Katoro Gold Regulatory News (KAT)

Katoro Gold Plc

(Incorporated in England and Wales)

(Registration Number: 9306219

Share code on the AIM: KAT

ISIN: GB00BSNBL022

("Katoro" or "the Company")

Condensed Consolidated Annual Financial Results for the year ended 31 December 2019

Dated 15 May 2020

Katoro Gold plc ("Katoro" or the "Company") (AIM: KAT), the Tanzanian focused exploration and development company is pleased to announce its audited annual financial results for the year ended 31 December 2019. The Company's annual report will be dispatched to shareholders shortly and will also be available from the Company's website at www.katorogold.com. Details of the date and venue for this year's AGM will be announced on posting of the annual report.

The financial statements are set out below and should be read in conjunction with the 2019 annual report which contains the notes to the financial statements.

Overview

· Completed the investment and option agreement with Power Metal Resources (AIM:POW) (previously known as African Battery Metals plc) to acquire an initial 25% interest in the Haneti Nickel Project, with an option to acquire a further 10% interest, totalling 35%

· Completed the soil sampling programme undertaken at the Haneti Nickel Project which successfully identified a new, previously unknown, exploration target and increasing the strike length of previously identified high priority areas

· Announced a potential disposal of Reef Miners Limited to Lake Victoria Gold Limited ("LVG") for a total staged cash consideration of up to US$1.0 million and a 1.5% Net Smelter Royalty, and post period end reaching a final agreement with LVG

· Post period end:

o entered into a binding conditional agreement to participate in a strategic gold production opportunity in South Africa, focused on the reprocessing of an existing 1.34 million ounce of gold JORC compliant tailings resource

o raised £215,000 (gross) through a placing to new and existing shareholders to finance the continued development of the Company's project portfolio

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

This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) no. 596/2014. 

Chairman's Report

Dear Shareholders

2019 was a year of strategic partnerships and project consolidation that saw Katoro Gold PLC (the "Company" or "Katoro") create a solid baseline for strong growth and value creation for shareholders.

Haneti Nickel Project, Tanzania

The 5,000 sq. km polymetallic Haneti Nickel Project in Tanzania is a highly prospective, high-grade nickel sulphide asset. Previous work, totalling approximately US$1.5 million, has identified grades of up to 13.59% nickel with additional gold, cobalt, platinum credits and some significant lithium anomalies.

In early 2019, the Company undertook a complete desktop review and analysis of all historic work undertaken on the project, which identified several new high priority exploration targets. Based on the results of this analysis a new exploration work programme was undertaken.

In March 2019 the Company entered into an option agreement with African Battery Metals (AIM:ABM) to acquire an initial 25% interest in the Haneti Nickel Project, with an option to acquire a further 10% interest, totalling 35%. ABM subsequently exercised the option agreement and completed the investment to acquire 25% of the Haneti Project.

The results of the soil sampling programme undertaken at the Haneti Nickel Project successfully identified a new, previously unknown, exploration target and increasing the strike length of previously identified high priority areas.

Following further reviews of the accumulated work undertaken, the company identified two key targets at the Haneti project: Mihanza Hill and Mwaka Hill. As the year closed, planning for a maiden drill programme, the commencement of which would be subject to securing additional funding, was underway.

Imweru and Lubando Gold Projects, Tanzania

Imweru is in the Lake Victoria Goldfields region of northern Tanzania and forms part of the Imweru Licence Portfolio owned by Reef Miners Limited, a 100% Tanzanian registered subsidiary of Kibo Gold Ltd, which is a 100% owned Cypriot subsidiary of the Company.

Reef Miners Ltd is also the 100% owner of the Company's earlier stage Lubando gold project and Katoro's other gold prospecting licences in Tanzania. Together, Imweru and Lubando have a combined JORC compliant resource of 754,980 ounces of gold.

In August 2019 the company announced a potential disposal of Reef Miners Limited to Lake Victoria Gold Limited for a total staged cash consideration of up to US$1.0 million and a 1.5% Net Smelter Royalty.

Due diligence was ongoing as 2019 came to a close, with an agreement reached subsequent to the year-end as announced in March 2020.

COVID-19 Update

With Katoro having operations in Tanzania and now a Joint Venture ('JV') agreement to exploit six gold tailings dams in South Africa, the impact of local guidelines and restrictions must be considered and managed accordingly.

The South African Government has announced that the National Coronavirus Command Council has decided to enforce a nationwide lockdown, with effect from midnight on 26 March 2020. Furthermore, the Government of Tanzania has instituted travel restrictions, effective 23 March 2020.

The safety and wellbeing of Katoro's employees and contractors is the highest priority for the Company at this time. Accordingly, in response to the outbreak of COVID-19, and in line with government guidelines, a business continuity programme has been put in place. This has resulted in all non-essential travel being cancelled and all employees being asked to work from home. Discussions and work in respect of the JV gold project remain ongoing, to the extent that these can be advanced given prevailing restrictions. Any activity on site will however be halted.

The situation and guidance being given in respect of COVID-19 is an evolving one, which the Board will continue to actively monitor.

In this unprecedented time, it is our priority and responsibility to ensure the safety of our team. Accordingly, we are taking measures to ensure we limit travel and movement and are following the guidance of the authorities in the areas we operate. This is naturally a rapidly evolving situation, which we continue to monitor, and whilst certain activity has to be temporarily halted, we are working remotely to progress operations and discussions to ensure that we protect and advance the long-term value of our Company and the interests of our stakeholders. We will continue to provide updates on our business and operations as necessary. Finally, we would like to take this opportunity to send our very best wishes to all during this difficult time.

Outlook

Looking ahead, I am particularly excited about the district-scale opportunity that the Haneti JV offers for nickel (sulphide and laterite), Platinum Group Metals, copper, gold, lithium and rare earth elements. Alongside our JV partner Power Metal Resources (AIM:POW) (previously known as African Battery Metals plc), the project is ready to implement a maiden drill programme.

The proposed disposal of the Imweru and Lubando gold projects will enable Katoro to focus its resources on other projects in its portfolio, whilst still providing the Company with the option to maintain project exposure through a shareholding in Lake Victoria Gold.

The recent JV agreement to acquire a strategic gold tailings project in South Africa, has provided the company with an exciting near-term production opportunity with early cashflow potential. The Blyvoor gold project is a finance ready opportunity with a JORC compliant resource of 1.34Moz gold. All requisite mining and permitting licences are in place. The company is actively exploring multiple finance options at project level.

Finally, I would like to thank our shareholders, management, employees and advisors for their support over the course of the year and I look forward to providing further updates on our progress going forward.

Louis Coetzee

Executive Chairman

Dated 15 May 2020 

Strategic Report

The Board of Directors present their Strategic report together with the audited annual financial statements for the year ended 31 December 2019 of Katoro Gold PLC ("the Company") and its subsidiaries (collectively "the Group").

Principal activities

The principal activity of the Group is gold and nickel focussed exploration activities in Tanzania.

Review of business in the year

The Group is in its early stage of development and details of the operational activities of the Group are included in the Chairman's statement.

Financial activities

The result for the year ended 31 December 2019 amounted to a total comprehensive loss of £664,077 (31 December 2018: loss £492,275). The Group had a cash balance at year end of approximately £27,972. As can be seen from the above table and the Statement of Comprehensive Income, administrative expenditure have increased from year-on-year, with a slight increase in exploration expenditure. The main reason for the increase in the total comprehensive loss year-on-year is due to the increase in the share based payment transactions that is based on the fair value adjustments of share options that have vested during the period, as well as the increase in directors' remuneration. The reason for the increase in the directors' remuneration in the current year is due to it being applicable for a full period during 2019 whereas the comparative figure was based on remuneration for a part of the year (due to directors' remuneration only commencing through part of the prior year) - please refer to note 3 of the Annual Financial Statement for more information on directors' remuneration.

Key performance indicators

The Group is in its early stage of development and since its admission to AIM in May 2017, the Group has been focussed on exploration activities in Tanzania. The Group is currently in the evaluation phase and the key business objective is to complete this phase and move to development. Details of the expenditure incurred during 2019 are included above. Management do not consider there to be any KPI's at this stage other than the result for the period, which is included in the statement of comprehensive income.

Principal Risks and Uncertainties

The realisation of exploration and evaluation assets is dependent on the discovery and successful development of economic mineral reserves and is subject to a number of significant potential risks summarised as follows, and described further below:

• Financial instrument & Foreign exchange risk;

• Strategic risk;

• Funding risk;

• Commercial risk;

• Operational risk;

• Speculative Nature of Mineral Exploration and Development;

• Political Stability; and

• Foreign investment risks including increases in taxes, royalties and renegotiation of contracts.

Financial instrument and foreign exchange risk

The Company and Group are exposed to risks arising from financial instruments held and foreign exchange transactions entered into throughout the period.

Strategic risk

Significant and increasing competition exists for mineral acquisition opportunities throughout the world. As a result of this competition, the Group may be unable to acquire rights to exploit additional attractive mining properties on terms it considers acceptable. Accordingly, there can be no assurance that the Group will acquire any interest in additional operations that would yield reserves or result in commercial mining operations. The Company expects to undertake sufficient due diligence where warranted to help ensure opportunities are subjected to proper evaluation.

Funding risk

In the past the Group has raised funds via equity contributions from new and existing shareholders, thereby ensuring the Group remains a going concern until such time that revenues are earned through the sale or development and mining of a mineral deposit. There can be no assurance that such funds will continue to be available on reasonable terms, or at all in future. The Directors regularly review cash flow requirements to ensure the Group can meet financial obligations as and when they fall due.

The Group currently generates no revenue and had net assets of £177,714 as at 31 December 2019 (31 December 2018: £446,732).

The Directors have reviewed budgets, projected cash flows and other relevant information, and on the basis of this review and the below, they are confident that the Company and the Group will have adequate financial resources to continue in operational existence for the foreseeable future.

The Group had a cash balance at year end of approximately £27,972.

In the event that the Company is not able to raise further funding, and before any mitigating actions are taken, the Company has sufficient funds for its present working capital requirements through to the end of September 2020. The Directors though continue to review the Group's options to secure additional funding for its general working capital requirements, alongside its ongoing review of potential acquisition targets and corporate development needs. The Directors are confident in this light that such funding will be available, although there is no guarantee as to the terms of such funding or that such funding will be available. In addition, any equity funding may be subject to shareholder approvals in line with legal and regulatory requirements as appropriate. As a result, the Directors continue to monitor and manage the Company's cash and overheads carefully in the best interests of its shareholders.

Whilst the Directors continue to consider it appropriate to prepare the financial statements on a going concern basis the above constitutes a material uncertainty that shareholders should be aware of.

COVID-19 Update

With Katoro having operations in Tanzania and now a Joint Venture ('JV') agreement to exploit six gold tailings dams in South Africa, the impact of local guidelines and restrictions must be considered and managed accordingly.

The South African Government has announced that the National Coronavirus Command Council has decided to enforce a nationwide lockdown, with effect from midnight on 26 March 2020. Furthermore, the Government of Tanzania has instituted travel restrictions, effective 23 March 2020.

The safety and wellbeing of Katoro's employees and contractors is the highest priority for the Company at this time. Accordingly, in response to the outbreak of COVID-19, and in line with government guidelines, a business continuity programme has been put in place. This has resulted in all non-essential travel being cancelled and all employees being asked to work from home. Discussions and work in respect of the JV gold project remain ongoing, to the extent that these can be advanced given prevailing restrictions. Any activity on site will however be halted.

The situation and guidance being given in respect of COVID-19 is an evolving one, which the Board will continue to actively monitor. Furthermore, the foregoing may mean the company is unable to raise funding from usual sources.

In this unprecedented time, it is our priority and responsibility to ensure the safety of our team. Accordingly, we are taking measures to ensure we limit travel and movement and are following the guidance of the authorities in the areas we operate. This is naturally a rapidly evolving situation, which we continue to monitor, and whilst certain activity has to be temporarily halted, we are working remotely to progress operations and discussions to ensure that we protect and advance the long-term value of our Company and the interests of our stakeholders. We will continue to provide updates on our business and operations as necessary. Finally, we would like to take this opportunity to send our very best wishes to all during this difficult time.

Commercial risk

The mining industry is competitive and there is no assurance that, even if commercial quantities of minerals are discovered, a profitable market will exist for the sale of such minerals. There can be no assurance that the quality of the minerals will be such that the Group properties can be mined at a profit. Factors beyond the control of the Group may affect the marketability of any minerals discovered. Mineral prices are subject to volatile price changes from a variety of factors including international economic and political trends, expectations of inflation, global and regional demand, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods. Ultimately, the Group expects that prior to a development decision, a project would be the subject of a feasibility analysis to ensure there exists an appropriate level of confidence in its economic viability.

Operational risk

Mining operations are subject to hazards normally encountered in exploration, development and production. These include unexpected geological formations, rock falls, flooding, dam wall failure and other incidents or conditions which could result in damage to plant or equipment or the environment and which could impact any future production throughout. Although it is intended to take adequate precautions to minimise risk, there is a possibility of a material adverse impact on the Group's operations and its financial results. The Company will develop and maintain policies appropriate to the stage of development of its various projects.

Staffing and Key Personnel Risks

Recruiting and retaining qualified personnel is critical to the Group's success. The number of persons skilled in the acquisition, exploration and development of mining properties is limited and competition for such persons is intense. While the Company has good relations with its employees, these relations may be impacted by changes in the scheme of labour relations which may be introduced by the relevant governmental authorities. Adverse changes in such legislation may have a material adverse effect on the Group's business, results of operations and financial condition. Staff are encouraged to discuss with management matters of interest to the employees and subjects affecting day-to-day operations of the Group.

Speculative Nature of Mineral Exploration and Development

In addition to the above there can be no assurance that the current exploration programmes will result in profitable mining operations.

The recoverability of the carrying value of exploration and evaluation assets is dependent on the successful discovery of economically recoverable reserves, the achievement of profitable operations, and the ability of the Group to raise additional financing, if necessary, or alternatively upon the Company's ability to dispose of its interests on an advantageous basis. Changes in market conditions could require material write downs of the carrying value of the Group's assets.

Development of the Group's mineral exploration properties is, amongst others, contingent upon obtaining satisfactory exploration results and securing additional adequate funding. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. The degree of risk reduces substantially when a Group's properties move from the exploration phase to the development phase.

The discovery of mineral deposits is dependent upon a number of factors including the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, including the size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. In addition, several years can elapse from the initial phase of drilling until commercial operations are commenced.

Political Stability

The Company is conducting its activities in Tanzania. Following the recent changes to mining legislation and associated regulation in Tanzania, the Directors believe that the Government of Tanzania supports the development of natural resources by foreign investors and the Directors actively monitor the situation on an ongoing basis. However, there is no assurance that future political and economic conditions in Tanzania will not result in the Government of Tanzania adopting different policies regarding foreign development and ownership of mineral resources. Any changes in policy affecting ownership of assets, taxation, rates of exchange, environmental protection, labour relations, repatriation of income and return of capital, may affect the Company's ability to develop the projects.

Uninsurable Risks

The Group may become subject to liability for accidents, pollution and other hazards against which it cannot insure or against which it may elect not to insure because of prohibitive premium costs or for other reasons, such as amounts which exceed policy limits.

Foreign investment risks including increases in taxes, royalties and renegotiation of contracts

The Group is subject to risk arising from the ever-changing economic environment in which its subsidiaries operate, mainly driven by the changing regulatory environment governing corporate taxation, transfer pricing and other investment related operational activities. The Group continues to re-assess its investment decisions in order to limit exposure to the ever-changing regulatory environment in which it operates.

Section 172(1)(a) to (f) of the Companies Act 2006 requires each director to act in the way he or she considers would be most likely to promote the success of the company for the benefit of its members as a whole, with regard to the following matters:

a. The likely consequences of any decision in the long-term

Katoro is a mining exploration and development company. By their natures mining exploration and development projects are complex, capital intensive, last many years and involve a varied group of stakeholders. As such it is extremely important that the board considers all decisions made by the company in the context of their long-term impact on the company. Consequences of such decisions include (but are not limited to) the impact on all stakeholders (with particular care towards local communities), impact on environmental issues in and around project areas and the financial impact on the Company and its ability to function effectively. Katoro Gold is meticulous in its planning, as is required for permitting processes in the mining exploration and development sector. As such, the Company prepares detailed planning documents before initiating any major work programme. Such planning documents assess a variety of factors from community and environmental issues to technical geological and project funding matters. Where appropriate the Company provides copies of these reports on its website (www.katorogold.com) or releases excerpts via the London Stock Exchange's Regulatory News Service.

b. The interests of the company's employees

The health and safety of Katoro Gold's employees is of paramount concern to the board. It is imperative that Katoro Gold provides a safe and secure working environment for all staff. The Company conducts regular Health & Safety reviews and ensures that any operational plans are subject to rigorous scrutiny in their creation and constant monitoring during their implementation.

The Company is a responsible employer in respect to the approach it takes towards employee pay and benefits. These are constantly reviewed.

c. The need to foster the company's business relationships with suppliers, customers and others

Mining exploration and development projects involve a diverse and varied group of stakeholders. These include (but is not limited to) the Company's employees, government officials, local communities, financial backers, shareholders and other suppliers. The Company adopts a transparent and open stance in its dealings with all stakeholders to help build trust. Mining exploration and development projects can only succeed with the full support of all involved.

The board has oversight of the procurement and contract management processes in place and receives regular updates on any matters of significance, as well as approving the awarding of large contracts. The board ensures the company fully adheres to the Bribery Act 2010.

d. The impact of the company's operations on the community and environment

Mining exploration and development projects can have a significant impact on local communities and the environment. The board constantly reviews the impact of its operations on local communities and the environments. Where required, the Company completes detailed surveying work (such as Environmental Impact Assessments) and, where necessary, applies for relevant permits. Such processes require diligence and concentrated effort.

The board ensures it maintains positive relations with local communities, by engaging in local programmes and providing secure employment opportunities.

e. The desirability of the company maintaining a reputation for high standards of business conduct

As a listed Plc, Katoro Gold's reputation for the high standards of its business conduct is paramount. The board makes every effort to ensure it maintains these.

The Company is subject to the disclosure requirements of the AIM Rules for Companies and Financial Conduct Authority's Disclosure Transparency Rules. These comprehensive set of rules enforce a strict discipline upon the Company in terms of the manner, timeliness, subjectivity and content of its public disclosures.

Katoro Gold is also required to complete an annual audit. This is a rigorous analysis of the company's operations and review of the company's policies. The results of this are published each year in the Company's Annual Report.

Katoro Gold also publishes on its website an "AIM 26 Disclosure" (https://katorogold.com/investors/aim-rule-26), which details much of the manner in which the Company is run.

Katoro Gold is committed to corporate governance and adheres to the QCA Corporate Governance Code. The Company's corporate governance statement can be found here - https://katorogold.com/wp-content/uploads/2020/01/Final-Corporate-Governance-Statement-Katoro-Gold-plc_20092018_reviewed_14012020_pdf.pdf 

f. The need to act fairly as between members of the company

As a listed company, Katoro Gold is committed to treating its shareholders fairly and delivering shareholder value.

Katoro Gold is registered in England and Wales and is subject to the Companies Act. The Company is also subject to the UK City Code on Takeovers and Mergers. The Company's articles of association, which help define some of the actions between the Company and its shareholders, can be found here https://katorogold.com/investors/corporate-documents/ 

Condensed Consolidated Financial Results for the year ended 31 December 2019

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Cash Flow