Information  X 
Enter a valid email address

Metals Exploration (MTL)

  Print      Mail a friend

Friday 11 September, 2020

Metals Exploration

Final Results For The Year Ended 31 December 2019

RNS Number : 7976Y
Metals Exploration PLC
11 September 2020
 

METALS EXPLORATION PLC

 

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019

 

Metals Exploration plc (AIM: MTL) (the "Company" or the "Group"), the natural resources exploration and development company with assets in the Pacific Rim region, announces its final audited results for the year ended 31 December 2019.

 

The financial information set out in this announcement does not comprise the Group's statutory accounts for the year ended 31 December 2019. The financial information has been extracted from the statutory accounts of the Group for the year ended 31 December 2019. The auditors reported on these accounts. Their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006. The auditors made reference to a material uncertainty related to going concern in their report on the statutory accounts for the year ended 31 December 2019. The statutory accounts for the year ended 31 December 2018 have been delivered to the Registrar of Companies, whereas those for the year ended 31 December 2019 will be delivered to the Registrar of Companies following the Company's annual general meeting. Except where noted in the statutory accounts the accounting policies are consistent with those applied in the preparation of the interim results for the period ended 30 June 2019 and the statutory accounts for the year ended 31 December 2018, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

 

To access a full version of the 2019 annual report please go to the Company website investor centre web-page.

 

CHAIRMAN'S STATEMENT

 

Dear Shareholder,

 

At the time of writing the world continues to be in challenging times with the continuing COVID-19 pandemic. Despite a number of restrictions put in place by the Philippine government and other governments around the world that effect our supply chain, we have been able to remain operational with mining and gold production activities continuing, albeit at reduced mining rates and gold recovery rate.

 

The health and safety of our employees and stakeholders remains a paramount importance and we are pleased to say there has only been one COVID-19 case recorded at the mine site. Although we operate in a very remote mountainous location, in the north of the island of Luzon, the Group has implemented a number of on-site procedures to test for and quarantine potential COVID-19 cases to ensure, as far as possible, the safety of all of our employees and contractors . These protocols have kept several employees and contractors, who were COVID-19 positive, from gaining access to the mine site.

 

We continue to prioritize the development of our local community and have a strong partnership with the various national agencies and local governments from Barangay to Provincial level. During 2019, we continued to focus on health, education and capacity building amongst others in our local communities. In addition, during the COVID-19 crisis, we have adapted our programs with further community support to provide food relief supplies to local communities/families particularly affected by the COVID-19 quarantine work restrictions.

 

The operation has achieved over 11 million man-hours with no lost time incidents occurring since the last lost time incident in December 2016. This is a remarkable achievement for an operation of this nature, and all employees and contractors are to be congratulated on this outstanding record.

 

The Group is active in promoting and implementing "responsible mining" practices. The Group has continued to actively reduce the potential environmental impacts of its operations and enhance its environmental performance in mined-out and disturbed areas. Through its various programmes, the Group is responsible for planting almost 2 million endemic and cash crop trees. During 2019 the Group was, for the second consecutive year, the mining industry overall winner of the Philippine Government Best Forestry Management Program award.

 

During the year ended 31 December 2019 the Group made a number of positive operational improvements to the Runruno project. The mine underwent a number of structural changes in design and the new mine plan was successfully implemented. Key process improvements made by the management team included increasing mill throughput, solutions that have been found for the foaming issues in BIOX® and CIL, and parameter changes that we made in the flotation resulting in cleaner concentrate and incremental gold recoveries.

 

Importantly, we are pleased to report that these vital operational changes that were made resulted in the production of 68,983 troy ounces ("ozs") contained in gold doré bullion at Runruno, a 43.5% increase from the previous year. The final quarter of 2019 also achieved the highest production level during a quarter, producing 18,941 ozs.

 

The year ended 2019, was also the first year in the mines operation that the Company was able to record an operating profit since the first commencement of gold production, back in 2016. The resulting gold production improved our cash flows and has enabled the long overdue truck and shovel fleet rebuilds to commence with completion expected in Q2 2020.

 

We added to our senior management team during the course of 2019. We were pleased to appoint Darren Bowden as the Company's Chief Executive Officer together with strengthening the management team with the addition of a new Chief Financial Officer, General Manager Operations, General Manager Commercial and Technical Manager.

 

Importantly our new management team   and dedicated Filipino workforce, led by Darren, have overseen the Company's major milestone of recording a first year of operating profit since the first commencement of gold production, back in 2016.

 

Early in 2019, we approached our lenders and agreed a Standstill Agreement as the Company was unable to meet its obligations under the current terms of the outstanding Senior and Mezzanine debt facilities. Post the year end our two major shareholders purchased all the rights and obligations of the Senior facility. In March 2020 the Company was unable to reach agreement on the continuation of the Standstill Agreement and, due to the material uncertainty of the Company's financial condition, our shares were suspended from trading.

 

However, as announced on 8 September 2020 the Company has reached an in-principle agreement with its lenders, subject to completion of definitive documents and shareholder approval of certain changes to the Company's Articles of Association, which the Company believes removes the financial uncertainty that lead to the suspension upon AIM. The Company expects that the suspension to trading of its ordinary shares on AIM will be lifted following the Company entering into definitive deal documentation with its lenders and after the Company's AGM, subject to shareholders approving the requisite changes to its Articles.

 

During, what are no doubt difficult times around the world and for this Company, I would like to thank our entire workforce for their continued hard work in getting this Company and the Runruno mine into a more stable position.

 

 

 

Guy Walker, Interim Non-Executive Chairman

10 September 2020

BUSINESS REVIEW

 

COVID-19 IMPACT

The world-wide COVID-19 pandemic has had a negative impact on the Group's operations, however notwithstanding the Philippine government quarantine regulations, mining and gold production activities have continued albeit at reduced mining rates and a reduced gold recovery rate.

 

To comply with the Philippine government COVID-19 guidelines the Group restricted the movement of personnel to and from the mine site. Travel restrictions have resulted in a number of senior personnel being unable to return to site. In particular, senior maintenance managers were unable to return which, together with the delays in sourcing appropriate spare parts, has placed pressure on the Company's operations and maintenance procedures.

 

Interruptions to the Group's supply chain of operational consumables and spare parts have occurred. Power failures in the national grid and the inability to secure new supplies of bacteria culture for the BIOX ® process has had a significant impact on production from the end of March 2020.

 

Only one COVID-19 positive case has been detected at the mine site to date with the Runruno mine benefiting from its remote mountainous location in the north of the island of Luzon. Nonetheless, the Group has implemented various on-site procedures to test for and quarantine potential COVID-19 cases to ensure, as far as possible, the safety of its employees and contractors. These procedures have ensured that the Company continues to be compliant with relevant government directives and that any COVID-19 infected personnel are restricted from gaining access to the mine site.

 

The longer the COVID-19 pandemic continues, with the associated government restrictions on movement of senior personnel, the more at risk the mining and processing operations become. Notwithstanding the increasing risk to operations management is hopeful that the medium to long term impact on the Group will not be material.

 

FINANCIAL YEAR 2019 ("FY 2019") OVERVIEW

The Runruno operation's performance made positive improvements in FY 2019 with increased mill throughput, solutions found for the foaming issues in BIOX® and CIL, and parameter changes in flotation resulting in cleaner concentrate and incremental gold recoveries. The mine underwent structural changes in design and a new mine plan was implemented. Improved cash flows enabled the long overdue truck and shovel fleet rebuilds being started with completion expected in Q2 2020.

 

During FY 2019 68,983 troy ounces ("ozs") contained in gold doré bullion were produced at Runruno. This was a 43.5% increase from 2018, with Q4 2019 representing the highest production level during a quarter, producing 18,941 ozs. FY 2019 was first year of operation to record an operating profit since the commencement of gold production.

 

The principal significant operational issue during the first half of 2019 was the reliability and availability of the plant, with failures in the RSI tails-line impacting significantly on operations. The BIOX® circuit was stable during 2019 and no concentrate was required to be bypassed as the circuit maintained an active culture for all of 2019, however oxidation rates at incremental feed tonnes being lower than design negatively affected overall recovery. Notwithstanding significant maintenance issues experienced during FY 2019 (predominately tails line related) the Group's total throughput was 1.78Mt, an increase of 17.7% over FY 2018. The feed grade was impacted by higher than anticipated mining dilution at approximately 25% versus a design of 5%. A total of 97,386 ozs were processed during the year.

 

Further design considerations are currently being trialed in the plant to enhance recovery through flotation and to meet the requirements for higher plant throughput. FY 2020 will hopefully see operations consolidating FY 2019 gains with a focus on plant maintenance and reliability, and achieving a higher oxidation rate through BIOX®.

MINING OPERATIONS

The mining operations and mining equipment have performed well in 2019 with a revitalized mine plan contributing to the best yearly mine performance to date. Available free cashflow was allocated to equipment rebuilds of our aging fleet, improving reliability and reducing our longer-term requirements on contractors.

 

The east wall pit design has proven to be inadequate in dealing with the existing fault. Accordingly, in Q1 2019 Xenith Consulting were hired to complete a redesign of this wall and all internal pit stages to improve mine efficiency, ensure a correct material balance can be achieved and update mine planning and equipment requirements for the life of mine ("LOM").

 

Resource recovery reconciliation performed well until the start of mining in Stage 2 of the mine plan. Stage 2 mining commenced in December 2018 and during 2019 ore recovery compared to the ore resource model, did not perform as well as expected and continues to produce a poor reconciliation. An infill drilling campaign focused on Stage 2, but also including Stages 1 and 1.5, was commenced in August 2019 and provided valuable information regarding the western limits of the orebody. This programme has continued in 2020 to assist in a proposed update of the resource model and to provide for a new reserve statement in 2021.

 

All relevant permits for operations have been received by the Runruno mine.

 

PROCESS PLANT

During FY 2019 overall gold recovery from processing operations was 70.8% which is significantly below the feasibility forecast of 91% but well above 2018 levels of 57.9%. Continued improvements in recovery are targeted in 2020 through minor plant upgrades and achieving design oxidation rates in BIOX®.

 

Plant reliability again had a serious effect on overall performance in 2019 and operations played 'catch up' for the majority of 2019 to maintain operations. The RSI and mill availability were the key concerns in the first half of 2019, while BIOX® shaft failures and pumps impacted in the 2nd half of 2019.

 

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

 

· The crushing and grinding circuit operated above design throughput, and even with a lower than planed plant utilization level, achieving an availability rate of 87.2% for FY 2019;

· The milling circuit operated adequately during FY 2019 with incremental throughput being achieved moving production from approximately 230t/hr to 280t/hr. Further work is required in the circuit with the aim of commissioning the variable speed drive to assist with maintaining throughput and providing a more consistent size faction to flotation. The gravity circuit is operating close to design recoveries of 30%;

· A detailed review of the flotation circuit and the establishment of an on-site metallurgical laboratory led to several significant changes in reagents and operating conditions of the circuit ensuring incremental increases in recovery and improving concentrate grade for BIOX.  The circuit operated reliably with only minor maintenance issues. The increased throughput has put further pressure on the circuit design capacity and an ongoing trial of secondary technologies to improve recovery is ongoing;

· The CIL circuit was affected during FY 2019 by the froth created by BiOX®, which, through changes in flotation and concentrate feed to BIOX®, was solved in the 2nd half of 2019. This assisted in achieving an overall CIL recovery of 84% recovery against a design recovery of 96%. Design capacity is more than sufficient to meet current throughput with the circuit marginally over designed. The lower recovery is a function of the oxidation achieved in BiOX® and once the BiOX® circuit is stable and oxidation is improved so this will lead to enhanced gold recovery in CIL;

· The ancillary systems including counter current decantation, neutralisation , reagents, cyanide destruction and residue disposal circuits are all operating adequately but have been affected by a lack of working capital required to undertake necessary maintenance; and

· Plant utilisation continues to suffer from a lack of working capital and associated maintenance with increasing failures in the piping, pumping and support equipment. In Q1 2019 alone over 3 weeks of operations was lost due to repeated failures of the residual tailings line. A management focus during 2020 will be on improving the regular maintenance of fixed plant, moving from a reactive/remedial maintenance regime to more of a preventative/proactive maintenance regime; and on expanding the Group's inventory of critical spares.

A significant amount of management time has been focused on getting the BIOX® circuit to perform as intended and, while we have achieved design throughput, we have yet to achieve this throughput at the required oxidation levels. This lower oxidation has affected final design recovery through the CIL circuit with approximately 84% recovery against a design of 96% being achieved in 2019. It is clear that the circuit is not adequately supplied with air due to inaccurate design assumptions originally made and a fourth air blower was ordered for delivery in late 2020. Other operating parameters are also being studied to assist with the performance of the circuit.

 

RESIDUAL STORAGE IMPOUNDMENT (RSI)

The RSI is operating to design with an excellent environmental performance record. Staged construction of the RSI continues to meet the requirements of current and future operations

 

Stage 5 of the RSI was completed in 2019 and development of Stage 5.5 has commenced and is expected to be completed in 2020.

 

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

 

COMMUNITY AND SOCIAL DEVELOPMENT

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

 

It is the Group's objective to benefit its host communities by undertaking sustainable development within the community with programmes focused in the following key areas:

 

· Health;

· Education;

· Capacity building;

· Community development and empowerment;

· Enterprise development, improvement and networking;

· Infrastructure development; and

· Preservation and respect of socio-cultural values.

The reach of the programmes extends to assist the residents of the Barangay of Runruno and surrounding Barangays, the Municipality of Quezon and the Province of Nueva Vizcaya.

 

During the COVID-19 crisis these programs have been adapted, with community support, to provide relief foods supplies to local communities/families particularly affected by the COVID-19 quarantine work restrictions.



 

In 2020 the Group will require the relocation of illegal miners operating on the back of the existing operations in Stage 3 and Stage 4 of the mine plan. The Group is working closely with the local government to ensure the smooth transition of relocation of these itinerant people outside of the mining areas, to ensure access for the Group is available by the end of 2020 early 2021. Initial approaches and compensation packages have been agreed and executed with the groups and families in the immediate area of operations without incident.

 

HEALTH AND SAFETY

There have been no material health and safety incidents throughout the operational phase. A safe working culture is actively promoted by a dedicated department and is embraced across the Runruno site and in all departments, with all staff recognizing their individual responsibilities for their own safety and the safety of others. The operation has achieved in excess of 11 million man-hours with no lost time incidents occurring since the last lost time incident in December 2016. This is a remarkable achievement for an operation of this nature, and all employees and contractors are to be congratulated on this outstanding record.

 

ENVIRONMENT

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

 

REFORESTATION AND REHABILITATION

The Group has continued to actively reduce the potential environmental impacts of its operations and enhance its environmental performance in mined-out and disturbed areas. It undertakes this obligation through immediate and continuous rehabilitation activities and by the re-greening of disturbed areas, establishment of protection forests and the provision of habitat for wildlife within the FTAA area. These programmes demonstrably improve the environment within and surrounding the Group's operations and are designed for beautification, stabilisation , to off-set green-house gas emissions and the impacts of the Group's operations. Through its various programmes, the Group is responsible for planting almost 2 million endemic and cash crop trees.

 

During 2019 the Group was, for the second consecutive year, the mining industry overall winner of the Philippine Government Best Forestry Management Program award.

 

ENVIRONMENTAL MONITORING

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

 



 

LEGAL COMPLIANCE

High compliance standards are practiced across the Group in the maintenance of its operations. A large site based team is dedicated to managing the high levels of compliance mandated within the Philippines. The site is regularly audited with upwards of sixty audits, verifications or reviews of its operations undertaken annually by the various regulators. The wide range of permits to operate in the Philippines are secured from a number of Government agencies and regulators including the Department of Environment & Natural Resources, Mines & Geosciences Bureau, Environmental Management Bureau, Forest Management Bureau, Bureau of Internal Revenue, Bureau of Customs, Bureau of Investment, Provincial Government, Municipality, Philippines National Police, National Telecommunications Commission, Water Management Bureau, and the Local Government Units.

 

DEBT FUNDING

In early 2019 the Group approached its lenders on the basis that both the size and terms of debt facilities was unsustainable. The Group sought a Standstill Agreement with both its senior bank lenders and the mezzanine lenders during which the Group was relieved of making any principal or interest payments. This standstill request was agreed to by all external lenders from 31 March 2019 and it remained in place at year-end. The purpose of the standstill was to provide the Group and its external lenders time to negotiate a restructuring of the debt that will provide the Group with a sustainable debt position. 

 

Post year-end Runruno Holdings Ltd and MTL (Guernsey) Ltd, (an associated company of MTL Luxembourg SARL), the Company's two major shareholders and mezzanine lenders, completed a sale agreement with HSBC and BNP Paribas to purchase all the rights and obligations under Runruno Facility Agreement (the "Senior Facility"). This purchase was completed on 30 January 2020. The Senior Facility was acquired 70.6% by MTL Guernsey Ltd and 29.4% by Runruno Holdings Ltd. The total principal and capitalised interest owing under this facility at the time of purchase was $69.3 million.

 

Further on 9 March 2020, the Company announced that it had been unable to reach agreement on the continuation of the Standstill Agreement in respect of the Senior Facility and, due to the material uncertainty of the Company's financial condition, its shares were suspended from trading on the AIM market of the London Stock Exchange. 

 

On 8 September 2020 the Company announced it had reached a conditional in-principle agreement with its lenders, subject to completion of definitive documents and shareholder approval of certain changes to the Company's Articles of Association. The concessions negotiated in the conditional agreement, in the Company's opinion, remove the financial uncertainty that brought about the suspension of trading of its shares on the AIM market.

 

An important key outcome of the in-principle agreement will be the termination of the 2011 Agreement which will be replaced by a new relationship agreement between the Company and its two largest shareholders that will update the Company's corporate governance practices such that it is in far greater compliance with the QCA Code and which will enable the Company to seek new independent directors to join the Board.

 

Further details of the terms of the conditional in-principle agreement with the lenders can be found in Note 34 - Subsequent Events.

 

The Company expects the suspension of its shares to trading on the AIM market to be lifted upon completion of the debt restructure agreement, which is expected to occur in mid-October 2020.

 

As at year end the Group has total debt, including unpaid interest and fees, of $124.1 million (2018: $110.5 million), much of which was originally short term in nature with high attaching interest and penalty interest rates. The overall cost of the Group's debt will drop once the in-principle agreement with lenders is implemented. No debt principal repayments were made during FY 2019.

 

Refer to Note 23 for details of these debt facilities.

 

OUTLOOK

Since the end of 2018 the Group has implemented significant changes to the board, executive and senior management. We are glad to report that the changes have had a positive impact on operations and the morale and development of our local workforce. Efforts are ongoing on the various studies that are underway with the ultimate objective of improving the cash flow generated by the Runruno operation. The outcome of some of these studies have already provided significant benefits in plant performance and mine operations with further improvements targeted in 2020. Notwithstanding the impact of the COVID-19 pandemic, 2020 will be a year of consolidation with a focus on plant maintenance and reliability.

 

Further, the Group will continue the process of completing the in-principle agreement with its lenders such that, once completed, the material financial uncertainty surrounding the Group is removed.

 

 

 

Darren Bowden, Chief Executive Officer

10 September 2020



 

 

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

 





2019


2018


Notes



US$


US$

Continuing Operations







Revenue

3



94,280,289


61,414,966

Cost of sales




(75,819,654)


(69,883,233)








Gross profit/(loss)




18,460,635


(8,468,267)

Administrative expenses




(9,496,897)


(10,352,002)








Operating profit/(loss)

4



8,963,738


(18,820,269)








Impairment reversal/(loss)

8



23,213,749


(179,833,796)

Loss on sale of assets




(569,434)


-

Net finance and other costs

8



(17,778,610)


20,735,018

Share of profit of associates

16



22,829


5,851

Profit/(loss) before tax




13,852,272


(177,913,196)

Tax ( expense)/credit

9/10



(140,072)


1,526,455

Profit/(loss) for the period attributable to equity holders of the parent




13,712,200


(176,386,741)








Other comprehensive income :







Items that may be re-classified subsequently to profit or loss:







Exchange differences on translating foreign operations




1,566,525


57,880

Items that will not be re-classified subsequently to profit or loss:

Re-measurement of pension liabilities




 

 

(118,035)


 

 

162,938

Total comprehensive profit/(loss) for the period attributable to equity holders of the parent




15,160,690


(176,165,923)








Profit/(loss) per share:







Basic cents per share

11



0.66


(8.51)

Diluted cents per share




0.64


(8.51)



 

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2019





2019


Restated 2018


Notes



US$


US$

Non-current assets







Property, plant and equipment

12



106,978,695


80,416,625

Other intangible assets

14



49,567


98,533

Investment in associate companies

16



161,408


138,579

Trade and other receivables

17



4,222,863


3,333,083












111,412,533


83,986,820

Current assets







Inventories

18



9,478,457


6,973,238

Trade and other receivables

20



3,609,595


6,166,463

Cash and cash equivalents

19



4,818,981


1,497,431












17,907,033


14,637,132

Non-current liabilities







Loans

23



(11,282,574)


(26,286,052)

Retirement benefits obligations

21



(973,000)


(673,819)

Deferred tax liabilities

10



(812,481)


(722,977)

Provision for mine rehabilitation

24



(2,880,092)


(2,150,633)












(15,948,147)


(29,833,481)

Current liabilities







Trade and other payables

22



(14,355,288)


(15,053,100)

Loans - current portion

23



(112,794,363)


(84,203,230)












(127,149,651)


(99,256,330)

Net liabilities

 



(13,778,232)


(30,465,859)

 

Equity







Share capital

25



27,950,217


27,950,217

Share premium account




195,855,125


195,855,125

Shares to be issued reserve




-


4,928,152

Acquisition of non-controlling interest reserve




(5,107,515)


(5,107,515)

Translation reserve




14,744,085


13,177,560

Re-measurement reserve




66,803


184,838

Other reserves

26



1,526,937


-

Profit and loss account




(248,813,884)


(267,454,236)








 

Equity attributable to equity holders of the parent




 

(13,778,232)


 

(30,465,859)

 

The financial statements were approved by the Board of Directors on 10 September 2020 and were signed on its behalf by:

 

 

 

 

Guy R. Walker, Non-Executive Chairman

10 September 2020


 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

 

 


Share capital

Share premium account

Shares to be issued reserve

Acquisition of non-controlling interest reserve

Translation reserve

Re-measurement reserve

Other reserve

Profit and loss account

Total equity


US$

US$

US$

US$

US$

US$

US$

US$

US$

Balance at 1 January 2019

27,950,217

195,855,125

4,928,152

(5,107,515)

13,177,560

 

 

 

184,838

 

 

 

-

(267,454,236)

(30,465,859)

Exchange differences on translating foreign operations

-

-

-

-

1,566,525

 

 

-

-

-

1,566,525

Change in pension liability

-

-

-

-

-

(118,035)

-

-

(118,035)

Profit for the year

-

-

-

-

-

-

-

13,712,200

13,712,200

Total comprehensive income/(loss) for the year

-

-

-

-

1,566,525

(118,035)

-

13,712,200

15,160,690

Fair value of warrants

-

-

-

-

-

-

1,526,937

-

1,526,937

Transfer to profit and loss

-

-

(4,928,152)

-

-

-

-

4,928,152

-

Balance at 31 December 2019

27,950,217

195,855,125

-

(5,107,515)

14,744,085

 

66,803

 

1,526,937

(248,813,884)

(13,778,232)

 

Equity is the aggregate of the following:

· Share capital; being the nominal value of shares issued

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

· Shares to be issued reserve; being the credit side of the entry relating to the expense recognised in the statement of total comprehensive income for share based remuneration. As all share options have expired with no shares issued this reserve has been transferred to profit and loss.

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

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

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

· Other reserves: being the cumulative fair value of warrants associated with certain mezzanine debt facilities

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



 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2018

 

 


Share capital

Share premium account

Shares to be issued reserve

Acquisition of non-controlling interest reserve

Translation reserve

Re-measurement reserve

Profit and loss account

Total equity


US$

US$

US$

US$

US$

US$

US$

US$

Balance at 1 January 2018

27,950,217

195,855,125

4,928,152

(5,107,515)

13,119,680

 

 

21,900

(91,067,495)

145,700,064

Exchange differences on translating foreign operations

-

-

-

-

57,880

 

 

-

-

57,880

Change in pension liability

-

-

-

-

-

162,938

-

162,938

Loss for the year

-

-

-

-

-

 

-

(176,386,741)

(176,386,741)

Total comprehensive income/(loss) for the year

-

-

-

-

57,880

162,938

(176,386,741)

(176,165,923)

Balance at 31 December 2018

27,950,217

195,855,125

4,928,152

(5,107,515)

13,177,560

 

184,838

(267,454,236)

(30,465,859)

 

Equity is the aggregate of the following:

· Share capital; being the nominal value of shares issued

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

· Shares to be issued reserve; being the credit side of the entry relating to the expense recognised in the statement of total comprehensive income for share based remuneration

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

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

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

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


CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

 

 





2019


2018


Notes



US$


US$








Net cash generated/(used in) operating activities

27



13,691,659


(6,078,235)








Investing activities







Purchase of property, plant and equipment




(11,335,992)


(6,627,567)

Purchase of intangible assets




(63,078)


(97,285)

Proceeds from sale of plant and equipment




250,000


-








Net cash (used in) investing activities




(11,149,070)


(6,724,852)








Financing activities







Repayment of borrowings

23



-


(500,000)

Proceeds from borrowings

23



899,257


11,720,176

Settlement of gold forward contracts




-


(343,436)

Settlement of interest rate swap contracts




-


(8,100)








Net cash arising from financing activities




899,257


10,868,640








Net increase/(decrease) in cash and cash equivalents




3,441,846


(1,934,447)

Cash and cash equivalents at beginning of year




1,497,431


725,201

Foreign exchange difference




(120,296)


2,706,677








Cash and cash equivalents at end of year




4,818,981


1,497,431

 

 



 

COMPANY BALANCE SHEET

AS AT 31 DECEMBER 2019

 

 





2019


Restated 2018


Notes



US$


US$

Non-current assets







Investment in subsidiaries

15



-


-












-


-

Current assets







Trade and other receivables

20



39,977,668


487,126

Cash and cash equivalents

19



565,166


664,642












40,542,834


1,151,768

Non-current liabilities







Loans

23



(11,282,574)


(26,286,052)












(11,282,574)


(26,286,052)

Current liabilities







Loans

23



(44,705,987)


(20,324,082)

Trade and other payables

22



(442,196)


(508,922)












(45,148,183)


(20,833,004)








Net liabilities




(15,887,923)


(45,967,288)








Equity







Share capital

25



27,950,217


27,950,217

Share premium account




195,855,125


195,855,125

Shares to be issued reserve




-


4,928,152

Translation reserve




(940,976)


(830,624)

Other reserves

26



1,526,937


-

Profit and loss account




(240,279,226)


(273,870,158)








Equity attributable to equity holders of the parent




(15,887,923)


(45,967,288)

 

 

The Company has taken advantage of the exemption provided under section 408 of Companies Act 2006 not to publish an income statement or a statement of total comprehensive income.  The total comprehensive profit/(loss) for the year ended 31 December 2019 dealt with in the financial statements of the Company was $28,552,428(2018: ($239,264,452)).

 

The financial statements were approved by the Board of Directors on 10 September 2020 and were signed on its behalf by:

 

 

 

 

Guy R. Walker; Interim Executive Chairman

10 September 2020


 

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED 31 DECEMBER 2019 & 31 DECEMBER 2018

 

 


Share capital

Share premium account

Shares to be issued reserve

 

Translation reserve

 

Other reserves

Profit and loss account

Total equity

 


US$

US$

US$

US$

US$

US$

US$

 

 

Balance at1 January 2018

27,950,217

195,855,125

4,928,152

-

-

(35,436,330)

193,297,164

 

 

Exchange differences on translating foreign currencies

-

-

-

(830,624)

-

-

(830,624)

 

 

Loss for the year

-

-

-

-

-

(238,433,828)

(238,433,828)

 

Total comprehensive income/(loss) for the year

-

-

-

(830,624)

-

(238,433,828)

(239,264,452)

 

Balance at 31 December 2018

27,950,217

195,855,125

4,928,152

(830,624)

-

(273,870,158)

(45,967,288)

 

 

Exchange differences on translating foreign currencies

-

-

-

(110,352)

-

-

(110,352)

 

 

Profit for the year

-

-

-

-

-

28,662,780

28,662,780

 

Total comprehensive income for the year

-

-

-

(110,352)

-

28,662,780

28,552,428

 

Fair value of warrants

-

-

-

-

1,526,937

-

1,526,937



Transfer to profit and loss

-

-

(4,928,152)

-

-

4,928,152

-


-

Balance at 31 December 2019

27,950,217

195,855,125

-

(940,976)

1,526,937

(240,279,226)

(15,887,923)

 

 

Equity is the aggregate of the following:

· Share capital; being the nominal value of shares issued

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

· Shares to be issued reserve; being the credit side of the entry relating to the expense recognised in the income statement for share based remuneration. As all share options have expired with no shares issued this reserve has been transferred to profit and loss.

· Translation reserve; being the foreign exchange differences arising on the change of presentational currency and upon on the translation of foreign currencies

· Other reserves: being the cumulative fair value of warrants associated with certain mezzanine debt facilities.

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


 

COMPANY CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

 

 





2019


2018


Notes



US$


US$

Net cash used in operating activities

27



(2,069,014)


(11,191,002)








Financing activities







Proceeds from borrowings

23



899,257


11,720,176

Advances from subsidiary




1,100,000


-

Net cash from financing activities




1,999,257


11,720,176








Net (decrease)/increase in cash and cash equivalents




(69,757)


529,174

Cash and cash equivalents at beginning of year




664,642


175,796

Foreign exchange difference




(29,719)


(40,328)








Cash and cash equivalents at end of year




565,166


664,642

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies

 

The principal accounting policies are summarised below. Except as elsewhere disclosed, the accounting policies have all been applied consistently throughout the period covered by these financial statements.

 

Basis of preparation

The financial information has been prepared on a historical cost basis and in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

 

For the Group and its subsidiaries US Dollars is both the functional and presentational currency. Although the Company's functional currency is pounds sterling, it also uses US Dollars as their presentational currency, to better reflect the underlying performance of that entity.

 

Going concern

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

 

To date the Group has managed to limit the impact of COVID-19 its operations, the main impacts that have arisen during the COVID-19 crises are the limitation on movement of personnel to/from the project site and in/out of the Philippines, and supply chain interruptions affecting receipt of spares and consumables. These pressures are being managed although gold production has yet to ramp back up towards target levels. The longer the impacts of the pandemic continue the more at risk the operations become, however the Group's ability to keep the project in a positive cash flow position to date during the pandemic gives the Group reason to believe the impact of COVID-19 will not affect the going concern status of the Group.

 

Operational performance showed consistent improvement over 2019 and, for the first time since commencing production, the operation produced a pre-tax operational profit of $8.96 million, compared to a pre-tax operating loss of $18.82 million in 2018.

 

Notwithstanding these operational improvements, as at 31 December 2019, the Group's current liabilities exceeded its current assets by $109.24 million (2018: $84.62 million), due primarily to the portion of Group external borrowings that is either overdue or scheduled to be repaid by 31 December 2020. During 2019 the Group made no principal repayments under its external finance facilities.

 

However, the Group has reached a conditional in-principle agreement with its lenders and believes that there is a reasonable expectation that this agreement will be finalized and that this agreement will provide a sustainable financial structure to continue to operate the project to produce sustainable cashflows and to pay its liabilities as and when they fall due.

 

Over the next financial periods, the continuing viability of the Group and its ability to operate as a going concern and to meet its commitments as and when they fall due is dependent upon the ability of the Group to operate the Runruno Project successfully so as to generate sufficient cash flows from the Runruno Project to enable the Group to settle its liabilities (including the expected restructured debt facilities) as they fall due.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

As a consequence of the above matters, the Group's directors have concluded that material uncertainties exist, including the potential impact of COVID-19, that may cast significant doubt upon the Group's ability to continue as a going concern and that, therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the Group financial statements.

 

Nevertheless, after making enquiries and considering the uncertainties described above, the Group's directors believe that there are reasonable grounds to believe that the use of the going concern basis remains appropriate as:

 

· The Group's conditional in-principle agreement with its lenders removes the obligation for the Group to meet set interest and principal repayment schedules. It is proposed that only available cash over and above a minimum pre-agreed working capital level will be paid each quarter to lenders as repayment of interest and principal;

· The Group's conditional in-principle agreement with its lenders removes the risk that the Company will default on its debt facilities due not meeting fixed principal and interest repayment schedules. As a result the Company is not at risk of lenders enforcing security they hold against the Group or its assets in the event there is no quarterly payment of either interest or principal to lenders;

· The Group's conditional in-principle agreement with its lenders provides the Company with the ability to hold a working capital buffer in excess of current liabilities ensuring all external creditors can be paid;

· The Group currently believes, once the COVID-19 pandemic abates, it will achieve its revised forecast levels of gold production; and

· The Group currently believes, once the COVID-19 pandemic abates, its operations will produce sufficient positive cash flow to enable the Group to pay its debts (including the expected restructured debt facilities) as and when they fall due.

 

These financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts, nor to the amounts and classifications of liabilities that might be necessary should the Group not continue as a going concern.

 

Changes in accounting policies and disclosures

In the current year, the Group has adopted the disclosure requirements as a result of the issue IFRS 16: Leases. The adoption of this accounting standard has not had a material impact on these financial statements as in accordance with the transition exemptions the new disclosures have not been applied to low value or short term leases.  All other accounting policies and disclosures applied in the preparation of these financial statements are consistent with the accounting policies and disclosures applied in the preparation of the prior period financial statements.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

New standards and interpretations

The financial statements have been drawn up on the basis of accounting standards, interpretations and amendments effective at the beginning of the accounting period on 1 January 2019.  The new standards, interpretations and amendments effective from 1 January 2019 had no significant impact on the group.

 

The following new and amended Standards and Interpretations are not currently relevant to the Group or Company; however, they may have an impact in future years:

 

· IFRIC 23 "Uncertainty over Income Tax Treatments"

· Amendment to IFRS 9: "Prepayment Features with Negative Compensation"

· Amendment to IAS 28: "Investments in Associates and Joint Ventures"

· Amendment to IAS 19: "Employee Benefits"

· Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 in "Annual Improvements 2015-2017 cycle"

 

At the date of authorisation of these financial statements, the following standards and relevant interpretations, which have not been applied in these financial statements, were in issue but not yet effective:

· IAS 1 Presentation of Financial Statements

· IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors in relation to the definition of material.

 

These changes apply a new definition of materiality and will apply for the first time in the next financial year. The amendments clarify the definition of what is material to the financial statements and how to apply the definition. The amendments will have an impact on the presentation and disclosure in the financial statements. After applying the new definition, the financial statements may have fewer disclosures as it may be easier to justify that certain disclosures are immaterial to users of financial statements. Furthermore, more meaningful disclosures may be presented in a more prominent manner due to the additional guidance on the effects of obscuring information.

 

Basis of consolidation

The Group financial statements incorporate the financial statements of the Company and its subsidiary undertakings for the year ended 31 December 2019. A subsidiary is an entity controlled, directly or indirectly, by the Group. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

 

The financial statements of the subsidiary companies have been included in the Group's financial statements from the date of acquisition when control was passed to the Group using the acquisition method of accounting. The Group financial statements include the results of the Company and its subsidiaries as if they were a single reporting entity. On consolidation, intra-Group transactions and balances are eliminated.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

Business combinations and goodwill

On acquisition, the assets, liabilities and contingent liabilities of the Company's subsidiaries are measured at their fair values at the date of acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Goodwill arising on consolidation is recognised as an asset in the consolidated balance sheet and tested annually for impairment and any impairment is accounted for as a reduction in the value of the asset. Goodwill is considered to have an indefinite useful life.

 

Where there is an acquisition of an increased share of an existing subsidiary's net assets after the Company has previously gained, or had effective control of the decision making of the subsidiary, such that there is no dilution or loss of effective control in the subsidiary, then the transaction is accounted for in equity and reserves in the consolidated balance sheet. This particular type of acquisition transaction does not add to the value of goodwill on consolidation.

 

Foreign currency

Transactions in currencies different to the company's functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Exchange gains and losses on the settlement of monetary items are recognised in the statement of total comprehensive income .

 

On consolidation, the assets and liabilities are translated to US Dollars at the rates prevailing at the balance sheet date. Income and expenses are translated at the average exchange rates for the period. Exchange differences are recognised within other comprehensive income in the consolidated statement of total comprehensive income .

 

Taxation and deferred tax

Current tax is based on the taxable profit for the period. Taxable profit differs from net profit as reported in the statement of total comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been substantively enacted by the balance sheet date.

 

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base 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 only to the extent it is probable that future taxable profits will be available against which deductible temporary differences can be utilised.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited, as applicable, as a taxation debit/credit to the statement of total comprehensive income, except when it relates to items charged or credited directly to other comprehensive income in which case, the deferred tax is recognised in the other comprehensive income section within the statement of total comprehensive income.

 



 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority, on either the same taxable Group Company or different Group entities, which intend to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. 

 

Share based payments

The Company may enter into equity-settled share-based transactions with its Directors, employees of its subsidiaries, its contractors or and its lenders in which the counterparty provides services/goods to the Company in exchange for remuneration in the form of certain equity instruments of the Company. The equity instruments comprise warrants and share options.

 

The services/goods received by the Company in these share-based transactions are measured by reference to the fair value of the equity instruments at the date of grant and are recognised as an expense in the statement of total comprehensive income with a corresponding increase in equity, via a shares to be issued reserve for share options or in other reserves for warrants.

 

For equity instruments granted that do not vest until the counterparty completes a specified period of service, the expense is recognised as the services are being rendered by the counterparty during the vesting period. The expense recognised is based on the best available estimate of the number of equity instruments expected to vest and on the vesting date, the expense is revised to reflect the actual number of equity instruments that vested.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

For equity instruments granted that vest immediately and the counterparty is unconditionally entitled to the equity instruments, the expense is recognised in full on the grant date.

 

In the event that the warrants and/or share options do not vest and ultimately lapse then the shares to be issued reserve or other reserve is reduced accordingly.

 

Inventories

Inventories of finished goods (bullion), gold in circuit and stockpiles of processed ore are brought to account and stated at the lower of costs and estimated net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated based on normal operating capacity.  Costs are assigned to ore stockpiles and gold in circuit items of inventory based on weighted average costs.  Net realisable value is the estimated selling price in the ordinary course of business (excluding derivatives) less the estimated costs of completion and the estimated costs necessary to make the sale.

 

Consumables have been valued at cost less an appropriate provision for obsolescence.  Cost is determined on a first-in-first-out basis.

 

Intangible assets

Exploration costs

Costs relating to the exploration of precious and base metal properties are capitalised as intangible assets in the balance sheet once the Group has obtained the legal right to explore an area.

 

Capitalised exploration costs are reclassified to tangible assets once technical feasibility and commercial viability of extracting a mineral resource are demonstrable. The capitalised exploration costs are tested for impairment annually.

 

Where exploration costs have been incurred and capitalised for a specific tenement and the commercial and technical requirements to demonstrate positive economic returns using approved mining techniques has not been established, the Company recognises these costs as an intangible asset and tests these costs annually for impairment. These costs are considered fully impaired unless the results of exploration indicate the presence of mineral resources that have the potential to be defined as an inferred resource in accordance with industry standards.

 

Other Intangible assets

Intangible assets acquired separately are initially recognised at cost. Intangible assets acquired as part of a business combination are measured at their fair value at the date of acquisition. Subsequently, intangible assets are carried at cost less any accumulated amortisation and impairment losses. Amortisation charges are recognised in cost of sales. Computer software is amortised over its expected useful life of 3 years using the straight-line method. Licences acquired to support mining operations will be amortised over the expected useful life of the mining operation (or the term of the licence if shorter) when development is complete and mining commences. Intangible assets are tested annually for impairment.

 

Property, plant and equipment

Property, plant and equipment are initially recognised at cost plus directly attributable costs and are subsequently carried at cost less accumulated depreciation and impairment losses. Property, plant and equipment are depreciated over their expected useful lives, using the straight-line method.

 

The classes of depreciable assets, their expected useful lives and their depreciation methods are:

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

Buildings & leasehold improvements  10 years  Straight-line 

Drilling equipment  5 years  Straight-line

Motor vehicles  3-5 years  Straight-line

Fixtures, fittings and equipment    3 years  Straight-line

Process plant  applying the units of production over the useful life of the mine.

Residual Storage Impoundment  applying the units of production over the useful life of the mine.

Mining properties   applying the units of production over the useful life of the mine.

 

Mining properties costs have arisen entirely because of a reclassification of the intangible assets deferred exploration costs, advances to surface occupants, and mining licenses. As of 20 October 2011, the extraction of gold from the Runruno site was assessed as being both technically feasible and commercially viable. Further costs since this date have been capitalised directly to mining properties.

 

Construction in progress tangible assets have been incurred after 1 December 2011, the date the board of Directors announced that the Group had moved into the capital construction phase of its development. The costs were substantially incurred throughout 2012 to 2017.

 

Construction in progress costs are allocated to a property, plant and equipment tangible asset category, once the relevant asset has been assessed as being available for use as intended by management. The costs will be treated as being reclassified and will be depreciated according to the adopted method of the appropriate asset category.

 

The right-of-use assets are recognised for all leases, except for low value assets and/or short duration leases. These assets are measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date. The Group will depreciate the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

 

Investments

Investments in subsidiaries and investment in associates are recognised at cost less any impairment losses in the Company accounts.

 

Equity accounting is applied to investments in associates on a Group basis. Investments in associates are recognised at the cost of investment as adjusted for post-acquisition changes in the Group's share of net assets of the associate. Losses of an associate in excess of the Group's interest in that associate are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

 

Provision for mine rehabilitation and decommissioning

Provision is made for close down, restoration and environmental rehabilitation costs (which include the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas) at the end of the reporting period when the related environmental disturbance occurs, based on the estimated future costs using information available at the end of the reporting period. The provision is discounted using a current market-based pre-tax discount rate and the unwinding of the discount is classified as interest accretion in the statement of total comprehensive income.  At the time of establishing the provision, a corresponding asset is capitalised and depreciated over future production from the operations to which it relates.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

The provision is reviewed on an annual basis for changes to obligations or legislation or discount rates that affect change in cost estimates or life of operations.  The cost of the related asset is adjusted for changes in the provision resulting from changes in the estimated cash flows or discount rate, and the adjusted cost of the asset is depreciated prospectively.

 

Where rehabilitation is conducted systematically over the life of the operation, rather than at the time of closure, provision is made for the estimated outstanding continuous rehabilitation work at each end of the reporting period and the cost is charged to the statement of total comprehensive income.

 

Revenue recognition

Gold sales

The Group is principally engaged in the business of producing gold. Revenue is recognised when the Group transfers control of its gold to a customer at the amount at which payment is expected.   Sales revenue represents the gross proceeds receivable from the customer.

 

For gold sales, the enforceable contract is each purchase order, which is an individual, short-term contract, while the performance obligation is the delivery of the metals.

 

Recognition of sales revenue for the gold is based on determined metal in concentrate and the London Bullion Market Association (LBMA) quoted prices, net of smelting and related charges. 

 

Revenue is recognized when control passes to the customer, which occurs at a point in time when the metal concentrate is credited to the buyer's account and provisionally paid by the buyer.  Under the terms of offtake agreements with the customer, the Company issues a provisional invoice for the entire volume of concentrate loaded to customer's vessel. Final invoice is made thereafter upon customer's outturn of concentrates delivered and submission of their final assay report.  Adjustment is accordingly made against the final invoice with respect to provisional collections received by the Company within two days to determine amounts still owing from/to customers.

 

As the enforceable contract for the arrangements is the purchase order, the transaction price is determined at the date of each sale (i.e., for each separate contract) and, therefore, there is minimal future variability within scope of IFRS 15 and no further remaining performance obligations under those contracts.

 

Revenue from the sale of by-products such as silver is accounted for as a credit to the cost of sales.

 

Interest

Revenue is recognised as interest accrues using the effective interest method.

 

Production Fee

Production fees, incurred pursuant to the Mezzanine Debt facility, are recognised in profit or loss in the period in which they are incurred.

 

Financial instruments

Financial Assets

Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income and fair value through profit or loss.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

Financial assets at amortized cost (debt instruments)

This category is the most relevant to the Company.  The Company measures financial assets at amortized cost if both of the following conditions are met:

· The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

· The contractual terms of the financial asset give rise on specified dates to cash flows that are solely for payments of principal and interest on the principal amount outstanding.

 

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment.  Gains and losses are recognized in the statement of comprehensive income when the asset is derecognized, modified or impaired.

 

Financial liabilities

Initial recognition and measurement

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

 

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and other financial liabilities, net of directly attributable transaction costs. The Company's financial liabilities include payables and loans and borrowings.

 

Subsequent measurement

Payables

This category pertains to financial liabilities that are not held for trading or not designated as at fair value through profit or loss upon the inception of the liability. These include liabilities arising from operations (e.g., accounts payable and accrued liabilities). 

 

Payables are recognised initially at fair value and are subsequently carried at amortized cost, taking into account the impact of applying the EIR method of amortization (or accretion) for any related premium, discount and any directly attributable transaction cost.

 

As at December 31, 2019 and 2018, the Company's payables include trade and other payables.

 

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

 

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statements of total comprehensive income.

 

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.  When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability.  The difference in the respective carrying amounts is recognized in the statements of total comprehensive income.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

1.  Accounting policies (continued)

 

Compound financial instruments

Compound financial instruments comprise both liability and equity components. At issue date, the fair value of the liability component is estimated by discounting its future cash flows at an interest rate that would have been payable on a similar debt instrument without any equity conversion option. The liability component is accounted for as a financial liability. The difference between the net issue proceeds and the liability component is the equity component, and is accounted for as equity.

 

Any transaction costs associated with the issue of a compound financial instrument are allocated in proportion to the equity and liability components.

 

The interest expense on the liability component is calculated by applying the effective interest rate for the liability component of the instrument. The difference between the interest expense and the interest payments made are included in the carrying amount of the liability.



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

2.  Critical accounting judgements and key sources of estimation uncertainty

 

The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates, assumptions and judgements that affect the application of policies, and reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date.

 

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. Actual results may differ from reported amounts in the financial statements.

 

The estimates, assumptions and judgements which have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities are:

 

Estimates

Impairment of tangible and intangible assets, Group

An annual review is made of the carrying amount of an asset which may not be recoverable, or has previously been subject to an impairment charge. An asset's carrying value is written down, or conversely written up, to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use). To determine value in use the Group reviews future operations using the latest life of mine (LOM) model detailing future cash flows that the Runruno operation is expected to produce. The key assumptions for these value-in-use calculations are those regarding risk discount rates, the price of gold, gold recovery levels, plant availability levels, changes in the resource statements and forecast changes in direct costs, the availability of economic funding and the ability to renew its mining permit(s).

 

The net present value of these expected future cash flows is used to determine if an impairment, or impairment reversal, is required.

 

For the for year ended 31 December 2018 the net present value of these expected future cash flows was less than the carrying cost of the relevant tangible and intangible assets. As a result in the year ended 31 December 2018 the Group booked an impairment loss against its mining properties, plant and equipment, deferred exploration, mining licence and goodwill on consolidation.

 

For the ended 31 December 2019 the review of the net present value of expected future cash flows was greater than the carrying cost of the relevant tangible and intangible assets. As a result in the year ended 31 December 2019 the Group booked a reversal of a portion of the 2018 impairment charge against its mining properties, plant and equipment.

 

Recovery of intercompany receivable accounts, Company

Receivables due from group companies, which are interest free, are assessed under the expected credit losses model. In each case, the most appropriate assessment is for the Company to consider the output from the impairment tests and value-in-use calculations carried out in respect of the Group's mining properties, plant and equipment assets.

 

In 2018 the Company booked impairment against its loans receivable from its subsidiaries, a portion of which has been reversed in 2019, in accordance with the above noted estimate of impairment of tangible and intangible Group assets.

 

Refer to note 8 for detail on the impairment reversal/charges.



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

2.  Critical accounting judgements and key sources of estimation uncertainty (continued)

 

Determination of mineral resources and ore reserves

The determination of mineral resources and ore reserves impacts the accounting for asset carrying values, depreciation and amortisation rates, deferred stripping costs and provisions for decommissioning and restoration. 

 

There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available.

 

Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated which may impact asset carrying values, depreciation and amortisation rates, deferred stripping costs and provisions for decommissioning and restoration.

 

Subsequent to the end of the financial year a new estimation of mineral resources and ore reserves was calculated. This new statement of mineral resources and ore reserves has been calculated and reported in accordance with the Aus.IMM "Australian Code for reporting of Identified Mineral Resources and Ore Reserves"; and was prepared by Xenith Consulting, who are competent persons as identified by the Code.

 

Estimating gold-in-circuit and gold stockpile inventories

Gold-in-circuit is measured by the Company's metallurgists based on the gold grade/recovery across different structures of the process plant. Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained concentrates in dry metric tonnes is based on assay data, and the estimated recovery percentage is based on the expected processing method. Stockpile tonnages are verified by periodic surveys.

 

Although regular assay data is collected and production recoveries closely monitored these estimates that are valid at the time of estimation may be significantly different to the final gold recovered once processing of the inventories is completed.

 

Judgements

Debt Facilities

At the date of this report the Group has reached a conditional in-principle agreement with its lenders that, if completed, it believes will remove the financial uncertainty that led the Company to be suspended upon the AIM market.

 

Judgement is required in assessing the possible impact of whether this agreement will be indeed be settled with legally binding documentation and certain changes to the Articles of Association approved by shareholders, and it does in fact result in a satisfactory restructure of the Company's debt facilities such that the Company remains solvent.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

3.  Revenue


2019


2018


US$


US$

Revenue from sale of gold

94,280,289


61,414,966

 

All revenue from the sale of gold was received from one customer.

 

4.  Operating profit/(loss) for the year is stated after charging:


2019


2018


US$


US$

Depreciation of property, plant and equipment (see note 12)

9,290,373


24,852,156

Amortisation (see note 14)

48,966


48,364

Foreign exchange losses

1,480,638


666,291

Staff costs (see note 7)

10,155,565


9,310,513

Auditors remuneration (see note 5)

217,158


145,679

 

5.  Auditor's remuneration


2019


2018


US$


US$

Fees payable to the Group and Company's auditor for the audit of the Group and Company's accounts

147,379


100,060

Fees payable to the Company's auditor and its associates for other
 services

21,550


-

Taxation compliance services

48,229


45,619


217,158


145,679

 

6.  Segmental analysis

 

Operating segments have been identified based on the Group's internal reporting to the Chief Operating Decision Maker ('CODM') and in particular the components of the Group which are regularly reviewed by the CODM. The operating segments included in internal reports are determined on the basis of their significance to the Group. The CODM has been determined to be the Board of Directors as it is primarily responsible for the allocation of resources to segments and the assessment of performance of the segments. The primary segments have been identified into three geographic areas of the UK, Philippines and Singapore. The CODM uses 'loss before tax', 'cash & cash equivalents' and 'total liabilities' as the key measures of the segments' results and these measures reflect the segments' underlying performance for the period under evaluation.

 

The segment results for the year ended 31 December 2019 and 2018 and the reconciliation of the segment measures to the respective statutory items in the consolidated financial information are as follows:



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

6.  Segmental analysis (continued)

 

Year ended 31 December 2019

UK

Philippines

Singapore

Total


US$

US$

US$

US$

Segment results





Sales revenue

-

94,280,289

-

94,280,289

Group operating (loss)/profit

(5,672,880)

14,637,465

(847)

8,963,738

Other income & charges

-

23,213,749

-

23,213,749

Finance costs

(10,669,507)

(7,109,103)

-

(17,778,610)

Share of profits of associates

-

22,829

-

22,829

Loss on sale of assets

-

(569,434)

-

(569,434)

(Loss)/profit before tax

(16,342,387)

30,195,506

(847)

13,852,272

 

Segment assets





Segment tangibles & intangibles

-

107,028,262

-

107,028,262

Segment receivables & inventories

68,669

17,238,934

3,312

17,310,915

Segment cash

565,166

4,252,366

1,449

4,818,981

Equity-accounted investees

-

161,408

-

161,408






Total segment assets

633,835

128,680,970

4,761

129,319,566






Segment liabilities





Segment loans

(55,988,561)

(68,088,376)

-

(124,076,937)

Segment trade & other payables

(442,196)

(13,898,989)

(14,103)

(14,355,288)

Segment provisions and retirement benefits obligations

 

-

(3,853,092)

-

(3,853,092)

Segment deferred tax

-

(812,481)

-

(812,481)






Total segment liabilities

(56,430,757)

(86,652,938)

(14,103)

(143,097,798)

 

Total segment net (liabilities)/assets

(55,796,922)

42,027,908

(9,342)

(13,778,232)

 

Segment other information





Amortisation of intangible assets

-

(48,966)

-

(48,966)

Depreciation of property, plant and equipment

-

(9,290,373)

-

(9,290,373)

Additions to property, plant and equipment

-

11,921,874

-

11,921,874

 

Segment net assets are analysed net of intercompany transactions.

 

The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole.

 

 

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

6.  Segmental analysis (continued)

 

Year ended 31 December 2018

Restated UK

Restated Philippines

Singapore

Restated Total


US$

US$

US$

US$

Segment results





Sales revenue

-

61,414,966

-

61,414,966

Group operating loss

(5,720,184)

(13,083,213)

(16,872)

(18,820,269)

Other income & charges

-

(179,790,866)

(42,930)

(179,833,796)

Finance income/(costs)

(7,639,457)

28,375,364

(889)

20,735,018

Share of profits of associates

-

-

5,851

5,851






Profit/(loss) before tax

(13,359,641)

(164,498,715)

(54,840)

(177,913,196)

 

Segment assets





Segment tangibles & intangibles

-

80,515,158

-

80,515,158

Segment receivables & inventories

487,126

15,983,631

2,027

16,472,784

Segment cash

664,642

831,029

1,760

1,497,431

Equity-accounted investees

-

138,579

-

138,579






Total segment assets

1,151,768

97,468,397

3,787

98,623,952






Segment liabilities





Segment loans

(46,610,134)

(63,879,148)

-

(110,489,282)

Segment trade & other payables

(508,922)

(14,531,137)

(13,041)

(15,053,100)

Segment provisions and retirement benefits obligations

-

(2,824,452)

-

(2,824,452)

Segment deferred tax

-

(722,977)

-

(722,977)






Total segment liabilities

(47,119,056)

(81,957,714)

(13,041)

(129,089,811)

 

Total segment net (liabilities)/assets

(45,967,288)

15,510,683

(9,254)

(30,465,859)

 

Segment other information





Amortisation of intangible assets

-

(48,364)

-

(48,364)

Depreciation of property, plant and equipment

-

(24,852,158)

-

(24,852,158)

Transfer of capitalised expenditure to cost of sales

-

(2,330,221)

-

(2,330,221)

Additions to property, plant and equipment

-

6,627,567

-

6,627,567

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

7.  Staff numbers and costs - Group

 


2019


2018

The average number of persons, including Directors, was:

Number


Number

Administration

38


37

Development & operations

658


665


696


702






2019


2018

Staff costs of the above persons were:

US$


US$

Wages and salaries

9,805,664


9,080,649

Social security costs

313,921


167,894

Pension costs

229,063


61,970


10,348,648


9,310,513

 

Directors' emoluments:

2019


2018


US$


US$

Directors




D Bowden

720,000


-

I Holzberger

15,145


750,000

 

Sums paid to third parties in respect of Directors of the parent Company




MTL Luxembourg Sarl appointees:

A Stancliffe

28,070


-

T Dean

-


13,702

J Wilson

-


13,702

L Simovici

-


29,292

Runruno Holdings Limited appointee - G Walker

128,547


67,024


891,762


873,720

 

The Directors are considered to be the only members of key management personnel. All emoluments represent Directors' fees.

 

Pursuant to the Subscription and Shareholders' Agreement of 8 March 2011, MTL Luxembourg Sarl (formerly Solomon Capital Limited) and Runruno Holdings Limited subsequently entered into separate Services Agreements which detailed the terms of remuneration each of these companies receives for the supply of their representative Directors.

 

Share options held by Director:

 

As at 31 December 2019, there were no share options outstanding (2018: none).

 

Further details relating to key management are given in note 30 to the financial statements.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

8.  Other charges and income applied against profit and loss

 

8. (a)  Impairment charge/reversal - Group

Under IAS 36 - Impairment of Assets, each asset that forms a cash generating unit should be tested annually for impairment. The Group considers that the entire Runruno project (encompassing capitalised property, plant and equipment, mining licence costs and deferred exploration expenditure) comprises a single cash generating unit as all stages of the project are interdependent in terms of generating cash flow and do not have the capacity to generate separate and distinct cash flow streams. Accordingly, the annual recoverable value assessment made in accordance with IAS 36 is made on a whole of project basis. 

 

The Group assesses the recoverable amount of the Runruno project cash generating unit based on the value in use of the Runruno operations using cash flow projections over the remaining expected LOM and at appropriate discount rates. Based on assumptions current as at 31 December 2019 the Group reviewed its recent operational performance and its future expectations based on a review of the planned mining schedule to determine the recoverable amount the Runruno project could deliver.

 

The recoverable amount estimates were based on the following key assumptions and source information:

· gold resources to be mined based on the updated estimated reserves and resources and new remaining LOM mining schedule; adjusted for forecast mine and grade dilution;

· estimated gold recoveries forecast to be achieved over the remaining LOM;

· estimated ongoing capital expenditure required for the remaining LOM;

· estimated operating and administration costs for the remaining LOM including an inflation factor;

· future gold revenues based upon Bloomberg consensus gold price futures;

· future gold revenues calculated for the remaining LOM of 7 years; and

· risk discount rates of up to 16% (2018: 17.85%) being the Company's estimated weighted average cost of capital.

 

Although the remaining estimated reserves and resources have decreased since the 2018 estimate mainly due to 2019 production, there has been a sustained improvement in gold recoveries together with a significant rise in gold prices. Future gold price forecasts have also increased substantially. The changes in these variables have resulted in the estimated December 2019 recoverable value of the Runruno project being significantly higher than as forecast as at December 2018.

 

As a result the Group formed the view that $25 million of the December 2018 $176.4 million impairment charge be reversed to reflect the updated estimated recoverable value of the Runruno project. Thus a $25 million impairment charge reversal has been recorded as income for the 2019 financial year (refer note 12 - property, plant and equipment).

 

Impairment charges have been raised against trade and other receivables due, both within and after one year, in relation to withholding tax paid on intra-group management fees and VAT on importations and other goods and services. Under the FTAA these withholding taxes and VAT are recoverable, however given the Group continues to have little success in securing appropriate refunds of these taxes paid impairment charges have been raised. (refer note 17 - trade and other receivables due after one year; note 20 - trade and other receivables due within one year).



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

8.  Other charges and income applied against profit and loss (continued)

 

8. (b)  Impairment charge/reversal - Company

To a large extent the Runruno project has been funded by loans from the parent Company and these together with the Company's investment in its subsidiaries is represented by the value of the Runruno project cash generating unit. The 2018 estimate of the value of the Runruno project cash generating unit resulted in these loans and investments being fully written off.

 

Repayment of these loans and recovery of the investments is dependent upon the Runruno project producing sufficient cash surpluses. The December 2019 review of the future estimated cash flows that the Runruno project may produce showed that the Company's subsidiaries should produce positive cash flows over the remaining life of the project, enabling it to partially repay parent company advances. From a review of the subsidiaries net assets as at December 2019 it was estimated that $40 million of these parent company advances could be repaid. As a result the Company has reversed $40 million of the 2018 impairment of receivables due from subsidiaries (note 20 - trade and other receivables due within one year).

 

8. (c)  Finance costs and other income


2019


2018


US$


US$

Exchange (loss)/gain

(1,280,545)


33,436,775

Loan interest and fees

(16,202,713)


(12,695,377)

Warrant fair value expense

(295,352)


-

Bank interest and fees

-


(6,380)

Finance costs and other income

(17,778,610)


20,735,018





 

9.  Taxation

 




2019


2018

US$


US$

-


(40,648)

140,072


(1,485,807)





Total tax expense/(credit) for the year

140,072


(1,526,455)





The total tax expense/(credit) for the year can be reconciled to profit/(loss) for the year as follows:







2019


2018

US$


US$

Profit/(loss) before tax

13,852,272


(177,913,916)







 

2,631,932


(33,803,507)








(46,316)


(50,274,425)

2,768,484


37,031,825

1,680,675


1,128,174

(6,894,643)


44,391,538

(60)


(60)





Total taxation expense/(credit) for the year

140,072


(1,526,455)

 

10.  Deferred tax credit, liability and asset

 

Deferred tax credit

 


Tax Expense/(Credit)

Tax Liability

Tax Asset


2019

2018

2019

2018

2019

2018


US$

US$

US$

US$

US$

US$

Derivative assets

-

(4,643)

-

-

-

-

Undepleted asset retirement obligation

140,072

(70,636)

570,930

430,858

-

-

Unrealised foreign exchange gain

-

(1,306,295)

158,500

158,482

-

-

Other short term timing differences

-

(104,233)

83,051

133,637

-

-


140,072

(1,485,807)

812,481

722,977

-

-

 

The differences between the deferred tax credit through the Consolidated Statement of Total Comprehensive Income and the deferred tax liability on the Consolidated Balance Sheet has occurred from translation differences arising on consolidation. Liabilities are translated using the closing foreign exchange rate prevailing at 31December 2019 whereas the foreign currency composition of the statement of total comprehensive income is translated using the average rate for the whole of the year.

 

Deferred tax asset

For the year ended 31 December 2019 the Group has net unused tax losses of $53.8 million (2018: $40.6 million) available for offset against future profits. However, due to the Group's on-going tax losses situation, the deferred asset has not been recognised on the Consolidated Balance Sheet due to uncertainty over its future reversal. 

 

For the year ended 31 December 2019 the Group has net unused tax losses available for offset against future profits as follows:


2019


2018


US$


US$

UK

40,307,118


30,658,104

Philippines

9,721,944


9,952,032





Group unused tax losses available

50,029,062


40,610,136



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

11.  Profit/(loss) per share


2019


2018


US$


US$

Profit/(loss)




Net profit/(loss) attributable to equity shareholders for the purpose of basic and diluted profit/(loss) per share




13,712,200


(176,386,741)





Number of shares




Weighted average number of ordinary shares for the purpose of

basic profit/(loss) per share




2,071,334,586


2,071,334,586

Number of dilutive shares under warrant

30,950,049


-

Weighted average number of ordinary shares for the purpose of

diluted profit per share

2,102,284,635


2,071,334,586

Earnings per share




Basic profit/(loss) cents per share

0.66


(8.51)

Diluted Profit/(loss) per share

0.64


(8.51)

 

The profit/(loss) per share was calculated on the basis of net profit/(loss) attributable to equity shareholders divided by the weighted average number of ordinary shares. For the year ended 31 December 2018 the basic and diluted profit/(loss) per share is the same, as the exercise of share warrants would not reduce the profit/(loss) per share and are therefore, anti-dilutive.

 

 


 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

12.  Property, plant and equipment - Group

 


Motor vehicles

Office furniture & equipment

Buildings & leasehold improvements

Drilling, mining & milling equipment

Construction in progress (CIP)

 

Process plant

Residual Storage Impoundment

(RSI)

Mining properties

 Total


US$

US$

US$

US$

US$

US$

US$

US$

US$

Cost










As at 1 January 2018

1,043,758

1,493,097

2,086,898

18,040,895

182,019,852

-

-

38,477,372

243,161,872

 

Additions

-

-


327,000

6,173,774

126,793

-

-

6,627,567

Reclassification of CIP

-

-

1,816,229

912,232

(205,531,124)

114,898,191

18,657,361

69,247,111

-

Transfer from intangibles

-

-

-

-

-

-

-

13,414,068

13,414,068

Transfers to cost of inventories

-

-

(61,512)

(73,252)

-

(1,599,059)

(596,398)

-

(2,330,221)

Correction to accruals

-

-

-

-

-

(594,101)

-

-

(594,101)

Foreign exchange differences

(152,333)

-

(11,303)

(177,262)

23,511,272

1,662,591

2,026,060

4,631,723

31,490,748

As at 31 December 2018

891,425

1,493,097

3,830,312

19,029,613

6,173,774

114,494,415

20,087,023

125,770,274

291,769,933

Re-allocation

-

-

-

-

-

(1,662,591)

-

1,662,591

-

Additions

49,413

35,296

-

6,118,289

3,242,606

407,266

1,210,195

858,809

11,921,874

Reclassification of CIP

-

-

-

-

(6,083,520)

-

4,279,552

1,803,968

-

Disposals

-

-

-

(2,365,672)

-

-

-

-

(2,365,672)

As at 31 December 2019

940,838

1,528,393

3,830,312

22,782,230

3,332,860

113,239,090

25,576,770

130,095,642

301,326,135











Impairment










As at 1 January 2018

-

-

-

-

-

-

-

-

-

Additions (refer note 8(a))

-

-

-

(1,286,883)

-

(40,200,756)

(18,250,483)

(115,261,878)

(175,000,000)

31 December 2018

-

-

-

(1,286,883)

-

(40,200,756)

(18,250,483)

(115,261,878)

(175,000,000)

Reversal (refer note 8(a))

-

-

-

1,286,883

-

5,462,634

18,250,483

-

25,000,000











As at 31 December 2019

-

-

-

-

-

(34,738,122)

-

(115,261,878)

(150,000,000)



 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

12.  Property, plant and equipment - Group (continued)

 


Motor vehicles

Office furniture & equipment

Buildings & leasehold improvements

Drilling, mining & milling equipment

Construction in progress (CIP)

 

Process plant

Residual Storage Impoundment

(RSI)

Mining properties

 Total


US$

US$

US$

US$

US$

US$

US$

US$

US$

 

Depreciation










As at 1 January 2018

(962,973)

(1,471,761)

(960,594)

(8,387,783)

-

-

-

-

(11,783,111)

Charge for the period

(70,342)

(16,997)

(322,888)

(1,593,670)

-

(10,503,323)

(1,836,540)

(10,508,396)

(24,852,156)

Transfer from intangibles

-

-

-

-

-

-

-

(337,393)

(337,393)

Foreign exchange differences

151,895

-

5,202

124,862

-

-

-

337,393

619,352

As at 31 December 2018

(881,420)

(1,488,758)

(1,278,280)

(9,856,591)

-

(10,503,323)

(1,836,540)

(10,508,396)

(36,353,308)

Reallocation

-

-

-

-

-

138,291

-

(138,291)

-

Charge for the period

(9,224)

(8,677)

(341,558)

(1,401,991)

-

(4,624,579)

(2,492,896)

(411,448)

(9,290,373)

Disposals

-

-

-

1,296,241

-

-

-

-

1,296,241

As at 31 December 2019

(890,644)

(1,497,435)

(1,619,838)

(9,962,341)

-

(14,989,611)

(4,329,436)

(11,058,135)

(44,347,440)











Net book value










As at 31 December 2019

50,194

30,958

2,210,474

12,819,889

3,332,860

63,511,357

21,247,334

3,775,629

106,978,695

As at 31 December 2018

10,005

4,339

2,552,032

7,886,139

6,173,774

63,790,336

-

-

80,416,625

 

Refer note8 (a) for details of the impairment reversal/charge recognised against these assets.

 

Fixed and floating security charges are held over the Group's plant and equipment.

 


NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

13.  Goodwill

 


2019


2018


US$


US$

Cost

-


1,363,977

Allowance for impairment losses

-


(1,363,977)

Net book value

-


-

 

Goodwill arose from the acquisition of a 70% share in FCF Minerals Corporation in February 2005, and a further 15% in August 2007.  No goodwill was recognised on the acquisition of the remaining 15% shareholding in FCF Minerals Corporation in 2011, following the adoption of IAS27; Consolidated and Separate Financial Statements (revised 2008). Instead, the fair value of the consideration less the value of the non-controlling interest was accounted for in equity reserves as the 'Acquisition of Non-Controlling Interest Reserve' in the consolidated balance sheet.

 

The goodwill asset is considered a component of the Runruno project cash generating unit and was fully impaired in the year ended 31 December 2018.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

14.  Other intangible assets

 

Group


Exploration

expenses

 

Licences

 

Software

 

Total



US$

US$

US$

US$

Cost






As at 1 January 2018


7,861,503

5,524,053

575,456

13,961,012

Additions


-

-

97,285

97,285

Reclassified to mine development


(7,861,503)

(5,552,565)

-

(13,414,068)

Foreign exchange differences


-

28,512

(70,267)

(41,755)

As at 31 December 2018


-

-

602,474

602,474

Additions


63,078

-

-

63,078

As at 31 December 2019


63,078

-

602,474

665,552







Amortisation and impairment






As at 1 January 2018


-

(337,393)

(525,576)

(862,969)

Charge for the period


-

-

(48,364)

(48,364)

Reclassified to mine development


-

337,393

-

337,393

Foreign exchange differences


-

-

69,999

69,999

As at 31 December 2018


-

-

(503,941)

(503,941)

Charge for the period


-

-

(48,966)

(48,966)

Impairment charge for the period


(63,078)

-

-

(63,078)

As at 31 December 2019


(63,078)

-

(552,907)

(615,985)







Net Book Value






As at 31 December 2019


-

-

49,567

49,567







As at 31 December 2018


-

-

98,533

98,533







Costs associated with obtaining a license to mine at Runruno and deferred exploration were previously capitalised and are considered components of the Runruno project cash generating unit and were fully impaired in the year ended 31 December 2018. Exploration costs incurred during 2019 have also been fully impaired as exploration has not progressed to a point where it is considered possible that an inferred resource can be determined.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

15.  Investments in subsidiaries - Company

 


2019

2018


US$

US$




Cost

8,783,629

8,783,629

Impairment brought forward

(8,783,629)

(610,361)

Impairment charge for the year

-

(8,173,268)

Net book value

-

-

 

Refer to note 8(b) regarding the impairment charge raised against these assets. The investments in subsidiaries are as follows:

Company

Registered address

Percentage holding

Nature of business

 

Metals Exploration Pte

6 Temasek Boulevard,

 #29-00 Suntec Tower Four

Singapore 038986

 

  100%

Holding and investment company

FCF Minerals Corporation

22F, Salcedo Towers,

169 H.V. dela Costa St, Salcedo Village,

Makati City 1227, Philippines

 

100%

FTAA licensee, holder of mining rights and gold production

MTL Philippines 

22F, Salcedo Towers,

169 H.V. dela Costa St, Salcedo Village,

Makati City 1227, Philippines

100%

Holder of exploration rights

 

Metals Exploration Pte Ltd is a direct subsidiary of Metals Exploration plc, while FCF Minerals Corporation and MTL Philippines, Inc. are direct subsidiaries of Metals Exploration Pte Ltd.

 

Metals Exploration plc ROHQ established in the Philippines, is an overseas branch of the Company and therefore its results are reported together with the Company's.

 

The principal place of business of the subsidiary companies listed above is the same as their country of registration.

 

16  Investments in associates - Group

 


2019


2018


US$


US$

At 1 January

138,579


130,980

Share of profits of associates

22,829


5,851

Foreign exchange movements

-


1,748

At 31 December

161,408


138,579

 

 

 

Associate company

 

Domicile

 

Assets

US$

Liabilities

US$

P&L reserves

at 31 Dec 19

US$

Sales

US$

Gains/(losses)

US$

Ownership of

ordinary shares

on issue

%

 

Cupati Holdings Corporation

Philippines

2,809,630

(2,620,209)

189,421

88,727

75,074

39.99%

Woggle Corporation

Philippines

326,648

(217,213)

109,435

-

(18,000)

39.99%



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

17.  Trade and other receivables due after one year - Group

 


2019


2018


US$


US$

Other receivables

4,222,863


3,333,083


4,222,863


3,333,083

 

Other receivables include VAT on importations and other goods and services. An impairment has been calculated on the basis that the Group continues to have little success in advancing its legal challenges to recover VAT receivables. An impairment charge of $2.98 million against these receivables has been recognised (2018: $2.26 million).

 

18.  Inventories - Group

 


2019


2018


US$


US$





Gold doré on hand

2,588,338


1,509,132

Gold in circuit

2,009,508


1,712,017

Gold in ore stockpiles

1,496,238


2,636,387

Consumable inventories

3,634,373


1,615,702

Provision for obsolete consumable inventories

(250,000)


(500,000)


 

9,478,457


 

6,973,238

 

Gold inventories are recorded at the lower of cost and net realisable value.

 

During the year ended 31 December 2019 inventories recognised as an expense in the cost of sales was $19,153,185 (2018: $15,511,953).

 

19.  Cash and cash equivalents

 

Group

2019


2018


US$


US$

Cash on hand

7,107


6,638

Current accounts

4,811,874


1,490,793


4,818,981


1,497,431

 

Company

2019


2018


US$


US$

Current accounts

565,166


664,642


565,166


664,642

 

The directors consider that the carrying amount of these assets is a reasonable approximation of their fair value. The credit risk on liquid funds is limited because the counter-parties are banks with a high credit rating.



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

20.  Trade and other receivables due within one year

 

Group

2019


2018


US$


US$

Receivables from gold sales

175,198


2,090,727

Other receivables

2,988,828


3,850,782

Prepayments

445,569


224,954


3,609,595


6,166,463

 

For the financial period receivables from gold sales were generally received within 3 days of the gold doré having been shipped from the Runruno operation. The Group's trade receivables are derived through gold sales to a customer whose credit quality is assessed by considering the customers financial position, past performance and other factors. Within 5 days of year end, the Group had collected 100% of the trade receivables outstanding as at 31 December 2019. The Group believes the credit risk is limited as the customer pays within a short period of time.

 

Other receivables include withholding tax paid on intra-group management fees. Under the FTAA these withholding taxes are recoverable, however given the Group continues to have little success in securing appropriate refunds of various taxes paid. An impairment charge of $0.41 million against these receivables has been recognised (2018: Nil).

 

Company

2019


2018


US$


US$

Receivables from subsidiaries

39,908,999


-

Other receivables

10,882


404,247

Prepayments

57,787


82,879


39,977,668


487,126

 

A provision for impairment of receivables from subsidiaries was raised in 2018 using an expected loss model. The expected loss was estimated on the basis that recovery of amounts from the subsidiaries is uncertain. A review of the receivables from subsidiaries as at December 2019 resulted in a $40,000,000 reversal of the 2018 impairment. Refer to note 8(b).

 

Other receivables include withholding taxes paid as noted above. An impairment charge of $0.41 million against these receivables has been recognised (2018: Nil).

 

21.  Retirement benefits obligations - Group

 

The Group has an unfunded, non-contributory defined benefit retirement plan covering substantially all regular employees who have rendered at least six months of continuous service. Benefits are dependent on the years of service and the respective employee's compensation. The valuation of the retirement plan obligation is determined using the projected unit credit actuarial cost method. There was no planned termination, curtailment or settlement in either 2019 or 2018.

 

The relevant Philippine regulatory framework, RA 7641, known as the 'Retirement Pay Law', requires a provision for retirement pay to qualified private sector employees in the absence of any retirement benefits under any collective bargaining and other agreements which shall not be less than those provided under the law.

 

The amounts of retirement benefits costs recognised in the statements of comprehensive income are determined as follows:

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

21.  Retirement benefits obligations - Group (continued)

 


2019


2018


US$


US$

Current service costs

115,098


144,541

Interest costs

46,313


37,984


161,411


182,525

 

The amounts were distributed as follows:


2019


2018


US$


US$

Cost of sales

Current service costs

 

111,645


 

115,633

Interest costs

44,924


30,387


156,569


146,020

Administration expenses




Current service costs

3,453


28,908

Interest costs

1,389


7,597


4,842


36,505


161,411


182,525

 

Changes in the present value of the unfunded retirement benefits liability are determined as follows:

 


2019


2018


US$


US$

Balance at beginning of year

673,819


724,692

Current service costs

115,098


144,541

Interest costs

46,313


37,984

Benefits paid

(30,851)


(8,209)

Actuarial loss (gain) due to:

Changes in financial assumptions

 

199,752


 

(98,543)

Experience adjustments

(27,935)


(78,718)

Changes in demographic assumptions

(3,196)


(47,928)

Balance at year end

973,000


673,819

 

The principal assumptions used in determining the defined benefit retirement plan obligations are as follows:


2019


2018

Discount rate

4.93%


7.33%

Salary increase rate

2.00%


2.00%

Expected remaining working lives of employees

10 years


10 years

 

Turnover rate

13% at age 18 decreasing to 0% at age 60


13% at age 18 decreasing to 0% at age 60

 

 

Mortality rate

2017 Philippine Intercompany Mortality Table


2017 Philippine Intercompany Mortality Table

 

 

Disability rate

1952 Disability Study, Period 2, Benefit 5


1952 Disability Study, Period 2, Benefit 5



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

21.  Retirement benefits obligations - Group (continued)

 

The sensitivity analyses below has been determined based on reasonably possible changes of each significant assumption on the defined benefits retirement liability as at the end of the reporting period, assuming all other assumptions were held constant:

 


Increase/


2019


2018


 (decrease)


US$


US$

Discount rates

+1%

-1%


866,822

(1,068,527)


583,270

(695,713)

Salary pay increases

+1%


1,075,503


576,880

 

Shown below is the maturity analysis of the undiscounted benefit payments:

 




2019


2018




US$


Less than one year



40,758


More than one year to five years



406,056


More than five years to 10 years



648,879


More than 10 years to 15 years



1,074,992


More than 15 years to 20 years



1,171,090


More than 20 years



2,926,388


2,436,169




6,268,163


5,327,906

 

 

22.  Trade and other payables due within one year

 

Group

2019


Restated 2018


US$


US$

Trade payables

10,087,062


11,262,360

Other payables

495,084


2,361,906

Other tax and social security payable

158,725


217,719

Accruals

3,614,417


1,211,115


14,355,288


15,053,100

 

Company

2019


2018


US$


US$

Trade payables

252,511


323,919

Other tax and social security payable

76,128


75,420

Accruals

113,557


109,583


442,196


508,922

 

Trade payables comprise amounts outstanding for trade purchases and on-going costs, and together with other payables and accruals are measured at amortised cost. In 2018 outstanding interest and fees on debt facilities (Group $7,247,958; Company $6,668,810) were included in accruals but in 2019 are included in loan amounts payable (Refer note 23).



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

23.  Loans

 

Group  

On 28 May 2015, the Company entered into a loan Facility Agreement with two foreign international resource banks (the "Senior Lenders"). The original Facility Agreement provided $83,000,000 in project finance. The Facility Agreement has since been amended on a number of occasions as the Group was granted waivers from repayment of due principal.

 

In the period to 31 December 2017 principal totalling $19,200,000 was repaid by the Group. A further $500,000 of loan principal was paid in December 2018 as part of negotiating a new amendment to the Facility Agreement. The balance owing by the Group under the Facility Agreement as at 31 December 2018 was $63,300,000.

 

A key element of the December 2018 Facility Agreement amendment was a condition precedent that the Group raise a net $20,000,000 in fresh equity; of which $15,000,000 would be utilised to repay loan principal on 31 March 2019. Further deferred rescheduling of the remaining principal repayments was also part of this proposed amendment.

 

However, in early March 2019 the Group advised the Senior Lenders that the equity raise was not achievable, and the Group could not make the $15,000,000 principal repayment by 31 March 2019. At this point the Group sought a standstill period within which the Group was relived of making any principal or interest payments (the "Standstill Agreement"). This Standstill Agreement was initially agreed by the Senior Lenders for a period until 2 May 2019. Subsequently the Standstill Agreement was extended a number of times and was in place as at 31 December 2019.

 

The purpose of the Standstill Agreement was to provide the Group and the Senior Lenders (together with the Mezzanine Lenders as noted below) time to negotiate a restructuring of the debt aimed to provide the Group with a sustainable debt position.

 

No loan principal payments were made during the 2019 year. The balance owing by the Group under the Facility Agreement as at 31 December 2019 was $68,088,376, including all accrued and unpaid interest.

 

In January 2020 the Facility Agreement was acquired by companies associated with the Mezzanine Lenders (the "New Lenders"). On 9 March 2020 the Company advised that terms to continue the Standstill were not agreed with the New Lenders, and a default event had occurred under the original Facility Agreement.

 

In September 2020 the Group reached a conditional in-principle agreement with its lenders to restructure its borrowings such that it will no longer be in default and result in a sustainable debt profile.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

23.  Loans (continued)

 

As at 31 December 2019 the Group's outstanding loan position was:

 


2019*


Restated 2018*


$


$

Senior Lenders loans due within one year

68,088,376


63,879,148

Mezzanine Lenders loans due within one year

44,705,987


20,324,082

Total loans due within one year

112,794,363


84,203,230





Mezzanine Lenders loans due after one year

12,514,159


26,286,052

Less: Fair value of warrants issued in conjunction with loans

(1,231,585)


-

Total loans due after one year

11,282,574


26,286,052

 

* As at December 2018 accrued unpaid interest and fees ($7,247,958) were disclosed in Note 22 as part of the Accruals amounts. As at December 2019 accrued unpaid interest and fees are included in the loan liabilities numbers noted above.

 

Company  

In 2015 the Company entered into a facility agreement with two major shareholders, MTL (Luxembourg) Sarl and Runruno Holdings Limited (the "Mezzanine Lenders"). The purpose of this advance was for general corporate and working capital requirements of the Company and to enable completion of the Runruno project. The facility amount of $5,000,000 was repayable in 5 years, with interest capitalised against the facility at 20% per annum.

 

In 2017, the Company entered into a $21,000,000 mezzanine debt facility (subsequently increased to $23,240,851) with the Mezzanine Lenders payable within 60 months. On $12,000,000 of loan principal the interest rate is 8% pa plus 3 month US$ LIBOR, while the balance of principal attracts an additional 4% margin. While the loan is in default a further 2% default interest is charged on the overdue amounts. The proceeds from the facility were used to repay two short-term loans received from the same shareholders with the balance being utilised to facilitate capital and interest payments to the Group's Senior Lenders. A production fee is payable over a 60-month period in quarterly instalments equivalent to 1.3% of the gross gold sales of the Group from first drawdown, where the minimum quarterly fee payable is $250,000 and the maximum quarterly fee is capped at $500,000.

 

During 2018, the Company continued to seek short term unsecured loan facilities from the Mezzanine Lenders to make principal and interest payments to the Group's Senior Lenders and to provide working capital. In total, three separate facilities were advanced to the Company totaling $11,720,176. In January 2019 an additional $899,257 in loan principal was advanced to the Company. These three loans attract a 20% pa interest rate, with $6,000,000 of these loans attracting an additional 10% penalty interest if interest is not paid when due.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

23.  Loans (continued)

 

During 2019 in accordance with the Standstill Agreement (refer above) no payments of principal, interest or production fees on any Mezzanine debt facility were made. As a result penalty interest charges have applied.

 

As noted above the Standstill Agreement was not continued beyond 6 March 2020. Under the terms of an existing Inter-creditor Deed, the Mezzanine Lenders cannot take legal action to seek repayment of any amounts due under the Mezzanine Facilities until the Senior Facility Agreement has been fully repaid.  

 

As at 31 December 2019 the mezzanine loan position was:

 


2019


Restated 2018*


US$


US$

Mezzanine Lenders loans due within one year

44,705,987


20,324,082





Mezzanine Lenders loans due after one year

12,514,159


26,286,052

Less: Fair value of warrants issued in conjunction with loans

(1,231,585)


-

Total loans due after one year

11,282,574


26,286,052

 

* As at December 2018 accrued unpaid interest and fees ($6,668,810) were disclosed in Note 22 as part of the Accruals amounts. As at December 2019 accrued unpaid interest and fees are included in the loan liabilities numbers noted above.

 

These Company loan liabilities are included in the Group loans above.

 

24.  Provision for mine rehabilitation and decommissioning

 


2019


2018


US$


US$

At 1 January

2,150,633


1,949,738

Unwinding of discount

729,459


200,895





At 31 December

2,880,092


2,150,633

 

The Company makes provision for the future cost of rehabilitation of the process plant on a discounted basis. Provision for mine rehabilitation and decommissioning represents the present value of future rehabilitation and decommissioning costs. These provisions have been created based on the Company's internal estimates. Estimated costs include labour, equipment hire, consumables and transportation for disposal. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual costs will ultimately depend upon future market prices for the necessary works required which will reflect market conditions at the relevant time. Furthermore, the timing of the rehabilitation and expenditure of other costs is likely to depend on when the mine ceases to produce at economically viable rates, and the timing that the event for which the other provisions provided for will occur. 

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

25.  Called up share capital

 


2019


2018


US$


US$

Allotted ordinary shares at 1 January

(2,071,334,586 ordinary shares of £0.01 par value)

27,950,217


27,950,217





Allotted ordinary share at 31 December

(2,071,334,586 ordinary shares of £0.01 par value)

27,950,217


27,950,217

 

Share rights

Ordinary shares confer the right to vote and to participate in dividends, capital, and other distributions including on winding up. Ordinary shares are not redeemable.

 

26.  Compound financial instruments

 

Warrants

There were no warrants issued during 2019.

 

During the year ended 31 December 2017, two tranches of warrants were issued by the Company in conjunction with securing a mezzanine funding package.


Tranche 1

Tranche 2




Exercise Price

£0.055

£0.070

Expiry Date

31 December 2023

31 December 2023

Number of warrants

75,000,000

25,000,000

 

The fair value of these warrants as at the date of issue was independently calculated to be $1,526,937. The fair value of these warrants has been brought to account as an equity reserve in the year ended 31 December 2019. This warrant fair value was not previously brought to account. The unwinding of the fair value of these warrants is charged through the statement of comprehensive income and loss.



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

27.  Net cash provided by/(used in) operating activities

 

Group

2019


2018


US$


US$





Profit/(loss) before tax

13,852,272


(177,913,196)





Depreciation

9,290,373


24,852,158

Provisions

130,578


200,916

Impairment (reversal)/charge

(22,963,749)


179,833,796

Fair value gain on forward sales contracts

-


(227,268)

Fair value loss on interest rate swaps

-


14,722

Amortisation

48,966


48,364

Share of profits of associates

(22,829)


(5,851)

Loss on disposal of asset

569,434


-

Foreign exchange loss/(gain)

1,480,638


(33,436,754)

Decrease/(increase) in receivables

293,672


(1,832,819)

Increase in inventories

(2,505,219)


(6,973,238)

Increase in other assets

-


1,151,753

Increase in payables

13,517,523


8,209,224





Net cash provided by/(used in) operating activities

13,691,659


(6,078,235)

 

Company

2019


2018


US$


US$

Profit/(loss) before tax

28,662,780


(238,418,911)





Impairment (reversal)/charge

(38,778,397)


229,478,926

Foreign exchange loss

147,956


1,720,531

(Increase) in receivables

(2,040,734)


(10,179,284)

Increase in payables

9,939,381


6,207,736





Net cash used in operating activities

(2,069,014)


(11,191,002)

 

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

28.  Reconciliation of liabilities from financing activities

 

 

Group

Restated

1 January 2019

 

Cash flow

Non-cash movements

31 December 2019


$

$

$

$






Loans (current) - including accrued interest/fees

84,203,230

899,257

27,691,876

112,794,363

Loans (non-current)

26,286,052

-

(15,003,478)

11,282,574


110,489,282

899,257

12,688,398

124,076,937

 

 

 

Company

Restated

1 January 2019

 

Cash flow

Non-cash movements

31 December 2019


$

$

$

$

Loans (current) - including accrued interest/fees

20,324,082

899,257

23,482,648

44,705,987

Loans (non-current)

26,286,052

-

(15,003,478)

11,282,574


46,610,134

899,257

8,479,170

55,998,561

 

29.  Capital commitments

 

As at 31 December 2019 the Group had $nil outstanding capital commitments (2018: $nil).

 

30.  Related party transactions

 

Only members of the Board of Directors of Metals Exploration plc are deemed to be key management personnel. The Board has responsibility for planning, controlling and directing the activities of the Group. Key management compensation is disclosed in Note 7, Directors' emoluments section. Amounts due at period end the following amounts were due in relation to Directors' emoluments:

 

Amounts owing to Directors



2019

2018




$

$

D Bowden



6,000

-

 

Amounts owing to related parties





MTL Luxemburg



7,862

-

Runruno Holdings Limited



83,299

-




91,161

-

 

 

During the year, the Company received funds from its subsidiaries to fund operations. At the year end, the Company had loans due by its subsidiaries totaling $247 million (2018: $214 million). As at 31 December 2019 these loan amounts owed by subsidiaries were impaired to a net recoverable amount of $40 million (2018: Nil). (Refer Note 8(b)).

 

At the year end, the Company owed $78,000 (2018: $75,000) to its associates and the Group was owed $2.84 million (2018: $2.62 million) from its associates.



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

31.  Financial instruments

 

The Group's financial instruments comprise cash and cash equivalents, borrowings and items such as trade payables and trade receivables which arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Group's operations. The Group holds no gold price or interest rate hedging financial instruments.

 

The carrying values of financial assets at the year-end are as follows:

 

 

Group


Cash and cash equivalents

Trade and other receivables

 

Total




US$

US$

US$


As at 31 December 2019


4,818,981

7,832,458

12,651,439


As at 31 December 2018


1,497,431

9,466,546

10,963,977


Company






As at 31 December 2019


565,166

39,977,668

40,542,834


As at 31 December 2018


664,642

487,126

1,151,768


Cash and cash equivalents and trade and other receivables are held at amortised cost.

 

The carrying values of financial liabilities at the year-end are as follows:

 

 

Group

 

Trade payables

Restated Accruals and other payables

Restated

Loans

 

Total


US$

US$

US$

US$

As at 31 December 2019

10,087,062

4,268,226

124,076,937

138,432,225

As at 31 December 2018

11,262,360

3,790,740

110,489,282

125,542,382

Company





As at 31 December 2019

252,511

189,685

55,998,561

56,440,757

As at 31 December 2018

323,919

185,003

46,610,134

47,119,056

Trade payables, accruals and other payables and loans are held at amortised cost.

 

The Group's operations expose it to a variety of financial risks including liquidity risk, foreign currency exchange rate risk, commodity price risk, credit risk and interest rate risk. The policies set by the Board of Directors are implemented by the Group's finance departments and senior management. 

 

Liquidity risk

The Group actively monitors its cash resources to ensure it has sufficient available funds for operations and planned expansions. Fund-raising activity is, where possible, timed to meet cash requirements however, as noted in Note 23 above the Group is currently unable to raise fresh equity capital and has sought, and has been granted, a standstill period during which it is not required to make any principal or interest repayments on its debt facilities.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

31.  Financial instruments (continued)

 

The contractual maturities of the financial liabilities at the year-end are as follows:

Group

 

Trade and other payables

 

Restated

Loans

 

Restated

Total


US$

US$

US$

As at 31 December 2019




1 - 6 months

14,196,563

104,218,889

118,415,452

6 - 12 months

-

8,575,474

8,575,474

1 - 2 years

-

7,150,948

7,150,948

2 - 5 years

-

4,131,626

4,131,626

Total contractual cash flows

14,196,563

124,076,937

138,273,500

 

As at 31 December 2018

US$

US$

US$

1 - 6 months

15,053,100

82,268,134

97,321,234

6 - 12 months

-

1,935,096

1,935,096

1 - 2 years

-

3,064,904

3,064,904

2 - 5 years

-

23,221,148

23,221,148

Total contractual cash flows

15,053,100

110,489,282

125,542,382

 

Company

Trade and other payables

Restated

Loans

Restated

Total*


US$

US$

US$

As at 31 December 2019




1 - 6 months

366,068

36,130,513

36,496,581

6 - 12 months

-

8,575,474

8,575,474

1 - 2 years

-

7,150,948

7,150,948

2 - 5 years

-

4,131,626

4,131,626

Total contractual cash flows

366,068

55,988,561

56,354,629





As at 31 December 2018




1 - 6 months

508,922

18,388,986

18,897,908

6 - 12 months

-

1,935,096

1,935,096

1 - 2 years

-

3,064,904

3,064,904

2 - 5 years

-

23,221,148

23,221,148

Total contractual cash flows

508,922

46,610,134

47,119,056

 

* The Group's and Company's contractual future loan interest is presently not capable of being calculated.  

 

As at 31 December 2019 the average interest rate applicable to the Group's outstanding loans was 11.53% (2018: 11.95%). The average interest rate applicable to the Company's outstanding loans was 16.90% (2018: 17.19%). Note that a further production fee of 1.3% of gross gold sales (subject to a quarter minimum fee of $250,000 and a maximum quarter fee of $500,000) is payable quarterly (until September 2022) as part of the Company's mezzanine loan facilities.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

31.  Financial instruments (continued)

 

Credit risk

Credit risk is the risk of financial loss to the Group or Company if counterparty to a financial instrument fails to meet its contractual obligations.

 

The Group and Company are exposed to credit risk attributable to its cash balances; however, this risk is limited because the counterparties are large international banks.

 

The Group is exposed to credit risk for other receivables due from third parties. This risk is limited because the counterparties to the gold sales are internationally recognised. Further, the Group receives significant payment for the gold upon the presentation of transportation documents.

 

Other receivables include VAT on importations and other goods and services. An impairment has been calculated on the basis that the Group continues to have little success in advancing its legal challenges to recover VAT receivables.

 

The Company is exposed to credit risk to the extent that amounts owed by its subsidiaries and associates may not be recoverable in the future. An expected credit loss has been recognised in relation amounts owed by its subsidiaries and associates.

 

The maximum exposure to credit risk at the year-end is best represented by the carrying amounts of trade and other receivables, cash and cash equivalents.

 

Market risk and sensitivity analysis

Commodity price risk

The market price of gold is one of the most significant factors in determining the profitability of the Group's operations. The price of gold is subject to volatile price movements over short periods of time and is affected by numerous industry and macro-economic factors that are beyond the Group's control. In 2019 the gold price ranged from $1,269 to $1,583 per ounce, with an average market price of $1,400 per ounce (2018: $1,268 per ounce). The Group's policy is to sell gold at prevailing market prices. As at 31 December 2019 no financial instruments have exposure to gold prices.

 

The impact of a 10% increase/decrease in the Group's average gold sale price achieved during the financial year would have resulted in the Group's loss before tax being decreased/increased by $9,424,000. The impact is expressed on the assumption that the market price changes by 10% with all other variables held constant.

 

Interest rate risk

The Group has interest bearing assets comprising cash and cash equivalents which earn interest at a variable rate. Interest income is not material to the Group.

 

The Group has interest bearing liabilities and the impact on the reported profit for the year is an interest expense of $13,562,259 (2018: $12,740,445). 

 

The portion of the Group's interest-bearing borrowings exposed to changes in the 3 month US$ LIBOR rate is $95,104,992 (2018: $86,521,148). The remainder of the Group's borrowings bears interest at a fixed rate. A 5% increase in 3 month US$ LIBOR over the financial year would have resulted in an additional $106,000 in losses for the year (2018: $96,000). The analysis is based on the assumption that the applicable interest rate increased with all other variables held constant. All financial instruments with fixed interest rates are not subject to the interest rate sensitivity analysis.



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

31.  Financial instruments (continued)

 

Foreign currency exchange rate risk

The Group and Company are exposed to foreign currency exchange rate risk having cashflows predominantly in US Dollars, Pounds Sterling and Philippine Pesos. The Group monitors exchange rates actively and converts funds raised to other currencies when deemed appropriate in order to meet expected future foreign currency commitments. The Group does not use hedging instruments to protect against currency risk.

 

Since 1 January 2019 the functional currency of all Group entities except the Parent Company has been US Dollars. The Group's exposure to foreign currency translation risk due to accounts being in different currencies to the Group's presentational currency is limited to movements in Pounds Sterling. Exposures to movements in other currencies are not material.

 

As at 31 December 2019, if the Pound Sterling exchange had weakened/strengthened by 10% against US Dollars, with all other variables held constant, the loss before tax profit would have been $14,000 higher/lower.

 

32.  Capital risk management

 

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern to provide returns for shareholders and maintain an optimal capital structure to reduce the cost of capital.

 

The Group defines capital as being share capital plus reserves. The Board of Directors monitors the level of capital as compared to the Group's long-term debt commitments.

 

The Group is not subject to any externally imposed capital requirements.

 

33.  Contingent liabilities

 

The Group has no contingent liabilities identified as at 31 December 2019 (2018: $nil), other than:

 

· The Company has commenced a review of its options to comply with its RSI closure spillway obligations, which is a direct link to the provision in note 24. A preliminary assessment has been received from an external consulting group in relation to this matter. The Company is reviewing the implications of the conclusions in this report and as a result will implement various studies to assess the optimum engineering and logistical method to satisfy its RSI closure obligations.

 

These studies are at an early stage and will take several months to advance to a point where the Company can reliably estimate is the potential cost of its future RSI closure obligations with any degree of certainty.

 

Accordingly, it is currently not practicable to reliably estimate this RSI closure obligation, however it is possible that the Company's potential closure cost estimation could change materially. The Company expects that to complete its studies within the next twelve months such that it can reliably estimate these additional closure costs.

 



 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

34.  Post balance sheet events

 

COVID-19

Since year end the world-wide COVID-19 pandemic has unfolded which has impacted the Runruno operations. To date the impact of the Philippine government quarantine regulations combined with the interruption to international movement of goods and people has been managed such that operations at Runruno have continued, albeit at reduced levels. Although gold production has reduced since the general lockdown commenced in the Philippines in early March, the Company is currently hopeful that the pandemic can be managed with no medium or long term impact on the profitability of the Group.

 

Debt restructure and AIM Listing

In January 2020 Runruno Holdings Ltd and MTL (Guernsey) Ltd, (an associated company of MTL Luxembourg SARL), the Company's two major shareholders and mezzanine lenders, completed a sale agreement with HSBC and BNP Paribas to purchase all the rights and obligations under Runruno Facility Agreement (the "Senior Facility"). This purchase was completed on 30 January 2020. The Senior Facility was acquired 70.6% by MTL Guernsey Ltd and 29.4% by Runruno Holdings Ltd.

 

On 9 March 2020, the Company announced that it had been unable to reach agreement on the continuation of a Standstill Agreement in respect of the Senior Facility and, due to the material uncertainty of the Company's financial condition; its shares were suspended from trading on the AIM market of the London Stock Exchange. The Company's shares remain suspended from trading as at the date of this report.

 

However in September 2020 the Group reached an in-principle agreement with its lenders, subject to the completion of definitive documentation and shareholder approval of certain changes to the Company's Articles of Association, the material terms of which are:

 

· The Group will no longer be subject to set fixed principal and interest repayment schedules and will no longer be in default with effect from completion of the proposed restructuring ;

· The Group will be required to repay to lenders to the Lenders (a "Quarter Payment") within 5 business days of each quarter end, being an amount that is equal to the Group's net working capital ("NWC"), subject to first establishing and maintaining a $5 million cash buffer. NWC is to be defined as the Group's available cash on hand plus gold sales proceeds due, and gold doré on hand or in transit, less all current liabilities (including budgeted operational, CAPEX and exploration expenses, taxes, hedging costs and government charges, but excluding all unpaid debt principal and interest);

· The Quarterly Payments will be applied in the following order: (i) to pay any applicable fees or costs of the Lenders under the facilities; (ii) interest on the New Senior Facility; (iii) New Senior Facility principal; (iv) interest on the New Mezzanine Facility; and (v) New Mezzanine Facility principal;

· The Company is to pay RHL and MTLL US$4,000,000 in aggregate, being interest from 30 January 2020 to 31 August 2020 and a repayment of principal of approximately US$650,000 under the Senior Facility, within 2 business days of the execution of the term sheets;

· The New Senior Facility interest rate will be set at 7% pa accruing daily and compounding quarterly;

· The New Mezzanine Facility interest rate will initially be set at 15% pa accruing daily and compounding quarterly;



 

· Upon full repayment of the New Senior Facility, the New Senior Facility will be amended and restated so that all amounts then due under the New Mezzanine Facility as at such date will instead become due under the New Senior Facility without any other amendment to the terms of the New Senior Facility.  This would result in the outstanding amount becoming secured as per the New Senior Facility, in exchange for the interest rate being reduced to 7 per cent. per annum;

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

34.  Post balance sheet events (continued)

 

· The Group will no longer be required to pay a 1.3 per cent. gross production fee upon gold production (which is a requirement under the existing mezzanine debt facilities in respect of the period up to 30 September 2022);

· In circumstances where the Group is in default an additional penalty interest of 5% pa will apply;

· In contrast to what the Company had communicated in prior announcements, there will not be any debt swapped for new equity as part of the Proposed Restructuring;

· The 2011 Shareholder and Subscription Agreement will, on completion of the Proposed Restructuring, be replaced by new relationship agreements with RHL and MTLL, respectively, consistent with current corporate governance guidance;

· The Proposed Restructuring is conditional, amongst other things, upon: (i) the agreement and entry into of definitive documentation to effect the Proposed Restructuring; (ii) the replacement of the 2011 Shareholder and Subscription Agreement with the relationship agreements referred to above; (iii) the approval of shareholders being granted to certain amendments being made to the Company's articles of association as required by the agreements; and (iv) the satisfaction of the requirements of Rule 13 of the AIM Rules for Companies as the Proposed Restructuring constitutes a related party transaction; 

· Each of the Company and the Lenders have entered into a legally binding commitment to use their respective reasonable endeavours to enter into definitive agreements which reflect the terms set out in the term sheets by no later than 31 October 2020; and

· The Company is to pay the reasonable costs and expenses incurred by the Lenders in implementing the Proposed Restructuring.

 

As a result of this conditional in-principal agreement the Company's expectation is that the Company's shares will be requoted on AIM upon completion of the debt restructure.

 

35.  Ultimate controlling party

 

The Company has no ultimate controlling party however; MTL Luxemburg SARL owns 46.9% of the Company.  Although RHL holds only 19% of the Company, under the 2011 Subscription and Shareholder Agreement a number of Board reserve matters require the consent of the RHL appointed director, in addition to the consent of a majority of the Board. The 2011 Subscription and Shareholder Agreement remains in place as at the date of this report.

 

As a result both MTL Luxemburg SARL and Runruno Holdings Ltd are considered parties holding significant influence.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
FR MZGMLDMDGGZM

a d v e r t i s e m e n t