Jangada Mines Regulatory News (JAN)

Jangada Mines plc / EPIC: JAN.L / Market: AIM / Sector: Mining

5 December 2019

Jangada Mines plc

('Jangada' or the 'Company')

Final Results for Year Ended 30 June 2019

Jangada Mines plc, a natural resources company, is pleased to announce its audited annual financial results for the year ended 30 June 2019. The Company will today be posting the annual report & accounts to Shareholders, together with a notice convening the annual general meeting.

Overview

·; Early in the financial year, agreed a total fundraise package of £2.1 million to advance the Pedra Branca Project in Brazil

·; Progressed a bankable feasibility study ("BFS") at Pedra Branca through to completion of the verification stage

·; Completed exploration activities at the Pitombeiras West vanadium deposit in north eastern Brazil, which confirmed continuous high-grade vanadium, titanium and iron grades at surface

o Average grades for vanadium and titanium 3x higher than initially anticipated

·; Refocused operations through the sale of Pedra Branca do Brasil Mineracao Ltda., the entity that holds 100% of Pedra Branca rights, to TSX-listed ValOre Metals Corp in a cash and shares deal

·; Dedicated team and further resources to the development of Pitombeiras

·; Work planned at Pitombeiras includes further drilling and metallurgical work - a JORC (2012) compliant Preliminary Economic Assessment is underway and expected to be completed in late Q1 2020

Chairman's Report

During the year ended 30 June 2019, the Company continued its investment in the Pedra Branca Project ('the Project') in Brazil, supporting its economic prospects with an updated flowsheet that reduced its estimated CAPEX and identifying significant resources including nickel, copper sulphide, vanadium and titanium.

In the early part of the financial year, the Company agreed a total fundraise package of £2.1 million that allowed the Company to advance the Project towards a bankable feasibility study ('BFS'), quantifying the value of the nickel sulphide deposit, and undertaking exploration drilling at the vanadium project.

In January 2019, we announced our fully funded Q1 2019 work programme, which focussed on progressing the BFS through to completion of the verification stage. The delivery of a BFS for the PGM and nickel assets to further confirm Pedra Branca's technical and economic viability represented a significant milestone in the development of the Project.

In February 2019, we provided an update on our vanadium exploration activities at the Pitombeiras West vanadium deposit ('Pitombeiras') having completed an expanded outcrop sampling campaign. Results from 72 samples confirmed continuous high-grade vanadium, titanium and iron grades at the surface, with the average grades for vanadium and titanium being three times higher than initially anticipated by management. With these exciting results confirmed and given the overall demand for vanadium looks likely to grow strongly, primarily driven by its importance in energy storage, the Board made the decision to focus its resources on pursuing the development of Pitombeiras.

Accordingly, the Board took the decision to refocus the Company's operations through the sale of Pedra Branca do Brasil Mineracao Ltda., the entity that holds 100% of Pedra Branca rights to TSX-listed ValOre Metals Corp. ("ValOre"), to ensure a stronger foundation for the future development of the Project. In doing so, we could dedicate our team and further resources to the development of Pitombeiras in north eastern Brazil, whilst retaining an indirect exposure to the development of Pedra Branca.

The Board believes that ValOre will likely receive stronger support from the North American financial markets for the development of Pedra Branca. The Board continues to believe that Pedra Branca has strong potential; this is supported by the fact that a condition of the sale was the Company becoming a substantial shareholder of ValOre. Following the issuance of the initial consideration shares, Jangada owns a significant holding of 25 per cent in ValOre's enlarged share capital.

Financials

The disposal of Pedra Branca was completed post the balance sheet date. The cash consideration will support the Company's working capital requirements and allow it to substantially progress the development of Pitombeiras, which will involve further drilling and metallurgical work. A JORC (2012) compliant Preliminary Economic Assessment is underway and expected to be completed in late Q1 2020.

Outlook

The Board believes the Company is an attractive proposition following the sale of Pedra Branca and the refocus on Pitombeiras. With a healthy balance sheet following the sale, the Company is well positioned to develop this exciting project.

As always, the Board would like to thank our team for their work and our shareholders for their continued commitment to Jangada.

Brian McMaster

Executive Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2019

1. The Company has labelled the comparative information with the heading 'restated' to highlight the presentation of the discontinued operations previously not done so in the prior year's financial statements.

CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2019

COMPANY BALANCE SHEET

AS AT 30 JUNE 2019

The loss for the year dealt within the accounts of Jangada Mines plc was $1,594,000 (2018: $1,563,000).

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2019

Note: Cash and cash equivalents at the year-end of $130,000 includes $13,000 that is currently shown on the consolidated balance sheet within assets held for sale.

COMPANY CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2019

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2019

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 June 2019

The Company is a public limited company limited by shares, incorporated in England and Wales on 30 June 2015 with the registration number 09663756 and with its registered office at 20 North Audley Street, London W1K 6WE. The Company's principal activities are the exploration and development of mining assets in Brazil.

Basis of preparation and going concern basis

The audited consolidated financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU issued by the International Accounting Standards Board, under the historical cost convention.

The consolidated financial information is presented in United States Dollars ($), which is also the functional currency of the Company and Group. Amounts are rounded to the nearest thousand ($'000), unless otherwise stated.

The preparation of consolidated financial information in compliance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's and Group's accounting policies (see below and note 3).

As provided by section 408 of the 2006 Act, no statement of comprehensive income is presented in respect of the Company. The Company's loss for the year is disclosed on the Company balance sheet.

As discussed in the Directors' report, there exists a material uncertainty, which may cast doubt about the Group and Company's ability to continue as a going concern. The financial statements do not include any adjustments that may result if the Group and Company were unable to continue as a going concern.

Changes in accounting principles and adoption of new and revised standards

In the year ended 30 June 2019, the Directors have reviewed all the new and revised Standards. The only relevant new standard that is effective for this year's financial statements is IFRS 9 "Financial Instruments" but this has not had a material impact on the financial statements.

There are no standards in issue but not yet effective which could have a material impact on the financial statements.

Basis of Consolidation

The Group consolidates the financial information of Jangada Mines plc and its subsidiaries drawn up to 30 June each year. The subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continues to be consolidated until the date that such control ceases. The Company has control over a subsidiary 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 financial information of the subsidiary is prepared for the same reporting year as the parent company, using consistent accounting policies and is consolidated using the acquisition method. Intra-group balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Pedra Branca do Brasil Mineração Ltda and VTF Mineração Ltda's statutory year ends are 31 December and has not been adjusted to be consistent with the Company's year-end as Brazilian law requires the subsidiaries to prepare their statutory financial statements with a 31 December year end.

Foreign currency

Transactions entered into by the Group in a currency other than the currency of its primary economic environment in which it operates (the "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date.

Financial assets

All of the Group's financial assets are held within a business model whose objective is to collect contractual cash flows which are solely payments of principals and interest and therefore classified as subsequently measured at amortised cost.

Group's financial assets include cash and cash equivalents, Company's financial assets include cash and other receivables. The Group assesses on a forward-looking basis the expected credit losses, defined as the difference between the contractual cash flows and the cash flows that are expected to be received.

Financial liabilities

Financial liabilities include the other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Exploration and evaluation assets

Exploration and evaluation assets represent the costs of exploration work, studies, field costs, government fees and the associated support costs at the Group's Pedra Branca project and Pitmobeiras.

Costs incurred prior to obtaining the legal rights to explore an area are expensed immediately to the Statements of Profit or Loss and Other Comprehensive Income. Only material expenditures incurred after the acquisition of a license interest are capitalised. Historically, the expenditures related to exploration and evaluation have not been material, as the Company is active in areas where there are minimal and immaterial exploration and evaluation costs and therefore the costs in previous years have been expensed.

Taxation

The charge for current tax is based on the taxable income for the period. The taxable result for the period differs from the result as reported in the statement of comprehensive income because it excludes items which are not assessable or disallowed and it further excludes items that are taxable and deductible in other years. It is calculated using tax rates that have been enacted or substantially enacted by the statement of financial position date.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the audited consolidated balance sheet differs from its tax base.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The Company makes certain estimates and assumptions regarding the future. Judgements, estimates and assumptions are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The judgements, estimates and assumptions that 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.

Judgements

As discussed in the Directors' report, there exists a material uncertainty, which may cast doubt about the Group and Company's ability to continue as a going concern. Given the proceeds from the sale of the Pedra Branca project and based on the Company's planned expenditure on the Pitombeiras vanadium deposit and the Company's working capital requirements, the Directors have a reasonable expectation that the Company will have adequate resources to meet its capital requirements for the foreseeable future. For that reason, the Directors have concluded that the financial statements should be prepared on a going concern basis.

The Directors have considered the criteria of IFRS 6 regarding the impairment of exploration and evaluation assets and have decided based on this assessment that there is no basis to impair the carrying value of its exploration assets in respect to Pedra Branca (2019: $760,000, 2018: $324,000) and the Pitmobeiras project (2019: $41,000, 2018: $Nil) at this time.

Estimates and assumptions

The Company measures share options at fair value. For more detailed information in relation to the fair value measurement of such items, please refer to note 17.

The Company is exposed through its operations to the following financial risks:

·; Credit risk;

·; Foreign exchange risk; and

·; Liquidity risk.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions.

The directors monitor the utilisation of the credit limits regularly and at the reporting date does not expect any losses from non-performance by the counterparties.

Maximum risk credit exposure to the Company is the carrying value of financial assets.

Liquidity risk

Liquidity risk arises from the Company's management of working capital. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Company's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.

In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments.

Foreign exchange risk

Market risk arises from the Company's use of foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates (currency risk).

The above analysis includes the assets and liabilities of both the continuing operation and the discontinued operations of Pedra Branca as at 30 June 2019.

The potential impact of a 10% movement in the exchange rate of the currencies to which the Group is exposed is shown below:

The Company's objectives when maintaining capital are to safeguard the entity's ability to continue as a going concern. The Company sets the amount of capital it requires in proportion to risk. The Company manages its capital structure and makes adjustment to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

General objectives, policies and processes

The board of directors has overall responsibility for the determination of the Company's risk management objectives and policies. The overall objective of the board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company's competitiveness and flexibility.

Principal financial instruments

The principal financial instrument used by the Company, from which financial instrument risk arises, is related party borrowings.

Capital management

The Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

There were no changes in the Company's approach to capital management during the period.

The Company is not subject to externally imposed capital requirements.

The Company evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with IFRS 8. In the Directors' opinion, the Group only operates in one segment being mining services. All non-current assets have been generated in Brazil.

In May 2019, the Company committed to disposing of Pedra Branca do Brasil Mineracao S/A. The Board considers that it is in the best interests of shareholders to focus the Company's resources on pursuing the development of Pitombeiras. The sale completed on 14 August 2019.

The results of Pedra Branca for the year are presented below:

The major classes of assets and liabilities of Pedra Branca classified as held for sale as at 30 June are, as follows:

The net cash flows relating to Pedra Branca are, as follows:

Factors that may affect future tax charges 

Apart from the losses incurred to date, there are no factors that may affect future tax charges. 

At the year end, $853,000 (2018: $568,000) of cumulative unrelieved tax losses arose in Brazil and the United Kingdom, which could be utilised in the foreseeable future.

In September 2018, the Company issued 34,999,996 new ordinary shares at a price of £0.03 per share as well as 34,999,996 warrants to the placees on a 1 for 1 basis, exercisable in whole or in part at £0.06 (7.9 US cents) until 15 October 2020. See Note 17.

There is no impact from 34,999,996 warrants and 15,250,000 options outstanding at 30 June 2019 (2018: 15,250,000 options) on the loss per share calculation because they are considered anti-dilutive. These options could potentially dilute basic EPS in the future.

There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

Staff costs, including directors' remuneration, were as follows:

Excluding directors, there were five members of staff during the year ended 30 June 2019 (2018: 3). Excluding directors remuneration, staff costs during the year were salaries $30,081 (2018: $17,183), social security $8,480 (2018: $4,688), other benefits $2,409 (2018: $660).

The Discontinued operations has been reclassified as Assets held for sale (See Note 6).

Under the terms of the Share Purchase Agreement Valore Metals Corp paid $180,000 upon signing of the binding letter of agreement. See note 20.

The Company has provided for the cost of Consulmet Metals (Pty) Ltd for the consultancy work undertaken in lieu of fees based on its entitlement to 4,798,091 shares (2019: $205,000, 2018: $nil). These shares have not been issued.

Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of a winding up of 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 proxy, at a meeting of the Company.

The fair value at grant date is independently determined using an adjusted form of the Black Scholes Model that takes into account the exercise price, the term of the option, the impact of dilution (where material), the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the peer group companies.

The model inputs for options granted previously included:

(a) options are granted for no consideration and vested options are exercisable for a period of two and a half years after the grant date: 2 June 2017.

(b) expiry date: 31 December 2019

(c) share price at grant date: 5.5 pence.

(d) expected price volatility of the company's shares: 50%.

(e) risk-free interest rate: 1.75%

(f) 50% of the share options vest 60 days post admission and the remaining 50% vest 90 days post production.

The expected price volatility is based on bench marking to similar AIM quoted companies, adjusted for any expected changes to future volatility due to publicly available information.

The warrants were valued using the Black Scholes Model with inputs noted in the above table and further inputs as follows:

(a) warrants were granted for no consideration and vested warrants are exercisable for a period of two years after the grant date: 15 October 2018.

(b) expiry date: 15 October 2020

(c) share price at grant date: 2.58 pence.

(d) expected price volatility of the company's shares: 50%.

(e) risk-free interest rate: 2.0%.

The details of the subsidiaries of the Company, which have been included in these consolidated financial statements are:

In May 2019, the Company committed to disposing of Pedra Branca do Brasil Mineracao S/A. The sale completed post year end on 14 August 2019.

During the period the Company entered into the following transactions with related parties.

Garrison Capital Partners Limited is a related party to the Company due to having directors in common. The balance owed as at 30 June 2019 was $62,000 (2018: $58,000) as disclosed in note 14.

Lauren McMaster is a related party to the Company due to being married to the Chairman. At the year-end the amount owed was $8,000 (2018: $18,000).

FFA Legal Ltda is a related party to the Group due to having a director in common with Group companies. At the year-end they were owed $nil (2018: $6,000).

Harvest Minerals Limited is a related party to the Company due to having directors in common. Throughout the year, Harvest Minerals contracted, at cost, the services of technical personnel for assistance with Harvest's development during periods when the Company was not actively involved in technical matters. These arrangements are not expected to be on-going. At the year-end they were owed $nil (2018: $nil).

Directors' remuneration is disclosed within note 10.

(a) Disposal

The Company post the Balance sheet date disposed of 23,862,321 quotas of Pedra Branca do Brasil Mineracao S/A, which represents 99.99% of all outstanding quotas of Pedra Branca (the "Purchased Shares"), while FFA Holding & Mineração Ltda. ("FFA") is the registered and beneficial owner of 1 quota of Pedra Branca, which represents 0.01% of all outstanding quotas of Pedra Branca (the "FFA Share"). Under the terms of the Share Purchase Agreement, Jangada has agreed to sell the Purchased Shares to the Purchaser and FFA has agreed to transfer the FFA Share to the Purchaser.

The Share Purchase Agreement sets out that the following consideration is payable to Jangada pursuant to the Disposal:

1. The issuance and allotment to Jangada of the:

a. Initial Consideration Shares in the Purchaser, Valore Metals Corp, totalling 22,000,000 on the date of closing of the Disposal ("Completion");

b. Post-Closing Consideration Shares totalling 3,000,000 payable in six equal tranches of 500,000 each tranche, commencing on the date falling six months after Completion and ending on the date falling thirty-six months after Completion.

2. Cash payments to Jangada in the aggregate of CAD$3,000,000 ($2.4m as at 30 June 2019 exchange rate), as follows:

a. CAD$250,000 ($0.2m) payable on signing in May 2019 (received);

b. CAD$750,000 ($0.6m) payable on Completion (received);

c. CAD$1,000,000 ($0.8m) on, or before, 3 months after Completion (received); and

d. CAD$1,000,000 ($0.8m) on, or before, 6 months after Completion.

(b) Shares purchases

On 15 October 2019, Brian McMaster and Luis Azevedo purchased 6,000,000 Ordinary Shares of £0.0004 each in the Company at an average price of 1.3 pence per Ordinary Share purchased. Following the purchase, the beneficial interest increased to:

The Directors consider that the Company has no single controlling party.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

ENDS

For further information please visit www.jangadamines.com or contact: