Rambler Metals and Mining PLC
Annual Report 2018

Plain-text annual report

REGISTERED NUMBER: 05101822 (ENGLAND AND WALES) RAMBLER METALS AND MINING PLC ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 RAMBLER METALS AND MINING PLC CONTENTS OF THE FINANCIAL STATEMENTS Company Information Chairman’s Statement Strategic Report Corporate Governance Statement Report of the Directors Directors’ Responsibilities 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 2 3 5 24 32 34 35 41 42 43 44 45 46 79 80 81 82 83 RAMBLER METALS AND MINING PLC COMPANY INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2018 Directors: Secretary: Registered office: T I Ackerman# E C Chen# B Labatte# B A Mills# G R Poulter# M V Sander# A A Booyzen (appointed 1st April 2019) N P Williams (resigned 31st March 2019) P Mercer (resigned 18th April 2019) T Sanford (appointed 19th April 2019) 3 Sheen Road Richmond Upon Thames Surrey TW9 1AD Registered number: 5101822 (England and Wales) Auditor: Bankers: Solicitors: #Independent directors Deloitte LLP Hill House 1 Little New St London EC4A 3TR HSBC plc 69 Pall Mall London SW1Y 5EY Norton Rose Fulbright 3 More London Riverside London SE1 2AQ Page 2 RAMBLER METALS AND MINING PLC CHAIRMAN’S STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2018 Fiscal 2018 saw the completion of the Phase II expansion plan for the Ming Copper-Gold Mine, targeting production of 1,250 metric tonnes per day (‘mtpd’) with a life of mine now over 20 years based on current mineral reserves. The operation was successful in setting a throughput record for the year of approximately 364,000 dry metric tonnes (‘dmt’), a seven percent increase year over year. At the Nugget Pond copper and gold milling facility processing improvements continued to show the plant’s ability to process at the targeted throughput rate while achieving daily record ore throughput as high as 1,395 dmt per day. The mine ventilation project was successfully completed during March 2018. The mine’s ventilation system was reversed allowing for increased “in mine time” which has provided for consistent increases in mine production and improved cycle times. Given the productivity improvements we are now turning our attention to increasing the overall mill feed grade and returning the Company to positive cash flows. There is a positive long term outlook for the copper price, which bodes well for future mine expansion plans. With the completion of the Phase II expansion, and an expected return to positive cash flow, the Company will continue its evaluation on a potential Phase III expansion to demonstrate the full value of the copper-gold asset with an optimized mine and mill production plan. Given its successes during the year the Company will also look to continue its surface exploration drill program. In 2017 the surface drilling program demonstrated that the Lower Footwall Zone (‘LFZ’) mineralization continues well beyond the currently defined mineral reserves with increases in grade and thickness at depth. The final drill hole in the 2017 returned the thickest LFZ mineralization discovered on the property to date, returning 1.65% copper over 102 meters including 36 meters of 2.59% copper. These initiatives could potentially add significant longer-term value to the project. The Board appointed Andre Booyzen as the Chief Executive Officer effective 3rd April 2019. Andre will strengthen Rambler’s position as an expanding, profitable copper gold producer with a long life and extensive growth opportunities looking ahead. Mr. Booyzen has over 15 of years of experience in positions of growing accountability in the mining sector. He has a history of consistent delivery of safety improvements, operational performance improvements, and financial turnarounds at underground mines, most recently at Mandalay Resources’ Costerfield mine, Australia. ‐ FINANCIAL RESULTS The Company’s financial results for the period reflect the stage reached in its Phase II expansion. As a result, the Company generated higher revenue compared with prior periods as well as higher production. The results include: • The Company generated revenue from sale of commodity and related services of US$31.4 million (2017: US$28.3 million) from the sale of copper concentrate containing gold and silver by-products. • An operating loss of US$17.2 million (2017: US$7.4 million loss). • Cash outflow of US$2.3 million from operations (2017 cash generated of US$1.3 million) during the year. • • • • The consolidated loss after taxation for the year amounted to US$20.0 million (loss per share of US$0.033) compared to a loss of US$4.1 million for 2017 (loss per share of US$0.008). Earnings before interest, taxes, depreciation, amortisation (“EBITDA*”) for the year was a loss of US$7.5 million (2017: earnings of US$2.8 million). The gross assets of the Company amounted to US$82.2 million (2017: US$97.1 million) at the end of the year. This included mineral property of US$35.4 million (2017: US$38.8 million) and intangible assets of US$3.2 million (2017: US$3.4 million) which consists of accumulated deferred exploration and evaluation expenditures. The Company’s cash balance at year end was US$0.2 million and net debt* was US$11.4 million (2017: US$6.6 million). Cash balance as of signing date was US$2.8 million. Words with the symbol * are defined as Alternative Performance Measures. For more information on APMs used by the Group, including definitions, please refer to page 18 of the Annual Report. Page 3 RAMBLER METALS AND MINING PLC CHAIRMAN’S STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) • Copper prices diminished materially during the year dropping from US$ 3.26/lb on January 1st 2018 to US$2.71/lb on December 31st 2018. The Company remains confident of an improving price outlook due to increasing shortages of metal and continued pressures from further downside supply issues. We are confident that we will reach our targeted production in 2019 and we look forward to updating the market on our progress over the coming months. B Mills Chairman June 4, 2018 Page 4 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 STRATEGIC REPORT, including appendices, is intended to help the reader understand Rambler Metals and Mining plc (‘the parent company’) and its subsidiaries (the ‘Company’ or ‘Rambler’), our operations and our present business environment. It has been prepared as of April 30, 2019 and covers the results of operations for the year ended December 31, 2018. This discussion should be read in conjunction with the audited Financial Statements for the year ended December 31, 2018 and notes thereto. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and their interpretations adopted by the International Accounting Standards Board (“IASB”), as adopted by the European Union and with IFRS and their interpretations adopted by the IASB. The Company’s presentation currency is US dollars (US$) and the financial information is in US$ unless otherwise stated. These statements together with the following STRATEGIC REPORT are intended to provide investors with a reasonable basis for assessing the potential future performance. See Forward Looking Statement disclosure in other matters (page 20). OVERVIEW The Company is transforming the Ming Copper-Gold Mine Project (‘the Project’) with a fully funded expansion. Its principal activity is the development, mining and exploration of the Project in Newfoundland and Labrador (see map on page 17) with a longer term goal of continued exploration and development of other properties in its portfolio, all located in Canada. The Company is looking forward to: 1. Optimizing production to above the 1,300 mtpd optimized design and further reducing costs. The focus of the cost improvement efforts will be: maintenance practice improvements to increase equipment availability in the mine; cycle time improvements for improved productivity in the mine; improving grade control and upgrading low grade material by crushing and screening; and improving gold and silver recovery in the plant. 2. Following sustained production and improved cash flow at the planned tonnes and grade the Company will continue with engineering studies with a view to further increase production to 2,000 mtpd and beyond. Detailed engineering will continue in 2019/2020 and will include: underground material handling options; shaft rehabilitation; expanding the Nugget Pond mill versus building a higher capacity mill nearer to the mine. 3. Continue the diamond drilling exploration programs, from underground and surface, aiming to increase available resources and reserves through continued exploration within the Ming mine mineralized trend, as well as some nearby properties. See Forward Looking Information in other matters (page 20). The Company’s 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 Company’s Ordinary Shares trade on the London AIM market under the symbol “RMM”. Page 5 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2018  Production of 364,176 dmt for the year (2017: 339,631 dmt), a 7% increase, with copper concentrate grade of 28% (2017: 28%).  Intersected significant Ming North Zone mineralization in the underground drilling program including hole R18-722-12 which returned 25.5 meters downhole length of 9.4% copper with 5.1 g/t gold.  Revenue for the year was US$31.4 million (2017: US$28.3 million). The increase in revenue compared to prior year is mainly due higher production and higher copper prices during the year.  Average prices for the year were US$2.93 (2017: US$2.79) per pound of copper and US$1,265 (2017: US$1,257) per ounce gold.  Operating loss for the year was US$17.2 million (2017: US$7.4 million). EBITDA* for the year was a loss of US$7.5 million (2017: earnings of US$2.8 million).  Cash production costs for the year were US$32.0 million (2017: US$25.4 million). Net direct cash costs net of by-product credits (‘C1 costs*’) for the year were US$3.52 per pound of saleable copper (2017: US$2.86). Refer page 18.  Cash outflow from operations for the year was US$2.3 million (2017: Cash generated of US$1.3 million). SUBSEQUENT EVENTS • • In January 2019 the Company, via its wholly-owned subsidiary, Rambler Metals and Mining Canada Limited, received a bridge loan from CE Mining III Rambler Limited (“CEIII”) of US$1 million bearing interest of 10% per annum in support of short-term working capital requirements at its Canadian operation. In March 2019 the Company closed a private placement funding of US$11 million by way of an issuance of 599,781,897 new ordinary shares in the capital of Rambler at a subscription price of US$0.018 (£0.014) per ordinary share. The proceeds of the subscription were for working capital purposes and to repay the US$1 million unsecured loan owing to CEIII. The loan was fully repaid in March 2019 including interest. • An Open Offer for shares was closed in April 2019 with 37,940,043 ordinary shares issued for proceeds of £524,860.58. • The shares of the company delisted from TSX Venture Exchange (TSXV) at the close of 15th January 2019. The minimal trading activity of the Company’s Shares on the TSXV no longer justified the expense and administrative requirements associated with maintaining this dual listing. Page 6 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2018 Revenue  A total of 15,525 dmt (2017 – 14,907 dmt) of concentrate was provisionally invoiced during the year containing 4,187 (2017 – 3,968) tonnes of saleable copper metal and 4,189 (2017 – 3,357) ounces of saleable gold at an average price of US$2.93 (2017 – US$2.79) per pound copper and US$1,264 (2017 - US$1,257) per ounce gold, generating revenue of US$29.7 million (2017 – US$30.3 million). Costs  Cash production costs for the year were US$32.0 million (2017: US$25.4 million). Net cash direct costs per pound of copper net of by-product credits (‘C1*’) for the year were US$3.52 per saleable copper pound (2017 - US$2.86). Saleable copper in the period was 9.1 million pounds (2017 – 8.7 million pounds). Lower head grade, together with increased operating development costs from mining the post pillar cut and fill (‘PPCF’) areas in the LFZ contributed to the rise in C1 costs* compared to 2017.  Sustained throughput at 1,250 mtpd and improvements in grade towards an average of 1.5% Cu will have a positive effect on C1 costs* which are expected to decline towards US$2.00 and will decline further as production moves away from PPCF mining towards less expensive bulk mining methods (longitudinal stoping).  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. C1 and C3 costs per pound of saleable copper C1 C3 6.00 5.00 4.00 3.00 2.00 1.00 0.00 8 1 0 2 1 Q 8 1 0 2 2 Q 8 1 0 2 3 Q 8 1 0 2 4 Q Avg Cu price per pound 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 Alternative Performance Measures (page 18) for a reconciliation of these measures to reported production expenses. Page 7 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) Loss  The net loss before tax for the year was US$18.3 million (2017: US$5.4 million).  EBITDA* for the year was a loss of US$7.5 million (2017: earnings of US$2.8 million). Cash flow and cash resources  Cash outflow from operations for the year were US$2.3 million (2017: cash generated of US$1.3 million). The decrease in the cash generated relates to the operating loss and changes in working capital. The cash balance at December 31, 2018 was US$0.2 million (2017: 3.4 million). Financing and Investment  During the year, a repayment of US$1.8 million (2017: US$1.1 million) (project to date $20.4 million) was made on the Company’s Gold streaming from the delivery of 1,395 payable ounces (2017: 876) of gold (project to date 14,257 (2017: 12,862) ounces have been delivered).  Net debt* excluding the Gold streaming was US$11.4 million (2017: US$6.6 million).  In March 2019 the Company closed a private placement funding of US$11 million by way of an issuance of 599,781,897 new ordinary shares in the capital of Rambler at a subscription price of US$0.018 (£0.014) per ordinary share. The proceeds of the subscription were for working capital purposes and to repay the US$1 million unsecured loan owing to CEIII. The loan was fully repaid in March 2019 including interest.  An Open Offer for shares was closed in April 2019 with 37,940,043 ordinary shares issued for proceeds of £524,860.58. Page 8 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) FINANCIAL RESULTS FOR YEAR ENDED DECEMBER 31, 2018 (Continued) OPERATIONAL SUMMARY Ore and Concentrate Production Summary for Fiscal 2018 PRODUCTION 2018 2017 Dry Tonnes Milled 364,176 339,631 Copper Recovery (%) 96.3 95.6 Gold Recovery (%) 70.7 60.7 Copper Head Grade (%) 1.24 1.27 Gold Head Grade (g/t) 0.57 0.58 CONCENTRATE (Delivered to Warehouse) Copper (%) Gold (g/t) 2018 2017 28.1 27.7 9.4 8.0 Dry Tonnes Produced 15,525 14,907 Saleable Copper Metal (tonnes) 4,187 3,968 Saleable Gold (ounces) 4,189 3,357 • For the fiscal year the Nugget Pond copper and gold milling facility achieved record throughput for ore processed. The facility processed 364,176 dmt at 1.24% copper and 0.58 g/t gold in 2018. • Recovery of metal to concentrate was 96.3% and 70.7% for copper and gold respectively for the quarter (96.1% and 61.0% for the 2017 fiscal year). For the full year the operation produced 15,525 tonnes (2017: 14,907 tonnes) of concentrate containing saleable metal of 4,187 tonnes (2017: 3,968 tonnes) of copper and 4,189 ounces (2017: 3,357 ounces) of gold. • Rambler delivered on all of its safety targets during 2018. For the fiscal year there was one lost time incident and no fatalities. • Mine performance has shown significance improvements from 2018 compared to 2017. Mostly notably improvements include: o Production drilling meters increased 20% (2018: 38,179 m, 2017: 31,857 m) o Total material hauled increased 8% (2018: 1,508 mtpd, 2017: 1,399 mtpd) o Production blasting increased 27% (2018: 141,660 dmt, 2017: 111,531 dmt) o Mine ore produced increase 6% (2018: 364,363 dmt, 2017: 343,032 dmt) Page 9 OUTLOOK Management continues to pursue the following objectives:  Further evaluate the potential of a Phase III operation with increase in mine production and mill throughput to 2,000 mtpd, and beyond.  Continuing with the underground exploration program to allow for further exploration of the mineralized trends both up-dip and down-dip with the goal to increase near-mine mine resource and reserves.  Updating the resource model and mine plans to enable access to higher grade areas of the mine, sooner.  In late 2019 and/or early 2020 to continue with the surface exploration diamond drilling program aimed to double the current plunge length of the known massive sulphide and LFZ mineralization. Page 10 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) FINANCIAL REVIEW Fiscal 2018 (US$000’s) Commentary Revenue of US$31.4 million was generated through the sale of 15,525 dmt of copper concentrate containing 4,187 tonnes of accountable copper metal and 4,189 ounces of accountable gold. This compared with revenue of US$28.3 million in 2017 which was generated through the sale of 14,907 dmt of copper concentrate containing 3,968 tonnes of accountable copper metal and 3,357 ounces of accountable gold. Revenue also includes a decrease in fair value adjustments with regards to provisional invoices of US$1.7 million (2017: increase of 2.0 million) Production costs relate to the processing and mining costs associated with the Company’s Ming Mine and include processing costs of US$6.3 million (2017: US$5.6 million), mining costs of US$24.9 million (2017: US$20.8 million) and depreciation and amortisation of US$9.9 million (2017: US$7.8 million). The cost of production of pounds of copper increased during the year due to lower head grades compared to the previous year. General and administrative expenses were higher than the previous year by US$2.4 million mainly due to increase in legal and professional fees by US$ 2.2 million as Highland Group, a consulting firm, conducted an efficiency program during the year. Foreign exchange gains/(losses) arising on the Gold streaming increased in the year as a result of weakening of the Canadian dollar against the US dollar during the period. Income tax debit The income tax debit is the deferred tax debit due to full reversal deferred tax asset of Rambler UK as it is not expected the company will make profit to recover losses. The credit for 2017 includes an amount of US$1.2 million in respect of mining tax. 29,718 41,091 5,823 (1,503) (1,680) 3,879 Addition to Mineral property The Company incurred costs of US$3.9 million in the year which included labour costs of US$1.9 million and underground development costs of US$2.9 million. In 2017 the Company incurred costs of US$5.3 million including labour of US$2.6 million and underground development costs of US$2.7 million. 3,189 Capital spending on property, plant and equipment during the year included US$1.7 million (2017: US$6.1 million) spent on underground equipment and US$1.5 million (2017: US$2.7 million) spent on assets under construction including ventilation upgrades and reclamation and closure works related directly to the Phase II expansion. Comparatives 2017 (US$000’s) B/ (W)* 30,339 (2)% 34,242 (20)% 3,441 (69)% 940 (260)% 1,296 (229)% 5,278 (27)% 8,053 (60)% Capital spending on exploration and evaluation in the year relates to Little Deer US$ 30K (2017: US$41K) and Mine Ming US$18K (2017: 979K), the spend reduced compared to prior year due to increased focus on delineation drilling at the Ming Mine operation. 48 1,020 (95)% *B / (W) = Better / (Worse) Page 11 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION 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. The financial statements have been prepared on a going concern basis which assumes that the Group will be able to realise its assets and settle its obligations in the normal course of business. The financial statements do not reflect adjustments to the carrying values and classification of assets and liabilities that would be necessary should the Group be unable to continue as a going concern. Such adjustments might be material. The Group intends to fund its operations and growth from the operating cash flows of the Ming mine, and to the extent required, through the accessing of equity and debt markets and the proceeds from the exercise of warrants. Management believes that the Ming Mine will generate enough operating cash flows to support the day to day activities and future growth requirements of the business, but there is a risk that production not ramping up in line with forecasts or lower than forecast commodity prices will result in the need for additional financing. Refer to the “subsequent events” above for details of equity raising. Historically the Company has been successful in accessing equity and debt markets to finance the acquisition and development of the Ming Mine site, and management is currently finalising talks with a third party to obtain additional funding within the coming weeks. However, as this funding is not yet committed, it is not wholly within the Group’s control and this represents a material uncertainty which casts significant doubt upon the Group’s continued ability to operate as a going concern, such that it may be unable to realise its assets and discharge its liabilities in the normal course of business. Cash flows utilized in investing activities amounted to US$6.6 million for the year (2017: US$10.4 million). Cash of US$3.9 million (2017: US$5.3 million) was spent on the Company’s Mineral Property, US$3.2 million (2017: US$4.1 million) was spent on property, plant and equipment and US$0.05 million (2017: US$1.0 million) was spent on exploration at the Ming mine. Cash flows generated from financing activities during the year amounted to US$5.8 million (2017: US$10.2 million) and included repayments of the Gold streaming of US$1.8 million (2017: US$1.1 million), finance lease repayments of US$2.1 million (2017: US$2.6 million) and advanced purchase facility repayments US$1.5 million (2017: US$1.1 million) offset by US$2.0 million received from CE III Mining Rambler Limited, US$0.6 million from government assistance, US$1.5 million from Sandstorm and funds received, net of expenses, on issue of share capital of US$7.3 million (2017: 8.3 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$3.2 million (FY2017: US$3.5 million). 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 streaming 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, equity 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 the Company’s financial liabilities are measured at amortised cost. Page 12 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION (CONTINUED) Financial Instruments (continued) 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 24 of the financial statements for the year ended December 31, 2018. COMMITMENTS AND LOANS Gold streaming In March 2010, the Company entered into an agreement (“Gold streaming”) 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 to the Company totalling US$20 million in return for gold. 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 to Sandstorm 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. Rambler purchases the payable gold from the market and repayment is made in kind to Sandstorm. The Gold streaming is accounted for as a financial liability carried at fair value through profit and loss. The liability is based on management’s best estimate of the time of delivery of payable gold, the total amount of gold expected to be produced over the life of the mine, the timing of production, the Company’s view on forecast gold prices and the rate implicit in the loan at the date of inception. The movement in the fair value of the liability recognised in the income statement during the period was a credit of US$1.3 million (2017: US$0.6 million charge). The Gold streaming is secured by a fixed and floating charge over the assets of the Company. Government Assistance To date the Company has received US$1.2 million (2017: US$0.6 million) in interest free repayable contributions from a Canadian government agency. Contributions to a total of US$1.6 million are available in support of the Phase II expansion project for the mine. The contributions are repayable over eight years from May 2019. The fair value of the contributions received calculated at a market interest rate of 10% have been classified as a financial liability with the difference between the fair value and the amount received credited against the cost of assets under construction. Page 13 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) COMMITMENTS AND LOANS (CONTINUED) Advance Purchase Facility During 2017, the Company repaid the balance of an advanced purchase agreement originally signed in July 2015 with Transamine Trading S.A. (“Transamine”). Then in December 2017, the Company entered into a new advance purchase facility with Transamine. Pursuant to the terms of the Purchase Agreement, Transamine agreed to purchase in advance, at Rambler’s option, up to US$4 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 Project. At December 31, 2018 the balance was US$3.8 million (2017: US$4.0 million). The loan is repayable by eighteen monthly instalments of US$222,222 plus interest at 6.75% per annum commencing June 28, 2018. Related party loan CE Mining III Rambler Limited In November 2018 the Company received a convertible loan of US$2 million from CE Mining III Rambler Limited with a maturity of one year. The loan is unsecured, convertible at the option of CE Mining III Rambler Limited on or before November 26, 2019 at a share price of C$0.05. It carries interest at 10.0% per annum. Expenses worth US$0.3 million were spent with regards to the loan, these expenses have been classified as deferred expenses and will be amortised during the loan term. At 31st December 2018 the balance was US$1.7 million including interest of US$0.02 million and deferred cost of US$0.3 million. CE Mining II Rambler Limited In October 2017 the company received a loan of US$1 million from CE Mining II Rambler Limited. The loan was unsecured and carried interest at 9.5% per annum. In June 2018 Company repaid U$1.0 million including interest. Finance lease balances At December 31, 2018 the Company had finance lease commitments of US$3.7 million (2017: US$4.6 million). The Company entered into finance lease commitments of US$1.6 million (2017: US$2.2 million) to finance the acquisition of underground mobile equipment during the period. Subsequent events The group received a bridge loan from CE Mining III Rambler Limited (“CEIII”) of US$1 million subsequent to the year end. Refer to note 26 for further details. Page 14 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) OFF BALANCE SHEET ARRANGEMENTS The Company has no off balance sheet arrangements. RELATED PARTY TRANSACTIONS Identity of related parties The Group has a related party relationship with its subsidiaries and with its directors and executive officers. Transactions with key management personnel The directors’ compensations were as follows: Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 255 242 21 19 21 19 86 19 21 19 17 15 21 19 442 352 Dec 31, 2018 Dec 31, 2017 No. ‘000 No. ‘000 7,800 4,575 7,800 4,575 Dec 31, 2018 Dec 31, 2017 $’000 $’000 585 508 27 26 116 58 728 592 Salary – executive N Williams* Fees – non-executive B A Mills B Labatte M V Sander T I Ackerman G Poulter E C Chen Share options held by directors were as follows: N Williams Total key management personnel compensations were as follows: Short-term employee benefits Social security costs Share-based payments *Norman Williams resigned as a director from 31st March 2019. Page 15 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) RELATED PARTY TRANSACTIONS (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 Registered address Rambler Mines Limited Ordinary 100% Holding company England Rambler Metals and Mining Canada Limited Common 100% (indirectly) Exploration, development and mining Canada 1948565 Ontario Inc. Common 100% Exploration Canada 3 Sheen Road Richmond Upon Thames, Surrey TW9 1AD PO Box 610 Baie Verte, NL A0K 1B0 PO Box 610 Baie Verte, NL A0K 1B0 Ultimate and controlling party CE Mining II Rambler had shareholding of 60% as of 31st December 2018. The Group also has a number of related party loans, details of which are disclosed on page 14. Page 16 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) LOCATION MAP Page 17 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) ALTERNATIVE PERFORMANCE MEASURES The Company has included Alternative 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, earnings before interest, taxes, depreciation, amortisation (‘EBITDA’) and net debt. 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 December 31, 2017: Cash Operating Cost All amounts in 000s of US Dollars except pounds of saleable copper 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 C3 per Pound of Saleable Copper All amounts in 000s of US Dollars except pounds of saleable copper Net direct cash costs (see above) Depreciation and amortisation Corporate Cash Expense Cash Interest Expense Fully allocated costs (C3 cost) Pounds of saleable copper C3 cost per pound of saleable copper Year to Dec 31, 2018 Year to Dec 31, 2017 $ $ $ $ $ $ 31,204 31,204 4,564 (3,730) 32,038 9,091 $ $ $ $ $ 26,444 26,444 2,173 (3,224) 25,393 8,876 3.52 $ 2.86 Year to Dec 31, 2018 Year to Dec 31, 2017 $ 32,038 $ 9,921 878 653 43,490 $ 9,091 25,393 7,824 1,061 463 34,741 8,876 4.78 $ 3.91 $ $ Page 18 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) ALTERNATIVE PERFORMANCE MEASURES (continued) EBITDA is a widely used metric of corporate profitability. EBITDA is a measure of a company's overall financial performance and is used as an alternative to simple earnings or net income in some circumstances. EBITDA is used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. Earnings before interest, tax and depreciation All amounts in 000s of US Dollars Profit/(loss) after tax per Financial statements Taxation Net interest Depreciation and amortisation EBITDA $ $ Year to Dec Year to Dec 31, 2018 31, 2017 (20,046) $ (4,148) 1,680 895 (1,296) 379 9,921 7,824 (7,550) $ 2,759 Net debt is a liquidity metric used to determine how well a company can pay all its debts if they were due immediately. Net debt shows much debt a company has on its balance sheet compared to its liquid assets. Net debt shows how much cash would remain if all debts were paid off and if a company has enough liquidity to meet its debt obligations. Cash Finance leases Related party loan Government assistance Sandstorm loan Advance purchase facility Net debt 2018 US$’000 2017 US$’000 241 3,351 (3,707) (1,733) (796) (1,505) (3,864) (11,364) (4,570) (1,002) (390) - (3,996) (6,607) Page 19 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) OTHER MATTERS Outstanding Share & Option Data As at the date of this STRATEGIC REPORT the following securities are outstanding: Security Shares issued or Issuable Common Shares 659,139,702 Warrants Options - 20,677,000* *if all options have fully vested Weighted Average Exercise Price -- -- US$0.06 For further assistance Mr. Tim Sanford, Corporate Secretary can be reached directly at +1-709- 532-5736 or tsanford@ramblermines.com. Forward Looking Information This STRATEGIC REPORT 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 December 31, 2018. 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 STRATEGIC REPORT, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Page 20 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) OTHER MATTERS (continued) Forward Looking Information(continued) Unless stated otherwise, statements containing FLI herein are made as of the date of this STRATEGIC REPORT 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 STRATEGIC REPORT 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 STRATEGIC REPORT 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 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 copper and/or concentrator simultaneously with the Assumptions Risk Factors Actual expenditures from operations will not exceed revenues Achieving the planned capital and operating development and production targets; and, timely completion of drill to allow commencement of bays exploration drilling Successful completion of a detailed engineering existing review infrastructure and availability of finance from cash flow from operations of Expenditures exceeding revenues resulting from fluctuations in the market and forward prices of copper, gold, silver or certain other commodities, or increased costs of production or production, stoppages or grade shortfalls Development delays access to production ore reducing Economic viability Further information Additional information relating to the Company is on London Stock Exchange at www.londonstockexchange.com and on the Company’s web site at www.ramblermines.com. Page 21 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS A review of the Company’s business and future developments is set out in the Strategic Report 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 improved since the last financial reporting period end and the Company has not made any further provision for impairment during the period. Copper Cash Official LME (US$/lb) - Price) $4.50 $3.50 $2.50 $1.50 Page 22 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED) Foreign currency risk The Company has a small amount of cash resources and certain liabilities including the Gold streaming and the advance purchase facility 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. 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. Should any additional equity financing be required this 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. Please refer to page 12 for further information on the liquidity of 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: A A Booyzen President and CEO Director June 4, 2019 Page 23 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE STATEMENT The Board of Rambler Metals and Mining Plc (the “Company”) is committed to the principles of good corporate governance and recognises the importance of improving the opportunity and potential for the success of the Company and increasing shareholder value over the medium to long-term. We believe strongly in the value and importance of robust corporate governance and in our accountability to all the Company’s stakeholders, including shareholders, employees, customers, contractors, suppliers and the communities in which the Company operates. Rambler currently complies with the principles of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) to the extent that the Directors consider it appropriate, having regard to the Company’s size, board structure, nature of operations and available resources. The QCA Code identifies ten principles to be followed for companies to deliver growth in long term shareholder value, encompassing an efficient, effective and dynamic management framework accompanied by good communication to promote confidence and trust. The sections below set out the ways in which the Company applies the ten principles of the QCA Code in support of the Company’s medium to long-term success, together with any areas of non- compliance. ESTABLISH A STRATEGY AND BUSINESS MODEL WHICH PROMOTE LONG-TERM VALUE FOR SHAREHOLDERS The strategy and business operations of the Company are set out in the Strategic Report of the Company’s Annual Report. The Company’s strategy and business model and amendments thereto, are developed by the Chief Executive Officer and his senior management team and approved by the Board. The senior management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level. More specifically, and in order to deliver the optimal medium- and long-term value for its shareholders, the Board has adopted a three-fold strategy of operational reliability, increased production and cost management, resulting in an optimal and financially viable company. The Board recognizes that through execution of this strategy, there will be opportunities to convert resources into reserves and thereby extend the mine life beyond the current life-of-mine plan. The Company’s ability to execute its strategy is highly dependent on the skills and abilities of its people. We undertake ongoing initiatives to foster effective and good staff engagement and ensure that remuneration packages are competitive in the market in which the company operates. The Board manages the risk via the Safety and Health Committee and the Technical Committee. SEEK TO UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS The Board is committed to maintaining a regular dialogue with both existing and potential new shareholders in order to communicate the Company’s strategy and progress and to understand the needs and expectations of shareholders. The Chief Executive Officer and Chief Financial Officer are principally responsible for shareholder liaison and have regular dialogue with institutional investors in order to develop an understanding of their views. The Company’s investor relations activities encompass dialogue with both institutional and private investors. This could include meetings with analysts, investors and institutional shareholders of the Company. The Company also endeavours to maintain a dialogue and keep shareholders informed through its public announcements and its corporate website, www.ramblermines.com where the Annual Report as well as investor presentations and interim accounts are available. The Annual General Meeting of the Company, attended by a quorum of Directors, also gives the Directors the opportunity to report to shareholders on current and proposed operations which are in the public domain and enables them to express their views of the Company's business activities. The Board attaches importance to maintaining good relationships with all its shareholders and ensures that all price sensitive information is released to all at the same time in accordance with the AIM Rules. Page 24 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE STATEMENT (CONTINUED) SEEK TO UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS (CONTINUED) The Company has not historically announced the detailed results of shareholder voting to the market. However, the Board may consider doing so going forward. The Company also maintains dialogue with interested equity research analysts and whilst the Company has not historically hosted dedicated analyst meetings in respect of its annual and interim financial results, the Chief Executive Officer and Chief Financial Officer may also consider doing so in future. TAKE INTO ACCOUNT WIDER STAKEHOLDER AND SOCIAL RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG-TERM SUCCESS The Board recognises that the success of the Company is reliant on the stakeholders of the business and, to this effect, the Company engages with these stakeholder groups on a regular basis. The Board recognises its responsibility under UK and Canadian corporate law to promote the success of the Company for the benefit of its members. The Board also understands that it has a responsibility towards employees, partners, suppliers, contractors and the local communities in which it operates and has in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships. The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company. This feedback can be provided either during formal feedback sessions or using the ’contact us’ page of our website (www.ramblermines.com/contact.php). Stakeholder Shareholders Customers of Reason for Engagement Shareholders are the the owners the Company and board’s primary mission is to increase shareholder value Our customers are for essential generation of revenues Suppliers and partners The Company Staff and Employees engages with external suppliers Recruiting and retaining highly skilled motivated and professions is one of the key drivers of our success How we engage As described in section “Seek to understand and meet shareholder needs and expectations”. Senior executives maintain regular dialogue with the company that buys the Company’s concentrates to ensure a good relationship that encourages pro-active issue resolution. We work to ensure that relevant members of staff engage in a respectful and professional manner with suppliers. We operate systems to ensure that supplier invoices are processed and paid within agreed timeframes. In addition regular communication between Directors and employees, site management conducts regular staff meetings to promote effective two -way communication with agreement on goals, targets and aspirations of the employees and the Company. to Page 25 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE STATEMENT (CONTINUED) EMBED EFFECTIVE RISK MANAGEMENT, CONSIDERING BOTH OPPORTUNITIES AND THREATS The Board has overall responsibility for ensuring risk is appropriately managed across the business. The Board sets clear strategic objectives for the business. The risks to the achievement of those objectives are identified by corporate and divisional management and a few examples are shown below. The audit committee provides further independent review and robust challenge. The Board is satisfied with the effectiveness of the system of internal controls but, by their very nature, these procedures can provide reasonable, not absolute, assurance against material misstatement or loss. Identified risks are evaluated, both before and after controls and mitigating actions have been applied, as to their likelihood of occurring and potential financial and reputational impact. Risks are treated in accordance with risk appetite, which has been defined by the Board across a range of risk categories. Risk Example 1: 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. The Group maximum exposure to credit risk at December 31, 2018 was represented by receivables and cash resources. Risk Example 2: Foreign currency risk The Company has a small amount of cash resources and certain liabilities including the Gold streaming and the advance purchase facility 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 Audit Committee meets not less than twice a year and considers the Company's financial reporting (including accounting policies) and internal financial controls. The committee receives reports from management and from the Company's auditors. The Company has in place a series of procedures and controls designed to identify and prevent the risk of loss. These procedures are formally documented and are reported on. The Audit Committee has reviewed the systems in place and considers these to be appropriate. The success of the Company depends on its ability to mitigate and understand the risks facing the business and take appropriate action in a timely manner. The Board meets at least quarterly to evaluate the Company’s risk appetite. Risk Example 3: Cost Control A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Company’s actual performance, compared to the budget, are reported to the Board on a monthly basis. The Company maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material loss or claims against the Company. The insured values and type of cover are comprehensively reviewed on a periodic basis. The CEO and CFO conduct meetings with their team at least once a week to discuss their business area and to consider new risks and opportunities presented to the Company, making recommendations to the Board and/or Audit Committee as appropriate. The management discussions and analysis are presented in a director’s report presented twice a year and is available on the website. A summary of the principal risks and uncertainties facing the Company, as well as mitigating actions, are available in the Company’s Annual Reports which are available on the company website at: http://www.ramblermines.com/financial-statements.php Page 26 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE STATEMENT (CONTINUED) MAINTAIN THE BOARD AS A WELL-FUNCTIONING, BALANCED TEAM LED BY THE CHAIR Rambler’s Board currently consists of six non-executive directors and one executive director. It is the Board's policy to maintain independence by having at least half of the Board comprising non-executive directors who are free from any business or other relationship with the Company. The structure of the Board ensures that no one individual or group dominates the decision-making process. All the directors are subject to election by shareholders at the first Annual General Meeting after their appointment to the Board and then subject to re-election at annual intervals. Details of the directors including brief biographies are set out at http://www.ramblermines.com/directors-and- officers.php The Board is responsible to the Company’s shareholders for the proper management of the Company and formally meets at least on a quarterly basis. The Compensation, Corporate Governance and Nominating Committee meets at least once a year and is responsible for making decisions on directors' remuneration packages. Remuneration of executive directors is established by reference to the remuneration of executives of equivalent status both in terms of level of responsibility of the position and by reference to their job qualifications and skills. The Compensation 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 include performance related bonuses and the grant of share options. Other committees such as the Safety, Health and Environment Committee and the Technical Committee provide technical oversight directly to operations and key management personnel. The Board considers it collectively has an appropriate balance of skills and experience, as well as an appropriate balance of personal qualities and capabilities. Further, the Board believes it has a good balance between executive and non-executive Directors and considers all six non-executive directors as being independent, thus considers that the balance is appropriate for a company of its size. At this stage the CFO is not a member of the Board of Directors. However, given the size and culture of the company, the CFO is invited to attend and participate in every board meeting to provide expertise and report on the financial health of the company. Board members are all expected to fully engage in board meetings and activities they have committed to. All board members are part of, and actively participate in at least one board sub-committee. Board members are also expected to review weekly and monthly operations reports, as well as half yearly and annual reports. ENSURE THAT BETWEEN THEM THE DIRECTORS HAVE THE NECESSARY UP-TO-DATE SKILLS The Board considers that all the directors are of sufficient competence and calibre to add strength and objectivity to its activities and bring considerable experience in the financial and operational development of the Company. Details of the directors including brief biographies are set out at http://www.ramblermines.com/directors-and- officers.php The Board also has the relevant professional and technical skills to ensure they can fulfil their duties. The Board believes that the current skills of the directors reflect a broad range of both commercial and professional skills across the relevant industries and territories in which the Company operates, plus the Board has sufficient experience of operating in public markets. The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or informal. The Company is committed to a culture of equal opportunities for all employees regardless of gender. The Board will be diverse in terms of its range of culture, nationality and international experience. Six Directors are currently male and there is one female on the Board. The Board will seek opportunities in future to increase the diversity of the Board. Page 27 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE STATEMENT (CONTINUED) EVALUATE BOARD PERFORMANCE BASED ON CLEAR AND RELEVANT OBJECTIVES, SEEKING CONTINUOUS IMPROVEMENT The members of the Board are evaluated each year by way of peer appraisal. The appraisal seeks to determine the effectiveness and performance of each member with regards to their specific roles as well as their role as a Board member in general. The appraisal system seeks to identify areas of concern and make recommendations for any training or development to enable the Board member to meet their objectives which will be set for the following year. The appraisal process will also review the progress made against prior year targets to ensure any identified skill gaps are addressed. Details of the reviews, the findings and agreed actions may be made available in future Annual Reports, at the discretion of the Board. Whilst the Board considers this evaluation process is currently best carried out internally, the Board will keep this under review and may consider independent external evaluation reviews in due course as the Company grows. As well as the appraisal process, the Board monitors the non-executive directors’ status as independent to ensure a suitable balance of independent non-executive and executive directors remains in place. The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning. Succession planning is formally considered by the Board on an annual basis, in conjunction with the appraisal process. Due to the importance of succession planning, the Board will also consider this on an ad hoc basis as required. PROMOTE A CORPORATE CULTURE THAT IS BASED ON ETHICAL VALUES AND BEHAVIOURS The board believes that the promotion of a corporate culture based on sound ethical values and behaviours is essential to maximise shareholder value. Our core values serve as a common language that allows all members of staff to work together as an effective team and it is these values and our shared long-term business vision and strategy that we believe will drive growth in shareholder value over the long term. The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Company’s operations because the Board recognises that the culture of any business is set by the actions and conduct of its Board of Directors. These values are enshrined in the written policies and working practices adopted by all employees in the Company. The Board takes the time to consider the wider ramifications to its stakeholders when making strategic and corporate decisions, whilst at the same time delivering the long-term objectives of stakeholders. Having open communications with stakeholders allows them to give constructive feedback to the Board and enables the Board to monitor the reactions of those stakeholders to decisions made. The Company operates in international markets and is mindful that respect of individual cultures is critical to corporate success. Accordingly, the Board endeavours to promote sound ethical values and behaviours and treats its customers, suppliers and business partners with such respect at all times. The Board has implemented a code for Directors' and employees' dealings in securities which it considers to be appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation. The Company is committed to providing a safe environment for its staff and all other parties for which the Company has a legal and moral responsibility. The Company operates a Health and Safety Committee which meets regularly to monitor, review and make decisions concerning health and safety matters. The Company’s health and safety policies and procedures are enshrined in the Company’s documented quality systems, which encompass all aspects of the Company’s day-to-day operations. Page 28 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE STATEMENT (CONTINUED) MAINTAIN GOVERNANCE STRUCTURES AND PROCESSES THAT ARE FIT FOR PURPOSE AND SUPPORT The Board recognises that the responsibility for ensuring the Company operates in the correct manner is ultimately theirs and as such the Board has implemented various sub-committees which helps implement the strategy of the Board. The executive director and CFO have day-to-day responsibility for the operational management of the Company’s activities. The non-executive directors are responsible for bringing independent and objective judgement to Board decisions. There is a clear separation of the roles of the Chief Executive Officer and the non-executive Chairman, who is Mr. Bradford Mills. The Chairman is responsible for overseeing the effectiveness of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the non-executive directors are properly briefed on matters. The Chairman has overall responsibility for corporate governance matters in the Company. The Chief Executive Officer is responsible for implementing the strategy of the Board and managing the day-to-day business activities of the Company. The Board has established audit, compensation, safety and technical committees with formally delegated duties and responsibilities, as set out below. AUDIT COMMITTEE The Audit Committee has responsibility for ensuring that the financial performance of the Company is properly reported on and reviewed, and its role includes monitoring the integrity of the financial statements of the Company (including annual and interim accounts and results announcements), reviewing internal control and risk management systems and ensuring that an effective system of internal controls is maintained, reviewing any changes to accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by external auditors and advising on the appointment of external auditors. The Audit Committee have unrestricted access to the Company’s external auditors. The Audit Committee meets at least twice per annum. The Audit Committee comprises three non-executive directors, with Eason Chen being the elected Chairman. The other members are Bradford Mills (Chairman) and Glenn Poulter. COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITTEE The Compensation Committee, which meets as required but at least twice per year, has the following responsibilities with respect to compensation matters: recruitment, development and retention of senior management; • • appointment, performance evaluation and compensation of senior management; • succession planning systems and processes relating to senior management; • compensation structure for the Board of Directors and senior management including salaries, annual and long-term incentive plans and plans involving share options, share issuances and share unit awards; • pension and benefit plans; and • share ownership guidelines. The Compensation Committee has the following responsibilities with respect to corporate governance and nominating matters: • develop and recommend to the Board of Directors criteria for selecting new directors; • assist the Board of Directors by identifying individuals qualified to become members of the Board of • Directors (consistent with criteria approved by the Board of Directors); recommend to the Board of Directors the director nominees for the next annual meeting of shareholders and for each committee of the Board of Directors and the chair of each committee; • develop and recommend to the Board of Directors appropriate corporate governance principles for • the Company; recommend to the Board of Directors procedures for the conduct of Board meetings, and the proper discharge of the Board of Directors’ mandate; Page 29 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE STATEMENT (CONTINUED) COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITTEE (CONTINUED) • oversee the annual review of the Board of Directors’, its committees’ and individual directors’ performance and the assessment of the Board of Directors’ and committee charters; and • undertake such other initiatives that may be necessary or desirable to enable the Board of Directors to provide effective corporate governance. The Compensation Committee comprises of three Non-Executive Board members, with Mark Sander being the elected Chairman of the Compensation Committee. The other members of the Compensation Committee are Eason Chen and Glenn Poulter. SAFETY, HEALTH AND ENVIRONMENT COMMITTEE The Safety, Health and Environment Committee, which meets as required but at least three times per year, is appointed by the Board of Directors to discharge the Board of Directors’ responsibilities relating to compliance and review of applicable environmental, community, health and safety legislation, rules and regulations in the jurisdictions in which the company operates. The purpose of the Safety, Health and Environmental Committee is to assist the Board of Directors in management of the Company of policies, programs and systems relating to environmental, community and health and safety issues. They will work with management in reviewing safety, health and environmental performance and metrics and where necessary provide insight into the development of appropriate safety, health and environmental performance and metrics. The Committee will further monitor current and future regulatory issues that pertain to the operations of the Company. The Safety, Health and Environment Committee (SHEC) comprises of two Non-Executive Board members and one Executive, with Belinda Labatte being the elected Chairman of the Safety, Health and Environment Committee. The other members of the SHEC are Terrel Ackerman and Andre Booyzen. TECHNICAL COMMITTEE The Technical Committee, which meets as required but at least three times per year, is appointed by the Board of Directors as a standing committee to assist the Board of Directors in its oversight of technical and operational matters. The Technical Committee comprises of three Non-Executive Board members, with Terrell Ackerman being the elected Chairman of the Technical Committee. The other members of the Technical Committee are Mark Sander and Andre Booyzen. NON-EXECUTIVE DIRECTORS The Board adheres to guidelines relating to the appointment of non-executive directors, to ensure good corporate governance. Both the Chairman (Mr. Bradford Mills) and non-executive directors are appointed for a year at a time and are re- elected annually at the Company’s Annual General Meeting. In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the success of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence; a duty to avoid conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a proposed transaction or arrangement. Page 30 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE STATEMENT (CONTINUED) COMMUNICATE HOW THE COMPANY IS GOVERNED AND IS PERFORMING BY MAINTAINING A DIALOGUE WITH SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS The Board is committed to maintaining good and regular communication with its shareholders and other stakeholders and aims to ensure that all communications concerning the Company’s activities are clear, fair and accurate. The Board welcomes an open dialogue with shareholders. The Investor Relations section of the Company’s website also provides all required regulatory information as well as other helpful information for shareholders and other relevant stakeholders including podcasts and presentations. Results of shareholder meetings and details of votes cast will be publicly announced through the regulatory system and displayed on the Company’s website http://www.ramblermines.com with suitable explanations of any actions undertaken as a result of any significant votes against resolutions. Page 31 RAMBLER METALS AND MINING PLC REPORT OF THE DIRECTORS FOR THE YEAR ENDED DECEMBER 31, 2018 The Directors present their report with the audited financial statements of the Company for the year ended December 31, 2018. 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 E C Chen B Labatte B A Mills G R Poulter M V Sander A A Booyzen (appointed 1st April 2019) N P Williams (Resigned 31st March 2019) DIVIDENDS No dividends will be distributed for the year ended December 31, 2018. SIGNIFICANT SHARE INTERESTS At June 4, 2019 the parent company was aware of the following substantial share interests: CE Mining III Rambler CE Mining II Rambler Compagnie Odier SCA CI Financial FINANCIAL INSTRUMENTS Number of Ordinary Shares % of Share Capital 431,592,148 396,363,636 185,244,599 124,138,495 33.29 30.57 14.29 9.58 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 24 to the financial statements. Page 32 RAMBLER METALS AND MINING PLC REPORT OF THE DIRECTORS FOR THE YEAR ENDED DECEMBER 31, 2018 (CONTINUED) LIKELY FUTURE DEVELOPMENTS Details of likely future developments are set out in the Strategic Report. SUBSEQUENT EVENTS Details of subsequent events are set out in the Strategic Report. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITOR Each of the persons who is a director at the date of approval of this annual report confirms that: • so far as the director is aware, there is no relevant audit information of which the company's auditor is unaware; and the director has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the company's auditor is aware of that information. • This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. AUDITOR Deloitte LLP have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting. ON BEHALF OF THE BOARD: T Sanford Company Secretary June 4, 2019 Page 33 RAMBLER METALS AND MINING PLC DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the Annual Report 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 are required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements under IFRSs as adopted by the EU. Under company law the directors must not approve the accounts 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 and company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors: • properly select and apply accounting policies; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and • make an assessment of the company's ability to continue as a going concern. 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 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. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement We confirm that to the best of our knowledge: • • • the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company’s position and performance, business model and strategy. This responsibility statement was approved by the board of directors on 4 June 2019 and is signed on its behalf by: A A Booyzen Chief Executive Officer June 4, 2019 Page 34 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RAMBLER METALS AND MINING PLC Report on the audit of the financial statements Opinion In our opinion: • the financial statements of Rambler Metals and Mining plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2018 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board (IASB); 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. • • • We have audited the financial statements which comprise: • • • • • • the consolidated income statement; the consolidated and parent company statement of comprehensive income; the consolidated and parent company statement of financial position; the consolidated and parent company statements of changes in equity; the consolidated statement of cash flows; and the group related notes 1 to 26 and parent company related notes C1 to C6. The financial reporting framework that has been applied in their preparation is applicable law and 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. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty relating to going concern We draw attention to note 1 in the financial statements, which indicates that there is a risk that lower than forecast commodity prices or production issues will result in the need for the Group to obtain additional financing for the development of the Ming Mine site. In response to this, we: • • • • • have evaluated the design and implementation of key internal controls over management’s assessment of going concern; tested the clerical accuracy of management’s cash flow forecast and agreed key assumptions to supporting evidence; considered the historical accuracy of forecasts previously prepared by management and took into account the variances that arose; considered the ability of the group to meet production figures forecast by the latest NI 43-101 technical report, especially in light of actual production in the first quarter of the year being lower than forecast; and understood the impact of a range of reasonable sensitivities on the forecast headroom. Page 35 As stated in note 1, these events or conditions, along with the other matters as set forth in note 2 to the financial statements, indicate that a material uncertainty exists that may cast significant doubt on the group’s and the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Summary of our audit approach Key audit matters The key audit matters that we identified in the current year were: • Impairment of in-production and development assets; and • Going concern (see material uncertainty relating to going concern section) The materiality that we used for the group financial statements was $800,000 which was determined on the basis of 1.5% of the net assets of the group. We have performed full-scope audit procedures for the significant entities Rambler Metals & Mining Canada and Rambler Metals & Mining PLC which constitutes 97% of the group’s Net Assets and 100% of the group’s Revenue. There have been no significant changes in our audit approach as compared to prior year. Materiality Scoping Significant changes in our approach Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the material uncertainty relating to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. The key audit matters identified are consistent with prior year. Impairment of in-production and development assets Key audit matter description At December 31, 2018 in-production and development assets are carried at $35.4 million and $3.2 million respectively and the in-production Ming Mine is carried net of significant impairment provisions previously recorded. IAS 36 requires that for assets other than goodwill, where there has been a positive change in the estimates used to determine an asset’s recoverable amount since an impairment loss was recognized, the impairment loss shall be reversed. The impairment assessment is an inherently judgemental process that requires the estimation of several key assumptions. As a consequence of the continued volatility in the forecast gold price, the assessment of the recoverable amount of in-production and development assets in accordance with IAS 36 “Impairment of Assets” or IFRS 6 “Exploration for and Evaluation of Mineral Resources” is a key audit matter. Due to the level of judgement involved in the valuations, this has been identified as an area of potential management bias. The accounting policies for impairment and impairment reversal are set out in note 2 to the financial statements and key sources of estimation Page 36 uncertainty set out in note 3. The carrying value of the in-production and development assets are set out note 10 and note 9 respectively. How the scope of our audit responded to the key audit matter We have evaluated the design and implementation of entity level controls over the impairment assessment process for in-production mining and development assets. We have reviewed and challenged management’s assessment as to whether indicators of impairment or impairment reversal exist. For development assets we have assessed whether mining licenses and permits remain in good standing and management continues to incur expenditure in respect of the project. Where indicators have been identified in respect of in-production assets we obtained copies of the valuation models and performed the following procedures: • Determined that mining licenses and permits remain in good standing; • Reviewed the forecasts within the models and assessed the historical accuracy of management’s forecasting process by comparing current year actual performance to prior year budgets; • Reviewed and challenged the most recent NI 43-101 technical report against management’s production plans and capital and operating forecasts. We have also assessed the competence, capability and objectivity of management’s expert; Independently tested key macro assumptions including the forecast gold and copper prices and foreign exchange rates; and • • Utilized internal Deloitte valuation specialists to evaluate the Group’s cost of capital. Key observations We concur with the key assumptions used by Management including the forecast gold price and discount rate. We concur with Management’s assessment that at the reporting date the carrying value of in-production mining asset is supported by its value in use, and no impairment or impairment reversal is required. We did not identify any audit adjustments that warranted reporting to the Audit Committee. Our application of materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Group financial statements Parent company financial statements Materiality $800,000 (2017: $950,000) $792,000 (2017: $807,500) Basis for determining materiality 1.7% of net assets Parent company materiality equates to 1.1% of net assets, which is capped at 99% of group materiality. Rationale for the benchmark applied We consider net assets to be an appropriate basis for materiality as the users of the financial statements will be most interested in balance We consider net assets to be an appropriate basis for materiality for the Company as it acts as a holding company for the group. Page 37 sheet based metrics whilst the Group’s operations are still evolving, and the income statement does not fully reflect the size and scale of the business. Net Assets $53,628k Net Assets Group materiality Group materiality $800k Audit Committee reporting threshold $40k We set our performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality therefore was set at 70% of group materiality for the 2018 audit (2017: 70%), being $560,000 (2017: $665,000). We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $40,000 (2017: $47,500), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. We have performed full-scope audit procedures for the significant entities Rambler Metals & Mining Canada and Rambler Metals & Mining PLC which constitutes 97% of the group’s Net Assets and 100% of the group’s Revenue. As the operations are principally based out of St John’s, Canada, we have focused our audit work in this geographical area and have taken a fully substantive testing approach similar to prior year. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. We have nothing to report in respect of these matters. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a Page 38 material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. Responsibilities of directors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Report on other legal and regulatory requirements Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. • In the light of the knowledge and understanding of the group and of the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of these matters. Matters on which we are required to report by exception Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion: • • we have not received all the information and explanations we require for our audit; or adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns. • Directors’ remuneration Page 39 Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made. We have nothing to report in respect of this matter. Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to 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. Paul Barnett FCA (Senior statutory auditor) For and on behalf of Deloitte LLP Statutory Auditor London, UK 4 June 2019 Page 40 RAMBLER METALS AND MINING PLC CONSOLIDATED INCOME STATEMENT For the Year Ended December 31, 2018 (EXPRESSED IN US DOLLARS) Revenue Production costs Depreciation and amortisation Gross loss Administrative expenses Exploration expenses Operating loss Exchange (loss)/gain Loss on disposal of fixed assets Profit on disposal of equity investments Gain on fair value of Gold streaming Net finance costs Net expense Loss before tax Note Year to Year to 31 December 31 December 2018 US$’000 2017 US$’000 5 29,718 30,339 (31,204) (26,444) (9,887) (7,798) (11,373) (3,903) (5,823) (3,441) - (6) 6 (17,196) (7,350) 22 8 (1,503) 940 (95) - - 779 1,323 566 (895) (379) (1,170) 1,906 (18,366) (5,444) Income tax (expense)/credit 9 (1,680) 1,296 Loss for the period Loss per share (20,046) (4,148) Note Year to Year to 31 December 31 December 2018 US$ 2017 US$’000 Basic and diluted loss per share 19 (0.033) (0.008) Page 41 RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Year Ended December 31, 2018 (EXPRESSED IN US DOLLARS) Year to Year to 31 December 31 December 2018 2017 US$’000 US$’000 Loss for the period (20,046) (4,148) Other comprehensive income Items that may be reclassified into profit or loss Exchange differences on translation of foreign operations (net of tax) (4,608) 4,165 Disposal of equity investment (net of tax) Items that will not be reclassified to the income statement Loss on fair value of equity investment (net of tax) Other comprehensive (loss)/gain for the period - (250) (37) (140) (4,645) 3,775 Total comprehensive (loss)/gain for the period (24,691) (373) Page 42 REGISTERED NUMBER: 05101822 (ENGLAND AND WALES) RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at December 31, 2018 (EXPRESSED IN US DOLLARS) Note 31 December 31 December 2018 US$’000 2017 US$’000 10 11 12 13 9 16 15 16 17 21 22 20 21 22 23 18 18 18 18 18 18 3,168 3,397 35,441 38,834 24,634 28,443 102 610 11,192 13,851 3,247 3,530 77,784 88,665 2,333 2,467 1,126 829 730 1,830 241 3,351 4,430 8,477 82,214 97,142 6,897 3,887 2,514 2,852 11,195 7,314 20,606 14,053 16,176 5,576 4,708 6,072 7,829 10,624 1,855 1,961 14,392 18,657 47,216 64,432 9,524 8,061 95,999 89,309 - 859 180 180 (19,192) (14,584) 80 86 (39,375) (19,479) 47,216 64,432 Assets Intangible assets Mineral property Property, plant and equipment Equity 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 Liabilities Interest-bearing loans and borrowings Gold streaming Trade and other payables Total current liabilities Net current liabilities Interest-bearing loans and borrowings Gold streaming Provision Total non-current liabilities Net assets Equity Issued capital Share premium Share warrants reserve Merger reserve Translation reserve Other reserves Retained profits Total equity ON BEHALF OF THE BOARD: A A Booyzen Director Approved and authorised for issue by the Board on June 4, 2019 Page 43 RAMBLER METALS AND MINING PLC Consolidated Statement of Changes in Equity (EXPRESSED IN US DOLLARS) Group Balance at January 1, 2017 Comprehensive income Loss for the period Foreign exchange translation differences Disposal of equity investment (net of tax) Gain on equity investments (net of tax) Total other comprehensive income Total comprehensive income/(loss) for the period Transactions with owners Issue of share capital (note 18) Warrants exercised Share issue expenses Share-based payments Transactions with owners Balance at December 31, 2017 Balance at January 1, 2018 Comprehensive income Loss for the period Foreign exchange translation differences Loss on equity investments (net of tax) Total comprehensive income/(loss) for the period Transfer to Retained profits on disposal of equity investment (note 13) Transactions with owners Issue of share capital (note 18) Warrants exercised Share issue expenses Share-based payments Transactions with owners Balance at December 31, 2018 Share Capital US$’000 Share Warrants Merger Translation Other Retained Premium US$’000 Reserve US$’000 Reserve US$’000 Reserve US$’000 Reserve US$’000 Profits Total US$’000 US$’000 6,374 81,442 2,089 180 (18,749) 476 (15,443) 56,369 - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,165 - (240) - (150) - (390) (390) 4,165 (4,148) (4,148) - 4,165 - (240) - (150) - (390) - 3,775 1,687 - 6,749 1,230 - (112) - 1,687 8,061 7,867 89,309 - - (1,230) - (1,230) 859 - - - - - - - - - 180 - - - (14,584) - - - 86 - - 8,436 - - (112) 112 112 8,436 112 64,432 (19,479) 8,061 89,309 859 180 (14,584) 86 (19,479) 64,432 - - - - - - - - - - - - - - - - - (4,608) - - - (37) (37) (4,608) (20,046) (20,046) - (4,608) - (37) (4,645) - - - - - - 31 (31) - 1,463 - 5,847 859 - (16) - 1,463 9,524 6,690 95,999 - - (859) - (859) - - - - - - - - - - - - - - - - 180 (19,192) 80 - - 7,310 - - (16) 182 182 7,476 182 47,216 (39,374) Page 44 RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended December 31, 2018 (EXPRESSED IN US DOLLARS) Cash flows from operating activities Operating loss Depreciation and amortisation Loss/(gain) on derivative financial instrument (note 5) Share based payments (note 7) Foreign exchange difference Decrease in inventory (Increase)/decrease in debtors Decrease/(increase) in derivative financial instruments Increase/(decrease) in creditors Cash (utilised in)/generated from operations Interest paid Net cash (utilised in)/generated from operating activities Cash flows from investing activities Interest received Disposal of equity investment (note 13) 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 (note 18) Share issue expenses Loans received Repayment of Gold streaming (note 22) Repayment of Loans Capital element of finance lease payments Net cash generated 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 Page 45 31 December 31 December 2018 $’000 2017 $’000 (17,196) (7,350) 9,921 1,711 182 458 134 (297) (611) 3,827 7,824 (2,015) 112 (259) 29 455 941 1,961 (1,871) 1,698 (478) (376) (2,349) 1,322 78 43 485 (48) (3,879) (3,189) 1,103 (1,020) (5,277) (4,103) - (6,553) (9,254) 7,310 8,436 (16) 3,815 (1,755) (1,460) (112) 5,598 (1,105) (1,137) (2,116) (2,593) 5,778 9,087 (3,124) 1,155 3,351 14 2,156 40 241 3,351 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 Nature of operation and going concern The principal activity of the Company and its subsidiaries (“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 Strategic Report on pages 5 to 23. In addition, notes 18 and 21 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. 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. The financial statements have been prepared on a going concern basis which assumes that the Group will be able to realise its assets and settle its obligations in the normal course of business. The financial statements do not reflect adjustments to the carrying values and classification of assets and liabilities that would be necessary should the Group be unable to continue as a going concern. Such adjustments might be material. The Group intends to fund its operations and growth from the operating cash flows of the Ming mine, and to the extent required, through the accessing of equity and debt markets and the proceeds from the exercise of warrants. Management believes that the Ming Mine will generate sufficient operating cash flows to support the day to day activities and future growth requirements of the business, but there is a risk that production not ramping up in line with forecasts or lower than forecast commodity prices will result in the need for additional financing. Historically the Company has been successful in accessing equity and debt markets to finance the acquisition and development of the Ming Mine site, and management is currently finalising talks with a third party to obtain additional funding within the coming weeks. However, as this funding is not yet committed, it is not wholly within the Group’s control and this represents a material uncertainty which casts significant doubt upon the Group’s continued ability to operate as a going concern, such that it may be unable to realise its assets and discharge its liabilities in the normal course of business. 2 Significant accounting policies 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 accounting policies applied are consistent with those adopted and disclosed in the Group financial statements for the year-ended 31 December 2017, except for changes arising from the adoption of the following new accounting pronouncements which became effective in the current reporting period: • IFRS 9 Financial Instruments • IFRS15: Revenue from Contracts with Customers • IFRIC 22: Foreign Currency Transactions and Advance Consideration • Annual Improvements to IFRSs: 2014-2016 Cycle: IFRS1 and IAS28 IFRS 15 Revenue from Contracts with Customers: IFRS 15 Revenue from Contracts with Customers became effective for the Group from 1 January 2018, replacing all previous revenue standards and interpretations. Page 46 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (a) Statement of compliance (continued) IFRS 15 Revenue from Contracts with Customers (continued) The Group’s revenue is primarily derived from commodity sales, for which the point of recognition is dependent on the contract sales terms, known as the International Commercial Terms (Incoterms). As the transfer of risks and rewards generally coincides with the transfer of control at a point in time under the Incoterms, the timing and amount of revenue recognised by the Group for the sale of commodities is not materially affected. For the Incoterms Cost, Insurance and Freight (CIF) and Cost and Freight (CFR) the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. Consequently, the freight service on export commodity contracts with CIF/CFR Incoterms represents a separate performance obligation as defined under the new standard, and a portion of the revenue earned under these contracts, representing the obligation to perform the freight service, is deferred and recognised over time as this obligation is fulfilled, along with the associated costs. There have been no significant judgements made in the application of IFRS 15. There was no material impact on opening retained earnings as at 1 January 2018 as a result of this transition difference on group and company only financial statements. IFRS 9 Financial Instruments IFRS 9 Financial Instruments became effective for the Group from 1 January 2018, replacing IAS 39 Financial Instruments: Recognition and Measurement. The impacts of adopting IFRS 9 on the Group results have been as follows: Impairment: The standard introduces an expected credit loss (ECL) model for the assessment of impairment of financial assets held at amortised cost. For trade receivables and contract assets, the Company applies a simplified approach in calculating ECLs and recognizes a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. Classification and measurement: The measurement and accounting treatment of the Group’s financial assets is materially unchanged on application of the new standard with the exception of equity investments previously categorised as available for sale. These are now held at fair value through other comprehensive income, meaning the recycling of gains and losses on disposal and impairment losses is no longer permitted for this category of asset. There is no material impact to the net assets of the Group at 1 January 2017, 31 December 2017 or 1 January 2018, or to the Group’s results for the year ended 31 December 2017 from this change. Financial instrument Classification under IFRS 9 Classification under IAS 39 Derivative financial instruments Fair value through profit and loss Fair value through profit and loss Equity investments Fair value through other comprehensive income Trade receivables and other receivables Trade payables and other payables Amortised cost Gold streaming Amortised cost Fair value through profit and loss Available for sale Loans and receivables Amortised cost Fair value through profit and loss Loans and borrowings Amortised cost Amortised cost Page 47 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) 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 Standard Board but have not adopted will have a material impact on the financial statements. The following are the major new IFRS accounting standards in issue but not effective the annual reporting period ended December 31, 2018: IFRS /Amendment IAS 19 IFRS 10 Title Employee Benefits, amendments regarding plan amendments, curtailments or settlements Consolidated Financial Statements Application date of standard January 1, 2019 Application date for Company January 1, 2019 Not confirmed As and when become effective January 1, 2019 IFRIC 23 Uncertainty over Income Tax Treatments January 1, 2019 IAS 28 IFRS IFRS 16 Investments in Associates and Joint Ventures January 1, 2019 January 1, 2019 Annual improvement to IFRS standards 2015- 2017 Leases January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 IFRS 16 Leases IFRS 16 Leases became effective for the Group from 1 January 2019, replacing IAS 17 Leases. The Group has completed the necessary changes to internal systems and processes to embed the new accounting requirements. The principal impact of IFRS 16 is to change the accounting treatment by lessees of leases currently classified as operating leases. Lease agreements will give rise to the recognition by the lessee of a right-of-use asset and a related liability for future lease payments. The Group expects an impact of circa US$1,000 on transition as the majority of existing leases are accounted as finance lease. (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 December 31, 2018 the closing rate of exchange of US dollars to 1 GB pound was 1.28 (December 31, 2017: 1.35) and the average rate of exchange of US dollars to 1 GB pound for the year was 1.33 (December 31, 2017: 1.28). 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. Page 48 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (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 Group are translated to US dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of the Group 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 statement of comprehensive income upon disposal. (e) Property, plant and equipment (i) Owned assets Items of property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour and the 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. Page 49 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (e) Property, plant and equipment (continued) (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. (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. Page 50 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) Equity investments (h) Equity investments are recognised at fair value with changes in value recorded in other comprehensive income as they are not held for short-term profit-taking trading under the company’s business model. Subsequent to initial recognition these are stated at fair value. Movements in fair values are recognised in other comprehensive income. 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 fair value reserve are transferred to Retained profits. 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. ) 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 (note 17) 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(t)), 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. Page 51 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (m) Impairment of non-financial assets (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. (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 Gold streaming is accounted for under IFRS 9 and is considered a financial liability as the Group purchases the payable gold from the market in order to repay Sandstorm based on actual production in the period. It is stated at fair value through profit and loss (note 22). 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. (q) Revenue recognition The Group is engaged principally in sales of metal concentrate that are stated at their invoiced amount which is net of treatment and refining charges. Revenue for sale of commodity is recorded when control of the commodity passes to the customer. Sales of commodities are provisionally priced such that the price is not settled until a predetermined future date and is based on the market price at that time. These sales are marked to market at each reporting date using the forward price for the period equivalent to that outlined in the contract. Revenue on provisionally priced sales is recognised at the forward market price when control passes to the customer and is RAMBLER METALS AND MINING PLC Page 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (q) Revenue recognition (continued) classified as revenue from contracts with customers. Subsequent mark-to-market adjustments are recognised in revenue from other sources. Revenues from the sale of material by-products are recognised within revenue at the point control passes. Where a by-product is not regarded as significant, revenue may be credited against the cost of sales. Revenue from services is recognised over time in line with the policy above. Our revenue contract contains separate performance obligations for the sale of commodities and the provision of freight services, the portion of the revenue representing the obligation to perform the freight service is deferred and recognised over time as the obligation is fulfilled based on the estimated time taken to port of delivery, along with the associated costs. In situations where the Group is acting as an agent, amounts billed to customers are offset against the relevant costs (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 53 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, • • and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, 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. Mining taxes and royalties are treated and disclosed as current and deferred taxes if they have the characteristics of an income tax. 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 16) - Equity investments (note 13) For more detailed information in relation to the fair value measurement of the items above, please refer to the applicable notes. Page 54 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Critical judgements and accounting estimates (a) Critical judgements in applying the Company’s accounting policies 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 judgements in applying the Company’s accounting policies, Going concern Judgements are necessary in applying the going concern basis in the preparation of the Company’s financial statements in respect of the Company’s ability to continue as a going concern for a period of at least 12 months from the date of signing the current period’s report. Mineral Property, Property, Plant and Equipment and Exploration and Evaluation Costs Notes 2(g) and 2(m) describe the judgements necessary to implement the Company’s policy with respect to the carrying value of the Company’s mineral property and exploration and evaluation costs. Management considers these assets for impairment at least annually with reference to the following indicators: Reviewing the financial performance compared to forecast; Reviewing the key production and milling statistics to forecast; Reviewing the commodity price forecasts against assumptions in the previous impairment model; and Considering any significant changes to the cost of capital. The Company uses 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. The directors have assessed whether there are any indicators of impairment in respect of mineral property, property, plant and equipment and exploration and evaluation costs totalling US$63.2 million (2017: US$70.6 million). In making this assessment they have considered the Group’s business plan which includes resource estimates, future processing capacity, future exchange rates, the forward market and longer term price outlook for copper and gold and assumptions regarding weighted average cost of capital. The Company continues to invest in exploration which has the potential to extend mine life and increase the rate of production. 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. Page 55 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Critical judgement and accounting estimates (continued) 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. (b) Key sources of estimation uncertainty 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 7 and 19. Gold streaming The Group calculates the movement on the fair value of the Gold streaming liability based on estimates of future cash flows arising from the sale of payable gold (see note 22).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 fair value movement. Any changes to these estimates may result in a significantly different fair value movement recognised in the income statement. 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 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. 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 Year to Dec 31, 2018 Year to Dec 31, 2017 UK Canada Consolidated UK Canada Consolidated US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Revenue - 29,718 29,718 - 30,339 30,339 Non-current assets - 77,784 77,784 1,680 86,985 88,665 Page 56 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. Revenue Revenue from sale of commodity Freight and Insurance revenue related to sale of commodity (Loss)/gain on fair value of derivatives Information about major customers All our revenue is sold to one customer (2017: one customer). 6. Operating loss The operating loss is after charging: Depreciation – owned assets Amortisation Directors’ emoluments (see note 25) Auditor’s remuneration: Audit of these financial statements Fees payable to the auditor for other services: Other assurance services Year to Year to Dec 31, 2018 Dec 31, 2017 30,320 27,751 1,109 573 (1,711) 2,015 29,718 30,339 Year to Year to Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 5,787 4,134 442 4,469 3,355 351 116 132 41 6 The Audit Committee reviews the nature and extent of non-audit services to ensure that independence is maintained. 7. Personnel expenses Salary costs Wages and salaries Other short term benefits Compulsory social security contributions Share based payments Group Year to Group Year to Dec 31, 2018 Dec 31, 2017 US$’000 US$,000 10,659 10,074 628 565 1,620 1,675 182 112 13,089 12,426 Salary costs of US$222,000 (2017: US$533,000) were capitalised as part of the cost of assets under construction costs during the year. Page 57 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. Personnel expenses (continued) Number of employees The average number of employees during the period was as follows: Directors Administration Production and development Group Year to Group Year to Dec 31, 2018 Dec 31, 2017 7 7 14 14 180 164 201 185 During the period the Group granted share options to key personnel to purchase shares in the entity. The options are exercisable at the market price of the shares at the date of grant. Share-based payments The number and weighted average exercise prices of share options are as follows: Outstanding at the beginning of the period Granted during the period Exercised during period Forfeited during the period Expired during the period Outstanding at the end of the period Exercisable at end of period Weighted average exercise price Number of options Weighted average exercise price Number of options Dec 31, 2018 Dec 31, 2018 Dec 31, 2017 Dec 31, 2017 US$ 0.08 0.05 ‘000 13,229 9,790 - - 0.07 0.17 0.06 0.18 (1,912) (430) 20,677 2,478 US$ 0.38 0.09 0.06 0.11 0.82 0.13 0.35 ‘000 13,014 1,230 (450) (355) (210) 13,229 3,239 The options outstanding at December 31, 2018 have an exercise price in the range of US$0.05 to US$0.82 (December 31, 2017: US$0.05 to US$0.82) and a weighted average remaining contractual life of 2.8 years (December 31, 2017: 3.8 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. Page 58 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. Personnel expenses (continued) Fair value of share options and assumptions issued during the period 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) Year to Dec Year to Dec 31, 2018 31, 2017 US$0.07 US$0.07 US$0.09 US$0.07 US$0.09 106% 5 - 116% 5 - 2.07% 1.41% The expected volatility is based on the historical volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information. There is no performance or market conditions associated with the share option grants. The share-based payment expense relates to the following grants: Year to Dec Year to Dec 31, 2018 31, 2017 US$’000 US$’000 112 - 70 110 2 - 182 112 Year to Year to Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 (78) (43) 223 175 5 - 283 17 138 40 274 162 50 28 895 379 Share options granted in 2016 Share options granted in 2017 Share options granted in 2018 Total expense recognised as employee costs 8. Net finance costs Bank interest receivable Finance lease interest Sansdtorm loan interest Advance purchase facility interest and charges Other loan interest Off-take provisional payment interest Unwinding of discount on reclamation provision Page 59 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. Income tax Recognised in the income statement Current tax expense Current period Deferred tax expense/(credit) Origination and reversal of temporary timing differences Deferred income tax asset not recognised Mining tax – origination and reversal of temporary differences (Under)/over provision in previous year Total income tax (credit)/charge in income statement Year to Dec 31, 2018 US$,000 Year to Dec 31, 2017 US$,000 - - - 1,680 - - 1,680 (1,373) 55 22 (1,296) Reconciliation of effective tax rate A reconciliation between the tax credit and the product of the Group’s accounting loss multiplied by the Group’s statutory income tax rate for the year ended December 31, 2018 and year ended December 31, 2017 is as follows: Year to Dec 31, 2018 Year to Dec 31, 2017 US$’000 US$’000 (18,366) (5,444) (3,535) (1,872) - 213 6,839 (27) - - 62 - 1,680 (1,048) (458) 56 46 - (115) 107 87 23 6 (1,296) Year to Dec 31, 2018 Year to Dec 31, 2017 US$,000 US$,000 - - - - - (87) (48) (135) Loss before tax Income tax using the UK corporation tax rate of 19.00% (2017: 19.25%) Effect of tax rates in foreign jurisdictions (rates increased) Mining tax Net permanent differences Deferred income asset not recognised Effect of tax rates on chargeable gain Effect of change in tax rates Effect of tax losses and credits (Under)/over provision in previous year Exchange difference Recognised in other comprehensive income Current tax expense Current year Deferred tax credit Fair value re-measurement of available for sale investments Exchange difference on retranslation of UK deferred tax asset Total income tax expense/(credit) in statement of other comprehensive income Page 60 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. Income tax credit (continued) Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net Balance Balance Balance Balance Balance Balance Dec 31, 2018 Dec 31, 2017 Dec 31, 2018 Dec 31, 2017 Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 US$’000 - 2,283 118 - 1,581 - 1,992 86 - 919 Property, plant and equipment Mineral property Intangible assets Equity investment Gold streaming and government assistance Mining tax Other timing differences Tax value of loss carry-forwards and credits recognised Net tax assets /(liabilities) Movement in recognised deferred tax assets and liabilities 1,413 - 9,782 14,192 12,020 17,538 1,536 - (2,827) - - - - - (173) - (3,000) US$’000 (3,471) - - - - - (217) - (3,688) US$’000 (3,471) 2,283 118 - 1,581 1,536 (217) 9,782 11,192 US$’000 (3,471) 2,283 118 - 1,581 1,536 (217) 12,020 13,850 Recognised in income Balance Jan 1, 2017 Recognised in other comprehensive income Exchange difference Balance Dec 31, 2017 US$’000 US$’000 US$’000 US$’000 US$’000 Property, plant and equipment Mineral property Intangible assets Equity investment Gold streaming Mining tax Other timing differences Tax value of loss carry-forwards and credits – Canada Tax value of loss carry-forwards – UK 3,112 (3,064) (109) (3) (26) (1,496) 94 (8,624) (1,429) 133 945 (2) 90 (1,548) 55 191 (942) (218) - - - (87) - - - - (48) (11,545) (1,296) (135) 226 (164) (7) - (85) (95) 10 (774) 15 (874) 3,471 (2,283) (118) - (1,659) (1,536) 295 (10,340) (1,680) (13,850) Balance Jan 1, 2018 Written off Recognised in other comprehensive income Exchange difference Balance Dec 31, 2018 US$’000 US$’000 US$’000 US$’000 US$’000 Property, plant and equipment Mineral property Intangible assets Equity investment Gold streaming and government assistance Mining tax Other timing differences Tax value of loss carry-forwards and credits – Canada Tax value of loss carry-forwards – UK 3,471 (2,283) (118) - (1,659) (1,536) 295 (10,340) (1,680) (13,850) - - - - - - - - 1,680 1,680 - - - - - - - - - - (644) 291 32 - 740 123 (122) 558 - 978 2,827 (1,992) (86) - (919) (1,413) 173 (9,782) - (11,192) Page 61 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. Income tax credit (continued) 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$11.1 million (December 31, 2018: US$13.9 million). As at 31st December 2018, the Group had the total losses carried forward of US$25.1 million (2017: Nil) for which the deferred tax asset has not been recognised. The Group did not recognised a deferred tax assets in respect of mining tax (2017: deferred tax liability US$55,000) during the year bringing the balance to US$1.5 million (December 31, 2017: recognised deferred tax asset of US$1.5 million). The group considers that with recent increases in the market outlook for copper prices that it has sufficient evidence of future mining profits to justify the recognition of this asset. During the year the Company written off the deferred tax assets relating to the Parent Company US$1.7 million (2017: Nil) as the Company does not expect to generate income to set off against accumulated losses. 10. Intangible assets Cost Exploration and evaluation costs Ming Mine Little Deer Project Total US$’000 US$’000 US$’000 Balance at 1 January, 2017 - 2,169 2,169 Additions 979 41 1,020 Effect of movements in foreign exchange 15 193 208 Balance at December 31, 2017 994 2,403 3,397 Balance at 1 January, 2018 994 2,403 3,397 Additions 18 30 48 Effect of movements in foreign exchange (82) (195) (277) Balance at December 31, 2018 930 2,238 3,168 Carrying amounts At 1 January, 2017 At December 31, 2017 At 1 January, 2018 At December 31, 2018 - 2,169 2,169 994 2,403 3,397 994 2,403 3,397 930 2,238 3,168 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. Following the assessment, management concluded that no impairment triggers had been noted that would require a formal impairment test and impairment charge against exploration and evaluation costs has been recorded. Page 62 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. Mineral property Cost Balance at January 1, 2017 Additions Effect of movements in foreign exchange Balance at December 31, 2017 Balance at January 1, 2018 Additions Effect of movements in foreign exchange Balance at December 31, 2018 Amortisation and impairment Balance at January 1, 2017 Amortisation charge Effect of movements in foreign exchange Balance at December 31, 2017 Balance at January 1, 2018 Amortisation charge Effect of movements in foreign exchange Balance at December 31, 2018 Carrying amounts At January 1, 2017 At December 31, 2017 At January 1, 2018 At December 31, 2018 Mineral property US$’000 69,701 5,278 5,064 80,043 80,043 3,879 (6,629) 77,293 35,248 3,355 2,606 41,209 41,209 4,134 (3,491) 41,852 34,453 38,834 38,834 35,441 Consideration of impairment for mineral property costs As a result of the loss in the year, the directors concluded that there was an impairment indicator at 31 December 2018. A valuation model was completed with the critical assumptions being as set out in Note 3. This showed that the Page 63 recoverable amount was greater than the carrying value of the fixed assets and consequently no impairment was required. RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. Property, plant and equipment Cost Balance at January 1, 2017 Additions Reclassification Effect of movements in foreign exchange Balance at December 31, 2017 Land and buildings Assets under constructi on US$’000 US$’000 Motor vehicle s US$’00 0 Plant and equipment Fixtures, fittings and equipment Computer equipment Total US$’000 US$’000 US$’000 US$’000 3,956 1,357 222 39,362 25 2,814 - (319) - - 5,143 319 94 1 769 45,760 70 8,053 - - - 279 159 15 3,024 6 57 3,540 4,260 4,011 237 47,848 101 896 57,353 Balance at January 1, 2018 4,260 4,011 237 47,848 101 896 57,353 Additions Disposals Reclassification Effect of movements in foreign exchange Balance at December 31, 2018 Depreciation and impairment losses Balance at January 1, 2017 Depreciation charge for the year Effect of movements in foreign exchange Balance at December 31, 2017 Balance at January 1, 2018 Depreciation charge for the year Disposals Effect of movements in foreign exchange Balance at December 31, 2018 Carrying amounts At January 1, 2017 At December 31, 2017 At January 1, 2018 81 1,573 - 2,743 2 82 4,481 - - - (1,168) - (2,133) - 2,133 - - - (1,168) - - (347) (335) (19) (4,133) 3,994 3,116 218 47,423 (8) 95 (76) (4,918) 902 55,748 2,141 - 215 19,523 89 736 22,704 362 163 - 7 4,073 - 15 1,501 4 7 22 52 4,468 1,738 2,666 - 237 25,097 100 810 28,910 2,666 - 237 25,097 100 810 28,910 399 - - - - 5,354 1 33 5,787 - (1,073) - - (1,078) (234) - (19) (2,182) 2,831 - 218 27,196 1,815 1,357 7 19,839 1,594 4,011 - 22,751 1,594 4,011 - 22,751 (8) 93 5 1 1 (67) (2,505) 776 31,114 33 23,056 86 28,443 86 28,443 Page 64 At December 31, 2018 1,163 3,116 - 20,227 2 126 24,634 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. Property, plant and equipment (CONTINUED) 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 December 31, 2018, the net carrying amount of leased plant and machinery was US$3.7 million (December 31, 2017: US$5.1 million). The leased plant and machinery secure lease obligations (see note 21). During the period plant and equipment additions of US$1.6 million (2017: US$4.2 million) were acquired through finance lease arrangements. 13. Equity Investments Cost or valuation Balance at January 1, 2017 Disposals Revaluation Effect of movements in foreign exchange Balance at December 31, 2017 Balance at January 1, 2018 Revaluation Disposals Effect of movements in foreign exchange Balance at December 31, 2018 Carrying amounts At December 31, 2017 At December 31, 2018 Equity investments US$’000 1,333 (324) (389) (10) 610 610 (37) (443) (28) 102 610 102 In 2017 the Company disposed all its remaining shareholding in Marathon Gold Corporation for US$1.1 million which was the fair value, the total gain was of US$0.8 million. Then in 2018 Company disposed of its remaining shareholding in Maritime Resources Corp for US$0.5 million which was the fair value, the total loss was of US$0.6 million. The carrying amount of the remaining US$102,000 of equity investments relates to investments in eleven companies (2017: twelve companies) which are listed. The valuation is determined using the closing market price of the shares on the respective stock exchange and is considered level 1 in the IFRS13 fair value hierarchy. Page 65 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14. Inventory Metals in process Operating supplies Dec 31, 2018 Dec 31, 2017 US$’000 608 1,725 2,333 US$’000 561 1,906 2,467 The cost of inventories recognised as an expense and included in cost of sales amounted to US$41.1 million (2017: US$34.2 million) 15. Trade and other receivables Trade receivables Other receivables Sales taxes recoverable Prepayments and accrued income Dec 31, 2018 US$’000 Dec 31, 2017 US$’000 - - 349 672 105 1,126 260 412 157 829 The Company applies a simplified approach in calculating expected credit losses (ECL) and recognizes a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. There are no trade receivables past due or considered impaired (period ended December 31, 2017: $nil). 16. Derivative financial asset Concentrate receivables from off-taker Dec 31, 2018 Dec 31, 2017 US$’000 730 US$’000 1,830 The carrying amount of the derivative financial asset is 2 fair value determined using forward prices of copper, gold and silver. The cost of the concentrate receivables is US$779,000 (December 31, 2017: US$1,104,000). considered level 2 under the IFRS13 fair value hierarchy level 17. Restricted cash Bearer deposit notes Dec 31, 2018 Dec 31, 2017 US$’000 3,247 US$’000 3,530 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. The bearer deposit notes mature on differing dates throughout fiscal 2018 and have a nominal value of US$3,247,000 (December 31, 2017 - US$3,530,000) giving an effective yield of 1.2% (December 31, 2017 – 1.2%). Page 66 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 18. Capital and reserves Share capital and share premium – group and company In issue at January 1, 2017 Issued on February 6, 2017 Issued on November 6, 2017 Share issue expenses Shares issued during the year Share capital Share premium Total US$’000 US$’000 US$’000 Number ‘000 6,374 81,442 87,816 414,290 1,681 6,726 8,407 135,000 6 23 29 450 - (112) (112) - 1,687 6,637 8,324 135,450 Transfer from share warrant reserve - 1,230 1,230 - In issue at December 31, 2017 8,061 89,309 97,370 549,740 In issue at January 1, 2018 Issued on May 25, 2018 Issued on June 01, 2018 Issued on June 13, 2018 Share issue expenses 8,061 89,309 97,370 549,740 334 1,338 1,672 25,000 868 3,474 4,342 65,000 261 1,035 1,296 19,400 - (16) (16) - Shares issued during the year 1,463 5,831 7,294 109,400 Transfer from share warrant reserve - 859 859 - In issue at December 31, 2018 9,524 96,999 105,523 659,140 At December 31, 2018, the authorised share capital comprised 1,000,000,000 (2017: 1,000,000,000) ordinary shares of 1p each. On May 25, 2018, the Company through a private placement of 25,000,000 shares at a price of US$ 0.0669 per share.with Lombard Odier Asset Management (USA) Corp raised US$1.7 million, On June 1, 2018, Aether Real Assets Co-Investment I L.P exercised 65,000,000 warrants at an exercise price of US$0.0668 raising funds of US$4.3 million. On June 13, 2018, the Company through a private placement of 19,400,000 shares at a price of US$ 0.0668 per share with Lombard Odier Asset Management (USA) raised US$1.3 million. 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. Warrants reserve At January 1, 2017 Fair value of warrants exercised on February 6, 2017 at US$0.0623 At December 31, 2017 At January 1, 2018 Fair value of warrants exercised on June 01, 2018 at US$0.0668 At December 31, 2018 Page 67 Number ‘000 $’000 200,000 2,089 (135,000) (1,230) 65,000 859 65,000 859 (65,000) (859) - - RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 18. Capital and reserves (continued) Warrants reserve (continued) 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 fair value of the share purchase warrants was 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 was measured by reference to the fair value of the warrants issued in the absence of information on the fair value of the services provided. 135 million warrants were exercised in the prior year and 65 million warrants were exercised during the year. 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 equity 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 facility Government assistance Loan from related party Sandstorm loan Gold streaming Net debt Equity Total capital Page 68 Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 241 3,351 (3,707) (4,570) (3,864) (3,997) (796) (390) (1,733) (1,002) (1,505) - (10,343) (13,476) (21,171) (20,084) (47,216) (64,734) (69,923) (84,818) RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 19. Loss per share Basic loss per share The calculation of basic earnings per share at December 31, 2018 was based on the loss attributable to ordinary shareholders of $20.0 million (2017: US$4.1 million) and a weighted average number of ordinary shares outstanding during the year ended December 31, 2018 of 613.7 million (2017: 535.7 million) calculated as follows: Loss attributable to ordinary shareholders Loss for the period attributable to ordinary shareholders Weighted average number of ordinary shares At January 1, 2017 Effect of shares issued during the year Weighted average number of ordinary shares at December 31, 2017 In issue at January 1, 2018 Effect of shares issued during period Weighted average number of ordinary shares at December 31, 2018 Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 (20,046) (4,148) Number ‘000 414,290 121,383 535,673 549,740 63,983 613,723 For the year ended 31 December 2018, because there would be a further reduction in loss per share resulting from the assumption that share options, warrants and convertible loan are exercised or converted, all these instruments are considered anti-dilutive and are ignored in the computation of loss per share. As there were no other instruments that may have a potentially dilutive impact, the basic and diluted loss per share is the same for the year-ended 31 December 2018. At December 31, 2018 there were 20,677,000 (December 31, 2017: 13,014,000) share options in issue of which none (December 31, 2017: 4,742,472) were considered to be dilutive. At December 31, 2018 there were no warrants outstanding (December 31, 2017: 65,000,000) warrants in issue of which nil were considered to be dilutive (December 31, 2017: 29,649,555). 20. Trade and other payables Trade payables Other payables Accrued expenses Dec 31, 2018 Dec 31, 2017 US$’000 8,314 1,022 1,859 11,195 US$’000 5,383 320 1,611 7,314 Other payables include payroll taxes and social contribution in relation to Rambler Metals and Mining Canada Limited RAMBLER METALS AND MINING PLC Page 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. Interest-bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 24. Non-current liabilities Sandstorm loan Government assistance Advance purchase facility Finance lease liabilities Current liabilities Sandstorm loan Government assistance Loan from related party Advance purchase facility Finance lease liabilities Sandstorm Loan Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 790 - 777 390 1,094 2,682 2,047 3,000 4,708 6,072 715 - 19 - 1,733 1,002 2,770 1,315 1,660 1,570 6,897 3,887 In December 2018, Company received a loan of US$1.5 million carrying interest rate of 9.5% per annum. The loan is repayable by twenty-one monthly instalments of US$ 69,000 including interest after the first interest payment of US$ 0.2m which was paid on 1 April 2019. Government Assistance During the year the Company received US$632,000 in interest free repayable contributions from a Canadian government agency. Contributions to a total of US$1.25 million are available in support of the Phase II expansion project for the mine. The contributions are repayable over eight years from May 2019. The fair value of the contributions received calculated at a market interest rate of 10% have been classified as a financial liability with the difference between the fair value and the amount received credited against the cost of assets under construction. Related party loan CE Mining III Rambler Limited In November 2018 the Company received a convertible loan of US$2 million from CE Mining III Rambler Limited with the maturity of one year. The loan is unsecured, convertible at the option of CE Mining III Rambler Limited on or before November 26, 2019 at share price of C$0.05. It carries interest at 10.0% per annum. Expenses worth US$0.3 million were spent with regards to the loan, these expenses have been classified as deferred expenses and will be amortised during the loan term. At 31st December 2018 the balance was US$1.7 including interest of US$0.02 million and deferred cost of US$0.3 million. The fair value of the conversion option was calculated line to be immaterial with reference to a normal loan without conversion option. CE Mining II Rambler Limited In October 2017 the company received a loan of US$1 million from CE Mining II Rambler Limited. The loan was unsecured and carried interest at 9.5% per annum. In June 2018 Company repaid U$1.0 million including interest. RAMBLER METALS AND MINING PLC Page 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. Interest-bearing loans and borrowings (continued) Advance Purchase Facility During the year 2017 the Company repaid the balance of the advance purchase facility originally signed in July 2015 and in December 2017 the Group entered into another amended and restated purchase agreement with Transamine Trading S.A. (“Transamine”). Pursuant to the terms of the Purchase Agreement, Transamine agreed to purchase in advance, at Rambler’s option, up to US$4 million of concentrate (the “Advance Purchase Payments”) to be used for working capital requirements. At December 31, 2018 the balance was US$3.8 million. The loan is repayable by eighteen monthly instalments of US$222,222 plus interest at 6.75% per annum commencing June 28, 2018. Finance lease liabilities Finance lease liabilities are payable as follows: Minimum lease Payments Interest Principal Minimum lease Payments Interest Principal Dec 31, 2018 Dec 31, 2018 Dec 31, 2018 Dec 31, 2017 Dec 31, 2017 Dec 31, 2017 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Less than one year 1,791 131 1,660 1,743 173 1,570 Between one and five years 2,118 71 2,047 3,146 146 3,000 3,909 202 3,707 4,889 319 4,570 Under the terms of the lease agreements, no contingent rents are payable. The finance lease liabilities are secured on the underlying assets. 22. Gold streaming Fair Value of Gold Loan liability opening balance Movement in fair value of gold loan Gold payment for the year Fair Value of Gold Loan liability closing balance Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 13,476 15,449 (1,323) (566) (1,810) (1,407) 10,343 13,476 In March 2010, the Company entered into an agreement (“Gold streaming”) with Sandstorm Resources Ltd. (‘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 oz of payable gold has been produced, the Company has agreed to sell to Sandstorm, at market price, a percentage equal to 25% x (85% divided by the actual percentage of metallurgical recovery of gold realized 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. The percentage of payable gold of 25% falls to 12% after 175,000 oz of payable gold has been produced and remains Page 71 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 22. Gold streaming (continued) payable 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. Rambler purchases the payable gold from the market and repayment is made in kind to Sandstorm. At December 31, 2018, the Company has produced 46,526 payable ounces of gold of which 14,535 ounces were transferrable to Sandstorm under the agreement as follows: Production year Payable gold ounces produced Ounces transferrable Pre-production 1 2 3 4 5 6 7 (to date) Total 15,429 4,888 5,945 5,408 6,905 3,040 3,889 1,022 46,526 4,937 1,280 1,904 1,689 2,069 955 1,342 359 14,535 The Gold streaming is accounted for as a financial liability carried at fair value through profit and loss. The liability is based on management’s best estimate of the time of delivery of payable gold, the total amount of gold expected to be produced over the life of the mime, the timing of production, the Company’s view on forecast gold prices and the rate implicit in the loan at the date of inception. The movement in the fair value of the liability recognised in the income statement during the period was a credit of US$1.3 million (2017: US$0.6 million charge). The Gold streaming is secured by a fixed and floating charge over the assets of the Group. 23. Provision Reclamation and closure provision Opening balance Unwinding of discount (note 8) Effect of movements in foreign exchange Ending balance Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 1,961 1,804 50 28 (156) 129 1,855 1,961 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 expected useful life of 20 years. The provision has been calculated based on the present value of the expected future cash flows discounting at 3.02% 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. The liability is secured by Letters of Credit for US$3.5 million. Page 72 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Financial instruments The Group’s principal financial assets comprise: cash and cash equivalents, restricted cash, equity investments, derivative financial instruments and other receivables. In addition the Company’s financial assets include amounts due from subsidiaries. The Group and Company’s financial liabilities comprise: trade payables; other payables; and accrued expenses. The Group’s financial liabilities also include interest bearing loans and borrowings and Gold streaming. All of the Group’s and Company’s financial liabilities are measured at amortised cost with the exception of Gold streaming as described in note 22 and their financial assets are classified as loans and receivables and measured at amortised cost with the exception of equity investments and derivative financial instruments as described in notes 13 and 16 respectively. The Group held the following categories of financial instruments at December 31, 2018: Financial assets Assets at fair value through profit and loss: Derivative financial instruments – level 2 fair value Equity investments: Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 730 1,830 Investment in quoted equity securities – level 1 fair value 102 610 Loans and receivables: Trade receivables Other receivables Sales taxes recoverable Cash at bank Restricted cash Total financial assets Liabilities at amortised cost or equivalent: Trade payables Other payables Accrued expenses Loans and borrowings Liabilities at fair value through P&L Gold streaming Total financial liabilities - - 349 260 672 412 241 3,351 3,247 3,530 4,509 7,553 5,341 9,993 Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 (8,314) (5,383) (1,022) (320) (1,859) (1,611) (11,605) (9,959) (22,800) (17,273) (10,343) (13,476) (33,143) (30,749) The carrying amounts of financial instrument are representative of the fair value related to each class of financial assets and liabilities in both years. Page 73 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Financial instruments (continued) The board of directors determines, as required, the degree to which it is appropriate to use financial instruments and hedging techniques to mitigate risks. The main risks for which such instruments may be appropriate are liquidity risk, credit risk and market risk which includes foreign currency risk, interest rate risk and commodity price risk each of which is discussed below. Liquidity risk With finite cash resources the liquidity risk is significant. This risk is managed by controls over expenditure and concentrating on achieving the payment milestones under the financing arrangement. Success will depend largely upon the outcome of on-going and future exploration and development programmes. Given the nature of the Group’s current activities the entity will remain dependent on a mixture of debt and equity funding in the short to medium term until such time as the Group becomes self-financing from the commercial production of mineral resources. The liabilities of the parent company are due within one year. The parent company has adequate financial resources to meet the obligations existing at December 31, 2018. Fixed rate financial liabilities At the year end the analysis of finance leases and hire purchase contracts which were all due in Canadian Dollars and are at fixed interest rates was as follows: Due within one year Due within one to two years Due within two to three years Due within three to four years Due within four to five years Due after five years Dec 31, 2018 Dec 31, 2017 US$’000 4,491 3,514 US$’000 3,306 4,402 857 1,317 190 408 151 81 499 352 9,702 9,866 The average fixed interest rate for the finance leases and hire purchase contracts outstanding at December 31, 2018 was 5.1% (2017: 5.3%). 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 15). The Group maximum exposure to credit risk at December 31, 2018 was represented by receivables and cash resources. Market risk Foreign currency risk The Company has a small amount of cash resources and certain liabilities including the Gold streaming and the advance purchase facility 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 74 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Financial instruments (continued) Market risk (continued) Foreign currency risk (continued) 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 At the period end the cash and short term deposits were as follows: Canadian $ US $ Sterling Equity Dec 31, 2018 Dec 31, 2017 US$’000 (199) US$’000 (17) 181 16 (979) (295) 890 269 Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 105 - 136 241 644 2,692 15 3,351 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 21. 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. Page 75 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24 Financial instruments (continued) Commodity price risk (continued) As explained in note 3 the Group calculates the fair value of the Gold streaming 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 Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 (1,212) (1,348) 3,029 3,369 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 Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 918 587 (918) (587) 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 76 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 25. 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: Dec 31, 2018 Dec 31, 2017 US$’000 US$’000 255 242 21 19 21 19 86 19 21 19 17 15 21 19 442 352 Dec 31, 2018 Dec 31, 2017 No. ‘000 No. ‘000 7,800 4,575 7,800 4,575 Dec 31, 2018 Dec 31, 2017 $’000 $’000 585 508 27 116 26 58 728 592 Salary – executive N Williams* Fees – non-executive B A Mills B Labatte M V Sander T I Ackerman G Poulter E C Chen Share options held by directors were as follows: N Williams Short term employee benefits Social security costs Share based payments *Norman Williams resigned as a director from 31st March 2019. Page 77 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 25. 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 Registered address Rambler Mines Limited Ordinary 100% Holding company England Rambler Metals and Mining Canada Limited Common 100% (indirectly) Exploration, development and mining Canada 1948565 Ontario Inc. Common 100% Exploration Canada 3 Sheen Road Richmond Upon Thames, Surrey TW9 1AD PO Box 610 Baie Verte, NL A0K 1B0 PO Box 610 Baie Verte, NL A0K 1B0 CE Mining II Rambler Limited is a controlling shareholder of the Company. Details of related party transactions with CE Mining II Rambler Limited are included in note 21. Ultimate and controlling party CE Mining II Rambler had shareholding of 60% as of 31st December 2018. 26. Subsequent events • • In January 2019 the Company, via its wholly-owned subsidiary, Rambler Metals and Mining Canada Limited, received a bridge loan from CE Mining III Rambler Limited (“CEIII”) of US$1 million bearing interest of 10% per annum in support of short-term working capital requirements at its Canadian operation. In March 2019 the Company closed a private placement funding of US$11 million by way of an issuance of 599,781,897 new ordinary shares in the capital of Rambler at a subscription price of US$0.018 (£0.014) per ordinary share. The proceeds of the subscription were for working capital purposes and to repay the US$1 million unsecured loan owing to CEIII. The loan was fully repaid in March2019 including interest. • An Open Offer for shares was closed in April 2019 with 37,940,043 ordinary shares issued for proceeds of £524,860.58. • The shares of the company delisted from TSX Venture Exchange (TSXV) at the close of 15th January 2019. The minimal trading activity of the Company’s Shares on the TSXV no longer justifies the expense and administrative requirements associated with maintaining this dual listing. Page 78 RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF COMPREHENSIVE INCOME For the Year Ended December 31, 2018 (EXPRESSED IN US DOLLARS) Year to December 31, Year to December 31, 2018 U$’000 2017 U$’000 (Loss)/profit for the period (4,591) (2,799) Other comprehensive income Items that may be reclassified into profit or loss Exchange differences on translation into presentation currency (4,271) 6,603 Other comprehensive profit/(loss) for the year (4,271) 6,603 Total comprehensive profit/(loss) for the year (8,862) 3,804 Page 79 REGISTERED NUMBER: 05101822 (ENGLAND AND WALES) RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF FINANCIAL POSITION As at December 31, 2018 (EXPRESSED IN US DOLLARS) Note December 31, December 31, Assets Investments Loans Deferred tax Total non-current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Liabilities Loan Trade and other payables Total current liabilities Total liabilities Net current assets Net assets Equity Issued capital Share premium Warrants reserve Translation reserve Retained profit Total equity C2 C2 C3 C4 C5 C5 2018 U$’000 2017 U$’000 1,449 1,532 73,509 71,458 - 1,680 74,958 74,670 13 28 136 15 149 43 75,107 74,713 1,733 - 334 217 2,067 217 2,067 217 (1,918) (174) 73,040 74,496 17 9,524 8,061 95,999 89,309 - 859 (10,870) (6,599) (21,613) (17,134) 73,040 74,496 As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the company is not presented as part of these financial statements. The company's total comprehensive loss for the financial year was US$8.9 million (2017: profit of US$3.8 million). ON BEHALF OF THE BOARD: A A Booyzen Director Approved and authorised for issue by the Board on June 4, 2018. Page 80 RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF CHANGES IN EQUITY (EXPRESSED IN US DOLLARS) US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Share capital Share premium Warrants reserve Translation reserve Accumulated losses Total Balance at January 1, 2017 Comprehensive income Loss for the year 6,374 81,442 2,089 (13,202) (14,394) 62,309 - - - - (2,799) (2,799) Foreign exchange translation differences - - - 6,603 - 6,603 Total other comprehensive income - - - 6,603 (2,799) 3,804 Total comprehensive loss for the year - - - 6,603 (2,799) 3,804 Issue of share capital Share issue expenses Share based payments Transactions with owners 1,687 7,979 (1,230) - - 8,436 - (112) - - - (112) - - - - 59 59 1,687 7,867 (1,230) - 59 8,383 Balance at December 31, 2017 8,061 89,309 859 (6,599) (17,134) 74,496 Balance at January 1, 2018 Comprehensive income Loss for the year 8,061 89,309 859 (6,599) (17,134) 74,496 - - - - (4,591) (4,591) Foreign exchange translation differences - - - (4,271) - (4,271) Total other comprehensive income - - - (4,271) (4,591) (8,862) Total comprehensive loss for the year - - - (4,271) (4,591) (8,862) Issue of share capital Warrants exercised Share issue expenses Share based payments Transactions with owners 1,463 5,847 - - - 7,310 - 859 (859) - - - - (16) - - - (16) - - - - 112 112 1,463 6,690 (859) - 112 7,406 Balance at December 31, 2018 9,524 95,999 - (10,870) (21,613) 73,040 Page 81 RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF CASH FLOWS For the Year Ended December 31, 2017 (EXPRESSED IN US DOLLARS) Cash flows from operating activities Operating loss Share based payments Foreign exchange losses Decrease in debtors (Decrease)/increase in creditors Cash generated from operations Interest paid Net cash utilised in operating activities Cash flows from investing activities Advances to subsidiaries Loans repaid by subsidiaries Net cash utilised in investing activities Cash flows from financing activities Proceeds from the issue of share capital (note 18) Loan received Net cash generated from financing activities Net increase/(decrease) 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 Year to December 31, Year to December 31, 2018 U$’000 2017 U$’000 (2,766) (2,906) 112 59 1,747 1,657 15 18 (150) 74 (1,072) (1,098) (55) - (1,127) (1,098) (8,879) (9,133) 827 707 (8,040) (8,426) 7,294 8,323 2,000 - 9,294 8,323 127 (1,201) 15 1,171 (4) 45 136 15 Page 82 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. Investments and loans Cost Balance at January 1, 2017 Advances Repayments Effect of movements in foreign exchange Balance at December 31, 2017 Balance at January 1, 2018 Advances Repayments Effect of movements in foreign exchange Balance at December 31, 2018 Investment in subsidiary Loans $’000 $’000 Total $’000 1,398 58,408 59,806 - 9,133 9,133 - (707) (707) 134 4,624 4,758 1,532 71,458 72,990 1,532 71,458 72,990 - 8,879 8,879 - (839) (839) (83) (5,989) (6,072) 1,449 73,509 74,958 The company has interests in the following subsidiary undertakings, which are included in the consolidated financial statements. Name Class Holding Activity Country of Incorporation Registered address Rambler Mines Limited Ordinary 100% Holding company England Rambler Metals and Mining Canada Limited Common 100% (indirectly) Exploration, development and mining Canada 1948565 Ontario Inc. Common 100% Exploration Canada The aggregate value of shares in subsidiary undertakings is stated at cost. The loans to the subsidiary undertakings are interest free. 3 Sheen Road Richmond Upon Thames, Surrey TW9 1AD PO Box 610 Baie Verte, NL A0K 1B0 PO Box 610 Baie Verte, NL A0K 1B0 Page 83 RAMBLER METALS AND MINING PLC NOTES TO THE COMPANY FINANCIAL STATEMENTS C3. Deferred tax The Company has incurred losses which will be available for offset against future taxable profits. Given the Company does not generate any income to set off against the available losses the Company has completely written off the deferred tax asset of $1.7 million (2017: Nil) in current year. Therefore, deferred tax asset as at 31 December 2018 was Nil (2017: 1.7 million) C4. Trade and other receivables Sales taxes recoverable Prepayments and accrued income C5. Trade and other payables Loan Trade payables Accrued expenses C6. Related party transactions December December 31, 2018 31, 2017 $’000 $’000 10 16 3 12 13 28 December 31, 2018 $’000 December 31, 2017 $’000 1,733 100 234 - 67 150 2,067 217 The Company has a related party relationship with its subsidiaries (see note C2) and with its directors and executive officers (see note 25). Transactions with subsidiary undertakings Details of loans advanced to subsidiary undertakings are included in note C2. Other related parties Transactions with other related parties are detailed in note 25. Page 84 

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