More annual reports from Pathfinder Minerals Plc:
2021 ReportGroup Directors and Strategic Report and Consolidated Financial Statements for the Year Ended 31 December 2016 for PATHFINDER MINERALS PLC PATHFINDER MINERALS PLC Contents of the Consolidated Financial Statements for the Year Ended 31 December 2016 Company Information Chairman’s Statement Directors and Strategic Report Report of the Independent Auditors Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash Flows Notes to the Statements of Cash Flows Notes to the Consolidated Financial Statements Page 1 2 4 7 9 10 11 12 13 14 15 16 17 18 PATHFINDER MINERALS PLC Company Information for the Year Ended 31 December 2016 DIRECTORS: Sir H C Bellingham R P Easby N S Trew SECRETARY: R P Easby REGISTERED OFFICE: Becket House 36 Old Jewry London EC2R 8DD REGISTERED NUMBER: 02578942 (England and Wales) SENIOR STATUTORY AUDITOR: Keith Fulton INDEPENDENT AUDITORS: SOLICITORS: NOMINATED ADVISOR: REGISTRARS: BANKERS: Chapman Davis LLP 2 Chapel Court London SE1 1HH Travers Smith LLP 10 Snow Hill London EC1A 2AL WH Ireland Limited 24 Martin Lane London EC4R 0DR Capita Assets Services 34 Beckenham Road Beckenham Kent BR3 4TU Royal Bank of Scotland 1 Dale Street Liverpool L2 2PP Page 1 PATHFINDER MINERALS PLC Chairman’s Statement for the Year Ended 31 December 2016 INTRODUCTION The primary activity of Pathfinder remains that of seeking to regain control of the valuable heavy mineral sands licences in Mozambique which were transferred in 2011, without Pathfinder's knowledge or consent, to the Company's former local partners. Another important activity during the year under review was the shoring up of the Company's balance sheet to enable it to continue its strategy to recover the licences. STEPS TO RECOVER THE COMPANY'S ASSETS While the English High Court determined in 2012 that, contrary to the defendants' assertions, Pathfinder does validly own the subsidiary company from which the licences were unlawfully removed, the Supreme Court in Mozambique is yet to recognise that decision - a step which the Company believes will likely have the effect of bringing to a successful conclusion the various proceedings in the commercial court in Maputo surrounding the same issue on which the English court has already ruled; and ultimately compel the Mozambique Government to restore control to Pathfinder of the licensed areas. That application for recognition by the Supreme Court remains pending. The Board continues to believe the prospects of the English court decision being recognised in Mozambique are high, based on a precedent in Mozambique relating to the formulation of jurisdiction clauses. The timing, however, remains entirely out of the Company's control. Some shareholders have expressed frustration over recent months with the length of time the Supreme Court is taking to opine on this issue. I assure you the Board shares their sentiment. I am afraid neither Pathfinder nor its legal counsel has any visibility over when the Supreme Court will deliver judgment on this matter. The Supreme Court there is not answerable to such schedules as might be adhered to in other judicial systems. There is nothing the Company can do to speed up the process. The only material update to have been received during 2016 in respect of the legal proceedings ongoing in the commercial court in Maputo was announced on 8 April 2016. This announcement recorded the Maputo court's refusal to hear a challenge brought by Pathfinder's subsidiary, IM Minerals Limited, to the validity of a shareholder resolution of CMDN, purportedly passed in May 2009. Pathfinder applied to the Maputo court on 13 April 2016 to appeal this defective decision, which is inconsistent with previous judgments in each of the Supreme Court, the English court and the Maputo court. Permission to appeal was granted on 13 June 2016 and a decision is awaited. It is important to note that we are not simply waiting for the Supreme Court or Maputo court to deliver its judgments. Pathfinder is actively pursuing parallel strategies to bring about a resolution which does not rely on the courts. To this end, on 6 May 2016, Pathfinder announced the appointment of Eduardo C. Mondlane Jr as its regional representative in Mozambique. Mr Mondlane Jr is a highly respected Mozambican who has been providing strategic advisory services in Africa for thirty years across industries including aerospace, infrastructure, energy, power and financial services. He has advised companies including Boeing Commercial Airplanes, United Technologies, Siemens and GE Capital Aviation. He has also served on the boards of Absa Group and Bank (Barclays Africa) and other Barclays African subsidiary banks. Mr Mondlane Jr, Pathfinder’s board and members of Pathfinder's legal counsel in Mozambique are actively engaged in discussions with relevant departments within the Mozambique Government including regarding the current status of the licensed areas which, at present, reside under the control of Pathfinder's former local partners. Furthermore, through Mr Mondlane Jr, Pathfinder is engaged in constructive discussions with Jacinto Veloso, the Company’s lead former local partner, in an attempt to bring about a resolution without further reliance on the judicial processes. At this point, there are no material developments and no certainty of a resolution outside of the courts; however, the board continues to push for a breakthrough. Page 2 PATHFINDER MINERALS PLC Chairman’s Statement for the Year Ended 31 December 2016 FINANCIAL RESULTS AND CURRENT FINANCIAL POSITION Good progress was made during 2016 to shore up the Company's balance sheet to enable us to continue our strategy to recover our assets. Gross proceeds of approximately £700,000 were raised through the issue of new shares to investors (including the chief executive) both during 2016 and earlier this year; and net proceeds of approximately a further £161,000 were raised through sale of all the shares previously owned by Pathfinder's former local partners (the defendants in the English court legal proceedings) following the English court's granting, on 23 August 2016, of orders for sale as part of the Company's enforcement in England of certain orders for payment of legal costs to the Company by the defendants. In parallel with bringing in additional funds, the Board continues to manage the central overheads of the Company rigorously in order to preserve cash as much as possible. The Company has foregone a physical head office; the overall cost of directors' fees has reduced and was approximately 17% less than the cost of directors' fees for 2015; and payments of an aggregate 41% of those directors' fees incurred in the period under review, in addition to other benefits such as pension contributions, have been deferred until the Company is in materially better financial health. The financial statements of the Pathfinder Group for the year ended 31 December 2016 follow later in this report. The Income Statement shows a reduced loss of £582,000 (2015 - £1,093,000) of which £138,000 relates to directors' fees and pension contributions that are recorded as a liability in 'Trade and other payables' but actual payment of which have been deferred as described above and in 'Note 20' to these accounts. The Group's Statement of Financial Position shows net assets (excluding £183,000 of deferred fees and pension contributions described in 'Note 20') at 31 December 2016 of £122,000 (31 December 2015 - £87,000). The assets are held largely in the form of cash deposits (totalling £134,000 at the end of the period). These assets were boosted by the raising of a further £200,000 after the year end, on 1 March 2017, through a placing of new shares with investors. CORPORATE EVENTS On 10 March 2016, James Normand resigned from the Board as Finance Director and, on 29 March 2016, we welcomed Robert Easby as his replacement. Robert qualified as a Chartered Accountant in 2000 and spent his early career in audit compliance and as a Company Law specialist within a large regional Chartered Certified Accountancy practice. OUTLOOK The Company will continue to report through the regulatory news service any material developments, either in respect of the Mozambique courts or the parallel discussions to bring about a faster resolution. The Board remains as determined as ever - as evidenced by the chief executive's own subscription for £100,000 worth of shares during the year under review - to bring about a successful resolution that recovers value for shareholders in the wake of these unpalatable events. We will continue to monitor the Company's financial position to ensure the Company has sufficient capital to bring our strategy to recover our assets to a successful conclusion. On behalf of the Board, I should like to thank our investors once again for their support. ON BEHALF OF THE BOARD: Sir H C Bellingham - Director 27 June 2017 Page 3 PATHFINDER MINERALS PLC Directors and Strategic Report for the Year Ended 31 December 2016 The directors present their report with the financial statements of the company and the group for the year ended 31 December 2016. DIVIDENDS No dividends will be distributed for the year ended 31 December 2016. An overview of the group results is presented in the Chairman's Statement. EVENTS SINCE THE END OF THE YEAR Information relating to events since the end of the year is given in the notes to the financial statements. DIRECTORS The directors shown below have held office during the whole of the period from 1 January 2016 to the date of this report. Sir H C Bellingham N S Trew Other changes in directors holding office are as follows: R P Easby - appointed 29 March 2016 J P Normand - resigned 10 March 2016 FINANCIAL INSTRUMENTS The company's financial instruments consist entirely of cash that arises directly from its operations. The main purpose of these financial instruments is to fund the company's operations as well as to manage working capital, liquidity and invest surplus funds. It is, and has been throughout the period under review, the company's policy not to enter into derivative transactions and no trading in financial instruments has been undertaken. POLITICAL DONATIONS AND EXPENDITURE No charitable or political contributions were made during the current or previous year. MAJOR SHAREHOLDERS As at 27 June 2017 the following shareholders had notified the company of an interest of 3% or more of the Company's ordinary share capital: Shareholder name Nicholas Trew JP Morgan Funds Paul Ellison and Gareth Roberts as Joint Administrators of Hill Street Investments plc James Buchan John Clarke Roger Clarke Number of 0.1p ordinary shares Shareholding percentage 21,449,735 9,467,000 7,884,000 7,010,210 6,626,006 6,626,006 11.90% 5.25% 4.37% 3.89% 3.68% 3.68% Page 4 PATHFINDER MINERALS PLC Directors and Strategic Report for the Year Ended 31 December 2016 COMPANY'S POLICY ON PAYMENT OF CREDITORS It is the company's policy to pay suppliers in accordance with the payment terms negotiated with them. The company's average creditor days during the year were 20 days (2016: 17 days). RISK EXPOSURE The Companies Act 2006 requires the Directors to set out in this report how the Group manages its exposure to risk. The directors consider that the Company has sufficient cash and cash equivalents to meet its foreseeable operational requirements. CORPORATE GOVERNANCE The Board is responsible for establishing the strategic direction of the Company, monitoring the Group's trading performance and appraising and executing development and acquisition opportunities. The Company holds regular Board meetings, at which financial and other reports, including working capital reports and acquisition opportunities, are considered and, where appropriate, voted on. The Directors support high standards of corporate governance and the Board complies with the QCA Guidelines so far as reasonably practicable and appropriate taking into account the Company's size. The Company's current situation does not allow for separate audit and remuneration committees and is not conducive to the appointment of non- executive directors, all of which the Board is keen to do as soon as circumstances allow. The Board supports the principle of clear reporting of financial performance to shareholders. Each year, shareholders receive a full annual report and interim report. The Board regards the Annual General Meeting as an opportunity to communicate directly with private investors. Directors attend the Annual General Meeting and are available to answer questions from shareholders present. The Board actively encourages feedback and shareholder dialogue, whether oral or written. DISCLOSURE IN THE STRATEGIC REPORT Strategic matters relating to the company throughout the reporting period are outlined in the Chairman's Statement. STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent; - state that the financial statements comply with IFRS; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Page 5 PATHFINDER MINERALS PLC Directors and Strategic Report for the Year Ended 31 December 2016 STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information. AUDITORS The auditors, Chapman Davis LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting. ON BEHALF OF THE BOARD: N S Trew - Director 27 June 2017 Page 6 Report of the Independent Auditors to the Members of Pathfinder Minerals Plc We have audited the financial statements of Pathfinder Minerals Plc for the year ended 31 December 2016, which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Company Statement of Financial Position, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Statement of Cash Flows, Company Statement of Cash Flows and the related notes 1 to 22. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors' Responsibilities set out on page five, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Group Strategic Report and the Report of the Directors to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: - give a true and fair view of the state of the group's and the parent company's affairs as at 31 December 2016 and of the group's loss for the year then ended; - have been properly prepared in accordance with IFRSs as adopted by the European Union; - the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and - the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Page 7 Report of the Independent Auditors to the Members of Pathfinder Minerals Plc Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or - the parent company financial statements are not in agreement with the accounting records and returns; or - certain disclosures of directors' remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit. Keith Fulton (Senior Statutory Auditor) for and on behalf of Chapman Davis LLP 2 Chapel Court London SE1 1HH 27 June 2017 Page 8 PATHFINDER MINERALS PLC Consolidated Income Statement for the Year Ended 31 December 2016 Notes 2016 £'000 CONTINUING OPERATIONS Revenue Other operating income Administrative expenses OPERATING LOSS Finance income LOSS BEFORE INCOME TAX Income tax LOSS FOR THE YEAR Loss attributable to: Owners of the parent Earnings per share expressed in pence per share: Basic Diluted 4 5 7 8 9 11 - 161 (743) (582) - (582) - (582) (582) -0.44 -0.44 2015 £'000 - 3 (1,104) (1,101) 8 (1,093) - (1,093) (1,093) -1.05 -1.05 The notes form part of these financial statements Page 9 PATHFINDER MINERALS PLC Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2016 LOSS FOR THE YEAR OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME FOR THE YEAR Total comprehensive income attributable to: Owners of the parent 2016 £'000 (582) - (582) (582) 2015 £'000 (1,093) - (1,093) (1,093) The notes form part of these financial statements Page 10 PATHFINDER MINERALS PLC (REGISTERED NUMBER: 02578942) Consolidated Statement of Financial Position 31 December 2016 Notes 2016 £'000 2015 £'000 ASSETS NON-CURRENT ASSETS Property, plant and equipment Investments CURRENT ASSETS Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS' EQUITY Called up share capital Share premium Retained earnings TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES 12 13 14 15 16 17 17 18 1 - 1 65 134 199 200 18,345 11,445 (29,851) (61) 261 261 200 - - - 94 80 174 174 18,289 11,022 (29,269) 42 132 132 174 The financial statements were approved by the Board of Directors on 27 June 2017 and were signed on its behalf by: R P Easby - Director The notes form part of these financial statements Page 11 PATHFINDER MINERALS PLC (REGISTERED NUMBER: 02578942) Company Statement of Financial Position 31 December 2016 Notes 2016 £'000 2015 £'000 ASSETS NON-CURRENT ASSETS Property, plant and equipment Investments CURRENT ASSETS Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS' EQUITY Called up share capital Share premium Retained earnings TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES 12 13 14 15 16 17 17 18 1 - 1 65 134 199 200 18,345 11,445 (29,850) (60) 260 260 200 - - - 94 80 174 174 18,289 11,022 (29,269) 42 132 132 174 The financial statements were approved by the Board of Directors on 27 June 2017 and were signed on its behalf by: R P Easby - Director The notes form part of these financial statements Page 12 PATHFINDER MINERALS PLC Consolidated Statement of Changes in Equity for the Year Ended 31 December 2016 Called up share capital £'000 Retained earnings £'000 Share premium £'000 Total equity £'000 Balance at 1 January 2015 18,289 (28,176) 11,022 1,135 Changes in equity Total comprehensive income - (1,093) - (1,093) Balance at 31 December 2015 18,289 (29,269) 11,022 42 Changes in equity Issue of share capital Total comprehensive income 56 - - (582) 423 - Balance at 31 December 2016 18,345 (29,851) 11,445 479 (582) (61) The notes form part of these financial statements Page 13 PATHFINDER MINERALS PLC Company Statement of Changes in Equity for the Year Ended 31 December 2016 Called up share capital £'000 Retained earnings £'000 Share premium £'000 Total equity £'000 Balance at 1 January 2015 18,289 (28,307) 11,022 1,004 Changes in equity Total comprehensive income - (962) - (962) Balance at 31 December 2015 18,289 (29,269) 11,022 42 Changes in equity Issue of share capital Total comprehensive income 56 - - (581) 423 - Balance at 31 December 2016 18,345 (29,850) 11,445 479 (581) (60) The notes form part of these financial statements Page 14 PATHFINDER MINERALS PLC Consolidated Statement of Cash Flows for the Year Ended 31 December 2016 Cash flows from operating activities Cash generated from operations Net cash from operating activities Notes 1 Cash flows from investing activities Purchase of tangible fixed assets Interest received Net cash from investing activities Cash flows from financing activities Share issue Share issue expenses Net cash from financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year 2 Cash and cash equivalents at end of year 2 2016 £'000 (423) (423) (2) - (2) 495 (16) 479 54 80 134 2015 £'000 (1,100) (1,100) - 8 8 - - - (1,092) 1,172 80 The notes form part of these financial statements Page 15 PATHFINDER MINERALS PLC Company Statement of Cash Flows for the Year Ended 31 December 2016 Cash flows from operating activities Cash generated from operations Net cash from operating activities Notes 1 Cash flows from investing activities Purchase of tangible fixed assets Interest received Net cash from investing activities Cash flows from financing activities Share issue Share issue expenses Net cash from financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year 2 Cash and cash equivalents at end of year 2 2016 £'000 (423) (423) (2) - (2) 495 (16) 479 54 80 134 2015 £'000 (1,100) (1,100) - 8 8 - - - (1,092) 1,172 80 The notes form part of these financial statements Page 16 PATHFINDER MINERALS PLC Notes to the Statements of Cash Flows for the Year Ended 31 December 2016 1. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS Group Loss before income tax Depreciation charges Finance income Decrease/(increase) in trade and other receivables Increase in trade and other payables 2016 £'000 (582) 1 - (581) 29 129 2015 £'000 (1,093) - (8) (1,101) (33) 34 Cash generated from operations (423) (1,100) Company Loss before income tax Depreciation charges Finance income Decrease/(increase) in trade and other receivables Increase/(decrease) in trade and other payables 2016 2015 £'000 (581) 1 - (580) 29 128 £'000 (962) - (8) (970) (33) (97) Cash generated from operations (423) (1,100) 2. CASH AND CASH EQUIVALENTS The amounts disclosed on the Statements of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts: Year ended 31 December 2016 Cash and cash equivalents Year ended 31 December 2015 Cash and cash equivalents Group Company 31.12.16 £'000 134 31.12.15 £'000 80 1.1.16 £'000 80 1.1.15 £'000 1,172 31.12.16 £'000 134 31.12.15 £'000 80 1.1.16 £'000 80 1.1.15 £'000 1,172 The notes form part of these financial statements Page 17 PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements for the Year Ended 31 December 2016 1. GENERAL INFORMATION Pathfinder Minerals Plc is a public limited company whose ordinary shares are listed on the Alternative Investment Market of the London Stock Exchange; and is incorporated and domiciled in the UK. The address of its registered office is Becket House, 36 Old Jewry, London EC2R 8DD. The financial statements of Pathfinder Minerals PLC for the year ended 31 December 2016 were authorised for issue by the Board on 27 June 2017 and the statement of consolidated financial position signed on the Board's behalf by Robert Easby. 2. STATUTORY INFORMATION Pathfinder Minerals Plc is a private company, limited by shares, registered in England and Wales. The company's registered number and registered office address can be found on the General Information page. 3. ACCOUNTING POLICIES Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention and are presented in the functional currency in £'000. As a result of the funding activities undertaken since the year end, the Company has improved its short-term liquidity position. The Board have reviewed the Company's cash requirements for the next 12 months and, after taking account of reasonably possible changes in both expenditure and equity investment, have concluded that the Company should be able to operate within its current level of financing. After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its financial statements. Although the Company's direct subsidiary, IM Minerals Limited, itself holds the whole of the issued share capital of Companhia Mineira de Naburi SARL, which in turn holds the whole of the issued share capital of Sociedade Geral de Mineracao de Moçambique SARL, events in 2011 indicated that the Company does not control either of these sub-subsidiaries. Neither has it been possible to obtain audited accounts for them. Accordingly these financial statements consolidate the financial statements of IM Minerals Limited only. IM Minerals Limited is a dormant intermediate holding company. Property, plant and equipment Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life. Plant and machinery - 33% on cost Taxation Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date. Page 18 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 3. ACCOUNTING POLICIES - continued Foreign currencies Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result. Employee benefit costs The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to the income statement in the period to which they relate. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and other short term highly liquid deposits with original maturities of three months or less. New standards and interpretations not yet adopted The adoption of new standards, where relevant, has had no impact on the reported results nor on the financial position of the company. Critical accounting estimates and judgements The preparation of financial information in accordance with generally accepted accounting practice, in the case of the Group using International Financial Reporting Standards as adopted by the European Union, requires the directors to make estimates and judgements that affect the reported amount of assets, liabilities, income and expenditure and the disclosures made in the financial statements. Such estimates and judgements must be continually evaluated based on historical experience and other factors, including expectations of future events. Details of accounting estimates and judgements that have the most significant effect on the amounts recognised in the financial statements have been disclosed under the relevant note or accounting policy for each area where disclosure is required. 4. SEGMENTAL REPORTING The Group has one activity only. Of the Group's administrative expenses, £53,000 (2015: £188,000) was spent in Mozambique. The whole of the value of the Group's and the Company's net assets in their respective financial statements at 31 December 2016 and 2015 was attributable to UK assets and liabilities. 5. OTHER OPERATING INCOME Sundry receipts 2016 £'000 161 2015 £'000 3 On 23 August 2016, the English High Court made orders for the sale of the aggregate 19,824,000 shares held by JV Consultores Internacionais Limitada and Diogo Cavaco in the Company. In the current year, other operating income represents receipts from the sale of these shares. The comparative figure for 2015 represents the sale of the fractional entitlement following the capital consolidation as set out in note 16. Page 19 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 6. EMPLOYEES AND DIRECTORS There were no employees, other than the directors. The following tables set out and analyse the remuneration of directors for the years ended 31 December 2016 and 2015. Year ended 31 December 2016: Henry Bellingham Nicholas Trew James Normand Robert Easby Benefits in kind £000 - Total emoluments £000 48 Contributions to pension schemes £000 - Total remuneration 2016 £000 48 5 4 - 9 155 54 45 302 15 5 - 20 170 59 45 322 Salary £000 48 150 50 45 293 In addition to the above amounts, James Normand received £14,665 as part of a settlement agreement following his resignation as director. Year ended 31 December 2015: Henry Bellingham John McKeon Nicholas Trew James Normand Fees £000 - 37 - - 37 Salary £000 48 - 150 120 318 Benefits in kind £000 - Total emoluments £000 48 Contributions to pension schemes £000 - Total remuneration 2015 £000 48 - 4 4 8 37 154 124 363 - 15 12 27 37 169 136 390 No share options were exercised by the directors, and no shares were received or receivable by any director in respect of qualifying services under a long term incentive scheme. 7. NET FINANCE INCOME Finance income: Deposit account interest 2016 £'000 2015 £'000 - 8 Page 20 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 8. LOSS BEFORE INCOME TAX The loss before income tax is stated after charging: Depreciation - owned assets Auditors' remuneration Foreign exchange differences 9. INCOME TAX 2016 £'000 1 11 8 2015 £'000 - 14 - Analysis of tax expense No liability to UK corporation tax arose for the year ended 31 December 2016 nor for the year ended 31 December 2015. Factors affecting the tax expense The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below: Loss before income tax 2016 £'000 (582) 2015 £'000 (1,093) Loss multiplied by the standard rate of corporation tax in the UK of 20% (2015 - 20%) (116) (219) Effects of: Unrelieved tax losses carried forward Income not chargeable to tax Tax expense 10. LOSS OF PARENT COMPANY 148 (32) - 219 - - As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these financial statements. The parent company's loss for the financial year was £(581,282) (2015 - £(962,202)). Page 21 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 11. LOSS PER SHARE Basic loss per share is calculated, as set out in the tables below, by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. A diluted loss per share has not been calculated as the effect of the exercise of outstanding warrants and options would be anti-dilutive. Basic Earnings attributable to ordinary shareholders Effect of dilutive securities Diluted Adjusted earnings Basic Earnings attributable to ordinary shareholders Effect of dilutive securities Diluted Adjusted earnings 2016 Weighted average number of shares Per-share amount pence Loss £'000 (582) - 131,985,901 - -0.44 - (582) 131,985,901 -0.44 2015 Weighted average number of shares Per-share amount pence Loss £'000 (1,093) - 103,716,156 - -1.05 - (1,093) 103,716,156 -1.05 Page 22 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 12. PROPERTY, PLANT AND EQUIPMENT Group COST Additions At 31 December 2016 DEPRECIATION Charge for year At 31 December 2016 NET BOOK VALUE At 31 December 2016 Company COST Additions At 31 December 2016 DEPRECIATION Charge for year At 31 December 2016 NET BOOK VALUE At 31 December 2016 Plant and machinery £'000 2 2 1 1 1 Plant and machinery £'000 2 2 1 1 1 Page 23 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 13. INVESTMENTS Company COST At 1 January 2016 and 31 December 2016 PROVISIONS At 1 January 2016 and 31 December 2016 NET BOOK VALUE At 31 December 2016 At 31 December 2015 Shares in group undertakings £'000 34,806 34,806 - - The group or the company's investments at the Statement of Financial Position date in the share capital of companies include the following: Subsidiaries I M Minerals Limited Registered office: United Kingdom Nature of business: Holding company Class of shares: Ordinary Companhia Mineira de Naburi SARL Registered office: Mozambique Nature of business: Mining Class of shares: Ordinary % holding 100.00 % holding 100.00 Page 24 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 13. INVESTMENTS - continued Company Sociedade Geral de Mineracao de Moçambique SARL Registered office: Mozambique Nature of business: Dormant Class of shares: Ordinary % holding 100.00 IM Minerals Limited held the shares in Companhia Mineira de Naburi SARL which held titanium dioxide mining concessions in the Republic of Mozambique. In November 2011 the original vendors of IM Minerals' subsidiary, Companhia Mineira de Naburi SARL ("CMdN"), advised the Company that they had procured the cancellation of IM Minerals' shares in CMdN and the transfer of its assets (the mining licences) to another company controlled by them. Whilst the Company is taking legal and other action in order to recover the shares and the licences, the Company, in the interest of accounting prudence, made full provision in the 2011 financial statements against the cost of its investment in IM Minerals. 14. TRADE AND OTHER RECEIVABLES Current: Other debtors VAT Prepayments and accrued income 15. CASH AND CASH EQUIVALENTS Bank accounts 16. CALLED UP SHARE CAPITAL Allotted, issued and fully paid: Number: Class: 160,255,079 183,688,116 Ordinary Deferred Group 2016 £'000 2015 £'000 Company 2016 £'000 2015 £'000 37 17 11 65 13 69 12 94 37 17 11 65 13 69 12 94 Group Company 2016 £'000 134 2015 £'000 80 2016 £'000 134 2015 £'000 80 Nominal value: 0.1p 9.9p 2016 £'000 160 18,185 2015 £'000 104 18,185 18,345 18,289 Page 25 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 16. CALLED UP SHARE CAPITAL - continued 56,538,356 Ordinary shares of 0.1p each were allotted as fully paid for cash at a premium of 0.776p per share during the year. During 2015, the company reorganised its share capital as follows: Each existing ordinary share was sub-divided into one divided ordinary share of 0.01p and one deferred share of 0.99p. The divided ordinary shares were consolidated, on a 10,000 for 1 basis, into consolidated ordinary shares of £1.00 each. Shareholders with a holding in excess of 10,000 existing ordinary shares, but which is not exactly divisible by 10,000, had their holding of consolidated ordinary shares rounded down to the nearest whole number of consolidated ordinary shares. The consolidated ordinary shares were then divided, on a 1 for 1,000 basis, into new ordinary shares of 0.1p each. The rights attaching to the new ordinary shares are the same as those attaching to the existing ordinary shares including, without limitation, the same voting and dividend rights. Every 10 resulting deferred shares of 0.99p held by a Shareholder was then consolidated into 1 deferred share of 9.9p. This consolidation brought the nominal value of the deferred shares back into line with that of the deferred shares already in issue. The Directors determined that any divided ordinary shares held by shareholders as a result of the above sub- division that were not a multiple of 10,000 be aggregated and sold in the market, free of commission. The proceeds of such sales were paid to each shareholder in proportion to the fractional entitlements to which such shareholder would otherwise have been entitled. However, where the proceeds of the fractional entitlement was less than £10, the proceeds were retained for the benefit of the Company, in accordance with Article 73.3 of the Company’s Articles. The value of this benefit was £2,506. Furthermore, the Directors determined that any deferred shares of 0.99p each held by shareholders as a result of the above sub-division that were not a multiple of 10 would (in accordance with article 73 of the Company’s Articles) be aggregated and transferred to the Company’s registrars and held by them until such time as the Company buys in the deferred shares, as the costs of selling such shares, producing cheques and posting the same to shareholders would exceed the actual value to shareholders of any resulting fractions. 17. RESERVES Group At 1 January 2016 Deficit for the year Cash share issue Share issue expenses At 31 December 2016 Retained earnings £'000 (29,269) (582) - - Share premium £'000 11,022 439 (16) Totals £'000 (18,247) (582) 439 (16) (29,851) 11,445 (18,406) Page 26 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 17. RESERVES - continued At 1 January 2015 Deficit for the year At 31 December 2015 Company At 1 January 2016 Deficit for the year Cash share issue Share issue expenses At 31 December 2016 At 1 January 2015 Deficit for the year At 31 December 2015 Retained earnings £'000 (28,176) (1,093) Share premium £'000 11,022 Totals £'000 (17,154) (1,093) (29,269) 11,022 (18,247) Retained earnings £'000 (29,269) (581) - - Share premium £'000 11,022 439 (16) Totals £'000 (18,247) (581) 439 (16) (29,850) 11,445 (18,405) Retained earnings £'000 (28,307) (962) Share premium £'000 11,022 Totals £'000 (17,285) (962) (29,269) 11,022 (18,247) 18. TRADE AND OTHER PAYABLES Current: Trade creditors Social security and other taxes Other creditors Accruals and deferred income Group 2016 £'000 2015 £'000 Company 2016 £'000 2015 £'000 18 11 220 12 261 35 11 65 21 132 17 11 220 12 260 35 11 65 21 132 During 2015, IM Minerals Limited, a subsidiary of the company, waived a loan payable by the company totalling £131,000. Page 27 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 19. CONTINGENT LIABILITIES As part of the agreement for the purchase of the shares in its subsidiary, Companhia Mineira de Naburi SARL (CMdN), the Company's subsidiary, IM Minerals Limited, agreed to pay the vendors a further sum of $9,900,000 if, following further exploration and appraisal, an agreement is reached for the construction of a facility for the processing of ore extracted from the Naburi mineral sands deposit. This sum has since been reduced by advances of £90,083, made by IM Minerals Limited, and £75,933, made by the Company, to one of the vendors, Mr Diogo Cavaco. Similarly, as part of its agreement for the purchase of the whole of the issued share capital of Sociedade Geral de Mineracao de Moçambique SARL, CMdN has agreed to pay the vendors, BHP Billiton, a further sum of $9,500,000 if, following further exploration and appraisal, an agreement is reached for the construction of a facility for the processing of ore extracted from the Moebase mineral sands deposit. This obligation is guaranteed by IM Minerals Limited. In the event that Pathfinder is successful in regaining control of the disputed Licences, the Company has agreed to issue ordinary shares to its' regional representative, Eduardo C. Mondlane Jr, equivalent to up to 25 per cent of the enlarged issued share capital of Pathfinder. In such circumstances, it is envisaged that the Mr Mondlane Jr will assist with the ongoing administration of Pathfinder's local operating subsidiaries and with the Company's relationships with regional and national authorities and with local communities. 20. RELATED PARTY DISCLOSURES At the balance sheet date J P McKeon, a former director, owed the company £8,924. In order to ease the pressure on the company's cash resources, the following directors deferred payment of their contracted salaries or fees and, where applicable, pension contributions. The amounts deferred, and included in other creditors, were as follows: Salary/ fees deferred at 1 January 2016 N S Trew J P Normand H C Bellingham R P Easby J P McKeon Total £000 19 15 6 - 1 41 Pension contributions deferred at 1 January 2016 £000 Salary/fees deferred during the year £000 Pension contributions deferred during the year Salary/fees deferred at 31 December 2016 Pension contributions deferred at 31 December 2016 £000 £000 15 4 - - - 87 27 28 17 1 £000 19 4 - - - 23 119 19 160 68 12 22 17 - 4 - - - - 4 These amounts will be made good when it is safe and reasonable for the company to do so, but no fixed date for repayment has been set. Details of directors' remuneration are given in note 6 above. Page 28 continued... PATHFINDER MINERALS PLC Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016 21. EVENTS AFTER THE REPORTING PERIOD Following the end of the year the company has raised £200,000 via a subscription for new shares. 22. SHARE OPTIONS AND WARRANTS The company granted the following share options to directors on 15 November 2016: Director H C Bellingham N S Trew R P Easby Number of shares the subject of options or warrants 2,750,000 2,750,000 1,375,000 6,875,000 Exercise price per share Latest exercise date 3p 3p 3p 15 November 2021 15 November 2021 15 November 2021 In addition to those listed above, J P Normand holds options over 1,600,000 shares with an exercise price of 47.5p. The fair value of the options granted on 15 November 2016 was determined using the Black-Scholes pricing model. The resulting value was deemed immaterial by the directors and no charge has been made to the income statement. As detailed in note 19, the company is contractually obliged to issue Eduardo Mondlane Jr ordinary shares equivalent to 25 per cent of the enlarged issued share capital of the company if certain conditions are met. Page 29
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