Rambler Metals and Mining PLC
Annual Report 2016

Plain-text annual report

REGISTERED NUMBER: 05101822 (ENGLAND AND WALES) RAMBLER METALS AND MINING PLC REPORT OF THE DIRECTORS AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JULY 31, 2016 RAMBLER METALS AND MINING PLC CONTENTS OF THE FINANCIAL STATEMENTS Company Information Chairman’s Statement Strategic Report Management’s Discussion and Analysis Report of the Directors Directors’ Responsibilities Corporate Governance Report Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Company Statement of Comprehensive Income Company Statement of Financial Position Company Statement of Changes in Equity Company Statement of Cash Flows Notes to the Company Financial Statements Page 1 2 4 6 30 32 33 34 36 37 38 39 40 41 76 77 78 79 80 RAMBLER METALS AND MINING PLC COMPANY INFORMATION FOR THE YEAR ENDED JULY 31, 2016 Directors: T I Ackerman (appointed June 2, 2016) E C Chen B Labatte (appointed June 2, 2016) B A Mills (appointed June 2, 2016) G R Poulter M V Sander (appointed June 2, 2016) N P Williams Secretary: P Mercer Registered office: Salatin House 19 Cedar Road Sutton Surrey SM2 5DA Registered number: 5101822 (England and Wales) Auditor: BDO LLP 55 Baker Street London W1U 7EU Page 1 RAMBLER METALS AND MINING PLC CHAIRMAN’S STATEMENT FOR THE YEAR ENDED JULY 31, 2016 2016 was a challenging year for the global mining industry as it struggled to rebalance supply in the face of reduced Chinese demand. Copper was no exception, as prices fell to below US$2.00/lb in January and has since stabilized at around US$2.15/lb. The industry has taken significant steps to cut high cost supply to match current demand but more may be needed to underpin a future price rally. In the meantime virtually all new projects have been shelved which puts Rambler in a unique position to execute a low capital cost, low operating cost expansion over the next 18 months in anticipation of this price recovery. In this regard, Rambler (‘the Company’) achieved some important corporate milestones in 2016. • The Company successfully raised approximately US$15 million equity with the potential for an additional US$ 13 million if certain objectives are achieved. • On the back of this capital raise the Company immediately started expansion of its Ming mine targeting 1,250 metric tonnes per day (‘mtpd’) of production by the end of 2017. This expansion will position the Company as a low cost producer with a 20 year mine life. • During the initial construction phase of this expansion, further engineering and assessment work will be carried out on re-establishing the shaft for hoisting with the integration of ore pre-concentration through dense media separation. Successful conclusion of this work could lead to further expansion of the mine, Phase III. The composition of the Board was adjusted after the financing to enhance its technical ability to manage the growth phase of the Company. The Company announced it will change its financial year end to December 31 commencing with the five months ended December 31, 2016 and will provide guidance on its planned targets for the calendar year ended December 31, 2017 early in the New Year. • • At the operational level, the Company delivered its planned targets for tonnes milled, recoveries, head grades and copper and gold production for the fiscal year. The Company has also identified exciting exploration targets within the Ming mine footprint that could allow for further growth if realized. The Company will start the exploration on these near mine targets in 2017. The Company continues to advance and develop other opportunities within Canada, as demonstrated by the acquisition of the remaining 50% interest in the Little Deer and Whalesback Copper Deposit from Thundermin Resources Inc. during the year. The presentation currency of the Company’s financial statements has been changed this year to US dollars (‘US$’). This change reflects the fact that all of our revenues are in US$. With the Company’s operational costs in Canadian dollars the Company is naturally hedged with a weak Canadian$/US$ exchange rate being consistent with weak commodity prices and vice versa. FINANCIAL RESULTS In spite of the challenging market condition the Company achieved reasonable financial results. These include: • • The Company generated revenue of US$30.4 million from the sale of copper concentrate containing gold and silver by-products. An operating loss of US$1.1 million (2015: US$0.9 million profit) before impairment. • Generation of cash of US$4.8 million (2015 US$7.3 million) from operations during the year. • • The consolidated loss after taxation in respect of the year ended July 31, 2016 amounted to US$12.8 million (loss per share of US$0.067) after a provision for impairment of US$11.3 million before tax, versus a loss of US$8.4 million for the year ended July 31, 2015 (loss per share of US$0.058) after a provision for impairment of US$12.1 million before tax. Earnings before interest, taxes, depreciation, amortisation (“EBITDA”) for the year were US$6.1 million (2015 : US$1.8 million). Page 2 RAMBLER METALS AND MINING PLC CHAIRMAN’S STATEMENT FOR THE YEAR ENDED JULY 31, 2016 (CONTINUED) • • The gross assets of the Company amounted to US$87.3 million as at the end of the year. This included Mineral property of US$35.2 million and intangible assets of US$2.2 million which consists of accumulated deferred exploration and evaluation expenditures on the Little Deer Project. The Company’s cash balance at year end was US$8.9 million and cash net of debt, excluding Gold Loan, was US$3.7 million. A provision for impairment of US$11.3 million before tax was recorded against the carrying value of the Ming Copper Gold Mine during fiscal 2016. The provision for impairment was a non-cash revaluation of assets reflecting the current market outlook regarding commodity prices, foreign exchange rates and the current market cost of capital. The provision was calculated using the 2015 Prefeasibility Study model updated for depletion in 2016 and does not consider management’s latest internal modelling for the Phase III expansion program currently being evaluated. Today the future of the Company looks bright with a healthy balance sheet and a funded expansion that will take us toward being a lowest quartile cost copper producer with a 20 year mine life. Significant future organic growth opportunities are embedded in our near mine exploration programs and through our low cost acquisition of good quality undeveloped nearby mineral resources. My thanks go to our employees, officers and directors for their strong support in successfully securing finance during the year to fund the expansion of the operation. I look forward to the continued implementation of this expansion plan in fiscal 2017. B Mills Chairman October 21, 2016 Page 3 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED JULY 31, 2016 REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS A review of the Company’s business and future developments is set out in the Management’s Discussion and Analysis including key performance indicators. PRINCIPAL RISKS AND UNCERTAINTIES An investment in Rambler should be considered speculative due to the nature of its operations and certain other factors. The risk factors which should be taken into account in assessing Rambler’s activities and an investment in securities of Rambler include, but are not limited to, those set out below. Should any one or more of these risks occur, it could have a material adverse effect on the value of securities of Rambler and the business, prospects, assets, financial position or operating results of Rambler, any one of which may have a significant adverse effect on the price or value of any securities of Rambler. The risks noted below do not necessarily comprise all those faced by Rambler and are not intended to be presented in any assumed order of likelihood or magnitude of consequences. Mining risks Mining operations are inherently risky. These operations are subject to all hazards and risks encountered in the exploration, development and production of mineralization in an underground setting. These include but are not limited to formation pressures, seismic activity, rock bursts, fires, power outages, cave-ins, flooding, explosions and other conditions involved in the drilling and removal of material. Any of these events could result in serious damage to the mine and other infrastructure, damage to life or property, environmental damage and possible legal liability. The Company has all necessary permits in place to continue with the current operation. As expansion plans progress, the Company will be required to submit revised Development Plans for approval by the ministry. There can be no guarantee that these revised plans will be agreed to or approved in a timely manner. The Company’s profitability will depend, in part, on the economic returns and actual costs of developing its mining projects, which may differ from the estimates made by the Company. Copper and Gold Price Volatility The Company’s revenues will continue to be derived from the extraction and sale of copper concentrate containing gold and silver by-products. The prices of copper, gold and silver have fluctuated widely, particularly in recent years, and are affected by numerous factors beyond the Company’s control including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative activities and increased global production due to new extraction developments and improved extraction and production methods. In recent years the price of copper has been affected by changes in the worldwide balance of copper supply and demand, largely resulting from economic growth and political conditions in China and other major developing economies. While this demand has resulted in higher prices for copper in past years, the current economic slowdown in China has placed downward pressure on the demand for copper. The effect of these factors on the price of copper and gold cannot be accurately predicted. Current predictions for the price of copper have had an adverse and material impact on the Company’s economic evaluations and on the Company’s results of operations resulting in the Company recording a provision for impairment during the year. This provision for impairment does not consider management’s latest internal modelling which factors in increased production through re-establishing the shaft for hoisting and the integration of ore pre-concentration, Phase III. Foreign currency risk The Company has a small amount of cash resources and certain liabilities including the Gold loan and the advance purchase agreement denominated in US dollars. All other assets and liabilities are denominated in Canadian dollars and GB pounds. Revenue is generated in US dollars while the majority of the expenditure is incurred in Canadian dollars and, to a lesser extent, GB pounds. The Company has a downside exposure to any strengthening of the Canadian Dollar or GB pound as this would increase expenses in US dollar terms. This risk is mitigated by reviewing the holding of cash balances in Canadian Dollars and GB pounds. Any weakening of the Canadian Dollar or GB pound would however result in the reduction of the expenses in US dollar terms. In addition movements in the Canadian dollar and GB pound/US Dollar exchange rates would affect the Consolidated Balance Sheet. Page 4 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED JULY 31, 2016 PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED) Additional Requirement for Capital As mentioned above, management is evaluating further increases in production through re-establishing the shaft for hoisting and the integration of ore pre-concentration. With further engineering and assessment, management will work to finalize internal modelling and economics for this Phase III expansion. Rambler has issued 200,000,000 warrants at an exercise price of US$0.07 (GBP 0.05) which, if exercised will, along with cash flows from increased production, provide the necessary capital for this Phase III expansion. However, the warrants and any additional equity financing may be further dilutive to shareholders and debt financing, if available, may involve restrictions on financing and operating activities. There is no assurance that additional financing will be available on terms acceptable to the Company. Uncertainty in the estimation of mineral resources and mineral reserves The estimation of mineral reserves, mineral resources and related grades has a degree of uncertainty. Until such a time as the mineral reserves and mineral resources are actually mined and processed, the quantity of grades must be considered as estimates only. The mineral reserve estimates of the Company have been determined or reviewed by an independent consultant and is based on assumed metal prices, cut-off grades and costs that may prove to be inaccurate. Any material change in these variables, along with differences in actual metal recoveries when compared to laboratory test results, may affect the economic outcome of current and future projects. ON BEHALF OF THE BOARD: N P Williams President and CEO Director October 21, 2016 Page 5 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 This MD&A, including appendices, is intended to help the reader understand Rambler Metals and Mining plc (‘the parent company’) and its subsidiaries (the ‘Company’ or ‘Rambler’), our operations and our present business environment. It has been prepared as of October 21, 2016 and covers the results of operations for the quarter and year ended July 31, 2016. This discussion should be read in conjunction with the audited Financial Statements for the year ended July 31, 2016 and notes thereto. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and their interpretations adopted by the International Accounting Standards Board (“IASB”), as adopted by the European Union and with IFRS and their interpretations adopted by the IASB. The Company’s presentation currency has been changed to US dollars (US$) and the financial information is in US$ unless otherwise stated. These statements together with the following MD&A are intended to provide investors with a reasonable basis for assessing the potential future performance. See Forward Looking Statement disclosure in Appendix 6. OVERVIEW The Company is transforming the Ming Copper-Gold Mine (‘Ming mine’) with a fully funded expansion. Its principal activity is the development, mining and exploration of the Ming mine in Newfoundland and Labrador (see map referenced in Appendix 1) with a longer term view of continued exploration and development of other properties in its portfolio which are all located in Canada. The Company is looking forward to: 1. Continuing the Phase II optimisation strategy, as described below, with funding now secured. 2. Kick starting further engineering studies aimed at boosting production beyond the Phase II - 1,250 metric tonnes per day (‘mtpd’) strategy. Detailed engineering and review to include ore pre- concentration (Dense Media Separation – “DMS”), shaft rehabilitation and improving gold recovery. 3. Maintaining its focus on reducing overall unit costs at its operation through a stepped increase in production. 4. Increasing available resources and reserves through further exploration both within the Ming mine and current land holdings. The Company’s new directors and management believe that these priorities provide a solid foundation for Rambler, and its shareholders, as it continues working towards building a successful mid-tier mining company. The parent Company’s Ordinary Shares trade on the London AIM market under the symbol “RMM” and the TSX Venture Exchange under the symbol “RAB”. Phase II optimisation strategy The results for the 2016 fiscal year incorporates the first year of the Phase II optimisation strategy incorporating the Lower Footwall Zone (“LFZ”) into the production stream. This strategy is based on the transformation of the current Phase I, high grade 650 mtpd operation, into a fully optimised Phase II at 1,250 mtpd with a mine life of more than 20 years. Coupled with the financing completed during the year, production is expected to continue to increase with the blending of LFZ ore with high grade massive sulphide (‘MMS’) ore. Fiscal 2016 was the first step towards fully optimising all available infrastructure at the mine and mill sites. With funding secured and in hand the LFZ mine development will be accelerated where possible with a goal of reaching full production by mid calendar 2017. The first production milestone was achieved during the fiscal year with daily mill throughput now in excess of 850 mtpd. The Company is reviewing opportunities to minimize the additional capital required to maintain 1,250 mtpd through the existing grinding circuit at the mill. The 21 year projected mine life did not consider shaft rehabilitation, ore pre-concentration or any further success with the ongoing exploration program. Page 6 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 HIGHLIGHTS FOR THE FOURTH QUARTER AND THE YEAR ENDED JULY 31, 2016  Production of 69,874 dmt (Q3/16: 56,695 dmt, Q4/15: 59,373 dmt) for the quarter with a total of 241,080 dmt for the year (2015: 215,535 dmt) in line with fiscal guidance with copper concentrate grade of 27% (Q3/16: 27%, Q4/15: 27%).  Phase II optimisation strategy continued with LFZ ore blended with ongoing production from the high grade MMS.  Revenue for the year was US$30.4 million for the year (2015: US$34.6 million) and for the quarter, $7.9 million (Q3/16: US$8 million, Q4/15 US$7.1 million).  Average prices for the year were US$2.20 per pound of copper, US$1,179 per ounce gold and US$15.66 per ounce silver.  Operating loss for the year was US$1.1 million before non-cash impairment of US11.3 million (2015: US$11.2 million) and for the quarter US$0.6 million before impairment (Q3/16: profit US$0.1 million, Q4/15: loss US$11.8 million). Earnings before interest, taxes, depreciation, amortisation (‘EBITDA’) for the year were US$6.1 million (2015: US$1.8 million) and for the quarter of US$0.055 million (Q3/16: US$3.3 million, Q4/15 US$(0.7 million)).  Net direct cash costs net of by-product credits (‘C1 costs’) for the year were US$1.72 per pound of saleable copper (2015: US$2.11) and for the quarter US$1.71 (Q3/16: US$1.70, Q4/15: US$2.10).  Cash flows generated from operating activities for the year were US$4.7 million (2015: US$7.3 million) and for the quarter were US$2.3 million (Q3/16: US$2.6 million, Q4/15: US$1.0 million). SUBSEQUENT EVENTS On August 22, 2016 the Company issued 9,405,000 options to employees at an exercise price of US$0.06 (CAD 0.0781). The options were issued to advance the interests of the Company by providing the senior officers and employees a performance incentive for continued and improved service enhancing their contribution to increased shareholder return by encouraging share ownership. On August 29, 2016 and September 8, 2016 the Company sold 1,176,500 and 190,000 common shares respectively of Marathon Gold Corporation thereby divesting approximately 50% of its equity stake for gross proceeds of US$0.8 million. Page 7 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 FINANCIAL RESULTS FOR THE YEAR ENDED JULY 31, 2016 Revenue  A total of 17,412 dmt (2015 – 17,662 dmt) of concentrate was provisionally invoiced during the year containing 4,508 (2015 - 4,622) tonnes of saleable copper metal, 7,129 (2015 - 4,926) and 37,701 (2015 - 23,744) ounces of saleable gold and silver respectively at an average price of US$2.20 (2015 – US$2.87) per pound copper, US$1,179 (2015 - US$1,207) per ounce gold and US$15.66 (2015 - US$16.81) per ounce silver, generating revenue of US$30.4 million (2015 – US$34.6 million). The reduction in revenue mainly reflects lower saleable metal sold as a result of lower head grades and lower average prices than the previous year. Costs  Net cash direct costs per pound of copper net of by-product credits (‘C1’) for the year were US$1.72 (2015 - US$2.10) and for the fourth quarter US$1.71 (Q3/16: US$1.70, Q4/15: US$2.10). Saleable copper in the year was 9.9 million pounds (2015 – 10.2 million pounds) and in the fourth quarter was 2.4 million pounds (Q3/16: 2.6 million, Q4/15 2.0 million). The cost reduced from Q4/15 due to the increased copper production and a weakening of the Canadian dollar against the US dollar.  A summary of the Company’s net cash direct costs (C1) and fully allocated costs (C3) net of by-product credits per pound of saleable copper together with the average sales price of copper for the past four quarters are shown below. The decrease in costs between Q2/16 and Q3/16 was as a result of higher copper production and increased gold price. C1 and C3 costs per pound of saleable copper $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $- C1 cost C3 cost Avg Cu price per pound 6 1 / 1 Q 6 1 / 2 Q 6 1 / 3 Q 6 1 / 4 Q 5 1 0 2 l a c s i F 6 1 0 2 l a c s i F The Company has included non-GAAP performance measures: net cash direct costs per pound of saleable copper net of by-product credits (C1 costs) and fully allocated costs (net of by-product credits)(C3 costs) per pound of saleable copper, throughout this document. C3 costs include interest charges which are shown below the operating profit line in the income statement. This is a common performance measure in the mining industry but does not have any standardized meaning. Refer to Appendix 4 for a reconciliation of these measures to reported production expenses. Page 8 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 FINANCIAL RESULTS FOR THE YEAR ENDED JULY 31, 2016 (CONTINUED) Loss  The net loss before tax for the year was US$15.2 million (US$3.9 million before impairment) compared with a loss of US$13.6 million (US$1.5 million before impairment) for the year ended July 31, 2015. The net loss for the quarter ended July 31, 2016 was US$12.8 million (US$15.4 million before tax) or US$0.067 per share which compares to a profit of US$0.9 million for Q3/16 and a loss of US$5.9 million (US$10.4 million before tax) for Q4/15.  Earnings before interest, taxes, depreciation, amortisation (“EBITDA”) for the year were US$6.1 million (2015 : US$1.8 million). Impairment  As part of the annual impairment review of asset carrying values a provision of US$11.3 million was recorded in relation to the Ming Mine. Following the publication of the Company’s Prefeasibility Study (‘PFS’), extraction of ore from the Ming mine’s Lower Footwall Zone has been included in the Mine plan adopted by management for fiscal 2016. During the year, the Company carried out an impairment review of the related cash generating unit (“CGU”). The review determined that the mine remains commercially viable however as a result of the current market outlook regarding commodity prices, foreign exchange rates and assuming the current pre-tax real discount rate of 10.71% the recoverability of the entire carrying value of the mineral property is questionable. As a result a provision for impairment was recognised in the consolidated income statement reflecting the non-cash revaluation of assets.  The impairment review was based on the original PFS model adjusted for 2016 depletion and does not reflect management’s latest internal modelling which factors in increased production through re- establishing the shaft for hoisting and the integration of ore pre-concentration, Phase III. Management is confident that the new model will deliver significant value.  The provision for impairment is sensitive in particular to production volumes, commodity prices, discount rate and foreign exchange rates. Production volumes used in the mine plan are based on proven and probable mineral reserves only and do not consider any value for the potential conversion of any remaining measured or indicated resources. The impairment loss incurred in the year would be reversed on an assumption that long term copper prices of US$2.71 per pound included in the mine plan increased by approximately 4% whereas a 4% reduction would result in an additional provision for impairment of US$21.9 million. The provision for impairment would be reversed on an assumption that the US dollar included in the model at an exchange rate of USD/CAD of 0.81 strengthened against the Canadian dollar by approximately 3.5% whereas a 3.5% reduction would result in an additional provision for impairment of US$21.9 million. A fall in the discount rate of approximately 2.15% to 8.56% would reverse the impairment charge whereas an increase of approximately 2.15% to 12.86% would result in an additional provision of US$20.1 million. The conditions used to calculate the provision for impairment are reflective of the state of current market conditions. Page 9 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 FINANCIAL RESULTS FOR THE YEAR ENDED JULY 31, 2016 (Continued) Cash flow and cash resources  Cash flows generated from operating activities were US$4.8 million compared with US$7.3 million in the previous fiscal year. Cash flows generated from operating activities were US$2.4 million in Q4/16 compared to US$2.6 million in Q3/16 and US$1.0 million in Q4/15. The decrease in the cash generated relates to the operating loss and changes in working capital. The cash balance at July 31, 2016 was US$8.9 million. Financing and Investment  During the year a repayment of US$2.3 million (project to date $15.8 million) was made on the Company’s Gold Loan from the delivery of 1,935 payable ounces of gold (project to date 10,996 ounces have been delivered).  Net debt excluding the Gold loan was as follows: Cash Finance leases Advance purchase agreement Net cash (debt) Q4/16 US$’000 8,929 (3,195) (1,980) 3,756 Q3/16 US$’000 473 (3,202) (3,118) (5,847) Q4/15 US$’000 3,389 (3,566) (1,879) (2,056) OPERATIONAL SUMMARY Ore and Concentrate Production Summary for Fiscal 2016 PRODUCTION Q1 2016 Q2 2016 Q3 2016 Q4 2016 Year end F2016 Dry Tonnes Milled Copper Recovery (%) Gold Recovery (%) Silver Recovery (%) Copper Head Grade (%) Gold Head Grade (g/t) Silver Head Grade (g/t) 58,053 56,458 56,695 69,874 241,080 95.3 70.6 76.4 2.42 1.45 11.77 96.4 75.3 75.4 2.07 1.40 10.20 96.3 67.9 70.7 2.22 1.62 10.34 94.7 62.6 65.8 1.83 1.16 7.97 95.6 68.7 71.8 2.12 1.40 9.97 F2016 Guidance 235,000 - 250,000 94 – 96 65 – 70 65 – 75 2.0 - 2.5 1.0 – 2.0 6.0 – 10.0 Page 10 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 OPERATIONAL SUMMARY (continued) CONCENTRATE (Delivered to Warehouse) Copper (%) Gold (g/t) Silver (g/t) Dry Tonnes Produced Copper Metal (tonnes) Gold (ounces) Silver (ounces) Q1 2016 26.57 12.90 101.75 4,788 1,272 1,986 15,664 Q2 2016 26.49 16.35 110.28 3,621 960 1,889 12,860 Q3 2016 26.98 13.98 92.05 4,530 1,222 2,037 13,407 Q4 2016 Yearend F2016 F2016 Guidance 27.41 12.39 90.10 4,108 1,126 1,637 11,899 26.89 13.82 98.09 17,047 4,580 7,549 53,830 27 - 29 6.0 – 8.0 55 - 75 17,000 - 21,000 4,500 - 6,000 5,500 - 6,500 42,000 - 57,000 Rambler met or exceeded its 2016 fiscal year production guidance. Targets were achieved for tonnes milled, metal recovery, grades and copper and gold production. Gold ounces exceeded guidance by 16%, a record for gold in concentrate production, resulting from adjustments made to the floatation circuit in the first half of the year. During the fourth quarter of the year more focus was place on increasing mill throughput. Once throughput is fully optimized the team will work towards re-establishing the high gold recoveries. Copper grades of 2.12% and gold grades of 1.40 g/t were in line with guidance and decreased in the fourth quarter with increased production from the LFZ. Total mill throughput for the year was 241,080 dry metric tonnes, a 12% increase over the 216,000 tonnes milled in fiscal 2015. Ore and Concentrate Production Quarterly results comparison PRODUCTION Q4/15 (May, Jun, Jul) Q4/16 (May, Jun, Jul) Q3/16 (Feb, Mar, Apr) Q4/16 (May, Jun, Jul) Dry Tonnes Milled 59,373 69,874 18% 56,695 69,874 23% Copper Recovery (%) Gold Recovery (%) Silver Recovery (%) Copper Head Grade (%) Gold Head Grade (g/t) Silver Head Grade (g/t) 96.6 68.7 72.8 1.93 1.22 8.75 94.7% 62.6% 65.8% -2% -9% -10% 1.83 1.16 7.97 -5% -5% -9% 96.3% 67.9% 70.7% 2.22 1.62 10.34 94.7% 62.6% 65.8% -2% -8% -7% 1.83 1.16 7.97 -17% -28% -23% Page 11 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 OPERATIONAL SUMMARY (continued) • Production of 4,108 tonnes of copper concentrate representing a 14% increase over Q4 2015 and a 9% decrease from Q3 2016. • Dry tonnes milled of 69,874 tonnes remaining, an increase of 18% on Q4 2015 and representing a 23% increase from Q3 2016 driven by an increase in Lower Footwall Zone ore availability. This resulted in the production of: • 1,126 tonnes of Copper (4,580 tonnes for the year) • 1,637 ounces of Gold (7,549 ounces for the year) • 11,899 ounces of Silver (53,830 ounces for the year) • Head grades of copper averaged 1.83% for the quarter and 2.12% for the year; gold at 1.16 g/t (‘grammes per tonne’) for the quarter and 1.4 g/t for the year; silver at 7.97 g/t for the quarter and 9.97 g/t for the year. • Concentrate grade for Copper 27.41%, Gold 12.39 g/t and Silver 90.10 g/t representing a 3 and a 2 percent increase in copper concentrate grade over Q4/2015 and Q3/2016 respectively. Gold and Silver in concentrate both showed decreases over Q4 2015 and Q3 2016. OUTLOOK Management continues to pursue the following objectives:  With funding secured and in hand, continue transitioning from the Phase I to Phase II by blending increasing amounts of LFZ ore with plans to reach 1,250 mtpd by mid Fiscal 2017.  Further evaluate ore pre-concentration (DMS); engineer a potential shaft rehabilitation; and improve gold recovery at the Nugget Pond Mill. All potentially providing further upside opportunities with the goal to further reduce unit costs, Phase III.  Continuing to advance development headings into new high grade zones to allow for further exploration both up-dip and down-dip to increase mine resource and reserves.  Further define the mineral potential of untested areas of the LFZ through an aggressive infill diamond drilling program currently underway. Continue assessing regional gold projects, like the former producing Hammerdown Gold mine, with the goal of adding a second source of revenue outside of the Ming Mine. Nugget Pond’s gold processing circuit is currently idle but could potentially be operated in conjunction with the copper concentrator. Page 12 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 FINANCIAL REVIEW Fiscal 2016 (US$000’s) 30,378 Commentary Revenue of US$30.3 million was generated through the sale of 17,413 dmt of copper concentrate containing 4,508 tonnes of accountable copper metal and 7,129 ounces of accountable gold. This compared with revenue of US$34.6 million in the prior year generated through the sale of 17,052 dmt of copper concentrate containing 4,493 tonnes of saleable copper metal and 4,653 ounces of saleable gold. The reduction in revenue mainly reflects lower average prices. Comparatives Fiscal 2015 (US$000’s) B/ (W)* 34,583 (12)% 28,508 Production costs relate to the processing and mining costs associated with the Company’s Ming Mine and include processing costs of US$5.0 million (2015: US$5.4 million), mining costs US$16.6 million (2015: US$18.4 million) and depreciation and amortisation of US$6.9 million (2015: US$6.2 million). The cost of production of pounds of copper increased during the year due to lower head grades compared to the previous year. 30,111 5% 2,899 General and administrative expenses were lower than the previous year by US$603,000. Employment costs reduced by US$313,000. Legal and professional costs reduced by US$70,000 reflecting savings in corporate legal costs, travel and investor relation costs reduced by $132,000 and security and general expenses reduced by $59,000. 3,502 17% 11,268 Provision for impairment represents the provision for impairment on the Ming Mine of US$11.3 million (2015: US$11.5 million) and a provision for impairment of US$ nil (2015: US$0.6 million) on available for sale investments. The provision for impairment on the Ming Mine is mainly as a result of the current market outlook regarding commodity prices, foreign exchange rates and the current market cost of capital. 539 Gain/(loss on derivative financial instruments. The Company realised a gain on derivative financial assets of $591,000, being the difference in the commodity prices at time of provisional invoicing, and actual commodity prices realised on the fixed portion of the shipment. An unrealised loss of $52,000 resulted at year end being the difference in the commodity prices at time of provisional invoicing and anticipated commodity prices upon final settlement following the future shipment of concentrates in the Company’s warehouse at year end. 12,100 7% (1,812) 130% (237) Foreign exchange losses arising on the Gold Loan reduced in the year as a result of the Canadian dollar against the US dollar during the year. (3,604) 93% 2,422 Income tax credit/(charge) The income tax charge is the deferred tax charge arising from the recognition of losses offset by an overprovision made in 2015. 5,207 (53)% Mineral property The Company incurred costs of US$4.1 million in the year which included labour costs of US$1.5 million and underground development costs of US$2.1 million and an adjustment of US$0.5 to the reclamation and closure provision. In 2015 the Company incurred costs of US$4.5 million in the year including labour of US$2.5 million and underground development costs of US$2.2 million offset by an adjustment of $0.2 million to the reclamation and closure provision. 4,050 4,493 10% 5,122 Capital spending on property, plant and equipment increased during the year including US$3.1 million spent on underground equipment and US$0.5 million on surface and general plant and equipment. In addition US$1.5 million was spent on assets under construction including the construction of a building to house the crusher, ventilation upgrades and mine rescue equipment. 4,494 (14)% 1,903 Capital spending on exploration and evaluation relates mainly to the acquisition of 50% of the Little Deer Copper Deposit in the Thundermin amalgamation. 3,460 45% *B / (W) = Better / (Worse) Page 13 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 SUMMARY OF QUARTERLY RESULTS The quarterly results for the Company for the last eight fiscal quarters are set out in the following table. Quarterly Results (All amounts in 000s of US Dollars, except Loss per share figures) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Fiscal 2016 Revenue (Loss)/profit before impairment and tax Net (loss) income (Loss)/earnings per Share (Basic & Diluted) Fully allocated cost net of by-products (C3) per pound of saleable copper Fiscal 2015 Revenue (Loss)/profit before impairment and tax Net Income (Loss)/earnings per Share (Basic & Diluted) Fully allocated cost net of by-products (C3) per pound of saleable copper 7,890 (4,120) (12,827) (0.067) 7,976 1,241 859 0.002 6,009 (1,501) (1,115) (0.003) 8,503 420 277 0.001 2.71 2.55 2.78 2.28 7,103 1,708 (5,927) (0.041) 7,339 1,532 1,056 0.007 9,040 (5,119) (3,730) (0.026) 11,101 420 249 0.002 2.76 2.85 3.36 2.60 Since 2012 when commercial production commenced at the Ming Mine the Company’s results have been, and are expected to continue to be, influenced by the operational results of the Mine. Financial results are impacted by the levels of copper concentrate production, the costs associated with that production and the selling prices of the concentrate. The prices for the copper, gold and silver contained in the concentrate are determined using prevailing international prices in US Dollars whereas the majority of the mine costs are in Canadian Dollars. Volatility of revenue and earnings over the past two years is due to the combined effect of changes in volumes and fluctuations in metal prices and the fluctuation of the US Dollar exchange rate. Page 14 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION Historically the Company has been successful in accessing the equity and debt markets to finance the initial acquisition of the Ming Mine site, a US$20 million gold loan and a US$8 million credit facility to finance the construction of the mine and milling facilities and drawing US$3 million of an advance purchase facility. In June 2016 the Company accessed approximately US$15 million in equity finance to improve working capital and to provide funds for the planned increase in production from the mine and improved capacity at the mill. In future, the Company plans to fund operational requirements through internally generated cash flow, proceeds from the exercise of warrants, debt offerings and, if necessary, additional equity financing. The Company continually reviews operational results, expenditures and additional financial opportunities in order to ensure adequate liquidity to support its growth strategy while maintaining or increasing production levels at the Ming Mine. However, there is no guarantee that the Company will have access to future capital or the ability to generate positive cash flows. Cash flows utilised in investing activities amounted to US$7.6 million for the year (2015: US$9.9 million). Cash of US$3.6 million (2015: US$4.7 million) was spent on the Company’s Mineral Property, US$2.9 million (2015: US$2.4 million) was spent on property, plant and equipment, US$0.5 million (2015: US$3.1 million) on exploration at the Ming mine. The Company acquired Thundermin Resources Inc. by way of an amalgamation with 1948565 Ontario Inc. for the issue of 8,757,838 ordinary shares and net cash of US$0.07 million. Cash flows generated from financing activities during the period amounted to US$9.1 million (2015: utilised US$2.7 million) and included repayments of the gold loan of US$2.3 million (2015: US$1.9 million) and finance lease repayments of US$2.6 million (2015: US$2.7 million) offset by a receipt of US$1 million (2015: US$1.9 million) from an advanced purchase facility and funds received, net of expenses, on issue of share capital of US$14.3 million. The Company is required to hold Letters of Credit in favour of the Government of Newfoundland and Labrador in respect of the reclamation and closure liability at the existing Nugget Pond Mill and Ming mine. At period end the Company holds bearer deposit notes totalling US$3.3 million (2015: US$2.5million) Sales of copper concentrate are in US dollars and the majority of the Company’s expenses are incurred in Canadian dollars. The Company’s principal exchange rate risk relates to movements between the Canadian and US dollar. The Gold Loan is repayable from future sales of gold mitigating the exchange risk. Management will closely monitor exchange fluctuation and consider the use of forward exchange contracts as required. Interest rates on the capital leases and short term borrowings are fixed, eliminating interest rate risk. Financial Instruments The Company’s principal financial assets comprise: cash and cash equivalents, restricted cash, available for sale investments, derivative financial instruments and trade and other receivables. The Company’s financial liabilities comprise trade payables; other payables; and interest bearing loans and borrowings. All of the Company’s financial liabilities are measured at amortised cost. The Board of Directors determines, as required, the degree to which it is appropriate to use financial instruments and hedging techniques to mitigate risks. The main risks for which such instruments may be appropriate are foreign currency risk, liquidity risk, credit risk, interest rate risk and commodity price risk each of which is discussed in note 26 of the financial statements for the year ended July 31, 2016. Page 15 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION (continued) COMMITMENTS AND LOANS Gold Loan In March 2010, the Company entered into an agreement (“Gold Loan”) with Sandstorm to sell a portion of the life-of- mine gold production from its Ming Mine. Under the terms of the agreement Sandstorm made staged upfront cash payments for the gold to the Company totalling US$20 million. For this, in each production year following the first year of production, until 175,000 ounces of payable gold has been produced, the Company has agreed to sell a percentage equal to 25% x (85% divided by the actual percentage of metallurgical recovery of gold realised in the immediately preceding production year) provided that, if the payable gold production in any production year after the third production year is less than 15,000 ounces, then in each such production year, Sandstorm payable gold shall not be less than 25% of the payable gold. In each production year following the first year of production, after 175,000 ounces of payable gold has been produced, the Company has agreed to sell a percentage equal to 12% x (85% divided by the actual percentage of metallurgical recovery of gold realised in the immediately preceding production year) provided that, if the payable gold production in any production year after the third production year is less than 15,000 ounces, then in each such production year, Sandstorm payable gold shall not be less than 12% of the payable gold for the remainder of the period ending 40 years after the date of the agreement. After the expiry of the 40 year term, the agreement is renewable in 10 year terms at the option of Sandstorm. The Gold Loan is accounted for as a financial liability carried at amortised cost. In determining the effective interest rate implicit in the cash flows arising from the loan the cash flows are forecast based on management’s best estimates of the time of delivery of payable gold, the total amount of gold expected to be produced over the mine life and the timing of that production. Total interest of US$2.6 million (2015: US$3.2 million reversed) was charged during the period. The Gold Loan is secured by a fixed and floating charge over the assets of the Company. Advance Purchase Agreement In July 2015 the Company entered into a purchase agreement with Transamine Trading S.A. (“Transamine”) wherein Rambler has extended its off-take agreement with Transamine with respect to concentrate from the Ming Copper- Gold Mine until December 31, 2021. Pursuant to the terms of the Purchase Agreement, Transamine has agreed to purchase in advance, at Rambler’s option, up to US$5 million of concentrate (the “Advance Purchase Payments”). The Advance Purchase Payments accrue interest at a rate of three month LIBOR plus 3.5% per annum and will be secured by a second charge against the assets of Rambler’s operating subsidiary and guaranteed by the Company. The Advance Purchase Payments were used for working capital requirements along with the development and construction of Rambler’s Lower Footwall Zone optimisation plan (Phase II) at the Ming Mine. The Company drew down US$3 million of Advance Purchase Payments and further advances are no longer available under the agreement. At July 31, 2016 the balance was US$1.98 ,million which, following an addendum to the Purchase Agreement which saw a lump sum of US$1 million repaid on June 17,2016. The remainder is repayable by twelve monthly instalments of US$176,005 plus interest at 3 month LIBOR plus 7.5%. The repayment by instalments commenced July 15, 2016. The advance purchase payments of US$3 million have been accounted for as a financial liability carried at amortised cost. Page 16 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 COMMITMENTS AND LOANS (CONTINUED) Loan and lease balances At July 31, 2016, interest bearing loans and borrowings comprised of finance lease commitments of US$3,195,000. The Company entered into finance lease commitments of US$2,256,000 to finance the acquisition of underground mobile equipment during the year. Page 17 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 1 – LOCATION MAP Page 18 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 2 - SELECTED FINANCIAL INFORMATION & REVIEW OF OVERALL PERFORMANCE Financial Highlights (All amounts in 000s of US Dollars, unless otherwise stated) Year ended July 31, 2016 2015 2014 Gold sales – gold doré (Ounces) Average price (per ounce) - N/A - N/A Concentrate sales post commercial production (dmt) 17,048 17,662 Average provisional price ($ per tonne Cu, Ag & Au concentrate) Average revenue per pound of Cu ($) Revenue Production Expenses Exploration Expenditure Administrative expenses Impairment charge Net (loss) income Cash Flow generated from operating activities Cash Flow used in investing activities Cash Flow from (used in) financing activities Net increase (decrease) in cash Cash and cash equivalents at end of period Total Assets Total Liabilities Working Capital Weighted average number of shares outstanding (000s) Earnings (loss) per share ($US) 1,772 2.20 30,378 (28,508) (26) (2,899) (11,268) (12,806) 4,808 (7,702) 9,138 6,244 8,929 87,255 (25,569) 2,412 191,132 (0.067) 2,013 2.87 34,583 (30,111) (32) (3,502) (12,100) (8,352) 7,325 (9,939) (2,725) (5,339) 3,389 84,553 (25,370) (4,288) 144,168 (0.058) 293 1,447 25,806 2,254 3.19 57,863 (37,015) (87) (4,129) - 8,398 23,062 (9,247) (10,133) 3,682 8,755 109,631 (29,367) 6,022 143,863 0.058 Page 19 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 3 - FINANCIAL REVIEW FOR THE QUARTER ENDED JULY 31, 2016 Q4/16 Results (US$000’s) Commentary 7,890 5,643 804 Revenue of US$7.9 million in Q4/16 was generated through the sale of 4,169 dmt of copper concentrate containing 1,103 tonnes of saleable copper metal, 1,513 ounces of saleable gold and 7,862 ounces of saleable silver compared with US$8.0 million from the sale of 4,595 dmt of copper concentrate in Q3/16. The small reduction in revenue reflects lower average copper prices during the quarter on lower saleable copper metal. Revenue in Q4/15 was generated through the sale of 3,598 dmt of copper concentrate containing 931 tonnes of saleable copper metal and 1,392 ounces of saleable gold. Production costs relate to the processing and mining costs associated with the Company’s Ming Mine production and include processing and mining costs of US$1.3 million (Q3/16: US$1.4 million) and US$4.3million (Q3/16: US$4.1 million) respectively. Processing and mining costs in Q4/15 were of $1.4 million and $3.6 million respectively. General and administrative expenses were higher than the previous quarter by US$131,000 mainly due to an increase in staff costs of US$115,000 relating to the payment of executive bonuses, an increase of US$55,000 in promotional and travel offset by a fall in legal and professional costs of US$92,000 and the receipt of a royalty payment of US$27,000. In comparison to Q4/15 administrative expenses increased by US$41,000. Staff costs increased by $77,000, promotional and travel costs increased by US$26,000 and legal and professional costs decreased by $92,000. 11,268 Provision for impairment represents the provision for impairment on the Ming Mine of US$11.3 million. The provision for impairment on the Ming Mine is mainly as a result of the current market outlook regarding commodity prices, foreign exchange rates and the current market cost of capital. The provision does not reflect management’s current modelling. Gain/(loss) on derivative financial instruments. During the quarter the net unrealised fair value gain adjustment recognized was US$52,000 being the difference in the commodity prices at time of provisional invoicing and anticipated commodity prices upon final settlement offset by a realised loss of US$740,000 on the final settlement of the Company’s thirteenth concentrate shipment. During Q3/16 the net unrealised fair value gain adjustment recognized was $116,000 being the difference in the commodity prices at time of provisional invoicing and anticipated commodity prices upon final settlement. (792) During Q4/15 the net unrealised fair value gain adjustment recognized was $4,000 being the difference in the commodity prices at time of provisional invoicing and anticipated commodity prices upon final settlement offset by a realised loss of US$370,000 on the final settlement of the Company’s tenth concentrate shipment. Comparatives Q3/16 B/ (W)* Q4/15 B/ (W) 7,976 (1)% 7,103 11% 5,476 (3)% 5,086 (11)% 673 (19)% 763 (5)% - N/A 12,100 7% 116 (783)% (366) (116)% (598) Foreign exchange differences arising on the Gold Loan resulted in a loss in Q4/16 as a result of the weakening of the Canadian dollar against the US dollar during the quarter. 1,364 (144)% (1,595) 63% 2,561 Income tax credit/(expense). A deferred tax credit of US$2,561,000 was recognised on the loss for the quarter. This compares with a charge of US$381,000 in Q3/16 and a credit of US$4,465,000 for Q4/15. (381) 772% 4,465 (43)% Page 20 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 3 - FINANCIAL REVIEW FOR THE QUARTER ENDED JULY 31, 2016 (continued) Q4/16 Results (US$000’s) Commentary Comparatives Q3/16 B/ (W)* Q4/15 B/ (W) 921 Mineral property The Company incurred costs of US$1.0 million in the quarter offset by US$0.6 million of cost reallocated to operating expenditure in the quarter. The cost includes labour costs of $0.5 million and underground development costs of $0.5 million and an increase in the reclamation and closure provision of $0.5 million. 1,192 23% 824 (12)% 1,329 Capital spending on property, plant and equipment reduced by US$1.0 million during the quarter compared to Q3/16 and included the purchase of an additional haul truck. 2,327 43% 1,043 (27)% 54 Capital spending on exploration and evaluation costs in Q4/16 mainly relates to the Pre-Feasibility Study on the Ming mine’s Lower Footwall Zone and further exploration drilling the 1806 and 1807 zones. 103 48% 539 90% *B / (W) = Better / (Worse) Page 21 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 4 – NON-GAAP FINANCIAL MEASURES The Company has included non-GAAP performance measures throughout this document. These include: net direct cash cost (C1) per pound of saleable copper, fully allocated costs (C3) per pound of saleable copper and earnings before interest, taxes, depreciation, amortisation (‘EBITDA’). C1 and C3 costs per pound of saleable copper are common performance measures in the mining industry but do not have any standardized meaning. The guidance provided by the World Gold Council for calculating all-in costs was followed; however, the Company adjusts for non-cash items and includes financing fees within the total cash costs. Total cash operating costs include mine site operating costs (mining, processing and refining, in-mine drilling expenditures, administration, and production taxes), but are exclusive of other costs (non-cash inventory valuation adjustments, reclamation, capital, long-term development and exploration). These measures, along with sales, are considered to be key indicators of the Company’s ability to generate operating earnings and free cash flows from its mining operations. The Company believes that certain investors use this information to evaluate the Company’s performance and ability to generate cash flows. These should not be considered in isolation as a substitute for measures of performance prepared in accordance with IFRS and are not necessarily indicative of production costs presented under IFRS. The following tables provide reconciliation of said costs to the Company’s financial statements for the year ended July 31, 2016: Cash Operating Cost All amounts in 000s of US Dollars except pounds of saleable copper Three months ended Year to Jul 31, Jul 31, 2016 Apr 30, 2016 Jul 31, 2015 2016 2015 Production Costs per Financial Statements Cash Production Costs On-site general administration costs By-product credits Net direct cash costs (C1) Pounds of saleable copper C1 cost per pound of saleable copper $ $ $ $ $ $ 5,195 $ 5,195 $ 528 $ 5,665 $ 5,665 $ 428 $ 5,086 $ 21,701 $ 23,928 5,086 $ 21,701 $ 23,928 479 $ 1,811 $ 2,049 (1,577) $ (1,603) $ (1,260) $ (6,450) $ (4,424) 4,146 $ 4,490 $ 4,305 $ 17,062 $ 21,553 2,431 2,638 2,051 9,939 10,190 1.71 $ 1.70 $ 2.10 $ 1.72 $ 2.11 Page 22 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 4 - NON-GAAP FINANCIAL MEASURES (continued) C3 per Pound of Saleable Copper All amounts in 000s of US Dollars except pounds of saleable copper Three months ended Year to Jul 31, Jul 31, 2016 Apr 30, 2016 Jul 31, 2015 2016 2015 Net direct cash costs (see above) $ 4,146 $ 4,490 $ 4,305 $ 17,062 $ 21,553 Depreciation and amortisation 2,071 1,733 Profit on sale of property, plant and equipment Corporate Cash Expense Cash Interest Expense Fully allocated costs (C3 cost) Pounds of saleable copper C3 cost per pound of saleable copper - 273 103 - 226 282 1,418 (419) 271 76 6,972 (105) 1,015 544 6,680 (419) 1,302 383 $ $ 6,593 $ 6,731 $ 5,651 $ 25,488 $ 29,499 2,431 2,638 2,051 9,939 10,190 2.71 $ 2.55 $ 2.76 $ 2.56 $ 2.89 Page 23 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 4 - NON-GAAP FINANCIAL MEASURES (continued) Earnings before interest, tax and depreciation All amounts in 000s of US Dollars Three months ended Year to Jul 31, Jul 31, 2016 Apr 30, 2016 Jul 31, 2015 2016 2015 (Loss)/profit after tax per Financial statements $ (12,827) $ 859 $ (5,927) $ (12,806) $ (8,352) Taxation Net interest Depreciation and amortisation Gain on disposal of property, plant and equipment Provision for impairment EBITDA (2,561) 2,104 2,071 - 11,268 381 346 1,733 - - (4,465) (3,418) 1,419 (419) 12,100 (2,422) 3,207 6,972 (105) (5,207) (3,019) 6,680 (419) 11,268 12,100 $ 55 $ 3,319 $ (710) $ 6,114 $ 1,783 Page 24 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 5 - CRITICAL ACCOUNTING POLICIES AND ESTIMATES The details of the Company’s accounting policies are presented in accordance with International Financial Reporting Standards as set out in Note 2 to the financial statements. The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The following estimates are considered by management to be the most critical for investors to understand some of the processes and reasoning that go into the preparation of the Company’s financial statements, providing some insight also to uncertainties that could impact the Company’s financial results. Going Concern Historically the Company has been successful in accessing the equity and debt markets to finance the initial acquisition of the Ming Mine site, a US$20 million gold loan and a US$8 million credit facility to finance the construction of the mine and milling facilities and drawing US$3 million of an advance purchase facility. In June 2016 the Company accessed approximately US$15 million in equity finance to improve working capital and to provide funds for the planned increase in production from the mine and improved capacity at the mill. In future, the Company plans to fund operational requirements through internally generated cash flow, proceeds from the exercise of warrants, debt offerings and, if necessary, additional equity financing. The Company continually reviews operational results, expenditures and additional financial opportunities in order to ensure adequate liquidity to support its growth strategy while maintaining or increasing production levels at the Ming Mine. However, there is no guarantee that the Company will have access to future capital or the ability to generate positive cash flows. Based on the above management concludes the Compay has adequate resources to continue in operational existence for the foreseeable future. Thus it continues to adopt the going concern basis of accounting in preparing the financial statements. Share-based payments The Company calculates the cost of share based payments using the Black-Scholes model. Inputs into the model in respect of the expected option/warrant life and the volatility are subject to management estimates and any changes to these estimates may have a significant effect on the cost. The assumptions used in calculating the cost of share based payments are explained in notes 6 and 21 of the financial statements for the year ended July 31, 2016. Page 25 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 5 - CRITICAL ACCOUNTING POLICIES AND ESTIMATES (continued) Gold Loan The Company calculates the effective interest rate on the Gold Loan based on estimates of future cash flows arising from the sale of payable gold (see note 24 of the financial statements for the year ended July 31, 2016). The cash flows will be dependent on the production of gold and its selling price at the time of delivery which have been estimated in line with the mine plan, future prices of gold and resource and reserve estimates. Management’s estimates of these factors are subject to risk and uncertainties affecting the amount of the interest charge. Any changes to these estimates may result in a significantly different interest charge which would affect the income statement and the corresponding Gold Loan liability. Mineral Property and Exploration and Evaluation Costs The directors have assessed whether there are any indicators of impairment in respect of mineral property and exploration and evaluation costs. In making this assessment they have considered the Company’s business plan which includes resource estimates, future processing capacity, the forward market and longer term price outlook for copper and gold. Resource estimates have been based on the most recently filed NI43-101 report and its opportunities economic model which includes resource estimates without conversion of its inferred resources. Management’s estimates of these factors are subject to risk and uncertainties affecting the recoverability of the Company’s mineral property and exploration and evaluation costs. The assessment determined that the mine remains commercially viable however as a result of the current market outlook regarding commodity prices, foreign exchange rates and the current pre-tax real discount rate of 10.71% the recoverability of the entire carrying values of the mineral property and exploration and evaluation costs is questionable. As a result, a provision for impairment was recognised in the consolidated income statement. The impairment review was based on the original PFS model adjusted for 2016 depletion and does not reflect management’s latest internal modelling which factors in increased production through re-establishing the shaft for hoisting and the integration of ore pre-concentration. Management are confident that the new model will deliver significant value. Amortisation of Mineral Property Amortisation of the Mineral Property is calculated on a unit of production method expected to amortise the cost including future forecast capital expenditure over the expected life of the mine based on the tonnes of ore expected to be extracted. Any changes to these estimates may result in an increase in the amortisation charge with a corresponding reduction in the carrying value of the Mineral Property. Closure Costs The Company has an obligation to reclaim its properties after the minerals have been mined from the site, and has estimated the costs necessary to comply with existing reclamation standards. These estimates are recorded as a liability at their fair values in the periods in which they occur. If the estimate of reclamation costs proves to be inaccurate, the Company could be required to increase the provision for site closure and reclamation costs, which would increase the amount of future reclamation expense, resulting in a reduction in the Company’s earnings and net assets. Revenue Revenues are subject to variation after the date of sale due to assay, price and foreign exchange fluctuations. Management monitors these changes closely and at the end of the period the directors will consider whether the effect of these variations are material on the whole and determine whether an adjustment is therefore appropriate. Page 26 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 5 - CRITICAL ACCOUNTING POLICIES AND ESTIMATES (continued) Available for sale investments Management considers that they do not have significant influence over the financial and policy decisions of the entities in which investment has been made and therefore have included the investments as available for sale investments. Deferred tax The Company has incurred losses which will be available for offset against future taxable profits and one of the subsidiaries has tax credits available to offset against future tax liabilities. Following the declaration of commercial production in the previous year it has been concluded that the Company has sufficient evidence of future taxable profits to justify the recognition of a deferred tax asset. If future taxable profits prove to be insufficient the Company could be required to reduce the deferred tax asset which would result in a reduction in the Company’s earnings and net assets. The Company has adopted all of the new and revised Standards and Interpretations that are relevant to its operations and effective for accounting periods beginning on or after 1 January 2015. The adoption of these new and revised Standards and Interpretations had no material effect on the profit or loss or financial position of the Company. No standards issued but not yet effective have been adopted early. International Financial Reporting Standards that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended July 31, 2016: Title IFRS /Amend ment IFRS 9 Financial instruments: Classification and Measurement IFRS 15 Revenue from contracts with customers IFRS 16 Leases Nature of change to accounting policy Application date of standard Application date for Company No change to accounting policy, therefore, no impact No change to accounting policy, therefore, no impact No change to accounting policy, therefore, no impact January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2019 January 1, 2019 Management have reviewed the impact of the above standards and interpretations and have concluded that they will not result in any material changes to reported results. Details of the main accounting policies of the Company are included in note 2 of the financial statements for the year ended July 31, 2016. Page 27 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 6 – OTHER MATTERS Outstanding Share & Option Data As at the date of this MD&A the following securities are outstanding: Security Shares issued or Issuable Common Shares 414,289,702 Warrants Options 200,000,000 12,939,000* *if all options have fully vested Weighted Average Exercise Price -- US$0.066 US$0.15 For further assistance Mr. Peter Mercer, Corporate Secretary can be reached directly at +1-709-800-1929 ext.500 or pmercer@ramblermines.com. Forward Looking Information This MD&A contains "forward-looking information" ("FLI") which may include, but is not limited to, statements with respect to the Company’s objectives and strategy, future financial or operating performance of the Company and its projects, exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, government regulation of mining exploration and development, environmental risks, title disputes or claims and limitations of insurance coverage. All statements, other than statements of historical fact, are forward-looking statements. Often, but not always, statements containing FLI can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur be achieved or continue to be achieved. Forward-looking statements are based on opinions, estimates and assumptions of management considered reasonably at the date the statements are made. Key assumptions include without limitation, the price of and anticipated costs of recovery of, copper concentrate, gold and silver, the presence of and continuity of such minerals at modeled grades and values, the capacities of various machinery and equipment, the availability of personnel, machinery and equipment at estimated prices, mineral recovery rates, and others. Investors are cautioned however that forward-looking statements necessarily involve both known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the FLI. Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; conclusions of economic evaluations; availability and cost of credit; fluctuations in Canadian dollar interest rates; fluctuations in the relative value of United States dollars, Canadian dollars and British Pounds; changes in planned parameters as plans continue to be refined; fluctuations in the market and forward prices of copper, gold, silver or certain other commodities; possible variations of ore grade or recovery rates; failure of equipment; accidents and other risks of the mining exploration industry; political instability, insurrection or war; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, as well as those factors discussed in the section entitled "Risks and Uncertainties" in the Report of Directors for the year ended July 31, 2016. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the FLI contained in this MD&A, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Page 28 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2016 APPENDIX 6 – OTHER MATTERS (continued) Forward Looking Information(continued) Unless stated otherwise, statements containing FLI herein are made as of the date of this MD&A and the Company disclaims any intention or obligation and assumes no responsibility to update or revise any FLI contained herein, whether as a result of new information, future events or otherwise, except as required by applicable law. Other than as required by applicable securities law, the Company disclaims any obligation to update any forward- looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. All of the forward-looking statements made in this MD&A are qualified by these cautionary statements. Accordingly, readers should not place undue reliance on forward-looking statements. The following table outlines certain significant forward-looking statements contained in this MD&A and provides the material assumptions used to develop such forward-looking statements and material risk factors that could cause actual results to differ materially from the forward looking statements. FLI statements Continued positive cash flow Assumptions Risk Factors Actual expenditures from operations will not exceed revenues Expenditures exceeding revenues resulting from fluctuations in the forward prices of market and copper, gold, silver or certain other commodities, or increased costs of production, or production stoppages or shortfalls Development delays access to production ore reducing Economic viability Continued mining and milling the exposed massive sulphide and LFZ workplaces with further exploration up-dip and down-dip Increase production from the Ming Mine to allow the optimization of the Nugget Pond copper concentrator at 1,250 mtpd and potentially allow the gold hydromet to be operated independently and/or simultaneously with the copper concentrator Achieving the planned capital and operating development and production targets; and, timely completion of drill bays to allow commencement of exploration drilling Successful completion of a detailed engineering existing review infrastructure and availability of finance from cash flow from operations of Further information Additional information relating to the Company is on SEDAR at www.sedar.com and on the Company’s web site at www.ramblermines.com. Page 29 RAMBLER METALS AND MINING PLC REPORT OF THE DIRECTORS FOR THE YEAR ENDED JULY 31, 2016 The Directors present their report with the audited financial statements of the Company for the year ended July 31, 2016. PRINCIPAL ACTIVITY The principal activity of the Company is the development, mining and exploration of the Ming Copper-Gold Mine located in Newfoundland and Labrador and the exploration and development of other strategic properties within the immediate area. The principal activity of the parent company is that of a holding company. DIRECTORS The Directors during the period under review were: T I Ackerman (appointed June 2, 2016) T S Chan (resigned June 2, 2016) E C Chen D H W Dobson (resigned December 4, 2015) L D Goodman (resigned June 2, 2016) B Labatte (appointed June 2, 2016) B A Mills ( appointed June 2, 2016) G Ogilvie (resigned June 2, 2016) G R Poulter M V Sander (appointed June 2, 2016) J S Thomson (resigned June 2, 2016) N P Williams DIVIDENDS No dividends will be distributed for the year ended July 31, 2016. SUBSTANTIAL SHARE INTERESTS At September 30, 2016 the parent company was aware of the following substantial share interests: CE Mining II Rambler Henderson Global Investors Tinma International Ltd. FINANCIAL INSTRUMENTS Number of Ordinary Shares % of Share Capital 261,363,636 46,248,223 22,736,992 63.09 11.16 5.49 The Board of Directors determines, as required, the degree to which it is appropriate to use financial instruments and hedging techniques to mitigate risks. The main risks for which such instruments may be appropriate are foreign exchange risk, liquidity risk, credit risk, interest rate risk and commodity price risk, each of which is discussed in note 26 to the financial statements. Page 30 RAMBLER METALS AND MINING PLC REPORT OF THE DIRECTORS FOR THE YEAR ENDED JULY 31, 2016 (CONTINUED) LIKELY FUTURE DEVELOPMENTS Details of likely future developments are set out in the Management’s Discussion and Analysis. SUBSEQUENT EVENTS Details of subsequent events are set out in the Management’s Discussion and Analysis. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITOR All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company’s Auditor for the purposes of their audit and to establish that the Auditor is aware of that information. The Directors are not aware of any relevant audit information of which the Auditor is unaware. AUDITOR The auditor, BDO LLP, will be proposed for re-appointment in accordance with Section 489 of the Companies Act 2006. ON BEHALF OF THE BOARD: P Mercer Company Secretary October 21, 2016 Page 31 RAMBLER METALS AND MINING PLC DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the strategic report, the report of the directors and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the group and company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and with IFRS and their interpretations adopted by the IASB. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company and of the profit or loss of the group for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • • state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Website publication The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the directors. The directors' responsibility also extends to the on-going integrity of the financial statements contained therein. Page 32 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED JULY 31, 2016 In formulating the Group's corporate governance procedures the Board of Directors takes due regard of the principles of good governance set out in the UK Corporate Governance Code issued by the Financial Reporting Council in September 2012 and the size and development of the Group. The Group also has regard to the Quoted Companies Alliance (QCA) Guidelines on Corporate Governance for AIM Companies. The Board of Rambler Metals and Mining PLC is made up of one executive Director and six non-executive Directors. G Poulter is the lead independent non-executive director and N Williams is the Group's President and Chief Executive. It is the Board's policy to maintain independence by having at least half of the Board comprising non- executive directors. The structure of the Board ensures that no one individual or group dominates the decision making process. The Board ordinarily meets no less than quarterly providing effective leadership and overall control of the Group's affairs through the schedule of matters reserved for its decision. This includes the approval of budgets and business plans, items of major capital expenditure, risk management policies and the approval of the financial statements. Formal agendas, papers and reports are sent to the directors in a timely manner, prior to Board meetings. The Board delegates certain of its responsibilities to Board committees which have clearly defined terms of reference. Between the Board meetings, the executive Director, the Chief Financial Officer and some of the non-executive directors are in contact on a regular basis to review and discuss progress. All Directors have access to the advice and services of the Company secretary, who is responsible for ensuring that all Board procedures are followed. Any Director may take independent professional advice at the Group's expense in the furtherance of his duties. The Audit Committee, which meets not less than quarterly and considers the Group's financial reporting (including accounting policies) and internal financial controls, is chaired by E C Chen, the other members being B Mills and G Poulter. The committee receives reports from management and from the Group's auditor. The Group has in place a series of procedures and controls designed to identify and prevent the risk of loss. The Audit Committee has reviewed the systems in place and considers these to be appropriate. The Compensation, Corporate Governance and Nominating Committee, which meets at least once a year and is responsible for making decisions on directors' remuneration packages and the development of the Board, is chaired by M Sander, E C Chen, G Poulter and B Labatte are the other committee members. The Safety, Health and Environment Committee was created to assist the Board in the effective discharge of its responsibilities in relation to safety, health and environmental issues and is chaired by B Labatte with T Ackerman and N Williams as its other members. The Technical Committee is responsible for assurance to the Board in relation to the oversight of technical and operational matters and is chaired by T Ackerman, M Sander and N Williams are the other committee members. Remuneration of executive Directors is established by reference to the remuneration of executives of equivalent status both in terms of time commitment, level of responsibility of the position and by reference to their job qualifications and skills. The Remuneration Committee will also have regard to the terms which may be required to attract an executive of equivalent experience to join the Board from another company. Such packages may include performance related bonuses and the grant of share options. The Board attaches importance to maintaining good relationships with all its shareholders and ensures that all price sensitive information is released to all shareholders at the same time in accordance with AIM and Toronto Stock Exchange-Venture market rules. The Group's principal communication is through the Annual General Meeting and through the annual report and accounts, quarterly and interim statements. Page 33 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RAMBLER METALS AND MINING PLC We have audited the financial statements of Rambler Metals and Mining PLC for the year ended 31 July 2016 which comprise the consolidated income statement, the consolidated and parent company statements of comprehensive income, the consolidated and parent company statements of financial position, the consolidated and parent company statements of changes in equity, the consolidated and parent company statements of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in 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. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements In our opinion: • • • • the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs as at 31 July 2016 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Separate opinion in relation to IFRSs as issued by the IASB As explained in Note 2 to the group financial statements the group, in addition to applying IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB). Page 34 RAMBLER METALS AND MINING PLC CONSOLIDATED INCOME STATEMENT For the Year Ended July 31, 2016 (EXPRESSED IN US DOLLARS) Revenue Production costs Depreciation and amortisation Gross profit Administrative expenses Exploration expenses Operating (loss)/profit before impairment Provision for impairment Operating loss after impairment Exchange loss Bank interest receivable Gain/(loss) on derivative financial instruments Finance costs Net financing expense Loss before tax Income tax credit Loss for the year attributable to owners of the parent Loss per share Basic loss per share Diluted loss per share Note 2016 US$’000 2015 US$’000 4 12 5 7 8 9 30,378 (21,701) (6,807) 1,870 (2,899) (26) (1,055) (11,268) (12,323) (237) 25 539 (3,232) (2,905) 34,583 (23,928) (6,183) 4,472 (3,502) (32) 938 (12,100) (11,162) (3,604) 64 (1,812) 2,955 (2,397) (15,228) (13,559) 2,422 5,207 (12,806) (8,352) Note 2016 US$ 2015 US$ 22 22 (0.067) (0.058) (0.067) (0.058) Page 36 RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Year Ended July 31, 2016 (EXPRESSED IN US DOLLARS) Loss for the year Other comprehensive income Items that may be reclassified into profit or loss Exchange differences on translation of foreign operations (net of tax) Gain/(loss) on available for sale investment (net of tax) Other comprehensive loss for the year 2016 US$’000 2015 US$’000 (12,806) (8,352) (1,222) 1,178 (44) (12,520) (313) (12,833) Total comprehensive loss for the year and attributable to the owners of the parent (12,850) (21,185) Page 37 REGISTERED NUMBER: 05101822 (ENGLAND AND WALES) RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at July 31, 2016 (EXPRESSED IN US DOLLARS) Assets Intangible assets Mineral property Property, plant and equipment Available for sale investments Deferred tax Restricted cash Total non-current assets Inventory Trade and other receivables Derivative financial asset Cash and cash equivalents Total current assets Total assets Equity Issued capital Share premium Share warrants reserve Merger reserve Translation reserve Fair value reserve Retained profits Total equity Liabilities Interest-bearing loans and borrowings Provision Total non-current liabilities Interest-bearing loans and borrowings Trade and other payables Total current liabilities Total liabilities Total equity and liabilities ON BEHALF OF THE BOARD: Note 31 July 2016 US$’000 31 July 2015 US$’000 1 August 2014 US$’000 10 11 13 14 9 19 15 16 17 18 21 24 25 24 23 2,233 35,238 23,125 2,402 8,420 3,339 74,757 2,383 599 587 8,929 12,498 87,255 6,374 81,455 2,089 180 (16,756) 1,075 (12,731) 61,686 13,650 1,833 15,483 5,226 4,860 10,086 25,569 87,255 14,084 32,561 20,919 994 6,447 2,495 77,500 1,831 1,593 240 3,389 7,053 17,001 47,424 23,577 1,975 1,611 2,989 94,577 3,628 1,947 724 8,755 15,054 84,553 109,631 2,471 72,128 - 180 (15,534) (103) 41 59,183 12,732 1,297 14,029 6,064 5,277 11,341 25,370 84,553 2,471 72,128 - 180 (3,014) 210 8,289 80,264 18,588 1,747 20,335 4,866 4,166 9,032 29,367 109,631 N P Williams Director Approved and authorised for issue by the Board on October 21, 2016 Page 38 RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EXPRESSED IN US DOLLARS) Group Balance at August 1, 2014 Comprehensive income Profit for the year Foreign exchange translation differences Gain on available for sale investments (net of tax) Total other comprehensive income Total comprehensive income for the year Transactions with owners Issue of share capital Share-based payments Transactions with owners Balance at July 31, 2015 Balance at August 1, 2015 Comprehensive income Loss for the year Foreign exchange translation differences Gain on available for sale investments (net of tax) Total other comprehensive income Total comprehensive income/(loss) for the year Transactions with owners Issue of share capital Share issue expenses Share-based payments Transactions with owners Balance at July 31, 2016 Share Capital US$’000 Share Premium US$’000 Warrants Reserve US$’000 Merger Reserve US$’000 Translation Reserve US$’000 Fair Value Reserve US$’000 Accumulated Losses US$’000 Total US$’000 180 (3,014) 210 8,289 80,264 - (12,520) - (12,520) (12,520) - - - (15,534) - - (313) (313) (313) - - - (103) (8,352) - - - (8,352) - 104 104 41 (8,352) (12,520) (313) (12,833) (21,185) - 104 104 59,183 (15,534) (103) 41 59,183 - (1,222) - (1,222) (1,222) - - - - - 1,178 1,178 1,178 - - - (12,806) - - - (12,806) (1,222) 1178 (44) (12,806) (12,850) - - 34 16,215 (896) 34 15,353 61,686 - 180 - (16,756) - 1,075 34 (12,731) - - - - - - - - - - - - - - - - - - - - - - - - 180 180 - - - - - - - - 2,471 72,128 - - - - - - - - - - - - - - - 2,471 - 72,128 2,471 72,128 - - - - - 3,903 - - 3,903 6,374 - - - - - 10,223 (896) - 9,327 81,455 2,089 - 2,089 2,089 Page 39 RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended July 31, 2016 (EXPRESSED IN US DOLLARS) Cash flows from operating activities Operating loss Depreciation and amortisation Gain on disposal of property, plant and equipment Provision for impairment Share based payments Foreign exchange difference Decrease/(increase) in inventory Decrease/(increase) in debtors (Increase)/decrease in derivative financial instruments (Decrease)/increase in creditors Cash generated from operations Interest paid Net cash generated from operating activities Cash flows from investing activities Interest received Acquisition of bearer deposit note Acquisition of listed investment Acquisition of subsidiary net of cash (note 20) Acquisition of evaluation and exploration assets Acquisition of Mineral property – net Acquisition of property, plant and equipment Disposal of property, plant and equipment Net cash utilised in investing activities Cash flows from financing activities Issue of share capital Share issue expenses Loans received Repayment of Gold Loan (note 24) Repayment of Loans Capital element of finance lease payments Net cash utilised in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of period Page 40 2016 $’000 2015 $’000 (12,323) 6,972 (105) 11,268 34 (703) (551) 1,014 191 (723) 5,074 (266) 4,808 25 (844) - (49) (480) (3,551) (2,939) 136 (7,702) 15,105 (896) 1,000 (2,297) (1,179) (2,595) 9,138 6,244 3,389 (704) 8,929 (11,162) 6,680 (419) 12,100 104 (1,678) 1,797 354 (1,328) 1,112 7,560 (235) 7,325 64 - (308) - (3,107) (4,693) (2,404) 509 (9,939) - - 1,880 (1,932) - (2,673) (2,725) (5,339) 8,755 (27) 3,389 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 Nature of operation and going concern The principal activity of the Group is the operation, development and exploration of the Ming Copper-Gold Mine (“Ming Mine”) located in Baie Verte, Newfoundland and Labrador, Canada. The Group’s business activities, together with the factors likely to affect its future development, performance and position, its financial position, cash flows, liquidity position and borrowing facilities are set out in the Management Discussion and Analysis on pages 6 to 29. In addition, notes 21 and 26 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. Historically the Company has been successful in accessing the equity and debt markets to finance the initial acquisition of the Ming Mine site, a US$20 million gold loan and a US$8 million credit facility to finance the construction of the mine and milling facilities and drawing US$3 million of an advance purchase facility. In June 2016 the Company accessed approximately US$15 million in equity finance to improve working capital and to provide funds for the planned increase in production from the mine and improved capacity at the mill. In future, the Company plans to fund operational requirements through internally generated cash flow, proceeds from the exercise of warrants, debt offerings and, if necessary, additional equity financing. The Company continually reviews operational results, expenditures and additional financial opportunities in order to ensure adequate liquidity to support its growth strategy while maintaining or increasing production levels at the Ming Mine. However, there is no guarantee that the Company will have access to future capital or the ability to generate positive cash flows. Based on the above management concludes the Group has adequate resources to continue in operational existence for the foreseeable future. Thus it continues to adopt the going concern basis of accounting in preparing the financial statements. 2 Significant accounting policies Rambler Metals and Mining Plc (the “Company”) is a company registered in England and Wales. The consolidated financial statements of the Company for the year ended July 31, 2016 comprise the Company and its subsidiaries (together referred to as the “Group”). Statement of compliance (a) The consolidated financial statements of Rambler Metals and Mining plc have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and their interpretations issued by the International Accounting Standards Board (“IASB”), as adopted by the European Union and with IFRS and their interpretations adopted by the IASB. There are no material differences on application to the Group. The consolidated financial statements have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group has adopted all of the new and revised Standards and Interpretations that are relevant to its operations and effective for accounting periods beginning on or after 1 January 2015. The Group has not adopted any standards or interpretations in advance of the required implementation dates. It is not expected that adoption of standards or interpretations which have been issued by the International Accounting Standards Board but have not been adopted will have a material impact on the financial statements. Refer to Appendix 5 of Management’s Discussion and Analysis on page 34 for standards not yet effective. Page 41 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (b) Basis of preparation The financial statements are presented in United States dollars (“US dollars”), rounded to the nearest thousand dollars. US Dollars is used as the presentation currency in line with industry peers. The parent company has a functional currency of GB pounds and the majority of the Group’s operations are carried out by its operating subsidiary which has a functional currency of Canadian dollars. Foreign operations are included in accordance with the policies set out in note 2(d). At July 31, 2016 the closing rate of exchange of US dollars to 1 GB pound was 1.32 (July 31, 2015: 1.55) and the average rate of exchange of US dollars to 1 GB pound for the year was 1.42 (2015: 1.48). Change of presentation currency The Group’s principal operations are based in Canada with revenue generated in US dollars. The Directors consider that using US dollars as the Group’s presentation currency allows greater comparability with industry peers and have therefore changed the Group’s presentation currency from Canadian dollars to US dollars. The change of the Group’s presentation currency has been accounted for in accordance with IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’. On the change of the Group’s presentational currency, comparative figures previously reported in Canadian dollars were translated into US dollars as follows: • income and expenses were translated at the average exchange rate for the relevant period; • assets and liabilities were translated at the closing exchange rate on the relevant balance sheet date; and • equity items were translated at historical exchange rates. The exchange rates used were as follows: Average rate Closing rate 2015 2014 2013 2012 CAD$=US$ CAD$=US$ CAD$=US$ CAD$=US$ 1.22 1.31 1.07 1.09 1.01 1.03 1.01 1.00 As a result of the change of the Group’s presentation currency, a currency translation difference of $2,012,000 was recognised in equity as at 31 July 2015 which represented the difference between the Group’s assets and liabilities translated from Canadian dollars into US dollars at the closing exchange rate on that date of CAD$1 = US$1.31 and the equity items recognised in the consolidated financial statements that were translated from Canadian dollars to US dollars at historical exchange rates. Page 42 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) The currency translation difference arose as follows: Ordinary share capital Share premium account Retranslation of net assets from Canadian dollars to US dollars US$’000 457 14,256 (12,701) 2,012 The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The accounting policies have been applied consistently by Group entities. (c) Basis of consolidation (i) Subsidiaries An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control is obtained. (ii) Transactions eliminated on consolidation Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. (d) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. (ii) Translation into presentation currency The assets and liabilities of the UK parent are translated to US dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of the parent company are translated to US dollars at rates approximating to the foreign exchange rates ruling at the dates of the transactions. (iii) Net investment in foreign operations Exchange differences arising from the translation of the net investment in foreign operations are taken to translation reserve. They are released into the income statement upon disposal. Page 43 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (e) Property, plant and equipment (i) Owned assets Items of property, plant and equipment are stated at cost. The cost of self-constructed assets includes the cost of materials, direct labour and the initial estimate of the costs of dismantling and removing the items and restoring the site on which they are located, where an obligation to incur such costs exists. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. (ii) Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases. (iii) Subsequent costs The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred. (iv) Depreciation Depreciation is charged to the income statement or capitalised as part of the exploration and evaluation costs or Mineral property where appropriate, on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. Depreciation on assets under construction does not commence until they are complete and available for use. The estimated useful lives are as follows: • buildings • plant and equipment • motor vehicles • • computer equipment fixtures, fittings and equipment 5 to 10 years 2 to 10 years 3 years 3 years 3 years The estimated useful lives and residual values of the assets are considered annually and restated as required. (f) Mineral property Upon transfer of ‘Exploration and evaluation costs’ into ‘Mineral property’, all subsequent expenditure on the construction, installation or completion of infrastructure facilities is capitalised within ‘Mineral property’. Development expenditure is net of proceeds from all sale of gold and copper concentrate extracted during the development phase and until commercial production is declared. Mineral property is amortised on a unit of production basis. Future forecast capital expenditure is included in the unit of production amortisation calculation. Page 44 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (g) Intangible assets (i) Exploration and evaluation costs These comprise costs directly incurred in exploration and evaluation. They are capitalised as intangible assets pending determination of the feasibility of the project. When the existence of economically recoverable reserves and the availability of finance are established, the related intangible assets are transferred to Mineral property. Where a project is abandoned or is determined not to be economically viable, the related costs are written off. The recoverability of deferred exploration and evaluation costs is dependent upon a number of factors common to the natural resource sector. These include the extent to which the Group can establish economically recoverable reserves on its properties, the ability of the Group to obtain necessary financing to complete the development of such reserves and future profitable production or proceeds from the disposition thereof. (ii) Impairment of exploration and evaluation costs Impairment reviews for exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances apply: • unexpected geological occurrences that render the resource uneconomic; • • • title to the asset is compromised; variations in metal prices that render the project uneconomic; and variations in the exchange rate for the currency of operation. Available for sale investments (h) Available for sale investments are recognised at fair value with changes in value recorded in other comprehensive income. Subsequent to initial recognition available-for-sale financial assets are stated at fair value. Movements in fair values are recognised in other comprehensive income, with the exception of impairment losses which are recognised in profit or loss. Fair values are based on prices quoted in an active market if such a market is available. If an active market is not available, the Company establishes the fair value of financial instruments by using a valuation technique, usually discounted cash flow analysis. When an investment is disposed, any cumulative gains and losses previously recognised in equity are recognised in profit or loss. Inventory (i) Stockpiled ore is recorded at the lower of production cost and net realisable value. Production costs include all direct costs plus an allocation of fixed costs associated with the mine site. Operating supplies are valued at the lower of cost and net realisable value. Cost is determined on an average cost basis. Trade and other receivables (j) Trade and other receivables are generally stated at their cost less impairment losses. Receivables in respect of the sale of copper concentrate which contain an embedded derivative linking them to future commodity prices are measured at fair value through profit and loss and are treated as derivative financial assets or liabilities. Receivables with a short duration are not discounted. Page 45 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) Financial instruments measured at fair value through profit and loss (k) Financial instruments measured at fair value through profit and loss, which includes all derivative financial instruments and receivables containing embedded derivatives arising from sales of concentrate, are measured at fair value at each balance sheet date with changes in value reflected directly within the income statement. Cash and cash equivalents (l) Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Restricted cash is not available for use by the Group and therefore is not considered highly liquid. Impairment of non-financial assets (m) The carrying amounts of the Group’s assets (except deferred exploration and evaluation costs (see accounting policy (g)(ii)) and deferred tax assets (see accounting policy 2(s)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (see accounting policy 2(m)(i)). An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. (i) Calculation of recoverable amount The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. (ii) Reversals of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. 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. Page 46 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (n) Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial liabilities include finance leases and hire purchase contracts which are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of comprehensive income over the period of the borrowings on an effective interest basis except where the difference between cost and redemption value qualify to be capitalised as part of the cost of a qualifying asset. The Company accounts for its share warrants as equity at fair value as of the date of issuance on the Company’s consolidated balance sheets and no further adjustments to their valuation are made. Management estimates the fair value of these liabilities using option pricing models and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate. Trade and other payables (o) Trade and other payables are stated at amortised cost. Provisions (p) The Group records the present value of estimated costs of legal and constructive obligations required to restore mining and other operations in the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration, reclamation and revegetation of affected areas. Revenue recognition (q) Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of sales tax. The Company recognises revenue when the amount of the revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met as described below. Any revenues generated during commissioning are treated as a contribution towards previously incurred costs and are therefore credited against mining and development assets accordingly. Sale of concentrate Revenue associated with the sale of copper concentrate is recognised when significant risks and rewards of ownership of the asset sold are transferred to the Group's off-taker, which is when the Company receives provisional payment for each lot of concentrate invoiced. Where a provisional invoice is not raised, risks and rewards of ownership transfer when the concentrate passes over the rail of the shipping vessel. Adjustments arising due to differences in assays and weights, from the time of provisional invoicing to the time of final settlement, are adjusted to revenue. Page 47 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (r) Expenses (i) Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. (ii) Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge 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. (iii) Borrowing costs Borrowing costs are recognised in the income statement where they do not meet the criteria for capitalisation. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised. Equity settled share based payments (s) All share based payments are recognised in the financial statements. All goods and services received in exchange for the grant of any share-based remuneration are measured at their fair values. Fair values of employee services are determined indirectly by reference to the fair value of the share options awarded. Their value is appraised at the grant dates and excludes the impact of non-market vesting conditions. All share-based remuneration is ultimately recognised as an expense in the income statement with a corresponding credit to the accumulated losses in the balance sheet. If vesting periods apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if the number of share options ultimately exercised is different to that estimated on vesting. Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital. Page 48 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) Income tax (t) Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Fair value measurement (u) A number of assets and liabilities included in the Group’s financial statements require measurement at, and/or disclosure of, fair value. The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’): - Level 1: Quoted prices in active markets for identical items (unadjusted) - Level 2: Observable direct or indirect inputs other than Level 1 inputs - Level 3: Unobservable inputs (i.e. not derived from market data). The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur. The Group measures a number of items at fair value: - Derivative financial asset (note 17) - Available for sale investments (note 14) For more detailed information in relation to the fair value measurement of the items above, please refer to the applicable notes. Page 49 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Critical accounting estimates and judgements The details of the Group’s accounting policies are presented in accordance with International Financial Reporting Standards as set out in Note 2 to the financial statements. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following estimates are considered by management to be the most critical for investors to understand some of the processes and reasoning that go into the preparation of the Company’s financial statements, providing some insight also to uncertainties that could impact the Company’s financial results. Going Concern The risks associated with going concern are explained in note 1. Mineral Property and Exploration and Evaluation Costs The directors have assessed whether there are any indicators of impairment in respect of mineral property and exploration and evaluation costs. In making this assessment they have considered the Group’s business plan which includes resource estimates, future processing capacity, the forward market and longer term price outlook for copper and gold. Resource estimates have been based on the most recently filed NI43-101 report and its opportunities economic model which includes resource estimates without conversion of its inferred resources. Management’s estimates of these factors are subject to risk and uncertainties affecting the recoverability of the Group’s mineral property and exploration and evaluation costs. The assessment determined that the mine remains commercially viable however as a result of the current market outlook regarding commodity prices, foreign exchange rates and the current market based pre-tax real discount rate of 10.71% the recoverability of the entire carrying values of the mineral property and exploration and evaluation costs is questionable. As a result, a provision for impairment was recognised in the consolidated income statement. Amortisation of Mineral Property Amortisation of the Mineral Property is calculated on a unit of production method expected to amortise the cost including future forecast capital expenditure over the expected life of the mine based on the tonnes of ore expected to be extracted. Any changes to these estimates may result in an increase in the amortisation charge with a corresponding reduction in the carrying value of the Mineral Property. Closure costs The Group has an obligation to restore its properties after the minerals have been mined from the site, and has estimated the costs necessary to comply with existing reclamation standards. These estimates are recorded as a liability at their fair values in the periods in which they occur. If the estimate of reclamation costs proves to be inaccurate, the Group could be required to increase the provision for site closure and reclamation costs, which would increase the amount of future reclamation expense, resulting in a reduction in the Group’s earnings and net assets. Page 50 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Critical accounting estimates and judgements (continued) Share-based payments The Group calculates the cost of share based payments using the Black-Scholes model. Inputs into the model in respect of the expected option/warrant life and the volatility are subject to management estimate and any changes to these estimates may have a significant effect on the cost. The assumptions used in calculating the cost of share based payments are explained in notes 6 and 20. Gold Loan The Group calculates the effective interest rate on the Gold Loan based on estimates of future cash flows arising from the sale of payable gold (see note 24).The cash flows will be dependent on the production of gold and its selling price at the time of delivery which have been estimated in line with the mine plan, future prices of gold and reserve estimates. Management’s estimates of these factors are subject to risk and uncertainties affecting the amount of the interest charge. Any changes to these estimates may result in a significantly different interest charge which would affect the carrying value of the exploration and evaluation costs and the corresponding Gold Loan liability. Revenue Revenues are subject to variation after the date of sale due to assay, price and foreign exchange fluctuations. Management monitors these changes closely and at the end of the period the directors will consider whether the effect of these variations are material on the whole and determine whether an adjustment is therefore appropriate. Available for sale investment Management consider that they do not have significant influence over the financial and policy decisions of Maritime and therefore have included the investment as an available for sale investment. 4. Operating segments The Group’s operations relate to the exploration for and development of mineral deposits with support provided from the UK and as such the Group has only one operating segment. Information about geographical areas 2016 2015 UK Canada Consolidated UK Canada Consolidated US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Revenue - 30,378 30,378 - 34,583 34,583 Non-current assets 1,567 73,190 74,757 1,569 75,931 77,500 Information about major customers Revenues from transactions with a single customer exceeding 10% of total revenues were as follows: Customer A 2016 2015 US$’000 US$’000 30,378 30,378 34,583 34,583 Page 51 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. Operating profit The operating profit is after charging: Depreciation – owned assets Gain on disposal of property, plant and equipment Amortisation Impairment charges (see note 12) Directors’ emoluments (see note 27) Auditor’s remuneration: Audit of these financial statements Fees payable to the auditor for other services: Other assurance services 2016 2015 US$’000 US$’000 2,906 (105) 4,066 11,268 416 81 4 3,011 (419) 3,669 12,100 464 81 7 The Audit Committee reviews the nature and extent of non-audit services to ensure that independence is maintained. 6. Personnel expenses Salary costs Wages and salaries Other short term benefits Compulsory social security contributions Share based payments Group 2016 Group 2015 US$’000 US$,000 8,308 504 1,412 34 9,302 506 1,680 104 10,258 11,592 Salary costs of US$259,000 (2015: US$13,000) were capitalised as part of the cost of assets under construction costs during the year. Number of employees The average number of employees during the year was as follows: Directors Administration Production and development Group 2016 Group 2015 7 11 122 140 7 14 117 138 During the year the Group granted share options to key personnel to purchase shares in the entity. The options are exercisable at the market price of the shares at the date of grant. Page 52 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. Personnel expenses (continued) Share-based payments The number and weighted average exercise prices of share options are as follows: Outstanding at the beginning of the year Granted during the year Cancelled during the year Outstanding at the end of the year Exercisable at end of year Weighted average exercise price 2016 US$ Number of options 2016 ‘000 Weighted average exercise price 2015 US$ Number of options 2015 ‘000 0.37 0.62 0.49 0.36 0.36 5,190 0.37 264 - (375) 0.39 5,079 4,999 0.37 0.37 5,506 - (316) 5,190 4,795 The options outstanding at July 31, 2016 have an exercise price in the range of US$0.13 to US$0.84 (2015: US$0.14 to US$0.84) and a weighted average remaining contractual life of 4.3 years (2015: 5.3 years). The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on the Black- Scholes model. Fair value of share options and assumptions issued during the year 2016 2015 Fair value at measurement date Share price (weighted average) Exercise price (weighted average) Expected volatility (expressed as weighted average volatility used in the modelling under Black-Scholes model) Expected option life (years) Expected dividends Risk-free interest rate (based on national government bonds) US$0.03 US$0.62 US0.07 94% 4 - 0.55% - - - - - - - The expected volatility is based on the historical volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information. There is no performance or market conditions associated with the share option grants. The share-based payment expense relates to the following grants: Share options granted in 2012 Share options granted in 2013 Share options granted in 2014 Total expense recognised as employee costs 2016 2015 US$’000 - 18 16 34 US$’000 13 23 68 104 Page 53 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. Loss on derivative financial instruments Gain/(loss) on concentrate receivables from off-taker 8. Finance costs Finance lease interest Gold loan interest Advance purchase facility interest and charges Off-take provisional payment interest Unwinding of discount on reclamation provision 9. Income tax Recognised in the income statement Current tax expense Current year Deferred tax credit Origination and reversal of temporary timing differences Over provision in previous year Total income tax credit in income statement Reconciliation of effective tax rate Loss before tax Income tax using the UK corporation tax rate of 20% (2015: 20.67%) Effect of tax rates in foreign jurisdictions (rates increased) Non-deductible expenses Effect of change in tax rates Effect of tax losses and credits Over provision in previous year Exchange difference 2016 2015 US$’000 US$’000 539 (1,812) 2016 2015 US$’000 US$’000 123 2,648 279 144 38 3,232 214 (3,347) - 139 39 (2,955) 2016 2015 US$,000 US$,000 - - - - (4,186) 1,764 (2,422) (5,207) - (5,207) 2016 2015 US$’000 US$’000 (15,228) (13,559) (3,046) (1,416) 371 (52) 155 1,764 (198) (2,422) (2,803) (1,019) 122 8 (1,556) - 41 (5,207) Page 54 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. Income tax (continued) Recognised in other comprehensive income Current tax expense Current year Deferred tax (credit)/expense Fair value re-measurement of available for sale investments Exchange difference on retranslation of UK deferred tax asset Over provision in previous period Total income tax expense/(credit) in statement of other comprehensive income Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: 2016 2015 US$,000 US$,000 - 201 256 -- 457 - - (21) (196) (50) (267) Property, plant and equipment Mineral property Intangible assets Available for sale investment Gold loan Tax value of loss carry-forwards and credits recognised Net tax assets / (liabilities) Assets Liabilities Net Balance Balance Balance Balance Balance Balance July 31, 2016 July 31, 2015 July 31, 2016 July 31, 2015 July 31, 2016 July 31, 2015 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 - 3,328 107 - - 8,974 12,409 - 1,795 110 713 6,294 8,912 (3,264) - - (91) (634) (2,103) - (361) - - (3,264) 3,328 107 (91) (634) - - (3,989) (2,464) 8,974 8,420 (2,103) 1,795 (361) 110 713 6,294 6,448 Page 55 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. Income tax credit (continued) Movement in recognised deferred tax assets and liabilities Property, plant and equipment Mineral property Intangible assets Available for sale investment Gold loan Other timing differences Tax value of loss carry-forwards and credits Property, plant and equipment Mineral property Intangible assets Available for sale investment Gold loan Other timing differences Tax value of loss carry-forwards and credits Recognised in income Balance Aug 1, 2014 Recognised in other comprehensive income Exchange difference Balance July 31, 2015 US$’000 US$’000 US$’000 US$’000 US$’000 1,682 1,989 1,523 32 138 (26) (6,949) (1,611) 741 (3,689) (964) (92) (878) (8) (317) (5,207) - - - (53) - - (148) (201) (320) (95) (198) 3 27 4 1,150 571 2,103 (1,795) 361 (110) (713) (30) (6,264) (6,448) Balance Aug 1, 2015 Recognised in income Recognised in other comprehensive income Exchange difference Balance Jul 31, 2016 US$’000 US$’000 US$’000 US$’000 US$’000 2,103 (1,795) 361 (110) (713) (30) (6,264) (6,448) 1,157 (1,528) (467) - 1,348 1 (2,933) (2,422) - - - 201 - - 256 457 4 (5) - - (1) - (5) (7) 3,264 (3,328) (106) 91 634 (29) (8,946) (8,420) The Group has incurred losses which will be available for offset against future taxable profits and one of the subsidiaries has tax credits available to offset against future tax liabilities. The Group considers that it has sufficient evidence of future taxable profits to justify the recognition of a deferred tax asset of US$8.4 million (2015: US$6.4 million). Page 56 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. Intangible assets Cost Balance at 1 August 2014 Additions Effect of movements in foreign exchange Balance at 31 July 2015 Balance at 1 August 2015 Additions Transfer to mineral property Effect of movements in foreign exchange Balance at July 31, 2016 Impairment Balance at 1 August 2014 Provision for impairment Effect of movements in foreign exchange Balance at July 31, 2015 Balance at 1 August 2015 Transfer to mineral property Effect of movements in foreign exchange Balance at July 31, 2016 Carrying amounts At 1 August 2014 At 31 July 2015 At 1 August 2015 At July 31, 2016 Ming Mine US$’000 Exploration and evaluation costs Little Deer Project Total US$’000 US$’000 16,496 3,225 (3,056) 16,665 16,665 440 (17,125) 20 - - 3,354 (142) 3,212 3,212 (3,214) 2 - 16,496 13,453 13,453 - 505 235 (109) 631 631 1,463 - 139 2,233 - - - - - - - - 505 631 631 2,233 17,001 3,460 (3,165) 17,296 17,296 1,903 (17,125) 159 2,233 - 3,354 (142) 3,212 3,212 (3,214) 2 - 17,001 14,084 14,084 2,233 Following the integration of the Lower Footwall Zone into the Company’s mine plan, costs of US$ 17.1 million were transferred to mineral properties. Consideration of impairment for exploration and evaluation costs The directors have assessed whether there are any indicators of impairment in respect of exploration and evaluation costs. Page 57 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. Mineral property Cost Balance at August 1, 2014 Additions Effect of movements in foreign exchange Balance at July 31, 2015 Balance at August 1, 2015 Additions Transfer from exploration and evaluation costs Effect of movements in foreign exchange Balance at July 31, 2016 Amortisation and impairment Balance at August 1, 2014 Amortisation charge Provision for impairment Effect of movements in foreign exchange Balance at July 31, 2015 Balance at August 1, 2015 Amortisation charge Provision for impairment Transfer from exploration and evaluation costs Effect of movements in foreign exchange Balance at July 31, 2016 Carrying amounts At August 1, 2014 At July 31, 2015 At August 1, 2015 At July 31, 2016 Mineral property US$’000 53,519 4,493 (9,237) 48,775 48,775 4,050 17,125 108 70,058 6,095 3,669 8,119 (1,669) 16,214 16,214 4,066 11,268 3,214 58 34,820 47,424 32,561 32,561 35,238 Consideration of impairment for mineral property costs The directors have assessed whether there are any indicators of impairment in respect of mineral property costs. See note 12 for an explanation of the factors considered in respect of the Ming Mine. Page 58 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. Provision for impairment Summary of impairments The following impairment charges were recognised in the income statement for the year ended July 31, 2016: Mineral property Exploration and evaluation costs Available for sale investments 2016 2015 US$’000 US$’000 11,268 - - 11,268 8,119 3,354 627 12,100 Consideration of impairment for mineral property costs As part of the annual impairment review of asset carrying values a charge of $11.3 million (2015: $11.5 million) was recorded in relation to the Ming Mine. Following the publication of the Group’s PFS, extraction of ore from the Ming Mine’s Lower Footwall Zone has been included in the Mine plan adopted by management for fiscal 2016. During the year, the Group carried out an impairment review of the related cash generating unit (“CGU”). The review determined that the mine remains commercially viable however as a result of the current market outlook regarding commodity prices, foreign exchange rates and the current market cost of capital of 10.71% the recoverability of the entire carrying values of the mineral property is questionable. As a result, an impairment was recognised in the consolidated income statement. In accordance with its accounting policies and processes, each asset or CGU is evaluated annually at July 31, to determine whether there are any indications of impairment. If any such indications of impairment exist, a formal estimate of the recoverable amount is performed. In assessing whether an impairment is required, the carrying value of the asset or CGU is compared with its recoverable amount. The recoverable amount is the higher of the CGU’s fair value less costs of disposal (“FVLCD”) and value in use (“VIU”). Given the nature of the Group’s activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, the VIU for each CGU is determined based on the net present value of the future estimated cash flows (expressed in real terms) expected to be generated from the continued use of the CGUs based on the most recent life of mine plan, and its eventual disposal, using assumptions a market participant may take into account. These cash flows were discounted using a real pre-tax discount rate that reflected current market assessments of the time value of money and the risks specific to the CGU. Key assumptions The determination of value in use is most sensitive to the following key assumptions: • Production volumes • Commodity prices • Discount rates • Exchange rates Page 59 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. Provision for impairment (continued) Production volumes: In calculating the value in use, the production volumes incorporated into the cash flow models were based on the PFS released in July 2015. After milling and recovery, approximately 158,000 tonnes of copper is estimated to be produced with 90,000 ounces of gold and 528,000 ounces of silver. Estimated production volumes are based on a 21 year life of mine plan and take into account development plans for the mine agreed by management as part of the long-term planning process. Production volumes used in the model are based on probable and proven mineral reserves and do not take account the potential conversion of any measured or indicated resource. Production volumes are dependent on a number of variables, such as: the recoverable quantities; the production profile; the cost of the development of the infrastructure necessary to extract the reserves; the production costs; the contractual duration of mining rights; and the selling price of the commodities extracted. The production profile used is consistent with the reserves volumes approved as part of the Group’s process for the estimation of proved and probable reserves. The production profile excludes potential conversion of resource into reserve. Commodity prices: Forecast commodity prices are based on management’s estimates and are derived from forward price curves and long-term views of global supply and demand, building on past experience of the industry and consistent with external sources. These prices were adjusted to arrive at appropriate consistent price assumptions for the different qualities and type of commodities, or, where appropriate, contracted prices were applied. Estimated long–term copper, gold and silver prices of US$2.71 per pound, US$1,300 per ounce and US$22 per ounce respectively, have been used to estimate future revenues. Discount rate: In calculating the VIU, a pre-tax discount rate of 10.71% was applied to the pre-tax cash flows expressed in real terms. This discount rate is derived from the Group’s pre-tax weighted average cost of capital (WACC), with appropriate adjustments made to reflect the risks specific to the CGU. The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on its interest bearing borrowings the Group is obliged to service. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data. Exchange rates: Foreign exchange rates are estimated with reference to external market forecasts and updated at least annually. The rates applied for the first five years of the valuation are based on observable market data including spot and forward values, thereafter the estimate is interpolated to the long term assumption, which involves market analysis including equity analyst estimates. The assumed long-term US dollar/CAD dollar exchange rate is estimated to be US$0.81. Sensitivity analysis: Any variation in the key assumptions above would either result in further impairment or lead to a reversal of impairment. The total provision for impairment that would arise for the Ming Mine due to the effect of an increase or decrease in the key assumptions is summarised below: Total provision for impairment Copper price (4% increase/decrease) Discount rate (at 8.56%/12.86%) Increase Decrease US$’000 US$’000 - - 21,911 20,058 Page 60 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. Property, plant and equipment Land and buildings Assets under construction Motor vehicles Plant and equipment Fixtures, fittings and equipment Computer equipment Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 4,080 16 (161) - (668) 3,267 3,267 138 - 641 17 4,063 1,897 318 (145) (336) 1,734 1,734 304 - 7 2,045 2,183 1,533 1,533 2,018 42 808 - (236) (82) 532 532 1,159 - (963) - 728 - - - - - - - - - - 42 532 532 728 238 35 - - (45) 228 228 - - - - 228 210 30 - (38) 202 202 14 - 1 217 28 26 26 11 39,765 3,602 (261) 236 (6,952) 36,390 36,390 3,822 (707) 322 58 39,885 18,604 2,585 (209) (3,324) 17,656 17,656 2,522 (675) 46 19,549 21,161 18,734 18,734 20,336 101 9 - - (17) 93 93 2 - - 1 96 94 7 - (17) 84 84 6 - - 90 7 9 9 6 889 24 - - (150) 45,115 4,494 (422) - (7,914) 763 41,273 763 1 - - - 764 41,273 5,122 (707) - 76 45,764 733 21,538 3,011 (354) (3,841) 71 - (126) 678 20,354 678 20,354 2,906 (675) 54 60 - - 738 22,639 156 23,577 85 20,919 85 20,919 26 23,125 Cost Balance at August 1, 2014 Additions Disposals Reclassification Effect of movements in foreign exchange Balance at July 31, 2015 Balance at August 1, 2015 Additions Disposals Reclassification Effect of movements in foreign exchange Balance at July 31, 2016 Depreciation and impairment losses Balance at August 1, 2014 Depreciation charge for the year Eliminated on disposals Effect of movements in foreign exchange Balance at July 31, 2015 Balance at August 1, 2015 Depreciation charge for the year Eliminated on disposals Effect of movements in foreign exchange Balance at July 31, 2016 Carrying amounts At August 1, 2014 At July 31, 2015 At August 1, 2015 At July 31, 2016 Leased plant and machinery The Group leases surface and underground equipment under a number of finance lease agreements. At the end of each lease the Group has the option to purchase the equipment at a beneficial price. At July 31, 2016, the net carrying amount of leased plant and machinery was US$4,211,000 (2015: US$2,984,000). The leased plant and machinery secures lease obligations (see note 24). During the year plant and equipment additions of US$2,256,000 (2015: US$2,090,000) were acquired through finance lease arrangements. Page 61 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14. Available for sale investments Cost or valuation Balance at August 1, 2014 Acquisitions Revaluation Provision for impairment Effect of movements in foreign exchange Balance at July 31, 2015 Balance at August 1, 2015 Acquisitions Revaluation Effect of movements in foreign exchange Balance at July 31, 2016 Carrying amounts At July 31, 2015 At July 31, 2016 Available for sale investments US$’000 1,975 288 (342) (627) (300) 994 994 21 1,371 16 2,402 994 2,402 Rambler holds a 10.86% equity stake in Maritime Resources Corp and a representative on the Board of Directors. This representation does not result in the Group having significant influence over the investment. The market price at July 31, 2016 was US$0.21 (2015: US$0.08 per share). Rambler holds 2.58% equity stake in Marathon Gold Corporation. The market price at July 31, 2016 was US$0.37 (2015: US$0.19 per share). The Company acquired a number of listed investments on the acquisition of Thundermin Resources Inc. at a fair value of US$21,000. The carrying amount of the available for sale investments is the level 1 fair value determined using the closing market price of the shares on the TSX exchange. The cost of the available for sale investments is US$1,776,000 (2015: US$1,752,000). 15. Inventory Metals in process Operating supplies 2016 2015 US$’000 US$’000 580 1,251 891 1,492 2,383 1,831 Page 62 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16. Trade and other receivables Trade receivables Other receivables Sales taxes recoverable Prepayments and accrued income There are no trade receivables past due or considered impaired (2015: $nil). 17. Derivative financial asset Concentrate receivables from off-taker 2016 2015 US$’000 US$’000 207 - 232 206 402 250 752 143 599 1,593 2016 2015 US$’000 US$’000 240 587 The carrying amount of the derivative financial asset is the level 2 fair value determined using forward prices of copper, gold and silver. The cost of the concentrate receivables is US$638,000 (2015: US$235,000). 18. Cash and cash equivalents Bank balances Cash and cash equivalents in the statement of cash flows 19. Restricted cash Bearer deposit notes 2016 2015 US$’000 US$’000 3,389 3,389 8,929 8,929 2016 2015 US$’000 US$’000 2,495 3,339 The Group is required to hold Letters of Credit in favour of the Government of Newfoundland and Labrador in respect of the reclamation and closure liability associated with the Ming Mine. An additional Letter of Credit of US$843 was obtained during the year in connection with an additional reclamation and closure liability for an extension of the waste stockpile. The bearer deposit notes mature on differing dates throughout fiscal 2016 and have a nominal value of US$3,339,000 (2015 - US$2,495,000) giving an effective yield of 1.2% (2015 – 1.2%). Page 63 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 20. Acquisition of subsidiary The Group acquired the entire share capital of Thundermin Resources Inc. by way of an amalgamation into 1948565 Ontario Inc. on January 12, 2016. The fair value of the assets acquired was as follows: Exploration and evaluation assets Listed investments Trade and other receivables Cash at bank Trade and other payables Net assets acquired Issue of share capital Cash consideration Total consideration Book value Fair value adjustment Fair value US$’000 US$’000 US$’000 3 21 21 21 (308) (242) 1,421 - - - - 1,421 1,424 21 21 21 (308) 1,179 1,109 70 1,179 The acquisition was accounted for as an asset acquisition as the definition of a business in IFRS 3 – Business Combinations was not met. 21. Capital and reserves Share capital and share premium – group and company In issue at 1 August 2014 Issued during the year In issue at 31 July 2015 In issue at 1 August 2015 Issued during the year In issue at July 31, 2016 Share Share Number capital premium US$’000 US$’000 Number ‘000 72,128 144,168 - 72,128 144,168 - 2,471 2,471 2,471 3,903 6,374 72,128 144,168 9,327 270,122 81,455 414,290 At July 31, 2016, the authorised share capital comprised 1,000,000,000 ordinary shares of 1p each. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. On January 12, 2016 the Company issued 7,142,857 shares for US$0.15 each raising a total of US$1,050,000 as part consideration for the acquisition of Thundermin Resources Inc. On February 5, 2016 the Company issued 1,614,981 shares for US$0.04 each raising a total of US$60,055 as part consideration for the acquisition of Thundermin Resources Inc. On June 3, 2016 the Company issued 261,363,636 ordinary shares for US$0.06 (GBP0.04) each. The Company also issued 200,000,000 warrants to purchase ordinary shares at US$0.07 per share (GBP0.05). Of the total proceeds of US$15.1 million, US$3.8 million was credited to share capital, US$9.2 million to share premium account and US$2.1 million was credited to the warrants reserve representing the fair value of the warrants issued. Page 64 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. Capital and reserves (continued) Warrants reserve At August 1, 2015 Fair value of warrants issued during the year At July 31, 2016 Number ‘000 $’000 - 200,000 200,000 - 2,089 2,089 On June 3, 2016 the Company issued 200,000,000 share purchase warrants at an exercise price of US$0.07 (GBP 0.05). The share purchase warrants expire on 3 June 2018. The fair value of the share purchase warrants is measured using the Black-Scholes model assuming an expected volatility of 100%, a risk-free interest rate of 1% and a contractual life of the warrant of 2 years. The fair value of services received in return for the warrants issued is measured by reference to the fair value of the warrants issued in the absence of information on the fair value of the services provided. The share warrant reserve reflects the value of outstanding share warrants based on the fair value of the share warrants at the time of issue. Merger reserve The merger reserve arose from the acquisition of Rambler Mines Limited by Rambler Metals and Mining PLC. This acquisition was accounted for in accordance with the merger accounting principles set out in UK Financial Reporting Standard 6 and the Companies Act 1985, which continue under the Companies Act 2006, whereby the consolidated financial statements were presented as if the business previously carried out through Rambler Mines Limited had always been owned and controlled by the Company. The transition provisions of IFRS 1 allow all business combinations prior to transition to IFRS to continue to be accounted for under the requirements of UK GAAP at that time. Accordingly this acquisition has not been re-stated in accordance with that standard. Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the parent company which has a different functional currency from the presentation currency. Exchange differences arising are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised in the income statement in the period of disposal of the operation. Fair value reserve The fair value reserve comprises cumulative adjustments made to the fair value of available for sale investments. Capital management The Group’s objectives when managing capital are to safeguard the entity’s ability to continue as a going concern so that it can continue to increase the value of the entity for the benefit of the shareholders. Given the nature of the Group’s current activities the entity will remain dependent on a mixture of debt and equity funding until such a time as the Group becomes self-financing from the commercial production of mineral resources. The Group’s capital was as follows: Cash and cash equivalents Finance leases Advance purchase loan Gold loan Net debt Equity Total capital Details of employee share options outstanding are set out in note 5. 2016 US$’000 2015 US$’000 8,929 (3,195) (1,979) (13,702) (9,947) (61,686) (71,633) 3,389 (3,566) (1,879) (13,351) (15,407) (59,183) (74,590) Page 65 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 22. Earnings per share Basic earnings per share The calculation of basic earnings per share at July 31, 2016 was based on the loss attributable to ordinary shareholders of $12,806,000 and a weighted average number of ordinary shares outstanding during the period ended July 31, 2016 of 191,132,000 calculated as follows: Loss attributable to ordinary shareholders Loss for the period Loss attributable to ordinary shareholders Weighted average number of ordinary shares At August 1, 2014 Effect of shares issued during the year At July 31, 2015 In issue at August 1, 2015 Effect of shares issued during year Weighted average number of ordinary shares at July 31, 2016 2016 US$’000 2015 US$’000 (12,806) (12,806) (8,352) (8,352) Number ‘000 144,168 - 144,168 144,168 46,964 191,132 There is no material difference between the basic and diluted loss per share. At July 31, 2016 there were 5,373,157 (2015: 5,189,667) share options in issue of which 578,925 (2015: 578,925) were considered to be dilutive and may have a dilutive effect on the basic earnings or loss per share in the future. At July 31, 2016 there were 200,000,000 (2015: nil) warrants in issue of which none were considered to be dilutive. 23. Trade and other payables Trade payables Non trade payables Accrued expenses 2016 2015 US$’000 US$’000 3,396 193 1,271 4,860 3,996 217 1,064 5,277 24. Interest-bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 26. Page 66 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Interest-bearing loans and borrowings (continued) Non-current liabilities Finance lease liabilities Gold Loan Current liabilities Current portion of finance lease liabilities Advance Purchase Facility Current portion of Gold Loan Finance lease liabilities Finance lease liabilities are payable as follows: Less than one year Between one and five years 2016 2015 US$’000 US$’000 1,550 12,100 13,650 1,320 11,412 12,732 1,645 1,980 1,601 5,226 2,246 1,879 1,939 6,064 Minimum lease Payments 2016 Interest 2016 Principal 2016 Minimum lease Payments 2015 Interest 2015 Principal 2015 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 1,730 1,611 3,341 85 61 146 1,645 1,550 3,195 2,356 1,360 3,716 110 40 150 2,246 1,320 3,566 Under the terms of the lease agreements, no contingent rents are payable. The finance lease liabilities are secured on the underlying assets. Gold Loan In March 2010, the Group entered into an agreement (“Gold Loan”) with Sandstorm to sell a portion of the life of mine gold production from its Ming Mine. Under the terms of the agreement Sandstorm made staged upfront cash payments for the gold to the Group totalling US$20 million. For this, in each production year following the first year of production, until 175,000 ounces of payable gold has been produced, the Group has agreed to sell a percentage equal to 25% x (85% divided by the actual percentage of metallurgical recovery of gold realised in the immediately preceding production year) provided that, if the payable gold production in any production year after the third production year is less than 15,000 ounces, then in each such production year, Sandstorm payable gold shall not be less than 25% of the payable gold. In each production year following the first year of production, after 175,000 ounces of payable gold has been produced, the Group has agreed to sell a percentage equal to 12% x (85% divided by the actual percentage of metallurgical recovery of gold realised in the immediately preceding production year) provided that, if the payable gold production in any production year after the third production year is less than 15,000 ounces, then in each such production year, Sandstorm payable gold shall not be less than 12% of the payable gold for the remainder of the period ending 40 years after the date of the agreement. After the expiry of the 40 year term, the agreement is Page 67 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Interest-bearing loans and borrowings (continued) renewable in 10 year terms at the option of Sandstorm. The Gold Loan is accounted for as a financial liability carried at amortised cost. In determining the effective interest rate implicit in the cash flows arising from the loan the cash flows are forecast based on management’s best estimates of the time of delivery of payable gold, the total amount of gold expected to be produced over the mine life and the timing of that production. Total interest of US$2,648,000 (2015: US$3,180,000 reversed) was charged during the period. The Gold Loan is secured by a fixed and floating charge over the assets of the Group. Advance Purchase Facility In July 2015 the Group entered into a purchase agreement with Transamine Trading S.A. (“Transamine”) wherein Rambler has extended its off-take agreement with Transamine with respect to concentrate from the Ming Copper- Gold Mine until December 31, 2021. Pursuant to the terms of the Purchase Agreement, Transamine agreed to purchase in advance, at Rambler’s option, up to US$5 million of concentrate (the “Advance Purchase Payments”). to be used for working capital requirements along with the development and construction of Rambler’s Lower Footwall Zone optimisation plan (Phase II) at the Ming Mine. The Company drew down US$3 million of Advance Purchase Payments and further advances are no longer available under the agreement. At July 31, 2016 the balance was US$1,980,000 which, following an addendum to the Purchase Agreement which saw a lump sum of US$1,000,000 repaid on June 17,2016. The remainder is repayable by twelve monthly instalments of US$176,005 plus interest at 3 month LIBOR plus 7.5%. The repayment by instalments commenced July 15, 2016. The advance purchase payments of US$3,000,000 have been accounted for as a financial liability carried at amortised cost. 25. Provision Reclamation and closure provision Opening balance Charged/(credited) to Mineral Property Unwinding of discount Effect of movements in foreign exchange Ending balance 2016 2015 US$’000 US$’000 1,297 498 38 - 1,833 1,727 (200) 44 (274) 1,297 The reclamation and closure provision has been made in respect of costs of land restoration and rehabilitation expected to be incurred at the end of the Ming Mine’s useful life. The provision has been calculated based on the present value of the expected future cash flows associated with reclamation and closure activities as required by the Government of Newfoundland and Labrador. The provision relates to restoration of all three sites associated with the Ming Mine project: mill, mine and port sites. During the year the Company made an additional provision in respect of its extended stockpile resulting in an amount of US$498,000 being debited to mineral properties (2015: US$200,000 credited to the Mineral Property). The liability is secured by Letters of Credit for US$3,338,728. Page 68 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 26. Financial instruments The Group’s principal financial assets comprise: cash and cash equivalents, restricted cash, available for sale investments, derivative financial instruments and other receivables. In addition the Company’s financial assets include amounts due from subsidiaries. The Group and Company’s financial liabilities comprise: trade payables; other payables; and accrued expenses. The Group’s financial liabilities also include interest bearing loans and borrowings. All of the Group’s and Company’s financial liabilities are measured at amortised cost and their financial assets are classified as loans and receivables and measured at amortised cost with the exception of available for sale investments and derivative financial instruments as described in notes 13 and 16 respectively. The Group held the following categories of financial instruments at July 31, 2016: Financial assets Assets at fair value through profit and loss: Derivative financial instruments – level 2 fair value Available for sale investments: Investment in quoted equity securities – level 1 fair value Loans and receivables: Trade receivables Other receivables Sales taxes recoverable Cash at bank Restricted cash Total financial assets Liabilities at amortised cost or equivalent: Trade payables Non trade payables Accrued expenses Loans and borrowings Total financial liabilities 2016 2015 US$’000 US$’000 587 240 2,402 994 - 206 250 8,929 3,339 12,724 15,713 207 232 402 3,389 2,495 6,725 7,959 2016 2015 US$’000 US$’000 (3,996) (3,396) (217) (193) (1,064) (1,271) (18,796) (18,876) (24,073) (23,736) The board of directors determines, as required, the degree to which it is appropriate to use financial instruments and hedging techniques to mitigate risks. The main risks for which such instruments may be appropriate are liquidity risk, credit risk and market risk which includes foreign currency risk, interest rate risk and commodity price risk each of which is discussed below. Page 69 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 26. Financial instruments (continued) Liquidity risk With finite cash resources the liquidity risk is significant. This risk is managed by controls over expenditure and concentrating on achieving the payment milestones under the financing arrangement. Success will depend largely upon the outcome of on-going and future exploration and development programmes. Given the nature of the Group’s current activities the entity will remain dependent on a mixture of debt and equity funding in the short to medium term until such time as the Group becomes self-financing from the commercial production of mineral resources. The liabilities of the parent company are due within one year. The parent company has adequate financial resources to meet the obligations existing at July 31, 2016. The Group’s and Company’s trade payables, other payables and accrued expenses are generally due between one and three months and the Group’s other financial liabilities are due as follows: Due within one year Due within one to two years Due within two to three years Due within three to four years Due within four to five years Due after five years 2016 US$’000 2015 US$’000 5,516 3,464 2,516 2,341 2,204 14,450 30,491 6,412 3,482 2,046 1,964 2,012 14,368 30,284 Fixed rate financial liabilities At the year end the analysis of finance leases and hire purchase contracts which were all due in Canadian Dollars and are at fixed interest rates was as follows: Fixed rate liabilities Due within one year Due within one to two years Due within two to three years Due within three to four years Due within four to five years 2016 US$’000 2015 US$’000 1,731 772 601 218 19 3,341 2,356 1,125 214 20 1 3,716 The average fixed interest rate for the finance leases and hire purchase contracts outstanding at July 31, 2016 was 4.6%. Credit risk The Group generally holds the majority of its cash resources in Canadian dollars given that the majority of the Group’s outgoings are denominated in this currency. Given the current climate, the Group has taken a very risk averse approach to management of cash resources and management and Directors monitor events and associated risks on a continuous basis. There is little perceived credit risk in respect of trade and other receivables (see note 16). The Group maximum exposure to credit risk at July 31, 2016 was represented by receivables and cash resources. Page 70 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 26. Financial instruments (continued) Market risk Foreign currency risk The Company has a small amount of cash resources and certain liabilities including the Gold loan and the advance purchase agreement denominated in US dollars. All other assets and liabilities are denominated in Canadian dollars and GB pounds. Revenue is generated in US dollars while the majority of the expenditure is incurred in Canadian dollars and, to a lesser extent, GB pounds. The Company has a downside exposure to any strengthening of the Canadian Dollar or GB pound as this would increase expenses in US dollar terms. This risk is mitigated by reviewing the holding of cash balances in Canadian Dollars and GB pounds. Any weakening of the Canadian Dollar or GB pound would however result in the reduction of the expenses in US dollar terms. In addition movements in the Canadian dollar and GB pound/US Dollar exchange rates would affect the Consolidated Balance Sheet. The policy in relation to the translation of foreign currency assets and liabilities is set out in note 2(d), 'Accounting Policies Foreign Currency' to the consolidated financial statements. The Group does not hedge its exposure of foreign investments held in foreign currencies. There is no significant impact on profit or loss from foreign currency movements associated with the Parent company’s assets and liabilities as the foreign currency gains or losses are recorded in the translation reserve. Exchange rate fluctuations may adversely affect the Group’s financial position and results. The following table details the Group’s sensitivity to a 10% strengthening and weakening in the GB pound and Canadian Dollar against the US Dollar. 10% represents management’s assessment of the reasonable possible exposure. 10% strengthening of GB pound 10% weakening of GB pound 10% strengthening of Canadian dollar 10% weakening of Canadian dollar Equity 2016 2015 US$’000 US$’000 (783) 712 (291) 265 (47) 43 (404) 367 Page 71 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 26. Financial instruments (continued) Market risk (continued) Foreign currency risk (continued) At the year end the cash and short term deposits were as follows: At July 31, 2016 Canadian $ US $ Sterling At July 31, 2015 Canadian $ US $ Sterling Floating rate Assets Total $’000 $’000 757 17 8,155 8,929 720 17 8,192 8,929 $’000 $’000 1,205 2,101 83 3,389 1,205 2,101 83 3,389 Interest rate risk The Group's policy is to retain its surplus funds on the most advantageous term of deposit available up to twelve month's maximum duration. Details of the Group’s borrowings are described in note 24. If the interest rate on deposits were to fluctuate by 1% there would be no material effect on the Group’s and Company’s reported results. Commodity price risk Commodity price risk is the risk that the Group’s future earnings will be adversely impacted by changes in the market prices of commodities. The Group is exposed to commodity price risk as its future revenues will be derived based on contracts with customers at prices that will be determined by reference to market prices of copper and gold at the delivery date. As explained in note 3 the Group calculates the effective interest rate on the Gold Loan based on estimates of future cash flows arising from the sale of payable gold. In estimating the cash flows the following table details the Group’s sensitivity to a 10% increase and a 25% decrease in the price of gold. These percentages represent management’s assessment of the reasonable possible exposure. 10% increase in the price of gold 25% decrease in the price of gold Gross assets 2015 2016 US$’000 US$’000 (1,370) 3,425 (1,609) 4,021 Page 72 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 26. Financial instruments (continued) Market risk (continued) Commodity price risk (continued) Receivables in respect of the sale of copper concentrate which contain an embedded derivative linking them to future commodity prices are measured at fair value through profit and loss and are treated as derivative financial assets or liabilities. In estimating the value of the derivative the following table details the Group’s sensitivity to a 5% increase and a 5% decrease in the price of copper, gold and silver. These percentages represent management’s assessment of the reasonable possible exposure. 5% increase in the price of copper, gold and silver 5% decrease in the price of copper, gold and silver Gross assets 2015 2016 $’000 $’000 434 (434) 804 (804) Financial assets The floating rate financial assets comprise interest earning bank deposits at rates set by reference to the prevailing LIBOR or equivalent to the relevant country. Fixed rate financial assets are cash held on fixed term deposit. Fair values In the directors’ opinion there is no material difference between the book value and fair value of any of the Company’s financial instruments. Page 73 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 27. Related parties Identity of related parties The Group has a related party relationship with its subsidiaries and with its directors and executive officers. Transactions with key management personnel The directors’ compensations were as follows: Salary – executive N Williams Fees – non-executive B A Mills B Labatte M V Sander T I Ackerman G Poulter G Ogilvie L D Goodman T S Chan J Thomson E C Chen Share options held by directors were as follows: G Ogilvie N Williams1 J Thomson D H W Dobson L D Goodman 2016 $’000 2015 $’000 282 292 5 5 5 5 17 32 23 10 18 14 416 - - - - 13 63 24 24 24 24 464 At 31.07.16 At 31.07.15 No. No. ‘000 N/A 1,175 N/A N/A N/A 1,175 ‘000 1,100 1,175 400 45 45 2,765 1 100,000 options at an exercise price of $0.96 expiring on 7 July 2018, 75,000 options at an exercise price of $0.18 expiring on 10 November 2018, 250,000 options at an exercise price of $0.50 expiring on 7 May 2020 and 750,000 options at an exercise price of $0.50 expiring on 19 February 2024. Total key management personnel compensations were as follows: Short term employee benefits Social security costs Share based payments 2016 $’000 2015 $’000 412 37 19 468 656 41 61 758 Page 74 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 27. Related parties (continued) Subsidiaries The company has interests in the following material subsidiary undertakings, which are included in the consolidated financial statements. Name Class Holding Activity Country of Incorporation Rambler Mines Limited Rambler Metals and Mining Canada Limited Ordinary 100% Holding company England Common 100% (indirectly) Exploration, Canada 1948565 Ontario Resources Inc. Common 100% development and mining Exploration Canada Ultimate and controlling party CE Mining II Rambler Limited, a controlling shareholder of the Company, holds 200,000,000 warrants which equates to US$2.089m (see Note 21). Following the allotment of 261,363,636 shares during the year to CE Mining II Rambler Limited, CE Mining Fund II L.P. became the controlling shareholder of the Company. 28. Subsequent events On August 22, 2016 the Company issued 9,405,000 options to employees at an exercise price of US$0.06. The options were issued to advance the interests of the Company by providing the directors, senior officers and employees a performance incentive for continued and improved service enhancing their contribution to increased shareholder return by encouraging share ownership. On August 29, 2016 and September 8, 2016 the Company sold 1,176,500 and 190,000 common shares respectively of Marathon Gold Corporation thereby divesting approximately 50% of its equity stake for gross proceeds of US$0.8 million. Page 75 RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF COMPREHENSIVE INCOME For the Year Ended July 31, 2016 (EXPRESSED IN US DOLLARS) Loss for the year Other comprehensive income Items that may be reclassified into profit or loss Exchange differences on translation into presentation currency Other comprehensive loss for the year Total comprehensive loss for the year 2016 US$’000 2015 US$’000 5,870 (5,594) (9,252) (9,252) (5,156) (5,156) (3,382) (10,750) Page 76 REGISTERED NUMBER: 05101822 (ENGLAND AND WALES) RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF FINANCIAL POSITION As at July 31, 2016 (EXPRESSED IN US DOLLARS) Assets Investments Deferred tax Total non-current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity Issued capital Share premium Warrants reserve Translation reserve Retained profit Total equity Liabilities Trade and other payables Total current liabilities Total liabilities Total equity and liabilities ON BEHALF OF THE BOARD: Note C3 C4 C5 C6 21 C7 2016 US$’000 2015 US$’000 55,861 1,567 57,428 41 8,155 8,196 65,624 6,374 81,455 2,089 (8,746) (15,759) 65,413 211 211 211 51,968 1,651 53,619 61 86 147 53,766 2,471 72,128 - 506 (21,643) 53,462 304 304 304 65,624 53,766 N P Williams Director Approved and authorised for issue by the Board on October 21, 2016. Page 77 RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF CHANGES IN EQUITY (EXPRESSED IN US DOLLARS) Balance at August 1, 2014 Comprehensive income Loss for the year Foreign exchange translation differences Total other comprehensive income Total comprehensive loss for the year Share based payments Transactions with owners Balance at July 31, 2015 Balance at August 1, 2015 Comprehensive income Loss for the year Foreign exchange translation differences Total other comprehensive income Total comprehensive loss for the year Issue of shares Share issue expenses Share based payments Transactions with owners Balance at July 31, 2016 Share capital US$’000 Share premium US$’000 Warrants reserve US$’000 Translation reserve US$’000 Accumulated losses US$’000 Total US$’000 2,471 72,128 - - - - - - - - - - - - 2,471 72,128 2,471 72,128 - - - - 3,903 - - 3,903 6,374 - - - - 10,223 (896) - 9,327 81,455 - - - - - - - - - - - - - 2,089 - 2,089 2,089 5,662 (16,107) 64,154 - (5,594) (5,156) (5,156) (5,156) - - 506 - - (5,594) 58 58 (21,643) (5,594) (5,156) (5,156) (10,750) 58 58 53,462 506 (21,643) 53,462 - 5,870 (9,252) (9,252) (9,252) - - - - (8,746) - - 5,870 - - 14 14 (15,759) 5,870 (9,252) (9,252) (3,382) 16,215 (896) 14 15,333 65,413 Page 78 RAMBLER METALS AND MINING PLC STATEMENT OF CASH FLOWS For the Year Ended July 31, 2016 (EXPRESSED IN US DOLLARS) Cash flows from operating activities Operating profit/(loss) Share based payments Foreign exchange losses Decrease/(increase) in debtors Increase in creditors Net cash utilised in operating activities Cash flows from investing activities Acquisition of subsidiary Advances to subsidiaries Loans repaid by subsidiaries Net cash generated from/( utilised in) investing activities Cash flows from financing activities Proceeds from the issue of share capital Share issue expenses Net cash from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of period 2016 $’000 5,695 14 (7,258) 20 (92) (1,621) (70) (5,277) 1,530 2015 $’000 (5,848) 58 4,573 26 91 (1,100) - - 1,063 (3,817) 1,063 15,105 (896) 14,209 8,771 86 (702) 8,155 - - - (37) 133 (10) 86 Page 79 RAMBLER METALS AND MINING PLC NOTES TO THE COMPANY FINANCIAL STATEMENTS C1. Accounting policies The accounting policies of the Company are consistent with those adopted by the Group with the addition of the following: Investments Investments are stated at their cost less impairment losses. C2. Loss of parent company As permitted by section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these financial statements. The parent company’s profit for the financial year was $5,925,000 (2015: loss $5,594,000). C3. Investments Cost Balance at August 1, 2014 Repayments (net) Effect of movements in foreign exchange Balance at July 31, 2015 Balance at August 1, 2015 Acquisition of subsidiary Advances Repayments Effect of movements in foreign exchange Balance at July 31, 2016 Investment in subsidiary $’000 Loans $’000 Total $’000 406 - (33) 373 373 1,110 - - 15 1,498 62,262 (1,064) (9,603) 51,595 51,595 - 5,277 (1,530) (979) 54,363 62,668 (1,064) (9,636) 51,968 51,968 1,110 5,277 (1,530) (964) 55,861 The company has interests in the following subsidiary undertakings, which are included in the consolidated financial statements. Name Class Holding Activity Country of Incorporation Rambler Mines Limited Rambler Metals and Mining Canada Limited Ordinary 100% Holding company England Common 100% (indirectly) Exploration, Canada 1948565 Ontario Inc. Common 100% development and mining Exploration Canada The aggregate value of shares in subsidiary undertakings is stated at cost. The loans to the subsidiary undertakings are interest free. Page 80 RAMBLER METALS AND MINING PLC NOTES TO THE COMPANY FINANCIAL STATEMENTS C4. Deferred tax The Company has incurred losses which will be available for offset against future taxable profits. Given the continuing profitability of one of the Company’s subsidiaries it has been concluded that the Company has sufficient evidence of future taxable profits to justify the recognition of a deferred tax asset of $1.6 million (2015: US$1.6 million). C5. Trade and other receivables Sales taxes recoverable Prepayments and accrued income C6. Cash and cash equivalents Bank balances Cash and cash equivalents in the statement of cash flows C7. Trade and other payables Trade payables Non trade payables Accrued expenses C8. Related party transactions 2016 2015 $’000 $’000 24 17 41 14 47 61 2016 2015 $’000 $’000 8,155 8,155 86 86 2016 $’000 105 1 105 211 2015 $’000 82 1 221 304 The Company has a related party relationship with its subsidiaries (see note C3) and with its directors and executive officers (see note 27). Transactions with subsidiary undertakings Details of loans advanced to subsidiary undertakings are included in note C3. Other related parties Transactions with other related parties are detailed in note 27. Page 81 

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