Annual report 2017
Annual
report
2017
Contents
>
Welcome
1
2
3
CEO’s statement
4
Chairman’s statement
5
Company Information
and Properties Overview
6
4
5
Directors and Corporate
Information
10
Directors’ report
11
6
Independent
auditor’s report
24
7
8
Financial Statements
32
Notes to the
Financial Statements
40
3
OVOCA GOLD Plc___Annual Report 2017
1
CEO’s Statement
Dear Shareholders and Colleagues!
I write to you with optimism, as well as weariness. Regarding the latter, Ovoca has been in a protracted legal
fight concerning the Taymura oil assets in Siberia. In the course of the legal proceedings the courts have made
several decisions with which we strongly disagree, but which has changed the direction of proceedings in an
unfavorable direction. Of course management has a fiduciary responsibility to pursue the Company’s claims as far
as possible, but the outlook for a successful conclusion to these proceedings looks poor. Regarding optimism, the
Board is continuing to review the strategic direction of Ovoca to utilise our liquidity to maximise shareholder value.
This could include a shift in direction with changes to business focus and composition of the team. Once I am able
to share the details of this review with you I will.
I would like to mention that management’s caution since the sale of Olcha and retaining the proceeds of the
sale of Goltsovoye, has proven to be the correct course. By having a critical mass of capital within the company, and
by avoiding jumping into the natural resource sector in the past few years, the Company has been able to avoid the
protracted bear market that continues to this day, but have the financial firepower to make a decisive move, which
I anticipate we will announce soon.
Best regards,
Kirill Golovanov, CEO
4
PART 2___ Chairman’s Statement
2
Chairman’s Statement
Dear Stakeholders,
It is no secret that Ovoca Gold has been at the intersection of two powerful trends that make it exceptionally
challenging for our Company to advance and prosper. The precious metals market has been in a slump since 2012,
and despite the brief up-tick in sentiment in 2017, conditions remain poor. The oil and gas market has experienced
a similar slump, starting in 2014, and oil continues to be a weak market. In summary, the two commodities where
the Ovoca team has deep insight have not been in a positive market for a long time. The other trend that cannot
go unnoticed is the worsening relations between Russia and Western Europe/USA. Regardless of one’s political
views, in terms of business the poor political situation has a real impact on Ovoca.
Ovoca has a strong cash position, which has afforded the team to look a little farther out in terms of business
opportunities. The board and management have also been very realistic about where we stand today. Two things
are clear, we need to get the Company out from under the influence of the two powerful trends I mentioned above
and will be considered by the Board as it continues to review the strategic direction of Ovoca.
I hope you will share my enthusiasm for what we are doing.
Sincerely,
Mikhail Mogutov, Chairman
5
OVOCA GOLD Plc___Annual Report 2017
3
Company Information
and Properties Overview
Stakhanovsky
The Stakhanovsky exploitation license is situated in the north-western
part of the Magadan Region and covers an area of 73 km2. The site is 40
km from Susuman, a town with a population of 7,500 and approximately
700 km northwest of Magadan. The Stakhanovsky exploitation license is
owned by OOO Magsel, a wholly-owned subsidiary of Ovoca Gold. The
license allows for exploration work, mine development, and mining and
is currently valid until 7 May 2027; however, this can be extended upon
successful petition to the appropriate Russian authorities.
Stakhanovsky has significant infrastructure in place either adjacent
to, or at site. A seasonal village, named Udarik, is used by placer miners
in the summer months to mine near-by placer deposits for gold. Power
lines connect Udarnik to the regional power grid. Udarnik has several
housing complexes that could be used for future operations, and the road
to Stakhanovsky from Susuman is maintained year round.
The deposit area is dominated by two main fault systems, a sub-
longitudinal (south southeast striking) set of faults, and gently sloping
thrust faults, which strike northeast. The two different fault sets are
believed to have acted as conduits for magmatic fluids leading to the
development of dykes and sills.
The dykes and sills vary in thickness from several metres up to twenty
metres, averaging eight metres, and have a strike from several tens of
metres to several kilometres.
Gold mineralisation is associated with the quartz veinlet stockwork
that cuts through the beresite dykes/sills. The gold mineralisation is
most prevalent in the more intensely altered dykes/sills, which often
contain visible gold.
Resource Estimation
Resource modelling completed in 2013 at the Stakhanovsky prospect
has identified four shallow dipping, gold-bearing, beresite dyke zones
that have variable strikes. These four areas are known as: Zabolocheny
(1 domain), Albitovy (3 domains), Burovaya (1 domain) and Berizitovy (2
domains). The dyke zones vary in width from one metre to more than five
metres. Most of the mineralisation has low average grades; Albitovy (1.14
Mt @ 0.23 g/t Au), Berizitovy (2.73 Mt @ 0.63 g/t Au), Burovaya (1.44
Mt @ 1.15 g/t Au) and Zabolocheny (6.73 Mt @ 1.22 g/t Au).
Most of the mineralisation is shallow dipping and drilling is yet to
close the mineralisation off at depth, hence additional resource potential
remains. Modelling so far indicates that mineralisation extends to
approximately 50 m to 60 m depth. Zabolocheny is the steepest and best-
drilled domain and in some areas, this structure has been modelled to
6
PART 3___Company Information and Properties Overview
approximately 100 m depth. Zabolocheny retains the greatest potential
for future resource development. Additional potential also exists at
Burovaya and selected areas of Berizitovy.
The mineralisation wireframes have been constructed based on;
diamond drilling (7,301 m), reverse circulation drilling (7,110 m), and
trenches (7,281 m). Considerable portions of the resource wireframes are
less than 2.0 m wide and much of this mineralisation will be uneconomic.
Given that the mineralised domains are quite narrow, the proposed open
pit would comprise a significant volume of waste and a high stripping
ratio is anticipated.
Table 1. Stakhanovsky Mineral Resources Samples by Type – Complete Database
Diamond Drillholes (DD)
Reverse Circulation Drillholes (RC)
Trench/Channel (TR/CH)
Total
Number
103 holes
120 holes
177 lines
400 units
Samples
2,390
1,733
2,658
6,781
Metres
7,301
7,110
7,281
21,692
* Note: the above table represents the total sample database, not all samples were used for grade and tonnage estimation.
The total Joint Ore Resource Committee (JORC) Mineral Resource for
Stakhanovsky is 4.4 Mt @ 2.3 g/t Au, comprising 327 koz Au. This estimate
is based on a cut-off grade of 0.5 g/t Au. Due to the coarse-grained nature
of the gold mineralisation, it is possible that Ovoca will mine the deposit
to the geological boundaries in order to maximise gold recovery.
Table 2. Stakhanovsky Mineral Resources by Classification
Resource Category
Tonnes (Mt)
Au Grade (g/t)
Gold (koz)
Measured + Indicated
Inferred
Total
Open Pit
2.8
1.6
4.4
2.6
1.9
4.5
231
96
327
Note:
a) Unless otherwise stated all Mineral Resources are quoted as 100% and are not attributable with respect to ownership.
b) Results are rounded to one decimal place in this table to reflect the level of accuracy of the estimate.
c) Resources reported to cut-off grade = 0.5 g/t Au.
Magadannedra (Regional Office of “GKZ” the State Reserves Committee)
have approved the temporary resource calculation conditions, aimed at
upgrading the Stakhanovsky Resource. In addition, Magadannedra has
extended the terms for the next stage of exploration at Stakhanovsky
field up to 2018.
7
OVOCA GOLD Plc___Annual Report 2017
3
Additional information
Ovoca continues to pursue the recovery of its funds from LLC Taymura.
The bankruptcy procedure ended in March 2018 after the settlement
agreement was reached between the creditors of LLC Taymura and
approved by the Court. Under the terms of the settlement agreement
each creditor should receive the recovery of debts at discount of 55%
until the end of 2018.
Although the Company was included into the terms of the settlement
agreement later the Court excluded Ovoca from the register of creditors.
Currently the Company is preparing to appeal to Supreme Court of Russia
in order to secure its interests.
The management does not anticipates to receive and then develop
any of LLC Taymura assets as a result of such dispute and has been focused
on structuring the other potential investment that is going to be disclosed
in due course to the public in a separate document.
8
PART 3___Company Information and Properties Overview
Gold-Bearing Dykes
9
OVOCA GOLD Plc___Annual Report 2017
4
Directors
and corporate information
Directors
Mikhail Mogutov
Executive Chairman
Kirill Golovanov
CEO (Executive Director)
Kenneth Kuchling
Non-Executive Director
Yuri Radchenko
Non-Executive Director
Donald Schissel
Non-Executive Director
Leonid Skoptsov
Non-Executive Director
Timothy McCutcheon
Non-Executive Director
Registered Office
17 Pembroke Street Upper
Dublin 2
D02 AT22
Business Address
17 Pembroke Street Upper
Dublin 2
D02 AT22
Other Business Information
Svetlana Radchenko
Chief Financial Officer
Kirill Golovanov
Corporate Secretary
Registration number
105274
Incorporated
15 January 1985
Web site
www.ovocagold.com
Principal banker
Allied Irish Banks plc
Terenure Road
Rathgar
Dublin 6
Ireland
Auditors
Grant Thornton
Chartered Accountants &
Statutory Audit Firm
Molyneux House
Bride Street
Dublin 8
Ireland
Solicitors
OBH Partners
(formerly McEvoy Partners)
17 Pembroke Street Upper
Dublin 2
D02 AT22
Stockbrokers & Nomad
Davy
Davy House
49 Dawson Street
Dublin 2
Ireland
Registrars
Computershare Investor
Services (Ireland) Limited
Heron House
Sandyford Industrial Estate
Dublin 18
Ireland
10
PART 5___Directors’ Report
5
Directors’ Report
The Directors present their annual report and audited financial
statements for the financial year ended 31 December 2017 of Ovoca Gold
plc (“the Company”), a company registered and domiciled in the Republic
of Ireland and its subsidiaries (collectively “the Group”).
Principal Activity, Business Review and Future Developments
The Group’s main activity is the exploration for precious metals and
other minerals in Russia. The Directors have reviewed the financial position
of the Group and are satisfied that the Group will continue to operate for
the foreseeable future.
A detailed business review is included in the company information and
property overview.
Key Performance Indicators
At this stage of the Group’s business activities the Directors think it
is appropriate to limit the Key Performance Indicators (KPIs) used to monitor
progress in the delivery of the Group’s strategic objectives, to assess actual
performance against targets and to aid management of the business, other
than the monitoring of licenses and stages of exploration.
The Board monitors relevant KPIs which it considers appropriate for
managing the activities inherent in exploration and appraisal operations.
The KPIs for the Group are as follows:
> Financial KPIs
Shareholder return – the performance of the share price;
Exploration expenditure – funding and development costs.
> Non-financial KPIs
Environment management – strict environmental policies in place;
Operational success – completion of production plan.
Results and Dividends
The results of the Group are disclosed on page 32 of the financial
statements. The directors did not recommend the payment of a dividend.
Principal Risks and Uncertainties
The Group’s operating activities are principally carried out in Russia.
Accordingly, the principal risks and uncertainties detailed below have
been identified. The Group seeks to minimise the effects of these risks
through careful monitoring of the risks on an ongoing basis.
> Exploration Risk; Exploration and development activities may be delayed
or adversely affected by factors outside the Group’s control, in particular:
11
OVOCA GOLD Plc___Annual Report 2017
5
climatic conditions, performance of joint venture partners or suppliers,
availability, delays or failures in installing and commissioning plant and
equipment; unknown geological conditions; remoteness of location;
actions of host governments or other regulatory authorities (relating to,
inter alia, the grant, maintenance or renewal of any required authorisations,
environmental regulations or changes in law).
> Commodity Price Risk; The demand for, and price of precious metals and
other minerals is dependent on global and local supply and demand,
actions of governments or cartels and general global economic and
political developments.
> Political Risk; As a consequence of activities in different parts of the world,
the Group may be subject to political, economic and other uncertainties,
including but not limited to terrorism, war or unrest, changes in national
laws and energy policies and exposure to different legal systems.
> Foreign Exchange Risk; Exchange rate fluctuations may affect the cost
that the Group incurs with its operations. Any fluctuations of the Euro
and Russian Rouble against the US Dollar may have a significant impact
on the Company’s financial position and results in future.
The carrying amount of the Group’s foreign currency denominated
monetary assets and monetary liabilities at the end of the reporting date
are as follows:
United States Dollar
Russian Rouble
Financial Assets
Financial Liabilities
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
€’000
31/12/2016
€’000
21,131
1,694
21,852
87
-
8
-
11
The following table details the Group’s sensitivity to a 10% increase
and decrease in the Euro against United States Dollar and Russian Rouble.
10% is the sensitivity rate used which represents management’s assessment
of the reasonably possible change in foreign exchange rates. The sensitivity
analysis includes only outstanding foreign currency denominated monetary
items and adjusts their translation at the year-end for a 10% change in
foreign currency rates.
Profit or loss
United States Dollar Impact
Russian Rouble Impact
31/12/2017
€’000
2,134
31/12/2016
€’000
2,207
31/12/2017
€’000
170
31/12/2016
€’000
8
12
PART 5___Directors’ Report
> Credit Risk; this refers to the risk that a counter party will default on its
contractual obligations resulting in financial loss to the Group. The Group
has adopted a policy of only dealing with creditworthy counterparties
and obtaining significant collateral, where appropriate, as a means of
mitigating the risk of financial loss from defaulters. The table below
analyses the maximum exposure of the Group’s financial assets which are
subject to credit risk:
Trade and other receivables (Note 19)
Cash and cash equivalents (Note 21)
Total
Group
31/12/2017
€’000
Group
31/12/2016
€’000
Group
31/12/2017
US$’000
Group
31/12/2016
US$’000
40
5,549
5,589
34
6,741
6,775
48
6,647
6,695
36
7,102
7,138
The Group continuously monitors defaults of customers and other
counterparty, identified either individually or by the group, and incorporates
this information into its credit risk controls. In relation to the credit risk
for cash and cash equivalents, the risk is considered to be negligible, since
the counterparties are reputable banks with high quality external credit
ratings. The Group’s management considers that all of the above financial
assets are of good credit quality, as the Group’s policy is to deal only with
creditworthy customers.
> Liquidity Risk; the Group holds its cash in currencies in which it expects
to incur expenditure. The Group’s reporting currency is the Euro. The most
meaningful information relates to the Group’s current liquidity – since
it is not generating any income from its mineral projects.
The table below analyses the Group’s financial liabilities into relevant
maturity groupings based on the earliest date on which the Group can be
required to pay. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 1 year equal to their carrying
values as the impact of the discounting is not significant.
Balances due within 1 year
Trade and other payables (Note 25)
Total
Group
31/12/2017
€’000
46
46
Group
31/12/2016
€’000
217
217
Group
31/12/2017
US$’000
55
55
Group
31/12/2016
US$’000
229
229
13
OVOCA GOLD Plc___Annual Report 2017
5
The Group considers expected cash flows from financial assets in
assessing and managing liquidity risk, in particular its cash resources and
available for sale financial assets. The Group’s current cash resources (Note
21), trade and other receivables (Note 19) and available for sale financial
assets (Note 17) significantly exceed the current cash outflow requirements.
> Market Risk; Factors beyond the control of the Group may affect the
marketability of its securities. Prices are subject to fluctuation and are
affected by factors beyond the control of the Group. The effect of these
factors on the Group’s operations cannot be accurately predicted. Fluctuations
in stock market prices affect the Group’s available for sale financial assets.
The Group seek to minimise this risk by closely monitoring stock market
movements on an ongoing basis.
Directors, Secretary and Their Interests
In accordance with Section 329 of the Companies Act 2014, the interests
(all of which are beneficial) of the Directors and Secretary who held office
at the date of approval of the annual report and at 31 December 2017 and
their families in the share capital of the Company were:
Ordinary shares of 12.5 cents each
Options over Ordinary shares
23/04/18
31/12/17
01/01/17
23/04/18
31/12/17
01/01/17
Mikhail Mogutov
Leonid Skoptsov
Yuri Radchenko
Timothy McCutcheon
Donald Schissel
Kenneth Kuchling
Kirill Golovanov
-
-
-
11,656,203
11,656,203
11,656,203
11,656,202
11,656,202
11,656,202
-
-
-
-
-
-
-
-
-
19,506,203
19,506,203
16,256,203
-
-
-
-
-
-
-
-
-
-
-
-
200,000
-
-
-
-
200,000
200,000
-
1,800,000
Further details of the above share options of the directors as at 31
December 2017 are as follows:
Kenneth Kuchling
200,000
£0.36
22 February 2018
Number of options
Exercise Price
End of exercise period
14
PART 5___Directors’ Report
Share Price
The Company’s shares are primarily traded on the Enterprise Securities
Market (ESM) of the Irish Stock Exchange, and the Alternative Investment
Market (AIM) of the London Stock Exchange. The Company’s shares are also
traded on the Frankfurt, Berlin, Munich and Stuttgart exchanges.
The market price of the Company’s shares on ESM at 31 December 2017
was €0.08 (2016: €0.13). During the financial year ended 31 December 2017
the market price of the Company’s shares ranged from €0.08 to €0.16 (2016:
€0.08 to €0.13).
The market price of the Company’s share on AIM at 31 December 2017
was £0.11 (2016: £0.09). During the financial year ended 31 December 2017
the market price of the Company’s shares ranged from £0.08 to £0.14 (2016:
£0.04 to £0.16).
Significant Shareholders
So far as the Directors are aware, the names of the persons other
than the Directors who, directly or indirectly, are interested in 3 percent
or more of the issued share capital of the Company as at 21 May 2018
are as follows:
Euroclear Nominees Limited
Pickco Trading Co Limited
Bbhisl Nominees Limited
Davycrest Nominees
Citibank Nominees (Ireland) Designated Activity Company
Chase Nominees Limited
Ordinary shares of €1.25c each
% of issued share capital
18 828 414
7 928 531
7 611 143
5 684 782
4 416 685
3 231 200
21,28%
8,96%
8,60%
6,43%
4,99%
3,65%
Group Undertakings
Details of the Company’s subsidiary undertakings are set out in note
16 to the financial statements.
Directors’ Interest in Contracts
None of the Directors had a beneficial interest in any contract to
which the Company or Group was a party during the period except as
detailed in note 26.
15
OVOCA GOLD Plc___Annual Report 2017
5
Political Donations
The Group made no political donations during the financial year.
Going Concern
The Group has significant liquid resources in the form of cash reserves
of €5.5 million and available for sale financial assets of €15.9 million and
the Directors are satisfied that there are sufficient levels of funding within
the Group to enable them to trade for the foreseeable future, and to explore
further investment opportunities if appropriate projects exist.
The Directors consider that in preparing the financial statements that
they have taken into account all information that could reasonably be
expected to be available. On this basis, they consider that it is appropriate
to prepare the financial statements on the going concern basis.
Recoverability of Loans and Receivables
In 2014, the Company entered into a loan agreement with a third party.
In return for a US$6.3 million loan, Ovoca Gold plc received an exclusive
period to complete due diligence on JSC Evenkiya Fuel and Energy Company
(ETEK) and LLC Taymura. The loan was secured by certain receivables of
LLC Taymura, non-encumbrance of the assets for the exclusive period, and
personal guarantees. In the event that acquisition terms could not be
agreed the loan was to be returned with interest to the company. The loan
subsequently went in to default for non-repayment.
The Company has taken legal measures under Russian law to recover
the full amount including interest. Payables, assets and accounts have
been seized by the courts on behalf of Ovoca Gold plc.
16
PART 5___Directors’ Report
Details of Executive Directors
Mikhail Alexandrovich Mogutov, Executive Chairman
Mr. Mogutov joined the board of Ovoca in June 2006 and became
Chairman in 2008. In 1988 Mr. Mogutov was a founder of the Bioprocess
Group, which was an asset management and business-development company
with interests in various industries. One notable success of the Bioprocess
Group is OAO “United Machinery Plants” (OMZ), which is Russia’s largest
machine building company producing the majority of Russian-made oil rigs
and mining/drilling equipment. In 1996 OMZ was the first Russian company
to list on the London Stock Exchange.
Between 1997 and 1999 Mr. Mogutov was the Chairman of Vostsibugol,
one of Russia’s largest coal mining enterprises, with an annual output of
over 13 million tons of coal. He became increasingly active in natural
resource development after 1999 and in 2006 he was part of the group that
vended into Ovoca Gold plc 100% of OAO Ajax - the owner of the high grade
Goltsovoye silver project in the Magadan Region, Russia.
Doctorate, Moscow Physics-Technical Institute, Moscow, Russia. Fluent
in Russian and English.
Kirill Golovanov, Chief Executive Officer
Mr. Golovanov joined Ovoca as a corporate advisor in 2007 and moved
to be the manager of the Company’s Russia representative office in 2009.
During his time at Ovoca he played a major role in the development and
subsequent sale of the Goltsovoye silver deposit. He has extensive experience
in mining and corporate law, as well as working experience at leading
Russian enterprises, such as Gazprombank and Vneshekonombank.
Additionally, he was a department manager in the Federal Service on
Bankruptcy and Finance Restoration – a subdivision of the Russian Federation
Ministry of Finance.
JD, Moscow State Law Academy, Moscow, Russia. MBA, Duke University’s
Fuqua School of Business, NC, USA. Fluent in Russian and English.
Details of Non-Executive Directors
Tim McCutcheon, Non-Executive Director
Mr. McCutcheon joined the Board of Ovoca as a Non-Executive Director
in January 2009 and moved into the CEO position in December 2009. Prior
to Ovoca, Mr. McCutcheon was a partner at DBM Capital Partners, an
investment manager and corporate finance boutique specializing in the
mining sector of Russia and the former Soviet Union. He also worked at
several investment banks such as Bear Stearns, Aton Capital and Pioneer
Investments as an award-winning metals and mining sector analyst and as
an investment banker. He was one of the first analysts in Russia to write
about its gold mining sector and he has advised numerous international
gold mining companies on M&A, business development, and Russian business
practices.
BA, cum laude, Columbia College, New York, NY. MBA, Finance, Columbia
Business School. Fluent in English and Russian.
17
OVOCA GOLD Plc___Annual Report 2017
5
Leonid Pavlovich Skoptsov, Non-Executive Director
Mr. Skoptsov joined the board of Ovoca in June 2006 and was the Company’s
CEO from 2006 to 2009. Mr. Skoptsov was part of the Bioprocess Group team
that owned and ran OAO “United Machinery Plants” (OMZ). He also played
an active part in natural resource development prior to Ovoca. He was the
Chairman of OAO Pervaya Gornorudnaya Companiya from 2001 - 2005, a zinc-
lead asset developer. He was also the Chairman of OAO Volganeft from 2000
to 2004, a mid-tier oil producer in Russia which was successfully sold to
Russneft. He was part of the group that vended into Ovoca Gold plc 100%
of OAO Ajax – Goltsovoye.
BA, cum laude, Moscow State University, Moscow, Russia. Fluent in Russian
and English.
Yuri Ivanovich Radchenko, Non-Executive Director
Mr. Radchenko became a board member of Ovoca in June 2006. Mr.
Radchenko is a Magadan resident and has a long history of natural resource
development in the region. He was deeply involved in the development of
the Julietta gold-silver mine by Bema Gold Corporation and he is currently
the Chairman of Julietta’s operating company. Additionally, he was the
discoverer of the Lunnoye silver deposit, which is now one of OAO Polymetal’s
core assets. He was part of the group that vended into Ovoca Gold plc 100%
of OAO Ajax – Goltsovoye.
MS Geology, Kazakhstan Polytechnical Institute, Almaty, Kazakhstan.
Donald Schissel, Non-Executive Director
Mr. Schissel joined the board of Ovoca in March 2010. Before Ovoca, he
retired from BHP Billiton after a career there that extends back for almost
30 years. Donald was Regional Exploration Manager - Eurasia between 1992
– 1999, as well as Exploration Manager - Russia and Kazakhstan between
2005 – 2009. During Don’s tenure at BHP he was involved in the team
discovery of the Oyu Tolgoi porphyry copper deposit in Mongolia (currently
a core asset of Ivanhoe Mines Ltd (Nasdaq: IVN)), the Jinlong gold deposit
in China, and the Fedorova Tundra PGM deposit in Russia.
MSc Geology, University of Montana, Missoula, Montana, USA.
Kenneth Kuchling, Non-Executive Director
Kenneth Kuchling joined the board of Ovoca in March 2012. Mr. Kuchling
provides mining consulting services with multiple clients globally. He has
worked on such projects as Northgate Mining’s Kemess North copper-gold
mine in Canada, NovaGold’s Rock Creek project in Canada, Oromin Exploration’s
Sabodala gold project in Senegal, as well as having assisted with BHP
Billiton’s study of potash projects globally. Additionally, from 1997 to 2000
Mr. Kuchling was the Senior Mining Engineer for Rio Tinto’s Diavik diamond
mine in Canada, playing a key role in completing the feasibility study and
permitting of the project.
M. Eng. in Mining Engineering from the University of British Columbia,
Vancouver, Canada, and a B. Eng. in Mining Engineering from McGill University,
Montreal, Canada.
18
PART 5___Directors’ Report
Corporate Governance Statement
The Directors are committed to maintaining the highest standards
of corporate governance commensurate with the size, stage of development
and financial status of the Group.
Board
The board currently has seven directors, comprising two Executive
Directors and five Non-Executive Directors. The Board met formally on
5 occasions during 2017. An agenda and supporting documentation was
circulated in advance of each meeting. All the Directors bring independent
judgment to bear on issues affecting the Group and all have full and
timely access to information necessary to enable them to discharge
their duties. The Directors have a wide and varying array of experiences
in the industry, Non-Executive Directors are not appointed for specific
terms. Each Non-Executive Director comes up for re-election every three
years and each new Director is subject to election at the next Annual
General Meeting following the date of appointment.
The following committees deal with the specific aspects of the Group
affairs:
Audit Committee: This Committee comprises two Non-Executive
Directors. The external auditors have the opportunity to meet with
members of the Audit Committee without executive management present
at least once a year. The duties of the Committee include the review of
the accounting principles, policies and practices adopted in preparing
the financial statements, external compliance matters and the review
of the Group’s financial results.
Nominations Committee: Given the current size of the Group a
Nominations Committee is not considered necessary. The Board reserves
to itself the process by which a new Director is appointed.
Remuneration Committee: This Committee comprises one Non-
Executive Director and one Executive Director. This Committee
determines the contract terms, remuneration and other benefits of
the Executive Directors, Chairman and Non-Executive Directors. Further
details of the Group’s policies on remuneration, service contracts and
compensation payments are given in the Remuneration Committee
Report below.
Communications: The Group maintains regular contact with shareholders
through publications such as the annual and half-year report and via
press releases on the Group’s website, www.ovocagold.com. The Directors
are responsive to shareholder enquiries throughout the year. The Board
regards the Annual General Meeting as a particularly important
opportunity for shareholders, Directors and management to meet and
exchange views.
19
OVOCA GOLD Plc___Annual Report 2017
5
Internal Control
The Directors have overall responsibility for the Group’s system of
internal control and have delegated responsibility for the implementation
of this system to executive management. This system includes financial
controls that enable the Board to meet its responsibilities for the integrity
and accuracy of the Group’s accounting records. The Group’s system of
internal financial control provides reasonable, though not absolute
assurance that assets are safeguarded, transactions authorised and
recorded properly and that material errors or irregularities are either
prevented or detected within a timely period. Having made appropriate
enquiries, the Directors consider that the system of internal financial,
operational and compliance controls and risk management operated
effectively during the period covered by the financial statements and
up to the date on which the financial statements were signed. The internal
control system includes the following key features, which have been
designed to provide internal financial control appropriate to the Group’s
businesses:
> budgets are prepared for approval by the Board;
> expenditure and income are compared to previously approved budgets;
> a detailed investment approval process which requires Board approval of
all major capital projects and regular review of the physical performance
and expenditure on these projects.
Remuneration Committee Report
The Group’s policy on senior executive remuneration is designed to
attract and retain people of the highest calibre who can bring their
experienced and independent views to the policy, strategic decisions and
governance of the Group.
In setting remuneration levels, the Remuneration Committee takes
into consideration the remuneration practices of other companies of
similar size and scope. A key philosophy is that staff must be properly
rewarded and motivated to perform in the best interests of the
shareholders.
20
PART 5___Directors’ Report
Accounting Records
The Directors believe that they have complied with the requirement
of section 281 to 285 of the Companies Act, 2014, with regard to the
keeping of accounting records by employing persons with appropriate
expertise and by providing adequate resources to the financial function.
The accounting records are held at the Company’s business address at 17
Pembroke Street Upper, Dublin 2, Ireland.
Compliance Statement
The directors of the Company acknowledge that they are responsible
for securing the Company compliance with its relevant obligations, as
defined by Section 225 of the Companies Act 2014.
The directors are satisfied that they have the necessary arrangements
and structures in place as required by Section 225(b) and that these are
regularly reviewed in accordance with Section 225(c) but they have not
formally put in place the policy required by Section 225(a).
The reasons for this are:
> the ongoing commitments of the Board who have been involved in the
legal proceedings during the year;
> the continued commitment of the board in searching for and evaluating
strategic opportunities ;
> the relevant arrangements and structures which were in place needed to
be constantly reviewed and re-evaluated;
> this did not facilitate the putting in place a formal compliance policy
statement as matters were in flux;
> the board are actively rectifying this at present with the Groups advisors
and the policy will be formally in place shortly.
Disclosure of Information to Auditors
Each of the persons who are directors at the time when this Directors’
report is approved has confirmed that:
> so far as that director is aware, there is no relevant audit information of
which the Company’s auditors are unaware, and
> that director has taken all the steps that ought to have been taken as a
director in order to be aware of any relevant audit information and to
establish that the Company’s auditors are aware of that information.
Events After the Reporting Period
Events subsequent to the period end are dealt with in note 30 to the
financial statements.
21
OVOCA GOLD Plc___Annual Report 2017
5
Auditors
The auditors, Grant Thornton, continue in office in accordance with
section 383(2) of the Companies Act 2014.
This report was approved by the board on 21 May 2018 and signed on
its behalf.
Yuri Radchenko
Kirill Golovanov
Director
Director
22
PART 5___Directors’ Report
Directors’ Responsibilities Statement
The Directors are responsible for preparing the annual report and
financial statements, in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year giving a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group and
Company for that period. The Directors have elected to prepare the Group
financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU IFRS) and have
elected to prepare the Company financial statements in accordance with
EU IFRS, as applied in accordance with Irish law and regulations.
The Group and Company financial statements are required by law
to present fairly their financial position and performance for each
financial year.
In preparing each of the Group and Company financial statements,
the Directors are required to:
> select suitable accounting policies and then apply them consistently;
> make judgements and accounting estimates that are reasonable and
prudent;
> state whether the financial statements have been prepared in accordance
with applicable accounting standards, identify those standards, and note
the effect and the reasons for any material departure from those standards;
and
> prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Company will continue in
business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The directors are responsible for ensuring that the Group and
Company keeps or causes to be kept adequate accounting records which
correctly explain and record the transactions of the Group and Company,
enable at any time the assets, liabilities, financial position and profit
or loss of the Company to be determined with reasonable accuracy,
enable them to ensure that the financial statements and Directors’
report comply with the Companies Act 2014 and Companies (Accounting)
Act 2017 and enable the financial statements to be audited. 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 and
Company’s website. Legislation in Ireland governing the preparation
and dissemination of financial statements and other information included
in Directors’ reports may differ from legislation in other jurisdictions.
Approved on behalf of the Board on 21 May 2018
Yuri Radchenko
Director
Kirill Golovanov
Director
23
OVOCA GOLD Plc___Annual Report 2017
6
Independent Auditors’ Report
to the Members of Ovoca Gold Plc
Opinion
We have audited the financial statements of Ovoca Gold plc for the
financial year ended 31 December 2017, which comprise Consolidated income
statement, Consolidated statement of other comprehensive (loss)/income,
Consolidated statement of changes in equity, Company statement of changes
in equity, Consolidated statement of financial position, Company statement
of financial position, Consolidated statement of cash flows, Company statement
of cash flows and the related notes, including the summary of significant
accounting policies.
The financial reporting framework that has been applied in their preparation
is Irish law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union.
In our opinion:
the consolidated financial statements give a true and fair view in accordance
with IFRSs as adopted by European Union, of the state of the assets, liabili-
ties and financial position of the Group at 31 December 2017 and of its prof-
it and cash flows for the financial year then ended;
the parent Company statement of financial position gives a true and fair view,
in accordance with IFRSs as adopted by European Union as applied in accor-
dance with the provisions of the Companies Act 2014 and the Companies (Ac-
counting) Act of 2017, of the state of the parent Company’s assets, liabilities
and financial position of the Company as at 31 December 2017 and of its cash
flows for the financial year then ended; and
the financial statements have been properly prepared and in accordance with
the requirements of the Companies Act 2014 and the Companies (Accounting)
Act of 2017.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (Ireland) (‘ISAs’) and applicable law. Our responsibilities
under those standards are further described in the responsibilities of the
auditor for the audit of the financial statements’ section of our report.
We are independent of the Group and Company in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in Ireland, namely the Irish Auditing and Accounting Supervisory
Authority (IAASA) Ethical Standard concerning the integrity, objectivity
and independence of the auditor. 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.
24
PART 6___Independent Auditors’ Report
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation
to which the ISAs (Ireland) require us to report to you where:
the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified
material uncertainties that may cast significant doubt about the company’s
ability to continue to adopt the going concern basis of accounting for a pe-
riod of at least twelve months from the date when the financial statements
are authorised for issue.
Under the Listing Rules we are required to review the directors’ statement,
set out on page 16, in relation to going concern.
We have nothing to report having performed our review.
Key audit matters
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit, and the directing of efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and therefore we
do not provide a separate opinion on these matters.
Overall audit strategy
We designed our audit by determining materiality and assessing the risks
of material misstatement in the financial statements. In particular, we looked
at where the directors made subjective judgements as discussed in the key
audit matters section. We also addressed the risk of management override of
internal controls, including evaluating whether there was any evidence of
potential bias that could result in a risk of material misstatement due to fraud.
How we tailored the audit scope
The Group has two business segments, exploration and investment
activities that are operated principally in Russian Federation and Bermuda,
respectively, and with administrative activities in the Republic of Ireland.
We tailored the scope of our audit taking into account the areas where
the risk of misstatement was considered material to the Group.
In establishing the overall approach to our audit we assessed the risk of
material misstatement at a Group level, taking into account the nature, likelihood
and potential magnitude of any misstatement. As part of our risk assessment,
we considered the control environment in place at Ovoca Gold plc.
25
OVOCA GOLD Plc___Annual Report 2017
6
Materiality and audit approach
The scope of our audit is influenced by our application of materiality. We
set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the
effect of misstatements, both individually and on the financial statements
as a whole.
Based on our professional judgement, we determined materiality for the
Group as follows: 0.50% of total assets for the financial year ended 31 December
2017.
We agreed with the board of directors that we would report to them
misstatements identified during our audit above 5% of materiality as well as
misstatements below that amount that, in our view, warranted reporting for
qualitative reasons.
Significant risks identified
The risks of material misstatement that had the greatest effect on our
audit, including the allocation of our resources and effort, are set out below
as significant risks together with an explanation of how we tailored our audit
to address these specific areas in order to provide an opinion on the financial
statements as a whole. This is not a complete list of all risks identified by our
audit.
Valuation of available for sale financial assets
The Group has significant available for sale financial assets comprised
of a portfolio of equity investments amounting to €’000 15,868. These
instruments are measured at fair value with the corresponding fair value
change recognised in other comprehensive income. The valuation is performed
by the company using a Level 1 fair value hierarchy which are valuations based
on quoted prices (unadjusted) in active markets. In addition, the Group
determines whether objective evidence of impairment exists for individual
investments. This is one of the key judgmental area that our audit has
concentrated on and the biggest asset of the Group.
Our response
For this risk, our audit procedures included testing of the following:
Evaluated whether the management expert has the necessary competence,
capabilities and objectivity for the auditor’s purposes;
Obtained an understanding of the work of the management expert and eval-
uate the adequacy of the management expert’s work including the relevance
and reasonableness of the management expert’s conclusions, the assumptions
and methods adopted and the relevance, completeness and accuracy of any
source data used;
26
PART 6___Independent Auditors’ Report
Significant risks identified (continued)
Obtained market prices from published quotations at year end and recalculated
the market value by multiplying the market price by the number of shares
held;
Evaluated the Group’s assessment whether objective evidence of impairment
exists for individual investments; and
Assessed the completeness and accuracy of the disclosures relating to the
available for sale financial assets to assess compliance with disclosure
requirements included in the consolidated financial statements in accordance
with IFRSs as adopted by European Union.
Recoverability of previously impaired loans and receivables
In February 2014, the Company entered into a loan agreement with lending
an amount of US$’000 6,345 to Taymura LLC. The loan subsequently went into
default and the Company has since taken legal measures to recover such debt.
The receivable has been impaired in full. Due to continuous legal action taken
by the Company, it requires management to make subjective judgments over
both timing of reversal of the previously impaired amounts.
Our response
For this risk, our audit procedures included testing of the following:
Evaluated the principal assumptions underlying management’s estimates of
the outcomes and effects of contingencies, and the reasonableness of the
amounts and disclosures to be included in the financial statements;
Obtained management’s representation regarding contingencies and an update
of claims to the date of the auditors’ report and corroborated managements
view through the review of available evidence to the same date;
Reviewed contingencies reported in prior years and determined whether the
contingency has been resolved or circumstances giving rise to the contingency
have changed; and
Determine whether the changed circumstances have been correctly reflected
in the financial statements.
Other information
Other information comprises information included in the Annual Report,
other than the financial statements and our auditor’s report thereon, including
the Chairman’s Report, Chief Executive’s Report and Directors’ Report. The
directors are responsible for the other information. 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.
27
OVOCA GOLD Plc___Annual Report 2017
6
Other information (continued)
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies in the financial statements, we are
required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
The Directors’ assessment of the prospects of the Company and
the principal risks that would threaten the solvency or liquidity
of the Company
Under the Listing Rules we are required to review the Directors’ statement
that they have carried out a robust assessment of the principal risks facing
the company and the Directors’ statement in relation to the longer term
viability of the company. Our review was substantially less in scope than an
audit and only consisted of making inquiries and considering the Directors’
process supporting their statements; checking that the statements are in
alignment with the relevant provisions of the Code; and considering whether
the statements are consistent with the knowledge acquired by us in the course
of performing our audit. We have nothing to report having performed our
review.
Matters on which we are required to report by the Companies
Act 2014 and the Companies (Accounting) Act 2017
We have obtained all the information and explanations which we consider
necessary for the purposes of our audit.
In our opinion the accounting records of the Company were sufficient to
permit the financial statements to be readily and properly audited.
The financial statements are in agreement with the accounting records.
In our opinion the information given in the Directors’ Report is consistent
with the financial statements.
Based solely on the work undertaken in the course of our audit, in our opinion,
the Directors’ report has been prepared in accordance with the requirements
of the Companies Act 2014 and the Companies (Accounting) Act 2017.
Matters on which we are required to report by exception
Under the Companies Act 2014 we are required to report to you if, in our
opinion, the disclosures of directors’ remuneration and transactions specified
by section 305 to 312 of the Acts have not been made. We have no exceptions
to report arising from this responsibility.
28
PART 6___Independent Auditors’ Report
Responsibilities of the management and those charged with
governance for the financial statements
Management is responsible for the preparation of the financial statements
which give a true and fair view in accordance with IFRS as adopted by the
European Union, and for such internal control as directors determine necessary
to enable the preparation of financial statements are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing
the Group and 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 management either intends to liquidate the Group and
Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group
and Company’s financial reporting process.
Responsibilities of the auditor 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 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.
As part of an audit in accordance with ISAs, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for their opinion.
Detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Group
and Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern
basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group and Company’s ability to continue as a going
concern. If they conclude that a material uncertainty exists, they are required
29
OVOCA GOLD Plc___Annual Report 2017
6
Responsibilities of the auditor for the audit of the financial
statements (continued)
to draw attention in the auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify their
opinion. Their conclusions are based on the audit evidence obtained up to
the date of the auditor’s report. However, future events or conditions may
cause the Group and Company’s to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a matter that achieves
a true and fair view.
We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that may
be identified during the audit.
We report on the audit of a group, and we obtain sufficient appropriate
audit evidence regarding the financial information of the entities or business
activities within the group to express an opinion on the group financial
statements. We are responsible for the direction, supervision and performance
of the audit, and we remains solely responsible for the auditor’s opinion.
We also provide those charged with governance with a statement that
they have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may
reasonably be thought to bear on their independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance,
we determine those matters that were of most significance in the audit of
the financial statements of the current period and are therefore the key audit
matters. These matters are described in the auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determines that a matter should not be communicated
in the report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
Corporate governance statement
In our opinion, based on the work undertaken in the course of our audit
of the financial statements, the description of the main features of the internal
control and risk management systems in relation to the financial reporting
process included in the Corporate Governance Statement, is consistent with
the financial statements and has been prepared in accordance with section
1373(2)(c) of the Companies Act 2014.
Based on our knowledge and understanding of the Group and the Company
and its environment obtained in the course of our audit of the financial statements,
we have not identified material misstatements in the description of the main
features of the internal control and risk management systems in relation to the
financial reporting process included in the Corporate Governance Statement.
30
PART 6___Independent Auditors’ Report
Corporate governance statement (continued)
In our opinion, based on the work undertaken during the course of our
audit of the financial statements, the information required by section 1373(2)
(a),(b),(e) and (f) is contained in the Corporate Governance Statement.
Report on other legal and regulatory requirements
We were appointed by the Board of Directors on 4 February 2010 to audit
the financial statements for the financial year ended 31 December 2009. This
is the ninth year we have been engaged to audit the financial statements of
the Group and the Company.
We are responsible for obtaining reasonable assurance that the financial
statements taken as a whole are free from material misstatement, whether
caused by fraud or error. Owing to the inherent limitations of an audit, there
is an unavoidable risk that material misstatements of the financial statements
may not be detected, even though the audit is properly planned and performed
in accordance with the ISAs Ireland. Our audit approach is a risk-based
approach and is explained more fully in the responsibilities of the auditor for
the audit of the financial statements’ section of our report.
We have not provided non-audit services prohibited by the IAASA’s
Ethical Standard and have remained independent of the entity in conducting
the audit.
The audit opinion is consistent with the additional report to the audit
committee.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the company’s members, as a body, in
accordance with section 391 of the Companies Act 2014. 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.
Cathal Kelly
For and on behalf of
Grant Thornton
Chartered Accountants &
Statutory Audit Firm
Dublin 8
Date: 21 May 2018
31
OVOCA GOLD Plc___Annual Report 2017
7
Financial Statements
Consolidated Income Statement
Administration expenses
Other gains and losses
Operating loss
Finance costs
Finance income
Loss for the financial year before tax
Income tax
Loss for the financial year
Attributable to:
Owners of the parent
Loss per share
Basic loss per share (cents)
Fully diluted loss per share (cents)
Note
5
7
8
8
13
14
14
2017
€’000
(1,439)
606
(833)
(11)
463
(381)
-
(381)
(381)
(381)
2016
€’000
(1,783)
620
(1,163)
(11)
215
(959)
-
(959)
(959)
(959)
2017
$’000
(1,624)
684
(940)
(12)
522
(430)
-
(430)
(430)
(430)
2016
$’000
(1,973)
686
(1,287)
(12)
238
(1,061)
-
(1,061)
(1,061)
(1,061)
(0.47)
(1.18)
(0.53)
(1.30)
(0.47)
(1.18)
(0.53)
(1.30)
All amounts relates to continuing operations.
The accompanying notes on pages 40 to 59 form an integral part
of these financial statements.
32
PART 7___Financial Statements
Consolidated Statement of other Comprehensive (Loss)/Income
Loss for the financial year
Other comprehensive (loss)/income:
Items that may be reclassified
subsequently to profit or loss
Foreign exchange (loss)/gain arising
from translation of financial
statements of a foreign operation
Fair value movement on available for
sale financial assets during the
financial year
Exchange movement on available for
sale financial assets during the
financial year
Other comprehensive (loss)/income
for the financial year
Total comprehensive (loss)/income
for the financial year
Note
2017
€’000
(381)
2016
€’000
(959)
2017
$’000
(430)
2016
$’000
(1,061)
17
17
(3,202)
483
(459)
(352)
1,447
5,600
1,634
6,198
1,068
(687)
(1,068)
(3,104)
2,979
2,020
1,212
2,387
1,957
(3,434)
2,412
1,351
There is no income tax impact in respect of the components recognised
within the statement of other comprehensive (loss)/income.
The accompanying notes on pages 40 to 59 form an integral part of
these financial statements.
33
OVOCA GOLD Plc___Annual Report 2017
7
Consolidated Statement of Changes In Equity
At 1 January 2017
Comprehensive loss:
Loss for the financial year
Other comprehensive income/
(loss):
Fair value movement on
available for sale financial
assets during the financial year
Exchange movement on available
for sale financial assets during
the financial year
Foreign exchange (loss)/gain
arising from translation of
financial statements of a
foreign operations
Transfer to other reserves
Total comprehensive
income/(loss)
Share
capital
€’000
11,057
-
-
-
-
-
-
Balance at 31 December 2017
11,057
Foreign
currency
translation
reserve
€’000
6,947
Share
based
payment
reserve
€’000
1,294
Treasury
shares
Retained
earnings
Total
(attribut-
able to
owners of
the parent)
€’000
(547)
€’000
2,213
€’000
23,471
-
-
-
(3,202)
-
-
-
-
-
(856)
(3,202)
3,745
(856)
438
-
-
-
-
-
-
(547)
(381)
(381)
-
-
-
-
(381)
1,832
1,447
1,068
(3,202)
-
(1,068)
22,403
Other
reserves
€’000
2,507
-
1,447
1,068
-
856
3,371
5,878
At 1 January 2016
11,057
11
6,464
1,294
(547)
3,172
21,451
Comprehensive loss:
Loss for the financial year
Other comprehensive
income/(loss):
Fair value movement on
available for sale financial
assets during the financial year
Exchange movement on
available for sale financial
assets during the financial year
Foreign exchange gain/(loss)
arising from translation of
financial statements of a
foreign operation
Total comprehensive income/
(loss)
-
-
-
-
-
Balance at 31 December 2016
11,057
-
5,600
(3,104)
-
-
-
-
483
2,496
2,507
483
6,947
-
-
-
-
-
-
-
-
-
-
1,294
(547)
(959)
(959)
-
-
-
(959)
2,213
5,600
(3,104)
483
2,020
23,471
The accompanying notes on pages 40 to 59 form an integral part of
these financial statements.
34
PART 7___Financial Statements
Company Statement of Changes in Equity
Share capital
Other reserves
Share based
payment reserve
Retained
earnings
Total (attribut-
able to owners of
the parent)
€’000
11,057
€’000
11
At 1 January 2017
Comprehensive income:
Profit for the financial year
Transfer to other reserves
Total comprehensive income
At 31 December 2017
At 1 January 2016
Comprehensive income:
Profit for the financial year
Total comprehensive income
-
-
-
11,057
11,057
-
-
At 31 December 2016
11,057
€’000
1,294
-
(856)
(856)
€’000
11,553
233
-
233
€’000
23,915
233
-
233
438
11,786
24,148
1,294
9,058
21,420
-
-
2,495
2,495
2,495
2,495
1,294
11,553
23,915
-
856
856
867
11
-
-
11
The accompanying notes on pages 40 to 59 form an integral part of
these financial statements.
35
OVOCA GOLD Plc___Annual Report 2017
7
Consolidated Statement of Financial Position
Note
2017
€’000
2016
€’000
2017
US$'000
2016
US$'000
Assets
Non-current assets
Property, plant and equipment
Available for sale financial assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Loans and receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Ordinary shares
Treasury shares
Retained earnings
Other reserves
Foreign currency translation reserve
Share based payment reserve
Current liabilities
Trade and other payables
Total current liabilities
15
17
18
19
20
21
22
22
23
24
24
24
25
988
15,868
16,856
4
40
-
5,549
5,593
1,517
15,340
16,857
56
34
-
6,741
6,831
1,454
19,008
20,462
5
48
-
6,647
6,700
2,028
16,162
18,190
59
36
-
7,102
7,197
22,449
23,688
27,162
25,387
11,057
11,057
15,586
15,586
(547)
1,832
5,878
3,745
438
(547)
2,213
2,507
6,947
1,294
(607)
3,257
6,585
1,494
792
(607)
3,687
2,780
1,953
1,759
22,403
23,471
27,107
25,158
46
46
217
217
55
55
229
229
Total equity and liabilities
22,449
23,688
27,162
25,387
The accompanying notes on pages 40 to 59 form an integral part of
these financial statements.
Approved on behalf of the Board of Directors on 21 May 2018
Yuri Radchenko
Director
Kirill Golovanov
Director
36
PART 7___Financial Statements
Company Statement of Financial Position
Note
2017
€’000
2016
€’000
2017
US$'000
2016
US$'000
Assets
Non-current assets
Property, plant and equipment
Financial assets
Total non-current assets
Current assets
Trade and other receivables
Loans and receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and Liabilities
Equity
Ordinary shares
Retained earnings
Other reserves
Foreign currency translation reserve
Share based payment reserve
Current liabilities
Trade and other payables
Total current liabilities
15
16
19
20
21
22
23
24
24
24
25
2
27,145
27,147
699
-
2,837
3,536
3
27,145
27,148
792
-
158
950
3
28,599
28,602
837
-
3,398
4,235
4
28,599
28,603
834
-
166
1,000
30,683
28,098
32,837
29,603
11,057
11,786
867
-
438
24,148
6,535
6,535
11,057
11,553
11
-
1,294
23,915
4,183
4,183
15,586
18,129
1,041
(10,486)
739
25,009
15,586
17,867
16
(10,037)
1,764
25,196
7,828
7,828
4,407
4,407
Total equity and liabilities
30,683
28,098
32,837
29,603
The accompanying notes on pages 40 to 59 form an integral part of
these financial statements.
Approved on behalf of the Board of Directors on 21 May 2018
Yuri Radchenko
Director
Kirill Golovanov
Director
37
OVOCA GOLD Plc___Annual Report 2017
7
Consolidated Statement of Cash Flows
Note
2017
€’000
2016
€’000
2017
US$'000
2016
US$'000
Cash flows from operating activities
Continuing operations
Loss for the financial year before tax
Foreign currency movements
Reversal of impairment of tangible
fixed assets
Depreciation
Net finance income
15
8
Decrease/(increase) in inventories
(Increase)/decrease in trade and
other receivables
Decrease in loan and other
receivables
Decrease in trade and other payables
Net cash used in operating
activities
Cash flows from financing activities
Net interest received and dividend
income
8
Net cash generated from financing
activities
Cash flows from investing activities
Net purchases of property, plant and
equipment
Net disposal of property, plant and
equipment
15
Net cash generated from/(used in)
investing activities
Net decrease in cash and cash
equivalents
Cash and cash equivalents at the
beginning of financial year
Cash and cash equivalents at the
end of year
21
21
(381)
(1,215)
-
37
452
52
(6)
-
(171)
(959)
(98)
(229)
44
204
(10)
28
678
(52)
(1,232)
(394)
(452)
(452)
-
492
492
(1,192)
6,741
5,549
(204)
(204)
(1)
-
(1)
(599)
7,340
6,741
(430)
(467)
-
41
510
54
(12)
-
(174)
(478)
(510)
(510)
-
533
533
(455)
7,102
6,647
(1,061)
(352)
(253)
51
226
(8)
32
741
(65)
(689)
(226)
(226)
(2)
-
(2)
(917)
8,019
7,102
The accompanying notes on pages 40 to 59 form an integral part of
these financial statements.
38
PART 7___Financial Statements
Company Statement of Cash Flows
Cash flows from operating activities
Profit (loss) for the financial year
before tax
Foreign currency movements
Depreciation
Net finance expense
(Increase)/decrease in trade and
other receivables
Increase in trade and other payables
Reversal of impairment of financial
assets
Net cash generated from operating
activities
Cash flows from financing activities
Net finance expense
Net cash used in financing
activities
Cash flows from investing activities
Net purchases of property, plant and
equipment
Net cash used in investing
activities
Net increase in cash and cash
equivalents
Cash and cash equivalents at the
beginning of year
Cash and cash equivalents at the
end of year
21
21
Note
15
2017
€’000
233
-
1
(4)
93
2,352
2016
€’000
2,495
-
2
(6)
567
398
2017
US$'000
2016
US$'000
262
(449)
1
(5)
(3)
3,421
2,761
(968)
3
(7)
651
272
-
(3,365)
-
(2,619)
2,675
4
4
-
-
2,679
158
2,837
91
6
6
(1)
(1)
96
62
158
3,227
5
5
-
-
3,232
166
3,398
93
7
7
(2)
(2)
98
68
166
The accompanying notes on pages 40 to 59 form an integral part of
these financial statements.
39
OVOCA GOLD Plc___Annual Report 2017
8
Notes
To The Financial Statements
1
General Information
Ovoca Gold Plc (“the Company”) is a public limited company incorporated in Ireland on 15 January 1985. The address of its
registered office and principal place of business is 17 Pembroke Street Upper Dublin 2, Ireland.
These financial statements for the financial year ended 31 December 2017 consolidate the individual financial statements of
the Company and its subsidiaries (together referred to as ‘the Group’).
The Group’s main activity is the exploration for precious metals and other minerals in Russia.
On 21 April 1987, the Company’s shares were admitted to trading on the Irish Stock Exchange Enterprise Securities Market
(ESM) and on 30 June 2005 to the London Stock Exchange’s Alternative Investment Market (AIM).
2
Statement of Accounting Policies
The following accounting policies have been applied consistently in dealing with items which are considered material in
relation to the Group’s financial statements.
Statement of compliance
The consolidated and Company financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and their interpretations approved by the International Accounting Standards Board (IASB) as
adopted by the European Union (EU) and Irish Statute comprising the Companies Act, 2014 and Companies (Accounting) Act
2017.
The Company has availed of the exemption in Section 304(2) of the Companies Act, 2014 not to present its individual Income
Statement and related notes that form part of the approved Company financial statements.
The Company has also availed of the exemption from filing its individual Income statement with the Registrar of Companies
as permitted by Section 304(2)(c) of the Companies Act, 2014.
The IFRSs adopted by the EU as applied by the Company and the Group in the preparation of these financial statements are
those that were effective at 31 December 2017.
Application of New and Revised IFRSs
The following standards and interpretations became effective for the 2017 financial statements but did not have a material
impact on the Group’s financial statements:
> IAS 7 Statement of Cash Flows (amendment) – Disclosure Initiative;
> IAS 12 Income Taxes (amendment) – Recognition of Deferred Tax Assets for Unrealised Losses
> Annual improvements to IFRSs 2012 – 2014-2016 Cycle – various standards;
> IFRS 12 Disclosure of Interests in Other Entities (amendment) – Clarification of the scope of disclosure requirements
in IFRS 12;
40
PART 8___ Notes to the Financial Statements
2
Statement of Accounting Policies (continued)
Application of New and Revised IFRSs (continued)
The IASB and IFRIC have issued additional standards and interpretations which are effective for periods starting after
January 1, 2017, majority of which have not yet been adopted by the EU. The following standards and interpretations have yet
to be adopted by the Group:
Standards
Effective date
IFRS 9
Financial Instruments
IFRS 15
Revenue from Contracts with Customers
January 1, 2018 (adopted by the EU with effectivity
date of January 1, 2018)
January 1, 2018 (adopted by the EU with effectivity
date of January 1, 2018)
IFRS 16
Leases
January 1, 2019 (not yet adopted by the EU)
The Group has not anticipated that there will be a material impact on the adoption of these standards
and interpretations on its financial statements on initial adoption.
Basis of preparation
The Group and Company financial statements are prepared on the historical cost basis as modified
by the measurement at fair value of certain financial assets and liabilities at fair value through profit
and loss and available-for-sale financial assets. The accounting policies have been applied consistently
by Group entities.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Ovoca Gold plc and
its subsidiaries for the financial year ended 31 December 2017.
Subsidiaries are entities controlled by the Group. Control is achieved when the Group is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. Specifically, the Group controls an investee if, and
only if, the Group has:
> Power over the investee (i.e., existing rights that give it the current ability to direct the relevant
activities of the investee);
> Exposure, or rights, to variable returns from its involvement with the investee; and
> The ability to use its power over the investee to affect its returns.
Generally, when the Group has less than a majority of the voting or similar rights of an investee,
the Group considers all relevant facts and circumstances in assessing whether it has power over an
investee, including:
> The contractual arrangement(s) with the other vote holders of the investee;
> Rights arising from other contractual arrangements; and
> The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated
from the date that control commences until the date that control ceases. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group. Intra-group balances and any unrealised gains or losses or income or expenses arising from
intra-group transactions are eliminated in preparing the Group financial statements.
41
OVOCA GOLD Plc___Annual Report 2017
8
2
Statement of Accounting Policies (continued)
Functional and presentation currency
These consolidated financial statements are presented in Euro Thousand (€’000), which is the
Company’s functional currency. The US$ Thousand ($’000) equivalent is shown for information purposes.
Foreign currencies
Monetary assets and liabilities denominated in a foreign currency are translated into Euro at the
exchange rate ruling at the statement of financial position date. Revenues, costs and non-monetary
assets are translated at the exchange rates ruling at the dates of the transactions. Exchange differences
are dealt with through the income statement.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated
using the exchange rates at the transaction date), except for non-monetary items measured at fair value
which are translated using the exchange rates at the date when fair value was determined.
On consolidation, the assets and liabilities of overseas subsidiary companies are translated into
Euro at the rates of exchange prevailing at the statement of financial position date. Exchange differences
arising from the restatement of the opening statements of financial position of these subsidiary
companies are dealt with through reserves. The operating results of overseas subsidiary companies are
translated into Euro at the average rates applicable during the year.
On the disposal of a foreign operation, the cumulative amount of the exchange differences relating
to that foreign operation, recognised in other comprehensive income and accumulated in the separate
component of equity, shall be reclassified from equity to the income statement when the gain or loss
on disposal is recognised.
Revenue recognition – interest revenue
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to that asset’s net carrying amount.
Taxation
Taxation on the profit or loss for the period comprises current and deferred tax. Taxation is
recognised in the income statement except to the extent that it relates to items recognised directly in
equity, in which case the related tax is recognised directly in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates and
laws that have been enacted or substantially enacted at the statement of financial position date, and
any adjustment to tax payable in respect of previous periods.
Deferred tax is provided on the basis of the liability method on temporary differences at the
statement of financial position date. Temporary differences are defined as the difference between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. However,
deferred tax is not accounted for, if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting nor
taxable profit or loss, or where, in respect of taxable temporary differences associated with investments
in subsidiaries, joint ventures and associates, the timing and reversal of the temporary differences is
subject to control by the Group and it is probable that reversal will not occur in the foreseeable future.
Deferred tax assets and liabilities are not subject to discounting and are measured at the tax rates that
are anticipated to apply in the period in which the asset is realised or the liability is settled based on
tax rates and tax laws that have been enacted or substantively enacted at the statement of financial
position date. The carrying amounts of deferred tax assets are subject to review at each year end date
and are reduced to the extent that future taxable profits are considered to be inadequate to allow all
or part of any deferred tax asset to be utilised.
Operating leases
Operating lease rentals are charged to the income statement on a straight line basis over the
lease term.
Inventories
Inventories are carried at the lower of cost or net realisable value.
42
PART 8___ Notes to the Financial Statements
2
Statement of Accounting Policies (continued)
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Given the short-dated nature of
these assets the original invoice value equates to initial fair value. Trade receivables are subsequently
measured at amortised cost using the effective interest method, less an impairment provision when there
is objective evidence that it will not be possible to collect all amounts due according to the original terms
of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy and default or delinquency in payments are considered indicators that the trade receivable
is impaired. The amount of the provision is the difference between the asset’s carrying amount and the
present value of the estimated future cash flows, discounted at the original rate of interest. The amount
of the provision is recognised in the income statement in selling and distribution costs.
Other loans and receivables
Other loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not traded in an active market. They are included at fair value in non-current assets unless the
investment is due to mature within 12 months of the statement of financial position date. Loans and
receivables are recognised at fair value on recognition and amortised cost thereafter. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy and default or delinquency in
payments are considered indicators that the trade receivable is impaired. The amount of the provision is
the difference between the asset’s carrying amount and the present value of the estimated future cash
flows, discounted at the original rate of interest. The amount of the provision is recognised in the income
statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits, including bank deposits of less
than three months maturity. Bank overdrafts that are repayable on demand and form an integral part of
the Group’s cash management are included as a component of cash and cash equivalents for the purpose
of the statement of cash flows.
Intangible assets (deferred exploration costs)
In accordance with International Financial Reporting Standard 6 - Exploration for and Evaluation of
Mineral Resources, the Group uses the cost method of recognition. Exploration costs include licence costs,
survey, geophysical and geological analysis and evaluation costs, costs of drilling and project-related
overheads.
Exploration expenditure in respect of properties and licenses not in production is deferred and is
carried forward in the statement of financial position under intangible assets in respect of each area of
interest where:
> the operations are ongoing in the area of interest and exploration or evaluation activities have not
reached a stage which permits a reasonable assessment of the existence or otherwise of economically
recoverable reserves; or
> such costs are expected to be recouped through successful development and exploration of the area of
interest or alternatively by its realisation.
When the Directors decide that no further expenditure on an area of interest is worthwhile, the
related expenditure is written off or down to an amount which it considers represents the residual value
of the Group’s interest therein.
Property, plant and equipment and depreciation
Property, plant & equipment are stated at cost, less accumulated depreciation. No depreciation is
provided on land. Depreciation is provided at rates calculated to write off the cost less residual value of
each asset over its expected useful life, which are reviewed each financial year, as follows:
Mining equipment
Office furniture and equipment
Fixtures and Fittings
Buildings
- 20% Straight line
- 10% Straight line
- 20% Straight line
- 2% Straight line
Investments in subsidiaries
Investments in subsidiaries are measured at cost less accumulated impairment.
43
OVOCA GOLD Plc___Annual Report 2017
8
2
Statement of Accounting Policies (continued)
Impairment
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication
exists then the asset’s recoverable amount is estimated. For intangible assets that have indefinite lives
or that are not yet available for use, recoverable amount is estimated at each reporting date.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit
exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that is
expected to generate cash flows that largely are independent from other assets and groups. Impairment
losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating
units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to
reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. The
recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risk specific to the asset. With the exception of goodwill, all assets are subsequently reassessed
for indications that an impairment loss previously recognised may no longer exist. An impairment loss is
reversed if the asset’s or cash-generating unit’s recoverable amount exceeds its carrying amount.
Available-for-sale financial assets
The Group’s investments in equity securities that are not accounted for as a subsidiary, associate or
joint venture are classified as available-for-sale financial assets. Subsequent to initial recognition, they
are measured at fair value and changes therein, including translation differences, are recognised directly
in equity. The fair value of investments classified as available-for-sale is their quoted market price at the
statement of financial position date. When such an investment is derecognised, the cumulative gain or
loss in equity is transferred to profit or loss.
The Group assesses at each statement of financial position date whether there is objective evidence
that a financial asset or a group of financial assets are impaired. In the case of equity securities classified
as available for sale, a significant or prolonged decline in the fair value of the security below its cost is
considered as an indicator that the securities are impaired. If any such evidence exists for available-for-
sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and
the current fair value, less any impairment loss on that financial asset previously recognised in profit and
loss – is removed from equity and recognised in the income statement. Impairment losses recognised in
the income statement on equity instruments are not reversed through the income statement.
Trade payables
Trade payables are initially stated at fair value which, given the short-dated nature of these liabilities
equates to initial cost. Trade payables are subsequently measured at amortised cost, using the effective
interest rate method, when the age or payment terms of the liability indicates that initial cost no longer
equates to fair value.
Equity and reserves
Ordinary shares represents the nominal (par) value of shares that have been issued. Share premium
includes any premiums received on issue of share capital. Any transaction costs associated with the issuing
of shares are deducted from share premium.
Treasury shares are recognised at cost and deducted from equity.
Other reserves comprise of the gains and losses including its foreign exchange movement relating
to available for sale financial assets equity instruments and transfers of expired share based payment
reserve to other reserve.
Foreign currency translation reserve comprises translation differences arising from the translation
of the financial statements of the Group’s foreign entities into euro.
Retained earnings include all current and prior period retained profits. All transactions with owners
of the parent are recorded separately within equity.
44
PART 8___ Notes to the Financial Statements
2
Statement of Accounting Policies (continued)
Share based payments
Employees (including Directors) of the Group may be entitled to remuneration in the form of share-
based payment transactions, whereby employees render service in exchange for shares or rights over shares.
Details of the Group’s share option scheme are set out in note 28 of the consolidated financial statements.
For any share options granted, the fair value of the option is recognised as an expense in the income
statement with a corresponding increase in equity. The fair value is measured at grant date excluding the
impact of non-market conditions and spread over the period during which the employees become
unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the
actual number of share options that are expected to vest where vesting conditions are non-market
conditions. When the options are exercised, the proceeds received, net of any directly attributable
transaction costs, are credited to share capital (nominal value) and share premium.
Earnings per share
Fair values
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS
is calculated by dividing the income or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by
adjusting the income or loss attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise
convertible notes and share options granted to employees.
For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based
on the degree to which inputs to the fair value measurements are observable and the significance of the
inputs to the fair value measurement in its entirety, which are described as follows:
Level 1:
Level 2:
Level 3:
quoted prices (unadjusted) in active markets for identical assets and liabilities
valuation techniques for which the lowest level of inputs which have a significant
effect on the recorded fair value are
observable, either directly or indirectly
valuation techniques for which the lowest level of inputs that have a significant
effect on the recorded fair value are not
based on observable market data.
Available-for-sale financial assets are measured at Level 1. There were no transfers between Levels
in 2017 and 2016.
Provisions, contingent liabilities and contingent assets
Provisions are recognized when present obligations as a result of a past event will probably lead to
an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount
of the outflow may still be uncertain. A present obligation arises from the presence of legal or constructive
commitment that has resulted from past events. Provisions are measured at the estimated expenditure
required to settle the present obligation, based on the most reliable evidence available at the reporting
date, including the risks and uncertainties associated with the present obligation. Provisions are discounted
to their present values, where the time value of money is material. All provisions are reviewed at each
statement of financial position date and are adjusted to reflect the current best estimate.
Significant management judgment in applying accounting policies and estimation uncertainty
The preparation of the financial statements requires management to make judgments, estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes.
The judgments, estimates and assumptions used in the financial statements are based upon management’s
evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual
results could differ from these estimates, and the effect of any change in estimates will be adjusted in
the financial statements when they become reasonably determinable.
Judgments, estimates and assumptions are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable
under these circumstances.
45
OVOCA GOLD Plc___Annual Report 2017
8
2
Statement of Accounting Policies (continued)
Judgments
In the process of applying the company’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the amounts
recognised in the financial statements:
Determination of Group’s functional currency
The determination of a company’s functional currency often requires significant judgement where
the primary economic environment on which it operates may not be clear. Based on the economic substance
of the underlying circumstances relevant to the Company, the functional currency of the company has
been determined to be the Euro. The Euro is the currency of the primary economic environment in which
the company operates.
Determining classification of financial instruments
The Group classifies a financial instrument, or its component parts, on initial recognition as a financial
asset, a financial liability or an equity instrument in accordance with the substance of the contractual
agreement and the definitions of a financial asset, a financial liability or an equity instrument. The substance
of a financial instrument, rather than its legal form, governs its classification in the financial statements.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition
and measurement of assets, liabilities, income and expenses is provided below. Actual results may be
substantially different.
Estimating allowance for impairment on inventories
Management estimates the net realisable values of inventories, taking into account the most reliable
evidence available at each reporting date. The future realisation of these inventories may be affected by
future technology or other market-driven changes that may reduce future selling prices.
Estimating allowance for trade, loans and other receivables
Significant financial difficulties of a debtor, probability that the debtor will enter bankruptcy and
default or delinquency in payments are considered indicators that loans and receivables may be impaired.
The Directors use all available information to them to assess if loans and receivables may be impaired.
The amount of any provision is the difference between the asset’s carrying amount and the present value
of the estimated future cash flows, discounted at the original rate of interest if applicable.
Useful lives of depreciable assets
The annual depreciation charge depends primarily on the estimated lives of each type of asset and,
in certain circumstances, estimates of fair values and residual values. The directors annually review these
asset lives and adjust them as necessary to reflect current thinking on remaining lives in light of technological
change, prospective economic utilisation and physical condition of the assets concerned. Changes in
asset lives can have significant impact on depreciation charges for the period. It is not practical to quantify
the impact of changes in asset lives on an overall basis, as asset lives are individually determined, and
there are a significant number of asset lives in use. The impact of any change would vary significantly
depending on the individual changes in assets and the classes of assets impacted.
Impairment of non-financial assets
Determining whether non-financial assets are impaired requires an estimation of the value in use
of the cash generating units to which the assets have been allocated. The value in use calculation requires
the directors to estimate the future cash flows to arise from the cash-generating unit and a suitable
discount rate in order to calculate present value. Where the actual cash flows are less than expected, a
material impairment may arise.
Measurement of the recoverable amounts of intangible assets
In accordance with International Financial Reporting Standard 6 - Exploration for and Evaluation of
Mineral Resources, the Group uses the cost method of recognition. Exploration costs include licence costs,
survey, geophysical and geological analysis and evaluation costs, costs of drilling and project-related
overheads. The Directors base the recoverability of the carrying value of these intangible assets on industry
specific data in addition to using their judgment to assess the assets recoverability.
46
PART 8___ Notes to the Financial Statements
2
Statement of Accounting Policies (continued)
Utilisation of tax losses
The Directors have not deemed it appropriate to recognise deferred tax assets resulting from significant
losses being carried forward from previous years on the basis that it is not certain these losses will be
utilized in future periods.
Fair value measurement
Management uses valuation techniques to determine the fair value of financial instruments (where
active market quotes are not available) and non-financial assets. This involves developing estimates and
assumptions consistent with how market participants would price the instrument. Management bases its
assumptions on observable data as far as possible but this is not always available. In that case management
uses the best information available. Estimated fair values may vary from the actual prices that would be
achieved in an arm’s length transaction at the reporting date.
3
Going concern
The Directors have reviewed the current state of the group’s finances, taking into account resources currently available. The
Directors are satisfied that sufficient funding will be available to the group to enable it to trade for the foreseeable future.
On this basis the directors consider that it is appropriate to prepare the financial statements on the going concern basis. The
Directors consider that in preparing the financial statements they have taken into account all information that could
reasonably be expected to be available. The financial statements do not include any adjustments that would result if the
Director’s plans were not successful.
47
OVOCA GOLD Plc___Annual Report 2017
8
4
Segmental reporting
(a) Primary reporting format – business segments
At 31 December 2017, the Group had two business segments, exploration activities and investment. Exploration activities are
primarily carried out by subsidiary companies, Comtrans, Bulun and Magsel which are carried out in the Russian Federation.
Investing activities are carried out by another subsidiary company, Silver Star Limited, a company located in Bermuda.
Administrative activities represent group administration costs, primarily incurred in Ireland and the Russian Federation.
Continuing Operations – 31 December 2017
Exploration
activities
€’000
Administrative
€’000
Investment
€’000
Exploration
activities
US$’000
Total
€’000
Investment
US$’000
Administrative
US$’000
Total
US$’000
Administration
expenses
Other (losses)/gains
Operating loss
Finance costs
Finance income
(141)
(5)
(146)
(2)
-
(Loss)/gain before tax
(148)
Income tax
-
(Loss)/gain after tax
(148)
Segment assets
Segment liabilities
Net assets
997
(5)
992
(831)
555
(276)
(5)
463
182
-
182
(467)
(1,439)
56
(411)
(4)
-
606
(833)
(11)
463
(159)
(6)
(165)
(1)
-
(415)
(381)
(166)
-
-
-
(415)
(381)
(166)
(631)
320
(311)
(6)
522
205
-
205
18,589
2,863
22,449
1,466
22,267
-
(41)
(46)
(6)
-
(834)
(1,624)
370
(464)
(5)
-
684
(940)
(12)
522
(469)
(430)
-
-
(469)
(430)
3,429
(49)
27,162
(55)
18,589
2,822
22,403
1,460
22,267
3,380
27,107
Continuing Operations – 31 December 2016
Exploration
activities
€’000
Investment
€’000
Administrative
€’000
Exploration
activities
US$’000
Total
€’000
Investment
US$’000
Administrative
US$’000
Total
US$’000
Administration
expenses
Other gains/(losses)
Operating gain/(loss)
Finance costs
Finance income
Gain/(loss) before
tax
Income tax
(147)
177
30
-
-
3
-
Gain/(loss) after tax
30
(751)
579
(885)
(136)
(1,783)
(163)
(831)
(979)
(1,973)
620
196
(3,084)
3,574
686
(172)
(1,021)
(1,163)
(5)
215
38
-
38
(6)
-
(11)
215
-
(1,027)
(959)
-
-
(1,027)
(959)
33
-
33
-
33
(3,915)
2,595
(1,287)
(6)
238
(6)
-
(12)
238
(3,683)
2,589
(1,061)
-
-
-
(3,683)
2,589
(1,061)
Segment assets
1,587
21,856
245
23,688
2,102
23,027
258
25,387
Segment liabilities
(8)
-
(209)
(217)
(8)
-
(221)
(229)
Net assets
1,579
21,856
36
23,471
2,094
23,027
37
25,158
48
PART 8___ Notes to the Financial Statements
5
Loss on ordinary activities before taxation on continuing
operations
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
Administration expenses
Employee expense (Note 10)
Directors remuneration (Note 11)
Depreciation (Note 15)
Services provided by the Group's auditors (Note 6)
Operating lease rentals - property (Note 31)
Other administration expenses
Total administration expenses
6
Services provided by the auditor
Audit services – group audit
Audit services- statutory entities
Tax advisory services
Total auditors remuneration
7
Other gains and losses
Reversal of previously impaired fixed assets
Trade payables written back (Note 25)
Realised foreign exchange gains
Other expenses
Total other gains
(227)
(440)
(37)
(50)
(11)
(674)
(247)
(483)
(44)
(50)
(14)
(945)
(257)
(497)
(41)
(55)
(12)
(763)
(1,439)
(1,783)
(1,624)
(272)
(536)
(51)
(55)
(15)
(1,044)
(1,973)
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
39
3
8
50
36
6
8
50
43
3
9
55
39
7
9
55
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
-
149
497
(40)
606
229
-
391
-
620
-
168
561
(45)
684
253
-
433
-
686
8
Finance costs and finance income
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
Finance costs
Bank interest and charges
Total finance costs
Finance income
Dividends received
Total finance income
(11)
(11)
463
463
(11)
(11)
215
215
(12)
(12)
522
522
(12)
(12)
238
238
9
Employees
31/12/2017
Number
31/12/2016
Number
The average monthly number of employees of the group during the financial year was (excluding directors):
Administration and operational staff
6
6
49
OVOCA GOLD Plc___Annual Report 2017
8
10
Employment costs
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
Staff costs (inclusive of directors) during the financial year were as follows:
Wages and salaries
Social insurance costs
Total employment costs
The above employment costs relate to short term benefits only.
641
26
667
727
3
730
724
30
754
805
3
808
11
Directors’ remuneration
2017
2016
31/12/2017
31/12/2016
31/12/2017
31/12/2016
Share-based benefits
Short-term benefits
Mikhail Mogutov
Timothy McCutcheon
Yuri Radchenko
Donald Schissel
Leonid Skoptsov
Number of options
-
-
-
-
-
-
-
-
200,000
-
Kenneth Kuchling
200,000
200,000
Kirill Golovanov
-
1,800,000
Directors remuneration
200,000
2,200,000
€’000
106
16
16
16
106
16
164
440
€’000
108
16
16
16
75
16
236
483
US$’000
US$’000
120
18
18
18
120
18
185
497
120
18
18
18
83
18
261
536
The share based benefits relate to the number of exercisable share options held by directors at the year end. Please refer to
note 28 for details on share options granted in the year and the expense recognised. There were no options exercised during
the financial year. 3,000,000 share options expired during the financial year.
12
Retirement benefit costs
The Group does not operate a pension scheme.
13
Income tax (Group)
Analysis of tax charge for the year
Income tax
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
-
-
-
-
Reconciliation of factors affecting the income tax charge for the year
Loss on ordinary activities before tax
Corporation tax at standard rate 2017: 12.5% (2016: 12.5%)
Effects of
Ineligible costs and losses carried forward to future periods
Total income tax
(381)
(48)
48
-
(959)
(120)
120
-
(430)
(54)
(1,061)
(133)
54
-
133
-
A deferred tax asset has not been recognised at the reporting date in respect of trading tax losses. Due to the history of past
losses, the Company has not recognised any deferred tax asset in respect of tax losses to be carried forward which are approx-
imately €9.2 million at 31 December 2017 (2016: €8.8 million).
50
PART 8___ Notes to the Financial Statements
14
Loss per share
Basic loss per share is calculated by dividing the weighted average number of ordinary shares in issue into the loss after
taxati on for the period.
Diluted loss per share is calculated by adjusting the weighted average number of share in issue to assume conversion of all
potential ordinary shares. For the purpose of calculating diluted loss per share for both 2016 and 2015, the potentially
exercisable instruments in issue would have the effect of being antidilutive and, as such, the diluted loss per share is the
same as the basic loss per share for both years.
Basic loss per share
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
Loss after taxation from continuing operations
(381)
(959)
(430)
(1,061)
Weighted average number of ordinary shares (thousands)
81,564
81,564
81,564
81,564
Basic loss per share
(0.47)c
(1.18)c
(0.53)c
(1.30)c
Diluted loss per share
Weighted average number of ordinary shares (all measures)
(thousands)
81,564
81,564
81,564
81,564
Fully diluted loss per share
(0.47)c
(1.18)c
(0.53)c
(1.30)c
Weighted average number of ordinary shares excludes 6,895,000 (2016: 6,895,000) ordinary shares which are held within the
group as treasury shares.
15
Property, plant and
equipment
Group
Mining
equip.
€'000
Office
furniture &
equip.
€'000
Land and
buildings
€'000
Cost
At 1 January 2017
Disposals
At 31 December 2017
Depreciation
At 1 January 2017
Charge for year
Depreciation on
disposal
At 31 December 2017
Net book values
At 31 December 2017
At 31 December 2016
810
(501)
309
203
2
(9)
196
113
607
70
-
70
67
1
-
68
2
3
1,131
-
1,131
224
34
-
258
873
907
51
Total
€'000
2,011
(501)
1,510
494
37
(9)
522
988
1,517
Mining
equip.
$'000
Office
furniture &
equip.
$'000
Land and
buildings
$'000
Total
$'000
2,647
(543)
2,104
619
41
(10)
650
111
-
111
105
3
-
108
1,526
-
1,526
284
36
-
320
3
6
1,206
1,242
1,454
2,028
1,010
(543)
467
230
2
(10)
222
245
780
OVOCA GOLD Plc___Annual Report 2017
8
Property, plant and equipment (continued)
The residual values and useful lives of property, plant and equipment are reviewed at each financial year end. The useful lives
have been reviewed and deemed to be appropriate.
Company
Cost
At 1 January 2017
Additions
At 31 December 2017
Depreciation
At 1 January 2017
Charge for year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Office furniture and
equipment €'000
31/12/2017
Total
€'000
Office furniture
and equipment
$'000
50
-
50
47
1
48
2
3
50
-
50
47
1
48
2
3
68
-
68
64
1
65
3
4
Total
$'000
68
-
68
64
1
65
3
4
16
Financial assets – company
Silver Star Limited
Investment in subsidiaries
at cost
Movement
during the
financial
year
€’000
-
-
01/01/2017
€’000
27,145
27,145
31/12/2017
€’000
01/01/2017
US$’000
27,145
28,599
27,145
28,599
Movement
during the
financial
year
US$’000
-
-
31/12/2017
US$’000
28,599
28,599
In the opinion of the directors, the fair value of financial assets in the company statement of financial position at 31
December 2017 was equal to the carrying value at that date.
52
PART 8___ Notes to the Financial Statements
At 31 December 2017 the company had the following direct and indirect subsidiary undertakings:
Name
CJSC Bulun
Magsel Limited
Comtrans
Registered office & country of incorporation
Activity
13 A Koltcevaya street, Magadan 685000, Russian
Federation
Mineral Exploration
13 A Koltcevaya street, Magadan 685000, Russian
Federation
Mineral Exploration
13 A Koltcevaya street, Magadan 685000, Russian
Federation
Support Company
Ovoca Mining Limited
36 Vyronos Avenue, Nicosia Tower Center, 8th Floor,
1506 Nicosia, Cyprus
Dormant
Silver Star Limited
27 Reid Street, 1st Floor, Hamilton HM11, Bermuda
Investment
Ovoca Gold (Russia) Limited
17 Pembroke Street Upper, Dublin 2, Ireland
Support company
Proportion
holding
100%
100%
100%
100%
100%
100%
All the shares are directly held in subsidiaries, with the exception of CJSC Bulun and Magsel Limited which are held through
Silver Star Limited, and comprise of ordinary shares held in each company.
17 Available for sale financial assets – Group
At 1 January
Fair value movement
Foreign exchange movement
Translation adjustment
At 31 December
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
15,340
1,447
1,068
(1,987)
15,868
12,263
5,600
(3,104)
581
16,162
1,634
1,212
-
13,398
6,198
(3,434)
-
15,340
19,008
16,162
53
OVOCA GOLD Plc___Annual Report 2017
8
17 Available for sale financial assets – Group (continued)
Available for sale financial assets include the following:
Quoted securities
15,868
15,340
19,008
16,162
Polymetal International plc
Asset managed fund
Other
14,577
1,276
15
14,028
1,289
23
17,461
1,529
18
14,780
1,358
24
15,868
15,340
19,008
16,162
The Investment in Polymetal International plc represents the holding of 1,405,000 shares. Polymetal International plc is
listed on the London stock exchange. The asset managed fund represents investments in quoted investments in US listed
entities.
The above securities are denominated in the following currencies:
Sterling
US Dollar
AUS Dollar
€’000
14,577
1,276
15
€’000
14,028
1,289
23
US$’000
US$’000
17,461
1,529
18
14,780
1,358
24
15,868
15,340
19,008
16,162
At 31 December 2017, if the underlying equity securities price in respect of investments held by the Group and classified on
the statement of financial position as available-for-sale had strengthened/weakened by 5% with all other variables held con-
stant, other components of equity would have been €’000 793/US$’000 950 higher/lower (2016: €’000 767/US$’000 808
higher/lower), mainly as a result of changes in fair values. All items listed are valued using Level 1 inputs. Valuation methods
for Levels 1, 2 and 3 are described in the “fair value hierarchy” section of the accounting policies.
The Group noted a decline in market value of the available for sale financial assets for Polymetal International plc from £9.21
per share to approximately £7.20 at a date close to signing the financial statements. The decline in market value reflects
circumstances that have arisen subsequent to the end of the reporting period. Therefore, the Company does not adjust the
carrying value of these assets in these financial statements.
18
Inventories
Inventories
31/12/2017
€’000
31/12/2016
€’000
31/12/2017
US$’000
31/12/2016
US$’000
4
56
5
59
The Group has not recognised an inventory write down during the year (2016: €nil).
In the opinion of the directors the replacement cost of the stock did not differ significantly from the figure shown.
54
PART 8___ Notes to the Financial Statements
19
Trade and other receivables
Group
31/12/2017
€’000
Group
31/12/2016
€’000
Company
31/12/2017
€’000
Company
31/12/2016
€’000
Group
31/12/2017
US$’000
Group
31/12/2016
US$’000
Company
31/12/2017
US$’000
Company
31/12/2016
US$’000
Tax and social
welfare
Amounts owed by
group
undertakings
40
-
40
34
-
34
6
4
693
699
788
792
48
-
48
36
-
36
7
4
830
837
830
834
All amounts are short term. The net carrying value of trade receivables is considered a reasonable approximation of fair
value.
All balances are current and deemed to be recoverable.
20
Loans and receivables
Group
31/12/2017
€’000
Group
31/12/2016
€’000
Company
31/12/2017
€’000
Company
31/12/2016
€’000
Group
31/12/2017
US$’000
Group
31/12/2016
US$’000
Company
31/12/2017
US$’000
Company
31/12/2016
US$’000
Advanced during
the year
Amounts received
Loans receivable
-
-
-
678
(678)
-
-
-
-
678
(678)
-
-
-
-
741
(741)
-
-
-
-
741
(741)
-
On February, 5 2014 the Company entered in to a loan agreement, as the lender with Taymura LLC, an unrelated company
registered in Russia, as the Borrower. The Company has provided Taymura LLC a loan in the amount of US$6,345,000. The loan
was advanced at an initial interest rate of 8% per annum, increasing in the event of default to 12% per annum.
In return for the Company received an exclusive period to complete due diligence on JSC Evenkiya Fuel and Energy Company
(ETEK) and LLC Taymura. The full amount of the loan and any interest accruing, was secured by certain receivables of LLC
Taymura, non-encumbrance of the assets for the exclusive period and personal guarantees of a number of the shareholders of
LLC Taymura. The loan subsequently went into default for non-repayment.
Ovoca Gold plc has taken measures under Russian law to recover the full amount including interest. Various assets have been
seized by the courts on behalf of the Company and to date the company has recovered approximately US$1 million in cash and
receivables.
It is intended to rigorously pursue all available options to recover the loans and the Company has already taken steps to
pursue the personal guarantees which were used to secure loan. The Directors believe that substantially the entire loan will
be recovered, however there can be no certainty in that regard.
55
OVOCA GOLD Plc___Annual Report 2017
8
21
Cash and cash equivalents
Group
31/12/2017
€’000
Group
31/12/2016
€’000
Company
31/12/2017
€’000
Company
31/12/2016
€’000
Group
31/12/2017
US$’000
Group
31/12/2016
US$’000
Company
31/12/2017
US$’000
Company
31/12/2016
US$’000
Cash at bank and
in hand
Short term
deposits
22
Share capital
Group and Company
Authorised equity
4,921
6,027
2,837
628
5,549
714
6,741
-
2,837
158
-
158
5,895
6,350
3,398
752
6,647
752
7,102
-
3,398
166
-
166
31/12/2017
€
31/12/2016
€
31/12/2017
US$
31/12/2016
US$
120,000,000 Ordinary shares of 12.5 cent each
15,000,000
15,000,000
21,000,000
21,000,000
15,000,000
15,000,000
21,000,000
21,000,000
Group and Company
Issued, called up and fully paid
At 1 January 2017
Number of
ordinary
shares
Share capital
€’000
Share capital
US$’000
88,458,806
11,057
15,586
At 31 December 2017
88,458,806
11,057
15,586
On 28 April 2015, Ovoca Gold plc purchased 5,800,000 ordinary shares of nominal value €0.125 each of the issued share
capital of the Company at a price of GBP 6.8p. Ovoca Gold plc intends to hold these shares as treasury stock. As of year-end
2017, the Company has a total of 81,563,806 Ordinary Shares in issue excluding treasury shares of 6,895,000. The purchase
was made pursuant to the authority granted by shareholders at an Extraordinary General Meeting of the Company held on 17
October 2014. To date, Ovoca Gold plc has acquired 7.8% (2016: 7.8%) of its own share capital under this approved share
buyback programme.
23
Retained earnings
Retained earnings
at 1 January
(Loss)/profit for
the year
Retained earnings
at 31 December
Group
31/12/2017
€’000
Group
31/12/2016
€’000
Company
31/12/2017
€’000
Company
31/12/2016
€’000
Group
31/12/2017
US$’000
Group
31/12/2016
US$’000
Company
31/12/2017
US$’000
Company
31/12/2016
US$’000
2,213
3,172
11,553
9,058
3,687
4,748
17,867
15,106
(381)
(959)
233
2,495
(430)
(1,061)
262
2,761
1,832
2,213
11,786
11,553
3,257
3,687
18,129
17,867
In accordance with the provisions of the Companies Act 2015, Section 304(2), the Company has not presented an income
statement. An income for the year of €’000 233 (2016: income of €’000 2,495) has been recognised in the income statement of
the Company.
56
PART 8___ Notes to the Financial Statements
24 Other reserves
Group
Other
reserves
€’000
Foreign
currency
reserve
€’000
Share
based
payment
reserve
€’000
Total
€’000
Other
reserves
US$’000
Foreign
currency
reserve
US$’000
Share
based
payment
reserve
US$’000
Total
US$’000
At 1 January 2017
2,507
6,947
1,294
10,748
2,780
1,953
1,759
6,492
Fair value movement on
available for sale financial
assets during the year
Foreign exchange movement
on available for sale
financial assets during
the year
Foreign exchange gain/(loss)
arising from translation
of financial statements
of a foreign operations
1,447
1,068
-
-
-
(3,202)
-
-
-
1,447
1,634
1,068
1,212
-
-
-
-
1,634
1,212
Transfer to other reserve
856
-
(856)
-
At 31 December 2017
5,878
3,745
438
10,061
6,585
1,494
(3,202)
-
959
(459)
-
(8)
(467)
(959)
792
-
8,871
At 1 January 2016
11
6,464
1,294
7,769
16
2,305
1,759
4,080
Fair value movement on
available for sale financial
assets during the year
Foreign exchange movement
on available for sale
financial assets during
the year
Foreign exchange gain/(loss)
arising from translation
of financial statements
of a foreign operations
5,600
(3,104)
-
-
-
483
-
-
-
5,600
6,198
(3,104)
-
483
(3,434)
At 31 December 2016
2,507
6,947
1,294
10,748
2,780
-
-
(352)
1,953
-
-
-
6,198
-
(3,786)
1,759
6,492
Share
based
payment
reserve
€’000
1,294
(856)
-
Other
reserves
US$’000
Foreign
currency
reserve
US$’000
Share
based
payment
reserve
US$’000
Total
US$’000
16
(10,037)
1,764
(8,257)
1,025
-
(1,025)
-
-
(449)
-
(449)
Total
€’000
1,305
-
-
438
1,305
1,041
(10,486)
739
(8,706)
1,294
1,305
-
-
16
-
(9,069)
1,764
(7,289)
(968)
-
(968)
1,294
1,305
16
(10,037)
1,764
(8,257)
Company
At 1 January 2017
Transfer to other reserve
Exchange movements
At 31 December 2017
At 1 January 2016
Exchange movements
At 31 December 2016
Other
reserves
€’000
Foreign
currency
reserve
€’000
11
856
-
867
11
-
11
-
-
-
-
-
-
57
OVOCA GOLD Plc___Annual Report 2017
8
25
Trade and other payables
Group
31/12/2017
€’000
Group
31/12/2016
€’000
Company
31/12/2017
€’000
Company
31/12/2016
€’000
Group
31/12/2017
US$’000
Group
31/12/2016
US$’000
Company
31/12/2017
US$’000
Company
31/12/2016
US$’000
Trade payables
Amounts owed to
group
undertakings
Accruals
10
-
36
46
171
-
46
217
1
153
6,498
36
6,535
3,984
46
4,183
6
-
49
55
180
-
49
229
1
161
7,784
43
7,828
4,197
49
4,407
All amounts are short term. The net carrying value of trade payables is considered a reasonable approximation of fair value.
Trade payables written back during the year amounted to €’000 149 (2016:€Nil).
26
Related party transactions
Details of subsidiary undertakings are shown in note 16. In accordance with International Accounting Standard 24 - Related
Party Disclosures, transactions between group entities that have been eliminated on consolidation are not disclosed.
Included in amounts due from group undertakings of the Company are amounts of €’000 693 (2016:€’000 750) due from
Comtrans and €Nil (2016: €’000 38) due from Magsel.
Included in amounts due to group undertakings of the Company is an amount of €’000 6,507 (2016: €’000 3,983) due to Silver
Star Limited.
Key management personnel are the Board of Directors. Details of the remuneration of Directors are disclosed in Note 11 of
the consolidated financial statements.
None of the related party transactions disclosed above were undertaken with the parent company, Ovoca Gold plc.
27
Financial instruments
The Group monitors relevant aspects of financial instrument risk on an ongoing basis. Financial instrument risks primarily
relates to foreign exchange risk, liquidity risk and market risk.
The carrying amounts of trade and other receivables, cash and cash equivalents and trade and other payables financial assets
and liabilities is considered a reasonable approximation of its fair values while available-for-sale financial assets are
determined by reference to quoted market bid prices at the close of business on the reporting date since these are actively
traded.
28
Share based payments – Group and Company
Under the share option scheme employees of the Group can receive conditional awards of share options depending on their
performance, seniority and length of service. All options issued to date vest once granted. IFRS 2 requires that a recognised
valuation methodology be employed to determine the fair value of share options granted. The valuation model used by the
Company in years where options are granted or vesting is the Bi-nominal model. Fair value is determined under the equity
settled share based remuneration schemes operated by the Group.
The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical
analysis of daily share prices over the last three years.
The market vesting condition was factored into the valuation of the phantom options by applying an appropriate discount to
the fair value of equivalent share appreciation rights without the specified vesting conditions.
The Group did not enter into any share-based payment transactions with parties other than employees during the current or
previous period.
Expired share options were transferred to other reserves during the year.
58
PART 8___ Notes to the Financial Statements
28
Share based payments – Group and Company – continued
Outstanding at 1 January 2017
Expired during the year
Outstanding at 31 December 2017
Of which:
2017
Weighted
average
exercise
price
(€ cent per
share)
Number of
options
39
-
39
3,800,000
600,000
3,200,000
Number of
options
3,200,000
3,000,000
200,000
Exercisable at 31 December 2017
200,000
39
3,200,000
The following table shows the number of options outstanding with the exercise price:
Outstanding at 31 December 2017
29
Capital management
Number of
options
200,000
200,000
Exercise
price
£0.36p
2016
Weighted
average
exercise
price
(€ cent per
share)
39
-
39
39
Date of expiry
22/02/2018
The Group considers total equity as capital. Its primary objective in capital management is to maintain a strong credit rating
in order to support its business and maximize shareholder value.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To
maintain or adjust the capital structure, the Company may issue new shares or other financial instruments in relation to
ensure the liquidity and the necessary level of the working capital.
The amounts managed as capital by the Group for the reporting periods are as summarized as follows:
Total equity
30
Events after the reporting period
2017
€'000
2016
€'000
2017
$'000
2016
$'000
22,403
23,471
27,107
25,158
There were no other significant events after the year end date other than the those disclosed in Note 17 in the notes to the
financial statements.
31
Commitments
Operating leases
Group
31/12/2017
€’000
Group
31/12/2016
€’000
Company
31/12/2017
€’000
Company
31/12/2016
€’000
Group
31/12/2017
US$’000
Group
31/12/2016
US$’000
Company
31/12/2017
US$’000
Company
31/12/2016
US$’000
No later than one
year
Total
11
11
14
14
-
-
-
-
12
12
15
15
-
-
-
-
The Group leases offices under non-cancellable operating lease agreements. The lease terms are between one and two years,
and the majority of lease agreements are renewable at the end of the lease period at market rate.
The lease expenditure charged to the income statement during the year is disclosed in note 5 of the consolidated financial
statements.
32
Reclassification of accounts
Certain accounts have been reclassified to conform to current year presentation.
33
Approval of the financial statements
These financial statements were approved by the Board of Directors on 21 May 2018.
59
OVOCA GOLD Plc___Annual Report 2017
>
Notes
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