Jangada Mines Regulatory News (JAN)

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

30 November 2018

Jangada Mines plc

('Jangada' or the 'Company')

Final Results for Year Ended 30 June 2018

Jangada Mines plc, a natural resources company developing South America's largest and most advanced platinum group metals ('PGM') project, is pleased to announce its audited annual financial results for the year ended 30 June 2018. The Company will shortly be posting the annual report & accounts to Shareholders, together with a notice convening the annual general meeting.

Overview of activities during the year, and post year end

· Independently assessed, substantial JORC resource increases across commodity basket

o 50% increase in global ore volume to 34.5 million tonnes at 1.3 g/t PGM+Au

o 53% increase in PGM resource to 1.45 million ounces

o 28% increase in nickel resource to 140 million pounds

o 11% increase in copper resource to 26 million pounds

o 4% increase in cobalt resource to 6.7 million pounds

· Metallurgical test work demonstrated that the inclusion of magnetic separation could positively impact the economics of the Project

o Addition of magnetic separation increased recoveries of PGM and yielded unexpectedly high gold and chrome grades in pre-concentrate

· PEA confirmed that the Project has the potential to become a robust, low CAPEX and OPEX, shallow, open pit operation yielding attractive financial returns and a short payback period

o NPV of US$192 million, IRR of 67% and 1.6-year payback

o Potential life-of-mine of 13 years at 64,000 ounces of PGM+Au, 2.2 Mlb of nickel, 1.2Mlb of copper, 44,000 lb of cobalt and 30,000t of chrome

o Low CAPEX requirement of US$64.4 million and low OPEX of US$17.31/t of ROM

· Issuance of the Environmental Licence required for trial mining

· High-grade economic nickel and copper sulphide mineralisation identified potentially enhancing the already strong project economics

· Successfully secured a funding package of £2.1 million enabling the Company to advance the Project towards a bankable feasibility study ('BFS'), quantifying the value of the nickel sulphide deposit, additional hydrology and metallurgy test work and exploration drilling at the vanadium project

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

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.

Chairman's Report

The last twelve months have, again, been a particularly productive period for the Company at the Pedra Branca multi-commodity project ('Pedra Branca' or 'the Project') in the north east of Brazil. Pedra Branca is the largest and most advanced stage PGM asset in South America. It hosts a JORC (2012) compliant mineral resource estimate of 1.45 million ounces of palladium, platinum and gold, in addition to 140 million pounds of nickel, 26 million pounds of copper and 6.7 million pounds of cobalt. The Project is located 280km from Fortaleza, a major Brazilian port city.

In May 2018, we upgraded the JORC (2012) compliant resources of the Project by 50% and, in June 2018, reported the positive flotation and magnetic separation results from the metallurgy programme. We immediately proceeded with the completion of a rescoped PEA which envisages a low cost, shallow open pit operation with an estimated 64,000 ounces of PGM and gold production per annum over a life of mine of 13 years. The planned mine has the potential to deliver an internal rate of return ('IRR') of 76%, with a net present value ('NPV') of US$192 million. These strong economics summarised in the PEA clearly highlight the exceptional potential of the Project. Finally, post-period end, we completed a review and update of our process flowsheet which has resulted in an estimated 32% reduction in capital expenditure for the development of the full operation. We anticipate that the updated figure will further enhance the already strong economics of the Project.

Over the reporting period, we have concluded several work streams that have advanced the Project towards development. These include a substantial upgrade in the precious metal and base metal mineral resource estimates and positive metallurgical test work resulting in the completion of a robust Preliminary Economic Assessment ('PEA') of the envisaged operation.

 Over US$35 million of exploration work has been completed at Pedra Branca and a review of the database has led to the discovery of nickel and copper mineralisation immediately beneath the current PGM mining envelope.

Furthermore, we received environmental authorisation for trial mining at the Project and announced the discovery of significant high-grade nickel and copper sulphide anomalies in close proximity to our current PGM resources. Finally, we secured a funding package of £2.1 million at the end of Q3 2018. This included a placing that raised £1.05 million in cash and an agreement reached with South African metallurgical consulting firm, Consulmet, for the acceptance of shares in lieu of services rendered to the value of just over £300,000. Furthermore, we secured a 12-month unsecured loan facility from Celtic Capital Pty Limited of US$1.0 million, which we have not yet drawn down. The team has delivered key value creating events, thereby establishing a strong platform as we advance the Project into the next important stage of its growth.

We have established a clear strategy to further develop the Project and unlock shareholder value over the coming months. We are now in a position to finance and deliver our work programme for the next period, which will include advancing the Project toward a BFS, quantifying the value of the nickel sulphide deposit, additional hydrology and metallurgical test work and exploration drilling at our vanadium project.

We believe Pedra Branca is truly a remarkable multi-commodity asset with strong potential to sustain a highly profitable operation.

Finally, on behalf of the Board, I say thank you to the Jangada team for their hard work and to our shareholders for their continued support.

B K McMaster

Director30 November 2018Jangada Mines plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2018

CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2018

COMPANY BALANCE SHEET

AS AT 30 JUNE 2018

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2018

COMPANY CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2018

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2018

NOTES TO THE FINANCIAL INFORMATION

FOR THE YEAR ENDED 30 JUNE 2018

The Company is a public limited company, incorporated in England and Wales on 30 June 2015 with the registration number 09663756 and with its registered office at Level 2, 34 Dover Street, London W1S 4NG. The Company's principal activities are the provision of mining services.

The financial information contained in this announcement does not constitute the Company's statutory financial statements for the year ended 30 June 2018 but has been extracted from them. The auditors have reported on these financial statements, and their report was unqualified and did not contain any statement under section 498(2) or (3) Companies Act 2006. The report was modified to highlight a material uncertainty in relation to going concern as follows:

Material Uncertainty Related to Going Concern

We draw attention to notes 2 and 3 of the financial statements which indicate further funding will be required to finance the Group's and Company's pre-production programme in Brazil. The Directors are confident that the Company will be able to raise these funds however there is no binding agreement, other than that detailed in Note 18, in place at the date of this report.

These conditions indicate the existence of a material uncertainty and may cast doubt on the ability of the Group and Company to continue as a going concern. Our opinion is not modified in respect of this matter. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

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 ($), which is also the functional currency of the Company and Group and is the preferred currency of the owners of the Company. Amounts are rounded to the nearest thousand ($'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 significant doubt about the Group and Company's ability to continue as a going concern. The financial information does not include the adjustment that would result if the Group and Company were unable to continue as a going concern.

Accounting standards in issue but not yet effective

At the date of authorisation of the financial information, a number of standards and interpretations were in issue but not yet effective. The Directors do not anticipate that the adoption of these standards and interpretations, or any of the amendments made to the existing standards as a result of the annual improvements cycle, will have a material effect on the financial information on the year of initial application.

IFRS 9 "Financial Instruments"

In July 2014, the IASB issued IFRS 9 "Financial Instruments" that replaces IAS 39 "Financial Instruments: Recognition and Measurement" and all previous versions of IFRS 9. IFRS 9 "Financial Instruments" incorporates the three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. Except for hedge accounting, the standard should be applied using the retrospective application.

This standard will be effective for Jangada Mines Plc's year ending 30 June 2019.

The Directors do not expect the adoption of this standard will have a material impact on Jangada Mines Plc financial information.

In May 2014, the IASB issued IFRS 15 "Revenue from Contracts with Customers". The standard requires an entity to recognise revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard will supersede all current revenue recognition requirements under IFRS when it becomes effective.

This standard will be effective for Jangada Mines Plc's year ending 30 June 2019.

The Directors do not expect the adoption of this standard will have a material impact on the Jangada Mines Plc Financial Information.

IFRS 16 "Leases"

This standard will require lessees to recognise most leases on the balance sheet as liabilities.

This standard will be effective for Jangada Mines Plc's year ending 30 June 2020.

The Directors do not expect the adoption of this standard will have a material impact on the Jangada Mines Plc Financial Information.

Basis of Consolidation

The Group consolidates the financial information of Jangada Mines Plc and its subsidiary drawn up to 30 June each year. The subsidiary is consolidated from the date of its 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's year end is 31 December and has not been adjusted to be consistent with the Company's year end as Brazilian law requires Pedra Branca to prepare its 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 liabilities

The Company classifies its financial liabilities into one category:

Other financial liabilities

Other 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 pre-feasibility studies, field costs, government fees and the associated support costs at the Group's Pedra Branca Platinum Group Metal project.

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 statement of financial position 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 significant doubt about the Group and Company's ability to continue as a going concern. The Directors are confident that the Company will be able to raise the required funds and therefore have concluded that the financial information 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 (2018: $324,000, 2017: $Nil) at this time.

Due to the control which the Company holds over its subsidiary Pedra Branca and the Company's continued support of its subsidiary, the Directors consider that the intercompany receivable owed by Pedra Branca to the Company is fully recoverable and it has therefore not been impaired at the year end.

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 15.

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.

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).

Fair value hierarchy

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

The Group's financial instruments are set out below:

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

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.

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

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: mining services. All non-current assets have been generated in Brazil.

Factors that may affect future tax charges 

There were no factors that may affect future tax charges. 

At the year end, $568,000 (2017: $256,000) of cumulative tax losses arose in Brazil and the UK. No deferred tax asset has been recognised as at 30 June 2018, as the Directors concluded that it was unlikely there would be future profits against which the unrelieved tax losses could be utilised in the foreseeable future.

The share options issued upon admission are not included within the weighted average number of shares calculation as their effect is anti-dilutive.

Directors' remuneration was as follows:

At the year end Directors were owed $104,000 (2017: $65,000) in relation to unpaid remuneration and expenses.

Excluding directors, there were 3 members of staff during the year ended 30 June 2018 (2017: 1). Excluding directors' remuneration, staff costs during the year were salaries $17,183 (2017: Nil), social security $4,688 (2017: $Nil), other benefits $660 (2017: $1,209).

On 15 December 2016, the Company entered into a convertible loan note with Craig Hubler Profit Sharing Plan as the lender for the sum of US$100,000, with interest accruing at the rate of 20% per annum and a maturity date of 15 December 2017.

Also on 15 December 2016, the Company entered into a convertible loan note with Sagert Road Investments LLC as the lender for the sum of US$300,000, with interest accruing at the rate of 20% per annum and a maturity date of 15 December 2017.

On 24 August 2017, the two convertible loan notes and all accrued interest were repaid in full.

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 during the year ended 30 June 2017 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 (2017: 31 December 2019).

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

(d) expected price volatility of the company's shares: 40% (2017: 40%).

(e) risk-free interest rate: 1.75% (2017: 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 fair value of the share options at the measurement date is $0.026.

The details of the sole subsidiary of the Company, which have been included in the consolidated financial information are:

\* The Company holds 22,574,327 shares (referred to as quotas) of R$1.00 each in Pedra Branca, fully subscribed and of which 19,904,630 shares are paid up to date. The remaining one quota of R$1.00 fully subscribed and paid up to date is held by FFA Holding & Mineracao Ltda (a vehicle 99.99 per cent. owned by Mr Azevedo) for the benefit of the Company and in compliance with Brazilian laws which require two quota holders for limited liability companies.

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 a director in common, the balance owed as at 30 June 2018 is disclosed in note 13.

Lauren McMaster is a related party to the Company due to being the spouse of a Director. Mrs McMaster's contract was for a fixed term and which has expired and not been renewed.

FFA Legal Ltda is a related party to the Group due to having a director in common with Group. At the year end they were owed $6,000 (2017: $nil).

Directors' remuneration is discussed within note 9.

Pedra Branca do Brasil Mineracao S/A, is a related party as it is a subsidiary of the Company, balances are disclosed in note 12.

(a) Placing

On 27 September 2018, the Company completed a placing to raise £1.05 million, before expenses, through the issue of 34,999,996 new Ordinary Shares (the "Placing Shares") at the Placing Price (being £0.03 per Placing Share); and 34,999,996 Warrants (the "Placing Warrants") to the placees on a 1 for 1 basis, exercisable in whole or in part at 6p until 15 October 2020. The issue of Placing Warrants was conditional on the passing of the Resolutions at the General Meeting, which duly occurred on 15 October 2018.

The Directors intend on using the net proceeds of the Placing to:

- Continue to develop the Pedra Branca project including the completion of necessary studies to progress a bankable feasibility study; and

- Provide general working capital to the Company.

Brandon Hill Capital Ltd ("Brandon Hill") and Arden Partners plc ("Arden Partners") were acting as joint brokers to the Company in relation to the Placing. The monetary liability towards Brandon Hill and Arden Partners has been settled through the issue of, in aggregate, 1,500,000 Ordinary Shares.

(b) Loan facility

On 27 September 2018, the Company entered into a loan agreement with Celtic Capital Pty Limited ("Celtic"), as trustee for Celtic Capital Trust under which it will have access to up to $1,000,000 for a period of 12 months from entering into the agreement. The Company may drawdown in tranches between $10,000 and $100,000 at any time it wishes, subject to two business days' notice first being given. Only once a draw down has taken place will any interest start accruing on the drawn down sum at a rate of 10 per cent per annum. An arrangement fee of $50,000 payable to Celtic was satisfied through the issue of 1,266,666 new Ordinary Shares at £0.03 each, which were admitted to trading on AIM at the same time as the Placing Shares. At at the date of this document, no funds have been drawn down.

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