Vast Resources plc
Annual Report 2019

Plain-text annual report

256569 Vast Resources R&A Cover spread.qxp 11/10/2019 21:35 Page 1 VADV AD V V ALVA Y MAR ANCING PRIM S INT O UE DRIVER T TION PR ODUC R eport & A Acc oun ts 2019 60 Gracechurch Street London, EC3V 0HR United Kingdom Info@vastplc.com +44 (0) 1491 615 232 www.vastplc.com 256569 Vast Resources R&A Cover spread.qxp 11/10/2019 21:35 Page 2 Vast Resources has a diversified portfolio encompassing the mining development curve. It is focused on the transformation from an exploration company to a mining company and delivering multiple revenue streams. 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These opportunities comprise the Baita Plai Polymetallic Mine (‘BPPM’) in Romania, and the Group’s expected diamond concession in Zimbabwe. This establishes the platform to support Vast’s strategic objective to expand its footprint in these jurisdictions. In repositioning the business, the Group has divested its 25.01% stake in its Zimbabwean gold operations, reduced debt, strengthened its management team, and directed resources exclusively to placing its key Romania and Zimbabwean assets into production. The Group was awarded the Baita licence on 15th October 2018 but was unable to draw on Tranche B of the Mercuria prepayment facility in order to fund capital expenditure programs at BPPM and the Manaila Polymetallic Mine (‘MPM’). The objective of these programs was to restart production at BPPM and to improve operational efficiency at MPM. Consequently, the Group is well advanced in the process of arranging new funding which it is prioritising for BPPM and its diamond concession given the short lead times expected to generate free operational cashflow, and has placed MPM on care and maintenance in expectation of a second funding round at a later stage. Financial • US$ 8.6 million gain on disposal of Zimbabwean gold operations. • • • • • US$ 21.4 million reduction in the carrying amounts of loans and borrowings to US$ 5.5 million (2018: US$ 27 million) Total revenue, including operations that were discontinued in April 2019, increased to US$ 34.7 million (2018: US$ 30.7 million). Revenue from continuing operations increased to US$ 3.4 million (2018: US$ 3.1 million) Romanian operations continued to be a net cash absorber given a delay in financing the required capital expenditure to place BPPM into production and to improve profitability at MPM. Cash balance at the period end of US$ 0.569 million (2018: US$ 1.3 million). Operational Development • Baita Plai Association Licence executed on 15th October 2018, giving the Group the right to mine at BPPM. • • • • 1,725 and 242 tonnes of copper and zinc concentrate respectively produced at MPM from April 2018 to December 2018, at which point MPM was placed on care and maintenance. 29.41% economic interest acquired in the Blueberry Polymetallic Gold project in Romania which has raised US$ 1 million to meet exploration costs. Hiring of key management and technical personnel for the Group’s Zimbabwe diamond opportunity. The Chiadzwa Community Diamond Concession Joint Venture was signed post period end. 2 VAST RESOURCES 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 3 Funding Equity: Fundraising share issues during the year (gross proceeds before cost of issue): US$ 124,338 7,804,519 985,929 8,914,786 £ Shares Issued Issued to 91,351 5,987.332 769,451 6,848,134 18,270,103 2,313,540,750 488,073,476 2,819,884,329 Exercise of warrants Issued to investors Issued to convertible security investor Fundraising share issues post period end (gross proceeds before cost of issue): Announced 30 May 8 August Total US$ 1,136,646 795,268 1,931,914 £ Shares Issued Issued to 900,000 655,000 775,862,068 595,454,545 Issued to investors Issued to investors 1,555,000 1,371,316,613 Debt • US$ 3.1 million was repaid to Sub-Sahara Goldia Investments. • US$ 20.6 million was disposed of as part of the sale and restructuring of Vast’s Zimbabwe operations. Management • Appointment of Nick Hatch as Non-executive Director on 9th May 2018. • • • • Appointment of Mark Mabhudhu as specialist adviser to and then Executive Director of Vast’s diamond division on 6th July 2018 Appointment of Andrew Hall as Head of Corporate Development and Investor Relations on 1st December 2018. Resignation of Carl Kindinger as Group CFO on 10th February 2019. Appointment of Paul Fletcher as Group CFO on 11th February 2019. Political • Continued improved business environment in Zimbabwe VAST RESOURCES 3 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 4 Chairman’s Report The reporting period and the period to date since, has been a testing one for the Board. It has been a period marked equally by great opportunities and challenges. It has also been one of significant change of direction for the Company due to the decision to dispose of our Zimbabwe gold interests and instead use our accumulated in-house knowledge of Zimbabwe by focussing on the Zimbabwe diamond sector. Romania In Romania we were delighted in October to acquire the association licence giving the right to mine at Baita Plai. But we were of course disappointed that the process had proved to have been such a long and exacting one. We have had to bear monthly dewatering and maintenance costs over a long period. We have forgone the income that might otherwise have arisen from production. The delay has been costly. Our financial planning for the Romanian operation – both Baita Plai and Manaila – had been underpinned by the Mercuria pre-payment facility from which we had expected a second tranche (Tranche B) of US$5.5 million. The drawdown of the tranche was delayed and eventually, to our great surprise, was withdrawn in January. As stated in the Strategic Report this withdrawal was unrelated to the Company’s standing or to the viability of the Company’s Romanian operation. The effect of this has been to further delay the commissioning of Baita Plai and to force the decision to put Manaila onto care and maintenance while we prioritised Baita Plai. The process of negotiating and agreeing the detailed documentation necessary for the refinance of Baita Plai has been time consuming but has, at the time of writing, reached an advanced stage. However, during the waiting period we have prepared a detailed and costed commissioning and production plan for Baita Plai, and have moreover ordered, purchased, or are already implementing the long lead items so that the mine can be commissioned within three months of the drawdown of the finance. We continue to believe that Baita Plai is a key asset for the Company and that when in production the mine will be transformational for the Company. Zimbabwe During the reporting period we have been steadily appraising the diamond opportunities in Zimbabwe and in July 2018 appointed as head of our diamond division Mark Mabhudhu who has a lifetime of experience in senior management roles in the diamond sector including being former CEO of Government owned Zimbabwe Consolidated Diamond Company (pvt) Ltd (‘ZCDC’). As a result, a number of opportunities have been offered to us and due diligence, where appropriate, has been undertaken. Considerable effort has now resulted in a formal joint venture agreement with the Chiadzwa Community and the prospect very shortly of a joint venture involving both the Community and ourselves with ZCDC under which the ZCDC joint venture company will be given the right to mine the Chiadzwa Community Concession. This Concession is in a general area which we had previously referred to as the Marange Diamond Fields. Indigenisation laws in Zimbabwe, including for diamonds, have now been abolished. Moreover, we understand that the diamond joint venture with our partners, Chiadzwa Community and ZCDC will, subject to completion of all agreements, entitle the ZCDC joint venture company to retain sale proceeds from the diamonds, that are not required in Zimbabwe, offshore. This constitutes a significant advantage compared with the position for gold operations where all sales have to be made via the in-country refinery owned by the Reserve Bank, and where remission of proceeds are restricted by the Exchange Control laws. Although our Zimbabwe gold assets were performing well there were several issues which militated against our ability to extract cash from their operation in the short or medium term for general corporate purposes. The operation also carried large debt on our balance sheet which was unhelpful in our fundraising negotiations. We accordingly took the fundamental decision to dispose of our Zimbabwe gold assets and concentrate our resources on the diamond sector. 4 VAST RESOURCES 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 5 Directors and management Executives Mark Mabhudhu was appointed on 6 July 2018 initially as a specialist advisor to the board of our Zimbabwe subsidiary, but subsequently as executive head of the Company’s diamond division. Mark, at appointment, had been involved in diamond mining for more than 22 years, both in Zimbabwe and internationally, including 11 years with Debswana, the joint venture company between De Beers and the government of Botswana. As already stated he had previously been CEO of ZCDC. Andrew Hall was appointed Head of Corporate Development and Investor Relations on 1 December 2018. He has a background in natural resource and finance linked businesses and previously worked at a natural resources focussed merchant bank where he established and managed the alternative finance distribution business covering asset managers, private equity, investment banks, family offices and trading houses. Paul Fletcher was appointed on 8 February 2019 as Chief Financial Officer and has progressed into playing an integral senior role in the management of the Group’s finances. Paul has formerly held a variety of senior finance and operational roles in trading, processing, and financial businesses in the US, Europe and Asia. Non-Executive As reported in the 2018 Annual Report Nick Hatch was appointed to the Board as a Non-Executive Director on 9 May 2018. Nick has 35 years of experience in mining investment banking, primarily as a mining analyst and in managing mining and metals research and equities teams, most recently as a Director of Mining Equity Research at Canaccord Genuity in London. Funding During the reporting period US$7.9 million was raised in equity finance (including warrant exercises) and a further US$1.0 net of payments was raised through the Bergen Facility. US$3.1 million was repaid to Sub-Sahara Goldia Investments Ltd. At the time of writing we are near to finalisation of documentation on a funding which will be sufficient to fund both the commissioning of Baita Plai and the commencement of diamond mining at the Chiadzwa Community Concession. Corporate Governance As stated in the Strategic Report the Company has adopted the Quoted Company Alliance (‘QCA’) code on Corporate Governance. The Board strives to promote a corporate culture based on sound ethical values and behaviours. To that end the Company has adopted a strict anti-corruption and whistle blowing policy, but the Directors are not aware of any event in either jurisdiction which might be considered to breach this policy. The Company has also adopted a code for Directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016. The Board is also aware that the tone and culture it sets will greatly impact all aspects of the Company and the way that employees behave, as well as the achievement of corporate objectives. A large part of the Company’s activities is centred upon an open dialogue with shareholders, employees and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. VAST RESOURCES 5 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 6 Chairman’s Report continued Appreciation The continued support of shareholders through times that have been challenging is much appreciated. Following the funding of the Baita Plai Mine in Romania, and (subject to completion of agreements) of the Chiadzwa Community Concession in Zimbabwe, the Group believes that it will become cash positive. To fellow directors, thank you for your advice and support, and to management and staff both in Romania and Zimbabwe for their continued effort on behalf of the Company. Brian Moritz Chairman 6 VAST RESOURCES 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 7 Strategic Report Principal activities, review of business and future developments Vision The vision of the Group is to become a mid-tier mining group, one of the largest polymetallic (copper, zinc, silver, and gold) producers in Romania, and a major player in the re-emergence of the mining industry in Zimbabwe, where the Group now has a major focus on its diamond interests. Principal activities In Romania the Group is focussed on reopening the Baita Plai Polymetallic Mine (‘BPPM’) where an accelerated commissioning schedule (from the time that funding is secured) aimed at delivering cashflow within six months has been agreed and will be fully implemented following drawdown of full funding now expected to be agreed shortly. Meanwhile the previously operating Manaila Polymetallic Mine (‘MPM’) remains on care and maintenance pending adoption of a new effective mine plan that will achieve profitability. In Zimbabwe, following the divestment of its gold mining interests shortly prior to period end, the Group reached an advanced stage in the agreement of joint ventures on a substantial diamond concession in the Chiadzwa Diamond Fields (previously referred to as the Marange Diamond Fields). In both jurisdictions the Group holds further mining claims or other interests which are under appraisal. Review of business Romania General Following intensive negotiations between the Romanian Government, related agencies, and Baita SA, as holder of the head licence, the association licence granting the Group the right to mine at BPPM was approved by the State Mining Regulatory Body on 15th October 2018. Due to matters unrelated to either Vast’s standing or to the viability of Vast’s Romanian operations, the Group was unable to draw down on the US$ 5.5 million second tranche (‘Tranche B’) of the Mercuria prepayment facility. These funds were earmarked for capital expenditure programs at BPPM and MPM with the objective of recommission at BPPM and improving operational efficiency at MPM. Consequently, the Group has been in the process of arranging, and is now expected shortly to achieve, new funding which as far as Romania is concerned will prioritise BPPM given the project’s short lead time to generating free operational cash flows. MPM will remain on care and maintenance in expectation of a second funding round at a later stage. BPPM (80% interest, 10% Directors) The non-availability of Mercuria Tranche B has negatively impacted the Group’s results in Romania and has caused the Group to raise supplemental debt and equity funds during the course of the period. Despite these headwinds, the Group has made progress rehabilitating the BPPM infrastructure and in making improvements as well as significant inroads into implementing long lead items. Specific accomplishments include the following: • • • • • • • • • Installation of new, high efficiency pumps Securing direct electricity supply Cleaning milling and flotation circuits Maintained and continued restoration of underground workings and access Commenced installation of new, independent electricity supply Advanced work on refurbishment of the flotation plant including installation of a new sediment tank Commenced installation of the 7 kilometre tailings pipe to the tailings dam Cleaning railway in preparation for use Acquired and restored a 300 metre drilling rig VAST RESOURCES 7 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 8 Strategic Report continued Completion is dependent upon obtaining drawdown of funding which is expected to be agreed shortly. The Group estimates that subject to financing being arranged as hoped in the near future profitable production will have been achieved during the now current financial year. MPM (100% interest) 1,720 and 242 tonnes of copper and zinc concentrate respectively were produced at MPM from April 2018 to December 2018, at which point MPM was then placed on temporary care and maintenance originally due to adverse winter weather conditions. However, given the absence of funding, the decision was later taken to place the mine on continued care and maintenance until such time that BPPM was funded, and new funding arranged for MPM that was better suited to its investment needs and exploration potential. Revenues increased 10.8% to US$ 3.432 million (2018: US$ 3.098 million). As highlighted last year, a program of drilling undertaken in 2017 has proven the potential of opening a second open-pit mine at the Carlibaba section of MPM. A JORC compliant Resource statement confirmed a Measured, Indicated and Inferred mineral Resource of 4.6 million tonnes suitable for open-pit mining (3.6 million tonnes Measured and Indicated). Underground mineral Resources in the Measured and Indicated category was determined at 0.399 million tonnes. The implied open pit life is 11 years based on open pit and underground Measured and Indicated Resources at a rate of 30,000 tonnes per month. MPM also has significant underground exploration potential which would be transformative and would require additional investment beyond those planned for the Carlibaba open pit extension and new plant facility. For these reasons, the commercial opportunity is potentially much larger and will require a revised funding and investment strategy. Blueberry Polymetallic Gold Project (‘Blueberry’) (29.41% effective interest). The Group acquired an effective 29.41% economic interest in Blueberry through EMA Resources Ltd (‘EMA’) in a brown field perimeter located at Baia de Aries in the ‘Golden Quadrilateral’ of Western Romania on which historic work has demonstrated prospectivity for gold and polymetallic minerals. The Group is undertaking exploration on the perimeter with a view to establishing a JORC Resource sufficient to justify an independent IPO. The following exploration activities were undertaken at the Blueberry prospect: • • • • • • Surface geological mapping. Archival data searches for information relating to the Baia de Aries polymetallic mine. 41 surface diamond drill holes completed for a total core length of 6 717 metres. All 6,717 metres of core split with half sent to an independent laboratory for assay and the remaining half kept in storage. 300 soil geochemical samples gathered on an approximate 100 metre by 100 metre grid spacing and analysed at an independent laboratory. The exploration perimeter divided into eight zones for exploration and preliminary drilling undertaken in 4 of the 8 identified target areas. Drilling successfully intersected mineralised zones containing predominantly gold and silver with certain localities exhibiting polymetallic copper – lead - zinc mineralisation. Follow up drilling is planned for these areas in order to define the orientations and the extent of the mineralised zones as a number of intersections remain open at depth and along strike. The soil sampling program encompassed approximately 40% of the exploration area. Further sampling is required to the southwest and the northeast to complete the soil sampling coverage. The soil sampling identified previously unknown areas of mineralisation in the southern portion of the exploration area with gold in soil values of up to 17.7 grams per ton gold. To date the Group has arranged US$ 1 million third party financing on behalf of the venture. 8 VAST RESOURCES 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 9 Other Romanian prospects Work has been in progress with the benefit of third party money on extending our footprint in Romania through our current claims at Magura Neagra and Piciorul Zimbrului (collectively known as ‘Zagra’). The Group has undertaken a drilling programme targeting sets of polymetallic veins together with areas of disseminated sulphide mineralization. The Group continues to believe that exploration of the many mining opportunities that have become dormant over the last two decades will be an attractive prospect for global mining players seeking to capitalize on the projected increase in demand globally for copper occasioned by the global transition to clean energy and electric vehicles. The Group’s ‘first mover position’ in Romania has attracted interest in resuscitating the large-scale polymetallic resource projects in Romania. Discussions have been held with global mining players and investors to leverage their financial strength and expertise to jointly exploit these considerable opportunities. Zimbabwe In April 2019, the Group divested its 25.01% stake in its Zimbabwean gold related operations which included the producing Pickstone-Peerless Gold Mine (‘PPGM’) together with the non-producing Eureka Gold Mine in the course of restoration(‘Eureka’), and the dormant Giant Gold Mine (‘GGM’). The Group recorded an accounting gain on disposal of US$ 8.6 million. This divestment was driven in part by need to restructure the Group’s balance sheet to enable the financing of strategic projects and by the Group’s strategy to focus resources on opportunities generating high and near term operating free cashflow unrestrained by tight currency controls as represented by BPPM and the expected diamond concession in Zimbabwe. During the period, the divested Zimbabwean gold operations recorded profits of US$ 8.4 million (2018: US$ 2.3 million) on revenue of US$ 31.2 million (2018: US$ 27.6 million). These results have been heavily impacted by foreign exchange gains arising from a devaluation occasioned by the re-designation of all US dollar balances in Zimbabwe as RTGS (Real Time Gross Settlement) balances. This has resulted in significant gains of US$ 5.7 million mainly arising from foreign exchange revaluation gains on local currency denominated borrowings. On a normalized basis after removing foreign exchange gains, profits from the discontinued Zimbabwean operations increased by 16.4% to US$ 2.683 million (2018: US$ 2.305 million), largely driven by increased milled volumes (up 30% to 383,838 tonnes) and associated increased gold production (up 14% to 749kgs). Both the gain on disposal of US$ 8.6 million and the profits of $US 8.4 million from the divested Zimbabwean gold operations are disclosed as profits from discontinued operations in the consolidated statement of comprehensive income. Diamond Concession – Chiadzwa Diamond Fields The Group has completed due diligence on the diamond concession on which it expects to get the full right to mine shortly and has prepared a full operating plan. Corporate The Group has repositioned its business, disposing of its Zimbabwean gold operations in order to focus on BPPM and its expected diamond interests. This restructuring has enabled the Group to repay $2.5 million of its loan from Sub-Sahara Goldia Investments (‘Sub-Sahara’) and to reduce its borrowings by an additional $18.6 million thereby significantly reducing the Group’s gearing, simplifying the balance sheet, and creating a financial platform for growth and refinancing. The Group has been actively seeking substantive financing following the withdrawal of Mercuria’s US$ 5.5 million Tranche B to finance BBPM and the diamond opportunity in Zimbabwe. At the time of writing this report the Group is near to concluding agreed documentation with an institution which will provide funding for the Group’s operations both at BBPM and in Zimbabwe. During the year the Group strengthened its management team through the hiring of industry experts in the diamond sector. VAST RESOURCES 9 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 10 Strategic Report continued Strategy The Group’s strategy is to: • • • • • • • • • Attract appropriate funding for the Group – including from institutional investment Attract appropriate joint venture partners and public institutions to invest in the Group and projects of mutual interest Grow into a mid-tier mining company both organically and through acquisitions financed principally by third parties Optimise operations to produce positive cashflows Add value to operations by increasing resources and reserves If expedient, hold significant minority stakes in new ventures operationally managed by the Group Finance growth, where possible in a non-dilutive manner Maintain exposure to Zimbabwe and Romania where the Group has acquired in-depth country knowledge Continue to work with Government and local communities in Zimbabwe in the diamond sector, and to develop the diamond business in a transparent way for the benefit of all stake holders Key performance indicators In executing its strategy, the Board considers the Group’s key performance indicators to be, or will be after recommencement of mining: • Cash cost per tonne milled – – – Cash cost per tonne is derived from aggregate cash costs divided by tonnes milled and measures productivity. For PPGM the cash cost for the period until discontinuance was US$ 48/tonne (2018: US$ 62/tonne), 23% lower than the 2018 result. For MPM the cash cost for the period of production was US$ 70/tonne (2018: US$ 42/tonne), 60% higher than the 2018 result reflecting reduced volumes. • Cash costs per ounce sold for gold and per tonne for concentrate – – – Cash cost per ounce sold is calculated by dividing aggregate cash cost by gold ounces produced or concentrate tonnes produced and measures productivity. For PPGM the cash cost was US$ 770/ounce (2018: US$ 880/ounce), 12.5% lower than the 2018 result. For MPM the cash cost was US$ 2,208/tonne (2018: US$ 1,471/tonne), 50% higher than the 2018 result reflecting reduced volumes. • Plant production volumes as a measure of asset utilisation – – PPGM processed a mill feed of 383,838 tonnes for the period till divestment (2018: 295,424 tonnes), 30% higher than the 2018 level. MPM processed mill feed of 62,391 tonnes for the period of production (2018: 106,488 tonnes), 41% lower than the 2018 level. • Total resources and reserves – These indicators measure our ability to discover and develop new ore bodies, including through acquisition of new mines, and to replace and extend the life of our operating mines. There have been no changes over the previous year other than as a result of the disposal of the Group’s gold interest in Zimbabwe. The alluvial diamond interest in Zimbabwe where there is an imminent expectation of a right to mine is considered very prospective, but by its nature is not susceptible to the estimation of a JORC Resource. • The rate of utilization of the Group’s cash resources. This is discussed further below. 10 VAST RESOURCES 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 11 Cash resources The Group’s year end position was US$ 0.569 million (2018: US$ 1.3 million). During the year cash inflows from operating activities (including discontinued activities) were US$ 5.3 million. Excluding discontinued activities, cash outflows from operating activities were US$ 7.9 million. A significant portion of these outflows are directly related to developing, supporting and maintaining our mining assets, allowing the Group to quickly start production and generate significant revenue at both BPPM and the diamond concession once funding is in place and the diamond special grant is procured. Cash outflows from investing activities (including discontinued activities) were US$ 13.3 million. Excluding discontinued activities, cash outflows from investing activities were US$ 1.3 million mainly driven by additions to mining assets in the Group’s Romanian operations. Cash inflows from funding activities (including discontinued activities) were US$ 7.2 million. Excluding discontinued activities, cash inflows from funding activities were $5.2 million, comprising the net of the proceeds from the issuance of shares of US$ 8.1 million less net repayment of loans and borrowings of US$ 2.9 million. The Directors monitor the cash position of the Group closely to plan sufficient funds within the business to allow the Group to meet is commitments and continue the development of assets. As part of this process, the Directors closely monitor capital expenditure and the regulatory requirements of the licences to ensure they continue in good standing. Principal risks and uncertainties • Risk – Going concern The Group is in an advanced stage of agreeing documentation on a substantial funding. However, if this funding should fail it may cast doubt about the Group’s ability to continue as a going concern. Other material uncertainties constituting this risk include unseasonal severe climatic conditions, unforeseen delays in permits and licences for new mining or plant investments, cost overruns and adverse commodity price movements. Mitigation/Comments The Board will continue to engage, or after recommencement of mining will engage, with providers of commodity trade finance, potential joint venture and other investors in order for them to understand the fundamental strength of the Group’s business and attract additional funding when required. The Board also will, whenever possible, retain sufficient cash margin to offset contingencies. The remittance restrictions for the Zimbabwean gold operations will not apply to the Group’s diamond investments as the Group is advised that foreign currency regulations will allow export proceeds not required to meet costs in Zimbabwe to be retained offshore. • Risk – Mining Mining of natural resources involves significant risk. Drilling and operating risks include geological, geotechnical, seismic factors, industrial and mechanical incidents, technical failures, labour disputes and environmental hazards. Mitigation/Comments Use of strong technical management together with modern technology and electronic tools assist in reducing risk in this area. Good employee relations are also key in reducing the exposure to labour disputes. The Group is committed to following sound environmental guidelines and is keenly aware of the issues surrounding each individual project. VAST RESOURCES 11 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 12 Strategic Report continued • • • • Risk - Commodity prices Commodity prices are subject to fluctuation in world markets and are dependent on such factors as mineral output and demand, global economic trends and geo-political stability. Mitigation/Comments The Group’s management constantly monitors mineral grades mined and cost of production to ensure that mining output becomes or remains economic. As highlighted earlier, due to matters unrelated to both Vast’s standing and the viability of Vast’s Romanian operations, the Group was unable to draw down on the US$ 5.5 million second tranche (‘Tranche B’) of the Mercuria prepayment facility. These funds were earmarked for capital expenditure programs at BPPM and the Manaila Polymetallic Mine (‘MPM’) with the objective of restarting production at BPPM and to improve operational efficiency at MPM. Consequently, the Group is well advanced in the process of arranging new funding which it is prioritising for BPPM and its diamond concession given the short lead times expected to generate free operational cash flows, and has placed MPM on care and maintenance in expectation of a second funding round at a later stage. Risk – Management and Retention of Key Personnel The successful achievement of the Group's strategies, business plans and objectives depend upon its ability to attract and retain certain key personnel. Mitigation/Comments The Group’s policy is to foster a management culture where management is empowered and where innovation and creativity in the workplace are encouraged. The Group has in place a “Share Appreciation Right Scheme” for Directors and senior executives to provide incentives based on the success of the business. It is also introducing more specific incentive arrangements for the Group’s diamond business in Zimbabwe. During the period the Group has been successful in attracting new talent across its businesses. Risk - Country and Political The Group’s operations are based in Romania and Zimbabwe. Emerging market economies could be subject to greater risks, including legal, regulatory, economic, bribery and political risks, and are potentially subject to rapid change. In addition, there are risks particular to Zimbabwe arising from a scarcity of foreign exchange, difficulty with foreign remittances of funds and the, now albeit very substantially mitigated, risk of indigenisation. Mitigation/Comments The Group’s management team is experienced in its areas of operation and skilled at operating within the framework of the local culture in Romania and Zimbabwe to progress its objectives. The Group routinely monitors political and regulatory developments in each of its countries of operation. In addition, the Group actively engages in dialogue with relevant government representatives to keep abreast of all key legal and regulatory developments applicable to its operations. The Group has several internal processes and checks in place to ensure that it is wholly compliant with all relevant regulations to maintain its mining or exploration licences within each country of operation. Risk - Social, Safety and Environmental The Group's success may depend upon its social, safety and environmental performance, as failures can lead to delays or suspension of its mining activities. Mitigation/Comments The Group takes its responsibilities in these areas seriously and monitors its performance across these areas on a regular basis. 12 VAST RESOURCES 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 13 Corporate Governance The Company has adopted the QCA (Quoted Company Alliance) Code on corporate governance. Details of how the Company complies with this are set out in the Company’s website. Principles which are required to be dealt with under the Code in the Company’s Annual Report are set out below. Business model and strategy This is described above under Strategy and elsewhere in this Report. Risk Management In addition to its other roles and responsibilities, the Audit and Compliance Committee is responsible to the Board for ensuring that procedures are in place and are being implemented effectively to identify, evaluate and manage the significant risks faced by the Company. The Directors have established procedures, as represented by this statement, for the purpose of providing a system of internal control. An internal audit function is not considered necessary or practical due to the size of the Company and the close day to day control exercised by the Executive Directors. The Board works closely with and has regular ongoing dialogue with the Company Financial Director and financial controller and has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems. The risks facing the Company are detailed above. The Board seeks to mitigate such risks so far as it is able to do, as explained above, but certain important risks cannot be controlled. The CEO is primarily responsible to the Board for risk management. In particular, the products the Company mines and is seeking to identify are traded globally at prices reflecting supply and demand rather than the cost of production. In Romania, the Company seeks to protect its cash flow by means of a long term offtake agreement, but it does not hedge future production. Maintenance of a well functioning Board of Directors led by the Chairman Current membership of the Board is as follows: Name Brian Moritz Andrew Prelea Roy Tucker Craig Harvey Eric Diack Nick Hatch Role Non-executive Chairman Chief Executive Officer Finance Director Chief Operating Officer Non-executive director Non-executive director Appointed 6 October 2016 1 March 2018 5 April 2005 1 March 2018 30 May 2014 9 May 2018 All the Non-executive Directors are considered to be independent. All the Directors are subject to re-election at intervals of no more than three years. The table illustrates the success of the Board in refreshing its membership. The Board is well balanced both in its skill sets and in the domicile of its members. Of the Executive Directors, Andrew Prelea is resident in Romania, Roy Tucker in the UK, and Craig Harvey in Southern Africa. Of the Non- Executive Directors, Nick Hatch and Brian Moritz are resident in the UK, whilst Eric Diack resides in Southern Africa. All of the current Non-executive Directors are considered to be independent. None of them have been a Director for a sufficient length of time to prejudice such independence. Non-executive Directors are committed to devote 3 days per month to the Company. Executive Directors devote substantially the whole of their time to the Company. Where possible Directors are physically present at board meetings, but, due to the wide divergence of locations, Directors may be present by telephone. VAST RESOURCES 13 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 14 Strategic Report continued During the thirteen month period ended 30 April 2019 there were six full board meetings in addition to twelve meetings on specific issues. Of the Directors holding office throughout the period, Brian Moritz, Andrew Prelea, Roy Tucker and Eric Diack, attended all the full meetings either in person or by telephone. Appropriate skills and experience of the Directors The CVs of the Directors - three executives and three Non executives - as disclosed on the website, are set out below. In addition, the Company has employed the outsourced services of Ben Harber of Shakespeare Martineau as company secretary. Andrew Prelea – Chief Executive Officer Andrew has been involved with Vast since 2013 and has spearheaded the development of the Company’s Romanian portfolio. Beginning his career in the early 1990s as a bulk iron ore and steel trader in Romania, he then went on to develop his career in the property and earthmoving sector in Australia before returning to Romania in 2003, initially to focus on the development of properties for the Romanian Ministry of Defence and latterly, private sector developments. Throughout his 26-year career, Andrew has developed extensive investor and public relations experience and has advised the Romanian government on wide ranging high-level topics including social housing and economic policy. He has built a strong network of contacts across the mining and metals industries and Europe and southern Africa, in addition to policy makers and governmental authorities. Brian Moritz - Chairman Brian is a Chartered Accountant and former Senior Partner of Grant Thornton UK LLP, London; he formed Grant Thornton’s Capital Markets Team which floated over 100 companies on AIM under his chairmanship. In December 2004, he retired from Grant Thornton UK LLP to concentrate on bringing new companies to the market. He specialises in natural resources companies, primarily in Africa, and was formerly chairman of Metal Bulletin plc, African Platinum plc and Chromex Mining plc as well as currently being chairman of several junior mining companies. Roy Tucker – Finance Director Roy is a Chartered Accountant with 43 years of high level and broad spectrum professional and business experience. He has been the founder of a London banking group, served on bank boards and had a position as a major shareholder of a substantial London commodity house. He is also the founder of Legend Golf and Safari Resort in South Africa. He has substantial investment in the Romanian property sector. Craig Harvey – Chief Operating Officer Craig began his career with Gold Fields of SA in 1988 as a bursary student in Economic Geology where he worked on various gold, platinum, coal and exploration projects. At Harmony Gold he managed the mineral resources on various operations and was involved in due diligence on acquisitions. He joined Simmer and Jack with a focus on shallow hydro-thermal gold deposits in the Eastern Transvaal and later moved into a corporate role managing and auditing the mineral resource process across all gold and uranium operations. Craig spent 3 years in a Principal Consultant role for Ravensgate based in Perth, Australia, where he conducted numerous resource estimations, valuations and technical reports mainly in gold, uranium, copper and iron ore. Craig joined Vast Resources as a consultant in 2013 and became Chief Operating Officer in March 2017. During his tenure with Vast Resources, he has been heavily involved in both Zimbabwe and Romania. Eric Diack – Non-Executive Officer Eric is a Chartered Accountant with many years’ experience in the mining and industrial landscape. Eric is the former CEO of Anglo American Ferrous Metals Divisions, and has served on numerous major listed and unlisted company boards, mainly associated with Anglo American. He is currently a member of the Bidvest Group and Aveng boards which are large South African listed companies with extensive international operations. 14 VAST RESOURCES 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 15 Nick Hatch – Non-Executive Director Nick has 35 years’ experience in mining investment banking, primarily as a mining analyst and in managing mining & metals research and equities teams. He was most recently Director of Mining Equity Research at Canaccord Genuity in London. Nick’s experience includes researching and advising on mining companies and projects across the globe and across the commodity spectrum and includes companies of all sizes. Nick left investment banking in 2017, and has recently set up his own company, Nick Hatch Mining Advisory Ltd, to provide mining research, business development and financing advice. He holds a degree in Mining Geology and is a Chartered Engineer. The Company believes that the current balance of skills in the Board as a whole reflects the broad range of commercial and professional skills that the Company requires. Among the Executive Directors, Andrew Prelea is experienced in general management, including identifying and negotiating new business opportunities; Roy Tucker is a Chartered Accountant with many years experience in general financial management; and Craig Harvey is a qualified geologist experienced in constructing and operating mines. Among the Non-executives Brian Moritz is a Chartered Accountant with senior experience. In addition to his financial skills he has former experience as a Registered Nominated Adviser. Eric Diack is also a Chartered Accountant with experience in operational as well as financial management. Nick Hatch is a qualified geologist with experience in evaluating mining companies and natural resource projects. Importantly, Directors without geological qualifications have significant experience with junior companies in the natural resources sector. Evaluation of Board Performance The Group is in the process of fast evolution and at this stage in the Company’s development it is not deemed necessary to adopt formal procedures for evaluation of the Board or of the individual Directors. There is frequent informal communication between members of the Board and peer appraisal takes place on an ongoing basis in the normal course of events however the Board will keep this under review and may consider formalised independent evaluation reviews at a later stage in the Company’s development Given the size of the Company, the whole Board is involved in the identification and appointment of new Directors and as a result, a Nominations Committee is not considered necessary at this stage. The importance of refreshing membership of the Board is recognised and has been implemented. In 2018 Andrew Prelea was appointed to replace Roy Pitchford as CEO, and Nick Hatch replaced Brian Basham as a Non-executive Director. The Directors believe that the Board operates efficiently and cost effectively for the benefit of all stakeholders. Nevertheless, it is envisaged that the Board will be strengthened in due course as and when new projects are operated by the Company. Maintenance of Governance Structures and Processes The corporate governance structures which the Company is able to operate are limited by the size of the Board, which is itself dictated by the current size and geographical spread of the Company’s operations, with Directors resident in the UK, Romania and Southern Africa. With this limitation, the Board is dedicated to upholding the highest possible standards of governance and probity. The Chairman, Brian Moritz: • • • leads the Board and is primarily responsible for the effective working of the Board; in consultation with the Board ensures good corporate governance and sets clear expectations with regards to Company culture, values and behaviour; sets the Board’s agenda and ensures that all Directors are encouraged to participate fully in the activities and decision-making process of the Board. The CEO, Andrew Prelea: • is primarily responsible for developing Vast’s strategy in consultation with the Board, for its implementation and for the operational management of the business; VAST RESOURCES 15 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 16 Strategic Report continued • • • • • • is primarily responsible for new projects and expansion; is responsible for attracting finance and equity for the Company; runs the Company on a day-to-day basis; implements the decisions of the Board; monitors, reviews and manages key risks; is the Company’s primary spokesperson, communicating with external audiences, such as investors, analysts and the media. The Chief Operating Officer, Craig Harvey: • • • • • is responsible for operational improvements and efficiency of mining operations in Romania; is responsible for expansion and exploration of projects at the mine level; is responsible for the re-opening of the Baita Plai mine; assists and advises on the operation and expansion of the Zimbabwe operations and projects; provides technical input on new projects. The Finance Director, Roy Tucker: • • • • • is responsible for the administration of all aspects of the Group; assisted by the Chief Financial Officer oversees the accounting function of all group companies; runs the UK head office as the only UK based Executive Director; assisted by the Chief Financial Officer deals with all matters relating to the independent audit; is the main point of contact with the Company’s lawyers and Nomad, and the London Stock Exchange. The Remuneration Committee is chaired by Nick Hatch and comprises Eric Diack and Nick Hatch. It meets on an ad hoc basis when required. The Remuneration Committee is responsible for establishing a formal and transparent procedure for developing policy on executive remuneration and to set the remuneration packages of individual Directors. The Committee’s policy is to provide a remuneration package which will attract and retain Directors and management with the ability and experience required to manage the Company and to provide superior long-term performance. The Audit and Compliance Committee is chaired by Eric Diack and comprises Nick Hatch and Eric Diack. It normally meets twice per annum to inter alia, consider the interim and final results. In the latter case the auditors are present and the meeting considers and takes action on any matters raised by the auditors arising from their audit. The chairman, Brian Moritz, attends the meetings of these committees when requested to do so. Matters reserved for the Board include: • • • • • • Vision and strategy Production and trading results Financial statements and reporting Financing strategy, including debt and other external financing sources Budgets, acquisitions and expansion projects, divestments and capital expenditure and business plans Corporate governance and compliance 16 VAST RESOURCES 256569 Vast Resources R&A pp02-pp17.qxp 11/10/2019 21:36 Page 17 • • • Risk management and internal controls Appointments and succession plans Directors’ remuneration Shareholder Communication The Board is committed to maintaining effective communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with its private shareholders as explained above under Principle Two. The Company is desirous of obtaining an institutional shareholder base, and institutional shareholders and analysts will have the opportunity to discuss issues and provide feedback at meetings with the Company. The Investors section of the Company’s website provides all required regulatory information as well as additional information shareholders may find helpful including: information on Board members, advisors and significant shareholdings, a historical list of the Company’s Announcements, its corporate governance information, the Company’s publications including historic annual reports and notices of annual general meetings, together with share price information. The results of shareholder meetings will be publicly announced through the regulatory system and displayed on the Company’s website with suitable explanations of any actions undertaken as a result of any significant votes against resolutions. Outlook While the period has been challenging the Group has completed a successful divestment of its Zimbabwean gold operations and is in the last stages of arranging finance to focus on its key assets, BPPM and the Zimbabwean diamond concession. These projects which by industry standards offer low cost entry, are expected to generate high returns and strong operational free cashflow generation, providing the platform for Vast’s expansion. As stated last year, the forecast global growth in electric vehicles remains likely to create, over the next decade, a shortage of copper. Whereas global supply and demand for copper is currently broadly balanced, worldwide there is a decline in ore grades, while community resistance and water supply issues are holding back discovery and exploitation such that management continues to believe that current supply will be overtaken by demand in a few years placing upward pressure on copper prices and spurring investment in new copper mining capacity. Management also believes that the business environment in Zimbabwe will continue to improve as the government establishes an attractive base for sustainable foreign investment, and that the Group, having obtained the licence for BPPM and having established significant first mover know-how, will begin to see traction on its other Romanian opportunities. Management believes that a combination of a bullish outlook on polymetallics together with a reduction in Romanian and Zimbabwean country risk premiums will provide significant medium-term growth in the share price and bode well for the financial performance of these businesses. Many thanks to fellow Board members and management for the commitment and hard work that has been put into the Group. On behalf of the Board, Andrew Prelea Group Chief Executive Officer VAST RESOURCES 17 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 18 Report of the Directors for the period ended 30 April 2019 The Directors present their report together with the audited financial statements for the thirteen-month period ended 30 April 2019. Results and dividends The Group statement of comprehensive income is set out on page 28 and shows the profit for the period. The Directors do not recommend the payment of a dividend (2018: nil). Financial instruments Details of the use of financial instruments by the Company and its subsidiary undertakings are contained in note 20 of the financial statements. Directors The Directors who served during the period and up to the date hereof were as follows: - Roy Tucker Eric Diack Brian Moritz Andrew Prelea Craig Harvey Nick Hatch Date of Appointment 5 April 2005 30 May 2014 3 October 2016 1 March 2018 1 March 2018 9 May 2018 Directors’ interests The interests in the shares of the Company of the Directors who served during the period were as follows: Eric Diack Craig Harvey Nick Hatch Brian Moritz Andrew Prelea Roy Tucker Total 30 April 2019 31 March 2018 Ordinary shares – 5,650,000 – 10,000,000 39,179,476 69,569,992 124,399,468 Share options Ordinary shares – 5,650,000 – – 18,438,736 31,607,029 – – – – – – Share options – – – – – – – 55,695,765 – 18 VAST RESOURCES 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 19 Cash-settled share rights The following rights are held by Directors in a cash-settled share rights performance programme: Subscription price Outstanding at 31 March 2018 Exercised during last 13 months Granted during last Outstanding at 30 April 2019 13 months Roy Tucker 8.75p 1,500,000 9.00p 750,000 6.00p 2,750,000 Total 5,000,000 See note 22 for further details of this programme. – – – – – – – – 1,500,000 750,000 2,750,000 5,000,000 Exercise date 50% Jul 2010 50% Jul 2011 50% Aug 2011 50% Aug 2012 50% Aug 2012 50% Aug 2013 Share Appreciation Rights Scheme The following Directors have been granted rights under the Company’s Share Appreciation Rights Scheme: Eric Diack Craig Harvey Andrew Prelea Roy Tucker In issue at 31 March 2018 Awarded Grant during date period Exercised / lapsed during period In issue at 30 April 2019 12,000,000 1 Jun 2015 5,000,000 1 Mar 2018 5,000,000 1 Mar 2018 1,250,000 1 Jun 2015 1,250,000 1 Jun 2015 9,000,000 1 Mar 2018 9,000,000 1 Mar 2018 18,000,000 1 Jun 2015 18,000,000 1 Mar 2018 18,000,000 1 Mar 2018 10,000,000 1 Jun 2015 8,000,000 1 Jun 2015 9,000,000 1 Mar 2018 9,000,000 1 Mar 2018 – (12,000,000) – – – – – (1,250,000) – – – – – – – – – – – – (10,000,000) – – – – – – – 5,000,000 5,000,000 – 1,250,000 9,000,000 9,000,000 18,000,000 18,000,000 18,000,000 – 8,000,000 9,000,000 9,000,000 132,500,000 – (23,250,000) 109,250,000 Vesting period Start Finish 31 Mar 2016 31 Mar 2019 31 Mar 2020 31 Mar 2016 31 Mar 2017 31 Mar 2019 31 Mar 2020 31 Mar 2017 31 Mar 2019 31 Mar 2020 31 Mar 2016 31 Mar 2017 31 Mar 2019 31 Mar 2020 31 Mar 2019 31 Mar 2022 31 Mar 2023 31 Mar 2019 31 Mar 2020 31 Mar 2022 31 Mar 2023 31 Mar 2020 31 Mar 2022 31 Mar 2023 31 Mar 2019 31 Mar 2020 31 Mar 2022 31 Mar 2023 See note 22 for further details of the SARS. VAST RESOURCES 19 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 20 Report of the Directors continued Directors’ remuneration 2019 (13 months) Eric Diack Craig Harvey Nick Hatch Brian Moritz Andrew Prelea Roy Tucker 2018 (12 months) Eric Diack Craig Harvey Brian Moritz Andrew Prelea Roy Tucker Roy Pitchford Brian Basham Salary/Fees earned * $’000 33 196 28 33 244 163 697 30 15 26 18 145 173 9 416 * The Company has developed a practice of deferring payment of varying proportions of sums earned by Directors until the Company liquidity position improves. $13,062 of Andrew Prelea’s remuneration last year was settled by issuing 7,407,407 shares. The Company has qualifying third party indemnity provisions for the benefit of the Directors. Future developments The Company’s plans for future developments are more fully set down in the Strategic Report, on pages 8 to 17. Research and development Detailed business and financing plans were prepared to bring Baita Plai Polymetallic Mine into production. The Group is well advanced in the process of arranging a funding facility that will allow it to meet these production objectives. Independent geological reports were commissioned for the diamond concession area in Zimbabwe as a means of preliminary identification of potentially economic areas. Preliminary processing plant layouts and designs were evaluated incorporating various technological methods of separation and recovery. Exploration drilling at Blueberry successfully intersected mineralised zones containing predominantly gold and silver with certain localities exhibiting polymetallic copper – lead - zinc mineralisation. Follow up drilling is planned for these areas in order to define the orientations and the extent of the mineralised zones. The soil sampling program encompassed approximately 40% of the exploration area. Further sampling is required to the southwest and the northeast to complete the soil sampling coverage. The soil sampling identified previously unknown areas of mineralisation in the southern portion of the exploration area with gold in soil values of up to 17.7 grams per ton gold. Disabled employees The Group gives full consideration to applications for employment from disabled persons where the candidate’s particular aptitudes and abilities are consistent with adequately meeting the requirements of the job. Opportunities are available to disabled employees for training, career development and promotion. Where existing employees become disabled, it is the Company’s policy to provide continuing employment wherever practicable in the same or an alternative position and to provide appropriate training to achieve this aim. 20 VAST RESOURCES 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 21 Auditors All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Group's auditors for the purposes of their audit and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware. Vast’s auditor, Crowe U.K. LLP, was initially appointed on 25 April 2016 and it is proposed by the Board that they be reappointed as auditors at the forthcoming AGM. Events after the reporting date These are more fully disclosed in Note 27. By order of the Board Ben Harber Secretary 29 September 2019 VAST RESOURCES 21 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 22 Statement of Directors’ Responsibilities The Directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and applicable law. 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 company and the group and of the profit or loss of the group for that period. In preparing these financial statements, the Directors are required to: • • • • select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are further responsible for ensuring that the Strategic Report and the Report of the Directors and other information included in the Annual Report and Financial Statements is prepared in accordance with applicable law in the United Kingdom. The maintenance and integrity of the Group’s website is the responsibility of the Directors; the work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred in the accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other information included in annual reports may differ from legislation in other jurisdictions. 22 VAST RESOURCES 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 23 Independent Auditor’s Report to the Members of Vast Resources Plc Opinion We have audited the financial statements of Vast Resources plc (the “Parent Company”) and its subsidiaries (the “Group”) for the thirteen month period ended 30 April 2019, which comprise: • • • • • the Group statement of comprehensive income for the period ended 30 April 2019; the Group and Parent Company statements of financial position as at 30 April 2019; the Group and Parent Company statements of cash flows for the period then ended; the Group and Parent Company statements of changes in equity for the period then ended; and the 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. In our opinion: • • • • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 April 2019 and of the Group’s profit for the period 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 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 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, 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 In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in ‘Basis of preparation and going concern assessment’ and ‘Areas of estimates and judgement’ in the financial statements concerning the Group’s and Parent Company’s ability to continue as a going concern. Further funds will be required to finance the Group’s and Parent Company’s working capital requirements and the development of the Group’s Romanian and Zimbabwean assets. The Group is at an advanced stage of agreeing documentation for a substantial funding and the Directors are confident that funds will be available to meet the Group’s commitments. However, binding agreements are not yet in place and this funding could fail. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s and Parent Company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group and Parent Company were unable to continue as a going concern. VAST RESOURCES 23 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 24 Independent Auditor’s Report to the Members of Vast Resources Plc continued Overview of our audit approach Materiality In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified. Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be $155,000, based on approximately 1% of the Group’s assets. We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control environment. Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and directors’ remuneration. We agreed with the Audit Committee to report to it all identified errors in excess of $5,000. Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds. Overview of the scope of our audit Of the Group’s reporting components, in addition to the Parent Company, we identified two entities comprising one component requiring full scope audits for group purposes located in Romania. Of the Group’s reporting components, in addition to the Parent Company, we identified two entities comprising one component requiring full scope audits for group purposes located in Romania. The components within the scope of our work accounted for 100% of total assets and continuing revenue. The work on these components was performed by component auditors. We issued instructions to the component auditors which included details of the significant areas to be covered, including the key audit matters detailed below, and the information required to be reported back. We reviewed the audit work performed by the component auditors, communicated our findings therefrom and any further work required by us was then performed by the component auditor. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the ‘Material uncertainty related to going concern section, we have determined the following key audit matters. This is not a complete list of all risks identified by our audit. 24 VAST RESOURCES 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 25 Key audit matter How the scope of our audit addressed the key audit matter We reviewed management’s process for considering going concern. We obtained management’s assessment of going concern, comprising cash flow and profit and loss forecasts for at least 12 months from the date at which the financial statements were approved and a summary of the funding available to the Group to cover that period. Our procedures included, but were not limited to: • • • identifying the key assumptions included within the forecasts which we discussed with management and, where appropriate, challenging the appropriateness thereof; considering sensitivity within the projections and considering available mitigation of expenditure; and reviewing relevant documentation in relation to funds raised by the Parent Company after the reporting date We also assessed the adequacy of disclosures made in the financial statements in relation to going concern Our procedures included, but were not limited to: • • agreeing the disposal to legal agreements documenting the transaction; and recalculating the profit or loss on disposal to ensure the accounting entries are appropriate. We also assessed the adequacy of disclosures made in the financial statements in relation to disclosures of the transaction and ensured adequate weighting has been included in the surround information. Going concern The Group recorded a loss from continuing operation of $9.95 million and at 30 April 2019 held cash and cash equivalents of $569,000 which was not sufficient to support the production, development and administrative costs of the Group for 12 months. The going concern basis of preparation of the financial statements may not be appropriate interest Disposal of the Group’s Zimbabwe gold interests In April 2019 the group sold its 50.01% interest in Ronquil Enterprises (pvt) Ltd through which it held its remaining 25.01% economic in the Pickstone Peerless Gold Mine and associated assets. This had a significant impact on the reported revenue and profitability of the Group, resulted in the derecognition of substantial assets, liabilities and Non- Controlling Interest in the Group and the recognition of a substantial gain on disposal. The accounting for the disposal may be materially misstated. Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to enable us to express an opinion on these matters individually and we express no such opinion. VAST RESOURCES 25 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 26 Independent Auditor’s Report to the Members of Vast Resources Plc continued Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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. Opinion on other matter prescribed by the Companies Act 2006 In our opinion based on the work undertaken in the course of our 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 directors’ report and strategic report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters where 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 the directors for the financial statements As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and 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. 26 VAST RESOURCES 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 27 Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Stephen Bullock (Senior Statutory Auditor) for and on behalf of Crowe U.K. LLP Statutory Auditor London 29 September 2019 VAST RESOURCES 27 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 28 Group Statement of Comprehensive Income for the period ended 30 April 2019 30 Apr 2019 Group $’000 31 Mar 2018 Group $’000 Note 2 22 4 5 13 Revenue Cost of sales Gross loss Overhead expenses Depreciation and impairment of property, plant and equipment Profit / (loss) on sale of property, plant and equipment Share option and warrant expense Sundry income Exchange (loss) / gain Other administrative and overhead expenses Loss from operations Finance income Finance expense Loss on disposal of interest in subsidiary loans Loss before taxation from continuing operations Taxation charge Total loss after taxation from continuing operations Profit after taxation from discontinued operations Total profit (loss) after taxation for the period Other comprehensive income Items that may be subsequently reclassified to either profit or loss (Loss) / gain on available for sale financial assets Exchange gain / (loss) on translation of foreign operations Total comprehensive profit / (loss) for the period Total profit / (loss) attributable to: – the equity holders of the parent company – non-controlling interests Total comprehensive profit / (loss) attributable to: – the equity holders of the parent company – non-controlling interests Profit / (loss) per share – basic and diluted Loss per share continuing operations – basic and diluted 8 8 3,432 (4,344) (912) (8,195) (1,206) 84 (264) 311 (2,798) (4,322) (9,107) 1 (845) – (9,951) – (9,951) 17,047 7,096 (3) 1,941 9,034 243 6,853 7,096 2,181 6,853 9,034 0.00 (0.16) 3,098 (4,298) (1,200) (3,334) (1,401) (23) (27) 129 2,301 (4,313) (4,534) – (708) (12,538) (17,780) – (17,780) 2,305 (15,475) 3 (1,435) (16,907) (17,295) 1,820 (15,475) (18,727) 1,820 (16,907) (0.36) (0.37) The accompanying accounting policies and notes on pages 33 to 69 form an integral part of these financial statements. 28 VAST RESOURCES 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 29 Group Statement of Changes in Equity for the period ended 30 April 2019 ) 7 0 9 6 1 ( , 0 2 8 1 , ) 7 2 7 8 1 ( , ) 5 9 2 7 1 ( , l a t o T 0 0 0 $ ’ - n o N 0 0 0 $ ’ s t s e r e t n i g n i l l o r t n o c l a t o T 0 0 0 $ ’ d e n i a t e R T B E 0 0 0 $ ’ t i c fi e d 0 0 0 $ ’ e v r e s e r 0 4 0 2 3 , 4 9 3 2 1 , 6 4 6 9 1 , ) 6 9 2 1 7 ( , ) 2 4 9 3 ( , – 7 2 – 0 0 7 1 , ) 1 0 3 2 ( , 5 5 0 3 , – 7 5 4 2 , 4 0 6 4 , – 2 7 7 1 , 4 1 6 7 1 , 7 4 0 3 2 , – 4 6 2 4 3 0 9 , – – 3 5 8 6 , 1 2 2 0 1 1 8 , 2 0 3 5 , – – ) 1 4 ( ) 1 4 9 9 2 ( , ) 1 4 9 9 2 ( , – 7 2 ) 7 5 7 ( ) 4 0 6 4 ( , ) 3 7 0 4 ( , 5 5 0 3 , ) 3 3 4 5 ( , 4 6 2 1 8 1 2 , – – 7 3 3 ) 7 5 7 ( ) 4 0 6 4 ( , – ) 3 7 0 4 ( , – – – – – – 3 4 2 – 9 2 2 – – – – ) 8 8 6 7 9 ( , ) 2 4 9 3 ( , 1 2 2 0 1 1 8 , 3 4 3 5 , – ) 7 3 9 0 0 1 ( , – – ) 1 2 7 3 ( , 2 4 9 3 , 0 0 0 $ ’ e l a s r o f e v r e s e r e l b a l i a v A i n g e r o F y c n e r r u c e r a h S n o i t a l s n a r t n o i t p o 0 0 0 $ ’ e v r e s e r 0 0 0 $ ’ e v r e s e r 0 0 0 $ ’ e r a h S i m u m e r p e r a h S l a t i p a c 0 0 0 $ ’ – 3 – – – – – 3 ) 3 ( – – – – – – ) 8 2 2 1 ( , 0 9 8 1 , 2 0 8 4 7 , 0 2 4 9 1 , 7 1 0 2 h c r a M 1 3 t A – – – – – ) 5 3 4 1 ( , – 7 2 ) 7 3 3 ( – – – – ) 3 6 6 2 ( , 0 8 5 1 , – – – – – 1 4 9 1 , – 4 6 2 ) 9 2 2 ( – – – ) 2 2 7 ( 5 1 6 1 , – – – – – – – – – – – – – – – – – – – – 5 3 4 2 , 7 3 2 7 7 , 0 2 6 0 4 0 0 2 , 8 4 4 4 , 5 8 6 1 8 , 2 6 6 3 , 2 0 7 3 2 , s e g r a h c t n a r r a w d n a n o i t p o e r a h S d e s p a l s t n a r r a w d n a s n o i t p o e r a h S s s o l e v i s n e h e r p m o c l a t o T d o i r e p e h t r o f i y r a d i s b u s n i i d e v e c e r t n e m t s e v n I d t L ) t v P ( s e s i r p r e t n E l i u q n o R – t e s s a g n n m n i i i t s e r e t n I i y r a d i s b u s n i I C N f o n o i t i s i u q c A i L R S p u o r G g n n M m o r a n S – i i s s o l e v i s n e h e r p m o c l a t o T 8 1 0 2 h c r a M 1 3 t A d o i r e p e h t r o f : h s a c r o f d e u s s i s e r a h S s e g r a h c t n a r r a w d n a n o i t p o e r a h S d e s p a l s t n a r r a w d n a s n o i t p o e r a h S d e u n i t n o c s i d n o d e s i n g o c e r e D : s n o i t a r e p o ) e t a v i r P ( s t n e m t s e v n I o i l g a l l a D – e v r e s e r T B E f o n o i t i n g o c e r e D 9 1 0 2 l i r p A 0 3 t A d e u s s i s e r a h S d e t i m L i The accompanying accounting policies and notes on pages 33 to 69 form an integral part of these financial statements. VAST RESOURCES 29 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 30 Company Statement of Changes in Equity for the period ended 30 April 2019 l a t o T 0 0 0 $ ’ 3 8 5 8 3 , ) 9 1 9 4 1 ( , – 7 2 5 5 0 3 , 0 0 0 $ ’ t i c fi e d ) 3 3 6 8 4 ( , ) 7 1 9 4 1 ( , – – 7 3 3 – – – – 0 0 0 $ ’ e v r e s e r ) 2 4 9 3 ( , d e n i a t e R T B E – ) 2 ( – – – – – – – – 7 2 – ) 7 3 3 ( 6 4 7 6 2 , ) 3 1 2 3 6 ( , ) 2 4 9 3 ( , ) 2 ( ) 4 5 9 4 ( , 0 8 5 1 , 4 4 7 5 3 , ) 4 0 3 6 6 ( , – 0 0 4 4 6 2 4 2 2 0 1 1 8 , – – 8 9 3 9 2 2 – – – ) 8 1 7 3 ( , 2 4 9 3 , – – 2 – – – – – – – – – – – 4 6 2 ) 9 2 2 ( – – ) 4 5 9 4 ( , 5 1 6 1 , – – – – – – – – – – – – – – 5 3 4 2 , 7 3 2 7 7 , 0 2 6 0 4 0 0 2 , 8 4 4 4 , 5 8 6 1 8 , 2 6 6 3 , 2 0 7 3 2 , 0 0 0 $ ’ e l a s r o f e v r e s e r e l b a l i a v A i n g e r o F y c n e r r u c e r a h S n o i t a l s n a r t n o i t p o 0 0 0 $ ’ e v r e s e r 0 0 0 $ ’ e v r e s e r 0 0 0 $ ’ e r a h S i m u m e r p e r a h S l a t i p a c 0 0 0 $ ’ ) 4 5 9 4 ( , 0 9 8 1 , 2 0 8 4 7 , 0 2 4 9 1 , r a e y e h t r o f s s o l e v i s n e h e r p m o c l a t o T s e g r a h c t n a r r a w d n a n o i t p o e r a h S d e s p a l s t n a r r a w d n a s n o i t p o e r a h S 7 1 0 2 h c r a M 1 3 t A h s a c r o f d e u s s i s e r a h S 8 1 0 2 h c r a M 1 3 t A d o i r e p e h t r o f t fi o r p e v i s n e h e r p m o c l a t o T s e g r a h c t n a r r a w d n a n o i t p o e r a h S d e s p a l s t n a r r a w d n a s n o i t p o e r a h S e v r e s e r T B E f o n o i t i n g o c e r e D h s a c r o f d e u s s i s e r a h S 9 1 0 2 l i r p A 0 3 t A The accompanying accounting policies and notes on pages 33 to 69 form an integral part of these financial statements. 30 VAST RESOURCES 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 31 Group and Company Statements of Financial Position As at 30 April 2019 30 Apr 2019 Group $’000 31 Mar 2018 Group $’000 30 Apr 2019 Company $’000 31 Mar 2018 Company $’000 Note Assets Non-current assets Property, plant and equipment Investment in subsidiaries Investment in joint ventures Loans to group companies Current assets Inventory Receivables Available for sale investments Cash and cash equivalents Total current assets Total Assets Equity and Liabilities Capital and reserves attributable to equity holders of the Parent Share capital Share premium Share option reserve Foreign currency translation reserve Available for sale reserve EBT reserve Retained deficit Non-controlling interests Total equity Non-current liabilities Loans and borrowings Provisions Deferred tax liability Current liabilities Loans and borrowings Trade and other payables Total current liabilities Total liabilities Total Equity and Liabilities 10 12 14 15 16 17 19 17 18 11,261 – – – 11,261 413 2,537 – 569 3,519 14,780 23,702 81,685 1,615 (722) – – (100,937) 5,343 (41) 5,302 4,043 489 – 4,532 1,476 3,470 4,946 9,478 14,780 45,534 559 – 46,093 4,054 5,406 13 1,300 10,773 56,866 20,040 77,237 1,580 (2,663) 3 (3,942) (97,688) (5,433) 23,047 17,614 22,635 1,397 3,330 27,362 4,331 7,559 11,890 39,252 56,866 1 1,673 – 34,568 36,242 – 361 – 218 579 – 1,583 – 25,179 26,762 – 93 3 208 304 36,821 27,066 23,702 81,685 1,615 (4,954) – – (66,304) 35,744 – 35,744 – – – – 309 768 1,077 1,077 36,821 20,040 77,237 1,580 (4,954) (2) (3,942) (63,213) 26,746 – 26,746 – – – – – 320 320 320 27,066 The accompanying accounting policies and notes on pages 33 to 69 form an integral part of these financial statements. The parent Company reported a loss after taxation for the year of US$ 3.237 million (2018: US$ 2.378 million). The financial statements on pages 28 to 69 were approved and authorised for issue by the Board of Directors on 29 September and were signed on its behalf by: Roy C. Tucker Registered number 5414325 Director 29 September 2019 VAST RESOURCES 31 256569 Vast Resources R&A pp18-pp32.qxp 11/10/2019 21:36 Page 32 Group and Company Statements of Cash Flow for the period ended 30 April 2019 30 Apr 2019 Group $’000 31 Mar 2018 Group $’000 30 Apr 2019 Company $’000 31 Mar 2018 Company $’000 (9,951) 17,047 (17,780) 6,099 (3,237) – (14,917) – CASH FLOW FROM OPERATING ACTIVITIES Profit (loss) before taxation for the period – from continuing operations – from discontinued operations Adjustments for: Depreciation and impairment charges (Profit) loss on sale of property, plant and equipment Gain on disposal of discontinued operations Loss on disposal of available for sale investments Loss on disposal of interest in loans Share option expense Changes in working capital: Decrease (increase) in receivables Decrease (increase) in inventories Increase (decrease) in payables Cash generated by / (used in) operations 4,554 (76) (8,649) 10 – 264 3,199 2,140 1,290 (1,275) 2,155 5,354 Investing activities: (11,391) Payments to acquire property, plant and equipment (4,480) Payments to acquire new subsidiary – Payments for investment in subsidiary 168 Proceeds on disposal of property, plant and equipment – Proceeds of third-party investment in subsidiary Proceeds of disposal of available for sale investments – Net cash inflow on disposal of discontinued operations 1,592 221 Proceeds of derecognition of EBT reserve – Payments to acquire controlling interest in subsidiary – Proceeds of loan assignment 559 Decrease (increase) in investment in joint venture – (Increase) decrease in loans to group companies Total cash used in investing activities (13,331) Financing Activities: Proceeds from the issue of ordinary shares Proceeds from loans and borrowings granted Repayment of loans and borrowings Total proceeds from financing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 8,110 6,165 (7,029) 7,246 (731) 1,300 569 2,862 22 – – 12,538 27 3,768 8 (2,392) (1,998) (4,382) (614) (9,197) – – 107 1,700 – – – (2,303) 2,300 (102) – (7,495) 3,055 9,177 (4,149) 8,083 (26) 1,326 1,300 – (2) – – – 264 – – – – 12,538 27 (2,975) (2,352) (268) – 452 184 (2,791) (1) – (90) – – 3 – 221 – – – (5,752) (5,619) 8,110 310 – 8,420 10 208 218 1,513 – (127) 1,386 (966) – – – – – – – – (2,303) 2,300 – (3,117) (3,120) 3,055 – – 3,055 (1,031) 1,239 208 The accompanying notes and accounting policies on pages 33 to 69 form an integral part of these financial statements. 32 VAST RESOURCES 256569 Vast Resources R&A pp33-pp40.qxp 11/10/2019 21:36 Page 33 Statement of Accounting Policies for the period ended 30 April 2019 General information Vast Resources plc and its subsidiaries (together “the Group”) are engaged principally in the exploration for and development of mineral projects in Sub-Saharan Africa and Eastern Europe. Since incorporation the Group has built an extensive and interesting portfolio of projects in these jurisdictions. The Company’s ordinary shares are listed on the AIM market of the London Stock Exchange. Vast Resources plc was incorporated as a public limited company under UK Company Law with registered number 05414325. It is domiciled and registered at 60 Gracechurch Street, London EC3V 0HR. Basis of preparation and going concern assessment The principal accounting policies adopted in the preparation of the financial information are set out below. The policies have been consistently applied throughout the current year and prior year, unless otherwise stated. These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS. During the period, the Group changed its year end from 31 March 2019 to 30 April 2019. The consolidated financial statements incorporate the results of Vast Resources plc and its subsidiary undertakings for the thirteen-month period ended 30 April 2019 and are therefore not entirely comparable to the previous year’s results for the twelve-month period ended 31 March 2018. The financial statements are prepared under the historical cost convention on a going concern basis. In April 2019 the Group disposed of its Zimbabwean gold operations to focus on its mining assets in Romania and its Marange diamond concession in Zimbabwe. The Group will require further funding in order to put these assets into production and to meet United Kingdom entity overheads and Romanian and Zimbabwean working capital needs. The Directors are confident that the Company will be able to raise such funds as it considers appropriate to meet such requirements over the course of the next 24 months, in cash. While no binding financing agreement is in place at the date of this Report, the Group is well advanced in the process of arranging new funding that will allow Vast to place the Baita Plai Polymetallic Mine (`BPPM’) into production and will enable the commencement of operations at the Group’s diamond concession, upon the imminent issuance of a special grant. Upon successfully funding these key assets, the Group would then be in a position to focus resources to secure the necessary investment to upgrade the Manaila Polymetallic Mine (`MPM’) which is currently on care and maintenance. These conditions indicate the existence of material uncertainty which may cast significant doubt about the Group’s and Company’s ability to continue as a going concern. The financial statements do not include the adjustment that would result if the Group and Company were unable to continue as a going concern. Changes in Accounting Policies At the date of authorisation of these financial statements, a number of Standards and Interpretations were in issue but were not yet effective. The Directors do not anticipate that the adoption of these standards and interpretations, or any of the amendments made to existing standards as a result of the annual improvements cycle, will have a material effect on the financial statements in the year of initial application. Areas of estimates and judgement The preparation of the Group financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the next financial year are discussed below: VAST RESOURCES 33 256569 Vast Resources R&A pp33-pp40.qxp 11/10/2019 21:36 Page 34 Statement of Accounting Policies continued Impairment of intangibles and mining assets a) The Group reviews, on an annual basis, whether deferred exploration costs, acquired either as intangible assets, as property, plant and equipment, or as mining options or licence acquisition costs, have suffered any impairment. The recoverable amounts are determined based on an assessment of the economically recoverable mineral reserves, the ability of the Group to obtain the necessary financing to complete the development of the reserves and future profitable production or proceeds from the disposition of recoverable reserves. Actual outcomes may vary. In the event that the Group is unable to secure financing for developing its Romanian assets, US$ 5.1 million of mining assets would be impaired. The disposal value of the remaining fixed assets held by the Group’s Romanian operations is not easily quantifiable Going concern and Inter-company loan recoverability b) The Group's cash flow projections, which have used conservative assumptions on forward commodity prices, indicate that the Group should have sufficient resources to continue as a going concern, although, as stated in the Principal Risks section of the Strategic Report and the basis of preparation and going concern assessment above, the Group will require additional funding for its near-term investment plans. While the Group is confident of its capacity to raise this funding, should it not materialise, or if the projections not be realised, the Group's going concern would depend on the success of future fund-raising initiatives. These conditions indicate the existence of material uncertainty which may cast significant doubt about the Group’s and Company’s ability to continue as a going concern. The recoverability of inter-Company loans advanced by the Company to subsidiaries depends also on the subsidiaries realising their cash flow projections. Estimates of fair value c) The Group may enter into financial instruments, which are required by IFRS to be recorded at fair value within the financial statements. In determining the fair value of such instruments, the Directors are required to apply judgement in selecting the inputs used in valuation models such as the Black Scholes or Monte Carlo models. Inputs over which the Directors may be required to form judgements related to volatility, vesting periods, risk free interest rates, commodity price assumptions and discount rates. In addition, where a valuation requires more complex fair value considerations the Directors may appoint third party advisers to assist in the determination of fair value. The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’): Level 1: Quoted prices in active markets for identical items (unadjusted). Level 2: Observable direct or indirect inputs other than Level 1 inputs. Level 3: Unobservable inputs (i.e. not derived from market data). The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Provisions d) The Group is required to estimate the cost of its obligations to realise and rehabilitate its mining properties. The estimation of the cost of complying with the Group’s obligations at future dates and in economically unpredictable regions, and the application of appropriate discount rates thereto, gives rise to significant estimation uncertainties. VAT recoverable e) In countries where the Group has productive mining operations carried out by its subsidiaries those subsidiaries are registered for Value Added Tax (VAT) with their respective local taxation authorities and, as their outputs are predominantly zero-rated for VAT, receive net refunds of VAT in respect of input tax borne on their inputs. This amount is carried as a receivable until refunded by the State The amount carried as a receivable is determined in accordance with the returns submitted to the taxation authorities. 34 VAST RESOURCES 256569 Vast Resources R&A pp33-pp40.qxp 11/10/2019 21:36 Page 35 Basis of consolidation Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the Company considers all relevant facts and circumstances, including: • • • • The size of the Company’s voting rights relative to both the size and dispersion of other parties who also hold voting rights. Substantive potential voting rights held by the Company and by other parties. Other contractual arrangements. Historic patterns in voting attendance. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. Business combinations The financial information incorporates the results of business combinations using the purchase method. In the statement of changes in equity, the acquirer’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Group statement of comprehensive income from the date on which control is obtained. The assets acquired have been valued at their fair value. Any excess of consideration paid over the fair value of the net assets acquired is allocated to goodwill. Any excess fair value over the consideration paid is considered to be negative goodwill and is immediately recorded within the income statement. Where business combinations are discontinued, whether by closure or disposal to third parties, any resultant gain or loss on the discontinued operation is identified separately and dealt with in the Group’s consolidated income statement as a separate item. Financial instruments IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement with new requirements for the classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. IFRS 9 introduces a new forward-looking impairment model based on expected credit losses to replace the incurred loss model in IAS 39. This determines the recognition of impairment provisions as well as interest revenue. The Group adopted IFRS 9 from 1 April 2018 with retrospective effect in accordance with the transitional provisions. The Group’s principal financial assets are cash and cash equivalents and receivables. VAST RESOURCES 35 256569 Vast Resources R&A pp33-pp40.qxp 11/10/2019 21:36 Page 36 Statement of Accounting Policies continued The Group has assessed the impact of IFRS 9 on the impairment of its financial assets and has concluded that the change in the impairment is immaterial. While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. The Group's financial assets consist of cash and cash equivalents and other receivables. The Group's accounting policy for each category of financial asset is as follows: Financial assets held at amortised cost Trade receivables and other receivables are classified as financial assets held at amortised cost. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the statement of comprehensive income. On confirmation that the receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. The Group’s financial assets held at amortised cost comprise other receivables and cash and cash equivalents in the statement of financial position. Cash and cash equivalents These amounts comprise cash on hand and balances with banks. Cash equivalents are short term, highly liquid accounts that are readily converted to known amounts of cash. They include short-term bank deposits and short- term investments. Any cash or bank balances that are subject to any restrictive conditions, such as cash held in escrow pending the conclusion of conditions precedent to completion of a contract, are disclosed separately as “Restricted cash”. There is no significant difference between the carrying value and fair value of receivables. Financial liabilities The Group’s financial liabilities consist of trade and other payables (including short terms loans) and long term secured borrowings. These are initially recognised at fair value and subsequently carried at amortised cost, using the effective interest method. Where any liability carries a right to convertibility into shares in the Group, the fair value of the equity and liability portions of the liability is determined at the date that the convertible instrument is issued, by use of appropriate discount factors. Foreign currency The functional currency of the Company and all of its subsidiaries outside Romania is the United States Dollar, while the functional currency of the Company’s Romanian subsidiaries is the Romanian Lei (RON), these are the currencies of the primary economic environment in which the Company and its subsidiaries operate. Transactions entered into by the Group entities in a currency other than the currency of the primary economic environment in which it operates (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the date of the statement of financial position. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in profit or loss, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation. 36 VAST RESOURCES 256569 Vast Resources R&A pp33-pp40.qxp 11/10/2019 21:36 Page 37 The exchange rates applied at each reporting date were as follows: • • • 30 April 2019 $1.3036: £1 and $1: RON 4.2440 and $1: RTGS 3.2641 31 March 2018 $1.4012: £1 and $1: RON 3.7779 and $1: RTGS 1 31 March 2017 $1.2253: £1 and $1: RON 4.2615 and $1: RTGS 1 On 22 February 2019 all US dollar balances in Zimbabwe were restated as RTGS (Real Time Gross Settlement) balances, as a separate and distinct currency tradeable against the US dollar. The initial inter-bank trading rate with the US dollar was US$ 1: RTGS 2.5. Intangible assets - Mining rights Mineral rights are recorded at cost less amortisation and provision for diminution in value. Amortisation will be over the estimated life of the commercial ore reserves on a unit of production basis. Licences for the exploration of natural resources will be amortised over the lower of the life of the licence and the estimated life of the commercial ore reserves on a unit of production basis. Inventories Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Weighted average cost is used to determine the cost of ordinarily inter- changeable items. Mining inventory includes run of mine stockpiles, minerals in circuit, finished goods and consumables. Stockpiles, minerals in circuit and finished goods are valued at their cost of production to their point in process using a weighted average cost of production, or net realisable value, whichever is the lower. Low grade stockpiles are only recognised as an asset when there is evidence to support the fact that some economic benefit will flow to the Company on the sale of such inventory. Consumables are valued at their cost of acquisition, or net realisable value, whichever is the lower. Investment in subsidiaries The Company’s investment in its subsidiaries is recorded at cost less any impairment. Non-controlling interests For business combinations completed on or after 1 January 2010 the Group has the choice, on a transaction by transaction basis, to initially recognise any non-controlling interest in the acquiree which is a present ownership interest and entitles its holders to a proportionate share of the entity's net assets in the event of liquidation at either acquisition date fair value or, at the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets. Other components of non-controlling interest such as outstanding share options are generally measured at fair value. The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests. Revenue Revenue from the sales of goods is recognised when the Group has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Group will receive the previously agreed upon payment. These criteria are considered to be met when the goods are delivered to the buyer. Where the buyer has a right of return, the Group defers recognition of revenue until the right to return has lapsed. However, where high volumes of sales are made to established wholesale customers, revenue is recognised in the period where the goods are delivered less an appropriate provision for returns based on past experience. Delivery of gold and metal concentrates is the Group’s single performance obligation under its contracts with its customers. The same policy applies to warranties. VAST RESOURCES 37 256569 Vast Resources R&A pp33-pp40.qxp 11/10/2019 21:36 Page 38 Statement of Accounting Policies continued Under IFRS 15, the freight service on export commodity contracts with CIF/CFR terms represents a separate performance obligation, and a portion of the revenue earned under these contracts, representing the obligation to perform the freight service, is deferred and recognised over time as this obligation is fulfilled, along with the associated costs for which the point of recognition is dependent on the contract sales terms. The Group’s agreed terms with Mercuria, currently its sole buyer of concentrates, require that the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. The impact of applying this methodology versus that currently adopted by the Group during the year ended 30th April 2019 is not material as the transfer of risks and rewards generally coincides with the transfer of control at a point in time. The timing and amount of revenue recognised by the Group for the sale of commodities is therefore not materially affected. The Group’s gold sales, which form part of discontinued operations, were also not affected by this standard. Provided the amount of revenue can be measured reliably and it is probable that the Group will receive any consideration, revenue for services is recognised in the period in which they are rendered. Pension costs Contributions to defined contribution pension schemes are charged to profit or loss in the year to which they relate. Production expenses Production expenses include all direct costs of production but exclude depreciation of property plant and equipment involved in the mining process, and mine and Company overhead. Property, plant and equipment Land is not depreciated. Items of property, plant and equipment are initially recognised at cost and are subsequently carried at depreciated cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. The corresponding liability is recognised within provisions. Depreciation is provided on all other items of property and equipment so as to write off the carrying value of items over their expected useful economic lives. It is applied at the following rates: Buildings Plant and machinery Fixtures, fittings & equipment Computer assets Motor vehicles – – – – – 2.5% per annum, straight line 15% per annum, reducing balance 20% per annum, reducing balance 33.33% per annum, straight line 15% per annum, reducing balance Development costs associated with the development of the Zimbabwean diamond project have been expensed as the concession has yet to receive a Special Grant. Capital works in progress: Property, plant and equipment under construction are carried at its accumulated cost of construction and not depreciated until such time as construction is completed or the asset put into use, whichever is the earlier. Proved mining properties Depletion and amortisation of the full-cost pools is computed using the units-of-production method based on proved reserves as determined annually by management. 38 VAST RESOURCES 256569 Vast Resources R&A pp33-pp40.qxp 11/10/2019 21:36 Page 39 Provision for rehabilitation of mining assets Provision for the rehabilitation of a mining property on the cessation of mining is recognised from the commencement of mining activities. This provision accounts for the full cost to rehabilitate the mine according to good practice guidelines in the country where the mine is located, which may involve more than the stipulated minimum legal commitment. When accounting for the provision the Company recognises a provision for the full cost to rehabilitate the mine and a matching asset accounted for within the non-current mining asset. The rehabilitation provision is discounted using a risk-free rate, which is linked to the currency in which the costs are expected to be incurred, and the applicable inflation rate applied to the cash flows. The unwinding of the discounting effect is recognised within finance expenses in the income statement. Share based payments Equity-settled share-based payments Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market 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 increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period. Where equity instruments are granted to persons other than employees, the fair value of goods and services received is charged to profit or loss, except where it is in respect to costs associated with the issue of shares, in which case, it is charged to the share premium account. Cash-settled share-based payments The Company also has cash-settled share-based payments arising in respect of a performance programme (see Note 22). A liability is recognised in respect of the fair-value of the benefit received under the programme and charged to profit or loss over the vesting period. The fair-value is re-measured at each reporting date with any changes taken to profit or loss. Remuneration shares Where remuneration shares are issued to settle liabilities to employees and consultants, any difference between the fair value of the shares on the date of issue and the carrying amount of the liability is charged to profit or loss. Stripping costs Costs incurred in stripping the overburden to gain access to mineral ore deposits are accounted for as follows: Stripping costs incurred during the development phase of the mine (before production begins) are capitalised as part of the depreciable cost of building, developing and constructing the mine. Capitalised costs are amortised using the units of production method, once production begins. VAST RESOURCES 39 256569 Vast Resources R&A pp33-pp40.qxp 11/10/2019 21:36 Page 40 Statement of Accounting Policies continued Stripping costs incurred during the production phase of the mine which give rise to the production of usable inventory are accounted for in accordance with the principles contained in the Group’s policy on Inventories. Stripping costs incurred in the production phase of the mine which result in improved access to ore are capitalized and recognized as additions to non-current assets provided that it is probable that the future economic benefit from improved access to the ore body associated with the stripping activity will flow to the Company, that it is possible to identify the component of the ore body to which access has been improved and that the costs relating to the stripping activity associated with that component of the ore body can be measured reliably. Tax The major components of income tax on the profit or loss include current and deferred tax. Current tax Current tax is based on the profit or loss adjusted for items that are non-assessable or disallowed and is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Tax is charged or credited to the statement of comprehensive income, except when the tax relates to items credited or charged directly to equity, in which case the tax is also dealt with in equity. Deferred tax Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs to its tax base, except for differences arising on: • • • The initial recognition of goodwill; The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the differences will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted. New IFRS accounting standards The following are the major new IFRS accounting standards in issue and effective from 1 January 2019 IFRS 16 Leases The principal impact of IFRS 16 will be to change the accounting treatment by lessees of leases currently classified as operating leases. Lease agreements will give rise to the recognition by the lessee of an asset, representing the right to use the leased item, and a related liability for future lease payments. Lease costs will be recognised in the income statement in the form of depreciation of the right of use asset over the lease term, and finance charges representing the unwind of the discount on the lease liability. The adoption of IFRS 16 does not materially impact the carrying value of lease liabilities given the Group’s negligible leasing exposure. 40 VAST RESOURCES 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 41 Notes to Financial Statements for the period ended 30 April 2019 1. Segmental analysis The Group operates in one business segment, the development and mining of mineral assets. The Group has interests in two geographical segments being Southern Africa (primarily Zimbabwe) and Europe (primarily Romania). The Group’s operations are reviewed by the Board (which is considered to be the Chief Operating Decision Maker (‘CODM’)) and split between mining exploration and development and administration and corporate costs. Exploration and development is reported to the CODM only on the basis of those costs incurred directly on projects. All costs incurred on the projects are capitalised in accordance with IFRS 6, including depreciation charges in respect of tangible assets used on the projects. Administration and corporate costs are further reviewed on the basis of spend across the Group. Decisions are made about where to allocate cash resources based on the status of each project and according to the Group’s strategy to develop the projects. Each project, if taken into commercial development, has the potential to be a separate operating segment. Operating segments are disclosed below on the basis of the split between exploration and development and administration and corporate. Continuing operations Discontinued operations Mining, exploration Mining, exploration and development Admin and and development Admin and Europe Africa corporate Total Europe Africa corporate Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Thirteen months to 30 April 2019 Revenue Production costs Gross profit (loss) Depreciation Profit (loss) on sale of property, plant and equipment Share option and warrant expense Sundry income Exchange (loss) gain Other administrative and overhead expenses Finance income Finance expense Profit on disposal of discontinued operations Taxation (charge) Profit (loss) for the year from continuing operations 30 April 2019 Total assets Total non-current assets Additions to non-current assets Total current assets Total liabilities 3,328 (4,344) (1,016) (1,200) 86 – 311 (2,283) (1,516) – (413) – – (6,031) 13,611 11,220 1,684 2,441 8,434 – – – – – – – – – – – – – – – – – – – 104 – 104 (6) 3,432 – (4,344) – (912) – (1,206) – 31,243 (18,527) 12,716 (3,348) (2) 84 – (8) (264) – (515) (264) – 311 – (2,798) – (2,806) 1 (432) (4,322) – 1 – (845) – – 670 6,494 (4,894) 2 (1,014) – – – – – – 8,649 (1,408) – – – – – – – (779) (22) – – – (11) 31,243 (18,527) 12,716 (3,348) (8) – 670 5,715 (4,916) 2 (1,014) 8,649 (1,419) (3,920) (9,951) – 17,859 (812) 17,047 1,169 41 53 1,078 1,044 14,780 – 11,261 – – – 1,737 – 3,519 – 9,478 – 14,371 – – – – – – – – 14,371 – VAST RESOURCES 41 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 42 Notes to Financial Statements continued 1. Segmental analysis continued Continuing operations Discontinued operations Mining, exploration Mining, exploration and development Admin and and development Admin and Europe Africa corporate Total Europe Africa corporate Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 12 Months to 31 March 2018 Revenue Production costs Gross profit (loss) Depreciation Profit (loss) on sale of property, plant and equipment Share option and warrant expense Sundry income Exchange (loss) gain Other administrative and overhead expenses Finance income Finance expense Loss on disposal of subsidiary company loans Taxation (charge) Profit (loss) for the year from continuing operations 31 March 2018 Total assets Total non-current assets Additions to non-current assets Total current assets Total liabilities 3,098 (4,298) (1,200) (1,398) (23) – 129 1,451 (1,700) – (708) – – (3,449) 14,976 11,669 3,134 3,186 9,686 – – – – – – – – – – – – – – – – – – – – – (3) 3,098 – (4,298) – (1,200) – (1,401) – 27,590 (19,114) 8,476 (1,460) – (23) – (27) 850 (27) – 129 – 2,301 – (2,613) – – (4,313) – – – (708) – 1 – 342 – (741) 42 (462) – – – – – – – – (67) – (32) 27,590 (19,114) 8,476 (1,460) 1 – 342 – (808) 42 (494) (12,538) – (12,538) – – – – (3,794) – – – (3,794) (14,331) (17,780) 2,404 (99) 2,305 320 16 – 425 327 15,296 – 11,685 – 41,306 34,409 264 (1) 41,570 34,408 3,134 – 3,611 – 10,013 – 6,063 6,898 14,379 – 264 14,860 6,063 7,162 29,239 There are no non-current assets held in the Company’s country of domicile, being the United Kingdom (2018: $nil). Revenue analysis by geographical location, product and customer Gold bullion Mineral concentrates Other 2019 2018 Group $’000 Romania – 3,328 104 3,432 Group $’000 Zimbabwe 31,243 – – 31,243 Group $’000 Romania – 3,098 – 3,098 Group $’000 Zimbabwe 27,590 – – 27,590 100% of gold bullion and mineral concentrate sales (2018: 100%) in both Romania and Zimbabwe were made to a single customer in each respective country. Romanian revenues form part of continuing operations. All Zimbabwean revenues form part of discontinued operations. 42 VAST RESOURCES 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 43 2. Group loss from operations Operating loss is stated after charging/(crediting): Auditors’ remuneration (note 3) Depreciation Employee pension costs Share option expense Foreign exchange loss/(gain) (Gain)/loss on disposal of property, plant and equipment 3. Auditor’s remuneration from continuing operations Fees payable to the Company’s auditor for the audit of the Company’s annual accounts Fees payable to the Company’s auditor for other services: – Audit of the accounts of subsidiaries – Other services Auditors remuneration from discontinued operations 4. Finance expense from continuing operations Interest paid on secured borrowings Interest paid on unsecured borrowings Interest paid on convertible loan Finance expense from discontinued operations 2019 Group $’000 105 1,206 43 264 2,798 (84) 2019 Group $’000 59 46 – 105 33 2019 Group $’000 770 – 75 845 1,014 5. Taxation There was no taxation charge for continuing operations during the year (2018: US$ nil). Taxation from discontinued activities was as follows: Income tax on profits Deferred tax charge Tax charge (credit) 2019 Group $’000 485 934 1,419 2018 Group $’000 129 1,401 61 27 (2,301) 23 2018 Group $’000 83 46 – 129 22 2018 Group $’000 698 10 – 708 494 2018 Group $’000 – 3,794 3,794 VAST RESOURCES 43 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 44 Notes to Financial Statements continued 5. Taxation continued Deferred tax assets are only recognised in the Group where the company concerned has a reasonable expectation of future profits against which the deferred tax asset may be recovered. The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained as follows: Profit/(loss) before taxation Profit/(loss) before taxation at the standard rate of corporation tax in the UK of 19% (2018: 19%) Difference in tax rates in foreign jurisdictions Income not chargeable to tax Expenses not allowed for tax Short term timing differences Loss carried forward Income tax charge on profits Factors that may affect future tax charges: 2019 Group $’000 2018 Group $’000 8,515 (11,681) 1,618 2,007 (4,629) 1,308 (1,056) (1,237) 485 (2,219) 690 (227) 350 (1,795) (3,201) – Tax losses Accumulated tax losses 2019 Group $’000 49,558 2018 Group $’000 61,423 2019 Company $’000 31,152 2018 Company $’000 28,903 However, these losses will only be recoverable against future profits, the timing of which is uncertain, and a deferred tax asset has not been recognised in respect of these losses. A deferred tax asset has not been recognised in respect of accumulated tax losses for the Company. 6. Employees from both continuing and discontinued operations Dis- Dis- Group Continuing continued Group Continuing continued $’000 $’000 $’000 $’000 $’000 $’000 2019 2018 Staff costs (including directors) consist of: Wages and salaries – management 1,383 753 630 987 513 Wages and salaries – other 6,057 2,444 3,613 4,224 2,523 7,440 3,197 4,243 5,211 3,036 Consultancy fees 1,057 754 303 1,419 912 Social Security costs 257 165 92 229 162 Healthcare costs – – – – – Pension costs 201 43 158 213 61 8,955 4,159 4,796 7,072 4,171 The average number of employees (including directors) during the year was as follows: Management 19 11 8 15 9 Other operations 590 208 382 371 213 609 219 390 386 222 474 1,701 2,175 507 67 152 2,901 6 158 164 44 VAST RESOURCES 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 45 7. Directors’ remuneration Directors’ emoluments Company contributions to pension schemes Directors and key management remuneration 2019 Group $’000 697 – 697 2018 Group $’000 402 14 416 The Directors are considered to be the key management of the Group and Company. Four of the Directors at the end of the period have share options receivable under long term incentive schemes. The highest paid Director received an amount of $244,166 over the thirteen-month period (2018: $196,359). Included within the above remuneration are amounts accrued at 30 April 2019. 8. Earnings per share Profit and loss per ordinary share has been calculated using the weighted average number of ordinary shares in issue during the relevant financial year. The weighted average number of ordinary shares in issue for the period is: Profit/(loss) for the period ($’000) Profit/(loss) per share basic and diluted (cents) Profit/(loss) from continuing operations for the period ($’000) Profit/(loss) per share basic and diluted continuing operations (cents) Profit/(loss) from discontinued operations for the period ($’000) Profit/(loss) per share basic and diluted discontinued operations (cents) The effect of all potentially dilutive share options is anti-dilutive. 30 Apr 2019 Group 31 Mar 2018 Group 5,887,042,985 243 0.00 (9,649) (0.16) 9,892 0.17 4,821,870,747 (17,295) (0.36) (17,898) (0.37) 603 0.01 9. Loss for the financial year The Company has adopted the exemption allowed under Section 408(1b) of the Companies Act 2006 and has not presented its own income statement in these financial statements. VAST RESOURCES 45 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 46 Notes to Financial Statements continued 10. Property, plant and equipment Group Buildings Fixtures, and Capital Plant and fittings and Computer Motor Improve- Mining Work in machinery equipment assets vehicles ments assets progress Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Cost at 1 April 2017 8,401 Additions during the year 811 Reclassification 9,942 Disposals during the year (131) Impairment – Foreign exchange movements 224 202 227 605 3,231 53 109 94 33 (30) 30 – 242 (62) (78) (60) (28) – – – (34) 24,946 6,382 1,908 6,189 194 (10,378) (2) – – – 43,994 9,197 – (361) (34) 7 3 60 296 385 50 1,025 Cost at 31 March 2018 19,247 170 291 699 3,740 27,431 2,243 53,821 Additions during the period 1,392 Acquired through business combination 2,812 Reclassification 246 Disposals during the period (14) Discontinued operations (20,142) Foreign exchange movements (338) 103 118 313 176 5,428 3,861 11,391 21 102 2 1,790 – – – 134 – – – (380) 4,727 – – – – (82) (243) (382) (707) (2,240) – – (26,188) (2,830) (96) (52,732) (5) (11) (62) (306) (497) (110) (1,329) Cost at 30 April 2019 3,203 46 118 245 3,212 6,174 2,784 15,782 Depreciation at 1 April 2017 2,963 Charge for the year 1,826 Disposals during the year (91) Foreign exchange movements 100 Depreciation at 31 March 2018 4,798 Charge for the year 2,710 Acquired through business combination 52 Disposals during the period (4) Discontinued operations (5,402) Foreign exchange movements (201) Depreciation at 30 April 2019 1,953 Net book value at 31 March 2018 14,449 Net book value at 31 April 2019 1,250 119 139 283 345 21 79 114 152 (62) (78) (34) (1) 978 604 670 – – – 5,431 2,862 (266) 5 – 42 42 71 – 260 83 140 405 538 1,719 604 44 162 100 210 1,222 106 8,287 4,554 – 9 – – – – 61 – – – – (84) (238) (319) (68) – – (1,828) – (4) (7,939) (8) (7) (54) (95) (73) – (438) 35 66 132 585 1,040 710 4,521 87 151 294 3,202 25,712 1,639 45,534 11 52 113 2,627 5,134 2,074 11,261 46 VAST RESOURCES 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 47 Company Plant and machinery $’000 Fixtures, fittings and equipment $’000 Computer assets $’000 Motor vehicles $’000 Buildings and Improve- ments $’000 Cost at 31 March 2017 Additions during the year Disposals during the year Cost at 31 March 2018 Additions during the period Disposals during the period Cost at 30 April 2019 Depreciation at 31 March 2017 Charge for the year Disposals during the year Depreciation at 31 March 2018 Charge for the period Disposals during the period Depreciation at 30 April 2019 Net book value at 31 March 2018 Net book value at 30 April 2019 30 – – 30 – – 30 30 – – 30 – – 30 – – 11. Investments in subsidiaries Cost at the beginning of the year Additions during the year Cost at the end of the year 5 – – 5 – – 5 5 – – 5 – – 5 – – 23 – – 23 1 – 24 23 – – 23 – – 23 – 1 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Total $’000 58 – – 58 1 – 59 58 – – 58 – – 58 – 1 2019 Company $’000 1,583 90 1,673 2018 Company $’000 218 1,365 1,583 The principal subsidiaries of Vast Resources plc, all of which are included in these consolidated Annual Financial Statements, are as follows: Country of registration Class Proportion held by group 2019 Proportion held by group 2018 Nature of business Company African Consolidated Resources SRL Millwall International Investments Limited Moorestown Limited Romania Ordinary 80% 80% BVI BVI Ordinary 100% 100% Ordinary 100% 100% Sinarom Mining Group SRL Romania Ordinary 100% 100% Vast Resources Romania Ltd Vast Resources Zimbabwe (Private) Limited United Kingdom Zimbabwe Ordinary 100% 100% Ordinary 100% 100% Mining exploration and development Holding company Mining exploration and development Mining exploration and development Holding company Mining exploration and development The table above shows the principal subsidiaries of the Company. A full list of all group subsidiaries is given in Note 28, at the end of this report. VAST RESOURCES 47 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 48 Notes to Financial Statements continued 12. Investment in joint venture and subsidiary company On 1 April 2018 the Group acquired a 25.01% interest in Delta Gold (Private) Limited (“Delta”) for US$ 4.5 million which was held indirectly through the Group’s interest in Dallaglio Investments (Private) Limited (“Dallaglio”). Delta is incorporated in Zimbabwe and is the owner of the Eureka Gold Mine which at the time of the acquisition was on care and maintenance. The goodwill arising on this transaction was US$ 0.6 million The Group previously held a 25.01% interest in a Joint venture, Cordillera (Private) Limited (Cordillera), which was indirectly held through the Group’s interest in Breckridge Investments (Private) Limited, the operating company for the Pickstone Peerless mine in Zimbabwe. Cordillera is incorporated in Zimbabwe and its main interest is the provision of custom milling services to artisanal miners operating in the vicinity of the Pickstone Peerless Gold Mine. On 1 April 2018 the Joint Venture was fully absorbed into the operations of Breckridge Investments (Private) Limited. Both of these investments have been disposed of as part of the Group’s disposal of its gold operations in Zimbabwe. The associated fixed asset additions associated with these investments are disclosed within the fixed asset note. No detailed disclosures have been made of these transactions as, in the opinion of the Directors, they are not material to the financial statements. 13. Profit after taxation from discontinued operations On 23rd April 2019, the Group disposed of its remaining 25.01% interest in Dallaglio Investments (Private) Limited, the holding company for the Pickstone Peerless and Eureka Gold mines in Zimbabwe. On 24th April 2019, the group disposed of its 100% interest in Canape Investments (Private) Limited, the holding company for its gold investments in Zimbabwe. The aggregate consideration received for these disposals was $3.5 million. The amounts included within the profit (loss) after taxation from discontinued operations are as follows: Gain on disposal of operations Profit after tax from discontinued operations before Zimbabwe dollar devaluation Profit after tax from discontinued operations - devaluation gains Total profit after taxation from discontinued operations 30 Apr 2019 Group $’000 31 Mar 2018 Group $’000 8,649 2,683 5,715 17,047 – 2,305 – 2,305 48 VAST RESOURCES 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 49 The net assets and non-controlling interests derecognised in arriving at the gain on disposal are as follows: Non current assets Property, plant and equipment Joint venture investments Total non-current assets Current assets Inventories Trade receivables Available for sale investments Cash and cash equivalents Total current assets Non Current liabilities Loans and borrowings Provisions Deferred tax liability Total non-current liabilities Current liabilities Trade payables Loans and borrowings Total current liabilities Attributable goodwill Net assets de-recognised Consideration received: Cash Total consideration received Gain on disposal Consideration received Net assets derecognised Non-controlling interest de-recognised Fair value of retained interest Cumulative gain/loss on financial assets at FVTOCI reclassified on loss of control of subsidiaries Cumulative exchange differences in respect of net assets of the subsidiaries reclassified from equity on loss of control of subsidiaries Gain on disposal $’000 44,793 – 44,793 3,045 1,276 1,908 6,229 14,873 240 4,386 19,499 1,554 5,743 7,297 566 24,792 3,500 3,500 3,500 (24,792) 29,941 – – – 8,649 VAST RESOURCES 49 256569 Vast Resources R&A pp41-pp50.qxp 11/10/2019 21:36 Page 50 Notes to Financial Statements continued 13. Profit after taxation from discontinued operations continued The breakdown of the components of profit after tax from discontinued operations in the period is as follows: 30 Apr 2019 31 Mar 2018 Group Group $’000 $’000 Revenue 31,243 27,590 Cost of sales (18,527) (19,114) Gross profit 12,716 8,476 Overhead expenses (1,887) (1,925) Depreciation (3,348) (1,460) (Loss) profit on disposal of fixed assets (8) 1 Sundry income 670 342 Exchange gains 5,715 – Other administrative expenses (4,916) (808) Profit from operations 10,829 6,551 Finance income 2 42 Finance expense (1,014) (494) Loss on disposal of interest in subsidiary loans – – Profit before taxation from continuing operations 9,817 6,099 Taxation charge (1,419) (3,794) Total profit after taxation for the year 8,398 2,305 Other comprehensive income (3) – Total comprehensive profit for the period 8,395 2,305 Total comprehensive profit attributable to: The equity holders of the parent company 1,249 613 Non-controlling interest 7,146 1,692 8,395 2,305 Cash generated by/absorbed in: Operating activities Investing activities Financing activities 2019 2018 Continuing operations Discontinued operations Continuing operations Discontinued operations (7,872) (1,348) 5,262 13,226 (11,983) 1,985 (5,131) (5,437) 7,989 4,517 (2,059) 92 50 VAST RESOURCES 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 51 14. Loans to group companies Loans to Group companies are repayable on demand. The treatment of this balance as non-current reflects the Company’s expectation of the timing of receipt. 15. Inventory Minerals held for sale Production stockpiles Consumable stores 16. Receivables Trade receivables Other receivables Short term loans Prepayments VAT Apr 2019 Group $’000 61 48 304 413 Mar 2018 Group $’000 1,484 1,425 1,145 4,054 Apr 2019 Company $’000 Mar 2018 Company $’000 – – – – – – – – Apr 2019 Group $’000 Mar 2018 Group $’000 Apr 2019 Company $’000 Mar 2018 Company $’000 – 1,502 174 74 787 2,537 94 1,145 789 1,366 2,012 5,406 – 137 224 – – 361 – 29 50 14 – 93 Of which: Of which: not impaired as at 30 April 2019 and past due in the following periods: Carrying amount before deducting any impairment loss 707 1,704 2,411 Related impairment loss Neither impaired Net nor past due on 30 April 2019 carrying amount Not more than three months More than three months and not more than More than six months six months 707 202 909 – 1,502 1,502 – 1,502 1,539 – – – – – – – – – Trade receivables Other receivables At the reporting date, included within VAT receivable is an amount in respect of VAT owed to African Consolidated Resources SRL of US$ 710,362 (RON 3,014,349) The amount represents VAT paid on the Baita Plai Mine’s care and maintenance operations. As reported last year, ANAF, the Romanian revenue authority had refused to accept aforesaid amount as a legitimate VAT receivable as a mining licence was not then in place for Baita Plai Mine. On 15th October 2018, the mining licence was granted. The Romanian Court has instructed an independent VAT audit and, subsequent to the reporting date, the audit has been completed satisfactorily and supports the Group’s claim for repayment. VAST RESOURCES 51 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 52 Notes to Financial Statements continued 17. Loans and borrowings Non-current secured borrowings consist of: Non-current Secured borrowings Unsecured borrowings less amounts payable in less than 12 months Current Secured borrowings Unsecured borrowings Bank overdrafts Current portion of long-term borrowings Total loans and borrowings Non-current secured borrowings consist of: Apr 2019 Group $’000 Mar 2018 Group $’000 Apr 2019 Company $’000 Mar 2018 Company $’000 4,043 – – 4,043 978 498 – – 1,476 5,519 8,149 14,838 (352) 22,635 – 2,664 1,315 352 4,331 26,966 – – – – 309 – – – 309 – – – – – – – – • • US$ 4,000,000 (2018: US$ 4,000,000) secured offtake finance from Mercuria Energy Trading SA. The loan is secured by a pledge on 49.9% of the shares of the Group’s subsidiary Sinarom Mining Group SRL and bore annual interest of 9.4%. US$ 43,449 (2018: US$ 69,131) asset financing loans secured on the underlying movable assets belonging to ACR SRL. Current secured borrowing consists of: • US$ 978,453 (2018: US$ 4,080,000) loan from Sub-Sahara Goldia Investments Ltd secured by a pledge over 50.1% of the shares of the Group’s subsidiary Sinarom Mining Group SRL. The loan bears interest at 12% per annum and is repayable within the year. Current unsecured borrowing consists of: • • US$ 189,072 (2018: US$ 220,156) loans from the non-controlling interests in African Consolidated Resources SRL, the holder of the rights to the Baita Plai Mine. The loans from the non-controlling interests are interest free and have no fixed terms of repayment. There is no expectation that this loan will be called. US$ 309,635 (2018: nil) loan from M Semere bearing an interest rate of 6%. There is no expectation that this loan will be called. 52 VAST RESOURCES 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 53 Reconciliation of liabilities arising from financing activities Non cash changes Amortised 1 Apr Cash - finance 2018 flows charges 2019 Group $’000s $’000s $’000s Long-term borrowings 22,635 (3,754) 412 Short-term borrowings 4,331 7,896 1,435 Total liabilities from financing activities 26,966 4,142 1,847 Loans Disposal repaid of Accrued interest Exchange in other in shares liabilities adjustments payables $’000s $’000s 35 (412) (5,543) – $’000s $’000s – (14,873) (900) (5,743) 30 Apr 2019 $’000s 4,043 1,476 (900) (20,616) (5,508) (412) 5,519 Non cash changes Amortised 1 Apr finance 2017 Cashflows charges $’000s $’000s 2018 Group $’000s 3,923 708 Long-term borrowings 3,166 (98) 494 Short-term borrowings 3,935 Loss Loan on loan disposal disposal Cashflows* $’000s $’000s 12,538 2,300 – 31 Mar 2018 $’000s 22,635 4,331 Total liabilities from financing activities 7,101 3,825 1,202 12,538 2,300 26,966 * Loan disposal cashflows are included in investing activities Reconciliation of external interest costs Amortised finance charges – short-term borrowings Amortised finance charges – long-term borrowings Total external interest for the period 18. Trade and other payables Trade payables Other payables Other taxes and social security taxes Accrued expenses Apr 2019 Group $’000 1,193 1,033 1,027 217 3,470 Mar 2018 Group $’000 5,719 769 980 91 7,559 Trade payables Other payables Amount 30 days 60 days 90 days 120 days 1,193 1,033 365 709 57 171 170 8 105 4 Maturity profile for trade and other payables 2019 Group $’000s 1,435 412 1,847 2018 Group $’000s 494 708 1,202 Apr 2019 Company $’000 Mar 2018 Company $’000 288 470 10 – 768 186 106 28 – 320 150 days or more 496 141 VAST RESOURCES 53 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 54 Notes to Financial Statements continued 19. Provisions Provision for rehabilitation of mining properties – Provision brought forward from previous periods – Derecognised on disposal of subsidiary Apr 2019 Group $’000 Mar 2018 Group $’000 Apr 2019 Company $’000 Mar 2018 Company $’000 1,397 (908) 489 1,095 302 1,397 – – – – – – As more fully set out in the Statement of Accounting Policies on page 39, the Group provides for the cost of the rehabilitation of a mining property on the cessation of mining. Provision for this cost is recognised from the commencement of mining activities. This provision accounts for the estimated full cost to rehabilitate the mine at Manaila according to good practice guidelines in the country where the mine is located, which may involve more than the stipulated minimum legal commitment. The comparative figures include provisions in respect of Pickstone Peerless which was divested in April 2019. When accounting for the provision the Group recognises a provision for the full cost to rehabilitate the mine and a matching asset accounted for within the non-current mining asset. 20. Financial instruments – risk management Significant accounting policies Details of the significant accounting policies in respect of financial instruments are disclosed on page 35. The Group’s financial instruments comprise available for sale investments, cash and items arising directly from its operations such as other receivables, trade payables and loans. Financial risk management The Board seeks to minimise its exposure to financial risk by reviewing and agreeing policies for managing each financial risk and monitoring them on a regular basis. No formal policies have been put in place in order to hedge the Group and Company’s activities to the exposure to currency risk or interest risk; however, the Board will consider this periodically. No derivatives or hedges were entered into during the year. The Group and Company is exposed through its operations to the following financial risks: • • • Credit risk Market risk (includes cash flow interest rate risk and foreign currency risk) Liquidity risk The policy for each of the above risks is described in more detail below. The principal financial instruments used by the Group, from which financial instruments risk arises are as follow: • • • • Receivables Cash and cash equivalents Trade and other payables (excluding other taxes and social security) and loans Available for sale investments The table below sets out the carrying value of all financial instruments by category and where applicable shows the valuation level used to determine the fair value at each reporting date. The fair value of all financial assets and financial liabilities is not materially different to the book value. 54 VAST RESOURCES 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 55 Loans and receivables Cash and cash equivalents Receivables Loans to Group Companies Available for sale financial assets Available for sale investments (valuation level 1) Other liabilities Trade and other payables (excl. short term loans) Loans and borrowings 2019 Group $’000 569 2,537 – – 3,470 5,519 2018 Group $’000 1,300 5,406 – 13 7,559 26,966 2019 Company $’000 218 361 34,568 – 768 309 2018 Company $’000 208 93 25,179 3 320 – Credit risk Financial assets, which potentially subject the Group and the Company to concentrations of credit risk, consist principally of cash, short-term deposits and other receivables. Cash balances are all held at recognised financial institutions. Other receivables are presented net of allowances for doubtful receivables. Other receivables currently form an insignificant part of the Group’s and the Company’s business and therefore the credit risks associated with them are also insignificant to the Group and the Company as a whole. The Company has a credit risk in respect of inter-company loans to subsidiaries. The recoverability of these balances is dependent on the commercial viability of the exploration activities undertaken by the respective subsidiary companies. The credit risk of these loans is managed as the directors constantly monitor and assess the viability and quality of the respective subsidiary’s investments in intangible mining assets. Maximum exposure to credit risk The Group’s maximum exposure to credit risk by category of financial instrument is shown in the table below: Cash and cash equivalents Receivables 2019 Carrying value $’000 569 2,537 2019 Maximum exposure $’000 1,620 10,454 2018 Carrying value $’000 1,300 5,406 2018 Maximum exposure $’000 1,817 6,941 The Company’s maximum exposure to credit risk by class of financial instrument is shown in the table below: Cash and cash equivalents Receivables Loans to Group Companies Market risk 2019 Carrying value $’000 218 361 34,568 2019 Maximum exposure $’000 8,964 342 36,237 2018 Carrying value $’000 208 93 25,179 2018 Maximum exposure $’000 1,663 1,540 40,132 Cash flow interest rate risk The Group has adopted a non-speculative policy on managing interest rate risk. Only approved financial institutions with sound capital bases are used to borrow funds and for the investments of surplus funds. VAST RESOURCES 55 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 56 Notes to Financial Statements continued 20. Financial instruments – risk management continued The Group and the Company seeks to obtain a favourable interest rate on its cash balances through the use of bank deposits. At the reporting date, the Group had a cash balance of $0.569 million (2018: $1.300 million) which was made up as follows: Sterling United States Dollar Euro Lei (Romania) Zimbabwe Dollar 2019 Group $’000 218 205 – 31 115 569 2018 Group $’000 106 1,131 1 62 – 1,300 At the reporting date, the Company had a cash balance of $0.218 million (2018: $0.208 million) which was made up as follows: Sterling United States Dollar Euro Lei (Romania) 2019 Company $’000 2018 Company $’000 218 – – – 218 106 102 – – 208 The Group had interest bearing debts at the current year end of US$ 5.330 million (2018: US$ 9.464 million). These are made up as follows: Interest rate 9.4% 12% 6% 12% Secured long-term loans Secured short-term loans Unsecured loans Bank overdraft These loans are repayable as follows: – Within 1 year – Between 1 and 2 years – In more than 2 years 2019 Group $’000 4,043 978 309 – 5,330 1,287 4,043 – 2018 Group $’000 8,149 1,315 9,464 2,000 3,667 3,797 2019 Company $’000 2018 Company $’000 – 309 – 309 309 – – – – – – – – Borrowings of US$ 4 million carry a floating interest rate with the remainder having fixed rates. An increase in interest rates of 1% would increase the annual finance expense by US$ 40,000. 56 VAST RESOURCES 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 57 Foreign currency risk Foreign exchange risk is inherent in the Group’s and the Company’s activities and is accepted as such. The majority of the Group’s expenses are denominated in United States Dollars and therefore foreign currency exchange risk arises where any balance is held, or costs incurred, in currencies other than United States Dollars. At 30 April 2019 and 31 March 2018, the currency exposure of the Group was as follows: At 30 April 2019 Cash and cash equivalents Trade and other receivables Trade and other payables Available for sale investments At 31 March 2018 Cash and cash equivalents Trade and other receivables Trade and other payables Available for sale investments Sterling $’000 US Dollar $’000 Euro $’000 218 162 (320) – 106 14 (258) – 205 387 (902) – 1,131 4,026 (3,246) 13 – – – – 1 – (42) – Other $’000 146 1,989 (2,271) – 62 1,366 (4,013) – Total $’000 569 2,537 (3,493) – 1,326 5,960 (7,559) 13 The effect of a 10% strengthening of Sterling against the US dollar at the reporting date, all other variables held constant, would have resulted in decreasing post tax losses by $5,952 (2018: $13,527 decrease). Conversely the effect of a 10% weakening of Sterling against the US dollar at the reporting date, all other variables held constant, would have resulted in increasing post tax losses by $5,952 (2018: $13,527 decrease). At 30 April 2019 and 31 March 2018, the currency exposure of the Company was as follows: Sterling $’000 US Dollar $’000 Euro $’000 Other $’000 At 30 April 2019 Cash and cash equivalents Trade and other receivables Loans to Group companies Trade and other payables Available for sale investments At 31 March 2018 Cash and cash equivalents Other receivables Loans to Group companies Trade and other payables Available for sale investments 218 137 (320) – 106 14 1,286 (258) – – 943 34,568 (470) 102 79 22,686 (82) 3 – – – – – – 1,207 – – – – – – – – – – – – Total $’000 218 1,080 34,568 (790) – 208 93 25,179 (340) 3 Liquidity risk Any borrowing facilities are negotiated with approved financial institutions at acceptable interest rates. All assets and liabilities are at fixed and floating interest rate. The Group and the Company seeks to manage its financial risk to ensure that sufficient liquidity is available to meet the foreseeable needs both in the short and long term. See also references to Going Concern disclosures in the Strategic Report on page 11. As set out in Note 18, of the consolidated trade and other payables balance of $2.226 million, $1,302 million is due for payment within 60 days of the reporting date. The maturity profile of interest bearing debts are highlighted above. VAST RESOURCES 57 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 58 Notes to Financial Statements continued 20. Financial instruments – risk management continued Capital The objective of the Directors is to maximise shareholder returns and minimise risks by keeping a reasonable balance between debt and equity. In previous years the Company and Group has minimised risk by being purely equity financed. In the current year, the Group has assumed debt risk but has kept the net debt amount as low as possible. The Group’s debt to equity ratio is 93.4% (2018: 145.7%), calculated as follows: Loans and borrowings Less: cash and cash equivalents Net debt Total equity Debt to capital ratio (%) 21. Share capital As at 31 March 2017 Issued during the year * As at 31 March 2018 Issued during the year * As at 30 April 2019 Apr 2019 $000’s 5,519 (569) 4,950 5,302 93.4% Ordinary 0.1p No of shares Nominal value Deferred 0.9p No of shares Nominal value 4,663,404,459 461,882,523 5,125,286,982 2,819,884,329 6,570 863,562,664 – 620 7,190 863,562,664 – 3,662 7,945,171,311 10,852 863.,562,664 12,850 – 12,850 – 12,850 Mar 2018 $’000 26,966 (1,300) 25,666 17,614 145.7% Share premium 74,802 2,435 77,237 4,448 81,685 * Details of the shares issued during the year are as shown in the table below and in the Statement of Changes of Equity on pages 25-26. There were no shares reserved for issue under share options at 30 April 2019 (2018: nil). The deferred shares carry no rights to dividends or to participate in any way in the income or profits of the Company. They may receive a return of capital equal to the amount paid up on each deferred share after the ordinary shares have received a return of capital equal to the amount paid up on each ordinary share plus £10,000,000 on each ordinary share, but no further right to participate in the assets of the Company. The Company may, subject to the Statutes, acquire all or any of the deferred shares at any time for no consideration. The deferred shares carry no votes. The ordinary shares carry all the rights normally attributed to ordinary shares in a company subject to the rights of the deferred shares. See also Note 27 on page 67 for details of share issues after the reporting date. 58 VAST RESOURCES 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 59 Date of issue No of shares Issue price (pence) Purpose of issue 2018 4 Apr 17 1 Jun 17 14 Jun 17 26 Jul 17 9 Oct 17 17 Oct 17 27 Oct 17 30 Oct 17 1 Nov 17 3 Nov 17 21 Nov 17 21 Nov 17 27 Nov 17 6 Dec 17 11 Dec 17 13 Dec 17 22 Dec 17 29 Dec 17 30 Jan 18 1 Feb 18 22 Feb 18 9 Mar 18 23 Mar 18 6,116 20,000,000 51,386 225,017 2,228 2,112 1,061,060 183,180 265,161 36,794 190,476,190 1,000,000 807,018 382,062 234,261,876 123,553 1,250,956 163,147 541,204 5,799 8,000,000 37,664 3,000,000 461,882,523 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.525 0.5 0.5 0.5 0.525 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Issued for cash to investors Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Open offer to existing shareholders Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants VAST RESOURCES 59 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 60 Notes to Financial Statements continued 21. Share capital continued Date of issue 2019 5 Apr 2018 10 May 2018 15 May 2018 23 May 2018 31 May 2018 22 Jun 2018 27 Jun 2018 24 Jul 2018 2 Aug 2018 7 Aug 2018 28 Aug 2018 29 Aug 2018 29 Aug 2018 29 Sep 2018 12 Oct 2018 16 Oct 2018 18 Oct 2018 18 Oct 2018 2 Nov 2018 5 Dec 2018 7 Dec 2018 18 Dec 2018 4 Jan 2019 18 Jan 2019 4 Feb 2019 13 Feb 2019 13 Feb 2019 13 Feb 2019 13 Feb 2019 4 Mar 2019 4 Mar 2019 12 Apr 2019 12 Apr 2019 12 Apr 2019 Issue price (pence) Purpose of issue No of shares 8,200,000 244,240 513,456 300,000 539,280 78,701 238,095,238 2,426,640 400,000 1,384,087 3,000,000 14,043 133,914,127 354,006 13,920 57,331 70,847,785 16,666,666 188,679,245 153,810 576,835 68,000,000 13,754 164,469,356 0.5 0.5 0.5 0.5 0.5 0.5 0.525 0.5 0.5 0.5 0.5 0.5 0.645 0.5 0.5 0.5 0.6 0.6 0.53 0.5 0.5 0.1 0.5 0.24 255,604,120 0.12 550,000,000 74,074,074 29,629,629 10,000,000 550,000,000 7,189,542 407,407,407 7,407,407 29,629,630 2,819,884,329 0.135 0.135 0.135 0.135 0.153 0.153 0.135 0.135 0.135 Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Placing Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Subscription Exercise of open offer warrants Exercise of open offer warrants Exercise of open offer warrants Placing Exercise of open offer warrants Placing Exercise of open offer warrants Exercise of open offer warrants Subscription (Bergen convertible security) Exercise of open offer warrants Exercise of conversion rights (Bergen convertible security) Exercise of conversion rights (Bergen convertible security) Placing Subscription Subscription Subscription Placing Subscription Placing Subscription Subscription Directors and Management financing agreement As previously reported, on 6 January 2016 the Directors of the Company, together with certain senior managers, subscribed an aggregate amount of £0.5 million for new ordinary shares of 0.1p each in the Company, together with one warrant for each share issued; these warrants carry an entitlement either to one share at a price of 130 per cent of the issue price of the shares to which the warrant related or to a number of shares to be determined by a calculation based on a Black Scholes valuation of the shares at the time of exercise. 62,500,000 new Ordinary Shares were issued by the Company together with 62,500,000 warrants. As at 31 March 2018, the Directors and senior managers held 5,208,313 unexercised warrants. None of these have been exercised in the current year and all remain unexercised at 30 April 2019. The last date for exercise is 31 March 2021. 60 VAST RESOURCES 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 61 Existing shareholders financing agreement As reported in the report for the year to 31 March 2016, on 4 March 2016 the Company entered into an agreement with a number of existing shareholders (the “Investors“) for their subscription for up to £0.8 million, on similar terms as those agreed with the Directors and Management, detailed above. A total of 190,211,632 shares were subscribed for; in addition, 190,211,632 warrants were issued. At 31 March 2018 there remained 6,613,756 warrants unexercised by these investors. None of these have been exercised in the current year and all remain unexercised at 30 April 2019. The last date for exercise is 31 March 2021. 22. Share based payments Equity – settled share based payments The Company has granted share options and warrants to Directors, staff and consultants. In June 2015, the Company also established a Share Appreciation Scheme to incentivise Directors and senior executives. The basis of the Scheme is to grant a fixed number of ‘share appreciation rights’ (SARs) to participants. Each SAR is credited rights to receive at the discretion of the Company ordinary shares in the Company or cash to a value of the difference in the value of a share at the date of exercise of rights and the value at date of grant. The SARS are subject to various performance conditions. The tables below reconcile the opening and closing number of SAR’s in issue at each reporting date: Issued during Lapsed during year year Exercised during year Exercise price Options 0.3p 0.45p 0.5p 0.5p 0.7p 0.7p In issue at 31 March 2018 – 5,000,000 50,500,000 50,500,000 24,500,000 28,500,000 20,000,000 – – – – – – – (2,500,000) (2,500,000) (24,500,000) – 159,000,000 20,000,000 (29,500,000) Exercise price Options In issue at 31 March 2017 Issued during Lapsed during year year Exercised during year 0.45p 0.5p 0.5p 0.7p 0.7p – – 56,500,000 40,500,000 5,000,000 50,500,000 50,500,000 – – (32,000,000) (12,000,000) 97,000,000 106,000,000 (44,000,000) – – – – – – – – – – – – – In issue at 30 April 2019 20,000,000 5,000,000 48,000,000 48,000,000 – 28,500,000 149,500,000 In issue at 31 March 2018 5,000,000 50,500,000 50,500,000 24,500,000 28,500,000 159,000,000 Final exercise date March 2022 June 2020 March 2022 March 2023 March 2019 March 2020 Final exercise date June 2020 March 2022 March 2023 March 2019 March 2020 VAST RESOURCES 61 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 62 Notes to Financial Statements continued 22. Share based payments continued The tables below reconcile the opening and closing number of share options and warrants in issue at each reporting date: Exercise price Warrants 0.4p 0.5p variable variable variable In issue at 31 March 2018 5,425,000 547,274,243 14,583,250 6,613,756 573,896,249 565,000,000 1,138,986,249 * Extended from June 2019 Exercise price Warrants 0.4p 0.5p 0.5p 0.5p variable variable In issue at 31 March 2017 5,425,000 6,659,903 564,418,700 13,340,097 14,583,250 6,613,756 Issued during Lapsed during year year Exercised during year In issue at 30 April 2019 – – – – – – – – – – – – – – – 5,425,000 (18,270,103) 529,004,140 14,583,250 6,613,756 – – (18,270,103) 555.626.146 565,000,000 – (18,270,103) 1,120,626,146 Issued during Lapsed during year year Exercised during year In issue at 31 March 2018 – – – – – – – – – – – – – – – – (6,659,903) 5,425,000 – (17,144,457) 547,274,243 (13,340,097) – 14,583,250 – 6,613,756 – (37,144,457) 573,896,249 565,000,000 – (37,144,457) 1,138,896,249 Final exercise date October 2019 December 2019* January 2021 March 2021 See note* Final exercise date October 2019 December 2017 June 2019 December 2017 January 2021 March 2021 See note variable 611,040,706 – – 565,000,000 611,040,706 565,000,000 Note: These warrants are only exercisable in the event of a default in repayment of the Mercuria Tranche A pre-payment off-take facility of US$ 4,500,000 (Mercuria Warrants). Outstanding at the beginning of the year Granted during the year Lapsed during the year Exercised during the year Outstanding at the end of the year Exercisable at the end of the year 2019 2018 Weighted average exercise price (pence) 0.44 0.30 0.44 – 0.45 0.43 Weighted average exercise price (pence) 0.43 0.50 0.75 – 0.44 0.41 Number 732,896,249 20,000,000 (47,770,103) (18,270,103) 686,856,043 613,856,043 Number 708,040,706 106,000,000 (44,000,000) 37,114,457 732,896,249 701,040,706 The weighted average remaining lives of the SARs, share options or warrants outstanding at the end of the period is 34 months (2018: 22 months). Of the 686,856,043 SARs, options and warrants outstanding at 30 April 2019 (2018: 732,896,249), 613,856,043 (2018: 701,040,706) are fully vested in the holders and are exercisable at that date. 62 VAST RESOURCES 256569 Vast Resources R&A pp51-pp63.qxp 11/10/2019 21:37 Page 63 Fair value of share options The fair values of share options and warrants granted have been calculated using the Black Scholes pricing model which takes into account factors specific-to-share incentive plans such as the vesting periods of the plan, the expected dividend yield of the Company’s shares and the estimated volatility of those shares. Based on the above assumptions, the fair values of the options granted are estimated to be: Share Option or Warrant Value variable variable 0.5p 0.5p 0.5p variable 0.4p Grant date Apr 16 Jul-16 Jul-16 Aug-16 Aug-16 Oct-16 Oct-16 Share price at date of grant 0.240p 0.360p 0.315p 0.265p 0.290p 0.280p 0.320p Vesting periods Mar-21 Mar-21 Jun-19 Jun-19 Jun-19 Mar-21 Oct-19 Volatility Life (years) Dividend yield 135% 135% 76% 76% 76% 135% 76% 5.00 5.00 4.11 4.01 3.97 5.00 3.97 nil nil nil nil nil nil nil Risk free interest rate 1.5% 1.5% 0.63% 0.34% 0.34% 1.5% 0.18% Fair value .2055p .3082p 0.5670p 0.0522p 0.0664p 0.2397p 0.1012p Volatility has been based on historical share price information. A higher rate of volatility is used when determining the fair value of certain options in order to reflect the special conditions attached thereto. Based on the above fair values the expense arising from equity-settled share options and warrants made was $263,967 (2018: $26,747). Cash-settled share-based payments The Directors of the Company had set up an Employee Benefit Trust (EBT) in which a number of employees and directors were participants (the ‘Participants’). The EBT held shares on behalf of Participants until such time as those Participants exercised their right to require the EBT to sell the shares. On the sale of the shares the Participants would have received the appreciation of the value in the shares above the market price on the date that the shares were purchased by the EBT, subject to the first 5% in growth in the share price, on an annual compound basis, being retained by the EBT. The Participants were to pay 0.01p per share to acquire their rights. In view of the large reduction in the Company’s share price since the EBT was set up, the value of the rights of the Participants under the EBT has become negligible, and accordingly the EBT has been terminated by the sale of the shares and the application of the sale proceeds in repayment of the loan by The Company to the EBT. In the event of an increase in the Company’s share price to a figure substantially in excess of 6p, the Company would have a liability to Participants equal to the rights that the Participants would have had under the EBT. The EBT rights of Participants are set out in the table below. Exercise price Outstanding at 31 March 2018 Exercised during last 13 months Lapsed during last 13 months Granted during last 13 months Outstanding at 30 April 2019 Date exercisable from 8.75p 8.75p 9.00p 9.00p 6.00p 6.00p 6,000,000 6,000,000 2,500,000 2,500,000 7,750,000 7,750,000 32,500,000 – – – – – – – – – – – – – – – – – – – – – 6,000,000 6,000,000 2,500,000 2,500,000 7,750,000 7,750,000 32,500,000 July 2010 July 2011 August 2011 August 2012 August 2012 August 2013 As at 30 April 2019 a total of 32,500,000 of the EBT participation rights were exercisable. VAST RESOURCES 63 256569 Vast Resources R&A pp64-end.qxp 11/10/2019 21:37 Page 64 Notes to Financial Statements Notes to Financial Statements continued 22. Share based payments continued Exercise price Outstanding at 31 March 2017 Exercised during last 12 months Lapsed during Last 12 months Granted during last 12 months Outstanding at 31 March 2018 Date exercisable from 8.75p 8.75p 9.00p 9.00p 6.00p 6.00p 6,000,000 6,000,000 2,500,000 2,500,000 7,750,000 7,750,000 32,500,000 – – – – – – – – – – – – – – – – – – – – – 6,000,000 6,000,000 2,500,000 2,500,000 7,750,000 7,750,000 32,500,000 July 2010 July 2011 August 2011 August 2012 August 2012 August 2013 As at 31 March 2018 a total of 32,500,000 of the EBT participation rights were exercisable. Fair value of Participants’ rights The fair values of the rights granted to participants under the EBT have been calculated using a Black Scholes valuation model. Based on the assumptions set out in the table below, as well as the limitation on the growth in share price attributable to the participants (as set out in the table above) the fair-values are estimated to be: Rights exercisable from: Jul 2010 Jul 2011 Aug 2011 Aug 2012 Aug 2012 Aug 2013 Grant date Validity of grant Vesting periods Share price at date of grant Volatility Dividend yield Risk free investment rate Fair value Oct 2010 10 years Aug 2009 10 years Aug 2009 10 years Oct 2010 10 years Aug 2009 – Aug 2009 – Oct 2010 – Oct 2010 – Aug 2012 9.00p 51% Nil 0.65% Nil Aug 2011 9.00p 51% Nil 0.65% Nil Jul 2010 8.75p 51% Nil 0.65% Nil Jul 2011 8.75p 51% Nil 0.65% Nil Sep 2011 10 years Sep 2011– Aug 2012 6.00p 51% Nil 0.65% Nil Sep 2011 10 years Sep 2011– Aug 2013 6.00p 51% Nil 0.65% Nil The Group has recorded liabilities in respect of the Participants’ rights of $nil and $nil in 2018 and 2019. Fair value is determined by using the Black Scholes model using the assumptions noted in the above table. The Group recorded total expenses of $nil and $nil in 2018 and 2019, respectively. The total intrinsic value at 31 December 2018 and 2019 was $nil and $nil, respectively. Volatility has been calculated by reference to historical share price information. Warrant and Share option expense Warrant and share option expense: – In respect of remuneration contracts – In respect of financing arrangements Total expense / (credit) 2019 Group $’000 264 – 264 2018 Group $’000 27 – 27 23. Reserves Details of the nature and purpose of each reserve within owners’ equity are provided below: • • • Share capital represents the nominal value at 0.1p each of the shares in issue. Share premium represents the balance of consideration received net of fund raising costs in excess of the par value of the shares. The share options reserve represents the accumulated balance of share benefit charges recognised in respect of share options granted by the Company, less transfers to retained losses in respect of options exercised or lapsed. 64 VAST RESOURCES 256569 Vast Resources R&A pp64-end.qxp 11/10/2019 21:37 Page 65 • • • The foreign currency translation reserve represents amounts arising on the translation of the Group and Company financial statements from Sterling to United States Dollars, as set out in the Statement of Accounting Policies on page 36, prior to the change in functional currency to United States Dollars, together with cumulative foreign exchange differences arising from the translation of the Financial Statements of foreign subsidiaries; this reserve is not distributable by way of dividends. The available for sale reserve represents the gains/(losses) arising on recognising financial assets classified as available for sale at fair value. The retained deficit reserve represents the cumulative net gains and losses recognised in the Group statement of comprehensive income. 24. Non-controlling Interests The non-controlling interests (NCI) in Dallaglio Investments (Private) Limited and its subsidiaries, together with the NCI in Ronquil Enterprises (Private) Limited, were de-recognised on the disposal of the Group’s interests in both Companies, as more fully set out in Note 13. African Consolidated Resources SRL is an 80% owned subsidiary of the Company which also has an NCI. This follows the merger of this company with Mineral Mining in February 2016. Summarised financial information for these three entities, before intra-group eliminations, is presented below together with amounts attributable to NCI: Investments & subsidiaries $000’s For the period ended 30 April 2019 African Dallaglio Consolidated Resources SRL $000’s Ronquil Enterprises (Private) Limited Total NCI $000’s $000’s Revenue 31,243 418 – 31,661 Cost of sales (18,527) (219) – (18,746) Gross Profit (loss) 12,716 199 – 12,915 Overhead expenses (750) (1,764) (17) (2,531) Operating profit (loss) 11,966 (1,565) (17) 10,384 Finance expense (1,012) (3) – (1,015) Loss before tax 10,954 (1,568) (17) 9,369 Tax expense / credit (1,408) – – (1,408) Profit (loss) after tax 9,546 (1,568) (17) 7,961 Total comprehensive profit (loss) allocated to NCI 7,155 (293) (9) 6,853 Cash flows from operating activities 13,226 (574) – 12,652 Cash flows from investing activities (13,575) (1,690) – (15,265) Cash flows from financing activities 1,985 2,264 – 4,249 Net cash inflows/(outflows) 1,636 – – 1,636 As at 30 April 2019 Assets: Property plant and equipment – 7,125 – 7,125 Inventory – 8 – 8 Receivables – 830 – 830 Liabilities: $000’s $000’s $000’s $000’s Loans and other borrowings – 700 – 700 Trade and other payables – 1,479 – 1,479 Accumulated non-controlling interests – (41) – (41) VAST RESOURCES 65 256569 Vast Resources R&A pp64-end.qxp 11/10/2019 21:37 Page 66 Notes to Financial Statements continued 24. Non-controlling Interests continued African Consolidated Resources Dallaglio and subsidiaries SRL $000’s For the year ended 31 March 2018 $000’s Ronquil Sinarom Enterprises Mining (Private) Group SA Limited Total NCI $000’s $000’s $000’s Revenue 27,590 664 3,098 – 31,352 Cost of sales (19,114) – (4,298) – (23,412) Gross Profit (loss) 8,475 664 (1,200) – 7,939 Administrative expenses (1,567) (653) (1,514) – (3,734) Operating profit (loss) 6,908 11 (2,714) – 4,205 Finance expense (419) (1) (10) (21) (451) Loss before tax 6,489 10 (2,724) (21) 3,754 Tax expense/credit (3,794) – – – (3,794) Profit (loss) after tax 2,695 10 (2,724) (21) (40) Total comprehensive profit (loss) allocated to NCI 1,702 3 125 (10) 1,820 Cash flows from operating activities 5,984 (1,720) 1,105 – 5,369 Cash flows from investing activities (6,190) (1,023) (2,036) – (9,249) Cash flows from financing activities – 2,745 1,663 – 4,408 Net cash inflows/(outflows) (206) 2 732 – 528 As at 31 March 2018 $000’s Assets: $000’s $000’s $000’s $000’s Intangible assets – (1) – – (1) Property plant and equipment 15,905 6,501 5,184 – 27,590 Investment in joint venture 559 – – – 559 Inventory 2,883 12 1,094 – 3,989 Receivables 4,302 845 521 25 5,693 Cash and cash equivalents 272 3 763 – 1,038 Liabilities: – – Loans and other borrowings 4,730 8,719 12,487 – 25,936 Trade and other payables 2,336 835 2,572 – 5,743 Deferred tax liability 3,330 – – – 3,330 Provisions 877 – 521 – 1,398 Accumulated non-controlling interests 20,348 252 – 2,447 23,047 25. Related party transactions Company and group Directors and key management emoluments are disclosed in notes 6 and 7. Group The non-controlling interest in African Consolidated Resources SRL, where 20% of the shareholding of the subsidiary is held by third parties (the “AP Group”), consisting as to a majority of a director and senior executives of the group, namely: Roy Tucker Andrew Prelea Senior Romanian management Non-related party (Director) (Director) 2% 8% 2% 8% At the reporting date, there was an amount owing by African Consolidated Resources SRL to the AP Group of $91,656 (2018: $165,399). At the reporting date, there was an amount owing by African Consolidated Resources SRL to the individual related members of the AP Group, totalling $65,606 (2018: $78,348). 66 VAST RESOURCES 256569 Vast Resources R&A pp64-end.qxp 11/10/2019 21:37 Page 67 At the reporting date, there was an amount owing by African Consolidated Resources SRL to Ozone Homes SRL (Ozone) of US$ 9,568 (2018: US$16,727) in respect of transactions undertaken by Ozone in 2014. Ozone is a company controlled by Andrew Prelea, the Group CEO and senior Group executive in Romania. During the year, the company had a service contract with Roy Tucker to provide office premises and associated services totalling US$ 25,420 including VAT. 26. Contingent liabilities and capital commitments Capital commitments The Group acquired an effective 29.41% economic interest through EMA Resources Ltd (`EMA’) in a brown field perimeter in the `Golden Quadrilateral’ of Western Romania on which historic work has demonstrated prospectivity for gold and polymetallic minerals. The Group is undertaking exploration on behalf of the perimeter owners with a view to establishing a JORC resource sufficient to justify an independent IPO. To date the Group has arranged US$ 1 million third party financing on behalf of the venture in the form of convertible debt to fund a drilling and assay programme. This programme is underway and is anticipated to deliver sufficient information to support an Inferred JORC Mineral Resource for gold and other polymetallic minerals including silver, copper, lead and zinc in one or more of several distinct breccia pipes. Of the US$ 1 million convertible funding, the Company has committed to repay US$ 750,000 to a convertible debt investor in EMA Resources Limited (‘EMA’) (the owner of the Blueberry Project) on 31st December 2019 in the event the investor elects not to convert into shares in EMA. Such an event might arise if the assay results are unsatisfactory and / or the planned IPO of EMA has not taken place. As explained in more detail in the Strategic Report, current indications are that the assays are encouraging and it is anticipated that the project will continue to support the necessary third-party financing beyond 31 December 2019 and to the conclusion of the drilling and assay programme. 27. Events after the reporting date Exercise of warrants Warrants were exercised, and shares issued, as follows: Date 21 June 2019 7 August 2019 Warrants exercised Shares issued 1,221 244 1,221 244 Warrant security to Mercuria Pursuant to the terms of the Warrant Instrument between the Company and Mercuria dated 13 March 2018, warrants were issued to Mercuria to subscribe for shares in the Company up to a further aggregate nominal amount of £1,750,000 (in addition to the existing warrants to subscribe for shares in the Company for a nominal amount of £565,000 already granted in connection with the Warrant Instrument). These warrants have been issued to Mercuria as security for the Tranche A advance of US$4,500,000 under the Mercuria Pre-payment Agreement and are only exercisable in the event of a default thereunder. Share placings and subscriptions On 30 May the Company announced that it had raised, in aggregate, £900,000 before costs through a placing of 775,862,068 ordinary shares of 0.1p in the Company at a price of 0.116p per share. On 8 August the Company announced that it had raised, in aggregate, £655,000 (£625,000 after costs) through a placing of 595,454,545 ordinary shares of 0.1p in the Company at a price of 0.11p per share. The Subscription was undertaken by a new institutional investor, to whom it has been agreed to issue 17,000,000 warrants to subscribe for Ordinary Shares in the Company at an exercise price of 0.13p per share and 17,000,000 warrants at an exercise price of 0.15p per share. All warrants will expire on 8 August 2022. VAST RESOURCES 67 256569 Vast Resources R&A pp64-end.qxp 11/10/2019 21:37 Page 68 Notes to Financial Statements continued 27. Events after the reporting date continued Historical diamond claims The Company announced on 26 September that it had settled its historical claims by mutual consent and that the Company would update the matter further as this matter progressed. Chiadzwa Community joint venture The Company announced on 26 September that it had signed a Joint Venture Agreement with a company designated to represent the Chiadzwa Community in relation to the Chiadzwa Diamond Concession in Zimbabwe. Corporate broker On 5 August 2019 the Company was informed that one of its joint corporate brokers, SVS Securities plc, had been placed into Special Administration. 28. Group subsidiaries A full list of all subsidiary companies and their registered offices is given below: Company African Consolidated Resources SRL African Consolidated Resources PTC Ltd * Breckridge Investments (Private) Limited Cadex Investments (Private) Limited Canape Investments (Private) Limited Conneire Mining (Private) Limited Dallaglio Investments (Private) Limited Country of registration Romania BVI Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Dashaloo Investments (Private) Limited Exchequer Mining Services (Private) Limited Fisherman Mining Limited Zimbabwe Zimbabwe Zambia Heavystuff Investment Company (Private) Limited Kleton Investments (Private) Limited Lafton Investments (Private) Limited Lescaut Investments (Private) Limited Lomite Investments (Private) Limited Lotaven Investments (Private) Limited Mayback Investments (Private) Limited Millwall International Investments Limited Moorestown Limited Mystical Mining (Private) Limited Naxten Investments (Private) Limited Nivola Mining (Private) Limited Olebile Investments (Private) Limited Perkinson Investments (Private) Limited Possession Investment Services (Private) Limited Rabame Investments (Private) Limited Ronquil Enterprises (Private) Limited Sackler Investments (Private) Limited Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe BVI BVI Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe 68 VAST RESOURCES Reg. office Group Interest 2018 note 2017 Nature of business 1 3 5 5 6 6 5 6 6 7 6 5 5 5 5 5 5 3 3 6 6 6 6 6 6 6 6 6 Mining development nil Nominee company 25.05% Mining Production Claim holding Mining investment Claim holding 80% 80% nil – 100% 100% – 100% 100% 100% – 25.05% Holding Company for 100% 100% 100% 100% 49.6% 100% Breckridge Investments (Private) Limited Claim holding Claim holding Mining exploration and development Claim holding 25.05% Claim holding Claim holding 25.05% Claim holding Claim holding 25.05% Claim holding 25.05% Claim holding 100% 100% – 100% 100% – 100% 100% – – 100% 100% 100% 100% Holding company Mining exploration and development Claim holding Asset holding 25.05% Claim holding Claim holding Claim holding 100% 100% 100% 100% – 100% 100% 100% 100% Claim holding 25.05% Claim holding 50.01% Holding company 100% 100% – – 100% 100% Claim holding 256569 Vast Resources R&A pp64-end.qxp 11/10/2019 21:37 Page 69 Company Country of registration Reg. office Group Interest 2018 note 2017 Zimbabwe Schont Mining Services (Private) Limited Romania Sinarom Mining Group SRL UK Vast Resources Nominees Limited ** UK Vast Resources Romania Limited Zimbabwe Vast Resources Zimbabwe (Private) Limited Zimbabwe Accufin Investments (Private) Limited Zimbabwe Aeromags (Private) Limited Zimbabwe Campstar Mining (Private) Limited Chaperon Manufacturing (Private) Limited Zimbabwe Charmed Technical Mining (Private) Limited Zimbabwe Chianty Mining Services (Private) Limited Zimbabwe Corampian Technical Mining (Private) Limited Zimbabwe Zimbabwe Deep Burg Mining Services (Private) Limited Zimbabwe Deft Mining Services (Private) Limited Zimbabwe Febrim Investments (Private) Limited Zimbabwe Hemihelp Investments (Private) Limited Zimbabwe Isiyala Mining (Private) Limited Zimbabwe Katanga Mining (Private) Limited Zimbabwe Kengen Trading (Private) Limited Zimbabwe Kielty Investments (Private) Limited Lucciola Investment Services (Private) Limited Malaghan Investments (Private) Limited Methven Investment Company (Private) Limited Mimic Mining (Private) Limited Monteiro Investments (Private) Limited Nedziwe Mining (Private) Limited Notebridge Investments (Private) Limited Pickstone-Peerless Mining (Private) Limited Prudent Mining (Private) Limited Rania Haulage (Private) Limited Regsite Mining Services (Private) Limited Riberio Mining Services (Private) Limited Swadini Miners (Private) Limited Tamahine Investments (Private) Limited The Salon Investments (Private) Limited Vono Trading (Private) Limited Wynton Investment Company (Private) Limited Zimchew Investments (Private) Limited Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe 6 2 4 4 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Nature of business Claim holding Mining production Nominee company Mining investment Mining investment Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant 100% 100% 100% 100% Dormant Dormant 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant 100% 100% 100% 100% Dormant Dormant * ** Notes 1 2 3 4 5 6 7 The company has effective control of this entity Formerly ACR Nominees Ltd Addresses of Registered offices: Sat Iacobeni,Str.Minelor Nr.20, Jud. Suceava, Romania Str.9 Mai, Nr.20, Baia Mare, Jud.Maramures, 430274 Romania Nerine Chambers, PO Box 906, Road Town, Tortola, British Virgin Islands Nettlestead Place, Nettlestead, Maidstone, Kent ME18 6HE, United Kingdom 121 Borrowdale Road, Gun Hill, Harare, Zimbabwe 6, John Plagis Avenue, Alexandra Park, Harare, Zimbabwe Suite 2, Diplomatic Centre, Mass Media, Off Alick Nkhata Road, Lusaka, Zambia VAST RESOURCES 69 256569 Vast Resources R&A pp64-end.qxp 11/10/2019 21:37 Page 70 Company information Directors Secretary and registered office Non-Executive Chairman Chief Executive Officer Finance Director Chief Operations Officer Non-Executive Director Non-Executive Director Brian Moritz Richard Andrew Prelea Roy Clifford Tucker Craig Harvey Eric Kevin Diack Nick Hatch Ben Harber 60 Gracechurch Street London EC3V 0HR Country of incorporation United Kingdom Legal form Website Auditors Nominated & Financial Adviser Corporate Broker Registrars Public Limited Company www.vastplc.com Crowe UK LLP St Bride’s House 10 Salisbury Square London EC4Y 8EH Beaumont Cornish Limited 10th Floor 30, Crown Place London EC2A 4EB SP Angel Corporate Finance LLP Price Frederick House 35-39 Maddox Street London W1S 2PP Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Registered number 5414325 70 VAST RESOURCES 256569 Vast Resources R&A Cover spread.qxp 11/10/2019 21:35 Page 2 Vast Resources has a diversified portfolio encompassing the mining development curve. It is focused on the transformation from an exploration company to a mining company and delivering multiple revenue streams. Piciourul Zimbrului Carlibaba Manaila P me olyme t lli M allic Mine Bait a Plai allic Mine P oolyme P t Blueberr Gold Pr y oject a Magur Neagr a obeni ocessing Iac (Pr Plan t) R OMANIA BUCHARE TS HARARE ZIMB AB WE w a Community Chiadz Diamond Concession V t RasVa esour (cid:3) (cid:3) ces has a long-s t anding pr (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:286)(cid:448)(cid:415)(cid:272)(cid:437)(cid:282)(cid:381)(cid:396)(cid:393)(cid:296)(cid:381)(cid:381)(cid:349)(cid:367)(cid:381)(cid:414)(cid:396)(cid:381)(cid:393)(cid:258)(cid:336)(cid:374)(cid:349)(cid:346)(cid:400)(cid:349)(cid:367)(cid:271)(cid:258)(cid:410)(cid:400)(cid:286)(cid:374)(cid:381)(cid:282)(cid:286)(cid:400)(cid:437)(cid:272)(cid:381)(cid:296)(cid:400)(cid:349)(cid:410)(cid:47)(cid:856)(cid:286)(cid:449)(cid:271)(cid:258)(cid:271)(cid:373)(cid:349)(cid:127)(cid:374)(cid:349)(cid:282)(cid:374)(cid:258) (cid:296)(cid:381)(cid:286)(cid:374)(cid:349)(cid:367)(cid:286)(cid:393)(cid:349)(cid:393)(cid:400)(cid:410)(cid:349)(cid:336)(cid:374)(cid:349)(cid:448)(cid:381)(cid:373)(cid:282)(cid:374)(cid:258)(cid:373)(cid:396)(cid:286)(cid:410)(cid:396)(cid:258)(cid:286)(cid:374)(cid:286)(cid:346)(cid:410)(cid:374)(cid:349)(cid:400)(cid:286)(cid:349)(cid:396)(cid:410)(cid:374)(cid:437)(cid:381)(cid:272)(cid:381)(cid:449)(cid:410)(cid:286)(cid:400)(cid:286)(cid:346)(cid:410)(cid:374)(cid:349)(cid:400)(cid:410)(cid:286)(cid:400)(cid:400)(cid:258) (cid:3) (cid:856)(cid:286)(cid:448)(cid:396)(cid:437)(cid:272)(cid:410)(cid:374)(cid:286)(cid:373)(cid:393)(cid:381)(cid:367)(cid:286)(cid:448)(cid:286)(cid:282)(cid:286)(cid:346)(cid:410)(cid:393)(cid:437)(cid:400)(cid:286)(cid:415)(cid:349)(cid:374)(cid:437)(cid:410)(cid:396)(cid:381)(cid:393)(cid:393)(cid:381)(cid:367)(cid:258)(cid:400)(cid:349)(cid:258)(cid:396)(cid:393)(cid:393)(cid:258)(cid:282)(cid:374)(cid:258)(cid:282)(cid:367)(cid:286)(cid:302)(cid:374)(cid:449)(cid:381)(cid:396)(cid:271) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) ound in both R (cid:3) esence on the gr h (cid:3) omania 256569 Vast Resources R&A Cover spread.qxp 11/10/2019 21:35 Page 1 VADV AD V V ALVA Y MAR ANCING PRIM S INT O UE DRIVER T TION PR ODUC R eport & A Acc oun ts 2019 60 Gracechurch Street London, EC3V 0HR United Kingdom Info@vastplc.com +44 (0) 1491 615 232 www.vastplc.com 

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