Company Registration No. 10829496 (England and Wales)
ERRIS RESOURCES PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
ERRIS RESOURCES PLC
COMPANY INFORMATION
Directors
Mr J Martin
Mr O C Rifaat
Mr A du Plessis
Mr G Brown
Mr J D Taylor-Firth
Mr A J Partington
Mr M A Marr-Johnson
(Appointed 12 November 2018)
(Resigned 28 February 2019)
(Resigned 11 October 2018)
Secretary
Mr O C Rifaat
Company number
10829496
Registered office
Independent Auditor
Business address
UK Brokers
29-31 Castle Street
High Wycombe
Bucks
HP13 6RU
United Kingdom
PKF Littlejohn LLP
Statutory Auditor
1 Westferry Circus
Canary Wharf
London
E14 4HD
United Kingdom
The Clubhouse
8 St James's Square
London
SW1Y 4JU
United Kingdom
Shard Capital Partners Ltd
20 Fenchurch Street
London
EC3M 3BY
United Kingdom
Turner Pope Investments (TPI) Ltd
36 Old Jewry
London
EC2R 8DD
United Kingdom
ERRIS RESOURCES PLC
COMPANY INFORMATION
Solicitors
Solicitors (Sweden)
Solicitors (Ireland)
Nominated Advisor
Registrar
Competent Person
Public Relations
DWF LLP
Bridgewater Place
Water Lane
Leeds
LS11 5DY
United Kingdom
Mannheimer Swartling Advokatbyrå
Carlsgatan 3
Box 4291
203 14 Malmӧ
Sweden
DWF Dublin
5 George's Dock
IFSC
Dublin 1
Ireland
Allenby Capital Ltd
5th Floor
5 St Helen's Place
London
EC3A 6AB
United Kingdom
Share Registrars Ltd
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
United Kingdom
Addison Mining Services Ltd
64 Addison Road
Wanstead
London
E11 2RG
United Kingdom
St Brides Partners LLP
Salisbury House
London Wall
London
EC2M 5QQ
United Kingdom
ERRIS RESOURCES PLC
CONTENTS
Chairman's statement
Strategic report
Directors' responsibilities statement
Directors' report
Corporate Governance Statement
Independent auditor's report
Group statement of comprehensive income
Group statement of financial position
Company statement of financial position
Group statement of changes in equity
Company statement of changes in equity
Group statement of cash flows
Company statement of cash flows
Page
1 - 3
4 - 10
11
12 - 14
15 - 20
21 - 24
25
26
27
28
29
30
31
Notes to the financial statements
32 - 57
ERRIS RESOURCES PLC
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
Chairman's Statement
Erris Resources has had an active year with significant work undertaken at the Abbeytown zinc-lead-silver-copper
project in Northwest Ireland, that resulted in the successful delineation of new mineralisation. Parallel to this, we
continued to work with our partner, Centerra Gold (‘Centerra’) in Sweden, where a number of new gold targets have
been tested. More recently, this partnership has been expanded into two new districts in Finland where several
targets are under review. Additionally, we are actively seeking and evaluating new projects that fit the Erris
Resources model.
Ireland
Erris Resources holds six licence areas covering an area of 159km2 comprising the Abbeytown Project in County
Sligo. The area hosts the Abbeytown Mine located within an active limestone quarry operated by the Harrington
Group. The old zinc-silver-lead mine is a brownfields exploration project with recently assessed underground
workings and new evidence of mineralisation extending southwards from the historic workings as drilled by Erris
Resources over the last year.
During the year, Erris Resources has focused on expanding its knowledge of the mineralisation at Abbeytown with
the objective of delineating a high grade Zinc-Silver-Lead resource that has the potential to support a new
commercial operation. To this end, the 2018 work programme included both a surface and an underground
diamond drilling programme.
The surface diamond drilling programme was designed to test the strike and depth extensions of the mineralisation
away from the old mine and consisted of ten angled holes on an area between 140m and 375m south of the old
mine. Many holes intersected strong mineralisation and helped to improve our understanding of the controls on
mineralisation.
The underground drilling programme was intended to test the continuity of the mineralisation identified via the
surface drill programme and the original mine workings and consisted of 12 drill holes. The programme involved re-
accessing the underground workings, ensuring that the portal entrances to the underground mine were safe,
scaling down the main drives, installing radio systems, reconditioning access and working areas, improving
ventilation, and taking face channel samples from twelve pillars in the main Index Bed Workings. Additionally,
underground mapping, surveying, and 3D modelling were concluded. Post period end, on 30 January 2019, we
announced the results of this programme. We are excited by the developments from this work and how it ties in the
mineralisation from underground to the extension of mineralisation identified by drilling 375m away to the south.
The surface and underground drill programmes have successfully demonstrated that mineralisation extends south
from the old mine, which was previously unknown. The programmes returned several high-grade drill intersections
including:
•
•
•
•
10.85% Zn & Pb combined and 31.1g/t Ag over 4.0m in ERAB001
15.63% Zn & Pb combined and 90.68 g/t Ag over 4.1m in ERAB005
9.14% Zn & Pb combined with 92.89 g/t Ag over 4.5m in ERAB007 and
14.37 % Zn & Pb combined and 67.25g/t Ag over 2.0m in ABUG009 from underground
Post period end, we also completed soil sampling work in a new target area near the Ox Mountains Fault, an
important basin bounding fault with large displacement, a feature which is commonly considered favourable for
mineralisation as large faults are good conduits for mineralising hydrothermal fluids. Circa 270 soil samples were
taken at 10m spacing along north south lines across an area where previous wide spaced soil samples indicated
anomalism in lead and zinc. A number of new targets have been generated, with one very strong anomaly showing
up to 1200ppm Pb, 1500ppm Zn and 10ppm Ag in two adjacent samples coincident with a fault inferred from the
reprocessed airborne EM data. These results confirm that structures within the Ox Mountains Fault zone are
targets for mineralisation while the very strong anomaly is a priority drill target to extend the footprint of known
mineralisation ~900m south of the mine. The identification of strong anomalies coincident with structures in this
area is confirmation that the Company's exploration model and soil sampling methodology is working to expand the
known system at Abbeytown.
- 1 -
ERRIS RESOURCES PLC
CHAIRMAN'S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
Results were also announced post period end on 13 March 2019 from a metallurgical study by Wardell Armstrong,
which defined the potential zinc, lead and silver recoveries enabling us to begin assessment of the economic
potential of the project. The results were very positive as they demonstrated that a good recovery can be achieved
at a very coarse grind size (212um) while the ore is relatively soft requiring a minimum grind time. The tests are
preliminary in nature as the sample type is limited, however the ore characteristics are favourable for the project.
Mineralisation drilled along strike from the mine does not differ significantly in style or mineralogy to that in the
metallurgical sample so a similar outcome may be expected.
The work that we have undertaken at Abbeytown continues to indicate that there is potential to expand the
mineralised system. The surface and underground drilling has provided us a good understanding of the geology
with the scope to extend the known footprint of the mineralisation further south. The high grades near surface and
the nature of the mineralisation, combined with the underground development that Erris has made safe, all have the
potential to lead to the development of a low cost operation.
In line with our strategy focused on accelerating resource delineation and development, we are now focused on
evaluating alternatives to advance the project. This could be through a joint venture or industry partnership or
further drilling to further expand the footprint of the project.
In addition to Abbeytown, we acquired 18 contiguous prospecting licences covering 673km2 in an area prospective
for base metal mineralisation east of Galway, County Galway (‘the Galway Project’). While the licences are located
40km west of the Tynagh Mine, which hosted 9.4Mt at 3.2% Zn, 3.0% Pb, 0.3% Cu and 1 oz/ton Ag and cover
similar geology to Tynagh, the area is not well explored. Prior to developing drill targets, preliminary prospecting of
geophysical targets is underway.
Sweden and Finland
Erris Resources has a strategic alliance with TSX listed Centerra, whereby Centerra funds an ongoing generative
programme, typically US$250,000 per annum, to discover new base or precious metal assets in Sweden and
Finland. Work involves data reviews and target generation, mapping, sampling, geochemical and geophysical
surveys and permit applications. Erris Resources is the initial operator of these programmes and receives a
management fee comprising 10% of eligible expenses.
During the year under review, the Company undertook work programmes at several targets in Sweden; this is low
cost exploration whereby targets are tested in a rapid and efficient way, and if they do not deliver the required
criteria we move onto the next target. Unfortunately, results from our various programmes did not return the
potential for a plus million-ounce gold deposit in line with Centerra’s size criteria so we decided to relinquish the
exploration grounds and move on with generating new targets.
2019 has seen Centerra support us once again as it acknowledges Erris Resources’ cost-effective and time
efficient methods of testing targets and our ability to generate new targets, a key factor for exploration success. To
this end, it committed to spend $250,000 on generative exploration work in 2019 with the option to elect individual
projects to earn a 70% interest by spending US$3 million (51% by spending US$1 million and an additional 19% by
spending US$2 million).
In addition to ongoing work in Sweden, the strategic alliance will now focus its efforts on two areas in Finland: the
Laivakangas district in Central Finland; and the Central Lapland Greenstone belt in Northern Finland. Within these
districts, several targets are under review. A number of Reservation Permit applications have been submitted with
one already granted. Under the Finnish Mining Act, an area of land can be reserved for a period of up to two years
while an exploration permit application is being prepared. Additionally, Erris Resources is actively reviewing new
potential targets in Sweden.
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ERRIS RESOURCES PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
The directors present the strategic report for year ended 31 December 2018.
1
2
Highlights – 12 months to 31 December 2018
Erris Resources Plc ("Erris" or "the Company") was incorporated on 21 June 2017. On 1 December 2017,
Erris Resources Plc acquired the entire issued share capital of Erris Resources (Exploration) Ltd by way of a
share for share exchange. This transaction was treated as a group reconstruction and accounted for using
the reverse merger accounting method. Accordingly, the financial information for the comparative 15
months period to 31 December 2017 has been presented as if Erris Resources (Exploration) Ltd had been
owned by Erris Resources Plc throughout the prior period. On 21 December 2017, Erris successfully
completed its admission to trading on the AIM market of the London Stock Exchange, raising £4m from new
shareholders, including as a cornerstone 18.9% investor one of Canada’s largest mining companies, Osisko
Gold Royalties Ltd ("Osisko").
During 2018, Erris continued its strategic alliance with Centerra Gold Inc ("Centerra"), which spent a total of
US$1.8m on the Brännberg, Klippen and Käringberget Designated Project Areas ("DPAs") under the terms
of its strategic alliance agreement with Erris. Whilst the results from drilling revealed gold mineralisation on
all of these properties, especially Brännberg, none of these results reached the levels required by Centerra
and accordingly it has elected not to spend any further amounts on these three areas. Erris elected to
relinquish the Käringberget licenses entirely but has maintained ownership of Brännberg and Klippen and is
looking for other potential partners for these projects.
During 2018, Centerra provided a further US$250,000 in generative funding to identify future DPA
opportunities in Sweden. In 2019, Centerra is continuing this generative funding relationship with a
commitment to spend a further US$250,000, with an extension of focus into Finland.
During 2018, Erris drilled 17 surface holes totalling 2,889m and completed an underground drilling
programme of 12 holes over 1,005m on the Abbeytown Project, which confirmed mineralisation over 250m
of strike length.
Erris Resources – Strategic Review
2.1 Company Overview
Erris is a mineral exploration and development company with 24 prospecting licences in Ireland, 11
exploration permits in Sweden and one reservation permit in Finland. In Ireland, the licences total 673 km2 at
the Galway Project and 159km2 at the Abbeytown Project. The Abbeytown Project licences include the
historic Abbeytown deposit, and are focussed principally on economic zinc mineralisation, with ancillary
lead, silver and copper potential. In Sweden, the total area under licence is 24,292Ha across 11 permits with
six of the permits making up the Brännberg Gold project. All the Swedish permits are primarily focussed on
gold. In Finland, the Company was granted one reservation application in North Finland in February 2019
with another permit pending in central Finland. The reservation permits will allow the Company time to carry
out research and non-invasive field work in order to apply for a full exploration permit within part of the
exclusive reservation area.
Erris has been validated by major industry partners both at a project level and at the corporate level. Osisko
Gold Royalties Ltd (market capitalisation of approximately C$2.0 billion) has a 1 per cent. royalty on the
Abbeytown Project and Erris’s Swedish licences and became a 18.91 per cent shareholder at the IPO. At
the project level, Centerra. (market capitalisation of approximately C$2.1 billion) has a strategic alliance with
Erris where project expenditure of US$1,000,000 by Centerra on each project over two years will earn it a
51 per cent. interest in each project, with Erris retaining a 49 per cent. interest without having to invest any
additional funds. In 2018, Centerra spent US$1.49m on these DPAs plus a further US$0.2m on generative
exploration. In 2019, it has already committed to spending a further US$250,000 on generative exploration
in Finland during the year.
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ERRIS RESOURCES PLC
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
2.2 Company Strategy
Erris Resources' business model can best be defined as seeking to create shareholder value through the
process of discovering or advancing new mineral deposits. Well-managed exploration success finding
commercially viable deposits can create capital value even in a period of weak metal prices. The Directors
believe that Erris Resources’ business model maximises the chance of making commercial discoveries in an
efficient manner, as follows:
Technically-led team
The Directors and senior management team have significant exploration
experience, with a track record of deposit discovery from first principal through to
resource definition, advanced studies and mine development. In addition, the
team has experience of sourcing the funding required for mining projects via its
capital markets expertise and joint venture pedigree.
Low risk jurisdictions
Prospective Property
Portfolio
The Erris Resources portfolio comprises mineral licences in areas with proven
metallogenic potential, an active mining industry, relatively low political risk, and
transparent permitting processes. Erris Resources has a zinc-lead-silver-copper
project in Ireland and conducts gold exploration in Sweden and Finland. New
targets in Europe and potentially further afield are currently being assessed, but
only if they meet most or all of the key criteria above.
The current portfolio includes the Abbeytown Project, a 15 km trend of discrete
lead-zinc-silver prospects, barely explored since the 1980s, newly reinterpreted
after several years of fieldwork, systematic data integration and fresh geological
thinking. In Sweden, Erris Resources has a portfolio of gold and polymetallic
projects in northern Sweden. In Finland, Erris has recently acquired one
reservation permit with another application submitted and pending grant of
permit. The Company continues to actively manage its license portfolio in
prospective jurisdictions and will update the market when any results from new
license areas demonstrate the potential for high priority drill targets.
Dynamic Work
Programme
Erris Resources completed 9,787 metres of diamond drilling across Ireland and
Sweden in 2018 and is currently assessing its plans for later in 2019. At the
Abbeytown Project in Ireland, a 2,889 metre above ground exploration
programme was completed, backed up by a 1,044 metre underground drilling
programme.
2.3 Business Plan
The Board will continue to run the Group with a low-cost base in order to maximise the amount that is spent
on exploration and development as this is where value is best added. To this extent, the corporate office is
run on a streamlined basis by a core team, and specialists are employed in Ireland, Sweden and Finland.
The Group historically financed its activities through capital raisings as a private company, the sale of
royalties and through its joint venture agreements with established industry players. Erris Resources’ public
listing has enabled the Group to target a wider pool of investors, especially with the approval of its EIS
status received from HMRC. The Group will continue to look for new licence areas, new assets and plans to
fund these through its historic mix of equity placings and strategic alliances.
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ERRIS RESOURCES PLC
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
2.4 Principal Risks and Uncertainties
Set out below are the principal risks and uncertainties facing the Group any of which could have a material
adverse effect on the Group’s business, financial condition, results of operations and prospects. For a full
list please refer to the Admission Document published in December 2017.
● Mining, Exploration and Development Risks.
There is no certainty that the expenditure to be made in the exploration and development of the Group’s
properties in which it has an interest will result in profitable commercial operations. Most exploration projects
do not result in the discovery of commercially mineable deposits. The successful exploration and
development of mineral properties is speculative and subject to a number of uncertainties and hazards,
which even a combination of careful evaluation, experience and knowledge may not eliminate.
● Risks associated with the Centerra JV Agreement
Centerra has elected not to further fund exploration of the DPAs at Brännberg, Klippen and Käringberget,
but has elected to continue its generative spending with Erris Resources. While the Group will retain 100
per cent. ownership of any DPA that Centerra elects not to fund, it may not have the necessary funds
available or be able to generate the necessary funds to further develop the licence areas.
● Risks associated with the expiration of Prospecting Licences in Ireland and other associated
approvals
The prospecting licences held were granted to Erris Resources over the course of 2013, for a period of six
years. Each prospecting licence carries with it certain conditions that must be fulfilled over the term of the
licence in order to allow them to continue in force and/or be renewed upon expiry. The licensor may revoke
the licences at any time if there are reasonable grounds for doing so, or if the licensee fails to comply with its
various obligations under the terms of the licence agreement.
● Risks associated with the expiration of or failure to obtain Exploration Permits in Sweden and
other associated approvals
The prospecting licences held were granted to Erris Resources over the course of 2013, for a period of six
years. Each prospecting licence carries certain conditions that must be fulfilled over the term of the licence
in order to allow them to continue in force and/or be renewed upon expiry. The licensor may revoke the
licences at any time if there are reasonable grounds for doing so, or if the licensee fails to comply with its
various obligations under the terms of the licence agreement.
● Ongoing Capital requirements
If the Group is unable to raise capital when needed or on suitable terms, the Group could be forced to delay,
reduce or eliminate its exploration and development efforts. Furthermore, any additional equity fundraising in
the capital markets may be limited due to disruption or uncertainty in the markets or may be dilutive for
shareholders. Any debt-based funding, should it be obtainable, may bind the Group to restrictive covenants
and curb its operating activities and ability to pay potential future dividends even when profitable.
● Personnel retention and recruitment
The Group’s ability to compete in the competitive resource sector depends upon its ability to retain and
attract highly qualified management, geological, technical and industry experienced personnel. Such
personnel are expected to play an important role in the development and growth of the Group, in particular
by maintaining good business relationships with regulatory and governmental departments and essential
partners, contractors and suppliers.
● Environmental laws and regulations
The Group’s operations are subject to various state and foreign environmental laws concerning, among
other things, water discharges, air emissions, waste management, toxic use reduction and environmental
clean-up. Environmental laws and regulations continue to evolve, and it is likely the environmental laws and
standards that regulate the operations will continue to be increasingly stringent in the future. Any violation
of, litigation relating to or liabilities under these laws and regulations could have a material adverse effect on
the Group
● Potential Acquisitions
As part of its business strategy, the Group may make acquisitions of, or significant investments in,
complementary companies or prospects. Any such transactions will be accompanied by risks commonly
encountered in making such acquisitions including risks associated with operating in foreign jurisdictions.
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ERRIS RESOURCES PLC
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
● Market perception
Market perception of exploration and extraction companies may change in a way which could impact
adversely the value of investors’ holdings and the ability of the Company to raise further funds through the
issue of further Ordinary Shares or otherwise.
● Economic risk and world commodity price volatility
Commodity prices are subject to fluctuations. These fluctuations could adversely affect the Group’s
operations and financial condition once it commences production.
3
Operational review & outlook
3.1 Ireland
Erris holds six prospecting licences (“PLs”) at its 100% owned brownfield Lead-Zinc Abbeytown Project in
Ireland covering a total of 159km2. The licences have been held since 2013 and are due for their first
renewal at the end of the six year term in late August (5 PLs) and late September (1PL) 2019. The licences
are reviewed by the Exploration and Mining Division every two years to ensure compliance with minimum
expenditure commitments which the Company has satisfied on both occasions in 2015 and 2017. The
minimum expenditure commitments for the current two-year period have been met and Erris will submit
renewal reports by May 2019 for five of the PLs. One PL north of Ballysadare Bay will not be renewed as
this is deemed to be less prospective for base metals. The Company does not anticipate any difficulty in
renewing the PLs.
Erris was granted eighteen PLs in Co. Galway in August 2018 in an area covering 673km2. These were all
open incentive licences meaning that the minimum expenditure is only €2,500 per licence for the first two
years until August 2020. Erris will conduct early stage exploration and determine which PLs warrant
expenditure to meet the commitments by August 2020. The results of the historic data review combined with
new regional aeromagnetic data is very encouraging as several targets with base metal potential been
outlined.
At Abbeytown, in the year to 31st December 2018, Erris drilled 17 surface holes for a total of 2,889m and
completed an underground drilling programme of 12 holes for a total of 1,004m. Ten of the surface holes
(1,864m) were drilled in an area south of the old workings, which defined mineralisation over a strike length
of 250m and showed some very high-grade intersections of zinc, lead, silver and copper. Reported results
from some of these holes included:
•
•
•
•
•
10.85% Zn & Pb combined and 31.1g/t Ag over 4.0m in ERAB001
10.85% Zn+Pb combined over 4m and 41.45 g/t Ag from 95m to 98m in hole ERAB003.
15.63% Zn+Pb combined and 90.68 g/t Ag over 4.1m in ERAB005
15.57% Zn+Pb combined, 1.9% Cu and 51.50 g/t Ag over 2m from 150.0m-152.0m and 9.14%
Zn+Pb combined with 92.89 g/t Ag over 4.5m from 105.0m-109.5m in ERAB007
Copper rich intersection in ERAB010 with 5m grading 4.7% Zn+Pb combined, 1.12% Cu and 29.3
g/t Ag from 119.5m to 124.5m including 3.5m grading 6.29% Zn+Pb combined, 1.59% Cu and
39.93 g/t Ag from 121.0m to 124.5m.
As noted, in parallel to the surface drill programme, the historic mine was opened up. This enabled Erris to
firstly take channel samples from twelve pillars in the main Index Bed Workings, which included a sample of
4m grading 18.40% Zn+ Pb combined with 116.85 g/t Ag from Pillar 4. In parallel with this, Erris was able
to complete underground mapping, surveying, and 3D modelling. Finally, Erris was able to test the gap
between the underground mine and the surface holes by focused drilling from two underground drill pads.
Reported results from the underground drilling holes included:
•
•
•
•
•
•
12.66 % Zn+Pb combined and 21.05g/t Ag over 2.0m in ABUG004
14.37 % Zn+Pb combined and 67.25g/t Ag over 2.0m in ABUG009
10.43 % Zn+Pb combined and 34.73g/t Ag over 2.7m in ABUG009
5.33 % Zn+Pb combined and 21.44g/t Ag over 5.0m in ABUG010
9.32 % Zn+Pb combined and 60.4g/t Ag over 4.0m in channel sample pillar AB-PL-10
7.88 % Zn+Pb combined and 48.86g/t Ag over 3.0m in channel sample pillar AB-PL-11
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ERRIS RESOURCES PLC
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
A metallurgical study involving a bench flotation test and a bond mill test on material collected from the
Abbeytown mine was undertaken by Wardell Armstrong. This study indicated that production of a good
quality, saleable zinc concentrate can be achieved from a straightforward flotation process. The Flotation
rougher test work indicated that good results could be achieved over a broad range of primary grind sizes,
even as coarse as 80% passing 212μm. The results demonstrated excellent recoveries including 96.2%
lead and 95.8% zinc. There were high silver credits identified with 448ppm silver in the lead concentrate
and 340ppm in the zinc concentrate with no significant deleterious elements. The Bond Ball Mill Work Index
was 8.76kWh/t, classifying the sample as being soft with respect to grindability indicating that any potential
development could enjoy favourable processing costs as it would require relatively low primary milling power
requirements. These results will help Erris look at the economic potential of the project. One of the key
attractions of the Abbeytown Project is that the mineralisation is essentially outcropping with good existing
underground development allowing for a low-cost start to any future mining activity.
Soil sampling work in a new target area near the Ox Mountains Fault has been completed, which will help
determine the potential extension of the mineralised structures towards the Ox Mountain fault located
approximately 1,200m south of the mine.
During the year and post period end, Erris has continued to extend its work on its other Irish licenses. Erris
drilled 7 holes at Skreen in a wide-spaced programmed designed to gain information on stratigraphy,
structure and to test soil anomalies. This information has allowed the Company to develop a new and better
interpretation of the regional aeromagnetic data. Regional work, including orientation mapping and sampling
on the Galway licences, will continue. Preliminary prospecting of geophysical targets on the Company's
Galway project is underway. These licences are 15-40km from the previously producing Tynagh Mine,
adjoin a large land package owned by Boliden and have excellent potential for the discovery of base metal
mineralisation.
3.2 Sweden
In Sweden, the Company currently has 11 permits of which two are due for renewal in October 2019. These
are Brännberg number 1 and number 2 covering a combined 2,610 Ha. The renewal for these requires the
Company to show progress which can be done through mapping, rock sampling and soil sampling. The
Company does not anticipate any difficulty renewing these permits either in full or in part for another three
years if it chooses.
The Centerra Gold Strategic Alliance
Erris holds and operates a portfolio of Exploration Permits in northern Sweden that is funded through the
Strategic Alliance with Centerra Gold. Within this Strategic Alliance, Centerra completed its US$1.49m work
plan for 2018 to explore the portfolio. Three general exploration and drilling programmes were undertaken at
Brännberg, Klippen and Käringberget, and generative exploration work has been undertaken at Storklinten,
Orrträsket, Skarvsjö, and Gunnarbäcken.
Brännberg
During the year, a total of 14 holes totalling 2,681.7m were drilled to test the down dip and along-strike
continuations of mineralisation intersected in historic drilling by Beowulf Mining. Drilling also tested new
ground magnetic anomalies and IP chargeability anomalies. All holes encountered mineralisation with the
highlights being as follows:
•
•
•
•
BB001: 7.55m @ 1.15g/t Au, 1.93% As, 0.1% Cu from 108.25m-115.80m
BB002: 1.95m @ 2.07g/t Au, 2.20% As, 0.13% Cu from 124.45m-126.40m
BB003: 1.65m @ 8.14g/t Au, 0.67% As, 0.01% Cu from 52.90m-54.55m
BB004: 17.2m @ 1.93g/t Au, 3.06% As, 0.26% Cu from 160.90m-178.10m
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ERRIS RESOURCES PLC
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
Centerra has elected not to continue with this Project due to the mineralised system not demonstrating the
size to host a >1-million-ounce gold deposit. The project has now reverted back 100% to Erris and the
Company will undertake follow-up work to determine the resource potential of the project and consider
whether it can be advanced on its own or potentially in partnership with a junior gold developer. Drilling to
date has only tested approximately 900m along a single corridor within the 5,285Ha permit block. Drill
results confirm that there is a gold system at Brännberg that warrants further work. The project is only
10.8km from the active Maurliden Mine (Boliden) and 6.2km from a closed mine (Mensträsk).
Klippen
In 2017, Erris drilled 9 holes within the Klippen project area, totalling 1,797.4m. In 2018, a further 13 NQ2
diamond holes for 2,854.3m were drilled, taking the total drilled at Klippen by Erris to 4,651.7m. Two high-
grade veins were encountered and returned over 30g/t Au but were only 15-40cm wide. A ground magnetic
survey was also carried out in the year.
The work undertaken historically and by Erris has focussed on the zones containing the best surface
geochemical responses and anomalies. The nature of the veining (thin and infrequent veins, and mostly low
grade) encountered in the drill programmes is not indicative of a potentially economic mineralising system.
Accordingly, both Centerra and Erris concluded that the area did not warrant further investment and the
license areas due for renewal were relinquished.
Käringberget
A ground EM survey carried out in February 2018 failed to identify any conductors that warranted drill testing
and the planned drill programme at Käringberget was reduced to two exploration holes. The two holes were
drilled to test magnetic anomalies identified during a ground magnetometer survey. The holes failed to
intersect significant mineralisation with the anomaly caused by disseminated pyrrhotite barren of gold and
base metals. Centerra made the decision not to advance this project based on the results to date with Erris
in agreement on the limited potential of the project once the magnetic anomalies had been tested. No
further work will be carried out and the ground relinquished.
Wholly owned projects in Sweden
In line with the corporate objective of identifying low-cost opportunities with the potential to create
shareholder value, Erris was granted a number of exploration licences in Sweden that lie outside of the
defined Area of Interest under the Strategic Alliance with Centerra. The licences include areas surrounding
the historic Enåsen mine, that produced 1.7 Mt at 3 g/t gold from 1984 to 1991. In 2018, Erris undertook
magnetic surveys, surface sampling, mapping, and ground-truthing at Gunnarbäcken, and Storklinten;
together with prospecting and mapping took place at Orrträsket and Skarvsjö. In 2019, Erris will continue to
evaluate and prioritise projects of potential value to shareholders.
3.3 Generative and
Finland
Centerra has elected to continue its generative agreement with the Company covering Sweden and has also
expanded the programme into Finland. Under the terms of the agreement, Centerra is committed to spend
$250,000 on generative exploration work in 2019 with the option to elect individual projects to earn a 70%
interest by spending US$3 million, as to 51% by spending US$1 million and an additional 19% by spending
US$2 million. The initial focus will be on two areas, where there are several targets under review: the
Central Lapland Greenstone belt in Northern Finland and the Laivakangas district in Central Finland.
Erris has already been granted the Sakiatieva reservation permit in North Finland, which is valid for two
years and covers an area of 95.86km2. Erris has submitted a second application for a second large
reservation permit at Pirunkoukka in Central Finland, which will be valid for two years and covers 641.9km2.
Under the Finnish Mining Act, these permits will allow Erris to carry out exploration and convert part of the
permits to full exploration permits should significant drill targets be identified.
- 9 -
ERRIS RESOURCES PLC
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the group and parent company financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union and, as regards the parent
company financial statements, as applied in accordance with the provisions of the Companies Act 2006. Under
company law the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the group and company, and of the profit or loss of the group and company for
that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether applicable IFRS, as adopted by the European Union 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
group and company will continue in business.
•
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the financial statements comply with the Companies Act
2006.
They are also responsible for safeguarding the assets of the Group and parent company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The Company is compliant with AIM rule 26 regarding the Company's website.
- 11 -
ERRIS RESOURCES PLC
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
The directors present their annual report and audited financial statements for the year ended 31 December 2018.
The comparative period comprises the 15 months ended 31 December 2017.
Principal activities
The principal activity of the Company and Group continued to be that of the exploration of viable sites for the
purpose of extracting natural resources. Details of future developments are included in the Strategic Report.
Results and dividends
The results for the year are set out on page 25.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as
follows:
Mr J Martin
Mr O C Rifaat
Mr A du Plessis
Mr G Brown
Mr J D Taylor-Firth
Mr M A Marr-Johnson
Mr A J Partington
(Appointed 12 November 2018)
(Resigned 11 October 2018)
(Resigned 28 February 2019)
Directors' interests
The directors' interests in the shares of the company were as stated below:
% of issued share
capital
0.09%
0.39%
-
0.13%
-
-
% of issued share
capital
0.09%
0.39%
0.13%
-
-
-
Share Options
250,000
800,000
-
100,000
100,000
100,000
Share Options
250,000
800,000
100,000
100,000
800,000
100,000
As at 31 December 2018
No of shares
Jeremy Martin
Cherif Rifaat
Anton du Plessis
Jeremy Taylor-Firth
Graham Brown
Andrew Partington
27,000
120,000
-
40,000
-
-
As at 31 December 2017
No of shares
Jeremy Martin
Cherif Rifaat
Jeremy Taylor-Firth
Graham Brown
Merlin Marr-Johnson
Andrew Partington
27,000
120,000
40,000
-
-
-
- 12 -
ERRIS RESOURCES PLC
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
Substantial shareholdings
The directors are aware of the following substantial interests or holdings in 3% or more of the company's ordinary
called up share capital as at 31 March 2019:
Major shareholder
David Hall
Osisko Gold Royalties
Archean Capital Corporation
No of shares
6,827,000
5,876,000
960,000
% of issued share
capital
21.97%
18.91%
3.09%
Directors' insurance
The Group has made qualifying third party indemnity provisions for the benefit of its directors, which were made
during the period and remain in force at the reporting date.
EIS Status
On 18 September 2018, Erris announced that it had received notice from HMRC that its Enterprise Investment
Scheme (“EIS”) status had been confirmed and that any individual investors who had participated in the IPO and
who wished to take advantage of the EIS tax relief benefits should contact the Company. Since that date, the
Company has issued certificates to 65 shareholders who acquired a total of 3,743,000 shares in the IPO.
Supplier payment policy
The Group's current policy concerning the payment of trade creditors is to follow the CBI's Prompt Payers Code
(copies are available from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU).
The Group's current policy concerning the payment of trade creditors is to:
•
•
•
settle the terms of payment with suppliers when agreeing the terms of each transaction;
ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in
contracts; and
pay in accordance with the Group's contractual and other legal obligations.
Working capital and liquidity risk
Cashflow and working capital forecasting is performed in the operating entities of the Group and consolidated at a
Group level basis for monthly reporting to the Board. The Directors monitor these reports and rolling forecasts to
ensure the Group has sufficient cash to meet its operational needs. The Board has a policy of maintaining at least a
GBP1m cash reserve headroom at all times. The Group has no other material fixed cost overheads other than
Director and employee costs, all of whom are on three-month notice period contracts to ensure the Group has
maximum flexibility in its operational expenditure.
Foreign currency risk
The Company operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, namely GBP for its Head Office costs and the value of its shares for fund-raising, Euros for the majority
of its expenditure and the US$ in relation to its agreement with Centerra Gold for the recovery of costs and
management fees. The Group’s Treasury risk management policy is to hold part of its cash reserves in Euros and
to match as promptly as possible its Euro expenditures on Centerra work programmes to the fund recovery from
Centerra that is denominated in US dollars. The balance of funds are held in GBP to match to its Head Office
costs.
Credit and Interest Rate Risk
The Company has no borrowings and a low level of trade creditors and has minimal credit or interest rate risk
exposure.
Auditor
PKF Littlejohn LLP has expressed its willingness to continue in office and a resolution proposing that they be re-
appointed will be put at a General Meeting.
- 13 -
ERRIS RESOURCES PLC
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
Changes to the AIM rules on 30 March 2018 require AIM companies to apply a recognised corporate
governance code from 28 September 2018. Erris has chosen to adhere to the Quoted Company Alliance’s
(“QCA”) Corporate Governance Code for Small and Mid-Size Quoted Companies (revised in April 2018) to meet
the new requirements of AIM Rule 26. The Company includes below for the first time the disclosures required
under these QCA guidelines.
Board Composition
As at 31 December 2018, the Board comprised two Executive Directors, a Non-Executive Chairman and three
other Non- executive Directors. Details of the current Directors are set out within the List of Directors below. The
Board will continue to review its structure in order to provide what it considers to be an appropriate balance of
executive and non-executive experience and skills.
The Board considers the following Non-Executive Directors to be independent – Graham Brown and Jeremy
Taylor-Firth. None of these directors have been employees, have a significant business relationship or close
family ties with related parties or represent significant shareholders. Whilst each of these directors has received
Options under the company’s Share Option Scheme, these are non-material in nature and do not compromise
their independence.
Board Terms of Reference and Powers
The Board sets the Company’s strategic aims and ensures that necessary resources are in place in order for the
Company to meet its objectives. All members of the Board take collective responsibility for the performance of
the Company and all decisions are taken in the interests of the Company.
Whilst the Board has delegated the normal operational management of the Company to the Executive Directors
and other senior management, there are detailed specific matters subject to decision by the Board of Directors.
These include acquisitions and disposals, joint ventures and investments and projects of a capital nature.
The Non-Executive Directors have a particular responsibility to challenge constructively the strategy proposed by
the Chairman and Executive Directors; to scrutinise and challenge performance; to ensure appropriate
remuneration and that succession planning arrangements are in place in relation to Executive Directors and
other senior members of the management team. The Executive Directors enjoy open access to the Non-
Executive Directors with or without the Chairman being present.
Director Commitments
The two Executive Directors, Cherif Rifaat and Anton du Plessis, are employed on part-time contracts.
All Non-Executive Directors acknowledge in their letter of appointment that the nature of the role makes it
impossible to be specific on maximum time commitment and that at certain times of increased activity, then
preparation and attendance at meetings will increase. All Directors are expected to attend all Board meetings
(either in person or by phone), the AGM, one annual Board strategy meeting a year and committee meetings.
Board Meetings
The Board looks to meet in a formal manner on a quarterly basis, with additional meetings held as required to
review the corporate and operational performance of the Group. Each Board Committee has compiled a
schedule of work, to ensure that all areas for which the Board has responsibility are addressed and reviewed
during the course of the year.
The Chairman, aided by the Company Secretary, is responsible for ensuring that the Directors receive accurate
and timely information. The Company Secretary compiles the Board and Committee papers which are circulated
to Directors well in advance of all meetings. The Company Secretary provides minutes of each meeting and
every Director is aware of the right to have any concerns minuted.
- 15 -
ERRIS RESOURCES PLC
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
A summary of Board meetings attended in the 12 months to 31 December 2018 is set out below:
Jeremy Martin
Cherif Rifaat
Anton Du Plessis
Graham Brown
Jeremy Taylor-Firth
Andrew Partington
Merlin Marr-Johnson
1st Feb’18
28th Mar’18 17th May’18 26th Jun’18 1st Oct’18
✓
✓
n/a
✓
✓
✓
✓
✓
✓
n/a
✓
✓
✓
✓
✓
✓
n/a
✓
✓
✓
✓
✓
✓
n/a
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
n/a
10th Dec’18
✓
✓
✓
✓
✓
✓
n/a
Board Committees
The Board has delegated specific responsibilities to the Audit and Remuneration Committees, details of which
are set out below. Each Committee has written terms of reference setting out its duties, authority and reporting
responsibilities. It is intended that these will be kept under continuous review to ensure they remain appropriate
and reflect any changes in legislation, regulation or best- practice.
There is currently no internal audit function, given the size of the Group, although the Audit Committee keeps this
under annual review.
The Board considers that, at this stage in the Company's development, it is not necessary to establish either a
formal nominations or corporate governance committee and that these processes shall be carried out by the
Board. This decision will be kept under review by the Directors on an on-going basis.
Audit Committee
The Audit Committee will meet at least three times a year and is responsible for ensuring that the financial
performance of the Group is properly reported and monitored and for meeting the auditors and reviewing the
reports from the auditors relating to accounts and internal control systems. The external auditors will attend all
meetings and the Audit Committee will have discussions with the external auditors at least once a year without
any executive Directors being present. The Audit Committee comprises Jeremy Taylor-Firth as Chairman (in
replacement of Andrew Partington who stepped down in February 2019) and Graham Brown.
The Audit Committee has met three times since 31 December 2017 and all members at the relevant time
attended all meetings. The Committee has unrestricted access to the Group’s Auditor. The CFO attends the
Committee meeting by invitation.
Remuneration Committee
The Remuneration Committee reviews the performance of the executive Directors and sets and reviews the
scale and structure of their remuneration, the terms of their service agreements and the granting of share options
with due regard to the interests of the Shareholders. In determining the remuneration of executive Directors, the
Remuneration Committee seeks to enable the Company to attract and retain executives of high calibre. No
director is permitted to participate in discussions or decisions concerning his own remuneration. The
Remuneration Committee will meet as and when necessary. The Remuneration Committee comprises Graham
Brown as Chairman and Jeremy Martin.
Board as a whole
The skills and experience of the Board are set out in their biographical details below. The experience and
knowledge of each of the Directors gives them the ability to constructively challenge strategy and to scrutinise
performance. The Board believes it has a mix of technical skills (e.g. geologists), sector experience (exploration
through to production with resources companies), public company experience and financial expertise to enable it
to deliver on its strategy. Whilst there is not currently a balance of genders on the Board, the Company’s
directors look to appoint individuals with complementary skills and experience to fulfil the Company’s strategy,
regardless of gender.
- 16 -
ERRIS RESOURCES PLC
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
The Board do not believe that any of the Directors have too many directorship roles at other listed companies
and are hence at risk of “over-boarding” as defined by ISS voting guidelines but will continue to monitor this on
an ongoing basis. The Board is satisfied that the Chairman and each of the non-executive Directors is able to
devote sufficient time to the Group’s business.
Anton du Plessis joined the Board and Merlin Marr-Johnson resigned from the Board during the period to 31
December 2018. Andrew Partington resigned from the Board after the year end.
The directors keep their skillsets up to date by attending industry and qualification relevant seminars and training
sessions.
List of Directors
Jeremy Martin. Non-Executive Chairman
Jeremy is a founding director of Erris Resources. Mr. Martin holds a degree in mining geology from the
Camborne School of Mines, and a MSc. in mineral exploration from the University of Leicester. He has worked in
South America, Central America and Europe, where he was responsible for grassroots regional metalliferous
exploration programmes through to resources definition and mine development. Jeremy has been involved in the
formation of a number of publicly listed mineral resource companies. He is currently Chief Executive of Horizonte
Minerals and holds BSc (Hons), MSc, ACSM, MSEG.
Anton du Plessis. Chief Executive Officer
Anton has over 20 years' experience in the finance sector. During this time, he has held senior positions at
several international investment banks including CIBC (The Canadian Imperial Bank of Commerce), Bank of
America Merrill Lynch and Morgan Stanley with a focus on advising natural resources companies on the
execution of strategic and financing transactions. He has worked on transactions across a range of commodities
and for a number of leading global players including Anglogold Ashanti, Rio Tinto and BHP Billiton. Prior to
embarking on his investment banking career, Mr du Plessis worked for the Anglo American group in a corporate
finance and business development capacity.
Cherif Rifaat. Chief Financial Officer
Cherif is a UK chartered accountant who has more than 20 years of venture capital, corporate finance,
operational turnaround and investor relations experience since his qualification with KPMG. He has primarily
worked with technology, mining and real estate companies, with an emphasis on those in a start-up, pre-IPO or
restructuring phase. He has been a corporate and financial adviser to the lithium mining company, Bacanora
Minerals, since it listed on AIM in 2014. Cherif is a graduate from the University of St Andrews, Scotland. He
holds MA (Hons) in modern history and has been a member of the ICAEW since 1998.
Graham Brown. Non-Executive Director
Graham holds a BSc. from the University of Strathclyde, Glasgow. He has been a Fellow of the Society of
Economic Geologists (“SEG”) since 1999, participated in the Colombia Senior Executives programme in 2004
and the Duke Business Leaders programme in 2007. He is a past councillor of the SEG and current British
Geological Survey industry adviser and Natural History Museum honorary research fellow. In 2011, he was the
co-recipient of the PDAC Thayer Lindsley Award and from 2013 attained both Chartered Geologist and
European Geologist professional status. Mr. Brown joined Amax as an exploration geologist in 1980 and worked
on a variety of exploration and mining operations in the Circum-Pacific region. For almost a decade Mr. Brown
worked as a consultant involved with the exploration and evaluation of a number of major discoveries in both
Asia and Europe. In 1994, he joined Minorco as Chief Geologist. Subsequently he became the Europe-Asia
region’s Vice President Exploration and following the Minorco-Anglo American plc merger in 1999, he served as
Vice President Geology. In 2003 he was appointed Senior Vice President Exploration and managed
geosciences, technical services, and R&D programs. In 2005 he was promoted to Head of Base Metals
Exploration and in 2010 he took up the position of Group Head of Geosciences for the Anglo American Group.
- 17 -
ERRIS RESOURCES PLC
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
Jeremy Taylor-Firth. Non-Executive Director
Jeremy has worked in investment management since 1996. He initially worked at Matheson Securities, which
was acquired by Prudential-Bache Ltd and subsequently renamed Dryden Wealth Management. In June 2006,
he joined Singer & Friedlander Investment Management as an Investment Director. This business was then
acquired by Williams de Broe where he worked until October 2010. Jeremy is currently an Investment Manager
with Hanson Asset Management, where he has worked for the last six years. He is also the non-executive
chairman of Primorus Investments plc. Jeremy holds CISI Level 6 PCIAM.
Merlin Marr-Johnson. Chief Executive Officer (resigned 11 October 2018)
Merlin joined Erris Resources as CEO in April 2017. He is a graduate in geology from Manchester University and
holds a Masters Degree in Mineral Deposit Evaluation from the Royal School of Mines, Imperial College. He
holds BSc (Hons) in geology, MSc, DIC and FGS.
Andrew Partington. Non-Executive Director (resigned 28 February 2019)
Andrew is a partner with Toronto based investment bank Paradigm Capital Inc. specialising in corporate
advisory, M&A, and equity raising for mining and metals companies. Andrew holds a B.Sc. (Hons) Engineering
Geology from the University of Portsmouth and an MBA from York University’s Schulich School of Business as
well as MIMMM and FGS.
Key Management and Technical Adviser
Aiden Lavelle Chief Operating Officer
Aiden is an experienced exploration manager who played a key role in the discovery of the Pandora prospect in
Djibouti. His international work also includes target generation, project management and resource definition. He
holds BSc (Hons), MSc, MIGI, P.Geo and is based in Ireland.
David Hall Technical Adviser
David was a founding director of Erris Resources. He is a graduate in geology from Trinity College Dublin and
holds a Masters Degree in Mineral Exploration from Queens University, Kingston, Ontario. He has 29 years of
experience in the exploration sector and has worked on and assessed exploration projects and mines in over 50
countries. From 1992, David was Chief Geologist for Minorco SA, responsible for Central and Eastern Europe,
Central Asia and the Middle East. He moved to South America in 1997 as a consultant geologist for Minorco
South America and subsequently became exploration manager for AngloGold South America in 1999, where he
was responsible for exploration around the Cerro Vanguardia gold mine in Argentina, around the Morro Velho
and Crixas mines in Brazil and establishing the exploration programme that resulted in the discovery of the La
Rescantada gold deposit in Peru as well as certain joint ventures in Ecuador and Colombia. David is also
founder and former Executive Director of Stratex International Plc, an AIM traded company with exploration
assets in Turkey and in which Teck Resources Limited is an equity shareholder. He is a fellow of the Society of
Economic Geologists and EuroGeol. He is currently CEO of Thani-Stratex Resources and non-executive
chairman of Horizonte Minerals. He holds BA (Hons), MSc, FSEG, MIGI, P. Geo.
Board Advice during the year
During the year, the Board did not commission any external advice for its own matters.
Internal Advisory roles
Senior Independent Director
Due to the size of the company, the Board does not feel it necessary to appoint a Senior Independent Director.
Company Secretary
The CFO undertakes the joint role of company secretary, as the Board does not feel the size of the company
warrants an independent person.
- 18 -
ERRIS RESOURCES PLC
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
Annual Board appraisal
In accordance with current best practice and the Code, the Board has decided to initiate an annual formal
evaluation of its performance and effectiveness and that of each Director and its Committees. This evaluation
will be conducted during the year by way of a questionnaire and interviews with the Chairman. In addition, the
Non-Executive Directors will meet, informally, without the Chairman present and evaluate his performance. The
Board currently considers that the use of external consultants to facilitate the Board evaluation process is
unlikely to be of significant benefit to the process, although the option of doing so is kept under review.
Ongoing Board Development
Executive Directors are subject to the Company’s annual review process through which their performance
against predetermined objectives is reviewed and their personal and professional development needs
considered.
Non-executive Directors are encouraged to raise any personal development or training needs with the Chairman
or through the Board evaluation process.
The Company Secretary ensures that all Directors are kept abreast of changes in relevant legislation and
regulations, with the assistance of the Company’s advisers where appropriate.
Succession Planning
The Board has a minuted emergency succession plan for the Senior Management Team. On an ongoing basis,
board members maintain a watching brief to identify relevant internal and external candidates who may be
suitable additions to or backup for current board members.
Audit Committee Report
During 2018, the Audit Committee’s agenda has continued to be built around the usual review of the half year
and full year financial results. As well as the reporting requirements, the Audit Committee has also paid close
attention to the cash flow requirements of the Group to ensure that the Company maintains a tight control on
expenditure and remains well financed.
The Audit Committee is responsible for assuring accountability and effective corporate governance over the
Company’s financial reporting, including the adequacy of related disclosures, the internal financial control
environment and the processes in place to monitor this.
In respect of financial reporting activities, the Audit Committee reviews and recommends to the Board for its
approval all half-year and full-year financial results announcements. In considering the financial results contained
in the 2018 Annual Report and Financial Statements, the Audit Committee reviewed the significant issues and
judgements made by management in determining those results. A key element of the work going forward will be
the continued development of the control of risk within the business.
Jeremy Taylor-Firth
Audit Committee Chairman 4 April 2019
- 19 -
ERRIS RESOURCES PLC
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
Remuneration Committee report
In determining the remuneration of Executive Directors and senior management, the Remuneration Committee
seeks to enable the Company to attract, retain and motivate high calibre talent in order for the Company to
pursue its strategy and achieve its annual business plan and budgets as approved by the Board.
For details of Directors’ emoluments, please refer to note 31 of the Consolidated Financial Statements. The
Remuneration Committee met after the year end to review performance for 2018. The Remuneration Committee
acknowledged the progress made in advancing the Abbeytown project, continuing the relationship with Centerra
and generally keeping strong financial controls over the Company’s cash. But in the light of the poor share price
performance in the period, which was itself in large part due to external market related factors, it was decided
that no bonuses or options would be awarded in relation to 2018 performance, and salary and director fee levels
would not be increased. The Remuneration Committee will continue to review performance on an ongoing basis
and will recommend Option awards, if individual circumstances warrant it.
Jeremy Martin
Remuneration Committee Chairman 4 April 2019
Engagement with all shareholders
The Board attaches great importance to providing shareholders with clear and transparent information on the
Group's activities, strategy and financial position. General communication with shareholders is co-ordinated by
the Chairman, CEO and CFO.
The Company publishes on its website the following information, which the Board believes plays an important
part in presenting all shareholders with an assessment of the Group’s position and prospects:
•
•
•
•
•
•
The Company’s latest Investor presentation
The Company’s most up to date technical reports on each of its projects;
Annual and Half-Yearly Financial Statements;
All company press releases issued under the RNS service;
Details on the results of all resolutions put to a vote at the most recent AGM;
Contact details including a dedicated email address info@errisresources.com through which investors
can contact the company.
The Company’s Annual General Meeting (AGM) will generally be held in London in May following the publication
of its annual results and all shareholders are invited to attend. There will be an open question and answer
session during which shareholders may ask questions both on the proposed resolutions and the business in
general.
Institutional Investors
In general, the Board maintains a regular dialogue with its institutional investors, providing them with such
information on the Company’s progress as is permitted within the guidelines of the AIM rules, MAR and
requirements of the relevant legislation. The Company typically holds meetings with institutional investors and
other large shareholders following the release of interim and financial results.
Private Investors
The Company is committed to engaging with all shareholders and not just institutional shareholders. As the
company is too small to have a dedicated investor relations department, the CEO is responsible for reviewing all
communications received from shareholders and determining the most appropriate response. The CEO works in
conjunction with the Company’s PR Advisers, St Brides Partners, to facilitate engagement with its shareholders.
Board review
The Board as a whole is kept informed of the views and concerns of major shareholders by briefings from the
CEO, Chairman and the Company’s Broker.
- 20 -
ERRIS RESOURCES PLC
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ERRIS RESOURCES PLC
Opinion
We have audited the financial statements of Erris Resources Plc (the 'parent company') and its subsidiaries (the
'group') for the year ended 31 December 2018 which comprise the Group Statement of Comprehensive Income, the
Group Statement of Financial Position, the Company Statement of Financial Position, the Group Statement of
Changes in Equity, the Company Statement of Changes in Equity, the Group Statement of Cash Flows, the
Company Statement of Cash Flows and notes to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRS) as adopted by the European Union and as regards the
parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
In our opinion the financial statements:
•
•
•
give a true and fair view of the state of the group's and the parent company's affairs as at 31 December
2018 and of the group's and parent company's loss for the year then ended;
have been properly prepared in accordance with IFRS as adopted by the European Union and as regards
the parent company financial statements, as applied in accordance with the provisions of the Companies
Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the
financial statements section of our report. We are independent of the group and parent company in accordance with
the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard, as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to
you where:
•
•
the directors' use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the group's or the parent company’s ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds
for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. Group and
parent company materiality was €70,000 and €58,500 respectively, based on 1% of gross assets. For both
components in the scope of our group audit, we allocated a materiality that is less than our overall group materiality.
- 21 -
ERRIS RESOURCES PLC
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ERRIS RESOURCES PLC
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the
Financial Statements. In particular, we looked at areas involving significant accounting estimates and judgement
by the directors and considered future events that are inherently uncertain. As in all of our audits, we also
addressed the risk of management override of internal controls, including evaluating whether there was evidence
of bias by the directors that represented a risk of material misstatement due to fraud.
A full scope audit was performed on the complete financial information of the Group’s operating components
located in United Kingdom, Ireland and Sweden, with the Group’s key accounting function for all being based in
the United Kingdom.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How the scope of our audit responded
to the key audit matter
Recoverability of intangible assets
(refer note 12)
The group holds significant intangible assets,
comprising exploration and evaluation costs, with
a carrying value at 31 December 2018 of
€1,745,118. The exploration projects are at an
early stage of development and independent
resource and reserve estimates are not currently
available to enable value in use calculations. The
carrying value of these intangible assets are
tested annually for impairment. In addition, there
is a risk that the amounts capitalised do not meet
the recognition criteria in accordance with IFRS 6.
We performed the following procedures:
•
•
•
•
•
•
to
the
title
licenses,
testing on capitalised
in
Confirmed good
conjunction with adherence to any specific terms
and criteria within those licenses.
Reviewed progress on exploration activities at
each of the license areas during the year and
subsequent to the year end.
Undertook substantive
expenditure.
Inquired of management whether there are any
indicators of impairment in addition to those of
which we are previously aware.
Discussed with management the scope of their
future budgeted and planned expenditure on
each licence area.
financial
As disclosed
statements,
recognised project
impairment charges of €317,000 during the year.
in note 12
the Group
the
to
- 22 -
ERRIS RESOURCES PLC
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ERRIS RESOURCES PLC
Other information
The other information comprises the information included in the annual report, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the group
and parent company financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of 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 strategic report and the directors' report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report and 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 directors
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the
group's and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic alternative but to do so.
- 23 -
ERRIS RESOURCES PLC
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ERRIS RESOURCES PLC
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: http://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.
David Thompson (Senior Statutory Auditor)
for and on behalf of PKF Littlejohn LLP
Statutory Auditor
1 Westferry Circus
Canary Wharf
London
E14 4HD
Date : 4 April 2019
- 24 -
ERRIS RESOURCES PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
Continuing operations
Revenue
Cost of sales
Gross profit
Exploration projects impairment
Administrative expenses
IPO costs
Share based payments charge
Operating loss
Finance income
Loss before taxation
Tax on loss
Loss for the financial year
Other comprehensive income
Total comprehensive income for the year
Earnings per share from continuing
operations attributable to the owners of the
parent company
Basic (cents per share)
Diluted (cents per share)
Notes
4
24
6
9
10
27
11
12 months
ended
31 December
2018
€
15 months
ended
31 December
2017
€
165,216
(129,569)
35,647
(317,396)
(696,083)
-
(124,901)
(1,102,733)
1,289
(1,101,444)
-
(1,101,444)
-
111,676
(53,005)
58,671
-
(204,725)
(340,044)
(70,955)
(557,053)
54
(556,999)
27,720
(529,279)
-
(1,101,444)
(529,279)
(3.54)
(3.54)
(2.65)
(2.65)
Total (loss)/profit and comprehensive (loss)/income for the year is attributable to the owners of the parent
company.
- 25 -
ERRIS RESOURCES PLC
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Share
capital
Notes
€
Share
premium
account
€
Balance at 1 October 2016
183,932
673,889
Other
reserves
Retained
earnings
Total
€
-
-
-
-
-
€
€
267,987
1,125,808
(529,279)
(529,279)
(529,279)
(529,279)
-
-
-
-
4,551,125
(218,036)
70,955
-
-
-
-
-
182,044
-
4,369,081
(218,036)
-
(14,843)
-
(673,889)
70,955
688,732
167,201
3,477,156
759,687
-
4,404,044
351,133
4,151,045
759,687
(261,292) 5,000,573
-
-
-
-
-
-
-
-
-
-
-
(1,101,444)
(1,101,444)
-
(1,101,444)
(1,101,444)
124,901
(57,212)
-
57,212
124,901
-
67,689
57,212
124,901
Period ended 31 December 2017:
Loss and total comprehensive income
for the period
Total comprehensive income for the period
25
24
Issue of share capital
Issue costs
Credit to equity for equity settled
share-based payments
Merger reserve
Total transactions with owners
recognised directly in equity
Balance at 31 December 2017
Year ended 31 December 2018:
Loss and total comprehensive income
for the year
Total comprehensive income for the year
Credit to equity for equity settled
share-based payments
Transfer of lapsed share options
24
Total transactions with owners recognised
directly in equity
Balance at 31 December 2018
351,133
4,151,045
827,376
(1,305,524) 4,024,030
- 28 -
ERRIS RESOURCES PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Share
capital
€
Share
premium
€
Other
reserves
€
Retained
earnings
€
Notes
Balance at 21 June 2017
Period ended 31 December 2017:
Loss and total other comprehensive
income for the period
Total comprehensive income for the period
Issued on incorporation
Issued on acquisition of subsidiary
Issue of share capital
Issue costs
Credit to equity for equity settled
share-based payments
25
25
24
Total transactions with owners
recognised directly in equity
Balance at 31 December 2017
Year ended 31 December 2018:
Loss and total other comprehensive
income for the year
Total comprehensive income for the year
Credit to equity for equity settled
share-based payments
Transfer of lapsed share options
24
Total transactions with owners
recognised directly in equity
Balance at 31 December 2018
-
-
-
-
-
-
1
169,088
182,044
-
-
-
4,369,081
(218,036)
-
-
-
-
-
-
-
-
-
70,955
Total
€
-
-
(436,589)
(436,589)
(436,589)
(436,589)
-
-
-
-
-
1
169,088
4,551,125
(218,036)
70,955
351,133
4,151,045
70,955
-
4,573,133
351,133
4,151,045
70,955
(436,589) 4,136,544
-
-
-
-
-
-
-
-
-
-
-
-
(647,187)
(647,187)
(647,187)
(647,187)
124,901
(57,212)
-
57,212
124,901
-
67,689
57,212
124,901
351,133
4,151,045
138,644
(1,026,564) 3,614,258
- 29 -
ERRIS RESOURCES PLC
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
Year ended
31 December
2018
€
€
Notes
15 months
ended 31
December
2017
€
€
Cash flows from operating activities
Cash used in operations
32
Net cash outflow from operating activities
Cash flows from investing activities
Exploration expenditure
Exploration expenditure utilising funds from
Strategic Alliance Agreement
Interest received
(704,956)
(704,956)
(407,068)
(407,068)
(1,014,729)
(1,493,877)
1,289
(320,812)
(907,265)
54
Net cash used in investing activities
(2,507,317)
(1,228,023)
Cash flows from financing activities
Proceeds from issue of shares
Share issue costs
Repayment of borrowings
Funds received from Strategic Alliance Agreements
56,319
-
-
1,432,704
4,494,806
(218,036)
(1,429)
886,715
Net cash generated from financing
activities
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rates
Cash and cash equivalents at end of year
1,489,023
5,162,056
(1,723,250)
3,526,965
4,090,143
-
2,366,893
546,194
16,984
4,090,143
- 30 -
ERRIS RESOURCES PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
Year ended 31
December
2018
€
€
Notes
21 June 2017
to 31
December
2017
€
€
Cash flows from operating activities
Cash used in operations
33
Net cash used in operating activities
Cash flows from investing activities
Exploration expenditure
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue costs
Net cash generated from financing
activities
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rates
Cash and cash equivalents at end of year
(1,821,189)
(1,821,189)
(269,390)
(269,390)
(138,801)
1,289
-
-
(137,512)
-
56,319
-
4,494,806
(218,036)
56,319
4,276,770
(1,902,382)
4,007,380
4,011,695
-
2,109,313
-
4,315
4,011,695
- 31 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1
Accounting policies
Company information
Erris Resources Plc (“the Company”) is a public limited company which is listed on the AIM Market of the
London Stock Exchange domiciled and incorporated in England and Wales. The registered office address is
29-31 Castle Street, High Wycombe, Buckinghamshire, United Kingdom, HP13 6RU.
The group consists of Erris Resources Plc and its subsidiaries.
1.1 Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRIC interpretations as adopted for use in the European Union and with those parts of
the Companies Act 2006 applicable to companies reporting under IFRS (except as otherwise stated).
The financial statements are prepared in euros, which is the functional currency of the Company and the
Group's presentation currency, since the majority of exploration expenditure is denominated in this currency.
Monetary amounts in these financial statements are rounded to the nearest €.
The consolidated financial statements have been prepared under the historical cost convention. The principal
accounting policies adopted are set out below.
1.2 Basis of consolidation
The consolidated financial statements incorporate those of Erris Resources Plc and all of its subsidiaries (ie
entities that the group controls when the group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity).
Erris Resources Plc was incorporated on 21 June 2017. On 1 December 2017, Erris Resources Plc acquired
the entire issued share capital of Erris Resources (Exploration) Ltd by way of a share for share exchange.
This transaction was treated as a group reconstruction and accounted for using the reverse merger
accounting method. Accordingly, the financial information for the comparative period s been presented as if
Erris Resources (Exploration) Ltd had been owned by Erris Resources Plc throughout the prior period.
All financial statements are made up to 31 December 2018. Where necessary, adjustments are made to the
financial statements of subsidiaries to bring the accounting policies used into line with those used by other
members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are
eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are
deconsolidated from the date on which control ceases.
1.3 Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the group
and company have adequate resources to continue in operational existence for the foreseeable future. Thus
the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.4 Revenue
Revenue is recognised at the fair value of the consideration received or receivable for services provided over
time in the normal course of business and is shown net of VAT and other sales related taxes.
- 32 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
1
Accounting policies
Recognised in revenue are charges that are invoiced to the group's joint venture partner. These are based
upon costs together with management fees incurred in connection with exploration programmes carried out
under joint venture arrangements and in which the group acts as principal. Revenue from providing services
is recognised in the accounting period in which the services are rendered. The execution of exploration
programmes under joint venture funding arrangements is a key component of the strategy of the group.
1.5
Intangible fixed assets other than goodwill
Capitalised Exploration and Evaluation costs
Capitalised Exploration and Evaluation Costs consist of direct costs and fixed salary/consultant costs,
capitalised in accordance with IFRS 6 "Exploration for and Evaluation of Mineral Resources". The group and
company recognises expenditure in Exploration and Evaluation assets when it determines that those assets
will be successful in finding specific mineral assets. Exploration and Evaluation assets are initially measured
at cost. Exploration and Evaluation Costs are assessed for impairment when facts and circumstances
suggest that the carrying amount of an asset may exceed its recoverable amount. Any impairment is
recognised directly in profit or loss.
1.6 Property, plant and equipment
Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of
depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their
useful lives on the following bases:
Plant and equipment
Fixtures and fittings
Computers
25% on cost
25% on cost
25% on cost
The gain or loss arising on the disposal of an asset is determined as the difference between the sale
proceeds and the carrying value of the asset and is recognised in the income statement.
1.7 Non-current investments
In the parent company financial statements, investments in subsidiaries are initially measured at cost and
subsequently measured at cost less any accumulated impairment losses.
1.8
Impairment of non-current assets
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset,
the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets not yet ready to use and not yet subject to amortisation are reviewed for impairment
whenever events or circumstances indicate that the carrying value may not be recoverable.
- 33 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
1
Accounting policies
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a revaluation decrease.
1.9 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks.
1.10 Financial assets
Financial assets are recognised in the group's and company's statement of financial position when the group
and company becomes party to the contractual provisions of the instrument.
Financial assets are classified into specified categories at initial recognition and subsequently measured at
amortised cost, fair value through other comprehensive income, or fair value through profit or loss. The
classification of financial assets at initial recognition that are debt instruments depends on the financial assets
cash flow characteristics and the business model for managing them.
Financial assets are initially measured at fair value plus transaction costs. In order for a financial asset to be
classified and measured at amortised cost, it needs to give rise to cash flows that are "solely payments of
principal and interest SPPI" on the principal amount outstanding.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest rate method and
are subject to impairment. The group's and company's financial assets at amortised cost comprise trade and
other receivables and cash and cash equivalents.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial. The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating the interest income over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected
life of the debt instrument to the net carrying amount on initial recognition.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
- 34 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
1
Accounting policies
Financial liabilities
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability to the net carrying
amount on initial recognition.
Derecognition of financial liabilities
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or
cancelled.
1.11 Equity instruments
Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs.
1.12 Taxation
Income tax represents the sum of current and deferred tax.
Current tax
The tax currently payable is based on taxable profit or loss for the period. Taxable profit or loss differs from
net profit or loss as reported in the income statement because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
group’s and company's liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting end date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial information and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill
or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor
the accounting profit.
Deferred tax is charged or credited in the income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and
liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities
and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.13 Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs
are required to be recognised as part of the cost of non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are
received.
Termination benefits are recognised immediately as an expense when the group and company is
demonstrably committed to terminate the employment of an employee or to provide termination benefits.
- 35 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
1
Accounting policies
1.14 Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.15 Equity
Share capital
Ordinary shares are classified as equity.
Share premium
Share premium represents the excess of the issue price over the par value on shares issued. Incremental
costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Merger reserve
A merger reserve was created on purchase of the entire share capital of Erris Resources (Exploration) Ltd
which was completed by way of a share for share exchange and which has been treated as a group
reconstruction and accounted for using the reverse merger accounting method.
Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of equity-settled share-based payment
transactions.
1.16 Share-based payments
Equity-settled share-based payments with employees and others providing services are measured at the fair
value of the equity instruments at the grant date. Fair value is measured by use of an appropriate pricing
model. Equity-settled share-based payment transactions with other parties are measured at the fair value of
the goods and services, except where the fair value cannot be estimated reliably, in which case they are
valued at the fair value of the equity instrument granted.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based
on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
When the terms and conditions of equity-settled share-based payments at the time they were granted are
subsequently modified, the fair value of the share-based payment under the original terms and conditions and
under the modified terms and conditions are both determined at the date of the modification. Any excess of
the modified fair value over the original fair value is recognised over the remaining vesting period in addition
to the grant date fair value of the original share-based payment. The share-based payment expense is not
adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an
acceleration of vesting and the amount that would have been recognised over the remaining vesting period is
recognised immediately.
- 36 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
1
Accounting policies
1.17 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessees. All other leases are classified as operating leases.
Rentals payable under operating leases, including any lease incentives received, are charged to income on a
straight-line basis over the term of the relevant lease except where another more systematic basis is more
representative of the time pattern in which economic benefits from the lease asset are consumed.
1.18 Foreign exchange
Foreign currency transactions are translated into the functional currency using the rates of exchange
prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains
and losses arising on translation are included in administrative expenses in the income statement for the
period.
The financial statements are presented in the functional currency of Euros, since the majority of exploration
expenditure is denominated in this currency.
1.19 Exceptional items
Items are disclosed separately in the financial statements where it is necessary to do so to provide further
understanding of the financial performance of the group. They are items that are material, either because of
their size or nature, or that are non-recurring.
The legal, professional and other costs directly incurred on admission to AIM during the period ended 31
December 2017 have been categorised as an exceptional item.
1.20 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief
Executive Officer, the group's chief operating decision-maker ('CODM').
1.21 New standards, amendments and interpretations not yet adopted
The following standards and amendments were adopted by the group and company during the year, none of
which had a material impact:
•
•
•
IFRS 9 - Financial Instruments
Amendments to IFRS 2 - Classification and Measurement of Share-based Payment Transactions
Annual improvements to IFRS Standards 2014-2016 Cycle.
At the date of approval of these financial statements, the following standards and amendments were in issue
but not yet effective, and have not been early adopted:
•
•
•
IFRS 16 - Leases
Annual improvements to IFRS Standards 2015-2017 cycle
Amendments to References to the Conceptual Framework in IFRS Standards.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a
material impact on the group or company.
- 37 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
2
Judgements and key sources of estimation uncertainty
In the application of the accounting policies, the directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised where the revision affects only that
period, or in the period of the revision and future periods where the revision affects both current and future
periods.
Critical judgements
The following judgements and estimates have had the most significant effect on amounts recognised in the
financial statements.
Share-based payment
Estimating fair value for share based payment transactions requires determination of the most appropriate
valuation model, which depends on the terms and conditions of the grant. This estimate also requires
determination of the most appropriate inputs to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and making assumptions about them. For the
measurement of the fair value of equity settled transactions with employees at the grant date, the group and
company uses the Black Scholes model.
Stability of Joint Venture Partners
The stability of the joint venture partners is periodically reviewed in determining the likelihood of future funding
for related projects.
Impairment of Capitalised Exploration Costs
Group capitalised exploration costs had a carrying value as at 31 December 2018 of €1,745,118 (2017 :
€1,047,708). Management tests annually whether capitalised exploration costs have a carrying value in
accordance with the accounting policy stated in note 1.5. Each exploration project is subject to an annual
review either by a consultant or senior company geologist to determine if the exploration results returned to
date warrant further exploration expenditure and have the potential to result in an economic discovery. This
review takes into consideration long-term metal prices, anticipated resource volumes and grades, permitting
and infrastructure as well as the likelihood of on-going funding from joint venture partners. In the event that a
project does not represent an economic exploration target and results indicate that there is no additional
upside, or that future funding from joint venture partners is unlikely, a decision will be made to discontinue
exploration. The Directors have reviewed the estimated value of each project prepared by management and
have decided to impair the value of the Swedish assets to €100,000 in light of Centerra’s decision not to
continue with the three projects under current DPAs. The Directors do believe there remains value in these
Swedish assets and are looking for an appropriate partner to take them forward. The Directors do not believe
there is any impairment to the value of the Abbeytown assets in Ireland.
- 38 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
3
Financial Risk and Capital Risk Management
The Group’s and Company's activities expose it to a variety of financial risks: market risk (primarily currency
risks), credit risk and liquidity risk. The overall risk management programme focusses on currency and
working capital management.
Foreign Exchange Risk
The Group and Company operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, namely GBP for its Head Office costs and the value of its shares for fund-raising,
Euros for the majority of its expenditure and the US$ in relation to its agreement with Centerra Gold for the
recovery of costs and management fees. The Group’s Treasury risk management policy is to hold part of its
cash reserves in Euros and to match as promptly as possible its Euro expenditures on Centerra work
programmes to the fund recovery from Centerra that is denominated in US dollars. The balance of funds are
held in GBP to match to its Head Office costs.
Credit and Interest Rate Risk
The Group and Company have no borrowings and a low level of trade creditors and have minimal credit or
interest rate risk exposure.
Working Capital and Liquidity Risk
Cashflow and working capital forecasting is performed in the operating entities of the Group and consolidated
at a Group level basis for monthly reporting to the Board. The Directors monitor these reports and rolling
forecasts to ensure the Group has sufficient cash to meet its operational needs. The Board has a policy of
maintaining at least a GBP1m cash reserve headroom at all times. The Group has no other material fixed
cost overheads other than Director and employee costs, all of whom are on three month notice period
contracts to ensure the Group has maximum flexibility to amend its operational expenditure.
4
Revenue
An analysis of the Group's revenue is as follows:
Revenue analysed by class of business
Management fees
Group
2018
€
2017
€
165,216
111,676
All the management fees are received from Centerra Gold under the terms of the Strategic Alliance
Agreement. There were no unsatisfied performance obligations at 31 December 2018 (31 December 2017 :
none).
- 39 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
5
Segmental reporting
The Group operates principally in the UK, Ireland and Sweden, with operations managed on a project by
project basis within each geographical area. Activities in the UK are mainly administrative in nature whilst the
activities in Ireland and Sweden relate to exploration and evaluation work. The reports used by the Board and
management are based on these geographical segments.
Ireland
2018
€
Sweden
2018
€
Others
2018
€
UK
2018
€
Total
2018
€
Revenues
Cost of sales and administrative
expenses
Share based payments charge
Project Impairment
Gain/loss on foreign exchange
Profit/(loss) from operations per
reportable segment
-
165,216
(124,680)
-
-
(11,425)
-
-
(317,396)
(1,912)
(136,105)
(154,092)
Reportable segment assets
Reportable segment liabilities
1,914,392
27
111,951
3,813
-
-
-
-
-
-
-
-
1,289
166,505
(660,882)
(124,901)
-
(26,753)
(785,562)
(124,901)
(317,396)
(40,090)
(811,247)
(1,101,444)
2,145,002
143,475
4,171,345
147,315
Revenues
Cost of sales and administrative
expenses
Share based payments charge
Gain/loss on foreign exchange
Profit/(loss) from operations per
reportable segment
Ireland
2017
€
Sweden
2017
€
Others
2017
€
UK
2017
€
Total
2017
€
-
111,676
-
54
111,730
(53,577)
-
(1,142)
(9,679)
-
(181)
(7,405)
-
-
(510,129)
(70,955)
(15,661)
(580,790)
(70,955)
(16,984)
(54,719)
101,816
(7,405)
(596,691)
(556,999)
Reportable segment assets
Reportable segment liabilities
768,000
4,829
308,387
74,669
-
-
4,262,497
258,813
5,338,884
338,311
- 40 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
6
Operating loss
Operating loss for the year is stated after charging:
Exchange losses
Share-based payments
Operating lease charges
Exploration costs expensed
Exploration projects impairment
7
Auditor's remuneration
Fees payable to the company's auditor and associates:
For audit services
Audit of the financial statements of the group and company
Total audit services
For other services
Tax
Corporate tax compliance (parent and subsidiaries)
Services relating to corporate finance transactions
Total non-audit services
Total audit and non-audit costs
Group
2018
€
2017
€
40,090
124,901
22,477
124,680
317,396
16,984
70,955
2,403
71,986
-
Group
2018
€
2017
€
22,500
22,500
22,500
22,500
16,843
4,000
-
-
-
37,500
20,843
37,500
43,343
60,000
8
Employees
The average monthly number of persons (including directors) employed by the group and company during the
year was:
Directors
Employees
Group
2018
Number
2017
Number
Company
2018
Number
2017
Number
6
8
14
6
3
9
6
-
6
6
-
6
- 41 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
8
Employees
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Group
2018
€
858,784
66,508
7,556
2017
€
284,592
21,821
-
Company
2018
€
467,649
34,470
4,067
932,848
306,413
506,186
2017
€
14,651
1,130
-
15,781
Aggregate remuneration expenses of the group include €348,678 (2017 : €101,222) of costs capitalised and
included within non-current assets. In 2018, €178,495 (2017 : €118,455) aggregate remuneration expenses
of the group have been reimbursed by joint venture partners.
Aggregate remuneration expenses of the company include €100,553 (2017 : €NIL) of costs capitalised and
included within non-current assets.
Directors remuneration is disclosed in note 31.
9
Finance income
Interest income
Interest on bank deposits
10 Taxation
Current tax
Current tax on result for the current period
Group
2018
€
1,289
2017
€
54
Group
2018
€
2017
€
-
(27,720)
- 42 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
10 Taxation
The actual charge for the year can be reconciled to the expected charge based on the profit or loss and the
standard rate of tax as follows:
Loss before taxation
Expected tax credit based on the standard rate of corporation tax in the UK of
19.00% (2017: 19.17%)
Tax effect of expenses that are not deductible in determining taxable profit
Unutilised tax losses carried forward
Foreign exchange differences
Taxation charge/(credit) for the year
2018
€
2017
€
(1,101,444)
(556,999)
(209,274)
23,731
185,543
-
(106,777)
-
83,694
(4,637)
-
(27,720)
- 43 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
11 Earnings per share
Weighted average number of ordinary shares for basic earnings per share
Effect of dilutive potential ordinary shares:
- Weighted average number of outstanding share options
Weighted average number of ordinary shares for diluted earnings per share
Earnings
Continuing operations
Loss for the period from continuing operations
2018
Number
2017
Number
31,069,430
19,983,454
4,462,500
2,300,000
35,531,930
22,283,454
€
€
(1,101,444)
(529,279)
Earnings for basic and diluted earnings per share attributable to equity
shareholders of the company
(1,101,444)
(529,279)
Earnings per share for continuing operations
Basic and diluted earnings per share
Basic earnings per share
Diluted earnings per share
-
-
(3.54)
(2.65)
(3.54)
(2.65)
There is no difference between the basic and diluted earnings per share for the period ended 31 December
2018 or 2017 as the effect of the exercise of options would be anti-dilutive.
- 44 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
12
Intangible fixed assets
Group
Cost
At 1 October 2016
Additions - group funded
At 31 December 2017
Additions - group funded
At 31 December 2018
Amortisation and impairment
At 1 January 2018
Project impairment
At 31 December 2018
Carrying amount
At 31 December 2018
At 31 December 2017
Ireland
Exploration
and Evaluation
costs
€
Sweden
Exploration
and Evaluation
costs
€
Total
€
543,261
207,491
181,215
115,741
724,476
323,232
750,752
894,366
296,956
120,440
1,047,708
1,014,806
1,645,118
417,396
2,062,514
-
-
-
-
(317,396)
-
(317,396)
(317,396)
(317,396)
1,645,118
100,000
1,745,118
750,752
296,956
1,047,708
Intangible assets comprise capitalised exploration and evaluation costs (direct costs and fixed salary /
consultant costs) of the Ireland Zinc Projects and the Sweden Gold Projects (excluding the amounts
recovered from Centerra Gold as per note 21).
Company
Cost
At 21 June 2017 and 1 January 2018
Additions - group funded
At 31 December 2018
Amortisation and impairment
At 21 June 2017 and 1 January 2018
Project impairment
At 31 December 2018
Ireland
Exploration
and Evaluation
costs
€
Sweden
Exploration
and Evaluation
costs
€
Total
€
-
92,985
-
45,816
-
138,801
92,985
45,816
138,801
-
-
-
-
(45,816)
-
(45,816)
(45,816)
(45,816)
- 45 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
12
Intangible fixed assets
Carrying amount
At 31 December 2018
At 31 December 2017
13 Property, plant and equipment
Group
Cost
At 1 January 2018 and 31 December 2018
Depreciation and impairment
At 1 January 2018
Depreciation
At 31 December 2018
Carrying amount
At 31 December 2018
At 31 December 2017
92,985
-
-
-
92,985
-
Plant and
equipment
€
Fixtures and
fittings
€
Computers
€
Total
€
2,605
3,307
4,951
10,863
2,605
-
3,230
77
4,951
-
10,786
77
2,605
3,307
4,951
10,863
-
-
-
77
-
-
-
77
The company had no property, plant and equipment at 31 December 2018 or 31 December 2017.
Depreciation charges of €77 (2017 : €2,419) have been capitalised and included within intangible exploration
and evaluation costs asset additions for the year.
14 Fixed asset investments
Investments in subsidiaries
Group
2018
€
2017
€
Company
2018
€
2017
€
-
-
169,090
169,089
Notes
15
Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid.
- 46 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
14 Fixed asset investments
Movements in non-current investments
Company
Cost or valuation
At 1 January 2018
Additions
At 31 December 2018
Carrying amount
At 31 December 2018
At 31 December 2017
15 Subsidiaries
Shares in group
undertakings
€
169,089
1
169,090
169,090
169,089
Details of the company's subsidiary at 31 December 2018 are as follows:
Name of undertaking
Registered
office
Nature of
business
Erris Resources (Exploration) Ltd United Kingdom Exploration
Exploration
Erris Zinc Limited
Exploration
Tulivuori Exploration OY
Ireland
Finland
Class of
shares
held
Ordinary
Ordinary
Ordinary
% Held
Direct
Indirect
100.00
100.00
100.00
-
-
-
On 1 December 2017, Erris Resources Plc acquired the entire issued share capital of Erris Resources
(Exploration) Ltd by way of a share for share exchange. This transaction has been treated as a group
reconstruction and accounted for using the reverse merger accounting method.
The registered office address of Erris Resources (Exploration) Ltd is 29-31 Castle Street, High Wycombe,
Bucks, HP13 6RU.
On 26 February 2018, Erris Resources Plc acquired the entire issued share capital of Erris Zinc Limited on
incorporation. Erris Zinc Limited is a company registered in Ireland.
The registered office address of Erris Zinc Limited is The Bungalow, Newport Road, Castlebar, Co. Mayo.
F23YF24.
On 12 December 2018, Erris Resources (Exploration) Ltd acquired the entire issued share capital of
Tulivuori Exploration OY shortly after incorporation. Tulivuori Exploration OY is a company registered in
Finland and will be renamed Erris Finland.
The registered office address of Tulivuori Exploration OY is c/o Bokforingsbyra Mattans AB, Storalanggatan
57 A 11, 65100 Vasa, Finland,
- 47 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
16 Financial instruments
Financial assets at amortised cost
Trade and other receivables
Cash and bank balances
Financial liabilities at amortised cost
Borrowings
Trade and other payables
17 Trade and other receivables
Amounts falling due within one year:
Unpaid share capital
Amounts owed by group undertakings
Other receivables
Prepayments and accrued income
Group
2018
€
2017
€
Company
2018
€
2017
€
59,334
2,366,893
200,956
4,090,143
1,294,319
2,109,313
177,569
4,011,695
2,426,227
4,291,099
3,403,632
4,189,264
-
116,667
1,139
306,524
-
51,449
-
221,809
116,667
307,663
51,449
221,809
Group
2018
€
-
-
39,884
19,450
2017
€
56,319
-
91,429
53,208
Company
2018
€
-
1,261,369
13,500
19,450
2017
€
56,319
-
68,042
53,208
59,334
200,956
1,294,319
177,569
In the previous period, there was an amount of €56,319 (£50,000) included in the balance sheet within share
capital called up but unpaid, which relates to a delayed receipt from a subscriber which was received on 3
January 2018. The share capital is stated as called up and fully paid, as this was purely a timing issue.
The carrying amounts of the Group and Company's trade and other receivables are denominated in the
following currencies:
Euros
Other currencies
18 Trade and other receivables - credit risk
Group
2018
23,645
35,689
2017
4,370
196,586
Company
2018
-
1,294,319
2017
-
177,569
59,334
200,956
1,294,319
177,569
Fair value of trade and other receivables
The directors consider that the carrying amount of trade and other receivables is equal to their fair value.
No significant balances are impaired at the reporting end date.
- 48 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
19 Trade and other payables
Trade payables
Other payables
Accruals and deferred income
Group
2018
€
14,635
687
97,551
2017
€
165,834
1,821
73,901
Company
2018
€
13,909
-
37,540
2017
€
160,588
-
61,221
112,873
241,556
51,449
221,809
In the current period, the majority of the accruals relate to work done on the underground drilling at
Abbeytown, but only invoiced in January 2019.
The carrying amounts of the Group and Company's current liabilities are denominated in the following
currencies:
Group
2018
56,244
56,629
2017
6,351
235,205
Company
2018
-
51,449
2017
-
221,809
112,873
241,556
51,449
221,809
Euros
Other currencies
20 Borrowings
Group
2018
€
2017
€
Company
2018
€
2017
€
Unsecured borrowings at amortised cost
Director's loans - D Hall
-
1,139
-
Analysis of borrowings
Borrowings are classified based on the amounts that are expected to be settled within the next 12 months
and after more than 12 months from the reporting date, as follows:
Payable within one year
-
1,139
-
-
-
The directors' loans are interest free and repayable on demand.
- 49 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
21 Amounts owed to Strategic Alliance partner
Amounts owing to Centerra Gold Inc
3,794
64,968
-
Group
2018
€
2017
€
Company
2018
€
2017
€
-
On 1 January 2016, the company entered into a strategic alliance with Centerra Gold over an Area of Interest
("AOI") in Northern Sweden within which Erris holds exploration permits over seven areas totalling 253km2.
Under the terms of this agreement, Centerra have the right to make an election ("Election") in respect of any
or all of the designated project areas ("DPA" or "DPAs") in the AOI and on any rights subsequently acquired
by Erris during the first two years after initial grant of the permit. Centerra must spend US$400,000 on drilling
on each of those two DPAs within the subsequent twelve months and US$600,000 on each of those two
DPAs within the following 12 months. If Centerra spends the aggregate US$1,000,000 on each DPA, they
will earn a 51% stake in that DPA. In the period to 31 December 2017, Centerra elected two DPAs at Klippen
and Käringberget. In the year to 31 December 2018, Centerra elected to continue with these two DPAs and
elect a third at Brännberg. During 2018, Centerra made the decision to not proceed further with these three
DPAs, but has extended the Generative programme for 2019 to find new DPAs in Sweden and Finland.
During the period, Centerra has spent a total of €1,496,375 (2017 : €907,265), comprising reimbursed costs
of €1,331,159 (2017 : €795,591) and paid management fees of €165,216 (2017 : €111,674). In accordance
with the terms of the agreement, amounts received but not yet expensed are repayable to Centerra.
A summary of the funding received from and costs incurred on behalf of Centerra is analysed as follows:
Year ended 31 December 2018
Funding from
Centerra
Exploration
expenditure
Generative
Klippen
Käringberget
Brännberg
€
177,943
516,384
161,341
577,036
€
202,566
464,585
139,490
522,020
Management
and
consultancy
fees
€
51,129
46,403
15,522
52,162
Net
€
(75,752)
5,396
6,329
2,854
1,432,704
1,326,163
165,216
(61,173)
22 Retirement benefit schemes
Defined contribution schemes
Charge to profit or loss in respect of defined contribution schemes
2018
€
4,113
2017
€
-
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme
are held separately from those of the group in an independently administered fund.
- 50 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
23 Share Options
Movements in the number of share options outstanding and their related weighted average exercise prices
are as follows:
Year ended 31 December 2018
Average
Exercise Price
in £ per Share
Period ended 31
December 2017
Average
Exercise Price
in £ per Share
Options
Number
Options
Number
At beginning of the period
Granted
Lapsed
At end of period
£0.094
£0.100
£0.092
4,500,000
-
(950,000)
£0.084
£0.10
-
1,700,000
2,800,000
-
3,550,000
£0.094
4,500,000
Exerciseable at the period end
Weighted average remaining exercise period, years
3,550,000
3.48
2,933,332
4.48
No new options were issued during the year and 800,000 Options due to Merlin Marr-Johnson lapsed after
the year end. Share options outstanding at the end of the period have the following expiry dates and
exercise prices:
Grant
Vest
Expiry Date
2014
2015
2017
2014
2015
2017
2022
2022
2022
Exercise
Price, £
Share options (number)
0.08
0.10
0.10
2018
1,250,000
300,000
2,000,000
2017
1,400,000
300,000
2,800,000
3,550,000
4,500,000
During the previous period the Company revised the exercise period of the options granted before the date
of admission down to 5 years from 10 years.
The weighted average fair value of options granted during the period, determined using the Black-Scholes
valuation model, was £0.436 per option. The significant inputs into the model were:
share price at the date of grant
exercise price
volatility
dividend yield
expected option life
annual risk-free interest rate
24.25p
as shown above
10.60%
-
1.5-2 years
2.83%
The volatility measured at the standard deviation of continuously compounded share returns is based
on statistical analysis of daily share prices.
- 51 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
24 Share-based payment transactions
The Directors believe that the success of the Group will depend to a significant degree on the performance of
the Group's senior management team. The Directors also recognise the importance of ensuring that the
management team are well motivated and identify closely with the success of the Group.
Accordingly, the Company has adopted the Share Option Plan which includes Options granted on admission
and which replace the options in the capital of the subsidiary held by certain Existing Shareholders and
others. The Options will expire after a maximum period of 5 years.
The Share Option Plan also includes Options which have been granted to the Directors as part of the terms of
their appointment.
Expenses recognised in the year (2017 : period)
Arising from equity settled share-based
payment transactions
124,901
70,955
124,901
70,955
Group
2018
€
2017
€
Company
2018
€
2017
€
25 Share capital
Ordinary share capital
Issued and fully paid
31,069,430 ordinary shares of 1p each
Group and company
2017
€
2018
€
351,133
351,133
351,133
351,133
The Group's share capital is issued in £ but is converted into the functional currency of the Group (Euros) at
the date of issue of the shares.
- 52 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
26 Other reserves
Group
At 30 September 2016
Additions
At 31 December 2017
Additions
Transfer of lapsed share options
Merger
reserve
€
Share based
payment
reserve
€
Total
€
-
688,732
-
70,955
-
759,687
688,732
70,955
759,687
-
-
124,901
(57,212)
124,901
(57,212)
At 31 December 2018
688,732
138,644
827,376
A merger reserve was created on purchase of the entire share capital of Erris Resources (Exploration) Ltd
which was completed by way of a share for share exchange and which has been treated as a group
reconstruction and accounted for using the reverse merger accounting method.
27 Retained earnings
Group
2018
€
2017
€
Company
2018
€
2017
€
At the beginning of the year/period
Loss for the year/period
Share based payment transactions (net)
(261,292)
(1,101,444)
57,212
267,987
(529,279)
-
(436,589)
(647,187)
57,212
-
(436,589)
-
At the end of the year
(1,305,524)
(261,292)
(1,026,564)
(436,589)
- 53 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
28 Financial commitments, guarantees and contingent liabilities
On 13 October 2016, the Company entered into an asset purchase agreement with Beowulf Mining Sweden
AB (“Beowulf”) pursuant to which the Company purchased exploration rights for the areas known as
Grundsträsk nr 6 and Grundträsk nr 7 (together with all information relating thereto) from Beowulf. The
consideration of US$200,000 will become payable subject to the Company announcing JORC indicated
resource of 100,000 troy ounces of gold, together with a further amount of $2 per troy ounce on the
announcement of indicated resource subject to a JORC indicated resource of at least 1 million troy ounces.
Pursuant to this agreement, the Company is obliged to grant to Beowulf a royalty under which it is paid 1 per
cent. of the net smelting revenue generated by the Company on any gold produced from the property. This
royalty shall continue indefinitely unless the Company “buys out” the royalty by payment of US$2,000,000 to
Beowulf. In addition, the Company is obliged to abide by the terms of the “2003 Data Access Agreement”
which was entered into between Beowulf, the Scanex Group (“Scanex”) and Mirab Mineral Resources AB
(“Mirab”) on 14 November 2003 for a period of 15 years. Pursuant to the terms of this agreement, Scanex and
Mirab provided Beowulf with data relating to past mining exploration in return for the granting by Beowulf of a
royalty to Scanex and Mirab for 1 per cent. of the net smelting revenue generated by Beowulf in relation to the
area known as Grundträsk. The Company is required to honour this royalty.
Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome
can be considered probable or reasonably estimable and hence no provision has been made in the financial
statements.
29 Operating lease commitments
Lessee
At the reporting end date, the Group and Company had outstanding commitments for future minimum lease
payments under non-cancellable operating leases, which fall due as follows:
Within one year
Between two and five years
Group
2018
€
11,070
32,288
2017
€
3,960
-
43,358
3,960
Company
2018
€
-
-
-
2017
€
-
-
-
30 Events after the reporting date
There are no events after the balance sheet date to report.
- 54 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
31 Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
Mr J Martin
Mr O C Rifaat
Mr M A Marr-Johnson
Mr G Brown
Mr A J Partington
Mr J D Taylor-Firth
M A Du Plessis
2018
Remuneration Share Option
Charge
€
€
2017
Remuneration Share Option
Charge
€
€
42,775
62,959
125,918
30,184
25,249
25,184
4,166
10,853
48,836
32,653
10,853
10,853
10,853
-
1,998
3,330
6,659
1,332
-
1,332
-
5,458
24,561
24,562
5,458
5,458
5,458
-
316,435
124,901
14,651
70,955
In the prior period, the Directors were appointed on 13 December 2017.
Transactions with related parties
During the year the group entered into the following transactions with related parties:
Group
Strategic Alliance partner
Key management personnel
Company
Key management personnel
Consultancy and expenses
2017
€
2018
€
Management fees
2017
€
2018
€
-
77,404
-
114,439
165,216
-
111,674
-
70,140
66,048
-
-
Aggregate consultancy and expenses include €42,421 (2017 : €11,673) of costs capitalised and included
within non-current assets and €24,424 (2017 : €22,037) of costs reimbursed by joint venture partners. There
were no amounts outstanding at the year end.
Amounts owed to the directors are disclosed in note 20.
Strategic Alliance arrangements with Centerra Gold are disclosed in note 11. During the period, Centerra
reimbursed costs of €1,331,159 (2017 : €795,591) and paid management fees of € 165,216 (2017 :
€111,674). As at 31 December 2018, there is an outstanding liability of €1,296 (2017 : €64,968) owing to
Centerra Gold included within other payables.
- 55 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
31 Related party transactions
The following amounts were outstanding at the reporting end date:
Amounts owed to related parties
Group
Strategic Alliance partner
Key management personnel
Company
Strategic Alliance partner
Key management personnel
32 Cash (used in)/generated from group operations
Loss for the year after tax
Adjustments for:
Taxation charged/(credited)
Investment income
Amortisation and impairment of intangible assets
Foreign exchange
Equity-settled share-based payment expense
Movements in working capital:
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash used in operations
2018
€
3,794
-
2017
€
64,968
1,139
3,794
66,107
-
-
-
-
2018
€
2017
€
(1,101,444)
(529,279)
-
(1,289)
317,396
-
124,901
(27,720)
(54)
-
(16,984)
70,955
84,440
(128,960)
(140,290)
236,304
(704,956)
(407,068)
- 56 -
ERRIS RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2018
33 Cash (used in) / generated from operations - company
Loss for the year after tax
Adjustments for:
Investment income
Foreign exchange
Equity-settled share-based payment expense
Movements in working capital:
(Increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash used in operations
2018
€
2017
€
(647,187)
(436,589)
(1,289)
-
124,901
-
(4,315)
70,955
(1,127,254)
(170,360)
(121,249)
221,808
(1,821,189)
(269,390)
- 57 -