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Papua Mining Plc (ROCK)

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Monday 21 May, 2018

Papua Mining Plc

Final Results

RNS Number : 7076O
Papua Mining Plc
21 May 2018
 

Papua Mining plc
("Papua" or "the Company")
Annual Results for the year ended 31 December 2017

 

Papua Mining plc, a UK company focused on the exploration of gold and copper deposits in Australia and Papua New Guinea, is pleased to announce its Annual Results for the year ended 31 December 2017, which will be posted to shareholders shortly.

 

For further information on the Company please visit www.papuamining.com or contact:

 

 

Papua Mining plc

David Price, Chief Executive Officer

 

Cenkos Securities plc

Nominated Adviser & Broker,

Derrick Lee/Beth McKiernan

 

  [email protected]

 

 

+44 131 220 6939

 

Chairman's Statement

 

It is with pleasure that I present the Annual Report for Papua Mining plc ("Papua" or "PML" or "the Company") for the financial year ending 31st December 2017. This year has been a transformational one for the Company with the acquisition of quality exploration projects in Queensland, Australia. Exploration activity commenced in Queensland and our projects in Papua New Guinea are undergoing a geological and geochemical reappraisal.

 

Since the transaction in October 2017 which saw Papua acquire the Queensland assets, the Company has been actively applying for new tenements as part of its expansion strategy in the area immediately surrounding the Queensland projects. According to the Fraser Institute's 2016 annual survey of mining and exploration companies report, Queensland ranks within the top 10 mining investment jurisdictions globally.

 

Papua now holds three Exploration Licences (EL's) on the island of New Britain in Papua New Guinea ("PNG"), three Exploration Permit for Minerals (EPM's) in Queensland, Australia and three applications for EPM's, also in Queensland. The total area under licence, is 352 square kilometres in PNG and 624 square kilometres in Australia, including applications. With the introduction of the new projects in October 2017, Papua has a suite of gold and copper exploration projects ranging from high-grade, vein-hosted gold, through to moderate-scale breccia and intrusion-related gold/copper, and right through to large-scale porphyry copper projects. The variety of project size, together with the potential for either open cut and underground extraction methods provides Papua with multiple opportunities for exploration success and development pathways.

 

 

The revised board includes the addition of a new CEO, David Price. David is a successful geologist and an experienced board member of publicly-listed companies. Importantly, he has relevant operational experience in both Australia and Papua New Guinea. The board is determined in its efforts to establish a growth-orientated company through exploration success, acquisition of new projects and will also examine potential for near-term development of projects as they arise.

 

In October 2017, the Company raised £1.4m through a placement of new shares. This funding was raised for operational use, primarily to commence the exploration activity on the Queensland properties . Since raising these funds, the Company has already completed its first drilling program at the Plateau prospect within the Lighthouse tenement in Queensland. This already demonstrates that Papua's board is focused on direct exploration expenditure and a results-driven attitude towards the advancement of the Company's projects.

In light of the Company's geographical focus now being on Australia and PNG, we are proposing to change the name of the Company from Papua Mining plc to Rockfire Resources plc at the forthcoming Annual General Meeting.

I anticipate an exciting and successful year ahead. I trust that you will join us as we aim to build Papua Mining towards being a mid-tier mineral exploration company with a focus on exploration success, growth and investment return.

 

Michael Somerset-Leeke

18 May 2018

 



 

Directors' Biographies

 

Michael Somerset-Leeke (aged 73) Chairman 

 

Michael Somerset-Leeke was formerly Chairman of Winchmore PLC, a quoted investment trust which developed a significant presence in the leisure sector. Prior to this, Mr Somerset-Leeke was Senior Partner at Coni & Covington Stockbrokers. Mr Somerset-Leeke has been a substantial shareholder in Papua since before the Company's admission to AIM in March 2012 and remains a significant shareholder.

David William Price (aged 52) CEO and Managing Director

 

David Price is a qualified geologist and an experienced mining executive and technical operator in the global mining industry. He has over 30 years' experience and has led companies through every stage of development from grassroots targeting to mining project finance. Mr Price has relevant copper porphyry, epithermal, vein-hosted and intrusion-related gold experience working in Australia, Papua New Guinea, Greece, Fiji Islands, Austria, Indonesia and the Philippines. Past appointments include CEO of Golden Tiger Mining Limited and CEO of Convergent Minerals Limited, both ASX-listed public companies. Mr Price is a Fellow of the Australasian Institute of Mining and Metallurgy and is a 'Competent Person' in Mineral Exploration in accordance with the Joint Ore Resource Committee Guidelines.

 

Hugh McCullough (aged 68)

 

Hugh McCullough has over 40 years' experience in gold and base metal exploration, principally in Ireland, Ghana, Mali and Papua New Guinea. In 1982, Mr McCullough became chief executive of Glencar Mining plc, a public company listed on the IEX (of the Dublin Stock Exchange) and the AIM market of the London Stock Exchange. Mr. McCullough was responsible for the management of Glencar for over 27 years until Glencar was taken over by Gold Fields Limited in September 2009. During his time at Glencar, Mr. McCullough was involved in a number of multi-million-ounce gold discoveries and oversaw the development of certain gold deposits from exploration to production. Mr.McCullough holds an Honours degree in Geology from University College Dublin and the degree of Barrister-at-Law from the King's Inns, Dublin.

 

Kieran Harrington (aged 55)

 

Kieran Harrington is a geologist with +30 years of experience and expertise in gold exploration, mine development, project evaluation and project management, with particular experience and past success in exploration of gold deposits in West Africa and Europe. He joined Glencar Mining plc in 1992 as a senior geologist where he was involved in the discovery of a major commercial mine in Ghana (Wassa) and the more recent discovery of the Komana Deposit in Southern Mali. He left Glencar as Technical Director on its acquisition by Gold Fields Limited in 2009. Prior to joining Glencar, Mr. Harrington worked with Tara Prospecting Ltd and Burmin Exploration and Development Ltd. Mr. Harrington is a Professional Geologist holding an Honours degree in Geology from the National University of Ireland, Galway.

 

 

 

Review of Operations

 

Papua Mining plc, through its four incorporated subsidiaries, holds six exploration tenements and three applications for tenements, with a total combined area of 976 square kilometres in Papua New Guinea and Australia.  Details of the EL's and EPM's currently held are given on the project pages of our Company website www.papuamining.com

EPM 25617 - Lighthouse Project, Queensland, Australia

 

Lighthouse is an under-explored gold/silver project which is interpreted as an intrusion-related, structurally-controlled (breccia) deposit. Sixty six (66) drill holes have been drilled at the 'Plateau Deposit' which forms part of the Lighthouse Project. Lighthouse lies within one of the most productive structural corridors on the east coast of Australia, hosting Pajingo (2.4MOz gold), Mt Leyshon (4MOz gold, 2.3MOz silver), Ravenswood (+4MOz gold) and Charters Towers (+7MOz gold).

 

At Plateau, previous exploration has intersected high grade gold and silver at the brecciated southern margin of a felsic plug. Outcrops of gossan, alteration by silica, magnetite and chlorite are vectors identified by previous mapping campaigns.

 

Tectonic breccia, gossan and rhyolite were first identified in 1979 by Pennarroya geologists during their search for volcanic hosted stratiform base metal deposits. Plateau and the Lighthouse tenement generally, has been explored by large corporations including Esso Exploration in 1984, City Resources Ltd. in 1987, CRA Exploration Limited in 1989, Central Coast Exploration in 1991, Aberfoyle Exploration between 1992 and 1997, Newcrest Exploration in 2005 and more recently by Ramellius Resources Limited.

 

Gold mineralisation at Plateau occurs within quartz and sulphide-bearing veins/stockwork, feeder dykes and polymict breccia at the margin of a felsic plug and has been mapped for almost 1km east-west. Mineralogy at Plateau comprises iron sulphides, opaline and jasperoidal silica, fine chalcedonic banding with minor free quartz and manganese oxide. A fine network of veining, brecciation and stockwork has developed in the altered andesite adjacent to the opaline veins to the north of Plateau.

 

Esso undertook the first percussion drilling program at Plateau in 1984, consisting of 7 holes for 875m and a further 7 diamond drill holes for 1,577m in a second round of drilling. City Resources Ltd. drilled an additional 17 percussion holes (PLP108 - PLP124) for a total of 815m. This initial percussion drilling was followed in 1988 by a further 31 reverse circulation holes for a total of 1,655m. A single deep Newcrest diamond drill hole tested for gold mineralisation at depth. This hole confirmed that the breccia is much larger than the surface expression suggests, having been intersected between 150m and 520m below surface. The hole intersected 2m @ 1.0g/t Au at 550m below surface and directly beneath the near-surface gold identified in earlier drilling.

 

Papua Mining undertook an RC drilling campaign in November/December 2017. This program consisted of 11 drill holes for a total of 2,111m and the deepest hole drilled was 250m. The aim of this initial drill programme is three-fold; infill between existing drill holes; extension along strike from existing drill holes, and exploration drilling of several new, semi-regional targets. It was reported at the end of December 2017 that drilling had been completed prior to the start of the wet season but at the period end, no results had been received back from the laboratory. Visual inspection of the drill chips recorded intercepts of sulphides and quartz veining, but results from the laboratory were still awaited. A table showing the drill collars is included below.

 

Table showing the drilling collars at the Plateau Prospect November/December 2017

Hole Number

EAST (AGD94)

NORTH (AGD94)

RL (m)

DEPTH (m)

DIP (°)

AZIMUTH
(mag)

TARGET

BPL001

459711

7740374

304

250

-60

040

Conceptual target only. Western margin of rhyolite.

BPL002

459841

7740315

312

200

-60

000

Southern margin of breccia. Strike extension.

BPL003

460099

7740435

327

200

-60

330

Conceptual target only. Eastern margin of rhyolite.  

BPL004

460297

7740405

329

250

-60

350

South-dipping eastern zone. Depth extension.

BPL005

460425

7740410

316

250

-60

350

South-dipping eastern zone. Depth extension.

BPL006

460634

7740469

305

125

-60

350

Conceptual target only. Eastern step-out.

BPL007

460355

7740502

308

100

-60

350

Conceptual target only. Parallel zone to north.

BPL008

460246

7740511

328

106

-60

350

Conceptual target only. Parallel zone to north.

BPL009

459824

7740177

316

130

-60

330

Conceptual target only. Undrilled NE structures.

BPL010

459548

7739894

293

250

-60

135

Conceptual target only. Southern magnetic low.  

BPL011

460221

7740601

326

250

-70

190

Conceptual target only. Southern margin of breccia.





2111




 

Subsequent to the period end, results were received from the laboratory.

 

Two RC holes (BPL002 and BPL004) were drilled into the main line of mineralisation with the aim of increasing the depth and strike extension of gold/silver mineralisation which was identified from historical drilling. These holes confirmed the validity of historical drilling results (from 30 years ago) and also successfully increased the lateral and vertical extensions to the mineralisation.

 

A further two holes (BPL001 and BPL003) were drilled off the line of mineralisation with the aim of definitively testing the east and west margins of a rhyolite dome which were previously thought to be unmineralised. Hole BPL001 intersected another gold lode (2m @ 0.83g/t Au + 9.2g/t Ag from 28m downhole) which expanded the exploration potential on the western side of the rhyolite dome.

 

Hole BPL003 intersected a broad zone of previously unknown silver (145m @ 1.2g/t Ag) starting at 16m downhole, which included a strong zone of 40m @ 3.0g/t Ag from 55m downhole. This hole was drilled on the eastern margin of the rhyolite dome which was previously thought to be unmineralized, providing an exciting new exploration zone to be followed up in further drilling.

 

As PML's knowledge of the Plateau Prospect increases through drilling, similarities to the operating Mt Wright Gold Mine (50km NE of Plateau) are being observed, which has historical resources of more than 1.5 million ounces. Importantly, the main lode mineralisation at Mt Wright was not intersected until 160m below surface with mineralisation extending down to 1,200m below surface.

 

Hole BPL005 was designed to drill through an interpreted fault zone and to definitively test an area where mineralisation was not anticipated. The hole intersected 2m @ 1.0g/t Au, 7.7g/t Ag and 1.0 % Zn from 139m downhole.

 

Drill hole BPL006 returned 20m @ 0.2% Cu from surface, which is the broadest elevated copper zone intersected to date at Plateau. This broad zone of elevated copper in the eastern-most hole sits on the western edge of a surface copper geochemical anomaly which is continuous between Plateau and Split Rock (2.5km north of Plateau). At Split Rock, which lies inside the Lighthouse tenement, historical surface rock samples collected in 2011 returned up to 11.36% Cu, 3.5 g/t Au, 38.1 g/t Ag and 0.4% Co.

 

Split Rock is a significant surface copper anomaly (2km x 1.5km), which represents another prospective target for PML. This prospect will be included in an Induced Polarisation (IP) geophysical survey being planned. This survey will assist in determining if Plateau and Split Rock form part of a much larger mineralised system, which could potentially be connected at depth.

 

BPL007 and BPL008 were both drilled into the main line of mineralisation with the aim of filling gaps in the historical drilling pattern, close to surface. These holes have confirmed the validity of historical drilling results (from 30 years ago) and have also successfully filled gaps in the drilling density to assist in the aim of delivering a Maiden Resource.

 

Two holes (BPL009 and BPL010) were designed as pure exploration holes and were drilled south of the main lode of mineralisation (250m and 650m respectively) with the aim of testing the prospectivity of regional structures. Hole BPL009 drill-tested a NE-striking, semi-regional fault which was barren of mineralisation, as was hole BPL010, which tested a remote, circular magnetic feature.

 

The final hole (BPL011) was a "scissor hole" drilled north of the main line of mineralisation to test for possible repetitions of mineralisation to the north and to drill back towards the mineralisation and parallel to the mineralisation to ensure holes were targeted in the correct orientation. BPL011 concluded that there is no repetition to the north and confirmed drilling orientation and additionally intersected 1m @ 1g/t Au at 244m downhole.

 

Drilling results showed significant intersections of gold and base metals for many of the holes drilled.

 

Papua Mining plc







Plateau Prospect, Queensland





Significant RC drilling results Nov/Dec 2017




Hole

From

To

Interval

Au

Ag

Zn

Cu

Number

(m)

(m)

(m)

(g/t)

(g/t)

(%)

(%)

BPL001

28

30

2

0.83

9.2



BPL002

39

61

22

1.86

22.3



BPL002

129

145

16

0.21

3.2

1.1


BPL003

32

95

63


2.3



BPL004

129

139

10

1.37

12.4



BPL005

139

141

2

1.00

7.7

1.0

0.2

BPL006

0

20

20




0.2

BPL007

16

36

20

0.50

2.5



BPL007

0

43

43


2.0



BPL007

0

22

22



0.4


BPL008

18

28

10

1.90

9.0



BPL008

25

49

24



0.5


BPL009

no significant assays

BPL010

no significant assays

BPL011

244

245

1

1.00




 

 

EPM 25715 - Marengo Project, Queensland, Australia

 

Marengo is a low-sulphidation, epithermal system which saw a gold rush develop during the late 1870's. The project hosts thirty-seven (37) gold diggings within multiple, hornfelsed intrusive events displaying varied composition, alteration and mineralisation. Hand-picked production is recorded as averaging 2oz/t Au (60g/t Au). Historical rock sampling returned highly anomalous results including 17g/t Au, 78g/t Ag and 2.16% Cu. Costeaning by previous explorers returned 12m @ 6.10g/t Au and thirty-nine (39) drill holes have been drilled by previous explorers.

 

Chalcedonic silica, banded quartz/sulphide epithermal veins and hydrothermal breccias have all been identified and particularly around the One Mile Mountain prospect. Little modern exploration has been undertaken and BGM considers the potential for discovery to be very high at Marengo.

 

The first company to take out a lease which covered the Marengo Goldfield was St Joseph Phelps Dodge in 1968. Phelps collected 2,200 stream sediment samples throughout the region and completed initial geological mapping. Carpentaria Gold took out the licence over Marengo between 1970 and 1972, followed by Central Coast Exploration, which formed a JV over the licence in 1972 but withdrew shortly after. Esso Exploration acquired the licence in 1975 with little work being completed and AOG Minerals took over the licence in 1976. This tenure was also short-lived and only preliminary work including geological mapping was undertaken.

 

The first serious work programs were put together by Intek Services when they acquired the tenement in 1981. Their exploration efforts concentrated on One Mile Mountain and the Three Brothers. This work concluded that One Mile Mountain required more follow-up work.

 

In 1987, Xenolith Gold acquired the tenement and drilled 38 RC drill holes. These holes were drilled at the following locations; Homeward Bound, Toomeys, Westward and Flat Reef. In 1994, Strike Exploration acquired the tenement and finally Australian Oriental Minerals was granted the licence over Marengo in 2007. Australian Oriental Minerals did not undertake any field work and all work was confined to desk top studies and literature reviews. No field work has been completed in the Marengo area since 1994.

 

The bulk of EPM 25715 is vastly under-explored. Although numerous copper and gold occurrences are mapped and the tenement contains abundant structural targets, there has been limited exploration work completed within the tenement area. Potential exists to identify structurally-controlled, intrusion-related copper and gold deposits occurring at the margins of the monzonites and granites mapped within the tenement. At the end of December 2017, no field work had been undertaken at Marengo during the last 12-month period.

 

 

EL 25531 - Copperhead, Queensland, Australia

 

Copperhead was initially explored by CRA Exploration in 1963/64 during regional exploration of the Normanby Goldfield, which lies 7 km to the west. This regional work identified the Copperhead area by outlining strongly anomalous copper results over a very large area.

 

Exploration was followed up by Carpentaria Exploration in 1970 with further drainage sampling and again, Copperhead returned strongly anomalous copper assays. Fortuitously, in January 1970, Cyclone Ada caused severe flooding in the region and the heavy rains washed out dense undergrowth from the tributaries of the Andromache River and Copperhead was literally unearthed.

 

Historical auger sampling at Copperhead delineated a 3.5km x 1.5km copper anomaly. This zone contains a 2.8km x 0.8km core high grade anomaly, which has a peak result of 0.55% Cu. Subsequent drilling was focused at the central section of the high-grade anomaly only.

 

Subsequent work has shown that Julivon Creek (the stream draining Copperhead) had a large number of mineralised (chalcopyrite, pyrite, molybdenum) shears for at least half its length. It was due to Cyclone Ada that Copperhead was discovered! In 1972, Carpentaria Exploration drilled 5 drill holes and the results from this drilling are outstanding, with each hole intersecting visible copper mineralisation for large intervals of its length. Based on the core assay results, Carpentaria estimated a mineral resource in 1972 which does not comply with the JORC Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012 Edition).

 

In 1988, WMC briefly explored the area surrounding Copperhead. Costain Australia acquired the tenement in 1989 and re-logged and sampled the original drill core from the 1972 Carpentaria drilling. No work has been completed in the immediate area surrounding Copperhead since 1989.

 

Mineralisation at Copperhead is typically pyrite- and chalcopyrite-filled fractures and veins with occasional molybdenite. Subsurface mineralisation is confined to and controlled by fractures and quartz veins. Pervasive hairline fractures are dominant, annealed by chalcopyrite and pyrite filling, with numerous fractures/veins thickening to several centimetres. Copper mineralisation appears to be both spatially and genetically (syn/post) related to pegmatite and aplite phases. Copper-bearing veins are noted to overprint pegmatite and aplite dykes, suggesting that the copper source is chronologically late and yet to be identified. Molybdenum mineralisation is less abundant than either chalcopyrite or pyrite but is essentially identical in its distribution.

 

The copper anomaly is not confined and remains open in all directions. The auger anomaly suggests that the mineralised zone could potentially be over 3.5km long and 1.5km wide. Further drilling is expected to add material tonnes to the deposit. Copperhead provides opportunity to estimate an impressive JORC resource with limited financial outlay and in an expedited timeframe. Real potential exists to define a world-class porphyry deposit at Copperhead. At the end of December 2017, no field work had been undertaken at Copperhead during the last 12-month period.

 

EL 2322 and EL 2051 - Mt Visi Project, New Britain, PNG

 

Initial prospecting in 2014 led to the discovery of significant copper and gold mineralisation in surface outcrop. Between December 2015 and March 2016, five diamond core drill holes were drilled for a total of 776 metres. The deepest hole drilled was to a downhole depth of 211 metres.

 

Geological logs from this drilling highlight potassic alteration, anomalous copper mineralization and intrusive diorite. There are clear signs that the drilling has encountered weakly mineralised porphyry and potential exists for a much larger porphyry target in the immediate vicinity of the drilling.

 

Follow-up, infill soil sampling on the Southeast Anomaly and ridge & spur sampling indicated that the copper in soil values are more consistently anomalous approximately 2-3 km southeast from the drilled target area at Mt. Visi. These results highlighted the necessity to carry out further exploration in the area east and southeast of Mt. Visi.

 

An initial appraisal of the drill core from Mt Visi has been undertaken and further logging and examination is in progress. Alteration and sulphide zonation, characteristic of a mineralising porphyry, have been encountered both at surface and in the drilling at Mt. Visi. Inner zone borniteK-feldspar ± biotite alteration gives way to magnetitechalcopyritesilica distally, while epidote occurs in the upper parts of the system where it has some spatial and temporal association with sericite. Chlorite overprints much of the pre-existing hydrothermal alteration and is strongly associated with pyrite. The bulk of the hydrothermal alteration is hosted within a plagioclasehornblende phyric diorite, that is intimately associated with significant shear zones and hydrothermal breccias.

 

Sulphide mineralisation crops out over a significant area at surface in the drilling area and was also encountered in all drill holes. Bornite and chalcopyrite cooccur, almost invariably together with quartz and/or magnetite, within the diorite. Fine molybdenum is evident, usually associated with quartz.

 

Pyrite mineralisation is abundant but rarely associated in any frequency with either bornite or chalcopyrite. Pyrite is widespread at surface within the eastern portion of the diorite and in the volcanics adjacent to the eastern diorite margin. In drill core, pyrite mineralisation is very strong in the lower half of VE22DDH001.

 

Hydrothermal alteration mineral assemblages, including high temperature potassic, inner propylitic, outer propylitic and phyllic, form telescoping haloes over and surrounding a plagioclase-hornblende phyric diorite body. The intrusive system at Mt. Visi is concentrically zoned and indicative of a nearby mineralising hydrothermal source.

 

The altered / mineralised diorite mapped at surface in the 'mineralised corridor' crops out over an area approximately 120m x 40m, with the associated hydrothermal alteration approximately 150m x 80m. There is potential for the development of a cluster of porphyry deposits such as those seen in a similar environment at Wafi--Golpu in PNG.

 

There are multiple vectors towards higher grade mineralisation at the Mt. Visi Prospect, with potassic alteration intensity, quartz vein density and copper sulphide mineralization concentration all increasing with depth in holes VE22DDH003, VE22DDH004 and VE22DDH005. Spot assays from several samples in VE22DDH001 suggest a notable increase in molybdenum with depth. A structural intersection is considered an appropriate model for the diorite emplacement, hydrothermal alteration, shearing and major hydrothermal brecciation encountered by drilling.

 

Assay results for 20 samples selected from VE22DDH001 yielded results of up to 0.22 g/t Au (at 81.7m), 0.14% Cu (at 159.1m) and 77ppm Mo (at 149.3m). An interval in V22DDH004 from 49m - 120m (71m) downhole was also assayed by the laboratory. Copper grades were mostly anomalous and the total intercept averaged 382ppm Cu, which is 30% higher than the corresponding copper grade from the XRF analysis. The same 71m interval averaged 0.04g/t Au. Anomalous copper was seen in four of the five holes drilled and the assays received for the selected sections of core confirm that the system is mineralized. At the end of December 2017, no field work had been undertaken at Mt Visi during the  previous 12-month period.

 

 

EL 1462 - Tripela Project, New Britain, PNG

 

Exploration activities on our Tripela porphyry copper project were limited to desk-top studies during the year.

 

Mapping and sampling in 2011/12 discovered significant copper soil anomalism at Tripela, with float and outcrop sampling identifying numerous occurrences of in-situ, high-grade copper with grades up to 29% Cu returned from outcrop assays.

 

Subsequent shallow diamond drilling confirmed the presence of zoned argillic and phyllic alteration which we believed to be marginal to a porphyry body. Follow-up, deeper drilling intersected high temperature, inner propylitic alteration, characteristic of nearby porphyry development. An aggregate total of 9,031m has been drilled over the past four years.

 

As described above, the work to date has identified a significant porphyry system with strong vectors supporting the potential for an economic copper-gold porphyry orebody. At the end of December 2017, no field work had been undertaken at Tripela during the previous 12-month period.

 

 

Key Performance Indicators and Risk Management

 

Key performance indicators

 

The Board monitors KPIs which it considers appropriate for a group at Papua Mining's stage of development.

 

As a mineral exploration business, an important factor is a steadily improving market perception of the progress and value of the business leading to an improving share price, continued support from shareholders and therefore the ability to raise new equity capital at increasing prices, thus minimising dilution for those early investors who bore significant risk.

 

The KPIs for the Group are as follows:

 

Financial KPIs

 

Shareholder return - the performance of the share price. 

The Company listed on AIM in March 2012 at a share price of £0.44 and issued further shares in February 2013 at £0.80, in June 2014 at £0.20, in December 2015 at £0.01, in May 2016 at £0.03 and in October 2016 at £0.01 per share.  The share price at 1 June 2017 was £0.01 and additional funds were raised in October 2017 at £0.0115 per share.

 

Exploration expenditure - funding and development costs. 

The availability of sufficient cash to facilitate continued investment and funding of exploration programmes is essential.  The Group monitors the availability of sufficient cash to fund exploration programmes.  At 31 December 2017 the Group had cash and cash equivalents of £1,257,194 (2016: £375,447).

 

Non financial KPIs

 

Environment management - the Group has environmental policies in place. 

The Group is aware of the potential impact that its operations may have on the environment.  The Group ensures that, at a minimum, its subsidiaries comply with the local regulatory requirements and industry standard principles for environmental and social risk management. In Australia, the Group has statutory Environmental Permits granted by the Queensland Government.

 

Performance against these environmental policies is continuously monitored.  The Directors consider that this has served to minimise any negative impact of current exploration activities on the environment.

 

Operational - exploration success and the addition of quality Exploration projects.

Exploration activity during the year has focused heavily on the Lighthouse tenement. The Directors are encouraged by the prospectivity of the Group's other Exploration Licences and work is expected to be done on each of the tenements throughout the year ahead. The Group, through its 100%-owned subsidiary company has accumulated exploration ground in Queensland to ensure a "buffer zone" to protect the Lighthouse tenement from rival exploration companies and also to increase its exposure to highly prospective ground in close proximity to the Lighthouse tenement.

 

Risk Management

 

The Directors consider that assessing and monitoring the inherent risks in the exploration business, as well as other financial risks, is crucial for the success of the Group.  Risk assessment is essential in the Group's planning processes.  The Board regularly reviews the performance of projects against plans and forecasts.  Further detail on management of financial risk is set out in note 15.

 

Principal Risks and Uncertainties

 

The management of the business and the execution of the Board's strategy are subject to a number of risks:

·        the success of mineral exploration projects is, by their nature, inherently uncertain, and the availability of new information can significantly change estimates of mineral resources;

·        the risk of sovereign, social or political uncertainty in both Australia and Papua New Guinea;

·        the viability of exploration projects is largely driven by commodity prices and commodity prices can be subject to volatile fluctuations;

·        Liquidity, currency and Interest Rate variations represent risks associated with a Group operating in several jurisdictions

 

 

The principal risks and the measures taken by the Group in order to mitigate these risks are set out in more detail below.

 

Exploration and development risk

 

The Group's business operations are subject to risks and hazards inherent in the exploration industry. The exploration for and the development of mineral deposits involves significant risks which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, it is impossible to ensure that the Group's current exploration programmes will result in a profitable, commercial mining operation.

 

The Board aims to manage the development of the Group as a successful exploration business by ensuring that additional prospective licences are applied for and granted on a timely basis, or otherwise acquired. To help mitigate exploration risk, the Board also employs qualified and experienced personnel - all of whom have relevant operational experience in Australia and Papua New Guinea.

 

Political Risk

 

There is a risk that assets will be lost through expropriation, unrest or war. Papua Mining has recently further minimized its exposure to political risk by acquiring key projects in Australia. PML now operates in two jurisdictions with relatively stable political systems, established fiscal and mining codes and a well-established and proven mining industry.

 

Papua Mining further minimizes risk by ensuring that the majority of cash funds are securely held within financial institutions of high standing outside of Papua New Guinea.

 

Social and anti-mining disruption is increasing in most jurisdictions globally and there is increasing regulatory pressure for mining companies to engage and include communities and landowners. Papua actively communicates with and informs landowners and communities of its expectations and plans for field work and long-term objectives. In Australia, there are clear guidelines set by the Queensland Government for approaching landowner discussions and Papua adheres to these guidelines strictly in its efforts to minimize risk from social opposition to exploration and mining. 

 

Commodity Risk

 

Commodities are subject to high levels of volatility in price and demand.  The price of commodities depends on a whole range of factors, which are outside the control of the Group.  There is the risk the price for minerals will fall to a point where it becomes uneconomic to extract them from the ground.  This is an interest risk of the mining industry, mitigation of which is currently outside of the group's control whilst it is still in an exploration, rather than extraction, phase. Papua has recently decreased its commodity risk by acquiring gold projects in Queensland, thereby reducing the Company's sole exposure to copper.

 

Liquidity Risk

 

There is a risk of running out of working and investment capital. The Group relies for funding on the issue of share capital. The Group has no borrowing and maintains tight financial and budgetary control to keep its operations cost effective. Although there can be no absolute assurance that adequate funding will be available when required, the Directors are confident that they will secure additional funding when required to do so, as demonstrated by the fundraisings in October 2016 and October 2017.

 

Currency risk

 

Fluctuations in currency exchange risks can significantly impact cash flows. The Group maintains currency in Sterling, Australian Dollars and Papua New Guinea Kina to finance its overseas operations. In 2017 the Group has had exposure to Sterling, Euro, Australian Dollars and Papua New Guinea Kina.  The mix of currencies is such that the Directors believe the Group's exposure is minimal.  The Directors do however regularly monitor currency exchange rates and make judgments as to whether to enter into hedging contracts accordingly.  Currently no such hedging contracts are in place.

 

 

 

Interest rate risk

 

The only significant interest-bearing asset within the Group is cash which is largely held in the United Kingdom.  The Directors constantly review the interest rate to ensure optimum return on deposits for the Group.

 

Strategic report approved on behalf of the Board.

 

 

David W Price

Chief Executive Officer

 

18 May 2018


Directors' Report

 

Principal Activity

 

The principal activities of the Group are the exploration for gold and copper resources in Australia and Papua New Guinea (PNG). The Group's strategy is to explore for and, where the Directors believe that it is commercially feasible, develop deposits of gold and/or copper. The Company strategy includes considering opportunities for project sale at a point when any of the Groups projects become appropriately advanced enough to consider such options.

 

On 16 October 2017, the Group acquired 100% of the voting rights of BGM Investments Pty Ltd, an Australian-based business, thereby obtaining control. The acquisition was made to expand the Group's geographical exposure to the exploration activities.

 

The Group currently holds three granted Exploration Licences (EL's) in PNG, three Exploration Permit for Minerals (EPM's) in Queensland, Australia and two Exploration Permit for Mineral Applications (EPMA's), also in Queensland.

 

Financial overview

 

The loss for the year is in line with the Directors' expectations. With significant funding (£1.44m) being raised in October 2017, the Directors are confident that they will be able to secure additional funding when required to do so. The Directors are also of the view that the investment sentiment in the resource sector is improving, to the extent that the exploration success the Company has achieved to date should enable it to raise sufficient additional exploration funding to continue the exploration programmes in both jurisdictions.

 

A detailed review of the Group's business, including its targets and strategies is given in the Chairman's Statement and the Review of Operations.

 

Results and Dividends

 

The results for the year are in line with Directors' expectations.  The Directors do not recommend a dividend.

 

Going Concern 

 

The Directors have prepared a cash flow forecast which supports the Directors' reasonable expectation that Papua Mining plc has adequate resources to continue in operational existence for a period of at least 12 months from the date of signing these financial statements. This cash flow forecast assumes that the exploration programme will continue at a specified rate which has been built into this forecast, and that the Group has sufficient cash resources to meet those exploration plans. Thus, they have adopted the going concern basis of accounting in preparing the annual financial statements.

 

 

Directors

 

The Directors in office during the year are listed below. The interests of the Directors in the shares of the Company at the relevant dates were as follows:


As at

As at

As at

Options held


31-Dec

31-Dec

31-Dec

31-Dec


2017

2016

2015

2017


 Ordinary Shares

 Ordinary Shares

 Ordinary Shares

Options






Michael Somerset-Leeke

51,151,102

37,991,102

23,191,102

-

David W Price

13,600,000

-

-

6,600,000

Hugh McCullough

504,571

504,571

504,571

1,997,886

Kieran Harrington

8,392

328,392

328,392

1,997,886

John Haggman

14,000,000

-

-

4,000,000

Paul Johnson*

20,869,565

-

-

-

Michael Jolliffe*

185,004

185,004

185,004

626,763

John Hutchison*

-

-

-

-

*As at 31 December 2017 or at the date of retirement if earlier.

 

On November 23, 2017 Kieran Harrington sold 320,000 Shares which he held at 31 December 2016. David Price and John Haggman were allocated Ordinary Shares and Options as part of the BGM transaction to acquire BGM Investments Pty Ltd ("BGM") which finalized on October 16, 2017. Michael Somerset-Leeke, David Price, Paul Johnson and John Haggman acquired Ordinary Shares and Warrants resulting from the Placement which finalized on October 16, 2017.

 

Substantial Shareholdings

 

As at 16 May 2018, being the latest practical date prior to publication of this document, the Company was aware of the following holdings of 3% or more of the issued share capital of the Company:


Shares in the company

% of the Company's issued share capital




Lynchwood Nominees Limited

46,228,892

13.46

Jim Nominees Limited

40,361,150

11.76

Hargreaves Lansdown (Nominees) Limited

29,840,096

8.69

Beaufort Nominees Limited

17,944,557

5.23

Pershing Nominees Limited

16,384,621

4.77

WB Nominees Limited

13,224,451

3.85

A&H Advisory Pty Limited

13,000,000

3.79

Blue Lake Resources Pty Limited

13,000,000

3.79

Edward Fry

13,000,000

3.79

Hargreaves Lansdown

  11,388.652

3.32




 

 

Directors' remuneration

 

 

With the addition of a new CEO in October 2017, salaries were again payable by the Group. Payments to Non-Executive Directors resumed in October 2017, however there were no benefits paid to Directors during 2017.

 

The Group made payments into the private pension scheme of the Chief Executive Officer during 2017 in accordance with the Australian Superannuation Act 2005.

 

Share Options were granted to David Price and John Haggman as part of the transaction to acquire BGM in October 2017. Michael Somerset-Leeke, David Price, Paul Johnson and John Haggman were all granted Warrants as part of their participation in a placement in October 2017, in which all places were issued with one Warrant for every placing share for which the subscribed .

 

Full details of Directors' emoluments are set out in note 18 of the financial statements.

 

 

Environmental Policy

 

The Group's projects are subject to the relevant Australian and PNG laws and regulations relating to environmental matters.

 

The Group's strategy is to explore for and, where the Directors believe that it is commercially feasible, develop deposits of gold and/or copper within the jurisdictions of Australia and PNG. It is the Group's intention to conduct its activities in a professional and responsible manner, for the benefit of the Company's shareholders, its employees and the national and local communities within which it operates.

 

The Group aims to, at all times, conduct its operations in an environmentally responsible manner and in accordance with relevant legislation. The Group aims to adopt Best Practice policies as recommended by the World Bank, the International Council on Mining & Metals ("ICMM") and others where the Group deems that local legislation to be inadequate in terms of environmental protection. The Group has in place a detailed Field Operations Guidelines Manual which covers in considerable detail the measures to be taken by field personnel to minimize any negative environmental impact of current exploration activities on the environment.

 

The Group also recognises the enormous potential of its activities for positive impact on the communities in which it operates and strives to optimise these positive impacts as far as is possible.

 

 

Directors' Indemnities

 

In October 2017, the Group took out Directors and Officers Indemnity Insurance with Lloyd's Insurance to cover its Directors and Officers against the costs of defending themselves in legal proceedings taken against them in that capacity and in respect of any damages resulting from those proceedings. In November 2017, the PML subsidiary, BGM Investments Pty Ltd. took out Public Liability Insurance with Sterling Insurance to cover any claims against its operational activities in Australia.

 

Political contributions

 

No political donations have been made.

 

 

Corporate Governance

 

The Board of Directors is committed to maintaining high standards of corporate governance and is accountable to the Company's shareholders for the proper corporate governance of the Group.  The UK Corporate Governance Code does not apply to AIM companies, and PM plc instead follows the principles of corporate governance set out in the QCA Guidelines.  PM plc operates within the mining sector in an effective and efficient way, with integrity and due regard for the interests of shareholders, and applies principles of general governance applicable to the size and stage of development of the Group.

 

Audit Committee

 

The Audit Committee ensures the operation of good financial practices throughout the Group, ensures that controls are in place to protect the assets of the Group, reviews the integrity of financial information, reviews the interim and annual financial statements and reviews all aspects of the audit programme.

 

The Audit Committee is chaired by Mr. Michael Somerset-Leeke and also comprises Mr. Hugh McCullough.         

 

Remuneration Committee

 

The Remuneration Committee is responsible for establishing a formal and transparent procedure for developing policy on executive remuneration and for setting the remuneration packages of individual Executive Directors and will meet at least twice per annum.

 

The Remuneration of Non-Executive Directors will be a matter for the executive members of the Board.

 

The Remuneration Committee is chaired by Mr. Michael Somerset-Leeke and also comprises Mr. Hugh McCullough.         

 

 

Auditor

 

The auditor, Grant Thornton, Dublin has indicated its willingness to continue in office and a resolution proposing that they be re-appointed will be put to the forthcoming Annual General Meeting.

 

Statement of Disclosure to Auditor

 

The Directors who held office at the date of approval of the Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware and each Director has taken all 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 Company's auditor is aware of that information.

 

Shareholders' consent will be sought at the forthcoming Annual General Meeting which will propose the reappointment of Grant Thornton Dublin as independent auditor of the Company and to authorise the Directors to determine the auditor's remuneration.

 

 

On behalf of the board

 

 

David W Price

Chief Executive Officer

 

18 May 2018


Papua Mining plc

Reports and Financial statements for the year ended 31 December 2017

 

Statement of Directors' Responsibilities

 

The Directors are responsible for preparing the Strategic Report, the Director's Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and have elected to prepare the company financial statements in accordance with IFRS as adopted by the EU.

 

The group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and the Company and the financial performance of the Group.  The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.

 

In preparing the Group and Company financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgments and accounting estimates that are reasonable and prudent;

·      state whether they have been prepared in accordance with IFRSs adopted by the EU;

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006.  They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The Group's report and accounts will be published on the Group's website and in this regard the Directors accept responsibility for the maintenance and integrity of the PM plc website.

 

 

 

 

 

 

Annual General Meeting and Recommendation

 

The Board considers that the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and the Group as a whole and its unanimous recommendation is that shareholders support these proposals as the Directors intend to do in respect of their own holdings. Further details regarding the location and timing of the Company's forthcoming Annual General Meeting will be provided shortly.

 

On behalf of the board

 

 

David W Price

Chief Executive Officer

 

18 May 2018


INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PAPUA MINING PLC

 

Opinion

 

We have audited the financial statements of Papua Mining plc for the year ended 31 December 2017, which comprise the Consolidated statement of financial position, Company statement of financial position, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, Company statement of changes in equity, Consolidated statement of cash flows, Company statement of cash flows and the related notes, including the summary of significant accounting policies.

 

The financial reporting framework that has been applied in their preparation is applicable or UK law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

In our opinion:

 

•              the consolidated financial statements give a true and fair view in accordance with IFRSs as adopted by European Union, of the state of the assets, liabilities and financial position of the Group at 31 December 2017 and of its loss and cash flows for the year then ended;

•              the parent Company statement of financial position gives a true and fair view, in accordance with IFRSs as adopted by European Union as applied in accordance with the provisions of the Companies Act 2006 of the state of the parent Company's assets, liabilities and financial position of the Company as at 31 December 2017 and of its cash flows for the year then ended; and

•              the financial statements have been properly prepared and in accordance with the requirements of the Companies Act 2006.

 

Basis for opinion

 

We conducted our audit in accordance with International Standards on Auditing (UK) ('ISAs') and applicable law. Our responsibilities under those standards are further described in the 'responsibilities of the auditor for the audit of the financial statements' section of our report. We are independent of the Group and Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in United Kingdom, namely the Financial Reporting Council's Ethical Standard concerning the integrity, objectivity and independence of the auditor. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Conclusions relating to going concern

 

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

•              the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

•              the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

 

Under the Listing Rules we are required to review the directors' statement, set out on page 13 of the Annual Report & Accounts, in relation to going concern.

 

We have nothing to report having performed our review.

 

Key audit matters

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and the directing of efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and therefore we do not provide a separate opinion on these matters.

Overall audit strategy

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgments as discussed in the key audit matters section. We also addressed the risk of management override of internal controls, including evaluating whether there was any evidence of potential bias that could result in a risk of material misstatement due to fraud.

How we tailored the audit scope

We tailored the scope of our audit taking into account the areas where the risk of misstatement was considered material to the Group, taking into account the nature of the Group's business and the industry in which it operates.

In establishing the overall approach to our audit we assessed the risk of material misstatement at a Group level, taking into account the nature, likelihood and potential magnitude of any misstatement. As part of our risk assessment, we considered the control environment in place at Papua Mining plc.

Materiality and audit approach

The scope of our audit is influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.

Based on our professional judgment, we determined materiality for the Group as follows: 1.0% of total assets for the financial year ended 31 December 2017. 

We agreed with the board of directors that we would report to them misstatements identified during our audit above 5% of materiality as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Significant risks identified

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are set out below as significant risks together with an explanation of how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole. This is not a complete list of all risks identified by our audit.

Impairment of capitalised exploration costs

The Group has significant exploration costs included under intangible assets amounting to £1,634,574 as at 31 December 2017. Management's assessment of the recoverable amount of the capitalised exploration costs require estimation and judgment around assumptions used, including reserves and resources and related production profiles, future operating and capital expenditure, commodity prices, discount rates and exchange rates. Changes to assumptions could lead to material changes in the estimated recoverable amount.

Our response

In order to address this risk, our audit procedures included testing of the following:

·      Reviewed management's identification of indicators of impairment under IFRS 6;

·      Assessed methodology used by management to estimate the recoverable value of each cash generating unit (CGU) to ensure consistency with IFRS 6; and

·      Assessed reasonableness of each key assumption used in management's cash flow forecasts used to calculate recoverable values by evaluating the assumptions used by management as to its reasonableness and check the consistency with other estimates used in the consolidated financial statements.

 

Acquisition accounting for significant business combination

 

The Group completed the 100% acquisition of BGM Investments Pty Ltd on 16 October 2017 at a cost of £648,000 payable through cash of £50,000 and the issue of 52 million Papua shares at £0.0115 per share the business of BGM, a private Australian company with three projects covering gold, copper, silver and zinc exploration targets. As a result, effective from the 16 October 2017, BGM became a subsidiary of the Group and was consolidated from that date. As the amounts involved are material to the consolidated financial statements and the fair value assessment is complex and requires significant management judgment for the assessment of the fair value of assets acquired and the liabilities assumed at the date of acquisition, the matter was significant to our audit.

 

Our response

In order to address this risk, our audit procedures included testing of the following:

·      Assessed and evaluated the share purchase agreements and challenged acquisition accounting assessments made by management;

·      Assessed completeness of fair value adjustments recognized by reading sale and purchase agreements, and board papers; and

·      Evaluated adequacy of the disclosures provided by the Group

 

Other information

Other information comprises information included in the Annual Report, other than the financial statements and our auditor's report thereon, including the Chairman's Statement, Strategic Report and Directors' Report. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies in the financial statements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

The Directors' assessment of the prospects of the Company and the principal risks that would threaten the solvency or liquidity of the Company

Under the Listing Rules we are required to review the Directors' statement that they have carried out a robust assessment of the principal risks facing the company and the Directors' statement in relation to the longer term viability of the company. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review.

 

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

·      adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

·      the financial statements are not in agreement with the accounting records and returns; or

·      certain disclosures of directors' remuneration specified by law are not made; or

·      we have not received all the information and explanations we require for our audit.

 

Responsibilities of the management and those charged with governance for the financial statements

Management is responsible for the preparation of the financial statements which give a true and fair view in accordance with IFRS as adopted by the European Union, and for such internal control as directors determine necessary to enable the preparation of financial statements are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group and Company's financial reporting process.

Responsibilities of the auditor for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

•              Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for their opinion.

•              The risk of detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•              Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and Company's internal control.

•              Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

Responsibilities of the auditor for the audit of the financial statements (continued)

•              Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and Company's ability to continue as a going concern. If they conclude that a material uncertainty exists, they are required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify their opinion. Their conclusions are based on the audit evidence obtained up to the date of the auditor's report. However, future events or conditions may cause the Group and Company's to cease to continue as a going concern.

•              Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a matter that achieves a true and fair view.

The auditor shall communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that may be identified during the audit.

The auditor shall report on the audit of a group, and we obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the group financial statements. The auditor is responsible for the direction, supervision and performance of the audit, and remains solely responsible for the auditor's opinion.

The auditor shall also provide those charged with governance with a statement that they have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on their independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, the auditor determines those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. These matters are described in the auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, the auditor determines that a matter should not be communicated in the report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Corporate governance statement

In our opinion, based on the work undertaken in the course of our audit of the financial statements, the description of the main features of the internal control and risk management systems in relation to the financial reporting process included in the Corporate Governance Statement, is consistent with the financial statements and has been prepared in accordance with applicable law.

Based on our knowledge and understanding of the Group and the Company and its environment obtained in the course of our audit of the financial statements, we have not identified material misstatements in the description of the main features of the internal control and risk management systems in relation to the financial reporting process included in the Corporate Governance Statement.

In our opinion, based on the work undertaken during the course of our audit of the financial statements, the information prepared in accordance with applicable legal requirements and rules 7.2.2, 7.2.3 and 7.2.7 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority is contained in the Corporate Governance Statement.


Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Company's compliance with ten provisions of the UK Corporate Governance Code specified for our review. We have nothing to report having performed our review.

 

 

Report on other legal and regulatory requirements

We were appointed by the Board of Directors on 2 May 2016 to audit the financial statements for the financial year ended 31 December 2015. This is the third year we have been engaged to audit the financial statements of the Group and the Company.

We are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs UK Our audit approach is a risk-based approach and is explained more fully in the 'responsibilities of the auditor for the audit of the financial statements' section of our report.

We have not provided non-audit services prohibited by the FRC's Ethical Standard and have remained independent of the entity in conducting the audit.

The audit opinion is consistent with the additional report to the audit committee.

The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the company's members, as a body, in accordance with chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

Cathal Kelly (Senior Statutory Auditor)

For and on behalf of
Grant Thornton
Chartered Accountants &
Statutory Auditor

Dublin 8

Date: 18 May 2018


Papua Mining plc

Consolidated statement of financial position at 31 December 2017

 




Note



2017


2016







£


£

Assets


















Non-current assets








Intangible assets


8



1,634,574


1,519,386

Goodwill



20



          602,456


                   -







2,237,030


1,519,386

Current Assets








Cash and cash equivalents

11



1,257,194


375,447







1,257,194


375,447










Total assets





3,494,224


1,894,833










Equity and liabilities







Equity attributable to shareholders

of the parent                                           12





Share capital





6,339,011


5,624,153

Share premium





13,114,312


10,432,630

Other reserves





2,295,035


2,083,178

Share based payment reserve




1,074,289


957,198

Foreign exchange reserve




-


775,610

Share warrant reserve




29,676


-

Retained deficit





(19,619,882)


(18,111,708)

Total equity





3,232,441


1,761,061










Current liabilities








Trade and other payables

14



261,783


133,772










Total equity and liabilities




3,494,224


1,894,833

 

 

The financial statements on pages 32 to 52 were approved and authorised for issue by the Board of Directors on 18 May 2018 and signed on its behalf by:

 

 

 

David W Price

Chief Executive Officer                                                                       

 

 

 

 


Papua Mining plc

Company statement of financial position at 31 December 2017

 




Note



2017


2016







£


£









          

Assets


















Non-current assets








Intangible assets


8



376,258


406,405

Investments


9



648,000


-

Trade and other receivables

10



1,284,918


1,112,981







2,309,176


1,519,386

Current Assets








Cash and cash equivalents

11



1,128,510


368,623







1,128,510


368,623










Total assets





3,437,686


1,888,009










Equity and liabilities







Equity attributable to shareholders                   12






Share capital





6,339,011


5,624,153

Share premium





13,114,312


10,432,630

Other reserves





1,801,872


1,636,602

Share based payment reserve




1,074,289


957,198

Foreign exchange reserve




-


759,933

Share warrants reserve




29,676



Retained deficit





(19,043,270)


(17,656,279)

Total equity





3,315,890


1,754,237










Current liabilities








Trade and other payables

14



121,796


133,772










Total equity and liabilities




3,437,686


1,889,009

 

The financial statements on pages 32 to 52 were approved and authorised for issue by the Board of Directors on 18 May 2018 and signed on its behalf by:

 

 

 

David W Price

Chief Executive Officer                                                                       

 

 

 


 



Papua Mining plc

Consolidated statement of comprehensive income for the year ended 31 December 2017

 




Note



2017


          2016







£


£










Administrative expenses





(380,388)


(6,091,360)

Operating loss

5



(380,388)


(6,091,360)









Loss before taxation


(380,388)


(6,091,360)








Income tax expense

6



-


-

Loss for the year attributable to the

owners of the company




(380,388)


(6,091,360)









Items that may be reclassified subsequently to profit or loss:







Other comprehensive (loss)/gain - foreign exchange translation movement




(245,363)


775,610

Total comprehensive income attributable to the owners of the company




(625,751)


(5,315,750)










Loss per share attributable

to shareholders







Basic


7



(0.01)


(0.06)

Diluted


7



(0.01)


(0.06)

 

 

The Company has elected to take exemption under section 408 of the Companies Act 2006 to not present the parent Company statement of comprehensive income. The loss for the Company is shown in the company statement of changes in equity.

 

 

 

 

 


Papua Mining plc

Consolidated statement of changes in equity for the year ended 31 December 2017



Share Capital

Share Premium

Other Reserves

Share-based Payment Reserve

Share Warrants Reserve

Foreign Exchange Reserve

Retained Deficit

Total Equity



£

£

£

£

£

£

£

£

At 1 January 2016


 5,554,264

 9,747,519

2,083,178

923,699

                     -

-

(12,020,348)

 6,288,312

Comprehensive income






-




Loss for the financial year


-

-

-

-

-

-

 (6,091,360)

(6,091,360)

Foreign exchange translation movement


-

-

-

-

-

775,610

-

775,610

Total comprehensive income


-

-

-

-

-

775,610

(6,091,360)

(5,315,750)

Transactions with owners










Share issued during the year


 69,889

 685,111

-

-

-

-

-

 755,000

Share-based expense


-

-

-

 33,499

-

-

-

 33,499

Total Transactions with owners


 69,889

 685,111

 -

 33,499

 

-

-

-

 

788,499

As at 31 December 2016


 5,624,153

 10,432,630

2,083,178

957,198

-

775,610

 (18,111,708)

 1,761,061

Comprehensive income










Loss for the financial year


-

-

-

-

-

-

 (380,388)

(380,388)

Foreign exchange translation movement


-

-

-

-

-

(245,363)

-

(245,363)

Total comprehensive income


-

-

-

-

-

(245,363)

(380,388)

(625,751)

Transactions with owners










Share issued during the year


191,348

2,009,153

-

-

-

-

-

2,200,501

Share issuance cost


-

 (148,756)

-

-

-

-

-

 (148,756)

Share warrants issued during the year


 

-

-

 

-

 

-

 16,994

 

-

 

-

16,994

Share-based expense


-

-

-

28,392

-

-

-

28,392

Total Transactions with owners


 191,348

 1,860,397

 -  

28,392

16,994

-

-

2,097,131

Change in functional currency*


523,510

821,285

211,857

88,699

12,682

(530,247)

(1,127,786)

-

At 31 December 2017


 6,339,011

13,114,312

2,295,035

1,074,289

29,676

-

 (19,619,882)

 3,232,441

*For the year ended 31 December 2017 the Company changed its functional currency from U.S. Dollar to Great Britain Pounds (GBP) and adopted the GBP as its reporting currency. The change in functional currency has been applied prospectively and the change in reporting currency has been applied retrospectively. Gains and losses from these translations are recognised in other comprehensive income and included in "Foreign exchange reserve". Please refer to the "foreign currency transactions" accounting policy note for further detail.



Papua Mining plc

Company statement of changes in equity for the year ended 31 December 2017



Share Capital

Share Premium

Other Reserves

Share-based Payment Reserve

Share Warrants Reserve

Foreign Exchange Reserve

Retained Deficit

Total Equity



£

£

£

£

£

£

£

£

At 1 January 2016


 5,554,264

 9,747,519

1,636,602

923,699

                     -

-

(11,723,040)

6,139,044

Comprehensive income






-




Loss for the financial year


-

-

-

-

-

-

 (5,933,239)

(5,933,239)

Foreign exchange translation movement


-

-

-

-

-

759,933

-

759,933

Total comprehensive income


-

-

-

-

-

759,933

(5,933,239)

(5,173,306)

Transactions with owners










Share issued during the year


 69,889

 685,111

-

-

-

-

-

 755,000

Share-based expense


-

-

-

 33,499

-

-

-

 33,499

Total Transactions with owners


 69,889

 685,111

 -

 33,499

 

-

-

-

 

788,499

As at 31 December 2016


 5,624,153

 10,432,630

1,636,602

957,198

-

759,933

 (17,656,279)

 1,754,237

Comprehensive income










Loss for the financial year


-

-

-

-

-

-

(288,438)

(288,438)

Foreign exchange translation movement


-

-

-

-

-

(247,040)

-

(247,040)

Total comprehensive income


-

-

-

-

-

(247,040)

(288,438)

(535,478)

Transactions with owners










Share issued during the year


191,348

2,009,153

-

-

-

-

-

2,200,501

Share issuance cost


-

 (148,756)

-

-

-

-

-

 (148,756)

Share warrants issued during the year


 

-

-

 

-

 

-

 16,994

 

-

 

-

16,994

Share-based expense


-

-

-

28,392

-

-

-

28,392

Total Transactions with owners


 191,348

 1,860,397

 -  

28,392

16,994

-

-

2,097,131

Change in functional currency*


523,510

821,285

165,270

88,699

12,682

(512,893)

(1,098,553)

-

At 31 December 2017


 6,339,011

13,114,312

1,801,872

1,074,289

29,676

-

 (19,043,270)

 3,315,890

*For the year ended 31 December 2017 the Company changed its functional currency from U.S. Dollar to Great Britain Pounds (GBP) and adopted the GBP as its reporting currency. The change in functional currency has been applied prospectively and the change in reporting currency has been applied retrospectively. Gains and losses from these translations are recognised in other comprehensive income and included in "Foreign exchange reserve". Please refer to the "foreign currency transactions" accounting policy note for further detail.


Papua Mining plc

Consolidated statement of cash flows for the year ended 31 December 2017





      2017


            2016





£


£

Cash flow from operating activities














Total comprehensive expense

for the year before tax




(380,388)


   (6,091,360)

Adjustments to reconcile net loss before

income tax to cash flow from operating

activities:






Impairment of intangible assets




-


5,823,708

Share based payments




28,392


33,499

Foreign exchange translation




(35,613)


12,739

Movement  in  operating assets/liabilities

- Other debtors




-


             12,175

- Other liabilities




80,007


             (47,704)

Net cash flow from operating activities



(307,602)


(256,943)








Cash flow from investing activities







Exploration expenditure




(214,496)


(324,501)

Acquisition of BGM Investments Pty Ltd



  

(49,900)


-

Net cash generated from investing activities




(264,396)


(324,501)








Cash flow from financing activities







Proceeds from issuance of ordinary shares



1,602,501


755,000

Share issue costs




(148,756)


-

Net cash generated from financing activities




1,453,745


755,000








Net increase in cash and cash equivalents




881,747


173,556








Cash and cash equivalents at the beginning of year




375,447


201,891








Cash and cash equivalents at the end of the year




1,257,194


375,447








 





      2017


      2016



      


     £


     £

Cash flow from operating activities














Total comprehensive expense for the year before tax




(288,438)


(5,933,239)








Adjustments to reconcile net loss before

income tax to cash flow from operating

activities:






Impairment of investments




-


1,649,308

Impairment of intangible assets




-


990,106

Share based payments




28,392


33,499

Foreign exchange translation




(193,713)


604,386

Net (increase)/decrease in operating assets







- Other receivables




(171,937)


2,173,519

Net decrease in operating liabilities







 - Other liabilities




(11,976)


   (50,082)

Net cash flow from operating activities



(637,672)


(532,503)








Cash flow from investing activities







Exploration expenditure




(6,186)


(47,475)

Acquisition of BGM Investments Pty Ltd




(50,000)


-

Net cash used in investing activities




(56,186)


(47,475)








Cash flow from financing activities







Proceeds from issuance of ordinary shares



1,602,501


755,000

Share issue costs




(148,756)


-

Net cash generated from financing activities




1,453,745


755,000








Net decrease in cash and cash equivalents




759,887


175,022








Cash and cash equivalents at the beginning of year




368,623


193,601








Cash and cash equivalents at the end of the year




1,128,510


368,623








 

 

Papua Mining plc

Notes to the financial statements 

 

1              Group and principal activities

 

For the purposes of these financial statements, the term "PM plc Group" is defined as the companies Papua Mining plc (the "Company"), Papua Mining Limited, BGM Investments Pty Ltd, Aries Mining Limited and Sagittarius Mining Limited.

 

Papua Mining plc is a public limited company, quoted on AIM, and is incorporated and domiciled in England and Wales. The company's registered office is 27/28 Eastcastle Street, London W1W 8DH, United Kingdom.

 

The PM plc Group's main activity is the exploration for gold and copper resources in Australia and Papua New Guinea, as set out in the Strategic Report and the Directors' Report.

 

2              Adoption of new and revised standards

 

The financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) and adopted by the EU. 

 

New and amended standards and interpretations

 

The Group applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2017. The nature and the impact of each amendment is described below:

 

Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative

The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The amendment is not applicable since the Group has no financing activities arising from loans only on the issuance of shares.

 

Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealised losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. The amendment has no significant impact to the Group as it has not recognised deferred tax asset with respect to unrealised losses.

 

Annual Improvements Cycle - 2014-2016

Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in IFRS 12

The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10-B16, apply to an entity's interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. This has no impact to the Group's financial statements as the Group does not have interest in subsidiary that is included in a disposal group or classified as held for sale.

 

At the date of authorisation of these financial statements, amendments to existing standards have been published by the IASB that are not yet effective. These are listed below:

 

Standard/interpretation

Effective date

IFRS 9

Financial Instruments

1 January 2018

IFRS 15

Revenue from Contracts with Customers

1 January 2018

IFRS 2

Share-based Payments - Classification and Measurement of Share-based Payment Transactions

1 January 2018

IFRS 16

Leases

1 January 2019

 

In 2017, the Group did not early adopt any of these new or amended standards and do not plan to early adopt any of the standards issued but not yet effective. The Group do not anticipate that there will be a material impact on the adoption of these standards and interpretations on its financial statements on initial adoption.

 

 

3              Basis of preparation and significant accounting policies

 

a)    Basis of preparation

These consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations (collectively IFRSs) as adopted for use in the European Union.

 

The financial statements are prepared on the historical cost basis except for the measurement of certain financial instruments at fair value as described below.  The principal accounting policies adopted are set out below.

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies

 

b)    Basis of consolidation

Subsidiaries are entities controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

·      Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);

·      Exposure, or rights, to variable returns from its involvement with the investee; and

·      The ability to use its power over the investee to affect its returns.

 

Generally, when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·      The contractual arrangement(s) with the other vote holders of the investee;

·      Rights arising from other contractual arrangements; and

·      The Group's voting rights and potential voting rights.

 

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Intra-group balances and any unrealised gains or losses or income or expenses arising from intra-group transactions are eliminated in preparing the Group financial statements.

 

c)     Going concern

 

The Directors have prepared a cash flow forecast which supports the Directors' reasonable expectation that Papua Mining plc has adequate resources to continue in operational existence for a period of at least 12 months from the date of signing of the financial statements. This cash flow forecast assumes that the exploration programme will continue at a specified rate which has been built into this forecast, and that the Group has sufficient cash resources to meet those exploration plans. Thus, they have adopted the going concern basis of accounting in preparing the annual financial statements. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. In assessing whether the going concern assumption is appropriate, management has considered the group's existing working capital as well as future commitment. Management is confident that the Group have sufficient resources available to meet their existing and planned future commitments and thus have prepared the financial statements on a going concern basis.

 

d)    Business combinations

The Group applies the acquisition method in accounting for business combination. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset of liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair value.

 

3      Basis of preparation and significant accounting policies (continued)

 

e)    Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

·      Expected to be realised or intended to be sold or consumed in the normal operating cycle;

·      Held primarily for the purpose of trading;

·      Expected to be realised within twelve months after the reporting period; or

·      Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

·      It is expected to be settled in the normal operating cycle;

·      It is held primarily for the purpose of trading;

·      It is due to be settled within twelve months after the reporting period; or

·      There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current.

 

f)     Intangible assets - exploration and evaluation costs

Exploration and evaluation expenditure costs comprise costs associated with the acquisition of mineral rights and mineral exploration and are capitalised as intangible assets pending the feasibility of the project. They also include certain administrative costs that are allocated to the extent that those costs can be related directly to operational activities.

 

If an exploration project is deemed successful based on feasibility studies, the related expenditures are transferred to development and production assets and amortised over the estimated useful life of the ore reserves on a unit of production basis. Where a project is abandoned or considered to be no longer economically viable, the related costs are written off to profit or loss.

 

To date the PM plc Group has not progressed to the development and production stage in any areas of operation.

 

g)     Impairment of non financial assets

 

The PM plc Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the PM plc Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used.

 

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset. For assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the PM plc Group makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.

 

3              Basis of preparation and significant accounting policies (continued)

 

h)     Financial instruments

Recognition, initial measurement and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities is described below.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

The PM plc Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired.

Other receivables: These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Cash and cash equivalents: These include cash in hand, deposits held at call with banks and bank overdrafts.

Investments in subsidiaries:  These are included in these financial statements at the cost of the ordinary share capital acquired.  Adjustments to this value are only made when, in the opinion of the Directors, a permanent diminution in value has taken place and where there is no prospect of an improvement in the foreseeable future.

Classification and subsequent measurement of financial liabilities

On initial recognition, financial liabilities are classified as financial liabilities at fair value through profit or loss (FVTPL), loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

Financial liabilities are measured subsequently at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss.

All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance expense or finance income.

The PM plc Group classifies its financial liabilities as:

Trade and other payables: These are initially recognised at fair-value and then carried at amortised cost. They arise principally from the receipt of goods and services.

Equity instruments: These are recorded at fair value on initial recognition net of transaction costs.

Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Impairment of financial assets

The Group assesses at each end of the reporting period whether a financial asset or a group of financial assets is impaired.  An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred 'loss event') has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. 

Evidence of impairment may include indications that the contracted parties or a group of contracted parties is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization, and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.



Papua Mining plc

Notes to the financial statements 

 

3              Basis of preparation and significant accounting policies (continued)

 

h)     Financial instruments (continued)

Financial Assets at Amortized Cost

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. 

Financial Assets at Amortised Cost

If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, the asset is included in the group of financial assets with similar credit risk and characteristics, and that group of financial assets is collectively assessed for impairment.  Those similar credit risk characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtor's ability to pay all amounts due according to the contractual terms of the assets being evaluated.  Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in the collective assessment of impairment.

If there is objective evidence that an impairment loss on financial assets carried at amortized cost has been incurred, the amount of loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original EIR (i.e., the EIR computed at initial recognition).  All impairment losses are recorded only through the use of an allowance account.  The amount of loss is recognized in consolidated statement of comprehensive loss.

Fair value measurement

Management uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case, management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

 

i)      Provisions

A provision is recognised in the balance sheet when the PM plc Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessment of the time value jf money and, where appropriate, the risks specific to the liability.

 

 

j)      Current and deferred tax

 

The tax expense represents the sum of the current tax expense and deferred tax expense.

 

Tax payable is based on taxable profit for the year. Taxable profit differs from accounting profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and further excludes items that are never taxable or deductible. The Group's liability for current tax is measured using tax rates that have been enacted or substantively enacted by the reporting date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available, against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or if from the initial liabilities in a transaction that affect either the taxable profit or the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the asset to be recovered.

 

3    Basis of preparation and significant accounting policies (continued)

 

j)      Current and deferred tax (continued)

 

Deferred tax is calculated at the rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in profit and loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. 

 

k)     Pensions

 

Pension costs charged in the financial statements represent the contributions payable by the group during the year into defined contribution pension schemes.

 

l)      Foreign currency transactions

 

Functional and reporting currency

Functional currency - Prior to 31 December 2017, the Group's functional currency was the United States Dollars (USD). The functional currency was revisited by the Group in late 2017 as a result of a significant increase in the level of GBP transactions in the fourth quarter. Upon detailed analysis of all facts and circumstances it was determined based on relevant cash flows and the economic environment that the functional currency had changed from USD to GBP.

 

Reporting currency - In addition, beginning 1 January 2017 the Group also changed its reporting currency from USD to GBP to provide greater clarity to users of the financial statements. The change in reporting currency was applied retrospectively effective beginning 1 January 2016. Financial statements for all periods presented have been recast into GBP. All monetary assets and liabilities denominated in foreign currencies are translated into GBP using exchange rates in effect as of the date of the balance sheet date. The GBP translated amounts of nonmonetary assets and liabilities as of 31 December 2016 became the historical accounting basis for those assets and liabilities as of 31 December 2016. Revenue and expense transactions are translated at the approximate exchange rate in effect at the time of the transaction. All resulting exchange differences were recognised within foreign exchange reserve, a separate component of shareholders' equity.

 

In applying the change in reporting currency the Group applied the current rate method for presenting the comparative period presented. Under this method all assets and liabilities of the Group's operations were translated from their USD functional currency into GBP using the exchange rates in effect on the balance sheet date and shareholders' equity were translated at the historical rates. Opening shareholders' equity at 1 January 2016 has been translated at the historic rate on that date and any other movements in shareholders' equity during the year from 1 January 2016 to 31 December 2016 were translated using the appropriate historical rates at the date of the respective transaction. All other revenues, expenses and cash flows were translated at the average rates during the reporting periods presented. The resulting translation adjustments are reported under comprehensive income as a separate component of shareholders' equity.

 

Any difference which arose between the historical basis for nonmonetary assets and liabilities set as of 1 January 2017 and the historical basis for nonmonetary assets and liabilities due to the change in reporting currency was posted to the foreign exchange reserve translation adjustment in 2016.

 

Transactions and balances

Transactions in currencies other than the functional currency of the Group entities are recorded at the exchange rates prevailing at the dates of the related transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, as well as from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the statement of comprehensive income. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are translated to the respective functional currencies of the Group's entities at the rates prevailing on the relevant balance sheet date.

 

Foreign operations

In the PM plc Group's financial statements, all assets, liabilities and transactions of PM plc Group entities with a functional currency other than the US Dollar are translated into US Dollar upon consolidation. The functional currency of the entities in the PM plc Group has remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into US Dollars at the closing rate at the reporting date. Income and expenses have been translated into US Dollars at the average rate over the reporting period. Exchange differences are charged/credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

 

 

l)      The principal exchange rates used to the Sterling £ in the preparation of the 2017 financial statements are:


       Annual average

               Year end


2017

2016

2017

2016





US$

0.77

0.74

0.74

0.81

PNG Kina

0.24

0.23

0.23

0.25

Australian Dollar

0.59

0.55

0.58

0.59

Euro

0.87

0.82

0.89

0.86

 

m)  Investments (parent company)

 

Investments held as non-current assets comprise investments in subsidiary undertakings and are stated at cost less any provision for any impairment.

 

n)  Equity and reserves

 

Equity and reserves comprises the following:

 

-       "Share capital" is the nominal value of equity shares.

-       "Share premium" represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs

-       "Share based payment reserve" represents a reserve arising on the grant of share options to certain Directors and key employees.

-       "Other reserve" represents a reserve arising from a group reorganisation in 2011.

-       "Retained deficit" comprises cumulative profit and loss to date.

 

o)  Share based payments

 

The Group issues equity-settled share-based payments to certain directors and key employees. Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of instruments that will eventually vest with a corresponding adjustment to equity. Fair value is measured by use of a Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions, and behavioral considerations.

 

Non-vesting and market vesting conditions are taken into account when estimating the fair value of the option at grant date. Service and non-market vesting conditions are taken into account by adjusting the number of options expected to vest at each reporting date.

 

p)   Critical accounting estimates and judgements

 

The PM plc Group makes estimates and assumptions concerning the future. The resulting estimates will by definition, seldom equal the actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Certain amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, but actual results may differ from the amounts included in the financial statements. The Board has considered the critical accounting estimates and assumptions used in the historical financial information and concluded that the area of judgement that has the most significant effect on the amounts recognised in the financial statements concern.

 

Determination of functional currency

 

Management has concluded that the Great Britain Pounds (GBP) is the currency of the primary economic environment in which the group operates and therefore it's functional currency.  The GBP is the currency in which business risks and exposures are measured and the Company's assets and liabilities are largely denominated and settled in GBP.

 

p)   Critical accounting estimates and judgements (continued)

 

Control assessment in a business combination

 

As disclosed in Note 20, the Group owns 100% of the voting rights in BGM Investments PTY Ltd. Management has assessed its involvement in BGM in accordance with IFRS 10's revised control definition and guidance and has concluded that it has control of the said company. 

 

Recoverability of deferred exploration costs

 

All costs associated with gold and copper exploration are capitalised on a project basis, pending a decision on the economic feasibility of the project. This capitalisation of such costs gives rise to an intangible asset in the consolidated statement of financial position. Exploration costs are capitalised where it is considered likely that the amount will be recovered by future exploitation, sale or alternatively where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. This requires management to make estimates and assumptions as to the future events and circumstances, especially in relation to whether an economically viable extraction operation can be established. Such estimates are subject to change and following initial capitalisation, should it become apparent that recovery of the expenditure is unlikely, the relevant capitalised amount will be impaired and written off to the consolidated statement of comprehensive income on disposal of the net investment.

 

Impairment of goodwill and non-financial assets

 

Determining whether goodwill and non-financial assets are impaired requires an estimation of the value in use of the cash generating units to which the assets have been allocated. The value in use calculation requires the directors to estimate the future cash flows to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual cash flows are less than expected, a material impairment may arise.

 

Provision for impairment of financial assets

 

Determining whether the carrying value of financial assets has been impaired requires an estimation of the value in use of the investment in subsidiaries and joint venture vehicles. The value in use calculation requires the directors to estimate the future cash flows expected to arrive from these vehicles and a suitable discount rate in order to calculate present value.

 

Allowances for impairment of trade receivables 

 

The Group estimates the allowance for doubtful trade receivables based on assessment of specific accounts where the Group has objective evidence comprising default in payment terms or significant financial difficulty that certain customers are unable to meet their financial obligations.  In these cases, judgment used was based on the best available facts and circumstances including but not limited to, the length of relationship.

 

Deferred tax assets

 

Deferred tax is recognised based on differences between the carrying value of assets and liabilities and the tax value of assets and liabilities. Deferred tax assets are only recognised to the extent that the Group estimates that future taxable profits will be available to offset them.

 

Fair value measurement

 

Management uses valuation techniques to determine the fair value of financial instruments (where active

market quotes are not available) and non-financial assets. This involves developing estimates and

assumptions consistent with how market participants would price the instrument. Management bases its

assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

 

4    Segmental reporting

 

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the exploration activities. The Group's reportable segment under IFRS 8 Operating Segments is as follows:

 

Exploration: Being the exploration activities of gold and copper resources in Papua New Guinea and Australia. The chief operating decision maker is the Chief Executive Officer.

 

Information regarding the Group's reportable segment is presented below.

 

The following is an analysis of the Group's results by reportable segment:



              Segment Loss




2017

2016




£

£

Exploration segment










Admin fees

(68,789)

(63,919)

Loan write-off

-

(306)

Bank charges

(9,583)

-

Travel

(12,809)

-

Legal

(687)

-




 

The accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 3. Segment losses represent the losses incurred by each segment without allocation of central administration costs and directors' salaries, other operating income, share of profit or loss of jointly controlled entities, profit on disposal of jointly controlled entities, interest costs, interest income and income tax expense. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

 

Other segment information:

 


   Additions to non-current assets



2017

2016



£

£

Exploration assets arising from business combination


45,444

-

Exploration additions


214,496

324,501

 

In addition to the above, impairment losses of £Nil (2016: £5,823,708) were recognised in respect of intangibles. These impairment losses were attributable exploration costs.

 

The Group operates in two principal geographical areas: Papua New Guinea and Australia. The Group's information about its non-current assets* by geographical location are detailed below:

 

 



             Non-current assets*




2017

2016









          £

          £

Papua New Guinea



1,034,321

1,112,981

Australia



223,996

-

 

 



 

1,258,317

 

1,112,981

*Non-current assets excluding goodwill, financial instruments and investment in jointly controlled entities.

 

The management information provided to the chief operating decision maker does not include an analysis by reportable segment of assets and liabilities and accordingly no analysis by reportable segment of total assets or total liabilities is disclosed.

 

5              Operating loss




2017


2016





£


£

Operating loss is stated after charging:







Fees payable to the PM plc Group's auditor for the audit of PM plc Group's financial statements




29,941


25,950

Fees payable to the PM plc Group's auditor

for taxation services




2,995


1,635

Share based payment expense




28,392


33,499

Foreign exchange losses/(gains)




(58,376)


(16,286)

Impairment of intangible assets




-


5,729,813








6              Taxation

Group




2017


2016





£


£

Domestic current year tax







U.K. corporation tax - current year




-


-








Deferred tax







Origination and reversal of temporary differences




-


-








Income tax expense




-


-








Factors affecting tax charge for the year







Loss on ordinary activities before taxation




(380,388)


(6,091,360)








Loss on ordinary activities at the UK standard rate of 19.25% (2016: 20.00%)


(73,225)


(1,218,272)








Effects of:







Carried forward losses (UK)




56,601


20,071

Non-deductible expenses




16,624


1,198,201

Current tax charge




-


-

The Group has UK tax losses of approximately £3,275,504 (2016: £2,981,475) available to carry forward against future trading profits, subject to agreement by HMRC. No provision has been made for a potential deferred tax asset of approximately £630,535 (2016: £573,934) arising from UK tax losses. The Group has not recognised a deferred tax asset on any losses carried forward due to the uncertainty of future profits.

 

7              Loss per share

Group




2017


2016





£


£

Loss for the purpose of basic

and diluted earnings per share




(380,388)


(6,091,360)

Numbers







Weighted average number of ordinary shares for

the purpose of basic and diluted earnings per share




243,448,670


100,077,285








Loss per share - basic




(0.01)


(0.06)

Loss per share - diluted




(0.01)


(0.06)








 

 

Loss per share has been calculated by dividing loss for the year by the weighted average number of ordinary shares in issue during the year.

Diluted loss per share has been calculated by dividing the loss for the year by the weighted average number of ordinary shares in issue during the year adjusted to assume conversion of all dilutive potential options/warrants.  In accordance with the provisions of IAS33, shares under option were not regarded as dilutive in calculating diluted earnings per share.

 

8              Intangible assets

 

Group




2017


2016





£


£

Exploration costs














Cost







At beginning of year




15,904,738


12,909,702

Additions through business combination

Additions




45,444

214,496


-

324,502

Foreign currency translation




  (1,430,001)


2,670,534

At the end of year




14,734,677


15,904,738








Impairment







At beginning of year




(14,385,351)


(6,653,974)

Impairment charge




-


(5,823,708)

Foreign currency translation




1,285,248


(1,907,669)

At the end of year




(13,100,103)


(14,385,351)








Net Book Value




1,634,574


1,519,386

 

Company




2017


2016





£


£

Exploration costs














Cost







At beginning of year




1,489,494


1,193,490

Additions




6,397


47,475

Foreign currency translation




(133,312)


248,529

At the end of year




1,362,579


1,489,494








Impairment







At beginning of year




(1,083,089)


-

Impairment charge




-


(990,106)

Foreign currency translation




96,768


(92,983)

At the end of year




(986,321)


(1,083,089)








Net Book Value




376,258


406,405

 

 

The Directors have reviewed all exploration costs for indications of impairment. They impair exploration costs where the exploration project is no longer considered economically viable or where the carrying amount exceeds the recoverable amount. An assets recoverable amount is the higher of the assets fair value less costs to sell and its value in use. The impairment charge of £NIL (2016 £5,823,708) in respect of the Group intangible assets and £NIL (2016:£1,649,308) in respect of the Company intangible assets, is included within administration expenses in the Consolidated Statement of Comprehensive Income.

In assessing potential impairment charges, the directors consider economic factors and the mining industry as a whole and the effect of market value of metal prices. The Directors also consider recent transactions within the industry where the acquisition price of similar companies that are publically available. In light of this, in the prior year, the directors decided that the value of the intangible assets held, was no longer in line with the value stated in the previous accounting periods and as such, have opted to impair the intangible assets down to the value of the company. This was deemed a more accurate valuation for the intangible assets and the future value they will add to the company. No such indicators were in place in the current year.

 

9              Investments

Company




2017


2016





£


£

Additions (see Note 20):







Investment in BGM Investments Pty Ltd




648,000


-








 

 

An impairment charge of £NIL (2016: £1,649,308) was recognized by the Company in respect of the carrying value of investments during the year 2017. The investment was fully impaired due to the decline in the investee's assets.

 

The Group's principal subsidiary undertakings at 31 December 2017, all of which are included in the consolidation, were as follows:

 


Proportion

Class of

Nature of

                       Country of

Name of Company

held

shareholding

business                           

                 incorporation

Subsidiary undertakings





Papua Mining Limited

100%

Ordinary

Exploration

British Virgin Islands

Aries Mining Limited

100%

Ordinary

Exploration

Papua New Guinea

Sagittarius Mining Limited

100%

Ordinary

Exploration

Papua New Guinea

BGM Investments Pty Ltd

100%

Ordinary

Exploration

Australia

 

10           Trade and other receivables

Company




2017


2016





£


£








Amounts owed by Group undertakings (non-current)




1,284,918


1,112,981

 

There are no fixed terms of repayment of amounts owed by Group undertakings, which are technically repayable on demand.  As it is not intended for the amounts due to be repaid within one year these receivables have been classified in the financial statements as non-current assets. An impairment charge of £NIL (2016:£2,587,916) in respect of the amounts owed by group undertakings, is included within administration expenses in the Company Statement of Comprehensive Income. The Directors consider the carrying value of trade and other receivables to equal their fair value.

 

 

11           Cash and cash equivalents

Group




2017


2016





£


£








Cash at bank




1,257,194


375,447








Company




2017


2016





£


£








Cash at bank




1,128,510


368,623

 

Cash and cash equivalents comprise cash.

 

The directors consider the carrying value of cash and cash equivalents to equal fair value.

 

12     Equity

Group and Company




2017


2016





Number


Number








Issued share capital














Ordinary shares of £0.001 each

Deferred shares of £0.099 each




343,342,293

51,215,534


151,994,423

51,215,534












2017


2016





£


£

 

Issued share capital







Fully paid




5,408,245


5,222,332

 

Fully paid ordinary shares carry one vote per share and carry the right to dividends. There are no shares held by the entity or its subsidiaries or associates.

 

133,913,044 ordinary shares of £0.001 each were issued at a price of £0.0115 per share on 13 October 2017. In addition, 133,913,044 warrants to subscribe for ordinary shares of £0.001 each were granted at a price of £0.023. 1,087,000 ordinary shares of £0.001 each were issued at a price of £0.0115 per share on 13 October 2017 in lieu of fees incurred in connection with the placing and 6,150,435 warrants to subscribe for ordinary shares of £0.001 each were granted at a price of £0.023 and 4,347,826 ordinary shares of £0.001 each were issued at a price of £0.0115 per share on 13 October 2017 in lieu of fees incurred in connection with the placing.

 

The following table summarises the movements in warrants outstanding for the financial year ended 31 December 2017:

 




2017

 






 Number of options

 

 


Weighted

average exercise

 price (£)









Outstanding at 1 January 2017





-


-

Granted during the year





140,063,479


0.02

Outstanding at 31 December 2017





140,063,479


0.02









Exercisable at 31 December 2017





140,063,479


0.02

 

 

12     Equity (continued)

Following the issue of share warrants, the following table lists the inputs used in calculating warrants reserve.

 

The inputs into the Black Scholes model are as follows:


2017


2016








Share price




1.15p


-

Exercise price




2.3p


-

Expected volatility




31%


-

Expected life




1-2 years


-

Discount rate




0.9%


-

 

40,000,000 ordinary shares of £0.001 each were issued at a price of £0.01 per share on 10 October 2016 and 11,200,000 ordinary shares of £0.001 each were issued at a price of £0.01 per share on 10 October 2016. In addition, 444,444 ordinary shares of £0.001 were issued to a trade creditor in settlement of an invoice for £5,000 and 1,777,778 ordinary shares of £0.001 were issued to a trade creditor in settlement of an invoice for £20,000. Also 13,800,000 ordinary shares of £0.001 were issued to satisfy a convertible note of £138,000.

 

2,000,000 ordinary shares of £0.001 each were issued at a price of £0.03 per share on 16 May 2016. In addition, 666,667 ordinary shares of £0.001 were issued to a trade creditor in settlement of an invoice for £20,000.

 

The Group recognised share warrants which was deducted to share premium of £29,676 (2016: £NIL).

 

Share premium

 

The share premium account represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

 

Share based payment reserve

 

Represents the reserve account which is used for the corresponding entry to the share based payment charge through profit and loss (note 13).

 

Share warrant reserve

 

Represents the reserve account which is used for the corresponding entry to the share warrants issued during the year.

 

Foreign currency translation reserve

 

Represents the reserve account which is used for the translation of the Group's functional currency from USD to GBP.

 

Other reserves

 

Represents the reserve arising from a share for share exchange as part of a group reorganisation in 2011.

 

Capital management

 

The Group's objectives when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to ensure sufficient resources are available to meet day to day operating requirements.  The Group defines capital as 'equity' and 'cash' as shown in the consolidated statement of financial position.  As at 31 December 2017 the Group held equity and cash balances of £3,232,441 and £1,257,194 (2016: £1,761,061 and £375,447) respectively.


The Board of Directors takes full responsibility for managing the Group's capital and does so through board meetings, review of financial information, and regular communication with officers and senior management.

 

In order to maximise ongoing development efforts, the Company does not pay dividends.  The Group's investment policy is to invest its cash in deposits with high credit worthy financial institutions with short term maturity.  The Group expects its current capital resources will be sufficient to carry out its operating plans over the foreseeable future.

 

 

 

13     Share based payments

Details of share options granted are as follows:


2017


2016

 


Number of options

 

 


Weighted

average exercise

 price (£)


 Number of options

 

 


Weighted

average exercise

 price (£)









 

Outstanding at 1 January 2017

6,620,421


0.02


6,620,421


0.02

 

Granted during the year

9,000,000


0.02


-


-

 

Outstanding at 31 December 2017

15,620,421


0.02


6,620,421


0.02

 









 

Exercisable at 31 December 2017

15,620,421


0.02


4,413,614


0.02

 

 

No shares options were exercised in this or the prior period.

 

On 21 December 2015, share options were granted over 6,620,421 ordinary shares to certain employees.  These share options are exercisable at £0.02125 ($0.023) and the vesting periods are, 2,206,807 immediately on raising future fundraising, one year (2,206,807 shares) and two years (2,206,807) from the grant date.  The options lapse on the tenth anniversary of the grant date.

 

On 16 October 2017, 9,000,000 share options were granted to David Price and John Haggman. These share options are exercisable at £0.023 and the vesting periods are 3,000,000 immediately upon acquisition of BGM, one year (3,000,000 shares) and two years (3,000,000) from the grant date. The options lapse on the third anniversary of the date of grant.

 

The following tables list inputs to the models used for two plans for the years ended 31 December 2017 and 2016.

 

21 December 2015 grant date:

 

The inputs into the Black Scholes model are as follows:


2017


2016








Share price




1.88p


1.88p

Exercise price




2.12p


2.12p

Expected volatility




32%


32%

Expected life




1-2 years


1-2 years

Discount rate




1.87%


1.87%

 

 

16 October 2017 grant date (Share options):

 

The inputs into the Black Scholes model are as follows:


2017


2016








Share price




1.15p


-

Exercise price




2.3p


-

Expected volatility




42%


-

Expected life




1-3 years


-

Discount rate




0.9%


-

 

 

Expected volatility was determined by reference to the historical volatility of the share price of the Company.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

 

The Group recognised total expenses of £28,392 (2016: £33,499) relating to equity-settled share based payment transactions in the year.

 

14            Trade and other payables

 

Group




 

2017


2016





£


£








Trade payables




1,455


19,932

Other payables




73,354


79,266

Accruals




186,974


34,574





261,783


133,772

 

Company




 

2017


 

2016





£


£








Trade payables




1,455


19,932

Other payables




69,303


79,266

Accruals




51,038


34,574





121,796


133,772

 

The Directors consider the carrying value of trade and other payables to equal their fair value.

 

15           Financial instruments

 

In common with other businesses, the PM plc Group is exposed to risks that arise from its use of financial instruments. This note describes the PM plc Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

 

The significant accounting policies regarding financial instruments are disclosed in note 3.

 

The PM plc Group does not have any derivative products or any long term borrowings. The PM plc Group is not exposed to interest-bearing indebtedness. The exploration activities of the PM plc Group were financed by proceeds of issue of shares.

 

Principal financial instruments

 

The principal financial instruments used by the PM plc Group, from which financial instrument risk arises, are as follows:





2017


2016





£


£

Financial Assets







Cash and cash equivalents




1,257,104


375,447

Financial Liabilities







Trade payables




1,455


19,932

Other payables




120,204


79,264





121,659


99,196

 

The Directors consider that the fair value of the above financial instruments is equal to the carrying values.

 

General objectives, policies and processes

 

The Directors have overall responsibility for the determination of the PM plc Group's risk management objectives and policies and, while retaining ultimate responsibility for them, has delegated authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the PM plc Group's finance function. The Board receives regular reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

 

The overall objective of the Directors is to set policies that seek to reduce risk as far as possible without unduly affecting the PM plc Group's competitiveness and flexibility. The Directors consider that the risk components detailed below apply to the PM plc Group and is managed at Group level.

 

 

15           Financial instruments (continued)

 

Credit risk

Credit risk refers to the risk that the PM plc Group's financial assets will be impaired by the default of a third party. The PM plc Group is exposed to this risk primarily on its cash and cash equivalents as set out in note 11.

Credit risk is managed by ensuring that surplus funds are deposited only with well-established financial institutions of high quality credit standing.

 

 

 

Foreign currency risk

Foreign currency risk refers to the risk that the value of a financial commitment, recognised asset or liability will fluctuate due to changes in foreign currency rates.

 

The PM plc Group operates primarily in Australia and Papua New Guinea. Transactions are substantially denominated in PNG Kina, Australian $, Sterling and US Dollars. As such the PM plc Group is exposed to transaction foreign exchange risk. The mix of currencies and terms of trade with its suppliers are such that the Directors believe that the PM plc Group's exposure is minimal and consequently they have not, to date, specifically sought to hedge that exposure. Most of the PM plc Group's funds are in Sterling with only sufficient funds held overseas to meet local costs. Funds are periodically transferred overseas to meet local costs when required.

 

Commodity price risk

Commodity price risk is the risk that the PM plc Group's future earnings will be adversely impacted by changes in the market prices of commodities. The PM plc Group is exposed to commodity price risk as its future revenues may be determined by reference to market prices of copper and gold.

 

Liquidity risk

Liquidity risk relates to the ability of the PM plc Group to meet future obligations and financial liabilities. To date the PM plc Group has relied upon shareholder funding of its activities. Future exploration and development activities may be dependent upon the PM plc Group's ability to obtain further financing through equity financing or other means. Although the PM plc Group has been successful in the past in obtaining equity finance there can be no assurance that the PM plc Group will be able to obtain adequate financing in the future or that the terms of the financing will be favorable.

 

The financial statements have been prepared on a going concern basis and note 3(c) provides further information in this regard.

 

Sensitivity analysis

 

Foreign currency sensitivity analysis

Currency risks are defined by IFRS 7 as the risk that the fair value or future cash flows of a financial asset or liability will fluctuate because of changes in foreign exchange rates.

 

The following table details the transactional impact of changes in foreign exchange rates on financial assets and liabilities at the Balance Sheet date, illustrating the (decrease)/increase in PM plc Group operating result caused by a 10% strengthening of US$, PNG Kina and the Euro compared to the year end spot rate. The analysis assumes that all other variables, in particular other foreign currency exchange rates, remain constant. The PM plc Group operates in four different currencies, and those with a material impact are noted here:

 








Year

ended 31 December 2017


Year

ended 31 December 2016





£


£








US$




-


85

PNG Kina




-


-

Euro




200


2,000

Australian Dollar




-


-

 

16            Capital commitments

 

The PM plc Group's capital commitments relate to licence expenditure and related exploration activities, the cost of which will be met from future fundraising.

 

The PM plc Group currently holds six Exploration Licenses. The Group's licences will have total expenditure commitments of approximately £251,099 over the coming 12 month period.

 

17            Staff costs

 

Number of employees

 

The average monthly number of employees (excluding Directors) of the Group during the year was:

 





2017


2016















Administration




-


2

Technical




-


5





-


7

 

Employment costs (excluding directors)





2017


2016





£


£








Wages and salaries




-


26,998

Social security costs




-


3,783

Employee share based payment charge




-


33,499





-


64,280

 

18            Directors emoluments

 

Aggregate emoluments, including benefits in kind, by director are as follows:   

2017

Directors

Directors'

fees

 

Salary

Pension

contributions

Sub

total

Medical

insurance

Social

security

costs

Total


£

£

£

£

£

£

£









H McCullough

-

34,906

-

34,906

-

208

35,114

K Harrington

1,858

4,000

-

5,858

-

54

5,912

D Price

-

12,500

-

12,500

-


12,500

P Johnson

-

4,000

-

4,000

-

54

4,054

M Somerset-Leeke

J Haggman   

-

-

-

-

-

-

-

-

-

-

-

-

-

-


1,858

55,406

-

57,264

-

316

57,580

 

2016

Directors

Directors'

fees

 

Salary

Pension

contributions

Sub

total

Medical

insurance

Social

security

costs

Total


£

£

£

£

£

£

£









H McCullough

-

22,083

-

22,083

-

111

22,194

K Harrington

3,715

6,219

-

9,934

-

709

10,643

M Jolliffe

-

-

-

-

-

-

-

G Palm

-

-

-

-

-

-

-

K Lough

-

-

-

-

-

-

-


3,715

28,302

-

32,017

-

820

  32,837

 

 

 

 

 

 

Share options held by the directors as follows:

 





2017


2016





Number of options


Number of options








Michael Jolliffe




626,763


626,763

David W Price

John Haggman

Hugh McCullough




6,600,000

4,000,000

1,997,886


-

-

1,997,886

Kieran Harrington




1,997,886


1,997,886

 

The key management personnel of the Group are considered to be entirely represented by the Directors.

 

No Director has yet benefitted from any increase in value of share capital since issuance of the options.

 

No Director exercised share options in the year.

 

19            Related party transactions

 

As well as remuneration of Directors (note 18), the following transactions fall within the scope of IAS 24 Related Party Disclosures.

 

(1)    The Company was charged fees of £3,651 (2016:£0) during the year by AA Corporate Management in respect of accounting and company secretarial services. AA Corporate Management is controlled by Antoine Awad, a director of Papua Mining Limited.

 

(2)           Hybreasal Limited, a company connected to the director Kieran Harrington, charged fees of £1,858 (2016: £3,715) to the company during the year.  These fees are included within the remuneration stated in note 18.

 

At 31 December 2017 there were £1,858 (2016: £Nil) amounts payable to the above related parties.

 

20            Business Combination

 

On 16 October 2017, the Group acquired 100% of the voting rights of BGM Investments Pty Ltd, an Australian-based business, thereby obtaining control. The acquisition was made to enhance the Group's position in the exploration activities in Australia.

 

The details of the business combination are as follows.

 

Fair value of consideration transferred














Settled in shares






598,000

 

Settled in cash






50,000

 

 

Total






648,000

 








 



Book value


Fair value adjustments


Fair value

 



£


£


£

 








 

Intangibles


45,444


-


45,444

 








 

Cash at bank


100


-


100

 








 

Total assets


45,544


-


45,544

 








 

Creditors due within one year


(48,004)


48,004


-

 








 

Identifiable net assets


(2,460)


48,004


45,544

 








 

Goodwill on acquisition






602,456

 








 

Consideration settled in cash






50,000

 

Cash at bank acquired






(100)

 

Net cash outflow on acquisition






49,900

 

                                  

Consideration transferred

The acquisition of BGM was settled in cash amounting to £50,000 and the issue of own Papua shares of 52,000,000 at £0.115 or 598,000.

 

 

 

Identifiable net assets

The fair value of intangibles acquired as part of the business combination amounted to £45,444.

 

In addition, on acquisition date, creditors due within one year of BGM was settled by payment of the consideration amount. The fair value of these creditors due within one year at date of acquisition that was settled amounted to £48,004.

 

Goodwill

Goodwill of £602,456 is primarily related to growth expectations, substantial skill and expertise of BGM's Directors and expected cost synergies. Goodwill is not expected to be deductible for tax purposes.

 

BGM's contribution to the Group results

BGM incurred a loss of £38,714 for the 3-month period from 16 October 2017 to the reporting date, primarily due to administrative costs.

 

21            Non-cash transaction

 

During the year, the Group entered into a non-cash financing activity which is not reflected in the consolidated statement of cash flows. This transaction relates to the issuance of own Papua shares for 52,000,000 at £0.0115 or £598,000 to acquire the 100% voting rights of BGM Investments Pty Ltd on October 2017 (Note 20).

 

22            Post Balance Sheet Events

 

There are no post balance sheet events.

 

23            Control

 

The company is quoted on AIM and there is no individual controlling party.  The Directors' Report provides details of those shareholders with an individual holding exceeding 3% of issued share capital.

 

24            Approval of financial statements

 

The board of directors approved these financial statements on 18 May 2018.


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