PERE.L Regulatory News (PERE)

8 September 2022

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 AS AMENDED BY REGULATION 11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310.

Half Year Results for the six months ended 30 June 2022

London, United Kingdom - Pembridge Resources plc (LSE: PERE) ("Pembridge" or the "Company") is pleased to announce its unaudited results for the six months ended 30 June 2022.

Interim results:

The condensed interim financial statements of the Group, as set out in full below, show a loss for the period of US$3.9m (H1 2021: loss US$3.8m, full year 2021: profit of US$20.6m) and net assets of US$7.3m (30 June 2021: net liabilities US$13.4m, 31 December 2021: net assets US$10.9m). The loss for the period is due primarily to the mark-to-market revaluation of the investment in Minto Metals Corp, which gave a non-cash loss of US$3.0m. As at 30 June 2022 the Group had US$0.6m (30 June 2021: US$3.6m (of which US$0.4m was included in assets held for sale), 31 December 2021: US$0.3m) in cash reserves. The Board consider it appropriate to maintain the going concern basis in the preparation of these financial statements as the Directors have a reasonable expectation that the Group and Company will be able to continue in operational existence for the foreseeable future.

Recent developments:

· The Company lent a total of CAD 4 million to Minto Metals Corp ("Minto"), to fund Minto's surety account, during 2019 and 2020. The loan carries interest at 8% and is due to be repaid in full via quarterly instalments each of CAD 1 million. Two instalments of CAD 1 million were repaid by Minto in March and June 2022.

· On 17 January 2022, the Company announced its strategic plans for the future. Following Minto's listing on the TSXV and C$31 million capital raise in 2021 and the publication of Minto's updated 43-101 Preliminary Economic Assessment Technical Report, the Company now believes that Minto is in a robust financial position and that the Company is now in a position to look for new projects to invest in. Accordingly, the Company has approved a strategy of identifying new projects to invest in, that can deliver further value to its shareholders. The Company sees a number of opportunities in the de-carbonisation of the energy market. To that extent it will review a wide range of projects that can range from mining of commodities related to the de-carbonisation of the energy market through to renewable energy projects. Since January, the Directors have focused on identifying suitable projects and suitable business partners to join with in developing them.

The approved strategy sets out key investment criteria guidance based on which potential projects are to be evaluated. The Strategy sets out preference for projects that are in production or close to production stage and have technical reports confirming resources and/or reserves. The key investment criteria approved in the Company's strategy are for equity stakes acquired to be above 10% in projects with an IRR above 12% and preference for projects with NPV8% above $30 million.

Share options

In recognition for their work in 2021, on 7 September 2022 the Company granted new share options to its employees as set out below. These options vest with immediate effect.

Gati Al-Jebouri, Chief Executive Officer and Chairman of the Board of Pembridge said:

"We are pleased that the Company is now being repaid by Minto and with the operational progress being made at the Minto mine. The mark-to-market revaluation of our investment in Minto at the balance sheet date reflects the recent fall in the copper price but does not reflect the ongoing exploration work on the Minto site, which we expect to lead to an increase in the life of the mine. We remain confident in the prospects for the Minto mine and that it will give a good return on our investment in the next few years.

We are also excited by the prospect of expanding our asset portfolio. The market for energy is growing worldwide and recent events mean that this is particularly the case in Europe, where there is also a political as well as social desire to move towards renewable energy. We are working on identifying projects that are appropriate for our company and executing them in the near term."

Cautionary Statement

This News Release includes certain "forward-looking statements" which are not comprised of historical facts. Forward-looking statements include estimates and statements that describe the Company's future plans, objectives or goals, including words to the effect that the Company, or management, expects a stated condition or result to occur. Forward-looking statements may be identified by such terms as "believes", "anticipates", "expects", "estimates", "may", "could", "would", "will", or "plan". Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Although these statements are based on information currently available to the Company, the Company provides no assurance that actual results will meet management's expectations. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information. Forward-looking information in this news release includes, but is not limited to, the Company's intentions regarding its objectives, goals or future plans and statements. Factors that could cause actual results to differ materially from such forward-looking information include, but are not limited to, the Company's ability to predict or counteract the potential impact of COVID-19 coronavirus on factors relevant to the Company's business, failure to identify additional mineral resources, failure to convert estimated mineral resources to reserves with more advanced studies, the inability to eventually complete a feasibility study which could support a production decision, the preliminary nature of metallurgical test results may not be representative of the deposit as a whole, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, political risks, uncertainties relating to the availability and costs of financing needed in the future, changes in equity markets, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects, capital, operating and reclamation costs varying significantly from estimates and the other risks involved in the mineral exploration and development industry, and those risks set out in the Company's public documents. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.

ENDS

NOTES TO EDITORS

About Pembridge Resources plc

Pembridge is a mining company that is listed on the standard segment of the Official List of the FCA and trading on the main market for listed securities of London Stock Exchange plc. Pembridge has an investment in Minto Metals Corp, a British Columbia incorporated business listed on the TSX Venture Exchange under the symbol "MNTO" that operates the Minto mine in Yukon, Canada.

Enquiries:

Pembridge Resources plc: +44 (0)7905 125740

Gati Al-Jebouri, Chief Executive Officer and Chairman of the Board

David James, Chief Financial Officer

Tavira Securities - United Kingdom: +44 (0)20 7100 5100

Jonathan Evans

Registered number: 07352056 (England and Wales)

Operations update:

The following is an overview of recent developments.

Minto repayments

The Company lent a total of CAD 4 million to Minto Metals Corp ("Minto"), to fund Minto's surety account, during 2019 and 2020. The loan carries interest at 8% and is due to be repaid in full via quarterly instalments each of CAD 1 million. Two instalments of CAD 1 million were repaid by Minto in March and June 2022.

Updated Strategy

On 17 January 2022, the Company announced its strategic plans for the future. Following Minto's listing on the TSXV and C$31 million capital raise in 2021 and the publication of Minto's updated 43-101 Preliminary Economic Assessment Technical Report, the Company now believes that Minto is in a robust financial position and that the Company is in a position to look for new projects to invest in. Accordingly, the Company has approved a strategy of identifying new projects to invest in, that can deliver further value to its shareholders. The Company see a number of opportunities in the de-carbonisation of the energy market. To that extent it will review a wide range of projects that can range from mining of commodities related to the de-carbonisation of the energy market through to renewable energy projects. Since January, the Directors have focused on suitable projects and suitable business partners to join with in developing them.

The approved strategy sets out key investment criteria guidance based on which potential projects are to be evaluated. The Strategy sets out preference for projects that are in production or close to production stage and have technical reports confirming resources and/or reserves. The key investment criteria approved in the Company's strategy are for equity stakes acquired to be above 10% in projects with IRR above 12% and preference for projects with NPV8% above $30 million.

Changes in group structure

The revised share structure linked to listing Minto Metals Corp in November 2021 meant that, effective from the year end accounts to 31 December 2021, Pembridge no longer accounted for Minto as a subsidiary and, having no subsidiaries as at 31 December 2021, presented its accounts on a company only basis.

On 6 April 2022, a new subsidiary was formed in Bulgaria, called Pembridge Resources Bulgaria LLC. This company acts as a regional office to evaluate possible local projects. It is owned 80% by Pembridge Resources plc and its results since formation are included in these half year results. The new subsidiary had one employee at 30 June 2022.

Changes to Risk in 2022

The Board believes that there has been no material change to the Group's principal risks and uncertainties, as set out in its 2021 Annual Report, during the year.

Responsibility Statement

We confirm that to the best of our knowledge:

· The condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as contained in UK-adopted IFRS (UK-adopted international accounting standards);

· This interim report includes a fair review of the information required by:

o  DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of condensed interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

o  DTR 4.2.8R of the Disclosure and Transparency Rules, being related parties' transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position of the Group during that period, and any changes in the related parties' transactions described in the last annual report that could do so.

The names and functions of the Directors of Pembridge Resources plc are as follows:

On behalf of the Board

Gati Al-Jebouri

CEO & Chairman of the Board

7 September, 2022

Consolidated statement of comprehensive income

for the period 1 January to 30 June 2022

For the periods to 30 June 2021 and to 30 June 2022, the basic and dilutive loss per share are the same because the effect of the exercise of share options and warrants would be anti-dilutive.

Consolidated statement of financial position

as at 30 June 2022

Consolidated Statement of changes in equity

for the period 1 January to 30 June 2022

Consolidated Statement of changes in equity (continued)

for the period 1 January to 30 June 2022

The following describes the nature and purpose of each reserve within equity:

Consolidated Cash flow statement

Notes to the condensed consolidated financial statements

for the period 1 January to 30 June 2022

1. NATURE OF OPERATIONS AND GENERAL INFORMATION

The principal activity of Pembridge Resources plc is that of a mining company. The Company has an investment in the Minto copper-gold-silver mine in Yukon, Canada.

Pembridge Resources plc is incorporated and domiciled in England. The address of Pembridge Resources plc's registered office is 38-43 Lincoln's Inn Fields, London WC2A 3PE. Pembridge Resources plc's shares are admitted to the Standard Segment on the Official List of the London Stock Exchange.

Pembridge Resources plc's financial statements are presented in United States dollars (US$), which is also the functional currency of the Company.

These condensed interim unaudited consolidated financial statements for the six-month period ended 30 June 2022 comprise the Company and its subsidiaries (together referred to as the "Group"). At 31 December 2021, the Company did not have any subsidiaries so the year end accounts prepared to that date were prepared on a company only basis.

These condensed interim financial statements were approved for issue by the Board of Directors on 7 September 2022.

These condensed interim financial statements for the six months ended 30 June 2022 do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.

2. Basis of preparation

The unaudited condensed consolidated interim financial statements have been prepared in accordance with UK-adopted International Accounting Standard 34 'Interim Financial Reporting' and the Disclosure and Transparency Rules of the UK Financial Conduct Authority.

These Condensed Group Financial Statements have been prepared using the same accounting policies as used in the preparation of the Group's annual financial statements for the year ended 31 December 2021, except for taxes on income in the interim period which are accrued using the tax rate that would be applicable to the expected total annual profit or loss. The assessment of the Group's critical accounting estimates and judgements remain consistent with the 2021 Annual Report and Financial Statements. The Group's Annual report and financial statements for the year ended 31 December 2021 were prepared in accordance with UK-adopted international accounting standards (IFRS) and the requirements of the Companies Act 2006.

The Condensed Group Financial Statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2021. The financial information presented in this document is unaudited.

The comparative figures for the financial year ended 31 December 2021 are not the Group's statutory accounts for that financial year but have been extracted from those accounts. Those accounts have been reported on by the Company's auditor and delivered to Companies House. The report of the auditor was unqualified, did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. These sections address whether proper accounting records have been kept, whether the Company's accounts are in agreement with those records and whether the auditor has obtained all the information and explanations necessary for the purposes of its audit.

2. Basis of preparation (continued)

Basis of consolidation

The Condensed Group Financial Statements incorporate the financial statements of the Company and entities controlled by the Company (its "subsidiaries"). Control exists when the Company has the power to direct the relevant activities of an entity that significantly affect the entity's return so as to have rights to the variable return from its activities. In assessing whether control exists, potential voting rights that are currently exercisable are taken into account. The results of subsidiaries acquired or disposed of during the year are included in the Condensed Group Income Statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The principal accounting policies applied in the preparation of these Condensed Group Financial Statements are set out in the Notes. These policies have been consistently applied to all of the years presented, unless otherwise stated. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those detailed herein to ensure that the Condensed Group Financial Statements are prepared on a consistent basis. All intra-Group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's interest therein.

Non-controlling interests consist of the amount of those interests at the date of the original business combination together with the non-controlling interests' share of profit or loss and each component of other comprehensive income less their dividends since the date of the combination. Their share of comprehensive income/(loss) is attributed to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

New and Revised IFRS

Certain new accounting standards and interpretations have been published that are applicable for periods commencing 1 January 2022 and others that are not mandatory for reporting periods commencing on 1 January 2022 and have not been early adopted by the Group. The Group's assessment of the impact of these new standards and interpretations is that they are not expected to have a significant impact on the Group's financial position, performance, cash flows and disclosures.

Going concern

The condensed interim financial statements have been prepared on a going concern basis, which assumes that the Company will continue operating in the foreseeable future and will be able to service its debt obligations, realise its assets and discharge its liabilities as they fall due. 

The Company has a planning, budgeting and forecasting process to determine the funds required to support their operations and expansionary plans. The budget for 2022 assumes that Pembridge starts to receive C$1m quarterly repayments of its C$4m loan from Minto, the first two of which were received in March and June 2022. The remaining instalments of C$1m and interest thereon (expected to be nearly C$1m, to be received in March 2023) will be available to fund the Company's operating costs, to fund new ventures or to start repaying the Company's US$5.7m loan (including interest accrued to 30 June 2022) from Gati Al-Jebouri. Minto's dividend policy is not controlled by Pembridge, although Pembridge has one of the seven seats on Minto's Board. However, it is likely that Minto will start to distribute some of its profits in the future which would continue the inflow of cash to Pembridge.

Pembridge does not presently plan to sell its 11.2% holding in Minto, but Minto is now a publicly listed company so this can be done if necessary to raise funds. A restriction on pre-existing owners selling shares means that, as at 30 June 2022, Pembridge could sell only 30% of its shares, but that restriction will lift in the following stages so that it would be possible to sell further shares if the cash proceeds were needed.

10% - no restriction

20% - restriction ends 25 May 2022

30% - restriction ends 25 November 2022

40% - restriction ends 25 May 2023

2. Basis of preparation (continued)

Having prepared forecasts based on current resources, assessing methods of obtaining additional finance and assessing the possible impact of COVID-19, the Directors believe the Company has sufficient resources to meet its obligations for a period of 12 months from the date of approval of these Interim Financial Statements. Taking these matters into consideration, the Directors continue to adopt the going concern basis of accounting in preparing these Interim Financial Statements. The Interim Financial Statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.

Risks and uncertainties

As at 30 June 2022 the key risks that could affect the Company in the medium term and the factors that mitigate those risks have not substantially changed from those set out in the Annual Report and Financial Statements for the year ended 31 December 2021. 

Segment reporting

In the opinion of the directors the operations of the Company currently represent one segment, and are treated as such, when evaluating its performance. The chief operating decision maker is the Board of Directors. The Board of Directors reviews management accounts prepared for the Company when assessing performance.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

All revenue reported in the six months to 30 June 2021 comprised the sale of metal concentrate to one customer by Minto, hence was in discontinued activities. From December 2021, Minto's results are not consolidated in Pembridge's results.

When considering the recognition of revenue, IFRS 15 requires preparers to go through five steps which will determine the timing and quantum of the revenue recognised at a given time.

Identify contract with a customer

Since acquisition, Minto sells its concentrate to its only end customer, which is Sumitomo, under an offtake agreement. Sales of copper are made direct to Sumitomo and sale of gold and silver are made to Sumitomo via Wheaton, hence the valuation of the gold and silver revenues is determined by Minto's contract with Wheaton but timing of revenue recognition for them is the same as for copper.

Identify performance obligation

The performance obligation is the sale of copper, gold and silver concentrate to Sumitomo, including its transportation to a location specified by them in Japan. At the end of each month, under the offtake agreement, Minto weighs and assays the concentrate it has produced and Sumitomo takes title to it, paying Minto a provisional payment of 90% of its value. Minto must keep the concentrate separate from any other product in a location approved by Sumitomo and may not sell it to any other party. From this point, Minto has control over the concentrate and, if it is still physically in Minto's care, Minto is acting as its custodian for Sumitomo.

Determine the transaction price

The Company's metal concentrates are sold under a pricing arrangement where final prices are determined by quoted market prices in a period subsequent to the date of sale. Until prices are final, revenues are recorded based on forward market prices for the expected period of final settlement. Subsequent variations in the final determination of the metal concentrate weight and assay are recognised as revenue adjustments as they occur until finalised. Subsequent variations in the final determination of the price are treated as a remeasurement of a financial asset under IFRS 9 and are recognised as revenue adjustments as they occur until finalised. 

Allocate price to each performance obligation

There is one overarching performance obligation, which is the delivery of metal concentrates to Sumitomo. This includes the production of the concentrates and their transportation to Japan. Their transportation does not carry significant risks or rewards and its cost can be estimated in advance, so the revenue is recognised net of that cost until it is delivered.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS (continued)

Recognise revenue when the performance obligation is satisfied by transferring good or service to customer (i.e. the customer obtains control)

Because Sumitomo gains control over the concentrate at the end of each month, even if it is on the Minto site, and its subsequent transportation does not carry significant risks or rewards, the main obligation is satisfied when Sumitomo takes title and the revenue is booked at this time, net of costs such as transportation and refining which will be incurred in completing the transaction.

4. FINANCE COSTS

5. INCOME TAX

The income tax credit of US$ 221,000 in the period to 30 June 2021 was payable to the Yukon government under the Quartz Mining Act and was included in results from discontinued operations in the results to 30 June 2021. There was no income tax charge or credit for the period to 30 June 2022 or for the year to 31 December 2021.

6. EARNINGS PER SHARE

The calculation of the earning per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

The basic and diluted loss per share been calculated using the loss attributable to shareholders of the Company as the numerator, i.e. no adjustment to loss was necessary. For the periods to 30 June 2021 and to 30 June 2022, the basic and dilutive loss per share are the same because the effect of the exercise of share options and warrants would be anti-dilutive.

7. SHARE CAPITAL AND PREMIUM 

Further to an equity raise announced on 17 December 2021, the Company issued 3,200,000 shares on 25 January 2022 and a further 1,600,000 shares on 6 June 2022. These shares were issued at a price of 5p per share and the proceeds from these two issues were £240,000.

Ordinary shares have attached to them full voting, dividend and capital distribution rights (including on a winding up).

8. RELATED PARTY TRANSACTIONS

The Company has paid remuneration of US$295,000 to its Directors for the six months ending June 30, 2022 (six months to 30 June 2021: US$87,520, year to 31 December 2021: US$286,000).

The Company has a loan facility with Gati Al-Jebouri, to be repaid by 31 December 2022 and carrying interest at an annual rate of 10%. The Company also pays an arrangement fee in the amount of 6% of the amounts drawn down under the Loan. Under this facility, £3.4m had been borrowed at 30 June 2022.

In June 2021, the Company issued convertible loan notes with a value of USD 3 million, with an interest rate of 14%, redeemable after two years, in order that it could participate in Minto's capital raise. The loan notes may be converted into Ordinary Shares in the Company at any time from 1 June 2022 until 31 May 2023 at an exercise price of $0.113 (8p at an exchange rate of £1 - $1.415). Gati Al-Jebouri has invested USD 500,000 in the convertible loan notes.

9. DISCONTINUED OPERATIONS (six months to 30 June 2021)

Pembridge announced on 16 June 2021 that Minto was entering into a reverse take-over ("RTO") agreement with a publicly listed corporation 1246778 B.C. Ltd, which is a reporting issuer in Canada, to form a listed issuer to be renamed Minto Metals Corp. ("Minto Metals"), and would file an application to the TSXV to list the shares of this company on the TSX Venture Exchange (TSXV) and, concurrently, raise funds from a private placement. As part of the RTO process, Pembridge's shares in Minto would be replaced in a share-for-share exchange whereby all existing Minto shareholders received voting shares in Minto Metals. Because this would mean that Pembridge no longer held all of the voting shares in Minto, it would no longer have legal control of Minto and, with effect from date of listing on TSXV, would no longer treat Minto as a subsidiary in its consolidated financial statements. When the half year results to 30 June 2021 were released on 24 September, the capital raise had closed and the Board considered it virtually certain that the RTO would be completed. However, on 30 June 2021, Pembridge did control the Board of Minto and so included Minto in its consolidated reporting as at that date. The decision that Minto would become a publicly listed company, and that Pembridge would no longer control it, was taken and announced before 30 June 2021. Therefore, in the condensed interim financial statements to 30 June 2021, Pembridge showed Minto's results as being from discontinued operations and restated the results of comparative periods accordingly, and its assets and liabilities as 30 June 2021 were classified as assets and liabilities held for sale.

The RTO completed on 19 November 2021 with the result that, from that date, Pembridge's 11.2% holding does not give the Company control or substantial influence over Minto Metals. As a result, starting from its reporting for the year to 31 December 2021, Pembridge now accounts for its investment in Minto Metals not as a subsidiary but as a financial asset, which is revalued on a mark-to-market basis. The following information is the last information from Minto that was included in Pembridge's consolidated results.

Results of Minto discontinued operations

9. DISCONTINUED OPERATIONS (CONTINUED)

Cash flows from Minto discontinued operations

Effect of the disposal group on the financial position of the Group

10.  BORROWINGS