Critical Min Regulatory News (CMRS)

12 July 2023

Caerus Mineral Resources PLC

('Caerus' or the 'Company')

Annual Report and Financial Statements for the Year Ended 31 December 2022

Caerus Mineral Resources plc (LON:CMRS), the exploration and resource development company focused on developing mineral resources to support the global drive for 'Clean Energy' is pleased to announce its audited Report and Accounts for the year ended 31 December 2022. The Company intends to hold a General Meeting in the near future to approve the Report and Accounts.

The Report and Accounts are now available on the website at http://www.caerusmineralresources.com/ and a copy will also shortly be made available on the FCA's National Storage Mechanism ('NSM') in electronic format, as required under DTR obligations. The Chairman's report is provided below.

The Company has applied to the FCA for restoration of its listing and will issue another RNS once restoration has been approved.

Chairman's Report

2022 was a tumultuous year for Caerus Mineral Resources ('CMR'). The composition of the Board changed significantly, the Company agreed to divest its portfolio of assets, new corporate governance structures and protocols were implemented, and, critically, the Company's strategy was refined.

Following my appointment in May, my primary objective was to ensure that shareholder value was being created. It quickly became apparent that the Company's portfolio of assets faced significant challenges. Accordingly, we initiated an operational and strategic review of the business.

The Company had previously reported positive operational developments regarding the Troulli and Kalavasos assets. However, it was soon clear that these projects faced fundamental and likely unresolvable challenges. The Troulli project, whilst offering good long-term potential, was destined to require extensive capital expenditure and significant management time, which outweighed the potential upside the asset provided. Following a thorough review, it was decided that Troulli was unlikely to be large enough to be sufficiently economically attractive.

The Company's previous management believed there was significant scope to build a copper resource in the Kalavasos Project, where the Company held four licences. These licenses required approvals from the Cyprus Ministry of Defence (the 'MOD') to develop the assets, approvals the former management believed would be granted. At the request of the new Board, meetings with the Cypriot Mines Service Department were conducted over the summer of 2022, during which it became apparent the approvals would not be forthcoming as the MOD required the land for long-term purposes. 

Further headwinds were experienced as the new management evaluated the governance structures and specific contracts relating to the Company's joint Cypriot venture with Bezant Resources Plc. The Company also reviewed the structure of its arrangement with BMG Resources Limited, a minority shareholder in CMR's subsidiary company TDL. TDL was responsible for maintaining and progressing several Cypriot projects. Evidently, the structure of those agreements, as signed, did not uphold shareholders' best interests and further justified the need for action regarding the Company's Cypriot strategy and assets.

The immediate outcome of these investigations was twofold. Firstly, the Company decided to make a strategic change of focus away from its Cyprus assets. This resulted in agreeing to the disposal of the assets in September, with the Company maintaining exposure to potential upside from the development of the Troulli project. Secondly, CMR enhanced its corporate governance and implemented new structures to ensure the Company always operates to high standards with all stakeholders. Reflecting this, and following CMR's investigation into certain actions and commercial decisions made by the previous management, the Company achieved settlement terms with former directors. The outcome of this was the return of most of their CMR shares to the Company for no consideration and the termination of their warrants.

When CMR took ownership with the gifting of the former director's shares, their market value was approximately £600,000. However, IFRS accounting rules do not appear to have conceived of this scenario, so we cannot report a profit on these shares. Similarly, the warrant cancellations, under IFRS 2, must be initially fully recognised in the current year P&L as a charge and, despite being cancelled, cannot be reversed in the current year. The total charge of £167,485, in relation to cancelled warrants, was recycled through the profit and loss reserve account and is shown in the 'Statement of Changes In Equity'. The warrant cancellation also has the advantage of reducing the shareholder's dilution.

Corporate governance has been further enhanced with the recent appointment of Adrian England as our Non-Executive Independent Director and new legal advisors.

Outlook 

The Board believes considerable shareholder value can be delivered if the Company remains focused on its strategy of taking opportunities arising from and aligned to supporting the European electric vehicle supply chain and its compliance with increasing global legislation.

CMR is committed to supplying the clean energy sector and will look to maximise opportunities created through the Company's alliance with EV Metals Group plc ('EVM'). However, in addition to the EVM alliance, the board is able to draw on its significant experience within the mining sector and the management's extensive network and deep understanding of the industry's dynamics. Accordingly, alongside opportunities that emerge from the EVM alliance, the board has been evaluating opportunities from its own network that fit its strategy. As the market recognises the long-term production deficit for commodities required to supply the EV transition, not all vendor valuation expectations meet CMR's high hurdle of delivering long-term sustainable value. We continue to ensure rigorous financial discipline when evaluating opportunities, and several opportunities in recent months have not progressed. However, in the first six months of the year, the Company has built several new and exciting relationships with owners of high-quality upstream and midstream assets where discussions regarding partnership and investment are ongoing. 

In recent weeks, CMR has decided to enter Morocco, which stands out as an extremely attractive jurisdiction for upstream and potentially midstream battery materials projects. With deposits of copper, manganese, nickel and potentially other clean technology metals and minerals, Morocco has proven well-mineralised geology yet is largely under-explored. Morocco's main trading partner is the European Union, and its modern infrastructure, proximity to Europe and political stability make it an excellent country for CMR to operate in. For a modest sum, CMR has agreed to acquire 80% of a local Moroccan exploration company, led by a highly regarded geologist with extensive knowledge of the region. This will enable CMR to enter into strategic upstream joint ventures in addition to creating its own portfolio of 100% owned projects. I look forward to updating you as our Moroccan portfolio and partnerships progress.

In December, we announced the payment of a deposit of £500,000 to secure the exclusivity of RIWAQ and its portfolio of 146 exploration licences in Saudi Arabia. In May, we completed our review of the RIWAQ portfolio and took the difficult decision not to pursue the opportunity. This was due to several factors, including the early stage of the projects and the very large size of the portfolio, which our Board decided would be too large a drain on CMR's resources. This deposit was received back post the year end. The Company is not currently planning to draw down on the existing CLN facility which is in place with EVM.

I want to thank the Department of International Trade ('DIT') for its help in the U.K. and overseas territories, where we continue to evaluate opportunities. Our success will enable the U.K. market to benefit from the essential commodities we can deliver for the security of a critical supply chain. 

2022 was a year of turmoil, though significant progress was made to stabilise the Company and ensure governance failings are not repeated. Beyond the Board and I would like to thank the FCA for assisting us in steering our way through a very difficult path for the Company. I am pleased to report all these issues are behind us now. The Company is now focused on developing excellent opportunities aligned with its clear strategy. Importantly, we are making meaningful progress. I look forward to providing our investors with updates over the next six months that return the Company to growth and value creation for all stakeholders.

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