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Financial Results

9 Nov 2022 07:00

RNS Number : 7523F
Caracal Gold PLC
09 November 2022
 

Caracal Gold plc / EPIC: GCAT / Market: Main / Sector: Mining

9 November 2022

Caracal Gold plc ('Caracal' or the 'Company')

Financial Results

 

Caracal Gold plc, the gold producer with operations in East Africa, is pleased to announce its Financial Results for the 18-month period ending 30 June 2022.

 

The qualified opinion is only on the opening balances as at 1 January 2021 and not that of the final closing balances for the Caracal Group.

 

The year-end of the Parent Company was changed in the period from December to June to align with that of the operating mines.

 

In order to ensure that the reporting period following the acquisition of Kilimapesa mine was no longer than the permitted 18 months, financial figures for Kilimapesa were prepared for the 12 months to 31 December 2020.

 

These financial figures were unaudited as a mid-period account.

 

CHAIRMAN'S STATEMENT

I am pleased to be writing to you as the new Chair of Caracal Gold plc. The period under review has been a busy and transformational period for the Company with the acquisition of the Kilimapesa Mine on 31 August 2021 (acquired via a reverse acquisition, see note 5 for further details) and the concurrent placing to raise funds for the Group's ongoing working capital and the satisfaction of acquisition-related liabilities. The Company has continued to raise further funds through the issue of smaller placings during the period under review. The Group have used these proceeds to progress notably in the growth of the Kilimapesa mining plant as well as the introduction of our Heap Leach Operations. Production has increased substantially with the result in our Revenue increasing to £7m for the period. However, the Group still remains loss making for the period.

 

Having overcome the global challenges stemming from COVID-19 pandemic we are delighted to be readmitted to the London Stock exchange and look forward to building future opportunities for our new shareholders. Due to the hard work of our staff our operations have both resumed and grown, and we have expanded and upgraded our operations at Kilimapesa. As the world is returning to normal, we remain focused on the continuing growth of our operations along with the health and safety of our employees, suppliers and local communities. Against the background of a global pandemic the gold price has remained a supportive factor and offers the prospect of stronger financial returns as our efficiency continues to improve.

 

Strategic Focus

The Board is aware of the risk of having a single asset in production and so we believe the acquisition in Tanzania will serve to start to reduce that risk. There has been an extensive drilling programme carried out at Kilimapesa which has supported the increase in JORC resource to 1,300,000 ounces. Gold Production has reached 12,000 ounces per annum and is on track to reach 16,000 ounces in 2023 and 24,000 by 2024.

 

Values and Culture

As the Board has been expanded through the appointment of new Directors so has the breadth of the skill set available. We believe in a strong corporate governance structure with management accountability and active oversight from the Board.

 

Three Board Committees, Audit, ESG and Remuneration, provide oversight and guidance in these areas, ensuring adoption of the correct strategies with the highest standards available along with protecting shareholder interests.

 

Caracal is committed to sustainable development and recognises that the long-term sustainability of our business is dependent upon responsible stewardship in both the protection of the environment and the efficient management of the exploration and extraction of mineral resources, and the sustainable use of resources for the benefit of all our stakeholders.

 

The mine is located in an area of high unemployment and so we are proud of the fact that we have created over 350 jobs for locals and over a hundred further jobs for Kenyans from other Districts. We liaise with the local community through our Community Liaison Officer and we also try to purchase locally where possible. We view our people as one of the key pillars of the company and are proud of the fact that in 18 months we have delivered around 500 new job opportunities.

 

Performance

The focus of the Board and Management is on the development of the operations at Kilimapesa, the upgrading of plant and machinery, grade improvement and the acquisition of further prospects. The Company has invested in a new Laboratory and a new Elution Plant as part of the programme of improvements which we believe will assist in our drive to improve standards, improve grades and drive returns. The company has also recently invested in a new fleet of work vehicles to improve efficiency, reduce downtime and breakdowns and offer a higher level of personal safety to the operators.

 

It is the intention of the Board to continue to invest in its operations, assets, people, and community as the company continues to grow whilst respecting the impact and influence of climate change and continuing to operate in a responsible manner.

 

In May 2022 it was agreed to acquire 100% of Tyacks Gold Limited ('Tyacks'), the holder of the licences collectively referred to as the Nyakafuru Project ('Nyakafuru' or the 'Project') in Tanzania. The Project is located in the world-class Lake Victoria Gold Fields in northern Tanzania, 140km southwest of Mwanza, Tanzania's second largest city, and 60km from Barrick Gold's 18Moz Bulyanhulu Gold Mine. This is an established high-grade shallow gold resources of 658,751oz at 2.08g/t contained within four deposits over 280 km2. This resource is amenable to development as a large scale conventional open pit operation and Carbon-in-Leach processing plant.

 

This will double Caracal's total gold resources to 1,330,197 ounces prior to impending resource update at Kilimapesa - delivering on the goal of building an emerging East African focussed gold producer.

 

The future is extremely promising for the Caracal Group and let me take this opportunity to thank all our shareholders for your support in this expansion.

 

Simon Games-Thomas

Chairman

8 November 2022

 

CHIEF EXECUTIVE'S STATEMENT

2021 was a transformative year for Caracal Gold PLC and all of its stakeholders. The standout event was the acquisition of the Kilimapesa Gold Mine in Kenya which concluded with the successful RTO on the LSE in September 2021.

 

This acquisition positioned Caracal as an established East African based and focussed gold producer and explorer and provided the Board and Management the platform to attract funding to optimise and grow our Kilimapesa operations and pursue our strategy of expanding our portfolio in the region.

 

In line with this strategy, in November 2021 we announced the acquisition of Tyacks Gold Limited (Tyacks) in Tanzania (see note 13 for further details on this acquisition). This transaction significantly grew our resource base with high quality ounces, it made us a multiple asset company and diversified our physical and geographic footprint. After a comprehensive legal and technical review, a final SPA was signed with the shareholders of Tyacks for the acquisition of 100% of Tyacks Gold and has begun work on the ground with whilst awaiting completion of all regulatory approvals which are in process.

 

At Kilimapesa work by the production team increased the number of ounces and confidence in our resources at Kilimapesa. Consequently, they finalised the strategy for increasing production and optimising recoveries and costs at Kilimapesa and also made significant progress on ESG and community related areas.

 

With Caracal's robust business fundamentals providing a strong platform from which to grow, we go into the next year excited at the opportunities in front of us, particularly the near-term opportunity for Kilimapesa to become a 24,000oz per annum producer during 2024 and for the ongoing increase of our resource base from exploration activities in both Kenya and Tanzania.

 

Highlights

Kilimapesa Gold Mine

Progress at Kilimapesa is across the board.

 

On the exploration side drilling activities commenced in January 2022 and have continued through the period, the highlight of these activities was the announcement of an updated MRE. This was the 1st significant exploration to be done on the license area in over 11 years.

 

Being based in a significant gold producing greenstone belt the project has significant exploration upside both within the mining license, where we plan to grow confidence and extend mine life, and within the wider exploration permit, where we continue to explore for large, shallow, high grade, open pit projects.

 

The Kilimapesa expansion project commenced in March 2022.

 

An expansion to 24,000oz per annum is underway at Kilimapesa. This expansion focusses on the processing of the lower grade ore being mined from the Kilimapesa Hill deposit through a heap leach processing facility with a capacity of 65,000tpm along with the required expansion of mining activities and infrastructure to support the expanded production.

 

The Kilimapesa Gold Mine employs 496 people, of which 470 are Kenyan highlighting Caracal's commitment to developing in country talent. Our investment is transforming the Trans Mara South region and our ongoing community initiatives directly benefit the people on the ground through investment into schools, roads, water projects and environmental initiatives.

 

Tyacks Gold

During the year Caracal successfully acquired 100% of Tyacks, which owns 11 exploration licenses in the Lake Victoria Gold Fields. The licenses are collectively known as the Nyakafura Project. The acquisition creates a major new gold mine development opportunity for Caracal in one of Africa's largest gold producing regions.

 

Nyakafura contains established high grade shallow gold resources of 658,751oz within four known, closely located deposits. Work done historically by major gold producer Resolute Mining have shown that these projects are amenable to large scale, conventional open pit mining and Carbon-in-Leach processing.

 

Looking forward to 2022, Caracal will commence with rehabilitating the infrastructure (camp, offices, workshops, vehicles etc), the existing core will be relogged and selected samples sent away for assay all of this work culminating in the preparation of a drilling plan which we expect to commence in the 4th QTR of 2022.

 

OUTLOOK

2022/2023 is set to be an exciting year for the group. Our ongoing exploration programs in Kenya and Tanzania will play an important role in growing our resource base and confidence in our resources which will translate into improving returns for all stakeholders from our shareholders to our social partners on the ground. The construction of the Kilimapesa expansion will complete and the production of 24,000oz will cement Caracal's profile as a upcoming producer, the success of the expansion at Kilimapesa will have a positive impact for all stakeholders including shareholders, social partners and the Kenyan Govt to name a few. The development plan for Tanzania and the next phase of Kilimapesa will also evolve and become clear to all of us during the year.

I would like to take this opportunity to thank our shareholders, employees, members of the Board, our local communities and all stakeholders for their continued commitment to the Company and ongoing support during the period. With the expansion at Kilimapesa, the ongoing exploration we are excited by the near and long-term prospects of becoming a diversified +50,000oz per annum producer and +3moz resource owner.

 

Robbie McCrae

Chief Executive Officer

8 November 2022

 

STRATEGY AND BUSINESS MODEL

The Company's strategy is to become a mid-tier, leading independent, diversified producer and explorer. We plan to develop and exploit our portfolio of producing and advanced exploration projects in Kenya and Tanzania. To this end we have developed and are carrying out the work programs to deliver maximum value and have recruited a management team with all the necessary experience to deliver on the work programs and project potential.

 

In Kenya the clear plan and strategy is to deliver on the expansion project increasing production to 24,000oz per month and to continue to grow and increase confidence in the resources at the project. Our regional exploration strategy to discover and prove additional commercially viable, shallow open pit style deposits within the license area is progressing well and will deliver results.

 

In Tanzania the strategy is to confirm the historical results and to carry out some additional exploration so that an updated mineral resource estimate can be published and from that work on the development plan for production can commence. With historic resources and significant opportunity for additional resources we are targeting 50,000oz per annum production from Nyakafura as our base case.

 

Despite many challenges including COVID good progress was made during 2021, including:

· Gold production was uninterrupted for the entire period,

· Expansion plan for Kilimapesa was finalized and work commenced,

· Board of Directors was strengthened with 2 NED and 1 executive appointments,

· Management was strengthened with key appointments across disciplines,

· Tanzania project was acquired growing resources and securing future growth.

 

The Company continues to review opportunities to build the company's portfolio particularly in the immediate region once these include advanced projects that will provide immediate additional resources ounces and production. 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 18 MONTH PERIOD ENDING 30 JUNE 2022

 

Note

18 months ended

30 June

2022

£'000

12 months ended

31 December

2020

£'000

Continuing operations

 

 

 

 

 

Revenue

7

6,858

1,399

Cost of sales

(9,007)

(2,353)

Gross loss

(2,149)

(954)

Administrative expenses

8

(7,188)

(10)

Listing costs

(1,146)

-

Share-based payments

24

(84)

-

Operating loss before finance costs

(10,567)

(964)

Finance costs (net)

10

(744)

(110)

Other income

2

-

Foreign exchange

(941)

(616)

Reverse acquisition expense

5

(3,298)

-

 

Loss before taxation

(15,548)

(1,690)

Taxation

11

-

-

 

Loss for the period

(15,548)

(1,690)

Other comprehensive income - items that may be reclassified subsequently to profit and loss account

Translation of foreign operations

(65)

511

Total other comprehensive income

(65)

511

Total comprehensive income for the period attributable to the owners of the Parent Company

(15,613)

(1,179)

 

Earnings per share - basic and diluted (pence)

 

 

12

(1.09p)

(0.12p)

 

 

The notes below form part of these financial statements.

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2022

 

 

 

 

 

Note

As at

30 June

2022

£'000

As at

31 December 2020

£'000

Non-Current Assets

Intangible assets

14

2,392

-

Property, plant and equipment

15

5,689

3,758

Total Non-Current Assets

 

8,081

3,758

 

Current Assets

Inventories

16

712

575

Trade and other receivables

17

826

737

Cash and cash equivalents

18

80

121

Total Current Assets

 

1,618

1,433

 

Total Assets

 

9,699

5,191

Equity and Liabilities

 

 

 

Share capital

23

1,879

4,430

Share premium

23

14,306

-

Translation reserve

444

509

Reverse acquisition reserve

5

6,481

-

Share-based payment reserve

148

-

Retained earnings

(25,321)

(9,773)

Total Equity

 

(2,063)

(4,834)

 

Non-Current Liabilities

Deferred tax liability

21

552

-

Provisions and contingent liabilities

22

1,989

-

Amount due to related parties

-

8,433

Loans and borrowings - non-interest bearing

 

20

 

-

 

48

Loans and borrowings - interest bearing

20

167

142

Total Non-Current Liabilities

 

2,708

8,623

 

Current Liabilities

Trade and other payables

19

7,357

1,330

Loans and borrowings - non-interest bearing

 

-

 

63

Loans and borrowings - interest bearing

20

1,697

9

Total Current Liabilities

 

9,054

1,402

 

Total Liabilities

 

11,762

10,025

 

Total Equity and Liabilities

 

9,699

5,191

 

 

The notes below form part of these financial statements.

 

Approved by the Board and authorised for issue on 8 November 2022.

 

Director

 

 

 

PARENT COMPANY STATEMENT OF FINANCIAL POSITION

Company Registration No. 09829720

 

 

 

 

 

Note

As at

30 June

2022

£'000

As at

31 December 2020

£'000

Non-Current Assets

Investments

13

9,537

-

Property, plant and equipment

15

302

-

Total Non-Current Assets

 

9,839

-

 

Current Assets

Trade and other receivables

17

7,108

12

Cash and cash equivalents

18

26

-

Total Current Assets

 

7,134

-

 

Total Assets

 

16,973

12

Equity and Liabilities

 

 

 

Share capital

23

1,879

132

Share premium

23

14,306

602

Share-based payment reserve

148

-

Retained earnings

(7,655)

(2,595)

Total Equity

 

8,678

(1,861)

 

Non-Current Liabilities

Provisions and contingent liabilities

22

619

-

Total Non-Current Liabilities

 

619

-

 

Current Liabilities

Trade and other payables

19

6,019

1,423

Convertible loan notes

20

1,657

450

Total Current Liabilities

 

7,676

1,873

 

Total Liabilities

 

8,295

1,873

 

Total Equity and Liabilities

 

16,973

12

 

 

The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 by choosing not to present its individual Statement of Comprehensive Income and related notes that form part of these approved financial statements.

 

The Company's loss for the period from operations is £5,060,000 (2020: loss of £1,074,000).

Approved by the Board and authorised for issue on 8 November 2022.

 

 Director

 

 

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022

18 months ended

30 June

2022

£'000

12 months ended

31 December

2020

£'000

Cash flows from operating activities

 

 

Operating loss - continuing operations

(15,548)

(1,690)

Adjustments for:

 

 

Depreciation/amortisation

825

456

Finance costs (net)

744

110

Other income

(2)

-

Foreign exchange movement

290

168

Shares issued in lieu of fees

856

-

Share-based payments

84

-

Reverse acquisition share-based payment expense

3,298

-

Operating cash outflows before working capital movements

(9,453)

(956)

(Increase)/decrease in trade and other receivables

(19)

81

Increase in trade and other payables

2,223

195

Increase in inventories

(137)

(91)

Net cash outflows from operating activities

(7,386)

(771)

 

 

 

Net cash flows from investing activities

 

 

Cash acquired on acquisition

82

-

Expenditure on intangibles

(548)

-

Expenditure of fixed assets

(1,094)

-

Net cash outflows from investing activities

(1,560)

-

Net cash flows from financing activities

(Repayments) on external loans

(168)

(25)

Proceeds from external loans

1,207

-

Increase in previous owners parent company loan (eliminated in consolidation in current year)

-

1,027

Finance costs (net)

(65)

(110)

Proceeds from issue of share capital

8,378

-

Cost of share issues

(442)

-

Net cash inflows from financing activities

8,910

892

 

Net (decrease)/ increase in cash and cash equivalents

(36)

121

Cash and cash equivalents at the beginning of the period

121

11

Effect of exchange rates on cash

(5)

(11)

Cash and cash equivalents at the end of the period

80

121

 

Significant non-cash transactions

The only significant non-cash transactions were the issue of shares and warrants detailed in notes 23 and 24.

 

PARENT COMPANY STATEMENT OF CASH FLOWSFOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022

18 months ended

30 June

2022

£'000

12 months ended

31 December

2020

£'000

Cash flows from operating activities

 

 

Operating loss

(5,060)

(1,074)

Adjustments for:

 

 

Depreciation

27

-

Finance costs (net)

546

144

Share-based payment - incentives

84

-

Shares issued for services

856

-

Operating cash outflows before working capital movements

(3,547)

(930)

(Increase)/decrease in trade and other receivables

(98)

468

Increase in trade and other payables

2,201

631

Net cash outflows from operating activities

(1,444)

169

 

 

 

Net cash flows from investing activities

 

 

Purchase of tangible fixed assets

(128)

-

Purchase of Investments

(548)

-

Cash advanced to subsidiaries

(6,997)

-

Net cash outflows from investing activities

(7,673)

-

Net cash flows from financing activities

Proceeds from external loans

1,207

-

Convertible loan note cash repayments

-

(25)

Finance costs (net)

-

(144)

Proceeds from issue of share capital

8,378

-

Cost of share issues

(442)

-

Net cash inflows from financing activities

9,143

(169)

 

Net increase in cash and cash equivalents

26

-

Cash and cash equivalents at the beginning of the period

-

-

Cash and cash equivalents at the end of the period

26

-

 

 

 

 

Significant non-cash transactions

The only significant non-cash transactions were the issue of shares and warrants detailed in notes 23 and 24.

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022

 

Share capital

 

 

£'000

Share premium

 

 

£'000

Share-based payment reserve

£'000

Reverse acquisition reserve

£'000

Foreign currency reserve

 

£'000

Retained earnings

 

 

£'000

Total

 

 

 

£'000

 

Balance at 31 December 2019

4,430

-

-

-

(2)

(8,083)

(3,655)

Loss for the year

-

-

-

-

-

(1,690)

(1,690)

Other comprehensive income

-

-

-

-

511

-

511

Total comprehensive income for the period

-

-

-

-

511

(1,690)

(1,179)

Balance at 31 December 2020

4,430

-

-

-

509

(9,773)

(4,834)

Loss for period

-

-

-

-

-

(15,548)

(15,548)

Other comprehensive income

-

-

-

-

(65)

-

(65)

Total comprehensive income for the period

-

-

-

-

(65)

(15,548)

(15,613)

Transfer to reverse acquisition reserve

(4,430)

-

-

4,430

-

-

-

Recognition of plc equity at acquisition date

132

602

-

6,443

-

-

7,177

Issue of shares for acquisition of subsidiary

462

4,156

-

(7,690)

-

-

(3,072)

Issue of shares for placings

946

7,682

-

-

-

-

8,628

Issue of shares to settle debt

159

1,429

-

-

-

-

1,588

Issue of shares in lieu of fees

143

1,285

-

-

-

-

1,428

Warrants exercised

37

-

-

-

-

-

37

Share based-payment

-

-

148

3,298

-

-

3,446

Cost of share issues

-

(849)

-

-

-

-

(849)

Total transactions with owners

(2,551)

14,306

148

6,481

-

-

18,384

Balance at 30 June 2022

1,879

14,306

148

6,481

444

(25,321)

(2,063)

 

 

 

 

PARENT COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022

 

Share capital

 

 

£'000

Share premium

 

 

£'000

Share-based payment reserve

£'000

Loan note equity reserve

£'000

Retained earnings

 

 

£'000

Total

 

 

 

£'000

 

Balance at 31 December 2019

132

602

-

22

(1,543)

(787)

Loss for the period

-

-

-

-

(1,074)

(1,074)

Equity element of the issue of 10% convertible loan notes

-

-

-

(22)

22

-

Total comprehensive income for the period

-

-

-

(22)

(1,052)

(1,052)

Balance at 31 December 2020

132

602

-

-

(2,595)

(1,861)

Loss for period

-

-

-

-

(5,060)

(5,060)

Other comprehensive income

-

-

-

-

-

-

Total comprehensive income for the period

-

-

-

-

(5,060)

(5,060)

Issue of shares for acquisition of subsidiary

462

4,156

-

-

-

4,618

Issue of shares for placings

946

7,682

-

-

-

8,628

Issue of shares to settle debt

159

1,430

-

-

-

1,589

Issue of shares in lieu of fees

143

1,285

-

-

-

1,428

Warrants exercised

37

-

-

-

-

37

Share based-payment

-

-

148

-

-

148

Cost of share issues

-

(849)

-

-

-

(849)

Total transactions with owners

1,747

13,704

148

-

-

15,599

Balance at 30 June 2022

1,879

14,306

148

-

(7,655)

8,678

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022

 

1 General information

Caracal Gold Plc ('the Company' or 'CGP') (formerly Papillon Holdings plc) is a public limited company with its shares traded on the Main Market of the London Stock Exchange. The address of the registered office is 27-28 Eastcastle Street, London, W1W 8DN. The Company was incorporated and registered in England and Wales on 19 October 2015 as a private limited company and re-registered on 24 June 2016 as a public limited company. It changed its name on 10 September 2021 to Caracal Gold Plc. The Company's registered number is 09829720.

 

The principal activity of the Company and its subsidiaries (the "Group") is the exploration, development and mining of gold in Kenya and Tanzania, and the development of further projects to expand its operations within this industry.

 

On 31 August 2021, the Company acquired the holding company of Mayflower Gold Investments Limited (MGIL) and thus a 100% indirect interest in Kilimapesa Gold Pty Ltd (KPGL), whose principal activity is an established gold mine and gold processing operation in Kenya. This was accounted for as a reverse acquisition - See note 5 below for further details.

 

These consolidated financial statements were approved for issue by the Board of directors on 5 November 2022.

 

2 Accounting policies

 

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards and requirements of the Companies Act 2006. The Financial Statements have also been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss.

 

The functional currency for each entity in the Group is determined as the currency of the primary economic environment in which it operates. The functional currency of the parent company CGP is Pounds Sterling (£) as this is the currency that finance is raised in. The functional currency of its subsidiary KPGL is the Kenyan Shilling and the functional currency of its subsidiary Tyacks is the Tanzanian Shilling. For both subsidiaries these are the currencies that mainly influences labour, material and other costs of providing services. The Group has chosen to present its consolidated financial statements in Pounds Sterling (£), as the Directors believe it is a more convenient presentational currency for users of the consolidated financial statements. Foreign operations are included in accordance with the policies set out below.

 

During the year the Company changed its accounting reference date from 31 December to 30 June to align itself with its newly acquired subsidiary. Consequently, the current year covers a 18 month period, whereas the prior year is a 12 month period and so is not entirely comparable year on year.

 

The preparation of financial statements in conformity with IFRS's requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial information are disclosed in Note 3.

 

a) Going concern

The consolidated financial statements have been prepared on a going concern basis. The Group's assets are not currently generating substantial revenues and therefore an operating loss has been reported. An operating loss is expected in the 12 months subsequent to the date of these financial statements. As a result, the Group will need to raise funding to provide additional working capital within the next 12 months. The ability of the Group to meet its projected expenditure is dependent on these further equity injections and / or the raising of cash through bank loans or other debt instruments. These conditions necessarily indicate that a material uncertainty exists that may cast significant doubt over the Group's ability to continue as a going concern and therefore their ability to realise their assets and discharge their liabilities in the normal course of business. Whilst acknowledging this material uncertainty, the directors remain confident of raising finance and therefore, the directors consider it appropriate to prepare the consolidated financial statements on a going concern basis. The consolidated financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. The auditors have made reference to going concern by way of a material uncertainty within their audit report.

 

b) Adoption of new and revised standards

 

i. New standards, amendments and interpretations adopted by the Group.

There were no new or amended accounting standards that required the Group to change its accounting policies for the year ended 30 June 2022 and no new standards, amendments or interpretations were adopted by the Group.

 

ii. New standards, amendments and interpretations not yet adopted by the Group.

The standards and interpretations that are relevant to the Group, issued, but not yet effective, up to the date of the Financial Statements are listed below. The Group intends to adopt these standards, if applicable, when they become effective.

 

Standard

Impact on initial application

Effective date

IFRS 17

Insurance Contracts

1 January 2023

IFRS 10 and IAS 28 (Amendments)

Long term interests in associates and joint ventures

Unknown

Amendments to IAS 1

Classification of Liabilities as current or non- current

1 January 2023

Amendments to IFRS 3

Reference to the Conceptual Framework

1 January 2022

Amendments to IAS 16

Property, Plant and Equipment - Proceeds before intended use

1 January 2022

Amendments to IAS 37

Onerous contracts - Cost of fulfilling a contract

1 January 2022

Annual Improvements to IFRS Standard 2018-2020 Cycle

Amendments to IFRS 1 First time adoption of IFR

Standards, IFRS 9 Financial Instruments, IFRS Leases

1 January 2022

 

The Directors have evaluated the impact of transition to the above standards and do not consider that there will be a material impact of transition on the financial statements.

 

2.2 Basis of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Please refer to note 5 for information on the consolidation of KPGL and the application of the reverse acquisition accounting principles.

 

The Group applies the acquisition method to account for business combinations. (There was an exception to this for the acquisition of KPGL as discussed in note 5 below). The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

 

Acquisition-related costs are expensed as incurred. 

 

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

 

Asset Acquisitions

Acquisitions of mineral exploration licences through the acquisition of non-operational corporate structures that do not represent a business, and therefore do not meet the definition of a business combination, are accounted for as the acquisition of an asset.

The consideration for the asset is allocated to the assets based on their relative fair values at the date of acquisition.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated.

 

2.3 Financial assets and liabilities

The Company classifies its financial assets at fair value through profit or loss or as loans and receivables and classifies its financial liabilities and other financial liabilities. Management determines the classification of it's investments at initial recognition, A financial asset or liability is measured initially at fair value. At inception transaction costs that are directly attributable to the acquisition or issue, for an item not at fair value through profit or loss, is added to the fair value of the financial asset and deducted from the fair value of the financial liabilities.

 

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determined payments that are not quoted on an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans are recognised when funds are advanced to the recipient. Loans and receivables are carried at amortised cost using the effective interest method (see below).

 

 

Other financial liabilities

Are non-derivative financial liabilities with fixed or determined payments. Other financial liabilities are recognised when cash is received from a depositor. Other financial liabilities are carried at amortised cost using the effective interest method. The fair value of the other liabilities repayable on demand is assumed to be the amount payable on demand at the statement of financial position date.

 

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Company has transferred substantially all the risks and rewards of ownership. In transactions in which the Company neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and retains control over the asset, the Company continues to recognise the asset to the extent of it's continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. There have not been any instances where assets have only been partly derecognised. The Company derecognises a financial liability when it's contractual obligations are discharged, cancelled or expired.

 

Amortised cost measurement

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal payments, plus or minus the cumulative amortisation using the effective interest method of any differences between the initial amount recognised and maturity amount, minus any reduction to impairment.

 

Fair value measurement

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date. The fair value of assets and liabilities in active markets are based on current bid and offer prices respectively. If the market is not active the Company establishes fair value by using other financial liabilities appropriate valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net of present value and discounted cash flow analysis.

 

2.4 Cash and cash equivalents

Cash and cash equivalents include cash in hand and on demand and term deposits, with maturities of three months or less from the date of acquisition, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, net of bank overdrafts.

 

2.5 Investments and loans in subsidiaries

Subsidiary fixed asset investments are valued at cost less provision for impairment. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all investment and loans in subsidiaries.

 

2.6 Impairment of non-financial assets

The carrying amounts of the Group's assets, other than inventories, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

 

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income.

 

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis.

 

In assessing value in use, the expected future cash flows from the asset are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time, value of money and the risks specific to the asset. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.

 

For an asset that does not generate cash inflows that are largely independent of those from other assets the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognised in the income statement whenever the carrying amount of the cash-generating unit exceeds its recoverable amount.

 

A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a change in the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior years. For goodwill, a recognised impairment loss is not reversed.

 

2.7 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of a Company after deducting all of its liabilities. Equity instruments issued are recorded at the proceeds received net of direct issue costs.

 

Share capital represents the amount subscribed for shares at nominal value.

 

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. Any bonus issues are also deducted from share premium.

 

The share-based payments reserve represents equity-settled shared-based employee remuneration for the fair value of the warrants issued. It also includes the warrants issued for services rendered accounted for in accordance with IFRS 2.

 

The reverse acquisition reserve was recognised during the formation of the Group when the legal acquiree was considered to be the accounting acquirer under the rules of IFRS 3. As the accounting acquiree was not a business under IFRS 3, a part of the transaction was outside the scope of IFRS 3. This resulted in the recognition of a 'reverse acquisition reserve' on consolidation and is set out in more detail in note 5 below.

 

The convertible loan note reserve is used to account for the equity component of the convertible notes.

 

The foreign exchange translation reserve policy is set out below in 2.10.

 

Retained earnings include all current and prior period results as disclosed in the Statement of Comprehensive Income, less dividends paid to the owners of the Company.

 

2.8 Current and deferred income taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

 

There is no tax payable as the Company has made a taxable loss for the year. Taxable loss differs from net loss as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

 

Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit or loss. Deferred tax liabilities are generally recognised for all taxable temporary differences.

 

Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

 

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

 

Current or deferred tax for the year is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively.

 

2.9 Rehabilitation and Environmental Provision

The Group recognises a rehabilitation and environmental provision where it has a legal and constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The nature of these restoration activities includes dismantling and removing structures; rehabilitating the mine and tailings dam; dismantling operating facilities; and restoring, reclaiming and revegetating affected areas.

 

On initial recognition, the present value of the estimated costs is capitalised by increasing the carrying amount of the related mining asset to the extent that it was incurred as a result of the development or construction of the mine. Any changes to or additional rehabilitation costs are recognised as additions or charges to the corresponding asset and rehabilitation liability when they occur.

 

Over time, the discounted liability is increased for the change in present value based on the discount rate that reflects current market assessments and the risks specific to the liability. The annual unwinding of the discount is recognised in the statement of comprehensive income as part of finance costs. The Group does not recognise a deferred tax asset in respect of the temporary difference on the rehabilitation liability nor the corresponding deferred tax liability in respect of the temporary difference on the rehabilitation asset.

 

2.10 Foreign currency translation

In preparing the financial statements of the Group entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

Exchange differences are recognised in profit or loss in the period in which they arise except for:

 

· exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

· exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge accounting); and

· exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a foreign exchange translation reserve (attributed to non-controlling interests as appropriate).

 

2.11 Share-based payments

The Group issued warrants in the period which were accounted for as equity settled share based payment transactions with employees. The fair value of the employees services received in exchange for these warrants is recognised as an expense in the profit and loss account with a corresponding increase in equity in the Share-based payment reserve. As there are no vesting conditions for these warrants the expense was recognised immediately and will not be subsequently revisited. Fair value is determined using Black-Scholes option pricing models.

The Group has also adopted an incentive plan to issue its management Performance Shares based on non-market based performance conditions. These are valued by management using the fair value of the equity instrument expected to be received and a judgement of the likelihood for these conditions to be met. At the end of each reporting period, the Group revises its estimate of the number of shares that are expected to be awarded.

Where equity instruments are granted to persons other than employees, the statement of comprehensive income is charged with the fair value of the goods and services received.

 

2.12 Intangible assets

 

Exploration and evaluation assets

Intangible assets represent exploration and evaluation assets (IFRS 6 assets), being the cost of acquisition by the Group of rights, licences and know-how. Such expenditure requires the immediate write-off of exploration and development expenditure that the Directors do not consider to be supported by the existence of commercial reserves.

 

All costs associated with mineral exploration and investments, are capitalised on a project-by-project basis, pending determination of the feasibility of the project. Costs incurred include appropriate technical and administrative expenses but not general overheads and these assets are not amortised until technical feasibility and commercial viability is established. If an exploration project is successful, the related expenditures will be transferred to "mining assets" and amortised over the estimated life of the commercial ore reserves on a unit of production basis. Where a licence is relinquished or a project abandoned, the related costs are written off. On 1 January 2020, all the exploration and evaluation expenditure relating to the Kilimapesa Mine was transferred to Mining assets as the mine is considered to be fully operational and production has commenced.

 

The recoverability of all exploration and development costs is dependent upon the discovery of economically recoverable reserves, the ability of the Group to obtain necessary financing to complete the development of reserves and future profitable production or proceeds from the disposition thereof.

 

Exploration and evaluation assets shall no longer be classified as such when the technical feasibility and commercial viability of extracting mineral resources are demonstrable. When relevant, such assets shall be assessed for impairment, and any impairment loss recognised, before reclassification to "Mine development". 

 

2.13 Property, plant and equipment

 

i) initial recognition

Upon commencement of commercial production, the intangible assets held under 'exploration and evaluation" are transferred into Mining Assets. Items of property, plant and equipment and Mining assets are stated at cost less accumulated depreciation and accumulated impairment losses.

 

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the rehabilitation obligation, and, for qualifying assets (where relevant), borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.

Producing mines also consist of the value attributable to mineral reserves and the portion of mineral resources considered to be probable of economic extraction at the time of an acquisition. When a mine construction project moves into the production phase, the capitalisation of certain mine construction costs ceases, and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to mining asset additions, improvements or new developments, underground mine development or mineable reserve development.

 

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

 

ii) Depreciation/amortisation

'Mining assets' are depreciated/amortised on a unit of production (UOP) basis over the economically recoverable reserves of the mine concerned. The unit of account used is the recoverable ounces of gold. Rights and concessions are depleted on the UOP basis over the economically recoverable reserves of the relevant area. The UOP rate calculation for the depreciation/amortisation of mine development costs takes into account expenditures incurred to date, together with sanctioned future development expenditure. Economically recoverable reserves include indicated reserves only.

 

Depreciation on other plant and equipment is provided to write off the cost of an asset, less its estimated residual value, evenly over the expected useful economic life of that asset. Freehold land, that has been acquired outright is not depreciated.

- Buildings 20 Years

- Plant and equipment 10 Years

- Motor vehicles 3- 5 Years

- Office equipment 6 Years

 

The residual value, if significant, is reassessed annually.

 

Surplus/(deficits) on the disposal of mining assets, plant and equipment are credited/ (charged) to income. The surplus or deficit is the difference between the net disposal proceeds and the carrying amount of the asset.

 

The Group holds some Right-of Use Assets - see policy note 2.15 below.

 

2.13 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of finished goods and work in progress comprises raw material, direct labour, other direct costs, variable production overheads and an allocation of fixed production overheads based on normal operating capacity, but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

 

Raw materials include costs incurred in acquiring the inventories and bringing them to their existing location and condition.

 

Broken ore comprises all ores extracted from the mine and stockpiled awaiting processing. The ores are valued at the cost of mining and transport to its current position.

 

Work-in-progress comprises materials in the process of being converted from raw materials to finished goods.

 

Precious metals inventories include bullion on hand and gold in process.

 

Bullion on hand and gold in process represent production on hand after the smelting process, gold contained in the elution process, gold loaded carbon in the Carbon in Leach (CIL), Carbon in Pulp (CIP) process, gravity concentrates, and any form of precious metal in process where the quantum of the contained metal can be accurately determined. It is valued at the average production cost for the period, including amortisation and depreciation.

 

2.14 Revenue

Revenue represents the fair value of consideration received or receivable for the sale of precious metal. It is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. It is stated net of Value Added Tax, rebates and trade discounts. Cash discounts are included as part of finance costs. No revenue is recognised if there are significant uncertainties regarding, the recovery of the consideration due, associated costs, the possible return of goods or the continuing management involvement with goods.

 

2.15 Leases

The Group has entered into leases of land (Saris leases) and field vehicles (additions in the current year). Lease liabilities are initially measured at the present value of lease payments unpaid at the commencement date. Lease payments are discounted using the incremental borrowing rate (being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions), unless the rate implicit in the lease is available. The Group currently uses the incremental borrowing rate as the discount rate for all leases. For the purposes of measuring the lease liability, lease payments comprise fixed payments and variable lease payments based on an index or rate.

 

Right-of-use assets are measured at cost, which comprises the initial measurement of the lease liability, plus any lease payments made prior to lease commencement, initial direct costs incurred, less any lease incentives received. These assets are depreciated over the lease term (or useful life, if shorter). Right-of-use assets are subject to an impairment test if events and circumstances indicate that the carrying value may exceed the recoverable amount.

 

Lease repayments made are allocated to capital repayment and interest so as to produce a constant periodic rate of interest on the remaining lease liability balance.

 

Right-of-use assets are presented within property, plant and equipment. Lease liabilities are presented as separate line items on the face of the Balance Sheet. In the Cash Flow Statement, lease repayments (of both the principal and interest portions) are presented within cash used in financing activities, except for payments for leases of short-term and low-value assets and variable lease payments, which are presented within cash flows from operating activities or cash used in investing activities in accordance with the relevant Group accounting policy.

 

2.16 Convertible loan notes

The component parts of convertible loan notes issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial assets for a fixed number of the Company's own equity instruments is an equity instrument.

 

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date.

 

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognised in equity will be transferred to the convertible loan note reserve. Where the conversion option remains unexercised at the maturity date of the convertible loan note, the balance recognised in equity will be transferred to retained earnings. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option.

 

Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognised directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortised over the lives of the convertible loan notes using the effective interest method.

 

2.17 Net financing costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable funds invested, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in the income statement.

 

Interest income is recognised in the income statement as it accrues, using the effective interest method. The interest expense component of finance lease payment is recognised in the income statement using the effective interest rate method.

 

2.18 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision maker, who are responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive Board of Directors.

 

3 Critical accounting estimates and judgments

 

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

 

Accounting for acquisitions and fair value (see Note 13)

Acquisitions are accounted for at fair value. The assessment of fair value is subjective and depends on a number of assumptions. These assumptions may include assessment of estimated resources, cost of bringing these resources to commercial production levels, discount rates, and the amount and timing of expected future cash flows from assets and liabilities. In addition, the selection of specific valuation methods for individual assets and liabilities requires judgment. The specific valuation methods applied will be driven by the nature of the asset or liability being assessed. The consideration given to a seller for the purchase of a business or a company is accounted for at its fair value. When the consideration given includes elements that are not cash, such as shares or options to acquire shares, the fair value of the consideration given is calculated by reference to the specific nature of the consideration given to the seller.

 

Impairment of investments and loans to subsidiaries (see Note 13)

The Group and the Company assess at each reporting date whether there is any objective evidence that investments in and loans to subsidiaries are impaired. To determine whether there is objective evidence of impairment, a considerable amount of estimation is required in assessing the ultimate realisation of these investments/receivables, including valuation, creditworthiness and future cashflows which are calculated from the Life of Mines calculations. As at the year end the Directors do not assess there to be any impairment of these amounts. 

 

Share-based payments (see Note 24)

The Group issues shares and warrants to its employees, directors, investors and suppliers. These are valued in accordance with IFRS 2 "Share-based payments". In calculating the related charge on issuing shares and warrants the Group will use a variety of estimates and judgements in respect of inputs used including share price volatility, risk free rate, and expected life. Changes to these inputs may impact the related charge.

 

Valuation of deferred consideration payable (see Note 5)

The Group has recorded a contingent consideration liability of £1.426m as at 30 June 2022 relating to the reverse acquisition of the KPGL. An estimate must be made when determining the value of contingent consideration to be recognised at each balance sheet date. Changes in assumptions could cause an increase, or reduction, in the amount of contingent consideration payable, with a resulting charge or credit in the consolidated income statement.

 

The deferred consideration (in the form of both deferred consideration shares and performance shares) is expected to be paid within 2 years of the acquisition and no discount was applied due to immateriality and immediacy of payment.  It is based upon the achievement of differing milestones of gold poured or sold in a month from 300 ounces to 1,500 ounces. The Directors believe that there is a high probability that these conditions will be met in the next 12 months of operations.

 

Recoverable value of mining assets (see Note 15)

Costs capitalised in respect of the Group's mining assets are required to be assessed for impairment under the provisions of IAS 36. Such an estimate requires the Group to exercise judgement in respect of the indicators of impairment and also in respect of inputs used in the models which are used to support the carrying value of the assets. Such inputs include estimates of gold reserves (see www.caracalgold.com), production profiles, gold price, capital expenditure, inflation rates, and pre-tax discount rates that reflect current market assessments of (a) the time value of money; and (b) the risks specific to the asset for which the future cash flow estimates have not been adjusted. The Directors concluded that there was no impairment as at 30 June 2022.

 

Rehabilitation and environmental "decommissioning" provision (see Note 22)

The Group's activities are subject to various laws and regulations governing the protection of the environment. The Group recognises management's best estimate of the asset decommissioning costs in the period in which they are incurred. Such estimates of costs include pre-tax discount rates that reflect current market assessments of (a) the time value of money; and (b) the risks specific to the asset for which the future cash flow estimates have not been adjusted. Actual costs incurred in future periods could differ materially from the estimates.

 

Additionally, future changes to environmental laws and regulations, life of mining assets, estimates and discount rates could affect the carrying amount of this provision. The Directors provisionally assessed the extent of decommissioning required as at 31 August 2021 and concluded that a provision of £1.4m should be recognised in respect of future decommissioning obligations at the Kilimapesa Gold Mine.

 

Valuation of inventory (see Note 16)

As at 30 June 2022, inventory has been valued at £712,000. This includes slow moving inventory but due to its nature the Directors do not believe that any impairment of this balance is necessary at year end.

 

4. Financial risk management

The Group's activities may expose it to some financial risks. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

 

a) Liquidity risk

Liquidity risk arises from the possibility that the Group and its subsidiaries might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. In addition to equity funding, additional borrowings have been secured to finance operations. The Group manages this risk by monitoring its financial resources and carefully plans its expenditure programmes. Financial liabilities of the Group comprise trade payables which mature in less than six months, convertible loan notes as referenced in note 20 and deferred consideration that is payable in shares.

 

b) Capital risk

The Group's objective when managing capital is to safeguard the entity's ability to continue as a going concern and develop its gold exploration, development and production activities to provide returns for shareholders and benefits for other stakeholders.

 

The Group's capital structure comprises all the components of equity (all share capital, share premium, retained earnings when earned and other reserves). When considering the future capital requirements of the Group and the potential to fund specific project development via debt, the Directors consider the risk characteristics of the underlying assets in assessing the optimal capital structure.

 

c) Credit risk

Credit risk is the risk that the Group will suffer a financial loss as a result of another party failing to discharge an obligation and arises from cash and other liquid investments deposited with banks and financial institutions. The Group considers the credit ratings of banks and institutions in which it holds funds to reduce exposure to credit risk. The Group considers that it is not exposed to major concentrations of credit risk.

 

The currency profile of the Group's cash and cash equivalents is as follows:

 

30 June 2022

31 December 2020

Cash and cash equivalents

£'000

£'000

GBP

-

-

Kenyan Shillings

23

2

USD

57

119

 

On the assumption that all other variables were held constant, and in respect of the Group's cash position, the potential impact of a 20% increase in the GBP: USD foreign exchange rate would not have a material impact on the Group's cash position and as such is not disclosed.

 

d) Fair value hierarchy

All the financial assets and financial liabilities recognised in the financial statements which are short-term in nature are shown at the carrying value which also approximates the fair values of those financial instruments. Therefore, no separate disclosure for fair value hierarchy is required. 

 

e) Market risk

Market risk arises from the Group's use of interest bearing and foreign currency financial instruments. It is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), and foreign exchange rates (currency risk). The Convertible loan note held at year end has a fixed interest rate and is denominated in US Dollars and therefore a risk exists that repayment may be higher than provided for if the foreign exchange rate significantly changes. This is mitigated by the underlying assets which are also denominated in US Dollar (ie the gold reserves).

 

A 10% movement in the strength of the US Dollar against Pound Sterling would increase the repayment by £164,000.

 

f) Price risk

Price risk arises from the exposure to equity securities arising from investments held by the Group. No such investments are held by the Group and therefore no risk has been identified.

 

g) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Pound sterling, US Dollar and Kenyan Shilling. Foreign exchange risk arises from recognised monetary assets and liabilities, where they may be denominated in a currency that is not the Group's functional currency. One significant risk in Kenya is a US Dollar risk as the loans to KPG are denominated in US Dollars. A 10% movement in the strength of the US Dollar against Pound Sterling would decrease the liability owed to the parent company by £1.6m. The Directors consider that, for the time being, no hedging or other arrangements are necessary to mitigate this risk.

 

h) Categories of financial instruments

In terms of financial instruments, these solely comprise of those measured at amortised costs and are as follows:

 

Group

Company

30 June

2022

31 Dec 2020

30 June

2022

31 Dec 2020

£'000

£'000

£'000

£'000

Trade and other payables

7,357

1,330

6,019

1,423

Cash and cash equivalents at amortised cost

 

80

 

121

 

26

 

-

Trade and other receivables

826

737

7,108

12

906

858

7,134

12

 

5. Reverse acquisition

On 31 August 2021, the Company acquired through an issue of 428,846,154 Consideration shares the entire share capital of MGIL and thus a 100% indirect interest in Kilimapsea Gold Pty Ltd (KPGL), whose principal activity is an established gold mine and gold processing operation in Kenya. (On 2 November 2021, 32,867,800 further consideration shares were issued in lieu of an outstanding cash payment of $450,000 to GMRL and a further payment of $150,000 in cash was made in accordance with the Prospectus).

 

Although the transaction resulted in KPGL becoming a wholly owned subsidiary of the Company, the transaction constitutes a reverse acquisition as in substance, it resulted in a fundamental change in the business of the Company and the executive management of KPGL were given the right to appoint two executive directors, one non-executive director and a non-executive chairman to the Company's board of directors, with the Company reserving the right to appoint two non-executive directors. Thus the executive management of KPGL effectively became the controlling executive management of the Company.

 

The shareholders of KPGL acquired a controlling interest in the Company, before further share issues to reduce debt and raise cash diluted their ownership to 29.61%. The transaction has therefore been accounted for as a reverse acquisition. As the Company's activities prior to the acquisition were purely the maintenance of the Main Market LSE Listing, acquiring KPGL and raising equity finance to provide the required funding for the operations of the acquisition the Directors determined that the Company did not meet the definition of a business in accordance with IFRS 3.

 

Accordingly, this reverse acquisition does not constitute a business combination. Although, the reverse acquisition is not a business combination, the Company has become a legal parent and is required to apply IFRS 10 and prepare consolidated financial statements.

 

The Directors have prepared these financial statements using the reverse acquisition methodology, but rather than recognising goodwill, the difference between the equity value given up by the KPGL shareholders and the share of the fair value of net assets gained by the KPGL shareholders is charged to the statement of comprehensive income as a share-based payment on reverse acquisition, and represents in substance the cost of acquiring a Main Market LSE listing.

 

In accordance with reverse acquisition accounting principles, these consolidated financial statements represent a continuation of the consolidated statements of MGIL and its subsidiaries and include:

 

- The assets and liabilities of MGIL and its subsidiaries at their pre-acquisition carrying value amounts and the results for both periods; and

- The assets and liabilities of the Company as at 31 August 2021 and its results from the date of the reverse acquisition 31 August 2021 to 30 June 2022.

 

On 31 August 2021, the Company issued 428,846,154 ordinary shares to acquire the entire share capital of MGIL and thus indirectly KPGL. On the same date, the Company was readmitted to the Main Market of the LSE, after completing its second Placing round with a placing share price of £0.01. The Company was also contracted to issue further cash and shares as part of the overall consideration calculation bringing the value of the investment in KPGL to £7,690,000 (see below for further details).

 

Because the legal subsidiary, KPGL, was treated on consolidation as the accounting acquirer and the legal Parent Company, CGP, was treated as the accounting subsidiary, the fair value of the shares deemed to have been issued by KPGL was calculated at £1,138,000 based on an assessment of the purchase consideration for a 100% holding of CGP of 132,400,000 shares at a weighted average placing price of £0.0086 per share.

 

The fair value of the net assets of CGP at acquisition was as follows:

 

 

£'000

Cash and cash equivalents

 

75

Other assets

 

6

Liabilities

 

(2,241)

Net Liabilities

 

(2,160)

 

The difference between the deemed cost (£1,138,000) and the fair value of the net liabilities assumed per above of £2,160,000 resulted in £3,298,000 being expensed within "reverse acquisition expenses" in accordance with IFRS 2, Share Based Payments, reflecting the economic cost to KPGL shareholders of acquiring a quoted entity.

 

The reverse acquisition reserve which arose from the reverse takeover is made up as follows:

 

 

£'000

Pre-acquisition equity1

 

(2,894)

KPGL share capital at acquisition 2

 

4,430

Investment in KPGL 3

 

(7,690)

Loan assigned from GMR on acquisition4

 

9,337

Reverse acquisition expense 5

 

3,298

 

 

6,481

 

1. Recognition of pre-acquisition equity of CGP as at 31 August 2021.

2. KPGL had issued share capital and share premium of £4,430,000. As these financial statements present the capital structure of the legal parent entity, the equity of KPGL is eliminated.

3. The value of the shares and cash issued by the Company in exchange for the entire share capital of KPGL. The above entry is required to eliminate the balance sheet impact of this transaction.*

4. The Loan held between GMR and KPGL was assigned to MGIL and therefore is eliminated as part of the Reverse Acquisition.

5. The reverse acquisition expense represents the difference between the value of the equity issued by the Company, and the deemed consideration given by KPGL to acquire the Company.

*Value of the Shares issued by the Company to acquire KPGL is made up as follows:

 

 

£'000

Consideration Shares

 

4,288

Deferred Consideration Shares

 

1,500

Cash Consideration

 

146

Share Consideration in lieu of cash

 

330

Performance Shares Awards

 

1,426

 

7,690

 

 

The Deferred Consideration shares were deemed payable before year end and therefore their cost has been included in the cost of the investment. £1m was payable on the recommencement of gold being commercially produced and sold at the mine on 24 September 2021 and £500,000 became payable on the achievement of the first 5,000 ounces of gold commercially produced and sold by KGPL on 31 March 2021. These shares (to be valued at 1p per share as per the Prosepectus) are still to be issued at year end and have been included in the Other Creditors balance.

 

The Performance Share Awards which were granted at the date of the Reverse Acquisition have been recognised as part of the cost of investment as under IFRS 2 as they do not have any non-vesting conditions and therefore should be recognised on grant. 

 

Recognition has been based on an estimate of the number of instruments which are expected to be issued based on the achievement of the following milestones at a share price forecast between 1.0p and 1.11p:

 

Management Incentives shall vest in five equal instalments upon the occurrence of the following milestones:

 

1. On the achievement of 300 ounces of gold poured or sold in a month (20%);

2. On the achievement of 600 ounces of gold poured or sold in a month (20%);

3. On the achievement of 900 ounces of gold poured or sold in a month (20%);

4. On the achievement of 1,200 ounces of gold poured or sold in a month (20%); and

5. On the achievement of 1,500 ounces of gold poured or sold in a month (20%).

 

There is no expiry date set for the achievement of the milestones with respect to the Performance Share Awards.

 

For the purposes of the current period of reporting, the values related to the transaction accounting are considered provisional. These fair values will be finalised within a period of twelve months from the reverse acquisition date.

 

6. Segment reporting

 

For the purpose of IFRS 8, the Chief Operating Decision Maker "CODM" takes the form of the board of directors. The Directors are of the opinion that the business of the Group focused on two reportable segments as follows:

 

· Head office, corporate and administrative, including parent company activities of raising finance and seeking new investment opportunities, all based in the UK and;

· Gold mining operations, all based in Kenya and Tanzania.

 

The geographical information is the same as the operational segmental information shown below.

 

18 month period ending 30 June 2022

United Kingdom £'000

Kenya

£'000

Tanzania

£'000

 

£'000

Revenue

-

6,858

-

6,858

Cost of sales

-

(9,007)

-

(9,007)

Gross Profit

(2,149)

-

(2,149)

Operating expenses

(3,411)

(3,776)

(1)

(7,188)

Operating Loss

(3,411)

(5,925)

(1)

(9,337)

Share-based payments

(84)

-

-

(84)

Listing costs

(1,146)

-

-

(1,146)

Other income/FX

(19)

(920)

-

(939)

Net finance costs

(546)

(198)

-

(744)

Reverse acquisition expenses

(3,298)

-

-

(3,298)

Loss before and after tax

(8,504)

(7,073)

(1)

(15,548)

Net Assets

Assets

435

6,862

2,402

9,699

Liabilities

(8,737)

(2,471)

(554)

(11,762)

Net assets (liabilities)

(8,302)

4,391

1,848

(2,063)

No segmental information has been provided for prior period as there was only one segment, being the Operations in Kenya. As such the prior year financial statements of the segment is the same as that set out in the prior period consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity and the consolidated statement of cash flows.

Major customer: all revenue in both periods came from one customer located in Kenya in each period.

 

7. Revenue

 

 

18 months ended 30 June 2022

Year ended 31 December 2020

 

£'000

£'000

Sales of precious metals

6,858

1,384

Total revenue

6,858

1,384

 

8. Expenditure by nature

 

 

18 months ended 30 June 2022

Year ended 31 December 2020

 

£'000

£'000

Directors remuneration

866

24

Wages and salaries

2,068

210

Depreciation of PPE

824

439

Legal and professional fees

1,459

-

 

During the year the Group obtained the following services from their auditors:

 

18 months ended 30 June 2022

Year ended 31 December 2020

 

£'000

£'000

Fees payable to the Group's auditors for the audit of the Company

 

65

 

16

Fees payable to the Group's auditors for other services - Reporting Accountant services in respect to the Reverse Acquisition

 

 

 

35

 

 

 

-

100

16

 

9. Directors and employees

 

The average monthly number of persons employed by the Group, including Executive Directors, was:

 

 

18 months ended

30 June 2022

£'000

Year ended 31 December 2020

£'000

Management

13

2

Operations

461

114

Administration

 

25

5

 

499

121

 

Remuneration in respect of these Directors and Employees was:

 

 

18 months ended

30 June 2022

£'000

Year ended 31 December 2020

£'000

Wages and salaries

1,135

205

Pensions (National Social Security Fund)

17

6

Directors' fees

772

-

1,924

206

 

The share-based payments comprised the fair value of warrants granted to directors and employees in respect of services provided.

 

Wages and salaries include amounts that are capitalised as development and production assets and others are administration expenses.

 

Directors' remuneration is disclosed in the Remuneration Report of these consolidated financial statements.

 

10. Finance costs

 

 

 

 

18 month period ended 30 June 2022

£'000

Year ended 31 December 2020

£'000

 

 

 

Interest on loans

609

110

Unwinding of discount on provisions

135

-

744

110

11. Taxation

 

No charge to taxation arises due to the losses incurred.

 

GROUP

18 months

period ended

 30 June

2022

12 months ended 31 December

2020

£'000

£'000

Loss on ordinary activities before taxation

(15,548)

(1,690)

Tax at the applicable rate of 24.5% (2020:30%)

(3,810)

(507)

Disallowed expenses

2,068

714

Losses for which no deferred tax is recognised

13,480

976

Total tax charge

-

-

 

The weighted average applicable tax rate of 24.5% (2021: 30%) used is a combination of the 19% standard rate of corporation tax in the UK and 30% Kenyan corporation tax.

 

The Group has total tax losses of £20,845,000 to carry forward against future profits. There are £1,230,000 of UK tax losses brought forward and £6,135,000 Kenyan tax losses brought forward.

 

No deferred tax asset on losses carried forward has been recognised on the grounds of uncertainty as to when profits will be generated against which to relieve said amount. 

 

12. Earnings per share

 

Basic and diluted loss per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. 

 

18 months ended

30 June

2022

12 months

ended

31December

2020

Loss for the period (£'000)

15,548

1,690

Weighted average number of shares in issue

1,423,204,110

1,429,487,180

Basic and Diluted loss per share (pence)

(1.09p)

(0.12)p

The weighted average number of shares is adjusted for the impact of the reverse acquisition as follows: Prior to the reverse takeover, the number of shares is based on KPGL, adjusted using the share exchange ratio arising on the reverse takeover; and from the date of the reverse takeover, the number of share is based on the Company. The prior year number of shares is also adjusted using the share exchange ratio.

 

There is no difference between the diluted loss per share and the basic loss per share presented. Warrants could potentially dilute basic earnings per share in the future but were not included in the calculation of diluted earnings per share as they are anti-dilutive for the period presented. 

13. Investment in subsidiaries

COMPANY

£'000

 

Cost and net book amount

At 1 January 2020, 2021

-

Additions - KPGL

7,690

Additions - Tyacks

1,847

Additions - Other subsidiaries

-

At 30 June 2022

9,537

 

Information about the composition of the Group at the end of the reporting period is as follows:

 

Name

Principal activity

Place of incorporation and operation

% owned subsidiary

Kilimapesa Gold Pty Ltd ("KPGL")

Precious metals production

Kenya

100*

Tyacks Gold Limited ("Tyacks")

Exploration and Mining

Tanzania

100

Mayflower Gold Investments Ltd ("MGIL")

Precious metals production

England and Wales

100

Caracal Investments Ltd

Holding company

Mauritius

100

 

*held indirectly through Mayflower Gold Investments Limited

 

On 31st August 2021, the Company acquired the entire share capital of KPGL. Further details regarding this reverse acquisition and its accounting can be found in Note 5 above. The registered office of KPGL is L.R. No.209/8342/3, First Ngong Avenue, PO Box 7478, Nairobi, Kenya.

 

MGIL was incorporated on 9th December 2020 and its registered office is 165 Fleet Street, London, UK, EC4A 2DY. On 16th August 2022, the company changed its name to Caracal Holdings Limited.

 

The registered office of Caracal Investments is c/o Dale International Trust Company Limited, 3rd Floor Tower A, 1 Cybercity, Ebene 72201, Mauritius.

 

The registered office of Tyacks is 10 Chato Street, Regent Estate, PO Box 9020, Dar es Salaam, Tanzania.

 

On 23 May 2022, the Company entered into a Sales and Purchase Agreement with Tyacks Gold Limited, a gold mining and exploration company, to acquire the entire share capital of said company (66.7% to the Company and 33.3% to MGIL). As consideration for the transaction, the Purchase price was agreed to be a total of £1.2m ($1.5m) cash which was paid in three tranches ($500,000 on 27 June 2022, $413,000 on 3 August 2022 and the final amount of $587,000 is still outstanding as at the date of these accounts) and the seller was also granted a 0.5% gross net smelter return royalty on all gold produced and sold related to the Project and Licences, less any transportation, insurance, marketing and refining costs. The present value of the contingent consideration (the net smelter royalty) was calculated to be £619,000.

 

The acquisition provided the Company with the opportunity to expand its gold production and exploration programme as Tyacks are the holder of several mining licenses. On this date the Company assumed 100% of the budgeted costs required to operate Tyacks and the Project and therefore it is considered that control was to have passed on the Signature Date of 23 May 2022.

 

The amounts recognised in respect of the identifiable assets acquired and liability assumed as a result of the acquisition are as follows:

 

Net book value of assets acquired

Fair value adjustments

Fair value of assets acquired

£'000

£'000

£'000

Intangible assets

-

2,392

2,392

Financial assets

10

-

10

Financial liabilities

(3)

-

(3)

Deferred tax liability

-

(552)

(552)

Total identifiable assets acquired and liabilities assumed

7

1,840

1,847

 

 

 

 

Fair value of consideration paid:

 

 

 

Cash paid

 

 

402

Cash due post year end

826

Contingent consideration

619

Total consideration

 

 

1,847

 

Under IFRS 3, a business must have three elements: inputs, processes and outputs. Tyacks is an early stage exploration company and has no mineral reserves and no plan to develop a mine. Tyacks does have titles to mineral properties but these could not be considered inputs because of their early stage of development. Tyacks has no processes to produce outputs and has not completed a feasibility study or a preliminary economic assessment on any of its properties and no infrastructure or assets that could produce outputs. Therefore, the Directors conclusion is that the transaction is an asset acquisition and not a business combination. The fair value adjustment to intangible assets of £2,392,000 represents the excess of the purchase and contingent consideration of £1,847,000 over the excess of the net assets acquired (net assets of £7,000) and a deferred tax liability of £552,000.

 

During the period since acquisition, Tyacks contributed a loss of £2,000 to the Group. If the acquisition had occurred on 1 January 2021, consolidated pro-forma loss for the 18 months ended 30 June 2022 would have been £58,000.

 

14. Intangible assets

 

GROUP

Total

 

£'000

Cost

 

Balance as at 1 January 2020

-

Additions/acquisitions

-

Balance as at 31 December 2020

-

Acquisition of Tyacks

2,392

Balance as at 30 June 2022

2,392

 

 

 

No impairment was recorded in either period.

15. Property, plant and equipment

 

GROUP

Land

Land

(leased)

Buildings

Mining

assets

Plant and equipment

Production vehicles

Field vehicles (leased)

Office equipment

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

 

 

 

 

Balance as at 31 December 2020

236

 

96

95

 

1,554

3,246

278

 

-

16

5,521

Additions

-

-

24

1,677

700

16

92

22

2,531

FX effect

7

4

3

71

124

10

4

1

224

Balance as at 30 June 2022

243

 

100

122

 

3,302

4,070

304

 

96

39

8,276

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

Balance as at 31 December 2020

-

 

12

38

 

155

1,300

246

 

-

12

1,763

Depreciation charge

-

 

9

7

 

63

624

32

 

-

1

736

FX effect

-

1

1

7

70

9

-

-

88

Balance as at 30June 2022

-

 

22

46

 

225

1,994

287

 

-

13

2,587

 

 

 

 

 

 

 

 

 

 

Carrying value

 

 

 

 

 

 

 

 

 

Balance as at 31 December 2020

236

 

84

57

 

1,399

1,946

32

 

-

4

3,758

Balance as at 30 June 2022

243

 

78

76

 

3,077

2,076

17

 

96

26

5,689

 

Details of land

Freehold land to the extent of 11,736 Ha, situated in Lolgorian, Transmara West, Narok County, held under Title Deed Nr

TRANSMARA/MOYOI/2366,Registry Map Sheet No. 19, in the Transmara District Land Registry.  Purchased on 4 May 2015 for £230,216.

Pledged as security

Field vehicle additions in the period were acquired through a finance lease agreement which is secured on these assets.

 

COMPANY

Plant and equipment

Total

 

£'000

£'000

Cost

 

 

Balance as at 31 December 2020,2021

-

-

Additions

330

330

Balance as at 30 June 2022

330

330

 

 

 

Depreciation

 

 

Balance as at 31 December 2020,2021

-

-

Additions

27

27

Balance as at 30 June 2022

27

27

 

Carrying value

Balance as at 31 December 2020,2021

-

-

Balance as at 30 June 2022

302

302

In assessing the carrying amounts of its mining assets, the Directors have used an expansion of the mining capacity up to 24,000 oz of gold per annum in the next year, Gold revenues have been estimated over the life of mine period at a management estimate of $1,600 per oz. A discount rate of 20% has been utilised to give a net present value of the existing mine. No impairment has been indicated.

 

16. Inventories

 

GROUP

As at

30 June

2022

As at

31 December 2020

 

£'000

£'000

Consumable stores

138

360

Raw materials

457

5

Precious metal on hand and in process

117

210

712

575

 

17. Trade and other receivables

 

 

Group

Company

 

30 June 2022

31 Dec 2020

30 June 2022

31 Dec 2020

 

£'000

£'000

£'000

£'000

Trade debtors

-

4

-

-

VAT receivables

642

729

71

-

Amounts due from Group undertakings

 

-

 

-

 

6,997

 

-

Other receivables and prepayments

184

4

39

12

 

826

737

7,108

12

 

All of the above amounts are due within one year.

Amounts due from Group undertakings are denominated in US dollars and interest free and repayable on demand.

Under IFRS 9, the Expected Credit Loss ("ECL") Model is required to be applied to the intercompany loans receivable from subsidiary companies, which are held at amortised cost. An assessment of the expected credit loss arising on intercompany loans has been calculated and the directors do not believe a provision is required in the parent Company financial statements during 2022 as the cashflows from the underlying asset (the Kilimapsea Mine) show that the repayments on the loan will cover the repayments required. The Company had no subsidiaries in prior year.

18. Cash and cash equivalents

 

 

Group

Company

 

30 June 2022

31 Dec 2020

30 June 2022

31 Dec 2020

 

£'000

£'000

£'000

£'000

Cash and cash equivalents

80

121

26

-

 

80

121

26

-

 

Cash and cash equivalents consist of balances in bank accounts and Company, a money transfer service used to efficiently execute international foreign currency transactions. Corpay is a part of the Barclays Group with a Fitch credit score of A and ABSA Bank Limited holds a BB- credit score.

19. Trade and other payables

 

 

Group

Company

 

30 June 2022

31 Dec 2020

30 June 2022

31 Dec 2020

 

£'000

£'000

£'000

£'000

Trade creditors

541

305

164

918

Amounts payable to related parties

 

-

 

221

 

-

 

-

Other payables and accruals

3,882

804

2,922

505

Taxes and social security

8

-

8

-

Deferred consideration

1,500

-

1,500

-

Contingent consideration due within one year

 

1,426

 

-

 

1,426

 

-

 

7,357

1,330

6,019

1,423

 

Other payables include an amount of £825,000 due to the owners of Tyacks for the completion of this acquisition (see note 13) and an amount of £2m owed to Orca Capital for Shares paid for but still to be issued.

 

The deferred consideration is due to Mayflower Capital as part of the consideration due for the acquisition of KPGL (see note 5). This is due to be paid in shares.

 

The contingent consideration is based on the management performance shares as set out in note 5 and is also due to be paid in shares.

 

20. Borrowings

 

Non-Interest Bearing:

Group

Company

 

30 June 2022

31 Dec 2020

30 June 2022

31 Dec 2020

 

£'000

£'000

£'000

£'000

Non-current liabilities

Other

-

48

-

-

Outstanding on purchase price of Land

 

-

 

-

 

-

 

-

 

-

48

Current liabilities

Other

-

48

-

-

Outstanding on purchase price of Land

 

-

 

15

 

-

 

-

 

-

63

-

-

 

KPGL owns a plot of land measuring 11,736 hectares described as parcel 2366 situated in the Transmara Region of Kenya. The liability is unsecured, interest free and was repaid in 2022.

 

Interest Bearing:

Group

Company

 

30 June 2022

31 Dec 2020

30 June 2022

31 Dec 2020

 

£'000

£'000

£'000

£'000

Non-current liabilities

Other

5

32

Finance leases

162

110

-

-

167

142

Current liabilities

Current portion of finance leases

 

40

 

9

 

-

 

-

Loan notes

1,657

-

1,657

450

 

1,697

9

1,657

450

 

Instalments due:

 

 

 

Minimum instalment

Interest

Principle

 

 

£'000

£'000

£'000

 

30 June 2022

Less than one year

1,657

407

1,250

Finance Leases

Vehicles

95

11

84

Land

119

8

111

 

Finance lease creditors

2022

2020

 

£'000

£'000

Less than one year

40

9

1-2 years

72

9

2-5 years

23

31

Over 5 years

67

70

 

New interest-bearing loans and borrowings relating to motor vehicles were taken out in the period and secured over these vehicles with a net book value of £96,000. The finance leases are repayable over 36 monthly instalments and bear interest at 8.58%. For more information about the Group's exposure to interest rate and foreign currency risk see note 4.

 

The Group also has a finance lease over the 10 acres of land where the Mine is situated. It has a term of 20 years and bears an interest rate of 10%.

 

Convertible loans

On 21 June 2022, the Company entered into a Loan Note Instrument with Mill End Capital Limited (the "Noteholder") for a total of £1.25m ($1.5m). This was draw down in its entirety on 27 June 2022. The total creditor recorded in the accounts is £1.7m which is made up of £1.25m principal and £407,000 accrued interest.

 

The terms of repayment vary on the time of such repayment as set out below:

 

Within 90 days - 120% of the principal to be repaid

Between 90-120 days - 126.667% of the principal to be repaid

Between 121-150 days - 133.333% of the principal to be repaid

 

If the amount is not paid within this time frame, then the Noteholder may notify the Company to convert the loan into shares which will be valued at 80% of the closing VWAP price of an ordinary share on the business day prior to that on which the Noteholder makes its request.

 

On 5 January 2021, the Company entered into individual standalone agreements with the holders of the remaining £450,000 of convertible loan notes (interest bearing at 10%). The combined outstanding interest payable was agreed at a fixed £62,500 and the holders agreed to convert their combined loan and accrued interest totalling £512,500 into 51,250,000 new ordinary shares of 1 pence each in the Company which took place on 31 August 2021 when the company's enlarged share capital was admitted to trading on the standard segment of the London Stock Exchange.

 

21. Deferred tax liabilities

 

Group

£'000

 

 

Brought forward as at 1 January 2021

-

Deferred tax arising from acquisitions in period

552

Carried forward as at 30 June 2022

552

 

The deferred tax liability has arisen following the acquisition of Tyacks in the year which has been accounted for as asset acquisition. Therefore a deferred tax liability has been recognised on the Fair Value uplift of the assets acquired (see note 13), which has been calculated at a rate of 30% of the uplift of asset value being the applicable Tanzanian tax rate. 

 

22. Provisions and contingent liabilities

 

 

Group

Company

 

30 June 2020

31 Dec 2020

30 June 2020

31 Dec 2020

 

£'000

£'000

£'000

£'000

Provision for rehabilitation and environmental provision

 

1,370

 

-

 

-

 

-

Contingent consideration

619

-

619

-

 

1,989

-

619

-

 

Group

£'000

Provision for rehabilitation and environmental provision

 

Brought forward as at 1 January 2021

-

Provision provided for on reverse acquisition

1,235

Unwinding of discount

135

Carried forward as at 30 June 2022

1,370

 

Rehabilitation and environmental provisions are based on management estimates of work and the judgement of the directors. By its nature, the detailed scope of work required, and timing of such work is uncertain. The provision had not been provided for prior to the reverse acquisition and is presented as a provisional figure in the current year accounts.

 

Group and Company

£'000

Contingent consideration

 

Brought forward as at 1 January 2021

-

Contingent consideration provided for in the period

619

Carried forward as at 30 June 2022

619

 

The contingent consideration is due on the purchase of Tyacks (see note 13 for further details).

 

23. Share capital and premium

 

Group

Ordinary Shares

(number)

Share Capital

£'000

Share Premium

£'000

 

Total

£'000

At 30 December 2019

600,000

4,430

-

4,430

At 31 December 2020

600,000

4,430

-

4,430

Transactions dated 31 August 2021:

Transfer of capital of KPGL to Reverse Acquisition Reserve

 

(600,000)

 

(4,430)

 

-

 

(4,430)

Issued share capital of CGP at acquisition 

 

132,400,000

 

132

 

602

 

734

Issue of shares for acquisition of subsidiary

 

428,846,154

 

429

 

3,860

 

4,289

Issue of shares at placing price £0.0075

358,251,275

358

2,329

2,687

Issue of shares at placing price £0.01

280,700,000

281

2,526

2,807

Issue of Equity-for-Debt shares

107,753,803

108

969

1,077

Issue of Convertible Debt shares

51,050,000

51

460

511

Issue of shares in lieu of settlement of fees

89,424,425

89

793

882

1,448,425,657

Issue of additional placing shares £0.01 on 20 September 2021

 

30,897,834

 

31

 

278

 

309

Issue of shares in lieu of settlement of fees on 20 September 2021

 

29,450,000

 

29

 

275

 

304

Issue of additional placing shares at £0.0075 on 20 September 2021

19,080,000

19

124

143

Issue of shares for acquisition of subsidiary (to GMRL $450,000)

 

32,867,800

 

33

 

296

 

329

Issue of shares in lieu of settlement of fees on 4 November 2021

 

14,608,709

 

15

 

136

 

151

Issue of shares at placing price of £0.0125 on 2 December 2021

 

40,000,000

 

40

 

460

 

500

Issue of shares at placing price of £0.0125 on 27 December 2021

 

24,000,000

 

24

 

276

 

300

Issue of shares in lieu of settlement of fees on 27 January 2022

 

9,100,000

 

9

82

91

Issue of shares on warrant exercise on 7 February 2022

 

37,500,000

 

38

-

38

Issue of shares at placing price of £0.0095 on 14 February 2022

 

177,048,592

 

177

1,505

1,682

Issue of shares at placing price of £0.0125 on 17 February 2022

 

16,000,000

 

16

184

200

Cost of share issue

(849)

(849)

As at 30 June 2022

1,878,978,592

1,879

14,306

16,185

The issued capital of the Group for the period to 31 August 2021 is that of KPGL which had 600,000 shares in issue of 1,000 Kenyan Shillings (KSH) each.

 

Upon completion of the acquisition the share capital of KPGL was transferred to the Reverse Acquisition Reserve (see note 5) and the share capital of CGP was brought to account. The shares were all of par value £0.001.

 

24. Warrants and share-based payments

 

The Group has issued the following warrants:

 

Date of Issue

Reason for issue

No. of warrants

Exercise price pence per share

Expiry date

24.06.2016

Founder warrants

20,000,000

1.0p

24.06.2023

24.06.2016

Placing (2016) warrants

41,200,000

0.004p

24.06.2022

01.08.2016

JIM Nominees Warrants

10,300,000

1.00p

24.06.2021

31.08.2021

Placing (2020/1) warrants

220,669,263

2.50p

31.12.2022

31.08.2021

Management warrants

150,000,000

1.00p

31.12.2022

08.03.2022

Placing Warrants

210,526,316

1.25p

30.09.2022

23.06.2022

Loan Note Warrants

52,101,062

0.8p

20.06.2024

704,796,641

Expired and

exercised

Founder/Placing (2016)/JIM Nominee

 

(71,500,000)

633,296,641

 

The movements in warrants during the period were as follows:

 

 

Number of warrants

Exercise price (pence)

As at 31 December 2019, 2020

-

-

Acquired through reverse acquisition

71,500,000

1.00p

Issued in the period

633,296,641

0.8p-2.5p

Expired in the period

(41,500,000)

1.0p

Exercised in the period

(30,000,000)

Pay debt

 

633,296,641

 

The Founder and all Placing warrants have been determined as equity instruments under IAS 32 and as such have been issued at nil cost. The Founder warrants were repriced from 1.25p to 1.0p and their expiry date was extended to 24 June 2023 on 31 August 2021. The Placing (2106) warrants were repriced from 1.25p to 1.0p and their expiry date was extended to 24 June 2022 on 31 August 2021.

 

The weighted average exercise price of the warrants outstanding at the year-end is 2.6p (2020: 1.0p). The weighted average life of the warrants outstanding at the year-end is 0.81 years (2020: 1.64 years).

 

The Management warrants and Loan Note warrants are valued in accordance with IFRS 2, as equity settled share-based payment transactions. £84,000 has been recognised as the fair value of compensation for the Management warrants and £64,000 for the Loan Note warrants.

 

Management warrants have the same milestones as the Performance Shares set out in note 5 above, however, their expiry date of 31.12.2022 lowers the probability of the milestones being met.

 

The fair value was calculated using the Black Scholes model with inputs as detailed below:

 

 

Management warrants

Loan Note warrants

Share price

1.0p

0.7p

Exercise price

1.0p

0.8p

Expected life

1.3 years

3 years

Volatility

31%

31%

Risk-Free Interest rate

1.24%

1.24%

Probability of Milestone being reached

36% overall

n/a

Expected dividends

-

-

 

Expected volatility has been based on an evaluation of the historical volatility of a similar Company's share price in the same industry and listed on the same Exchange. 

 

25. Contingent liabilities

 

The Group does not have any contingent liabilities at the year-end (2020: none).

 

26. Capital commitments

 

The Group has no known capital commitments as the licences do not contain a minimum spend. Ground rent at the Kilimapesa mine is 500,000 KES per year (£3,333) and is due to be paid annually until 2032. The exploration licence at Kilimapesa is 138,284 KES per year (£922) and is due to be paid for a period of two further years. All Royalty commitments are recorded as they fall due in the same accounting period as the revenue it relates to.

 

27. Ultimate controlling party

 

The Directors do not consider there to be one ultimate controlling party and the significant shareholders have been disclosed in the Directors' Report.

 

28. Related party transactions

 

Transactions with subsidiaries/related parties

 

 

30 June

2022

31 Dec

 2020

 

£'000

£'000

Amounts owed to related parties:

 

Gold Mineral Resources Limited (GMRL)

-

8,433

Caracal Investments Limited

8

-

Amounts due from related parties:

Kilimapesa Gold

6,997

-

 

In prior year KPGL had been granted loans from its Holding Company, GMRL. Interest was charged at 1% per annum. No interest has been charged since the loan was reassigned. The loan is unsecured and has no maturity date and is denominated in USD. This loan was transferred to MGIL as part of the Reverse Acquisition (see note 5).

 

Transactions with Key Management Personnel

 

Directors remuneration is set out in the Remuneration Report and note 9 to these accounts.

 

During the period ended 30 June 2022 (Year ended 31 December 2020 in prior year) the Directors received consultancy fees through the following companies:

 

Directors

Company

2022 Fees Paid

2020 Fees Paid

 

 

£'000

£'000

James Longley

James Longley Limited

156

80

Charles Tatnall

Tatbels Limited

146

80

 

During the prior year the Company received loans of £112,365 (2019: £8,915) from Fandango Holdings PLC at a rate of 5% per month payable upon demand. The amount of interest accrued at the year ended amounted to £24,792. Charles Tatnall is a director of Fandango Holdings PLC.

 

During the prior year ended the Company received loans totalling of £150,879 (2019: £57,000) from Stranger Holdings PLC at an interest rate of 5% per month. The amount of interest accrued at the year ended amounted to £ 70,384. Both Charles Tatnall and James Longley are directors of Stranger Holdings PLC.

 

On 5 January 2021 as part of a standstill agreement between Fandango Holdings PLC, Stranger Holdings PLC and Papillon Holdings PLC it was agreed that no further interest would accrue on any of the borrowings from the two companies, that the total amount of capital and interest due to Stranger Holdings PLC would be assigned to Fandango Holdings PLC and that the revised total amount due to Fandango Holdings PLC of £381,332 comprising capital and accrued interest would be converted into 38,133,261 new ordinary shares of 1 pence each in the company. This allotment of new shares took place on 31 August 2022 as part of the reverse acquisition of KPG.

 

During the prior year ended 31 December 2020 the Company received an interest free loan of £65,000 from Plutus Energy Limited payable upon demand. James Longley and Charles Tatnall are also the directors of Plutus Energy Limited. This was all paid back by 30 June 2022.

 

Medini Rwanda Pty Limited received 98.5 million consideration shares at £0.01 per share and Mansa Capital Limited received 5 million ordinary shares at £0.01 per share in lieu of cash as part of an introducers fee in relation to the reverse acquisition of KPG. Robbie McCrae is a director and has overall control of both companies.

 

Theseus Enterprises Limited received 55.3 million consideration shares at £0.01 per share in relation to the reverse acquisition of KPG. Gerard Kisbey-Green is a director and has overall control of said company.

 

KPG directors, due to the nature of the reverse acquisition, are considered to be related parties. These directors, that are not also directors of Caracal Gold are disclosed below:

 

Directors

Emoluments

 

2022

Share-based payments

2022

Total

 

2022

 

 

2020

 

£'000

£'000

£'000

£'000

J Brewer

90

8

98

-

LK Biwott

10

-

10

23

R Shikuko

33

-

33

-

 

Gathoni Muchani Investments Limited received 15.9 million ordinary shares at £0.01 per share in lieu of cash as part of an introducers fee in relation to the reverse acquisition of KPG. Jason Brewer, a director of KPG is also a significant shareholder of said company.

 

Management Warrants and Performance Shares

 

The following awards were made to related parties - see note 5 for the performance related conditions relating to these awards.

 

Directors

Number of Performance Shares awarded

Number of Management warrants awarded

Value of Performance shares included in deferred consideration

Value of Management warrants included in the share-based payments in the period

 

 

 

£'000

£'000

S Games-Thomas

-

15,000,000

8

-

James Longley

18,750,000

30,000,000

17

178

Charles Tatnall

18,750,000

30,000,000

17

178

G Kisbey-Green

30,000,000

30,000,000

17

285

R McCrae

30,000,000

30,000,000

17

285

J Brewer

52,500,000

15,000,000

8

499

150,000,000

150,000,000

84

1,425

 

29. Events after the reporting period

 

On 3 August 2022, the Company paid £343,308 as part of the final consideration for the purchase of Tyacks. The final payment of £482,155 is still due to be paid These amounts have been accounted for as a deferred consideration creditor in the accounts.

On 18 July 2022, the Company entered into a Convertible Loan Note Instrument with Koenig Vermoegensvermaltungsgesellschaft MBH ("Koenig"), a company incorporated and registered in Germany, for £2 million at an interest rate of 8% per annum. The conversion price being agreed as £0.06 per Ordinary share, save that where the price per ordinary share falls below £0.06, the conversion price shall be 90% of the 10 day VWAP price of an ordinary share. 266m warrants were also issued to Koenig, at an exercise price of £0.0085 and are exercisable for 2 years from the date of grant.

 

**ENDS**

 

For further information visit www.caracalgold.com or contact the following:

Caracal Gold plc

Robbie McCrae

 

info@caracalgold.com

VSA Capital Ltd

Financial Adviser and Joint Broker

Andrew Raca (Corporate Finance)

 

+44 203 005 5000

Clear Capital Markets Limited

Joint Broker

Keith Swann / Jon Critchley

+44 203 897 0981 / +44 203 869 6086

St Brides Partners Ltd

 Financial PR

Charlotte Page / Isabel de Salis / Isabelle Morris

caracal@stbridespartners.co.uk

DGWA, the German Institute for Asset and

Equity Allocation and Valuation

European Investor and Corporate

Relations Advisor

Katharina Löckinger

info@dgwa.org

 

 

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END
 
 
FR FSWEFAEESESF
Date   Source Headline
1st Jul 20247:00 amRNSFunding update
21st Jun 20247:00 amRNSFunding secured from strategic investor
13th May 20244:39 pmRNSUpdate
9th May 20243:08 pmRNSUpdate on the Annual Report and Interim Results
26th Mar 20249:08 amRNSSubscription to raise £780,000
7th Mar 202410:31 amRNSUpdate
23rd Jan 20249:30 amRNSSubscription to raise £140,000
19th Jan 20245:46 pmRNSFinancing Update
14th Nov 20237:00 amRNS$1.55m Debt Funding Update
1st Nov 20237:00 amRNSDelay to Publication of Annual Report and Accounts
26th Oct 20237:00 amRNSMine Plan for Kilimapesa expansion
24th Oct 20233:48 pmRNSDelay to Publication of Annual Report and Accounts
9th Oct 20238:32 amRNSResults of General Meeting
29th Sep 202311:16 amRNSSubscription raises £92,750
11th Sep 20237:00 amRNSNotice of General Meeting
4th Aug 20237:00 amRNSCorporate Update and Q2 2023
19th Jul 20239:29 amRNSResignation of Non-Executive Director
13th Jul 20233:55 pmRNSFinancing and group reserves and resources update
22nd Jun 202312:22 pmRNSTanzania Completion Update
12th Jun 20234:06 pmRNSCorporate Governance and Board Changes Update
7th Jun 202310:14 amRNSTR-1: Notification of Major Holdings
16th May 20234:30 pmRNSCorrection to terms of Mill End Facility
16th May 202310:51 amRNSDirector/PDMR Shareholding
15th May 20237:00 amRNSCorporate Update and Q1 2023 Operations Summary
12th May 20233:24 pmRNSSettlement of Loan Facility and PDMR Shareholding
26th Apr 20237:00 amRNSChairman Confirmation & Governance Review Update
24th Apr 20239:20 amRNSStatement re. Mining and Ore Processing Results
31st Mar 20232:32 pmRNSInterim results 31 December 2022
30th Mar 20237:00 amRNSHigh Grade Zone on Kilimapesa Hill
21st Mar 20239:05 amRNSSecond Price Monitoring Extn
21st Mar 20239:00 amRNSPrice Monitoring Extension
21st Mar 20237:00 amRNSHigh Grade Zone on Kilimapesa Hill
7th Mar 202310:37 amRNSTR-1: Notification
20th Feb 20234:35 pmRNSPrice Monitoring Extension
16th Feb 20234:40 pmRNSSecond Price Monitoring Extn
16th Feb 20234:35 pmRNSPrice Monitoring Extension
16th Feb 20237:00 amRNSAdditional Financing Secured & Corporate Update
8th Feb 202311:05 amRNSSecond Price Monitoring Extn
8th Feb 202311:00 amRNSPrice Monitoring Extension
24th Jan 20232:00 pmRNSPrice Monitoring Extension
24th Jan 20239:05 amRNSSecond Price Monitoring Extn
24th Jan 20239:00 amRNSPrice Monitoring Extension
23rd Jan 20234:45 pmRNSCorporate Update, Q3 &Q4 2022 Operations Summary
23rd Jan 202311:43 amRNSResult of AGM
16th Jan 20234:40 pmRNSSecond Price Monitoring Extn
16th Jan 20234:35 pmRNSPrice Monitoring Extension
13th Jan 20234:30 pmRNSBoard Change
10th Jan 20239:05 amRNSSecond Price Monitoring Extn
10th Jan 20239:00 amRNSPrice Monitoring Extension
10th Jan 20237:00 amRNSFinancing Update

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