Kodal Minerals Regulatory News (KOD)

Kodal Minerals Plc / Index: AIM / Epic: KOD / Sector: Mining

17 June 2016

Kodal Minerals Plc ('Kodal Minerals' or 'the Company')

Final Results

Kodal Minerals, the mineral exploration and development company, is pleased to announce announces its final results for the year ended 31 March 2016.

CHAIRMAN'S STATEMENT

I am pleased to present the Annual Report of Kodal Minerals plc ("Kodal Minerals" or the "Company" and together with its subsidiaries the "Group") for the year ended 31 March 2016.

The most significant recent event for the Group was the acquisition of a suite of West African gold projects from Taruga Gold Limited ("Taruga") which completed in May 2016 (the "Acquisition") after the end of our financial year. This transaction has broadened the geographic scope of our operations and further expanded the range of minerals in which the Group is interested.

Further details of the West African gold projects are set out in the Operational Review but the key features are:

· Acquired interests in a total of eight exploration concessions and two further concession applications;

· Projects are located in proven gold mineralised districts in Cȏte d'Ivoire and Mali, based on the prospective geology of the West African Birimian Greenstone sequence;

· Excellent locations with access to infrastructure and cost efficient exploration;

· Existing joint venture and farm-in agreements with major global gold producing companies Newcrest Mining Limited ("Newcrest") and Resolute Mining Limited ("Resolute");

· Work programmes in place to progress exploration work on the other concessions in Mali and Cȏte d'Ivoire;

· Strategy of acquiring prospective ground, employing low cost exploration methods to highlight potential and seeking to develop the projects through joint venture partnerships.

I am delighted that, in conjunction with the Acquisition, Bernard Aylward, the former CEO of Taruga, has joined our Board as CEO. We believe that Bernard's considerable experience as a manager and exploration geologist will greatly benefit the Group as it moves forward to exploit its new African projects as well as the Group's existing Norwegian copper-zinc and phosphate-iron ore assets. At the same time, Markus Ekberg has stepped down from the Board and I extend my thanks to him for his contribution to the Group over the last three years.

During the year to 31 March 2016, the focus of the Group's activities was on the copper-zinc deposit in western Norway referred to as the Grimeli Project. Final results from the 2,000 metre drilling programme were announced in August 2015 with some positive intersections as described more fully in the Operational Review. Further geophysical testing is required to establish a valid approach for further exploration. With only a small portion of many kilometres of potential target zone tested, the Grimeli Project remains a very interesting early stage exploration project.

The Group's other Norwegian project, the phosphate and titanomagnetite Kodal Project, is still being progressed through the Norwegian planning process. We continue to be disappointed with the pace at which the relevant Norwegian planning authorities make decisions and await further news on the scope of the environmental impact assessment work required.

At the same time as the Acquisition of the gold projects in May 2016, the Company completed a fundraising of £680,000 (before expenses of £135,000 relating to the acquisition and the fundraising) to finance further exploration work and other corporate costs. The Board remains focused on controlling costs to ensure that as much of the available funds as possible is spent on further exploration work to allow us to deliver a positive flow of news throughout the rest of this year. At the same time, the Group will continue to look for and appraise new projects. We look forward to being able to report back to you during the year on developments.

David Jones

16 June 2016

OPERATIONAL REVIEW

I am delighted to present my first operational Review for the Group following my appointment as Chief Executive Officer in May 2016.

Kodal Minerals has responded to both the challenges and opportunities presented to it by acquiring a suite of gold exploration assets in Cȏte d'Ivoire and Mali from Taruga, my former employer, through the acquisition of International Goldfields (Bermuda) Limited ("IG Bermuda") and its subsidiaries.

During the year ended 31 March 2016, the Group continued its exploration and development activities at its Norwegian projects, the Grimeli Project and the Kodal Project.

Grimeli Project

The Grimeli Project is a copper-zinc deposit around the site of former copper mines in western Norway. Channel sampling, geophysics and a 2,000 metre drilling programme have now been completed at this project. The drilling programme was carried out over the winter months in 2014/15 in extreme conditions and was completed as planned without any operational incidents. The project was the focus of much interest and support from local residents and the Group would like to thank the many individuals who went out of their way to assist.

The drilling campaign targeted geophysical anomalies that had been identified close to the historic mining area. The results were announced in February 2015 and August 2015 and returned significant intersections of copper and zinc mineralisation including 8.39% copper and 6.98% zinc. The drilling has indicated potential for new zones of mineralisation to be delineated parallel to and adjacent to the historically mined areas.

The Group is reviewing the drill results in conjunction with a re-interpretation of the geology and geophysics to determine the most effective technique to test this prospect. Field visits to the area indicate potential for strike extensions of the mineralisation to be delineated and this will also be reviewed to allow the Group to determine the size potential of any new discoveries.

Kodal Project

At the phosphate and titanomagnetite Kodal Project in southern Norway, progress was not as positive. There is no further exploration or other fieldwork left to complete until some progress is made at the municipal planning stage. Unfortunately, more than two years after agreeing that the project was of potential benefit and that the Group should proceed with development, neither of the two municipalities involved (Larvik and Andebu) has moved the project forward. There is no explanation for this lack of action nor has any route been identified whereby the Group can accelerate the process.

The Group is currently working with the municipalities to approve the format of the Environmental and Social Impact Assessment. There is no prescribed duration for this process and so the timing of the approval is uncertain.

In April 2016, Larvik municipality recommended that the impacts of the transport route from the mine to the port and the impacts of additional traffic volume at the port of Larvik be considered prior to any consideration of the impacts of the mine itself. While it is understood that even this recommendation is not yet final, if adopted it has the potential to add years to the planning process by obliging sequential rather than parallel processes.

On a positive note, the Group incurs very limited direct costs during this period.

Due to the significant fall in iron ore prices in 2014-15, the Group wrote off the carrying value of the Kodal Project and related equipment taking an impairment charge of £3,411,664 in the year ended 31 March 2015. Capitalised expenditure in respect of the Kodal Project has continued to be impaired in the year to 31 March 2016 as commodity prices have not yet recovered to a point at which the Kodal Project is potentially economic.

In December 2015, the Group allowed six of the seven previously held exploration licences surrounding the Kodal exploitation licences to lapse while retaining one exploration licence. This decision was made following detailed geological mapping of all seven licences. The retained licence area contains a mineralised outcrop which is of interest and is worthy of further investigation should the project move forward.

West African Projects

Following the Acquisition in May 2016, the Group has an interest in a total of eight mineral exploration concessions and two mineral exploration concession applications in Cȏte d'Ivoire and Mali owned by IG Bermuda through its subsidiaries. A summary of the mineral exploration concessions and two mineral exploration concession applications is set out in the table below. 

Note: In general, in Mali and Cȏte d'Ivoire the term "concession" is used to describe what in Norway would be referred to as a licence.

The following table shows further details of the exploration licences:

* Held under option agreements as set out in more detail in the respective project description sections.

The Kambali and Sotian concessions in Mali are due to expire in July 2016 and April 2017 respectively and do not have renewal options. The Group intends to apply for an extension of term of each concession (through the licence owner) and sees no impediment to such extensions being granted. No further work will be undertaken or payments made to the licence owner in respect of these concessions if the extensions are not granted.

FCFA is the CFA Franc BCEAO, the currency used by eight independent states in West Africa, including Cȏte d'Ivoire and Mali. At 16 June 2016, the FCFA to Sterling exchange rate was 829.15:1.

Cȏte d'Ivoire

The Group has acquired four exploration concessions and two concession applications in Cȏte d'Ivoire. The concession areas were targeted by IG Bermuda based on geological review, presence of artisanal workings and proximity of known mineralisation. The Group has also acquired the IG Bermuda interests in a farm-in agreement with Newcrest Mining Limited for one concession, and a joint venture agreement with Resolute Mining Limited for three concessions.

Mali

Kodal Minerals has acquired an interest in two projects in Mali, the Nangalasso Project (covering the Nangalasso and Sotian concessions), located in southern Mali adjacent to the Syama mine, and the SLAM Project (covering the Djelibani Sud and Kambali concessions) located in south-west Mali.

Based on exploration work on both projects undertaken by Taruga, the Group has defined significant targets suitable for follow-up drilling.

Work programme for 2016/17 in West Africa

The Group has developed a work programme for 2016/17 on its acquired concession areas in West Africa.

The main activity is planned for Mali at the Nangalasso Project with a programme of trenching to follow-up previous drilling intersections and the recent artisanal workings close to the drilling. The trenching is required to provide geological control on the structural orientation of the mineralised zones and to attempt to identify preferred zones and enhance targeting for drilling. This may be followed by a programme of aircore drilling.

For the Kambali Project, a programme of geochemical sampling and trenching is planned. This is designed to provide further control on geological structures and extent of mineralisation. However, no work will be completed on the ground until the concession is extended.

In Cȏte d'Ivoire, a programme of geochemical sampling is planned for the Korhogo concession to follow-up previous gold anomalous zones identified in regional work undertaken by Taruga. Subject to the results of this, a programme of drilling could be undertaken later in the year.

In addition, the Group will continue the process of acquiring additional ground, and attempting to find joint venture partners for the existing projects.

Future Strategy

In Africa, the Group intends to continue the strategy of ground acquisition and early low cost exploration to highlight the potential value of exploration projects. The Directors expect that such early exploration activities will be followed by further detailed exploration alongside joint venture partners.

The Board believes that the joint ventures already achieved with major mining and development companies in Resolute and Newcrest is a validation of the quality of the ground selection and of this approach.

Additional concessions in Mali and Cȏte d'Ivoire have been applied for and Kodal Minerals intends to continue to assess and acquire new opportunities.

In Norway, the Group will continue its efforts to move the Kodal Project through the planning process, although the pace of progress to date has been disappointingly slow, and will undertake further review and appraisal work on the Grimeli Project.

The current challenging market conditions for mining exploration companies are expected to continue. With the acquisition of the West African projects, the Board has diversified its project risk and will continue to appraise other well valued opportunities for further acquisition and investment.

I look forward to being able to report back with positive news from our own and our joint venture partners' exploration work as the year progresses.

FINANCE REVIEW

Results of operations

For the year ended 31 March 2016, the Group reported a loss for the year of £466,000 compared to a loss of £3,956,000 in the previous year which included the majority of the cost of impairing the Kodal Project (as described below). Excluding the impairment charges, the loss for the year was £416,000 compared to £545,000 in 2015, reflecting the lower administrative charges of £375,000 compared to £459,000 as the Board continued to focus on controlling costs.

In September 2015, in connection with the preparation of the financial statements for the year ended 31 March 2015, the directors undertook an impairment review of the carrying value of the Kodal Project in Norway in response to the significant fall in the price of iron ore, by performing a value in use calculation. This resulted in an impairment charge in the year to 31 March 2015 of £3,411,664. In the year to 31 March 2016, the Group has recognised a further impairment charge on the Kodal Project of £50,426 representing exploration and evaluation costs in the year prior and the write off of property, plant and equipment associated with the Kodal Project for which an alternative use has not been identified.

The carrying value of the Group's capitalised exploration and evaluation expenditure, net of the impairment charge relating to the Kodal Project increased from £285,000 to £597,000 reflecting the additional work undertaken at the Grimeli Project.

Cash balances as at 31 March 2016 were £135,000, a reduction from the previous year's level of £307,000 although as discussed below, further funds have been raised subsequent to the year-end. Net assets of the Group at the year-end were £704,000 (2015: £670,000).

Financing

Following the end of the financial year, the Company raised £680,000 (before expenses of £135,000 relating to the acquisition of IG Bermuda and the fundraising) by way of a placing and subscription of 1,700,000,000 ordinary shares at 0.04 pence per share. The shares were placed with new investors and existing shareholders of the Company. The net proceeds of the placing will be used to continue exploration work and for general corporate purposes.

Going concern and funding

The Group has not earned revenue during the year to 31 March 2016 as it is still in the exploration and development phases of its business. The operations of the Group are currently being financed from funds which the Company has raised from the issue of new shares.

As at 31 March 2016, the Group held cash balances of £135,000. In May 2016, the Group raised a further £680,000 (before expenses) by way of an issue of new shares. The Group's cash balances at 31 May 2016 were £712,000.

The Directors have prepared cash flow forecasts for the period ending 30 June 2017. The forecasts include the costs of the initial planned exploration work on the Group's concessions in Mali and Cȏte d'Ivoire, the costs of progressing the Norwegian projects and the corporate and operational overheads of the Group. Further fund raising will be required at an appropriate time in order to undertake additional phases of the exploration work and the Group has historically been successful in raising additional funds in such circumstances. However, the forecasts demonstrate that by reducing certain corporate and operational overheads, including as appropriate relinquishing one of the concessions if not considered sufficiently prospective, the Group has sufficient cash resources available to allow it to continue as a going concern and meet its liabilities as they fall due for a period of at least twelve months from the date of approval of these financial statements without the need for a further fund raising. Accordingly, the financial statements have been prepared on a going concern basis.

Utilising key performance indicators ("KPIs")

At this early stage of its exploration and development activities, Kodal Minerals does not consider KPIs to be a relevant performance metric.

Financial risk management objectives and policies

The Group's principal financial instruments comprise cash and trade and other payables. It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group's financial instruments are liquidity risk, price risk and foreign exchange risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash reserves to fund the Group's exploration and operating activities. Management prepares and monitors forecasts of the Group's cash flows and cash balances monthly and ensures that the Group maintains sufficient liquid funds to meet its expected future liabilities. The Group intends to raise funds in discrete tranches to provide sufficient cash resources to manage the activities through to revenue generation.

Price risk

The Group is exposed to fluctuating prices of commodities, including phosphate, iron ore, copper, zinc and gold, and the existence and quality of these commodities within the licence and project areas. The Directors will continue to review the prices of relevant commodities as development of the projects continues and will consider how this risk can be mitigated closer to the commencement of mining.

Foreign exchange risk

The Group operates in a number of overseas jurisdictions and carries out transactions in a number of currencies including Sterling, Norwegian Kronor, CFA Franc BCEAO and US dollars. The Group does not have a policy of using hedging instruments but will continue to keep this under review. The Group operates foreign currency bank accounts to help mitigate the foreign currency risk.

Bernard Aylward

Chief Executive Officer

16 June 2016

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2016

The loss for the current and prior years and the total comprehensive income for the current and the prior years are wholly attributable to equity holders of the parent company.

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF FINANCIAL POSITION

AS AT MARCH 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2016

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2016

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2016

Cash and cash equivalents comprise cash on hand and bank balances.

The financial statements have been prepared under the same accounting policies as applied in the previous year. For more information please see the Final Results statement announced on 4 September 2015.

Basis of preparation

The consolidated financial statements of Kodal Minerals Plc are prepared in accordance with the historical cost convention and in accordance with International Financial Reporting Standards ("IFRSs"), as adopted by the European Union ("EU") and in accordance with the provisions of the Companies Act 2006. The Company's ordinary shares are quoted on AIM, a market operated by the London Stock Exchange.

Going concern

The Group has not earned revenue during the year to 31 March 2016 as it is still in the exploration and development phases of its business. The operations of the Group are currently being financed from funds which the Company has raised from the issue of new shares.

As at 31 March 2016, the Group held cash balances of £135,000. In May 2016, the Group raised a further £680,000 (before expenses) by way of an issue of new shares. The Group's cash balances at 31 May 2016 were £712,000.

The Directors have prepared cash flow forecasts for the period ending 30 June 2017. The forecasts include the costs of the initial planned exploration work on the Group's concessions in Mali and Cȏte d'Ivoire, the costs of progressing the Norwegian projects and the corporate and operational overheads of the Group. Further fund raising will be required at an appropriate time in order to undertake additional phases of the exploration work and the Group has historically been successful in raising additional funds in such circumstances. However, the forecasts demonstrate that by reducing certain corporate and operational overheads, including as appropriate relinquishing one of the concessions if not considered sufficiently prospective, the Group has sufficient cash resources available to allow it to continue as a going concern and meet its liabilities as they fall due for a period of at least twelve months from the date of approval of these financial statements without the need for a further fund raising. Accordingly, the financial statements have been prepared on a going concern basis.

Exploration and evaluation expenditure

In accordance with the Group's accounting policy for exploration and evaluation expenditure, after obtaining licences giving legal rights to explore in the project area, all exploration and evaluation costs for each project are capitalised as exploration and evaluation assets.

The exploration and evaluation assets for each project are assessed for impairment when such facts and circumstances suggest that the carrying value of the assets may exceed the recoverable amount.

In connection with the preparation of the financial statements for the year ended 31 March 2015, the directors undertook an impairment review of the carrying value of the Kodal Project in Norway in response to the significant fall in the price of iron ore, by performing a value in use calculation.

The review identified that, using iron ore and phosphate prices based on the then prevailing prices, the project was uneconomic and accordingly the Board determined to impair in full the carrying value of the evaluation and exploration assets of the Kodal Project. This resulted in an impairment charge in the year to 31 March 2015 of £3,411,664. In the year to 31 March 2016, the Group has recognised a further impairment charge on the Kodal Project of £50,426 representing further exploration and evaluation costs and the write off of property, plant and equipment associated with the Kodal Project for which an alternative use has not been identified. At 31 March 2016 the carrying value of the Kodal Project was £nil compared to £nil in 2015.

No further expenditure is being incurred on the Kodal Project other than the costs of maintaining the extraction and exploration licences and limited consulting work to advance the Norwegian planning application.

The Grimeli Project is an early stage exploration project over which the Group holds exploration licences which are valid until July 2021. Exploration work in the area has generated positive initial drill results indicating the possible presence of further mineralisation and further appraisal and test work is planned in the year to 31 March 2017. The carrying value of the Grimeli Project as at 31 March 2016 was £668,234 (2015: £349,622) including exploration and evaluation assets at 31 March 2016 of £596,555 (2015: £284,898). The Board has considered the carrying value of these assets and concluded that no impairment is required due to the secure tenure, the positive results from completed exploration, the ongoing work programme and the potential for future discovery and development.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2016

1. SEGMENTAL REPORTING

The operations and assets of the Group in the year ended 31 March 2016 are focused in the United Kingdom and Norway and comprise one class of business: the exploration and evaluation of mineral resources. Management have determined that the Group had two operating segments being the Kodal Project and the Grimeli Project. The Parent Company acts as a holding company. At 31 March 2016, the Group had not commenced commercial production from its exploration sites and therefore had no revenue for the year.

2. LOSS BEFORE TAX

The loss before tax from continuing activities is stated after charging:

Amounts payable to RSM UK Audit LLP and its associates in respect of both audit and non-audit services are as follows;

3. EMPLOYEES' AND DIRECTORS' REMUNERATION

Apart from the Directors, who are considered to be the Group's key management personnel, there were no employees in the years to 31 March 2016 and 2015 respectively. 

The remuneration paid to directors is as follows:

Note 1 Novoco Mine Engineering Limited, a company wholly owned by Luke Bryan, provided consultancy services to the Group during the year and received fees of £46,750 (2015: £168,500) in cash.

4. LOSS PER SHARE

Basic loss per share is calculated by dividing the loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The following reflects the income and share data used in the computations:

Diluted loss per share is calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Options in issue are not considered diluting to the loss per share as the Group is currently loss making. Diluted loss per share is therefore the same as the basic loss per share.

5. SHARE BASED PAYMENTS

The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration.

Options issued in the year to 31 March 2014

Under an option agreement between the Company and Novoco Mine Engineering Limited ("Novoco"), a company wholly owned by Luke Bryan, the Company granted to Novoco options over 25,000,000 shares ("Option Shares") at an exercise price of 0.7 pence per share. The options become exercisable in respect of one third of the total number of Option Shares on each of the first, second and third anniversaries of 30 December 2013. The options are exercisable for a period of ten years from the date on which they vest and become exercisable.

Under an option agreement between the Company and David Hakes, a consultant to the Group, the Company granted to David Hakes options over 15,000,000 shares ("Option Shares") at an exercise price of 0.7 pence per share. The options become exercisable in respect of one third of the total number of Option Shares on each of the first, second and third anniversaries of 30 December 2013. The options are exercisable for a period of ten years from the date on which they vest and become exercisable.

Details of share options outstanding at 31 March 2016:

Date of grant Number of options Option price Exercisable between

30 December 2013 13,333,333 0.7 pence 30 Dec 2014 - 30 Dec 2024

30 December 2013 13,333,333 0.7 pence 30 Dec 2015 - 30 Dec 2025

30 December 2013 13,333,333 0.7 pence 30 Dec 2016 - 30 Dec 2026

Included within operating losses is a charge for issuing share options and making share based payments of £40,556 (2015: £88,555) which was recognised in accordance with the Group's accounting policies.

Additional disclosure information:

Weighted average exercise price of share options:

• outstanding at the beginning of the period 0.7 pence

• granted during the period N/A

• outstanding at the end of the period 0.7 pence

• exercisable at the end of the period 0.7 pence

Weighted average remaining contractual life of

share options outstanding at the end of the period 9.75 years

Tetra Option Agreement

The Group has granted to Tetra Minerals Oy ("Tetra") an option to subscribe for new shares. The maximum number of shares that are subject to the option is 714,285,714, corresponding to the number of shares that would be issued for a total amount of £5 million at 0.7 pence per share. The options vest and become exercisable only once the JORC indicated resource for phosphate minerals at the Kodal Project meet certain thresholds. These are as follows:

Once vested, the option may be exercised by Tetra at a subscription price of 10p per share for a period of three years after the date on which each tranche vests. If Kodal Phosphate AS relinquishes or does not renew the Kodal Project extraction licences before any of the options vest, then those options will lapse.

The Board has reviewed the Tetra option arrangements and determined that the fair value of the Tetra options is nil on the grounds that the option distribution is dependent on thresholds associated with the JORC phosphate mineral resources, the first of which, 90m tonnes, is well beyond the size of the current targeted ore body, which has a JORC mineral resource of 48.9m tonnes. Unless and until further exploration of the Kodal Project identifies a further potential ore body the likelihood of the thresholds being met is considered to be remote.

6. TAXATION

The Group has tax losses and other deferred tax assets totalling £582,000 (2015: £463,000) which will be able to be offset against future income. No deferred tax asset has been recognised in respect of these losses as the timing of their utilisation is uncertain at this stage.

7. INTANGIBLE ASSETS