Registered number: 07800337
POWER METAL RESOURCES PLC
ANNUAL REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
POWER METAL RESOURCES PLC
CONTENTS
Company Information
Chairman’s Review
Highlights
Introduction
Operations Review
Corporate Social Responsibility
Financial Review
Targets for 2021
Board Changes
Outlook
Strategic Report
The Board of Directors
Directors’ Report
Chairman’s Corporate Governance Statement
Independent Auditor’s Report to the Members of
Power Metal Resources plc
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
- 30 September 2019
Consolidated Statement of Changes in Equity
- 30 September 2020
Consolidated Statement of Cash Flows
Company Statement of Financial Position
Company Statement of Changes in Equity
- 30 September 2019
Company Statement of Changes in Equity
- 30 September 2020
Company Statement of Cash Flows
Notes to the Financial Statements
Page
1
2
3
4
10
10
11
11
11
12
17
18
21
26
32
33
34
35
36
37
38
39
40
41
POWER METAL RESOURCES PLC
COMPANY INFORMATION
Directors:
A Bell
P Johnson
S Richardson Brown
Ed Shaw
Executive Chairman
Chief Executive Officer
Non-Executive Director
Non-Executive Director
(Appointed 19 February 2020)
Company secretary:
ONE Advisory Limited
Company number:
07800337
Registered office:
Auditor:
Nominated Adviser and broker:
Joint brokers:
Solicitor:
201 Temple Chambers
3-7 Temple Avenue
London EC4Y 0DT
PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
London E14 4HD
SP Angel Corporate
Finance LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP
SI Capital Limited
46 Bridge Street
Godalming
Surrey GU7 1HL
First Equity Limited
Salisbury House
London Wall
Finsbury
London EC2M 5QQ
Druces LLP
Salisbury House
London Wall
London EC2M 5PS
Page 1
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Highlights from the year under review:
Operational
A strategic Australian gold joint venture was formed with Red Rock Resources plc (LON:RRR),
with Power Metal Resources holding 49.9%. By year end the joint venture holding company, Red
Rock Resources Australasia (Pty) Limited (“RRAL”) had lodged 12 licence applications covering
some 2,188 km2 in the Victoria goldfields region. Various technical work was completed in the year
including project reports for 11 of the licence applications and a National Instrument 43-101 report
for 8 of the licence applications as a group. A new office was secured in Ballarat town and an
exploration manager appointed to the joint venture company;
Following completion of ground geophysics in 2019 and the delineation of key drill targets, Power
Metal Resources elected on 31 December 2019 to earn in to a 40% project holding at the Molopo
Farms Complex Project, Botswana by expending US$500,000 on exploration, notably key target
drilling in 2020. A maiden drill programme commenced in October 2020;
A new strategic joint venture was formed between Power Metal Resources and Kavango Resources
Plc (LON:KAV) in respect of the Kalahari Copper Belt and Ditau Camp Projects in Botswana, with
each party having a 50% interest;
Review work was undertaken in respect of the exploration and commercialisation options in
respect of the Cobalt Blue nickel/cobalt project in Cameroon. No formal conclusions as to the way
forward were reached in the financial year, with deliberations continuing post year end and leading
to a decision to impair the value of the of the Cameroon project in full (£970,000);
A new earn in agreement was formed over the Silver Peak Project, including a former working
silver mine, in British Columbia, Canada. Due diligence programme sampling demonstrated
bonanza grade silver from channel sampling;
A pitting, sampling and mapping work programme was undertaken successfully at the Kisinka
Project in The Democratic Republic of the Congo. X-ray fluorescence testing of the samples
confirmed the presence of copper, with samples dispatched to South Africa for analysis and results
received post year end. The results announced in November 2020 demonstrated high grade copper
and cobalt values;
Power Metal Resources increased its interest in the Haneti Nickel Project by 10% to 35% in the
financial year and worked with joint venture partner AIM Listed Katoro Gold plc (LON:KAT) to
plan for commencement of maiden drilling for nickel sulphide and Platinum Group Metals
(“PGMs”) at the Project;
An agreement was signed in respect of the Alamo Gold Project in Arizona USA which saw Power
Metal Resources acquire an option to earn in to a maximum 75% interest in the project. An initial
reconnaissance survey conducted following the acquisition identified additional prospective areas
which were pegged and added to existing claims, increasing the project footprint;
A further strengthening of the Board saw Edmund Shaw, an experienced City finance professional,
join the Board as Non-executive Director in February 2020;
Page 2
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
At the year-end 30 September 2020 the Company held a private and listed shares/warrants portfolio
worth circa £1,481,000, including a £415,000 fair value uplift in the valuation of the portfolio of
listed investments in other junior natural resource companies held by the Company over the course
of the year (see note 13);
At the year end the Company held cash in GBP, USD, AUD and CAD of £913,000 in GBP equivalent.
Financial
Loss for the year to 30 September 2020 of £1.4 million (2019: £1.6 million);
Pre non-controlling interest total equity of £3.6 million at the year-end (2019: £1.8 million); and
Raised £1.7 million (before issue costs) in new equity financing during the financial year, from a
combination of new and existing shareholders, including the Directors, and an additional £266,000
of cash received by the Company during the year from exercises of Power Metal share warrants.
Post-year end
Expansion of exploration and activity across the Company’s project portfolio including:
Drilling programme commencement at the Molopo Farms Complex Project in Botswana
(announced 15 October 2020), the Silver Peak Project in Canada (announced 10 November 2020)
and the Haneti Nickel Project in Tanzania (announced 30 December 2020);
Next stage exploration programmes commenced at the Kalahari Copper Belt and Ditau Projects in
Botswana, the Alamo Gold Project in Arizona, USA and the Kisinka Project in The Democratic
Republic of the Congo (“DRC”);
Continuation of corporate activities since the year end with participation in a rights issue for
Kalahari Key Mineral Exploration (Pty) Limited and expansion of the Australian Gold Joint
Venture with an application to increase the JV footprint by a further 148 km2 surrounding the
Ballarat mine area; and
Option agreement signed in January 2021 providing 60 business-days for due diligence which if
successful would lead to the acquisition of First Development Resources Pty Limited, a private
Australian company with copper-gold exploration interests in Paterson Province, Australia.
Agreement signed by Power Metal Resources in January 2021 to acquire a package of gold
exploration properties in Ontario Canada, followed by an option agreement providing 30 days for
due diligence which if successful would lead to the acquisition of four additional exploration
projects also in Ontario, Canada. In February 2021, the Company announced it had exercised the
Option to acquire the McKellar Property by transferring total consideration of CAD$100,000 in cash
and shares;
In February 2021 RRAL received confirmation that three licence applications had been granted
enabling the commencement of ground exploration in the Victoria Goldfields, Australia;
Page 3
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
In February 2021, the Company announced, subject to shareholder approval, a capital reduction to
take place in order for distributions to be made to shareholders; and
Warrant exercises since the year end have raised a further £2,638,470 for the Company.
Introduction
Power Metal Resources advanced considerably during the year with an expansion in its project
portfolio across commodities, jurisdictions, and geological environments. The Company commenced
the financial year with four largely base metal interests in Africa and ended the year with six African
projects of substance, augmented by precious metal interests in North America and Australia. The
Company is now, in effect, a global operating company.
The board believe that each of the Company’s operational projects is capable of delivering a large scale
metal discovery, in line with the Company’s primary strategic objective. In the pursuit of this and with
our project partners in-country we have designed and where possible implemented a structured
exploration programme for each project.
COVID-19 restrictions around the world did impact the Company’s operational activities in the year,
mainly in respect of any localised restrictions impacting field operations. The Company’s structured
approach of working with local operating and management teams meant that aside from local
restrictions, we have been able to operate effectively managing our global activities from our London
headquarters.
During the year we raised £1.7million in equity financings to support our operational activities and
providing sufficient working capital for the smooth running of the business overall. The financings
were undertaken at the then market price to ensure we protected existing shareholders from heavily
discounted financings as is our policy.
Power Metal Resources has continued to build its investment portfolio of listed and private interests
and striving towards our objective of financial self-sustainability. At the year end the portfolio was
already demonstrating material capital gains, something we trust we can continue to build upon in the
2021 financial year. Our growth in this area will be further emboldened with the corporate activity to
spin-out certain interests into their own dedicated listed vehicles.
Operations Review
Projects
Australia
Following a period of planning and preparation in April 2020 Power Metal Resources announced a new
joint venture acquiring a 49.9% interest in Red Rock Australasia (Pty) Limited (“RRAL”) a private
Australian company, with the remaining 50.1% held by Red Rock Resources plc (LON:RRR).
During the financial year RRAL submitted 12 separate gold exploration licence applications in the
Victoria Goldfields in the State of Victoria, Australia and covering a total of 2,188km2. Also, during the
year RRAL consultants were engaged to prepare detailed project specific reports for each licence
application and a National Instrument 43-101 Technical Report for 8 licence applications, which
together formed the BMV Gold Project.
Page 4
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
RRAL also established an enhanced operational office in Ballarat and employed an Exploration
Manager and a community relations officer to coordinate and drive exploration programmes.
During the year work was also undertaken with RRAL’s tenement management company and Victoria
State Mines Department to advance licence applications to granted status. From the 12 licence
applications portfolio, 3 priority licence applications were awarded highest ranking status during
summer 2020 and advertised locally and regionally in accordance with application requirements (with
7 further licence applications granted highest ranking status to date post year-end). Licenses have been
granted post the year end in respect of the 3 priority licence applications.
During the year RRAL noted the potential to list some or all of its interests on a North American Stock
Exchange and received multiple approaches from third parties expressing an interest in its business,
from the perspective of the potential listing and for separate potential joint ventures with RRAL on
some or all of its interests.
Botswana – Molopo Farms Complex Project
Power Metal entered the financial year with an 18.26% stake in Kalahari Key Mineral Exploration (Pty)
Limited (“KKME”), the 100% owner of the Molopo Farms Complex Project (“MFC Project”), its only
project interest. The Company also held a right to elect to earn-in to a direct 40% interest in the MFC
Project, expiring on 31 December 2019, by expending US$500,000 on exploration costs, notably project
drilling, by 31 December 2020 (since extended to 30 April 2021).
In December 2019 and given the positive outcome from ground geophysics which identified multiple
high impact nickel sulphide/Platinum Group Metal (“PGM”) drill targets, the Company exercised its
right to earn in to the MFC Project.
The earn in formally commenced in October 2020 with the commencement of drilling at the MFC
Project.
Botswana – Ditau Camp Project and Kalahari Copper Belt
In April 2020 Power Metal Resources announced an option to acquire a 51% interest in the Ditau Camp
Project (rare earths exploration in Botswana), which was at the time 100% held by Kavango Resources
plc (LON:KAV). In parallel Power Metal Resources invested £38,000 into a zero coupon Convertible
Loan Note, convertible into 4,750,000 shares in Kavango at 0.80p per share (conversion actioned in July
2020).
As part of this financing, Power Metal Resources on conversion in July 2020 also received 4,750,000
warrants to subscribe for a further 4,750,000 Kavango Resources shares at a fixed price of 1.0p, and with
a life to expiry of 2 years. Should Power Metal Resources exercise the 1.0p warrants in full and within
one year of their grant, it will receive a further 4,750,000 warrants to subscribe for Kavango Resources
shares at a fixed price of 2.5p with the same expiry date as the 1.0p warrants noted above.
After a period of due diligence, project review and discussions with Kavango Resources plc, in
September 2020 a new strategic joint venture was announced whereby Power Metal Resources acquired
a 50% interest in the Ditau Camp Project and also two licences in the Kalahari Copper Belt
(copper/silver exploration in Botswana), also previously owned outright by Kavango.
Consideration for the transaction was the payment of £75,000 cash and the issue of £75,000 of Power
Metal Resources shares to Kavango (6 million new ordinary shares of 0.1 pence each in the Company
at a price of 1.25p each and 5 million Power Metal Resources warrants at 2.0p with a two year life to
Page 5
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
expiry and in the event of early exercise of 2.0p warrants (within 12 months of issue), replacement
warrants at 5.0p with the same life to expiry as the 2.0p warrants). In addition, Power Metal Resources
agreed to sole fund the first US$150,000 (in total) of exploration costs at the strategic joint venture
projects in the first two years.
The transaction between Kavango Resources plc and Power Metal Resources envisaged the listing of
the joint venture interests on a Canadian or UK stock exchange in 2021, and the first £10,000 of corporate
restructuring costs in respect of this were also to be paid by Power Metal Resources.
Initial exploration planning work on both joint venture properties was commenced during the financial
year with ground operations commenced prior to the year end. Work in respect of the listing of the
joint venture interests has been ongoing since the transaction was announced.
Cameroon
During the course of the financial year a project review was undertaken with Power Metal Resource’s
consultants to assess the exploration and commercialisation options in respect of 100% owned
Cameroon project, held through Cobalt Blue Holdings Inc. (“CBH”).
The pace of the review work was impacted by the additional pressures placed on the Company’s
managerial and technical team managing potential disruptions due to the COVID-19 pandemic and
also given the large amount of corporate work underway to assess, negotiate and conclude new
commercial acquisitions.
The Cameroon review continued post year and included an assessment of new additional exploration
data in respect of the project.
Given the proximity of the Cameroon project to the Nkamouna/Nada cobalt, nickel and manganese
deposit, the Company considered that the Cameroon project may hold value and may justify additional
exploration work. Notwithstanding this the directors reviewed the likely cost to renew exploration
licences and thereafter to undertake sufficient exploration work. The likely cost for renewal and further
exploration represented a material proportion of existing Company resources. When comparing this
with the other project opportunities now in the Company’s expanded portfolio the directors
determined a material commitment of financial and managerial resources to the Cameroon project was
not in the best interests of the Company.
As a result of the above the directors assessed the carrying value of CBH at the year end and took the
decision to impair the asset in its entirety. This impairment was due to the partly disappointing results
of the exploration previously conducted, with no definitive additional information received from our
review highlighting a clear and cost-effective pathway for further project development.
Furthermore, the effect of COVID-19 inhibited exploration during the year. The project licences were
due for renewal in the first quarter of 2021, and the renewal costs were considered likely to be expensive
and, given the lack of work recently there was a material risk that the renewals may not be granted.
It was therefore decided, reluctantly, to not undertake further material operations in Cameroon and the
asset was written down.
Page 6
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Note: With respect to Nkamouna, Geovic published an NI 43-101 compliant Mineral Resource1 on the
Nkamouna deposit with a total Measured, Indicated and Inferred Mineral Resource of 323mt of 0.21%
cobalt, 0.61% nickel and 1.26% manganese.
1 Source: NI 43-101 Technical Report, Geovic Mining Corp by SRK Consulting, 02 June 2011 (viewable
at Edgar Online)
Canada
In August 2020, a 30-day option agreement was signed in relation to the Silver Peak silver project in
British Columbia, Canada. The Silver Peak Project consists of a portfolio of mineral claims (the "claims")
over a system of high grade, intrusion related, polymetallic Ag-Pb-Zn-Cu veins, part of the historical
Eureka-Victoria Silver Mine, at Silver Peak in southern British Columbia, Canada.
The option fee paid was £26,819 with £12,500 payable through the issue of 1,000,000 Power Metal shares
at a price of 1.25p and £14,319 payable in cash.
Due diligence was undertaken, and the option exercised in September 2020 enabling Power Metal
Resources to earn in to a 30% interest.
On option exercise Power Metal Resources paid £129,683 to the Vendors comprising CAD$30,000
(£17,183) cash and £112,500 through the issue of 9,000,000 new Ordinary Shares at a price of 1.25p per
Option Exercise Share.
In addition, the Vendors were granted 9,000,000 warrants to subscribe for new Ordinary Shares in the
Company at a price of 1.75p with a three-year life to expiry.
Power Metal Resources must then spend CAD$250,000 (£143,193) on Project exploration, within 12
months (the "Exploration Spend") and of this amount CAD$25,000 was expended on the due diligence
exploration programme, leaving CAD$225,000 (£128,874) outstanding at the year end.
Subject to meeting the Exploration Spend and the receipt of satisfactory findings from exploration
work, and by 31 August 2021, Power Metal Resources may elect to acquire a 30% interest in the Project
by making a final payment of CAD$200,000 (£114,554 and the "Final Payment") with Power Metal
Resources having a choice to pay this in cash, or in Company shares, as follows.
Final Payment payable in cash:
-
-
Power Metal Resources can make a final cash payment of CAD$200,000.
Should Power Metal Resources make the Final Payment as cash, warrants will also be issued to
the Vendors in such volume as equates to CAD$100,000 divided by the 7-trading day volume
weighted average price of ("VWAP") of Power Metal Resources shares immediately preceding the
day of announcing the acquisition of the Project interest and at a price that equates to a 30%
premium to the 7-day VWAP and with a three year life to expiry.
Final Payment payable in shares:
- By payment of CAD$200,000 (£114,554) through the issue of Power Metal Resources shares at a
price based on the 7-trading day VWAP preceding the date of announcing the acquisition of the
Project interest ("Final Payment Shares");
Page 7
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
-
Should Power Metal Resources elect to make the Final Payment in Power Metal Resources shares
then the Vendors will be granted warrants to subscribe for new Ordinary Shares in such volume as
equates to 50% of the Final Payment Shares and at an exercise price equating to a 30% premium of
the issue price of the Final Payment Shares and with a three-year life to expiry.
During the course of due diligence conducted in August and September channel sampling was
undertaken at the property and assay results included Bonanza silver (Ag) and significant copper (Cu)
and lead (Pb) grades returned from two 0.5m long channel samples taken across the Victoria Vein.
A further next stage exploration programme was planned and attempted post year end, including
exploration drilling, however this was only partially completed due to weather conditions in the area.
The Democratic Republic of the Congo (DRC)
Following the discovery of a 6.8km copper anomaly at the Company’s 70% owned Kisinka Project near
Lubumbashi in the DRC, Power Metal Resources conducted a follow-up pitting, sampling and
mapping programme in early 2020.
The programme was conducted successfully on the ground with in-country X-ray Fluorescence (XRF)
of samples confirming the previously identified copper anomaly. Samples were prepared for assay
testing in South Africa, the results from which were received post year-end and which confirmed high
grade copper and cobalt.
The licence renewal at Kisinka Project was to be applied for in the year but the decision was taken
instead to convert the licence to a Permis d'Exploitation (production licence) with a 25 year life. As part
of the process 50% of the less prospective ground is to be surrendered, leaving the Company with 41
carrés miniers (each 84.95 ha).
Tanzania
Power Metal Resources entered the financial year with a 25% interest in the Haneti Project, a
polymetallic exploration project covering circa 5,000 km2 acquired in May 2019 and with the balancing
75% held by London listed Katoro Gold plc (LON:KAT) (‘Katoro Gold’). The original agreement in
May 2019 allowed Power Metal Resources to increase its holding in the Haneti Project by a further 10%,
provided payment of £25,000 was made to Katoro Gold by 18 May 2020.
This agreement was varied in the financial year and the deadline extended until 31 August 2020 and
on 20 August 2020 Power Metal Resources elected to increase its holding in the Haneti Project to 35%
and made the payment of £25,000 to Katoro Gold.
During the year Katoro Gold received approaches from external third parties with a view to earn-in,
joint venture or similar, in respect of the Haneti Project, with a primary focus on the nickel sulphide
exploration potential.
In addition, planning and preparations were made for the launch of a maiden drill programme at
Haneti Project targeting nickel sulphide and PGM targets with rotary air blast, then diamond drilling.
This programme was commenced post year end.
USA
In December 2019 Power Metal Resources signed an agreement with the holders of an option to earn
in to a 60% interest in the Alamo Gold Project in Arizona USA (the “Option”). This agreement enabled
Page 8
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Power Metal Resources to acquire the Alamo Gold Option, in exchange for certain cash and equity-
based payments to the Optionees and subject to Power Metal Resources exercising the Option and
assuming the financial commitments under the earn in arrangement specified in the Option.
The Alamo Gold Project (the “Project”) is a package of mining claims initially covering an area of
approximately 766 acres and is situated in west-central Arizona, USA. The Project was originally
identified as prospective for gold following the discovery of native gold nuggets (the "Nuggets") near
surface in numerous locations within the Project boundaries.
The geological environment supports further exploration to investigate the source of the nugget gold
and the potential for a large, mineralised gold system. In addition, the region in which the Project is
situated is prospective for precious and base metals, with regional mines that have produced silver,
lead, gold, zinc and copper.
A due diligence site visit was undertaken in January 2020 and after a period of option acquisition and
earn in agreement renegotiation, Power Metal Resources elected to acquire and exercise the Option in
July 2020, with amended terms including the right for Power Metal Resources to earn-in up to a 75%
interest in the Project.
The Project is currently 100% owned by Frisco Gold Corporation, Bullhead City, Arizona, USA
("Frisco").
Frisco as property owners had agreed an Option over the Project where, in exchange for the coverage
of certain annual property payments and costs expended on exploration, the Option holders could earn
into a project ownership stake. This was called a Right to Earn-in ("RTEI").
The Option holders in this case were Joe Carrabba, a former board director of Newmont Goldcorp and
Murray Nye, the CEO of Winston Gold Corp, (together the "Vendors").
Power Metal Resources acquired the Option from the Vendors. The Option provides a right to earn-in
to up to a 75% interest in the Project by covering property payments over a four-year period and
exploration expenditure over a three year period as outlined below.
The property payments and exploration spend is detailed below:
Cost Analysis
Year 1
Year 2
Year 3
Year 4
Overall Total
Property
Payments
US$
50,000
50,000
50,000
50,000
200,000
Exploration
Spend
US$
100,000
250,000
500,000
-
850,000
Final 75%
Payment
US$
-
-
-
50,000
Annual
Total
US$
150,000
300,000
550,000
100,000
50,000
1,100,000
Power Metal Resources has agreed to guarantee to pay the Year 1 property payments of U$50,000 and
first year exploration spend of US$100,000, in total US$150,000 (circa £119,530). After this commitment,
Power Metal Resources is not locked-in to any further payments on the Project.
Page 9
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
To acquire the Option, Power Metal Resources paid the Vendors consideration of £48,000 (circa
US$60,132) ("Initial Consideration") payable through the issue of 8,000,000 new shares (“Consideration
Shares”) at a price of 0.6p per share and to grant a warrant over 8,000,000 new shares at an exercise
price of 1.0p per share with a three year life to expiry.
The Consideration Shares were subject to a period of four months and one day where they could not
be sold or transferred without the express written approval of the Company. Were Power Metal
Resources shares trading at a VWAP of 1.5p or more for seven consecutive trading days, the
Consideration Shares were to become freely tradable.
In addition, upon earning into a 75% ownership (as outlined below) Power Metal Resources would pay
the Vendors a further US$200,000 (circa £143,000) in cash or, at the Company's sole volition, shares at a
volume weighted average price ("VWAP") based on the seven trading days prior to the announcement
of a 75% ownership interest ("Final Consideration").
If Power Metal Resources earn-in to a 75% interest in the Project the total effective cost of the Option
acquisition from the Vendors will be the Initial Consideration of £48,000 together with the Final
Consideration of £160,000, for a total of £208,000.
Upon acquisition of the Option, Power Metal Resources became the operator of the Project, working in
conjunction with a newly appointed North American gold advisory committee and forming an
operating committee with the current Project owners, Frisco.
Project Pipeline
Power Metal Resources management have an extensive network of contacts in the exploration business
and through this network have access to a pipeline of potential new project interests. All material
opportunities are reviewed from a technical and commercial perspective and the Company remains
open to the acquisition of further new projects if of sufficient merit when set against the Company’s
existing portfolio of interests.
Corporate Social Responsibility (“CSR”)
The Company maintains a focus on CSR through internal policies and our approach to external
operational activities.
The priority given to this aspect of our work is shown in the fact that at RRAL we recruited a community
relations officer as the second employee engaged, in order to start community engagement even in
advance of any license grant.
The Company will continue to prudently invest in the regions we have business activities, in support
of the communities where we operate. As an early stage Company, Power Metal Resources is keen to
employ workers from the areas in which we operate projects, and to operate in a safe, responsible, and
reasonable manner.
As certain projects mature, we would expect our community engagement to become more extensive in
line with the level of operational activities.
Financial Review
The Group recorded an audited loss after tax for the year to 30 September 2020 of £1.4 million (2019:
£1.6 million). The loss per share from continuing activities was 0.025p (2019: 0.55p).
Page 10
POWER METAL RESOURCES PLC
CHAIRMAN’S REVIEW
FOR THE YEAR ENDED 30 SEPTEMBER 2020
The Group’s exploration activities during the financial year under review were funded through the
issue of shares to either raise cash or in lieu of fees. In aggregate, new ordinary shares were issued
during the financial year, raising a total of approximately £1.7 million before placement costs (2019: £1
million). In addition, during the financial year the exercise of warrants brought an additional £0.266m
cash into the Company.
We ended the financial year with a cash balance of £0.91 million (2019: £0.17 million), which was
enhanced post financial year end by the exercise of warrants bringing an additional £2.6 million into
the Company post year end.
Targets for 2021
Our operational targets for the remainder of 2021 are:
To focus on applying financial resources diligently, with controlled corporate costs and focused
investment in exploration of our project portfolio;
To continue to build working capital, preferably through organic means, and move towards
financial self-sufficiently being defined as an ability to fund the Company’s operations without
absolute reliance on equity financings;
To continue to build our internal resources and external network and to develop our managerial
and operational teams to provide confidence in the market of our abilities to achieve our strategic
business objective of large scale metal discoveries;
To proactively continue corporate work to achieve crystallisation of value from spin-outs of certain
project interests into their own listed entities; and
To continue to review new opportunities and where financially and operationally practical to
acquire additional interests.
Board Changes
In February 2020 Edmund Shaw was appointed to the Board as Non-executive Director and in
September 2020 Iain Macpherson stepped down from the Board as Non-executive Director.
Outlook
After the restructuring and refinancing of financial year 2019, and the corporate growth of 2020, we
now look to 2021 as the year of expansive exploration across the Company’s project interests combined
with corporate activity related to potential spin-outs and new joint venture partnerships. Our aims are
simple, to secure a large scale metal discovery and to build our working capital rapidly and organically,
while maintaining the strength of our ‘balance sheet’.
Andrew Bell, Executive Chairman
22 February 2021
Page 11
POWER METAL RESOURCES PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Overview of the business
The financial year to 30 September 2020 resulted in a loss for the year of £1.4 million (2019: £1.6million).
Net assets at the year-end stood at £2.4 million (2019: £1.6 million). The Group’s cash position of £0.91
million as at 30 September 2020 was supplemented post year end following several warrant exercises,
which has raised £2.6 million at the report date. In addition, the Company’s asset base is bolstered by
listed and unlisted shares and warrants in resource companies valued at circa £1.5 million at 30
September 2020.
Business Strategy
The overriding strategic objective of the Company is to make large scale metal discoveries. Power Metal
Resources has been structured with a portfolio model with diversity of interests by commodity,
jurisdiction and geology which is considered by the Company to increase the likelihood of a large scale
metal discovery.
The Company seeks to minimise fixed financial or operational commitments providing underlying
operational flexibility. This enables the financial and managerial resources to be focused forward on
the projects with the greatest potential to deliver the discoveries targeted.
Further information on the Group’s operations is set out in the Chairman’s Review on page 4 to 9.
Principal risks
Exploration risk
The Group’s business is mineral exploration and evaluation, which are speculative activities. There is
no certainty that Power Metal Resources will proceed to the development of any of its projects or
otherwise realise their full value. The Group aims to mitigate this risk when evaluating new business
opportunities by targeting areas of potential where there is at least some historical drilling or geological
data available and where leading exploration consultants believe there is strong evidence of high class
mineral deposits.
Resource risk
All mineral projects have risk associated with defined grade and continuity. Mineral Reserves and
Resources will be calculated by the Group in accordance with accepted industry standards and codes
but are always subject to uncertainties in the underlying assumptions which include geological
projection and commodity price assumptions. At present Power Metal Resources does not have projects
with quantified Mineral Reserves and Resources.
Environmental risk
Exploration of a project can be adversely affected by environmental legislation and the unforeseen
results of environmental studies carried out during evaluation of a project. The Group’s environmental
risk extends to the Group’s corporate and exploration interests in Australia, Botswana, Cameroon,
Canada, The DRC, Tanzania and the USA. Power Metal Resources will ensure proper measures are
taken to assess environmental risk including appropriate technical submissions to reporting authorities
prior to work commencing. Also, any disturbance to the environment during any exploration on any
of the licence areas will be rehabilitated in accordance with the prevailing local regulations.
Page 12
POWER METAL RESOURCES PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Financing & liquidity risk
The Group has an ongoing requirement to fund its activities through the equity capital markets. There
is no certainty such funds will be available when needed. To date the Group has managed to raise the
required funds, primarily through equity placements, including placements undertaken during very
difficult market conditions of 2019/20 and monies from warrant exercises. However, the Directors have
prepared cash flow forecasts for at least the next 12 months from the date of this report and are
confident that the Company has sufficient financial resources to fund its operations.
From a wider perspective it is noted that the junior resource sector is cyclical, with peaks and troughs
in valuations of companies and generic sector confidence. The ease of financing follows this cyclicity
and that means the financing environment for junior companies can switch from challenging to
comfortable, and vice versa, quite quickly. The impact of cyclicity can be less significant for well-
respected companies with successful business models, and therefore the actual financing experience is
different for each company.
Political risk
All countries carry political risk that can lead to interruption of activity. Politically stable countries can
have enhanced environmental and social risks, risks of strikes and changes to taxation, whereas less
developed countries can have, in addition, risks associated with changes to the legal framework, civil
unrest and government expropriation of assets. The Company has working knowledge of the countries
in which it holds exploration licences and has appointed experienced local operators to assist the
Company in its activities in order to help reduce possible political risk.
Internal controls & risk management
The Directors are responsible for the Group’s system of internal financial control. Although no system
of internal financial control can provide absolute assurance against material misstatement or loss, the
Group’s system is designed to provide reasonable assurance that problems are identified on a timely
basis and dealt with appropriately. In carrying out their responsibilities, the Directors have put in place
a framework of controls to ensure as far as possible that ongoing financial performance is monitored in
a timely manner, that corrective action is taken and that risk is identified as early as practically possible,
and they have reviewed the effectiveness of internal financial control.
COVID-19 risk
In the current business climate, the Board acknowledges the COVID-19 pandemic risk and continues
to monitor the need to implement any changes to underpin the Group’s resilience to COVID-19, with
the key focus being on protecting all personnel, minimising the impact on critical workstreams and
ensuring business continuity.
Review of business and financial performance
The ongoing performance of the Company is managed and monitored using a number of key financial
and non-financial indicators (“KPIs”) on a monthly basis:
i. Cash position
Having sufficient cash for business operations is vital for an exploration company and cash
must be managed accordingly. The Directors review and manage the Group’s cash flow on a
monthly basis. The financial strategy is to ensure that, wherever possible, there are sufficient
funds to cover corporate overheads and exploration expenditure for as long a period as
possible. Power Metal Resources has confidence that financing of the Company can continue
Page 13
POWER METAL RESOURCES PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
as and when required, albeit the board is keen to avoid excessive dilution and will manage the
financing process with that objective in mind.
Furthermore, the Company has ensured that where possible it has built operational flexibility
in its corporate and exploration portfolio enabling expenditure to be paused should the
financing environment prove difficult and cash preservation prove essential.
ii. Exploration expenditure by project
The Company controls its exploration spend by project versus budget and in relation to its
available cash resources. If the results of exploration do not meet expectations, then budgeted
activities are re-evaluated or even cancelled. Evaluation of early stage projects is approached
in a cost effective way. The Group determines whether there are any indicators of impairment
of its exploration assets on an annual basis.
iii. Share price
The Company monitors its share price monthly versus a peer group of explorers. Many factors
outside the Company’s control can affect the share price but the Company appreciates that this
KPI is important to shareholders and the market in general in assessing the Company’s
performance.
Directors’ indemnities
The Group maintains directors’ and officers’ liability insurance providing appropriate cover for any
legal action brought against its Directors.
S172 Statement
The Board of Power Metal Resources is aware that the decisions we make may affect the lives of many
people. The Board makes a conscious effort to try and understand the interests of our stakeholders, and
to reflect them in the choices we make in creating long-term sustainable success for the business.
The Board views engagement with our shareholders and wider stakeholder groups as essential work.
We are aware that we need to listen to each stakeholder group, so that we can understand specific
interests, and foster effective and mutually beneficial relationships. By understanding our stakeholders,
we can build their needs into the decisions we take.
Throughout this Annual Report, we provide examples of how we:
Foster relationships with stakeholders;
- Consider the likely consequences of long-term decisions;
-
- Understand our impact on our local community and the environment; and
- Demonstrate the importance of behaving responsibly.
This section serves as our section 172 statement and should be read in conjunction with the Strategic
Report and the Company’s Corporate Governance Statement. Section 172 of the Companies Act 2006
requires Directors to act in a way that they consider, in good faith, would most likely promote the
success of the Company for the benefit of its members as a whole, taking into account the following
factors (among others) listed in S172:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
Page 14
POWER METAL RESOURCES PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) the impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct,
and
(f) the need to act fairly as between members of the company.
The Directors continue to have regard to the interests of the Company’s employees and other
stakeholders, including the impact of its activities on the community, the environment and
the Company’s reputation, when making decisions. Acting in good faith and fairly between members,
the Directors consider what is most likely to promote the success of the Company for its members in
the long term.
Due to the unprecedented global impacts of Governmental responses to COVID-19, the Company has
continually re-assessed and analysed its business strategy with the key focus being minimising the
impact on critical work streams, ensuring business continuity and conserving cash flows. As such,
active stakeholder engagement and open communication have become increasingly important in
decision making for the Board. Specific decisions taken during the year following consultations with
key stakeholders include:
-
- An intensification of investment community engagement through social media and through
online interaction with shareholders and investors to compensate for the reduced opportunities
for face to face engagement;
The decision to recruit a local community relations officer at the Red Rock Australasia Pty Ltd joint
venture at an early stage to engage with local communities, including special interest groups,
lobbyists, farmers, and residents, and to address environmental concerns, to compensate for the
travel restrictions preventing key management from travel to the area;
The issue of shares and options to service providers and options to directors in order to create long
term incentives, align their interests with those of the members and conserve cash through the
period of uncertainty during the earlier part of the accounting period.
-
The Board regularly reviews our principal stakeholders and how we engage with them. The
stakeholder voice is brought into the boardroom throughout the annual cycle through information
provided by management and also by direct engagement with stakeholders themselves, including
shareholder interviews and question and answer sessions with the Chief Executive Officer. The
relevance of each stakeholder group may increase or decrease depending on the matter or issue in
question, so the Board seeks to consider the needs and priorities of each stakeholder group during its
discussions and as part of its decision making.
The table below acts as our s172(1) statement by setting out the key stakeholder groups, their interests
and how Power Metal Resources has engaged with them over the reporting period. However, given
the importance of stakeholder focus, long-term strategy and reputation, these themes are also discussed
throughout this Annual Report.
Page 15
POWER METAL RESOURCES PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Stakeholder
Their interests
How we engage
Investors
Business sustainability
High standard of governance
Comprehensive review of financial
performance of the business
Success of the business
Ethical behaviour
Interim and Annual Report
Investor Relations section on
Company website
RNS announcements
Trading updates
Shareholder circulars
the
Awareness of long-term strategy and
direction
Improving market perception of the
business
Delivering
term value
long
to
AGM
Press releases
Media articles and interviews
Board encourages open dialogue with
the Company’s investors
Regulatory
bodies
shareholders
Compliance with regulations
Worker pay and conditions
Health and Safety
Brand reputation
Waste and environment
Insurance
Environmental protection
Environment
Sustainability
Energy usage
Community
Recycling
Waste Management
Community outreach
Human Rights
Sustainability
Company website
Stock exchange announcements
Annual Report
Direct contact with regulators
Compliance updates at Board Meetings
Consistent risk review
Oversight of corporate responsibility
plans
Adhere to local guidelines
Meeting with
representatives
key
community
Partnering with the communities in
which we operate – sharing plans/ideas
for discussion
Contractors
Terms and conditions of contract
Anti-Bribery Policy
Health and safety
Human rights and modern slavery
On behalf of the board
Paul Johnson, Chief Executive Officer
22 February 2021
Page 16
POWER METAL RESOURCES PLC
BOARD OF DIRECTORS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Andrew Bell, Executive Chairman
Andrew Bell began his career as a natural resources analyst at Morgan Grenfell & Co. in the 1970s. His
business experience encompasses periods in fund management and advisory work at leading financial
institutions, international corporate finance work and private equity. Andrew Bell's listed company
directorships are Red Rock Resources Plc (AIM), Chairman and Chief Executive Officer, and Jupiter
Mines Ltd (ASX), Non-Executive Director. Andrew Bell is also a former Director of various resource
sector companies including Resource Star Ltd (now Intiger Group Ltd) (ASX), and a former Non-
Executive Chairman of Greatland Gold Plc (AIM).
Andrew Bell has considerable sector experience, and his relevant skills also include financial, business
and legal analysis, knowledge of Africa and Asia, as well as experience of public markets.
Paul Johnson, Chief Executive Officer
Paul Johnson holds a degree in Management Science from the University of Manchester Institute of
Science and Technology and is a Chartered Accountant, Chartered Loss Adjuster and Associate of the
Chartered Insurance Institute. Paul is the Chief Executive Officer of Value Generation Limited, a family
investment and advisory company focused on the natural resource and related fintech sectors.
Paul Johnson is an experienced public company director and has previously been Chief Executive
Officer of Metal Tiger plc (AIM), Metal NRG plc (Aquis, formerly NEX) and China Africa Resources
plc (AIM). He has been Chairman of ECR Minerals plc (AIM) and Non-Executive Director of Greatland
Gold plc (AIM), Papua Mining plc (AIM), Thor Mining plc (AIM) and Armadale Capital (AIM).
Scott Richardson Brown, Non-Executive Director
Scott is a Fellow of the Institute of Chartered Accountants in England and Wales. He began his career
at Coopers & Lybrand (later PricewaterhouseCoopers) in the banking and capital markets division, he
later became a partner in the corporate broking/finance division of Oriel Securities Limited covering a
range of sectors.
Since leaving Oriel Securities Limited, Scott has held a number of directorships of AIM-quoted
companies operating within the natural resources sector in both CEO, CFO and Non-Executive Director
roles and specialises in restructuring and turning around companies in difficulty.
Ed Shaw, Non-Executive Director
Ed started his career 25 years ago at Citibank having studied Chemistry at the University of Bristol. Ed
was one of the founding partners of Newpeak Capital LLP in 2007 and has a long history of trading
and more recently raising capital for companies in the mining sector including microcap resource
stocks, the area of the market in which POW is currently positioned.
Ed complements the existing team and helps strengthen the Board particularly by adding weight to the
Company’s financing strategy, a key element of business management for listed microcaps.
Page 17
POWER METAL RESOURCES PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
The Directors present their report together with the audited consolidated financial statements of Power
Metal Resources plc (the “Company”), together with:
its 100% owned subsidiary, Regent Resources Interest Corp (“RRIC”);
its 100% owned subsidiary, Cobalt Blue Holdings (“CBH”); and
the 70% owned Power Metal Resources SA (formerly ABM Kobald SAS), (“PMR”), incorporated in
the DRC, in which its 70% interest in the Kisinka licence is held.
The Group’s focus is metals exploration and development with a focus currently on precious metals
exploration in North America and Australia together with base and strategic metals exploration in
Africa.
Results
The Group reports a loss after tax of £1.4 million (2019: £1.6 million) for the year ended 30 September
2020.
Major events after the reporting date
For information regarding events after the reporting date, see note 23 to the financial statements.
Dividends
The Directors do not recommend the payment of a dividend for the year ended 30 September 2020
(2019: £nil).
Financial risk management
The Group’s operations are exposed to a variety of financial risks and these are detailed in note 21 to
these financial statements.
Political donations
There were no political donations during the year ended 30 September 2020 (2019: £nil).
Bribery legislation
The Directors have adopted appropriate procedures to ensure compliance with the Bribery Act 2010.
Directors
The Directors of the Company who served during the year and since the reporting date are as follows:
A Bell, Executive Chairman
P Johnson, Chief Executive Officer
S Richardson Brown, Non-executive Director
I Macpherson, Non-executive Director (resigned 3 September 2020)
E Shaw, Non-executive Director (appointed 19 February 2020)
Directors’ interests
The beneficial interests of the Directors holding office on 30 September 2020 in the issued share capital
of the Company as at 30 September 2020 were as follows:
Page 18
POWER METAL RESOURCES PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Percentage of issued
ordinary share
capital
2.73%
A Bell
6.86%
P Johnson*
-
S Richardson Brown
E Shaw
1.53%
* Includes 750,000 ordinary shares held by his wife, Michelle Johnson, and 27,400,000 held by Value Generation Ltd, a company
beneficially owned by Paul Johnson
Number of ordinary
shares of 0.1p each
22,282,403
56,000,000
-
12,500,000
Details of share options and warrants granted to Directors are disclosed in note 18 to the financial
statements.
Directors’ remuneration and service contracts
Details of Directors’ emoluments including share-based payments are disclosed in note 8 to the
financial statements.
Short-term benefits
Salary/fees
£’000
48
80
Bonus
£’000
22
37
Share-based
payments
£’000
8
14
Total 2020
£’000
78
131
Total 2019
£’000
28
58
17
18
11
-
-
174
-
8
8
75
2
5
2
-
-
31
19
31
21
-
-
280
21
21
-
30
25
183
A Bell
P Johnson
I Macpherson
(Resigned 3.9.20)
S Richardson Brown
E Shaw
(Appointed 19.2.20)
R Murphy
(Resigned 15.2.19)
M Wood
(Resigned 29.3.19)
Total
There were no employees other than the Directors in the year ended 30 September 2020.
Directors’ indemnities
The Group maintains directors’ and officers’ liability insurance providing appropriate cover for any
legal action brought against its Directors.
Going concern
The financial statements are prepared on a going concern basis. In assessing whether the going concern
assumption is appropriate, the Directors have taken into account all relevant available information
about the current and future position of the Group, including current level of resources and the
required level of spending on exploration and corporate activities. As part of their assessment, the
Directors have also taken into account the potential for continuing warrant exercises and the ability to
raise new funding whist maintaining an acceptable level of cash flows for the Group to meet all
commitments.
The Directors have stress tested the Group’s cash projections, which involves preserving cash flows
and adopting a policy of minimal cash spending for a period of at least 12 months from the date of
Page 19
POWER METAL RESOURCES PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
approval of these financial statements. The Directors believe the measures they have available will
result in sufficient working capital and cash flows to continue in operational existence. Taking these
matters in consideration, the Directors continue to adopt the going concern basis of accounting in the
preparation of the financial statements.
The financial statements do not include the adjustments that would be required should the going
concern basis of preparation no longer be appropriate.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial period. Under
that law the Directors have elected to prepare the financial statements in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the European Union. The financial statements
are required by law to give a true and fair view of the state of affairs of the Company and the Group
and of the Group’s results for that period.
select suitable accounting policies and then apply them consistently;
In preparing these financial statements, the Directors are required to:
make judgements and estimates that are reasonable and prudent;
state whether the financial statements comply with IFRS as adopted by the European Union; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company to enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Statement of disclosure to auditor
So far as the Directors are aware:
all the Directors have taken the steps that they ought to have taken to make themselves aware of
any relevant audit information and to establish that the auditor is aware of that information.
there is no relevant audit information of which the Company’s auditor is unaware; and
Auditor
PKF Littlejohn LLP have expressed their willingness to continue in office and a resolution will be
proposed at the annual general meeting to reappoint PKF Littlejohn LLP as auditor for the next financial
year.
By order of the Board
Paul Johnson, Chief Executive Officer
22 February 2021
Page 20
POWER METAL RESOURCES PLC
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
As Chairman of the Board of Directors of Power Metal Resources plc, it is my responsibility to ensure
that POW has both sound corporate governance and an effective Board. As Chair of POW, my
responsibilities include leading the Board effectively, overseeing the Company’s corporate governance
model, and ensuring that good information flows freely between Executives and Non-Executives in a
timely manner. The Chairman’s principal responsibility is to ensure that the Company and its Board
are acting in the best interests of shareholders.
This report follows the structure of the Quoted Companies Alliance Corporate Governance (“QCA
Code”) guidelines and explains how we have applied the guidance. The Board considers that the Group
complies with the QCA Code so far as it is practicable having regard to the size, nature and current
stage of development of the Company, and areas of non-compliance are disclosed in the text below.
Further details of the Company’s compliance with the QCA Code can be found on the Company’s
Corporate Governance page on the website (https://www.powermetalresources.com/p/188/corporate-
governance), any areas of non-compliance will be disclosed in the text below.
The Board understands that application of the QCA Code supports the Company’s medium to long-
term success whilst simultaneously managing risks and providing an underlying framework of
commitment and transparent communications with stakeholders.
POW seeks to constantly improve its corporate governance practices, illustrated this year through the
appointment of Ed Shaw as a Non-Executive Director on 19 February 2020.
Strategy and Risks
A description of the Company’s business model and strategy can be found on page 12, and the key
challenges in their execution can be found on page 12 to 13.
The Board has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The Group’s risk management policies are established to identify and analyse
the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks in a timely
manner. The Board ensures that corrective action is taken and that risks are identified as early as
practically possible, as well as being responsible for reviewing the effectiveness of internal financial
controls. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities. Although no system of internal financial control can provide
absolute assurance against material misstatement or loss, the Group’s system is designed to provide
reasonable assurance that problems are identified on a timely basis and dealt with appropriately. In
addition, members of the Board attend industry conferences and seminars to keep abreast of sector
risks and industry changes.
The Audit Committee (as well as the Board as a whole) reviews reports from the Company’s auditors
relating to the internal control systems in use throughout the Group in order to determine the adequacy
and efficiency of internal control and risk management systems. An internal audit function is not yet
considered necessary as day to day control is sufficiently exercised by the Company’s Executive
Directors. However, the Board will continue to monitor the need for an internal audit function.
Page 21
POWER METAL RESOURCES PLC
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Shareholder needs and expectations
Power Metal Resources places a great deal of importance on communication with its stakeholders and
is committed to establishing constructive relationships with investors and potential investors in order
to assist it in developing an understanding of the views of its shareholders. The Company seeks to
provide effective communication through Interim and Annual Reports, along with Regulatory News
Service announcements on the Company website, www.powermetalresources.com and active
engagement including CEO interviews and Q&A sessions with a range of social and investor-oriented
media. The Company also has a News Archive section on the website, enabling investors to easily
access a range of archived reports and previous updates, as well as a Shareholder Circulars page which
includes key business and corporate governance updates. This year, in order to improve shareholder
communications, the Board has provided regular updates to shareholders on the progress of the
Company’s projects through RNS announcements and on its website.
Power Metal Resources is committed to maintaining a healthy dialogue between the Board and all of
its shareholders to enable shareholders to come to informed decisions about the Company. This is
achieved through formal meetings such as the AGM, which typically provides an opportunity to meet,
listen and present to shareholders, and shareholders are encouraged to attend. The Company is open
to receiving feedback from key stakeholders and will take action where appropriate. The key contacts
for shareholder liaison are Andrew Bell and Paul Johnson, who meet with shareholders as and when
requested.
Information on the Investors section of the Company’s website is kept updated and contains details of
relevant developments, interviews, presentations and key reports.
The Company also engages the services of external media service providers who assist with Power
Metal Resources’ public and investor relations, ensuring information is accessible to stakeholders and
released in a timely and informative manner. These advisers also seek to encourage and facilitate
shareholder engagement.
The Board
The Company’s Board includes Directors from a range of industries including the accounting and
finance, and natural resources sectors. The Company believes that the current balance of skills in the
Board as a whole reflects a very broad range of personal, commercial and professional capabilities,
providing the ability to deliver the Company’s strategy for the benefit of shareholders over the medium
and long-term.
The Board currently comprises an Executive Chairman, Andrew Bell, one Executive Director, Paul
Johnson and two Non-Executive Directors, Scott Richardson Brown and Ed Shaw.
Ed Shaw is employed by the Company’s joint broker, First Equity, and, as such, the Company does not
consider him to be Independent for the purposes of Corporate Governance. Scott Richardson Brown is
considered to be an Independent Director for the purposes of Corporate Governance. As at 30
September 2020, Scott Richardson Brown has an interest in 6,000,000 options. Neither Mr Richardson
Brown not the Company believe that his interests are significant in assessing his independence.
Page 22
POWER METAL RESOURCES PLC
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
The Board notes that the QCA recommends that there be two Independent Non-Executive Directors,
and that the Chair be Independent. Therefore, the Board acknowledges that, at its current stage of
development, it does not comply with Principle 5 of the QCA Code, although the Board notes that the
Chairman and Non-Independent Director both have significant experience in building successful
businesses and offer key expertise to the Executive Directors thus benefitting the Company as a whole.
Furthermore, the Board maintains that its composition will be frequently reviewed as the Company
develops.
Mr Paul Johnson works for 240 days per year and Mr Andrew Bell works for 162 days per year. Mr
Richardson Brown and Mr Shaw work for not less than 24 days per year. Prior to his departure from
the Company, Mr Macpherson worked for a minimum of 36 days per year. Biographical details of the
Directors can be found on page 17.
During the financial year but since the business restructuring in 2020, there were 5 routine Board
Meetings and 5 non-routine Board Meetings, and the attendance of each director is outlined below:
Director
Andrew Bell
Paul Johnson
Iain Macpherson*
Scott Richardson Brown
Ed Shaw**
* resigned 3 September 2020
** appointed 19 February 2020
Routine Board Meetings
(5)
5
5
5
5
3
Non-Routine Board Meetings
(5)
5
5
5
5
3
Advisors
ONE Advisory Limited has been contracted by the Company to act as POW’s Company Secretary and
has been given the responsibility for ensuring that Board procedures are followed and that the
Company complies with all applicable rules, regulations and obligations governing its operation,
including assistance with Board and shareholder meetings and Market Abuse Regulations (“MAR”)
compliance. ONE Advisory Limited also supports the Board in its development of the Company’s
corporate governance responsibilities, assisting with the Company’s application of the QCA Code and
amendments in relation to AIM Rule 26.
The Company’s Nominated Adviser is consulted on all matters. The Company took advice on general
corporate plc management, potential & actual acquisitions, changes to board composition and business
strategy.
All Directors have access to independent professional advice, if required.
Board Evaluation
The Directors consider that the Company and Board are not yet of a sufficient size for a full Board
evaluation to make commercial and practical sense. Therefore, the Board accepts that the Company
does not comply with this aspect of the QCA Code, although in the frequent Board meetings/calls, the
Directors can discuss any areas where they feel a change would be beneficial for the Company, and the
Company Secretary remains on hand to provide impartial advice. As the Company grows, it intends to
expand the Board and, with expansion, re-consider the need for a formal Board evaluation.
Page 23
POWER METAL RESOURCES PLC
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Culture
The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of
the Company as a whole and that this will impact the performance of the Company. The Board is aware
that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole.
The corporate governance arrangements that the Board has adopted are designed to ensure that the
Company delivers long-term value to its shareholders, and that shareholders have the opportunity to
express their views and expectations for the Company in a manner that encourages open dialogue with
the Board. The Board also ensures that communities within the regions that the Company operates
within continue to be supported, being cognisant of the Company’s pledge to CSR.
A large part of the Company’s activities is centred upon an open and respectful dialogue with
shareholders, contractors, regulators and other stakeholders. Therefore, the importance of sound
ethical values and behaviours is crucial to the ability of the Company to successfully achieve its
corporate objectives. The Board places great importance on this aspect of corporate life and seeks to
ensure that this flows through all that the Company does. The Directors consider that at present the
Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive
and constructive challenge.
Audit Committee
The Audit Committee comprises Scott Richardson Brown and Paul Johnson and is chaired by Scott
Richardson Brown. The Audit Committee is responsible for ensuring that the financial performance,
position and prospects of the Group are properly monitored and reported on and for meeting the
auditor and reviewing audit reports relating to the accounts. The Audit Committee is required to report
formally to the Board on its proceedings after each meeting on all matters for which it has responsibility.
Remuneration Committee
The Remuneration Committee comprises Scott Richardson Brown and Edmund Shaw, and is chaired
by Scott Richardson Brown, a qualified chartered accountant. The Committee is responsible for the
review and recommendation of the scale and structure of remuneration for senior management,
including any bonus arrangements or the award of share options with due regard to the interests of
shareholders and the performance of the Company.
The Board notes that additional information supplied by the Audit Committee and by the
Remuneration Committee has been disseminated across the whole of this Annual Report, rather than
included as separate Committee Reports.
Major events after the reporting date
For information regarding events after the reporting date, see note 23 to the financial statements.
Shareholder Engagement
The Board is committed to maintaining effective communication and having constructive dialogue with
its shareholders and other relevant stakeholders. The Company intends to have ongoing relationships
with both its private and institutional shareholders (through meetings and presentations), and for them
to have the opportunity to discuss issues and provide feedback at meetings with the Company.
Page 24
POWER METAL RESOURCES PLC
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2020
In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting, where
possible. The Board discloses the result of general meetings by way of announcement and additionally
discloses the results of proxy votes during the meetings and subsequently on the website. The proxy
results of the 2020 Annual General Meeting can be found on the Company’s Corporate Governance
webpage. The Board maintains that, if there is a resolution passed at a GM with 20% votes against, the
Company will seek to understand the reason for the result and, where appropriate, take suitable action.
The latest Corporate Documents can be found on the Company’s website. Information on the Investors
section of the Group’s website is kept updated and contains details of relevant developments,
interviews, presentations, and other key information.
Andrew Bell
Executive Chairman
22 February 2021
Page 25
POWER METAL RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POWER METAL RESOURCES PLC
Opinion
We have audited the financial statements of Power Metal Resources Plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 30 September 2020 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial
Position, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated
and Parent Company Statements of Cash Flows and notes to the financial statements, including a
summary of significant accounting policies. 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.
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 30 September 2020 and of the group’s and parent company’s loss for
the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
the parent 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of
the group and parent company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) 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 group’s or the parent company’s ability to continue
to adopt the going concern basis of accounting for a period of at least twelve months from the
date when the financial statements are authorised for issue.
Page 26
POWER METAL RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POWER METAL RESOURCES PLC
Our application of materiality
We apply the concept of materiality in both planning and performing the audit, and in evaluating the
effect of misstatements. At the planning stage, materiality is used to determine the financial statements
areas that are included within the scope of the audit and the extent of the sample sizes during the audit.
The materiality applied to the group financial statements was £72,900, based on 2% of gross assets, as
it is from these assets that the group seeks to deliver returns for shareholders, in particular the value of
exploration and development projects the group is interested in. Performance materiality has been set
at 70% of headline materiality, and the threshold for which we communicate errors to management has
been set at 5% of headline materiality. We also agreed to report any other audit misstatements below
that threshold that we believe warranted reporting on qualitative grounds. Materiality for the
significant components within the group has been set at a level between £72,000 - £3,300, using gross
assets as a basis.
Materiality has been reassessed at the closing stages of the audit, taking into consideration new
information which arose. No alterations were made to materiality either during or at the conclusion of
the audit.
An overview of the scope of our audit
In designing our audit, we looked at areas which deemed to involve significant judgement and
estimation by the directors, such as the key audit matters surrounding the carrying value of intangible
assets, and the classification and valuation of investment and financial assets balances. Other
judgemental areas include the recoverability of receivables from other group entities and the valuation
of share-based payments. We also addressed the risk of management override of controls, including
consideration of whether there was evidence of bias that represented a risk of material misstatement
due to fraud.
Work on all significant components of the group has been performed by us as group auditor.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
Key Audit Matter
How the scope of our audit responded to the key
audit matter
Carrying value of intangible exploration and
evaluation assets (Note 10)
The Group and Company hold material
intangible assets relating to capitalised costs in
respect of mineral exploration projects.
Our work in this area included:
Evaluating and corroborating the status
of the projects during the year, and
Page 27
POWER METAL RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POWER METAL RESOURCES PLC
There is a risk impairment indicators exist which
would result in an impairment of the year end
intangible assets balance.
The Directors consider each asset to assess
whether there are indicators of impairment by
considering the potential resources available
from
evaluation work
and
undertaken, together with the availability of
finance to further evaluate the exploration
rights.
exploration
As a result of this evaluation, the Directors have
recognised an impairment charge of £970,000 in
respect of the carrying value of Cobalt Blue
Holdings during the year.
subsequent to the year end, to identify
any evidence of impairment indicators
in accordance with IFRS 6;
Obtaining and reviewing applicable
correspondence and license agreements
to ensure transactions are accounted for
in accordance with the terms therein;
Confirming good title to the projects
exists as at the year-end;
Evaluating, and providing challenge to,
management’s impairment assessment;
and
Reviewing the disclosures in the
financial statements, including those
relating to estimates and judgements
used, and evaluating their
completeness.
We found the judgements used by the Directors
in their impairment assessment were reasonable.
Classification and valuation of investments (in
subsidiaries, associates, joint ventures and
other financial assets) (Notes 11, 12 and 13)
Investments in subsidiaries (Company), as well
Our work in this area included:
as joint ventures, associates and equity
investments as financial assets (Group &
Confirming ownership and good title in
respect of all investments within the
Company), are the most significant balances in
Group;
the financial statements.
Considering the criteria within IAS 28
There is a risk that the requirements of IAS 28,
IFRS 9, IFRS 10 and IFRS 11 have not been
applied correctly, and that investment balances
have been inappropriately classified and
recorded in the financial statements.
Given the early stage exploration activities in
these entities, existence of losses and potential
delays in advancing developments at the
underlying projects depending on the
availability of funding to meet minimum
Page 28
Investments in Associates and Joint
Ventures and determining whether the
accounting treatment of the JV entities
is in accordance with the standard,
including corroboration to relevant
supporting documentation and
agreements – taking into consideration
percentage ownership, Board
representation as well as any
indications of significant influence,
control, or joint control;
POWER METAL RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POWER METAL RESOURCES PLC
expenditure and earn-in commitments, there is
Agreeing closing fair values of equity
a risk that the investment balances are not fully
investments and derivative financial
recoverable.
instruments;
Considering the recoverability of
investments by reference to underlying
net asset values, including the
recoverability potential of the
underlying exploration projects by
reference to IFRS 6; and
Obtaining and reviewing Board
impairment papers in respect of
investments, providing appropriate
challenge and corroboration for any key
assumptions made.
We found the judgements used by the Directors
in their basis of classification and valuation were
reasonable.
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the group and parent company financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon. 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 or apparent
material misstatements, 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
Page 29
POWER METAL RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POWER METAL RESOURCES PLC
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their
environment obtained in the course of the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors’ responsibilities, the directors are responsible for
the preparation of the group and parent company financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the group and parent company financial statements, the directors are responsible for
assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
Page 30
POWER METAL RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POWER METAL RESOURCES PLC
anyone, other than the company and the company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
David Thompson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
22 February 2021
15 Westferry Circus
Canary Wharf
London E14 4HD
Page 31
POWER METAL RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2019
Revenue
Gross profit
Operating expenses
Impairment
Fair value gains through profit or loss
Loss from operating activities
Share of post-tax losses of equity accounted joint ventures
Loss before tax
Taxation
Note
6
10
13
12
9
2020
£’000
9
9
(835)
(970)
415
(1,390)
(33)
2019
£’000
-
-
(668)
(954)
36
(1,586)
-
(1,414)
(1,586)
-
-
Loss for the year from continuing operations
(1,414)
(1,586)
Other comprehensive income
Items that will or may be reclassified to profit or loss;
Exchange translation
Total other comprehensive (expense)/income
(2)
(2)
63
63
Total comprehensive expense for the year
(1,416)
(1,523)
Loss for the period attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive loss attributable to:
Owners of the parent
Non-controlling interests
(1,381)
(33)
(1,414)
(1,349)
(67)
(1,416)
(1,539)
(47)
(1,586)
(1,466)
(57)
(1,523)
Earnings per share from continuing operations attributable to
the ordinary equity holder of the parent:
Basic and diluted loss per share (pence)
17
(0.25)
(0.55)
The notes on pages 41 to 67 are an integral part of these financial statements
Page 32
POWER METAL RESOURCES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2020
30 September
2020
£’000
30 September
2019
£’000
Note
Assets
Intangible assets
Investments in associates and joint ventures
Financial assets at fair value through
profit or loss
Non-current assets
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Shares to be issued
Capital redemption reserve
Share based payment reserve
Exchange reserve
Accumulated losses
Total
Non-controlling interests
Total equity
Liabilities
Trade and other payables
Deferred consideration
Current liabilities
Total liabilities
10
12
13
14
15
16
18
19
20
156
284
1,208
1,648
110
913
1,023
2,671
7,286
14,910
22
5
1,286
71
(20,911)
2,669
(275)
2,394
161
116
277
277
1,126
-
309
1,435
32
171
203
1,638
6,843
13,228
-
5
1,195
39
(19,530)
1,780
(208)
1,572
66
-
66
66
Total equity and liabilities
2,671
1, 638
The financial statements of Power Metal Resources plc, company number 07800337, were approved by
the board of Directors and authorised for issue on 22 February 2021. They were signed on its behalf by:
Paul Johnson
Chief Executive Officer
The notes on pages 41 to 67 are an integral part of these financial statements
Page 33
POWER METAL RESOURCES PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2019
Share
capital
£‘000
Share
premium
£‘000
6,606
12,453
-
-
-
237
-
-
237
-
-
-
950
(93)
(82)
775
6,843
13,228
Balance at 1 October
2018
Loss for the year
Total other
comprehensive
income/(expense)
Total comprehensive
expense for the year
Issue of ordinary
shares
Costs of share issues
Share-based payments
Total transactions
with owners
Balance at 30
September 2019
Capital
redemption
reserve
£’000
Share
based
payment
reserve
£’000
Exchange
reserve
£’000
Accumulated
losses
£‘000
Non-
controlling
interests
£‘000
Total
£‘000
Total
Equity
£‘000
1,086
(34)
(17,991)
2,125
(151)
1,974
5
-
-
-
-
-
-
-
5
-
-
-
-
-
109
109
-
73
73
-
-
-
-
1,195
39
(19,530)
(1,539)
(1, 539)
-
73
(47)
(10)
(1,586)
63
(1,539)
(1,466)
(57)
(1,523)
-
-
-
-
1,187
(93)
27
1,121
1,780
-
-
-
-
1,187
(93)
27
1,121
(208)
1,572
The notes on pages 41 to 67 are an integral part of these financial statements
Page 34
POWER METAL RESOURCES PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Share
capital
£‘000
Share
premium
£‘000
Shares
to be
issued
£’000
Capital
Redemption
Reserve
Share
based
payment
Reserve
Exchange
reserve
Retained
deficit
£’000
£’000
£’000
£‘000
Non-
Controlling
Interests
£‘000
Total
Equity
£‘000
Total
£‘000
Balance at 1 October 2019
6,843
13,228
Loss for the period
Total other comprehensive
income/(expense)
Total comprehensive income /
(expense) for the period
Issue of ordinary shares
Costs of share issues
Share-based payments
Total transactions with owners
-
-
-
443
-
-
443
-
-
-
1,768
(86)
-
1,682
Balance at 30 September 2020
7,286
14,910
-
-
-
-
22
-
-
22
22
5
1,195
39
(19,530)
1,780
(208)
1,572
-
-
-
-
-
-
-
-
-
-
-
-
91
91
-
32
32
-
-
-
-
(1,381)
(1,381)
-
32
(33)
(34)
(1,414)
(2)
(1,381)
(1,349)
(67)
(1,416)
-
-
-
-
2,233
(86)
91
2,238
-
-
-
-
2,233
(86)
91
2,238
5
1,286
71
(20,911)
2,669
(275)
2,394
The following describes the nature and purpose of each reserve:
Share Capital: Amount subscribed for share capital at nominal value.
Shares to be issued: Amount subscribed for share capital not yet issued at the reporting date.
Share based payment reserve: Amounts recognised for the fair value of share options and warrants granted.
Non-controlling interests: Cumulative net profits/(losses) and exchange differences in relation to non-controlling interests.
Retained profits/(losses): Cumulative net profits/(losses) recognised in the financial statements.
Share Premium: Amount subscribed for share capital in excess of nominal value.
Capital Redemption Reserve: Amounts relating to the purchase of Company’s own shares.
Exchange Reserve: Foreign exchange differences in re-translation.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 35
POWER METAL RESOURCES PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
AS AT 30 SEPTEMBER 2020
Cash flows used in operating activities
Loss for the year
Adjustments for:
Fair value adjustments
Share of post-tax losses of equity accounted joint
ventures
Impairment
Expenses settled in shares
Share-based payment expense
Foreign exchange differences
Changes in working capital:
(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangibles
Purchase of financial assets at fair value through
profit or loss
Investment in joint ventures
Proceeds from investment disposals
Net cash outflows from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Issue costs
Net cash inflows from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange (loss) on cash and cash equivalents
Cash and cash equivalents at 30 September
2020
£’000
2019
£’000
(1,414)
(1,586)
(415)
33
970
267
91
(2)
(470)
(78)
95
(453)
-
(504)
(201)
20
(685)
1,965
(85)
1,880
742
171
-
913
(36)
-
954
186
27
65
(390)
8
(209)
(591)
(15)
(273)
-
-
(288)
1,000
(93)
907
28
147
(4)
171
The notes on pages 41 to 67 are an integral part of these financial statements
Page 36
POWER METAL RESOURCES PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2020
Assets
Investments in subsidiaries
Investments in associates & joint ventures
Financial assets
Non-current assets
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Shares to be issued
Capital redemption reserve
Share based payment reserve
Accumulated losses
Total Equity
Liabilities
Trade and other payables
Deferred consideration
Current liabilities
Total liabilities
Note
11
12
13
14
15
16
18
19
20
2020
£’000
156
316
1,208
1,680
716
913
1,629
3,309
7,286
14,910
22
5
1,286
(20,508)
3,001
192
116
308
308
2019
£’000
1,126
-
309
1,435
538
171
709
2,144
6,843
13,228
-
5
1,195
(19,225)
2,046
98
-
98
98
Total equity and liabilities
3,309
2,144
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 loss for the financial year dealt with in the
financial statements of the parent Company was £1,283,000 (2019: £1,462,000).
The notes on pages 41 to 67 are an integral part of these financial statements
Page 37
POWER METAL RESOURCES PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 SEPTEMBER 2019
Share capital
£‘000
Share
premium
£‘000
Capital
redemption
reserve
£’000
Share
based
payment
reserve
£’000
Accumulated
losses
£‘000
Total
Equity
£‘000
Balance at 1 October 2018
Effect of adoption of IFRS 9
Balance at 1 October 2018 restated
Loss for the year
Total comprehensive expense for the year
Issue of ordinary shares
Costs of share issues
Share-based payments
6,606
-
6,606
-
-
237
-
-
237
12,453
-
12,453
-
-
950
(93)
(82)
775
Balance at 30 September 2019
6,843
13,228
5
-
5
-
-
-
-
-
-
5
1,086
-
1,086
-
-
-
-
109
109
1,195
(17,682)
(81)
(17,763)
2,468
(81)
2,387
(1,462)
(1,462)
(1,462)
(1,462)
-
-
-
-
(19,225)
1,187
(93)
27
1,121
2,046
The notes on pages 41 to 67 are an integral part of these financial statements
Page 38
POWER METAL RESOURCES PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Share
Capital
Share
premium
Shares to
be issued
Capital
Redemption
Reserve
£‘000
£‘000
£’000
£’000
Share
based
payment
reserve
£‘000
Retained
deficit
Total equity
£‘000
£‘000
Balance at 1 October 2019
6,843
13,228
Loss for the period
Total comprehensive (expense) for the period
Issue of ordinary shares
Cost of share issues
Share-based payments
-
-
443
-
-
443
-
-
1,768
(86)
1,682
Balance at 30 September 2020
7,286
14,910
-
-
-
22
-
-
22
22
5
-
-
-
-
-
-
5
-
1,195
(19,225)
2,046
(1,283)
(1,283)
(1,283)
(1,283)
-
-
-
-
2,233
(86)
91
2,238
3,001
1,286
(20,508)
-
-
-
-
91
91
The following describes the nature and purpose of each reserve:
Share Capital: Amount subscribed for share capital at nominal value.
Shares to be issued: Amount subscribed for share capital not yet issued at the reporting date.
Share based payment reserve: Amounts recognised for the fair value of share options and warrants granted.
Share Premium: Amount subscribed for share capital in excess of nominal value.
Capital Redemption Reserve: Amounts relating to the purchase of Company’s own shares.
Retained profits/(losses): Cumulative net profits/(losses) recognised in the financial statements.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 39
POWER METAL RESOURCES PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Cash flows from operating activities
Loss for the year
Adjustments for:
Fair value adjustment
Impairment
Expenses settled in shares
Share based payment expense
Changes in working capital:
(Increase) in trade and other receivables
Increase/(Decrease) in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Investment in subsidiary undertakings
Investment in joint ventures
Investment in financial assets
Proceeds from investment disposals
Net cash outflows from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Issue costs
Net cash inflows from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange (losses) on cash and cash equivalents
Cash and cash equivalents at 30 September
2020
£’000
2019
£’000
(1,283)
(1,462)
(415)
970
267
91
(370)
(178)
95
(453)
-
(201)
(504)
20
(685)
1,965
(85)
1,880
742
171
-
913
(36)
1,006
186
27
(279)
(85)
(176)
(540)
(15)
-
(273)
-
(288)
1,000
(93)
907
79
96
(4)
171
The notes on pages 41 to 67 are an integral part of these financial statements
Page 40
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
1.
Reporting entity
Power Metal Resources plc is a public company limited by shares which is incorporated and domiciled
in England and Wales. The address of the Company’s registered office is 201 Temple Chambers, 3-7
Temple Avenue, London EC4Y 0DT. The consolidated financial statements of the Company as at and
for the year ended 30 September 2020 include the Company and its subsidiaries. The Group is primarily
involved in the exploration and exploitation of mineral resources in Africa, Australia, Canada and the
US.
2.
Going concern
The financial statements are prepared on a going concern basis. In assessing whether the going concern
assumption is appropriate, the Directors have taken into account all relevant available information
about the current and future position of the Group, including current level of resources, additional
funding raised during the year and post year-end, and the required level of spending on exploration
and drilling activities. As part of their assessment, the Directors have also taken into account the ability
to raise new funding whist maintaining an acceptable level of cash flows for the Group to meet all
commitments.
In the current business climate, the Directors acknowledge the COVID-19 pandemic and has
implemented logistical and organisational changes to underpin the Group’s resilience to COVID-19,
with the key focus being minimising the impact on critical work streams, ensuring business continuity
and conserving cash flows. COVID-19 may impact the Group in varying ways leading to the Group
reducing all non-essential expenditure, the potential impairment of assets held, the Group’s ability to
finance exploration and drilling activities and meet commitments relating to its investments, including
for transactions entered into after the financial reporting date (note 23) The inability to gauge the length
of such disruption further adds to this uncertainty. For these reasons, the preservation of cash flows is
a primary focus for the Directors.
The Directors have stress tested the Group’s cash projections, which involves preserving cash flows
and adopting a policy of minimal cash spending for a period of at least 12 months from the date of
approval of these financial statements. The Directors believe the measures they have put in place and
will result in sufficient working capital and cash flows to continue in operational existence, assuming
that all exploration and drilling activities are managed carefully and curtailed if necessary. For the
Group to carry out the desired levels of exploration and drilling activities, the Directors believe that it
needs to secure further funding either from a strategic partner or subsequent equity raisings in the next
financial year, which the Group has succeeded in completing over recent years. Taking these matters
in consideration, the Directors continue to adopt the going concern basis of accounting in the
preparation of the financial statements.
The financial statements do not include the adjustments that would be required should the going
concern basis of preparation no longer be appropriate.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 41
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
3.
Basis of preparation
Statement of compliance
(a)
The consolidated financial statements have been prepared in accordance with applicable International
Financial Reporting Standards (“IFRS”) and with those parts of the UK Companies Act 2006 applicable
to companies reporting under IFRS as adopted by the European Union. The financial statements are
prepared on the historical cost basis or the fair value basis where the fair valuing of relevant assets of
liabilities has been applied.
(b)
(i) New and amended standards, and interpretations issued and effective for the financial
year beginning 1 October 2019
There were no new standards, amendments or interpretations effective for the first time for periods
beginning on or after 1 October 2019 that had a material effect on the Group or Company financial
statements.
(ii) New standards, amendments and interpretations in issue but not yet effective
At the date of approval of these financial statements, the following standards and interpretations
which have not been applied in these financial statements were in issue but not yet effective (and in
some cases had not been adopted by the EU):
Amendments to References to Conceptual Framework in IFRS Standards – effective 1 January
2020
Definition of Material (Amendments to IAS 1 and IAS 8) – effective 1 January 2020
Amendment to IFRS 3 Business Combinations – effective 1 January 2020
Amendments to IFRS 9, IAS 39 and IFRS 17: Interest Rate Benchmark Reform – effective 1
January 2020
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform –
Phase 2 – effective 1 January 2021*
Amendment to IFRS 3 Business Combinations – Reference to the Conceptual Framework –
effective 1 January 2022*
Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets – effective 1
January 2022*
Annual Improvements to IFRS Standards 2018-2020 Cycle – effective 1 January 2022*
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as
Current or Non-current and Amendments to IAS 1: Classification of Liabilities as Current or
Non-current – Deferral of Effective Date – effective 1 January 2023*
*subject to EU endorsement
The Directors do not expect that the adoption of these standards will have a material impact on the
financial information of the group or company in future periods.
Functional and presentation currency
(c)
These consolidated financial statements are presented in Pounds Sterling, which is the Company’s
functional and presentation currency. All financial information presented has been rounded to the
nearest thousand pounds, except where otherwise indicated.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 42
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Use of estimates and judgements
(d)
The preparation of the consolidated financial statements in conformity with IFRS requires management
to make judgements, estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the year in which the estimates are revised and in any future years affected.
The estimates and assumptions that have the most significant effect on the amounts recognised in the
consolidated financial statements and/or have a significant risk of resulting in a material adjustment
within the next financial year are as follows:
Group
Carrying value of intangible assets
– Notes 4(f)
In arriving at the carrying value of intangible assets, the Group determines the need for impairment
based on the level of geological knowledge and confidence of the mineral resources. Such decisions are
taken on the basis of the exploration and research work carried out in the period utilising expert reports.
Classification of investments
- Note 4 (a) (ii)
The Group determines the classification of investment in associates based on whether significant
influence is held in the entity. The existence of significant influence is evidenced in the following ways:
-
-
-
-
-
Board of directors’ representation,
Management personnel swapping or sharing,
Material transactions with the investee,
Policy-making participation,
Technical information exchanges.
If there is no evidence of any of the above, the Group determines that investments held are classified
as financial assets.
Fair value measurement
- Note 4 (c)
All assets and liabilities for which fair value is measured and disclosed in the financial statements are
categorised within the fair value hierarchy (see note 4 (c) (ii).
For investments which are unlisted, the Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of unobservable inputs.
Parent
Receivables from Group undertakings
– Note 14
The notes on pages 41 to 67 are an integral part of these financial statements
Page 43
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
The Parent Company in applying the expected credit loss (ECL) model under IFRS 9 must make
assumptions when implementing the forward-looking ECL model. This model is required to be used
to assess the intercompany loans receivable from subsidiaries for impairment.
Estimations were made regarding the credit risk of the counterparty and the underlying probability of
default in each of the credit loss scenarios. The scenarios identified by management included
Production, Divestment, Fire-sale and Failure. These scenarios considered technical data, necessary
licences to be awarded, the Company’s ability to raise finance, and ability to sell the project. The
directors make judgements on the expected likelihood and outcome of each of the above scenarios, and
these expected values are applied to the loan balances.
4.
Significant accounting policies
The accounting policies set out below have been applied consistently throughout the year presented in
these consolidated financial statements and have been applied consistently by Group entities.
(a)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company made up to 30 September each year.
Business combinations
On acquisition, the assets and liabilities of a subsidiary are measured at their fair value at the date of
acquisition. Any excess of the cost of the acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill. If the aggregate of the acquisition-date fair value of the
consideration transferred and the amount recognised for the non-controlling interest (and where the
business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously
held equity interest in the acquiree) is lower than the fair value of the assets, liabilities and contingent
liabilities and the fair value of any pre-existing interest held in the business acquired, the difference is
recognised in profit and loss.
Subsidiaries and acquisitions
(i)
Business combinations are accounted for using the acquisition method as at the acquisition date – i.e.,
when control is transferred to the Group. Control is when the investor has power over the investee,
exposure or rights, to variable returns from its involvements with the investee, and the ability to use its
power over the investee to affect the amount of the investor’s returns.
The results of subsidiaries acquired or disposed of during the year are included in the statement of
comprehensive income from the effective date of acquisition, or up to the effective date of disposal, as
appropriate.
Non-controlling interests in subsidiaries are presented separately from the equity attributable to equity
owners of the parent Company. When changes in ownership in a subsidiary do not result in a loss of
control, the non-controlling shareholders’ interests are initially measured at the non-controlling
interests’ proportionate share of the subsidiaries net assets. Subsequent to this, the carrying amount of
non-controlling interests is the amount of those interests at initial recognition plus the non-controlling
interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 44
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Equity accounted investees
(ii)
Associates
Associates are entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but not the ability to
control or jointly control those policies. Investments in associates are accounted for using the equity
method of accounting.
Joint Arrangements
Joint arrangements are where parties are bound by a contractual arrangement and that arrangement
gives two or more of those parties joint control of the arrangement. Joint arrangements are accounted
for using the equity method of accounting.
Equity method of accounting
Under the equity method of accounting, interests in associates and joint arrangements are initially
recognised at cost. The Group’s share of associates and joint arrangements post acquisition profit / loss
after tax and other comprehensive income/ loss are presented as the ‘Share of results of Equity
accounted investees’ in the Group income statement and Group Statement of other comprehensive
income respectively. The cumulative post-acquisition movements are adjusted against the carrying
amount of the investment less any impairment in value. Where indicators of impairment arise, the
carrying amount of the associate is tested for impairment by comparing its recoverable amount against
its carrying value. Unrealised gains arising from transactions with associates are eliminated to the
extent of the Group’s interest in the entity. Unrealised losses are similarly eliminated to the extent that
they do not provide evidence of impairment of a transferred asset. When the Group’s share of losses in
an associate or joint arrangement equal or exceeds its interest in the associate, the Group does not
recognise further losses unless the Group has incurred obligations or made payments on behalf of the
entity. When the Group ceases to have or significant influence, any retained interest in the entity is re-
measured to its fair value at the date when or significant influence is lost with the change in carrying
amount recognised in the income statement. The Group also reclassifies any movements previously
recognised in other comprehensive income to the income statement.
Transactions eliminated on consolidation
(iii)
Intra-group balances and transactions, and any income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
(b)
Foreign currency
Foreign currency transactions
(i)
Transactions in foreign currencies are translated to the respective functional currencies of Group
entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are retranslated to the functional currency at the exchange
rate at that date. The foreign currency gain or loss on monetary items is the difference between
amortised cost in the functional currency at the beginning of the period, adjusted for effective interest
and payments during the period, and the amortised cost in foreign currency translated at the exchange
rate at the end of the period.
Foreign currency differences arising on retranslation into an entity’s functional currency are recognised
in profit or loss.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 45
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Foreign operations
(ii)
The assets and liabilities of foreign operations are translated to pounds sterling at exchange rates at the
reporting date. The income and expenses of foreign operations are translated to pounds sterling at
exchange rates at the dates of the transactions, with differences recognised in other comprehensive
income.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither
planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items
are considered to form part of a net investment in the foreign operation and are recognised in other
comprehensive income and presented in the exchange reserve in equity.
(c)
Financial instruments
Financial assets
(i)
The Group classifies its financial assets into one of the categories discussed below, depending on the
purpose for which the asset was acquired. The Group’s accounting policy for each category is as
follows;
Amortised cost
The Group's financial assets held at amortised cost comprise trade and other receivables and cash and
cash equivalents in the consolidated statement of financial position.
These assets are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They arise principally through the provision of goods and services to
customers (e.g., trade receivables), but also incorporate other types of financial assets where the
objective is to hold their assets in order to collect contractual cash flows and the contractual cash flows
are solely payments of the principal and interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their acquisition or issue and are subsequently carried
at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables are recognised based on the simplified approach within
IFRS 9 using the lifetime ECLs. During this process the probability of the non-payment of the trade
receivables is assessed. This probability is then multiplied by the amount of the expected loss arising
from default to determine the lifetime ECL for the trade receivables. For trade receivables, which are
reported net; such provisions are recorded in a separate provision account with the loss being
recognised within administrative expenses in the consolidated statement of comprehensive income. On
confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
Cash and cash equivalents comprise cash and cash at bank balances.
Fair value through profit or loss
Financial assets held at fair value through the profit or loss comprise equity investments held. These
are carried in the statement of financial position at fair value. Subsequent to initial recognition, changes
in fair value are recognised in the statement of comprehensive income.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 46
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Financial liabilities
(ii)
The Group’s financial liabilities include trade and other payables. All financial liabilities are recognised
initially at fair value, net of transaction costs incurred, and are subsequently stated at amortised cost,
using the effective interest method.
Unless otherwise indicated, the carrying values of the Group’s financial liabilities measured at
amortised cost represents a reasonable approximation of their fair values.
Fair value
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
statements are categorised within the fair value hierarchy. The fair value hierarchy prioritises the inputs
to valuation techniques used to measure fair value. The Group uses the following hierarchy for
determining and disclosing the fair value of financial instruments and other assets and liabilities for
which the fair value was used:
-
-
-
level 1: quoted prices in active markets for identical assets or liabilities;
level 2: inputs other than quoted prices included in level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices); and
level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
(d)
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity, net of any tax effects.
(e)
Intangible assets
Prospecting and exploration rights
(i)
Rights acquired with subsidiaries are recognised at fair value at the date of acquisition. Other rights
acquired and development expenditure are recognised at cost.
Exploration and evaluation costs arising following the application for the legal right, are capitalised on
a project-by-project basis, pending determination of the technical feasibility and commercial viability
of the project. When a project is deemed not feasible, related costs are expensed as incurred. Costs
incurred include any costs pertaining to technical and administrative overheads. Administration costs
that are not directly attributable to a specific exploration area are expensed as incurred, and
subsequently capitalised if it is reasonably certain that a resource will be defined.
Capitalised development expenditure will be measured at cost less accumulated amortisation and
impairment losses.
Impairment
(f)
Whenever events or changes in circumstance indicate that the carrying amount of an asset may not be
recoverable an asset is reviewed for impairment. An asset’s carrying value is written down to its
estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if
that is less than the asset’s carrying amount.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 47
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Impairment reviews for deferred exploration and evaluation expenditure are carried out on a project
by project basis, with each project representing a potential single cash generating unit. An impairment
review is undertaken when indicators of impairment arise such as:
- unexpected geological occurrences that render the resource uneconomic;
-
-
-
title to the asset is compromised;
variations in mineral prices that render the project uneconomic;
substantive expenditure on further exploration and evaluation of mineral resources is neither
budgeted nor planned; and
the period for which the Group has the right to explore has expired and is not expected to be
renewed.
-
Impairment losses are recognised in profit or loss. For all assets, an impairment loss is reversed only
to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Employee benefits – share based payments
(g)
The grant date fair value of share-based payment awards granted to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period that the employees become
unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the
number of awards for which the related service and non-market performance conditions are expected
to be met, such that the amount ultimately recognised as an expense is based on the number of awards
that meet the related service and non-market performance conditions at the vesting date. For share-
based payment awards with non-vesting conditions, the grant-date fair value of the share-based
payment is measured to reflect such conditions and there is no true-up for differences between expected
and actual outcomes.
Market vesting conditions are factored into the fair value of all options granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective of whether market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where terms and conditions of options are modified before they vest, the increase in the fair value of
the options, measured immediately before and after the modification, is also charged to the income
statement over the remaining vesting period.
Finance income and finance expense
(h)
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues
in profit or loss, using the effective interest method.
Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions
and impairment losses recognised on financial assets.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a
qualifying asset are recognised in profit or loss using the effective interest method.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 48
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Taxation
(i)
Tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or
loss except to the extent that it relates to a business combination, or items recognised directly in equity
or in other comprehensive income.
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in
respect of previous years. Current tax payable also includes any tax liability arising from the
declaration of dividends.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
tax is not recognised for:
-
-
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss; and
temporary differences related to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which
the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its
assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity,
or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or
their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which
they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
Segmental information
(j)
An operating segment is defined as a component of an entity that engages in business activities from
which is may earn revenues and incur expenses, whose operating results are regularly reviewed by the
entity’s chief operating decision maker and for which discrete financial information is available.
The Group disclose reportable segments which are regularly reviewed by the chief operating decision
maker, (the CEO) and revenues, expenses and non-current assets in relation to each reporting segment
are presented in note 5 to the financial statements.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 49
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
5.
Operating segments
The Group has one single business segment which is the exploration of mineral resources and
exploitation.
During the year, the Company acted as the holding company of entities involved in mineral resources
exploration and exploitation in both the Democratic Republic of Congo and Cameroon. Therefore, the
Group has the following geographical segments, detailed in the tables below. None of the segments
generated revenue during the period.
Non-current Assets
Cameroon
Democratic Republic of Congo
Total
6.
Operating expenses
Operating expenses include:
Staff costs (note 7)
Foreign exchange loss/(gain)
Share based payment expense
Auditor’s remuneration – audit services
2020
£’000
-
156
156
2020
£’000
296
1
46
24
Auditor’s remuneration in respect of the Company amounted to £23,500 (2019: £27,000).
7.
Staff costs
Social security contributions
Directors’ salary and fees
Share based payments
2020
£’000
18
249
29
296
The monthly average number of employees (including Directors) during the period was:
Directors
2020
5
5
2019
£’000
970
156
1,126
2019
£’000
184
(4)
28
27
2019
£’000
1
167
16
184
2019
4
4
There were no employees other than the Directors in the year ended 30 September 2020 or year ended
30 September 2019.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 50
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
8.
Directors’ emoluments
2020
Fees
Wages and salaries
Share based payments
Total
2019
Fees
Wages and salaries
Share based payments
Total
Executive
£’000
-
187
22
209
Executive
£’000
-
137
8
145
Non-
executive
£‘000
17
46
9
71
Non-
executive
£‘000
17
13
8
38
Emoluments disclosed above include the following amounts paid to the highest Director:
Emoluments for qualifying services
9.
Taxation
Reconciliation of tax expense
Losses from operations
Tax using the Company’s effective domestic tax rate of 19% (2019:
19%)
Effects of:
Disallowable expenditure
Current losses with no recognisable deferred tax asset
Total
£‘000
17
232
31
280
Total
£‘000
17
150
16
183
2019
£‘000
58
2020
£’000
131
2020
£’000
(1,414)
2019
£’000
(1,586)
(269)
(301)
193
76
-
-
301
-
Factors that may affect future tax charges
At the year end, the UK Company had unused tax losses available for offset against suitable future
profits of approximately £4,412,382 (2019: 2,998,303). A deferred tax asset has not been recognised in
respect of such losses due to uncertainty of future profit streams.
The main rate of UK corporation tax during the year ended 30 September 2020 was 19.00 per cent (2019:
19.00 per cent).
The notes on pages 41 to 67 are an integral part of these financial statements
Page 51
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
10.
Intangible assets
Group
Cost
As at 1 October 2018
Effect of movements in exchange rate
Balance at 30 September 2019
As at 1 October 2019
Disposals
Balance at 30 September 2020
Impairment
As at 1 October 2018
Charge
Balance at 30 September 2019
As at 1 October 2019
Impairment
Disposals
Balance at 30 September 2020
Net book value
At 30 September 2019
At 30 September 2020
Prospecting
and
exploration
rights
£’000
7,795
(2)
7,793
7,793
(6,667)
1,126
5,713
954
6,667
6,667
970
(6,667)
970
1,126
156
The opening balance of intangible assets was initially recognised on the acquisition of the three
subsidiaries, Power Metal Resources SA (formerly ABM Kobald SAS), (PMR), Cobalt Blue Holdings
(CBH) and Regent Resources Interests Corporation (RRIC), which was impaired in full at 30 September
2019, and subsequently written off.
Intangible assets
PMR
CBH
Total
2020
£’000
156
-
156
2019
£‘000
156
970
1,126
The Directors regularly assess the carrying value of the Group’s assets, including its prospecting and
exploitation rights, and write off any exploration expenditure that they believe to be unrecoverable.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 52
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
PMR
Following the discovery of a 6.8km copper anomaly at the Company’s 70% owned Kisinka Project near
Lubumbashi in the DRC, Power Metal conducted a follow pitting, sampling, and mapping programme
in early 2020. The programme was conducted successfully on the ground with in-country X-ray
Fluorescence (XRF) of samples confirming the previously identified copper anomaly. Samples were
prepared for assay testing in South Africa, the results from which were received post year-end, but
which confirmed high grade copper and cobalt.
The licence renewal at Kisinka Project was to be commenced in the year but the decision was taken
instead to convert the licence to a Permis d'Exploitation (production licence) with a 25 year life. As part
of the process 50% of the less prospective ground is to be surrendered, leaving the Company with 41
carrés miniers (each 84.95 ha).
As a licence in a prospective area and close to existing discoveries, with a significant apparent discovery
awaiting confirmation, this license in the Board’s view is likely to have a value greatly in excess of sums
expended, and the carrying value is not subject to any impairment.
CBH
At the reporting date, the Group held four Cameroon-based nickel-cobalt exploration licences through
two 100% owned subsidiaries of CBH. These licences expire in the first quarter of 2021, unless renewed.
The locations of the four licences held and the Ntam Est licence applied for are either adjacent to, or
within 50km of the Nkamouna/Mada Cobalt Project ("Nkamouna/Mada") in Cameroon, formerly
owned by ex-TSX-listed Geovic Mining Corp ("Geovic"), where in 2011 SRK Consulting (US) Inc.
reported a giant NI 43-101 compliant cobalt/nickel resource.
The directors assessed the carrying value of CBH at the year end and took the decision to impair the
asset in its entirety. This was due to the disappointing results of the exploration during the year,
combined with the effect of COVID-19 inhibiting exploration and lacklustre cobalt prices at a time when
other prices were performing strongly. Additionally, the licences are due for renewal in the first quarter
of 2021 which would be expensive and, given the lack of work may not be granted, therefore it was
decided not to conduct further operations in Cameroon and the asset was written down.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 53
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
11.
Investments in subsidiaries
Company
As at 1 October 2018
Additions
Balance at 30 September 2019
As at 1 October 2019
Disposals
Balance at 30 September 2020
Impairment
As at 1 October 2018
Charge
Balance at 30 September 2019
As at 1 October 2019
Impairment
Disposal
Balance at 30 September 2020
Net book value
At 30 September 2019
At 30 September 2020
Non-current investments
Investment in PMR
Investment in CBH
Total Investment in subsidiaries
Investment
in subsidiary
undertakings
£’000
5,819
-
5,819
5,819
(1,006)
4,813
3,687
1,006
4,693
4,693
970
(1,006)
4,657
1,126
156
2019
£‘000
156
970
1,126
2020
£’000
156
-
156
At the date of this report, all subsidiaries are still owned by the Company.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 54
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Directly
Activity
Country of
incorporation
Ownership
interest
Registered office
Power Metal
Resources SA
(formerly ABM
Kobald SAS)
Regent
Resources
Interests
Corporation
Cobalt Blue
Holdings Inc
Loxcroft
Cameroon
Holdings Ltd
Mining and
exploration
Democratic
Republic of Congo
70%
Mining and
exploration
British Virgin
Islands
100%
Mining and
exploration
British Virgin
Islands
100%
Mining and
exploration
Cameroon
100%
indirectly
LC Minerals Ltd Mining and
exploration
Cameroon
100%
indirectly
LC Exploration
Ltd
Mining and
exploration
Cameroon
100%
indirectly
No. 1022, Avenue of the
Congolese Armed Forces,
Gombe River Gallery,
Kinshasa, DRC
P.O. Box 2283, ABM
Chambers, Columbus
Centre, Road Town, Tortola,
British Virgin Islands
Intershore Chambers, Road
Town, Tortola, British
Virgin Islands
P.O. Box 25647, Bastos,
Yaoundé, Republic of
Cameroon
P.O. Box 25647, Bastos,
Yaoundé, Republic of
Cameroon
P.O. Box 25647, Bastos,
Yaoundé, Republic of
Cameroon
For the year ended 30 September 2020, the subsidiary Power Metals SA incurred a loss of £109,000
(2019: £155,000). There were no other material losses in the subsidiaries.
12.
Investments in associates and joint ventures
Group
Opening balance
Additions
Share of losses
Closing balance
2020
Total
£’000
-
317
(33)
284
2019
Total
£‘000
-
-
-
-
In April 2020, the company acquired 49.9% of Red Rock Australasia Pty Ltd (RRAL), with Red Rock
Resources Plc holding 50.1%. The joint venture was set up to build a strategic gold exploration portfolio
in Australia. Power Metal Resources Plc contributed £44,320 to acquire 49.9% of the share capital of the
joint venture company. At the year ended 30 September 2020, RRAL had incurred a loss of
The notes on pages 41 to 67 are an integral part of these financial statements
Page 55
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
approximately AUD $121,338. Power Metal Resources Plc included its share of the loss in the financial
statements for the year ended 30 September 2020. This amounted to £32,795.
In September 2020, the Company acquired 50% of four prospecting licences in Botswana, from Kavango
Resources Plc, with a view to creating a new joint venture based in Botswana. During the year, the
Company transferred £272,402 towards the joint venture, including £116,000 of deferred consideration.
At the year-end date, the joint venture company had not yet been set up and therefore there was no
profit or loss attributable to the Company.
Company
Opening balance
Additions
Closing balance
13.
Financial assets with fair value through profit & loss
Group & Company
Opening balance
Additions
Fair value adjustment – equity investment
Fair value adjustment – derivative assets
Disposals
Closing balance
14.
Trade and other receivables
Listed
£’000
132
114
214
201
(20)
641
Unlisted
£’000
177
390
-
-
-
567
Group
Accounts receivable
Other receivables
Prepayments
Company
Receivables due from group undertakings
Accounts receivable
Other receivables
Prepayments
2020
Total
£’000
-
317
317
2020
Total
£’000
309
504
214
201
(20)
1,208
2020
£’000
10
65
35
110
2020
£’000
606
10
65
35
716
2019
Total
£‘000
-
-
-
2019
Total
£‘000
-
273
28
8
-
309
2019
£‘000
-
11
21
32
2019
£‘000
507
-
11
20
538
The notes on pages 41 to 67 are an integral part of these financial statements
Page 56
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
15.
Cash and cash equivalents
Group & Company
Bank balances
Cash and cash equivalents
16.
Share capital
Ordinary shares in issue at 1 October
Issued for cash
Issued in settlement for expenses
2020
£’000
913
913
2019
£‘000
171
171
Number of ordinary shares
2020
372,838,101
416,626,316
28,852,125
2019
136,579,143
200,000,000
36,258,958
In issue at 30 September – fully paid (par value 0.1p)
818,316,542
372,838,101
Deferred shares in issue at 1 October
In issue at 30 September
Balance at beginning of year
Share issues
Balance at 30 September
Number of deferred
shares
2020
3,628,594,957
3,628,594,957
2019
3,628,594,957
3,628,594,957
Ordinary
share capital
2020
£’000
6,843
443
7,286
2019
£‘000
6,606
237
6,843
All ordinary shares rank equally with regard to the Company’s residual assets.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company.
Both classes of deferred shares (Deferred and Deferred A), do not entitle the holders thereof to receive
notice of or attend and vote at any general meeting of the Company or to receive dividends or other
distributions or to participate in any return on capital on a winding up unless the assets of the Company
are in excess of £1,000,000,000,000. The Company retains the right to purchase the deferred shares from
any shareholder for a consideration of one penny in aggregate for all that shareholder's deferred
shares. As such, the deferred shares effectively have no value. Share certificates will not be issued in
respect of the deferred shares.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 57
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Issue of ordinary shares
In October 2019, the Company issued 4,852,125 new ordinary shares to enter into a due diligence period
to enable inspection, verification and sampling in respect of the Alamo project.
In December 2019, the Company announced a share placing of 175,000,000 new ordinary shares of 0.1
pence each, at a price of 0.40 pence per share, raising £700,000.
In July 2020, the Company announced it had raised £1,000,000 through a subscription of 210,526,316
new ordinary shares of 0.1 pence each at a price of 0.475 pence per share.
In July 2020, the Company acquired an option providing a right to earn-in up to a 75% interest in the
Alamo Gold project. The Company paid the vendors a total consideration of £48,000 for the option,
through the issue of 8,000,000 new ordinary shares at a price of 0.60 pence per share.
On 17 August 2020, the Company paid for a 30-day exclusivity period for due diligence in respect of
the Silver Peak project, for £14,319 in cash and £12,500 payable through the issue of 1,000,000 shares in
the Company at a price of 1.25 pence per share.
In August and September 2020, 31,100,000 were issued in relation to warrant exercises; 16,100,000 were
exercised at a price of 1.0 pence per share, and 15,000,000 were exercised at a price of 0.70 pence per
share.
On 14 September 2020, the Company exercised the option over the Silver Peak project, enabling the
Company to earn-in to a 30% interest. The Company acquired the option for total consideration of
£129,683, comprising £17,183 in cash and £112,500 through the issue of 9,000,000 new ordinary shares
at a price of 1.25 pence per share.
In September 2020, the Company acquired a 50% interest in four Botswana prospecting licences with a
view to holding them in a Botswana private holding company as a joint venture with Kavango
Resources plc. Consideration for the acquisition consisted of £75,000 cash and the issue of 6,000,000
shares in the Company to Kavango Resources plc, at a price of 1.25 pence each, totalling £75,000.
17.
Earnings per share
Basic and diluted loss per share
The calculation of basic and diluted loss per share is based on the loss attributable to ordinary
shareholders of £1,381,290 (2019: £1,539,176), and a weighted average number of ordinary shares in
issue of 558,893,170 (2019: 278,814,166).
The notes on pages 41 to 67 are an integral part of these financial statements
Page 58
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
18.
Share options and warrants
Reconciliation of outstanding share options:
2020
Outstanding at 1 October 2019
Granted during the year
Lapsed during the year
Outstanding at 30 September 2020
Exercisable at 30 September 2020
Number
of options
28,375,358
35,000,000
(50,000)
63,325,358
58,375,358
Weighted
average
exercise
price
(£’s)
0.04
0.02
0.20
0.26
0.24
The weighted average contractual life of the options outstanding at the reporting date is 2 years and
191 days.
Exercise prices of share options outstanding at the end of the period:
97,500
1,000,000
27,227,858
15,000,000
20,000,000
£6.000
£0.050
£0.015
£0.010
£0.020
2019
Outstanding at 1 October 2018
Granted during the year
Outstanding at 30 September 2019
Exercisable at 30 September 2019
Directors Options
Weighted
average
exercise
price
(£’s)
0.749
0.015
0.764
0.546
Number
of options
1,147,500
27,227,858
28,375,358
27,875,358
Included within the options issued in the year ended 30 September 2020 were 30,000,000 options issued
to directors (2019: 27,227,858).
2020
Andrew Bell
Paul Johnson
Scott Richardson Brown
Ed Shaw
Exercise price
(£’s)
0.020
0.020
0.010
0.010
Number of
Options
7,500,000
12,500,000
5,000,000
5,000,000
30,000,000
The notes on pages 41 to 67 are an integral part of these financial statements
Page 59
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
2019
Andrew Bell
Paul Johnson
Exercise price
(£’s)
0.015
0.015
Number of
Options
13,613,929
13,613,929
27,227,858
The fair values of the options granted during the year were calculated using the Black Scholes Model
with the following assumptions:
Risk free interest rate
Expected volatility
Expected dividend yield
Life of the option
Share price at measurement date
0.460% & 0.133%
70%
0.00%
1.5 years & 2 years
£0.0038 & £0.0093
Reconciliation of outstanding warrants
2020
Outstanding at 1 October 2019
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding and exercisable at 30 September 2020
Weighted
average
exercise
price
(£’s)
0.02
0.01
0.01
0.38
0.34
Number of
warrants
218,431,480
432,526,316
(1,672,735)
(31,100,000)
618,185,061
The weighted average contractual life of the options outstanding at the reporting date is 1 year and 83
days.
2019
Outstanding at 1 October 2018
Lapsed during the year
Granted during the year
Outstanding and exercisable at 30 September 2019
Directors Warrants
Number
of
warrants
8,298,050
(866,570)
211,000,000
218,431,480
Weighted
average
exercise
price
(£’s)
0.274
0.068
0.011
0.019
No warrants were issued to directors in the year ended 30 September 2020 (2019:Nil).
The notes on pages 41 to 67 are an integral part of these financial statements
Page 60
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
The fair values of the warrants granted during the year were calculated using the Black Scholes
Model with the following assumptions:
Risk free interest rate
Expected volatility
Expected dividend yield
Life of the option
Share price at measurement date
0.132%, 0.139% & 0.167%
70%
0.00%
1 year, 1.5 years & 2 years
£0.007, £0.0125 & £0.0115
£46,000 has been recognised as a share based payment expense in the Statement of Comprehensive
Income related to the issue of share options and warrants and £45,000 has been included in non-current
assets as it relates to the acquisition of certain financial assets.
19.
Trade and other payables
Group
Trade payables
Accrued expenses
Company
Trade payables
Accrued expenses
Payable to group undertakings
2020
£’000
24
137
161
2020
£’000
24
137
31
192
2019
£‘000
20
46
66
2019
£‘000
20
46
32
98
The Group’s and Company’s exposure to currency and liquidity risk related to trade and other payables
is disclosed in note 21.
20.
Deferred consideration
Group & Company
Deferred consideration
2020
£’000
116
2019
£‘000
-
The deferred consideration relates to $150,000 which the Company has committed to transfer to the
joint venture held with Kavango Resources Plc over two years from September 2020. The Directors
expect that this amount will be paid in the 12 months from the year end.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 61
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
21.
Financial instruments
Financial risk management
Overview
The Group has exposure to the following risks arising from financial instruments.
credit risk
liquidity risk
-
-
- market risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring and managing risk, and the Group’s management of
capital.
Risk management framework
The Company’s board of Directors has overall responsibility for the establishment and oversight of the
Group’s risk management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the
Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions and
the Group’s activities. The Group, through its training and management standards and procedures,
aims to develop a disciplined and constructive control environment in which all employees understand
their roles and obligations.
Cost may be an appropriate estimation of fair value at the measurement date only in limited
circumstances, such as for a pre-revenue entity when there is no catalyst for change in fair value, or the
transaction date is relatively close to the measurement date. Other indicators include insufficient recent
information , Wide range of possible fair values and cost represents the best estimate.
Financial instruments measured at fair value
The fair value hierarchy of financial instruments measured at fair value is provided below. The different
levels have been defined as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1),
Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly or indirectly (level 2),
Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (level 3).
The notes on pages 41 to 67 are an integral part of these financial statements
Page 62
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Group & Company
30 September 2020
Financial Assets at fair value
through profit or loss
Financial assets (fair value through
the profit or loss)
30 September 2019
Financial Assets at fair value
through profit or loss
Financial assets (fair value through
the profit or loss)
Level 1
£’000
Level 2
£’000
Level 3
£’000
641
641
-
-
567
567
Level 1
£’000
Level 2
£’000
Level 3
£’000
133
133
-
-
176
176
Total
£’000
1,208
1,208
Total
£’000
309
309
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was as follows:
Group
Trade and other receivables
Cash and cash equivalents
Company
Trade and other receivables
Cash and cash equivalents
Carrying
amount
2020
£’000
110
913
1,023
Carrying
amount
2020
£’000
716
913
1,629
2019
£‘000
11
171
182
2019
£‘000
506
171
677
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
The notes on pages 41 to 67 are an integral part of these financial statements
Page 63
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation.
The following are the contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements.
Group
30 September 2020
Non-derivative financial
liabilities
Trade and other payables
Deferred consideration
30 September 2019
Non-derivative financial
liabilities
Trade and other payables
Company
30 September 2020
Non-derivative financial
liabilities
Trade and other payables
Deferred consideration
30 September 2019
Non-derivative financial
liabilities
Trade and other payables
Carrying
amount
£’000
2 months
or less
£’000
2-12 months
£’000
More than
1 year
£’000
161
116
277
161
-
161
-
116
116
-
-
Carrying
amount
£’000
2 months
or less
£’000
2-12 months
£’000
More than
1 year
£’000
66
66
66
66
-
-
-
-
Carrying
amount
£’000
2 months
or less
£’000
2-12 months
£’000
More than
1 year
£’000
192
116
308
192
-
192
-
116
116
-
-
Carrying
amount
£’000
2 months
or less
£’000
2-12 months
£’000
More than
1 year
£’000
98
98
98
98
-
-
-
-
The Group reviews its facilities regularly to ensure that it has adequate funds for operations and
expansion plans.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 64
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and
equity prices will affect the Group’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return.
Due to the nature of the Group’s operations, it will be mainly exposed to fluctuations in the price of
iron and gold. The Group, where able, will look to hedge its foreign currency exposure.
Currency risk
The Group operates internationally and is exposed to foreign currency risk arising on cash and cash
equivalents and receivables denominated in a currency other than the respective functional currencies
of Group entities. The currencies in which these transactions primarily are denominated are US Dollar
(USD), Canadian Dollar (CAD) and Australian Dollar (AUD). The following balances were held in
foreign currency at the reporting date are:
Net foreign currency financial
(liabilities)/assets
USD
CAD
AUD
Total net exposure
Group
Company
2020
£’000
354
38
42
434
2019
£’000
-
-
-
-
2020
£’000
354
38
42
434
2019
£’000
-
-
-
-
Sensitivity analysis
A 10 per cent strengthening of sterling against the respective currencies at 30 September 2020 would
have increased/(decreased) equity and profit or loss by the amounts shown below;
Group
Profit and loss
USD
CAD
AUD
Total net exposure
2020
£’000
(35)
(4)
(4)
(43)
2019
£’000
-
-
-
-
Company
Profit and loss
USD
CAD
AUD
Total net exposure
2020
£’000
(35)
(4)
(4)
(43)
2019
£’000
-
-
-
-
Equity
2020
£’000
(35)
(4)
(4)
(43)
Equity
2020
£’000
(35)
(4)
(4)
(43)
2019
£’000
-
-
-
-
2019
£’000
-
-
-
-
The notes on pages 41 to 67 are an integral part of these financial statements
Page 65
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
A 10 per cent weakening of the sterling against the respective currencies would have an equal but
opposite effect.
Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Capital consists of equity which at 30
September 2020 for the Group totalled £2,394,000 (2019: £1,572,000) and for the Company totalled
£3,001,000 (2019: £2,046,000).
Accounting classifications and fair values
Fair values and carrying amounts
The carrying values of financial assets and liabilities are all approximate to their fair values per the
statement of financial position.
22.
Related parties
In addition to matters reported in note 8, the following related party transactions took place during the
year ended 30 September 2020:
Andrew Bell, a Director who served during the year is also director of Red Rock Resources plc,
providing consultancy services to the Company. Further details on the joint venture arrangement with
Red Rock Resources plc is disclosed in the Chairman’s Statement and note 12 to the financial
statements. The total fees invoiced to the Company for the year ended 30 September 2020 was £52,572
(2019: £30,000), of which nil was outstanding at the year end.
Paul Johnson, a Director who served during the year is also director of Value Generation Limited, a
management consultancy business. The total fees invoiced to the Company for the year ended 30
September 2020 were £18,084 (2019: £30,780) which was settled in full prior to the year end.
During the year, the Company advanced funds to Power Metal Resources SA, totalling £108,884 (2019:
£92,133). The loan is repayable on demand and on 30 September 2020, £687,372 was outstanding. An
expected credit loss of £16,333 was recognised at the year-end in respect of the intercompany receivable
(2019: £86,773).
The Company advanced £5,790 to its subsidiary, Cobalt Blue Holdings during the year, (2019: £25,333).
The loan is repayable on demand and £31,123 remains outstanding at the year end. An expected credit
loss of £1,853 was recognised at the year-end in relation to the intercompany receivable (2019: £8,107).
The Company advanced £1,796 to its subsidiary, Regent Resources Interests Corp during the year
(2019: Received £44,994). The £30,271 remains repayable to the subsidiary at the year end.
23.
Subsequent events
Drilling programme commencement at the Molopo Farms Complex Project in Botswana (announced
October 2020), the Silver Peak Project in Canada (November 2020) and the Haneti Nickel Project in
Tanzania (December 2020);
The notes on pages 41 to 67 are an integral part of these financial statements
Page 66
POWER METAL RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Next stage exploration programmes commenced at the Kalahari Copper Belt and Ditau Projects in
Botswana, the Alamo Gold Project in Arizona, USA and the Kisinka Project in The Democratic Republic
of the Congo (“DRC”);
Continuation of corporate activities since the year end with participation in a rights issue for Kalahari
Key Mineral Exploration (Pty) Limited and expansion of the Australian Gold Joint Venture with an
application to increase the JV footprint by a further 148 km2 surrounding the Ballarat mine area;
Option agreement signed in January 2021 providing 60 business days for due diligence which if
successful would lead to the acquisition of First Development Resources Pty Limited, a private
Australian company with copper-gold exploration interests in Paterson Province, Australia;
Agreement signed by Power Metal Resources in January 2021 to acquire a package of gold exploration
properties in Ontario Canada, followed by an option agreement providing 30 days for due diligence
which if successful would lead to the acquisition of four additional exploration projects also in Ontario,
Canada. In February 2021, the Company announced it had exercised the Option to acquire the McKellar
Property by transferring total consideration of CAD$100,000 in cash and shares;
In February 2021 RRAL received confirmation that three licence applications had been granted enabling
the commencement of ground exploration in the Victoria Goldfields, Australia;
In February 2021, the Company announced, subject to shareholder approval, a capital reduction to take
place in order for distributions to be made to shareholders; and
Warrant exercises since the financial year end have raised a further £2,638,470 for the Company.
The notes on pages 41 to 67 are an integral part of these financial statements
Page 67