant experience in geology, mineral exploration and evaluation, and mine engineering and development; he has the leadership, public communication skills and legal & regulatory understanding required for a publicly listed, junior miner. Charles is a former Chartered Accountant with 32 years’ experience. After graduating with a degree in Classics from Cambridge University, he joined PwC where he was an audit partner for 20 years as part of its Energy, Utilities & Mining Group, including secondments to Moscow and Madrid. Charles has been responsible for providing services to many international resources groups, including those with operations in Russia, Kazakhstan and Africa, as well as North & South America. Charles has also acted as reporting accountant and advisor for many companies quoted on both LSE’s AIM and Main Market. He brings knowledge and skills to the board in the areas of finance & accounting, audit, corporate governance, internal control & risk management frameworks for public quoted, mining companies. As an audit partner for 20 years, he is experienced in providing an independent point of view. ROBERT WOOLDRIDGE (Non-executive Chairman) STEVEN ZANINOVICH (Operations Director) Steve has more than 25 years' experience in project management, encompassing all stages of mine development. Steve has been closely involved with the delivery and commissioning of lithium producer Tawana Resources Ltd's Bald Hill Lithium Project in Western Australia. Prior to Tawana Resources Ltd, Steve served as COO with Gryphon Minerals before assuming the role of Vice President of Major Projects and becoming part of the Executive Management Team at Teranga Gold Corporation, following its acquisition of Gryphon. During his extensive career, Steve has gained specific expertise in the development of multiple mining operations across various commodities and jurisdictions in West Africa. Steve was appointed to the board on 27 July 2022. 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, healthcare and technology sectors. He brings knowledge of and skills in capital markets, broking, corporate finance and corporate governance in small & mid-cap miners. QINGTAO ZENG (Non-executive Director) Dr Zeng completed a PhD in geology at the University of Western Australia in 2013. Dr Zeng has been engaged as a consulting geologist, principally working with CSA Global based in Perth, Australia, and has a range of geological and commercial specialities. Since 2015, Dr Zeng has been extensively involved in the lithium exploration and development sector and through his strong network of contacts throughout China has helped clients complete a range of contracts relating to the supply or purchase of lithium in the form of concentrate or direct shipping ores. He brings detailed knowledge of the mining sector, in particular of lithium, with extensive Chinese contacts across the value chain from engineering, construction, processing, financing & investment, and commercial markets. 18 ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG) AND SUSTAINABILITY The Directors recognise the importance of operating in a sustainable manner with high levels of governance, and with respect for environmental and social considerations. As this also helps drive value for shareholders over the long term, there is increasing investor and public interest in understanding how companies address ESG issues. We note the Quoted Companies Alliance has published a Practical Guide to ESG for small and mid-sized quoted companies. We recognise lithium has a crucial role to help decarbonise the economy through its use in batteries in Electric Vehicles, but it is also important that the lithium is mined in a responsible and sustainable manner. As we are currently at the exploration stage of our Company’s mine life cycle, our focus has been on the more social aspects. We have been engaging with the Mali government and local communities to adapt our planned approach for their comments and suggestions. Although we have been granted a formal legal licence we also need the goodwill of the local community to operate near Bougouni. It is important to continue to manage these social aspects throughout the life cycle of our Bougouni project, minimising disruption, providing job opportunities, and supporting local social projects. The potential environmental impacts will only arise when we commence development, including mine and plant construction and enter into production. However, we are considering those environmental aspects now within our design plans. Our Environmental Social Impact Assessment (ESIA) considered air quality, water & waste-water management, energy sources, waste & hazardous materials management, as well as the potential ecological impacts. These results formed part of our Preliminary Feasibility Study (PFS) and feed into our engineering design plans. We continue to develop our PFS and the project design not only to improve the process engineering and efficiency of our plant but also to ensure the impact of potential climate change events is managed, and improvements to greenhouse gas emissions and energy sources are also considered. We are in the process of updating our ESIA and carrying out further engagement with the local community and mining ministry explaining our latest plans and responding to their feedback. Our approach to governance already follows the QCA Code, as set out below in our Corporate Governance section; this details the way we approach governance considering the 10 principles. As we develop our projects over the next few years, we will also develop our narrative to explain how we address environmental and social matters, and our ESG objectives, targets and results alongside our normal financial performance reporting. 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 UK-adopted International Accounting Standards; 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 Group and Company 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 RSM UK Audit LLP offer themselves for reappointment as auditors in accordance with section 489(4) of the Companies Act 2006. A resolution to reappoint RSM 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 5 September 2023. Robert Wooldridge Director 5 September 2023 KODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS 19 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTS CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 MARCH 2023 legal and political matters. For assessing our mineral resources the group employs independent experts and assayers to analyse the results from our drilling programmes. In order to help manage our development risk, we have employed an Operations Director with significant experience of bringing mines into production in west Africa; he works with local and international mining consultants who are similarly experienced in lithium, mine construction & development and operating in west Africa. The board and the executive team closely monitor the group’s financial position and cash flow forecasts; together with financial advisors they consider the group’s funding needs and finance-raising opportunities. Kodal has welcomed the Hainan group as our partners for the development of the Bougouni Lithium Project. Kodal and Hainan have spent a lot of time working together and finalising plans for the development of the project in order to enter production as soon as possible. The key drivers to the continued growth of the lithium market are the increasing demand for electric vehicles and battery storage as well as growth in the use of personal electric devices driven by social choice, government regulations and an improvement in the performance and affordability of high-quality battery products. In addition to the lithium prospects in Mali, the Company holds a suite of gold assets in Mali and Cote d’Ivoire. With the increase in the gold price, the Company continues to assess and rank the projects it holds directly to determine priorities for further exploration or for ways to deliver value to our shareholders. Principle 2. Seek to understand and meet shareholder needs and expectations The Board is committed to communicating openly and regularly with both its private and institutional shareholders to ensure that its strategy and performance are understood. Significant developments are disseminated through RNS announcements which are then made available on the Company’s website. The Company communicates regularly with private shareholders through investor evenings and similar events; audio and video interviews; periodic webcast Question & Answer sessions. The Company’s website also contains its latest corporate presentations and interview recordings. In addition, the Company encourages all shareholder to attend the Annual General Meeting which provides an excellent opportunity to meet with management and engage directly with them. CHAIRMAN’S INTRODUCTION We formally adopted the Quoted Companies Alliance Corporate Governance Code 2018 (the “QCA Code”) in September 2018, believing it to be the most appropriate code for an AIM quoted company of our size and stage of development. As chairman, I am responsible for leading the board; ensuring its composition with people of the right experience and engagement; and focusing on our strategy to bring our African lithium project to production. As a small company, we are aware that the board’s and senior management’s actions and attitude have a strong impact on the culture of our organisation; the regular, on-site presence of our CEO and Project Manager in Mali and Cote d’Ivoire, as well as regular communication with our local manager are important aspects of conveying and monitoring our culture and values. I believe for the size of our company we have a well-functioning board, the right corporate structures, appropriate engagement and information flow with our small senior management team, and a clear strategy to drive value for our shareholders, employees, communities where we operate, and our suppliers. We have engaged closely with local communities and the Malian government through the Environmental and Social Impact Assessment process and taken their considerations into account; in addition to our market updates, our CEO makes regular presentations, gives media interviews and engages with shareholders, to keep stakeholders informed and understand expectations. We explain more under the QCA Code’s ten principles below. Principle 1. Establish a strategy and business model which promote long-term value for shareholders The Board has concluded that highest medium- and long-term value can be delivered to shareholders though a primary focus on the continued exploration and development of its Bougouni Lithium project (the “Project”) located in southern Mali. The medium-term objective is to develop the Project through feasibility studies and bring it in to production as rapidly as possible. The Strategic and Operational Review above explains the strategy, key areas of focus and challenge, and management action, including completing full engineering design, obtaining financing for construction and further exploration of the gold assets. The Principal Risks outlined on pages 13 to 14 highlight the key challenges the Group faces in executing the strategy and how the Board seeks to protect the Group from those risks. Our country manager in Mali meets regularly with local mining officials to ensure our licences and titles are kept in good standing; he and other advisors keeps us informed of changes to local regulatory, 20 Kodal has an active and effective investor relations programme which includes regular institutional roadshows to meet shareholders and potential shareholders. It also meets its corporate brokers and other research analysts to assist them in preparing and publishing their research on the Company. During the year Canaccord Genuity were appointed as joint brokers and financial advisers to expand our reach to potential investors. These promotional and marketing activities are co-ordinated by its corporate broker and financial PR advisers. Principle 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success As the Company scales up to bring the Bougouni Lithium project into development, good relationships with the capital equipment suppliers, engineering contracts, local workforce, finance providers and offtake customers will become increasingly important. The Company’s CEO, Operations Director and Country Manager in Mali regularly visit the locations in which Kodal operates and meets with these stakeholders in order to gain their feedback on the Company’s operations. Any concerns raised are communicated to the Board for further consideration. A key part of Kodal’s business model is assessing the impact that the Company’s business activities will have on the host communities and environment in which it operates. As part of its application for a mining licence at Bougouni, the Company carried out an Environmental and Social Impact Assessment (ESIA) engaging with and responding to comments from officials of the departments of Geology & Mines, Forestry & Water, Heritage & Culture, as well as the local community as a whole. The Company is also committed to ensuring the safety of its workers on site and has strict health and safety policies which it firmly enforces. Principle 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation. The Board is responsible for identifying and managing areas of significant business risk for the Company; the Audit & Risk Committee assists the board in ensuring that there is an effective system for risk management in place. At each Board meeting, the Directors review ongoing operational performance, discuss budgets and forecasts and new risks associated with ongoing operations; appropriate mitigating actions and controls are discussed with management, and subsequently monitored by the Directors. The Board formally reviews and documents the principal risks to the business at least annually as part of the annual audit process. The Company has in place an anti-bribery and corruption policy as well as other policies and procedures to which employees, management, consultants and, where appropriate, key suppliers are required to adhere. Robust financial procedures and safeguards are in place regarding expenditure and accounting functions. The principal risk areas identified by the board and the mitigating actions are set out above. The Board has considered the need for an internal audit function to provide assurance on the effectiveness of risk management and internal controls; however, given the size of the group and the stage of its development, the board does not consider this necessary. The Board works closely with and has regular ongoing dialogue with its finance functions across the Group and has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems. Principle 5. Maintaining the Board as a well-functioning, balanced team led by the Chair The Board meets approximately each month throughout the year to discuss important operational and strategic matters and to review financial and operational performance. In addition, there are additional board meetings to consider specific proposals, including for example to issue further shares to raise funds or to consider different development approaches and financing arrangements. Board papers are provided in advance with the information necessary to facilitate a proper assessment of the issues under consideration. The non-executive directors spend between 2 and 6 days a month working on Company matters. The structure and composition of the Board has been kept under review by the Chair during the year. Although the board has just one formal independent non-executive director (below the QCA Guide of two), there are two executive directors and three non-executive directors, who recognise the importance of maintaining an independent mind-set and objectivity in their views. The board size and structure was considered appropriate given the lower level of activity in the Company to date, however, as activity increases with the Company moving into the development phase, this will be kept under review, as will gender and diversity balance. Although these directors hold some share options and company shares, the holdings are not considered to be of sufficient size to impact their independent judgments (including Charles Joseland whose shares in the Company were worth £43,875 at year-end). Biographical details of all the directors are set out on page 18. 21 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS CORPORATE GOVERNANCE REPORT CONTINUED Principle 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Chairman reviews the performance of individual Directors on an on-going basis and assesses each Director’s contribution to the effective operation and management of the Company. The Chairman sets individual objectives for each Director within the context of the overall strategy and objectives for the Company; at the end of the year, he considers each director’s performance, including the level of achievement of their objectives, and their overall contribution to the Company’s performance. The review establishes further objectives for the coming year, identifying any additional training or other support that may be required. The reviews for the year recognised the executive directors’ success of attracting, selecting and negotiating with suitable partners to finance the Bougouni lithium project on appropriate terms for the Company’s shareholders; also advancing and ensuring the readiness of the lithium project, including the fast track DMS phase, for prompt development once funding is available. The non-executives contribution was recognised in providing robust challenge to management on strategic priorities, budgets, partner choices & contractual negotiations, as well as governance, internal control, and financial & tax matters; also the state and outlook of lithium markets, introducing potential partners and liaison with major shareholders. Succession planning is the responsibility of the Remuneration and Nomination Committee and is reviewed by the Board at least on an annual basis. When considering succession planning, the Remuneration and Nomination Committee takes into account the skills and experience required as the Company grows and develops its projects. Principle 8. Promote a culture that is based on ethical values and behaviours As a small company the Board’s and senior management’s actions and attitude have a strong impact on the culture of our organisation. The Board believes that it has established a culture of responsible and ethical behaviour which it follows and which it believes has been successfully transmitted to its employees overseas. The Directors believe that this Board provides the Company and its shareholders with the necessary skills and experience to drive the business forward balanced by a sufficient level of independent analysis and judgement to provide challenge and oversight. As a Board, the Directors are also mindful of the need to control costs and provide value for shareholders. In the year ended 31 March 2023 there were 10 full board meetings of which Robert Wooldridge attended 10, Bernard Aylward 10, Charles Joseland 10, Steven Zaninovich 10 and Qingtao Zeng 10. In addition to the full board meetings, additional ad hoc meetings were convened as required to issue shares and for other procedural matters. The Board has an Audit & Risk Committee which during the year to 31 March 2023 comprised Charles Joseland (Chair) and Robert Wooldridge. In the year ended 31 March 2023, the Audit & Risk Committee met three times, both members attending on each occasion. The Board also has a Remuneration & Nomination Committee which during the year to 31 March 2022 comprised Robert Wooldridge (Chair), Charles Joseland and Qingtao Zeng. The Remuneration & Nomination Committee meets as required and at least once each year. In the year ended 31 March 2023, the Remuneration and Nomination Committee met three times, all members attending on each occasion. Principle 6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities. Biographical details of the Directors are on page 18. The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, including in the areas of geology, mineral exploration, mine engineering and development, public company and capital markets, finance and corporate governance. The directors keep their skillsets up to date by attending industry and relevant seminars and training sessions. During the year, the Directors sought advice from their corporate advisers (including the Company’s nominated adviser, lawyers and accountants) on the contractual arrangements, tax treatments across jurisdictions and the various financing agreements entered into during the year. The Company has also employed the services of Weaver Financial Limited to act as Company Secretary. When considering the composition of the Board and the appointment of new Directors, the Board has established a Remuneration & Nomination Committee to oversee this process and make recommendations to the Board. The Board recognises that it currently has limited diversity, and this will form a part of any future recruitment consideration. 22 Foremost amongst these are its focus on: • The health and safety of its workers and consultants; • • • An awareness of the environmental and social impact of its operations on the local communities and efforts to mitigate and minimise them; contributing to the overall development of the local communities in which it operates; conducting honest and transparent dealings with employees, consultants and suppliers; and • adopting a zero tolerance to bribery. At this stage of its development, Kodal has only approximately 40 non-Board employees all of whom are based at its offices in Mali and Cote d’Ivoire. There is near daily contact with these offices and regular visits by the CEO which have recommenced post- pandemic. This enables the Board to monitor employees’ conduct and behaviour to ensure that the Company’s ethical values and standards are recognised and respected, and appropriate action taken where necessary. Principle 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board. Kodal’s key strategic, financial and operational decisions are reserved exclusively for the decision of the Board. The Board seeks to meet formally approximately once a month and is supplied with appropriate and timely information ahead of each meeting. The Directors are free to seek any further information they consider necessary. In addition, there are additional Board meetings to consider specific matters that require decision between the regular board meetings and to which all Directors are invited. In addition to the formal meetings, there is regular contact and communication between the Board members to discuss day-to-day operational matters. Robert Wooldridge, the Non-executive Chairman, is responsible for the running of the Board and Bernard Aylward, the Chief Executive Officer, has executive responsibility for running the Company’s operational activities. Bernard Aylward and Robert Wooldridge take responsibility for the Company’s liaison with shareholders. At year-end Charles Joseland provided additional input into the audit process, reviewing financial forecasts, judgments and estimates, accounts disclosure and liaising with the auditors; independence is maintained as the underlying judgments, accounts preparation and forecasts are made by the CEO, Operations Director and/or Financial Controller. The Company has a significant shareholder, Suay Chin International Pte Ltd (“Suay Chin”), which owns 14.10% of the Company’s issued share capital. It is a Singapore registered company which has extensive connections with the Chinese lithium market including lithium carbonate producers and lithium-ion battery manufacturers. Suay Chin has entered into a Relationship Agreement with the Company and its advisers, under which it undertakes to do all such things as it is reasonably able to do to ensure that the Company is capable of carrying on its business independently of Suay Chin. Under this agreement, it also has the right to appoint a Director to the Board of Kodal and Qingtao Zeng has been appointed in this capacity. The Board is supported by the Audit & Risk Committee and the Remuneration & Nomination Committee. The reports of those committees are set out below. The Board continues to monitor its governance framework on an ongoing basis. The Directors have not engaged the services of external governance advisers Principle 10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The Board attaches great importance to providing shareholders with clear and transparent information on the Group’s activities, strategy and financial position. All material information is released to the London Stock Exchange via RNS announcements which are then made available on the Company’s website. The Company prepares and updates a corporate presentation which is also available on its website along with other news and information about the Company and its operations. As detailed in Principle 2 above, the directors believe that the Company has an effective and well-established programme for communicating with both its institutional and private shareholders. The Company will disclose the outcome of all shareholder votes on its website and in the case of 20% of independent votes being case against a resolution, provide an explanation of the actions that will be taken to enable the Board to understand the reasons for this result and any future actions it will take to address such concerns. The Company’s website contains historic annual reports for the past five years and also notices of general meetings. 23 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS CORPORATE GOVERNANCE REPORT CONTINUED REPORT FROM THE AUDIT & RISK COMMITTEE The Audit & Risk Committee comprised Charles Joseland and Robert Wooldridge and was chaired by Charles Joseland during the year. The Committee meets at least twice a year to consider the integrity of the financial statements of the Group, including its annual and interim accounts, the accounting policies and auditor reports, as well as the terms of appointment and remuneration for the auditors, the effectiveness of the Group’s internal controls and risk management systems, and external compliance matters. 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 Committee met with the auditors to discuss their audit plan and scope of work, and also the findings from their audit. There was specific focus on the fair presentation of the Company’s exploration and development activities, the assumptions underlying the calculation of warrants and share options, the carrying value and any potential impairment of the evaluation and exploration assets and inter-company balances, compliance with laws and regulations including the status of the licences, and the going concern assumption. The Committee also considered the process for identifying and considering risks and their mitigating actions, and their disclosure in the Annual Report on pages 13 to 14. They also considered the need for an internal audit function but decided the size and complexity of the Group did not justify it at present. However, it will keep this decision under annual review. REMUNERATION REPORT The Remuneration Committee performs both remuneration and nomination functions and during the year ended 31 March 2023 comprised Robert Wooldridge (Chair), Charles Joseland, and Qingtao Zeng. It meets as and when required but at least annually. The purpose of the remuneration function is to ensure that the 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 directors is set by a Board committee whose Chairman has no personal interest in the outcome of the committee’s decision and will have appropriate regard to the interests of the shareholders. The purpose of the nomination function is to identify and nominate potential new directors to the Board as considered necessary and make recommendations on such appointments to be considered by the Board as a whole. 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. 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. The Remuneration Committee is considering a new long term incentive plan for management aligned with the Group’s objectives and to drive shareholder value. Directors’ salary and fees year ended 31 March 2023 £ Share based payments year ended 31 March 2023 (see note 5) £ 177,847 50,000 45,000 166,667 25,000 464,514 180,724 78,153 119,366 159,291 139,680 677,214 Total year ended 31 March 2023 £ 358,571 128,153 164,366 325,958 164,680 1,141,728 Total year ended 31 March 2022 £ 355,242 46,164 89,798 – 27,549 518,753 Bernard Aylward (a) Charles Joseland Robert Wooldridge Steven Zaninovich (b) Qingtao Zeng (c) 24 Notice periods of the Directors Bernard Aylward’s appointment will continue until the earlier of: (i) the termination of the consultancy agreement between the Company and Matlock Geological Services Pty Ltd (a company wholly owned by Mr Aylward); and (ii) termination by either the Company or Mr Aylward on three months’ prior written notice. Steven Zaninovich’s appointment will continue until the earlier of: (i) the termination of the consultancy agreement between the Company and Zivvo Pty Ltd (a company wholly owned by Mr Zaninovich); and (ii) termination by either the Company or Mr Zaninovich on six months’ prior written notice. Charles Joseland’s, Robert Wooldridge’s and Qingtao Zeng’s service agreements are subject to three months’ notice of termination by either party. PENSIONS In compliance with the Pensions Act 2008 the Company has established a Workplace Pension Scheme for its UK based employees and Directors with effect from 1 July 2017. Prior to this date, the Company has not made any pension arrangements for the Directors. The Company made no contributions into the scheme on behalf of the Directors in the year. Four Directors exercised share options in the period, with respective gains on exercise as follows: Bernard Aylward £3,860; Charles Joseland £20,044; Robert Wooldridge £10,509; and Steven Zaninovich £4,632. a b c Matlock Geological Services Pty Ltd (“Matlock”) a company wholly owned by Bernard Aylward, provided consultancy services to the Group during the year ended 31 March 2023 and received fees of £139,514 (2022: £97,450). These fees are included within the remuneration figure shown for Bernard Aylward. Zivvo Pty Ltd (“Zivvo”) a company wholly owned by Steven Zaninovich, provided consultancy services to the Group during the year ended 31 March 2023 and received fees of £140,000 in the period after his appointment as director on 27 July 2022. These fees are included within the remuneration figure shown for Steven Zaninovich. In addition to the amounts included above, Geosmart Consulting Pty Ltd, a company wholly owned by Qingtao Zeng, provided consultancy services to the Group during the year and received fees of £24,627 (2022: £27,136). The reference to “Share based payments” recorded in the consolidated statement of comprehensive income relate to a theoretical calculation of the non-cash cost to the Group of any share options granted to the directors that were awarded and still vesting to the Directors during the year. Included within the amounts shown above for share based payments, £205,324 has been treated as Exploration and Evaluation expenditure. These would not represent cash payments to the Directors either made in the past or due in the future. Further information on the share options granted to the Directors is set out in Note 5 on page 45. 25 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KODAL MINERALS PLC FOR THE YEAR ENDED 31 MARCH 2023 OPINION We have audited the financial statements of Kodal Minerals Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 March 2023 which comprise of the consolidated statement of comprehensive income, the consolidated and parent company statements of financial position, the consolidated and parent company statement of changes in equity, the consolidated and parent company statements of cashflows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted International Accounting Standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2023 and of the group’s loss for the year then ended; • • the group financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards; the parent company financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards 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. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. MATERIAL UNCERTAINTY RELATING TO GOING CONCERN We draw attention to page 39 in the financial statements, which indicates that the group and parent company is dependent upon the satisfactory completion of a Financing Transaction with Hainan Mining Co. Limited in order to continue to meet payments to creditors without the need to raise additional funding. As stated on page 39 , these conditions indicate that a material uncertainty exists that may cast significant doubt on the group and parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting in the preparation of the financial statements included: • • • • • • • Reviewing the group’s cashflow forecasts, including challenge of the forward-looking assumptions used by management in their assessment; Checking the mathematical accuracy of management’s cashflow models and agreeing opening balances to 31 March 2023 actual figures; Corroborating the inputs into the cashflow forecast by ensuring that they are consistent with the testing performed in respect of management’s impairment review. Reviewing the impact of mitigating options that may be available to management and considering the level of uncertainty inherent to those options; Reviewing and corroborating key extracts of the funding for development and production transaction agreement; Discussion with management on the funding options available to the group should the Hainan deal take longer than currently anticipated or not complete; and Reviewing the accuracy and completeness of disclosures in the financial statements Given the significance of the going concern basis to the Group and Parent Company’s financial statements we consider this to be a key audit matter. 26 As a key observation, we draw attention to page 39 of the financial statement which considers the impact of Financing Transaction not completing within the envisaged time frame. We note that should this scenario occur, the group’s cashflow forecast indicates the need to raise additional funding within forecast period. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. SUMMARY OF OUR AUDIT APPROACH Key audit matters Group Parent Company • Carrying value of exploration and evaluation • Carrying value of intercompany balances intangible assets • Going concern Materiality Group Parent Company • Overall materiality: £339,000 (2022: £282,000) • Overall materiality: £327,000 (2022: £278,000) • Performance materiality: £254,000 (2022: • Performance materiality: £245,000 (2022: £212,000) £208,000) Scope Our audit procedures covered 97% of total assets and 96% loss before tax. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group and parent company financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the group and parent company financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section we have determined the matter described below to be the key audit matters to be communicated in our report. CARRYING VALUE OF EXPLORATION AND EVALUATION INTANGIBLE ASSETS Key audit matter description As shown in the Statement of Financial Position and discussed in note 7, the Group’s main assets are in exploration and evaluation assets of £14.5m (2022: £11.4m). This is considered to be a Key Audit Matter due to the significance of the balance to the Group Statement of Financial Position and the level of judgement involved in the impairment review. There is a risk that the carrying value of the assets are not supportable. 27 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED How the matter was addressed in the audit Management completed impairment assessments for both the lithium and gold exploration and evaluation assets, on which our work included: • Agreed a sample of additions to supporting documentation and confirm these have been accurately recorded. • Audited management’s judgements and conclusions over the indications of impairment and consideration of the most appropriate level for any impairment testing. • Discussed exploration results and future work plans with management to understand any key uncertainties for each project. • Reviewed correspondence with the licencing authorities and the terms of the licence agreements to ascertained whether there were any indications of non-compliance or loss of tenure. • Considered the results of exploration activities, commodity prices and foreign exchange fluctuations to determine if there are any further indications of impairment. • As part of our work on subsequent events we reviewed the terms of the partial disposal of the investment in Bougouni West and considered whether this impacts on our findings. • Audited the related disclosures in the financial statements. • Challenged the key assumptions to determine whether the calculations comply with IFRS 6 and IAS 36. The related disclosures are included in note 7 in the financial statements. Key observations The majority of the additions to the intangible assets in the year ended 31 March 2023 relate to the lithium project since the licence has now been approved and a full funding for the development and commencement of production agreement is close to completion at the point of approval of the financial statements. CARRYING VALUE OF INTERCOMPANY BALANCES Key audit matter description As shown in the Statement of Financial Position and discussed in note 9, the Company has a significant receivable balance from Group subsidiaries of £14.3m as at 31 March 2023 (2022: £10.8m). This is considered to be a Key Audit Matter due to the significance of the balance to the Company Statement of Financial Position and the level of judgement involved in the impairment review. There is a risk that the carrying value of the assets are not supportable. How the matter was addressed in the audit Management prepared an expected credit loss (“ECL”) model to assess the expected credit loss over a range of scenarios. This included assessments for both the lithium and gold exploration projects, on which our work included: • Reviewed the ECL model and the mechanics of the workings provided by management; • Corroborated and challenged the inputs used within the model – such as NPV of expected completion, expected sales price of a potential buy-out and the likelihood of each scenario; • Reviewed and challenged the key assumptions made in each scenario and assessed the reasonableness of the probability assigned to each scenario. • For balances denominated in foreign currencies we confirmed the exchange rates used are appropriate with reference to third party sources; • Reviewed the associated disclosure against the requirements under IFRS 9. The related disclosures are included in note 9 in the financial statements. Key observations The outcome of the model resulted in a reversal of some of the previously recognised credit loss. The main driver for the write back was management’s assumption around the likelihood of project collapse being lower than in the ECL model in the prior year. 28 OUR APPLICATION OF MATERIALITY When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could reasonably influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements. Based on our professional judgement, we determined materiality as follows: Group Parent Company Overall materiality £339,000 (2022: £282,000) £327,000 (2022: £278,000) Basis for determining overall materiality 2.16% of total assets 2.26% of total assets Rationale for benchmark applied The group is in the early stages of E&E development and consequently the majority of expenses are capitalised under IFRS 6. The carrying value of assets is therefore the key metric considered by users of the financial statements The value of the company is reflected in its investment and intercompany balances with its subsidiaries and as such total assets is considered to be the appropriate benchmark. Performance materiality £254,000 (2022: £212,000) £245,000 (2022: £208,000) Basis for determining performance materiality 75% of overall materiality 75% of overall materiality Reporting of misstatements to the Audit Committee Misstatements in excess of £16,900 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. Misstatements in excess of £16,300 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. AN OVERVIEW OF THE SCOPE OF OUR AUDIT The group consists of eight components, located in the following countries; • United Kingdom, • Mali, • Bermuda • Ivory Coast. 29 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED Full scope audits were performed on three components which were Kodal Minerals Plc, International Goldfields Mali SARL and Kodal Future Minerals SARL. Analytical procedures at group level for the remaining five components. The coverage achieved by our audit procedures was: Number of components Total assets Profit before tax Full scope audit Analytical procedures Total OTHER INFORMATION 3 5 8 96% 4% 100% 97% 3% 100% The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. 30 RESPONSIBILITIES OF DIRECTORS As explained more fully in the directors’ responsibilities statement set out on page 1 7, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. THE EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements, to perform audit procedures to help identify instances of non-compliance with other laws and regulations that may have a material effect on the financial statements, and to respond appropriately to identified or suspected non- compliance with laws and regulations identified during the audit. In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit. However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud. In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team: • • • obtained an understanding of the nature of the industry and sector, including the legal and regulatory framework that the group and parent company operates in and how the group and parent company are complying with the legal and regulatory framework; inquired of management, and those charged with governance, about their own identification and assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud; discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where the financial statements may be susceptible to fraud. 31 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED The most significant laws and regulations were determined as follows: LEGISLATION / REGULATION ADDITIONAL AUDIT PROCEDURES PERFORMED BY THE GROUP AUDIT ENGAGEMENT TEAM INCLUDED: IFRS and Companies Act 2006 Review of the financial statement disclosures and testing to supporting documentation; Completion of disclosure checklists to identify areas of non-compliance. UK Bribery Act Enquiry of internal and external legal advisors; Inspection of policies and procedures, internal reports and minutes of meetings of the Board, Committees and management. Licensing compliance regulations Review of all licenses to ensure validity and check expiry; Review of licenses for particular susceptibility or where significant contingent liabilities could arise. The areas that we identified as being susceptible to material misstatement due to fraud were: RISK AUDIT PROCEDURES PERFORMED BY THE AUDIT ENGAGEMENT TEAM: Management override of controls Testing the appropriateness of journal entries and other adjustments; Assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and Evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. USE OF OUR REPORT This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. DAVID HOUGH (Senior Statutory Auditor) For and on behalf of RSM UK Audit LLP, Statutory Auditor Chartered Accountants 25 Farringdon Street, London, EC4A 4AB. 5 September 2023 32 KODAL MINERALS PLC FINANCIAL STATEMENTS KODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS 33 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2023 CONTINUING OPERATIONS Administrative expenses Share based payments Operating Loss Finance charge Loss Before Tax Taxation Year ended 31 March 2023 £ (944,473) (516,581) (1,461,054) – (1, 461,054) – Year ended 31 March 2022 £ (540,655) (342,876) (883,531) (19,556) (903,087) – Note 5 2 6 Loss for the year from continuing operations (1, 461,054) (903,087) OTHER COMPREHENSIVE INCOME Items that may be subsequently reclassified to profit or loss Currency translation gain / (loss) 331,259 (108,167) Total comprehensive income for the year (1,129,795) (1,011,254) Loss per share Basic and diluted (pence) 4 (0.0087) (0.0057) The loss for the current and prior years and the total comprehensive income for the current and the prior years are wholly attributable to owners of the parent company. 34 CONSOLIDATED AND PARENT COMPANY STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2023 Registered number: 07220790 NON-CURRENT ASSETS Intangible assets Property, plant and equipment Amounts due from subsidiary undertakings Investments in subsidiary undertakings CURRENT ASSETS Other receivables Cash and cash equivalents Non-current assets classified as held for sale TOTAL ASSETS CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES NET ASSETS EQUITY Attributable to owners of the parent: Share capital Share premium account Share based payment reserve Translation reserve Retained deficit TOTAL EQUITY 7 8 9 9 10 7 11 12 12 Group 31 March 2023 £ Group 31 March 2022 £ Company 31 March 2023 £ Company 31 March 2022 £ Note 14,521,888 11,442,403 91,771 3,309 – – – – – – – – 14,296,318 10,785,230 512,373 14,613,659 11,445,712 14,808,691 11,175 544,988 556,163 513,109 5,769 1,045,515 1,051,284 – 11,175 425,704 436,879 – 512,373 11,297,603 5,769 949,844 955,613 – 15,682,931 12,496,996 15,245,570 12,253,216 (800,007) (406,341) (378,171) (100,959) (800,007) (406,341) (378,171) (100,959) 14,882,924 12,090,655 14,867,399 12,152,257 5,315,619 18,765,206 1,537,779 12,632 4,947,595 15,933,071 1,150,678 (318,627) 5,315,619 18,765,206 1,537,779 – 4,947,595 15,933,071 1,150,678 – (10,748,312) (9,622,062) (10,751,205) (9,879,087) 14,882,924 12,090,655 14,867,399 12,152,257 The Company’s loss for the year ended 31 March 2023 was £1,206,922 (2022: £651,696). The financial statements were approved and authorised for issue by the board of directors on 5 September 2023 and signed on its behalf by Charles Joseland Director 35 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2023 Attributable to the owners of the Parent GROUP At 31 March 2021 Comprehensive income Loss for the year Other comprehensive income Currency translation loss Total comprehensive income for the year Transactions with owners Share based payment Proceeds from shares issued At 31 March 2022 Comprehensive income Loss for the year Other comprehensive income Currency translation gain Total comprehensive income for the year Transactions with owners Share based payment Proceeds from shares issued Proceeds from exercise of share options Share options lapse Share issue expenses At 31 March 2023 Share capital £ Share premium account £ Share based payment reserve £ Translation reserve £ Retained deficit £ Total equity £ 4,916,364 15,841,134 807,802 (210,460) (8,718,975) 12,635,865 – – – – – – – – 31,231 91,937 – – – – (903,087) (903,087) (108,167) (108,167) – (903,087) (108,167) (1,011,254) 342,876 – – – – – 342,876 123,168 4,947,595 15,933,071 1,150,678 (318,627) (9,622,062) 12,090,655 – – – – – – – – 334,821 33,203 2,665,179 309,171 – – – 721,905 – – – – – (334,804) (142,215) – – (1,461,054) (1, 461,054) 331,259 331,259 – 331,259 (1,461,054) (1,129,795) – – – – – – – – 334,804 721,905 3,000,000 342,374 – – (142,215) 5,315,619 18,765,206 1,537,779 12,632 (10,748,312) 14,882,924 36 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2023 COMPANY At 31 March 2021 Comprehensive income Loss for the year Total comprehensive income for the year Transactions with owners Share based payment Proceeds from shares issued At 31 March 2022 Comprehensive income Loss for the year Total comprehensive income for the year Transactions with owners Share based payment Proceeds from shares issued Proceeds from exercise of share options Share options lapse Share issue expenses At 31 March 2023 Share capital £ Share premium account £ Share based payment reserve £ Retained deficit £ Total equity £ 4,916,364 15,841,134 807,802 (9,227,391) 12,337,909 – – – – – – 31,231 91,937 – – (651,696) (651,696) (651,696) (651,696) 342,876 – – – 342,876 123,168 4,947,595 15,933,071 1,150,678 (9,879,087) 12,152,257 – – (1,206,922) (1,206,922) (1,206,922) (1,206,922) – – – – – – 334,821 33,203 2,665,179 309,171 721,905 – – – – – 721,905 3,000,000 342,374 – – – – (334,804) 334,804 (142,215) – – (142,215) 5,315,619 18,765,206 1,537,779 (10,751,205) 14,867,399 37 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2023 Cash flows from operating activities Loss before tax Adjustments for non-cash items: Group Year ended 31 March 2023 £ Group Year ended 31 March 2022 £ Company Year ended 31 March 2023 £ Company Year ended 31 March 2022 £ Note (1,461,054) (903,087) (1,206,923) (651,698) Write back of impairment of intercompany balances Share based payments Operating cash flow before movements in working capital – 516,581 (944,473) – (180,000) 342,876 (560,211) 516,581 (870,342) (196,000) 342,876 (504,822) 10,244 (220,892) (210,648) (715,470) (5,406) 393,666 388,260 (556,213) 10,244 (218,275) (208,031) (768,242) (5,406) 277,213 271,807 (598,535) (103,633) (1,600) (3,006,324) (2,474,768) – – – – – – (3,109,957) (2,476,368) (3,125,764) (3,125,764) (2,673,079) (2,673,079) 2,857,785 342,374 3,200,159 (466,011) 1,045,515 (34,516) 544,988 1,962,064 – 1,962,064 (1,282,546) 2,432,807 (104,746) 1,045,515 2,857,785 342,374 3,200,159 (524,140) 949,844 – 1,962,064 – 1,962,064 (1,426,485) 2,376,329 – 425,704 949,844 Movement in working capital (Increase)/decrease in receivables Increase/(decrease) in payables Net movements in working capital Net cash outflow from operating activities Cash flows from investing activities Purchase of tangible assets Purchase of intangible assets Loans to subsidiary undertakings Net cash outflow from investing activities Cash flow from financing activities Net proceeds from share issues Net proceeds from exercise of share options Net cash inflow from financing activities 8 7 12 (Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Exchange (loss) on cash Cash and cash equivalents at end of the year Cash and cash equivalents comprise cash on hand and bank balances. 38 PRINCIPAL ACCOUNTING POLICIES FOR THE YEAR ENDED 31 MARCH 2023 The Group has adopted the accounting policies set out below in the preparation of the financial statements. All of these policies have been applied consistently throughout the period unless otherwise stated. The Company is incorporated in England and Wales with registered number 07220790. The Company’s registered office is at Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. BASIS OF PREPARATION The consolidated financial statements of Kodal Minerals Plc are prepared in accordance with the historical cost convention and in accordance with UK-adopted International Accounting Standards. The Company’s ordinary shares are quoted on AIM, a market operated by the London Stock Exchange. In accordance with the exemption allowed by Section 408(3) of the Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income. GOING CONCERN The Group has not earned revenue during the year to 31 March 2023 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 ordinary shares. On 31 August 2023 the group has cash at bank amounting to £1,984,000. In January 2023 the Group signed binding agreements with Hainan to enter into a joint venture to develop the Bougouni Lithium Project. Under these agreements, Hainan will subscribe for equity in the joint venture vehicle amounting US$100 million; they will also subscribe for equity of US$17.75m in the ordinary shares of Kodal Minerals Plc, plus the immediate repayment to the Company for historical development expenses amounting to US$5.66m, the agreements together being the Financing Transaction. Completion of the Financing Transaction is subject to meeting various conditions precedent including Hainan receiving formal Government approval for the investment and Kodal completing a restructure of its Mali subsidiary holdings. At the date of this report, it is noted that Hainan has received all necessary approvals from the Chinese Government authorities to allow it to complete its funding and investment including “Overseas Project Investment Filing Certificates” from the Hainan Province National Development and Reform Commission (“NDRC”) and Company Overseas Investment Certificate from the Department of Commerce of Hainan Province. Kodal has continued with the restructuring of its subsidiary companies and confirms that the new mining company Les Mines de Lithium de Bougouni has been fully registered and the Mali DNGM notified that this new company will be the owner and operator of the mining licence. In addition, the Company has completed the restructure of Future Minerals SARL such that all of Kodal’s lithium assets in Mali are now 100% owned by Kodal Mining UK Limited (the joint venture vehicle for Kodal and Hainan to develop the Bougouni Lithium project). Kodal is continuing to work with the relevant authorities to finalise all regulatory matters to allow completion of the Financing Transaction. Both Hainan and the Company remain committed to the Financing Transaction and Hainan has recently advanced to the Company a US$3.5m prepayment on its subscription for ordinary shares in the Company. The long stop date for finalising the conditions precedent has been extended several times by mutual consent and the parties continue to work together to expedite the completion of the Financing Transaction at the earliest opportunity. The Group has prepared cash flow forecasts for the period ending 30 September 2024 under several scenarios, including on the basis that the Hainan transaction completion is delayed for several more months and also that the Hainan transaction does not proceed. Under both of these scenarios the Group will require further funding within the foreseeable future. The directors are confident of raising sufficient funding to cover ongoing expenditure and overheads, based on indications from Hainan that they would make further prepayments available, and/or the Group will be able to raise further equity given the quality of the Bougouni lithium project, continuing interest from potential investors and finance providers, and forecasts showing continuing strong demand and pricing for spodumene and lithium. Although the Group has been successful in the past obtaining additional funding, there is no assurance that it will be able to do so in the future or that such arrangements will be on terms advantageous to the Group. These conditions indicate the existence of a material uncertainty that may cast doubt on the Group’s ability to continue as a going concern. The consolidated statements for the year ended 31 March 2023 have been prepared on a going concern basis as the Board is of the opinion that the group will be successful in completing the Hainan transaction in the near future and/or securing further funding in order to meet its liabilities as they fall due for at least 12 months from the date of signing these accounts. Accordingly, these consolidated financial statements do not include any adjustments to the recoverability and classification of recorded assets and liabilities and related expenses that might be necessary should the Group be unable to continue as a going concern. 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 on consolidation. 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. 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 (“£”), 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 West African subsidiary undertakings were converted using an end of year rate of XOF 1 : £0.00135 (2022: XOF 1 : £0.00129). 39 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS PRINCIPAL ACCOUNTING POLICIES CONTINUED 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. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation, which is included in administrative expenses, is charged so as to write off the costs of assets down to their residual value, 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. INVESTMENTS IN SUBSIDIARIES Investments in subsidiaries are stated at cost less any provision for impairment. Where the recoverable amount of the investment is less than the carrying amount, an impairment is recognised. • 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 ASSETS - 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. 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. Where the carrying amount exceeds the recoverable amount, an impairment is recognised in profit or loss. INTANGIBLE ASSETS AND IMPAIRMENT Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives. Amortisation, which is included in administrative expenses, 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 EXPLORATION AND EVALUATION EXPENDITURE DEFERRED TAXATION In accordance with IFRS 6 (Exploration for and Evaluation of Mineral Resources), 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 of production basis; or 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. FINANCIAL INSTRUMENTS 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. IFRS 7 (Financial Instruments: Disclosures) 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. The required disclosures have been made in Note 14 to the financial statements. The Group’s policies include that no trading in derivative financial instruments shall be undertaken. 40 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 amortised cost less provision made for impairment of these receivables. A provision for impairment of receivables is established when there is an expected credit loss on 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 profit or loss. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale are presented separately on the face of the statement of financial position, in current assets. 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. These amounts are carried at amortised cost. 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. SHARE CAPITAL Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds. EQUITY SETTLED TRANSACTIONS (SHARE BASED PAYMENTS) 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 also granted equity settled options and warrants. 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 over the vesting period, which ends on the date the recipient becomes fully entitled to the award. Fair value is determined by using the Black-Scholes option pricing model. In valuing equity settled transactions, account is taken of service and performance conditions (vesting conditions) in addition to performance conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest. 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 profit and loss, with a corresponding entry in equity, or for options awarded to executive directors, the award is considered as part of their remuneration and the overall cost is allocated between operating costs and exploration and evaluation cost. 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 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. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of these consolidated financial statements in accordance with UK-adopted International Accounting Standards (“IFRS”) 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. IFRS also require management to exercise its judgement in the process of applying the Group’s accounting policies. 41 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS PRINCIPAL ACCOUNTING POLICIES CONTINUED 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 In accordance with the Group’s accounting policy for exploration and evaluation expenditure, after obtaining licences giving legal rights to explore in the project area, all exploration and evaluation costs for each project are capitalised as exploration and evaluation assets. The exploration and evaluation assets for each project are assessed for impairment when such facts and circumstances suggest that the carrying value of the assets may exceed the recoverable amount. The directors have assessed the Group’s gold projects in Mali and Côte d’Ivoire that are not part of the joint venture agreements and determined that they remain prospective. Accordingly, the directors have determined to continue to maintain these licences and explore ways for the Group to advance these prospective areas most effectively. Accordingly, no impairment review has been conducted on these assets. The directors have assessed the Group’s Bougouni Lithium project in Mali, taking into account the updated Preliminary Feasibility Study and the agreement reached with Hainan in January 2023 for the funding of the project. This project continues to be evaluated and there is no indication of impairment. Accordingly, no impairment review has been conducted on these assets. The Group’s exploration activities and future development opportunities are dependent upon maintaining the necessary licences and permits to operate, which typically require periodic renewal or extension. In Mali and Côte d’Ivoire, the process of renewal or extension of a licence can only be initiated on expiry of the previous term and takes time to be processed by the relevant government authority. Until formal notification is received there is a risk that renewal or extension will not be granted. As detailed in the Operational Review, at the date of these financial statements, the Group’s key exploration licences are current. As detailed in note 7, the total carrying value of the exploration and evaluation assets at 31 March 2023 was £14.5 million (2022: £11.4 million). The Group complies with the prevailing laws and regulations relating to these licences and ensures that the regulatory reporting and government compliance requirements for each licence are met. Valuation of warrants and share options In accordance with the Group’s accounting policy for equity settled transactions, all equity settled share-based payments are measured at fair value at the date of issue. Fair value is determined by using the Black-Scholes option pricing model based on the terms of the options and warrants, the Company’s share price at the time and assumptions for volatility and exercise date. The assumptions used to value the options and warrants are detailed in note 5. For options awarded to the non-executive directors, the award has been considered to be in relation to their overall contribution to the Group and, accordingly, the charge has been included within operating costs in the Consolidated Statement of Comprehensive Income. For options awarded to executive directors the award is considered as part of their remuneration. This overall cost is allocated between operating costs and exploration and evaluation costs, the latter of which are capitalised against specific projects. For the award of warrants associated with the raising of funds through the issue of new shares, the charge has been 42 treated as a share issue expense and offset against the share premium account. Recoverability of intercompany balances to subsidiary undertakings The Company has outstanding intercompany balances from its directly held subsidiaries resulting from the primary method of financing the activity of those subsidiaries. The balances are shown in the Company Statement of Financial Position. However, there is a risk that the subsidiaries will not commence sufficient revenue generating activities and that the carrying amount of the intercompany balances will, therefore, exceed the recoverable amount. Under the requirements of IFRS 9 management has run various scenarios on the expected credit loss of the Company’s intercompany balances, including the project being put into operation, the project being sold and the project collapsing. Management has updated its calculations reflecting additional amounts advanced to its subsidiaries for work on its lithium and gold projects during the year, the reduced the risk of credit loss given improvements since last year in the financial, lithium and gold markets and the reduced risk of project collapse following the granting of the mining licence. At 31 March 2023, amounts due to the Company from subsidiary undertakings totalled £14,296,000 (2022: £10,785,000), net of a credit loss provision of £501,000 (2022: £681,000). ADOPTION OF NEW AND REVISED STANDARDS The Group has adopted all of the new or amended Accounting Standards and interpretations issued by the International Accounting Standards Board (“IASB”) that are mandatory and relevant to the Group’s activities for the current reporting period. 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. These are listed below. The Board anticipates that all of the pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. The amendments to the standards noted below are not expected to have a material impact on the Group’s consolidated financial statements. Standard IAS 1 Presentation of Financial Statements IAS 1 Presentation of Financial Statements Details of amendment / New Standards and Interpretations Amendments to IAS 1 Presentation of Financial Statements to specify the requirements for classifying liabilities as current or non-current. Amendments to IAS 1 Presentation of Financial Statements to specify the requirements for disclosure of accounting policies. Annual periods beginning on or after 1 January 2024 1 January 2023 There are other standards and amendments in issue but not yet effective, which are not likely to be relevant to the Group which have therefore not been listed. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 1. SEGMENTAL REPORTING The operations and assets of the Group in the year ended 31 March 2023 are focused in the United Kingdom and West Africa and comprise one class of business: the exploration and evaluation of mineral resources. Management have determined that the Group had two operating segments being the West African Gold Projects and the West African Lithium Projects, and a UK administration centre. The Parent Company acts as a holding company. At 31 March 2023, the Group had not commenced commercial production from its exploration sites and therefore had no revenue for the year. YEAR ENDED 31 MARCH 2023 Administrative expenses Share based payments Loss for the year At 31 March 2023 Other receivables Cash and cash equivalents Non-current assets classified as held for sale Trade and other payables Intangible assets - exploration and evaluation expenditure Property, plant and equipment Net assets at 31 March 2023 YEAR ENDED 31 MARCH 2022 Administrative expenses Share based payments Finance charge Loss for the year At 31 March 2022 Other receivables Cash and cash equivalents Trade and other payables Intangible assets - exploration and evaluation expenditure Property, plant and equipment Net assets at 31 March 2022 UK £ 912,390 516,581 1,428,971 11,175 425,704 – (129,332) – – 307,547 UK £ 538,625 342,876 19,556 901,057 5,769 949,850 (100,959) – – West Africa Gold £ West Africa Lithium £ 4,288 – 4,288 – 90,426 – – 3,305,948 1,042 3,397,416 27,795 – 27,795 – 28,858 513,109 (670,675) 11,215,940 90,729 11,177,961 West Africa Gold £ West Africa Lithium £ 866 – – 866 – 38,481 – 2,410,787 – 1,164 – – 1,164 – 57,184 (305,382) 9,031,616 3,309 8,786,727 854,660 2,449,268 Total £ 944,473 516,581 1,461,054 11,175 544,988 513,109 (800,007) 14,521,888 91,771 14,882,924 Total £ 540,655 342,876 19,556 903,087 5,769 1,045,515 (406,341) 11,442,403 3,309 12,090,655 43 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. LOSS BEFORE TAX The loss before tax from continuing activities is stated after charging: Fees payable to the Company’s auditor Share based payments (note 5) Directors’ salaries and fees Employer’s National Insurance Amounts payable to RSM UK Audit LLP and its associates in respect of audit services are as follows; Group Year ended 31 March 2023 £ Group Year ended 31 March 2022 £ 53,000 516,581 182,247 10,598 40,000 342,876 167,980 5,980 Group Year ended 31 March 2023 £ Group Year ended 31 March 2022 £ Audit services – statutory audit of parent and consolidated accounts 53,000 40,000 3. EMPLOYEES AND DIRECTORS’ REMUNERATION The average number of people employed in the Company and the Group is as follows: Average number of employees (including directors): 45 19 5 4 The directors are key management personnel of the Company. The remuneration expense for directors of the Company is as follows: Group 31 March 2023 Number Group 31 March 2022 Number Company 31 March 2023 Number Company 31 March 2022 Number Directors’ remuneration Directors’ social security costs Total Year ended 31 March 2023 £ Year ended 31 March 2022 £ 182,247 10,598 192,845 167,980 5,980 173,960 In addition to the amounts included above, £282,267 (2022: £79,469) of the directors’ remuneration cost has been treated as Exploration and Evaluation expenditure. 100% of the salary cost of the Group’s employees in West Africa has been treated as Exploration and Evaluation expenditure (2022: 100%). Directors’ salary and fees year ended 31 March 2023 £ Share based payments year ended 31 March 2023 (see note 5) £ 177,847 50,000 45,000 166,667 25,000 464,514 180,724 78,153 119,366 159,291 139,680 677,214 Total year ended 31 March 2023 £ 358,571 128,153 164,366 325,958 164,680 1,141,728 Bernard Aylward (a) Charles Joseland Robert Wooldridge Steven Zaninovich (b) Qingtao Zeng (c) 44 Included within the amounts shown above for share based payments, £191,771 has been treated as Exploration and Evaluation expenditure. Four Directors exercised share options in the period, with respective gains on exercise as follows: Bernard Aylward £3,860; Charles Joseland £20,044; Robert Wooldridge £10,509; and Steven Zaninovich £4,632. Bernard Aylward (a) Charles Joseland Robert Wooldridge Qingtao Zeng (c) Directors’ salary and fees year ended 31 March 2022 £ 132,449 45,000 45,000 25,000 247,449 Share based payments year ended 31 March 2022 (see note 5) £ 222,793 1,164 44,798 2,549 271,304 Total year ended 31 March 2022 £ 355,242 46,164 89,798 27,549 518,753 a b c Matlock Geological Services Pty Ltd (“Matlock”) a company wholly owned by Bernard Aylward, provided consultancy services to the Group during the year ended 31 March 2023 and received fees of £139,514 (2022: £97,450). These fees are included within the remuneration figure shown for Bernard Aylward. Zivvo Pty Ltd (“Zivvo”) a company wholly owned by Steven Zaninovich, provided consultancy services to the Group during the year ended 31 March 2023 and received fees of £140,000 in the period after his appointment as director on 27 July 2022. These fees are included within the remuneration figure shown for Steven Zaninovich. Steven Zaninovich was appointed to the board on 27 July 2022. In addition to the amounts included above, Geosmart Consulting Pty Ltd, a company wholly owned by Qingtao Zeng, provided consultancy services to the Group during the year and received fees of £24,627 (2022: £27,136). 4. LOSS 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 result and share data used in the computations: Year ended 31 March 2023 Year ended 31 March 2022 Loss £ Weighted average number of shares Basic loss per share (pence) 1,461,054 16,812,417,355 903,087 15,809,383,877 0.0087 0.0057 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 loss 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 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. Share options outstanding Opening balance Lapsed in the year Issued in the year Exercised in the year Closing balance Year ended 31 March 2023 Number Year ended 31 March 2022 Number 250,000,000 205,000,000 (77,500,000) – 470,000,000 45,000,000 (60,000,000) – 582,500,000 250,000,000 45 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5. SHARE BASED PAYMENTS CONTINUED Performance share rights outstanding Opening balance Issued in the year Exercised in the year Closing balance Warrants outstanding Opening balance Lapsed in the year Issued in the year Exercised in the year Closing balance Year ended 31 March 2023 Number 175,000,000 Year ended 31 March 2022 Number – 75,000,000 175,000,000 (10,000,000) – 240,000,000 175,000,000 Year ended 31 March 2023 Number Year ended 31 March 2022 Number 205,000,000 285,355,663 (12,500,000) 170,000,000 – – (36,250,000) (80,355,663) 326,250,000 205,000,000 Options, warrants and performance share rights outstanding for each of the directors at the year-end are outlined below: Exercisable date Bernard Aylward Robert Wooldridge Qingtao Zeng Charles Joseland Steven Zaninovich 8 May 2019 – 8 May 2024 20 Nov 2018 – 20 Nov 2023 20 Nov 2019 – 20 Nov 2024 1 Mar 2019 – 1 Mar 2024 6 November 2021 To be determined (Note 2) 6 November 2021 To be determined (Note 1) To be determined (Note 2) 27 Aug 2021 – 27 Aug 2026 27 Aug 2022 – 27 Aug 2027 27 Aug 2023 – 27 Aug 2028 To be determined (Note 1) To be determined (Note 2) To be determined (Note 3) 18 Aug 2022 – 18 Aug 2027 18 Aug 2023 – 18 Aug 2028 18 Aug 2024 – 18 Aug 2029 – – – – – – 30,000,000 40,000,000 75,000,000 6,250,000 – – – – – – – – – 2,500,000 2,500,000 – – – – – – – – – 15,000,000 7,500,000 7,500,000 7,500,000 3,750,000 3,750,000 30,000,000 40,000,000 60,000,000 – – – – – – – – – – – – – – – – – – – – – – – – 23,333,334 33,333,333 33,333,333 43,333,334 43,333,333 43,333,333 25,000,000 25,000,000 25,000,000 – – – 26,666,666 33,333,334 90,000,000 – – – – – – 72,500,000 77,500,000 95,000,000 – – – Closing balance 275,000,000 126,250,000 150,000,000 75,000,000 395,000,000 1. 2. 3. Exercisable from date of securing the finance for construction of the Bougouni mine Exercisable from date of first commercial production from the Bougouni Project Exercisable from date of production of 175,000 tonnes of spodumene concentrate from the Bougouni project 46 Included within operating losses is a charge for issuing share options and making share-based payments of £684,932 (2022: £342,876). Details of share options outstanding at 31 March 2023: Date of grant 20 December 2013 20 December 2013 20 December 2013 8 May 2017 8 May 2017 20 November 2017 20 November 2017 27 August 2021 27 August 2021 27 August 2021 18 August 2022 18 August 2022 18 August 2022 18 August 2022 18 August 2022 18 August 2022 Number of options Option price Exercisable between 13,333,333 13,333,333 13,333,333 12,500,000 20,000,000 2,500,000 2,500,000 22,500,000 11,250,000 11,250,000 37,500,000 47,500,000 70,000,000 95,000,002 104,999,999 104,999,999 0.7 pence 0.7 pence 0.7 pence 0.38 pence 0.38 pence 0.38 pence 0.38 pence 0.36 pence 0.36 pence 0.36 pence 0.3 pence 0.34 pence 0.38 pence 0.3 pence 0.34 pence 0.34 pence 30 Dec 2014 – 30 Dec 2024 30 Dec 2015 – 30 Dec 2025 30 Dec 2016 – 30 Dec 2026 8 May 2018 – 8 May 2023 8 May 2019 – 8 May 2024 20 Nov 2018 – 20 Nov 2023 20 Nov 2019 – 20 Nov 2024 27 Aug 2021 – 27 Aug 2026 27 Aug 2022 – 27 Aug 2027 27 Aug 2023 – 27 Aug 2028 To be determined To be determined To be determined 18 Aug 2022 – 18 Aug 2027 18 Aug 2023 – 18 Aug 2028 18 Aug 2024 – 18 Aug 2029 Details of performance share rights outstanding at 31 March 2023: Date of grant 27 August 2021 27 August 2021 27 August 2021 27 July 2022 27 July 2022 27 July 2022 Details of warrants outstanding at 31 March 2023: Date of grant 22 May 2017 23 November 2018 23 November 2018 23 November 2018 27 July 2022 27 July 2022 27 July 2022 Number of performance share rights 30,000,000 50,000,000 85,000,000 25,000,000 25,000,000 25,000,000 Option price Exercisable between nil nil nil nil nil nil 6 November 2021 To be determined To be determined To be determined To be determined To be determined Number of warrants Option price Exercisable between 6,250,000 0.38 pence 22 May 2019 – 22 May 2024 26,666,666 0.14-0.38 pence 1 March 2019 – 1 March 2024 33,333,334 0.14-0.38 pence 90,000,000 0.14-0.38 pence 47,500,000 52,500,000 70,000,000 0.28 pence 0.325 pence 0.38 pence To be determined To be determined To be determined To be determined To be determined 47 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5. SHARE BASED PAYMENTS CONTINUED Additional disclosure information: Weighted average exercise price of share options and warrants: • 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 0.35 pence 0.30 pence 0.27 pence 0.35 pence 5.7 years Warrants, Options and Performance Share Rights issued in the year to 31 March 2023 On 27 July 2022, the Company granted warrants over 170,000,000 ordinary shares and Performance Share Rights of up to 75,000,000 ordinary shares to Steven Zaninovich. The warrants are registered in the name of Zivvo Pty Ltd, a company wholly owned by Steven Zaninovich. The Warrants and Performance Share Rights carry vesting conditions that are linked to achievement of milestones critical to the development of the Bougouni Project as follows: • • • Securing of finance for the Bougouni mine and completion of all Mali Government Agreements, Update and Variation of Mining Licence and Environment permitting in relation to the Bougouni Project; Receipt of funds from first sale of spodumene concentrate from the Bougouni Project within 18 months of receipt of finance; and 175,000 tonnes of spodumene concentrate produced from the Bougouni Project. Subject to the vesting conditions being satisfied, Mr Zaninovich may call for Ordinary Shares, as set out in the table below, to be issued to him at any time within five years of the vesting condition being met and upon payment by them of the nominal value for the Ordinary Shares in relation the Performance Share Rights and the exercise price in relation to the share options. Warrants Vesting criteria Exercise Price Number Performance Share Rights Securing of finance for the Bougouni mine Receipt of funds from first sale of spodumene concentrate from Bougouni within 18 months of receipt of finance Production of 175,000 tonnes of spodumene concentrate from Bougouni Total £0.00280p 47,500,000 £0.00325p 52,500,000 £0.00380p 70,000,000 £0.00335p average 170,000,000 25,000,000 capped at £250,000 value 25,000,000 capped at £250,000 value 25,000,000 capped at £250,000 value 75,000,000 total capped at £750,000 value On 18 August 2022, the Company granted options over 155,000,000 ordinary shares to Bernard Aylward and Mohamed Niare (Country Manager, Mali). The Share Options carry vesting conditions that are linked to achievement of milestones critical to the development of the Bougouni Project as follows: • • • Securing of finance for the Bougouni mine and completion of all Mali Government Agreements, Update and Variation of Mining Licence and Environment permitting in relation to the Bougouni Project; Receipt of funds from first sale of spodumene concentrate from the Bougouni Project within 18 months of receipt of finance; and 175,000 tonnes of spodumene concentrate produced from the Bougouni Project. Subject to the vesting conditions being satisfied, the holders of the Share Options may call for Ordinary Shares, as set out in the table below, to be issued to them at any time within five years of the vesting condition being met. 48 Share Options Vesting criteria Exercise price Bernard Aylward Mohamed Niare Securing of finance for the Bougouni mine 0.3 pence Up to 30 million ordinary shares Up to 7.5 million ordinary shares Receipt of funds from first sale of spodumene concentrate 0.34 pence Up to 40 million ordinary shares Up to 7.5 million ordinary shares 175,000 tonnes of spodumene concentrate produced 0.38 pence Up to 60 million ordinary shares Up to 10 million ordinary shares Total Up to 130 million ordinary shares Up to 25 million ordinary shares On 18 August 2022, the Company granted options over 315,000,000 Ordinary Shares to members of the management team, of which those granted to Non-Executive Directors were as set out in the table below. The options will vest in equal tranches with the first one third vesting immediately and exercisable at 0.3 pence per share, and the remaining two thirds vesting in two equal tranches on the first and second anniversaries of the grant and exercisable at 0.34 pence per share. Director Charles Joseland Robert Wooldridge Qingtao Zeng Number of Options granted 75,000,000 100,000,000 130,000,000 The fair values of the options and warrants granted were calculated using the Black-Scholes valuation model. The inputs to the model were: Strike price Share price Volatility Expiry date Risk free rate Dividend yield 27 July 2022 18 August 2022 0.00p – 0.38p 0.30p – 0.38p 0.11p – 0.25p 0.11p – 0.26p 75% 75% 15/3/28 – 15/12/30 15/3/28 – 15/12/30 0.24% – 0.26% 0.23% –0.30% 0.0% 0.0% Options and Performance Share Rights issued in the year to 31 March 2022 On 27 August 2021, the Company granted Performance Share Rights of up to 175,000,000 ordinary shares to Bernard Aylward and Mohamed Niare (Country Manager, Mali). The Performance Share Rights carry vesting conditions that are linked to achievement of milestones critical to the development of the Bougouni Project as follows: • • • Award of mining licence; Securing the finance for construction of the Bougouni mine; and First commercial production from the Bougouni Project. Subject to the vesting conditions being satisfied, the holders of the Performance Share Rights may call for Ordinary Shares, as set out in the table below, to be issued to them at any time within five years of the vesting condition being met and upon payment by them of the nominal value for the Ordinary Shares. Performance Share Rights over New Ordinary Shares Vesting criteria Bernard Aylward Mohamed Niare Award of mining licence Securing the finance for construction of the Bougouni mine First commercial production from the Bougouni Project Total Up to 30 million New Ordinary Shares (capped at value on vesting of £300,000) Up to 40 million New Ordinary Shares (capped at value on vesting of £400,000) Up to 75 million New Ordinary Shares (capped at value on vesting of £750,000) Up to 145 million New Ordinary Shares (capped at value on vesting of £1.45m) Up to 10 million New Ordinary Shares (capped at value on vesting of £100,000) Up to 10 million New Ordinary Shares (capped at value on vesting of £100,000) Up to 10 million New Ordinary Shares (capped at value on vesting of £100,000) Up to 30 million New Ordinary Shares (capped at value on vesting of £300,000) 49 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5. SHARE BASED PAYMENTS CONTINUED In the event of a change of control of the Company, 50 per cent. of any unvested Performance Share Rights will vest immediately, provided that the Company’s share price at the time of the change of control exceeds 0.34 pence, being the share price when the awards were made. On 27 August 2021, options over Ordinary Shares were granted to Robert Wooldridge and Qingtao Zeng as set out in the table below. The Options are exercisable at 0.36 pence per share, with 50 per cent of the Options vesting immediately and the remaining 50 per cent. vesting in two equal tranches on the first and second anniversaries of the grant. All unvested options will vest immediately on a change of control of the Company. Director Robert Wooldridge Qingtao Zeng 6. TAXATION Taxation charge for the year Factors affecting the tax charge for the year Loss from continuing operations before income tax Tax at 19% (2022: 19%) Expenses not deductible Losses carried forward not deductible Deferred tax differences Income tax expense Number of Options granted 30,000,000 15,000,000 Group Year ended 31 March 2023 £ Group Year ended 31 March 2022 £ – – (1,461,054) (277,600) 636 178,814 98,150 – (903,087) (171,587) – 106,440 65,147 – The Group has tax losses and other potential deferred tax assets (including in relation to share options) totalling £3,759,000 (2022: £2,978,000) 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 GROUP COST At 1 April 2021 Additions in the year Effects of foreign exchange At 1 April 2022 Additions in the year Classified as held for sale Effects of foreign exchange At 31 March 2023 AMORTISATION At 1 April 2021 and 1 April 2022 and 31 March 2023 NET BOOK VALUES At 31 March 2023 At 31 March 2022 At 31 March 2021 The Company did not have any Intangible Assets as at 31 March 2021, 2022 and 2023. 50 Exploration and evaluation £ 8,964,089 2,546,686 (68,372) 11,442,403 3,226,956 (513,109) 365,638 14,521,888 – 14,521,888 11,442,403 8,964,089 Non-current assets classified as held for sale Group 31 March 2023 £ Group 31 March 2022 £ Company 31 March 2023 £ Company 31 March 2022 £ 513,109 513,109 – – – – – – On 19 April 2023, the Company announced the sale of the Bougouni West project, further details on which are disclosed in Note 18 on page 58. The Bougouni West project was held as an asset for sale at 31 March 2023. 8. PROPERTY, PLANT AND EQUIPMENT GROUP COST 1 April 2021 Additions in the year Effects of foreign exchange At 1 April 2022 Additions in the year Effects of foreign exchange At 31 March 2023 DEPRECIATION At 1 April 2021 Depreciation charge At 1 April 2022 Depreciation charge At 31 March 2023 NET BOOK VALUES At 31 March 2023 At 31 March 2022 At 31 March 2021 Plant and machinery £ 26,079 1,600 (47) 27,633 103,633 137 131,403 17,402 6,922 24,324 15,308 39,632 91,771 3,309 8,677 All tangible assets are wholly associated with exploration and development projects and therefore the amounts charged in respect of depreciation are capitalised as evaluation and exploration assets within intangible assets. The Company did not have any Property, Plant and Equipment as at 31 March 2021, 2022 and 2023. 51 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. SUBSIDIARY UNDERTAKINGS a. AMOUNTS DUE FROM SUBSIDIARY UNDERTAKINGS Amounts due from subsidiary undertakings Company 31 March 2023 £ 14,296,318 14,296,318 Company 31 March 2022 £ 10,785,230 10,785,230 Under the requirements of IFRS 9 management has run various scenarios on the expected credit loss of the Company’s intercompany balances, including the project being put into operation, the project being sold and the project collapsing. Management has updated its calculations reflecting: a) additional amounts advanced to its subsidiaries for work on its lithium and gold projects during the year; b) the reduced risk of credit loss given improvements since last year in the financial, lithium and gold markets; and c) the reduced risk of project collapse, assessed at 2% for lithium projects and 5% for gold projects, compared to 5% for each in prior year, given the high lithium prices, the holding of the exploitation licence and the financing for the Bougouni Lithium Project now having been agreed. The review has concluded that at 31 March 2023 a credit loss provision of £501,000 should be held against amounts due from subsidiaries (2022: £681,000). b. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS The consolidated financial statements include the following subsidiary companies: Company Subsidiary of Country of incorporation Kodal Norway (UK) Ltd Kodal Minerals Plc United Kingdom International Goldfields (Bermuda) Limited Kodal Minerals Plc Bermuda International Goldfields Côte d’Ivoire SARL International Goldfields Mali SARL Jigsaw Resources CIV Ltd International Goldfields (Bermuda) Limited International Goldfields (Bermuda) Limited International Goldfields (Bermuda) Limited Côte d’Ivoire Mali Bermuda Corvette CIV SARL Jigsaw Resources CIV Ltd Côte d’Ivoire Future Minerals SARL Kodal Mining UK Limited International Goldfields (Bermuda) Limited Kodal Minerals Plc Mali United Kingdom 52 Registered office Prince Frederick House, 35-39 Maddox Street, London W1S 2PP MQ Services Ltd Victoria Place, 31 Victoria Street, Hamilton HM 10 Bermuda Abidjan Cocody Les Deux Plateaux 7eme Tranche BP Abidjan Côte d’Ivoire Bamako, Faladi, Mali Univers, Rue 886 B, Porte 487 Mali MQ Services Ltd Victoria Place, 31 Victoria Street, Hamilton HM 10 Bermuda Abidjan Cocody Les Deux Plateaux 7eme Tranche BP Abidjan Côte d’Ivoire Bamako, Faladi, Mali Univers, Rue 886 B, Porte 487 Mali Prince Frederick House, 35-39 Maddox Street, London W1S 2PP Equity holding Nature of business 100% Operating company 100% Holding company 100% Mining exploration 100% Mining exploration 100% Holding company 100% Mining exploration 100% Mining exploration 100% Mining exploration Kodal Minerals plc has issued a guarantee under section 479C to its subsidiary, Kodal Norway (UK) Ltd (“Kodal Norway”, company number 08491224) in respect of its activities for the year ended 31 March 2023 to allow Kodal Norway to take advantage of the exemption under s479A of the Companies Act 2006 from the requirements of the Act relating to audit of its individual accounts for the year ended 31 March 2023. Year ended 31 March 2023 £ Year ended 31 March 2022 £ 512,373 – 512,373 512,373 – 512,373 CARRYING VALUE OF INVESTMENT IN SUBSIDIARIES Opening balance Impairment in the year Closing balance 10. OTHER RECEIVABLES Other receivables Group 31 March 2023 £ Group 31 March 2022 £ Company 31 March 2023 £ Company 31 March 2022 £ 11,175 11,175 5,769 5,769 11,175 11,175 5,769 5,769 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 and there are no expected credit losses. 11. TRADE AND OTHER PAYABLES Trade payables Other payables Group 31 March 2023 £ Group 31 March 2022 £ Company 31 March 2023 £ Company 31 March 2022 £ 616,877 183,130 800,007 348,505 57,836 406,341 195,041 183,130 378,171 44,359 56,600 100,959 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. 12. SHARE CAPITAL GROUP AND COMPANY Allotted, issued and fully paid: At 31 March 2021 May 2021 May 2021 November 2021 At 31 March 2022 May 2022 March 2023 At 31 March 2023 Note Nominal Value Number of Ordinary Shares Share Capital £ Share Premium £ a b c d e £0.0003125 £0.0003125 £0.0003125 £0.0003125 £0.0003125 15,732,363,511 48,790,008 31,565,656 19,583,212 15,832,302,387 1,071,428,569 106,250,000 17,009,980,956 4,916,364 15,841,134 15,247 9,864 6,120 4,947,595 334,821 33,203 5,315,619 14,515 18,545 58,877 15,933,071 2,522,964 309,171 18,765,206 a) On 18 May 2021, a total of 48,790,008 shares were issued to the Investors at a price of 0.061 pence per share in connection with the exercise of warrants. b) On 18 May 2021, a total of 31,565,656 shares were issued to the Investors at a price of 0.09 pence per share in connection with the exercise of warrants. c) On 5 November 2021, a total of 19,583,212 shares were issued pursuant to the Company’s agreement with Bambara Resources SARL at 0.3319p per share. 53 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED 12. SHARE CAPITAL CONTINUED d) On 10 May 2022, a total of 1,071,428,569 shares were issued via a placing and subscription at a price of 0.28 pence per share. e) On 20 March 2023, a total of 106,250,000 shares were issued pursuant to the exercise of options, warrants and Performance Share Rights from certain directors, senior management and consultants of the Company. The shares were issued at between 0.14 and 0.38 pence per share. 13. RESERVES Reserve Share premium Share based payment reserve Translation reserve Retained earnings Description and purpose Amount subscribed for share capital in excess of nominal value. Cumulative 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. Gains/losses arising on re-translating the net assets of overseas operations into sterling. Cumulative net gains and losses recognised in the consolidated statement of financial position. 14. 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 these 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 results 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 does not have any borrowings and does not pay interest. 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 2023 earned interest of £nil (2022: £nil). Due to the Group’s relatively low level of interest-bearing assets and the very low interest rates available in the market the Group is not exposed to any significant interest rate risk. Credit risk Credit risk refers to the risk that a counterparty could default on its contractual obligations resulting in financial loss to the Group. The Group’s principal financial assets are cash balances and other receivables. The Group has adopted a policy of only dealing with what it believes to be creditworthy counterparties and would consider obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure to and the credit ratings of its counterparties are continuously monitored. An allowance for impairment is made where there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables concerned. Other receivables consist primarily of prepayments and other sundry receivables and none of the amounts included therein are past due or impaired. 54 Financial instruments by category – Group 31 March 2023 Assets Other receivables Cash and cash equivalents Total Liabilities Trade and other payables Total 31 March 2022 Assets Other receivables Cash and cash equivalents Total Liabilities Trade and other payables Total Financial instruments by category – Company 31 March 2023 Assets Amounts due from subsidiary undertakings Other receivables Cash and cash equivalents Total Liabilities Trade and other payables Total 31 March 2022 Assets Amounts due from subsidiary undertakings Other receivables Cash and cash equivalents Total Liabilities Trade and other payables Total Financial assets at amortised cost Other financial liabilities at amortised cost 11,175 544,988 556,163 – – – Total 11,175 544,988 556,163 – – (800,007) (800,007) (800,007) (800,007) 5,769 1,045,515 1,051,284 – – – – – (406,341) (406,341) Financial assets at amortised cost Other financial liabilities at amortised cost 14,296,318 11,175 425,704 14,733,197 – – – – 5,769 1,045,515 1,051,284 (406,341) (406,341) Total 14,296,318 11,175 425,704 14,733,197 – – (378,171) (378,171) (378,171) (378,171) 10,785,230 5,769 949,844 11,740,843 – – – – 10,785,230 5,769 949,844 11,740,843 – – (100,959) (100,959) (100,959) (100,959) 55 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED 14. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED Foreign exchange risk Throughout the periods presented in the consolidated financial statements, the functional currency for the Group’s West African subsidiaries has been the CFA Franc. The Group incurs certain exploration costs in the CFA Franc, US Dollars, Australian Dollars and South African Rand and has exposure to foreign exchange rates prevailing at the dates when Sterling funds are translated into other currencies. The CFA Franc has a fixed exchange rate to the Euro and the Group therefore has exposure to movements in the Sterling : Euro exchange rate. 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 in West Africa and other countries and will develop currency risk mitigation procedures if the significance of this risk materially increases. The Group’s consolidated financial statements have a low sensitivity to changes in exchange due to the low value of assets and liabilities (principally cash balances) maintained in foreign currencies. Once any project moves into the development phase a greater proportion of expenditure is expected to be denominated in foreign currencies which may increase the foreign exchange risk. Financial instruments by currency – Group GBP USD ZAR AUD XOF Total 31 March 2023 Assets Other receivables Cash and cash equivalents Total Liabilities 11,175 425,704 436,879 – – – – – – – – – – 119,284 119,284 11,175 544,988 556,163 Trade and other payables (122,278) (446,098) (98,621) (65,094) (67,916) (800,007) GBP USD ZAR AUD XOF Total 31 March 2022 Assets Other receivables Cash and cash equivalents Total Liabilities 5,769 949,850 955,619 – – – Trade and other payables (64,671) (304,145) – – – – – – – – 95,665 95,665 5,769 1,045,515 1,051,284 (36,289) (1,236) (406,341) 56 Financial instruments by currency – Company GBP USD ZAR AUD XOF Total 31 March 2023 Assets Amounts due from subsidiary undertakings 14,296,318 Other receivables Cash and cash equivalents Total Liabilities 11,175 425,704 14,733,197 – – – – – – – – – – – – – – – – 14,296,318 11,175 425,704 14,733,197 Trade and other payables (122,278) (24,262) (98,621) (65,094) (67,916) (378,171) GBP USD ZAR AUD XOF Total 31 March 2022 Assets Amounts due from subsidiary undertakings 10,785,230 Other receivables Cash and cash equivalents Total Liabilities 5,769 949,844 11,740,843 Trade and other payables (64,671) – – – – – – – – – – – – – – (36,288) – – – – – 10,785,230 5,769 949,844 11,740,843 (100,959) 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. In the future, 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. 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. Disclosure of financial instruments and financial risk management for the Company has not been performed as they are not significantly different from the Group’s position described above. 57 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED 15. RELATED PARTY TRANSACTIONS The Directors represent the key management personnel of the Group and details of their remuneration are provided in note 3. 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 2023, the Company paid fees to SP Angel of £173,605 (2022: £30,000). The increase compared to prior year reflects SP Angel’s provision of broker services in relation to the £3 million fundraising in May 2022. The balance due to SP Angel at 31 March 2023 was £nil (2022: £nil). Matlock Geological Services Pty Ltd (“Matlock”) a company wholly owned by Bernard Aylward, a director, provided consultancy services to the Group during the year ended 31 March 2023 and received fees of £139,514 (2022: £97,450). These fees are included within the remuneration figure shown for Bernard Aylward in note 3. The balance due to Matlock at 31 March 2023 was £nil (2022: £nil). Geosmart Consulting Pty Ltd (“Geosmart”), a company wholly owned by Qingtao Zeng, a director, provided consultancy services to the Group during the year ended 31 March 2023 and received fees of £24,627 (2022: £27,136). The balance due to Geosmart at 31 March 2023 was £nil (2022: £14,528). Zivvo Pty Ltd (“Zivvo”), a company wholly owned by Steven Zaninovich, a Director, provided consultancy services to the Group. Steven Zaninovich was appointed as a Director on 27 July 2022 and between that date and 31 March 2023, Zivvo received fees of £140,000. These fees are included within the remuneration figure shown for Steven Zaninovich in note 3. The balance due to Zivvo at 31 March 2023 was £nil. 16. CONTROL No one party is identified as controlling the Group. 17. CAPITAL COMMITMENTS The Group had capital commitments to exploration and evaluation expenditure of £nil (2022: £nil). 18. EVENTS AFTER THE REPORTING PERIOD On 19 April 2023, the Company announced the sale of the Bougouni West project for a total cash consideration for Kodal of £2.0 million to Leo Lithium Ltd. The Bougouni West project comprised two concessions, Mafélé Ouest and N’kemene Ouest (the “Concessions”). Kodal entered into a binding agreement with Leo Lithium Ltd to sell the Mafélé Ouest concession and agreed terms for the sale of the N’kemene Ouest concession, conditional on renewal of the licence. The Bougouni West project was held as an asset for sale at the year end. On 3 August, the Company announced receipt of a conditional prepayment of US$3.5 million as part of the funding package for the Bougouni Lithium Project between the Company and Hainan Mining Co. Limited and its wholly owned UK-incorporated subsidiary Xinmao Investment Co. Limited. The prepayment is repayable or, at the discretion of Hainan Mining Co. Limited, convertible into new ordinary shares in the Company should the funding agreement not proceed. 58 NOTICE OF ANNUAL GENERAL MEETING KODAL MINERALS PLC (REGISTERED IN ENGL AND AND WALES NO. 07220790) Notice is hereby given that the Annual General Meeting of Kodal Minerals plc (the “Company”) will be held at Fieldfisher LLP, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3TT on Friday 29 September 2023 at 11:00 am for the purposes of considering and, if thought fit, passing the following resolutions, of which Resolutions 1 to 6 (inclusive) will be proposed as ordinary resolutions and Resolution 7 will be proposed as a special resolution: ORDINARY BUSINESS 1. 2. To receive the audited financial statements of the Company for the financial period ended 31 March 2023 and the reports of the directors of the Company (the “Directors”) and the auditors thereon. To re-appoint Steven Zaninovich as a Director, 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 Bernard Aylward as a Director, who retires in accordance with article 30.2 of the Articles and offers himself for re-appointment. 4. To re-appoint Charles Joseland as a Director, who retires in accordance with article 30.2 of the Articles and offers himself for re-appointment. 5. To re-appoint RSM 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 6. That the Directors, and any committee to which the Directors delegate relevant powers, 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 £2,659,763 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 2024 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. 7. That, conditional on the passing of Resolution 6, the Directors, and any committee to which the Directors delegate relevant powers, 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 6 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. b. 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 the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate nominal amount of £1,595,858, and the power hereby granted shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2024 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. BY ORDER OF THE BOARD REGISTERED OFFICE Weaver Financial Limited Company Secretary 5 September 2023 Prince Frederick House 35-39 Maddox Street London W1S 2PP 59 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTICE OF ANNUAL GENERAL MEETING CONTINUED NOTES: ENTITLEMENT TO ATTEND, SPEAK AND VOTE 1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), the Company has specified that only those members entered on the register of members at 11:00 am on 27 September 2023 (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 11:00 am on 27 September 2023 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. You can register your vote(s) for the Annual General Meeting either: • • • by visiting www.shareregistrars.uk.com, clicking on the “Proxy Vote” button and then following the on-screen instructions (you can find your log-in details for the on-line portal on the top of your proxy form); by post or by hand to Share Registrars Limited, 3 The Millennium Centre, Crosby Way, Farnham, Surrey GU9 7XX using the proxy form accompanying this notice; in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out in notes 7 to 10 below. In order for a proxy appointment to be valid the proxy must be received by Share Registrars Limited by 11:00 am on 27 September 2023. 4. 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 5. 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. 6. 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, 3 The Millennium Centre, Crosby Way, Farnham, Surrey GU9 7XX 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). 60 APPOINTMENT OF PROXIES USING CREST 7. 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. 8. 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 & International 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 11:00 am on 27 September 2023. 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. 9. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & International 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. 10. 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. CHANGING PROXY INSTRUCTIONS 11. To change your proxy instructions, simply submit a new proxy appointment using one of the methods set out above. 12. Note that the cut-off time for receipt of proxy appointments also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. If the Company receives more than one appointment of a proxy in respect of any one share, the appointment received last revokes each earlier appointment and the Company’s decision as to which appointment was received last is final. TERMINATION OF PROXY APPOINTMENTS 13. I n order to revoke a proxy appointment, you must notify the Company by no later than 11.00 am on 27 September 2023. If you attempt to revoke your proxy appointment but the revocation is received after the time specified, your original proxy appointment will remain valid. JOINT SHAREHOLDERS 14. In the case of joint shareholders, the vote of the senior who tenders a vote, whether in person (including by corporate representative) or by proxy, shall be accepted to the exclusion of the votes of the other joint shareholders. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members. CORPORATE REPRESENTATIVES 15. 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. 61 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSKODAL MINERALS PLC | GROUP ANNUAL REPORT & FINANCIAL STATEMENTS NOTICE OF ANNUAL GENERAL MEETING CONTINUED EXPLANATORY NOTES TO THE RESOLUTIONS An explanation of each of the resolutions contained in the notice of meeting is set out below. Resolutions 1 to 6 (inclusive) will be proposed as ordinary resolutions. For an ordinary resolution to be passed, more than half of the votes cast must be in favour of the resolution. Resolution 7 will be proposed as a special resolution. For a special resolution to be passed, at least three quarters of the votes cast must be in favour of the resolution. Resolution 1 - This resolution seeks approval from shareholders for the receipt of the directors’ and auditors’ reports and the financial statements of the Company for the year ended 31 March 2023. Resolution 2 - This resolution seeks approval from shareholders to re-appoint Steven Zaninovich as a director of the Company (“Director”), who retires in accordance with article 24.2 of the articles of association of the Company (the “Articles”) and offers himself for re-appointment. Resolution 3 - This resolution seeks approval from shareholders to re-appoint Bernard Aylward as a Director, who retires in accordance with 30.2 of the Articles and offers himself for re-appointment. Resolution 4 - This resolution seeks approval from shareholders to re-appoint Charles Joseland as a Director, who retires in accordance with 30.2 of the Articles and offers himself for re-appointment. Resolution 5 - This resolution seeks approval from shareholders to reappoint RSM UK Audit LLP as the auditors of the Company and to authorise the Directors to fix their remuneration as they see fit. Resolution 6 - 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 2024, unless the authority is renewed or revoked prior to such time. This authority is limited to the issue of a maximum of 8,511,241,600 ordinary shares (representing approximately 50 per cent. of the Company’s entire issued share capital as at the date of this notice). Resolution 7 - 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 2024. This authority is limited to the allotment of a maximum of 5,106,745,600 ordinary shares for cash, free of pre-emption rights (representing approximately 30 per cent. of the Company’s entire issued share capital as at the date of this notice). ISSUED SHARES AND TOTAL VOTING RIGHTS As at 6.00 p.m. on 4 September 2023, the Company’s issued share capital comprised 17,022,480,956 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 6.00 p.m. on 4 September 2023 is 17,022,480,956. The Company does not hold any shares in treasury. 62 CONNECTING WITH THE EMERGING LITHIUM OPPORTUNITY CONTENTS Highlights Strategic Report Chairman’s Statement Operational Review Finance Review Governance Report of the Directors Corporate Governance Report Remuneration Report Independent Auditor’s Report Financial Statements 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 1 2 3 5 10 16 17 20 24 26 33 34 35 36 37 38 39 43 59 COMPANY INFORMATION DIRECTORS Bernard Aylward Charles Joseland Robert Wooldridge Steven Zaninovich Qingtao Zeng SECRETARY Weaver Financial Limited Stapeley House London Road Nantwich CW5 7JW COUNTRY OF INCORPORATION England and Wales REGISTERED NUMBER 07220790 REGISTERED OFFICE Prince Frederick House 35-39 Maddox Street London W1S 2PP NOMINATED ADVISER Allenby Capital Limited 5 St Helen’s Place London EC3A 6AB SOLICITORS Fieldfisher LLP Riverbank House 2 Swan Lane London EC4R 3TT FINANCIAL ADVISER AND JOINT BROKER SP Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London W1S 2PP JOINT BROKER Canaccord Genuity Limited 88 Wood Street London EC2V 7QR AUDITOR RSM UK Audit LLP 25 Farringdon Street London EC4A 4AB SHARE REGISTRARS Share Registrars Limited 3 The Millennium Centre Crosby Way Farnham Surrey GU9 7XX KODAL MINERALS PLC GROUP ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 Registration number 07220790 (England and Wales) I K O D A L M N E R A L S P L C | G R O U P A N N U A L R E P O R T & F I N A N C I A L S T A T E M E N T S | 2 0 2 3