Metals Exploration Regulatory News (MTL)

16 May 2023

METALS EXPLORATION PLC

Final Results for the Year Ended 31 December 2022

Metals Exploration plc (AIM: MTL) (the "Company" or the "Group"), a gold producer in the Philippines, announces its final audited results for the year ended 31 December 2022.

The financial information set out in this announcement does not comprise the Group's statutory accounts for the years ended 31 December 2022 or 31 December 2021. The financial information has been extracted from the statutory accounts of the Group and the Company for the years ended 31 December 2022 and 31 December 2021. The auditors reported on those accounts; the 31 December 2022 and 31 December 2021 reports were unqualified and did not contain a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2021 have been delivered to the Registrar of Companies, whereas those for the year ended 31 December 2022 will be delivered to the Registrar of Companies following the Company's annual general meeting.

To access a full version of the 2022 annual report, please go to the Company website investor centre webpage.

ABOUT METALS EXPLORATION

Philippine Gold Producer

Metals Exploration plc ("Metals Exploration", the "Company", or the "Group") is a Philippines focused gold producer operating the Runruno gold and molybdenum mine 250 kilometres north of Manila in the mineral rich Nueva Viscaya province. 

Group vision & mission statement

The Group's vision is to be the most admired gold producer in the Philippines. Our mission is to enhance the lives of our people and local communities through the responsible management of our natural resources, to build a multi-project business and to deliver performance that stakeholders can be proud of.

Well-defined values embedded into the business processes and structures along with consistent leadership actions and behaviors provide the foundation for corporate culture and its subsequent success. As a responsible mining company, we ensure that our Company's core values reverberate across all aspects of our business and represent the way we do business.

PRODUCTION AND FINANCIAL HIGHLIGHTS

CHAIRMAN'S REPORT

Dear Shareholder,

The period under review has seen Metals Exploration continue to make excellent operational progress despite a number of challenges which impacted the operating profit for the year. As Chairman, I am delighted to announce that the Company ended FY2022 exceeding its guidance for gold production and at an All-In-Sustaining-Cost (AISC) of US$1,235 per ounce, below the FY2022 AISC guidance of between US$1,275 to US$1,325 per ounce. This was an outstanding achievement by the team and a testament to the continued high standards that they strive to achieve.

Earlier in FY2022, the Philippines Government relaxed its Covid restrictions which facilitated international travel. I was therefore able to visit Runruno and our office in Manila for the first time since my appointment in April 2021. In this vein, although Covid remains an ongoing health issue, its impact on the workforce and operation is negligible, though the after effects of the pandemic continue to have some impact on the mine's supply chains.

As for my initial impressions of the operation when I visited in May 2022, I could not have been more impressed by the positive "buzz" there was on site amongst all the employees and management. It was clearly a high performing, high morale site. That is testament to the CEO and General Manager's leadership. One also could not fail to be impressed by the exemplary housekeeping which to me is a proxy for good management, including management of safety and care for the environment and local communities.

We were also delighted that this commitment, as well as the Company's continued focus on safety and the communities where we operate, has been recognised by the Government. As a Company, we were very pleased to receive the highest government mining award attainable in the Philippines, the Presidential Mineral Industry Environmental Award (PMIEA) in the Surface Mining Category. In addition to this, the Company was also named Runner-up for the award for Safest Surface Mining Operation Award and third runner up in the Best Mining Forest Contest - Metallic Category. These awards are recognition of the team's continued achievements and of their outstanding levels of dedication, initiative and innovation in the pursuit of excellence in environmental protection, health and safety management and social/community development.

As a mining company, safety as a mindset and in particular, the safety of our team, remains at the forefront of everything we do. In this respect, we are delighted to be able to report an exceptional safety record. At the time of publishing this report, the Group has achieved in excess of 19 million man-hours with no lost time incidents occurring. An outstanding achievement for any mining company; and something the team is incredibly proud of, and are dedicated to ensure that this record continues into the year ahead.

Our community programmes remain at the heart of what we do and each year the Group sets aside 1.5% of direct mining and processing costs to be applied in its Social Development and Management Program ("SDMP") projects; designed to benefit the local communities. Last year working with the local communities, we invested US$3.6 million in a number of areas including, but not limited to, health, education, and infrastructure development. 

We do not intend to rest "on our laurels" in these respects. We will continue to ensure that we operate to the highest standards and actively promote responsible mining practices to reduce the potential environmental impacts of our operations and enhance the environmental performance in mined-out and disturbed areas; whilst continuing to work with our local communities to deliver our extensive community and environmental programmes targeted to their requirements.

The focus at Runruno for FY2022 was on improving plant performance and operational reliability, thereby underpinning strong cash flows for the Company. This has helped us accelerate the repayment of our debt.

Notwithstanding operational issues for several months in Q2 and Q3 of FY2022, this was a very strong year at Runruno. FY2022 gold production of 72,537 ounces exceeded our gold production guidance; whilst the last quarter of the year was the Company's best ever quarter, achieving record quarter performances across several key metrics, including record gold production with 25,474 ounces recovered; showing what can be achieved with a stable power supply which had impacted earlier in the year. We were also delighted to maintain, at such high levels, our average gold recovery at 85.7%, again a very significant achievement by the team. Despite these strong operational performances, the FY2022 operating profit for the year was lower than FY2021. As mentioned, this was due to a number of external challenges, such as power outages, leading to production losses affecting operations in the period from March to August 2022.

During Q4 2022, the Group's senior debt was effectively fully repaid. A nominal amount of circa US$1,200 remains unpaid to ensure that various loan securities remain in place while the Company completes the elevation of the status of the mezzanine loans to that of secured debt. This is a hugely significant milestone for the Company that considerably strengthens our balance sheet enabling us to consider investment in exploration and any appropriate acquisition opportunities.

In May 2022, we were also delighted to announce the appointment of Tim Livesey as a Non-executive Director, replacing Jeremy Wrathall. Tim has over 30 years of professional exploration, project development and mining experience in gold and base metals across Africa, Europe, the Middle East and Asia covering both technical and executive management. I would like to take this opportunity to thank Jeremy for his contribution to the Company during his tenure as a Non-executive Director and wish him well with the ongoing development of Cornish Lithium.

On behalf of the Board, I would like to take this opportunity to thank our entire workforce for all their efforts this year, as well as all our stakeholders and investors, for their continued support.

The year under review has highlighted the Group's robust business fundamentals. These fundamentals provide us with a strong platform from which to grow. We expect Runruno to continue to operate well producing strong cash flows which, with our strengthened balance sheet, will also enable us to invest not only in the exploration upside at Runruno, but also to look at appropriate acquisition opportunities creating a larger more robust company that will deliver our strategy and thus value to all our stakeholders.

David Cather

Independent Non-Executive Chairman

15 May 2023

CHIEF EXECUTIVE OFFICER'S REPORT

Despite operational challenges faced during a large part of 2022, the Group is pleased to have closed out the year with gold production exceeding its published gold production guidance for the year.

With the Group's robust business fundamentals providing a strong platform from which to grow, we go into 2023 focused on opportunities to transform the Group into a multi-project company.

Most importantly, the Group continues to create a net-positive impact for its stakeholders and local communities. Our environmental, sustainability and social programmes continue to be of a very high standard, ensuring the Company continues to be accountable, transparent, and responsible in its corporate purpose.

SAFETY AND HEALTH

Safety is at the core of the Group's business, being the priority subject at all levels of activity. During the year there were no material safety and health incidents throughout the project site. A safe working culture is actively promoted by a dedicated occupational health and safety department and is embraced across the Runruno site and in all departments, with all staff recognising their individual responsibilities for their own safety and the safety of others.

Evidence of adhering to these values is the excellent safety record that the Group's employees and contractors have achieved. As at the date of this report the Group has achieved in excess of 19 million man-hours with no lost time incidents occurring since the last lost time incident in December 2016. This is a remarkable achievement for an operation of this nature, and all employees and contractors are to be congratulated on this outstanding record.

During the year COVID-19 cases had limited impact on our employees, contractors and operations; with all positive cases dealt with in accordance with Philippine Government regulations. Currently over 97% of all employees and contractors are fully vaccinated against the COVID-19 virus.

FINANCIAL YEAR 2022 ("FY2022") OVERVIEW

Operational profit was US$23.8 million (2021: US$29.4 million) following gold production for FY2022 of 72,537 ounces, being marginally down on FY2021's production of 73,206 ounces. The gold production was achieved with average gold recovery improving to 85.7% from 84.5% in FY2021. The AISC for FY2022 was US$1,235 per ounce (2021: US$1,281 per ounce), which was below the FY2022 AISC guidance of approximately US$1,275 to US$1,325 per ounce.

During FY2022 the gold price remained strong resulting in an average sales price of US$1,797 per ounce (2021: US$1,792 per ounce). Total sales for FY2022 were US$124.4 million (2021: US$129.8 million).

Management's operational focus during FY2022 was on improving plant performance and operational reliability. Mill throughput was maintained above nameplate design levels, while numerous modifications and equipment upgrades throughout the process circuit have improved general performance of the plant.

The main reason for the FY2022 operating profit for the year being lower than FY2021 was due to several power outages leading to production losses that affected operations, including the performance of BIOX®, in the period March to August 2022.

GROUP DEBT

During FY2022 the cash generated from operations was US$38.2 million (FY2021: US$46.5 million). This enabled the Group to make US$33.8 million in debt interest/principal repayments during FY2022 (FY2021: US$39.7 million).

As at year end 2022, the Group had total debt, including unpaid interest, of US$81.9 million (2021: US$103.6 million). Refer to note 23 of the financial statements for full details of the Group's debt.

During FY2022 the Group made regular monthly loan repayments such that, except for a nominal circa US$1,200, the New Senior Debt has been fully repaid. This nominal amount was left in place to ensure various securities remained in place until the mezzanine loans are elevated to the status of secured borrowings (the "Elevation").

The Elevation process requires completion of complex and multi-country documentation and the registration of new security arrangements in numerous jurisdictions. The necessary material documentation has been agreed by all parties. The October 2020 debt restructuring agreements envisage the interest rate applicable to the Mezzanine Debt being reduced from 15% to 7% once the Senior Debt is repaid and the elevation of the Mezzanine Debt to "new" Senior Debt is complete. 

The majority mezzanine lender, MTL Luxemburg, Nick Candy's investment vehicle, (holding 70.7% of the Mezzanine Debt), has confirmed in writing that, subject to completion of the Elevation documents within a reasonable period (expected to be before the end of Q3 2023), the interest rate on its portion of the Mezzanine Debt will reduce to 7% per annum from 15% per annum from 3 November 2022 (being the date that the Company could have fully repaid the Senior Facility, but for the requirements of the elevation).

The minority 29.3% mezzanine lenders, the RHL Group, have not confirmed the same in writing. As a result the Company has created a provision for possible increased interest of US$334,000, being the difference between 15% per annum and 7% per annum on the RHL and D&A loans for the period 3 November 2022 to 31 December 2022. The RHL Group is yet to make a decision on reducing the 7% interest rate from 3 November 2022 and it is the Company's understanding that the RHL Group will consider this once the Elevation is completed within a reasonable period.

MINING OPERATIONS

Total material moved during FY2022 was above budget at 13.7Mt (million tonnes) (FY2021: 10.8Mt).

Mining operations during FY2022 were concentrated in Stages 2 and 3, with mining of Stage 2 completed in Q2 2022. In-pit backfilling commenced in Q2 2022, which will reduce closure and environmental restoration costs upon the eventual closure of the mine.

Unfortunately, the Group's access to Stages 3, 4 and 5 did not occur as early as planned due to delays in removing the remaining illegal miners from these areas. Delays in accessing key areas of Stage 3 continued until May 2022. These delays in having suitable access to Stage 3 affected the 2022 mining schedule resulting in higher grade material from Stage 3 being pushed into the Q4 2022 section of the mining schedule. Good equipment performance during most of Q4 2022 enabled this Stage 3 higher grade material to be delivered for processing prior to the end of FY2022.

Access issues to Stages 4 and 5 resulted in the suspension of the Group's exploration programme during FY2022, however, these access issues were largely resolved at FY2022 year-end with the near-pit exploration programme recommencing in Q1 2023.

The FY2023 drill programme will consist of 10 diamond drill holes and 14 reverse-circulation holes for an aggregate meterage of 3,410 metres. The drill programme is aimed at discovering additional economic resources outside of the current mine plan pit-shell, especially to the north, east and west of the current Stage 5 pit design. The objective is to discover new economically mineable ounces that would increase the Runruno life of mine ("LOM"). The area to be drilled has been worked by small scale miners as evidenced by the ball mills and tunnels discovered during recent reconnaissance activity.

All relevant permits for operations remain in place for the Runruno mine.

GOLD RESERVE STATEMENT

Access delays and inclement weather issues resulted in insufficient resource definition drilling undertaken during FY2022 to issue an updated ore reserve statement. A new ore reserve statement is expected to be released in Q4 2023.

The most recent gold reserve statement was issued in February 2022, based on data as at 1 August 2021, as follows:

Table 1 -Ore Reserve estimate - published in February 2022

Using a Surpac block model, the Group modeled an internal estimation of the subsequent depletion of ore due to mining that has occurred since the above model was calculated (the period 1 August 2021 to 31 December 2022). The estimated resource depletion and the resulting depleted reserve statement (note that these calculations have not been independently verified) as at 31 December 2022 are:

Table 2 - Ore depletion estimate

Table 3 - December 2022 Depleted Ore Reserve estimate

PROCESS PLANT

Plant performance in FY2022 continued to show improvement in gold recovery from both the flotation and BIOX® circuits. During FY2022, the Group achieved an overall gold recovery of 85.7%, an improvement upon FY2021 which was 84.5%. Total gold produced in FY2022 was 72,537 ounces compared to 73,206 ounces in FY2021.

The project suffered from a series of power failures from March 2022 through into Q3 2022. These numerous power failures contributed to failures of the BIOX® bacteria culture and ongoing difficulties in maintaining stability of the BIOX® bacteria culture. In addition, difficulties were experienced in Q2 2022 in re-establishing a stable bacteria culture in BIOX® due to an unidentified contaminant that developed in the return water sources that were being used to feed the BIOX® circuit. These issues impacted the overall efficiency of the BIOX® circuit for the year with resultant gold production losses. In addition, the BIOX® circuit was negatively impacted by a higher sulphur content than forecast in the processed ore.

Further unplanned downtime during FY2022 resulted mainly from tails line failures and conveyor belt and return water line repairs which the Company is seeking to minimise through proactive maintenance.

During FY2022, a major upgrade to the process plant return water and cooling systems was completed, improving plant availability and throughput rates. This upgrade also improved the ability to control BIOX® temperatures with further marginal production gains in BIOX® anticipated.

Notwithstanding the above, the process plant crushed ore operations were above design throughput with the following points of note:

· The crushing and grinding circuit operated above design throughput, achieving an availability rate of 86.5% (FY2021: 89.5%) and processing 2.07Mt of ore (FY2021: 2.14Mt);

· The milling circuit operated adequately during FY2022 with incremental throughput being achieved, whilst maintaining production at approximately 273t/hr (FY2021: 273t/hr);

· The gravity circuit operated marginally below design recoveries at 27.9% (FY2021: 26.9%);

· Fine-tuning of the flotation circuit resulted in incremental increases in recovery and improving concentrate grade for BIOX®. The circuit operated reliably with only minor maintenance issues;

· The CIL circuit achieved an overall CIL recovery of 89.9% (FY2021: 90.8%);

· A major upgrade to the return water circuit was completed providing greater control of temperatures in the BIOX®; and

· The ancillary systems including counter current decantation, neutralisation, reagents, cyanide destruction and residue disposal circuits all operated adequately.

RESIDUAL STORAGE IMPOUNDMENT (RSI)

The Group's tailings products are delivered to a residual storage impoundment (RSI) structure. This structure has been designed and is being constructed to international standards that relate to water storage dams. The standard to which the RSI is being constructed far exceeds international standards that apply to traditional mining tailings dam structures.

The final scheduled lift to the RSI was not completed by year-end due to inclement weather conditions. This is expected to be completed in Q2 2023.

The RSI remains in compliance with local guidelines and local development requirements, although it has not reached the final design stage of being capable of successfully coping with a 'Probable Maximum Flood' event. Studies have determined the final in-rock spillway location and detailed engineering drawings are almost complete. Initial earthworks both at the top and bottom of the final in-rock spillway commenced in Q1 2023. This final in-rock spillway will ensure the RSI has the capacity to cope with a 'Probable Maximum Flood' event.

The performance of the RSI is continuously monitored by independent international consulting engineers. During FY2022, a different independent consulting group conducted an audit of the RSI design and its construction to date. This report listed certain recommendations which the Group will adopt where appropriate.

GOVERNMENT INDUSTRY AWARDS

During Q4 2022, the Group was awarded the following Philippine Government awards:

· Presidential Mineral Industry Environmental Award (PMIEA) in the Surface Mining Category;

· Runner-up, Safest Surface Mining Operation Award; and

· 3rd Runner-up, Best Mining Forest Contest - Metallic Category.

These awards are given to mining companies in recognition of outstanding levels of dedication, initiatives and innovations in the pursuit of excellence in environmental protection, health & safety management and social/community development. Winning the Presidential award is the highest Government mining award attainable in the Philippines.

OUTLOOK

Annual production guidance for FY2023 has been set at 68,000 - 72,000 ounces at an AISC of between US$1,250 - US$1,300 per ounce. FY2023 operations are expected to maintain the general operational results produced during FY2022, such that free cash flow is maintained from a stable consistent level of mining and gold production.

Both in-pit shell and out-pit shell drilling will be undertaken in an endeavor to add further resources to the Group's gold inventory. The Group's positive operational cash-flows will, in the main, continue to be utilised to reduce the Group's outstanding debt as quickly as possible.

Further, the operational stability and positive cash flows will allow the Group to investigate acquiring other mining opportunities in the Philippines.

Darren Bowden, Chief Executive Officer

15 May 2023

Competent Persons' Statement

The information contained in this report that relates to the Gold Reserves Estimate, issued in February 2022, was compiled by Paola Tuyor of Metals Exploration and reviewed and verified by Grant Walker of Xenith Consulting. Mr Walker is a Member of The Australasian Institute of Mining and Metallurgy and is a Competent Person as defined by the JORC Code, 2012 Edition, having five years' experience that is relevant to the style of mineralisation and type of deposit described in the Report.

Mr Darren Bowden, a director of the Company, a Member of the Australasian Institute of Mining and Metallurgy and who has been involved in the mining industry for more than 25 years, has compiled, read and approved the technical disclosure in this regulatory announcement in accordance with the AIM Rules - Note for Mining and Oil & Gas Companies.

Forward Looking Statements

Certain statements relating to the estimated or expected future production, operating results, cash flows and costs and financial condition of Metals Exploration plc and the Group, planned work at the Company's projects and the expected results of such work contained herein are forward-looking statements which are based on current expectations, estimates and projections about the potential returns of the Group, industry and markets in which the Group operates in, the Directors' beliefs and assumptions made by the Directors. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by words such as the following: "expects", "plans", "anticipates", "forecasts", "believes", "intends", "estimates", "projects", "assumes", "potential" or variations of such words and similar expressions. Forward-looking statements also include reference to events or conditions that will, would, may, could or should occur. Information concerning exploration results and mineral reserve and resource estimates may also be deemed to be forward-looking statements, as it constitutes a prediction of what might be found to be present when a project is actually developed.

These statements are not guarantees of future performance or the ability to identify and consummate investments and involve certain risks, uncertainties and assumptions that are difficult to predict, qualify or quantify. Among the factors that could cause actual results or projections to differ materially include, without limitation: uncertainties related to raising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes in planned work resulting from logistical, technical or other factors; the possibility that results of work will not fulfil projections/expectations and realise the perceived potential of the Company's projects; uncertainties involved in the interpretation of drilling results and other tests and the estimation of gold reserves and resources; risk of accidents, equipment breakdowns and labour disputes or other unanticipated difficulties or interruptions; the possibility of environmental issues at the Company's projects; the possibility of cost overruns or unanticipated expenses in work programs; the need to obtain permits and comply with environmental laws and regulations and other government requirements; fluctuations in the price of gold and other risks and uncertainties.

The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law or the AIM Rules.

AUDIT COMMITTEE REPORT

Dear Shareholders,

I am pleased to report to you on behalf of the Audit Committee.

Since April 2021, the Audit Committee has been comprised of only non-lender appointed, non-executive directors (two of whom are independent), which has consolidated the Group's commitment to improved corporate governance.

The Group's established financial reporting structures have continued to perform effectively in the year, and the Committee has continued to oversee the proper maintenance of these structures. The Group's robust framework of internal controls facilitated a smooth external audit process, helping to ensure the integrity of the 2022 Annual Report.

Aims of the Audit Committee

The overall aim of the Audit Committee is to assist the Board in discharging its duties regarding the financial statements, to ensure that a robust framework of accounting policies is in place and enacted, and to oversee the maintenance of proper internal financial controls and risk management. The Committee monitors the integrity of the Financial Statements of the Interim and Annual Reports and formal announcements relating to the Group's financial performance, including advising the Board that the Annual Report taken as a whole is fair, balanced and understandable.

The Committee reviews significant financial reporting issues, key judgements and accounting policies and disclosures in financial reports, reviews the effectiveness of the Group's internal control procedures and risk management systems and considers how the Group's internal audit requirements shall be satisfied, making recommendations to the Board. It reviews the independent auditor's audit strategy and implementation plan and its findings in relation to the Annual Report and Interim Financial Statements. It monitors the relationship with the Group's independent auditor including the consideration of audit fees and independence.

Membership and attendance

The Audit Committee consists of myself, Andrew Chubb, as the Chair, together with two other Non-Executive Directors, David Cather and Tim Livesey. The Committee aims to meet at least three times each year. The external audit team and the Chief Financial Officer are invited to attend meetings of the Committee, and I am satisfied that we were presented with papers of good quality, and in a timely manner. Attendances at committee meetings during the year were:

The external auditors attended all committee meetings during the year.

Key responsibilities

The main responsibilities of the Audit Committee are contained within its terms of reference that have been approved by the Board and are available on our website. The terms of reference and the key responsibilities of the Audit Committee are set out below:

· Maintain the integrity of the annual and interim financial statements of the Company and review any significant reporting matters they contain;

· Review the Annual Report and Accounts and other financial reports;

· Maintain the accuracy and fairness of the Company's financial statements, including through ensuring compliance with applicable accounting standards and the AIM Rules;

· Review the adequacy and effectiveness of the Company's internal control environment and risk management systems;

· Review the adequacy and effectiveness of the Company's Whistleblowing policies;

· To consider the need for, and to oversee, internal audit activities; and

· Oversee the relationship with, and the remuneration of, the external auditor, reviewing their performance and advising the Board members on their appointment.

Activities of the Audit Committee during the year

On behalf of the Board, the Audit Committee has closely monitored the maintenance of internal controls and risk management during the year. Key financial risks are reported during each Audit Committee meeting, including developments and progress made towards mitigating these risks.

The Committee received regular reports from the Chief Financial Officer throughout the year and was satisfied with the effectiveness of internal controls and risk mitigation. The Committee also received and considered reports from the external auditor, CLA Evelyn Partners Limited (formerly Nexia, Smith & Williamson) ("EP"), which included control findings relevant to their audit.

Significant reporting matters

The Audit Committee has reviewed management's assessment of critical accounting judgements and key sources of estimating uncertainty disclosed in note 2.

As part of the review, the Committee considered whether:

· There are any material or sensitive omissions from the Annual Report narrative;

· The Annual Report narrative is a true and balanced reflection of events and performance in the year;

· There is consistency throughout the Annual Report and Financial Statements; and

· There is a clear explanation of key performance indicators, their link to performance and strategy and equal prominence of statutory performance measures.

The Committee is satisfied that management have considered these matters appropriately and that a reasonable conclusion has been reached, and appropriate disclosure made, based on the information available to the Group. The Committee is not aware of any significant failings or weaknesses in the Company's existing system of internal controls. The Committee has determined that an internal audit function is not an appropriate mechanism for the Company in the context of the Company's level of complexity of its operations.

Going concern

The Directors consider the continuing strong operating and financial performance of the Group, together with its flexible debt repayment terms provide ample evidence that there currently is no material uncertainty surrounding the Company and the Group's ability to continue as a going concern.

Accordingly, the Company and Group financial statements are prepared on a going concern basis. Further detail regarding the reasoning behind this conclusion can be found in the Directors' Report on page 31.

External audit

The Audit Committee considers various matters when reviewing the appointment of an external auditor including their performance in conducting the audit and its scope, terms of engagement including remuneration and their independence and objectivity.

EP was reappointed as external auditors at the Company AGM in June 2022. The Audit Committee has confirmed it is satisfied with EP's knowledge of the Company and its effectiveness as external auditor. The Company continues to reduce its reliance upon EP for the provision of non-audit services. As such the Audit Committee has recommended the reappointment of EP to the Board. There will be a resolution to this effect at the forthcoming Annual General Meeting.

The year ahead

The Committee remains focussed on ensuring that the robust framework of internal controls and risk management currently in place throughout the Group is maintained. Financial risk management will continue to be closely monitored, and mitigated where appropriate.

The Committee will also continue its close dialogue with the Company's external auditors, highlighting any emerging financial risks or matters facing the Company throughout the coming year and ensuring that the Company's financial reporting mechanisms continue to be subjected to scrutiny and challenge.

Andrew Chubb, Chair of the Audit Committee

15 May 2023

REMUNERATION COMMITTEE REPORT

Dear Shareholders,

It is my pleasure to report to you on behalf of the Remuneration Committee.

As part of the Group's commitment to improved corporate governance, only non-lender, appointed non-executive directors (two of whom are independent) have been members of the Remuneration Committee since April 2021.

Throughout 2022 the Committee has continued to focus on aligning reward with performance and providing incentives, such that the Company's remuneration framework best facilitates an environment that will deliver the swift repayment of the Group's debt enabling the Group to focus on strategic opportunities to grow the Group's activities. Certain covenants within the Group's debt documents require lender approvals of any equity incentive schemes and the Committee's efforts in seeking a lender approved acceptable long-term incentive programme continue.

Aims of the Remuneration Committee

The Committee's overall aim is to align employee remuneration with the successful delivery of long-term shareholder value. Our core principles that enable us to achieve this goal are:

1. To offer competitive remuneration to executive management that attracts, retains and motivates highly skilled individuals;

2. To align remuneration packages with performance-related metrics that mirror our long-term business strategy; and,

3. To encourage accountability in the workplace and link reward with success.

The Group currently operates the following remuneration framework:

· Annual salary and associated benefits; and

· Discretionary bonuses that are granted following the Committee's assessment of performance against certain key business indicators.

Membership and attendance

The Remuneration Committee consists of myself, Tim Livesey, as the Chair, together with two other Non-Executive Directors, David Cather and Andrew Chubb. The Committee aims to meet at least two times each year. I joined the Board as an Independent Non-Executive Director part way through the year and as such had the opportunity to attend one of the two meetings held in 2022. Attendances at Committee meetings during the year were:

No Director is involved in any decisions relating to their own remuneration. None of the Committee has any personal financial interest, conflicts of interests arising from cross-directorships, or day-to-day involvement in running the business.

Terms of reference

The terms of reference of the Remuneration Committee, that have been approved by the Board and are available on our website, are set out below:

· Determine and propose to the Board the Company's overall remuneration policy and monitor the efficacy of the policy on an ongoing basis;

· Determine and propose to the Board the remuneration of the Executive Directors and senior management;

· Determine the objectives and headline targets for any performance-related bonus or incentive schemes;

· Monitor, review and approve the remuneration framework for other senior employees; and,

· Review and approve any termination payment, such that these are appropriate for both the individual and the Company.

Executive remuneration package and service contracts

There was no change to the CEO's base remuneration and no material changes to other executive remuneration packages during the year. The Group's remuneration framework includes payment of an annual salary and short term bonus. At present there is no long-term incentive programme in place. Executives are provided with life assurance cover equivalent to two times their base salary (capped at £500,000). There are no pension/superannuation schemes in place for executives or non-executive directors. Termination of executive contracts are subject to a 3 month notice period or an in lieu base salary termination payment.

Management Incentive Programme ("MIP") - 2022 Performance

The CEO and other senior executives are eligible to participate in a MIP. The MIP awards an annual short-term bonus based on performance achieved against pre-determined key performance indicators ("KPIs"). Given the Group priority on being cash generative to reduce external debt, the KPIs are focused on operations and productivity performance.

The following table details the KPIs that were set during 2020 and adopted by the Committee in its assessment of the Group's performance and the quantum of the MIP bonus, to apply for FY2022.

Glossary:

KPI - Key performance indicator; LTI - Lost time injury; TRIFR - Total reportable injury frequency rate

FTAA - Financial and Technical Assistance Agreement; RSI - Residual storage impoundment

Of the total MIP bonus, 15% is satisfied by an issue of Metals Exploration ordinary shares, at an issue price being the 30-day VWAP market value prior to the date the MIP bonus is approved (subject to shareholder approval).

At the annual general meeting to be held on 19 June 2023, shareholders will be asked to approve the future issue of 13,400,686 new ordinary shares to executives as part of the 2022 MIP bonus award. In June 2022, following the 2022 AGM, 17,461,385 new ordinary shares were issued to management as part of the 2021 MIP award.

Non-executive director remuneration

All non-executive directors are appointed under a letter of engagement that sets out the terms, responsibilities and remuneration attaching to their appointment. The remuneration of lender nominated non-executive directors is governed by the terms of a revolving credit facility and relationship agreements between the Company and the two major shareholders. The remuneration of non-lender nominated non-executive directors is determined by the full board.

Director remuneration

The Directors' remuneration for the year was as follows:

Notes:

¹ Includes consulting fees paid to private consulting companies.

2 Includes shares issued in lieu of cash bonus and year-end accrual of unpaid bonuses.

3 fees paid in accordance with Services Agreements between the Company and MTL (Luxembourg) Sarl and the Company and Runruno Holdings Limited

No element of the Directors' remuneration (other than the share options and shares issued as part of the MIP bonus as noted above) is currently related to the Company's future share price.

Director interests in shares and options

No directors own any shares in the Company apart from Mr Bowden who owns 8,257,355 ordinary shares.

Directors' beneficial interests in unissued ordinary shares granted by the Company under share options as at FY2022 year-end are as follows:

Vesting/exercise conditions

Provided the option-holder remains a director of the Company,

1 the remaining 2,200,000 options shall vest on 28 October 2023. A further exercise condition for all the options is that the Company's 30 day volume weighted average share price must exceed £0.0215 per share during the life of the options.

2 the remaining 2,200,000 options vest on 17 June 2023 and 2,200,000 options on 17 June 2024. A further exercise condition for all the options is that the Company's 30 day volume weighted average share price must exceed £0.0165 per share during the life of the options.

The relevant Non-Executive Directors' independence is not considered to be compromised due to holding these options as the level of share options are deemed to be sufficiently immaterial. 

The Year Ahead/LTIP

Under the Group's existing debt finance agreements material changes to the Group's remuneration policies and the level of executive and senior management remuneration require approval from the Group's lenders (who together own in excess of 65% of the Company's issued share capital). As such, the introduction of a long-term incentive programme ("LTIP") requires approval of the Company's lenders. Significant progress has been made in negotiating the introduction of an acceptable LTIP, that has lender support. It is expected that the terms of a LTIP will be finalised by the end of Q3 2023.

Other than the introduction of a long-term incentive scheme for executives and senior management, it is not proposed to make any change to remuneration policy.

Tim Livesey, Chair of the Remuneration Committee

15 May 2023

SUSTAINABILITY REPORT

In accordance with Philippine Government requirements, the Group issues a biennial in-depth sustainability report. Shareholders are recommended to access the most recent biennial sustainability report issued in May 2022, covering the 2020 and 2021 calendar years, which is available on the Company website at www.metalsexploration.com/esg.

The report is prepared in accordance with the Global Reporting Initiative (GRI) Standards and provides stakeholders with a transparent account and comprehensive information on our sustainability performance and governance disclosures.

RISK MANAGEMENT

The Group's Code of Conduct enumerates its ethics. Operational procedural standards, aligned with legal requirements, have been established for all activities we undertake. Operations are certified with ISO 14001:2015 compliance and the Group is a member of the Chamber of Mines of the Philippines "Towards Sustainable Mining" initiative. The reporting of any infractions, particularly on safety concerns and potential environmental non-compliance, is participatory and cuts across all employees regardless of position.

COMMUNITY AND SOCIAL DEVELOPMENT

Each year the Group sets aside 1.5% of direct mining and processing costs to be applied in its Social Development and Management Program ("SDMP") projects; designed to benefit the local communities. Implementation of the SDMP passes through a series of community consultations to identify appropriate socio-economic programmes. The Group's SDMP objectives are to benefit host communities by undertaking sustainable development within the community with programmes focused on:

· Health;

· Education;

· Capacity building;

· Community development and empowerment;

· Enterprise development, improvement and networking;

· Infrastructure development; and

· Preservation and respect of socio-cultural values.

Total community programme expenditure for FY2022 was US$3.6 million, up from US$1.9 million in FY2021. The reach of the programmes extends to assist the residents of the Barangay of Runruno and surrounding Barangays, the Municipality of Quezon and the Province of Nueva Vizcaya.

The Community Relations Department, the community interface arm of the Group, maintains strong partnerships with various national agencies and local governments from Barangay to Provincial level. They are primarily engaged in managing the implementation of identified and prioritised projects within the mandated Social Development and Management Program and other programmes under them as a component of the Group's commitment to its Corporate Social Responsibility ("CSR").

The relocation of illegal miners operating on the back of the existing/planned operations in Stages 3, 4 and 5 of the mine plan was a major issue for the Group to resolve. Throughout this process the Group received significant community support of its actions. The Group continues to work closely with the local government in relation to these areas. Agreed compensation packages were paid to those families that relocated and to date this undertaking has proceeded without incident.

SAFETY AND HEALTH

As the mine-site was relatively free of COVID-19 cases from February 2022, the pandemic had limited impact on employees, contractors and operations; and all positive cases were dealt with in accordance with Philippine Government regulations.

Otherwise, there were no material safety and health incidents throughout the project site. A safe working culture is actively promoted by a dedicated occupational health and safety department and is embraced across the Runruno site and in all departments, with all staff recognising their individual responsibilities for their own safety and the safety of others. To date the operation has accumulated in excess of 19 million man-hours with no lost time incidents.

HUMAN CAPITAL

The Group recognises that the valuable work of our people greatly contributes to long-term success; and it seeks to be a preferred employer. Priority in employment opportunities are initially provided for people from the communities within which the Group operates.

Our policy is to recruit and retain the most talented and high-performing people who share the Group's commitment to sustainable development. Great care is taken in every step of the employment process with an emphasis on equality, diversity, work-place safety and employee welfare.

ENVIRONMENT

The Group is active in promoting and implementing "responsible mining" practices. It is a leader in the Philippine mining industry in its environmental and environmental rehabilitation practices, having received numerous government/industry awards in this area over a number of years. The Group recognises good environmental management as a key parameter in its CSR charter. The Group maintains and promotes its commitment to the effective stewardship, protection and enhancement of the environment in and around the areas where it operates, including the conduct of its business in an environmentally sound manner. This is the driving thrust towards the goal of sustainable development and reducing potential significant impacts of the Runruno operations upon the environment.

WASTE MANAGEMENT

Safe management of tailings and other waste products are crucial to the safety of our communities and longevity of our operations. All tailings are sent to the residual storage impoundment facility (RSI) which has been constructed to international standards applicable to water storage dams, which are much higher than international standards applicable to mining tailings.

While the Group has a strong waste management record to date, it understands the risks associated with tailings management are a particular concern to our stakeholders and the Group is determined to maintain high levels of safe tailings management.

REFORESTATION AND REHABILITATION

The Group acts positively to reduce the potential environmental impacts of its operations. It undertakes this obligation through immediate and continuous rehabilitation activities, by the re-greening of disturbed areas, the establishment of protection forests and the provision of habitat for wildlife within the FTAA area.

These programmes demonstrably improve the environment within and surrounding the Group's operations and are designed for beautification, stabilisation and to off-set green-house gas emissions and the impacts of the Group's operations. Through its various programmes, the Group has been responsible for planting over 2 million endemic and cash crop trees.

A total of 7.68 hectares were rehabilitated during FY2022 (FY2021: 7.17 hectares) to bring the total area rehabilitated since commencement of mining to 44.13 hectares.

As a manifestation of our unwavering and exemplary commitment, the Group has received awards from the Philippine government Best Mining Forest Contest for six consecutive years (2017-2022).

WATER MANAGEMENT

Mining activities require a large and constant supply of water and the Group recognises that access to safe water is a fundamental right for local communities.

The Group operates a dynamic water management programme to avoid possible impacts on the downstream water quantity, quality and aquatic environment. The ASTER technology contained in the final segment of the process plant destroys all cyanide species from tailings before the tailings are pumped into the RSI.

CLIMATE CHANGE AND GREENHOUSE GAS EMISSIONS

The Group recognises its social responsibility to align its efforts to contribute to global climate change goals and targets including net-zero emissions by 2050. Policies to minimise the Group's greenhouse gas emissions ("GHG"), as far as economically practicable, are followed.

Within our operations we support the use of renewable energy by purchasing our electricity from a hydroelectric company.

Regulations made under the UK Companies Act 2006 requires the Group, to the extent practicable, to obtain relevant information on the Group's annual quantity of GHG emissions, which is reported in tonnes of carbon dioxide equivalent, and the Group's energy consumption.

Scope 1 GHG emissions from operations refers to direct activities that are owned or controlled by the Group; primarily emissions from fuel consumed by haul trucks, other vehicles and stationary plant at the Runruno project.

The calculation of GHG emissions is based on activity data, i.e. monitoring of fuel consumption rates, fuel composition, etc multiplied by industry produced conversion factors.

Scope 2 GHG emissions are indirect emissions from the generation of purchased electricity consumed by operations that are owned or controlled by the Group. Group Scope 2 emissions have been calculated using Philippine government recorded supplier-specific emission factors.

These Scope 1 and 2 GHG emissions are regularly reported to the Philippines mines department.

The Group's total carbon footprint (generated outside of the UK) for the last two financial years was measured as follows:

ENVIRONMENTAL MONITORING

The Group maintains very high compliance standards and employs industry leading initiatives to ensure the highest environmental performance. It regularly conducts its own internal comprehensive environmental monitoring programme to ensure compliance with its licence provisions, Philippine Regulations and any appropriate contemporary Standards. These programmes extend to reference sites outside the immediate operational area and are used to provide reference and base-line data for future use. The Government programmes quarterly monitoring by an independent, community based Multipartite Monitoring Team. The Group also engages an independent third-party consultant group specialising in environment monitoring services to conduct independent monitoring of its environmental performance.

LEGAL COMPLIANCE

High compliance standards are practiced across the Group. A large site-based team is dedicated to managing the high levels of compliance mandated within the Philippines. The site is regularly audited with upwards of 60 audits, verifications or reviews of its operations undertaken annually by the various regulators. The wide range of permits to operate in the Philippines are secured from more than a dozen Government agencies and regulators.

DIRECTORS' REPORT

The Directors present their Annual Report together with the audited financial statements of Metals Exploration plc (the "Company") and its subsidiary undertakings (the "Group"), for the year ended 31 December 2022.

PRINCIPAL ACTIVITIES

The principal activity of the Group is to identify, acquire, explore and develop mining and processing projects, mining companies, businesses or opportunities with particular emphasis on precious and base metals mining opportunities in the Philippines.

The Company was incorporated on 8 April 2004 under the Companies Act 1985 (now Companies Act 2006) and is registered in England and Wales with registered number 05098945. The Company was admitted to trading on AIM in October 2004.

The principal activity of the Company is that of a holding Company for its subsidiary undertakings, which are set out in note 14 of the financial statements.

FINANCIAL RESULTS

For the year ended 31 December 2022 the profit before tax of the Group for the year was US$8.7 million (2021: US$11.3 million).

DIVIDENDS

The Directors do not recommend the payment of a dividend for the year ended 31 December 2022 (2021: US$nil).

BUSINESS REVIEW AND FUTURE DEVELOPMENTS

A review of the current and future development of the Group's business is given in the Chairman's Statement on page 3 and the Chief Executive Officer's Report on page 5.

NOMINATED ADVISER & CORPORATE BROKER

The Company's nominated adviser is Strand Hanson Limited. The Company's corporate broker is Hannam & Partners ("H&P Advisory Limited").

AUDITOR

CLA Evelyn Partners Limited (formerly Nexia, Smith & Williamson) were re-appointed as auditor of the Company at the Annual General Meeting held in 2022 and it is proposed that they be re-appointed at the Company's forthcoming Annual General Meeting.

DIRECTORS & DIRECTORS' INTERESTS

The Directors of the Company during the year and since the year end were:

David Cather (Independent Non-Executive Chairman)

Darren Bowden (Chief Executive Officer and Executive Director)

Andrew Chubb (Non-Executive Director)

Tim Livesey (Independent Non-Executive Director), appointed 5 May 2022

Steven Smith (Non-Executive Director)

Guy Walker (Non-Executive Director)

Jeremy Wrathall (Independent Non-Executive Director), resigned 5 May 2022

Refer to the Remuneration Report for details of Directors' beneficial interests in unissued ordinary shares granted by the Company under share options.

ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES

During FY2022, the Company issued:

· 6,600,000 options to acquire new ordinary shares to Mr Livesey. These options are subject to the vesting conditions as noted in the Remuneration Report.

· 8,257,335 new ordinary shares to Mr Bowden in lieu of a cash payment of a portion of his management incentive bonus award.

Apart from outstanding share options, a full summary of which is disclosed in the Remuneration Report, there are no other arrangements entered into to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS' INTEREST IN CONTRACTS OF SIGNIFICANCE

No contract of significance to which the Company, or any of its subsidiary companies was a party and in which a Director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the financial year or at any time during the year; other than:

· Steven Smith is a 10% shareholder in MTL Guernsey Limited ("MTLG"). During the year the Company effectively completed the repayment of the debt payable to MTLG under the Senior Debt Facility.

· Andrew Chubb is a partner of Hannam & Partners, the Company's broker and financial adviser.

PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP

The Board of Directors review the principal risks and uncertainties facing the Group on an ongoing and regular basis. Assessments are made as to how to manage these and mitigate as much risk as possible through various controls. Many of these risks and uncertainties are common to all mining projects. The principal risks and uncertainties facing the Group are identified as follows:

Market risk

The profitability of the Group's projects is impacted by the risks associated with the gold market. Profitability can be affected by factors beyond the Group's control, such as a prolonged decline in world gold prices. The Group regularly tracks gold prices and regularly refines its models on financial profitability in order to have available for the Board at all times, a current view on the future financial viability of its active projects. The Group has attempted to mitigate this risk by entering into limited hedge arrangements in relation to future gold prices. Refer note 20.

The Group is exposed to currency risks in its operations; particularly in relation to Philippine domestic peso currency exposure from costs associated with mining and gold recovery. Currency exposures are carefully monitored, and forward contracts are in place to insure against major adverse currency movement risk. Refer note 20.

Nature of mining, resource estimation and mineral processing

Mineral resource and reserves estimation provides no assurance that the potential tonnage and grades will be achieved. The exploration of mineral rights is speculative in nature and any published results are expressions of judgement developed using industry tested measuring techniques, none of which can be relied upon with complete certainty. Each set of published results builds upon the previous published information and includes any new and reliable information from systematic drill results, mining, and recovery and reconciliation activities and is independently verified by qualified persons. However, this still involves experience, judgement, skill and estimation, all of which are imprecise, interpretative and open to challenge. The actual results of mining may differ upwards or downwards from the published reserves upon which the Group relies in its business projections.

The size of the deposit, its grade, depth and type of orebody, are only some of the particular attributes which determine the costs and recovery methods required to be employed. There is also the length of haul to the processing plant, age and maintenance programmes for plant and equipment, land access, environmental protection and community relations, capital costs, reclamation and closure costs and labour and host community relations. The quantities, costs and assumptions used to identify and interpret these variables can be modelled to the lowest level of detail possible, but they do not provide absolute certainty that the expected cost of mining will be achieved.

The metallurgy of the Group's ore requires a complex set of processes to extract economic levels of gold doré. Maintaining efficient processing operations requires specialised equipment and consumables, combined with an experienced and motivated processing team. It is also subject to numerous factors some of which are within the Group's ability to control, and some that are external factors outside the control of the Group.

Reserves and Life of Mine

Based upon the Group's current delineated gold reserves and planned mining schedule it is predicted that the Runruno project's remaining life of mine is approximately 3-4 years.

Exploration and development of mineral deposits involve a wide range of significant risks and require a significant investment over an extended period of time. These risks are seldom constant with new types invariably arising and adding to the industry's and Group's challenges.

Exploration success that results in the discovery of new gold resources that can be developed into new economic gold mineral reserves that in turn can extend the Runruno project life of mine is not guaranteed.

Mining regulatory risk

Mining investors are exposed to a high level of regulatory risk under the governing bodies responsible for the Philippine mining sector. There is a wide array of 'rules and regulations' ("Rules") that govern the regulatory regime for foreign mining investment in the Philippines and the Rules are created and enforced by several layers of government and government agencies nationally, provincially and locally. The Philippines mining industry is subject to frequent audit and review activity by regulatory agencies.

Failure to receive, extend or amend any Regulatory Approval, or delays in receiving, extending or amending any Regulatory Approval may adversely affect the properties, business or operations of the Group including, but not limited to, increasing the costs of the Group's activities; limiting the Group's capacity to produce gold; delaying the implementation of any planned changes to the Group's activities; or requiring the full or partial suspension of the Group's operations.

The Group has almost 500 approvals, licences and permits to conduct mining, processing and related activities at its Runruno Gold Project in the Philippines (collectively "Regulatory Approvals") and is routinely required to obtain new permits and Regulatory Approvals or to amend, renew or extend its existing permits and Regulatory Approvals.

As at the date of this Report, neither the Group nor the Runruno project is subject to any suspension or closure order. The Group has applied for, or is in the process of, applying for the issue, extension or renewal of a number of Regulatory Approvals and cannot be certain that they will be issued, extended or renewed on acceptable terms or within the required timeframes.

Key personnel

The Group's future success is substantially dependent upon the continued service of senior management, and it's highly skilled and trained personnel at all levels of management, however the retention of relevant members of staff cannot be guaranteed. There can be no certainty that the Group can recruit suitably qualified or skilled employees in a competitive, highly skilled, specialist industry and it is possible the Group will face periods of varying lengths of management and skills shortages.

Where key personnel cannot be retained in the medium to long term, the Group's commercial production could be compromised at various intervals.

Further, COVID-19 travel restrictions impacted on the ability of international senior management to travel to and from the project site, which combined with the imposition of various levels of government mandatory quarantine periods has added to the pressure of retaining key personnel. These travel difficulties are waning and it is hoped that this matter will not be an issue in the future.

Environmental risk

Mining operations are by nature environmentally risky ventures. As a responsible miner the Group takes its environmental responsibilities very seriously and is subject to stringent rules and regulations before, during and after its period of exploration and mining development. Open pit mining is mining on a large-scale and has the potential to become entangled in environmental disputes. The Group employs every effort to avoid and mitigate even the most minor of damage to the environment but it is aware it will always be exposed to these risks for as long as it is present at Runruno.

Any breach of its environmental code or obligations to the environment as dictated in its Financial or Technical Assistance Agreement ("FTAA") or its Environmental Compliance Certificate may result in a temporary suspension of operations, fines, and even the possibility of closure of mining operations at Runruno. The Group is aware there may be further environmental standards imposed throughout the life of its mining operations which will involve further costs, time and compromises to be compliant.

Political and Country Risk

The Philippines is a challenging jurisdiction for foreign mining companies to succeed. The Mining industry's percentage contribution to the country's GDP has dropped significantly over the last 30-40 years. Philippine political and country perceived risk issues have hindered the development of a world class Philippine mining industry. The Group has no control or influence in these matters and these risks are a constant.

In an effort to reduce these risks, the Group applied for and was granted a FTAA, a contract in law with the government. The 1995 Mining Act allows 100% foreign ownership of mining entities where there is a US$50 million investment or higher, through the ownership of a FTAA. Mines operating under a FTAA have recourse for disputes to be arbitrated offshore. Despite opposition to the 1995 Mining Act successive Presidents have supported the framework.

Further, it is noted that during the COVID-19 crisis the Government strongly supported the industry such that the Group was able to continue to operate, albeit initially on a reduced level. Further recent Philippine government pronouncements are increasingly mining supportive.

Access to Tenement Areas

The Group now has full access to all stages of the mining plan. However, further development of the Runruno project in Stages 4 and 5 are dependent upon the successful removal of a small number of illegal gold miners, and their structures, that still remain on Group owned land in those areas. Although the resettlement of these illegal miners is substantially complete, the delay in doing so has necessitated changes to the Group's mining schedule.

In order to mitigate any further risk in this matter, the Group has worked diligently with the local and provincial government departments with the aim of ensuring the process continues to proceed on as smooth as possible basis, and with limited disruption to existing and near term operations.

RSI Integrity

The Group's tailings waste is directed to a Residual Storage Impoundment ("RSI") facility. The RSI is being constructed to standards applicable to international water dam construction, which has significantly higher standards than normal mine tailings facilities. However, the failure of the RSI would be catastrophic, and as such the continued integrity of this structure is of the utmost importance.

Third party audits of the design and construction integrity of the RSI are conducted. Although the final lift to the RSI will be completed in Q2 2023 the RSI remains in compliance with local guidelines and local development requirements. Studies have determined the final in-rock spillway location and construction of the final in-rock spillway has commenced in Q1 2023. This final in-rock spillway will ensure the RSI has the capacity to cope with a 'Probable Maximum Flood' event.

The performance of the RSI is continuously monitored by an independent international consulting group.

GOING CONCERN

The consolidated financial statements of the Group have been prepared on a going concern basis, which contemplates the continuity of business activities and the realisation of assets and the settlement of liabilities in the normal course of business.

To date, the Group has managed to limit the negative impact of COVID-19 it believes the impact of COVID-19 will not affect the future going concern status of the Group.

Although the Group's current liabilities continue to exceed its current assets, primarily due to the estimated external borrowings the Group expects to repay within the next 12 months, profitable operations continued during FY2022. Further there is no obligation to adhere to a set loan principal or interest repayment schedule removing the risk of default under the debt due to cash flow issues.

As a result, the Directors believe there is no material uncertainty over the Group's going concern and that it is appropriate that the financial statements should be prepared on a going concern basis.

KEY PERFORMANCE INDICATORS

The Directors monitor the performance of the Group through the following key performance indicators:

· Safety - Safety is at the core of the Group's business. The Group aspires to a world class TRIFR target of

· Environment/permit compliance - The Group aims to have no major environmental/permitting incidents and

· Gold recovery - Overall gold recovery measured against budget reflects the outcome of ongoing technical work undertaken to improve operational performance. The average gold recovery in FY2022 was 85.7% (FY2021: 84.5%) surpassing the average gold recovery target. Gold recoveries are continuously monitored providing detailed information on day-to-day performance, and for ongoing studies into improving gold recovery even further.

· Free cash flow - Given the Group's high debt level the amount of free cash flow produced to pay down Group debt is of paramount importance; and performance is determined by comparison of actual results against budget. The cost efficiencies of operations are measured against budgets and forecasts on a weekly and monthly basis. Detailed annual budgets are approved by the Board. Free cash generated from operations of US$38.2 million (FY2021: US$46.5 million) exceeded budget.

· Total expenditure - Total operating cost and CAPEX expenditure is measured against budget on a weekly, monthly and annual basis. Projected costs are re-forecast at regular intervals. Total operating cost and CAPEX expenditure for FY2022 of US$89.7 million (FY2021: US$91.1 million) was slightly in below budget.

· Total movement of material - Actual physical mining performance, both ore and waste, compared to budget is a key driver to ongoing mining operations. Mine schedules are constantly being reviewed to ensure sufficient ore is delivered to the process plant on a timely basis at an economic grade. Actual tonnes mined during the year was 15% above budget at 13.7Mt (FY2021: 10.8Mt).

· Mill throughput - Actual tonnes milled of 2.1Mt (FY2021: 2.1Mt) compared to the 1.75Mt name-plant design of the process plant indicates the degree of success plant modifications have made on the Group's ability to increase production rates above original design expectations.

EVENTS AFTER THE BALANCE SHEET DATE

Details of significant events occurring after the balance sheet date are set out in note 36 to the financial statements.

FINANCIAL RISK MANAGEMENT

Details of the Group's policies with respect to financial risk management are given in note 34 to the financial statements.

Although monitoring financial risk falls within the terms of reference of the audit committee, this matter is a standard agenda item at all board meetings. The Group's finance departments implement policies set by the Board of Directors.

CORPORATE RESPONSIBILITY AND ENVIRONMENTAL POLICY

The Group's policy is to conduct operations in a safe and environmentally responsible manner to industry best practice standards, to respect the indigenous culture of the mining project areas, to promote social and economic development and to offer employment and training opportunities to those who live in the mining project areas.

POLITICAL CONTRIBUTIONS AND CHARITABLE CONTRIBUTIONS

During FY2022, the Group did not make any political or charitable contributions (FY2021: $nil).

ANNUAL GENERAL MEETING

This report and the financial statements will be presented to shareholders for their approval at the Annual General Meeting ("AGM").

The Company's AGM is expected to be held on or around 19 June 2023 at the offices of Armstrong Teasdale LLP in London. The Notice of the AGM will be issued shortly.

In accordance with the Company's Articles of Association, Messrs Cather, Bowden, Chubb, and Livesey will retire and will offer themselves for re-election at the AGM.

SHARE CAPITAL

During the year the Company undertook a capital reorganisation which consisted of both a capital sub-division and a capital reduction. Refer to note 25. On 31 December 2022, there were 2,088,796,421 ordinary shares of £0.0001 each in the capital of the Company in issue.

SIGNIFICANT SHAREHOLDINGS

As at 31 December 2022, the Company is either aware of or has been notified of the following shareholders who hold disclosable interests of 3% or more of the nominal value of the Company's ordinary shares:

BOARD ENGAGEMENT WITH STAKEHOLDERS - SECTION 172 STATEMENT

Section 172 of the Companies Act 2006 requires a Director of a company to act in the way he or she considers, in good faith, and would be most likely to promote the success of the company for the benefit of its members as a whole. In doing this, section 172 requires a Director to have regard, among other matters, to: the likely consequences of any decision in the long term; the interests of the company's employees; the need to foster the company's business relationships with suppliers, customers and others; the impact of the company's operations on the community and the environment; the desirability of the company maintaining a reputation for high standards of business conduct; and the need to act fairly with members of the company.

The Directors use the Board meetings as a mechanism for giving careful consideration to the factors set out above in discharging their duties under section 172.

Stakeholder engagement

Key stakeholder groups we engage with are listed below, together with an explanation of why we focus on them and how we engage them.

Employees

The success of the Group is dependent upon the hard work and dedication of all our employees. The Board ensures a continuing investment in existing employees who are supported through professional, technical and on-the-job training relevant to their functional areas. The Board directs executives and senior managers to keep staff informed of the progress and development of the Group on a regular basis through formal and informal operational updates, meetings and other regular communications. In addition, the Board ensures funds are provided for regular events to encourage employee participation in local community initiatives.

The Group strives to create an equal opportunity work environment where employees can be safe and healthy at all times, while feeling valued and supported. Employees are encouraged to speak out about anything that impacts their performance and/or safety.

The Board is conscious of its social obligation to impart skills and knowledge onto local Philippine employees. Accordingly over 98% of the Group's workforce is Philippine. Workforce gender diversity policies are actively followed with approximately 28% of the workforce being female.

Government Agencies & Local Communities

The Group operates in the highly regulated mining business in the Philippines. The Board ensures the Company adopts a positive focus on maintaining productive relations with local communities and all levels of government. As a result the Chief Executive Officer and senior managers regularly conduct consultations with multi-levels of government agencies to ensure that all regulatory approvals and permits remain in good order. Development of local community improvement programmes are undertaken with consultation of local government and community representatives.

Contractors & Suppliers

Our contractors and suppliers are key business partners, and the quality of goods and services we receive are essential to supporting operations and to provide the Group with the opportunity to produce positive cash flows.

As directed by the Board, management collaborates and continually works with our contractors and the full supply chain, sharing best practice and seeking out synergies to improve performance.

Lenders

For the entire reporting period, the CEO and the CFO, on behalf of the Board, were in regular contact with its lenders regarding the Group's performance and to ensure expectations are properly managed.

Customers

The Group's business in mining and selling gold doré means it only deals with a small number of end customers, being refiners of doré and/or gold concentrate. The Board ensures a close relationship is maintained with senior personnel at each customer group.

Investors

Investors are considered key stakeholders, and consequently investor relations are a focus area for Directors. Where possible the Board engages investors on Group performance following trading updates and results announcements.

DISCLOSURE OF INFORMATION TO THE AUDITORS

The Directors at the date of approval of this Annual Report individually confirm that:

· so far as the Director is aware, there is no relevant audit information of which the Group's auditors are unaware; and

· the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Group's auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provision of Section 418 of the Companies Act 2006.

Approved by the Board of Directors and signed on behalf of the Board

Darren Bowden, Chief Executive Officer

15 May 2023

STATEMENT OF TOTAL COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2022

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2022

The financial statements were approved by the Board of Directors on13 May 2023 and were signed on its behalf by:

Darren Bowden, Chief Executive Officer

 15 May 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022

Equity is the aggregate of the following:

· Share capital; being the nominal value of shares issued

· Share premium account; being the excess received over the nominal value of shares issued less direct issue costs

· Acquisition of non-controlling interest reserve; being the amounts recognised on acquiring additional equity in a controlled subsidiary

· Translation reserve; being the foreign exchange differences on the translation of foreign subsidiaries

· Re-measurement reserve: being the cumulative actuarial gains and losses, return on plan assets and changes in the effect of the asset ceiling (excluding net interest on defined benefit liability) recognised in other comprehensive income

· Other reserves: being the cumulative fair value of warrants associated with certain mezzanine debt facilities and share-based payments expense

· Profit and loss account; being the cumulative profit/(loss) attributable to equity shareholders

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

Equity is the aggregate of the following:

· Share capital; being the nominal value of shares issued

· Share premium account; being the excess received over the nominal value of shares issued less direct issue costs

· Acquisition of non-controlling interest reserve; being the amounts recognised on acquiring additional equity in a controlled subsidiary

· Translation reserve; being the foreign exchange differences on the translation of foreign subsidiaries

· Re-measurement reserve: being the cumulative actuarial gains and losses, return on plan assets and changes in the effect of the asset ceiling (excluding net interest on defined benefit liability) recognised in other comprehensive income

· Other reserves: being the cumulative fair value of warrants associated with certain mezzanine debt facilities and share-based payments expense

· Profit and loss account; being the cumulative loss attributable to equity shareholders

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2022

Note the comparative balances above have been updated to align with the current year categorisation and further disaggregation of line items; there have been no changes to the operating, investing and financing activity cash flow subtotals.

COMPANY BALANCE SHEET

AS AT 31 DECEMBER 2022

The Company has taken advantage of the exemption provided under section 408 of Companies Act 2006 not to publish an income statement or a statement of total comprehensive income. The total comprehensive income for the year ended 31 December 2022 dealt with in the financial statements of the Company was US$10,232,907 (2021: US$11,938,570).

The financial statements were approved by the Board of Directors on 13 May 2023 and were signed on its behalf by:

Darren Bowden; Chief Executive Officer

15 May 2023