PREMIER AFRICAN MINERALS LIMITED
ANNUAL REPORT
31 DECEMBER 2018
WWW.PREMIERAFRICANMINERALS .COM
(AIM:PREM)
Contents
Chairman & CEO statement
Strategic report
Directors’ report
Corporate governance statement
Independent auditor’s report
Consolidated statement of financial position
Consolidated statement of profit or loss and other
comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
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03
09
11
19
26
27
28
29
30
Chief Executive’s Statement
2018 was disappointing with a number of achievements anticipated being stalled and generally due to
circumstances not immediately under our control. Perfect hindsight may have avoided some of this
and post year end events and decisions discussed in this report are targeted at mitigation, remedy and
redirection, all intended to stabilise and then regenerate Premier African Minerals Limited (“Premier”
or the “Company”). The prospect of restructuring the ownership at RHA Tungsten (Pty) Ltd (“RHA”),
born out of the promise of a new Zimbabwe, failed to materialise and in its place the Zimbabwean
National Indigenisation and Economic Empowerment Fund (“NIEEF”) proposed in late 2018 that they
would fund RHA back into production whilst retaining their ownership. In this event, Premier’s loan
account to RHA, now in excess of $20 million, remains in place and Premier is reappointed as the
manager of the project. This was set out formally in a letter from the Zimbabwean Ministry of Industry,
Commerce and Enterprise Development (“Zimbabean Ministry”) and in a subsequent event, a new
contract was concluded, in which NIEEF set out a legally binding commitment to fund RHA.
Similarly, the failure to reach agreement on the proposed joint venture to develop Zulu Lithium (Pty)
Ltd (“Zulu”) has been exacerbated by the ongoing frustrations associated with the delay in granting
our Exclusive Prospecting Order (“EPO”) application over the on-strike extensions to Zulu. Most
disappointing is that these extension areas, in our opinion, are worth little to any other party without
the main body of the Zulu deposit but would be highly complementary to Zulu in the long term. The
combination of this, the failure to reach agreement on RHA and general shareholder sentiment all
supported the decisions taken in late 2018 to seek a new project for Premier. Out of this, the proposed
transaction with KME Holdings Limited (“KME”) and subsequently Honey Badger Resources Limited
(HBR) emerged. It was clear then, and is just as clear now, that Premier needs to diversify both country
and development risk as much to ensure the ability to raise adequate funding to develop its projects,
as to regain shareholder value and to achieve a state of self-sustainability where revenue is generated
from our projects, and dependence on equity placement ceases.
Some additional drilling at RHA supported our decision to suspend open pit operations at this time
and to seek to expand underground operations through the eventual development of a new decline
shaft to intersect higher grade and better defined mineralisation intersected in drilling at depth. A
prospective return to production at RHA was further supported by better fundamentals in the
tungsten market, something that persists today, and validation of previous studies conducted on our
behalf by Bara Consulting. There is no doubt in my mind that once RHA attains steady state, it will be
a long term and important tungsten producer.
It is abundantly clear to me today in late June 2019, that reliance exclusively on any event that is not
entirely under our control risks further delay and frustration in returning value in our company. There
is little doubt in my mind that Premier must diversify and identify revenue generating assets that are
actually in production and profitable now.
We continue to hold 5 010 333 shares in Circum Minerals Limited (“Circum”), currently valued in total
at $6 262 916.25. Circum has published a general update to shareholders in June 2019 and I remain
confident that the major shareholders and directors of Circum are now fully coordinated in their
intention to generate a liquidity event for shareholders before the end of 2019. The full update has
been made available to shareholders through our website (as announced on 12 June 2019).
On a corporate level, in September 2018, Russel Swarts ceased to be a Board member and Michael
Foster accepted the appointment as Chairman of the Board. I extend my appreciation to both. As a
Board we recognise that the corporate management team needs strengthening. An element of the
proposed HBR and KME transactions was intended to see just such an overhaul with both changes to
overall executive management and additions to our Board. That these transactions did not materialise,
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has not changed the Board’s intention.
As a final note, I would like to thank all our employees, directors and consultants for their continued
hard work.
I look forward to the next 12 months as a year of potential regeneration and change and a return to
value.
George Roach
Chief Executive Officer & Outgoing Chairman
30 June 2019
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Strategic Report
The strategic report provides a detailed assessment of the activities of the Company during the period under
review. It also details the main objectives of the Company related to our portfolio of assets. The principal risks
and uncertainties associated with our activities are outlined in a specific principal risks and uncertainties section.
This section of the annual report is produced in accordance with Guidance on the Strategic Report, June 2014
issued by United Kingdom and the Republic of Ireland's independent regulator, the Financial Reporting Council.
RHA
49% Interest owned by Premier
51% Locally indigenized owned by NIEEF
2018 saw a disappointing start with the suspension of operations in early January 2018 and the placing of the
mine under care and maintenance. It had become clear late in December 2017 that underground development
had not attained the levels expected and accordingly RHA would not meet the targets set for production during
2018. With the scrapping of indigenisation law in Zimbabwe, Premier approached the Zimbabwe Government
with a proposal that had initially found favour and support both in verbal discussion and then subsequently in
written confirmation. This proposal suggested that Premier would agree to capitalise our loan account in
exchange for the issuance of new shares in RHA such that Premier would hold 90% of the shares in issue
thereafter. There followed extensive meetings and discussions, all with the promise of action and
implementation of the proposal. This culminated late in 2018 with NIEEF through the office of the Zimbabean
Ministry, declining the proposal originally accepted and instead stating their intention to invest into RHA to
restart the mine. Whilst not expected, this alternative was attractive. At the same time, it assured Premier’s loan
and lifted any further funding requirement from Premier.
Drilling undertaken during 2018 had confirmed our decision not to proceed with the open pit operations. It had
been suspected for some time that the mineralisation within the upper areas of the pit envelope was widely
spread as a consequence of factors not previously identified and the clearly delineated quartz vein mineralised
structures self-evident in the underground operations, did not extend into the western areas of the pit. This
drilling did however, indicate that a future open pit operation would probably be feasible after a decline access
shaft to underground operations had been constructed. The need and desirability of his new shaft system had
long been contemplated and this drilling added further support in that an anticipated convergence of the
underground mineralised zones seemed to be supported by results obtained. Important to note that the existing
underground shaft system and adit are within the eastern areas of a possible future open pit envelope and this
is the reason for not looking to extend the open pit now.
Further validation undertaken during 2018 supported the continuing intention to return RHA to production and
identified a number of improvements possible to the process plant that would be expected to improve recoveries
and concentrate purity.
Recoverability of mine assets
The mine assets remain fully impaired at this time and are likely to so remain until NIEEF either funds the
operation or concludes another sustainable arrangement that allows the mine to be fully funded and returned
to operations.
Post Reporting Period
On 7 May 2019, Premier reported that NIEEF finally signed a legally binding agreement that included provisions
to fund RHA to the extent of $6 million. At the same time, Premier was reappointed as the manager.
In June 2019, Premier reported that RTGS six million had been deposited to the bank account of RHA. This
followed a conversation with the Zimbabwean Ministry in which it was made clear that this did not constitute
the entire assistance that would be provided to RHA through NIEEF and that the Zimbabwean Government
remained committed to facilitating a return to production at RHA as expeditiously as possible. Whilst the formal
agreement with NIEFF contains a provision that $6 million is to be funded by NIEEF, Premier is deeply
appreciative of the investment made to date and will properly appropriate the funds now available to the
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proposed restart RHA.
The Zimbabwean Government has stated that RTGS is the sole legal tender in Zimbabwe and has converted
existing $ holdings to RTGS on a one for one basis. An example of this includes the outstanding balance on the
RHA current account that had reflected an overdraft of some $300 000. This account now reflects a credit
balance of some RTGS 5,7 million. A substantial portion of RHA debt was incurred in Zimbabwe and is due and
payable to Zimbabwean registered and domiciled bodies. The full potentially beneficial impact of this will need
to be assessed in consultation with NIEEF and our Zimbabwean legal team. Similarly, it would be reasonable to
expect that certain costs of machinery and equipment dependent on imports increase in price subject to the
exchange rate of RTGS for foreign currency.
Premier is focused on getting RHA fully operational and has agreed that together with NIEEF, this is our prime
objective.
Finally, Premier’s joint liability in respect of part of the overall debt carried by RHA may now reduce.
The status in Zimbabwe is fluid in so far as currency is concerned and Premier will carefully monitor this and keep
the market and shareholders informed.
Zulu Lithium and Tantalum Project
Progress at Zulu has been disappointing. The proposed transactions firstly with Cadance Minerals PLC
(“Cadence”), and subsequently with KME, all intended to commence with the drilling required to support the
proposed DFS, have failed to complete. Similarly, the application for an extended area of 20,200 hectares
incorporating our existing Zulu claims under a single EPO has been stalled in the office of theZimbabwean Mining
Affairs Board for more than a year. Data compilation in regard to the extended area under EPO application
indicates further lithium mineralisation that would be complementary to a mine at Zulu but that is unlikely to
constitute another free standing mining operation. It is indeed disappointing that the delays in granting an EPO
is not supportive of sentiment and only goes to further frustrate development. Nevertheless, we continue to
believe that Zulu is a potentially outstanding deposit and Premier remains committed to this project and will
look to progress our DFS in the near future. Our scoping study presented in the last annual report underlined the
fundamentals that could apply when Zulu progresses and when assessment of country and investment risk
stabilises.
Post Reporting Period
Re-evaluation of investment and country risk associated with Zimbabwe has resulted in an increased discount
rate of 33%. Production of concentrates only cannot support this risk profile and primarily for this reason, the
decision has been taken to fully impair Zulu at this time. It should be noted that any decision to construct a
lithium carbonate plant would be expected to lead to a reversal of this impairment at present price levels and
even at this discount rate
Funding
During the reporting period we raised net proceeds of $1,715 million (2017:$16,525 million).
Principal activities and strategic review of the business
The principal activity of Premier and its subsidiary companies (the Group) during the year under review is the
mining, exploration, evaluation development and investment in natural resource properties on the African
continent
Premier was incorporated on 21 August 2007 in the British Virgin Islands (BVI) as a BVI business company with
number 1426861. The registered office is Craigmuir Chambers, PO Box 71, Road Town, Tortola, British Virgin
Islands. The Company was admitted to trading on the London Stock Exchange’s AIM Market on 10 December
2012.
Objectives
During 2019, the primary focus will be to secure the EPO under application for an extended area incorporating
Zulu, ensure compliance by NIEEF with the terms of their undertaking to provide funding of $6 million to bring
RHA back to production and to seek to mitigate risk through country, commodity and cash generative project
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status diversification.
Principal risks and uncertainties
The Group is subject to a number of risks and uncertainties which could have a material effect on its business,
operations or future performance, including but not limited to:
Credit Risk
Credit risk is the risk of potential loss to the Company if counterparty to a financial instrument fails to meet its
contractual obligations. The Company’s credit risk is primarily attributable to its liquid financial assets, including
cash, receivables, and balances receivable from the government. The Company limits the exposure to credit risk
in its cash by only investing its cash with high-credit quality financial institutions in business and savings accounts,
guaranteed investment certificates and in government treasury bills which are available on demand by the
Company for its programs. The Company does not invest in money market funds. The Company has no risk
exposure to asset backed commercial paper or auction rate securities.
Liquidity Risk
Liquidity risk is the risk that the Company will not have the resources to meet its obligations as they fall due. The
Company manages this risk by closely monitoring cash forecasts and managing resources to ensure that it will
have sufficient liquidity to meet its obligations. Also refer to the going concern section below.
Operating Risks
The activities of the Group are subject to all of the hazards and risks normally incidental to exploring and
developing natural resource projects. These risks and uncertainties include, but are not limited to environmental
hazards, industrial accidents, labour disputes, geo-political risks, encountering unusual or unexpected geologic
formations or other geological or grade problems, unanticipated changes in rock formation characteristics and
mineral recovery, encountering unanticipated ground or water conditions, land slips, flooding, periodic
interruptions due to inclement or hazardous weather conditions and other acts of God or un-favourable
operating conditions and losses.
Should any of these risks and hazards affect the Group’s exploration, development or mining activities, it may
cause the cost of production to increase to a point where it would no longer be economic to extract minerals
from the Group’s properties, require the Group to write-down the carrying value of one or more of its assets,
cause delays or a stoppage of mining and processing, result in the destruction of mineral properties or processing
facilities, cause death or personal injury and related legal liability, any and all of which may have a material
adverse effect on the Group.
Early-stage Business Risk
In the year under review, the Group recently recorded some revenue from operations at RHA and future revenue
from RHA will remain subject to rising of capital as contemplated in the previously proposed funding options.
The Group’s success will depend on its ability to raise capital and generate cash flows from production in the
future. The Board manages this risk by monitoring cash levels and reviewing cash flow forecasts on a regular
basis.
Market Risk (exchange rates, commodity and equity)
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign
exchange rates, and commodity and equity prices. These fluctuations may be significant.
Interest Rate Risk: The Company is exposed to interest rate risk to the extent that its cash balances bear variable
rates of interest. The interest rate risks on cash and short-term investments and on the Company’s, obligations
are not considered significant.
Foreign Currency Risk: The Company is exposed to the financial risk related to the fluctuation of foreign
exchange rates against the Company’s functional currency, which is the United States dollar (“USD”). The
Company expects to continue to raise funds in the United Kingdom. The Company conducts its business in
Zimbabwe with a significant portion of expenditures in that country historically denominated in USD and, in
5
addition, a portion of the Company’s business is conducted in South African Rands (“ZAR”). As such, it is subject
to risk due to fluctuations in the exchange rates between the USD and each of the ZAR and GBP, A significant
change in the currency exchange rates between the USD relative to foreign currencies could have an effect on
the Company’s results of operations, financial position or cash flows. The Company has not hedged its exposure
to currency fluctuations.
Commodity Price Risk - While the value of the Company’s core mineral resource properties, RHA and Zulu are
related to the price of tungsten and lithium and the outlook for these minerals, the Company currently does not
have any operating mines and hence does not have any hedging or other commodity-based risks in respect of
its operational activities.
Early-stage Project Risk
RHA moved into production during 2017, which was then suspended on 9 January 2018. Zulu is at an early stage
of development. In advancing these projects to the stage where they may be cash generative, many risks are
faced, including the inherent uncertainty of discovering commercially viable reserves, the capital costs of
exploration, competition from other projects seeking financing and operating in remote and often politically
unstable environments. While discovery of a mineral deposit may result in substantial rewards, few properties
that are explored are ultimately developed into economically viable operating mines. Major expenditure may be
required to establish reserves and it is possible that even preliminary due diligence will show adverse results,
leading to the abandonment of projects. Whether a mineral deposit will become commercially viable depends
on a number of factors, some of which are the particular attributes of the deposit, proximity to infrastructure,
financing costs and governmental regulations. The effect of these factors can only be estimated and cannot be
accurately predicted.
Environmental Risks and Hazards
All phases of the Group’s operations are subject to environmental regulation in the areas in which it operates.
Environmental legislation is evolving in a manner that may require stricter standards and enforcement, increased
fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a
heightened degree of responsibility for companies and their officers, directors and employees. There is no
assurance that existing or future environmental regulation will not materially adversely affect the Group’s
business, financial condition and results of operations. Environmental hazards may exist on the properties on
which the Group holds interests that are unknown to the Group at present. The Board manages this risk by
working with environmental consultants and by engaging with the relevant governmental departments and
other concerned stakeholders.
Licencing Risk
The Company’s exploration and development activities are dependent upon the grant of appropriate licences,
concessions, leases, permits and regulatory consents which may be withdrawn or made subject to limitations or
performance criteria. Such licences and permits are as a practical matter subject to the discretion of the
applicable Government or Government office. The Group must comply with known standards, existing laws and
regulations that may entail greater or lesser costs and delays depending on the nature of the activity to be
permitted. The interpretations, amendments to existing laws and regulations, or more stringent enforcement of
existing laws and regulations could have a material adverse impact on the Group’s results of operations and
financial condition. Whilst the Company continually seeks to do everything within its control to ensure that the
terms of each licence are met and adhered to, third parties may seek to exploit any technical breaches in licence
terms for their own benefit. There is a risk that negotiations with a Government in relation to the grant, renewal
or extension of a licence may not result in the grant, renewal or extension taking effect prior to the expiry of the
previous licence period, and there can be no assurance of the terms of any extension, renewal or grant.
Political and Regulatory Risk
The Group’s operating activities in Africa, notably in Zimbabwe, are subject to laws and regulations governing
expropriation of property, health and worker safety, employment standards, waste disposal, protection of the
environment, mine development, land and water use, prospecting, mineral production, exports, taxes, labour
standards, occupational health standards, toxic wastes, the protection of endangered and protected species and
other matters. The Group is dependent on the political and economic situation in these countries and may be
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adversely impacted by political factors such as expropriation, war, terrorism, insurrection and changes to laws
governing mineral exploration and operations.
Internal Control and Financial Risk Management
The Board has overall responsibility for the Group’s systems of internal control and for reviewing their
effectiveness. The Group maintains systems which are designed to provide reasonable but not absolute
assurance against material loss and to manage rather than eliminate risk.
The key features of the Group’s systems of internal control are as follows:
➢ Management structure with clearly identified responsibilities;
➢ Production of management information presented to the Board;
➢ Day to day hands on involvement of the Executive Directors and Senior Management; and
➢ Regular board meetings and discussions with the Non-executive directors.
The Group’s activities expose it to a number of financial risks including cash flow risk, liquidity risk and foreign
currency risk. The Group has identified certain short coming in the financial control systems, which are currently
in the process of being addressed.
Disclosure of management’s objectives, exposure and policies in relation to these risks can be found in note 30
to these financial statements.
Environmental Policy
The Group is aware of the potential impact that its subsidiary companies may have on the environment. The
Group ensures that it complies with all local regulatory requirements and seeks to implement a best practice
approach to managing environmental aspects.
The RHA located in Zimbabwe was granted approval of its Environmental Impact Assessment and is permitted
to undertake mining operations by the Environmental Management Agency of Zimbabwe.
Health and Safety
The Group’s aim is to achieve and maintain a high standard of workplace safety. In order to achieve this objective,
the Group provides ongoing training and support to employees and sets demanding standards for workplace
safety.
Going Concern
These consolidated financial statements are prepared on the going concern basis. The going concern basis
assumes that the Group will continue in operation for the foreseeable future and will be able to realise its assets
and discharge its liabilities and commitments in the normal course of business.
The Group has incurred operating losses from continuing operations amounting to $2,845 million (2017: $8,205
million) and negative cash flows from operations amounting to $1,558 million for the year ended 31 December
2018 (2017: $6,215 million) as the Group continued to maintain RHA in care and maintenance, attempted to
advance Zulu through the proposed Cadance joint venture processes described above in this report and explored
new opportunities to diversify and mitigate general risks associated with our Zimbabwe based projects.
As at 31 December 2018, current liabilities exceeded current assets by $3,423 million (2017: $1,843 million). The
Group raised $1,715 million (2017: $11,101 million) in net funding through share subscriptions to fund holding
costs at RHA inclusive of substantial additional debt incurred through RHA operations during the latter part of
2017, general group maintenance and preservation of assets and to investigate and assess potential
diversification as discussed in the paragraph above.
The Directors have prepared cash flow forecasts for the period ending 31 December 2020, on the basis of the
following considerations.
RHA
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The Company will not fund any of the activities at RHA after 1 July 2019.
•
• RHA concluded an agreement with NIEEF on 30 April 2019 in terms of which NIEEF undertook to
provide $6 million funding to bring RHA back into production.
• On 24 June 2019, NIEEF deposited RTGS6 million to the bank account of RHA.
• RTGS is the Zimbabwean local currency that is the sole legal tender now used in Zimbabwe.
•
Simultaneous with this, $ denominated bank accounts have been converted on a one to one basis to
RTGS.
• At this point in time, it is not clear whether this deposit is adequate to bring RHA back into production.
Zulu
•
•
The Company will seek to secure the EPO for Zulu and thereafter fund development of Zulu on the
basis of a “farm-in” or joint venture agreement with prospective partners.
The Company will only maintain the tenements and will not provide any further funding.
The Group
• Repayment of all debt settlement agreements entered into amounting to $0,926 million
•
The Company raised a loan of $350 000 in June 2019, and the cash flow is dependent on additional
capital being raised. There remains an active and liquid market for the Company’s shares and the
Company has historically been able to raise funding through equity placements and the Board
believes that it will continue to be able secure the funds required for ongoing working capital needs
going forward.
The Company will seek to diversify its operations and risk profile and limit the funds that need to be
raised through equity placements to provide necessary funding for the Company’s significantly
reduced fixed overhead.
•
In the event that the Company is unable to obtain additional equity finance for the Group’s working capital, a
material uncertainty exists which may cast significant doubt on the ability of the Group to continue as a going
concern and therefore be unable to realise its assets and settle its liabilities in the normal course of business.
George Roach
Chief Executive Officer
30 June 2019
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Directors’ Report
Results
The audited financial statements for the year ended 31 December 2018 are set out on pages 26 to 81. The Group
reported a loss before and after tax of $7,758 million for the year ended 31 December 2018 (2017: $19,761
million).
The loss before and after tax includes:
• A gross trading loss after depreciation and amortisation is $0,011 million (2017: $4,603 million);
• Administration expenses amounting to $2,834million (2017: $3,602 million);
• Given that RHA is under care and maintenance, it was decided to impair the carrying value in full of
the RHA assets by $0,244 million (2017:$9,809 million);
Finance costs amounting to $0,153 million (2017: $1,507 million); and
Impairment of intangible assets – Zulu Lithium of $4,563 (2017 $nil).
•
•
Impairments of the fair value of the available-for sale investments of $nil million (2017: $1,889) were taken
through other comprehensive income.
The total comprehensive loss for the year amounted to $7,758 million (2017: $21,650 million)
Dividends
The Directors do not recommend the payment of a dividend in respect of the year under review.
Fund-raising and capital
During the 2018 financial year net funds of $1,415 million (2017: $16,525 million) were raised through direct
subscriptions from the issue of share capital and the issuing of loan notes.
There remains an active and very liquid market for the Group’s shares.
Darwin
On 19 January 2017, the issue of loan notes generated proceeds of $0,523 million (£0,475 million).
During January and February 2017 all outstanding loan notes were redeemed through the issue of equity.
Further information on the Darwin loan notes is provided in notes 18.
No loan notes were issued for the year ended 31 December 2018.
Borrowings
During the prior years, George Roach had provided bridge loan financing of $0,56 million, of which $0,100 million
was converted to equity during 2017. During the current year a further $0,3 million was converted through the
issue of equity.
Further information on these transactions is included in note 17 and 32.
Other key elements of financial position
Exploration and Evaluation costs of $0,272 million (2017: $0,704 million) were capitalised on the Zulu in
Zimbabwe.
The Company’s holdings in Circum amount to $6,263 million (2017; $6,263 million).
Some $0,196 million was invested in the acquisition of property, plant and equipment during the year (2017:
$1,592 million).
Events after the reporting date
At the date these financial statements were approved, the Directors were not aware of any significant events
after the reporting date other than those set out in note 33 to the financial statements.
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Directors
The Directors of Premier who served during the period or subsequently were:
John (Ian) Stalker (appointed 4 December 2012, reappointed 22 April 2016, resigned 10 April 2018);
• George Roach (appointed on incorporation April 2007);
•
• Michael Foster (appointed 26 February 2015);
• Russel Swarts (appointed 19 January 2017);
• Godfrey Manhambara (appointed 27 September 2017)
• Wolfgang Hampel (appointed 10 April 2018)
Share capital
Premier’s shares are publicly traded on AIM with the stock ticker of PREM. As at the 31 December 2018, the
Company’s issued share capital consists of 7 383 679 743 (note 19) Ordinary Shares of no par value.
The company does not hold any Ordinary Shares in treasury.
Major Shareholders
As at the date of this report the Company is aware of the following persons who hold, directly or indirectly,
voting rights representing 3% or more of the issued share capital of the Company to which voting rights are
attached:
Name
Number of Ordinary Shares
% Issued Share Capital
George Roach*
618 796 609
8.4%
* George Roach and/or structures associated with G Roach. The percentage of shares not held in public hands is
8.4%.
There are no restrictions on the transfer of the Company’s AIM securities.
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Corporate Governance Statement
Premier is committed to maintaining the highest standards in corporate governance throughout its operations
and to ensure all its practices are conducted transparently, morally and efficiently. Therefore, and in accordance
with the AIM Rules for Companies (March 2018), Premier will continue to comply with the provisions of The UK
Corporate Governance Code July 2016, as published by the Financial Reporting Council Limited, to the extent the
Board consider appropriate, given the Company's size, stage of development and resources (the "Code").
Throughout the Reporting Period, the Company has continued to adhere to this Code and the following
statement sets out how the Company complies or otherwise departs from the principles of the Code.
Premier constantly seeks to maintain the highest levels of corporate governance whereby the Company ensures
that a periodic review of the Company’s corporate governance is done. Following this recent review, there have
been no corporate governance issues identified by Premier.
Accordingly, the Company has established specific committees and implemented certain policies, to ensure that:
•
•
•
•
it is led by an experienced Board which is collectively responsible for the long-term success of the
Company;
the Board and the committees have the appropriate balance of skills, experience, independence and
knowledge of the Company to enable them to discharge their respective duties and responsibilities
effectively;
the Board establish a formal and transparent arrangement for considering how it applies the
corporate reporting, risk management and internal control principles and for maintaining an
appropriate relationship with the Company's auditors; and
there is a dialogue with shareholders based on the mutual understanding of objectives.
In addition, the Company has adopted a comprehensive suite of policies including:
anti-corruption and bribery;
•
• health and safety;
•
•
•
environment and community;
IT, communications and systems; and
social media.
The Code followings 5 Main Principles, which are herein assessed in accordance with Premier commitment to
maintain the highest levels of corporate governance.
1. Leadership
The Role of the Board of Directors
The Board is responsible for the management of the business of the Company, setting its strategic direction and
establishing appropriate policies. It is the Directors’ responsibility to oversee the financial position of the
Company and monitor its business and affairs on behalf of the Shareholders, to whom they are accountable. The
primary duty of the Board is always to act in the best interests of the Company. The Board also addresses issues
relating to internal control and risk management. The Non-executive Director bring a wide range of skills and
experience to the Company, as well as independent judgment on strategy, risk and performance. The Non-
executive Director is considered by the Board to be independent at the date of this report. To achieve its
objectives, the Board strictly adheres to the Code.
The Board meets at least three times a year with supplementary meetings held as required. The agenda for the
Board meetings is prepared jointly by the Chairman and CEO. The Board maintains annual rolling plan (“Agenda”)
of items for discussion to ensure that all matters reserved for the Board, with other items as appropriate, are
addressed. The Agenda, with all accompanying documents, generally includes the following:
• Review of previous minutes;
• Discussion on various project activities and market conditions;
• Management Accounts and Financial position;
• Corporate Matters; and
• Other business matters that Board members can freely raise beyond the defined Agenda.
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The Annual Accounts of Premier best reflects the Board key types of decisions that the Board are required to
take in their pursuant of maintaining the highest levels of corporate governance. The following matters are
reserved for the Board;
Strategy, Policy and Management;
•
• Group Structure and capital requirements;
•
•
•
• Board structure; and
• Corporate governance matters.
Financial reporting and controls;
Internal and External controls;
Transactions and Commercial Contracts including delegation authority;
Premier has established varies committees to assist the Board in maintain the highest levels of corporate
governance. Of these committees, the following two strongly assist the decision making of the Board;
Audit Committee
The Audit Committee (“AC”), which comprises of Michael Foster and Godfrey Manhambara, and is chaired by
Godfrey Manhambara, is responsible for the appointment of auditors and the audit fee, and for ensuring that
the financial performance of the Company is properly monitored and reported. The Audit Committee, inter alia,
meets with the Company's external auditor and its senior financial management to review the annual and interim
financial statements of the Company, oversees the Company's accounting and financial reporting processes, the
Company's internal accounting controls and the resolution of issues identified by the Company's auditors.
Other key aspects of the AC include:
•
•
•
•
•
reviewing the Company's accounting policies and reports produced by internal and external audit
functions;
considering whether the Company has followed appropriate accounting standards and made
appropriate estimates and judgements, considering the views of the external auditor;
reporting its views to the board of directors if it is not satisfied with any aspect of the proposed
financial reporting by the Company;
reviewing the adequacy and effectiveness of the Company’s internal financial controls and internal
control and risk management systems;
reviewing the adequacy and effectiveness of the Company's anti-money laundering systems and
controls for the prevention of bribery and receive reports on non-compliance; and
• overseeing the appointment of and the relationship with the external auditor.
Remuneration Committee
The Remuneration Committee comprises of Godfrey Manhambara and Michael Foster and is chaired by Godfrey
Manhambara. The Remuneration Committee assumes general responsibility for assisting the Board in respect of
remuneration policies for Premier. The Committee reviews and recommends remuneration strategies for the
Company and proposals relating to compensation for the Company's officers, directors and consultants and
assesses the performance of the officers of the Company in fulfilling their responsibilities and meeting corporate
objectives. It has the responsibility for, inter alia, administering share and cash incentive plans and programmes
for Directors and employees and for approving (or making recommendations to the Board on) share and cash
awards for Directors and employees.
The Division of Responsibility of the Board of Directors
It is important that the Board itself contains the right mix of skills and experience to deliver the strategy of the
Company. The roles of the Chairman and Chief Executive Officer (“CEO”) are not exercised by the same person.
There is no one individual or group of individuals on the Board that have unfettered powers of discretion nor is
there any undue influence in the collective decision-making ability of the Board.
The responsibilities of the Chairman, CEO and Non-executive director are set out in writing and are review by
the Board annually to ensure that it remains relevant and accurate. In brief summary, they are responsible as
followings;
•
The Chairman’s role is to lead and manage the Board and play a role in facilitating the discussion of
the Company’s strategy, as set by the Board. And to effectively promote the success of the Company.
12
•
•
The CEO’s role, including the role of the Technical Director, is the responsibility of the day-to-day
management of the Company’s operational activities, and for the proper execution of the stagey as
set by the Board.
The Non-executive directors, act as a member of the unitary Board, however, they are required to
constructively challenge performance of management and help develop proposals on strategy,
agreeing of goals and the Company key objectives.
2. Effectiveness
The Composition of the Board
The Board and its committees should have the appropriate balance of skills, experience, independence and
knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively.
As such, the Board has been structured to ensure that correct mix of skills and experience are in place to allow
it to operate effectively:
•
•
•
a Chairman (Michael Foster), whose primary responsibility to lead and manage the Board. This remain
vital in the delivery of the Company's corporate governance model. The Chairman has a clear
separation from the day-to-day business of the Company which allows him to make independent
decisions.
a CEO (George Roach), whose primary focus is communicating, on behalf of the Company, with
shareholders, government entities, and the public. Leading the development of the Company's short-
and long-term strategy.
a Technical Director (Wolfgang Hampel), whose is responsible for leading, co-ordinating and
optimising the performance of the both mining and exploration services. With a further responsibility
for geological and mine planning activities, his role is critical in ensuring the quality and efficiency of
Premier geology, and
• one independent Non-Executive Directors (Godfrey Manhambara).
The Code requires that a smaller company (and which the Company is under the Code) should have at least two
independent non-executive directors. Godfrey Manhambara is independent under the Code. The Board also
regards Michael Foster as independent, notwithstanding that he participates in the Company’s share option plan
and had an interest in Casa Mining. The Board is satisfied that Michael Foster acts independently irrespective of
these interests. The Board also notes that no single individual will dominate decision making and further notes
that there has been sufficient challenge of executive management at meetings of the Board thereby confirming
that the Board is capable of operating effectively.
The Board has not appointed a senior Finance Director but is actively seeking for the appropriate candidate.
Additionally, the Company has a Company Secretary in the UK who assists the Chairman and CEO in preparing
for and running effective board meetings, including the timely dissemination of appropriate information. The
Company Secretary provides advice and guidance to the extent required by the Board on the legal and regulatory
environment.
The Nomination Committee (“NC”) has been established to regularly review and ensure that the Board has the
appropriate balance of skills, experience and knowledge of the Company. NC meets as required to consider the
composition of and succession planning for the Board, and to lead the process of appointments to the Board.
The Committee is made up of George Roach and Godfrey Manhambara and is chaired by George Roach.
Other key aspects of the NC include:
•
•
regularly reviewing the structure, size and composition (including the skills, knowledge, experience
and diversity) of the board and make recommendations to the board about any changes, succession
planning and vacancies; and
identifying suitable candidates from a wide range of backgrounds to be considered for positions on
the board.
Appointments to the Board
The appointment of new Directors to the Board is led by the NC who has the responsibility for nominating
candidates for appointment. Both the NC and Board considers the need for diversity, including equality, and that
the new directors must exhibit the required skills, experience, knowledge and independence.
13
The Board acknowledges that the Company is not in compliance with the Code whereby the NC should comprise
a majority of independent directors. The Board considers that the NC has a strong enough independent
component with Godfrey Manhambara.
Commitment
The Board requires that all directors should be able to allocate sufficient time to the Company to discharge their
responsibilities in accordance their letter of appointment. The Company maintains records of each letter of
appointment, which can be inspected at an agreed time, at the Company’s registered office.
The NC is responsible for considering on an annual basis, whether each director is able to devote sufficient time
to their duties.
Development
All directors are required to familiarise themselves with the Board and should regularly update and refresh their
skills and knowledge. The Company provides each joining director with an induction on the Company. Each
induction is tailored to the specific background and requirements of the new director. In general, the induction
contains information on:
Structures and operations;
•
• Board procedures;
• Corporate Governance; and
• Details regarding their duties and responsibilities.
Information and Support
As Premier constantly seeks to maintain the highest levels of corporate governance, it is imperative that
information is supplied to the Board in a form and of a quality appropriate to enable the Board to discharge its
duties in a timely manner. The supply of the information is done by the Chairman with the assistance of the
Company Secretary.
Premier encourage all Board members to seek independent professional advice (at the reasonable expense of
the Company) in the furtherance of their duties. The Board is given sufficient opportunity to meet with any
manager, consultant or contractor to gain further insight into Premier.
Evaluation
The Board recognises that it should undertake a formal and rigorous annual evaluation of its own performance,
that of its committees and individual directors. The evaluation of the Board’s performance is an assessment of
the following key factors:
•
•
•
•
•
•
The Board structure;
The Board’s performance;
The Board business strategy;
Financial reporting and controls;
Performance monitoring; and
Supporting and advisory roles.
The Board is not in compliance with the Code as the evaluation process is usually conducted internally due to
the size and complexity of the operations of the Company. Furthermore, the Board believes that internal
assessment best help identify the key strength and weaknesses to allow for effective evaluation. The Board will
continue to assess the internal review process against the growth of the Company as should the Company grow
in size it may consider getting an independent assessment.
The Chairman meets annually with the Non-executive directors without the executive directors to discuss the
Board balance, monitor the powers of individual executive directors and raise any other appropriate issues. A
similar review is also undertaken of the Chairman whereby the senior executive director meets with the Non-
executive directors.
Re-election
The Board believe that all directors should be submitted for re-election at regular intervals, subject to the
continued satisfactory performance of the Company.
The Director longest in office since their last appointment is required to retire by rotation or stand for
14
reappointment at the Annual General Meeting (“AGM”).
3. Accountability
Financial and Business reporting
A key duty of the Board is to oversee the financial affairs of the Company. The Financial Statements is the Board’s
primary means of presenting a fair, balanced and understandable assessment of the Company’s positions that
also best provides the information necessary to allow shareholders to assess the Company’s performance,
business model and strategy for that period.
You can view Premier Annual Report and Financial Statements on the Company’s webpage at the following
address, www.premierafricanminerals.com. Under the Strategic Review section of the Company’s Annual
Report and Financial Statements for the year ended December 2018, the Board set outs the strategic objectives
of the Company, how these will be delivered, Premier business model and how the Company will generate and
preserve value over the longer term for shareholders.
The Board have a reasonable expectation that the Group has adequate resources to continue in operations or
existence for the foreseeable future thus continues to adopt the going concern basis in preparing its Annual
Report and Financial Statements. Refer to note 6 to the financial statements.
Risk Management and Internal Control
The Board is responsible for determining the nature and extent of the significant risks it is willing to take in
achieving its strategic objectives. The Board manages the risk through the implementation of internal control
systems.
The Board has identified the following as some of the risks and their mitigation:
• Credit Risk: Credit risk is the risk of potential loss to the Company if counterparty to a financial
instrument fails to meet its contractual obligations. The Company’s credit risk is primarily attributable
to its liquid financial assets, including cash, receivables, and balances receivable from the government.
The Company limits the exposure to credit risk in its cash by only investing its cash with high-credit
quality financial institutions in business and savings accounts, guaranteed investment certificates and
in government treasury bills which are available on demand by the Company for its programs.
Liquidity Risk: Liquidity risk is the risk that the Company will not have the resources to meet its
obligations as they fall due. The Company manages this risk by closely monitoring cash forecasts and
managing resources to ensure that it will have enough liquidity to meet its obligations.
•
• Operating Risks: The activities of the Company are subject to all of the hazards and risks normally
incidental to exploring and developing natural resource projects. These risks and uncertainties
include, but are not limited to environmental hazards, industrial accidents, labour disputes, geo-
political risks, encountering unusual or unexpected geologic formations or other geological or grade
problems, unanticipated changes in rock formation characteristics and mineral recovery, encountering
unanticipated ground or water conditions, land slips, flooding, periodic interruptions due to inclement
or hazardous weather conditions and other acts of God or un-favourable operating conditions and
losses. The Company manages the risk by closing monitoring operations and maintaining adequate
insurance cover.
Early-stage Business Risk: The Board manages this risk by monitoring cash levels and reviewing cash
flow forecasts on a regular basis.
•
•
• Market Risk (exchange rates, commodity and equity): Market risk is the risk of loss that may arise from
changes in market factors such as interest rates, foreign exchange rates, and commodity and equity
prices. The Company manages the risk by closing monitoring exchange rates, commodity and equity
markets. The Company further engages consultants to undertake commodity forecast.
Interest Rate Risk: The Company is exposed to interest rate risk to the extent that its cash balances
bear variable rates of interest. The interest rate risks on cash and short-term investments and on the
Company’s, obligations are not considered significant and is not mitigated at this time.
Foreign Currency Risk: The Company is exposed to the financial risk related to the fluctuation of
foreign exchange rates against the Company’s functional currency, which is the United States dollar
(“USD”). The Company has not hedged its exposure to currency fluctuations.
Environmental Risks and Hazards: All phases of the Company’s operations are subject to
environmental regulation in the areas in which it operates. The Board manages this risk by working
•
•
15
•
•
•
with environmental consultants and by engaging with the relevant governmental departments and
other concerned stakeholders.
Licencing Risk: The Company’s exploration and development activities are dependent upon the grant
of appropriate licences, concessions, leases, permits and regulatory consents which may be
withdrawn or made subject to limitations or performance criteria. Such licences and permits are as a
practical matter subject to the discretion of the applicable Government or Government office. The
Group must comply with known standards, existing laws and regulations that may entail greater or
lesser costs and delays depending on the nature of the activity to be permitted. The interpretations,
amendments to existing laws and regulations, or more stringent enforcement of existing laws and
regulations could have a material adverse impact on the Group’s results of operations and financial
condition. Whilst the Company continually seeks to do everything within its control to ensure that the
terms of each licence are met and adhered to, third parties may seek to exploit any technical breaches
in licence terms for their own benefit. There is a risk that negotiations with a Government in relation
to the grant, renewal or extension of a licence may not result in the grant, renewal or extension taking
effect prior to the expiry of the previous licence period, and there can be no assurance of the terms of
any extension, renewal or grant.
Political and Regulatory Risk: The Company operating activities in Africa, notably in Zimbabwe, and
Togo, are subject to laws and regulations governing expropriation of property, health and worker
safety, employment standards, waste disposal, protection of the environment, mine development,
land and water use, prospecting, mineral production, exports, taxes, labour standards, occupational
health standards, toxic wastes, the protection of endangered and protected species and other
matters. The Group is dependent on the political and economic situation in these countries and may
be adversely impacted by political factors such as expropriation, war, terrorism, insurrection and
changes to laws governing mineral exploration and operations.
Internal Control and Financial Risk Management: The Board has overall responsibility for the Group’s
systems of internal control and for reviewing their effectiveness. The Group maintains systems which
are designed to provide reasonable but not absolute assurance against material loss and to manage
rather than eliminate risk.
The Board has overall responsibility for maintaining and reviewing the Group’s system of internal control and
ensuring that the controls are robust and effective in enabling risks to be appropriately assessed and managed.
On behalf of the Board, the AC conducts an annual review of the effectiveness of the systems of internal control
including financial, operational and compliance controls and risk management systems.
Audit Committee and Auditors
The functions of the AC are clearly described as part of the Leadership function in this note.
Whilst the Board sets the Company risk appetite, it reviews the operations and effectiveness of the Company’s
risk management activities through the AC, which undertake the day-to-day oversight of the risk management
framework on behalf of the Board. The Chairman of the AC regularly provides an update on the work carried out
by the AC to the board.
It is noted that the AC follow the recommendations of the Code whereby they monitor and review the
effectiveness of the internal audit activities. However, at this time, the Board have determined that the
appointment of internal auditor is not required due to the size of the Company.
4. Remuneration
The Level and Components of Remuneration
Executive directors’ remuneration should be designed to promote the long-term success of the Company.
Performance-related elements should be transparent, stretching and rigorously applied. The Board delegates
the responsibility for setting the appropriate levels of remuneration for its directors to the Remuneration
Committee.
The levels of Remuneration to directors are disclosed to shareholders in Premier Annual Report and Financial
Statements. Both the Board and Remuneration Committee seek to provide appropriate reward for the skill and
time commitment required so at to retain the right calibre of director at a cost to the Company and which reflects
the current market rates.
16
Procedure
The Board have a formal and transparent procedure for developing policy on the executive remuneration and
for fixing the remuneration packages of individual directors. As strict policy, no director is involved in deciding
their own remuneration.
The Remuneration Committee consider and approves the remuneration and where applicable, incentives and
benefits, and makes recommendations to the Board. The Committee will also govern employee share schemes.
The Chairman of the Committee will be consulted by the CEO in respect of the Company and director’s
performance approvals, compensation and in respect of any appointment/departures from roles.
The remuneration of non-executive directors shall be a matter for the executive members of the Board.
The Company has adopted a share dealing code to ensure directors and certain employees do not abuse, and do
not place themselves under suspicion of abusing inside information of which they are in possession and to
comply with its obligations under MAR which applies to the Company by virtue of its shares being traded on AIM.
Furthermore, the Company's share dealing code is compliant with the AIM Rules for Companies published by the
London Stock Exchange (as amended from time to time).
Under the share dealing code, the Company must:
• disclose all inside information to the public as soon as possible by way of market announcement
unless certain circumstances exist in which the disclosure of the inside information may be delayed;
•
keep a list of each person who is in possession of inside information relating to the Company;
• procure that all persons discharging managerial responsibilities and certain employees are given
clearance by the Company before they are allowed to trade in Company securities; and
• procure that all persons discharging managerial responsibilities and persons closely associated to
them notify both the Company and the Financial Conduct Authority of all trades in Company securities
that they make.
Additionally, under the share dealing code, no person discharging managerial responsibilities is permitted to deal
in Company securities (whether directly or through an investment manager) during a closed period; being the
period either: from the end of the relevant financial year up to the release of the preliminary announcement of
the Company’s annual results; from the end of the relevant financial period up to the release of the Company’s
half-yearly financial report or; 30 calendar days before the release of each of the Company’s first quarter report
and third quarter report.
5. Relations with Shareholders
Dialogue with shareholders
The Company recognises that maintaining strong communications with its shareholders promotes transparency
and will drive value in the medium to long-term. Accordingly, the Company has an established programme to
communicate with shareholders. This done by providing regular updates on the progress of the Company,
detailing recent business and strategy developments, in news releases which will be posted on the Company's
website and through certain social media channels. The Board has also engaged an internal Investor Relations
Officer (Fuad Sillem) who assist in maintaining the strong levels communication with shareholders.
The Disclosure Committee which comprises of Michael Foster and Godfrey Manhambara and is chaired by
Godfrey Manhambara is in place to assist the Board with the dialogue between the Company and its
shareholders. The Disclosure Committee assumes general responsibility for approval and monitoring compliance
with the Company’s disclosure controls and procedures. It has the responsibility, inter alia, determining whether
information is inside information, deciding whether the inside information is to be announced as soon as possible
and reviewing the scope, content and accuracy of disclosure. The Company has adopted a share dealing code
governing the share dealings of the Directors and applicable employees during close periods and is in accordance
with Rule 21 of the AIM Rules.
The Chairman and CEO are contactable via email. Their email address can be obtained at either the Company’s
registered office or by requesting them at the below address. To continually improve transparency, the Board
would be delighted to receive feedback from shareholders. Communications should be directed to
info@premierafricanminerals.com. The CEO has been appointed to manage the relationship between the
Company and its shareholders and will review and report to the Board on any communications received.
17
Constructive Use of General Meetings
The Company holds AGM each year, whereby all of the directors aim to attend the AGM and value the
opportunity of welcoming individual shareholders and other investors to communicate directly and address their
questions.
In addition to the mandatory information required and procedures to calling a general meeting, which can found
under the Company’s constitutional documents on the webpage, the Board ensure that a full, fair and balanced
explanation of business of all general meetings is sent in advance to shareholders.
George Roach
Chief Executive Officer & Outgoing Chairman
30 June 2018
18
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
PREMIER AFRICAN MINERALS LIMITED
1 Qualified opinion
We have audited the consolidated financial statements of Premier African Minerals Limited (“the Group”)
for the year ended 31 December 2018 set out on pages 26 to 81 which comprise the consolidated statement
of financial position, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of cash flows, the consolidated statement of changes in equity and the related notes,
including the significant accounting policies in note 4.
In our opinion, except for the possible effects of the matters described in the Basis for qualified opinion
section of our report, the consolidated financial statements:
•
give a true and fair view of the state of the Group’s affairs as at 31 December 2018 and of the Group’s
loss for the year then ended; and
• have been properly prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU).
Basis for qualified opinion
Included in the consolidated statement of financial position is an amount of $983 000 relating to Provision
– rehabilitation (the “provision”). In accordance with IFRSs as adopted by the EU IAS 37, Provision,
Contingent Liabilities and Contingent Asset, a provision shall be reviewed at the end of each reporting period
and adjusted to reflect the current best estimate. As indicated in note 15 to the consolidated financial
statements, the provision is based on the original assessment which was performed in 2014 and the Group
has not performed an updated assessment as at 31 December 2018 of the present obligation arising from
past disturbances. Consequently, we were unable to obtain sufficient and appropriate audit evidence to
determine whether the provision as at 31 December 2018 represents the present obligation of the Group
arising from past disturbances and whether any material adjustments to the consolidated financial
statements were required.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the group in accordance with the sections
290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered
Auditors (Revised January 2018), parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of
Professional Conduct for Registered Auditors (Revised November 2018) (together the IRBA Codes) and other
independence requirements applicable to performing audits of financial statements in South Africa. We
have fulfilled our other ethical responsibilities, as applicable, in accordance with the IRBA Codes and in
accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA
Codes are consistent with the corresponding sections of the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International Independence
Standards) respectively.
We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our qualified
opinion.
19
2 Material uncertainty related to going concern
The risk
Our response
Going concern
Accounting basis and disclosure
quality:
its
concern
We draw attention to
note 6 and 33.2 to the
financial
consolidated
statements
which
indicates that the Group’s
ability to continue as a
going
is
dependent on additional
funding being secured to
operational
meet
requirements.
These
events and conditions,
along with
the other
matters explained in note
6, constitute a material
uncertainty that may cast
significant doubt on the
to
Group’s
continue as a going
concern. Our opinion is
not modified in respect of
this matter.
ability
The Group’s ability to continue as a
going concern is dependent on the
following main factors:
Zulu
• The
group will maintain
tenements and will not provide
any further funding
• The company will seek to
secure the EPO for Zulu and
thereafter
the
development of Zulu on the
basis of a “farm-in” or joint
with
venture
prospective partners.
agreement
fund
Our procedures included:
Evaluating the director’s cash
flow forecast:
Reviewing the cash flow forecast to
determine the Group’s ability to
continue as a going concern and
challenging the assumptions used in
the forecast.
Evaluating factors considered in
the director’s going concern
assessment:
Reviewing
correspondence
between the directors and the
NIEEF
the
negotiations entered into between
the two parties to re-commission
the RHA mining operations.
understand
to
Considering the Group’s historic
ability to raise
funds and the
liquidity of the Group’s shares.
Group
• Working capital - obtaining
finance or
additional debt
equity to fund current and
future
capital
working
requirements.
Reviewing of
financing options
available to the Group to evaluate
the ability of the Group to pay their
debts as they become due.
• Repayment
all
debt
of
settlement agreements entered
into amounting
to $0,684
million.
The RHA mine was placed under
care and maintenance during
February 2018. Due
the
operational challenges experienced
at RHA mine, the RHA mine cash-
generating unit was fully impaired
at year-end.
to
The directors have prepared cash
flow forecasts for the period ending
31 December 2020, considering
forecast operating cash flows and,
and forecast expenditure for the
Assessing
transparency:
Evaluating the adequacy of the
Group’s disclosures in respect of
going concern.
20
The risk
Our response
rest of
overheads.
the Group
including
financial
consolidated
The
statements
the
explain
directors have formed a judgement
that it is appropriate to prepare the
consolidated financial statements of
the Group on a going concern basis.
how
However,
concluded that:
the directors have
• The Group will not fund any of
the activities of RHA after 1 July
2019.
between
• The re-commissioning of RHA
is dependent on receipt of the
US$6
difference
million and RTGS 6 million
already received from NIEEF.
• The repayment of all debt
settlement agreements entered
into amounting
to $0,926
million; and
• The ability to raise additional
funding as required.
In the event that the Group is unable
to obtain additional equity finance
for the Group’s working capital, a
material uncertainty exists which
may cast significant doubt on the
ability of the Group to continue as a
going concern.
Clear and full disclosure of the facts
and the directors’ rationale for the
use of the going concern basis of
preparation, including that there is
a related material uncertainty, is a
key financial statement disclosure
and so was the focus of our audit in
this
standards
require such matters to be reported
as a key audit matter.
area. Auditing
21
3 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the
audit of the consolidated financial statements and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by us, 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 consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters. Going concern is the most significant key audit matter and is described in section 2 above.
In arriving at our audit opinion above, the other key audit matter was as follows:
Impairment of the Zulu
lithium project cash-
generating unit (“CGU”)
Impairment expense $4.6
million
Refer to page 40 and 46
(accounting policy) and
(financial
52
pages
disclosures)
The risk
Our response
Forecast-based valuation
Our procedures included:
Zulu
lithium
statements.
The
project
impairment expense is significant
in the context of the consolidated
The
financial
estimated recoverable amount of
the Zulu project CGU is subjective
due to the inherent uncertainty of
assumptions
in
the
forecasting
discounting
and
future cash flows.
used
competence
expert’s
the
credentials:
Assessing
Evaluating
and
independence of an external geologist
and engineer engaged by the Group to
assess the measured and indicated
resources, grade and capacity (mine
life)
impairment
used
calculation.
the
in
The key assumptions used in the
impairment assessment are:
and
volumes
• production
grade;
commodity prices;
•
• discount rates;
• production costs; and
• mine life.
Benchmarking
assumptions:
Comparing the Group’s assumptions to
externally derived data in relation to
key inputs such as discount rate and
commodity prices.
Historical comparisons:
Comparing
forecasted
the Group’s
grade and production costs against the
achievement of historic results.
Sensitivity analysis:
Re-performing sensitivity analyses on
the commodity price assumption
applied.
Assessing transparency: Assessing
whether the Group’s disclosures were
appropriate in respect of the significant
and
judgements,
assumptions applied in the impairment
calculation.
estimates
22
fair
value
The
of
investment in Circum
Minerals Limited
Investment – available for
sale $6.2 million
Refer to pages 33, 34 and
46 (accounting policy)
and pages 53 and 68
(financial disclosures)
The risk
Our response
Fair value determination
Our procedures included:
in
investment
The
Circum
Minerals Limited is significant in
the context of the consolidated
financial statements.
The fair value of the investment in
Circum Minerals was based on:
•
•
the most recent placing
price utilised in April
2019 of US$1.25 per
share;
a published update by
Circum Minerals to
shareholders in June
2019; and
• management’s best
estimate of the fair value
at the reporting date
based on the available
information.
Latest placing: We obtained direct
confirmation from the Chief Financial
Officer and Company Secretary of
Circum Minerals Limited, confirming
that the last placement occurred on 30
April 2019 at a share price of $1.25 per
share.
Published update: We obtained the
published update to the shareholders
by Circum Minerals Limited dated June
2019. We reviewed the communication
for any indicators of a change in fair
value of the investment.
Management’s assessment of fair
value: We obtained management’s
assessment of the fair value of the
the
investment. We
assessment for any indicators of a
change in fair value of the investment.
reviewed
The US$1.25 per share may vary
depending on the outcome of
management’s
as
described in note 9 which will
directly influence the fair value of
the investment in Circum Minerals
as at 31 December 2018.
valuation
Assessing transparency: We assessed
whether the Group’s disclosures were
appropriate in respect of the significant
judgements,
and
assumptions applied in calculating the
fair value.
estimates
4 Our application of materiality and an overview of the scope of our audit
Materiality for the consolidated financial statements as a whole was set at US$ 160 000, determined with
reference to a benchmark of net assets of which it represents 2.8%. We agreed to report to the Audit
Committee any corrected or uncorrected identified misstatements exceeding US$ 4 800, in addition to other
identified misstatements that warranted reporting on qualitative grounds.
We subjected the RHA (Zimbabwe), RHA (Mauritius), Zulu Lithium and PREM components within the Group
to full scope audits for Group purposes. The work was performed by the Group audit team.
The components within the scope of our work accounted for the following percentages of the group's
results:
Group loss after tax
Group total assets
23
Full scope audits
93%
99%
For residual components, we performed analysis at an aggregated group level to re-examine our
assessment that there were no significant risks of material misstatement within these.
5 We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the
consolidated financial statements. Our opinion on the consolidated financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our
consolidated financial statements audit work, the information therein is materially misstated or
inconsistent with the consolidated financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.
6 Respective responsibilities
Responsibilities of the Directors for the Consolidated Financial Statements
The directors are responsible for the preparation of the consolidated financial statements in accordance
with International Financial Reporting Standards as adopted by the European Union, including being
satisfied giving a true and fair view, and for such internal control as the directors determine is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error. In preparing the consolidated financial statements, the directors are
responsible for assessing the Group’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 intend
either to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional
scepticism throughout the audit.
We also:
•
identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
24
•
•
•
•
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control;
obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control;
evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors;
conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern;
evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation; and
• obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities in the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence and, where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and, therefore, are
the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
7 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the members of Premier African Minerals Limited (“the Company”), as a body.
Our audit work has been undertaken so that we might state to the Company’s members those matters we
are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or for the opinions we have formed.
KPMG Inc. (s)
Registered auditors
85 Empire Road, Parktown
Johannesburg, 2193
South Africa
30 June 2019
25
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
EXPRESSED IN US DOLLARS
ASSETS
Non-current assets
Intangible assets
Investments
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Finance lease liabilities
Deferred tax
Provisions - rehabilitation
Current liabilities
Bank overdraft
Trade and other payables
Finance lease liabilities
Borrowings
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share based payment and warrant reserve
Revaluation reserve
Accumulated loss
Total equity attributed to the owners of the parent company
Non-controlling interest
TOTAL EQUITY
2018
$ 000
(Audited)
2017
$ 000
(Audited)
Notes
8
9
10
11
12
13
14
26
15
13
16
14
17
19
20
21
-
6 263
-
6 263
26
53
16
95
6 358
34
-
983
1 017
288
2 957
60
213
3 518
4 535
1 823
4 291
6 459
-
10 750
-
239
316
555
11 305
97
-
917
1 014
182
1 942
58
216
2 398
3 412
7 893
45 873
2 366
711
(34 423)
14 527
(12 704)
44 158
2 393
711
(27 614)
19 648
(11 755)
1 823
7 893
These financial statements were approved and authorised for issue by the Board on 30 June 2019 and are
signed on its behalf.
George Roach
Chief Executive Officer
The notes on pages 30 to 81 are an integral part of these consolidated financial statements.
26
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
Continuing operations
EXPRESSED IN US DOLLARS
Revenue
Cost of sales excluding depreciation and amortisation
Depreciation and amortisation
Gross loss
Administrative expenses
Operating loss
Fair value movement FVTPL
Impairment of PPE - RHA
Impairment of current assets - RHA
Impairment of intangible assets - Zulu
Finance charges
Loss before income tax
Income tax expense
Loss from continuing operations
Discontinued operation
Loss from discontinued operation net of tax
Loss for the year
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or
loss:
Fair value movement on investment
Notes
22
23
8, 10
24
9
10
8
25
26
9
Total comprehensive income for the year
Loss attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year
Loss per share attributable to owners of the parent (expressed in US
cents)
Basic loss per share
Diluted loss per share
27
27
2018
(Audited)
$ 000
2017
(Audited)
$ 000
168
(179)
-
(11)
(2 834)
(2 845)
47
(196)
(48)
(4 563)
(153)
(4 913)
(7 758)
-
(7 758)
368
(3 500)
(1 471)
(4 603)
(3 602)
(8 205)
(104)
(9 809)
-
-
(1 507)
(11 420)
(19 625)
-
(19 625)
-
(136)
(7 758)
(19 761)
-
-
(7 758)
(6 809)
(949)
(7 758)
(1 889)
(1 889)
(21 650)
(12 657)
(7 104)
(19 761)
(6 809)
(949)
(14 546)
(7 104)
(7 758)
(21 650)
(0.1)
(0.1)
(0.3)
(0.3)
The notes on pages 30 to 81 are an integral part of these consolidated financial statements.
27
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
EXPRESSED IN US DOLLARS
At 1 January 2017
Loss for the period
Other comprehensive income for the period
Total comprehensive income for the period
Transactions with Owners
Disposal of TCT IF
Issue of equity shares
Share issue costs
Share based payments
Loan note warrants
At 1 January 2018
Loss for the period
Other comprehensive income for the period
Total comprehensive income for the period
Transactions with Owners
Issue of equity shares
Share issue costs
Warrant options cancelled
Share based payments
At 31 December 2018
Share option
and warrant
reserve
$ 000
1 846
-
-
-
Share capital
$ 000
27 633
-
-
-
Revaluation
reserve
$ 000
2 600
-
(1 889)
(1 889)
Accumulated
loss
$ 000
(14 957)
(12 657)
-
(12 657)
Total
attributable
to owners of
parent
$ 000
17 122
(12 657)
(1 889)
(14 546)
Non-
controlling
interest
("NCI")
$ 000
(3 716)
(7 104)
-
(7 104)
Total equity
$ 000
13 406
(19 761)
(1 889)
(21 650)
-
17 503
(978)
-
-
44 158
-
-
-
1 838
(123)
-
-
45 873
-
-
-
404
143
2 393
-
-
-
-
-
(204)
177
2 366
-
-
-
-
-
711
-
-
-
-
-
-
-
711
-
-
-
-
-
(27 614)
(6 809)
-
(6 809)
-
-
-
-
(34 423)
-
17 503
(978)
404
143
19 648
(6 809)
-
(6 809)
1 838
(123)
(204)
177
14 527
(935)
-
-
-
-
(11 755)
(949)
-
(949)
-
-
-
-
(12 704)
(935)
17 503
(978)
404
143
7 893
(7 758)
-
(7 758)
1 838
(123)
(204)
177
1 823
The notes on pages 30 to 81 are an integral part of these consolidated financial statements.
28
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
EXPRESSED IN US DOLLARS
Net cash outflow from operating activities
Investing activities
Acquisition of property plant and equipment
Acquisition of intangible assets
Disposal of discontinued operation net of cash disposed of
Acquisition of investment
Proceeds on sale of investment
Net cash used in investing activities
Financing activities
Repayment of borrowings
Repayment of warrant liability
Proceeds from loan granted
Proceeds from issue of loan notes
Net proceeds from issue of share capital
Finance charges
Repayment of finance lease
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate variation
Net cash and cash equivalents at end of year
Notes
29
10
8
9
9
17
20
17
18
19
2018
$ 000
(Audited)
2017
$ 000
(Audited)
(1 558)
(6 215)
(196)
(272)
-
-
243
(1 592)
(704)
(84)
(2 986)
-
(225)
(5 366)
(25)
(204)
300
-
1 415
(38)
(71)
1 377
(406)
134
-
(272)
(65)
-
-
523
11 101
(18)
(71)
11 470
(111)
244
1
134
The notes on pages 30 to 81 are an integral part of these consolidated financial statements.
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
Reporting entity
Premier African Minerals Limited (‘Premier’ or ‘the Company’), together with its subsidiaries (the ‘Group’), was
incorporated in the Territory of the British Virgin Islands under the BVI Business Companies Act, 2004. The address
of the registered office is Craigmuir Chambers, PO Box 71, Road Town, Tortola, British Virgin Islands.
The Group’s operations and principal activities are the mining and development of mineral reserves on the African
continent.
Premier’s shares were admitted to trading on the London Stock Exchange’s AIM market on 10 December 2012.
2.
Basis of accounting
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) in issue and as endorsed by the European Union (“EU”). They were authorised for issue by the
Company’s board of directors on 30 June 2019.
Details of the Group’s accounting policies are detailed below.
This is the first set of the Group’s financial statements in which IFRS 15 Revenue from Contracts with Customers
and IFRS 9 Financial Instruments have been applied. Changes to significant accounting policies are described in
Note 3 below.
The preparation of financial statements in conformity with EU adopted IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the
Group’s accounting policies.
The accounting policies set out below are applied consistent across the Group and to all periods presented in these
consolidated financial statements.
Functional and presentation currency
The Group’s presentation currency and the functional currency of the majority of the group’s entities is US
dollars. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
Use of judgements and estimates
In preparing these consolidated financial statements, management has made judgements, estimates and
assumptions that affect the application of the Group’s 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 estimates are recognised
prospectively.
For details of the use of judgments and estimates refer to note 5 and detailed notes on the Intangible assets and
goodwill (note 8), Investments (note 9), Property, plant and equipment (note 10), Inventories (note 11), Trade and
other receivables (note 12) and Share based payment and warrant reserve (note 20).
3.
Changes in significant accounting policies
The Group has initially applied IFRS 15 (see 3.1 below) and IFRS 9 (see 3.2 below) from 1 January 2018. A number
of other new standards are also effective from 1 January 2018, but they do not have a material effect on the
Group’s financial statements.
Due to the transition methods chosen by the Group in applying these standards, comparative information
throughout these financial statements has not been restated to reflect the requirements of the new standards.
There is no effect of initially applying these standards.
3.1.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction
30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Contracts and IFRIC 13 Customer Loyalty Programmes. Under IFRS 15, revenue will be recognised when a customer
obtains control of the goods. Determining the timing of the transfer of control, at a point in time or over time,
requires judgement.
The Group has adopted IFRS 15 using the cumulative effect method (without practical expedients), with the effect
of initially applying this standard recognised at the date of initial application (i.e. 1 January 2018). Accordingly, the
information presented for 2017 has not been restated, i.e. it is presented as previously reported under IAS 18, IAS
11 and related interpretations. Additionally, the disclosure requirements in IFRS 15 have been applied to the
comparative information.
Sales of goods
For the sale of wolframite, revenue was previously recognised when the goods are delivered to the customers’
premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and
rewards of ownership transfer. Revenue was recognised at this point provided that the revenue and costs can be
measured reliably, the recovery of the consideration is probable and there is no continuing management
involvement with the goods.
Under IFRS 15, revenue will be recognised when a customer obtains control of the goods, which for the sale of
wolframite is when the wolframite is delivered to the customer’s premises. Accordingly there is no impact of IFRS
15 on the prior year figures, as all contracts are concluded once the customer takes delivery of the products sold.
The following tables summarise the impacts of adopting IFRS 15 on the Group’s statement of financial position as
at 31 December 2018 and it’s statement of profit and loss and other comprehensive income for the year then
ended for each line item that would be affected by the adoption of IFRS 15. There was no material impact on the
Group’s statement of cash flows for the year ended 31 December 2018.
Impact on the consolidated statement of financial position.
31 December 2018
Assets
Inventories
Trade and other receivables
Other assets
Total assets
LIABILITIES
Bank overdraft
Trade and other payables
Other financial liabilities
Total liabilities
Total net assets
EQUITY
Other equity
Retained earnings
Non-controlling interest
Total equity
Note
As reported
$ 000
Adjustments
$ 000
26
53
6 279
6 358
(288)
(2 957)
(1 290)
(4 535)
1 823
48 950
(34 423)
(12 704)
1 823
-
-
-
-
-
-
-
-
-
-
-
-
-
Impact on the consolidated statement of profit and loss and other comprehensive income
Amounts
without the
adoption of
IFRS 15
$ 000
26
53
6 279
6 358
(288)
(2 957)
(1 290)
(4 535)
1 823
48 950
(34 423)
(12 704)
1 823
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2018
Continuing operations
Revenue
Cost of sales
Impairment loss on trade receivables and
contract assets
Income tax expense
Others
Loss for the period
Total comprehensive loss for the period
Note
As reported
$ 000
Adjustments
$ 000
Amounts
without the
adoption of
IFRS 15
$ 000
168
(179)
-
-
(7 747)
(7 758)
(7 758)
-
-
-
-
-
-
-
168
(179)
-
-
(7 747)
(7 758)
(7 758)
IFRS 15 had no impact on the consolidated statements of financial position nor the consolidated statement of
profit and loss and other comprehensive income for the year ended 31 December 2017.
IFRS 15 requires additional disclosure in terms of the sources of revenue as follows:
Major product/service lines
Sale of Wolframite
Sale of scrap
Reserve Bank of Zimbabwe Export Incentive
Total revenue
Primary Geographical Markets
Africa
Timing of revenue recognition
Products transferred at a point in time
2018
$ 000
2017
$ 000
155
1
12
168
168
168
168
168
349
-
19
368
368
368
368
368
Sale of wolframite: Under IAS 18, revenue was recognised when the significant risks and rewards of ownership
had been transferred to the customer, recovery of the consideration was probable, the associated costs and
possible return of goods could be estimated reliably, there was no continuing management involvement with the
goods and the amount of revenue could be measured reliably. Revenue was measured net of returns, trade
discounts and volume rebates. The timing of the transfer of risks and rewards varied depending on the individual
terms of the sales agreement.
Under IFRS 15, revenue is recognised to the extent that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur. Therefore, for those contracts for which the Group was
unable to make a reasonable estimate of returns, revenue is recognised sooner under IFRS 15 than under IAS 18.
The impact of these changes on items other than revenue is a decrease in the refund liability, which is included in
trade and other payables. In addition, there is a new asset for the right to recover returned goods, which is part
of inventory.
Sale of scrap: Under IAS 18, revenue for these contracts was recognised when a reasonable estimate of the returns
could be made, provided that all of the other criteria for revenue recognition were met. The sale of scrap is not
subject to return and as such is fully recognised at the time when the buyer gains control over the goods.
32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reserve Bank of Zimbabwe Export Incentive: Under IAS 18, revenue for these contracts was recognised when a
reasonable estimate of the incentive could be made, provided that all other criteria for revenue recognition were
met. The RBZ Export Incentive is recognised as and when it is received.
3.2
IFRS 9 Financial Instruments
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts
to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and
Measurement.
As a result of the adoption of IFRS 9, the Group has adopted consequential amendments to IAS 1 Presentation of
Financial Statements, which require impairment of financial assets to be presented in a separate line item in the
statement of profit or loss and other comprehensive income. Previously, the Group’s approach was to include the
impairment of trade receivables in other expenses. Impairment losses on other financial assets are presented
under “finance costs”, similar to the presentation under IAS 39, and not presented separately in the statement of
profit or loss and other comprehensive income due to materiality considerations.
Additionally, the Group has adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures that
are applied to disclosures about 2018 but have not been generally applied to comparative information.
i.
Classification and measurement of financial assets and financial liabilities
IFRS 9 contains three principle classifications of financial assets, namely 1) measured at amortised costs; 2) Fair
value through other comprehensive income (FVOCI) and 3) fair value through profit and loss (FVTPL). The
classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is
managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of held-to-
maturity, loans and receivables and available-for-sale. Under IFRS 9 derivatives embedded in contracts where the
host is a financial assets in the scope of the standard are never separated. Instead, the financial instrument as a
whole is assessed for classification.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial
liabilities.
The adoption of IFRS 9 has not had a significant effect on the Group’s accounting policies related to financial
liabilities and derivative financial instruments.
For an explanation of how the Group classifies and measures financial instruments and accounts for related gains
and losses under IFRS 9, see Note 30.
The following table and accompanying notes below explain the original measurement categories under IAS 39 and
the new measurement categories under IFRS 9 for each class of the Group’s financial assets and financial liabilities
as at 1 January 2018.
The effect of adopting IFRS 9 on the carrying amounts of financial assets at 1 January 2018 relates solely to the
new impairment requirements.
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Original
classification
under IAS 39
New
classification
under IFRS 9
Note
Original
carrying
amount
$ 000
New carrying
amount
$ 000
Financial Assets
Equity securities
Trade and other
receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Bank overdrafts
Shareholder's loan
Trade and other payables
Finance lease liability
Total financial liabilities
a
b
Available-for-
sale
Loans and
receivables
Loans and
receivables
FVOCI - equity
instrument
Amortised cost
Amortised cost
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
6 263
6 263
53
16
53
16
6 332
6 332
(288)
(213)
(288)
(213)
(2 957)
(2 957)
(94)
(3 552)
(94)
(3 552)
Note a: These equity securities represent investments that the Group intends to hold for the long term for
strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial
application as measured at FVOCI. Unlike IAS 39, the accumulated fair value reserve related to these investments
will never be reclassified to profit or loss.
Note b: Trade and other receivables that were classified as loans and receivables under IAS 39 are now classified
at amortised cost.
The Group did not restate the carrying amounts of any financial assets or financial liabilities on 1 January 2018.
ii.
Impairment of financial assets
IFRS 9 replaces the “incurred loss” model in IAS 39 with an “expected credit loss (ECL)” model. The new impairment
model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but
not to investments in equity instruments. Under IFRS 9, credit losses are recognised earlier than under IAS 39, see
Note 30.
For assets in the scope of the IFRS 9 impairment model, impairment losses are generally expected to increase and
become more volatile. The Group has determined that the application of IFRS 9’s impairment requirements at 1
January 2018 results in no additional impairment.
iii.
Transition
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as
describe below:
•
The Group has used an exemption not to restate comparative information for prior periods with respect
to classification and measurement (including impairment) requirements. Therefore, comparative periods
have been restated only for retrospective application. Differences in the carrying amounts of financial
assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings
and reserves as at 1 January 2018. Accordingly, the information presented for 2017 does not generally
reflect the requirements of IFRS 9, but rather those of IAS 39.
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
The following assessments have been made on the basis of the facts and circumstances that existed at
the date of initial application:
o The determination of the business model within which a financial asset is held.
o The designation and revocation of previous designations of certain financial assets and financial
liabilities as measured at FVTPL.
o The designation of certain investments in equity instruments not held for trading as at fair value
through OCI (FVOCI).
4.
Significant accounting policies
4.1
Basis of consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when it is exposed to,
or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls another entity. The Group also assesses
existence of control where it does not have more than 50% of the voting power but is able to govern the financial
and operating policies by virtue of de-facto control. This is evidenced with RHA Tungsten (Private) Limited which
the Group owns 49% of but is consolidated into the Group (note 5).
Subsidiaries are consolidated, using the acquisition method, from the date that control is gained and non-
controlling interests are apportioned on a proportional basis.
When necessary amounts reported by subsidiaries have been adjusted to conform to the Group’s accounting
policies.
4.2
Business combinations and goodwill
The Group applies the acquisition method to account for business combinations. The consideration transferred
for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former
owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date.
4.3
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. The financial statements of subsidiaries are included in the consolidated financial
statements from the date on which control commences until the date on which control ceases.
4.4
Non-controlling interests (“NCI”)
Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net
assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions.
4.5
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are
eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.6
Foreign currency
4.6.1 Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currencies of Group companies at
the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at
the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a
foreign currency are translated into the functional currency at the exchange rate when the fair value was
determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated
at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit
or loss.
4.6.2 Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition,
are translated into dollars at the exchange rates at the reporting date. The income and expenses of foreign
operations are translated into dollars at the exchange rates at the dates of the transactions.
Foreign currency differences are recognised in Other Comprehensive Income (“OCI”) and accumulated in the
translation reserve, except to the extent that the translation difference is allocated to NCI.
When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint
control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to
profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but
retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group
disposes of only part of an associate or joint venture while retaining significant influence or joint control, the
relevant proportion of the cumulative amount is reclassified to profit or loss.
4.7
Discontinued operation
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be
clearly distinguished from the rest of the Group and which:
• represents a separate major line of business or geographic area of operations;
•
is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of
operations; or
is a subsidiary acquired exclusively with a view to re-sale.
•
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria
to be classified as held-for-sale.
When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI
is re-presented as if the operation had been discontinued from the start of the comparative year.
4.8
Adoption of new and revised standards
A number of new standards are effective for annual periods beginning after 1 January 2019 and earlier application
is permitted; however, the Group has not early adopted the new or amended standards in preparing these
consolidated financial statements.
The following standards are not expected to have a material impact on the Group’s financial statements in the
period of initial application. The significant standards have been elaborated on below.
Title
IFRS 16
IFRIC 23
Subject
Leases
Uncertainty over Income Tax Treatments
Effective date
1 January 2019
1 January 2019
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IFRS 16 Leases
IFRS 16 replaces existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement
contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions
Involving the Legal Form of a Lease.
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for
entities that apply IFRS 15 at or before the date of initial application of IFRS 16.
IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-
use asset representing its right to use the underlying asset and a lease liability representing its obligation to make
lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor
accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating
leases.
The Group has completed an initial assessment of the potential impact on its consolidated financial statements.
This is not expected to have a material impact on the group because the group has only one lease, which is
currently treated as a finance lease.
The Directors anticipate that the adoption of these Standards and Interpretations as appropriate in future periods
will have no material impact on the financial statements of the Group.
4.9
Revenue
Performance obligations and service recognition policies
Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises
revenue when it transfers control over of goods or services to a customer.
The following table provides information about the nature and timing of the satisfaction of performance
obligations in contracts with customers, including significant payment terms, and the related revenue recognition
policies. For the accounting policy on onerous contracts, see Note 12.
Revenue recognition
under IFRS 15 (applicable
from 1 January 2018)
Revenue recognition
under IAS 18 (applicable
before 1 January 2018)
Revenue is recognised
when the goods are
delivered and have been
accepted by the customers
at their premises or the
agreed point of delivery.
Revenue was recognised
when the goods were
delivered to the
customer’s premises or
the agreed point of
delivery.
Type of product/
service
Wolframite sales
Nature and timing of
satisfaction of
performance obligations,
including significant
payment terms
Customers obtain control
of the wolframite ore
when the ore has been
delivered to and have
been accepted at their
premises or the agreed
point of delivery. Invoices
are generated at that
point in time based on the
agreed upon weight of the
ore. Invoices are generally
payable within 30 days. No
discounts are provided for.
The sale of the ore is not
subject to a return policy.
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Type of product/
service
Scrap sales
Reserve Bank of
Zimbabwe Export
Incentive
Nature and timing of
satisfaction of
performance obligations,
including significant
payment terms
Customers obtain control
of the scrap when the
scrap has been delivered
to and have been
accepted at their premises
or the agreed point of
delivery. Invoices are
generated at that point in
time based upon the
agreed upon weight of the
scrap. Invoices are
generally payable within
30 days. No discounts are
provided for.
The sale of the scrap is not
subject to a return policy.
The Export Incentive is
provided on an individual
basis and has to be applied
for. It is based on the
export sales of the
company. As such the
revenue from the RBZ is
not guaranteed.
4.10
Employee benefits
Short-term employee benefits
Revenue recognition
under IFRS 15 (applicable
from 1 January 2018)
Revenue recognition
under IAS 18 (applicable
before 1 January 2018)
Revenue is recognised
when the goods are
delivered and have been
accepted by the customers
at their premises or the
agreed point of delivery.
Revenue was recognised
when the goods were
delivered to the
customer’s premises or
the agreed upon point of
delivery, which was taken
to be the point in time at
which the customer
accepted the goods and
the related risks and
rewards of ownership
were transferred.
The Group gains control
over the export incentive
when it is received in the
Group’s bank accounts.
Revenue for these
contracts was recognised
when a reasonable
estimate of the incentive
could be made, provided
that all other criteria for
revenue recognition were
met.
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the
amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation can be estimated reliably.
Share-based payment arrangements
The Group operates an equity-settled share option plan and issues warrants from time to time either with direct
subscriptions in equity or as finance related packages. The fair value of the service received in exchange for the
grant of options or issue of warrants is recognised as an expense or recognised as a deduction from equity or an
addition to intangible assets depending on the nature of the services received.
Share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date
of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of shares that will eventually vest.
Fair value is measured by use of the Black Scholes model. The expected life used in the model has been adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
The warrants issued as part of the loan note agreements contain certain re-set provisions as to exercise price
and/or number of warrants issued depending on certain conditions. Any share subscriptions priced at a price lesser
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
than the warrant exercise price will trigger a re-set of the exercise price to the lower share subscription price. The
warrants exercise price was re-set for all remaining Darwin warrants issued under the loan notes to a new exercise
price of 0.375p being the lowest subscription price on 16 December 2016. There were no re-set events during
2017 nor 2018.
4.11
Finance income and finance costs
The Group’s finance income and finance costs include:
•
•
•
interest income;
Interest expense;
dividend income;
Interest income and expense is recognised using the effective interest method. Dividend income is recognised in
profit or loss on the date on which the Group’s right to receive payment is established.
The “effective interest rate” is the rate that exactly discounts estimated future cash payments or receipts through
the expected life of the financial instrument to:
•
•
the gross carrying amount of the financial asset; or
the amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of
the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial
assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by
applying the effective interest rate to the amortised cost of the financial asset, if the asset is no-longer credit-
impaired, then the calculation of interest income reverts to the gross basis.
4.12
Income tax
Income tax expense comprises current and deferred tax. It 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 OCI.
4.12.1 Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any
adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or
receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related
to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
4.12.2 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;
• temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent
that the Group is able to control the timing of the reversal of the temporary differences and it is probable
that they will not reverse in the foreseeable future; and –– taxable temporary differences arising on the
initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused 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 used. Future
taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of
taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits,
adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual
subsidiaries in the Group. 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; such reductions are reversed when the
probability of future taxable profits improves.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has
become probable that future taxable profits will be available against which they can be used.
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.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the
Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.
4.13
Intangible assets and goodwill
All costs of Exploration and Evaluation (“E&E”) are initially capitalised as intangible assets, such as payments to
acquire the legal right to explore, costs of technical services and studies, seismic acquisition, exploratory drilling
and testing. The costs include directly attributable overheads together with the cost of other materials consumed
during the exploration and evaluation phases.
Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to profit or loss as
they are incurred.
E&E assets are not amortised.
Intangible assets related to each exploration licence or pool of licences are carried forward, until the existence (or
otherwise) of commercial reserves has been determined. Once the technical feasibility and commercial viability
of extracting a mineral resource is demonstrable, the related E&E assets are assessed for impairment on an
individual licence or cost pool basis, as appropriate, as set out below and any impairment loss is recognised in
profit or loss.
The Group considers each licence, or where appropriate, a pool of licences, separately, for the purposes of
determining whether impairment of E&E assets has occurred.
Intangible assets are assessed for impairment when facts and circumstances suggest that the carrying amount may
exceed its recoverable amount. Such indicators include, but are not limited to, those situations outlined in
paragraph 20 of IFRS 6 Exploration for and Evaluation of Mineral Resources and include the point at which a
determination is made as to whether or not commercial reserves exist.
When impairment indicators exist, the aggregate carrying value is compared against the expected recoverable
amount, generally by reference to the present value of the future net cash flows expected to be derived from
production of commercial reserves.
When a licence or pool of licences is abandoned or there is no planned future work, the costs associated with the
respective licences are written off in full and recognised in profit or loss.
Any impairment loss is recognised in profit or loss and separately disclosed.
4.14
Impairment
Policy applicable after 1 January 2018
4.14.1 Non-derivative financial assets
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities
at FVOCI are credit-impaired. A financial asset is “credit-impaired” when one or more events that have a
detrimental impact on the estimated future cash flows of the financial assets have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
•
•
•
•
•
significant financial difficulty of the borrower or issuer;
a breach of contract such as a default or being more than 90 days past due;
the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
it is probable that the borrower will enter bankruptcy or other financial reorganisiation; or
the disappearance of an active market for a security because of financial difficulties.
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A 12 months approach is followed in determining the Expected Credit Loss (“ECL”).
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of
the assets.
For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in OCI.
Write-off
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of
recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Group individually
makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable
expectation of recovery from the amount written off. However, financial assets that are written off could still be
subject to enforcement activities in order to comply with the Group’s procedures of recovery of the amounts due.
Policy applicable before 1 January 2018
4.14.2 Non-derivative financial assets
Financial assets not classified as at FVTPL are assessed at each reporting date to determine whether there is
objective evidence of impairment.
Objective evidence that financial assets are impaired includes:
• default or delinquency by a debtor;
• restructuring of an amount due to the Group on terms that the Group would not consider otherwise;
•
• adverse changes in the payment status of borrowers or issuers;
•
• observable data indicating that there is a measurable decrease in the expected cash flows from a group of
the disappearance of an active market for a security because of financial difficulties; or
indications that a debtor or issuer will enter bankruptcy;
financial assets.
4.14.3 Financial assets measured at amortised cost
The Group considers evidence of impairment for these assets at both an individual asset and a collective level. All
individually significant assets are individually assessed for impairment. Those found not to be impaired are then
collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are
not individually significant are collectively assessed for impairment. Collective assessment is carried out by
grouping together assets with similar risk characteristics.
In assessing collective impairment, the Group uses historical information on the timing of recoveries and the
amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the
actual losses are likely to be greater or lesser than suggested by historical trends.
An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of
the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in
profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects
of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently
decreases and the decrease can be related objectively to an event occurring after the impairment was recognised,
then the previously recognised impairment loss is reversed through profit or loss.
4.14.4 Available for sale financial asset
Impairment losses on available-for-sale financial assets are recognised, only when fair value is less than carrying
value and this is significant over a prolonged period, by reclassifying the losses accumulated in the fair value
reserve to profit or loss. The amount reclassified is the difference between the acquisition cost (net of any principal
repayment and amortisation) and the current fair value, less any impairment loss previously recognised in profit
or loss.
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.14.5 Non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories)
to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising
from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the
synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less cost of disposal.
Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any
goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro
rata basis.
An impairment loss in respect of goodwill is not reversed. For other 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.
4.15 Cash and cash equivalents
The Cash and cash equivalent comprises of bank accounts and bank overdraft. Cash and cash equivalent are
measured at amortised cost.
4.16
Inventory
Inventory is measured at the lower of cost and net realisable value. The cost of inventories is based on the first-
in, first-out principle. The cost of inventories includes the cost of consumables and cost of production. Net
realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses.
Inventory consists of mining consumables.
4.17
Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less
accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted
for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Group.
Depreciation
Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated
residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit
or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably
certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
•
Land & buildings – 10 years
Plant & equipment – 4/6 years
• Mine development - depreciated over the life of the mine currently assessed at 10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
4.18 Financial instruments
The Group classifies non-derivative financial assets into the following categories: loans and receivables and FVTPL
and FVTOCI financial assets.
The Group classifies non-derivative financial liabilities into the following category: other financial liabilities.
4.18.1 Non-derivative financial assets and financial liabilities – Recognition and derecognition
The Group initially recognises loans and receivables on the date when they are originated. All other financial assets
and financial liabilities are initially recognised on the trade date when the entity becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and
rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of
the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such
derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
Gains or losses on derecognition of financial liabilities are recognised in profit or loss as a finance charge.
Financial assets and financial liabilities are offset, and the net amount presented in the statement of financial
position when, and only when, the Group currently has a legally enforceable right to offset the amounts and
intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
4.18.2 Loans and receivables- Measurement
These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to
initial recognition, they are measured at amortised cost using the effective interest method.
4.18.3 Assets at FVOCI - Measurement
These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to
initial recognition, they are measured at fair value and changes therein, other than impairment losses, are
recognised in OCI and accumulated in the revaluation reserve.
When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.
4.18.4 Non-derivative financial liabilities – Measurement
Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction
costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest
method.
4.18.5 Convertible loan notes and derivative financial instruments
The presentation and measurement of loan notes for accounting purposes is governed by IAS 32 and IAS 39. These
standards require the loan notes to be separated into two components:
• A derivative liability, and
• A debt host liability.
This is because the loan notes are convertible into an unknown number of shares, therefore failing the ‘fixed-for-
fixed’ criterion under IAS 32. This requires the ‘underlying option component’ of the loan note to be valued first
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(as an embedded derivative), with the residual of the face value being allocated to the debt host liability (refer
financial liabilities policy above).
Compound financial instruments issued by the Group comprise convertible notes denominated in dollars that can
be converted to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and
does not vary with changes in fair value.
The liability component of compound financial instruments is initially recognised at the fair value of a similar
liability that does not have an equity conversion option. The equity component is initially recognised at the
difference between the fair value of the compound financial instrument as a whole and the fair value of the liability
component. Any directly attributable transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at
amortised cost using the effective interest method. The equity component of a compound financial instrument is
not remeasured.
Interest related to the financial liability is recognised in profit or loss. On conversion at maturity, the financial
liability is reclassified to equity and no gain or loss is recognised.
4.19
Provisions - Rehabilitation
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
An obligation to incur environmental restoration, rehabilitation and decommissioning costs arises when
disturbance is caused by the development or on-going production of a mining property. Such costs arising from
the decommissioning of plant and other site preparation work, discounted to their net present value, are provided
for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are
recognised in profit or loss over the life of the operation, through the depreciation of the asset and the unwinding
of the discount on the provision. Costs for restoration of subsequent site damage which is created on an ongoing
basis during production are provided for at their net present values and recognised in profit or loss as extraction
progresses.
Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work
(that result from changes in the estimated timing or amount of the cash flow, or a change in the discount rate) are
added to or deducted from the cost of the related asset in the current period. If a decrease in the liability exceeds
the carrying amount of the asset, the excess is recognised immediately in profit or loss. If the asset value is
increased and there is an indication that the revised carrying value is not recoverable, an impairment test is
performed in accordance with the accounting policy above.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount
is recognised as finance cost in profit or loss.
4.20
Equity
Equity comprises the following:
• Share capital - ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
• Share-options and warrant reserve - represents equity-settled share-based payments.
• Accumulated loss represent retained profits less retained losses.
• Revaluation reserve represents the difference between the nominal value of shares issued by the
Company to the shareholders of ZimDiv Holdings Limited (“Zimdiv”) and the nominal value of the ZimDiv
shares taken in exchange.
• Non-controlling interests represents the share of retained profits less retained losses of the non-
controlling interests.
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.21
Leases
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.
At inception or on reassessment of an arrangement that contains a lease, the Group separates payments and other
consideration required by the arrangement into those for the lease and those for other elements on the basis of
their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments
reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset;
subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is
recognised using the Group’s incremental borrowing rate.
4.21.1 Leased assets
Leases of property, plant and equipment that transfer to the Group substantially all of the risks and rewards of
ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower
of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the
assets are accounted for in accordance with the accounting policy applicable to that asset.
4.21.2 Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the
lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as
to produce a constant periodic rate of interest on the remaining balance of the liability.
4.22 Operating segments
Segmental information is provided for the Group on the basis of information reported internally to the chief
operating decision-maker for decision-making purposes. The Group considers that the role of chief operating
decision-maker is performed by the Group’s board of directors.
5.
Significant accounting judgements, estimates and assumptions
In preparing these consolidated financial statements, management has made judgements, estimates and
assumptions that affect the application of the Group’s 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 estimates are recognised
prospectively.
5.1.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the
amounts recognised in the consolidated financial statements is included in the following notes:
- Note 5.7 - consolidation: whether the Group has de facto control over an investee; and
- Note 14 - leases: whether an arrangement contains a lease.
5.2.
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within the year ended 31 December 2018 is included
in the following notes:
• Note 26 - recognition of deferred tax assets: availability of future taxable profit against which tax losses
carried forward can be used;
• Note 5.4 - Recoverability of exploration and evaluation assets: key assumptions underlying recoverable
amounts;
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
• Note 5.5 - Recoverability of RHA Cash-Generating Unit “CGU”: key assumptions underlying recoverable
amounts
• Note 15 – recognition and measurement of provisions and contingencies: key assumptions about the likelihood
and magnitude of an outflow of resources.
5.3. Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both
financial and non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows.
• Level 1: quoted prices (unadjusted) 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 (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy
as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during
which the change occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
• Note 20 - share-based payment arrangements;
• Note 30 - financial instruments.
5.4
Recoverability of exploration and evaluation assets
Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there
are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6
Exploration for and Evaluation of Mineral Resources. If there is any indication of potential impairment, an
impairment test is required based on value in use of the asset or fair value less cost to sell.
The carrying amount of exploration and evaluation assets at 31 December 2018 amounted to nil (2017: $4,291
million). Refer to note 8 for the assumptions used. During the current financial year there was an adverse
movement in the price of spodumene which resulted in the Exploration and evaluation assets being fully impaired
(2017: unimpaired).
5.5
Recoverability of RHA Cash-Generating Unit “CGU”
Determining whether a CGU is impaired requires an assessment of whether there are any indicators of
impairment, including by reference to specific impairment indicators prescribed in IAS36 Impairment of Assets. If
there is any indication of potential impairment, an impairment test is required based on the greater of fair value
less cost of disposal, and, value in use of the asset. The value in use calculation requires the entity to estimate the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate
the present value.
During 2017 the operating losses at RHA were higher than predicted due to operations in the open pit and
underground failing to deliver both the ore volumes and the anticipated grade. The operating losses are an
indicator of potential impairment. In December 2017, due to the lower ore delivery, anticipated grade and
operating losses, the Board of Directors decided to place the RHA Tungsten mine under care and maintenance.
As a result, management completed an impairment review.
The impairment review concluded that four months further capex will be required in order to open the existing
underground mining of 6,000 tons per month run of mine ore. Concurrently additional plant upgrades and a
connection to the national grid would result in a 40,000 ton per month run of mine ore operation. A further option
to construct a new decline vehicle access was not considered during this review.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Key assumptions used in calculating the discounted cash flow analysis included:
• 7,265 mtu concentrate production per month; 10 year mine plan; APT price of $275 per metric ton unit (‘mtu’);
• 20% discount rate; and a zero growth rate in operating cash flow after the plant is fully operational, forecast
to be for the full year 2019. Other key factors include attainment of forecast grade as set out in our resource
statement and plant operating parameters being achieved.
• The XRT sorter installation is a significant element in increasing confidence in RHA in that 70% of the anticipated
run of mine feed target of 40,000 ton per month is passed through the sorter, which is able to recover
approximately 90% of the mineralisation in a mass pull of some 5%.
• The model assumes annual revenues of $13.1m from 2020. Revenue generation is dependent on a number of
inter-linked assumptions and a combination of negative changes in those assumptions would result in further
impairment charges.
Sensitivity analysis was conducted on the volume, grade, concentrate production per month and APT price
assumptions in the model.
The management assessment concluded that the RHA Tungsten mine should be impaired in full. The impairment
loss amounted to $0,244 million (2017: $9,809 million).
In the event that the RHA negotiations are not successful, the alternatives proposed by the independent
engineering practice are considered impractical and the Group is unable to obtain additional debt or equity finance
for RHA, a material uncertainty exists which may cast significant doubt on the ability of RHA to realise its assets in
the normal course of business.
The management of RHA successfully concluded its negotiations subsequent to the year end, however at the date
of this report the full amount of the agreed upon funding has yet to be received. Accordingly, management felt
that it was prudent to maintain the impairment until such time as the counterparty has fulfilled its contractual
obligations.
The company will not fund any of the activities at RHA after 1 July 2019.
5.6
Estimation of useful life for mine assets
Mine assets are depreciated /amortised on a straight-line basis over the life of the mine concerned. Judgement is
applied in assessing the mine’s useful life and in the case of RHA, the Group’s only operating concern, is based on
the initial Preliminary Economic Assessment (‘PEA’) first published in August 2013 that initially modelled an 8 year
life of mine. The life of mine has subsequently been reassessed to a total of 10 years.
5.7
Basis of consolidation
RHA Tungsten (Private) Limited
During 2013, Premier concluded a shareholders’ agreement with NIEEF whereby NIEEF acquired 51% of the shares
of RHA. The principal terms of the agreement are as follows:
• ZimDiv Holdings Limited (‘ZimDiv’), a wholly owned subsidiary, is appointed as the Manager of the project for
an initial 5 year term.
• ZimDiv has marketing rights to the product.
• Each shareholder can appoint up to two directors each, with a 5th director who is rotated between each
shareholder. The 5th director will not have a vote.
• Although the local Zimbabwean company is responsible for financing and repayment of such. Premier has
secured the funding to advance RHA to production.
• There has been no operational change since the agreements were signed and Premier continues to fund RHA
until it becomes cash generative.
At the financial year-end, one director of RHA was from the Premier Group and one director from NIEEF. There is
no majority vote at board level and Premier still retains operational and management control through its
shareholders’ agreement. Following the assessment, the Directors concluded that Premier, through its wholly
owned subsidiary ZimDiv, retained control and should continue to consolidate 100% of RHA and recognise non-
controlling interests of 51% in the consolidated financial statements.
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.8
Valuations
•
Investments – Premier’s investment in Circum Minerals Limited (‘Circum’) is classified as an FVOCI as such is
required to be measured at fair value at the reporting date. As Circum is unlisted there are no quoted market
prices. In previous years the fair value of the Circum shares was derived using the most recent placing price.
The Fair value of the Circum shares as at 31 December 2018 was derived using the most recent placing price in
April 2019.
•
• Valuation of warrants, share options and ordinary shares issued as consideration – judgement is applied in
determining appropriate assumptions to be used in calculating the fair value of the warrants, shares and share
options issued. Refer accounting policy note and note 20.
Investment – Premier’s investment in Casa Mining Limited (‘Casa’) is classified as FVTPL and as such is required
to be measured at fair value at each reporting date. As Casa is unlisted there are no quoted market prices. The
fair value of the Casa shares as at 31 December 2017 was derived using the most recent placing price on 23
August 2017. A fair value adjustment was required for the investment in Arc Minerals for the shares sold during
2018. Refer to note 9.
• Provision for Rehabilitation - A provision is recognised for site rehabilitation and decommissioning of current
mining activities based on current environmental and regulatory requirements. The net present value of the
provision is calculated at a discount rate of 10% over an 8 year life of mine.
• The life of mine has subsequently been reassessed to a total of 10 years. The corresponding rehabilitation
assets was capitalised to property, plant and equipment and is depreciated over the life of the mine.
6.
Going Concern
These consolidated financial statements are prepared on the going concern basis. The going concern basis assumes
that the Group will continue in operation for the foreseeable future and will be able to realise its assets and
discharge its liabilities and commitments in the normal course of business.
The Group has incurred operating losses from continuing operations amounting to $2,845 million (2017: $8,205
million) and negative cash flows from operations amounting to $1,558 million for the year ended 31 December
2018 (2017: $6,215 million) as the Group continued to maintain RHA in care and maintenance, attempted to
advance Zulu through the proposed Cadance joint venture processes described above in this report and explored
new opportunities to diversify and mitigate general risks associated with our Zimbabwe based projects.
As at 31 December 2018, current liabilities exceeded current assets by $3,423 million (2017: $1,843 million). The
Group raised $1,715 million (2017: $11,101 million) in net funding through share subscriptions to fund holding
costs at RHA inclusive of substantial additional debt incurred through RHA operations during the latter part of
2017, general group maintenance and preservation of assets and to investigate and assess potential diversification
as discussed in the paragraph above.
The Directors have prepared cash flow forecasts for the period ending 31 December 2020, on the basis of the
following considerations.
RHA
The Company will not fund any of the activities at RHA after 1 July 2019.
•
• RHA concluded an agreement with NIEEF on 30 April 2019 in terms of which NIEEF undertook to provide
$6 million funding to bring RHA back into production.
• On 24 June 2019, NIEEF deposited RTGS6 million to the bank account of RHA.
• RTGS is the Zimbabwean local currency that is the sole legal tender now used in Zimbabwe.
•
Simultaneous with this, $ denominated bank accounts have been converted on a one to one basis to
RTGS.
• At this point in time, it is not clear whether this deposit is adequate to bring RHA back into production.
Zulu
•
•
The Company will seek to secure the EPO for Zulu and thereafter fund development of Zulu on the basis
of a “farm-in” or joint venture agreement with prospective partners.
The Company will only maintain the tenements and will not provide any further funding.
The Group
• Repayment of all debt settlement agreements entered into amounting to $0,926 million
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
•
The Company raised a convertible loan of $350 000 in June 2019, and the cash flow is dependent on
additional capital being raised. There remains an active and liquid market for the Company’s shares and
the Company has historically been able to raise funding through equity placements and the Board
believes that it will continue to be able secure the funds required for ongoing working capital needs
going forward.
The Company will seek to diversify its operations and risk profile and limit the funds that need to be
raised through equity placements to provide necessary funding for the Company’s significantly reduced
fixed overhead.
In the event that the Company is unable to obtain additional equity finance for the Group’s working capital, a
material uncertainty exists which may cast significant doubt on the ability of the Group to continue as a going
concern and therefore be unable to realise its assets and settle its liabilities in the normal course of business.
7.
Operating segments
The group has the following two reportable segments that are managed separately due to the different
jurisdictions.
Segmental results, assets and liabilities include items directly attributable to a segment as well as those that can
be allocated on a reasonable basis.
Reportable segments
RHA and RHA Mauritius
Zulu and Zulu Mauritius
Operations
Development and mining of Wolframite
Development of Lithium and Tantalite
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RHA
Tungsten
Mine
Zimbabwe
and RHA
Mauritius*
Exploration
Zulu Lithium
Zimbabwe
and Zulu
Mauritius
Total
continued
operations
Unallocated
Corporate
$ 000
$ 000
$ 000
$ 000
-
1 791
(47)
-
7
-
1 751
-
6 263
-
15
2
6 280
-
(213)
-
(1 313)
-
(1 526)
4 754
-
-
-
(168)
1 053
-
244
146
-
1 443
-
-
26
38
11
75
(94)
-
(288)
(1 645)
(983)
(3 009)
(2 934)
-
196
-
-
-
-
-
-
4 563
4 563
-
-
-
-
2
2
-
-
-
-
-
-
2
-
-
272
(168)
2 844
(47)
244
153
4 563
7 757
-
6 263
26
53
16
6 358
(94)
(213)
(288)
(2 957)
(983)
(4 535)
1 823
-
196
272
By operating segment
2018
Result
Revenue (1)
Operating loss
Fair value movement on investment
Impairment of RHA
Finance charges
Impairment of Zulu
Loss before taxation
Assets
Exploration and evaluation assets
Investments
Inventories
Trade and other receivables
Cash
Total assets
Liabilities
Other financial liabilities
Borrowings
Bank overdraft
Trade and other payables
Provisions
Total liabilities
Net assets
Other information
Depreciation and amortisation
Property plant and equipment additions
Costs capitalised to intangible assets
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RHA
Tungsten
Mine
Zimbabwe
and RHA
Mauritius
*
$ 000
Exploratio
n Zulu
Lithium
Zimbabwe
and Zulu
Mauritius
$ 000
Unallocate
d
Corporate
$ 000
Total
continued
operation
s
$ 000
TCT IF**
Mozambiqu
e
discontinued
operation
$ 000
Total
$ 000
-
(2 419)
(3 891)
368
(5 729)
(15 684)
-
-
-
368
(8 148)
(19 575)
246
(114)
(136)
614
(8 262)
(19 711)
-
6 459
18
306
6 783
-
216
-
753
-
969
-
-
221
2
223
155
-
182
1 188
917
2 442
4 291
-
-
8
4 291
6 459
239
316
4 299
11 305
-
-
-
1
-
1
155
216
182
1 942
917
3 412
7 893
5 814
(2 219)
4 298
-
-
-
-
-
-
-
-
-
-
-
-
4 291
6 459
239
316
11 305
155
216
182
1 942
917
3 412
7 893
-
-
(1 378)
1 473
-
-
(1 378)
(93)
(1 471)
1 473
-
1 473
By operating segment
2017
Result
Revenue (1)
Operating loss
Loss before taxation
Assets
Exploration and
evaluation assets
Investments
Trade and other
receivables
Cash
Total assets
Liabilities
Other financial liabilities
Borrowings
Bank overdraft
Trade and other
payables
Provisions
Total liabilities
Net assets
Other information
Depreciation and
amortisation
Property plant and
equipment additions
*Represents 100% of the results and financial position of RHA Tungsten (Private) Limited (“RHA”) whereas the
Group owns 49%. Non-controlling interests are disclosed in note 21.
**Represents 100% of the results and financial position of TCT Industrias Florestais Limitada (“TCT IF”) whereas
the Group owns 52%. Non-controlling interests are disclosed in note 21.
(1) RHA Revenue is generated from sales to Noble Minerals, in line with RHA’s off-take agreement.
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
Intangible assets and goodwill
Exploration and evaluations assets
Total intangible assets
Opening carrying value 2017
Expenditure on Exploration and evaluation
Exploration and evaluation transfer from PPE
Amortisation charge forestry concession
Disposal - limestone license
Disposal - forestry concession
Opening carrying value 2018
Expenditure on Exploration and evaluation
Impairment of Exploration and evaluation assets
Closing carrying value 2018
2018
$ 000
-
-
2017
$ 000
4 291
4 291
Other
intangible
assets
(Forestry
concession)
$ 000
Exploration
& Evaluation
assets
$ 000
5 436
704
119
-
(1 968)
-
4 291
272
(4 563)
-
1 022
-
-
(93)
-
(929)
-
-
-
-
Total
$ 000
6 458
704
119
(93)
(1 968)
(929)
4 291
272
(4 563)
-
The impairment loss amounted to $4,563 million (2017 $nil)Exploration and evaluation assets at 31 December
2018 comprise of Zulu located in Zimbabwe. In the prior year the exploration and evaluation assets comprised the
Zulu and the limestone licence in Mozambique.
Zulu Lithium and Tantalite Project
During the year $0,272 million (2017: $0,822 million) exploration costs were incurred and capitalised to Zulu.
Exploration work conducted during the year indicated that both lithium and tantalum recovery may be a viable
option. The Group views this project as strategic and exploration work will be continued in the future, cash flow
permitting.
The recent drop in the price of Spodumene to $700/t coupled with the political uncertainty and resulting country
risk included in the discount rate applied to Zimbabwe has resulted in the directors deciding to impair Zulu in full
for the year ended 31 December 2018. The impairment amounted to $2,491 million (2017 - $nil).
Key assumptions applied in calculating the discounted cash flow analysis included:
Targeted annual production of spodumene concentrate
Targeted annual production of petalite concentrate
Price of spodumene concentrate
Price of petalite concentrate
•
•
•
•
• Discount rate
• Operating costs per combined tonnage of concentrate
•
• Average strip ratio of
Estimated 15 year life of mine
84 000 tonnes
32 500 tonnes
$800/t
$400/t
10%
$486/t
5,5:1
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9.
Investments
Opening carrying value 2017 (1)
Shares acquired (5)(6)
Fair value adjustment (7)(8)
Closing carrying value 2017
Shares acquired
Fair value adjustment
Shares disposed (9)(10)(11)(12)(13)
Closing carrying value 2018
Reconciliation of movements in investments
Investment in Circum Minerals Limited – 15 May 2014
Fair value adjustment - February 2015(2)
Fair value adjustment – June 2015(3)
Investment in Casa Mining Limited(4)
Opening carrying value 2017
Acquisition at fair value (5)
Acquisition at fair value 2017(6)
Issue of Premier shares (6)
Fair value adjustment – 31 December 2017(7)(8)
Opening carrying value 2018
Fair value adjustment – 31 December 2018(8)
Sale of shares (9)(10)(11)(12)(13)
Circum Arc Minerals *
Mining
$ 000
250
50
(104)
196
-
47
(243)
-
Minerals
$ 000
4 000
4 152
(1 889)
6 263
-
-
-
6 263
1 400
1 100
1 500
-
4 000
-
2 936
1 216
(1 889)
6 263
-
-
6 263
-
-
-
250
250
50
-
-
(104)
196
47
(243)
-
Total
$ 000
4 250
4 202
(1 993)
6 459
-
47
(243)
6 263
1 400
1 100
1 500
250
4 250
50
2 936
1 216
(1 993)
6 459
47
(243)
6 263
* On 6 November 2017, Arc Minerals (formerly known as Ortac Resources Limited) announced that it would
make an offer to acquire all of the outstanding shares in Casa Mining Limited (“Casa”) ("Sale Shares") for a
consideration of 14.85 shares in Arc Minerals for each Sale Share (the "Casa Offer"). The Casa offer closed on
10 May 2018 and Premier converted 412 500 Casa shares into 6 128 822 new Arc Minerals shares. As at 31
December 2018 all shares were sold in Arc Minerals (2017:$0,196 million).
Arc Minerals (formerly known as Ortac Resources Limited) was designated on 1 January 2018 as FVTPL.
Circum Minerals was designated on 1 January 2018 as FVOCI.
(1) Represents 2 million shares in unlisted entity Circum Minerals Limited (‘Circum’).
(2) As Circum is unlisted there are no quoted market prices. Fair value of the shares was therefore estimated using
the price at which warrants in Circum shares were exercised by a third party in February 2015 at $1.25 per share.
(3) Fair value of the shares was adjusted to the most recent placing price of $2 per share during August 2015.
(4) Represents a 4.5% interest in Casa acquired in October 2016.
(5) Represents a 0.5% interest in Casa acquired in 2017.
(6) Represents a further 3 010 333 shares in Circum Minerals Limited settled by the issue of Premier’s shares at
$1,50 per share being a premium to the prevailing market price to compensate for potential market fluctuations
in the price of the company’s shares.
(7) As Circum is unlisted there are no quoted market prices. Fair value of the shares was therefore estimated using
the latest price at which the Company acquired shares during 2017 (at $1.25 per share).
(8) The fair value of the Casa Mining Limited shares were derived from the swop values of shares acquired
(9) Sale of Arc Minerals Shares 2 500 000 @ 0.0315 GBP
(10) Sale of Arc Minerals Shares 500 000 @ 0.03225 GBP
(11) Sale of Arc Minerals Shares 651 456 @ 0.0285 GBP
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(12) Sale of Arc Minerals Shares 2 200 000 @ 0.03025 GBP
(13) Sale of Arc Minerals Shares 277 366 @ 0.0301 GBP
The shares are considered to be level 3 financial assets under the IFRS 13 categorisation of fair value
measurements.
We continue to hold 5 010 333 shares in Circum currently valued in total at $6 262 916.25. Circum has published
a general update to shareholders in June 2019 and the major shareholders and directors are now fully coordinated
in their intention to generate a liquidity event for shareholders before the end of 2019.
The fair value of these investments at 31 December 2018 amounted to $6,263 million (2017: $6,459 million).
Premier’s investment in Circum is classified as FVOCI and as such is required to be measured at fair value at each
reporting date. As Circum is unlisted there are no quoted market prices. The fair value of the Circum shares was
derived using the previous issue price and validating it against the most recent placing price on 30 April 2019.
Sensitivity analysis
The investments are subject to changes in market prices. A 10% reduction in market prices would result in a $0,625
million (2017: $0,625 million) charge to Other Comprehensive Income, and nil (2017: $0,020 million) in profit and
loss.
10.
Property, plant and equipment
Mine
Development
$ 000
Plant and
Equipment
$ 000
Land and
Buildings
$ 000
Cost
At 1 January 2017
Additions
Additions TCT IF
Transfer to E&E
Disposal of TCT IF
At 31 December 2017
Additions
Disposals
At 31 December 2018
Accumulated Depreciation and Impairment Losses
At 1 January 2017
Charge for the year
Charge for the year TCT IF
Disposal of TCT IF
Impairment of RHA
At 31 December 2017
Charge for the period
Impairment of RHA
At 31 December 2018
Net Book Value
At 31 December 2017
At 31 December 2018
7 682
845
(119)
-
8 408
1
-
8 409
1 402
639
-
-
6 367
8 408
-
1
8 409
-
-
3 515
693
11
-
(104)
4 115
195
-
4 310
704
571
39
(39)
2 840
4 115
-
195
4 310
-
-
813
43
-
-
(4)
852
-
-
852
129
121
8
(8)
602
852
-
-
852
-
-
Total
$ 000
12 010
1 581
11
(119)
(108)
13 375
196
-
13 571
2 045
1 521
47
(47)
9 809
13 375
-
196
13 571
-
-
The impairment assessment is detailed in note 5.5, Significant accounting judgements, estimates and assumptions.
Refer note 14, Other financial liabilities for capitalised lease assets.
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Premier has demanded immediate remedy of RHA default under the plant rental contract which is secured by RHA
mineral claims certificates. On the 29 March 2019 an agreement was reached whereby $0,010 million per month
from 31 March 2019 would be paid.
11.
Inventories
Mine consumables
2018
$ 000
26
26
2017
$ 000
-
-
Inventories consist of spares and consumable. During 2017, a decision to place the RHA mine under care and
maintenance, production cost inventories to the value of $0,795 million was impaired. Such impairment was
recognised as cost of sales.
12.
Trade and other receivables
Indirect tax receivable
Other receivables
Prepayments
Current
Non-current
2018
$ 000
2017
$ 000
21
7
25
53
53
-
53
203
15
21
239
239
-
239
The receivables are considered to be held within a held-to-collect business model consistent with the Group’s
continuing recognition of the receivables.
As at 31 December 2018 the Group does not have any contract assets nor any contract liabilities arising out of
contracts with customers relating to the Group’s right to receive consideration for work completed but not billed.
Credit and market risks, and impairment losses
The Group did not impair any of its trade receivables as at 31 December 2018, as all trade receivables generated
during the financial year were settled in full prior to the year-end.
Information about the Group’s exposure to credit and market risks and impairment losses for trade receivables is
included in Note 30.
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
13.
Cash and cash equivalents
Bank balances
Bank overdrafts
Cash and cash equivalents per the statement of cash flows
2018
$ 000
16
(288)
(272)
2017
$ 000
316
(182)
134
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The bank overdraft facility of RHA amounting to $0,300 million held with Nedbank Zimbabwe is secured as follows:
Subordination of loans
Cession and assignment of stock and debtors
•
•
• NGCB - $0,200 million
• Unlimited guarantees.
14.
Finance lease liabilities
Finance lease
During 2015, the Group entered into a finance lease with Board Market Trading 258 (Pty) Ltd for the purchase of
two generators with a net book value of $0,124 million to be used at RHA. The finance lease is for a term of 48
months with interest charged at 19.5% per annum with monthly repayments of $0,006 million beginning from 1
August 2016. Depreciation of leased assets amounted to nil (2017: $0,033 million).
The agreement is classified as a finance lease as the rental period equal the estimated useful life of the assets
concerned and the Group has the right to purchase the assets outright at the end of the minimum lease term by
paying a nominal amount.
Future lease payments are due as follows:
2018
Not later than one year
Between one year and five years
2017
Not later than one year
Between one year and five years
Finance lease liability
Other financial liabilities
Current
Non-current
15.
Provisions - rehabilitation
As at 1 January
Unwinding of discount
Minimum lease
payments
$ 000
72
36
108
Minimum lease
payments
$ 000
72
113
185
Interest
$ 000
12
2
14
Interest
$ 000
14
16
30
2018
$ 000
94
94
60
34
94
2018
$ 000
917
66
Present value of
minimum lease
payments
$ 000
60
34
94
Present value of
minimum lease
payments
$ 000
58
97
155
2017
$ 000
155
155
58
97
155
2017
$ 000
809
108
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at 31 December
983
917
A provision is recognised for site rehabilitation and decommissioning of current mining activities based on current
environmental and regulatory requirements. The gross provision was calculated in 2014 and discounted to a net
present value using a discount rate of 10% over a life of mine of 8 years. The corresponding rehabilitation assets
was capitalised to property, plant and equipment and is depreciated over the life of the mine.
16.
Trade and other payables
Trade payables *
Accrued expenses
Payroll liabilities
2018
$ 000
1 188
1 211
558
2 957
2017
$ 000
362
1 011
569
1 942
All trade and other payables at 31 December 2018 are due within one year, non-interest bearing, and comprise
amounts outstanding for mine purchases and on-going costs, except as described further below. The Directors
consider that the carrying amount of trade and other payables approximates their fair value.
* On 11 March 2019, amounts owing to JRG Consulting amounted to $0,190 million and ZAR 0,245 million
(exchange rate of 0.0694 amounts to $0,017 million). Interest is charged at 12% per annum, compounded
monthly. Repayments are agreed at $0,055 million per month. At year-end $0,207 million (2017: $0,248) was
outstanding in terms of the Memorandum of Agreement.
* In April 2018 Brendan Roach loaned the company GBP 0,084 million. As at year end, the loan was still
outstanding.
* On the 31 July 2018 RHA entered into an agreement with Whaleside Shaft Sinkers to settle the outstanding debt
of $0,103 million which includes interest as at 31 December 2018. The company agreed to pay $0,020 million
per month from 1 January 2019.
* At 31 December 2018 there was an amount outstanding of $0,459 relating to consulting fees. In May 2019 most
of these fees were settled through shares.
17.
Borrowings
Loan G Roach – see related party transactions
Reconciliation of movement in borrowings
As at 1 January
Loans received
Loans repaid through conversion to equity (1) (3)
Offset of loan against receivable (2)
Repayment
Implementation fee
Accrued interest
As at 31 December
Current
Non-current
2018
(Audited)
$ 000
2017
(Audited)
$ 000
213
213
216
300
(300)
-
(25)
15
7
213
213
-
213
216
216
566
-
(100)
(196)
(65)
-
11
216
216
-
216
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Borrowings comprise loans from a related party and a non-related party. Loans from a related party are further
disclosed in Note 32, Related Party Transactions.
On 15 September 2015, George Roach provided a $0,300 million loan direct to Premier for the use at RHA.
(1)
The loan is unsecured and accrues interest at a rate of 3% per annum. As at 28 March 2017, the loan and accrued
interest totalled $ 0,309 million. On 28 March 2017 the Company announced that it had amended the terms of
the existing Loan Agreement ("Loan") with George Roach through the grant of conversion rights. The Board
granted conversion rights in respect of the Loan, which can now be converted into new ordinary shares at a price
of 0.5p per new ordinary share. On 15 December 2017 the company announced that George Roach had elected
to convert $0,100 million of the $0,300 million he provided to the Company. The outstanding loan balance of
$0,213 million continues to accrue interest at 3%.
On 27 April 2015 the Company entered into a two year $0,250 million loan facility with AgriMinco. ("Loan
(2)
Facility"). On 19 January 2017, Premier and AgriMinco agreed to settle the Loan Facility, subject to TSX Exchange
approval, whereby the outstanding amount owed by Premier under the Loan Facility (amounting to $0,261 million
including accrued interest) would be offset by the historic amounts owed by AgriMinco (amounting to $0,196
million). The net balance owed by Premier amounted to $0,065 million and Premier agreed to repay AgriMinco in
four equal instalments of $0,012 million from 15 March 2017, with an initial amount of $0,016 million on execution
of the settlement agreement. This balance was paid in full at year end.
On 5 June 2018 the Company entered into a loan with a company owned by a Trust of which George Roach
(3)
is a beneficiary, for a gross value of $0,300 million to assist with its cash flow requirements. The Loan carries an
implementation fee of US$0,015 million (5%) and a redemption fee of US$0,015 million (5%). On 9 November
2018, the Company converted the George Roach loan by issuing 142,045,455 shares at an issue price of 0.16p per
share for a total value of $0,300 million.
18.
Loan notes and derivatives
Convertible loan notes
As at 1 January
Loans notes issued
Loan notes converted (note 18)
Deferred finance costs
As at 31 December
Loan notes
2018
$ 000
-
-
-
-
-
2017
$ 000
1 874
523
(2 393)
(4)
-
On 23 August 2016, the Company entered into an agreement with Darwin Strategic Limited (“Darwin”) whereby
Darwin could subscribe for a total of £3.5 million in convertible loan notes in which the Company would receive
90% of the par value of the notes. The loan notes were to be issued in three tranches on fulfilment of certain
milestones. The notes would redeem 12 months from the subscription date unless repaid or converted.
The gross amount of the loans issued can be converted 100% of principal into ordinary shares at 90% of the traded
share price when certain conditions are met. In the prior year, this conversion option represents a derivative
liability for the company that is separately presented on the statement of financial position and fair valued through
profit or loss. The directors have concluded that the value of the conversion option is not material explaining why
no value was presented in the 2016 accounts. There were no derivative financial instruments at the end of 2017.
During the current year, the Company issued a further $ 0,523 million of loan notes. Darwin has converted all
outstanding loan notes into equity during the period under review.
Until all of the loan notes were converted in February 2017, they were secured by a put option held by the loan
note holder that would require George Roach to purchase the shares held in Circum at $2 per share represented
a guarantee given by the director. The put option expired on the conversion of the loan notes into ordinary shares.
No loan notes were issued for the year ended 31 December 2018.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19.
Share capital
Authorised share capital
9 billion (2017: 7 billion) ordinary shares of no par value.
Issued share capital
As at 1 January 2017
Shares issued on conversion for fees (1)
Shares issued on conversion of loan notes (2)
Shares issued under subscription agreement (3)
Shares issued under subscription agreement (4)
Shares issued under subscription agreement (5)
Shares issued under subscription agreement (6)
Shares issued on conversion of loan notes (7)
Shares issued on conversion of loan notes (8)
Shares issued on conversion of loan notes (9)
Shares issued on conversion of loan notes (10)
Shares issued on conversion of loan notes (11)
Shares issued under subscription agreement (12)
Shares issued on conversion for fees (13)
Shares issued on conversion for fees (14)
Shares issued to increase holding (15)
Shares issued under subscription agreement (16)
Shares issued to increase holding (17)
Shares issued on warrant exercise (18)
Shares issued to increase holding (19)
Shares issued under subscription agreement (20)
Shares issued under subscription agreement (21)
Shares issued on conversion for fees (22)
Shares issued on conversion of loan (23)
As at 31 December 2017
Shares issued on warrant exercise (24)
Shares issued under subscription agreement (25)
Shares issued on conversion of loan (26)
As at 31 December 2018
Less cumulative share costs
Net share capital as at 31 December 2018
Number of
Shares
‘000
2 111 611
5 455
204 122
526 316
5 263
5 263
105 263
196 431
196 431
294 646
317 844
14 098
402 279
3 000
3 000
189 492
685 714
87 500
3 559
236 167
654 762
252 031
59 756
14 964
Value
$ 000
29 457
18
646
1 250
13
13
249
559
562
834
932
125
2 514
19
19
765
1 983
451
12
1 363
3 338
1 345
393
100
6 574 967
46 960
250 000
416 667
142 045
563
975
300
7 383 679
48 798
2 925
45 873
(1)
(2)
(3)
(4)
On 1 January2017, the Company issued 5,454,545 shares at an issue price of 0.275p per share for a total value of £0.015 million ($0,018
million) for conversion of Directors fees.
On 3 January 2017, the Company issued 204 121 975 shares to Darwin on conversion of £0.475 million of loan notes (note 17) at an
issue price of 0.232704p per share. The issue price represents 90% of the share price around the date of conversion.
On 30 January 2017, the Company issued 526 315 789 shares under a subscription agreement at a price of 0.19p per share.
On 30 January 2017, the Company issued 5 263 158 shares under a subscription agreement at a price of 0.19p per share.
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(5)
(6)
(7)
(8)
(9)
On 30 January 2017, the Company issued 5 263 158 shares under a subscription agreement at a price of 0.19p per share
On 30 January 2017, the Company issued 105 263 158 shares under a subscription agreement at a price of 0.19p per share
On 31 January 2017, the Company issued 196 430 851 shares to Darwin on conversion of £0.400 million of loan notes (note 17) at an
issue price of 0.203634p per share. The issue price represents 90% of the share price around the date of conversion.
On 1 February 2017, the Company issued 196 430 851 shares to Darwin Strategic Limited on conversion of £0.400 million of loan notes
(note 17) at an issue price of 0.203634p per share. The issue price represents 90% of the share price around the date of conversion
On 3 February 2017, the Company issued 294 646 277 shares to Darwin on conversion of £0.600 million of loan notes (note 17) at an
issue price of 0.203634p per share. The issue price represents 90% of the share price around the date of conversion.
(10) On 7 February 2017, the Company issued 317 844 496 shares to Darwin on conversion of £0.675 million of loan notes (note 17) at an
issue price of 0.212368p per share. The issue price represents 90% of the share price around the date of conversion.
(11) On 20 February 2017, the Company issued 14 098 407 shares at an issue price of 0.7093p per share for a total value of £0.0100 million
($124 735) to Afmine for conversion of fees.
(12) On 27 March 2017, the Company issued 402 279 254 shares under a subscription agreement at a price of 0.59p per share
(13) On 31 March2017, the Company issued 3 000 000 shares at an issue price of 0.5p per share for a total value of £0.015 million ($0,019
million) for conversion of Directors fees.
(14) On 31 March2017, the Company issued 3 000 000 shares at an issue price of 0.5p per share for a total value of £0.015 million ($0,019
million) for conversion of Directors fees.
(15) On 7 July 2017, the Company issued 189 491 750 shares to increase holding in Circum at a price of 0.4p per share.
(16) On 31 July 2017, the Company issued 685 714 286 shares under a subscription agreement at a price of 0.7p per share
(17) On 1 August 2017, the Company issued 87 500 070 shares to increase holding in Circum at a price of 0.55p per share.
(18) On 21 August 2017, the Company issued 3 559 479 shares to Darwin on conversion of warrants at an issue price of 0.26p per share.
(19) On 23 August 2017, the Company issued 236 166 840 shares to increase holding in Circum at a price of 0.45p per share.
(20) On 2 October 2017, the Company issued 654 761 906 shares under a subscription agreement at a price of 0.3p per share.
(21) On 21 November 2017, the Company issued 252 031 250 shares under a subscription agreement at a price of 0.4p per share.
(22) On 12 December 2017, the Company issued 59 756 000 shares at an issue price of 0.5p per share to Afmine for conversion of fees.
(23) On 15 December 2017, the Company issued 14 964 020 shares at an issue price of 0.5p per share for a total value of $0,100 million to
George Roach for conversion of a portion of his loan.
(24) On 16 March 2018, the Company issued 250 000 000 shares to Darwin on conversion of warrants at an issue price of 0.16p per share.
(25) On 14 August 2018, the Company issued 416 666 667 shares under a subscription agreement at a price of 0.18p per share.
(26) On 9 November 2018, the Company issued 142 045 455 shares at an issue price of 0.16p per share for a total value of $0,300 million to
George Roach for conversion of his loan.
Reconciliation to balance as stated in the consolidated statement of financial position
As at 1 January
Shares issued under subscription agreements – cash flow
Shares issued to increase investment holding – non-cash
Shares issued on conversion of loans and loan notes (note 17) - non-
cash
Shares issued on exercise of warrants – cash flow
Shares issued on conversion of fees – non-cash
Share issue costs – cash flow
As at 31 December
20.
Share based payment and warrant reserve
Share options and warrants reserve beginning of year
Warrants granted
Share options
Warrants cancelled
Share options and warrants reserve end of year
2018
$ 000
2017
$ 000
44 158
975
-
27 633
12 067
1 216
300
563
-
(123)
45 873
3 759
12
449
(978)
44 158
2018
$ 000
2 393
-
177
(204)
2 366
2017
$ 000
1 846
143
404
-
2 393
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Share options and warrant arrangements are set out below.
Equity-settled Share base payment arrangement
The Company adopted an incentive share option plan (the ‘Plan’) during 2012. The essential elements of the Plan
provide that the aggregate number of common shares of the Company’s capital stock issuable pursuant to options
granted under the Plan may not exceed 15% of the issued and outstanding Ordinary Shares at the time of any
grant of options. Options granted under the Plan will have a maximum term of 10 years. All options granted to
Directors and management are subject to vesting provisions of one to two years.
All options are to be settled by the physical delivery of shares.
The fair value of all the share options has been measured using the Black-Scholes Model.
Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price,
particularly over the historical period commensurate with the expected term. The expected term of the
instruments has been based on historical experience and general option holder behaviour
The Company has granted the following share options during the years up to 31 December 2018:
Issued to
Date Granted
Vesting
Term
Employees and
consultants
Directors
Directors
Employees and
associates
Directors
Directors
Management
Management
Directors
Directors
Management
Management
Directors
Consultants
Directors
Consultants
Totals
10/02/2011
1 year
04/12/2012 See 1 below
04/12/2012 See 2 below
04/12/2012
See 3 below
29/07/2014 See 4 below
29/07/2014 See 5 below
29/07/2014 See 4 below
29/07/2014 See 5 below
13/03/2015 See 4 below
13/03/2015 See 5 below
13/03/2015 See 4 below
13/03/2015 See 5 below
19/01/2017 See 5 below
19/01/2017 See 5 below
19/01/2017 See 5 below
19/01/2017 See 5 below
Number of
Options Granted
‘000
2 250
Exercise
Price
Expiry Date
Estimated
Fair Value
1.135p
09/02/2014
0.87p
20 386
20 386
5 536
6 000
6 000
6 500
6 500
2 000
2 000
3 250
3 250
30 500
50 439
30 500
50 439
245 936
Nil
2p
03/12/2022
03/12/2022
Nil
1.15p
1.50p
1.15p
1.50p
0.9p
1.17p
0.9p
1.17p
0.28p
0.28p
0.40p
0.40p
03/12/2022
28/07/2024
28/07/2024
28/07/2024
28/07/2024
12/03/2025
12/03/2025
12/03/2025
12/03/2025
18/01/2027
18/01/2027
18/01/2027
18/01/2027
1.11p
1.85p
1.85p
1.15p
1.15p
1.15p
1.15p
0.67p
0.64p
0.67p
0.64p
0.278p
0.278p
0.28p
0. 28p
1. These share options vest on the two-year anniversary of the grant date. The options are exercisable at any
time after vesting during the grantee’s period as an eligible option holder, and must be exercised no later than
10 years after the date of grant, after which the options will lapse.
2. These share options vest in equal instalments annually on the anniversary of the grant date over a two year
period. The options are exercisable at any time after vesting during the grantee’s period as an eligible option
holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.
3. These share options vested on the grant date. The options are exercisable at any time after vesting during the
grantee’s period as an eligible option holder, and must be exercised no later than 10 years after the date of
grant, after which the options will lapse.
4. These share options vest on the one-year anniversary of the grant date. The options are exercisable at any
time after vesting during the grantee’s period as an eligible option holder, and must be exercised no later than
10 years after the date of grant, after which the options will lapse.
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. These share options vest on the two-year anniversary of the grant date. The options are exercisable at any
time after vesting during the grantee’s period as an eligible option holder, and must be exercised no later than
10 years after the date of grant, after which the options will lapse.
No share options were granted during the year ended 31 December 2018.
During the year ended 31 December 2017, two tranches of 30 500 000 options were granted to directors at 0.28p
and 0.40p, respectively, (2016: nil). Consultants were also awarded two tranches of 50 439 000 options at 0.28p
and 0.40p, respectively.
The fair value of the options granted during the year ended 31 December 2018 was $0,624 million (2017: $0,624
million). The assessed fair value of options granted to directors and management was determined using the Black-
Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date, the
expected price volatility of the underlying share, the expected dividend yield and the risk-free rate interest rate
for the term of the option.
During the year ended 31 December 2017, $0,404 million was charged to profit and loss and recognised in respect
of the above option schemes. The remainder of the fair value will be expensed in profit and loss over the remaining
vesting period. No share options were granted during the year ended 31 December 2018.
The Group has the following share options outstanding:
Grant Date
Expiry Date
Exercise Price Number of options
outstanding
‘000
04/12/2012
04/12/2012
29/07/2014
29/07/2014
13/03/2015
13/03/2015
19/01/2017
19/01/2017
03/12/2022
03/12/2022
28/07/2024
28/07/2024
12/03/2025
12/03/2025
18/01/2027
18/01/2027
Nil
2p
1.15p
1.50p
0.9p
1.17p
0.28p
0.40p
2 013
12 458
3 000
10 500
5 250
5 250
80 939
80 939
200 349
Number of options
vested and
exercisable
‘000
2 013
12 458
3 000
10 500
5 250
5 250
80 939
80 939
200 349
The following table lists the inputs into the valuation model for the year to 31 December 2017:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Share price at grant date
Exercise price
19 January 2017
issue
-
236.0
1.43
0.28p
0.28p
19 January 2017
issue
-
236.0
1.43
0.28p
0.40p
The number and weighted-average exercise prices of share options under the share option programmes and
replacement awards were as follows:
Options outstanding, beginning of year
Granted
Options outstanding, end of year
2018
2017
Shares
‘000
200 349
-
200 349
Weighted
Average
Exercise Price
0.55p
-
0.55p
Shares
‘000
38 471
161 878
200 349
Weighted
Average
Exercise Price
1.15p
0.34p
0.55p
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Warrants
The Company did not grant warrant options during the year (2017: 42,857 million)
Issued to
Date Granted
Advisors
Funders
Funders
Funders
Subscribers
Funders
Funders
Funders
Advisors
Funders
Funders
Totals
04/12/2012
28/01/2014
02/02/2015
29/04/2015
09/07/2015
15/09/2015
09/10/2015
22/08/2016
20/09/2016
15/12/2016
26/01/2017
Number of Warrants
Issued
‘000
7 017
9 000
40 000
16 674
1 500
3 559
21 951
79 778
23 000
44 000
42 857
287 336
Exercise Price
Expiry Date
4p
1.25p
1.25p
2.96875p
3p
1.4047p
1.025p
0.8437p
0.8p
0.375p
0.8437p
03/12/2017
27/01/2017
09/02/2018
06/05/2018
16/05/2018
22/09/2017
16/10/2018
29/08/2019
19/09/2019
22/12/2019
26/01/2020
The assessed fair value of the warrant options granted to funders and advisors was determined using the Black-
Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date, the
expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the
term of the options. The fair value of the warrant options granted to funders during the year ended 31 December
2018 was nil (2017: $0,143 million).
The following table lists the inputs into the valuation model for the year to 31 December 2017:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Share price at grant date
Exercise price
26 January
2017
issue
-
236.0
1.430
0.250p
0.8437p
22 August
2016
issue
-
203.0
0.56
0.475p
0.8437p
20 September
2016
issue
-
206.0
1.05
0.475p
0.375p
15 December
2016
issue
-
214.0
1.40
0.250p
0.800p
A summary of the status of the Company’s share warrants as of 31 December 2018 and changes during the year
are as follows:
Warrants outstanding, beginning of year
Granted
Expired
Exercised
Cancelled *
Warrants outstanding, end of year
2018
‘000
234 704
-
-
(6 350)
(205 354)
23 000
2017
‘000
200 479
44 801
(3 559)
(7 017)
-
234 704
A payment of $0,204 million was made during 2018 for the cancellation of the warrants above.
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group has the following warrant options outstanding:
Grant Date
Expiry Date
20/09/2016
19/09/2020
Exercise Price Number of options
outstanding
‘000
23 000
0.80p
Number of options
vested and exercisable
‘000
23 000
23 000
23 000
21.
Non-controlling interest
At 1 January
Non-controlling interest at (disposal) / acquisition – TCT IF
Non-controlling interest in share of losses for the year - RHA
Non-controlling interest in share of losses for the period ended September
2017 – TCT IF
At 31 December
2018
$ 000
(11 755)
-
(949)
-
2017
$ 000
(3 716)
(935)
(7 049)
(55)
(12 704)
(11 755)
The following table summarises the information relating to each of the Group’s subsidiaries that has material Non-
controlling interest, before any intra-group eliminations.
Non-controlling Interest percentage
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Net assets attributed to Non-controlling Interest
Revenue
Loss
Other Comprehensive Income
Total comprehensive income
Loss allocated to NCI
2018
RHA
51%
-
75
(19 791)
(5 094)
(24 810)
2017
RHA
51%
-
223
(19 518)
(3 754)
(23 049)
(12 704)
(11 755)
168
(1 860)
-
(1 860)
(949)
368
(13 822)
-
(13 822)
(7 049)
The share of losses in the year represents the losses attributable to non-controlling interests in RHA for the year
(2017 – RHA for the year and TCT IF for the nine months ended 30 September 2017).
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22.
Revenue
Major product/service lines
Sale of Wolframite
Sale of scrap
Reserve Bank of Zimbabwe Export Incentive
Total revenue
Primary Geographical Markets
Africa
Timing of revenue recognition
Products transferred at a point in time
23.
Cost of sales excluding depreciation and amortisation
Mining contractor
Staff costs
Consumables
Equipment hire and maintenance
Mining services
Plant services
Selling costs
Net realisable value adjustment of cost of inventory sold
Inventory write-down / (write-up)
2018
$ 000
2017
$ 000
155
1
12
168
168
168
168
168
2018
$ 000
24
66
17
57
3
2
2
8
-
179
349
-
19
368
368
368
368
368
2017
$ 000
661
906
240
816
39
11
32
-
795
3500
Cost of sales comprises production costs in RHA. The net realisable value adjustment of cost of inventory reflects
the impairment of the Inventory holding at RHA at 31 December 2018 as a consequence of the RHA being placed
under care and maintenance.
24.
Administrative expenses
Staff costs
Consulting and advisory fees
Directors’ fees
Audit, accounting and legal fees
Marketing and public relations
Travel
Costs incurred to cease operations
Security costs
Vehicle operating costs
Insurance
Office and administration
Foreign exchange losses
Share based payment (note 20)
2018
$ 000
222
1 107
97
303
64
268
174
24
64
43
294
(3)
177
2 834
2017
$ 000
461
1 099
74
228
152
419
-
42
57
51
465
7
547
3 602
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25.
Finance charges
Interest charged by suppliers
Interest on borrowings
Derivative financial liability transaction costs
Unwinding of discount on provisions
Loss on extinguishment of debt
Interest on finance lease
26.
Taxation
Deferred tax
As at 1 January
Disposal of TCT IF
As at 31 December
Income Tax
Taxation charge for the year
2018
$ 000
6
52
-
88
-
7
153
2018
$ 000
-
-
-
-
2017
$ 000
22
235
(4)
108
1 137
9
1 507
2017
$ 000
983
(983)
-
-
There is no taxation charge for the year ended 31 December 2018 (2017: Nil) because the Group is registered in
the British Virgin Islands where no corporate taxes or capital gains tax are charged. However, the Group may be
liable for taxes in the jurisdictions of the underlying operations.
The Group has incurred tax losses in West Africa and Zimbabwe; however a deferred tax asset has not been
recognised in the accounts due to the unpredictability of future profit streams. The accumulative tax losses not
recognised at RHA amount to $15,684 million (2016: $13,369 million).
Reconciliation of effective tax rate
2018
Loss before tax from continuing operations
Tax using the Zimbabwean company tax rate
Tax effect of:
Effects of tax rates in foreign jurisdictions
(7 758)
25%
(25%)
0%
Contingent liability
2018
$ 000
-
1 940
(1 940)
-
2017
-
25%
(25%)
0%
2017
$ 000
(19 607)
4 902
(4 902)
-
The Group operates across different geographical regions and is required to comply with tax legislation in various
jurisdictions. The determination of the Group’s tax is based on interpretations applied in terms of the respective
tax legislations and may be subject to periodic challenges by tax authorities which may give rise to tax exposures.
27.
Loss per share
The calculation of loss per share is based on the loss after taxation attributable to shareholders, divided by the
weighted average number of shares in issue during the year:
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2018
2017
Net loss attributable to owners of the company ($ 000)
(6 809)
(12 657)
Weighted average number of Ordinary Shares in calculating basic earnings
per share (‘000)
6 954 725
4 809 908
Basic loss per share (US cents)
Diluted loss per share (US cents)
Weighted average number of ordinary shares
Issued ordinary shares at 1 January ('000)
Weighted average of shares issued during the year ('000)
Weighted average number of ordinary shares at 31 December ('000)
(0.1)
(0.1)
(0.3)
(0.3)
6 574 967
379 758
6 954 725
2 111 611
2 698 297
4 809 908
As the Group incurred a loss for the year, there is no dilutive effect from share options and warrants in issue or
the shares issued after the reporting date.
28.
Directors’ remuneration
2018
Executive Directors
George Roach
Non-Executive Directors
John (Ian) Stalker (*)
Michael Foster
Russel Swarts (*)
2017
Executive Directors
George Roach
Non-Executive Directors
John (Ian) Stalker
Michael Foster
Russel Swarts (*)
Directors’
fees
$ 000
Consultancy
Fees
$ 000
Share
Options
$ 000
Total
$ 000
-
11
33
12
56
-
19
19
20
58
240
-
-
-
240
-
-
-
-
-
240
11
33
12
297
244
65
309
9
-
50
303
48
48
48
209
76
67
118
570
(*) These directors were not employed during the full financial year.
The Directors’ fees disclosed in note 24 herein include $0,015 million (2017: $0,015 million) being the fees paid to
Directors of RHA, who are not directors of the parent company.
The 2018 Directors fees noted above remain unpaid at the financial year-end. No pension benefits are provided
for any Directors or other employee benefits.
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. Notes to the statement of cash flows
Cash and cash equivalents comprise cash at bank, bank overdrafts and short term bank deposits with an original
maturity of three months or less. The carrying value of these assets is approximately equal to their fair value.
Loss before tax
Adjustments for:
Finance charges
Loan implementation fee
Impairment of PPE - RHA
Impairment of current assets - RHA
Impairment of intangible assets - Zulu
Depreciation and amortisation
Disposal of TCT IF
Fair value movement of investments
Impairment of inventories
Share based payments and warrant liabilities
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Net cash (outflow) from operating activities
2018
2017
(Audited)
(Audited)
$ 000
$ 000
(7 758)
(19 761)
153
15
196
48
4 563
-
-
(47)
-
177
(2 653)
(26)
138
983
(1 558)
1 507
-
9 809
-
1 471
22
104
795
547
(5 506)
(590)
(144)
25
(6 215)
30.
Financial Instruments – Fair values and risk management
The effect of initially applying IFRS 9 on the Group’s financial instruments is described in Note 3.2. Due to the
transition method chosen, comparative information has not been restated to reflect the new requirements.
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including
their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial
liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Trade and other receivables and trade and other payables classified as held-for-sale are not included in the table
below. As at 31 December 2018 the Group did not have any trade and other receivables nor any trade and other
payables that were classified as held-for-sale.
The Group has not disclosed the fair values of financial instruments such as short-term trade receivables and
payables, because their carrying amounts are a reasonable approximation of their fair value.
68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2018
Note
Financial assets measured at fair value
FVOCI
Carrying
value
FVOCI -
equity
instruments
$ 000
6 263
6 263
Financial assets not measured at fair value
Trade and other receivables
Cash and cash equivalents
Financial liabilities measured at fair
value
Financial liabilities not measured at fair value
Bank overdrafts
Unsecured loans from shareholders
Trade and other payables
-
-
-
-
-
-
-
-
-
Fair value
Financial
assets at
amortised
cost
$ 000
Other
financial
liabilities
$ 000
Total
$ 000
Level 1
Level 2
Level 3
Total
$ 000
$ 000
$ 000
$ 000
-
-
6 263
6 263
-
-
53
16
69
-
-
-
-
-
-
-
-
-
-
-
-
-
6 263
6 263
53
16
69
-
-
(288)
(213)
(2 957)
(3 458)
(288)
(213)
(2 957)
(3 458)
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2017
Note
Financial assets measured at fair value
Available-for-sale
Carrying
value
FVOCI -
equity
instruments
$ 000
6 459
6 459
Financial assets not measured at fair value
Trade and other receivables
Cash and cash equivalents
Financial liabilities measured at fair
value
Financial liabilities not measured at fair value
Bank overdrafts
Unsecured loans from shareholders
Trade and other payables
-
-
-
-
-
-
-
-
-
Fair value
Financial
assets at
amortised
cost
$ 000
Other
financial
liabilities
$ 000
Total
$ 000
Level 1
Level 2
Level 3
Total
$ 000
$ 000
$ 000
$ 000
-
-
6 459
6 459
-
-
239
316
555
-
-
-
-
-
-
-
-
-
-
-
-
-
6 459
6 459
239
316
555
-
-
(182)
(216)
(1 942)
(2 340)
(182)
(216)
(1 942)
(2 340)
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financial instruments – Fair values and risk management
B.
Measurement of fair values
i.
Valuation techniques and significant unobservable inputs
The following tables show the valuation techniques used in measuring Level 3 fair values for financial instruments
measured at fair value in the statement of financial position, as well as the significant unobservable inputs used.
Related valuation processes are described in Note 5.8.
Financial instruments measured at fair value
Type
Valuation technique
Significant unobservable
inputs
Inter-relationship between
significant unobservable
inputs and fair value
measurement
None
None
Unlisted
Equity
investments
Current market value
technique:
The valuation model is based
upon the latest price at which
raised
the unlisted entity
capital.
ii.
Transfers between Levels 1 and 2
There were no transfers between Levels 1 and 2 in either the current financial year or in the prior financial year.
C.
Financial Risk Management
The Group has exposure to the following risks arising from financial instruments:
– credit risk;
– liquidity risk; and
– market risk.
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’s audit committee oversees how management monitors compliance with the Group’s risk
management policies and procedures, and reviews the adequacy of the risk management framework in relation
to the risks faced by the Group. The Group’s audit committee undertake ad hoc reviews of risk management
controls and procedures, the results of which are reported to the audit committee.
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, and arises principally from the Group’s receivables from customers and
investments in debt securities.
The carrying amounts of financial assets represent the maximum credit exposure.
In the current year there was an impairment loss of $0,048 million comprising of $0,041 million for unrecoverable
accrued VAT and $0,007 million for unrecoverable sundry debtors. There was no impairment loss in the prior
year.
Trade receivables
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the factors that may influence the credit risk of its customer base,
including the default risk associated with the industry and country in which its customers operate. Details of
concentration of revenue are included in Note 4.9.
The Group has established a credit policy under which each new customer is analysed individually for
creditworthiness before the Group’s standard payment terms and conditions are offered. The Group’s review
includes external ratings, if they are available, financial statements, credit agency information, industry
information and in some cases bank references. Sales limits are established for each customer and are reviewed
regularly.
The Group limits its exposure to credit risk from trade receivables by establishing a maximum payment period
of one month.
The Group is monitoring the economic environment in Zimbabwe, where its exploration and mining operations
are based.
The Group does not require collateral in respect of trade and other receivables. The Group does not have trade
receivables for which a no allowance is recognised because of collateral.
At 31 December 2018 the exposure to credit risk for
trade receivables by geographic region was as follows:
Zimbabwe
Other
At 31 December 2018 the exposure to credit risk for
trade receivables by counterparty was as follows:
Zimbabwe Revenue Authority
Other
At 31 December 2018 the exposure to credit risk for
trade receivables by credit rating was as follows:
External credit ratings
Other
2018
$ 000
2017
$ 000
53
-
53
21
7
28
-
53
53
239
-
239
203
15
218
-
239
239
Expected credit loss assessment for corporate customers as at 1 January 2018 and 31 December 2018
The Group allocates each exposure to a credit risk grade based on data that is determined to be predictive of the
risk of loss (including but not limited to external ratings, audited financial statements, management accounts
and cash flow projections and available press information about customers) and applying experienced credit
judgement. Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk
of default.
The company had no exposure to credit risk for the year ended 31 December 2018 (2017 - nil)
Movements in the allowance for impairment in respect of trade receivables
The movement in the allowance for impairment in respect of trade receivables during the year amounted to nil.
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cash and cash equivalents
As at 31 December 2018, the Group held $0,016 million in cash and cash equivalents (2017: $0,316 million) and
had a $0,288 million bank overdraft (2017: $0,182 million). The cash and cash equivalents are held with bank
and financial institution counterparties which are rated BB to BAA (according to Standard and Poor’s).
Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the
short maturities of the exposures. The Group considers that its cash and cash equivalents have low credit risk
based on the external credit ratings of the counterparties. On the implementation of IFRS 9 the Group did not
impair any of its cash and cash equivalents.
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 have sufficient liquidity to meet its liabilities when
they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Exposure to liquidity risk
The following table presents the remaining contractual maturities of financial liabilities at the reporting date.
The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of
netting agreements.
Contractual cash flows
31 December 2018
Carrying
value
$ 000
2 Months
or less
$ 000
Total
$ 000
2 to 12
Months
$ 000
1 to 2
Years
$ 000
2 to 5
Years
$ 000
Non- derivative financial
liabilities
Bank overdrafts
Unsecured shareholder's
loan
Trade payables
288
(288)
(288)
-
-
213
2 957
3 458
(213)
(2 957)
(3 458)
-
-
(288)
-
(2 957)
(2 957)
(213)
-
(213)
Derivative financial
liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
More
than 5
years
$ 000
-
-
-
-
-
-
-
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2017
Carrying
value
$ 000
2 Months
or less
$ 000
Total
$ 000
2 to 12
Months
$ 000
1 to 2
Years
$ 000
2 to 5
Years
$ 000
Contractual cash flows
Non- derivative financial
liabilities
Bank overdrafts
Unsecured shareholder's
loan
Trade payables
182
(182)
(182)
-
-
216
1 942
2 340
(216)
(1 942)
(2 340)
-
-
(182)
-
(1 942)
(1 942)
(216)
-
(216)
Derivative financial
liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
More
than 5
years
$ 000
-
-
-
-
-
-
-
The interest payments on the financial liabilities represent the fixed interest rates as per the respective contracts.
The Group aims to maintain the level of its cash and cash equivalents and other highly marketable debt
investments at an amount in excess of expected cash outflows on financial liabilities other than trade payables.
The Group also monitors the level of expected cash inflows on trade and other receivables together with
expected cash outflows on trade and other payables.
In addition, the Group maintains the following lines of credit.
• $0,300 million overdraft facility that is unsecured. Interest would be payable at the rate of 9.5% (2017: 9.5%).
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.
Currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the
currencies in which sales, purchases, receivables and borrowings are denominated and the respective functional
currencies of Group companies. The functional currencies of Group companies are primarily Pound Sterling and
the US Dollar. The currencies in which these transactions are primarily denominated are Euro, US Dollar, South
African Rand and Pound Sterling. Subsequent to the year-end, the Zimbabwean government has implemented a
functional currency termed RTGS with effect from 1 March 2019. Hence, exposures to exchange rate fluctuations
arise. Refer to the segmental reporting information disclosed in note 7 for the financial assets and liabilities. On
24 June 2019, the Government of Zimbabwe has implemented RTGS as the only legal tender within Zimbabwe.
As such it is too recent to accurately assess the impact on the financial statements as at the date of the report.
All transactions are subject to spot rates and with no hedging transactions taking place.
Exposure to currency risk
The summary quantitative data about the Group’s exposure to currency risk as reported to the management of
the Group is as follows:
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2018
31 December 2017
Trade receivables
Unsecured shareholder's loan
Trade payables
Net statement of financial
position exposure
Next 6 months forecast sales
Next 6 months forecast
purchases
Net forecast transaction
exposure
EUR
'000
GBP
'000
USD
'000
ZAR
'000
EUR
'000
GBP
'000
USD
'000
ZAR
'000
-
-
(43)
-
-
(325)
53
(213)
(2 395)
-
-
(733)
-
-
(132)
-
-
(1 623)
239
(216)
(248)
-
-
(368)
(43)
(325)
(2 555)
(733)
(132)
(1 623)
(225)
(368)
-
-
-
-
-
-
-
-
-
-
- (1 245)
(1 205)
- (1 245)
(1 205)
-
-
-
-
Net exposure
(43)
(325)
(3 800)
(1 938)
(132)
(1 623)
(225)
(368)
The following significant exchange rates in relation to the reporting currency are applicable:
Euro
GBP
ZAR
Average rate for the year
Year-end spot rate
2018
1.1804
1.3368
0.0755
2017
1.1271
1.2872
0.0742
2018
1.2769
1.2747
0.0694
2017
1.0550
1.3308
0.0729
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at
the reporting date are as follows:
Sterling (£)
Euro (€)
South African Rand (ZAR)
Liabilities
2018
‘000
325
43
733
2017
‘ 000
1,623
132
368
Assets
2018
‘000
2017
‘000
-
-
-
-
-
-
The presentation currency of the Group is US dollars.
The Group is exposed primarily to movements in USD, the currency in which the Group receives most of its
funding, against other currencies in which the Group incurs liabilities and expenditure.
Sensitivity analysis
Financial instruments affected by foreign currency risk include financial investments (see note 9) cash and cash
equivalents, other receivables, trade and other payables and convertible loan notes. The following analysis,
required by IFRS 7 Financial Instruments: Disclosures, is intended to illustrate the sensitivity of the Group’s
financial instruments (at year end) to changes in market variables, being exchange rates.
The following assumptions were made in calculating the sensitivity analysis:
All income statement sensitivities also impact equity
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Translation of foreign subsidiaries and operations into the Group’s presentation currency have been excluded
from this sensitivity as they have no monetary effect on the results.
Income Statement / Equity
Exchange rates:
+10% $ Sterling (GBP)
-10% $ Sterling (GBP)
2018
$ 000
(42)
42
2017
$ 000
-
-
The above sensitivities are calculated with reference to a single moment in time and will change due to a number
of factors including:
•
•
•
Fluctuating other receivable and trade payable balances
Fluctuating cash balances
Changes in currency mix
Interest rate risk
The Group has entered into fixed rate agreements for its finance leases and shareholders loans. The Group does
not hedge its interest rate exposure by entering into variable interest rate swaps.
Exposure to interest rate risk
The interest rate profile of the Group’s interest-bearing financial instruments as reported to the management of
the Group is as per the table below.
Fixed rate instruments
Financial assets
Financial liabilities
2018
$ 000
-
310
310
2017
$ 000
-
371
371
Fair value sensitivity analysis for fixed-rate instruments
The Group does not account for any fixed-rate financial assets of financial liabilities at FVTPL. Therefore, a change
in interest rates at the reporting date would not affect profit or loss.
Other market price risk
The Group is exposed to equity price risk, which arises from equity securities at FVOCI (2017 available-for-sale)
are held as a long-term investment.
The Group’s investments in equity securities comprise small shareholdings in unlisted companies. The shares are
not readily tradable and any monetisation of the shares is dependent on finding a willing buyer.
Valuation techniques and assumptions applied for the purposes of measuring fair value
Due to the short term nature, the fair value of cash and receivables and liabilities approximates the carrying
values disclosed in the financial statements.
The fair value of financial assets is estimated by using other readily available information. As the Circum and Casa
shares are in privately held exploration companies, the fair values were estimated using observable placing prices
where available. The fair value of the Casa shares at 31 December 2017 were derived from the swop values of
shares acquired in Ortac announced on 6 November 2017.
76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Circum is unlisted there are no quoted market prices. The fair value of the Circum shares was derived using the
previous issue price and validating it against the most recent placing price on 30 April 2019.
Capital management
The Group manages its capital resources to ensure that entities in the Group will be able to continue as a going
concern, while maximising shareholder return.
The capital structure of the Group consists of equity attributable to shareholders, comprising issued share capital
and reserves. The availability of new capital will depend on many factors including a positive mineral exploration
environment, positive stock market conditions, the Group’s track record, and the experience of management.
There are no externally imposed capital requirements. The Directors are confident that adequate cash resources
exist or will be made available to finance operations but controls over expenditure are carefully managed.
31.
Subsidiaries
Premier had investments in the following subsidiary undertakings as at 31 December 2018, which principally
affected the losses and net assets of the Group:
Name
ZimDiv Holdings Limited
RRCC Ltd
Regent Resources Capital Corporation SAU
G and B African Resources Benin SARL
Zulu Lithium Mauritius Holdings Limited
RHA Tungsten Mauritius Limited
Kavira Minerals Holdings Limited
Tinde Fluorspar Holdings Limited
Lubimbi Minerals Holdings Limited
Gwaaii River Minerals Holdings Limited
Zulu Lithium (Private) Limited
RHA Tungsten (Private) Limited
Katete Mining (Private) Limited
Tinde Fluorspar (Private) Limited
LM Minerals (Private) Limited
BM Mining & Exploration (Private) Limited
Country of
incorporation and
operation
Proportion of voting
interest %
2018 2017
Activity
Mauritius
BVI
Togo
Benin
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
100
100
100
100
100
100
100
100
100
100
100
49*
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Holding Company
Holding Company
Exploration
Exploration
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Exploration
49*
Production
100
100
100
100
Exploration
Exploration
Exploration
Exploration
* Accounted as a controlled subsidiary, refer note 5- Significant accounting policies, estimates and
assumptions and note 5.7 - Basis of consolidation.
32.
Related party transactions
Ultimate controlling party
There is no single ultimate controlling party.
Transactions with key management personnel
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Loans from directors
On 15 September 2015, George Roach provided a $0,300 million loan direct to Premier for the use at RHA. The
loan is unsecured and accrues interest at a rate of 3% per annum. As at 28 March 2017, the loan and accrued
interest totalled $0,309 million. On 28 March 2017 the Company announced that it had amended the terms of
the existing loan agreement with George Roach through the grant of conversion rights. The Board granted
conversion rights in respect of the Loan, which can now be converted into new ordinary shares at a price of 0.5p
per new ordinary share. On 15 December 2017 the company announced that George Roach had elected to
convert $0,100 million of the $0,300 million ("Loan") he provided to the Company.
Subsequent to the reporting date, on 5 June 2018 the Company announced that it had entered into a loan with
a company owned by a Trust of which George Roach is a beneficiary, for a gross value of $0,300 million.
Supplies and Services
During 2018, administration fees of $0,114 (2017: $0,196 million) were paid by Premier to a trading business in
which George Roach, Director, is the beneficial owner. Administration fees comprised allocated rental costs and
administrative support services. At the financial year-end nothing remains outstanding of this amount (2017:
$nil).
Borrowings
In April 2018 Brendan Roach loaned the company GBP 0,084 million. As at year end, the loan was still
outstanding.
Remuneration of key management personnel
The remuneration of the Directors and other key management personnel of the Group are set out below for
each of the categories specified in IAS 24 Related Party Disclosures.
Consulting fees
Staff costs
Directors’ fees (note 28)
33.
Events after the reporting date
33.1 RHA Tungsten
2018
$ 000
240
126
56
422
2017
$ 000
303
120
58
481
On 14 February 2019 the company reported that it is now in discussions with the Zimbabean Ministry about
assisting with the funding of the recommissioning of the RHA.
As part of Premier's recapitalisation proposal submitted to the Ministry on the 18 January 2018 including
Premier's proposal for the restructuring of the ownership of RHA, RHA's management established that to get the
mine into a state of sustainable and potentially profitable production they would require the following:
electrification of mining operations, general working capital, further exploration drilling of the underground and
open pit, plant upgrades, semi mechanisation of the underground workings, and development of a decline shaft
and the equipping thereof to expose ore on the 810 and 760 levels respectively.
On 20 February 2019 the company advised that following a meeting with representatives from the Zimbabean
Ministry, a general agreement was reached on issues affecting the financing and return to production at RHA.
Appropriate agreements are in the process of being drafted and Premier expects to announce details and a
return to production schedule as soon as possible.
On 13 March 2019 the company reported that they received a letter on the 12 March 2019 from the Ministry
stating that the Zimbabean Ministry has secured a proposed investment of US$6 million for investment into RHA
for the immediate recommissioning of mining operations, subject to completion of the appropriate agreements.
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On 7 May 2019 the company reported the signing of a new Management Agreement ("MA") with NIEEF that is
expected to see RHA brought back into production without any further financing requirement from Premier.
On 24 June 2019, NIEEF deposited RTGS6 million to the bank account of RHA. RTGS is the Zimbabwean local
currency that is the sole legal tender now used in Zimbabwe. Simultaneous with this, US$ denominated bank
accounts have been converted on a one to one basis to RTGS.
At this point in time, it is not clear whether this deposit is adequate to bring RHA back into production.
Premier has agreed to entertain a direct approach from a potential alternative buyer of wolframite and to
facilitate a due diligence process by two other Development Finance Institutions who have concluded
confidentiality agreements with Premier.
33.2 Zulu Lithium
On 26 February 2019 Premier announced that Zulu would recommence drilling in Zimbabwe. Mobilisation will
commence immediately, and drilling is expected to commence as soon as mobilisation is complete and seasonal
rains permit.
The drilling programme will follow the recommendations identified in the DFS work programme and will focus
on expanding both the size and confidence of the current SAMREC compliant Resource at Zulu, as well as the
generation of geotechnical and hydrological data for the pit shell designs and future mine construction.
On 15 May 2019, the Company announced that the budget for the initial drilling programme, including
mobilisation, was estimated at approximately US$400 000. The Company issued, within the Company's existing
share authorities, 212 413 793 new Ordinary Shares of nil par value at an issue price of 0.145p per share to KME
Plant (Proprietary) Limited (“KME”) as pre-payment for mobilisation and drilling. The KME Payment Shares were
admitted to trading on AIM on 4 March 2019.
The KME Payment Shares, while issued, have not to date been released by Premier to the control of KME,
pending execution of the long form drilling contract, which is not currently in a final form that is acceptable to
both parties reflecting their current relationship.
On 28 May 2019 Premier reported that it has been unable to conclude a revised pricing structure for the long
form drilling contract that was commercially acceptable to both Premier and KME that fairly reflected the revised
relationship for the next phase of drilling activities at Premier's wholly-owned Zulu Lithium Project in Zimbabwe.
The proposed drilling programme with KME will, as a result not proceed and discussions with KME have been
terminated.
As the long form drilling contract with KME will not now proceed, Premier has cancelled the 212 413 793 KME
Payment Shares and application will be made to AIM for the cancellation of the KME Payment Shares from
trading on AIM, which occured on or about 4 June 2019 .
The Company has also been in contact with the office of the Zimbabwe Ministry of Mines and has been assured
that it will have further feedback on the long outstanding Exclusive Prospecting Order ("EPO") application for
areas surrounding Zulu in the near future. The Company believes that the granting of this EPO will add
significantly to Zulu and may assist in progressing discussions on alternative finance to progress the Definitive
Feasibility Study ("DFS") programme so as to minimise the requirement for Premier to raise funds directly.
33.3 Corporate matters
On 27 February 2018 Premier announced a placing to raise £400 000 before expenses at an issue price of 0.09
pence per new ordinary share.
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Premier announced the appointment of SVS Securities plc as the Company's joint broker to work alongside its
existing corporate broker, Shore Capital Stockbrokers Limited.
On 28 May 2019 the Company had meetings with members of the board of directors of Circum, which have been
encouraging, and has been assured that all Circum shareholders should expect an update in the near future.
On 29 May 2019, the Company announced that the Board had issued new ordinary shares to Directors and
employees and to certain third parties in settlement of accrued but unpaid amounts due, amounting in aggregate
to £145 787 ("Settlement Shares").
The Company issued 54 241 382 Settlement Shares to Directors in settlement of accrued but unpaid fees
(amounting in aggregate to £48 817) at an issue price of 0.09p per share, in total representing approximately
0.69 per cent. of the current issued share capital, as set out in the table below:
Individual
Director:
George Roach
Godfrey Manhambara
Michael Foster
Wolfgang Hampel
Amount
settled in
Settlement
Shares
(Note 1)
$’000
22 219
3 750
7 100
15 873
48 942
Issue price
of
Settlement
Shares
Settlement
Shares issued
(Note 1)
Total
Shareholding
following the
issue of the
Settlement
Shares
Shareholdi
ng in the
enlarged
issued
share
capital
0.09p
0.09p
0.09p
0.09p
24 688 014
4 166 667
7 888 889
17 497 813
54 241 383
643 484 623
4 166 667
16 343 434
17 636 667
681 631 391
8.05%
0.05%
0.20%
0.22%
In addition, a further 39 966 803 Settlement Shares have been issued to certain employees in settlement of
accrued but unpaid salaries due of £35 970 (see Note 1 above) at the Issue Price, and 67 777 778 Settlement
Shares to third parties in settlement of accrued but unpaid amounts owed of £61 000 (see Note 1 above), also at
the Issue Price.
The Settlement Shares, amounting in aggregate to 161 985 963 new Ordinary Shares, will rank pari passu in all
respects with the Company's existing issued ordinary shares and application will be made for admission of the
Settlement Shares to trading on AIM, which is expected to occur on or about 5 June 2019.
Settlement agreements have been entered into totalling $0,915 million with various staff members and
consultants. The above table is included in the total settlement agreements concluded.
On 21 June 2019 the Company reported that it has issued a convertible loan note for US$350 000 with Regent
Mercantile Holdings Limited. The annual interest rate payable on the outstanding loan will be 10% per annum.
The principal amount of US$350 000 will be made available to the Company in one advance with no deductions.
No warrants have been issued to Regent under the Convertible.
The principal amount (plus any accrued interest) under the Loan Agreement is repayable in two equal payments
on 1 August 2019 and 1 September 2019. Failing direct repayment of the loan by Premier, Regent at its sole
discretion may convert any percentage of a repayment within applicable share authorities into new Premier
shares at a conversion price equal to 90 per cent of the daily volume weighted average price ("VWAP") during
the five days trading days immediately prior to the relevant repayment date.
The Loan Agreement is subject to normal events of default and the Company has provided a number of standard
warranties and undertakings to Regent in respect of the Group. The Loan Agreement is secured over 350 000
shares of Circum held by Premier.
It was widely reported on 24 June 2019 that Zimbabwe had effectively adopted its own currency and that legal
tender in the domestic environment now excluded the direct use of all foreign currencies. This policy directive
by the Reserve Bank of Zimbabwe has affirmed that the RTGS will be Zimbabwe’s sole legal tender. Premier
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
expects to see potential adjustments to various aspects from operational to capital expenditure. We anticipate
that much of the day to day operations will remain at a one to one RTGS:$ conversion rate.
There remains a material uncertainty about the potential impact that the new RTGS policy will have on the
financial statements as at the date of this report and on the actual effect to the Group operations within
Zimbabwe.
33.4
Circum Minerals Limited investment
On 12 June 2019 the Company advised that the Circum update to Shareholders preferred route to a liquidity
event remains the project development in association with its equity and debt funders, in line with previous
disclosures, and which it expects might be concluded by the year end.
81