GCM Resources Regulatory News (GCM)

25 November 2019

GCM Resources plc

("GCM" or the "Company")

(AIM:GCM) 

Final Results for the year ended 30 June 2019

Notice of Annual General Meeting

GCM Resources plc announces the publication of its final audited results for the year ended 30 June 2019 (the "Annual Report and Accounts") and that the Company's 2019 Annual General Meeting will be held at 10.00 a.m. on Wednesday 18 December 2019, at No. 4 Hamilton Place, Mayfair, London, W1J 7BQ.

The Annual Report and Accounts and the Notice of Annual General Meeting will be posted to shareholders today. Copies are available on request from the Company and will be available on the Company's website (www.gcmplc.com). The Annual Report & Financial Statements are also available on the 'Financial Reports' page of the Company's website. 

For further information:

GCM Resources Plc

Annual Report and Audited Financial StatementsFor the year ended 30 June 2019

Executive Chairman's Statement

I am pleased to present the Company's Annual Report and Accounts for the year ended 30 June 2019 and to provide further details regarding our efforts to develop the strategic partnerships needed to advance our integrated coal mine and power project in Bangladesh. I would also like to express my appreciation for the continued support of our Company's shareholders and to reassure them that we remain very focussed on delivering returns on their investment.

As previously stated, our mission is to become an impact power project for the people of Bangladesh, providing the cheapest long-term large-scale electricity supply in the country, which we believe will be both attractive to the Government and in-line with their goals and objectives.

The Phulbari coal mine's Scheme of Development remains a key driver towards achieving our mission, however, the ultimate deliverable requires the mine to feed state-of-the-art, highly energy efficient, Ultra-Supercritical power plants, in order to generate 6,000MW of power in-country (the "Project"). The coal mine's viability would then become dependent on coal supply agreements with these power plants and, vice versa, the power plants' viability would be linked to the success of the coal mining operation. While we already have in place strict environmental management plans for the planned mining operation, we will also ensure these power plants operate to the highest possible environmental standards and, in particular, that they will utilise leading-edge flue gas cleaning systems to protect air quality and cooling systems that minimise water consumption.

As reported last year, the Company has signed a Joint Development Framework Agreement and Contract Framework Agreement with China Gezhouba Group International Engineering Co Limited ("CGGC"). This effectively defined a strategic partnership with CGGC, including the broad roles and responsibilities of each party for constructing of one of the required three phases (each being a 2,000MW mine-mouth power generation), to be implemented over a ten-year period, matching the mine's coal production ramp-up to 15Mtpa name-plate production.

During the reporting year, the Company took several steps to address the shortfall in power generation (4,000MW) necessary to underpin the captive coal mine's viability. One of the key developments for the year involved developing a working relationship with another China state-owned key enterprise, Power Construction Corporation of China Ltd ("PowerChina"). PowerChina is a world leading engineering, construction and power generation group and was ranked 10th amongst the Top 250 International Contractors by Engineering News Record 2018. Over this reporting year our team in Bangladesh worked closely with PowerChina with the main achievements being:

·; In September 2018: senior PowerChina officials visited the Project site and an agreement was signed to undertake a prefeasibility study and due diligence for 4,000MW mine-mouth power generation.

·; In November 2018: delivered a successful prefeasibility assessment report for the generation of 4,000MW in power, to be implemented in two phases, in-line with the coal mine's planned production ramp-up profile. This was shortly followed by the signing of an MOU galvanising a relationship setting out the steps towards developing the coal mine in conjunction with the 4,000MW of power plants, establishing a Joint Development Agreement and achieving approval from the Government of Bangladesh.

·; In January 2019: at a public signing ceremony in Dhaka, Bangladesh, the Company entered into a Joint Venture Agreement ("JVA") and a definitive Engineering, Procurement and Construction (EPC) Contract with PowerChina for the first phase 2,000MW mine-mouth power plant (comprising two 1,000MW units).

·; In March 2019: the Company entered into a second Joint Venture Agreement with PowerChina in relation to the second phase 2,000MW mine-mouth power plant, thereby completing the 4,000MW package.

The arrangements with PowerChina also carry an obligation to conduct any required power plant feasibility studies, facilitate the inclusion of the Project in the 'One Belt, One Road Initiative' of the People's Republic of China, and assist with financing the power plants. I am also delighted to report that working under the JVA with PowerChina has seen feasibility studies and proposals for the 4,000MW Phases I and II completed, with the ultimate deliverable being a very competitive power tariff.

In order to complete our proposal to the Government of Bangladesh (the "Government") the Company is also seeking to bring in a strategic mine development partner. To this end, the Company signed an MOU in July 2019 (just outside the reporting year) with both China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. ("NFC") and PowerChina to form a strategic partnership to jointly develop the Project. We have provided NFC with access to our data room and they are in the process of completing their due diligence studies. Once these studies are completed, we believe we will be a position to formalise our business relationship with NFC to develop, finance, operate and manage the Project, and thereby enable us to submit our proposal to the Government.

We believe the actions taken over and beyond the reporting year provide the greatest chance to deliver the value-add our shareholders deserve and provide the Government and people of Bangladesh with a long-term, large-scale, low-cost power solution. As we now push forward to formally present the Project proposals to the Government and seek to obtain the necessary approvals, our efforts will be greatly assisted by having appropriate consultants and lobbyists in both China and Bangladesh. I am pleased that we now have agreements with share based payments in place with both Dyani Corporation Limited, covering negotiations in China, and DG Infratech Pte Ltd, a Bangladeshi controlled company, working on the ground with us in Bangladesh.

Finally, I would like to acknowledge the enduring support of our shareholders and the tireless hard work of the Board and staff, all of which defines our Company and its tenacity to deliver the Project.

Datuk Michael Tang PJN

Executive Chairman

25 November 2019

Group Strategic Report

Strategy and business model

GCM Resources plc ("GCM") is committed to a strategy of developing the Phulbari coal deposit as a captive, large-scale, open pit mining operation supporting 6,000MW of highly energy efficient Ultra-Supercritical power generation, which is planned to be developed in three stages, over a ten year period, to complement the planned ramp-up in coal production to the nameplate 15Mtpa (the "Project"). GCM's business model to deliver the Project primarily involves forming Joint Venture Agreements with various internationally renowned companies to assist with obtaining the necessary government approvals, securing or providing the requisite financing and assisting with the development of the coal mine and power plants. As part of the business model, GCM also uses consultants in both China and Bangladesh to provide crucial guidance and lobbying support.

Fundamental elements of the Project include the 572 million tonne high-quality coal resource (JORC 2004 compliant), located in the Phulbari Coal Basin in North-West Bangladesh; the Company's contract with the Government of Bangladesh for "Exploration and Mining Coal in Northern Bangladesh"; the associated mining lease and exploration licences; and the already completed Definitive Feasibility Study for the mine, together with a comprehensive Environmental and Social Impact Assessment.

Although a Scheme of Development for mine development was submitted to the Government of Bangladesh in 2005 and still awaits approval, this document did not portray the mine as "captive" with an ultimate deliverable to the Government being 6,000MW of reliable, low-cost power. To this end, the Company's business model has developed significantly over time and the Project is now considered to comprise four integrated "Business Units", being the captive coal mine and the three 2,000MW power projects that will be commissioned in-line with the ramp-up to the nameplate 15Mtpa coal production. It is envisaged that the coal mine's viability will be underpinned by coal supply agreements with each of the three power projects and, in turn, the power projects' viability will be underpinned by the supply of reliable, competitively priced coal extracted from the Phulbari coal mine.

The Bangladesh Government remains committed to a rapid expansion of its energy sector, including the increase of coal-based power generation, and GCM equally remains committed to assist the Government meet its power sector needs. GCM's business model is to attempt to deliver Bangladesh's lowest coal-based power tariff, at a production rate that should make a significant positive impact on the country's industrial development and competitiveness in international markets.

Progress in-line with the strategy

The Company's mine development proposal remains robust, having been fully evaluated through the Definitive Feasibility Study ("DFS") leading to a Scheme of Development, which was submitted to the Government in October 2005. The DFS combines over two hundred individual studies by a team of international and national experts, with a view to delivering a world-class mining project plan, based on proven international best mining practices.

The Company engaged Hong Kong based Dyani Corporation Limited ("Dyani") to assist with establishing relationships with internationally renowned companies in Asia, with a view to forming strategic partnerships for coal mine and power plant developments. This has progressed well and we have developed solid working relationships with the Chinese state-owned-enterprises China Gezhouba Group International Engineering Co Limited ("CGGC"), Power Construction Corporation of China Ltd ("PowerChina") and China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. ("NFC").

To underpin the development of the required power plants GCM has entered into:

·; a Joint Development Framework Agreement and a Contract Framework Agreement with CGGC in relation to the construction of 2,000MW of mine-mouth power plants, being one of the required three phases (each being 2,000MW mine-mouth power generation); and

·; Joint Venture Agreements with PowerChina for 4,000MW of mine-mouth power plants being the remaining two phases of the total 6,000MW power generation.

Working alongside PowerChina, GCM's team has prepared the documents required by the Government for approval of the initial 4,000MW power plants. These documents include, inter alia, a financial model demonstrating the Company's ability to deliver a highly competitive power tariff, thereby achieving GCM's aim of delivering an efficient and logical use of the country's domestic coal resources, in the form of a low-cost, large-scale, power solution.

To underpin the coal mine development, GCM recently signed an MOU with both NFC and PowerChina to form a strategic partnership strengthening the joint develop approach to the Project. NFC are focussed on development of the mine and are in the process of completing their due diligence studies which includes review of the mine plan and the preparation of an independent financial model. Once these studies are completed, we will seek to formalise the business relationship in order to develop, finance, operate and manage the Project, following which, the Company plans to submit the formal Project proposal to the Government.

Whilst significant progress has been made with our Chinese partners and the proposal documents are nearing completion, the major challenge ahead remains obtaining the range of Government approvals required to progress the development of both the mine and the power plants. To assist with this final stage, the Company has engaged DG Infratech Pte Ltd ("DGI"), a Bangladeshi controlled company linked to a large portfolio of successful engineering construction and power sector projects in Bangladesh.

As GCM does not yet generate any revenue, the Group's operations shall continue to be funded by a combination of equity and debt financing.

For the foreseeable future, the Company's cash expenditure is not expected to increase and, as far as possible, obligations to key stakeholders will be primarily satisfied by the issue of new ordinary shares in the capital of the Company ("Ordinary Shares"), to both incentivise those stakeholders and preserve cash.

The Company believes the current strategy will deliver an attractive long-term low-cost power solution for the Government and people of Bangladesh and as such provides the best chance of delivering returns for our shareholders and ensuring the needs of all stakeholders, including the local community, are satisfied.

Year in review

While GCM began the last reporting year strengthening its relationship with CGGC, culminating in a Joint Development Framework Agreement for the initial 2,000MW Phase of mine-mouth power plant(s), this reporting year began with building a working relationship with PowerChina. GCM viewed PowerChina as the logical partner for development of the remaining 4,000MW necessary for viability of the planned Phulbari coal mine.

The Company recognised the significant value of an ongoing relationship with Dyani and, on 26 October 2018, extended its Consultancy Agreement for the pursuit of additional international recognised partners for mine development and the additional power plants. Details of the retainer fee and success fees both payable by the issue of new ordinary shares to Dyani, linked to milestones being MOU's, Framework Agreements and All Definitive Agreements for the mine and three power plants of 2000MW each were provided in the Company's announcement of 26 October 2018.

In September 2018, GCM announced that it had agreed with Sinohydro Corporation Limited ("Sinohydro") (PowerChina's international flagship company), to undertake a prefeasibility study and other due diligence for the remaining 4,000MW mine-mouth power plants. This study was preceded by GCM's team in Bangladesh hosting a large delegation from Sinohydro at the Phulbari site.

In November 2018, PowerChina delivered the "Power Plant Prefeasibility Assessment Report" ("PFS") and confirmed that, by utilising the latest highly energy efficient Ultra-Super Critical power plant design, 6,000MW could potentially be generated from the mine's thermal coal production. The PFS analysed the technical aspects of developing 4,000MW of power generating capacity to be implemented in two stages (each stage consisting of two 1,000MW units) at the Phulbari coal mine site.

The success of the prefeasibility study led rapidly to GCM signing an MOU with PowerChina at the end of November 2018 for the cooperative development of the 4,000MW power plants as well as the proposed coal mine. This set out the pathway to establishing a Joint Development Agreement and obtaining government approvals. Significantly, it also had PowerChina pursuing the inclusion of the Project as a One Belt, One Road Initiative of the People's Republic of China.

At the time of signing the MOU, GCM and PowerChina had anticipated submitting a formal proposal to the Government of Bangladesh by 28 February 2019. Unfortunately, this deadline was not achievable with more time required for preparation of power proposals, including tariff calculations, and identification of an appropriate potential mine development partner.

In January 2019, the Company entered into a Joint Venture Agreement ("JVA") and a definitive Engineering, Procurement and Construction ("EPC") Contract with PowerChina for the next 2,000MW mine-mouth power plant (comprising two 1,000MW units) phase. GCM is the lead party for the joint venture company set up to own the Power Plant and would be responsible for facilitating the Environmental Impact Assessment and for obtaining the necessary Government approvals. Details were provided in the Company's announcement of 17 January 2019. Subject to a mutually agreed valuation of the Power Plant and investment appraisal, pursuant to the JVA, GCM will be entitled an 80% interest in the Power Plant with PowerChina holding the remaining 20%. PowerChina is responsible for completing the feasibility study and promoting the Project for inclusion in the One Belt, One Road Initiative. Both parties are to assist with obtaining finance for the Power Plant development. In addition, PowerChina also has been granted the EPC contract subject to a number of preconditions with the key ones being government approval and financial closure.

In March 2019, the Company entered into a second Joint Venture Agreement with PowerChina for the final 2,000MW mine-mouth power plant phase, thus completing the 4,000MW PowerChina package which, combined with its Joint Development Framework Agreement with CGGC, means that agreements are in place for the planned 6,000MW required to ensure the Project's viability. The terms of this second JVA are identical to the first with the aim that it would ultimately be superseded by a definitive shareholder agreement.

As of 30 September 2019, Dyani held 19.3% of the Company's issued share capital. However, as a result of the accrual of the monthly retainer fees and the various milestones achieved since 10 April 2018, being the last date Dyani was issued new Ordinary Shares as payment for provision of its consulting services, as at 30 June 2019, the Company owed Dyani share based payments with an aggregate value of £5,240,000 which, at the Company's prevailing share price, would result in Dyani being issued an additional approximate 14.61% of the Company's enlarged issued share capital, resulting in Dyani holding approximately 33.9% of the Company, however the agreement with Dyani restricts the issue of shares if the resultant shareholding exceeds 30%, and as a result only 10.61% of the due 14.61% can be issued. The Company expects to issue shares to Dyani in December 2019.

Under the terms of the Consultancy Agreement with Dyani, their interest, together with the interest of any parties with which they are in concert, must remain below 30%. The Consultant is restricted from disposing of any shares received under the agreement for a period six months from issue, with exceptions of the monthly retainer of £25,000 paid quarterly in arrears by the issue of new ordinary GCM shares at 14p per share. The total shares payable to the Consultant under all agreements to date is capped at 45% of the enlarged issued share capital of the Company.

Post the reporting year, GCM progressed an additional two key developments:

The first is an MOU, signed in July 2019, with NFC and PowerChina, aimed at forming a strategic partnership to jointly develop the Company's proposed Phulbari coal mine. Under the terms of this arrangement, NFC is undertaking due diligence, including a review of the mine plan and financial model, and the parties will jointly pursue the necessary Government approvals. These workstreams, including the preparation of a Framework Agreement and Joint Development Agreement, are to be completed within a six-month timeframe. The workstreams are progressing well and the Company will provide an update in due course.

The second key post balance sheet development, was the Company entering into a consultancy agreement with DGI in September 2019 (the "DGI Agreement"), whereby DGI will provide the Company with advisory, management, lobbying and consultancy services for the Project's approval and development stages. DGI and its parent company have an established track record in developing large-scale engineering construction and power sector related projects in Bangladesh. DGI was selected after considerable research and the share-based fee arrangement agreed ensures the economic interests DGI and the Company are aligned with the Project's successful implementation.

DGI is due a monthly retainer fee of £12,000 from 1 September 2019, payable quarterly in arrears by the issue of new ordinary GCM shares at 18p per share, with no other financial payments or reimbursements payable unless they are agreed by the Company in advance. Pursuant to the DGI Agreement, DGI will also receive the following share-based success fees (being a percentage of GCM's issued share capital at the time of issue) based on achieving key project milestones:

1. written approval of the Coal Project's Scheme of Development, 5% of the issued share capital;

2. written approval of each of the three proposed 2000MW Power Plants, 2% of the issued share capital for each; and

3. commencement of Coal Project development, 4% of the issued share capital.

With exception of the monthly retainer, the DGI will be restricted from disposing of shares under the DGI Agreement for a period of six months from the date of issue. Full details of the DGI Agreement were provided in the Company's announcement of 4 September 2019.

The Company is committed to ensuring the local community and local authorities remain fully informed on the Project. To ensure this outcome we have several highly trained staff residing at our field facilities and have strengthened our team of Community Liaison Assistants selected to provide two-way communication with communities across the Project area. Through this team's considerable efforts, the Project's Resettlement Action Plan remains current.

While the Board is pleased to have delivered against its strategy of forming strategic joint venture partnerships in order to develop the Project, it is disappointed with the time taken. With the strong relationship established with our consultants / lobbyists the Company and its partners are working hard to be in a position where GCM can submit the proposal for the Project to the Government in order to gain the necessary approvals and implement the Project. The Board believes that this would unlock the Project's potentially enormous value for all stakeholders.

Finance review

The Group recorded a loss of £6,024,000 during the year ended 30 June 2019 compared to a loss of £5,351,000 during the previous year. The loss increased from the comparative year principally due to an increase in non-cash, share-based payments accrued in accordance with the Group's agreements with Dyani in relation to pre-development expenditure. The increase was from £4,515,000 in 2018 to £5,181,000 last year and allows the Group to continue its progress in-line with GCM's strategy of developing power generation as a new business stream, with no slow-down in pursuing continuing project progress.

The Group's recorded a net decrease in cash at the end of the year to £385,000 (2018: £446,000). Net cash used in operations for the year was £427,000 (2018: £1,150,000), cash used in investing activities was £581,000 (2018: £471,000), and cash inflow from financing was £947,000 (2018: £1,887,000).

The Group has continued its aim to maintain tight control of expenditure incurred during the year: Administrative expenses were up by 10.6% to £665,000 for the year ended 30 June 2019 (2018: £601,000), however, finance costs reduced by 14% to £164,000 (2018: £191,000). Capitalised expenditure in relation to the mine proposal was £613,000 for the year ended 30 June 2019 compared to £458,000 in the previous year. Overall costs excluding pre-development expenditure increased by 0.84% to £843,000 from £836,000 in the prior year.

To finance its operations during the year, on 30 November 2018, GCM agreed an amendment to the short-term loan facility with Polo Resources Limited ("Polo") (the "Polo Loan Facility"). The Polo Loan Facility was increased by £1,200,000 to £2,300,000 and provides that the lender has the option to convert all or part of the balance of the Polo Loan Facility at a conversion price of 11 pence per share, subject to Polo's maximum holding not exceeding 30% of the Company's enlarged share capital (See Note 12 for detailed terms).

As at the date of this report, the Company had fully drawn down on the increased Polo Loan Facility and the Company currently has approximately £315k in available cash resources, which the Director's believe will only be sufficient to fund the Company's cash requirements for the next two months, assuming the Company's currently forecast cash costs. The Company has received a non-binding commitment from Polo, whereby Polo has confirmed its willingness to enter into an agreement to increase the Polo Loan Facility by an additional £1,200,000 from the end of January 2020 should alternative financing not be secured by then (the "Agreed Facility Increase") which, at the Group's current cash burn levels, would provide sufficient financing for at least the following 12 months.

The Directors also note that, under the terms of the existing Polo Loan Facility, repayment can be requested upon 90 days' notice or, alternatively, the balance converted to shares at 11 pence per share at Polo's sole election. The Company does not currently have secured funding arrangements in place to cover the repayment of the existing Polo Loan Facility or further potential expenditure which would be needed to advance the Project, therefore, should the Agreed Facility Increase not materialise for any reason, or Polo requests repayment of the Polo Loan Facility, the Company would urgently need to secure additional capital in order to continue as a going concern, which may not be available on terms acceptable to the Board or on a workable timeframe.

However, the Directors are confident that the Agreed Facility Increase can be entered into by the end of January 2020 and a further announcement will be made as and when appropriate. As Polo is a substantial shareholder, holding 17.8% of the Company's issued share capital, entering into the Agreed Facility Increase documentation will constitute a related party transaction pursuant to Rule 13 of the AIM Rules for Companies.

Corporate Social Responsibility

GCM's vision, goal and planned actions are in line with the basic values of integrity and fairness for all stakeholders. For any large mining or development project to be successful it is crucial to develop and maintain a partnership with all concerned stakeholders, particularly at the local level.

The Company keeps on actively engaging with the local communities in and around the Project area, holding one-to-one meetings and group discussions, with the intention of achieving further social acceptance. This activity is being done by Company field staff utilising a select group of local grass-roots community liaison assistants. As the Company pursues strategic partners for the inclusion of mine mouth power plants together with the planned coal mine, it will ensure that a comprehensive environmental and social impact assessment (including a human rights impact assessment) is prepared covering both the mine and associated power plants. The Company has been working to update the population database and the number of potentially 'project affected people' and also has been undertaking a land price survey, to ensure the Project's Resettlement Plan remains current.

The Project will improve the economic and social well-being of people in the Project area and regular feedback through our field staff and community liaison assistants is that the majority want to see development and appreciate the job opportunities and other benefits that will be available. Around 17,000 jobs are expected to be directly and indirectly created as a consequence of developing the mine and associated infrastructure. However, work still needs to be done to estimate the number of additional jobs that would be created by the mine mouth power plants which is expected to be in the tens of thousands when downstream enabled industrial development is taken into account.

As part of GCM's water management and agriculture improvement plans, farms are expected to have year-round access to irrigation which combined with improved inputs and training is expected to increase agricultural output in the region. In this way the Project will make a contribution to the country's food security. Only one third of the mine footprint will be needed at any one time, allowing farming to continue prior to utilisation and after rehabilitation.

GCM has plan to resettle approximately 40,000 people, with 12,000 people moving to a new town extension and the remainder moving to new village sites or electing to use the opportunity to move to other areas in Bangladesh. This resettlement is to occur in six phases over a period of approximately 10 years from commencement of development. At this stage, it is expected that the construction of mine mouth thermal power plants will not require additional resettlement.

Detailed plans are in place to provide the local communities with new housing, religious centres, schools, health centres, electricity, reticulated water supply and improved sanitation. Compensation to those affected will, where appropriate, be a mix of measures such as long-term livelihood restoration support, replacement homes, retraining, employment and various financial assistance allowances. The Company intends to give local communities the opportunity to engage in any future planning process prior to implementation.

GCM further reiterates its commitment to developing the Project in accordance with the highest international and national environmental and social standards. The Company remains to be a signatory of the UN Global Compact, the world's largest voluntary corporate responsibility initiative, and is committed to complying with the social and environmental policies and standards of the International Finance Corporation (World Bank), the Equator Principles, the Asian Development Bank's (ADB) Safeguard Policies as well as the current policies and laws of Bangladesh.

Risks and uncertainties

The predominant risks and uncertainties faced by the Company are set out below:

Political and economic - risk that the Company's new approach being the to establish the Phulbari open pit coal mine as being captive to and packaged with 6,000 MW of state-of-the-art highly energy efficient Ultra-Supercritical power plants (the "Project") is not approved by the Government of Bangladesh. However, the Board has embarked on this strategy which involves bringing in strategic development partners for the coal mine and power plants as it believes this will be an attractive proposition for the Government and does provide the best opportunity for realising the huge benefits the Project is capable of delivering. The Company has also endeavoured to reduce this risk by employing the services of credible consultants / lobbyists, however, it recognises that the timing of approval remains in the hands of the Government. The Company retains its right to seek legal redress in accordance with the terms of the Contract with the Government in the event approval is not ultimately forthcoming. Refer to Note 1 of the consolidated financial statements for further information.

Strategic - risk that the strategic partnership with the Chinese state-owned-enterprises CGGC, PowerChina and NFC do not proceed and thus undermining the Company's strategy of presenting the Project as a captive coal mine with 6,000MW power generation that would take sufficient thermal coal production to ensure the mine's economic sustainability. The Company has taken steps to further reduce this risk through recent signed agreements aimed at further strengthening these strategic partnerships; and by putting in place incentive-based schemes with Dyani to enhance the relationships with the Chinese government organisations and with the Bangladeshi controlled entity, DGI, to assist with taking the Project through the government approval process to implementation.

Financing - risk that the Company will not be able to raise necessary funds as and when required to take the Project through the government approval process to implementation stage. The Directors are confident that the necessary funds will be obtained as and when required. For further details refer to page 13 of the Annual Report and Accounts.

Commercial - risk that the Project's economic viability is undermined by sustained adverse movement of coal price and key cost elements. To reduce this risk the Company has established the Project as an integrated coal mine and power development with Company and its strategic partners have equity positions in mine and power plants. In addition, there will be a rise and cost provision for the coal mine with the coal supply agreements for the power plants. While Bangladesh does have a couple of new power projects under construction and others in the pipeline, studies show a domestic coal solution remains economically very competitive to imported fuel options for large-scale power generation.

Legal - risk that the mining lease and exploration licences are revoked. The Group continues to comply with all terms of the Contract with the Government for "Exploration and Mining of Coal in Northern Bangladesh" and is careful to ensure that all ongoing conditions of the Contract and the associated mining lease and exploration licences are met. GCM has received legal opinion that the Contract is enforceable under Bangladesh and International law.

Health and safety, social and environmental risks - The Group remains committed to developing the Project and meeting the highest international social and environmental standards. For further details refer to page 7 of the Annual Report and Accounts.

Climate Change risk - Increased awareness and action against climate change will put pressure on governments and financing organisations to reduce exposure to fossil fuel related power generation. This could affect future Bangladeshi Government policy towards coal fired generation and limit funding appetite for the Project. Bangladesh is a developing country with forecast energy demand expected to outstrip installed power in the next 10 years. Power generation from in-country coal reserves is seen as a key factor in meeting this expected supply gap. Coal remains a cheap and abundant primary energy supply for developing countries like Bangladesh and this was acknowledged by the Bangladesh Government Power Secretary recently, when he told the Thomson Reuters Foundation that Bangladesh had no choice but to burn coal. He further said 'Bangladesh's economy is growing fast and it needs energy. Bangladesh's contribution to both climate change and greenhouse gas emission is very insignificant and with the intended coal use and coal fired power generation in next few decades, this contribution will remain insignificant compared to most other countries'. The Company will continue to monitor this risk in-line with developments in Government policy.

On behalf of the Board,

Datuk Michael Tang PJN

Executive Chairman

25 November 2019

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income

For year ended 30 June

Consolidated Statement of Changes in Equity

For year ended 30 June

(1) refer to note 14 for further information on share issuances

Consolidated Balance Sheet

As at 30 June

Datuk Michael Tang PJN

Executive Chairman

25 November 2019

Consolidated Cash Flow Statement

For year ended 30 June

Notes to the Consolidated Financial Statements

1. Accounting policies

GCM Resources plc is domiciled in England and Wales, was incorporated in England and Wales as a Public Limited Company on 26 September 2003 and admitted to the London Stock Exchange Alternative Investment Market ("AIM") on 19 April 2004.

The financial report was authorised for issue by the Directors on 25 November 2019, and the Consolidated Balance Sheet was signed on the Board's behalf by Datuk Michael Tang PJN.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 30 June 2019 and applied in accordance with the Companies Act 2006. The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 30 June 2019.

The functional and presentational currency of each of the entities in the Group is pounds sterling, and all values are rounded to the nearest thousand pounds (£000) except where otherwise indicated.

Political and economic risks - carrying value of intangible asset

The principal asset is in Bangladesh and accordingly subject to the political, judicial, fiscal, social and economic risks associated with operating in that country.

The Group's principal project relates to thermal coal and semi-soft coking coal, the markets for which are subject to international and regional supply and demand factors, and consequently future performance will be subject to variations in the prices for these products.

GCM, through its subsidiaries, is party to a Contract with the Government of Bangladesh which gives it the right to explore, develop and mine in respect of the licence areas. The Group holds a mining lease and exploration licences in the Phulbari area covering the prospective mine site. The mining lease has a 30-year term from 2004 and may be renewed for further periods of 10 years each, at GCM's option.

In accordance with the terms of the Contract, GCM submitted a combined Feasibility Study and Scheme of Development report on 2 October 2005 to the Government of Bangladesh. Approval of the Scheme of Development from the Government of Bangladesh is necessary to proceed with development of the mine. GCM continues to await approval.

The Group has received no notification from the Government of Bangladesh (the "Government") of any changes to the terms of the Contract. GCM has received legal opinion that the Contract is enforceable under Bangladesh and International law, and will consequently continue to endeavour to receive approval for development.

Accordingly, the Directors are confident that the Phulbari Coal and Power Project (the "Project") will ultimately receive approval, although the timing of approval remains in the hands of the Government. To enhance the prospects of the Project, GCM has engaged in a strategy to align the Project with the needs and objectives of the Government. The Government is seeking to rapidly expand the country's power generation, including the increase in coal fired power generation from the current 525MW to approximately 20,000MW.

The Group's strategy is to combine the planned coal mine with 6,000MW power plants in conjunction with large Chinese State-owned engineering enterprises. Over the last twelve months progress has been made in pursuit of this strategy as highlighted on page 3 of the Annual Report and Accounts.

Until approval of the Scheme of Development from the Government of Bangladesh is received there is continued uncertainty over the recoverability of the intangible mining assets. The Directors consider that it is appropriate to continue to record the intangible mining assets at cost, however if for whatever reason the Scheme of Development is not ultimately approved the Group would impair all of its intangible mining assets, totalling £41,250,000 as at 30 June 2019.

Going concern

As at 30 June 2019 the Group had £385,000 in cash and £2,637,000 in net current liabilities. The directors and Management have prepared a cash flow forecast to November 2020, which shows that the Group will require further funds to cover operating costs to advance the Phulbari Coal and Power Project and meet its liabilities as and when they fall due. Based on current forecasts further funds will need to be drawn down within the next two months in order to meet current operating cost projections. The Directors also note that under the terms of the existing short-term loan facility repayment can be requested upon 90 days' notice, or alternatively converted to shares at 11 pence per share at the lenders option. The Company does not currently have secured funding arrangements in place to cover this loan or further potential expenditure which may be needed to advance the Project, and accordingly GCM will need to raise funds in a short amount of time.

On 13 November 2019 the Company confirmed the availability of an increase in the short-term loan facility with Polo Resources Ltd by £1,200,000 to be spread in four quarterly instalments in advance. Based on projected future costs, the fundraising is expected to be sufficient to support the Company's operations for the twelve months from the date of this report, Subject to the existing Polo loan and any further draw downs not being called for repayment. The agreement via letter of intent confirms the short term loan facility to be increased on the basis no other funding options are successfully completed prior to the end of January 2020. The Company intends to explore other funding options in the next two months.

In forming the conclusion that it is appropriate to prepare the financial statements on a going concern basis the Directors have made the following assumptions that are relevant to the next twelve months:

- In the event that the short-term loan becomes payable, sufficient funding can be obtained; and

- In the event that operating expenditure increases significantly as a result of successful progress with regards to the Phulbari Coal and Power Project, sufficient funding can be obtained.

While the Directors remain confident that necessary funds will be available as and when required, as at the date of this report these funding arrangements are not secured, the above conditions and events represent material uncertainties that may cast significant doubt over the Group's ability to continue as a going concern. The financial statements have been prepared on a going concern basis. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Upon achieving approval of the Phulbari Coal and Power Project, significant additional financial resources will be required to proceed to development.

Use of judgements, estimates and assumptions

The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision affects both current and future periods.

Intangibles

In assessing the recoverability of intangible assets, if an impairment trigger under IFRS 6 is identified then intangibles are tested for impairment. Management has identified impairment triggers to be the market capitalisation of the Company compared to the recognised amount on the balances sheet and the delay in obtaining approval of the Scheme of Development. To assess for recoverability estimates are used to determine the expected net return on investment. The estimated return on investment takes into account estimated recoverable reserves, coal prices, development and production costs, capital investment requirements, discount rates and environmental and social costs among other things. Management has considered the estimated return on investment to be significantly higher than the current carrying value and therefore no impairment has been accounted for. Refer to "Political and economic risks - carrying value of intangible asset" section on page 28 of the Annual Report and Accounts for further details in respect of the recoverability of intangible mining assets and the boards judgement regarding the ultimate approval of the project being secured.

Power plant development costs

Power project expenditure is expensed as pre-development expenditure until it is probable that future economic benefits associated with the Project will flow to the Group and the costs can be measured reliably. To assess whether it is probable that future economic benefits will arise from the power plant development costs, management was required and considered: objective evidence that the power plant is technically and economically feasible, and objective evidence that the appropriate authorities of the Government of Bangladesh have, or are likely to approve power plant development. All power project expenditure were accordingly expensed in the year.

Amendments to the short-term loan

Judgement was required in determining the accounting for the Group's short-term loan which was restructured during the year. The restructure was considered to represent a significant modification with the loan restructured to allow the lender the right to convert the outstanding loan balance and accrued interest to new ordinary shares. Judgement was required in assessing whether the restructured facility represented a compound financial instrument in accordance with IAS32 Financial Instruments: Presentation or a prima facie on demand loan facility. Management concluded that as the loan has no maturity date and must be repaid within 90 days of receiving a request, it is in effect a rolling 90-day short term loan. Accordingly the loan is categorised as an on demand loan facility with no value attributed to the conversion feature and the loan carried forward at its face value.

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The consolidated financial statements present the results of the Company and its subsidiaries (the "Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives in the current and comparative periods are as follows:

·; buildings 7 - 40 years

·; plant and equipment 3 - 15 years

·; vehicles 5 - 7 years

The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.

Power project development costs

Power project expenditure is expensed as pre-development expenditure until it is probable that future economic benefits associated with the project will flow to the Group and the costs can be measured reliably. When it is probable that future economic benefits will flow to the Group, all costs associated with developing a power plant project are capitalised as power project expenditure within property, plant and equipment category of tangible non-current assets. The capitalised expenditure will include appropriate technical and administrative expenses but not general overheads. Power project assets are not depreciated until the asset is ready and available for use.

Intangible assets

Acquired intangible assets, are measured initially at cost and are amortised on a straight-line basis over their estimated useful lives.

Exploration and evaluation costs are capitalised as exploration and evaluation assets on an area of interest basis in accordance with IFRS 6. Costs such as geological and geophysical surveys, drilling and commercial appraisal costs, and other directly attributable costs of exploration and appraisal including technical and administrative costs, are capitalised as intangible exploration and evaluation assets.

Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:

(i) the expenditures are expected to be recouped through successful development and mining of the area of interest, or by its sale; or

(ii) activities in the area of interest have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing or planned for the future.

Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, and facts and circumstances suggest that the Group should test for impairment. In the event that there is an indicator of impairment, the Group performs an impairment test in accordance with its policy on impairment as stated below. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from intangible assets to mining property and development assets within property, plant and equipment.

Impairment

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Financial Instruments

Financial instruments are recognised when the Group becomes a party to the contractual provisions of the instrument and are subsequently measured at amortised cost.

Classification and measurement of financial assets

The initial classification of a financial asset depends upon the Group's business model for managing its financial assets and the contractual terms of the cash flows. The Group's financial assets are measured at amortised costs and are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that represent solely payments of principal and interest.

The Group's cash and cash equivalents and other receivables are measured at amortised cost. Other receivables are initially measured at fair value. The Group holds other receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost.

The Group has one financial assets measured at FVOCI (Fair Value Through Other Comprehensive Income which was fully impaired in previous years. There has been no impact on the treatment of the financial assets measured at FVOCI on transition to IFRS9. The Group has no financial assets measured at FVTPL (Fair Value Through the Statement of Profit or Loss)

Cash and cash equivalents

Cash includes cash on hand and demand deposits with any bank or other financial institution. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash which are subject to an insignificant risk of changes in value.

Impairment of financial assets

The Group recognises loss allowances for expected credit losses ("ECL's") on its financial assets measured at amortised cost. Due to the nature of its financial assets, the Group measures loss allowances at an amount equal to the lifetime ECLs. Lifetime ECLs are the anticipated ECLs that result from all possible default events over the expected life of a financial asset. ECLs are a probability-weighted estimate of credit losses.

Classification and measurement of financial liabilities

A financial liability is initially classified as measured at amortised cost or FVTPL. A financial liability is classified as measured at FVTPL if it is held-for-trading, a derivative or designated as FVTPL on initial recognition.

The Group's accounts payable, accrued liabilities and short-term debt are measured at amortised cost.

Accounts payable and accrued liabilities are initially measured at fair value and subsequently measured at amortised cost. Accounts payable and accrued liabilities are presented as current liabilities unless payment is not due within 12 months after the reporting period.

Short-term debt is initially measured at fair value, net of transaction costs incurred. Subsequently they are measured at amortised cost using the effective interest rate method. Short-term debt is classified as current when payment is due within 12 months after the reporting period.

The Group has no financial liabilities measured at FVTPL.

Where there is a modification to a financial liability, the financial original liability is de-recognised and a new financial liability is recognised at fair value in accordance with the Group's policy.

Other loans and borrowings

All loans and borrowings which are financial instruments are initially recognised at the present value of cash payable to the lender (including interest). After initial recognition they are measured at amortised cost using the effective interest rate method. The effective interest rate amortisation is included in finance costs in the income statement.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at banks and in hand.

Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised outside profit and loss, in which case it is recognised in other comprehensive income or directly in equity as appropriate.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

·; where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

·; in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

·; deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Foreign currency transactions

Transactions in currencies other than pounds sterling are recorded at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Share based payments

The cost of equity-settled transactions is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the recipients become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions) or to conditions not related to performance or service (non-vesting conditions).

Where equity settled share based payments are made to non-employees the cost of equity-settled transactions is measured by reference to fair value of the goods or services received and measured at the date the entity obtains the goods or the counterparty renders the service.

Where the fair value of the goods or services received cannot be estimated reliably, the entity measures the goods or services received, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders service.

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions, number of equity instruments that will ultimately vest or in the case of an instrument subject to a market condition or non-vesting condition, be treated as vesting as described above. This includes any award where non-vesting conditions within the control of the Group or the employee are not met. Where the equity-settled share based payment is directly attributable to exploration and evaluation activities, the movement in cumulative expense since the previous balance sheet date is capitalised, with a corresponding entry in equity. Otherwise, the movement in cumulative expense is recognised in the income statement, with a corresponding entry in equity.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement.

New standards and interpretations applied

There were a number of new and amended standards and interpretations during the year, below is a list of the new standards which impacted the Group:

The application of the new and amended standards and interpretations during the year did not have any impact on the accounting policies, financial position or performance of the Group, with the following noted below;

IFRS 9 Financial Instruments

IFRS 9, Financial Instruments introduced new requirements for the recognition, classification and measurement of financial assets and liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. IFRS 9 replaced the multiple classification and measurement models for financial assets and financial liabilities that existed under IAS 39 Financial Instruments, and the basis on which financial assets are measured will determine their classification as either, at amortised cost, fair value through profit and loss, or fair value through other comprehensive income. The Group's principal financial assets comprise cash and other receivables. All these financial assets continue to be classified and measured at amortised cost. The Group's principal financial liabilities comprise trade and other payables and loans. All these financial liabilities continue to be classified and measured at amortised cost.

The adoption of IFRS 9 has changed the Group's accounting for impairment losses for financial assets by replacing IAS 39's incurred loss approach with a forward-looking expected credit loss approach. IFRS 9 requires the Group to measure and recognise expected credit losses on all applicable financial assets.

The Company has assessed the resulting impact on the financial statements and there was no material quantitative impact on the financial statements. There are a number of additional disclosures that have been added to the financial statements.

New standards and interpretations not applied

IASB and IFRIC have issued a number of new standards and interpretations with an effective date after the date of these financial statements. These will be adopted in the period that they become mandatory, unless otherwise indicated. Information on the new standards which could impact the Group is presented below

Based on the current and foreseeable operations, the adoption of the above standards and interpretations will not have a material impact on the Group's financial statements in the period of initial application.

2. Segment analysis

The Group operates in one segment being the exploration and evaluation of energy related projects. The only significant project within this segment is the Phulbari Coal and Power Project (the Project) in Bangladesh.

3. Operating loss

 (1) Other staff costs for 2019 financial year were £414,000 of which £17,000 was expensed in administrative expenses, £nil expensed in exploration and evaluation costs and £397,000 capitalised (2018: £14,000 expensed in administrative expenses, £6,000 expensed in exploration and evaluation costs and £318,000 capitalised).

(2) Operating lease rental costs for 2019 financial year were £76,000 of which £15,000 was expensed and £61,000 capitalised (2018: £72,000 of which £21,000 was expensed and £51,000 capitalised).

(3) Total depreciation for 2019 was £5,000 which was capitalised to intangibles (2018: £56,000 capitalised).

During the year Phulbari-related exploration and evaluation costs amounting to £14,000 were expensed in accordance with the Group's accounting policy on exploration and evaluation costs (2018: £44,000).

4. Auditor's remuneration

The Group paid the following amounts to its auditors in respect of the audit of the financial statements and for other services provided to the Group.

5. Amounts paid for Directors' services, and staff costs

The amounts paid for Directors' services during the year are disclosed in further detail in the Directors' Report on page 15 of the Annual Report and Accounts. The aggregated remuneration of the highest paid director is £303,600.

Staff costs

(1) Excludes amounts paid for Directors' services.

6. Taxation

Reconciliation of the tax charge in the income statement

Unrecognised deferred tax assets

At 30 June 2019 tax losses for which a deferred tax asset was not recognised amounted to £18,229,000 (2018: £16,077,000). Deferred tax assets are only recognised should it become more likely than not that taxable profit or timing differences, against which they may be deducted, will arise.

7. Loss per share

There are 9,500,000 potentially dilutive options along with 14,357,265 potentially dilutive shares to be issued at 30 June 2019 which are not included in the calculation of diluted earnings per share in 2019 because they were anti‑dilutive for the period as their conversion to Ordinary Shares would decrease the loss per share.

8. Other Receivables

9. Intangible assets

The mineral rights will be amortised over the licence period (including extensions) once commercial production commences at the Phulbari Coal and Power Project.

The exploration and evaluation expenditure will have an indefinite useful life until approval is obtained for the Phulbari Coal and Power Project. At that time, the asset will be transferred to mining property and development assets within property, plant and equipment in accordance with accounting policy.

10. Investments

Principal undertakings

Investments in which the Group holds 20% or more of the nominal value of any class of share capital are as follows:

The investment in PeoplesTel has been accounted for as financial asset at Fair Value Through Other Comprehensive Income as GCM does not have significant influence. The investment was fully impaired during the year ended 30 June 2010.

11. Payables

Refer to note 20 for details of the related party accrued payable.

12. Borrowings

Refer to note 20 for details of the short-term loan from related party.

On 30 November 2018 the existing short-term loan facility of £1.1 million with Polo Resources Limited was increased by £1.2 million. Prior to this amendment, the principal terms of the loan were: a loan facility of up to £1.1 million to be repaid within 90 days upon request and attracting an interest rate of 12% per annum. The revised terms provided for an increase in the loan facility amount by £1.2 million, to £2.3 million. The £1.2 million being drawn down by the Company in equal quarterly instalments of £300,000. The Lender has the right to convert the outstanding loan balance and accrued interest to new ordinary shares of 10p each at a price of 11p per ordinary share within 14 days upon request. Any share issue to the Lender is conditional upon the Lender's interest, together with the interest of any parties with which it is in concert, remaining below 30% of the Company's issued capital. All other principal terms of the loan facility remain unchanged. Refer page 27 of the Annual Report and Accounts for details of Management judgement used in accounting for the loan amendment.

13. Commitments

Operating lease commitments

The Group has entered into operating leases on land and buildings, vehicles and office equipment. The duration of the leases are between 1 and 5 years. Future minimum rentals on these operating leases are as follows:

In addition, under the terms of the Prospecting License agreement with the Bangladesh authorities for contract licence areas B, G and H respectively, an annual fee of 500 Taka (£4.58 at year-end exchange rate) is payable for each hectare within the licence area. The Group currently leases 5,480 hectares within these licence areas. The licence has a 30 year term from 2004 and may be renewed for further periods of 10 years each, at GCM's option.

14. Authorised and issued share capital

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

On 18 July 2017 4,207,700 shares were issued to a consultant as payment for their services. The consulting payment included £60,000 (300,000 shares at 20p per share) as payment for a retainer and £1, 250,000 (3,907,700 shares at 32p per share) as payment for a success fee.

On 23 November 2017 5,813,953 shares were issued to new and existing investors to raise £2,000,000 at 34.4p per share. Costs incurred on the equity raise was £200,000.

On 10 April 2018 9,938,005 shares were issued to a consultant as payment for their services. The consulting payment included £180,000 (900,000 shares at 20p per share) as payment for a retainer, £1,543,000 (4,408,783 shares at 35p per share) as payment for a success fee, and £1,481,000 (4,629,222 shares at 32p per share) as payment for a success fee.

On 3 December 2018, 100,000 shares were issued to former director, on their resignation in lieu of services at a price of 17.9p per share.

On 25 June 2019, 425,000 shares were issued to former director on the exercising of their share options at a price of 11p per share for a total of £46,750.

Reserves

Share capital

The balance held in share capital relates to the nominal net proceeds on issue of the Company's equity share capital, comprising £0.10 ordinary shares.

Share premium account

The share premium account represents the premium received over the nominal value of ordinary shares on issue of the Company's equity. The share premium account has been reduced by expenditure associated with issuing shares such as listing costs.

Other reserves

This reserve records the fair value of conditional shares awarded which have not yet been settled. Refer note 17 for basis of valuation.

15. Notes supporting statement of cashflows

Cash and cash equivalents for the purposes of the statement of cash flows comprises:

Non-cash transactions from financing activities are shown in the reconciliation of liabilities from financing transactions:

16. Significant non-cash transactions

During the year the significant non-cash transactions during the year were as follows:

·; £5,181,000 of expenses were incurred on a consultant for their services. The consulting payment included £300,000 (2,142,857 shares at 14p per share) as payment for a retainer and £1,276,777 (3,928,546 shares at 32p per share), £2,734,857 (7,149,954 shares at 38.5p per share), and £868,872 (3,278,765 shares at 26.5p per share) as payments for success fees in reaching project milestones. These retainer and success fee shares had not been issued to the consultant at year end and have been included in other reserve for shares to be issued.

·; On 3 December 2018, 100,000 shares were issued to former director, on their resignation in lieu of services at a price of 17.9p per share, total fee £17,900.

17. Share based payments

The charge for share based payments during the year is shown in the following table:

Options

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.

The options outstanding at 30 June 2019 have an exercise price of £0.11 (2018: £0.11) and a weighted average contractual life of 0.9 years (2018: 1.9 years). At a weighted average share price on the date of exercise of £0.21, 425,000 options were exercised during the year.

Conditional shares scheme

GCM has a conditional share scheme for Directors, employees, associates, consultants and contractors. Ordinary shares will be issued for nil consideration, conditional upon the Group achieving milestones including approval by the Government of Bangladesh of the Scheme of Development for the Phulbari Coal and Power Project. The awards granted are classified as equity-settled, and therefore the fair value is determined by reference to the share price at the date of the grant, as required by IFRS 2.

Movement in non-vested conditional shares:

The grant details of the conditional shares outstanding as at 30 June 2019 are as follows:

The cumulative cost recognised in equity in relation to the conditional shares as at 30 June 2019 is £654,000 (2018: £625,000) after taking into account:

·; Expected timeframe for milestones to be achieved

·; Probability of successful completion of milestones

·; The conditional shares awarded to employees are subject to their employment at the time milestones are reached

The increase in the cost of conditional shares of £29,000 for the year ended 30 June 2019 is directly attributable to the Phulbari Coal and Power Project, and accordingly capitalised to intangibles on this basis (2018: £7,000).

18. Financial Instruments

The Group holds cash as a liquid resource to fund the obligations of the Group.

The Group's strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group's expenditure. This is achieved by regular monitoring of interest rates and periodic review of expenditure forecasts.

The Group has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk; however it does review its currency exposures on a regular basis. The Group has no significant monetary assets or liabilities that are denominated in a foreign currency.

The financial liabilities of the Group include trade payables and a short-term loan from a related party. Trade payables are recognised at fair value on initial recognition and subsequently measured at amortised cost. The short-term loan was recognised based on the present value of cash payable to the lender. As the short-term loan is payable within 12 months, the present value of the cash payable was equal to the principal value of the loan.

Interest rate risk

The interest rate maturity profile of the financial assets of the Group is as follows:

Other interest bearing financial instruments which are subject to fixed rate interest charges are the Group's borrowings as disclosed in Note 12.

Other financial instruments of the Group which are non-interest bearing and are therefore not subject to interest rate risk, are, non-interest-bearing cash and cash equivalents as at 30 June 2019 was £370,000 (2018: £14,000).

Credit risk

The Group considers the credit ratings of banks in which it holds funds in order to manage exposure to credit risk and counterparty risk. Funds are held in banks with credit ratings ranging from AAA -AA. The maximum credit risk at 30 June 2019 was as follows:

Liquidity risk

The Group ensures that it has sufficient cash to meet all its commitments when required, through equity and short term loan funding, please refer page 29 of the Annual Report and Accounts for further detail. The table below summarises the contractual maturity profile of the Group's financial liabilities as at 30 June 2019 and 2018.

Currency risk

The Group has no significant monetary assets or liabilities that are denominated in a foreign currency.

Fair values of financial assets and liabilities

Management have assessed that the fair value of cash, current receivables and current payables approximate their carrying amounts due to the short-term maturities of these instruments.

19. Contingent liabilities

Royalty

The Group is obliged to pay Deepgreen Minerals Corporation Pty Limited US$1 per tonne of coal produced and sold from the Phulbari mine. The Directors are of the opinion that a provision is not required in respect of these matters, as coal has not yet been produced at Phulbari.

Consultant success fees

The Group is obliged to pay a consultant, Dyani Corporation Limited, success fees conditional upon achieving key milestones relating to the advancement of the proposed 6,000MW coal fired power plant at the mine-mouth of the Phulbari Coal and Power Project, in North-West Bangladesh. As at 30 June 2019 the outstanding milestones were as follows:

Success Fee - Mine

·; a one-time fee equal to 2% of Issued Capital, to be paid within five business days following the execution of an Acceptable MOU with a Strategic Partner in respect to the Mine; and

·; a one-time fee equal to 3% of Issued Capital, to be paid within five business days following the execution of an Acceptable Framework Agreement with a Strategic Partner in respect to the Mine; and

·; a one-time fee equal to 4% of Issued Capital if an Acceptable Framework Agreement in respect to the Mine has been entered into, or 6% of Issued Capital if an Acceptable Framework Agreement with respect to the Mine has not been entered into, to be paid within five business days following the execution of an Acceptable Definitive Agreement with a Strategic Partner in respect to the Mine.

Success Fee - Power Plant 1

·; Fee 1 - a one-time fee equal to 5% of the Issued Capital, to be paid within five business days following the execution of all Acceptable Definitive Agreements with a Strategic Partner in respect to Power Plant 1

Success Fee - Power Plant 3

·; a one-time fee equal to 4% of Issued Capital, if an Acceptable Framework Agreement with respect to Power Plant 3 has been entered into, or 6% of Issued Capital if an Acceptable Framework Agreement with respect to Power Plant 3 has not been entered into, to be paid within five business days following the execution of all Acceptable Definitive Agreements with a Strategic Partner in respect to Power Plant 3.

The Directors are of the opinion that a provision is not required in respect of these success fees, as the milestones had not been met as at 30 June 2019.

20. Related Party Transactions

Key management personnel

Short-term related party loan

GCM is beneficiary to a £2.3 million short-term loan facility from one of its largest shareholders, with an interest rate of 12% per annum. As at 30 June 2019 the Group had utilised £2.0 million of the loan facility (2018: £1,100,000) and an interest accrual of £343,000 (2018: £179,000). The terms of the short-term loan requires repayment within 90 days of receiving notice from Polo Resource Limited. Refer to note 12.

Management services company

As disclosed in the Directors Report, for the year ended 30 June 2019, the remuneration for the services of Datuk Michael Tang PJN, Executive Chairman of the Company, was £303,600, which comprised of directors fees amounting to £6,000 (2018: £6,000) and management services of £297,600 paid to a management services company (2018: £297,600).

For the period September 2015 to November 2017 Datuk Michael Tang PJN offered to defer the payments due to his management services company until further notice in order to assist the Company. The total debt as a result of the deferment of £670,000 was repaid to the management services company during the prior year. In addition, the Company agreed to pay the management services company an interest payment of £63,000 in full settlement of the debt in the prior year. An annualised interest rate of 8% was used in calculating the interest amount.

As at 30 June 2019 the amount owing to the management services company of Datuk Michael Tang PJN was £248,000 (2018: £25,000).

21. Post-balance sheet events

The following events took place subsequent to 30 June 2019, for which there has been no adjustment to the June 2019 financial statements:

- On 11 July 2019, the Company announced that it had entered into a memorandum of understanding ("MOU") with China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. ("NFC") and Power Construction Corporation of China, Ltd. ("PowerChina"). The MOU provides for the formation of a strategic partnership to jointly develop the Company's proposed world class high grade coal resource of 572 million tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project in North-West Bangladesh.

- On 4 September 2019, the Company announced that it had entered into a consultancy agreement (the "Consultancy Agreement") with DG Infratech Pte Ltd, a Bangladeshi controlled company ("DGI" or the "Consultant"). The Consultancy Agreement is in relation to the advancement of the Company's proposed world class high grade coal resource of 572 million tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project in North-West Bangladesh (the "Coal Project") as well as the Company's proposed 3 x 2,000MW coal fired mine mouth power plants (the "Power Projects").