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SAVANNAH RESOURCES PLC
Company No 07307107
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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CONTENTS
BUSINESS REVIEW
Chairman’s Statement
Chief Executive’s Report
Corporate Social Responsibility
Strategic Report
Project Overviews
GOVERNANCE
Report of the Directors
Corporate Governance Statement
Statement of Directors’ Responsibilities
Report of the Independent Auditors
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Consolidated Financial Statements
COMPANY INFORMATION
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CHAIRMAN’S STATEMENT
2019 was another important year for Savannah and the
lithium industry, of which the Group aims to be an
integral part. Undeniably, lithium raw materials and the
Savannah share price both performed poorly during
2019. Nonetheless, our company made significant
progress last year in developing the potential of our
Mina do Barroso asset, and we regard the fall in lithium
raw material and chemical prices as an overcorrection,
masking the underlying global trend towards an
electrified future in which lithium ion batteries will have
a key role. The year was also marked by the award of the
three, key mining licences in Mozambique. We look
forward to providing further updates regarding the
major milestones for all our projects in the coming
months.
Mina do Barroso and Savannah have a vital, long term,
role to play in the European lithium battery industry and
have the potential to bring Portugal to the forefront of
European lithium supply. Our next objectives are to
complete the Environmental Impact Assessment (“EIA”)
and the Definitive Feasibility Study (“DFS”) on the
project, and obtain the legal authority and social
acceptance required for its development, which will
provide the foundation to secure construction finance.
Progress in Mozambique was confirmed towards the
end of the year and into 2020 with the award of the
three mining licences which are critical to the ultimate
development of the Mutamba mineral sands project.
These licence awards also coincided with a continuing
improvement in the market price of mineral sands
products. We are now making preparations to accelerate
work on the Mutamba PreFeasibility Study.
We also made progress in Oman, where the authorities
announced last August that they intended to issue the
mining licences we submitted applications for in 2016
on the Block 5 project. Meanwhile, we have continued
to examine our options under the strategic review we
initiated last year, and we expect to complete this and
commence a course of action during this year.
In respect of the Coronavirus pandemic we are proud to
have already taken actions to safeguard the wellbeing of
both our employees and other stakeholders at all our
operating sites ahead of official recommendations or
requirements by governments.
Notwithstanding the current impact of the Coronavirus
pandemic on all international stock exchanges, we hope
that completion of our objectives in 2020, while
remaining cost conscious at all times, will provide
support for the share price as the markets recognise the
critical role future lithium producers such as Savannah
will play in the developing EV revolution.
Portugal
Having become sole owner of the Mina do Barroso
project through the acquisition of the residual 25% stake
last June, Savannah immediately expanded the project’s
footprint by 50% by executing its option to acquire the
adjacent three block “Aldeia” mining lease application.
With the project’s resource expanded last May to 27Mt
(+37% vs. September 2018), the focus since summer
2019 has been on completing the project’s technical
appraisal, its permitting process, and the development
of associated commercial relationships.
As we explained at the time of the fundraising last
September, we concluded that further technical
evaluation work was required in light of the challenges
experienced in the commissioning of new spodumene
operations in Australia. This work is now moving toward
a conclusion and will be drawn together with all aspects
of the project in the DFS due later this year. The
development decision we hoped to make last year will
now be taken once the DFS has been completed.
The permitting process is underpinned by the project’s
EIA study. Hence, we will be shortly submitting this for
review by APA (the Portuguese Environment Agency).
This will be a major milestone. I would draw the
attention of all our stakeholders to the comprehensive
nature of the study, which is expected to extend to over
2,000 pages. In simple terms the study identifies the
potential impacts the project may have on the natural
environment and local communities, and provides
detailed plans for eliminating or minimizing these
impacts through project design, and for monitoring and
mitigating these impacts during the project’s operation
and beyond. Hence, the study’s content gives us the first
real opportunity to provide factbased answers to the
questions local stakeholders have had about how the
project will look and feel and what impact, if any, it will
have on their daily lives and the environment. We
welcome this engagement and the opportunity to work
with all stakeholders to ensure the study’s mitigating
measures are fully utilised once it receives approval.
We are also in the process of planning and designing a
series of programmes which, we hope, will see
Savannah’s lithium project become a significant support
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CHAIRMAN’S STATEMENT
to the local economy and communities in the Boticas
municipality in which we operate, as well as the wider
region. Around the world, the mining industry has
initiated, funded and operated a wide range of tailored
lasting
programmes which have generated
economic and social benefits for the communities that
live alongside projects. This has always been Savannah’s
intention with Mina do Barroso, and we look forward to
presenting our plans to the project stakeholders over the
coming months.
long
Details of our more
recent Corporate Social
Responsibility (“CSR”) programmes undertaken across
all our projects can be found in the CSR section.
For these benefits to be realised however, the project
must become a commercial reality. This can only happen
by having customers for our products. In that regard
Savannah is making significant progress in positioning
itself as Europe’s most attractive project partner for
industrial groups looking to build spodumene mineral
conversion plants in Europe for the production of lithium
hydroxide. Lithium hydroxide is a key component in
lithium batteries.
We are also receiving interest from major Portuguese
industrial groups around forming strategic partnerships
with Savannah on what is planned to be a sustainable
mine development, which puts Portugal at the heart of
Europe’s fast growing and highly strategic battery supply
chain. We expect the project to generate significant
direct and indirect economic benefits for Portugal and
we continue to enjoy solid support for the project from
the Portuguese Government. This has been further
enhanced by our partnership with, and inclusion in,
various EUbacked ventures relating to the development
of our project and an endtoend lithium battery supply
chain in Europe.
The electric vehicle revolution is well underway, and
2020 will likely see EV penetration levels rise notably as
the global market moves towards the expected c.10m
sales in 2025 and c.30m in 2030 (source: Bloomberg NEF
Electric Vehicle Outlook 2019). These numbers may
seem staggering to some, but with growing consumer
interest now adding to the
impetus created by
tightening emissions legislation, car companies globally
are about to expand their EV model ranges significantly.
On 16 March 2020 the Portuguese government’s
guidelines came into force and include requiring all
universities, schools, nurseries, public places, and bars
be closed at least until the end of March, and request
that the population avoid travelling and stay at home as
much as possible.
To sum up, notwithstanding undue disruption from
Coronavirus, 2020 should bring the evaluation and
planning phase of the Mina do Barroso project to a
close. During the year we expect to have completed the
DFS and, assuming the development decision is positive,
to have entered into offtake agreements, and advanced
our financing and our longterm community relationship
plans. We look forward to continuing to develop our
relationships with all stakeholders.
Mozambique
Our effort in maintaining an open dialogue and a good
relationship with the Government of Mozambique
proved its worth with the award of full Mining Licences
over the three contiguous concessions which cover the
key resourcebearing ground on our Mutamba mineral
sands joint venture. It is simply not possible to construct
and operate a mine without the necessary licences being
granted. Hence, we and our partner on the project, Rio
Tinto, view these licence awards as a significant de
risking step for the project’s ultimate development.
While the review and approval period extended beyond
our original expectations, the longterm impact on the
project was minimal in our view. In the intervening
period, the market dynamics within the titanium
feedstock sector
the
development of new, large scale, long life sources of
supply such as Mutamba.
favourable
remained
for
Furthermore, a mining operation in this region of
Mozambique could provide the longterm foundation for
meaningful economic and social development, and I
again refer readers to the CSR section for further details
of our community programmes in the area.
Savannah will continue to work on the Mutamba project
with Rio Tinto, focusing on the best way to draw value
from the project for our stakeholders. The current task
for Savannah is the PreFeasibility study on the project.
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CHAIRMAN’S STATEMENT
the project’s minority shareholders agreeing to receive
USD $11.9m worth of equity in Savannah as opposed to
cash to maintain their own exposure to this exciting
project. As a result, resource investment specialist
Slipstream Resources Investments Pty Ltd (“Slipstream”),
in Savannah,
which was an existing shareholder
significantly
to 12.9%.
interest
its
increased
Furthermore, the vendors of the 25% stake, including
Slipstream, agreed to a 12month lockin arrangement
on the shares received and a further 9month orderly
market restriction, following completion of the
transaction.
The deal has maximised our shareholders’ exposure to
one of the most important lithium projects in Europe
and gives Savannah greater control and optionality in
any future negotiations regarding project finance and
strategic partnerships on the project.
A small issue of Savannah shares was also used in June
2019 in an Agreement with Gentor Resources Inc
(‘Gentor’) to settle the USD $3m deferred consideration
element of the original 2014 acquisition of the Block 5
licence in Oman. USD $200,000 (~£158,000) of stock,
subject to a sixmonth orderly market agreement, was
issued to Gentor along with a cash payment of USD
$100,000 (~£79,000).
Completion of that study would lift our ownership of the
project from the current 20% to 35%.
Oman
We noted with sadness the passing of Oman’s leader for
nearly 50 years, His Majesty, Sultan Qaboos bin Said Al
Said, in January and sent our condolences to all our
Omani stakeholders at that time.
While we haven’t enjoyed the same licencing success to
date in Oman on the Mahab 4 and Maqail South project
applications as we have in Mozambique, we announced
in August that we had been advised by the Public
Authority for Mining in Oman (“PAM”) that it intends to
grant the licences under the new mining law. Savannah
maintains its dialogue with PAM and other relevant
government departments and agencies, with the licence
grants now only reliant on the government deciding on
the licence fee schedule and these fees being paid.
During the year, work in the field was limited to ground
programmes such as mapping with the emphasis placed
firmly on cost control to reflect the lower priority now
placed on these projects.
As discussed, Savannah’s focus remains firmly on
Portugal, but the award of the Block 5 mining licences
remains important in our view as it would greatly derisk
the overall project. Resolution on the renewal of the
Block 4 exploration licence applied for in 2018 is also
deemed as important for the same reason. To this end,
the strategic review initiated last year on these assets
continues. On a more positive note, Savannah did
receive interest from a number of groups regarding the
potential acquisition of these projects and discussions
are continuing. Savannah expects to conclude its
strategic review this year and provide a resolution for
our shareholders, employees and stakeholders on these
assets.
Corporate Update
We were delighted to receive a UK Department of
International Trade’s Overseas Direct Investment Award
for Portugal in November 2019. The recognition of our
commitment to the country to date by the UK
Government,
the Portuguese
to
Government, is highly appreciated.
in addition
At the time of last year’s annual report Savannah was in
the process of finalising the acquisition of the minority
25% stake in Mina do Barroso to take sole ownership of
the project. This was duly completed in June 2019 with
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CHAIRMAN’S STATEMENT
Savannah’s CEO, David Archer, receives the UK Department of International Trade’s Overseas Direct Investment
Award for Portugal, November 2019:
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Source: Company photo
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CHAIRMAN’S STATEMENT
with a £1.24m commitment. Al Marjan’s ongoing
commitment to Savannah is greatly appreciated, and we
were also pleased with the additional investment
received from our existing institutional shareholders as
well as a number of new investors.
Outlook
We will continue to monitor developments relating to
the Coronavirus pandemic and will take the appropriate
and proportionate actions to safeguard both our
employees’ and other stakeholders’ wellbeing. Such
actions may impact the speed of delivering on our
objectives. However, at Mina do Barroso our focus
remains firmly on completing the predevelopment
phase as soon as possible. This means lodging the EIA,
finishing the DFS, obtaining the necessary licences and
commercial agreements, and making preparations to
secure the offers of finance required to build the project.
Work on the PFS at Mutamba continues and whilst firm
cost controls are in place in respect of the Oman
licence
projects, we continue to shepherd our
applications through the Oman administration.
My thanks go to all our staff. Their continuing efforts to
progress our project portfolio in order to create value
for shareholders and benefits for all our stakeholders is
very much appreciated by myself and the Board. I would
also like to express the Board’s thanks to our many
shareholders who have continued to support the
company over the last year. We hope to repay your
continuing support by growing Savannah into a valuable
business based on responsible, sustainable mining
operations which bring benefits to all stakeholders.
Matthew King
Chairman
Date: 17 March 2020
Financial Overview
With its project evaluation programmes continuing
throughout the year, Savannah is reporting a loss before
and after tax of £3.8m for 2019 (2018: £3.4m). The
higher amount reflects an increase in administration
costs associated with the corporate transactions
completed during the year, a temporary modest increase
in staff levels, additional professional advisory services
and an adverse foreign exchange loss driven by the
strengthening of the GBP, though these expenses were
partially offset by no staff bonuses being awarded and a
reduction in travel costs.
Cash spent on exploration activity fell to £4.2m (2018:
£6.3m) overall. However, if the oneoff £2.0m milestone
payments made last year in relation to the original
acquisition of a 75% stake in Savannah Lithium Lda,
owner of the Mina do Barroso project, is taken into
account, exploration expenditure was broadly
unchanged. An amount of £294,000 relating to the Non
Controlling Interest value applicable to the additional
25% stake in Savannah Lithium Lda, which the Group
acquired in June 2019 through the issue of 163m new
ordinary shares
in
in the Company,
Exploration and Evaluation Assets. The agreed
transaction value as per the signed term sheet was USD
$11.9m, however in accordance with the financial
reporting requirements of IFRS only the value of the
in
interest (“NCI”)
Noncontrolling
intangible assets.
is recognised
is reported
The Group finished the year with Cash and Cash
Equivalents of £3.5m (2018: £7.7m). The cash position
includes the £5m (£4.83m net of expenses) placement
completed last September. As highlighted at the time,
these additional funds are being used primarily to
complete the DFS on the Mina do Barroso lithium
project in the current year. Availability of funds from the
equity capital markets for the mining sector was much
reduced in 2019 due to a number of factors including
the potential impact on the global economy of a
USChina trade war.
Hence, we were extremely pleased to raise this sum
which is understood to have been the sixth largest
fundraise by an AIM listed mining company in 2019. As
in other recent placings, the cornerstone of the financing
was our largest shareholder, Al Marjan Limited (20.7%),
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CHIEF EXECUTIVE’S REPORT
Savannah experienced some challenges during 2019 but
our company worked hard to meet these market and
operational challenges and we continued to make
progress with our projects. This has resulted in a number
of milestones which should provide the basis for the
further progress and value creation during the year
ahead.
At Mina do Barroso we are now busy with the project’s
EIA, the DFS, discussions with potential commercial
partners and financing groups, and finalising our
proposals for social and economic programmes for the
communities living close to the project. The commercial
agreements we are working towards and the imminent
submission of the EIA confirm the project’s status as
Portugal’s first significant contribution to the upstream
part of Europe’s developing lithium battery value chain.
Savannah is more than just the Mina do Barroso project,
however, and the licence awards on the Mutamba
mineral sands project after a thorough review period by
the Mozambican authorities have changed the
complexion of that project significantly. As a result, we
are now
increasing our work on the Mutamba
PreFeasibility study.
Progress with the mine licence awards in Oman has been
slower than in Mozambique but we continue our
dialogue with the Omani authorities on this point
alongside our own strategic review of the options
available to Savannah on these assets. Concluding and
actioning the findings of that review, ideally after the
award of the Block 5 related mining licences and renewal
of the Block 4 exploration licence, is a goal for the year.
However, this remains a
lower priority for the
management team relative to permitting and financing
the Mina do Barroso project and advancing the PFS on
Mutamba.
Portugal
Mina do Barroso remains our flagship asset as its risk
reward profile continues to be the most attractive
amongst our current portfolio. Despite the weakening
of lithium prices in 2019 we believe the project’s profile
has been greatly enhanced over the past year by a
number of factors including; a further increase in its
lithium resource, the simplification of its ownership
structure through Savannah’s acquisition of the residual
25% stake, the addition of the adjacent Aldeia mining
lease application ground; and the advanced nature of
the discussions we are having with potential lithium and
coproduct customers/offtakers and other Portuguese
strategic partners.
We believe that owing to the advanced nature of the
offtake discussions our shareholders can take particular
confidence that an offtake agreement with a significant
and well positioned counterparty is within our grasp.
From a wider market perspective, it also reiterates the
view held by informed lithium consumers that the
potential for supply shortages in the market exists in the
medium term despite the inventory surplus which
appeared last year. Furthermore, it also confirms the
views of many, including the European Commission, that
a European battery manufacturing industry must be
supported by domestic raw materials as competition
grows globally for access to lithium and risk associated
with long supply chains are brought into stark relief by
unexpected events such as the Coronavirus pandemic.
Mina do Barroso would offer an excellent foundation for
a short, low carbon, lithium supply chain in Europe.
I understand these longterm market trends were
difficult to credit during 2019 when reduced subsidies
on electric vehicles in China and increased inventories
of lithium raw materials and chemicals were driving
down the share prices of lithium companies. However,
the shortterm events masked the relentless evolution
and expansion of the lithium battery industry driven by
the transition to electrification in the transport sector,
and growth in other applications such as energy storage.
In hindsight, 2019 should perhaps be seen as a
transitionary year in the automotive industry and the
discomfort in the immature and rapidly expanding
lithium supply industry, akin to growing pains.
We believe the 2019 sales figures for the world’s car
market will bear this out with some analysis. While
global car and light duty vehicle sales fell 4.4% to 90.3m
(source: LMC Automotive) with Western Europe the only
major growth market (+1.2%), website EVvolumes.com
reports that this overall fall masked a 9% rise in plugin
vehicles sales to 2.3m. This lifts EV penetration in global
new vehicle sales to 2.5% from 2.2% in 2018.
At present forecasts appear to be for a further decline
in overall light vehicles sales in 2020 (e.g. Centre for
Automotive Research, Germany), with this trend
potentially exacerbated further by the impact of the
Coronavirus on all markets. However, may present
another opportunity for EVs to take market share as
more models are released at a range of price points.
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CHIEF EXECUTIVE’S REPORT
Digging deeper into the global EV market shows that
China, still the largest market for EVs, saw sales impacted
noticeably by the reduction in state subsidies in July, but
sales in China still grew by 3% to 1.2m. Encouragingly the
Chinese Government has subsequently confirmed that
the planned subsidy reduction for 2020 would not be
implemented. Sales in the US showed a fall yearonyear
of 11%. However, this is believed to reflect the poor
availability of affordable EVs in that market as opposed
to a wider rejection of the technology, with 2020
expected to bring a return to EV sales growth. The real
2019 EV success story was Europe, the market in which
Savannah believes Mina do Barroso has such an
important role to play.
Website EVvolumes.com reports European sales of plug
in vehicles reached 590,000 in 2019, 44% higher than
2018 with the overall penetration rate rising to 3.4% vs.
2.1% for 2018. Furthermore, 2020 could see plugin EV
sales in Europe approach 1m (37% of total sales; source:
Transport & Environment) and comfortably surpass that
level in 2021 (712% of total sales) as European auto
manufacturers begin the multiyear roll out of numerous
new models to avoid the significant fines faced if new
emission targets are missed. Furthermore, with
legislation then due to tighten from 2025 and again in
2030, the framework for mass adoption of EVs in the
region
in place. Overall, Transport &
Environment estimate that the total investment in EVs
by European car makers, which is already in the tens of
billions of Euros, will equate to approximately 50% of the
is already
total fines that would be due if they took no action on
the make up of their fleets. Based on those metrics it’s
very difficult to think that the EV revolution won’t take
place.
The advanced discussions we are in with offtakers is not
Savannah’s only commitment to the European lithium
battery value chain. During the past year we have
significantly strengthened our own ties with the
European Union through a number of its agencies and
initiatives.
We have also become a project partner in two initiatives
run by EIT RawMaterials, which has a mission to enable
sustainable competitiveness of the European minerals,
metals and materials sector along the value chain. The
first, the Certification of Raw Materials (“CERA”) project
has the brief to produce a standardised certification
scheme ensuring environmental, social and economic
sustainability in extraction, processing, trading and
manufacturing of all mineral raw materials. Savannah’s
Mina do Barroso project has been chosen as the pilot
mining project for evaluation to achieve the CERA
standard, and we believe meeting this rigorous EU
standard should give the project significant credit with
potential
industrial customers and Europebased
financiers.
The second project, “LiRef”, is validating two conversion
processes with the target to develop one robust and
flexible process to transform spodumene concentrate
into battery grade lithium chemical. If a common
European Annual Plugin Vehicle Sales & Market Share
Source: EVvolumes.com
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CHIEF EXECUTIVE’S REPORT
processing technology can be found it could be used in
Europeanbased spodumene conversion plants with the
capacity to treat ores from multiple sources including
Mina do Barroso.
Back at the project, our focus for 2019 was on
progressing the EIA, the Mine Plan Study, which is
another report required in the project licencing process,
intense resource
and DFS. Hence, following the
delineation campaigns of 2017 and 2018, there was less
drilling on the project in 2019 (69 holes for 5,887m
taking the total to date to 335 holes for 31,407m).
However, the company was still able to publish two
resource upgrades with the second estimate in May
representing a 37% increase over the September 2018
estimate in terms of contained Li2O (286kt). A 25%
increase in the midpoint of the additional Exploration
Target1 estimate (15Mt vs. 12Mt) was also made in May,
indicating the longterm potential to increase the
project’s resource towards 50Mt. While resource
expansion may have only modest significance to equity
markets currently, to industrial consumers of lithium, the
possibility of securing access to what may become
decades of stable supply is very valuable. Savannah was
also able to declare its first coproduct resource on the
project for the Grandao deposit. Further details of the
resource estimates can be found in the Project Summary
section.
As highlighted at the time of the fundraise last September,
and based on the operating performances of new
spodumene projects in Australia, we took the decision to
expand the original DFS metallurgical test work
programme to allow us to identify and optimise a lithium
recovery process that would work effectively across all
five orebodies on the project. This work has advanced and
will be concluded by a final phase of pilot scale testing.
As we outlined in September, many of the DFS
workstreams are at an advanced point, and the next task
will be to reevaluate what remains to be done once the
EIA and the associated Mine Plan Study have been
completed as much of the work prepared for those
studies is relevant to the DFS.
Air monitoring equipment being used to collect baseline data for the Mina do Barroso EIA study:
Source: Company photo
1 Cautionary Statement: The potential quantity and grade of the Additional Resource Targets is conceptual in nature, there has been insufficient prospecting work to estimate
a mineral resource and it is uncertain if further prospecting will result in defining a mineral resource.
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CHIEF EXECUTIVE’S REPORT
In regard to the EIA, the submission will represent a huge
effort on the part of Savannah’s project team and
consultants following a long period of data collection,
interpretation, design and planning. We expect the
consultation and approval process should take some six
months during which time we plan a comprehensive
programme of stakeholder engagement outlining and
discussing specific areas of the EIA and our project plans.
lithium resources. Management has met with a number
of ministers in the last year and we were delighted to
host the Secretary of State for Energy, João Galamba, at
the project site during the year. We were also delighted
to welcome to the project the British Ambassador to
Portugal, Chris Santy, and to win the UK Department of
International Trade’s Overseas Direct Investment Award
for Portugal.
To confirm, it is Savannah’s intention to develop the
project with the minimum of impact on the natural
environment and local communities. We are also
committed to making our operation as sustainable as
feasibly possible to attach the greatest environmental
benefit we can to the lithium concentrate we produce.
To this end, Savannah is looking to form strategic
partnerships with some of the high quality service
providers available within Portugal to help move Mina
do Barroso into development and bring maximum
benefits to the local economy and population, and
Portugal as a whole.
We are also very pleased with the continued strong
support the project enjoys from the Portuguese
Government, which remains keen to develop an in
country lithium industry based on Portugal’s substantial
We expect Mina do Barroso to dominate our news flow
in the next 12 months and look forward to the much
anticipated mass market EV ramp up in Europe in 2020
providing the sector with fresh momentum. Lithium
inventories, as well as external factors such as the
Coronavirus outbreak, may remain a drag on prices in
the first half of the year at least and further volatility in
this rapidly developing market must be considered
‘normal’ by lithium industry investors. However, we
hope that stock specific news will outweigh these
factors. Maintaining the progress of the project towards
a development decision point remains our goal and to
get there we must obtain all the necessary project
approvals, complete the DFS, enter
into offtake
agreements and financing commitments, and gain social
acceptance of the project’s development by clearly
demonstrating the many benefits it can bring.
Secretary of State for Energy, João Galamba (3rd from left) visiting the Mina do Barroso project in 2019:
Source: Company photo
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CHIEF EXECUTIVE’S REPORT
Mozambique
The final four months of 2019 and January 2020 marked
a significant period for Savannah’s Mutamba mineral
sands joint venture with Rio Tinto in Mozambique.
During that period the joint venture was granted first
conditional and then full Mining Licences for the three
contiguous concessions which cover the 4.4Bt Indicated
and Inferred resources currently estimated on the
project. These Mining Concession licences, granted by
the Minister of Mineral Resources and Energy in
Mozambique, are valid for an initial 25year period
(expiring in 2044) with the possibility of being extended
for a further 25 years.
Mutamba’s potential cannot be realised without the
foundation of valid mining licences. The project now has
these and given the risk perceived in the mining industry
around
‘licence to operate’ these awards carry
significant weight in our view. There remains much work
to do in respect of making Mutamba an operating mine,
beginning with the completion of a PreFeasibility Study,
which would increase Savannah’s stake in the project
from 20% to 35%. We continue with our efforts on this
front, but reiterate that our prime focus remains the
Mina do Barroso lithium project with the majority of our
finite cash reserves committed to moving that project
forward.
The Mining Licence application submitted for the
standalone Chilubane concession, located approximately
180km southeast of the main Mutamba project
concession, remains under consideration by the
Minister.
We have long flagged the potential of the Mutamba
project based on the scale of its resource, the
commercial significance of the mineral sands sector to
our JV partner, Rio Tinto and the positive findings of the
2017 Scoping Study. The investment case for the project
continues to be further enhanced by the encouraging
longterm outlook for underlying demand.
The market dynamics within the titanium feedstock have
remained favourable for the development of new
sources of supply such as Mutamba. Ilmenite is the
dominant titanium mineral in the Mutamba deposit, and
established Mozambiquebased mineral sands producer,
Kenmare Resources, reported in January 2020 that
prices received for its ilmenite product resumed their
previous upward trend in 2019, having eased in the
second half of 2018, with second half 2019 prices more
than 10% above those in the first half. We believe this
reflects the continuing decline in supply from existing
operations which began in 2015. The higher purity,
higher value titanium mineral, rutile, which also features
in the Mutamba ore has seen prices increase since 2017
as well, again reflecting the decline in production from
existing operations. This trend is expected to continue
over the next 34 years while demand, primarily from
the pigment industry, is expected to remain robust and
grow inline with the global economy.
Oman
I reiterate the condolences expressed by our Chairman
to all our Omani stakeholders on the passing of His
Majesty Sultan Qaboos bin Said Al Said in January.
It is expected by observers that Oman’s new leader, His
Majesty Sultan Haithum bin Tariq Al Said, who
succeeded to the throne on the death of his cousin, will
maintain the former Sultan’s focus on domestic,
economic and social reform. However, it also must be
expected that the change of leadership is likely to impact
the operation of Oman’s ministries in the short term.
Hence it will not surprise our shareholders to know that
there is little further to report at this stage in regard to
final mining licence awards over the Mahab 4 and
Maqail South copper projects (Block 5) since we
announced in August that we had been advised by PAM
that it intends to grant them. Savannah maintains its
dialogue with PAM and other relevant government
departments with only confirmation of the licence fee
structure and relevant payment required for the licences
to be issued. During the year, work in the field was
limited to ‘surface’ programmes such as mapping, with
the emphasis placed firmly on cost control to reflect the
lower priority now placed on these projects.
As discussed, Savannah’s focus remains on Portugal and
Mozambique, with the strategic review initiated last year
on our Oman assets continuing. We intend to conclude
this review and begin actioning its conclusions during
the year and would welcome the award of the Block 5
mining licences and the renewal of the Block 4
exploration licence (which is pending due to certain
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areas that are required for further exploration currently
not being included in the proposed licence renewal) as
it would help to clarify the options available to us. As
highlighted in the Chairman’s statement, Savannah has
received interest from a number of groups regarding the
potential acquisition of these assets and discussions are
ongoing.
thanks go
Summary
My
to Savannah’s staff who have
demonstrated enormous commitment during 2019 in
dealing with the challenging setting.
We continue to welcome these challenges believing that
the projects which Savannah manages can bring benefits
to all our stakeholders, and in the case of Mina do
Barroso play an important role in Europe’s climate
change action plan. 2020 is set to be another pivotal
year for Savannah.
David Archer
Chief Executive Officer
Date: 17 March 2020
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CORPORATE SOCIAL RESPONSIBILITY
Following on from our maiden Corporate Social
Responsibility (“CSR”) section last year, here we provide
an update on our Health & Safety record and our
continuing community engagement programmes across
our projects.
Health & Safety
The Health & Safety of our staff, contractors and visitors
remains a top priority for Savannah. One incident was
reported and subsequently reviewed in 2019 (2018:
1 incident) across all our projects and offices. We are
pleased to report the member of staff involved made a
quick and full recovery and was able to return to work.
Portugal
As we move nearer to a development decision point for
the Mina do Barroso project, our CSR programmes are
evolving as
is our general engagement with all
stakeholders in our project from those living in the
villages nearby through to
local administrators,
government ministers and EU agencies.
On the ground, our Information Centre in Covas do
Barroso village, which opened last April, continued to
provide a fixed point where local people can meet with
staff and receive information on the project. We also
kept up our
community newsletter
correspondence (also available on our website), hosted
community meetings, sponsored local events and made
regular
a donation to the local fire brigade, which is so vital in
this area due to frequent forest fires.
From January 2020 we have been offering regular
project visits for interested parties during which small
groups are given a tour of the project and can discuss
Savannah’s plans with our staff.
As outlined in the Chairman’s statement above, the
submission of the project’s EIA study will allow us to
provide stakeholders with a factbased analysis and a
comprehensive outline of our project plan. To
complement this, we expect to present comprehensive
community programmes and the Benefit Sharing Plans
that we intend to follow during the development and
operating phase of the Mina do Barroso project. We also
language website we
hope that the Portuguese
launched last year, www.minadobarroso.com has been
an additional source of useful information.
Savannah was also delighted to become a sponsor to FST
Lisboa, a team of engineering students from Instituto
Técnico de Lisboa, University of Lisbon, which has
entered an electric vehicle and a driverless vehicle of
their own design in the international Formula Student
competitions, including the FS series. The team’s
innovative efforts on the racetrack perhaps represent
the very furthest downstream part of the lithium battery
value chain and goes to demonstrate that Portugal has
the opportunity to encapsulate the whole chain from
mine to motorway if the country so desires.
Sponsorship award being presented to members of the FST Lisboa team by Savannah CEO, David Archer:
Source: Company photo
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CORPORATE SOCIAL RESPONSIBILITY
Following the success of the first phase of support, a
new partnership with GIZ will be considered in 2020.
In addition, Savannah will also join with six other
national and international groups including government
agencies, NGOs and private sector entities in the new,
five year, “IWAMAMBA” project. Through the project,
information and develop
the groups will share
collaborative models
community
for
programmes in the Mutamba river basin. Savannah will
contribute USD $10,000/year as well as relevant water
data and staff time.
further
Oman
With the initiation of the strategic review, work in the
field on our projects in Oman was very limited in 2019.
However, Savannah’s Omani team maintained its
engagement with the relevant communities and project
stakeholders, keeping them informed of Savannah’s
activities and attending important community events to
maintain a clear presence on the ground.
Savannah is looking forward to involving the local
community and the wider Portuguese population in the
Mina do Barroso project which could represent the
country’s first step into Europe’s new lithium battery
industry.
Mozambique
Savannah continued to contribute to community and
social programmes in the Inhambane province where
the Mutamba JV project is located. 2019 was the final
year of our initial 3year partnership on community
programmes with the German Society for International
Collaboration (‘GIZ’). During the three years the
partnership focused on the following key areas in its
work within the communities which surround the
project:
• Vocational training: 400 young people from the
Inhambane province completed training in trades
such as electrical maintenance, carpentry, plumbing
and civil construction at the training centres in
Inhambane and Jangamo which were funded by the
partnership. Around 80% of the local youth trained
to date have gained employment, and the electrical
maintenance training programme curriculum that
was initiated under this scheme is now being
implemented
across
training
Mozambique.
centres
at
• Value chain development: Small scale agriculture
was a key pillar of the partnership with the focus on
coconut and cassava production. 4,700 residents of
Jangamo and Inharrime received coconut seedlings
during the programme as part of the coconut palm
reforestation programme. A coconut palm nursery
with capacity for 20,000 seedlings was also set up
during the project while a ‘seeds for seedlings’
exchange programme remains in place to ensure the
reforestation project is sustained. The partnership
also supported the formation of a cassava mill,
managed by a newly formed Association which
represents the 120 local smallscale farmers who
have received training in cassava production.
Overall, over 400 local smallscale farmers have seen
a minimum 10% increase in income as a result of the
training and support received from the partnership.
• Access to energy: 3,000 families have gained access
to off grid solar systems through the partnership
under a low cost ‘Pay as you Go’ model.
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CORPORATE SOCIAL RESPONSIBILITY
Staff and students at the Jangamo vocational training centre:
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Source: Company photo
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STRATEGIC REPORT
Section 414A of the Companies Act 2006 (the ‘Act’) requires that the Group inform members as to how the Directors
have performed their duty to promote the success of the Group, by way of a Strategic Report.
Set out below are the applicable reporting requirements under the Act for the purposes of the Strategic Report,
together with guidance to other applicable sections of the 2019 Annual Report, which are incorporated by reference
into the Group’s Strategic Report.
Principal Activities, Fair Review of the Business and Future Developments
The following table provides summary reviews of the principal activities of the group in the year, financial results
and potential future developments. The comments below build on the commentary provided in the Chairman’s
Statement and Chief Executive’s Report:
Asset & location Ownership Activities undertaken
Mina do Barroso
lithium project,
Portugal
100%
• Projectrelated Acquisitions: In June 2019 the Group completed
the acquisition of the minority 25% stake in the operating
subsidiary, Savannah Lithium Lda which allowed the Group to take
sole ownership of the Mina do Barroso project. The acquisition was
made from the project’s minority shareholders via the issue of
163m new ordinary shares in the Company (Notes 8 and 11). Also,
in June 2019, the Group exercised the option purchased in
September 2018 to acquire a suite of land blocks adjacent to the
C100 (Mina do Barroso) Mining Lease. The 3 blocks (blocks A, B &
C), owned by private Portuguese company Aldeia & Irmão, S.A.
(“Aldeia”) are currently subject to a separate Mining Lease
Application. Once the Aldeia Mining Lease has been granted, the
mining rights will be transferred to a Group nominee entity, and
phased payments under the acquisition agreement will
commence.
• Exploration and Evaluation: Comprehensive programmes were
completed including mapping, surface and drill based sampling,
assaying of recovered samples, and metallurgical test work to
assess recovery rates of lithium and other mineral products.
• JORC Resource expansion and upgrade: Two lithium resource
estimates were made during the year based on our ongoing
sampling programme, culminating in the estimate announced in
May 2019 (27.0Mt at 1.06% Li2O). The Group also published a
maiden coproducts resource estimate on the Grandao deposit in
September 2019 (14.4Mt at 33.4% quartz and 42.6% Feldspar).
• Definitive Feasibility Study (“DFS”): Commissioned in July 2018, the
Group and its consultants continued to work on the DFS which is
building on the Scoping Study published in June 2018 to provide
the level of confidence in design and planning required to secure
project financing. The study will include: JORC resource and
reserve estimation, multiple phases of metallurgical test work, final
designs and schedules for (i) site layout, (ii) mining, (iii) processing
and (iv) storage of processed materials and (v) infrastructure,
capital and operating cost estimation, labour studies, commodity
market studies, and a project risk review. We expect the DFS to be
completed later this year.
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STRATEGIC REPORT
Asset & location Ownership Activities undertaken
• Licencing process: The Group continued to engage with all relevant
local and central government departments, and other stakeholders
in the project licencing processes.
• Environmental Impact Assessment (“EIA”): The EIA considers all
aspects of the environment which may be potentially impacted by
the project, and also the project’s social and economic context.
its
The EIA will evaluate the project’s
implementation, exploitation, deactivation and postdeactivation
phases. The outcomes of the assessment are a set of actions to be
undertaken throughout all the operating phases of the project to
minimise its environmental and social impact. The EIA will be
submitted shortly to APA, the Portuguese Environment Agency, for
review and approval as a key part of the overall project licencing
process.
impact during
• Community Engagement: The Group continued with its active
community engagement plan in the Boticas region, where the project
is located. The Group believes that with considerate and intelligent
management, the development of the Mina do Barroso project has
the potential to provide multiple longterm benefits for the area.
Further details on our community engagement activities can be
found in the Community Social Responsibility section.
Mutamba Heavy
Mineral Sands,
Mozambique
20% of
consortium with
Rio Tinto
• Licencing Process: Having submitted Mining Licence applications
for the project in 2018, the Consortium was pleased to be awarded
Mining Licences for the three concessions (9228C, 9229C and
9735C) which cover the key resourcebearing deposits on the
project during December 2019 and January 2020. The Licences are
all valid for an initial 25year period with the potential to be
extended by a further 25 years if required. The application for the
Chilubane concession (9230C), to the south of the main project
area, remains under consideration by the authorities.
• PreFeasibility Study (“PFS”): The Scoping phase of the PFS
continued during 2019, albeit at a very modest rate while the
processing of the Mining Licence applications was underway. Now
that the key Mining Licences have been awarded, the Group is
making preparations to accelerate work on the PFS.
• Community Engagement: The Group continued with its community
engagement plan associated with Mutamba. Further details of our
activities can be found in the Community Social Responsibility
section.
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STRATEGIC REPORT
Asset & location Ownership Activities undertaken
Block 4 & 5
Copper projects,
Oman
51% of Al Thuraya
LLC (Block 4);
65% of Al Fairuz
Mining (Block 5)
• Licencing Process: The Group received advice from Oman’s Public
Authority for Mining (‘PAM’) in mid2019 that it intends to grant
the Mining Licences which were applied for on the Mahab 4 and
Maqail South copper projects on Block 5. This followed
reconfirmation of ‘no objection’ from the 8 relevant ministries
concerned. The Mining Licences should be awarded once the
licence fees have been set under the new Mining Law which was
introduced in 2019, and the fees paid. In addition to the matter of
fees, the Block 5 exploration licence approval is currently subject
to approvals from three government ministries following
procedural changes resulting from the new Mining Law. Renewal
of the Block 4 Exploration Licence was also not completed by PAM
during the year and has been pending for around 18 months due
to certain areas that are required for further exploration not being
included in the proposed licence renewal (see Note 8). We are in
communication with PAM and the Omani Government on this
matter.
• Strategic Review: Based on the continuing Licencerelated delays
experienced, and the lower priority the Oman copper projects now
have in the Group’s portfolio, the Company initiated a Strategic
Review of its projects in Oman during 2019.
• Settlement of Deferred Consideration: In June 2019 the Company
entered into an agreement with Gentor Resources Inc to settle the
USD $3,000,000 Deferred Consideration related to the original
acquisition of the Block 5 licence in April 2014 (Note 11). The
Deferred Consideration obligation was cancelled in full by the issue
of USD $200,000 (~GBP £155,000) worth of ordinary shares in the
Company, which were subject to a six month orderly market
agreement; and cash payment totalling USD $100,000 (~GBP
£79,000).
• Community Engagement: The Group continued to engage with
relevant communities and project stakeholders associated with its
Oman projects. Further details are given in the Community Social
Responsibility section.
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STRATEGIC REPORT
Asset & location Ownership Activities undertaken
Fair review of
business
to £3,801,926
Income amounts
• The loss of the Group as set out on the Consolidated Statement of
Comprehensive
(2018:
£3,381,161), of which £3,861,344 (2018: £3,258,458) was related
to administrative costs. During 2019 the Group
invested
£3,894,826 (2018: £7,248,950) on mineral exploration and
evaluation on the licences it owns and operates, this is capitalised
as an intangible asset as set out in Note 8 in the Financial
Statements. This amount includes £294,000 relating to the Non
Controlling Interest (“NCI”) value applicable to the additional 25%
stake in Savannah Lithium Lda which the Group acquired in June
2019 through the issue of 163m new ordinary shares in the
Company. The agreed transaction value as per the signed term
sheet was USD $11.9m, however in accordance with the financial
reporting requirements of IFRS only the value of the NCI is
recognised in intangible assets.
• A review of the Group’s prospects is included in the Chairman’s
Statement and the Chief Executive’s Report.
Principal Risks and Uncertainties
The Board has identified various risk factors which taken individually or together may have a materially adverse
effect on the Group’s business. The principal risks and how they are managed are as follows:
Natural Resource Project Development & Construction Risk
There can be no guarantee that mineral exploration and evaluation programmes will result in the delineation of a
commercially viable project. However, to reduce this risk, the Group is focusing its activity primarily on brownfield
locations, previously delineated resources or established exploration targets. For example, the Mina do Barroso
project in Portugal already has a granted Mining Lease following exploration work done by previous owners, Blocks
4 and 5 in Oman feature a number of discontinued mining operations and the areas covered by the Consortium
with Rio Tinto in Mozambique were subject to exploration prior to our involvement.
When a commercially viable project is delineated, the Group will then be exposed to construction and project
delivery risk factors. These risk factors will include: project financing (see Future Funding Requirements section
below); licence and permitting (see Licence and Title Risk section below); key person (see Attraction and Retention
of Key People section below); and contractor and contract fulfilment/cost overrun. Risk relating to the main project
contractors will be mitigated by comprehensive tendering and due diligence processes being performed to identify
competent and financially robust service providers. Contract fulfilment and cost management will be mitigated by
structuring of contracts to include adequate penalty and incentive clauses.
Attraction and Retention of Key People
The success of the Group is dependent on the expertise and experience of the Directors and senior management
and the loss of one or more could have a material adverse effect on the Group. The Board has adopted a
remuneration policy aimed at rewarding performance, encouraging retention of key staff and aligning their interests
with those of shareholders.
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Future Funding Requirements
The Group has an ongoing requirement to fund its exploration and mine development activities and will need to
obtain additional finance to execute its plans. Potential sources of finance include the established debt and equity
capital markets (which themselves may be impacted by macroeconomic, political or environmental trends), offtake
or other industrial partners which could provide prepayment and working capital facilities in exchange for long
term supply contracts, commodity based royalty and stream finance groups which can also provide prepayments
in exchange for exposure to future revenue or production streams, major suppliers, and grants or other facilities
from government or other centralised bodies (e.g. EU). Senior management and the Board closely monitor the
cashflows of the Group. Cashflow projections are presented regularly to the Board for review and this assists in
ensuring expenditure is focused on areas of greatest development potential. Overheads and administration costs
are carefully managed. Also, see the Coronavirus Pandemic Risk section.
Licence and Title Risk
The granting, maintaining and renewal of the appropriate licence or licence equivalent is essential to the Group’s
exploration and development activities in all the countries in which it operates, and is usually at the discretion of
the relevant government authority. The Group seeks to ensure that is activities are always in compliance with the
relevant licences and associated standards, laws and regulations and will attempt to respond in a timely manner to
any changes in licence regulations. The costs associated with maintaining and renewing licences and complying
with all related licence requirements, together with delays experienced in the issuance of licences or conversion of
exploration licences into mining licences, may have a financial impact on the company through additional costs or
extensions to work programmes. The licences in the Group’s portfolio have been the subject of legal due diligence
in order to establish valid legal title and regular communication is maintained with the relevant government
authority in Portugal, Mozambique and Oman.
Country Risk
A greater or lesser degree of sovereign and political risk exists in all countries. At the reporting date, the Group
carried out a combination of exploration and mine development work in Portugal, Mozambique and Oman. Each
of these countries presents a very different risk profile. However, this also means the Group benefits from a
diversification of country risk. Country risk is further mitigated by ensuring the Group prioritises local incountry
employment and maintains working relationships at all levels with government, administrative bodies, local
communities and other stakeholders. The Board actively monitors relevant political and regulatory developments.
Commodity Price Risk
The Group’s primarily commodity focus is lithium, mineral sands and copper and the price movements in these
commodities can be volatile. This volatility can be caused by numerous factors beyond the Group’s control. A
sustained period of significant price volatility has the potential to adversely affect the Group operations.
Commodities risk is currently mitigated by ensuring the Group maintains a diverse portfolio of projects.
Assuming all previously highlighted development and construction related risks have been mitigated and production
is established at one or more of our projects, specific commodity price risk may be more actively managed. This
could be achieved through the use of mechanisms such as longterm sales contracts incorporating minimum pricing
levels or hedging strategies. In the case of the Mina do Barroso project, the spodumene lithium and its coproducts
are not currently exchange traded commodities and this necessitates entering into offtake agreements as part of
the project financing.
Social Licence Risk
In parallel with obtaining the necessary licences and permits to operate from national and local administrators,
natural resource companies, must also operate in a way that is acceptable to local community stakeholders and
broader civil society. Obtaining social acceptance is deemed by the industry to be the one of the most significant
risk factors it faces, and failure to achieve and maintain social acceptance could have a temporary or permanent
material adverse impact on the ability of a business to operate. The Group places great importance on its
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relationships with its neighbouring communities and wider stakeholder groups, and looks to mitigate ‘social licence’
risk through its proactive, countryspecific, CSR programmes, and through its wider company policies, including
those relating to corporate governance, conduct, and reporting and communication. See Corporate Social
Responsibility section for more details.
Coronavirus Pandemic Risk
On 11 March the World Health Organisation officially declared the Coronavirus outbreak affecting the world as a
“pandemic”. Its effects on global financial markets and everyday life in many countries has been significant and it
is expected to cause further uncertainty in the short to medium term. The fastchanging nature of this pandemic,
combined with governments’ resulting responses to it, are expected to have an impact on the Group’s day to day
operations and potentially its’ financial outlook. The situation will remain under close review and appropriate
actions taken.
Analysis of the Development and Performance of the Business
This information is contained in the Chairman’s Statement, and the Chief Executive’s Report.
Analysis of the Position of the Business
This information is contained in the Chairman’s Statement, and the Chief Executive’s Report.
Key Financial Performance Indicators and Milestones
Our key performance indicators (‘KPIs’) help the Board and executive management assess performance against our
strategic priorities and business plans.
Analysis Using Key Financial Performance Indicators and Milestones
KPIs Description Performance
Cash balance (for
exploration,
development and
going concern
purposes)
Cash balance available to
continue with the activity
of the Group
At the reporting date the Group’s cash balance was £3.5m
(2018: £7.7m). In common with many mineral exploration
companies, the Company raised equity funds for its
activities. The Directors believe that the Group’s project
portfolio is attractive and are confident that funding will
continue to be secured and that it is appropriate to prepare
the Financial Statements on a going concern basis. The
Company currently has a number of options in respect of
future financing and has engaged with potential financiers
and sources of capital.
The Directors have prepared cash flow forecasts for the
twelve month period from the date of approval of the
financial statements which indicates that additional funding
will be required in the second half of 2020. Although the
Company has been successful in the past in raising equity
finance, the lack of formal agreements means there can be
no certainty that the additional funding required by the
Group and the Company will be secured within the
necessary timescale although the Company has the ability
to take actions to reduce its financial commitments in
response to possible delays in funding due to the impact of
the Coronavirus with a corresponding slowing of the tempo
of activities. These conditions indicate the existence of a
SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
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STRATEGIC REPORT
KPIs Description Performance
material uncertainty which may cast significant doubt about
the Group and the Company’s ability to continue as a going
concern, however as aforementioned and evidenced by
announcements, the Company has routinely been able to
raise funds to progress its highly prospective portfolio and
the Group has received interest for alternative sources of
finance in particular for its flagship project in Portugal. The
Financial Statements do not include the adjustments that
would result if the Group and the Company was unable to
continue as a going concern.
To continue with its
operating activities as an
active and growing
mineral development
group, the Group has
raised funds from the
market.
During 2019 the Company raised gross cash proceeds of
£5.0m (2018: £14.7m) via the issuance of ordinary shares
in relation to an equity fundraise. This £5.0m is understood
to have been the sixth largest fundraise by an AIM listed
mining company in 2019. However, financing options, other
than issuing further equity in the Company, remain available
to the Group (see Future Funding Requirements above).
Having opened at 5.2p the share price initially rose by 25%
to the year’s high of 6.5p in midFebruary. From that point
the price fell to the year’s low of 1.95p in midSeptember
before rising by 15% to close the year at 2.25p, equating to
an overall decline of 57% (2017: 20%) versus year end 2018
which was consistent with the trend seen across the
majority of global lithium companies following what is
believed to be shortterm lithium price weakness. Funds
were raised at 2.0p in 2019 (2018: 8.25p).
During 2019 the Group continued its investment in
exploration activity, but the commitment was reduced
yearonyear by approximately 50% with additions in E&E
Assets of only £3.9m (2018: £7.2m). There was also a
parallel decrease in PPE investment with additions of just
£0.02m (2018: £0.3m) as no significant equipment
purchasing was required during the year. Although the
Group did acquire the 25% minority stake of the Mina do
Barroso project which gave it 100% ownership for an agreed
transaction value of USD $11.9m and consideration paid by
issuing new ordinary shares in the Company, only the value
of the NCI amounting to £294,000 is recognised in E&E
Assets.
Subscription and
placing of shares
Share price
The price reflects the
value of the Group as
determined by the free
trading of its ordinary
shares on public stock
exchanges such as the
AIM.
Investment in
Exploration &
Evaluation Assets
(‘E&E Assets’) and
Property, Plant and
Equipment (‘PPE’)
As an active and
expanding mine
development group, the
investment in E&E Assets
and PPE Assets show the
volume of activity which is
adding value.
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STRATEGIC REPORT
Analysis Using Other Key Performance Indicators and Milestones
KPIs Description Performance
Project pipeline
As an active mine
development group,
management is up to date
on the changes in the
market and looking for
new opportunities to
increase the potential of
the Group.
Mining Lease
Applications
As a mine development
group the grant of mining
leases as a precursor to
commencement of
production is a significant
milestone.
impacting on global
In recent years there has been (and continues to be) an
increase in the importance of the lithiumion battery
markets,
lithium demand with
projections showing significant increases in demand. In
2016 the Group started its investment in lithium projects
with the acquisition of exploration licences in Finland
(subsequently relinquished). Following the acquisition of
the Mina do Barroso lithium project in the north of Portugal
in 2017, the Group has the potential to become the first
significant lithium spodumene producer in Europe. During
2019 the Company increased its shareholders’ exposure to
this project through the acquisition of the 25% minority
stake which gave the Group 100% ownership.
Portugal:
In June 2019, the Group exercised the option purchased in
September 2018 to acquire a suite of land blocks adjacent
to the C100 (Mina do Barroso) Mining Lease. The 3 blocks
(blocks A, B & C), owned by private Portuguese company
Aldeia & Irmão, S.A. (Aldeia) are currently subject to a
separate Mining Lease Application which is being reviewed
by the Portuguese authorities. Once the Mining Lease
Application has been granted, the mining rights will be
transferred to a Group nominee entity.
Mozambique:
During December 2019 and January 2020 Mining Licences
were awarded by the Mozambique Ministry of Mineral
Resources and Energy on the three concessions which cover
the current 4.4Bt resource at the Mutamba mineral sands
project. Mining Licences 9735C, 9228C and 9229C were all
granted for an initial 25year period (expiring in 2044) with
the possibility of an additional 25year extension. The
application for Mining Licence 9735C over the Chilubane
concession, located 180km to the south west of the other
concessions,
the
government.
remains under consideration by
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STRATEGIC REPORT
KPIs Description Performance
Oman:
During 2019 the Group was advised by the Oman Public
Authority of Mining (“PAM”) that it intended to award the
Mining Licences which were previously applied for on the
Maqail South and Mahab 4 copper projects on Block 5. The
Mining Licences should be awarded once licencing fees have
been set under the new Mining Law introduced in 2019. In
addition to the matter of fees, the Block 5 exploration
licence approval is currently subject to approvals from three
government ministries following procedural changes
resulting from the new Mining Law. Renewal of the Block 4
Exploration Licence was also not completed by PAM during
the year and has been pending for around 18 months (see
Note 8). We are in communication with PAM and the Omani
Government on this matter.
Results in mineral
resources
As a mine development
group the report of
satisfactory mineral
resource results is a key
indicator of the potential
of the Group and its
projects.
Portugal:
Two lithiumrelated JORC resource updates were announced
during the year. The latter, in May, estimated a total resource
of 27.0Mt at 1.06% Li2O (vs. 20.1Mt at 1.04% Li2O in
September 2018). The resource estimate consisted of
Measured resources of 6.6Mt @ at 1.1% Li2O; Indicated
resources of 8.4Mt @ at 1.0% Li2O; and Inferred resources of
12.0Mt @ at 1.1% Li2O for 285,900t of total contained Li2O.
In addition to the JORC resource estimate, the Exploration
Target2 was also increased during the year to 11.019.0Mt at
1.0%1.2% Li2O (2018: 9.015.0Mt at 1.01.2% Li2O).
Having increased the size of the resource the Company is
keen to include as much of this additional material as
possible in the DFS, thus potentially extending the initial life
of the project beyond the 11 years outlined in 2018’s Scoping
Study. Importantly, any increase in the resulting mine life
makes the project more attractive to potential customers
and groups considering the development of a lithium
conversion plant in Portugal/Europe – stated goals of the
Portuguese Government and the European Commission.
The Group also published its maiden coproduct resource
estimate for the Mina do Barroso project during the year. In
September an estimate of 14.4Mt at 33.4% quartz and
42.6% feldspar was published for the Grandao deposit only.
This resource estimate consisted of Measured resources of
7.1Mt at 32.6% quartz and 42.8% feldspar, Indicated
resources of 6.3Mt at 34.6% quartz and 42.6% feldspar and
Inferred resources of 1.0Mt at 30.9% quartz and 40.3%
feldspar for total contained quartz and feldspar of 4.79Mt
and 6.11Mt respectively.
2 Cautionary Statement: The potential quantity and grade of the Additional Resource Targets is conceptual in nature, there has been insufficient prospecting work to estimate
a mineral resource and it is uncertain if further prospecting will result in defining a mineral resource.
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STRATEGIC REPORT
KPIs Description Performance
Mozambique & Oman:
There were no updates to the resource estimates on our
Oman (1.7Mt @ 2.2% copper) or Mozambique projects
(4.4Bt at 3.9% heavy mineral sands) during the year.
Economic Studies
Satisfactory completion of
economic studies is a key
indicator of the viability of
the Group’s mine
development projects.
Mina do Barroso, Portugal:
The Definitive Feasibility Study which was commissioned in
the second half of 2018 continued throughout 2019.
Additional mine design, mine planning, and metallurgical
test work was incorporated in the study during the year. This
was to reflect the increase in the number of orebodies now
defined at the project (up to 5 from 3 in May 2019 vs. May
2018) and to ensure all different ore types on the project
can be effectively processed by the planned concentrator
plant.
Mutamba, Mozambique:
Scoping work on the PreFeasibility Study continued, albeit
at a very modest pace while the Mining Licence applications
submitted in 2018 remained under consideration by the
authorities.
Mahab 4 & Maqail South, Oman:
The Scoping Study on the dual mine development remains
pending completion due to the delays associated with
licencing and associated agreements.
Section 172(1) Statement
The following disclosure describes how the directors have had regard to the matters set out in section 172(1)(a) to
(f) and forms the directors’ statement required under section 414CZA of the Companies Act 2006.
Information is presented below on a number of ‘principal decisions’ which the board made during the course of
2019. Principal decisions are not defined in legislation, but are considered material by the Board from the
perspective of the company, impacted stakeholder group, or both.
SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
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STRATEGIC REPORT
Stakeholder Group Importance of engagement How did the Board and/or
management engage
The key means of engagement
with shareholders include:
• AGM
•
Investor roadshows
• Ad hoc meetings in relation to
key news/questions
The key means of engagement
with staff includes:
•
•
Regular internal calls,
meetings and visits to project
sites by members of the board
and Executive team
Remuneration framework
including Long Term Incentive
Plan
Full details of the Group’s CSR
activities across its businesses can
be found in the CSR section.
Shareholders/Investors
A table of significant shareholders
can be found on the Report of the
Directors section and on the
company’s website.
Key metrics are:
•
•
•
Cash
Investment in Exploration &
Evaluation Assets
Share price
The company has not issued
additional investment instruments
beyond shares and sharerelated
warrants, such as corporate bonds,
and therefore has no other class of
investors.
Workforce
The average number of monthly
staff employed by the Group
during 2019 was 64 (2018: 56) –
see note 3 for further details.
For Savannah:
•
•
To maintain access to capital in
support of achieving the
Group’s stated business goals.
To receive
feedback/advice/assistance on
performance and execution of
the Group’s business plan
For the Shareholder/Investor:
•
•
To be kept informed on the
Group’s performance, changes
to strategy and other
developments
to assist ongoing investment
decision making
The company’s day to day running
and longterm development relies
on the recruitment, retention and
incentivisation of staff, and
provision of a safe working
environment
Community
Savannah works alongside
communities at all its project sites
and has active community
programmes underway in each
location. The Group aims to act
with integrity, transparency and
honesty in its dealings with
stakeholders and communities and
wishes for its host communities to
benefit from its projects.
For Savannah:
•
•
•
To ensure that Health & Safety
standards and other
regulations relating to
Savannah’s interaction with
the general public and public
services are being met
To ensure it secures and
maintains social acceptance of
its business activities among
the communities it works
alongside through effective
community engagement
programmes
To ensure that indirect
benefits from its operations
among the local community
are maximised
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STRATEGIC REPORT
Stakeholder Group Importance of engagement How did the Board and/or
management engage
•
To receive
feedback/advice/assistance on
these above topics
For Communities:
• Opportunity to receive up to
date information on
Savannah’s business activities
and programmes relevant to
communities
To register for and to take part
in relevant community
programmes
To provide feedback on
relevant topics
•
•
For Savannah:
•
•
To maintain good working
relationships and credit terms
with suppliers to ensure the
timely and costeffective
delivery of services and
supplies
To aid planning for future
supply requirements and to
identify suitable suppliers
For Suppliers:
•
•
To maintain a working
relationship with its customer
and provide product
information
To identify future business
opportunities with an existing
client
The Company’s engagement with
current and potential service
suppliers has been widespread
during the year. For example,
considerable time has been spent
working with existing suppliers of
goods and services to the Mina do
Barroso project, and identifying
and evaluating other groups which
may provide key contract services
during the construction and/or
production phases of the
operation.
Suppliers
Savannah requires a wide range of
services to maintain its business
activities and uses a wide range of
domestic and overseas suppliers to
meet its needs. When Savannah
moves into the development and
production phases at one or more
of its operations, supplier numbers
are expected to rise significantly
inline with the scale up of the
project concerned.
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Stakeholder Group Importance of engagement How did the Board and/or
management engage
Customers
As a preproduction business,
Savannah is yet to start generating
revenue from sales of product to
customers. However, the Group
expects to supply products to a
number of industrial customers
over time, beginning with
customers buying its lithium and
coproduct concentrate products
from the Mina do Barroso project.
Lenders
Savannah currently has no
corporate bonds or project finance
loans but expects project finance
to be a key part of the financing
mix for the development of its
projects, such as Mina do Barroso.
For Savannah:
•
•
To identify and build
relationships with future
customers to ensure our
projects become viable
commercial businesses
To access capital for project
development either directly
from customers, or from other
investors which view the
establishment of customer
relationships as a key de
risking factor in an investment
decision
For Customers:
•
•
To build a working relationship
with a wellmanaged, long
term raw material supplier
To secure a longterm supply
of product from a responsible
producer in markets where the
outlook is for increasing global
competition for supply, such as
lithium and mineral sands
For Savannah:
•
To identify and build
relationships with future
lenders to ensure sufficient
finance can be secured to
support project development
For Lenders:
•
To secure a lending agreement
with a listed mining company
which expects to be financing
its first mine build during
2020/2021
Management maintained its
efforts to build relationships with
potential customers for its lithium
and coproduct concentrates from
Mina do Barroso as discussed in
the Chairman’s and CEO
statements. Significant advances in
some negotiations have been
made and the Group believes that
formalised sales agreements can
be reached ahead of the project
going into production.
Under the consortium agreement
on the Mutamba mineral sands
project. Savannah’s partner, Rio
Tinto has the option to buy 100%
of the project’s future production
on commercial terms.
Management maintained a
dialogue with potential project
lenders in relation to Mina do
Barroso during the year.
Discussions with these groups is
expected to increase as the
project’s DFS moves towards a
conclusion as that study will be a
key part of a lending bank’s
evaluation of the project.
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STRATEGIC REPORT
Stakeholder Group Importance of engagement How did the Board and/or
management engage
Regulators/Government
Depending on the jurisdiction,
multiple departments and
agencies of national, regional
and/or local government can be
involved in the licencing and
monitoring of mining activities.
Environment
Savannah is committed to
minimising the environmental
impact of its operations through
design, monitoring, mitigation and
remediation.
For Savannah:
•
To build strong and supportive,
working relationships with all
relevant government
departments and to ensure
that the Group receives and
complies with the required
licences and authorities to
operate its projects
For governments:
•
•
To ensure that the Group is
meeting its responsibilities as
per its licences
To understand the needs of
Savannah as an operating
entity with respect to relevant
legislation
For Savannah:
•
Savannah places great
emphasis on minimising the
environmental impact of its
operations and also realises
the importance placed on
good environmental
management by all project
stakeholders including
governments, communities,
customers, investors and
lenders.
As outlined in the Chairman’s and
CEO’s statements, management
have had regular interaction with
the relevant departments and
personnel in the various levels of
government in all three countries
where it is has operations.
Savannah views the establishment
of active, twoway, relationships
with government stakeholders as
critical in the successful
development of its projects and in
its decisionmaking regarding the
Group’s longterm commitment to
each jurisdiction.
In parallel with all our project
stakeholders, minimising
Savannah’s environmental impact
is one of management’s highest
priorities, and work undertaken
across all its project sites to date
has been completed in accordance
with the relevant environmental
regulations. Since 2018 the Group
has been gathering data and
preparing the Environmental
Impact Assessment study for the
Mina do Barroso project. As part of
this process, the group has
engaged with relevant stakeholders
including the Portuguese
Government’s environmental
agency (APA), local administrators,
local communities and wildlife and
environmental groups so that the
project is designed to minimise its
environmental impact during
operation and following its closure.
The Environmental Impact
Assessment study will be
submitted for consideration by the
authorities in the coming months.
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STRATEGIC REPORT
Principal decisions
Savannah defines principal decisions as those which are material to the Group and its key stakeholder groups
detailed above.
In making the following principal decisions during the year the Board considered the outcome based on the relevant
stakeholders as well as the need to maintain a reputation for high standards of business conduct and the need to
act fairly between the members of the Group:
Principal decision 1: £5.0m equity placing, September 2019
Early in the second half of 2019, the Group’s management informed the board that the Mina do Barroso Definitive
Feasibility Study was not likely to be concluded by the end of the year as previously forecast, and that more working
capital would be required to complete the study and maintain normal operations across the Group. This was due
in part to the discovery of additional orebodies at the project during the preceding 12 months that needed to be
included in the study, and the decision to undertake additional metallurgical test work to reduce future plant
operating risk in light of the challenges experienced by new spodumene concentrate producers in Australia.
In consultation with management and the Group’s capital market advisers, the Board decided that a £5.0m equity
fundraise should be undertaken to provide the additional working capital required. This was duly completed and
announced to the market last September with investment from new and existing shareholdings, including a £1.2m
cash investment from the Company’s largest shareholder, Al Marjan Limited.
In making the decision the board considered:
• All stakeholders: Maintaining the Group as a going concern in the interest of all its stakeholders.
•
•
•
Shareholders: The impact on existing shareholders of raising additional equity was considered with the board
weighing up the need to maintain the Group as a going concern against the resulting equity dilution. Equity
market conditions were also factored into the decisionmaking process to strike the optimum balance between
the short term capital requirements of the Group and the price at which funds could be raised, compared to
the uncertainty around quantum and price that might have prevailed at a later time given the uncertainty
around Brexit and USChina trade talks. The fundraising was also seen as an opportunity to attract new
institutional equity investors into the Group which was considered a benefit to the Group’s longterm financial
stability.
Shareholders: The longterm value potential of Mina do Barroso: Mina do Barroso is the Group’s flagship asset,
and provides Savannah with its best opportunity to become cash flow positive in the near term. Completing
the DFS and moving the project through the licencing, financing and construction phases and into production
should accrete significant value for the Group. The fundraise was deemed to be critical in helping the Group
achieve this longterm goal.
Employees and Suppliers: The Board also concluded that securing more working capital would help the Group
to retain key staff and suppliers who can help the Group achieve its business objectives.
Principal decision 2: Acquiring the minority 25% stake in the Mina do Barroso project to become sole owner of
the project
In acquiring the outstanding 25% stake in the Mina do Barroso project not already owned in an US$11.9m all share
deal with the project’s minority shareholders, the board considered the following matters:
•
Shareholders: Acquisition of the 25% stake in an all share deal at this price meant that the proportion of project
value (e.g. as measured by net present value) per share increased, despite the increased number of share in
issue, and cash was preserved.
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•
•
Employees and Suppliers: Along with shareholders, the Board considered employees and suppliers to Savannah
by executing an all share deal, and therefore avoiding a reduction in working capital which may have led to the
need for further equity financing, cost cutting measures and/or cessation of supplier relationships.
Project stakeholders: The acquisition was determined to be beneficial to other existing and future project
stakeholders such as the Portuguese authorities, local communities, and financiers by simplifying the ownership
structure and identifying a single owner of the project with which these groups could engage with going forward.
However, owning 100% offers flexibility for the Group to allow major customers or suppliers to invest in the
project to ensure closer alignment of the parties’ interests.
Principal decision 3: Acquisition of the Aldeia mining lease application ground
In June 2019, the Group exercised its option to acquire the 3 block mining lease application ground, located next
to the C100 Mining Licence from the private Portuguese company Aldeia & Irmão, S.A. (‘Aldeia’). The acquisition,
which followed a period of technical and legal due diligence, increased the footprint of the Mina do Barroso lithium
project by approximately 50%, and an initial resource has already been established on Aldeia Block A (3.5Mt at
1.3% Li2O, representing 16% of the total contained Li2O resource). In exercising the option, originally acquired in
September 2018, the board considered the following matters:
•
•
•
•
Shareholders: The acquisition represented a low cost means of increasing shareholders’ exposure to ground
prospective for lithium mineralisation adjacent to the C100 licence of the Mina do Barroso project. All but
€55,000 of the €3.25m purchase price is payable in 71 monthly instalments only due after the mining lease has
been awarded and transferred to Savannah’s subsidiary. This will likely occur once the project is in production
and generating cash flow.
Lithium and coproduct customers: By potentially increasing the lithium resources and mineralisation (and co
product mineralisation) under the Group’s control, Savannah’s future customers should benefit as the Group
will be able to provide a larger/longer term source of supply.
Employees: By having a larger, longer life operation Savannah will be able to maintain its project workforce for
longer.
Project stakeholders: By having a larger, longer life operation Savannah’s tax and royalty revenue generation
period will be extended and it will be able to run its community Benefits Sharing Plan for longer.
Principal decision 4: Strategic Review of Oman
The Board took the decision to initiate a Strategic Review of Savannah’s business activities in Oman in the Spring
of 2019. At the time of the decision, the Group had spent almost 3 years awaiting the award of Mining Licences
from PAM following receipt of the last of eight ‘no objection’ letters from the various government ministries involved
in the licencing process. In initiating the review, the board considered the following matters:
•
•
•
Shareholders: Combining the wait on the licence awards in Oman with the fact that both the Group’s other
projects had both overtaken these projects in priority, led the board to begin assessing the opportunity cost of
continuing to commit its resources in Oman against the opportunities presented by the other projects.
Employees: The board is mindful that any changes to Savannah’s business in Oman, including any potential
change in ownership or cessation of work, would have a direct impact on the small number of employees in
the country.
Project stakeholders: Over the years in which Savannah has been involved in its two joint venture projects in
Oman, it has built relationships with a wide range of stakeholders ranging from government ministries and
agencies, to members of the public living near to the projects. Whilst the strategic review has been ongoing,
Savannah has maintained communications with these groups, and will consider the needs of these groups when
it concludes the review.
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STRATEGIC REPORT
The Strategic Review is ongoing and is expected to be concluded and its recommendations implemented during
the current year.
Principal decision 5: Settlement of deferred consideration element of 2014 Agreement with Gentor Resources
In June 2019, the board decided to settle the USD $3m deferred consideration element of the original 2014
acquisition Agreement with Gentor Resources Inc (‘Gentor’) on the Block 5 licence in Oman. The deferred
consideration was settled via the issue of USD $200,000 (~£158,000) of stock, subject to a six month orderly market
agreement; along with a cash payment of USD $100,000 (~£79,000). In taking this course of action the Board made
the following considerations:
•
•
Shareholders: The board considered the impact on existing shareholders of issuing USD $200,000 of new stock,
and the use of USD $100,000 of cash, and concluded it represented a reasonable undertaking in the light of a
potential USD $3m liability which could become a significant hurdle in any transactions undertaken following
the strategic review of our Oman projects.
Project stakeholders: The board also considered the group’s financial position and alternative uses for the cash
sum, and concluded that this transaction represented an effective use of cash as a means of removing a
significantly larger, long term, financial liability and a notable risk factor to any potential transaction relating to
our Oman assets.
Finally, although the Board has not made any Principal decisions in the year about the EIA which we has been
compiling for the Mina do Barroso project in Portugal, we have been involved in extensive engagement with the
community, the Portuguese Government/Regulators, potential suppliers, and potential customers in respect of it.
Further information is included in the Corporate Social Responsibility section.
Approval of the Board
This Strategic Report contains certain forwardlooking statements that are subject to the usual risk factors and
uncertainties associated with a mineral development business. While the Directors believe the expectation reflected
herein to be reasonable in view of the information available up to the time of the Board’s approval of this Strategic
Report, the actual outcome may be materially different owing to factors either beyond the Group’s control or
otherwise within the Group’s control but, for example, resulting from a change of strategy. Accordingly, no reliance
may be placed on the forwardlooking statements.
On behalf of the Board:
David Archer
Chief Executive Officer
Date: 17 March 2020
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The Mina do Barroso Lithium project, Portugal
Located less than 2 hours’ drive northeast of the city of Porto, the Mina do Barroso project covers an area of 8.36km2
in the Barroso hills of northeast Portugal and consists of the C100 Mining Lease3 (5.42km2) and an adjacent, 3
block, Mining Lease Application area (2.94km2). Through Savannah’s successful exploration programme, Mina do
Barroso has been defined as the most significant source of spodumene lithium in western Europe. In recent years,
spodumene lithium deposits have surpassed brine deposits as the major source of lithium raw material production
globally, and Savannah believes that Mina do Barroso can become an important source of this ‘conventional’ lithium
mineral for Europe’s burgeoning domestic lithium battery industry.
Savannah Resources has been managing the project since May 2017 when an initial 75% stake was acquired (with
all the milestones relating to purchase completed by October 2018). Savannah became the sole owner of the project
in June 2019 following the acquisition of the residual 25% stake from the project’s minority shareholders in an all
share transaction. June 2019 also saw the Group exercise the option it had taken in September 2018 to acquire the
adjacent Mining Lease Application area from the Portuguese company Aldeia & Irmão, S.A. (“Aldeia”) following a
period of technical and legal due diligence. This increased the project’s footprint by over 50% to its current size of
8.36km2.
Mina do Barroso location:
Source: Savannah corporate presentation, September 2019
Western Europe’s largest spodumene lithium resource
To date Savannah’s extensive exploration programme, which includes over 31,000m of drilling, has identified
8 deposits bearing spodumene lithium mineralisation on the project. From being a ‘preresource’ project when
acquired, JORC compliant Mineral Resources have now been estimated on five of these deposits (4 on the C100
licence and 1 on Aldeia Block A) which, as of May 2019, totalled 27.0Mt at 1.06% Li2O (containing 285.9kt of Li2O
or 707kt of lithium carbonate equivalent), representing the largest spodumene lithium resource in Western Europe.
Many of the lithium deposits on the project remain open to possible extensions through further exploration and
an Exploration Target4 ranging from 1119Mt at 1.01.2% Li2O has been estimated on three of the orebodies as of
May 2019. The project currently has a combined resource and exploration target of 3848Mt at 1.0 to 1.2% Li2O
hence, Savannah believes significant exploration upside remains.
3 The existing mining lease was granted to the previous project owners in 2006 and is valid for 30 years, but will need amendment or replacement for Savannah’s proposed
mine and concentrator development.
4 Cautionary Statement: The potential quantity and grade of the Additional Resource Targets is conceptual in nature, there has been insufficient prospecting work to estimate
a mineral resource and it is uncertain if further prospecting will result in defining a mineral resource.
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PROJECT OVERVIEWS
Mina do Barroso Lithium JORC Mineral Resource Estimate & Exploration Target:
JORC Mineral Resource Estimate (May 2019, 0.5% Li2O cutoff)
Deposit
Grandao
Resource
Category
Measured
Indicated
Inferred
Tonnes
(Mt)
6.6
6.4
4.8
Subtotal
17.7
Reservatorio
Measured
Indicated
Inferred
Subtotal
Pinheiro
Measured
NOA
Indicated
Inferred
Subtotal
Measured
Indicated
Inferred
Subtotal
Aldeia
Measured
Indicated
Inferred
Subtotal
All Deposits
Measured
Indicated
Inferred
Grand Total
–
–
3.2
3.2
–
–
2.0
2.0
–
0.4
0.3
0.6
–
1.6
1.8
3.5
6.6
8.4
12.0
27.0
Li2O grade (%)
Fe2O3 grade (%)
Li2O
contained (t)
1.1
1.0
1.0
1.04
–
–
1.0
1.0
–
–
1.0
1.0
–
1.2
1.0
1.1
–
1.3
1.3
1.3
1.1
1.0
1.1
1.06
0.7
0.8
0.7
0.7
–
–
1.4
1.4
–
–
0.7
0.7
–
0.8
0.9
0.9
–
0.5
0.4
0.4
0.7
0.7
0.9
0.8
71,600
65,300
48,900
181,800
–
–
32,000
32,000
–
–
20,000
20,000
–
4,200
2,900
7,100
–
21,300
23,700
45,000
71,600
86,700
127,600
285,900
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Exploration Target5 Summary (May 2019)
Deposit
Reservatorio
Grandao
Aldeia
Total
Rounding discrepancies may occur
Source: May 2019 JORC Resource update RNS
Tonnage Range (Mt)
Low
5.0
4.0
2.0
11.0
High
Li2O grade (%)
7.0
8.0
4.0
19.0
1.01.2
1.01.2
1.01.3
1.01.2
Not just a lithium project
In addition to the production of significant volumes of spodumene lithium concentrate, Mina do Barroso also has
the potential to produce feldspar and quartz which is in demand from the large ceramics and glass industries in
Portugal and Spain. Sales of these ‘coproducts’ would have the dual benefits of reducing the amount of processed
material which the project must store onsite and provide additional revenue which could significantly improve the
net production costs of the lithium concentrate.
During 2019 the Group estimated its first coproduct resource on the project, based only on pegmatite material
located inside the proposed Grandao pit (i.e. wholly within the existing lithium mineral resource model). Hence,
this resource is expected to increase further once similar estimates are performed on the NOA, Reservatorio,
Pinheiro and Aldeia deposits. Savannah also completed marketing and test work studies during 2019 to confirm
the coproducts’ suitability for various applications within the ceramic and glass industries.
Mina do Barroso Coproduct JORC Mineral Resource Estimate:
JORC Mineral Resource Estimate (September 2019, no lithium cutoff grade applied)
Resource Tonnes Quartz Feldspar
Deposit Category (Mt) Grade (%) Mt Grade (%) Mt
Grandao Measured 7.1 32.6 2.32 42.8 3.05
Indicated 6.3 34.6 2.17 42.6 2.67
Inferred 1.0 30.9 0.30 40.3 0.39
Subtotal 14.4 33.4 4.79 42.6 6.11
Rounding discrepancies may occur
Source: September 2019 JORC Resource update RNS
5 Cautionary Statement: The potential quantity and grade of the Additional Resource Targets is conceptual in nature, there has been insufficient prospecting work to estimate
a mineral resource and it is uncertain if further prospecting will result in defining a mineral resource.
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This independent work, completed on separate quartz and feldspar samples and a mixed bulk tail product,
confirmed that all three materials were suitable for commercial use. Specifically the test work showed that both
the separate quartz and feldspar products could be used in a variety of applications in both industries such as hotel
ware quality ceramics and container glass while the mixed bulk tail product could be used in ceramic applications,
such as vitrification and bone china. Encouragingly, the marketing study confirmed that prices for all the products
could be potentially higher (in the range of US$40100/t) than had been assumed in the 2018 Scoping Study
summarised below. Furthermore, production of the bulk material would also potentially eliminate approximately
US$15m from the estimated processing plant capex that would otherwise be required to produce separate quartz
and feldspar coproducts.
Positive Scoping Study completed in 2018
Based on the rapid delineation of an initial JORC Resource estimate and Exploration Target during late 2017 and
early 2018, Savannah commissioned a Scoping Study on the project. This was completed in June 2018 and reported
very positive project economics based on a 1.3Mtpa operation producing an average of 175ktpa of spodumene
concentrate and associated coproducts over an 11year life.
Definitive Feasibility Study and Environmental Impact Assessment
As a result of the positive Scoping study, Savannah commissioned a Definitive Feasibility study (DFS) and associated
Environmental Impact Assessment (EIA)6 study on the project in the second half of 2018.
The EIA study, which identifies all the potential environmental and social impacts the project may have, and details
how Savannah would monitor and minimise these, will shortly be submitted for review and approval by the
Portuguese Environmental Authority, APA. Approval of the EIA is a key part of the overall project licencing process.
Savannah expects the DFS to be completed this year, and to draw upon the latest JORC resource estimate available
as a basis for the project’s maiden JORC reserve estimate and final mine plan. To maximise the reserve tonnage,
which can only be drawn from the Measured and Indicated categories (currently 15Mt) of the JORC resource, a
programme of infill drilling is planned to upgrade sections of the existing 12Mt Inferred resource. As a result of the
c.90% increase in overall resources defined since the 2018 scoping study, the DFS is considering the possibility of
increasing the annual throughput rate to 1.5Mtpa resulting in an average annual output of c.200ktpa lithium
concentrate.
6 An EIA on the project was submitted and approved alongside the 2006 Mining Lease award, but a new study is required inline with Savannah’s proposed mine and
concentrator development.
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Mina do Barroso Project 2018 Scoping Study Key Facts:
Operating Parameters and assumptions
Mineable resource (June 2018)
14.4Mt at 1.07% Li2O. All open pit. Life of mine strip ratio
(waste: ore): 5.2: 1, years 14: 1.6:1
Initial life of mine
11 years at 1.3Mtpa throughput rate
Processing route & recovery rate
CrushgrindDense Media Separationflotation
recovery)
(80%
Concentrate production & spec
175ktpa (minimum), 6% spodumene
Concentrate production as LCE/Lithium
Hydroxide Equivalent (Preprocessing losses)
~26ktpa; ~29ktpa. Sufficient for ~0.5M 60kWh car battery
packs per annum
Coproducts
Initial capex
Feldspar (~276ktpa), quartz (~173ktpa) for use in the
ceramics and other industries
US$109m (Additional contingency of US$24.9m, included in
financial model)
Sustaining capital & closure costs
US$17.2m
LoM Operating cost (US$/t conc)
Financial & economic outcomes
Pricing assumptions (Average life of mine)
US$271/t (US$210/t average in Years 14). Costs include all
mining, processing, transport, shipping/freight, corporate,
admin, marketing & royalty costs and are net of byproduct
credits
Spodumene concentrate: US$685/t; Feldspar US$39/t;
Quartz US$33/t
Revenue (LoM; Avg pa)
EBITDA (LoM, Avg pa)
Pretax FCF (LoM; Avg pa)
Net FCF (LoM; Avg pa)
NPV (8% discount rate)
IRR
Payback
US$1,555m; US$140m
US$805m; US$73m
US$651m; US$59m
US$458m; US$41m
Pretax US$356m; Posttax US$241m
Pretax 63.2%; Posttax 48.6%
Pretax 1.7 years; Posttax 2.1 years
Source: June 2018 Scoping Study and subsequent company press releases
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Developing and commercialising the project
A final investment decision on the project’s development will be taken once the DFS has been completed. Alongside
receiving the necessary government approvals and social acceptance of the project, Savannah will also need to
secure the capital required to fund the project’s construction. In support of this financing, and given the project’s
growing significance to the European battery chain Savannah expects to conclude offtake agreements for its lithium
concentrate plus its coproduct output which will further confirm the project’s future revenue sources. In addition,
Savannah expects to identify key project contractors during the course of the DFS and secure their services when
a final investment decision has been taken.
Drilling on the Pinheiro deposit at the Mina do Barroso project:
Source: Company photo
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Mina do Barroso – a first for Portugal in the new lithium battery industry
Portugal is already established as Europe’s ‘largest’ lithium producer with approximately 800t produced in 2018.
However, all of the country’s current lithium production is used in the domestic ceramics and glassware industries,
and not in lithium battery production. Significant lithium mineralisation exists in Portugal, including at Mina do
Barroso, and in 2018 the Portuguese Government announced its ‘lithium strategy’ to support the development of
a new national manufacturing industry to service the growing lithium battery market in Europe.
Mining is the foundation for this new industry, but Portugal has stated that it wants to develop a domestic lithium
industry featuring downstream capacity too, with lithium chemical production stated as a target. Hence, Mina do
Barroso must be seen as part of the first phase in the development of a much larger national concern. If this can
be achieved, Portugal would be placed at the centre of the new European lithium battery supply chain which the
European Commission is so keen to establish in support of its efforts to combat climate change while maintaining
the region’s large automotive industry. The transport sector is the second largest generator of emissions (CO2
equivalent) in the EU behind energy supply.
As a result of these objectives, the Mina do Barroso project benefits from sustained national government support
and is part of the supply chain infrastructure required to fulfil national and European Commission policies. To
maximise the benefits which can flow from the project, Savannah is committed to developing Mina do Barroso in
a sustainable and responsible way that attaches the maximum environmental benefit to the lithium produced and
the best outcomes for the project’s stakeholders in terms of social and economic benefits.
Mutamba Mineral Sands Project, Mozambique
Savannah has been active in the Mineral Sands sector (titanium minerals and zircon) in southern Mozambique since
2013 and in October 2016 completed a Consortium Agreement with Rio Tinto which combined Savannah’s Jangamo
Project with Rio Tinto’s adjacent Mutamba Project (which included three deposit areas – Jangamo, Dongane and
Ravene), and its Chilubane Deposit, located 180km to the south west of the Mutamba Project. The enlarged
collective Mutamba Project, which is in the Gaza and Inhambane provinces and about 450km northeast of
Mozambique’s capital, Maputo, benefits from good infrastructure, including road, power and access to the nearby
ports of Inhambane and Maxixe approximately 40km away.
Having submitted Mining Licence applications for the project in 2018, the Consortium was pleased to be awarded
the Licences for the three concessions (9228C, 9229C and 9735C) which cover the key resourcebearing deposits
on the project during December 2019 and January 2020. The Licences are all valid for an initial 25year period with
the potential to be extended by a further 25 years if required. The application for the Chilubane concession (9230C),
to the south of the main project area, remains under consideration by the authorities.
Mining Mining
Concession No. Concession Name Area (km2) Expiry Date Status
9228C Jangamo Rio 118.1 3 Sep 2044 Licence issued
9229C Dongane 161.3 6 May 2044 Licence issued
9735C Jangamo Matilda 119.5 9 Apr 2044 Licence issued
9230C Chilubane 138.0 – Under Consideration
Source: Mutamba Licencing RNS, Jan 2020
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The Mutamba project location:
(cid:5)(cid:11)(cid:10)(cid:1)(cid:2)(cid:21)(cid:20)(cid:6)(cid:15)(cid:7)(cid:6)(cid:1)(cid:2)(cid:12)(cid:16)(cid:10)(cid:18)(cid:6)(cid:14)(cid:1)(cid:4)(cid:6)(cid:16)(cid:9)(cid:19)(cid:1)(cid:3)(cid:18)(cid:17)(cid:13)(cid:10)(cid:8)(cid:20)(cid:1)
(cid:1)
Source: Mutamba Licencing RNS, Jan 2020
Partnered with Rio Tinto, but Savannah taking the lead
Savannah is the operator and currently holds a 20% share in the project. The Group may increase its stake in the
Consortium up to 51% by funding and completing PreFeasibility (for an interim 35% stake) and Feasibility studies
on the project. Rio Tinto contributes its existing Mutamba camp, facilities and associated equipment, and the
Consortium Agreement includes an offtake agreement on commercial terms for the sale of 100% of production to
Rio Tinto (or an affiliate). Savannah completed a Scoping Study on the project in 2017 and is currently completing
the PreFeasibility study.
Mutamba’s Mineral Resources: A project of global scale
The global Mineral Resource estimate for the Mutamba project (Jangamo, Dongane and Ravene) currently stands
at 4.4Bt at 3.9% total heavy minerals (“THM”) comprising both Indicated and Inferred category material and
containing ilmenite, rutile and zircon. This includes a highgrade portion of 92Mt at 6.2% THM, which was defined
at Ravene. Significant potential also remains to expand the resource beyond its current boundaries, which will be
the focus of future prospecting activities.
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Mutamba JORC Mineral Resource Estimate (May 2017):
Ilmenite
Heavy (% in Ilmenite Rutile Zircon
Resource Sand Minerals Heavy (% in (% in (% in
Deposit Category (Mt) (%) Minerals) sand) sand) sand)
Jangamo (1336L) Indicated 1,780 3.8 62 2.4 0.06 0.11
Inferred 200 3.5 63 2.2 0.03 0.11
Jangamo (3617L) Inferred 65 4.2 60 2.5 0.08 0.15
Dongane Inferred 1,400 3.8 61 2.3 0.07 0.10
Ravene Inferred 900 4.1 56 2.3 – 0.10
Total 4,400 3.9 60 2.3 0.05 0.11
Source: Mutamba Scoping Study RNS, May 2017
Project development concept outlined by 2017 Scoping Study
The Mutamba Project has the potential for the definition of a large orebody able to sustain a significant mining
operation. The mineralisation is amenable to dry mining and dredge mining in parts, with ilmenite being the
dominant heavy mineral present. Savannah’s overall objective, together with Rio Tinto, is to build a commercial
mineral sands presence in Mozambique delivering a stable supply of titanium feedstock to global markets, via Rio
Tinto’s offtake.
Mineral sands industry expert TZMI was commissioned to conduct a scoping study to evaluate an initial low capex,
long life, dry mining operation. Key findings of the study, which was published in May 2017, are given in the following
table.
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Mutamba Mineral Sands: Scoping Study key data
Operating Parameters and assumptions
Mineable resource
Life of mine (LOM)
Mining rate
Life of mine strip ratio (waste: ore)
Mutamba TZMI Base
Case Prices
Management Case
One +10% Product
Price
Management Case
Two +20% Product
Price
451Mt at 6.0% THM (based on a conceptual mine plan utilising 33%
Indicated and 67% Inferred resource)
30 years
15Mtpa
2:451
Average annual production
456,000t of ilmenite and 118,000t of nonmagnetic concentrate
Preproduction capital expenditure
Contingency
Ilmenite Price (Free on Board, FOB)
Nonmagnetic Concentrate (FOB)
Financial & economic outcomes
US$152m
US$74m
US$185/t
US$250/t
US$204/t
US$275/t
US$222/t
US$300/t
PreTax Free Cashflow (LOM)
US$1,007M
US$1,347M
US$1,686M
PreTax Average Annual Free Cashflow
US$41M
PreTax NPV (10% discount)
US$154M
IRR (pretax)
Payback Period (pretax)
19%
5yrs
Source: Mutamba Scoping Study RNS, May 2017
US$52M
US$245M
23%
4yrs
US$62M
US$335M
27%
3yrs
Current work
Following the award of the key Mining Licence Concessions in December 2019 and January 2020, Savannah is in the
process of accelerating its work on the PreFeasibility Study having slowed its work programme in light of the
thorough Mining Licence review exercise undertaken by the Mozambican authorities during 2018 and 2019.
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The mineral sands pilot plant at Mutamba:
Source: Company photo
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REPORT OF THE DIRECTORS
The Directors present their report with the Financial
Statements of the Company and the Group for the year
ended 31 December 2019.
Dividends
The Directors do not recommend the payment of a
dividend (2018: £nil).
Events Since the Reporting Date
This information is contained in Note 25 to the Financial
Statements.
Directors
The Directors who have held office during the period
from 1 January 2019 to the date of this report (unless
otherwise stated) are as follows:
Statement as to Disclosure of Information to Auditors
So far as the Directors are aware, there is no relevant
audit information (as defined by Section 418 of the
Companies Act 2006) of which the Group’s auditors are
unaware, and each Director has taken all the steps that
he ought to have taken as a Director in order to make
himself aware of any relevant audit information and to
establish that the Group’s auditors are aware of that
information.
Auditors
The auditors, BDO LLP, will be proposed for re
appointment at the forthcoming Annual General
Meeting.
David Stuart Archer
Dale John Ferguson
Matthew James Wyatt King
Maqbool Ali Sultan
Imad Kamal Abdul Redha Sultan
James Gerald Leahy
Manohar Pundalik Shenoy1
Murtadha Ahmed Sultan1
1 Alternate Director
Directors’ Indemnity
The Group has agreed to indemnify its Directors against
third party claims which may be brought against them
and has in place a Directors and Officers’ insurance
policy.
Financial Instruments Risk
This information is contained in Note 18 to the Financial
Statements.
Future Development
This
Statement and the Chief Executive’s Report.
is contained
information
in the Chairman’s
Going Concern
This information is contained in the Strategic Report in
the Key Financial Performance Indicators and Milestones
section.
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REPORT OF THE DIRECTORS
The Directors’ beneficial interests (including the beneficial interests of their immediate family) in the ordinary shares
of the Company are as follows:
No. of shares held at
31 December 2019
No. of shares held at
31 December 2018
41,756,649
David Stuart Archer
Matthew James Wyatt King
1,104,028
Dale John Ferguson 49,581,6042
Maqbool Ali Sultan1
–
Imad Kamal Abdul Redha Sultan1
–
1,150,000
James Gerald Leahy
Manohar Pundalik Shenoy1
5,809,524
Murtadha Ahmed A Sultan1
–
41,756,649
1,104,028
15,962,8542
–
–
–
3,809,524
–
1 The Directors indicated are representatives of Al Marjan Ltd which held 268,262,589 shares at the reporting date (2018: 208,262,589 shares).
2 45,993,750 shares (2018: 12,375,000 shares) held indirectly through Slipstream Resources Investments Pty Ltd.
Details of Directors’ remuneration are disclosed in Note 3.
Details of Directors’ interests in Share Options and Investor Warrants are disclosed in Note 23.
Substantial Shareholding
At the date of this report the Company has been notified or is aware of the following interest in the shares of the
Company of 3% or more of the Company’s total issued Share Capital1:
No. of shares
268,262,589
167,250,000
42,019,792
41,756,649
39,100,000
%
20.68%
12.89%
3.24%
3.22%
3.01%
Name of Shareholder
Al Marjan Ltd (Directors2)
Slipstream Resources Investments Pty Ltd
Husain Salman Ghulam AlLawati
David Stuart Archer (Director)
Effective Investments Pty Ltd
1 Except those exempts under DTR 5.1.5 regulation.
2 Two Directors are representatives of Al Marjan.
On behalf of the Board:
David Archer
Chief Executive Officer
Date: 17 March 2020
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CORPORATE GOVERNANCE STATEMENT
The Company strives to ensure that its corporate
governance policies and procedures which are in place
across the Group are of a high standard. The Board
acknowledges the importance of good corporate
governance and in light of the Group’s size and rate of
progression, decided to adopt the provisions of the QCA
Corporate Governance Code in September 2018 (“the
Code”).
The Corporate Governance Statement in relation to the
principles of the QCA Corporate Governance Code is
provided
at
http://www.savannahresources.com/investor
relations/corporategovernance/.
Company
website
the
on
The Code is described as a practical, outcome orientated
approach to corporate governance that is tailored for
small and midsize companies. It is a valuable reference
for growing companies wishing to follow good
governance practice. The Company has adopted the
Code because it allows it to take a flexible yet adequate
approach to corporate governance, ensuring that the
Company places the right people in the right roles and
to ensure that right things are being done to deliver
value for all its stakeholders.
Following the appointment to the Board of James Leahy
as an independent nonexecutive Director in November
2018, the Company’s Chairman has relinquished his
roles as Chairman of the Remuneration Committee and
Chairman of the Audit and Risk Committee, thus
strengthening the independence of those Committees
from the Board itself.
The Board of Directors
The Board comprises of two executive Directors, four
nonexecutive Directors and two alternate Directors. The
Board formally meets approximately every quarter and
is responsible for setting and monitoring group strategy,
reviewing budgets and financial performance, ensuring
funding, examining major portfolio
adequate
management matters, formulating policy on key issues
and reporting to the shareholders.
Internal Financial Control
The Board is responsible for establishing and maintaining
the Group’s system of internal financial controls. Internal
financial control systems are designed to meet the
particular needs of the Group and the risk to which it is
exposed, and by its very nature can provide reasonable,
but not absolute, assurance against material
misstatement or loss. The Directors continue to review
the effectiveness of the procedures presently in place to
ensure that they are appropriate to the nature and scale
of the operations of the Group.
The Audit and Risk Committee
The Audit Committee’s responsibilities were expanded
to include a risk function in 2018 when it became the
Audit and Risk Committee. In particular, the committee
is reviewing inter alia also items reported under the
Company’s Compliance Policy as well as the AIM Rules
Compliance meeting and facilitates the management of
the Group’s Risk Register, in conjunction with the Board,
senior managers and appropriate professional advisers.
It comprises one nonexecutive Director and one
alternate Director – James Leahy (who chairs the
Committee), and Manohar Shenoy. The Committee’s key
responsibilities with respect to audit are for ensuring
that the financial performance of the Group is properly
reported on and monitored, and for meeting the
auditors and reviewing the reports from the auditors
relating to accounts and internal controls. It also reviews
the Group’s annual and interim Financial Statements
before submission to the Board for approval. The
Committee’s key responsibilities with respect to risk are
providing input to the Board in its assessment of
enterprise risk and the determination of risk appetite as
part of the overall setting of strategy for the Group. It
also assists the Board in its oversight of the Group’s risk
management framework
its
effectiveness.
including monitoring
The Group has developed a risk register, with the
intention of allowing risks to be identified, tracked and
addressed in order to mitigate any potential damage to
the Group or its businesses. Reporting on identified risks
as per the Group’s risk register has been included as a
standard recurring item on the Board’s and executive
management’s meetings.
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CORPORATE GOVERNANCE STATEMENT
The necessary controls and procedures, updated by the
Board in 2017 in order to comply with the UK Bribery
Act 2010, continue to be reviewed to ensure
compliance.
The Remuneration Committee
The Remuneration Committee comprises one non
executive Director and one alternate Director – James
Leahy (who chairs the Committee) and Manohar Shenoy.
It is responsible for reviewing the performance of the
executive Directors and for setting the scale and
structure of their remuneration, paying due regard to
the interests of shareholders as a whole and the
performance of the Group. The remuneration of the
Chairman and any nonexecutive Director is determined
by the Board as a whole, based on a review of the
current practices in other companies.
AIM Rule Compliance Committee
The AIM Rule Compliance Committee comprises one
nonexecutive and one executive Director – Matthew
King (who chairs the Committee) and David Archer, the
CEO. It is responsible for ensuring that resources and
procedures are in place to ensure the Company is at all
times in compliance with the AIM Rules for Companies.
The Committee is responsible for the Company’s
Corporate Governance Code management. The
Committee is also responsible for ensuring that the
executive Directors are communicating effectively with
the Company’s Nominated Adviser.
Furthermore, the Committee
for
monitoring the Company’s compliance with the AIM
Rules and the Market Abuse Regulations.
is responsible
Nominations Committee
The Company does not currently have a Nominations
Committee as the Board regards nominations matters as
best dealt with by the full Board, having regard to the
current size of the Company. The desirability for a
Nominations Committee will be reviewed on an annual
basis.
AntiBribery and Corruption
It is the Group’s policy to conduct business in an honest
way, and without the use of corrupt practices or acts of
bribery to obtain an unfair advantage in line with the UK
Bribery Act 2010. The Group takes a zerotolerance
approach to bribery and corruption and is committed to
acting professionally, fairly and with integrity in all its
business dealings and relationships wherever it operates
and implementing and enforcing effective systems to
counter bribery.
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Website Publication
The Directors are responsible for ensuring the Annual
Report and the Financial Statements are made available
on a website. Financial Statements are published on the
Company’s website in accordance with legislation in the
United Kingdom governing the preparation and
dissemination of Financial Statements, which may vary
from legislation in other jurisdictions. The maintenance
is the
and
responsibility of
the Directors. The Directors’
responsibility also extends to the ongoing integrity of the
Financial Statements contained therein.
integrity of the Company’s website
Directors’ Responsibilities
The Directors are responsible for preparing the Strategic
Report, the Report of the Directors and the Financial
Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the
Directors have elected to prepare the Group and
Company Financial Statements in accordance with
International Financial Reporting Standards (IFRSs) as
adopted by the European Union. Under Company law
the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company
and of the profit or loss of the Group for that period. The
Directors are also required to prepare Financial
Statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the
Alternative Investment Market.
In preparing these Financial Statements, the Directors
are required to:
•
select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
•
•
state whether they have been prepared
in
accordance with IFRSs as adopted by the European
Union, subject to any material departures disclosed
and explained in the Financial Statements; and
prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the
Financial Statements comply with the requirements of
the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
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REPORT OF THE INDEPENDENT AUDITORS
to the members of Savannah Resources Plc
Opinion
We have audited the financial statements of Savannah
Resources Plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 December 2019
which comprise the consolidated statement of
comprehensive income, the consolidated and company
statements of financial position, the consolidated and
company statements of changes
in equity, the
consolidated and company statements of cash flow and
notes to the financial statements, including a summary
of significant accounting policies.
The financial reporting framework that has been applied
in the preparation of the financial statements is
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union
and, as regards the parent company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of
the state of the group’s and of the parent company’s
affairs as at 31 December 2019 and of the group’s
loss for the year then ended;
the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been
properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in
accordance with the provisions of the Companies
Act 2006; and
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
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 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 related to going concern
We draw attention to note 1 in the financial statements
which explains that the group and parent company will
require additional funding in the second half of 2020 and
that there is no certainty that the funding required by
the group and the parent company will be secured
within the necessary timescale. As stated in note 1,
these events or conditions, along with the other matters
as set out in note 1, indicate that a material uncertainty
exists that may cast significant doubt on the group and
parent company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Given the conditions and uncertainties noted above we
considered going concern to be a Key Audit Matter. We
performed the following work as part of our audit:
We challenged the directors’ assessment that the group
and parent company would be able to continue as a
going concern and their ability to meet their financial
obligations as they fall due for a period of at least 12
months from the date of approval of the financial
statements. Our challenge of the key underlying
assumptions included:
• Assessing
the
forecast
expenditure by reference to Management’s planned
activity and actual expenditure in 2019.
reasonableness of
• Agreeing the current cash resources to supporting
documentation.
• We considered Management’s assessment of
possible adverse funding consequences arising from
the Coronavirus outbreak, whether there are any
other matters that may adversely impact upon their
assessment of going concern and discussed these
matters with Management.
• We reviewed information demonstrating ongoing
activity in respect of management’s engagement
with potential providers of additional financing.
We evaluated the adequacy of the disclosures in the
including management’s
financial
assessment that funding would be required in the
second half of 2020.
statements
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REPORT OF THE INDEPENDENT AUDITORS
to the members of Savannah Resources Plc
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) we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters. In addition to the going concern key audit matter in the
Material uncertainty related to going concern section above, the following matter was identified:
KEY AUDIT MATTER
Impairment of Exploration and Evaluation assets
As detailed in note 8 to the financial statements, the group holds three groups of exploration and evaluation assets: a
lithium project in Portugal; mineral sands in Mozambique and copper projects in Oman.
As set out in the accounting policy on Exploration and Evaluation Assets in note 1 to the financial statements, accounting
standards require Management to carry out an assessment at least annually for any indicators of impairment as set
out in the accounting policy. Reviewing indicators of impairment often require significant judgements, which are
explained in the section on key judgements relating to exploration and evaluation assets in note 1 to the financial
statements and given the subjectivity of the judgements we identified this impairment assessment as a significant risk
area and a key audit matter.
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
We reviewed and challenged Management’s assessment of the indicators of impairment, which was prepared in
accordance with the requirements of IFRS 6, Exploration for and Evaluation of Mineral Resources, by performing the
following procedures:
We agreed their assessment to supporting documentation, including:
o
o
o
o
Technical data relating to mineral resources
Scoping studies where available
Exploration and mining licence permits
For the Oman Block 4 and 5 exploration licences, which have not been renewed, we considered Management’s
assessment that they expect the licences to be granted by reference to their documented status of the renewal
process, correspondence with the licencing authorities and their legal advice on the licence renewal.
Evaluated the appropriateness of the disclosures provided in note 8 to the financial statements in relation to
Management’s assessment of impairment indicators, information relating to the status of the mining and exploration
licences for the projects and the requirements of relevant accounting standards.
KEY OBSERVATION
We found the impairment assessment of E&E assets prepared by management to be acceptable and appropriately
disclosed.
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REPORT OF THE INDEPENDENT AUDITORS
to the members of Savannah Resources Plc
Our application of materiality
Group materiality
Basis for materiality
£407,000 (2018: £420,000)
1.5% of total assets (2018: 1.5%)
Group performance materiality
£305,000 (2018: £315,000)
Basis for performance materiality
75% of group materiality (2018: 75% of group materiality)
Parent company materiality
Basis for materiality
£300,000 (2018: £310,000)
74% of group materiality (2018: 74% of group materiality)
Parent company performance materiality
£225,000 (2018: £232,500)
Basis for performance materiality
75% of parent company materiality (2018: 75% of parent
company materiality)
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
We consider total assets to be the most significant determinant of the group’s financial performance for users of
the financial statements as the group continues to bring its mining assets through to production.
A lower level of materiality, performance materiality, is used to determine the financial statement areas that are
included within the scope of our audit and the extent of sample sizes during the audit.
Each significant component of the group was audited to a lower level of materiality ranging from £27,300 to
£300,000.
We agreed with the Audit Committee that we would report to the Committee all individual audit differences
identified during the course of our audit in excess of £8,100 (2018: £8,400). We also agreed to report differences
below these thresholds that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the group and its environment, including the group’s
system of internal control, and assessing the risks of material misstatement in the financial statements at the group
level. We also addressed the risk of management override of internal controls, including assessing whether there
was evidence of bias by the directors that may have represented a risk of material misstatement due to fraud.
Our group audit scope focused on the group’s principal operating locations being:
•
•
•
the Mina do Barroso lithium project in Portugal held in Savannah Lithium Lda,
the Block 4 and Block 5 copper projects in Oman held in Al Thuraya LLC and Al Fairuz Mining Co LLC, respectively,
and
the Mutamba mineral sands project in Mozambique held in AME East Africa Ltd and Matilda Minerals Lda,
which were all subject to a full scope audit. Together with the parent company, which was also subject to a full
scope audit, these represent the significant components of the group and account for 99% of the group’s total
assets.
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REPORT OF THE INDEPENDENT AUDITORS
to the members of Savannah Resources Plc
The remaining components of the group were
considered nonsignificant and these components were
principally subject to analytical review procedures,
together with additional substantive testing over the risk
areas detailed above where applicable to that
component.
•
•
BDO LLP performed the audits of the parent company
and all components except the Portuguese component,
Savannah Lithium Lda, which was audited by the BDO
network member firm in Portugal.
The Group audit team was actively involved in the
direction of the audits performed by the component
auditor along with the consideration of findings and
determination of conclusions drawn. As part of our audit
strategy, we issued group audit engagement instructions
and discussed the instructions with the component
auditor. A senior member of the group audit team
performed a review of the component audit file and we
discussed the audit findings with the component auditor.
For this component we also performed audit procedures
in respect of the significant risk area that is reported as
the Key Audit Matter.
Other information
The directors are responsible for the other information.
The other information comprises the information
included in the annual report and financial statements,
other than the financial statements and our auditor’s
report thereon. 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 material misstatement in the financial
statements or a material misstatement of the other
information. If, based on the work we have performed,
we conclude that there is a material misstatement of this
other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by
exception
In the light of the knowledge and understanding of the
group and the parent company and its environment
obtained in the course of the audit, we have not
identified material misstatements in the strategic report
or the directors’ report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
•
adequate accounting records have not been kept by
the parent company, or returns adequate for our
audit have not been received from branches not
visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors’
responsibilities, the directors are responsible for the
preparation of the 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.
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REPORT OF THE INDEPENDENT AUDITORS
to the members of Savannah Resources Plc
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free
from material misstatement, whether due to fraud or
error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting
at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Council’s
website
Use of our report
This report is made solely to the parent 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 parent
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 parent company and the parent company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.
Stuart Barnsdall (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
17 March 2020
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2019
CONTINUING OPERATIONS
Revenue
Other Income
Administrative Expenses
Impairment of Intangible Assets
OPERATING LOSS
Finance Income
Finance Costs
LOSS BEFORE AND AFTER TAX ATTRIBUTABLE
TO EQUITY OWNERS OF THE PARENT
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to profit or loss:
Net change in Fair Value Through Other Comprehensive Income
of Equity Investments
Items that will or may be reclassified to profit or loss:
Exchange Gains/(Losses) arising on translation of foreign operations
OTHER COMPREHENSIVE INCOME FOR THE YEAR
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
ATTRIBUTABLE TO EQUITY OWNERS OF THE PARENT
Loss per share attributable to equity owners of the parent
expressed in pence per share:
Basic and diluted
From Operations
Notes
2019
£
2018
£
8
–
35,325
(3,861,344)
–
(3,826,019)
25,621
(1,528)
–
–
(3,258,458)
(140,024)
(3,398,482)
17,321
–
4
(3,801,926)
(3,381,161)
2,496
(73,345)
(609,228)
(606,732)
384,248
310,903
(4,408,658)
(3,070,258)
7
(0.36)
(0.44)
The notes form part of these Financial Statements.
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2019
ASSETS
NONCURRENT ASSETS
Intangible Assets
RightofUse Assets
Other Intangible Assets
Property, Plant and Equipment
Other NonCurrent Assets
Bank Deposits
TOTAL NONCURRENT ASSETS
CURRENT ASSETS
Investments
Trade and Other Receivables
Other Current Assets
Cash and Cash Equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
EQUITY AND LIABILITIES
SHAREHOLDERS’ EQUITY
Share Capital
Share Premium
Merger Reserve
Foreign Currency Reserve
Warrant Reserve
Share Based Payment Reserve
FVTOCI Reserve
Retained Earnings
Notes
2019
£
2018
£
8
21
9
10
15
15
11
13
15
14
16
16
16
23
23
21,068,376
37,785
10,804
1,337,229
248,275
742,363
17,413,168
–
342,881
1,437,068
253,188
–
23,444,832
19,446,305
36,762
285,699
19,171
3,484,781
3,826,413
18,007
330,774
223,733
7,715,435
8,287,949
27,271,245
27,734,254
12,974,598
33,511,787
6,683,000
(30,257)
975,679
410,121
(43,439)
(28,163,712)
8,814,518
31,060,554
–
579,126
1,000,221
508,051
(58,737)
(16,485,626)
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
26,317,777
25,418,107
LIABILITIES
NONCURRENT LIABILITIES
Loans and Borrowings
Lease Liabilities
TOTAL NONCURRENT LIABILITIES
CURRENT LIABILITIES
Loans and Borrowings
Lease Liabilities
Trade and Other Payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
24
21
24
21
17
–
12,059
12,059
–
18,990
922,419
941,409
953,468
25,813
–
25,813
16,895
–
2,273,439
2,290,334
2,316,147
27,271,245
27,734,254
The Financial Statements were approved by the Board of Directors on 17 March 2020 and were signed on its behalf
by:
David Archer
Chief Executive Officer
Company number: 07307107
The notes form part of these Financial Statements.
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COMPANY STATEMENT OF FINANCIAL POSITION
as at 31 December 2019
ASSETS
NONCURRENT ASSETS
Investments in Subsidiaries
Other Intangible Asset
Other Receivables
Other NonCurrent Assets
TOTAL NONCURRENT ASSETS
CURRENT ASSETS
Investments
Trade and Other Receivables
Other Current Assets
Cash and Cash Equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
EQUITY AND LIABILITIES
SHAREHOLDERS’ EQUITY
Share Capital
Share Premium
Merger Reserve
Warrant Reserve
Share Based Payment Reserve
FVTOCI Reserve
Retained Earnings
TOTAL EQUITY
LIABILITIES
CURRENT LIABILITIES
Trade and Other Payables
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
2019
£
2018
£
11
9
13
15
11
13
15
14
16
16
16
23
23
17
894,993
5,948
33,265,297
41,068
458,667
333,353
20,844,330
36,800
34,207,306
21,673,150
33,935
70,338
–
3,277,943
3,382,216
17,225
130,438
202,180
7,368,469
7,718,312
37,589,522
29,391,462
12,974,598
33,511,787
6,683,000
975,679
410,121
(43,439)
(17,341,234)
8,814,518
31,060,554
–
1,000,221
508,051
(58,737)
(12,883,510)
37,170,512
28,441,097
419,010
419,010
950,365
950,365
37,589,522
29,391,462
The Company total comprehensive loss for the financial year was £4,598,068 (2018: £2,523,008) (Note 6).
The Financial Statements were approved by the Board of Directors on 17 March 2020 and were signed on its behalf
by:
David Archer
Chief Executive Officer
Company number: 07307107
The notes form part of these Financial Statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2019
Share
Foreign Based
Share Share Merger Currency Warrant Payment FVTOCI Retained Total
Capital Premium Reserve Reserve Reserve Reserve Reserve Earnings Equity
£ £ £ £ £ £ £ £ £
At 1 January 2018 6,358,504 18,105,108 – 194,878 1,405,958 691,194 – (13,612,758) 13,142,884
Loss for the year – – – – – – – (3,381,161) (3,381,161)
Other Comprehensive
Income – – – 384,248 – – (58,737) (14,608) 310,903
Total Comprehensive
Income for the year – – – 384,248 – – (58,737) (3,395,769) (3,070,258)
Issue of share capital
(net of expenses) 2,056,014 12,967,604 – – – – – – 15,023,618
Contingent
consideration – – – – – 283,283 – – 283,283
Contingent
consideration shares
issued 400,000 – – – – (283,283) – (116,717) –
Share based payment
charges – – – – – 38,580 – – 38,580
Exercised options – – – – – (202,521) – 202,521 –
Lapse of options – – – – – (19,202) – 19,202 –
Issue of warrants – (12,158) – – 12,158 – – – –
Exercised warrants – – – – (326,755) – – 326,755 –
Lapse of warrants – – – – (91,140) – – 91,140 –
At 31 December
2018 8,814,518 31,060,554 – 579,126 1,000,221 508,051 (58,737) (16,485,626) 25,418,107
Loss for the year – – – – – – – (3,801,926) (3,801,926)
Other Comprehensive
Income – – – (609,383) – – 15,298 (12,802) (606,887)
Total Comprehensive
Income for the year – – – (609,383) – – 15,298 (3,814,728) (4,408,813)
Issue of share capital
(net of expenses)
(Note 16) 2,500,000 2,326,400 – – – – – – 4,826,400
Consideration for
acquisition of non
controlling interest
(Note 8, 16) 1,630,000 – 6,683,000 – – – – (8,019,000) 294,000
Consideration for
settlement deferred
consideration
(Note 11) 30,080 124,833 – – – – – – 154,913
Share based payment
charges – – – – – 33,170 – – 33,170
Lapse of options – – – – – (131,100) – 131,100 –
Lapse of warrants – – – – (24,542) – – 24,542 –
At 31 December
2019 12,974,598 33,511,787 6,683,000 (30,257) 975,679 410,121 (43,439) (28,163,712) 26,317,777
The following describes the nature and purpose of each reserve within owners’ equity:
Reserve
Share Capital
Share Premium
Merger Reserve
Description and purpose
Amounts subscribed for share capital at nominal value.
Amounts subscribed for share capital in excess of nominal value less costs of fundraising.
Amounts subscribed for share capital in excess of nominal value in respect of the consideration paid in an
acquisition arrangement, when the issuing company takes its interest in another company from below 90% to
90% or above equity holding.
Foreign Currency Reserve
Gains/losses arising on retranslating the net assets of group operations into Pound Sterling.
Warrant Reserve
Share Based Payment Reserve
FVTOCI Reserve
Retained Earnings
Fair value of the warrants issued.
Represents the accumulated balance of share based payment charges recognised in respect of asset acquired
and share options granted by Savannah Resources Plc, less transfers to retained losses in respect of options
exercised, lapsed and forfeited.
Cumulative changes in fair value of equity investments classified at fair value through other comprehensive income (FVTOCI).
Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income and other
transactions recognised directly in Retained Earnings.
The notes form part of these Financial Statements.
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COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2019
Share
Based
Share Share Merger Warrant Payment FVTOCI Retained Total
Capital Premium Reserve Reserve Reserve Reserve Earnings Equity
£ £ £ £ £ £ £ £
At 1 January 2018 6,358,504 18,105,108 – 1,405,958 691,194 – (11,058,857) 15,501,907
Loss for the year – – – – – – (2,449,663) (2,449,663)
Other Comprehensive
Income – – – – – (58,737) (14,608) (73,345)
Total Comprehensive
Income for the year – – – – – (58,737) (2,464,271) (2,523,008)
Issue of share capital
(net of expenses) 2,056,014 12,967,604 – – – – – 15,023,618
Shares issued 400,000 – – – – – – 400,000
Share based payment
charges – – – – 38,580 – – 38,580
Exercised options – – – – (202,521) – 202,521 –
Lapse of options – – – – (19,202) – 19,202 –
Issue of warrants – (12,158) – 12,158 – – – –
Exercised warrants – – – (326,755) – – 326,755 –
Lapse of warrants – – – (91,140) – – 91,140 –
At 31 December 2018 8,814,518 31,060,554 – 1,000,221 508,051 (58,737) (12,883,510) 28,441,097
Loss for the year – – – – – – (4,600,564) (4,600,564)
Other Comprehensive
Income – – – – – 15,298 (12,802) 2,496
Total Comprehensive
Income for the year – – – – – 15,298 (4,613,366) (4,598,068)
Issue of share capital
(net of expenses)
(Note 16) 2,500,000 2,326,400 – – – – – 4,826,400
Consideration for
acquisition of non
controlling interest
(Note 8, 16) 1,630,000 – 6,683,000 – – – – 8,313,000
Consideration for
settlement deferred
consideration
(Note 11) 30,080 124,833 – – – – – 154,913
Share based payment
charges – – – – 33,170 – – 33,170
Lapse of options – – – – (131,100) – 131,100 –
Lapse of warrants – – – (24,542) – – 24,542 –
At 31 December 2019 12,974,598 33,511,787 6,683,000 975,679 410,121 (43,439) (17,341,234) 37,170,512
The following describes the nature and purpose of each reserve within owners’ equity:
Reserve
Share Capital
Share Premium
Merger Reserve
Warrant Reserve
Share Based Payment Reserve
FVTOCI Reserve
Retained Earnings
Description and purpose
Amounts subscribed for share capital at nominal value.
Amounts subscribed for share capital in excess of nominal value less costs of fundraising.
Amounts subscribed for share capital in excess of nominal value in respect of the consideration paid in an
acquisition arrangement, when the issuing company takes its interest in another company from below 90% to
90% or above equity holding.
Fair value of the warrants issued.
Represents the accumulated balance of share based payment charges recognised in respect of asset acquired
and share options granted by Savannah Resources Plc, less transfers to retained losses in respect of options
exercised, lapsed and forfeited.
Cumulative changes in fair value of equity investments classified at fair value through other comprehensive income (FVTOCI).
Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income and other
transactions recognised directly in Retained Earnings.
The notes form part of these Financial Statements.
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CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2019
Cash flows used in operating activities
Loss for the year
Depreciation and amortisation charges
Impairment of assets
Share based payment charge
Finance income
Finance expense
Exchange losses/(gains)
Cash flow from operating activities before changes
in working capital
Decrease/(Increase) in trade and other receivables
(Decrease)/Increase in trade and other payables
Net cash used in operating activities
Cash flow used in investing activities
Purchase of intangible exploration assets
Purchase of other intangible assets
Purchase of tangible fixed assets
Purchase of investments
Proceeds from sale of investments
Bank deposits for mining licences
Guarantees for acquisition of intangible exploration assets
Interest received
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issues of ordinary shares (net of expenses)
Principal paid on lease liabilities
Interest paid on lease liabilities
Net cash from financing activities
(Decrease)/Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange losses on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
10,21
8
3, 23
4
8
9
10
11
11
15
15
21
21
2019
£
2018
£
(3,801,926)
40,872
–
33,170
(25,621)
1,528
196,229
(3,381,162)
31,194
140,024
38,580
(17,321)
–
(54,076)
(3,555,748)
254,550
(589,705)
(3,242,761)
(179,376)
562,925
(3,890,903)
(2,859,212)
(4,169,238)
(1,278)
(21,296)
(28,371)
12,112
(742,363)
–
25,621
(6,317,118)
(131,173)
(328,768)
(695)
104,461
–
(202,180)
17,321
(4,924,813)
(6,858,152)
4,826,400
(20,488)
(1,528)
14,986,546
–
–
4,804,384
14,986,546
(4,011,332)
7,715,435
(219,322)
5,269,182
2,455,968
(9,715)
3,484,781
7,715,435
The notes form part of these Financial Statements.
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COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2019
Cash flows used in operating activities
Loss for the year
Impairment of financial assets
Share based payment reserve charge
Finance income
Exchange losses/(gains)
Cash flow from operating activities before changes in working capital
Decrease/(Increase) in trade and other receivables
(Decrease)/Increase in trade and other payables
Net cash used in operating activities
Cash flow used in investing activities
Investment in subsidiaries
Loans to subsidiaries
Purchase of other intangible assets
Guarantees for acquisition of intangible exploration assets
Purchase of investments
Proceeds from sale of investments
Interest received
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issues of ordinary shares (net of expenses)
Net cash from financing activities
(Decrease)/Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange losses on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
13
3, 23
11
13
9
15
11
11
2019
£
2018
£
(4,600,564)
1,035,627
33,170
(25,514)
1,718,168
(1,839,113)
182,233
(512,038)
(2,449,736)
1,325,790
38,580
(17,321)
(628,473)
(1,731,160)
(103,289)
477,736
(2,168,918)
(1,356,713)
(27,195)
(6,512,623)
–
–
(26,326)
12,112
25,514
(115,784)
(8,049,798)
(131,173)
(202,180)
–
104,461
17,321
(6,528,518)
(8,377,153)
4,826,400
14,986,546
4,826,400
14,986,546
(3,871,036)
7,368,469
(219,490)
5,252,680
2,125,504
(9,715)
3,277,943
7,368,469
The notes form part of these Financial Statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of Preparation
These Consolidated Financial Statements and the Company Financial Statements have been prepared in
accordance with International Financial Reporting Standards, International Accounting Standards (collectively
“IFRSs”) as adopted by the EU and IFRIC and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. The Consolidated Financial Statements and the Company Financial Statements
have been prepared under the historical cost convention.
Presentational and Functional Currency
The functional currency of the Company is Pound Sterling. Each entity in the Group determines its own
functional currency and items included in the Financial Statements of each entity are measured using that
functional currency. The presentational currency of the Group is Pound Sterling.
Going Concern
In common with many mineral exploration companies, the Company raised equity funds for its activities. The Directors
believe that the Group’s project portfolio is attractive and are confident that funding will continue to be secured and
that it is appropriate to prepare the Financial Statements on a going concern basis. The Company currently has a
number of options in respect of future financing and has engaged with potential financiers and sources of capital.
The Directors have prepared cash flow forecasts for the twelve month period from the date of approval of the
financial statements which indicates that additional funding will be required in the second half of 2020. Although
the Company has been successful in the past in raising equity finance, the lack of formal agreements means
there can be no certainty that the additional funding required by the Group and the Company will be secured
within the necessary timescale although the Company has the ability to take actions to reduce its financial
commitments in response to possible delays in funding due to the impact of the Coronavirus with a
corresponding slowing of the tempo of activities. These conditions indicate the existence of a material
uncertainty which may cast significant doubt about the Group and the Company’s ability to continue as a going
concern, however as aforementioned and evidenced by announcements, the Company has routinely been able
to raise funds to progress its highly prospective portfolio and the Group has received interest for alternative
sources of finance in particular for its flagship project in Portugal. The Financial Statements do not include the
adjustments that would result if the Group and the Company was unable to continue as a going concern.
Basis of Consolidation
The Group accounts consolidate the accounts of Savannah Resources Plc and its domestic and foreign
subsidiaries, refer to Note 11. The foreign subsidiaries have been consolidated in accordance with IFRS 10
“Consolidated Financial statements” and IAS 21 “The effects of Foreign Exchange Rates”.
Intercompany transactions and balances between group companies are eliminated in full.
Equity Investments
Equity investments, excluding subsidiaries, are classified at fair value through other comprehensive income
(FVTOCI). They are carried at fair value with changes in fair value recognised in Other Comprehensive Income
and accumulated in the Fair Value Through Other Comprehensive Income Reserve. Upon disposal any balance
within Fair Value Through Other Comprehensive Income Reserve is reclassified directly to Retained Earnings
and is not reclassified to the Statement of Comprehensive Income.
All equity investments, excluding subsidiaries, held are quoted and traded in an active market. The variability
in the range of reasonable fair value estimated for these instruments is not significant, therefore, when there
is no active market for these equity investments the fair value will be estimated using historical market data.
When there are no active market and a reliable measure of the fair value of the investments is not available
these are carried at cost, this being the fair value carrying amount on the date of the reclassification. The change
in market value represents the fair value of shares held at the reporting date less the cost or fair value at the
start of the financial year.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES continued
An impairment is recognised for equity investments where there is a significant and sustained decrease in the
market value of the investment.
Investments in Subsidiaries and Associates
Investments in subsidiaries, associates and jointly controlled entities are accounted for at cost within the
individual accounts of the parent company. These investments are classified as NonCurrent Assets on the
Statement of Financial Position of the parent company.
Foreign Currencies
Transactions in foreign currencies are initially recorded in the functional currency by applying spot exchange
rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at the reporting date. Exchange differences
arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or
loss.
The income statements of individual group companies with functional currencies other than Pound Sterling
are translated into Pound Sterling at the average rate for the period, on the basis the average rate is a reasonable
approximation of the spot rates throughout the year, and the Statement of Financial Position translated at the
rate of exchange ruling on the reporting date. Exchange differences which arise from retranslation of the
opening net assets and results of such subsidiary undertakings are taken to equity (“Foreign Currency Reserve”).
On disposal of such entities, the deferred cumulative amount recognised in equity relating to that particular
operation is transferred to the Consolidated Statement of Comprehensive Income as part of the profit or loss
on disposal.
Intangible Assets
Exploration and Evaluation Assets
Once an exploration licence or an option to acquire an exploration licence has been obtained, all costs
associated with mineral property development and investments are capitalised on a projectbyproject basis
pending determination of the feasibility of the project. Costs incurred include appropriate technical and
administrative expenses but not general overheads. If a mining property development project is successful, the
related expenditures will be transferred to Property, Plant and Equipment and subsequently amortised over
the estimated life of the commercial ore reserves on a unit of production basis. Where a licence is relinquished,
a project is abandoned, or is considered to be of no further commercial value to the Group, the related costs
will be written off.
Unevaluated mineral properties are assessed annually at reporting date for indicators of impairment in
accordance with IFRS 6. For the purposes of assessing indicators of impairment, assets are grouped at the
lowest level for which there are separately identifiable cash flows (cash generating units) as disclosed in Note 8.
If commercial reserves are developed, the related deferred development and exploration costs are then
reclassified as development and production assets within Property, Plant and Equipment.
Acquisitions of Mineral Exploration Licences
Acquisitions of Mineral Exploration Licences through acquisition of nonoperational corporate structures that
do not represent a business, and therefore do not meet the definition of a business combination, are accounted
for as the acquisition of an asset. Related future cash consideration is contingent and is not recognised as an
asset or liability.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES continued
Other Intangible Assets
Once an option to acquire an exploration licence has been obtained by a Group holding company, with the
expectation that on execution the exploration licence is to be acquired by a subsidiary, costs are capitalised in
Other Intangible Assets. Costs incurred include appropriate technical and administrative expenses but not
general overheads. On execution of the option by a subsidiary the Other Intangible Assets are reclassified to
Investments in the Group holding company and classified as Exploration and Evaluation Assets by the subsidiary
that acquired the licence.
Property, Plant and Equipment
Tangible noncurrent assets used in exploration and evaluation are classified within Tangible NonCurrent Assets
as Property, Plant and Equipment. To the extent that such tangible assets are consumed in exploration and
evaluation the amount reflecting that consumption is recorded as part of the cost of the intangible asset.
Depreciation is provided on all items of Property, Plant and Equipment in order to write off the cost less
estimated residual value of each asset over its estimated useful life.
Plant & Machinery 4 – 10 years
Office Equipment 1 – 4 years
Motor Vehicles 4 years
Financial Instruments
Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position when the
Group becomes a party to the contractual provisions of the instrument.
Financial Assets
Trade and Other Receivables
Trade and other receivables are nonderivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment.
Under IFRS 9, impairment provisions are recognised based on a forwardlooking expected credit loss model.
The methodology used to determine the amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk
has not increased significantly since initial recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those for which credit risk has increased significantly,
lifetime expected credit losses along with the gross interest income are recognised. For those that are
determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are
recognised.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expires or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to
another entity.
There is no significant difference between carrying value and fair value of trade and other receivables.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand and balances held with banks. Cash equivalents are short
term, highly liquid accounts that are readily converted to known amounts of cash.
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1. ACCOUNTING POLICIES continued
Guarantees
Guarantees represents deposits held as security required by the local mining/environmental authorities in
relation to exploration/mining licences and applications thereof. They are not expected to be converted into
cash within less than year and therefore are classified as Other NonCurrent Assets. Guarantees are measured
at cost, less any impairment.
Financial Liabilities
Other Liabilities
Other liabilities consist of loan and borrowings and trade and other payables, which are initially recognised at
fair value and subsequently carried at amortised cost, using the effective interest method.
Financial liabilities are derecognised when they are extinguished, that is when the obligation is discharged,
cancelled or has expired. When a financial liability is derecognised, the cumulative gain or loss in equity (if any)
is transferred to the Consolidated Statement of Comprehensive Income.
There is no significant difference between the carrying value and fair value of other liabilities.
Taxation
Current taxes are based on the results shown in the Financial Statements and are calculated according to local
tax rules, using tax rates enacted or substantively enacted by the reporting date.
Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the
reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits
will be available against which timing differences can be utilised.
Leases
All leases are accounted for by recognising a rightofuse asset and a lease liability except for:
•
•
Leases of low value assets; and
Leases with a duration of 12 months or less.
IFRS 16 was adopted 1 January 2019 without restatement of comparative figures. For an explanation of the
transitional requirements that were applied as at 1 January 2019, see Note 24. The following policies apply
subsequent to the date of initial application, 1 January 2019.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease
term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically
the case) this is not readily determinable, in which case the Group’s incremental borrowing rate on
commencement of the lease is used.
On initial recognition, the carrying value of the lease liability also includes:
•
•
•
amounts expected to be payable under any residual value guarantee;
the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess
that option;
any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis
of termination option being exercised.
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1. ACCOUNTING POLICIES continued
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives
received, and increased for:
•
•
•
lease payments made at or before commencement of the lease;
initial direct costs incurred; and
the amount of any provision recognised where the group is contractually required to dismantle, remove
or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on
the balance outstanding and are reduced for lease payments made. Rightofuse assets are amortised on a
straightline basis over the remaining term of the lease or over the remaining economic life of the asset if,
rarely, this is judged to be shorter than the lease term.
Amounts payable for leases covered by the shortterm exemption are charged to the income statement on a
straightline basis over the term of the relevant lease.
ShareBased Payments
Where equity settled share options are awarded to Directors and employees, the fair value of the options at
the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period.
Nonmarket vesting conditions are taken into account by adjusting the number of equity instruments expected
to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is
based on the number of options that eventually vest. Market vesting conditions are factored into the fair value
of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of
whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the change in the fair value of the
options, measured immediately before and after the modification, is also charged to the Consolidated Statement
of Comprehensive Income over the remaining vesting period.
Where equity instruments are granted to persons other than employees for goods and services received, the
fair value of goods and services received is recognised in either the Statement of Comprehensive Income or
the Statement of Financial Position in accordance with the Group’s relevant accounting policies. Where it is not
possible to reliably value the goods or services received, the fair value is measured by valuing the equity
instruments granted using an option an option pricing model. The probability of nonvesting conditions being
satisfied are included in the fair value recognised at the measurement date.
Where warrants are granted as part of cash subscriptions of new shares in the Company these are designated
as Investor Warrants. The fair value of the Investor Warrants at the date of grant is charged thus decreasing
the value of the Share Premium. Fair value is measured by use of a warrant pricing model.
Joint Arrangements
The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control
over the relevant activities of the arrangement to the Group and at least one other party. Joint control is
assessed under the same principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as either: (a) Joint ventures: where the Group has rights
to only the net assets of the joint arrangement; (b) Joint operations: where the Group has both the rights to
assets and obligations for the liabilities of the joint arrangement.
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1. ACCOUNTING POLICIES continued
In assessing the classification of interests in joint arrangements, the Group considers: (a) The structure of the
joint arrangement; (b) The legal form of joint arrangements structured through a separate vehicle; (c) The
contractual terms of the joint arrangement agreement; and (d) Any other facts and circumstances (including
any other contractual arrangements).
The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues
and expenses in accordance with its contractually conferred rights and obligations.
NonCurrent Assets Held for Sale
Noncurrent assets and disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. This condition is regarded as met
only when the asset (or disposal group) is available for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable.
Management must be committed to the sale, which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all the assets and liabilities
of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether
the Group will retain a noncontrolling interest in its former subsidiary after the sale.
Noncurrent assets (and disposal groups) classified as held for sale are measured at the lower of their carrying
amount and fair value less costs to sell.
Key Accounting Estimates and Judgements
The preparation of financial information in conformity with IFRS requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of financial information and the reported
amounts of expenses during the reporting periods. Although these estimates are based on management’s best
knowledge of the amounts, event or actions, actual results ultimately may differ from those estimates.
The key accounting estimates and assumptions are set out below:
(a) Sharebased payments
In determining the fair value of sharebased payments made during the period, a number of assumptions
have been made by management. The details of these assumptions related to share options and warrants
are set out in Note 23.
(b) Going concern
In determining the Group’s ability to continue as a going concern the Directors consider a number of factors
including cashflow forecasts prepared by management. The detail of these factors are set out in Note 1
Going Concern heading.
The key judgements are set out below:
(a) Exploration and evaluation costs
The Group has to apply judgement in determining whether exploration and evaluation expenditure should
be capitalised within intangible assets as exploration and evaluation costs or expensed. The Group has a
policy of capitalising all costs which relate directly to exploration and evaluation costs (as set out above).
The total value of exploration and evaluation costs capitalised as at each of the reporting dates is set out
in Note 8. When the Group has applied for exploration and mining licences and these have not been granted
at the reporting date the management apply judgement in determining if this should be considered as an
impairment indicator. Management takes into account historic information about the timing of granting
licences by the relevant ministers and governments, and the information provided by the Group’s local
teams based on communications with these bodies.
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1. ACCOUNTING POLICIES continued
(b) Carrying value of Exploration and Evaluation Assets
The Group assesses at each reporting period whether there is any indication that these assets may be
impaired. If such indication exists, the Group estimates the recoverable amount of the asset. In the early
stages of exploration an indication of impairment may arise from drilling and assay results or from
management’s decision to terminate the project. Further details are set out in Note 8.
(c)
Impairment of Amounts due from Subsidiaries
When applying the expected credit loss model under IFRS 9 Management apply judgement to evaluate if
there was a significant increase in the credit risk of the loans since initial recognition to determine the
stage of these loans to conclude if need to be calculated the 12months expected credit losses or the
lifetime expected credit losses. To calculate the expected credit losses Management apply judgement to
define several scenarios and their likelihood with the expected cash flows associated to the recovery of
the loans, which are compared with the present value of the loans to calculate the expected credit losses.
(d) Classification of Joint Arrangement
In determining the accounting treatment of the agreements signed with other nongroup companies (Note
12) Management needed to determine if joint control exists and therefore apply IFRS 11 Joint
Arrangements. Also, when applying IFRS 11 it was necessary to evaluate the rights and obligations relating
to the agreements to conclude if it was a Joint Operation or a Joint Venture. During 2018 and 2019
management concluded that there were no relevant changes affecting the relationship between the Group
and the other parties and therefore there are no changes to the initial accounting treatment of these
agreements.
Accounting Developments During 2019
The accounting policies adopted are consistent with those of the previous financial year except for those relating
to leases and the new accounting policy stated above. Management has reviewed the new standards and
amendments to IFRS effective as of 1 January 2019. The most significant of these is IFRS 16 Leases. Details of
the effect that this had on the Financial Statements of the Group or Company are given in Note 24.
Accounting Developments Not Yet Adopted
There are a number of standards and interpretations which have been issued by the International Accounting
Standards Board that are effective in future accounting periods that the Group has decided not to adopt early.
The Group is currently assessing the impact of these new accounting standards and amendments.
2. SEGMENTAL REPORTING
The Group complies with IFRS 8 Operating Segments, which requires operating segments to be identified on
the basis of internal reports about components of the Group that are regularly reviewed by the chief operating
decision maker, which the Company considers to be the Board of Directors. In the opinion of the Directors, the
operations of the Group comprise of exploration and development in Oman, exploration and development in
Mozambique, exploration and development in Portugal, exploration in Finland, headquarter and corporate
costs and the Company’s third party investments.
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2. SEGMENTAL REPORTING continued
Based on the Group’s current stage of development there are no external revenues associated to the segments
detailed below. For exploration and development in Oman, Mozambique and Portugal the segments are
calculated by the summation of the balances in the legal entities which are readily identifiable to each of the
segmental activities. In the case of the Investments, this is calculated by analysis of the specific related
investment instruments. Recharges between segments are effectively at cost and included in each segment
below. Intercompany loans are eliminated to zero and not included in each segment below.
Mozambique
Oman Mineral Portugal HQ and
Copper Sands Lithium corporate Investments Elimination
£ £ £ £ £ £
Total
£
2019
Revenue – 67,985 1,468,6441 1,011,800 – (2,513,104)
35,325
(1,528)
Finance Costs – – (1,528) – – –
25,621
Interest Income – 107 – 25,514 – –
Share based payments – – – 33,170 – –
33,170
Loss for the year (227,672) (514,312) (1,050,912) (3,033,141) (11,516) 1,035,627 (3,801,926)
Loss on disposal of
Investments – – – – (11,516) –
(11,516)
Total Assets 5,507,375 5,957,598 12,261,328 3,508,182 36,762 – 27,271,245
Total NonCurrent Assets 5,409,757 5,859,794 12,128,265 47,016 – – 23,444,832
Additions to NonCurrent
Assets 553,010 1,039,529 3,353,402 (323,137) – –
Total Current Assets 97,618 97,804 133,063 3,461,166 36,762 –
Total Liabilities (115,095) (40,770) (317,634) (479,969) – –
4,622,804
3,826,413
(953,468)
Mozambique
Oman Mineral Portugal Finland HQ and
Copper Sands Lithium Lithium corporate Investments Elimination
£ £ £ £ £ £ £
Total
£
2018
Revenue – – 386,6941 – 1,011,614 – (1,398,308)
Interest Income – 157 – – 17,164 – –
Share based
payments – – – – 38,580 – –
38,580
Loss for the year (247,895) (647,656) (646,033) (152,485) (3,012,883) – 1,325,790 (3,381,162)
Total Assets 5,213,999 5,077,253 9,334,988 933 8,089,074 18,007 – 27,734,254
Total NonCurrent
Assets 5,017,160 4,928,172 9,130,820 – 370,153 – – 19,446,305
Additions to
NonCurrent Assets 553,846 505,256 6,212,870 – 351,118 – –
Total Current Assets 196,839 149,081 204,168 933 7,718,921 18,007 –
Total Liabilities (116,311) (50,060) (933,626) (2,258) (1,213,891) – –
7,623,090
8,287,949
(2,316,146)
–
17,321
1 Revenues included in the Portugal Lithium segment include £1,433,319 (2018: £386,694) relate to intercompany recharges within this segment
and therefore eliminated in column Elimination.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEES AND DIRECTORS
The average monthly number of employees (including Directors that receive remuneration) during the year
was as follows:
Operational
Nonoperational
Staff Costs (excluding Directors)
Salaries
Bonus
Social security and other employee expenses
Pension
Share based payment expense (see Note 23)
Group
Company
2019
No
42
22
64
2019
£
Group
2018
No
39
17
56
2018
£
1,790,408
–
184,706
57,404
25,835
2,058,353
1,527,761
131,752
106,112
24,241
38,580
1,828,446
2019
No
1
7
8
2019
£
550,421
–
65,861
57,404
25,835
699,521
2018
No
1
5
6
Company
2018
£
395,134
88,805
51,922
24,241
38,580
598,682
The Group numbers in the above table includes £779,233 (2018: £666,922) which was capitalised as an
intangible asset.
Directors’ Remuneration
Salaries
Bonus
Social security and taxes
Pension
Share based payment expense (see Note 23)
Other
2019
£
564,652
–
73,315
30,902
7,335
4,472
680,676
2018
£
435,786
170,191
57,656
19,704
–
–
683,337
The numbers in the above table include £131,101 (2018: £125,541) of Directors’ Remuneration which was
capitalised as an intangible asset in relation to the provision of specific technical services.
In 2018 a gross gain (before taxes) of £337,933 on the exercise of share options was attributable to the Directors.
The costs related to these exercised share options were charged in the Consolidated Statement of
Comprehensive Income when the options were vested in prior years. No share options were exercised during
2019.
The Directors’ remuneration is paid by the Company.
The Directors are considered to be the key management of the Group.
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3. EMPLOYEES AND DIRECTORS continued
The remuneration of Directors who held office during the year was as follows:
Directors’ Directors’
emoluments 2019 emoluments 2018
Salary Bonus Pension Non Other Total Salary Bonus Pension Non
cash cash
share share
options options
£ £ £ £ £ £ £ £ £ £
Total
£
Executive Directors
Dale Ferguson 149,652 – – 7,335 156,987 144,484 71,3111 – – 215,795
David Archer 310,000 – 30,902 – 4,472 345,374 247,200 98,8801 19,704 – 365,784
NonExecutive Directors
Matthew King 65,000 – – – – 65,000 40,000 – – –
James Leahy 40,000 – – – – 40,000 4,103 – – –
Maqbool Ali Sultan – – – – – – – – – –
Imad Kamal Abdul Redha Sultan – – – – – – – – – –
Manohar Shenoy – – – – – – – – – –
Murtadha Ahmed A Sultan – – – – – – – – – –
40,000
4,103
–
–
–
–
564,652 – 30,902 7,335 4,472 607,361 435,787 170,191 19,704 – 625,682
1 Bonuses unpaid as at 31 December 2018
Supported by KPMG LLP, the Remuneration Committee undertook a review of remuneration packages and
developed a new remuneration policy aimed at rewarding performance, encouraging retention of key staff and
aligning their interests with those of shareholders. A new longterm incentive plan (“LTIP”) LTIP intended to
support this policy was implemented in March 2019 and is designed to incentivise the Company’s Executive
Management Team. The 2018 Plan and all awards under it were terminated with no rewards granted.
The LTIP has been established to encourage longterm value creation for Savannah’s shareholders and to align
the interests of the participants with shareholders. Awards under the LTIP take the form of options over the
Company’s ordinary shares of 1 pence each, (the “Options”) which are only exercisable from the third
anniversary of the date of grant (subject to several market standard specific exceptions), at an exercise price
determined by the Remuneration Committee. Once exercised, these shares cannot be sold until five years from
the date of grant of the Option, except to the extent necessary to meet the costs of exercise, or where the
Remuneration Committee agrees to any reasonable request from an Option holder to make an earlier disposal.
The Board believes that the implementation of the LTIP will incentivise the participants and will also help
Savannah to attract and retain talented individuals in the future as the Company expedites the development
of its mining projects. The LTIP allows for up to 7.5% of the Company’s issued share capital to be allocated to
employees. The Remuneration Committee has adopted a policy whereby up to 5% of the Company’s issued
share capital should be made available via the LTIP to the Executive Management Team only, with the balance
being available to other employees. These percentages will be reviewed annually by the Company’s
Remuneration Committee. The LTIP also includes malus and clawback clauses.
The LTIP is a share option scheme of the kind commonly adopted by listed companies and 8,950,000 Options
with an exercise price of 10p were issued in March 2019 (Note 23). The exercise price of 10p represented an
87% premium to the closing share price on the preceding business day.
At the recommendation of the Remuneration Committee, KPMG was appointed to undertake a benchmarking
exercise on senior roles within the organisation. As a result of this exercise, which involved benchmarking to both
sector peer groups and listed companies by market capitalisation, it was recommended that the CEO’s (David
Archer’s) salary should be increased to £310,000. This was based upon the upper quartile range of benchmarked
groups and reflected the excellent way in which Mr Archer has led the Company, in particular with reference to the
significant milestones achieved at the Mina do Barroso lithium project in 2018. The previous time a benchmarking
exercise was undertaken was in 2016, and in respect of this salary increase in 2019 the Company consulted with
institutional investors once it had received and reviewed the benchmarking information provided by KPMG.
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4. LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging:
Depreciation and amortisation
Auditors’ remuneration:
– Statutory audit of the Group Financial Statements
– Nonaudit services
Fees payable to associated firms of the auditor for audit of subsidiaries
Fees payable to associated firms of the auditor for nonaudit services
Professional fees
Foreign exchange loss/(gain)
Operating lease payments (Note 21)
Share based payments
2019
£
2018
£
40,872
31,194
43,500
33,960
25,305
8,068
1,076,638
196,229
196,387
33,170
46,700
21,358
25,415
9,527
747,459
(54,076)
94,920
38,580
5.
INCOME TAX
Analysis of the Tax Charge
No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2019 nor for the
year ended 31 December 2018.
Factors Affecting the Tax Charge
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation
tax in the United Kingdom applied to the result for the year are as follows:
2019
£
2018
£
Loss on ordinary activities before tax
(3,801,926)
(3,381,161)
Loss on ordinary activities multiplied by the standard rate
of corporation tax in the UK of 19% (2018 – 19%)
Effects of:
Expenses not deductible for tax purposes
Different tax rates applied in overseas jurisdictions
Tax losses carried forward
Total income tax
(722,366)
(642,421)
50,059
87,926
584,381
–
116,593
31,777
494,051
–
Deferred Tax
The Group has carried forward losses amounting to £10,282,984 as at 31 December 2019 (2018: £8,732,530).
As the timing and extent of taxable profits are uncertain, the deferred tax asset arising on these losses has not
been recognised in the Financial Statements. Tax losses related to the subsidiaries in Mozambique and Portugal
can be carried forward for a 5 years and 12 years period respectively.
6. LOSS OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is
not presented as part of these Financial Statements. The parent company’s Total Comprehensive Loss for the
financial year was £4,598,068 (2018: £2,523,008).
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7. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the
conversion of all dilutive potential ordinary shares.
In accordance with IAS 33 as the Group is reporting a loss for both this and the preceding year the Share Options
and Investor Warrant are not considered dilutive because the exercise of these would have the effect of reducing
the loss per share.
Reconciliations are set out below.
Basic Loss Per Share
Losses attributable to ordinary shareholders:
Total loss for the year
Weighted average number of shares
Loss per share – total loss for the year from continuing operations
8.
INTANGIBLE ASSETS
Cost
At 1 January 2018
Additions
Transfer from Assets classified as held for sale
Foreign exchange movements
At 31 December 2018
Additions
Transfer from Other Intangible Assets
Foreign exchange movements
At 31 December 2019
Amortisation and impairment
At 1 January 2018
Impairment charged in the year
At 31 December 2018
Impairment charged in the year
At 31 December 2019
Net Book Value
At 1 January 2018
At 31 December 2018
At 31 December 2019
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2019
£
2018
£
(3,801,926)
1,042,871,447
0.0036
(3,381,161)
766,442,525
0.0044
Exploration and
Evaluation
£
9,809,994
7,248,950
137,128
357,120
17,553,192
3,894,826
333,353
(572,971)
21,208,400
–
140,024
140,024
–
140,024
9,809,994
17,413,168
21,068,376
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
INTANGIBLE ASSETS continued
In June 2019 the Group acquired the remaining 25% of Savannah Lithium Lda (“SL”) (Note 11), with
consideration satisfied by the issue of 163,000,000 ordinary shares in the Company (~GBP £8,313,000) (Note
16), and therefore this is a share based payment transaction. In 2019 the Exploration and Evaluation Asset has
been increased by £294,000, being the fair value of the NonControlling Interest (“NCI”) at the date of initial
acquisition. No NCI amounts have been recognised in equity as they are not considered material and they do
not continue after the acquisition of the remaining 25% in SL. The acquisition of the NCI is a transaction within
equity and the remaining value (GBP £8,019,000) has been recorded in the Group’s Retained Earnings.
The exploration and evaluation assets referred to in the table above comprise expenditure in relation to
exploration licences in Oman, Mozambique and Portugal. The Directors consider that for the purposes of
assessing impairment, the above exploration and evaluation expenditure is allocated to the following licence
areas, representing the Group’s Cash Generating Units (“CGUs”).
Mozambique Minerals Sands
Oman Copper
Portugal Lithium
2019
£
2018
£
3,874,935
5,258,775
11,934,666
3,645,207
4,868,220
8,899,741
21,068,376
17,413,168
The Directors have reviewed the carrying value of the CGUs and have not identified any indicators of
impairment, except the impairment of the assets in Finland in 2018. Therefore, there is no impairment charge
in 2019 or 2018 for Oman, Mozambique and Portugal. There were no disposals in 2019 or 2018.
The Block 4 exploration licence renewal has been pending for around 18 months due to a party claiming to
have rights to certain areas within Block 4 which resulted in those areas, which require further exploration,
being excluded from the ongoing renewal process. According to our legal advisers in Oman, the Group has the
right to renew the Block 4 exploration licence area in full, without any exclusions. This opinion is further
supported by previous correspondence from the competent authority in relation to this matter, and by the
series of renewals of the Block 4 exploration licence which contained no exclusions. At the reporting date, the
value of the Block 4 intangible exploration asset is £2.2m (2018: £2.1m). The Company is engaged with the
Public Authority of Mining and the government in respect of resolving this matter and the Board expects this
to be resolved with the Block 4 licence renewed with no exclusions in due course.
During the first quarter of 2019, the Group received all required ‘no objection’ or approvals letters for the
issuance of the mining licences on Mahab 4 and Maqail South mining areas in Block 5. In mid 2019, Savannah
received a notice from PAM indicating its intention to grant mining licences over the Mahab 4 and Maqail South
high grade copper deposits. Accordingly, mining licenses are expected to be granted once new licensing fees
have been set under the new Mining Law. The Directors expect the mining licences to be granted in the coming
months.
Block 5 exploration licence renewal was submitted in 2019. During the third quarter of 2019, Public Authority
for Mining has initiated the official procedures to renew the exploration license on Block 5 which haven’t been
completed yet. The Directors are confident that the renewal will be received relatively soon.
SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
INTANGIBLE ASSETS continued
In December 2019 Matilda Minerals Lda was granted with a Mining Concession for the Jangamo deposit – 9735C
for a period of 25 years. In December 2019 and January 2020 respectively Rio Tinto through its subsidiary
Mutamba Mineral Sands, S.A was granted with Mining Concessions for the Dongane/Ravene deposit – 9229C
for a period of 25 years and with a Mining Concession for the Jangamo deposit – 9229C for a period of 25 years.
The only outstanding mining concession application is the one related to Chilubane. The application was
submitted at the same time as the other applications and feedback received from the Ministry indicates that
no objections exists to the application. Some administrative matters need to be attended to in advance of the
award but there is no reason for the management to believe that these will be in any way insurmountable.
9. OTHER INTANGIBLE ASSETS
Group:
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
Foreign exchange movements
Transfers to Exploration and Evaluation Assets
At 31 December 2019
Amortisation
At 1 January 2018
Amortisation charged in the year
At 31 December 2018
Amortisation charged in the year
At 31 December 2019
Net Book Value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Other Intangible
Assets
£
–
346,349
346,349
5,948
(510)
(333,353)
18,434
–
3,468
3,468
4,162
7,630
–
342,881
10,804
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. OTHER INTANGIBLE ASSETS continued
Company:
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
Transfers to Investments in Subsidiaries
At 31 December 2019
Net Book Value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Other Intangible
Assets
£
–
333,353
333,353
5,948
(333,353)
5,948
–
333,353
5,948
In July 2018 the Company entered into an exclusive due diligence and option agreement for the potential
acquisition of a three block Mining Lease for lithium, feldspar and quartz (the “Proposed Licence Area”) (once
granted) totalling 2.94 km². Following the completion of the due diligence procedures with satisfactory results,
in September 2018 the Company elected to enter into an option to acquire the Proposed Licence Area which
is governed by a certain Pledge and Purchase Agreement following the grant of a mining lease from relevant
government/competent authorities (the “Aldeia Option”). In June 2019 the Aldeia Option was exercised and
the Company is required to commit to the purchase of the Proposed Licence Area once granted by the relevant
Portuguese government bodies (Note 19). The total consideration of the exclusive due diligence and the Aldeia
Option was Eur 373,000 (GBP £333,353), and after exercise of the Aldeia Option this has been transferred to
Evaluation and Exploration Assets in the Group accounts and to Investments in Subsidiaries in the Company
accounts.
SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. PROPERTY, PLANT AND EQUIPMENT
Motor
Vehicles
£
Cost
At 1 January 2018 75,363
Additions 72,419
Foreign exchange movements 3,631
At 31 December 2018 151,413
Reclassification due to
adoption of IFRS 16 (note 24) (56,096)
At 1 January 2019 95,317
Additions –
Foreign exchange movements (7,415)
At 31 December 2019 87,902
Depreciation
At 1 January 2018 31,644
Charge for year 21,352
Foreign exchange movements 2,219
At 31 December 2018 55,215
Reclassification due to
adoption of IFRS 16 (note 24) (11,778)
At 1 January 2019 43,437
Charge for year 14,224
Foreign exchange movements (3,113)
At 31 December 2019 54,548
Net Book Value
At 1 January 2018 43,719
At 31 December 2018 96,198
At 1 January 2019 51,880
At 31 December 2019 33,354
Office
Equipment
£
Plant and
Machinery
£
1,094,465
164,179
18,870
1,277,514
–
1,277,514
7,883
(43,641)
1,241,756
–
–
–
–
–
–
–
–
–
23,912
5,176
2,110
31,198
–
31,198
13,413
(1,585)
43,026
12,287
9,842
2,058
24,187
–
24,187
11,286
(1,234)
34,239
11,625
7,011
7,011
8,787
Land
£
46,275
9,361
709
56,345
–
56,345
–
(3,013)
53,332
–
–
–
–
–
–
–
–
–
Total
£
1,240,015
251,135
25,320
1,516,470
(56,096)
1,460,374
21,296
(55,654)
1,426,016
43,931
31,194
4,277
79,402
(11,778)
67,624
25,510
(4,347)
88,787
1,094,465
1,277,514
1,277,514
1,241,756
46,275
56,345
56,345
53,332
1,196,084
1,437,068
1,392,750
1,337,229
The pilot plant located in Mozambique has not been depreciated during the year because it is not fully
commissioned.
The above property, plant and equipment is allocated to the following licence areas, representing the Group’s
Cash Generating Units (“CGUs”):
Mozambique Minerals Sands
Oman Copper
Portugal Lithium
2019
£
2018
£
1,246,659
–
90,570
1,337,229
1,282,458
–
154,610
1,437,068
Management has evaluated the existence of impairment indicators of the Property, Plant and Equipment allocated
to the licence areas together with the impairment review performed for the Exploration and Evaluation Assets,
and it has concluded that there are no indicators of impairment. The carrying value of the Property, Plant and
Equipment Assets is not impaired and therefore an impairment charge has not been included in 2019 or 2018.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. INVESTMENTS
Group
At 1 January 2018
Additions at cost
Disposals
Change in market value of investment
Impairment
At 31 December 2018
Additions at cost
Disposals
Change in market value of investment
At 31 December 2019
Shares in
Investments at
FVTOCI
£
170,203
25,610
(104,461)
(71,910)
(1,435)
18,007
28,371
(12,112)
2,496
36,762
Equity investments are designated as Fair value through other comprehensive income (FVTOCI).
In 2019 the Company acquired 25 million shares in a listed company. The fair value of these shares is the quoted
value at the reporting date, being the fair value hierarchy level 1.
In January 2018 as part of the agreement with its partners in Al Fairuz Mining Company LLC (note 11) the
Company issued 1,000,000 ordinary shares in the Company and received 312,500 shares in a listed company
(Note 16). In 2019 the Company disposed these 312,500 shares in the listed company, with a loss on disposal
of £11,516. At 31 December 2019 the Company does not hold any other shares in this company.
In 2018 the Company disposed of 6.9 million shares in a listed company. At 31 December 2018 and 2019 the
Company does not hold any other shares in this company.
The fair value of the rest of shares held by the Company is the quoted value at the reporting date. The fair value
hierarchy in 2019 and 2018 for these shares is level 1 as the valuation is based wholly on quoted prices.
Company
NonCurrent
At 1 January 2018
Additions
At 31 December 2018
Additions
Transfer from Other Intangible Assets
At 31 December 2019
Shares in
Subsidiaries
£
342,883
115,784
458,667
102,973
333,353
894,993
SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. INVESTMENTS continued
Company
Current
At 1 January 2018
Additions at cost
Disposals
Change in market value of investment
Impairment
At 31 December 2018
Additions at cost
Disposals
Change in market value of investment
At 31 December 2019
Shares in
Investments at
FVTOCI
£
170,116
24,915
(104,461)
(71,910)
(1,435)
17,225
26,326
(12,112)
2,496
33,935
In June 2019 the Group acquired the 25% minority interest of Savannah Lithium Lda (“SL”) (formerly Slipstream
Resources Portugal Lda), increasing its interest in the entity to 100%. The Group issued 163,000,000 ordinary
shares in the Company (~GBP £8,313,000) as consideration for the additional 25% in SL. SL is a Portuguese
entity which is the holder of a series of highly prospective lithium projects with nearterm production potential
in the north of Portugal.
In 2018 the milestone payments related to the acquisition of the 75% interest in SL were fully satisfied.
In November 2018 the Group incorporated a new subsidiary Savannah Advisory Services Ltd, to deal with the
Group’s service contracts. The company is a whollyowned subsidiary of Savannah Resources Plc (“SAV”).
In October 2016 SAV, through its subsidiary AME East Africa Limited (“AME”), entered into a Consortium
Agreement (“CA”) with Rio Tinto Mining and Exploration Limited (“Rio Tinto”) whereby both parties would
combine their respective projects in Mozambique to form an unincorporated consortium. On signing of this
CA, AME owned 10% of the combined Mutamba Project and Rio Tinto owned the remaining 90%. After delivery
of Scoping Study in May 2017, AME’s interest in the Mutamba Consortium increased to 20%. AME can earn
into up to 51% in the Project by achieving prescribed milestones. Based on the terms of the CA, both AME and
Rio Tinto have joint control, and therefore this is a joint arrangement under IFRS. Further information about
the CA is included in Note 12.
In 2018 the Group started the process of divesting its investment in Finkallio Oy, and at 31 December 2018 the
Exploration and Evaluation Assets held on the Company were fully impaired. In 2019 the Group started the
process to liquidate Finkallio Oy, which is expected to be completed in 2020.
In June 2019 the Company entered into an agreement with Gentor Resources Inc to settle the deferred
consideration related to the original acquisition of the Block 5 licence in April 2014 as part of the strategic
review of the Oman portfolio. The deferred consideration of UDS $3,000,000 (payable 50% in cash/50% in
shares) relating to the share purchase agreement between the parties was cancelled in full return for the issue
of USD $200,000 (~GBP £155,000) worth of Ordinary Shares in the Company (3,008,025 ordinary shares) (Note
16), which were subject to a six month orderly market agreement; and cash payment totalling USD $100,000
(~GBP £79,000). In accordance with IFRS guidance on the settlement of liabilities by the issue of equity (IFRIC19)
the ordinary shares have been measured at their fair value with the premium recorded in the Share Premium
account. The value of this settlement consideration of USD$300,000 has been capitalised in Exploration and
Evaluation Assets (Note 8).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. INVESTMENTS continued
In November 2014 the Group entered into an earnin agreement (“Earnin”) to acquire up to a 65% interest in
Al Thuraya LLC (“Al Thuraya”) which wholly owns the highly prospective Block 4 Copper Project in Oman. In
September 2016 the Group earned the 51% interest in Al Thuraya after achieving the capital contribution of
USD $2,000,000 as per the Earnin. A further USD $2,600,000 (~GBP £1,972,000) cash investment within four
years (subsequently extended by eighteen months) is required to receive a further 14% shareholding in Al
Thuraya. These funds will be used for geological development activities. During the 2019 financial year the
Group made capital contributions of USD $237,046 (GBP £180,000) (2018: USD $441,769), being the total
contribution, as at 31 December 2019, of USD $3,749,295 (GBP £2,840,000) (2018: USD $3,512,249).
The Company had the following subsidiary undertakings, either directly or indirectly, at 31 December 2019,
which have been included in the Consolidated Financial Statements.
Subsidiary Registered office Nature of business Class of % Holding
share
Savannah Advisory Services
Limited2 United Kingdom7 Holding Company Ordinary 100%
AME East Africa Limited2 United Kingdom7 Holding Company Ordinary 100%
Matilda Minerals Limitada5 Mozambique8 Mining & exploration Ordinary 100%
Panda Recursos Limitada3 Mozambique9 Mining & exploration Ordinary 99.99%
Savannah Resources B.V.2 The Netherlands10 Holding Company Ordinary 100%
Gentor Resources Limited3 British Virgin Is.11 Holding Company Ordinary 100%
Sohar Mining L.L.C3,17 Oman12 Dormant Ordinary 70%1
Finkallio Oy3,18 Finland14 Mining & exploration18 Ordinary 100%
African Mining & Exploration
Limited2 United Kingdom7 Dormant Ordinary 100%
Savannah Resources Portugal B.V2 Netherlands10 Holding Company Ordinary 100%
AME Portugal Pty Ltd3 Australia15 Holding Company Ordinary 100%
Slipstream PORT Pty Ltd3 Australia15 Holding Company Ordinary 100%
Savannah Lithium Limitada3,6 Portugal16 Mining & exploration Ordinary 100%
Savannah Resources Lithium B.V2 Netherlands10 Holding Company Ordinary 100%
Joint Operations
Al Fairuz Mining L.L.C.3 Oman12 Mining & exploration Ordinary 65%4
Al Thuraya Mining L.L.C.3 Oman13 Mining & exploration Ordinary 51%4
1 This entity has been consolidated 100% despite the Group owning less than 100% of the voting rights. This is due to the Company having earn
in contracts whereby the Company is the only contributing party and has the ability to control the operation.
2 Directly held by Savannah Resources Plc
3 Indirectly held by Savannah Resources Plc
4 See details of joint operations in Note 12
5 99.99% Indirectly held by AME East Africa Limited and 0.01% Directly held by Savannah Resources Plc.
6 Formerly Slipstream Resources Portugal Limitada
7 Salisbury House, London Wall, London, EC2M 5PS, United Kingdom
8 Damiao de Gois, no 438, Sommerschield, Maputo, Mozambique
9 Rua 1301, Num 97, Sommerschield, Maputo, Mozambique
10 Strawinskylaan 3127, 8e verdieping, 1077ZX Amsterdam, The Netherlands
11 Trident Chambers, P.O. Box 146, Road Town, Tortola, VG1110, Virgin Islands, British
12 P.O.Box 1053, P.C.130, Azaiba, Muscat, Sultanate of Oman
13 P.O.Box 54, P.C.100, Muscat, Sultanate of Oman
14 c/o Bokf.byrå Mattans Ab, Storalånggatan 57 A 1, 65100 VASA, Finland
15 Level 20, 16 Carrington Street, Sydney, NSW 2000, Australia
16 Rua Jose Eigenmann, No 90, parish of Nogueira, municipality of Braga, Portugal, 4715199
17 Formerly Gentor Resources L.L.C
18 Under liquidation (expected to be concluded during H1 2020)
SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. JOINT ARRANGEMENTS
Unincorporated consortium Mutamba Project
In October 2016 Savannah Resources Plc, through its subsidiary AME East Africa Limited (AME), entered into a
consortium agreement (“Consortium Agreement”) with Rio Tinto Mining and Exploration Limited (Rio Tinto)
whereby both parties would combine their respective projects in Mozambique to form an unincorporated
consortium. On signing of this Consortium Agreement AME own 10% of the combined Mutamba Project and
Rio Tinto own the remaining 90%. AME can earn into up to 51% in the Project by achieving the following
milestones:
(a) Upon the Group completing the Phase 1 work programme (Scoping Study) it will have a 20% participating
interest in the Project;
(b) Upon the Group completing Phase 2 of the work programme (PreFeasibility study) it will have a 35%
participating interest in the Project;
(c) Upon the Group completing Phase 3 of the work programme (Feasibility study) it will have a 51%
participating interest in the Project.
In May 2017 the Group completed the Phase 1 milestone with the delivery of the Scoping Study, increasing its
interest in the combined Mutamba Project to 20%.
The Consortium is managed by a Consortium committee with two representatives from each party, and chaired
by an AME representative. AME is the operator of the Project, and it is responsible for preparing and
implementing the work programme and budget approved by the Consortium committee. Based on the terms
of the agreement both AME and Rio Tinto have joint control, and therefore this is a joint arrangement under
IFRS 11 Joint Arrangements.
The Consortium is currently unincorporated, and each party have rights to the assets, and obligations to the
liabilities, relating to the arrangement, therefore it is considered a Joint Operation. AME is responsible for all
funding related to the combined Project up until the delivery of a Feasibility Study. Since the execution of the
Consortium Agreement in 2016 the Group has capitalised £2,658,984 (2018: £2,366,186) in Exploration and
Evaluation Assets and £1,133,567 (2018: £1,122,092) in Property, Plant and Equipment, relating to the combined
project.
Shareholders’ agreement for Al Fairuz Mining L.L.C.
In 2014 Savannah Resources Plc, through the acquisition of its subsidiary Gentor Resources Limited, became
party to a shareholders’ agreement for Al Fairuz with the Al Fairuz Brothers.
Al Fairuz is managed by a Management Committee which, up until completion of a feasibility study, consist of
four members, two representatives from each party, and is chaired by a Savannah member. After completion
of the feasibility study Savannah is entitled to appoint a fifth member.
Savannah is the operator of the Project, and it is responsible for preparing and implementing the work
programme and budget approved by the Management Committee. Based on the terms of the agreement both
Savannah and the Al Fairuz Brothers have joint control, and therefore this is a joint arrangement under IFRS.
Each party has rights to the assets, and obligations to the liabilities, relating to the arrangement, therefore it is
considered a Joint Operation. Savannah is responsible for all of the funding of the projects. This funding will be
in the form of loans which would be reimbursed prior to any dividend distribution to shareholders. Since the
acquisition of Al Fairuz the Group has capitalised £2,896,545 (2018: £2,718,627).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. JOINT ARRANGEMENTS continued
Earnin agreement for Al Thuraya Mining L.L.C.
In 2014 Savannah Resources Plc entered into an earnin agreement in Al Thuraya Mining LLC.
Savannah Resources plc is the operator of the Project and has appointed two of the four members in the Board
or Al Thuraya. According with the Earnin agreement there are certain activities that shall only be undertaken
by the Company if all shareholders have given their prior consent. Based on the terms of the agreement both
Savannah and the other shareholders have joint control, and therefore this is a joint arrangement under IFRS 11
Joint Arrangements.
Each party has rights to the assets, and obligations to the liabilities, relating to the arrangement, therefore it is
considered a Joint Operation. Savannah is responsible for all of the funding of the project. This funding will be
in the form of capital contributions. Since the acquisition of Al Thuraya the Group has capitalised £2,215,146
(2018: £2,149,594).
13. TRADE AND OTHER RECEIVABLES
NonCurrent:
Amounts due from Subsidiaries
Total NonCurrent Trade and Other Receivables
Current:
VAT Recoverable
Other Receivables
Total Current Trade and Other Receivables
Group
Company
2018
£
2019
£
2018
£
–
–
33,265,297
20,844,330
33,265,297
20,844,330
2019
£
–
–
165,120
120,579
285,699
133,728
197,046
330,774
–
70,338
70,338
–
130,438
130,438
The carrying value of trade and other receivables classified at amortised cost approximates fair value.
The Amounts due from Subsidiaries include noncash transactions amounting to £6,943,971. This includes
£8,313,000 receivable from Savannah Resources Portugal BV related to the acquisition of the 25% of Savannah
Lithium Lda with consideration paid in new ordinary shares in the Company, £154,913 receivable from Savannah
Resources BV related to the cancelation of the deferred consideration commitment with Gentor Resources Inc
with consideration paid in new ordinary shares in the Company, and a decrease in the value of the Amounts
due from subsidiaries of £1,523,942 due to revaluation of loans in foreign currencies.
The Company applies the expected credit loss model to measure expected credit losses for amounts due from
subsidiaries. The company considered the probability of a default. The loans to subsidiaries are interest free
and are repayable on demand.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. TRADE AND OTHER RECEIVABLES continued
The Company expects that the carrying value of the intercompany loan receivable may not be fully recoverable
as the subsidiaries may not generate sufficient future profits to settle the amounts owing and accordingly, these
amounts have been partially impaired. Repayment of the loans is subject to the Directors’ assessment of the
Group’s requirements and availability of appropriate liquid resources. Among other things, the Company’s
expected credit loss model includes consideration of various risks affecting the success of underlying projects
of its subsidiaries. When determining the expected credit losses Management has taken into account that the
intercompany loans are related to projects that are in the exploration stage. Management has concluded that
the success of the project is the most important factor that will drive credit losses. This will be affected by the
results in mineral resources, the commodity prices, the capability of the Parent Company to obtain funds to
develop the projects and the success in obtaining or renewing exploration and mining licences. Several scenarios
and their likelihood have been considered to calculate the expected cash flows for the loans associated to each
project and the expected credit losses as at the reporting date. In the current period the Company estimates
that an expected credit loss calculated of £1m (2018: £1.3m) arises on the receivables from the subsidiaries,
and £1.9m relating to prior periods.
Movements in the impairment allowance for amounts due from subsidiaries for the year ended 31 December
2019 is as follows:
Company
At 1 January 2018
Charged during the year
At 1 January 2019
Charged during the year
At 31 December 2019
Impairment
from Subsidiaries
£
556,454
1,325,790
1,882,244
1,035,627
2,917,871
The breakdown of the Amounts due from Subsidiaries as at 31 December is as follows:
Company
Amounts due from Subsidiaries:
Outstanding amount
Impairment
14. CASH AND CASH EQUIVALENTS
2019
£
2018
£
36,183,168
(2,917,871)
22,726,574
(1,882,244)
33,265,297
20,844,330
Group
2019
£
2018
£
Company
2019
£
2018
£
Cash at Bank and in Hand
3,484,781
7,715,435
3,277,943
7,368,469
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15. OTHER CURRENT AND NONCURRENT ASSETS
NonCurrent:
Guarantees
Cash Deposits
Other
Total Other NonCurrent Assets
Current:
Guarantees
Other
Total Other Current Assets
Group
Company
2019
£
205,052
742,363
43,223
990,638
–
19,171
19,171
2018
£
213,645
–
39,543
253,188
202,180
21,553
223,733
2019
£
–
–
41,068
41,068
20187
£
–
–
36,800
36,800
–
–
–
202,180
–
202,180
The NonCurrent Assets – Guarantees are deposits required by the local mining/environmental authorities in
relation to exploration/mining licences and applications thereof.
NonCurrent Assets – Cash Deposits for £742,363 is a bank deposit with maturity lower than 3 months as of
the signing date but with the obligation to be renewed on the termination date and therefore has been classified
as NonCurrent Assets. This cash is associated to the bank guarantee necessary for the grant of mining licences
in Mozambique and is restricted cash until the end of the bank guarantee in 2023 (Note 22).
The Current Assets – Guarantees were guarantees required as part of the Aldeia Option (Note 9) executed as
part of the Portuguese project during September 2018. The remaining payments related to the options were
executed during 2019 and the guarantee was terminated.
16. SHARE CAPITAL
Allotted, issued and fully paid
At beginning of year
Issued during year:
Share placements
Exercise of share options
Exercise of warrants
In lieu of cash for acquisition of assets
Issued as condition of Joint arrangement
In lieu of cash for acquisition of
minority interest
Settlement of deferred consideration Oman
2019
2018
£0.01
ordinary
shares
number
£0.01
ordinary
shares
number
£
£
881,451,795
8,814,518
635,850,386
6,358,504
250,000,0001
–
–
–
–
2,500,000
–
–
–
–
177,640,185
12,980,112
13,981,112
40,000,000
1,000,000
1,776,402
129,801
139,811
400,000
10,000
163,000,0002
3,008,0253
1,630,000
30,080
–
–
–
–
At end of year
1,297,459,820
12,974,598
881,451,795
8,814,518
1 In respect of the Share placements in 2019 the net proceeds were £4,826,400 (2018: £14,010,819) of which £2,326,400 (2018: £12,234,417)
has been recorded in Share Premium. The gross proceeds were £5,000,000 (2018: £14,651,253).
2 Refer to Note 8 and Note 11 for details of shares issued in lieu of cash for the acquisition of a minority interest. £6,683,000 has been recorded
in Merger Reserve.
3 Refer to Note 11 for details of shares issued in relation to the settlement of deferred consideration. £124,833 has been recorded in Share Premium.
The par value of the Company’s shares is £0.01.
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17. TRADE AND OTHER PAYABLES
Current:
Trade Payables
Other Payables
Accruals
Amounts owing to Subsidiaries
Total Current Trade and Other Payables
Group
Company
2019
£
436,459
96,493
389,465
–
922,417
2018
£
1,027,100
82,571
1,163,768
–
2,273,439
2019
£
199,815
60,205
124,690
34,300
419,010
2018
£
183,914
69,711
692,380
4,360
950,365
In 2019 accruals represent mainly professional fees in the Group for which invoices have not been received at
the reporting date. In 2018 accruals included mainly work done in 2018 in the projects in Portugal (feasibility
study and drilling programme), professional fees in the Group for which invoices had not been received at the
reporting date, bonuses payable to employees and the payment to be made during 2019 in relation to the
Aldeia Option executed as part of the Portuguese project during September 2018.
Trade and other payables amounts relate mainly to work performed in the projects which balances are
capitalised and therefore these are included in Investing not operating cash flows.
18. FINANCIAL INSTRUMENTS
Financial Instruments – Risk Management
In common with all other businesses, the Group is exposed to risks that arise from its use of financial
instruments. This note describes the Group’s objectives, policies and processes for managing those risks and
the methods used to measure them. Further quantitative information in respect of these risks is presented
throughout these Financial Statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives,
policies and processes for managing those risks or the methods used to measure them from previous periods
unless otherwise stated in this note.
Principal Financial Instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
•
•
•
•
•
•
•
Intercompany Loan Receivables
Trade and Other Receivables
Cash and Cash Equivalents
Trade and Other Payables
Loans and Borrowings
Leases Liabilities
Investments
• Other NonCurrent Assets – Guarantees
Trade and other payables fall due for payment within 3 months from the reporting date.
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18. FINANCIAL INSTRUMENTS continued
Liquidity Risk
At the reporting date the Group’s cash balance was £3.5m (2018: £7.7m). This, in conjunction with the raising
of future cash through different options, which the Directors believe can be secured, will allow the Group to
continue working on its development/exploration activities and to meet its financial commitments for at least
12 months. In common with many nonrevenue generating companies, the Company routinely raises funds for
its development activities. The Group’s policy continues to be to ensure that it has adequate liquidity by careful
management of its working capital.
Foreign Exchange Risk
The Group is exposed through its operations to foreign exchange risk which arises because the Group has
overseas operations located in Mozambique whose functional currency is MZN, in Oman whose functional
currency is OMR which is pegged to the USD at a rate of 1 OMR to 2.6 USD and in Portugal whose functional
currency is Euro.
Foreign exchange risk also arises when individual group entities enter into transactions denominated in a
currency other than their functional currency. The Group’s policy is, where possible, to allow group entities to
settle liabilities denominated in their functional currency (Euro, OMR, MZN or Pound Sterling) with the cash
remitted to their own operations in that currency where practical. Where group entities have liabilities
denominated in a currency other than their functional currency (and have insufficient reserves of that currency
to settle them) cash already denominated in that currency will, where possible, be transferred from elsewhere
within the Group.
Market Risk
The Group holds equity investments in companies traded on active markets (see Note 11). The Directors believe
that the exposure to market price risk from this activity is acceptable in the Group’s circumstances.
The effect of a 10% increase in the value of the equity investments held at the reporting date would, all other
variables held constant, have resulted in an increase in other comprehensive income and net assets of £3,393
(2018: increase in other comprehensive income and net assets of £1,723). A 10% decrease in their value would,
on the same basis, have decreased other comprehensive income and net assets by the same amount.
Credit Risk
The Company is exposed to credit risk on its receivables from its subsidiaries. The subsidiaries are exploration
and development companies with no current revenue and therefore, whilst the receivables are due on demand,
they are not expected to be paid until there is a successful outcome on a development project resulting in
revenue being generated by a subsidiary. The Company has calculated the expected credit loss from these
receivables (Note 13).
The Group is exposed to credit risk in cash and cash equivalents and deposits with banks and financial
institutions. Only reputable banks and financial institutions which are rated by recognised rating agencies are
accepted by the Company in the UK. The Group policy is to maintain the majority cash and cash equivalents
within the Company in the UK and funds are remitted to other Group entities on a monthly basis to settle
liabilities as they fall due, to avoid credit risk associated to foreign jurisdictions banks. The Group policy is also
to operate at least with two banks in each country when possible.
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18. FINANCIAL INSTRUMENTS continued
Financial instruments by category (Group)
Financial Assets
Fair Value
Through Other
Amortised Comprehensive
Cost Income Total
£ £ £
As at 31 December 2019
Investments – 36,762 36,762
Other NonCurrent Assets 248,275 – 248,275
Cash Deposits 742,363 – 742,363
Other Current Assets 19,171 – 19,171
Cash and Cash Equivalents 3,484,781 – 3,484,781
Total Financial Assets 4,494,590 36,762 4,531,352
As at 31 December 2018
Investments – 18,007 18,007
Other NonCurrent Assets 253,188 – 253,188
Other Current Assets 223,733 – 223,733
Cash and Cash Equivalents 7,715,435 – 7,715,435
Total Financial Assets 8,192,356 18,007 8,210,363
See review of the fair value hierarchy of fair value through other comprehensive income assets in Note 11.
Financial Liabilities
Financial
Liabilities at
Amortised Cost Total
£ £
As at 31 December 2019
Trade and Other Payables 922,417 922,417
Lease Liabilities 31,049 31,049
Total Financial Liabilities 953,466 953,466
At 31 December 2018
Trade and Other Payables 2,273,439 2,273,439
Loans and Borrowings 42,708 42,708
Total Financial Liabilities 2,316,147 2,316,147
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18. FINANCIAL INSTRUMENTS continued
The Group’s net exposure to foreign exchange risk at the reporting date was as follows:
Functional Currency of Entity
GBP MZN EUR Total GBP MZN EUR Total
2019 2019 2019 2019 2018 2018 2018 2018
£ £ £ £ £ £ £ £
Foreign currency
financial assets
USD 481,830 31,466 14,440 527,736 2,468,014 76,259 56,688 2,600,961
EUR 1,702,214 – – 1,702,214 2,381,502 – – 2,381,502
AUD 585,224 – 5,202 590,426 797,215 – 5,419 802,634
GBP – – 668 668 – – – –
Total 2,769,268 31,466 20,310 2,821,044 5,646,731 76,259 62,107 5,785,097
Functional Currency of Entity
GBP Total GBP MZN OMR EUR Total
2019 2019 2018 2018 2018 2018 2018
£ £ £ £ £ £ £
Foreign currency
financial liabilities
USD 58,144 58,144 47,525 9,366 5,595 – 62,486
AUD 114,124 114,124 407,826 – – – 407,826
EUR 34,118 34,118 224,050 – – – 224,050
OMR 10,270 10,270 9,249 – – – 9,249
GBP – – – – 3,430 3,430
Total 216,656 216,656 688,650 9,366 5,595 3,430 707,041
The effect of a 10% strengthening of the USD against GBP at the reporting date on the USD denominated Cash
and Cash Equivalents carried at that date would, all other variables held constant, have resulted in a decrease
in pretax loss for the year and increase of net assets of GBP £58,637 (2018: £236,689). A 10% weakening in
the exchange rate would, on the same basis, have increased pretax loss and decreased net assets by GBP
£47,976 (2018: £288,705).
The effect of a 10% strengthening of the EUR against GBP at the reporting date on the EUR denominated Cash
and Cash Equivalents carried at that date would, all other variables held constant, have resulted in a decrease
in pretax loss for the year and increase of net assets of GBP £189,135 (2018: £216,917). A 10% weakening in
the exchange rate would, on the same basis, have increased pretax loss and decreased net assets by GBP
£154,747 (2018: £264,102).
The effect of a 10% strengthening of the AUD against GBP at the reporting date on the AUD denominated Cash
and Cash Equivalents carried at that date would, all other variables held constant, have resulted in a decrease
in pretax loss for the year and increase of net assets of GBP £65,603 (2018: £73,178). A 10% weakening in the
exchange rate would, on the same basis, have increased pretax loss and decreased net assets by GBP £53,675
(2018: £88,924).
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18. FINANCIAL INSTRUMENTS continued
Financial instruments by category (Company)
Financial Assets
Fair Value
Through Other
Amortised Comprehensive
Cost Income Total
£ £ £
As at 31 December 2019
Other Receivables 33,265,297 – 33,265,297
Other NonCurrent Assets 41,068 – 41,068
Investments – 33,935 33,935
Trade and Other Receivables 70,338 – 70,338
Cash and Cash Equivalents 3,277,943 – 3,277,943
Total Financial Assets 36,654,646 33,935 36,688,581
As at 31 December 2018
Other Receivables 20,844,330 – 20,844,330
Other NonCurrent Assets 36,800 – 36,800
Investments – 17,225 17,225
Trade and Other Receivables 130,438 – 130,438
Other Current Assets 202,180 – 202,180
Cash and Cash Equivalents 7,368,469 – 7,368,469
Total Financial Assets 28,582,217 17,225 28,599,442
See review of the fair value hierarchy of fair value through other comprehensive income assets in Note 11.
Financial liabilities
Financial
Liabilities at
Amortised Cost Total
£ £
As at 31 December 2019
Trade and Other Payables 419,010 419,010
Total Financial Liabilities 419,010 419,010
At 31 December 2018
Trade and Other Payables 950,365 950,365
Total Financial Liabilities 950,365 950,365
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18. FINANCIAL INSTRUMENTS continued
The Company’s net exposure to foreign exchange risk at the reporting date was as follows:
Functional Currency of Entity
GBP Total
2019 2019
£ £
Foreign currency financial liabilities
USD 39,432 39,432
AUD 18,061 18,061
EUR 30,516 30,516
OMR 10,270 10,270
Total 98,279 98,279
Functional Currency of Entity
GBP Total
2019 2019
£ £
Foreign currency financial assets
USD 6,732,424 6,732,424
EUR 22,432,437 22,432,437
AUD 585,224 585,224
OMR 16,738 16,738
Total 29,766,823 29,766,823
Capital Disclosures
The Group’s objectives when maintaining capital are:
•
•
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns
for shareholders and benefits for other stakeholders, and
to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may issue new shares or seek other financial
structures such as debt (project finance), royalties, streaming, mezzanine finance, or combinations thereof.
19. GROUP CONTINGENT LIABILITIES
Details of contingent liabilities where the probability of future payments is not considered remote are set out
below, as well as details of contingent liabilities, which although considered remote, the Directors consider
should be disclosed. The Directors are of the opinion that provisions are not required in respect of these matters,
as at the reporting date have not been triggered, it is not probable that a future sacrifice of economic benefits
will be required or the amount is not capable of reliable measurement.
Consideration payable in relation to the acquisition of the Aldeia Mining Lease Application for lithium,
feldspar and quartz (Portugal lithium project)
In June 2019 the Company exercised its option to acquire a Mining Lease Application for lithium, feldspar and
quartz from private Portuguese company, Aldeia & Irmão, S.A.. The total purchase price for the acquisition is
EUR €3,250,000 (~ GBP £2,778,000), which will only become due once the Mining Lease Application has been
granted and the Mining Rights transferred to an entity within the Group, at which point the agreed payment
schedule will consist of an initial EUR €55,000 (~ GBP £47,000) payment with the balance due in 71 equal
monthly instalments. Upon delivery of the request for transfer of the Mining Rights to an entity within the
Group, the Group shall provide with a bank guarantee of EUR €3,195,000 (~ GBP £2,730,000) that will be
reduced in accordance with the 71 monthly instalments.
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20. RELATED PARTY DISCLOSURES
Details of Directors’ remuneration are disclosed in Note 3. During the year £131,693 (2018: £198,287) was
payable to Blue Bone Consulting Pty Ltd (a company controlled by Dale Ferguson) for consultancy fees of which
£10,727 (2018: £83,193 including bonus) remained unpaid. The amounts payable to Blue Bone Consulting Pty
Ltd have been included in the Directors’ remuneration in Note 3.
Dale Ferguson is also a Director and minority shareholder of Slipstream Resources Investments Pty Ltd (one of
the Vendors of Savannah Lithium Lda). As such, he was excluded from any of the Group’s commercial
negotiations with the Vendors and was precluded from voting on Board matters related to the acquisition of
the 25% in Savannah Lithium Lda. Dale Ferguson indirectly received 33,618,750 ordinary shares in Savannah
Resources plc as consideration for the Transaction.
During the year £1,000 was payable to a related party from Matthew King for marketing services. There is no
unpaid balance relating to this at year end.
21. LEASES
RightofUse Assets
Vehicles
£
Cost
At 1 January 2019 (Note 24) 56,096
Additions 8,829
At 31 December 2019 64,925
Depreciation
At 1 January 2019 (Note 24) 11,778
Charge for year 15,362
At 31 December 2019 27,140
Net Book Value
At 1 January 2019 (Note 24) 44,318
At 31 December 2019 37,785
Lease Liabilities
Vehicles
£
At 1 January 2019 42,708
Additions 8,829
Lease payments (18,204)
Foreign exchange movements (2,284)
At 31 December 2019 31,049
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21. LEASES continued
2019
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years
Total Lease Liabilities
Current Liabilities
NonCurrent Liabilities
Minimum
lease
payments
£
19,643
12,197
–
Interest
£
653
138
–
Present
value
£
18,990
12,059
–
31,049
18,990
12,059
The rightofuse assets and related lease liabilities are for the lease of motor vehicles. Total 2019 cash flow
outflow amount is £19,732.
Other Leases
The Group has registered £192,219 in the Statement of Comprehensive Income related to shortterm leases.
Shortterm leases meet the requirements to not be accounted for by recognising a rightofuse asset and a
lease liability, having a duration of 12 months or less and without reasonable certainty about their renewal.
At 31 December 2019 the Other Lease commitments for the next 12 months is £90,449.
These leases are for business premises in Oman, Mozambique, Portugal and the UK.
22. GROUP COMMITMENTS
In 2014 the Group entered into an agreement to acquire shares in Al Thuraya LLC (“Al Thuraya”), owner of the
highly prospective Block 4 Copper Project. In September 2016 the Group earned a 51% interest in Al Thuraya
after achieving the capital contribution of USD $2,000,000 as per the Earnin agreement. The total contributions
as at 31 December 2019 are USD $3,749,294 (2018: $3,512,249), and therefore a further USD $850,705 (2018:
$1,087,751) cash contribution is required if the Company wishes to guarantee a further 14% shareholding in Al
Thuraya to achieve a 65% interest (Note 11).
In October 2016 Savannah Resources Plc, through its subsidiary AME East Africa Limited (AME), entered into a
consortium agreement (“CA”) with Rio Tinto Mining and Exploration Limited whereby both parties would
combine their respective projects in Mozambique to form an unincorporated consortium. See details of the CA
in Note 12.
As a condition of being granted with mining licence 9735C in Mozambique the Group, through Matilda Minerals
Lda, signed a bank guarantee of MZN 60,143,680 (~GBP £742,363) to be assigned to the Ministério Dos Recursos
Minerais e Energia (Ministry of Natural Resources and Energy). The guarantee is valid until the 28 November
2023 and Matilda Minerals Lda is obligated to maintain funds for the same amount as the guarantee in a bank
account. These funds can be transferred to bank deposits, and currently are held in a 3 months bank deposit
(Note 14).
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23. SHARE OPTIONS AND INVESTOR WARRANTS
Share Options and Investor Warrants to subscribe for Ordinary Shares in the Company are granted to certain
employees, Directors and investors. Some of the options issued vest immediately and others over a vesting
period and may include performance conditions. Options are forfeited if the employee leaves the group before
the options vest.
2019 2018
Weighted Weighted
average Weighted average Weighted
remaining
exercise remaining exercise
Number price life Number price
life
Share Options
Opening Balance 18,800,000 7.2p 1.78 31,923,443 5.7p
Granted 8,950,000 10.0p 4.20 1,000,000 8.0p
Lapsed (3,000,000) 8.8p – (1,143,334) 5.1p
Exercised – – – (12,980,109)1 3.6p
–
3.07
–
–
Closing Balance 24,750,000 8.0p 2.21 18,800,000 7.2p
1.78
Investor Warrants
Opening Balance 50,124,428 6.1p 1.71 66,562,109 5.7p
Granted – – – 343,432 11.3p
Lapsed (1,410,449) 5.0p – (2,800,000) 11.0p
Exercised – – – (13,981,113)2 3.6p
Closing Balance 48,713,979 6.1p 0.74 50,124,428 6.1p
–
2.62
–
–
1.71
1 Weighted average share price at the date of exercise was 9.3p.
2 Weighted average share price at the date of exercise was 10.6p.
Share schemes outstanding at 31 December 2019 are as follows:
Outstanding Exercisable Outstanding Exercisable
31 December 31 December 31 December 31 December Exercise
2019 2019 2018 2018 Price
Share Options
February 2014 – – 3,000,000 3,000,000 8.8p
March 2016 2,100,000 2,100,000 2,100,000 2,100,000 2.8p
December 2016 1,500,000 1,500,000 1,500,000 1,500,000 7.6p
March 2017 10,700,000 10,700,000 10,700,000 10,700,000 7.6p
August 2017 500,000 500,000 500,000 – 6.2p
January 2018 1,000,000 500,000 1,000,000 500,000 8.0p
March 2019 8,950,000 – – – 10.0p
24,750,000 15,300,000 18,800,000 17,800,000
Investor Warrants
September 2016 – – 1,410,449 1,410,449 5.0p
March 2017 1,480,952 1,480,952 1,480,952 1,480,952 7.4p
July 2017 11,165,477 11,165,477 11,165,477 11,165,477 6.0p
October 2017 35,724,118 35,724,118 35,724,118 35,724,118 6.0p
August 2018 343,432 343,432 343,432 343,432 11.3p
48,713,979 48,713,979 50,124,428 50,124,428
Expiry
Date
25/02/19
16/03/20
21/12/20
28/02/21
17/08/21
25/01/22
11/03/24
30/09/19
07/03/20
14/07/20
25/10/20
13/08/21
All of the Share Options granted attract a share based payment charge.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. SHARE OPTIONS AND INVESTOR WARRANTS continued
The fair value of the Share Options and Investor Warrants at the date of grant have been measured using the
BlackScholes pricing model that takes into account factors such as the option life, share price volatility and the
risk free rate. Volatility was calculated with reference to the Company’s historical share price volatility up to
the grant date to reflect a term approximate to the expected life of the option.
The Directors’ interests in the Share Options and Investor Warrants of the Company are as follows:
At 31 December 2019
Options/
Warrants at
1 Jan 2019
Quantity
granted
during
the year
Exercised
during
the year
Share Options
Matthew King
Dale Ferguson
David Archer
Dale Ferguson
1,500,000
2,000,000
7,000,000
–
–
–
–
3,000,000
Investor Warrants
David Archer
Al Marjan Ltd1
Manohar
Shenoy2
2,857,143
4,952,381
1,904,762
–
–
–
1 Two Directors are representatives of Al Marjan Ltd
2 Alternate Director
–
–
–
–
–
–
–
Options/
Warrants
at 31 Dec
2019
1,500,000
2,000,000
7,000,000
3,000,000
2,857,143
4,952,381
Exercise
price
Date of
the grant
2.76p
7.59p
7.59p
10.0p
16/03/16
01/03/17
01/03/17
11/03/19
First
date of
exercise
16/03/16
01/03/17
01/03/17
11/03/22
Final
date of
exercise
15/03/20
28/02/21
28/02/21
11/03/24
6.0p
6.0p
14/07/17
14/07/17
14/07/17
14/07/17
14/07/20
14/07/20
1,904,762
6.0p
14/07/17
14/07/17
14/07/20
At 31 December 2018
Options/
Warrants at
1 Jan 2018
5,321,776
2,000,000
1,500,000
7,000,000
Share Options
Dale Ferguson
Dale Ferguson
Matthew King
David Archer
Investor Warrants
David Archer
David Archer
Al Marjan Ltd1
Manohar
Shenoy2
11,111,112
2,857,143
4,952,381
Quantity
granted
during
the year
Exercised
during
the year
Options/
Warrants
at 31 Dec
2018
Exercise
price
Date of
the grant
–
–
–
–
(5,321,776)
–
–
–
–
2,000,000
1,500,000
7,000,000
– (11,111,112)
–
–
–
–
–
2,857,143
4,952,381
3.0p
7.59p
2.76p
7.59p
3.0p
6.0p
6.0p
First
date of
exercise
20/07/14
01/03/17
16/03/16
01/03/17
Final
date of
exercise
20/07/18
28/02/21
15/03/20
28/02/21
21/07/13
01/03/17
16/03/16
01/03/17
24/09/13
14/07/17
14/07/17
24/09/13
14/07/17
14/07/17
19/07/18
14/07/20
14/07/20
1,904,762
–
–
1,904,762
6.0p
14/07/17
14/07/17
14/07/20
1 Two Directors are representatives of Al Marjan Ltd
2 Alternate Director
SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. SHARE OPTIONS AND INVESTOR WARRANTS continued
The range of inputs of the Share Options granted in the financial year were as follows:
Share Options March 2019
Stock price 5.3p
Fair value of option 1.6p
Exercise Price 10.0p
Expected volatility 55%
Expected life 5 years
Risk free rate 0.6%
This fair value is the cost that is charged to the Statement of Comprehensive Income and is spread over the
expected vesting period which, for nonmarket vesting conditions (as noted above), is revised at each period
end. If the Investor Warrants issued relate to a share issue expense, the charge is to the Share Premium account.
Share Options granted
During the 2019 financial year 8,950,000 (2018: 1,000,000) Share Options were issued to employees to assist
with the recruitment, reward and retention of key employees. These Share Options vest upon the employee
meeting service and/or performance conditions.
Investor Warrants issued
During the 2018 financial year 343,432 Investor Warrants were issued in relation to placements in 2018. The
Investor Warrants vested immediately on issue. No Investor Warrants were issued in 2019.
24. EFFECTS OF CHANGES IN ACCOUNTING POLICIES
The Group and the Company adopted IFRS 16 Leases with a transaction date of 1 January 2019. The Group and
the Company have chosen not to restate comparatives on adoption of IFRS 16 and, therefore, the changes due
to the application of IFRS 16 are not reflected in the prior year financial statements. Rather, these changes have
been processed at the date of initial application and recognised in the opening equity balances. The application
of IFRS 16 has not had an impact on the Company leases and therefore no changes were required. Other new
and amended standards and Interpretations issued by the IASB did not impact the Group and Company as they
are either not relevant to the Group and Company’s activities or require accounting which is consistent with
the Group and Company’s current accounting policies.
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional
adjustments on the date of initial application (1 January 2019), without restatement of comparative figures.
The Group elected to apply the practical expedient to not reassess whether a contract is or contains a lease at
the date of initial application.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of
whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group
recognizes rightofuse assets and lease liabilities for most leases. However, the Group has elected not to
recognise rightofuse assets and lease liabilities for some leases of low value assets based on the value of the
underlying asset when new or for shortterm leases with a lease term of 12 months or less.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. EFFECTS OF CHANGES IN ACCOUNTING POLICIES continued
The following table presents the impact of adopting IFRS 16 on the statement of financial position as at 1 January
2019:
Adjustment
31/12/2018
£
IFRS 16
£
01/01/2019
£
ASSETS
Property, Plant and Equipment
RightofUse Assets
TOTAL ASSETS
LIABILITIES
NonCurrent Liabilities:
Loans and Borrowings
Current Liabilities:
Loans and Borrowings
NonCurrent Liabilities:
Lease Liabilities
Current Liabilities:
Lease Liabilities
TOTAL EQUITY AND LIABILITIES
(a)
(b)
(c)
(c)
(c)
(c)
1,437,068
–
1,437,068
(44,318)
44,318
–
1,392,750
44,318
1,437,068
25,813
(25,813)
16,895
(16,895)
–
–
–
–
42,708
25,813
25,813
16,895
–
16,895
42,708
(a) Property, Plant and Equipment was adjusted to reclassify leases previously classified as finance type to
RightofUse Assets. The adjustment reduced the cost of Property, Plant and Equipment by £56,096 and
accumulated amortisation by £11,778 for a net adjustment of £44,318.
(b) The adjustment to RightofUse assets is as follows:
£
Adjustment noted in (a) – finance type leases 44,318
Operating type leases –
RightofUse Assets 44,318
(c) Loans and Borrowings were adjusted to reclassify leases previously classified as finance type to Lease
Liabilities.
25. EVENTS SINCE THE REPORTING DATE
In January 2020 the Company issued 1,500,000 new ordinary shares to Matthew King in respect of 2016 Share
Options at an exercise price of 2.76 pence per share following an exercise of share options. Following the
exercise of these options Matthew King held 2,604,028 ordinary shares in the Company, representing 0.2% of
the issued share capital.
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COMPANY INFORMATION
DIRECTORS:
SECRETARY:
REGISTERED OFFICE:
Matthew James Wyatt King
David Stuart Archer
Dale John Ferguson
Maqbool Ali Sultan
Imad Kamal Abdul Redha Sultan
James Gerald Leahy
Manohar Pundalik Shenoy
Murtadha Ahmed Sultan
Chairman
Executive Director
Executive Director
NonExecutive Director
NonExecutive Director
NonExecutive Director
Alternate Director
Alternate Director
Christopher Michael McGarty
c/a Salisbury House
London Wall
London EC2M 5PS
Dominic Traynor
Salisbury House
London Wall
London EC2M 5PS
Salisbury House
London Wall
London EC2M 5PS
REGISTERED NUMBER:
07307107 (England and Wales)
AUDITORS:
BANKERS:
NOMINATED ADVISOR:
JOINT BROKERS:
SOLICITORS:
REGISTRARS:
BDO LLP
Chartered Accountants & Statutory Auditors
55 Baker Street
London W1U 7EU
NatWest Bank Plc
St James’ & Piccadilly Branch
PO Box 2DG, 208 Piccadilly
London W1A 2DG
SP Angel Corporate Finance LLP
Prince Frederick House
3539 Maddox Street
London W1S 2PP
finnCap Ltd
60 New Broad Street
London EC2M 1JJ
Whitman Howard Ltd
Connaught House
13 Mount Street
London W1K 3NB
Druces LLP
Salisbury House
London Wall
London EC2M 5PS
Share Registrars
The Courtyard, 17 West Street
Farnham
Surrey GU9 7DR
WEBSITE:
www.savannahresources.com
258501 Savannah cover 5mm spine.qxp 20/03/2020 19:02 Page 1
SAVANNAH RESOURCES PLC
Company No 07307107
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Perivan 258501