TIDMARCM
RNS Number : 8342B
Arc Minerals Limited
12 October 2020
12 October 2020
Arc Minerals Ltd
('Arc' or the 'Company')
2020 Annual Report and Notice of AGM
Arc Minerals Limited is pleased to present its audited financial
statements for the 12 months ended 31 March 2020 ("Financial
Statements") as extracted from the Company's 2020 Annual Report
which is now available on the Company's website at
www.arcminerals.com and which will be sent today to any
shareholders who have requested a printed or electronic copy. The
Financial Statements should be read in conjunction with the 2020
Annual Report which contains the notes to the Financial
Statements.
The Company further announces that the Annual General Meeting
("AGM") of the Company will be held at 2(nd) Floor, 180 Piccadilly,
London, W1J 9HF at 11:00 am GMT on 5 November 2020. In
consideration of the COVID-19 pandemic, the Directors encourage all
shareholders to exercise their right to vote by submitting a Form
of Proxy and to refrain from attending the AGM in person.
The Notice of AGM, Form of Proxy and the Company's 2020 Annual
Report are available in the Document Library on the Company's
website and at the following links:
Notice of Annual General Meeting 2020
http://www.arcminerals.com/files/doc_downloads/circulars_and_notices/2020/Notice-of-Annual-General-Meeting-2020.pdf
Form of Proxy - AGM 2020
http://www.arcminerals.com/files/doc_downloads/circulars_and_notices/2020/Form-of-Proxy-AGM-2020.pdf
2020 Annual Report
http://www.arcminerals.com/files/doc_financials/annual/Annual-Report-2020.pdf
The Company is pleased to report that the laboratory reports in
relation to the 2,500 soil samples from the Zamsort and Zaco
license areas are expected imminently and that an update will
follow shortly.
The Annual Report for the year ended 31 March 2020 is set out in
full below. All amounts in this report are in GBP unless otherwise
stated.
Abbreviated Financial Summary for the year ended 31 March
2020
The Financial Summary for the year ended 31 March 2020 is
included on pg. 9 of the Annual Report.
During the year and as previously reported, both assets held for
sale were sold:
(i) In February 2020, the Company completed the sale of the
Sturec project for AUD 800k in cash and a royalty of up to AUD 11m
based on AUD 2.00 per ounce should the Sturec resource increase
above 1.5m tonnes at 2.5 g/t before November 2024;
(ii) In March 2020, the Company sold 100% of its interest in
Casa Mining Ltd and received a Note in the amount of USD 5m due 19
March 2021, secured by the Casa shares, and a 3% net smelter
royalty capped at USD 45m.
The Company has accounted for these transactions conservatively
and has not assigned in the accounts a value to either royalty. The
two royalties total approximately USD 53m. The combined loss from
these sales amounted to GBP 20.7m, which increased the Total Loss
for the year to GBP 25.9m (2019 - GBP 5.8m).
During the year Arc invested USD 2.6m into Zamsort to fund
exploration and other costs.
Chairman's Statement
The past year was characterised by significant uncertainty in
the equity and commodities markets as a result of the ongoing US
and China trade talks, Brexit and the outbreak of the coronavirus
in China in the last quarter of 2019, which of course has
subsequently spread quickly and developed into a pandemic with
extensive global consequences.
The copper price remained relatively stable at the onset of the
pandemic and has since then staged a formidable recovery over the
past two quarters increasing to circa US$6,800/tonne - a price
level not seen since 2018. The consensus is that demand will keep
recovering as Chinese factories have resumed production and western
economies are recovering from the impact of the virus.
Despite this challenging backdrop, the longer-term outlook for
copper remains positive driven by industrialisation and
urbanisation in Asia and other parts of the developing world,
market size, supply constraints and increasing diversity of use in
electrical vehicles and renewable energy. This latter sector of the
market is expected to grow significantly as legislation is
progressively introduced to reduce greenhouse gas emissions.
The first half of 2020 was significantly challenged by the
impact of the Covid-19 pandemic and the requirement to modify and
align our operations accordingly. Fortunately, the impact of
Covid-19 on our projects has been minimised with most of our staff
working from home to ensure continuity of our business.
Despite these restrictions we have continued to make good
progress on our projects. In May, we acquired a further 20%
interest in Zaco Investments Limited ("Zaco") bringing our interest
to 72.50%. The Zaco exploration license is a significant priority,
covering 465km(2) of highly prospective tenement immediately
adjacent to the 407km(2) Zamsort exploration license and holding a
number of significant exploration targets including the Fwiji, West
Lunga, Nyambwezu, Muswema South as well as the Chihindi targets. In
June, we commenced drilling on some of these targets as part of our
2020 programme.
Further, since the beginning of this year we have seen a
significant increase in interest from major mining companies that
are all seeking to replenish their existing copper resource
inventories and/or looking for a new prospective exploration ground
for world-class copper discoveries. To that end, we have continued
to have a number of discussions with major diversified mining
groups. These discussions culminated in us signing a 6-month
exclusivity agreement with Anglo American in July. This exclusivity
agreement will allow Anglo American to have its team on the ground
and conduct an extensive technical review over our assets and,
depending on the outcome of this review, Anglo American has the
right to either extend the agreement and/or enter into a commercial
transaction for the development of certain or all of the targets on
our licenses.
As part of our commitment to selling our non-core assets, in
November, we divested our interest in the turec gold project in
Slovakia to MetalsTech Limited ("MetalsTech"), an Australian listed
mineral exploration and mining company for a consideration of up to
US$8 million.
In March we also announced the sale of our interest in the Missi
gold project in the DRC to Golden Square Equity Partners, a private
group, for a consideration payable of up to US$50 million. The
consideration comprises a loan note of US$5m payable to Arc on 19
March 2021 and a royalty agreement of up to US$45 million.
The proceeds from these two sales include up to US$ 53 million
of consideration related to potential future royalties. The Company
has elected not to value these royalties in the 2020 accounts
which, if valued, would have reduced this year's loss. Further
details concerning these sales are provided in the Financial
Summary section of Directors Report.
In June, we commenced the second season of exploration
activities over the Zamsort and Zaco licenses We plan to undertake
c 8,000m of diamond core drilling in the coming months. The
exploration effort is initially focussed on the Fwiji Target
('Fwiji') where the Company has already defined the target area
through previous exploration campaigns. Follow up work is also
planned at a number of the other target areas, including Cheyeza
East and Muswema.
At a corporate level, we bolstered our Board, welcoming Rémy
Welschinger as finance director. Rémy is a resource professional
with significant experience in the metals and mining sector.
Jonathan de Thierry stepped down from the Board on 31 March 2020
and I would like to thank him on behalf of the board for his
contributions and wish him well with his future endeavours. In
August, Don Bailey announced his intention to retire from the Board
on 1 September 2020. Don has made a very significant contribution
to the Company and we wish him a well-deserved retirement.
On a final note, I would like to take this opportunity to thank
our shareholders and employees for their continued support during
this transformative time for the Company. I look forward to
reporting on our progress in the months ahead.
Nick von Schirnding
Executive Chairman
12 October 2020
For more information visit www.arcminerals.com .
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
Forward-looking Statements
This news release contains forward-looking statements that are
based on the Company's current expectations and estimates.
Forward-looking statements are frequently characterised by words
such as "plan", "expect", "project", "intend", "believe",
"anticipate", "estimate", "suggest", "indicate" and other similar
words or statements that certain events or conditions "may" or
"will" occur. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that could cause
actual events or results to differ materially from estimated or
anticipated events or results implied or expressed in such
forward-looking statements. Such factors include, among others: the
actual results of current exploration activities; conclusions of
economic evaluations; changes in project parameters as plans
continue to be refined; possible variations in ore grade or
recovery rates; accidents, labour disputes and other risks of the
mining industry; delays in obtaining governmental approvals or
financing; and fluctuations in metal prices. There may be other
factors that cause actions, events or results not to be as
anticipated, estimated or intended. Any forward-looking statement
speaks only as of the date on which it is made and, except as may
be required by applicable securities laws, the Company disclaims
any intent or obligation to update any forward-looking statement,
whether as a result of new information, future events or results or
otherwise. Forward-looking statements
are not guarantees of future performance and accordingly undue
reliance should not be put on such statements due to the inherent
uncertainty therein.
**S**
Contacts
Arc Minerals Ltd
Nick von Schirnding (Chairman) +44 (0) 20 7917 2942
SP Angel (Nominated Adviser
& Broker)
Ewan Leggat / Soltan Tagiev +44 (0) 20 3470 0470
Notes to the Editors
Arc Minerals is a dynamic AIM listed exploration and mine
development company focused on the discovery and development of
large-scale copper and copper cobalt deposits in the Western part
of the Zambian Copperbelt.
Arc's current holdings include:
-- A 66% equity interest in Zamsort Limited ("Zamsort"), a
private company focused on a prospective copper licence in the
Zambia Copperbelt.
-- A 72.5% equity interest in Zaco Investment Limited ("Zaco"),
a private company focussed on a prospective copper and cobalt
license adjacent to Zamsort.
CONTENTS
CORPORATE INFORMATION 2
CHAIRMAN'S STATEMENT 4
STRATEGIC REPORT & OVERVIEW OF OPERATIONS 6
DIRECTORS' REPORT & FINANCE REVIEW 9
CORPORATE GOVERNANCE STATEMENT 16
DIRECTORS' RESPONSIBILITY STATEMENT 23
INDEPENT AUDITOR'S REPORT 24
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 28
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 29
CONSOLIDATED STATEMENT OF CASH FLOWS 30
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 31
NOTES TO THE FINANCIAL STATEMENTS 33
Corporate Information
Directors
Nicholas von Schirnding Director, Executive Chairman
Rémy Welschinger Finance Director
Brian McMaster Non-Executive Director
Mumena Mushinge Non-Executive Director
Chief Operations Officer
Vassilios Carellas
Registered Address
Craigmuir Chambers
Road Town. Tortola
British Virgin Islands, VG 1110
Independent Auditor
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London, E14 4HD
Company Solicitors (UK)
Hill Dickinson LLP
105 Jermyn St, St James's
London, SW1Y 6EE
Nominated Advisor and Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London, WC2R 1DJ
Registrars
Computershare Investor Services (Channel Islands) Ltd
PO Box 83
Ordnance House, 31 Pier Road
St Helier, JE4 8PW
Channel Islands
Overview
Arc Minerals Limited ("Arc Minerals" or "Arc") is a dynamic
junior mining company focused on the exploration and development of
its portfolio of copper-cobalt projects located in Africa. Key
assets comprise:
-- Zamsort Copper Project (66% owned) located in the Zambian
Copperbelt, which comprises the following projects:
o 4km(2) Small Scale Mining License, adjacent to a
o 4km(2) Small Scale Exploration License, both enclosed by a
o 400km(2) Large Scale Exploration Licence
o Soil sampling and airborne geophysics identified 8 large scale copper targets
o Drilling programme underway
-- Zaco Copper Project (72.5% owned) located in the Zambian
Copperbelt, which comprises the following projects:
o 4km(2) Small Scale Exploration License, enclosed by a
o 382km(2) Large Scale Exploration Licence, and a further
o 83km(2) Large Scale Exploration Licence
o Soil sampling and airborne geophysics identified 5 large scale
copper targets
o Drilling programme underway
Coupled with its exciting project portfolio, Arc Minerals has a
strong technical and commercial team with extensive experience in
Africa and a proven track record of bringing mining projects into
production.
2020 Highlights
-- Consolidated controlling interest in the Zaco license (72.5%)
-- Identified 13 large copper targets
-- Commencement of a diamond drilling programme at Zamsort and Zaco
-- Discovery of the Muswema prospect
-- Appointment of Rémy Welschinger as Finance Director
-- Divestment of interest in turec Gold project in Slovakia for
a consideration of up to US$8 million. Further details are provided
in the Directors Report.
-- Divestment of interest in Misisi Gold project the DRC for a
consideration of up to US$50 million. Further details are provided
in the Directors Report
-- Exclusivity agreement signed with Anglo American
-- Commencement of a diamond drilling programme at Zamsort and Zaco
Business Model and Strategy
The strategic vision of Arc Minerals is to build a leading
African focused copper exploration company leveraging off the three
core fundamentals it has put in place for delivering on this
vision:
-- High quality project pipeline;
-- Highly qualified and experienced team with a proven team
track record of finding resources; and
-- Supportive institutional and retail shareholder base.
Chairman's Statement
The past year was characterised by significant uncertainty in
the equity and commodities markets as a result of the ongoing US
and China trade talks, Brexit and the outbreak of the coronavirus
in China in the last quarter of 2019, which of course has
subsequently spread quickly and developed into a pandemic with
extensive global consequences.
The copper price remained relatively stable at the onset of the
pandemic and has since then staged a formidable recovery over the
past two quarters increasing to circa US$6,800/tonne - a price
level not seen since 2018. The consensus is that demand will keep
recovering as Chinese factories have resumed production and western
economies are recovering from the impact of the virus.
Despite this challenging backdrop, the longer-term outlook for
copper remains positive driven by industrialisation and
urbanisation in Asia and other parts of the developing world,
market size, supply constraints and increasing diversity of use in
electrical vehicles and renewable energy. This latter sector of the
market is expected to grow significantly as legislation is
progressively introduced to reduce greenhouse gas emissions.
The first half of 2020 was significantly challenged by the
impact of the Covid-19 pandemic and the requirement to modify and
align our operations accordingly. Fortunately, the impact of
Covid-19 on our projects has been minimised with most of our staff
working from home to ensure continuity of our business.
Despite these restrictions we have continued to make good
progress on our projects. In May, we acquired a further 20%
interest in Zaco Investments Limited ("Zaco") bringing our interest
to 72.50%. The Zaco exploration license is a significant priority,
covering 465km(2) of highly prospective tenement immediately
adjacent to the 407km(2) Zamsort exploration license and holding a
number of significant exploration targets including the Fwiji, West
Lunga, Nyambwezu, Muswema South as well as the Chihindi targets. In
June, we commenced drilling on some of these targets as part of our
2020 programme.
Further, since the beginning of this year we have seen a
significant increase in interest from major mining companies that
are all seeking to replenish their existing copper resource
inventories and/or looking for a new prospective exploration ground
for world-class copper discoveries. To that end, we have continued
to have a number of discussions with major diversified mining
groups. These discussions culminated in us signing a 6-month
exclusivity agreement with Anglo American in July. This exclusivity
agreement will allow Anglo American to have its team on the ground
and conduct an extensive technical review over our assets and,
depending on the outcome of this review, Anglo American has the
right to either extend the agreement and/or enter into a commercial
transaction for the development of certain or all of the targets on
our licenses.
As part of our commitment to selling our non-core assets, in
November, we divested our interest in the turec gold project in
Slovakia to MetalsTech Limited ("MetalsTech"), an Australian listed
mineral exploration and mining company for a consideration of up to
US$8 million.
In March we also announced the sale of our interest in the Missi
gold project in the DRC to Golden Square Equity Partners, a private
group, for a consideration payable of up to US$50 million. The
consideration comprises a loan note of US$5m payable to Arc on 19
March 2021 and a royalty agreement of up to US$45 million.
The proceeds from these two sales include up to US$ 53 million
of consideration related to potential future royalties. The Company
has elected not to value these royalties in the 2020 accounts
which, if valued, would have reduced this year's loss. Further
details concerning these sales are provided in the Financial
Summary section of Directors Report.
In June, we commenced the second season of exploration
activities over the Zamsort and Zaco licenses We plan to undertake
c 8,000m of diamond core drilling in the coming months. The
exploration effort is initially focussed on the Fwiji Target
('Fwiji') where the Company has already defined the target area
through previous exploration campaigns. Follow up work is also
planned at a number of the other target areas, including Cheyeza
East and Muswema.
At a corporate level, we bolstered our Board, welcoming Rémy
Welschinger as finance director. Rémy is a resource professional
with significant experience in the metals and mining sector.
Jonathan de Thierry stepped down from the Board on 31 March 2020
and I would like to thank him on behalf of the board for his
contributions and wish him well with his future endeavours. In
August, Don Bailey announced his intention to retire from the Board
on 1 September 2020. Don has made a very significant contribution
to the Company and we wish him a well-deserved retirement.
On a final note, I would like to take this opportunity to thank
our shareholders and employees for their continued support during
this transformative time for the Company. I look forward to
reporting on our progress in the months ahead.
Nicholas von Schirnding
Executive Chairman
12 October 2020
Strategic Report
Overview of Operations
Arc Minerals is incorporated in the British Virgin Island and is
engaged in the business of acquiring, exploring and developing
mineral properties. The Company's stock trades in British Pounds
Sterling on the AIM Market in London under the symbol ARCM.
Arc Minerals has two principal areas of interest:
1. The Zamsort copper project (66% interest) in the Copperbelt
in Zambia covering c 408km(2), which is one of the last
under-explored areas in the domes region in the copperbelt in
northwest Zambia and in close proximity to word-class mines
2. The Zaco copper project (72.5% interest), which lies adjacent
to the Zamsort copper project in north west Zambia and covers c.
469km(2)
During the year, Arc Minerals divested its interest in the turec
Gold Project in Slovakia. On 19 November 2019, Arc entered into a
sale and purchase agreement with MetalsTech Limited ("Metalstech"),
an Australian listed exploration and mining company for a
consideration of up to US$8.9million.
Arc Minerals also had an 99.43% interest Casa Mining Limited
("Casa") which holds the Misisi gold project in the eastern part of
the Democratic Republic of Congo ("DRC"). On 18 March 2020, Arc
entered into share and purchase agreements with Golden Square
Equity Partners Limited ("Golden Square") for a consideration
payable of up to US$50 million.
Zamsort and Zaco Copper Projects
The Zamsort Copper project is located approximately 900km by
road from Lusaka, in the North Western Province, and is well within
the trending arm of the major geological structure known as the
Lufilian Arc (Copperbelt), on the western flank of the Kabompo
Dome. The Copperbelt is home to all the major copper mines in
Zambia and Zamsort and Zaco copper projects represents one of the
last dome-related areas in Zambia yet to be explored in any
detail.
Over the last fifteen years, three new major copper mines have
been discovered and constructed to exploit the mineral resources in
the new western part of the Zambian Copperbelt. This region now
accounts for more than 75% of Zambian copper production and Zamsort
and Zaco are in close proximity to large operations such as First
Quantum Minerals' Sentinel and Kansanshi mines and Barrick Gold's
Lumwana mine.
The Zamsort Copper Project consists of three licences - a 4km(2)
small-scale mining license which host the Kalaba copper-cobalt
project, adjacent to a 4km(2) small scale exploration license that
hosts the Commercial Scale Demonstration ("CSD") Plant, both
enclosed by a large scale exploration license of 400km(2). The Zaco
license which lie adjacent to the Zamsort license and consist of
one small scale exploration license of 4km(2) and two large scale
exploration licences covering 382km(2) and 83km(2) respectively.
The licenses were previously explored by Equinox Minerals Limited
('Equinox') and Anglo American Prospecting Services ('AAPS') by way
of the 'Zambezi Joint Venture' ('JV') through AAPS's affiliate
Zamanglo Prospecting Ltd ('Anglo American') during the late 1990s
as part of the Kabompo Project.
The Kalaba copper-cobalt project benefits from a CSD plant which
has been refurbished, however given the relatively small size, the
plant requires a higher-grade ore feed. Cheyeza could provide this
feed and the plant is on standby while grade modelling and
metallurgical testing are in progress at Cheyeza East. In June
2019, the Company commenced a diamond drilling programme focussing
initially on the Cheyeza East area. Initial results demonstrated
pervasive mineralisation with intersections of 28.5m at 1.32% Cu
including 13m grading 2.31% and 18m at 2.35% Cu including 7.60m
grading 4.15% Cu. Further drill holes intercepted 1.27% over 32m
including 2.05% Cu over 17.50m and 2.79% Cu over 10.50m. The
Company identified a mineralised area at Cheyeza East of 650m long
and 300m wide.
In June 2020, the Company commenced with a further 8,000 meter
diamond drilling programme with hole depth of between 100-250m. The
exploration programme is initially focussed on the Fwiji target
where the Company has already defined the target area through
previous exploratory works. Follow up work at a number of the other
target areas, including Cheyeza and Muswema are also underway.
In July 2020, Arc's subsidiaries in Zambia entered into a six
month exclusivity agreement with a subsidiary of Anglo American in
respect to the Zamsort and Zaco Copper Projects.
At the request of Anglo American, t he company sent 2,500 soil
samples covering both license areas that were collected during the
2015 - 2019 soil sampling programmes for assay to ALS in South
Africa. Whilst the absolute values of the pXRF analyses are
sufficient to define the anomalous target areas, the detection
limits are not low enough to enable the mapping of the multiple
components of a hydrothermal mineral system, which otherwise could
be mapped using these assays from the ALS laboratory. The
components defined include lithology, stratigraphy and redox
boundaries as well as zones of metal depletion and metal
enrichment.
Assets Held For Sale
Both Sturec and Casa were designated by the Board for sale in
the prior year and both were sold during the year as summarised in
the Financial Summary within the Directors Report
Governance
Board of Directors
Nicholas von Schirnding, Director and Executive Chairman
Nick von Schirnding has over 25 years' experience in the mining
sector across a number of geographies. Nick was CEO of Asia
Resource Minerals plc, a FTSE listed mining company. Prior to this
Nick was a senior executive with Anglo American plc and De Beers.
Mr von Schirnding is also chairman of Fodere, a private minerals
processing business with a plant at Highveld Steel and a
non-executive director of Jangada Mines and Edenville Energy, both
listed in London.
Rémy Welschinger, Finance Director
Remy Welschinger has over 15 years' experience in finance. He
was Head of Commodities Sales at Deutsche Bank in Europe and, p
rior to that, an Executive Director in the Fixed Income and
Commodities division of Morgan Stanley in London. R emy is a
non-executive director of ASX-listed Infinity Lithium and a
director of Element-46 Ltd and Limehouse Capital Ltd, both private
UK companies.
Brian McMaster, Non-Executive Director
Brian McMaster has almost 20 years' experience in the area of
corporate reconstruction and turnaround and performance improvement
and 20 years in the mining and exploration industry. Brian's recent
experience includes founding Harvest Minerals and Jangada Mines,
AIM listed companies with Potash and PGM projects in Brazil
respectively, as well as numerous reorganisations and the
recapitalisation and listing of 12 Australian companies.
Brian's career to date includes significant working periods in
the United States, South America, Asia, India and UK. Brian was a
founding director in venture capital and advisory firm, Garrison
Capital Pty Ltd, and is also currently a director of a number of
ASX and AIM listed companies.
Mushinge Mumena, Non-Executive Director
Mumena Mushinge is well known Zambian based entrepreneur with a
long-standing history in the mining and minerals industry. Mr
Mushinge is a director of a number of privately-owned Zambian based
mining and power generation businesses. Mr Mushinge founded Zamsort
Limited in 2005 and has been instrumental in developing the Kalaba
prospect.
Directors' Report
The Directors present their annual report on the affairs of the
Group, together with the financial statements and Auditor's Report
for the year ended 31 March 2020.
Principal activities
The Group is engaged in the business of acquiring, exploring and
developing mineral properties in Africa. The review of the business
and future strategy is covered in the Chairman's Statement on page
4 and Strategic Review on page 6.
Results and Dividends
During the year cash decreased by GBP1.072m (2019: increase of GBP1.050m).
The loss on continuing operations of the Group after taxation
amounted to GBP2.936m (2019: Loss of 6.252m). There were no
dividends paid in 2020 (2019: nil).
Financial Summary
The year ended 31 March 2020 has seen several significant
corporate developments
On 19 November 2019, Arc entered into a sale and purchase
agreement with MetalsTech Limited ("Metalstech"), an Australian
listed exploration and mining company for the sale of its interest
in the turec gold project for a consideration of US$8 million. The
consideration comprises an initial option payment of A$30,000
followed by two cash payments aggregating A$750,000 (c.
US$500,000).
In addition if before November 2024, the turec JORC Indicated
and Measured Resource exceeds 1.5 million ounces gold at a grade
greater than 2.5g/t (inclusive of recoverable Ag equivalent),
MetalsTech will pay Arc a further A$2 royalty per additional ounce
of gold. This royalty is capped at 7 million ounces of gold or
Australian dollars 11M. Because of the general uncertainty about
the size of the Sturec resource the Company has not recorded the
royalty in the accounts.
Any consideration due under the Resource Upgrade Royalty may be
satisfied in such form of consideration or instrument acceptable to
MTC, in its sole discretion (including, but not limited to cash or
shares in MTC).
On 18 March 2020, Arc entered into share and purchase agreements
with Golden Square Equity Partners Limited ("Golden Square") for
the sale of its interest in the Misisi gold project for a
consideration payable of up to US$50 million. The transaction
closed on 19 March 2020 ("Completion Date"). An amount of US$5
million of the consideration was paid to Arc in the form of a loan
note which will mature on 19 March 2021. In the event that the
share capital of Casa is acquired by a publicly traded company, the
Purchaser may, at its option, discharge the US$5 million liability
by delivering shares of the public company with a market value of
US$5 million to Arc. Golden Square also assumed all existing Casa
group liabilities on the Completion Date, capped at US$3m.
In addition, Golden Square entered into a 3% royalty payment
agreement with Arc Minerals of up to US$45 million, based on future
gold production from the project(s) held by Casa as at the
Completion Date. In the accounts the Company has assigned nil value
to the Royalty, because of general uncertainties that surround the
future development of any minerals project. The valuation will be
reassessed in future years. Further discussion about the accounting
for the royalty can be found in notes 1(l)(ii) and 4 (d) (ii).
During the year Arc invested USD 2.58 million into Zamsort to
fund exploration and other costs.
Auditor Extension
During the year the audit committee made the executive decision
to request the extension of the auditor's Responsible Individual
for one additional year beyond the five-year rotation period as set
out within the audit industry's ethical standards. During the year,
the group acquired Zaco and disposed of both its Casa and Sturec
projects and related subsidiaries. The knowledge of the Responsible
Individual in relation to these material changes is considered
essential in ensuring that these are accurately presented in
accordance with IFRS requirements.
Events after the reporting period
In May 2020, Arc further consolidated its interest in the Zaco
license from 52.5% to 72.5%. The additional 20% was acquired from
Mr Mumena Mushinge, a director of the company, for a consideration
of 10 million shares in Arc.
Interest >3%
The following shareholders have a notifiable interest in the
Company:
-- Karl-Erik von Bahr 7.99%
-- Mushinge Mumena and spouse 6.90%
-- Lärarnas Riksförbund 6.28%
Directors
The names of Directors who served of the date of this report are
set out below:
Directors Date of Appointment Date of Resignation
------------------------ -------------------- --------------------
Executive Directors
Nick von Schirnding 24 January 2017 -
Rémy Welschinger 31 June 2019 -
Non-Executive Directors
Brian Mc Master 1 August 2017 -
Mumena Mushinge 05 February 2019 -
Don Bailey 1 June 2018 1 September 2020
Jonathan De Thierry 2 January 2018 31 March 2020
Directors' Remuneration
The Group remunerates the Directors at levels commensurate with
its size and experience of its Directors. The Remuneration
Committee determines and has reviewed the Directors' remuneration
and believes the levels are appropriate and in line with industry
sector median levels of remuneration.
Further details can be found on discussion about the
Remuneration Committee on page 21 within the Corporate Governance
Statement. Details of the Directors' emoluments and payments made
for professional services rendered are set out in note 7 to the
financial statements.
Directors' Interest
The beneficial interest of the Directors in the shares and
options of the Company are set out as follows:
Director Annual Report 2020 Annual Report 2019
Shares Options Warrants Shares Options Warrants
----------- ----------- ---------- ----------- ----------- ----------
Nicholas
von Schirnding 17,080,532 29,620,195 4,555,557 17,080,532 15,620,195 4,555,557
----------- ----------- ---------- ----------- ----------- ----------
Rémy
Welschinger* 14,528,844 15,580,000 7,444,446 13,028,844 1,600,000 7,444,446
----------- ----------- ---------- ----------- ----------- ----------
Brian McMaster 2,555,557 4,375,000 555,557 2,555,557 2,375,000 555,557
----------- ----------- ---------- ----------- ----------- ----------
Mumena Mushinge 67,402,463 2,800,000 333,334 57,402,463 800,000 333,334
----------- ----------- ---------- ----------- ----------- ----------
Don Bailey** 7,697,224 3,700,000 655,557 7,697,224 3,700,000 665,557
----------- ----------- ---------- ----------- ----------- ----------
Jonathan
de Thierry*** 13,767,888 2,000,000 266,667 13,767,888 2,000,000 266,667
----------- ----------- ---------- ----------- ----------- ----------
* Rémy Welschinger was appointed on 31 June 2019
** Don Bailey resigned effective 31 September 2020
*** Jonathan DeThierry resigned effective 31 March 2020
None of the Directors exercised any share options during the
year.
Corporate Governance
A statement on Corporate Governance is set out on pages 16 to
23.
Key Performance Indicators
The Board monitors the activities and performance of the Group
on a regular basis and
uses both financial and non-financial indicators to assess the Group's performance.
The Group underwent significant changes to its asset base in
2020. The Company sold its interest in the turec gold project in
Slovakia and its interest in the Misisi gold project in the
Democratic Republic of Congo ("DRC").
The indicators set out below were used by the Board during the
year ended 31 March 2020.
Non-Financial KPIs
The Board established the following goals for management in June
2019:
1. Successful financing of the Company;
2. JORC resource at Misisi;
3. Commissioning of the demonstration plant;
4. Profitable operation at the demonstration plant;
5. Disposal of non-core assets.
All these KPIs have been satisfied except (4) which remains an
ongoing process.
Financial KPIs
The current financial KPIs are:
Financial KPIs Measure 2020 2019
------------------------------- ----------- ------------ -------------
Total funds raised GBP 000's 1,795 6,183
Exploration costs capitalised GBP 000's 1,924 3,181
The Company raised gross funds of GBP 1.795m in 2020 versus GBP6.183m in 2019.
Exploration costs capitalised as intangible assets in the year
were GBP 1.934m (2019: GBP3.181m).
KPIs for 2021 will include:
1. A maiden resource on the Exploration Licenses of Zamsort and Zaco
2. A transaction with a large strategic partner
Health and Safety - number of reported incidents
There were no reportable incidents in the current year or prior
year
Risk Management Report
A Risk Management Report is set out on Page 13.
Environmental Policy
The Group is aware of the potential impact that its subsidiaries
and associated company may have on the environment. The Group uses
its best efforts to ensure that with regard to the environment its
subsidiaries and associated company comply with local regulatory
requirements and the revised Equator Principles.
Employment Policy
The Group is committed to promoting policies to ensure that high
calibre employees are attracted, motivated and retained for the
ongoing success of the business. Employees and those who seek to
work within the Group are treated equally regardless of sex,
martial status, creed, colour, race or ethnic origin.
Insurance
The Group maintains insurance in respect of its Directors and
Officers against liabilities in relation to the Company and the
Group. The Group maintains insurance in respect of its exploration
and development and operational programmes in Zambia.
Statement of Disclosure to the Auditor
As at the date of this report the serving Directors confirm:
-- So far as each Director is aware, there is no relevant audit
information of which the Group's auditor is unaware, and;
-- The Directors have taken all the steps that they ought to
have taken in order to make themselves aware of any relevant audit
information and to establish that the Group's auditor is aware of
such information.
Auditor
PKF Littlejohn LLP has signalled its willingness to continue in
office as auditor
Going Concern
The Directors have reviewed a forecast prepared by the executive
and have a reasonable expectation that the Group will be able to
raise funds to provide adequate resources to continue in operation
and satisfy liabilities for the foreseeable future. During the 3
years ended 31 March 2020 Arc raised in excess of GBP10 million
from the sale of equity and in May 2020 announced a further sale of
GBP2.4 million from the sale of shares. These ongoing equity sales
are indicative of consistent strong investor support. As well the
anticipated proceeds from realisation of the US$5M note related to
Casa sale, the Directors expect to deliver further results which
will lead to continuing market support albeit that further equity
raises will be required to fund delivery. The Directors therefore
consider it appropriate, despite the loss incurred during the year,
for the Company to continue to adopt the going concern basis in
preparing the Annual Report and Financial Statements. Further
details on the Directors assumptions and their conclusion are
included in the statement on going concern included in note1 (f) to
the Financial Statements.
The auditors have drawn attention to going concern within their
audit report by way of a material uncertainty.
Risk Management Report
The Company's risk exposures and the impact on the Company's
financial instruments are summarised as follows:
Credit Risk
Credit risk is the risk of potential loss to the Company if a
counterparty to a financial instrument fails to meet its
contractual obligations. The Company's credit risk is primarily
attributable to its liquid financial assets, including cash,
receivables, and balances receivable from the government. The
Company limits the exposure to credit risk in its cash by only
investing its cash with high-credit quality financial institutions
in business and savings accounts, guaranteed investment
certificates and in government treasury bills which are available
on demand by the Company for its programs. The Company does not
invest in money market funds. The Company has no risk exposure to
asset backed commercial paper or auction rate securities except for
the Loan Note - Casa sale of GBP 4.032m which is due in March 2021
and is backed by Casa shares representing 99.43% of Casa equity.
(refer Note 15)
Financing Risk
The development of the Group's properties will depend on the
Group's ability to obtain financing through the raising of equity
capital, joint venture of projects, debt financing, farm outs or
other means. There is no assurance that the Group will be
successful in obtaining the required financing. If the Group is
unable to obtain additional financing as needed, some interests may
be relinquished, and/or the scope of the operations reduced .
Liquidity Risk
Liquidity risk is the risk that the Company will not have the
resources to meet its obligations as they fall due. The Company
manages this risk by closely monitoring cash forecasts and managing
resources to ensure that it will have sufficient liquidity to meet
its obligations. All of the Company's current financial liabilities
are anticipated to mature within the next ninety days.
Exploration and Development Risk
There is no assurance that the Group's exploration and
development activities will be successful, and statistically few
properties that are explored are ultimately developed into
profitable producing mines.
The risk is mitigated by conservatively managing exploration
funds such that subsequent exploration expenditures are not
committed until results from previous stages have been evaluated.
There is regular lab testing during the year's exploration program
to minimise unwarranted expenditure.
We have also assembled a talented team of professionals
complemented by independent consultants we engage regularly.
Market Risk
Market risk is the risk of loss that may arise from changes in
market factors such as interest rates, foreign exchange rates, and
commodity and equity prices. These fluctuations may be
significant.
Interest Rate Risk: The Company is exposed to interest rate risk
to the extent that its cash balances bear variable rates of
interest. The interest rate risks on cash and short-term
investments and on the Company's, obligations are not considered
significant.
Foreign Currency Risk
The Company is exposed to the financial risk related to the
fluctuation of foreign exchange rates against the Company's
reporting currency, pound sterling. The Company expects to continue
to raise funds in London and Europe in sterling. The Company
conducts its primary business in Zambia ("Kwacha") with a
significant portion of expenditures in that country, for example
drilling expenditure, denominated in USD. As the Company reports in
Great British Pounds ("GBP"), it is subject to risk due to
fluctuations in the exchange rates between the GBP and each of the
USD and Kwacha. During the fiscal year the Kwacha has depreciated
approximately 30% against sterling and 35% against USD. Assets in
Zambia and most liabilities are denominated in Kwacha but the
shareholder loan is denominated in USD. These changes in the
currency exchange rates between the Kwacha relative to foreign
currencies have had a significant impact on the group accounts. The
Company has not hedged its exposure to currency fluctuations.
Commodity Price Risk
While the value of the Company's core mineral resource
properties, the Zamsort and Zaco copper projects are related to the
price of copper and the outlook for this mineral, the Company
currently does not have any operating mines and hence does not have
any hedging or other commodity-based risks in respect of its
operational activities.
Historically copper prices have fluctuated and are affected by
numerous factors outside of the Company's control, including but
not limited to: industrial demand; forward sales by producers and
speculators; levels of worldwide production; short-term changes in
supply and demand because of speculative hedging activities;
Licensing Risk
The Group's exploration and development activities are dependent
upon the grant of appropriate licences, concessions, leases,
permits and regulatory consents which may be withdrawn or made
subject to limitations or performance criteria. Such licences and
permits are as a practical matter subject to the discretion of the
applicable Government or Government office. The Group must comply
with known standards, existing laws and regulations that may entail
greater or lesser costs and delays depending on the nature of the
activity to be permitted. The interpretations, amendments to
existing laws and regulations, or more stringent enforcement of
existing laws and regulations could have a material adverse impact
on the Group's results of operations and financial condition.
Whilst the Group continually seeks to do everything within its
control to ensure that the terms of each licence are met and
adhered to, third parties may seek to exploit any technical
breaches in licence terms for their own benefit. There is a risk
that negotiations with a Government in relation to the grant,
renewal or extension of a licence may not result in the grant,
renewal or extension taking effect prior to the expiry of the
previous licence period, and there can be no assurance of the terms
of any extension, renewal or grant.
Political Risk
In conducting operations in Zambia, the Company is subject to
considerations and risks related to the political, economic and
legal environment in which the Company operates. Among other
things, the Company's results may be impacted by changes in the
political and social conditions in Zambia and by changes in
governmental policies with respect to mining laws and regulations,
anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation.
COVID-19 outbreak
The COVID-19 outbreak was declared a pandemic by the World
Health Organization in March 2020. The Group is constantly
reviewing the potential impact to their operations and implementing
measures to mitigate any possible impact as well as possible. The
health, safety and well-being of its employees and contractors
comes first and will be prioritized over other aspects of the
business.
To date, the Group has not seen a significant impact on its
business. The outbreak and the response of Governments in dealing
with the pandemic is interfering with general activity levels
within the community, the economy and the operations of the Group.
The scale and duration of these developments remain uncertain as at
the date of this report however they are not significantly
impacting the Company's operations.
This Risk Management Report has been approved by the Board and
signed on its behalf by:
Nicholas von Schirnding
Director & Executive Chairman
12 October 2020
Corporate Governance Statement
The Company is committed to maintaining the highest standards in
corporate governance throughout its operations and to ensure that
all of its practices are conducted transparently, ethically and
efficiently. The Company believes that scrutinising all aspects of
its business and reflecting, analysing and improving its procedures
will result in the continued success of the Company and improve
shareholder value. Therefore, and in accordance with the AIM Rules
for Companies (as updated from time to time), the Company has
chosen to formalise its governance policies by complying with the
UK's Quoted Companies Alliance Corporate Governance Code (the "QCA
Code").
The key challenges facing the company have been set out above in
the Chairman's Statement, the Strategic Report and the Directors'
Report.
The Board currently consists of four Directors: an Executive
Chairman, a Finance Director and two Non-Executive Directors
(NEDs). The Board considers that appropriate oversight of the
Company is provided by the currently constituted Board.
QCA Code
The 10 principles set out in the QCA Code are listed below, with
an explanation of how the Company applies each of the principles
and the reason for any aspect of non-compliance. There were no key
governance related matters that occurred during the year.
Business Model and Strategy
Arc's strategy is to invest in early stage copper-cobalt assets
primarily in Africa and to realise their potential either through
sale or development. Our aim is to create value for our
shareholders by improving on and expanding existing exploration
assets and identifying new exploration targets around existing
licence areas. Arc is currently focused primarily on the
copper-cobalt projects of Zamsort Limited and Zaco Investments
Limited in Zambia.
Arc delivers on its strategic aims by (i) defining additional
reserves and resources at its projects and surrounding licence
areas; (ii) securing appropriate funding; (iii) developing mineral
resources in situ; (v) maintaining good community relationships;
and (vi) employing compliant environmental governance
practices.
The key challenges facing the company have been set out in the
Risk Management report on pages 13 to 15.
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communication and
having constructive dialogue with its shareholders. Significant
developments are disseminated through the Regulatory News Service
("RNS") and timely updates to the Company's website. Additionally,
the Company holds Investor update calls when appropriate during
which Investors have access to the Chairman and other Officers. Arc
has an active and effective investor relations programme, which is
the responsibility of the Chairman, that includes institutional
road-shows and presentations, effective Annual General Meetings
with presentations to shareholders and a high level of disclosure
of activity to its shareholders.
Considering Wider Stakeholder and Social Responsibilities
The method used by the Company to obtain feedback from
stakeholders is discussed below under the heading Shareholder
Communication.
The board has identified the Company's stakeholders to include
staff, suppliers, customers, partners, local government and wider
communities. A key part of Arc's business model is identifying the
impact that activities will have on the surrounding communities at
Arc's projects. The Company is always looking for opportunity to
develop the wider communities in which it operates and Arc behaves
ethically in its recruitment, training and engagements. The
environmental impact of Arc's activities is also carefully
considered and the maintenance of high environmental standards
applied. Arc has established relationships with local and national
governments in the territories of its projects.
Risk management
Whilst the Board is ultimately responsible for identifying and
managing areas of significant business risk, it has established an
Audit and Risk Committee that ensures effective Risk Management
systems are in place that identify and manage key Company risks,
establish and maintain effective controls, and ensure compliance
with risk management policies and the reporting of any
non-compliance occurrences.
The Company's risk management systems have identified the key
risks applicable to the Company as set out in the Risk Management
Report on page 13 and appropriate mitigation controls are in place.
These risks are:
-- Credit Risk
-- Financing Risk
-- Liquidity Risk
-- Exploration and Development Risk
-- Market Risk
-- Commodity Price Risk
-- Licencing Risk
-- Political Risk
-- COVID 19
Well-functioning Board of Directors
The Board is comprised of two executive directors (Nick von
Schirnding, Executive Chairmen and Rémy Welschinger, Finance
Director) and two NEDs (Brian McMaster and Mumena Mushinge). Each
Director serves on the Board until the Annual General Meeting
following his election or appointment. The Executive Directors work
full time for the Company. NEDs are expected to allocate sufficient
time to the Company in order to meet their respective
responsibilities.
Appropriate Skills and Experience of the Directors
The Board considers the current balance of sector, financial and
public market skills and experience which it embodies is
appropriate for the size and stage of development of the Company
and that the Board has the skills and requisite experience
necessary to execute the Company's strategy and business plan whist
also enabling each Director to discharge his fiduciary duties
effectively. The Board recognises that it currently is limited in
diversity and this continues to form part of recruitment
consideration. Details of the current Board of Directors
biographies is provided on page 8.
The Board reviews annually, and when required, the
appropriateness of its mix of skills and experience to ensure that
it meets the changing business needs.
The Executive Chairman is assisted by the company secretariat in
preparing for and running effective board meetings, including the
timely dissemination of appropriate information. The company
secretariat provides advice and guidance to the extent required by
the board on the legal and regulatory environment.
Evaluating Board Performance
Arc reviews Board, Committee and individual director performance
on an ongoing basis in the context of its contribution to the
Company's financial performance.
The Remuneration Committee, of which details of the members are
provided further down in this report, compares the performance of
the Board with the requirements of its Terms of Reference, the
Company Vision and KPI's and critically reviews the composition of
the Board. The evaluation of the Board is carried out annually and
on a three-yearly cycle and the Committee may enlist an independent
evaluator as and when it deems it appropriate.
The Review Process, includes the following key
considerations:
-- Board's mission and goals
-- Board composition and effectiveness
-- Performance against Strategic Plan
-- Board s protocols and processes
-- Relationships with Stakeholders
-- Continuous professional learning of Board Members
Succession planning is considered by the Board as a whole and
reviewed annually.
Corporate Culture
The corporate culture of the Company is promoted throughout its
employees and contractors and is underpinned by compliance with
local regulations and the implementation and regular review and
enforcement of various policies as set out below so that all
aspects of the Company are run responsibly.
It is the Board's view that Arc's corporate culture is
consistent with its objectives, strategy and business model. A
significant part of the Company's activities is centred upon what
needs to be an open and respectful dialogue with employees, clients
and other stakeholders. Therefore, the importance of sound ethical
values and behaviours is crucial to the ability of the Company to
successfully achieve its corporate objectives.
The Board is aware that the tone and culture set by the Board
will greatly impact all aspects of the Company as a whole and the
way that employees behave. The board adheres to its group-wide
corporate governance policies which include:
-- anti-corruption and bribery;
-- whistleblowing;
-- health and safety;
-- environment and community;
-- IT, communications and systems; and
-- social media.
Maintenance of Governance Structures and Processes
Board of Directors
Arc's key strategic, financial and operational decisions are
reserved exclusively for the Board. The Board aims to meet every
six to eight weeks or more frequently if activities require and is
supplied with appropriate and timely information. The Directors are
free to seek any further information that they consider necessary.
All Directors have access to advice from the company secretariat
and Finance Director as well as independent professionals at the
Group's expense. Training is available for new Directors and other
Directors as necessary. The directors' biographies can be found on
the Company's website at
www.arcminerals.com/about-us/board-and-management and on page 8 of
this report.
It is important that the Board itself contains the right mix of
skills and experience in order to deliver the strategy of the
Company. As such, the Board is comprised of:
-- an executive chairman, whose responsibility is the delivery
of the Company's strategy and governance model and communication
with shareholders;
-- an executive finance director, whose responsibility is to
support the executive chairman in the delivery of the Company's
strategy. In particular, the finance director is responsible for
the formulation and submission to the Board of the Group's
financial strategy and for the financial performance of the Group
in line with the Company's strategy;
-- one independent, non-executive director;
-- one non-independent, non-executive director;
Director Position Independent Remuneration Nomination Audit & Risk
(Y/N) Committee Committee Committee Membership
Membership Membership
Nicholas Executive N - Member Member
von Schirnding Chairman
Rémy Finance Director N Member - -
Welschinger
Brian McMaster Senior Independent Y Chairman Chairman Chairman
Director
Mumena Mushinge Non-Executive N - - -
Director
A Director is considered independent if he is not a substantial
shareholder, has not been an employee within the group and has not
had a material business relationship with a Group company.
The board has appointed Mr Brian McMaster as Senior Independent
Director. Additionally, the Executive Chairman is assisted by the
company secretariat in preparing for and running effective board
meetings, including the timely dissemination of appropriate
information. The company secretariat provides advice and guidance
to the extent required by the Board on the legal and regulatory
environment. The Company does not specify any minimum time
commitment from Directors and instead reviews their time commitment
as part of their individual evaluations.
Each director serves on the board until the annual general
meeting following his election or appointment, and the board meets
at least three times a year.
The following matters are reserved for the Board:
Management Structure and Appointments
-- Executive Director responsibilities.
-- Board appointments or removals.
-- Board and senior management succession, training, development and appraisal.
-- Appointment or removal of Company Secretary.
-- Appointment or removal of internal auditor.
-- Remuneration, contracts, grants of options and incentive
arrangements for Executive Directors and senior management,
including any plans to be put to shareholders for approval.
-- Delegation of the Board's powers.
-- Agreeing membership and terms of reference of board committees and task forces.
-- Approval of delegated levels of authority.
-- Matters referred to the Board by the board committees.
Strategic/Policy Considerations
-- Business strategy.
-- Diversification/retrenchment policy.
-- Ensuring maintenance of a sound system of internal control and risk management, including:
-- Group's risk appetite statements.
-- Procedures for detection of fraud and the prevention of bribery.
-- Approval of the overall levels of insurance for the group,
including directors' and officers' liability insurance.
-- Agreement of codes of ethics and business practices.
-- An on-going assessment of significant risks and effectiveness of internal controls.
-- Calling of shareholders' meetings and approval of resolutions
and corresponding documentation to be put forward to shareholders
at a general meeting, plus any circulars, prospectuses and listing
particulars.
-- Avoidance of wrongful or fraudulent trading.
-- Ensuring a satisfactory dialogue with shareholders based on
the mutual understanding of objectives.
-- Considering the balance of interests between shareholders,
employees, customers and the community.
-- Reviewing the group's overall corporate governance arrangements.
-- Undertaking an annual review of its own performance, that of
its committees and individual directors and the division of
responsibilities.
Transactions
-- Transactions which are notifiable under the AIM Rules.
-- Approval of major capital projects.
-- Contracts which are material strategically or by reason of
size entered into by the Company in the ordinary course of business
e.g. bank borrowings over GBP1 million and acquisitions or
disposals of fixed assets (including intangible assets such as
intellectual property) above GBP1 million.
-- Major investments (including the acquisition or disposal of
interests of more than 3 per cent. in the voting shares of any
company or the making of any takeover offer.
-- Contracts not in the ordinary course of business.
-- Actions or transactions where there may be doubt over propriety.
-- Approval of certain announcements, prospectuses, circulars and similar documents.
-- Disclosure of directors' interests.
-- Transactions with directors or other related parties.
Finance
-- Raising new capital and confirmation of major financing facilities.
-- Changes relating to the group's capital structure, including
the reduction of capital and/or share issues.
-- Treasury policies requested to be put in place by the Board.
-- Discussion of any proposed emphasis of matter on the accounts.
-- Final approval of annual and interim reports and accounts and
material changes to accounting policies.
-- Appointment/reappointment or removal of the external auditor,
to be put to shareholders for approval in general meeting,
following the recommendation of the Board or its Committee.
-- Charitable and political donations.
-- Approval and recommendation of dividends.
-- Approval before each year starts of operating and capital
expenditure budgets for the year and any material changes to
them.
General
-- Major changes to the Group's corporate structure.
-- Any changes to the Company's listing status and status as a plc.
-- Approval of key policy documents including the share dealing
code and MAR policy, anti- bribery policy and whistleblowing
policy.
-- This schedule of matters reserved for board decisions.
The Board is supported by the audit and risk and remuneration
and nomination committees as described below.
Audit and Risk Committee
Arc's Audit and Risk Committee is responsible for ensuring that
the financial performance of the Company is properly monitored and
reported and in this capacity interacts as needed with the
Company's External Auditors. The Committee also considers risk
management and internal financial controls.
Some of the Audit Committee's duties include:
-- reviewing the Company's accounting policies and reports
produced by internal and external audit functions.
-- considering whether the Company has followed appropriate
accounting standards and made appropriate estimates and judgements,
taking into account the views of the external auditor.
-- reporting its views to the board of directors if it is not
satisfied with any aspect of the proposed financial reporting by
the Company.
-- reviewing the adequacy and effectiveness of the Company's
internal financial controls and internal control and risk
management systems.
-- reviewing the adequacy and effectiveness of the Company's
anti-money laundering systems and controls for the prevention of
bribery and receive reports on non-compliance.
-- overseeing the appointment of and the relationship with the external auditor.
The Audit and Risk Committee has two members, each of whom being
non-executive directors and at least one member has recent and
relevant financial experience and is independent. The current
members of the committee are Brian McMaster and Nick von
Schirnding. The committee chairman is Brian McMaster.
A copy of the terms of reference of the Audit and Risk Committee
can be found on the Company's website.
Remuneration Committee
The purpose of the Remuneration Committee is to determine and
agree with the board the framework or broad policy for the
remuneration of the Company's chairperson and executive directors.
The main duties of the Remuneration Committee include:
-- reviewing the pay and employment conditions across the
Company, including the board of directors.
-- approving targets and performance related pay schemes
operated by the Company and all share incentive plans and pension
arrangements.
The Remuneration Committee has two members, each of whom being
non-executive directors and at least one member is independent. The
current members of the committee are Brian McMaster and Rémy
Welschinger. Brian McMaster is the chairman of the committee.
A copy of the terms of reference of the Nomination Committees
can be found on the Company's website.
Nomination Committee
The purpose of the Nomination Committee is to evaluate and
determine the composition of the Board itself. The main duties of
the Nomination Committee therefore include:
-- Regularly reviewing the structure, size and composition
(including the skills, knowledge, experience, independence and
diversity) of the Board and make recommendations to the Board with
regard to any changes, succession planning and vacancies.
-- identifying suitable candidates from a wide range of
backgrounds to be considered for positions on the Board.
The Nomination Committee has two members, each of whom being
non-executive directors and at least one member is independent. The
current members of the committee are Brian McMaster and Nick von
Schirnding. Brian McMaster is the chairman of the committee.
A copy of the terms of reference of the Nomination Committees
can be found on the Company's website.
Given the small number of meetings held by of each of the
above-mentioned Committees, neither have produced a separate
report, however the Company intends to review this requirement on
an annual basis.
Share Dealing Code
The Company has adopted a share dealing code to ensure directors
and certain employees do not abuse, and do not place themselves
under suspicion of abusing inside information of which they are in
possession and to comply with its obligations under the Market
Abuse Regulation ("MAR") which applies to the Company by virtue of
its shares being traded on AIM. Furthermore, the Company's share
dealing code is complaint with the AIM Rules for companies
published by the London Stock Exchange (as amended from time to
time).
Under the share dealing code, the Company must:
-- disclose all inside information to the public as soon as
possible by way of market announcement unless certain circumstances
exist in which the disclosure of the inside information may be
delayed;
-- keep a list of each person who is in possession of inside
information relating to the Company;
-- procure that all persons discharging managerial
responsibilities and certain employees are given clearance by the
Company before they are allowed to trade in Company securities;
and
-- procure that all persons discharging managerial
responsibilities and persons closely associated to them notify both
the Company and the Financial Conduct Authority of all trades in
Company securities that they make.
Key Relationships
There are a number of key relationships and resources that are
fundamental to the Company's success, such as maintaining good
relationships with local communities and governments where the
Company operates as well as with engineering and financing groups
to ensure that the company has adequate resources to deliver its
strategy.
Shareholder Communication
The Company recognises that maintaining strong communications
with its shareholders promotes transparency and will drive value in
the medium to long-term. Accordingly, the Company will provide
regular updates on the progress of the Company, detailing recent
business and strategy developments, in news releases which will be
posted on the Company's website. In order to continually improve
transparency, the board would be delighted to receive feedback from
shareholders. Communications should be directed to
info@arcminerals.com. Nicholas von Schirnding has been appointed to
manage the relationship between the Company and its shareholders
and will review and report to the board on any communications
received.
Arc is committed to providing full and transparent disclosure of
its activities, via the RNS system of the London Stock Exchange.
Historical annual reports and interim accounts are available on the
Company's website.
Directors' Responsibility Statement
The Directors are responsible for preparing the Directors'
Report, the Risk Management Report, and the Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company
Financial Statements for each financial year. The Directors are
required by the AIM Rules of the London Stock Exchange to prepare
Group financial statements in accordance with International
Financial Reporting Standards ("IFRS") and have elected under
company law to prepare the Company Financial Statements in
accordance with IFRS.
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group and Company for that period.
In preparing the Group and Company Financial Statements, the
Directors are required to:
1. select suitable accounting policies and then apply them consistently;
2. make judgements and accounting estimates that are reasonable and prudent;
3. state whether they have been prepared in accordance with IFRS; and
4. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the Financial Statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Arc
Minerals website.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF ARC MINERALS
LIMITED
Opinion
We have audited the financial statements of Arc Minerals Limited
(the 'group') for the year ended 31 March 2020 which comprise the
Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Cash
Flows, the Consolidated Statement of Changes in Equity and notes to
the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion, the group financial statements:
-- give a true and fair view of the state of the group's affairs
as at 31 March 2020 and of its loss for the year then ended;
and
-- have been properly prepared in accordance with IFRSs as adopted by the European Union;
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty relating to going concern
We draw attention to note 1f in the financial statements which
identifies conditions that may cast significant doubt on the
group's ability to continue as a going concern. The group is not
expected to generate positive cash flows from operations in the 12
months from the date at which these financial statements were
signed and will need to either raise additional funds or obtain
receipt of the loan note due from the disposals throughout the
year. As stated in note 1f, these events or conditions, along with
the other matters as set forth in note 1f, indicate that a material
uncertainty exists that may cast significant doubt on the company's
ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Our application of materiality
The materiality applied to the group financial statements was
GBP83,400 (2019: GBP380,000), based on a percentage of gross
assets, as it is from these assets that the group seeks to deliver
returns for shareholders. The significant decrease being a result
of the assets disposed of during the year. Performance materiality
has been set at 75% of headline materiality, and the threshold for
which we communicate errors to management has been set at GBP4,170
(2019: GBP19,000). We apply the concept of materiality in both
planning and performing the audit, and evaluating the effect of
misstatements. At the planning stage, materiality is used to
determine the financial statements areas that are included within
the scope of the audit and the extent of the sample sized during
the audit. Materiality has been reassessed at the closing stages of
the audit, taking into consideration new information which arose.
No alterations were made to materiality either during or at the
conclusion of the audit.
An overview of the scope of our audit
In designing our audit, in addition to those material areas of
the financial statements, we looked at areas which were deemed to
be involving significant accounting estimates and judgements by the
director's, such as the carrying value of the receivable relating
to the disposal of the Misisi project and the valuation of the
Royalty agreement for both the disposals of the Misisi Project and
Sturec, including future events that are inherently uncertain such
as the carrying value of the exploration assets. We also addressed
the risk of management override of internal controls, including
amount other matters consideration of whether there was evidence of
bias that represented a risk of material misstatement due to
fraud.
Component auditors were used for the significant component in
Zambia, operating under our instruction. The Partner interacted
regularly with the component audit team during all stages of the
audit and was responsible for the scope and direction of the audit
process. This, in conjunction with the additional procedures
performed such as obtaining documentation for the carrying value of
the assets held, gave us sufficient appropriate evidence for our
opinion on the group.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter How the scope of our audit responded
to the key audit matter
Sale of the Misisi project and Sturec project (Note 4)
During the year the group has Our work in this area included:
disposed of its interests in * Obtaining the Sales and Purchase Agreements' as
its Misisi Project in the DRC support for both disposals;
and its Sturec project in Slovakia,
of which were both classified
as held for sale in the prior * Review and challenge of managements assessment of the
period. Royalty element of the consideration;
Included with in the consideration
package relating to the disposals
are Royalty agreements of which * Vouching amounts received to cash at bank;
additional consideration will
be become due based on the production
levels of each project. As both * Recalculation of the loss on disposal of both
are currently in the exploration projects; and
stage, this involves a significant
amount of management estimate.
There is a risk that the accounting * Reviewing the recoverability of the loan note
for the disposal of subsidiaries receivable relating to the disposal of the Misisi
and the valuation of the consideration project.
receivable is incorrectly recorded
and disclosed in the financial
statements. The carrying value of the loan
note receivable of $5m (GBP4,032k)
relating to the sale of the
Misisi Project is dependent
on the ability of the acquirer
to settle the amount due on
the date this falls due on 19
March 2021. We draw your attention
to note 15 of the financial
statements which discloses the
value of said loan note which,
if impaired, would likely have
a material impact on the financial
statements. Our opinion is not
modified in this respect.
==================================================================
Carrying value of exploration assets (Note 11)
The carrying value of intangible Our work in this area included:
assets as at 31 March 2020 was * Reviewing and considering the impairment indicators
GBP4,029k which comprises of in IFRS 6 in relation to the asset held;
exploration and evaluation expenditure
on the Zambian licence area.
There is the risk that the carrying * Obtaining support for ownership;
value of this project is impaired
and that exploration and development
costs capitalised during the * Reviewing with management the basis for impairment or
year have not been capitalised non-impairment and challenging any assumptions made;
in accordance with IFRS 6. and
* Performing substantive testing on capitalised
expenditure during the year to ensure it met the
capitalisation criteria of IFRS 6
==================================================================
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information. Our opinion on the group financial statements
does not cover the other information and we do not express any form
of assurance conclusion thereon. In connection with our audit of
the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
group financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the group financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at:
http://www.frc.org.uk/auditorsresponsibilities . This description
forms part of our auditor's report.
Use of our report
This report is made solely to the entity's members, as a body,
in accordance with our letter of engagement. Our audit work has
been undertaken so that we might state to the entity's members
those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone, other
than the entity and the entity's members as a body, for our audit
work, for this report, or for the opinions we have formed.
Joseph Archer (Engagement Partner) 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Statutory auditor London E14 4HD
12 October 2020
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2020
Year to Year to
31 March 31 March
2020 2019
Notes GBP 000s GBP 000s
Administrative expenses 3 (2,234) (2,341)
Impairment 4 - (582)
Operating loss (2,234) (2,923)
Interest and finance costs (303) (318)
13a
Loss on change of ownership status 14 (399) (2,809)
Loss on sale of shares of Andiamo
Exploration Limited - (202)
Loss before income tax (2,936) (6,252)
Income tax expense 5 - -
Loss for the year from continuing
operations (2,936) (6,252)
---------- ---------
Loss on disposal of assets held
for sale, net of tax 4d (20,671) -
Loss from discontinued operations 4d - (188)
Loss for the year (23,607) (6,440)
---------- ---------
Other comprehensive income:
Item that may be subsequently
reclassified to profit or loss
Increase in ownership in subsidiaries - (767)
Currency translation differences (2,248) 1,408
---------- ---------
Total comprehensive loss for the
year, net of tax (25,855) (5,799)
---------- ---------
Loss attributable to:
Equity holders of the parent (23,158) (6,003)
Non-controlling interest 20 (449) (249)
---------- ---------
(23,607) (6,252)
---------- ---------
Total comprehensive loss attributable
to:
Equity holders of the parent (24,642) (6,550)
Non-controlling interest 20 (1,213) (249)
---------- ---------
(25,855) (6,799)
---------- ---------
Earnings per share attributable
to owners of the parent during
the year
- Basic (pence per share) 8 (3.57) (1.12)
- Diluted (pence per share) 8 (2.81) (0.98)
- From continuing operations -
Basic 8 (0.72) (1.08)
- From continuing operations -
Diluted 8 (0.56) (0.95)
- From discontinued operations
- Basic 8 - (0.03)
- From discontinued operations
- Diluted 8 - (0.03)
The notes on pages 33 to 60 are an integral part of these
consolidated financial statements.
Consolidated Statement of Financial Position as at 31 March
2020
31 March 2020 31 March 2019
Notes GBP 000s GBP 000s
ASSETS
Non-current assets
Intangible assets 10 4,029 2,418
Investment in associate 13 - 339
Property, plant and equipment 11 3,328 3,359
Total non-current assets 7,357 6,116
-------------- --------------
Current assets
Inventory 44 268
Assets held for sale 4 - 27,035
Prepayments and other receivables 15 4,383 590
Cash and cash equivalents 169 1,226
Total current assets 4,596 29,119
TOTAL ASSETS 11,953 35,235
-------------- --------------
LIABILITIES
Current liabilities
Held for sale liabilities 4 - (1,944)
Trade and other payables 16 (3,073) (1,443)
Total current liabilities (3,073) (3,387)
Non-current liabilities
Long term loan payable 9 (3,198) (1,891)
-------------- --------------
TOTAL LIABILITIES (6,271) (5,278)
NET ASSETS 5,682 29,957
-------------- --------------
Share Capital 19 - -
Share premium 19 51,231 50,222
Share based payment reserve 18 998 1,320
Warrant reserve 84 -
Foreign exchange reserve (91) 2,157
Retained earnings (47,436) (24,438)
-------------- --------------
Equity attributable to equity
holders of the parent 4,786 29,261
Non-controlling interest 20 896 696
TOTAL EQUITY 5,682 29,957
-------------- --------------
These financial statements were approved by the Board of
Directors on 12 October 2020 and signed on its behalf by:
Nicholas von Schirnding
Executive Chairman
The notes on pages 33 to 60 are an integral part of these
consolidated financial statements.
Consolidated Statement of Cash Flows for the year ended
31 March 2020
Year to Year to
31 March 31 March
20 19
Notes GBP 000s GBP 000s
--------------------- ------- ----------------------------------------------------------------- --------------------------
Cash flows from
operating activities
Loss before income
tax and including
discontinued
operations (23,607) (6,440)
Loss on disposal of
Assets held for
sale 20,561 -
Interest Expense 10 303 318
Share based payment
and warrants issued 18 287 337
Loss on disposal of
associate
- 202
Write-down of
inventory 228 -
Impairment of
Intangible assets
and
other assets - 582
Fair value loss on
change of ownership
status 14 399 2,809
Gain on disposal of
fixed assets - (144)
Foreign exchange (17) 54
Depreciation and
amortisation (57) 52
----------------------------------------------------------------- --------------------------
Net cash used in
operating
activities
before changes in
working capital (1,903) (2,230)
----------------------------------------------------------------- --------------------------
Decrease/(increase)
in inventories 208 (268)
Decrease/(increase)
in trade and other
receivables 15 1,482 (253)
(Decrease)/increase
in trade and other
payables 16 (130) 374
----------------------------------------------------------------- --------------------------
Net cash generated
from / (used in)
operating
activities 343 (2,377)
----------------------------------------------------------------- --------------------------
Cash flows from
investing activities
Purchase of
intangible assets (1,954) (3,181)
Purchase of fixed
assets (362) (1,231)
Proceeds from
disposal of assets
held
for sale 206 -
Investment in Zaco
Limited (78) (297)
----------------------------------------------------------------- --------------------------
Net cash used in
investing
activities (2,188) (4,709)
----------------------------------------------------------------- --------------------------
Cash flows from
financing activities
Proceeds from issue
of ordinary shares
- net of share
issue costs
Proceeds from
exercise of - 6,183
warrants 152 -
Shareholder loan -
Zamsort 1,307 1,891
Cash acquired on
acquisition of Casa
Mining Limited - 62
----------------------------------------------------------------- --------------------------
Net cash from
financing
activities 1,459 8,136
----------------------------------------------------------------- --------------------------
Net
(decrease)/increase
in cash and
cash equivalents (1,072) 1,050
Cash and cash
equivalents at
beginning
of year 1,241 191
----------------------------------------------------------------- --------------------------
Cash and cash
equivalents at end
of
the year 169 1,241
----------------------------------------------------------------- --------------------------
The notes on pages 33 to 60 are an integral part of these
consolidated financial statements.
Consolidated Statement of Changes in Equity as at 31 March
2020
Attributable to equity holders of the Company
Share Share Foreign Share Warrant Retained Total Non-controlling Total
capital premium exchange based reserve earnings interest equity
reserve payment
reserve
GBP GBP GBP GBP GBP GBP
000s 000s GBP 000s 000s 000s GBP 000s 000s GBP 000s 000s
Balance as at
1 April 2018 - 38,324 749 1,333 - (16,257) 24,149 1,318 25,467
Loss for the
year - - - - - (6,440) (6,440) - (6,440)
Other
comprehensive
income(loss)
for the year
- currency
translation
differences - - 1,408 - - - 1,408 - 1,408
Other
comprehensive
income(loss)
for the year
- increase in
ownership
in
subsidiaries - - - - - (767) (767) - (767)
--------- --------------- --------- -------- -------- ---------- -------- ---------------- --------
Total
comprehensive
income (loss)
for the year - - 1,408 - - (7,207) (5,799) - (5,799)
Share capital
issued - 11,898 - - - - 11,898 - 11,898
Share based
payments
granted - - - 337 - - 337 - 337
Share based
payments
expired - - - (350) - 350 - - -
Acquisition of
99.43% of
Casa
Mining
Limited - - - - - - - (1,204) (1,204)
Acquisition of
66% of
Zamsort
Limited - - - - - (1,324) (1,324) 582 (742)
Total
transactions
with owners,
recognised
directly in
equity - 11,898 - (13) - (974) 10,911 (622) 10,289
--------- --------------- --------- -------- -------- ---------- -------- ---------------- --------
Balance as at
31 March 2019 - 50,222 2,157 1,320 - (24,438) 29,261 696 29,957
--------- --------------- --------- -------- -------- ---------- -------- ---------------- --------
Balance as at 1 April 2019 - 50,222 2,157 1,320 - (24,438) 29,261 696 29,957
Loss for the year - - - - - (23,607) (23,607) - (23,607)
Other comprehensive income(loss)
for the year - currency
translation
differences - - (2,248) - - - (2,248) - (2,248)
Other comprehensive income(loss)
for the year - increase in
ownership
in subsidiaries - - - - - - - - -
--- -------------- -------- ------ --- --------- --------- ------ ---------
Total comprehensive income
(loss)
for the year - - (2,248) - - (23,607) (25,855) - (25,855)
Share capital issued - 1,009 - - - - 1,009 - 1,009
Granted during the year - - - 287 84 371 - 371
Share option expired during the
year - - - (609) - 609 - - -
Disposal of 99.43% of Casa
Mining
Limited - - - - - - - (114) (114)
Zaco Non-controlling interest - - - - - - - 5 5
Increase in Zamsort
Non-controlling
interest - - - - - - - 309 309
Total transactions with owners,
recognised directly in equity - 1,009 - (322) 84 609 1,380 200 1,580
--- -------------- -------- ------ --- --------- --------- ------ ---------
Balance as at 31 March 2020 - 51,231 (91) 998 84 (47,436) 4,786 896 5,682
--- -------------- -------- ------ --- --------- --------- ------ ---------
Share capital: This represents the nominal value of equity
shares in issue and is nil as the shares have a nil par value.
Share premium: This represents the premium paid above the
nominal value of shares in issue.
Foreign exchange reserve: This reserve represents exchange
differences arising from the translation of the financial
statements of foreign subsidiaries and the retranslation of
monetary items forming part of the net investment in those
subsidiaries.
Share-based payments reserve: This represents the value of
share-based payments provided to employees and Directors as part of
their remuneration and provided to consultants and advisors hired
from time to time as part of the consideration paid. The reserve
represents the fair value of options and performance share rights
recognised as an expense. Upon exercise of options or performance
share rights, any proceeds received are credited to share capital
and share premium.
Retained earnings: This represents the accumulated profits and
losses since inception of the business and adjustments relating to
options and warrants.
Non-Controlling Interest: This represents the Non-Controlling
Interest element of Casa Mining Limited.
The notes on pages 33 to 60 are an integral part of these
consolidated financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
a. General Information and Authorisation of Financial Statements
The Company is registered in the British Virgin Islands under
the BVI Business Companies Act 2004 with registered number 1396532
and is located at Craigmuir Chambers, Road Town, Tortola. The
Company's ordinary shares are traded on the AIM Market operated by
the London Stock Exchange.
The principal activity of the Company during the year was that
of a holding company for a group engaged in the identification,
evaluation, acquisition and development of natural resource
projects.
The Financial Statements of Arc Minerals Limited for the year
ended 31 March 2020 were authorised for issue by the Board on 12
October 2020.
b. Basis of Preparation
The nancial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRS IC) as adopted by the European
Union.
The consolidated financial statements have been prepared on the
historical convention, as modified by the measurement to fair value
of financial assets through profit and loss and held for sale
assets and liabilities as described in the accounting policies
below.
The financial information is presented in Pounds Sterling (GBP)
and all values are rounded to the nearest thousand Pounds Sterling
(GBP000's) unless otherwise stated.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied unless otherwise
stated.
c. New and amended standards adopted by the Group
New and amended standards mandatory for the first time for the
year beginning 1 April 2019
The following new IFRS standards and/ or amendments are
mandatory for the first time of the Company:
-- IFRIC Interpretation 23 - Uncertainty over Oncome Tax treatments (effective 1 January 2019)
-- IFRS 16 - Leases (effective 1 January 2019)
IFRS 16 became effective for periods commencing on or after 1
January 2019 and as such is relevant for the year ended 31 December
2019. Under the provisions of the standard most leases, including
the majority of those previously classified as operating leases,
will be brought onto the statement of financial position, as both a
right-of-use asset and a largely offsetting lease liability. The
right-of-use asset and lease liability are both based on the
present value of lease payments due over the term of the lease,
with the asset being depreciated in accordance with IAS 16
'Property, Plant and Equipment' and the liability increased for the
accretion of interest and reduced by lease payments. The directors
have considered the effects on the Group's financial statements and
conclude there is no material impact.
Of the other IFRSs and IFRICs, none are expected to have a
material effect on future Company financial statements.
ii) New standards and interpretations not yet adopted
The International Accounting Standards Board (IASB) has issued
the following new and revised standards, amendments and
interpretations to existing standards that are not effective for
the financial year ending 31 March 2020 and have not been adopted
early. The Group is currently assessing the impact of these
standards and based on the Group's current operations do not expect
them to have a material impact on the financial statements.
standard / interpretation impact on initial application effective date
-------------------------- ------------------------------ ----------------
IFRS 3 (Amendments) Business Combinations 1 January 2020*
========================== ============================== ================
IAS 1 (Amendments) Presentation of Financial 1 January 2020*
Statements
========================== ============================== ================
IAS 8 (Amendments) Accounting policies, Changes 1 January 2020*
in Accounting Estimates
========================== ============================== ================
*Effective dates provided are the IASB effective dates. EU
effective dates are yet to be confirmed.
The Directors do not anticipate the adoption of these standards
and interpretations in future reporting periods will have a
material impact on the Group's financial statements
d. Basis of Consolidation
The consolidated financial statements consolidate the financial
statements of Arc Minerals Limited and the audited financial
statements of its subsidiary undertakings made up to 31 March 2020.
The audited accounts of Zamsort Limited are consolidated as of 31
December 2019 as it is deemed impractical to consolidate these
companies as at 31 March 2020. Any significant transactions between
1 January 2020 and 31 March 2020 have been recognised accordingly
in these financial statements.
Subsidiaries are entities over which the Group has control. The
Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
When necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies into line with
the Group's accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation.
e. Associates
Associates are entities over which the Group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting. Under the
equity method, the investment is initially recognised at cost and
the carrying amount is increased or decreased to recognise the
investor's share of the profit or loss of the investee after the
date of acquisition. The Group's investment in associates includes
any goodwill identified on acquisition.
Where the ownership interest in an existing investment is
increased whereby significant influence is obtained, the Group
re-measures the existing investment immediately prior to obtaining
significant influence with resulting gains/losses recognised
immediately in profit or loss. The fair value of the existing
investment added to the fair value of the consideration of the
additional investment is treated as the deemed cost and is
continued to be accounted for under the equity method.
If the ownership interest in an associate is reduced but
significant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income is
reclassified to profit or loss where appropriate.
The Group's share of post-acquisition profit or loss is
recognised in the statement of comprehensive income, and its share
of post-acquisition movements is recognised in the other
comprehensive income section of the statement of comprehensive
income with a corresponding adjustment to the carrying amount of
the investment. When the Group's share of losses in an associate
equals or exceeds its interest in the associate, including any
unsecured receivables, the Group does not recognise further losses,
unless it has incurred legal or constructive obligations or made
payments on behalf of the associate.
The Group determines at each reporting date whether there is any
objective evidence that the investment in the associate is
impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amounts of the
associate and its carrying value and recognises the amount adjacent
to 'share of profit/loss of associate' in the group statement of
comprehensive income.
When the Group loses significant influence over an associate, it
derecognises that associate and recognises a profit or loss being
the difference between the sum of the proceeds received and any
retained interest, and the carrying amount of the investment in the
associate at the date significant influence is lost.
Gains and losses resulting from upstream and downstream
transactions between the Group and its associates are recognised in
the Group's financial statements only to the extent of unrelated
investor's interests in the associates. Unrealised losses are
eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency
with the policies adopted by the Group.
Impairment gains and losses arising in investments in associates
are recognised in the statement of comprehensive income.
When the Group gains control of an associate the fair value of
the associate undertaking is then assessed with any gain or loss
arising being recognised within the income statement.
f. Going Concern
The financial statements have been prepared on a going concern
basis. The Group's assets are not generating revenues, operating
cash outflows have been incurred in the year and an operating loss
and cash outflow from operations is expected in the 12 months
subsequent to the date of these financial statements being signed
and, as a result, the Group will need to receive the funds related
to the loan note received on sale of Casa and/or raise funding to
finance their ongoing activities and non-discretionary
expenditures.
Based on the Board's review of a forecast for the next 12 months
the Directors have a reasonable expectation that the Group has
access to adequate resources to continue in operational existence
for the foreseeable future. Thus, they continue to adopt the going
concern basis of accounting in preparing the annual financial
statements for the year ended 31 March 2020.
Should the Group be unable to continue trading, adjustments
would have to be made to reduce the value of the assets to their
recoverable amounts, to provide for further liabilities which might
arise and to classify fixed assets as current.
The auditors make reference to a material uncertainty in
relation to going concern within their audit report.
g. Business combinations
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
the subsidiary is the fair value of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at
acquisition date. The Group recognises any non-controlling interest
in the acquiree on an acquisition by acquisition basis; either at
fair value or at the non-controlling interest's proportionate share
of the recognised amounts of the acquiree's identifiable net
asset.
Acquisition related costs are expensed as incurred.
If a business combination is achieved in stages, the acquisition
date carrying value of the acquiree's previously held interest in
the acquire is re-measured to fair value at the acquisition date;
any gain or loss arising from such a re-measurement are recognised
in profit or loss.
Goodwill is initially measured as the excess of the aggregate of
the consideration transferred and the fair value of non-controlling
interest over the identifiable net assets acquired and liabilities
assumed. If this consideration is lower than the fair value of the
net assets of the subsidiary acquired, the difference is recognised
in profit or loss in the Income Statement.
Any interest of non-controlling interests in the acquiree is
initially measured at the minority's proportion of the net fair
value of the assets, liabilities and contingent liabilities
recognised. There are no non- controlling shareholders of
subsidiaries.
h. Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the Board, being the Group's chief
operating decision-maker ("CODM").
i. Foreign currencies
The Group presentational currency is Pounds Sterling. Each
entity in the Group determines its own functional currency and
items included in the financial statements of each entity are
measured using that functional currency. At present the functional
currency for Zamsort Limited it is the Zambian Kwacha.
The presentation currency (Pounds Sterling - GBP) is used
primarily because the Parent Company Arc Minerals Limited is listed
on the Alternative Investment Market (AIM) of the London Stock
Exchange and raises its funding in GBP.
The results and financial position of all the Group entities
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
-- monetary assets and liabilities for each balance sheet
presented are translated at the closing rate at the date of that
balance sheet;
-- income and expenses are translated at average exchange rates during the accounting year; and
-- all resulting exchange differences are recognised in other
comprehensive income where material.
On consolidation, exchange differences arising from the
translation of the net investment in foreign entities, and of
monetary items receivable from foreign subsidiaries for which
settlement is neither planned nor likely to occur in the
foreseeable future are taken to other comprehensive income. When a
foreign operation is sold, such cumulative exchange differences are
subsequently reclassified in the income statement as part of the
gain or loss on sale.
j. Taxation
Tax is recognised in the consolidated Statement of Comprehensive
Income, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case, the
tax is also recognised in other comprehensive income or directly in
equity, respectively.
Deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences arising from differences
between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax bases used in the
computation of taxable profit. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of
goodwill; deferred tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Company is able
to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and
liabilities relate to taxes levied by the same taxation authority
on either the same taxable entity or different taxable entities
where there is an intention to settle the balances on a net
basis.
Deferred tax is calculated at the tax rates that are expected to
apply to the period when the asset is realised or the liability is
settled. Deferred tax assets and liabilities are not
discounted.
There has been no tax credit or expense for the year relating to
current or deferred tax.
k. Intangible assets
Exploration and evaluation assets
Exploration and development costs are carried forward in respect
of areas of interest where the consolidated entity's rights to
tenure are current and where these costs are expected to be
recouped through successful development and exploration, or by
sale. Alternatively, these costs are carried forward while active
and significant operations are continuing in relation to the areas
of interest and it is too early to make reasonable assessment of
the existence or otherwise of economically recoverable reserves.
When the area of interest is abandoned, exploration and evaluation
costs previously capitalised are impaired.
Costs incurred by the Company on behalf of its subsidiaries and
associated with mining development and investment are capitalised
on a project-by-project basis pending determination of the
feasibility of the project. Costs incurred include appropriate
technical and administrative expenses but not general overheads. If
a mining development project is successful, the related
expenditures will be written-off over the estimated life (useful
economic life) of the commercial ore reserves on a unit of
production basis. Impairment reviews are carried out regularly by
the Directors of the Company. Where a project is abandoned, or is
considered to be of no further commercial value, the related costs
will be written off to the Statement of Comprehensive Income.
The recoverability of these costs is dependent upon the
discovery of economically recoverable reserves, the ability of the
Group to obtain necessary financing to complete the development of
reserves and future profitable production or proceeds from the
disposal of recoverable reserves.
l. Significant accounting judgements, estimates and assumptions
Critical Accounting Estimates and Judgements
The preparation of financial statements using accounting
policies consistent with IFRS requires the Directors to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of income and expenses. The
preparation of financial statements also requires the Directors to
exercise judgement in the process of applying the accounting
policies. Changes in estimates, assumptions and judgements can have
a significant impact on the financial statements.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised
prospectively from the period in which the estimates are revised.
The following are the key estimate and assumption uncertainties
that have a significant risk of resulting in a material adjustment
within the next financial year:
(i) Valuation of exploration, evaluation and development expenditure
The value of the Group's exploration, evaluation and development
expenditure is dependent upon the success of the Group in
discovering economic and recoverable mineral resources, especially
in countries of operation where political, economic, legal,
regulatory and social uncertainties are potential risk factors.
The future revenue flows relating to these assets are uncertain
and will also be affected by competition, relative exchange rates
and potential new legislation and related environmental
requirements.
The Group's ability to continue its exploration programmes and
develop its projects is dependent on future fundraising, the
outcome of which is uncertain. The ability of the Group to continue
operating within its jurisdiction is dependent on a stable
political environment which is uncertain. This may also impact the
Group's legal title to assets held which would affect the valuation
of their assets.
The Group therefore makes estimates in relation to the valuation
of these assets with consideration of these factors.
There have been no changes to any past valuations.
(ii) Valuation of Casa Royalty
There are a number of key factors which affect the valuation of
the Casa Royalty which has a face value of US$ 45m (GBP 40m). These
include (a) development and construction timeframe; (b) appropriate
discount factor; (c) availability of construction financing; (d)
political stability (e) gold price and (f) ability to control
timing of receipt.
Given these uncertainties the Company has elected to assign nil
value to the Royalty. The Company will reassess this carrying value
in future as the Misisi Project progresses along the development
curve.
Further information can be found in Note 4 (d)(ii)
(iii) Sturec Resource Royalty
As disclosed in Note 4(d)(ii) Sturec was sold in February 2020.
As part of the transaction if before November 2024, the turec JORC
Indicated and Measured Resource exceeds 1.5 million ounces gold at
a grade greater than 2.5g/t (inclusive of recoverable Ag
equivalent), MetalsTech will pay Arc a further A$2 royalty per
additional ounce of gold . This royalty is capped at 7 million
ounces of gold or Australian dollars 11M. Because of the general
uncertainty about the size of the Sturec resource and the
difficulties of operating in Slovakia the Company has not recorded
the royalty in the accounts.
(iv) Receipt of the US$ 5 million receivable in respect of the Casa Sale
The Casa asset was sold during the period with the consideration
being a mixture of cash and royalty. The cash element was not due
on sale but falls for payment on 19 March 2021. Management have
made a judgement about the recoverability of this receivable and
their estimation is that will be settled in accordance with the due
dates stated within the sale and purchase agreement.
m. Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of cost and net realisable value. Cost comprises all
of costs of purchase, cost of conversion and other costs incurred
in bringing the inventories to their present location and
condition. Weighted average cost is used to determine the cost of
ordinarily interchangeable items.
Mining inventory includes run of mine stockpiles, minerals in
circuit and consumables. Stockpiles and minerals in circuit are
valued at the cost of production to their point in process using a
weighted average cost of production, or net realisable value,
whichever is lower. Low grade stockpiles are only recognised as an
asset when there is evidence to support the fact that some economic
benefit will flow to the Group on the sale of such inventory.
Consumables are valued at their cost of acquisition, or net
realisable value, whichever is lower.
n. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
o. Trade and other receivables
Receivables are recognised initially at cost, being their
initial fair value. These are classified as loans and receivables,
and so are subsequently carried at cost using the effective
interest method. The Directors are of the view that such items are
collectible and no provisions are required.
p. Financial instruments
The Group's financial instruments are classified as loans and
receivables. The classification depends on the purpose for which
the financial instruments were acquired. Management determines the
classification of its financial instruments at initial
recognition.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market, and comprise trade and other receivables and cash and cash
equivalents (see separate accounting policies for these items).
Trade and other payables are classified as financial
liabilities, and are initially recognised a cost, being their fair
value, and subsequently measured at amortised cost using the
effective interest method. Any interest is recognised as a finance
cost within the statement of comprehensive income.
There is no material difference between the carrying values and
fair value of the Group's financial instruments.
q. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses.
Depreciation is provided on all property, plant and equipment to
write off the cost less estimated residual value of each asset at
25% on a straight-line basis.
All assets are subject to annual impairment reviews.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replacement part is
derecognised. All other repairs and maintenance are charged to the
Statement of Comprehensive Income during the financial period in
which they are incurred.
The asset's residual value and useful economic lives are
reviewed, and adjusted if appropriate, at the end of each reporting
period.
An asset's carrying value is written down to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposal are determined by comparing the
proceeds with the carrying amount and are recognised within the
Statement of Comprehensive Income.
r. Impairment of assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount.
An asset's recoverable amount is the higher of its fair value
less costs to sell and its value in use. This is determined for an
individual asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets or groups
of assets, and the asset's value in use cannot be estimated to be
close to its fair value. In such cases, the asset is tested for
impairment as part of the cash-generating unit to which it belongs.
When the carrying amount of an asset or cash-generating unit
exceeds its recoverable amount, it is considered impaired and is
written down to its recoverable amount.
In assessing value in use, estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. Impairment losses relating to
continuing operations are recognised in those expense categories
consistent with the function of the impaired asset, unless the
asset is carried at revalued amount (in which case the impairment
loss is treated as a revaluation decrease).
An assessment is also made at each reporting date as to whether
there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A
previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset's
recoverable amount since the last impairment loss was recognised.
If that is the case, the carrying amount of the asset is increased
to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset
in prior years. Such reversal is recognised in the Statement of
Comprehensive Income unless the asset is carried at revalued
amount, in which case the reversal is treated as a revaluation
increase. After such a reversal, the depreciation charge is
adjusted in future periods to allocate the asset's revised carrying
amount, less any residual value, on a systematic basis over its
remaining useful life.
s. Trade and other payables
Trade and other payables are carried at amortised cost under the
effective interest method and represent liabilities for goods and
services provided to the Group prior to the end of the financial
year that are unpaid and arise when the Group becomes obliged to
make future payments in respect of the purchase of these goods and
services.
t. Assets held for sale
Assets (or disposal groups) classified as held for sale are
measured at the lower of their carrying amount or fair value less
costs to sell.
The Group classifies an asset (or disposal groups) as held for
sale if their carrying amount is to be recovered through a sale
transaction rather than through continued use. The Group considers
this to be the case when the asset (or disposal group) is available
for immediate sale in its present condition subject only to terms
that are usual and customary for sales of such assets (or disposal
groups) and the sale is considered to be highly probable.
A sale is considered to be highly probable if the Board of
Directors is committed to a plan to sell the asset (or disposal
group), and an active programme to locate a buyer and complete the
plan has been initiated and is expected to complete within one year
of classification.
Assets held for sale are no longer depreciated or amortised
while they are classified as held for sale. Interest and other
expenses attributable to the liabilities of the disposal group
continue to be recognised.
Assets classified as held for sale are presented separately from
the other assets in the statement of financial position. The
liabilities classified as held for sale are presented separately
from other liabilities in the statement of financial position.
u. Share-based payments
The Group provides benefits to senior personnel, consultants and
advisors of the Group in the form of share-based payments, whereby
such parties render services in exchange for shares or rights over
shares (equity-settled transactions).
The cost of these equity-settled transactions with such parties
is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value
is determined by using a Black-Scholes model.
In valuing equity-settled transactions, no account is taken of
any performance conditions, other than conditions linked to the
price of the shares of Arc Minerals Limited (market conditions) if
applicable.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant party become fully entitled to the
award (the vesting period).
The cumulative expense recognised for equity-settled
transactions at each reporting date until vesting date
reflects:
(i) the extent to which the vesting period has expired and;
(ii) the Group's best estimate of the number of equity instruments that will ultimately vest.
No adjustment is made for the likelihood of market performance
conditions being met, as the effect of these conditions is included
in the determination of fair value at grant date. The charge to the
Income Statement for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is only conditional upon a market
condition.
The dilutive effect, if any, of outstanding options is reflected
as additional share dilution in the computation of earnings/ (loss)
per share.
v. Earnings per share
Basic EPS is calculated as profit attributable to equity holders
of the parent for the period, adjusted to exclude any costs of
servicing equity (other than dividends), divided by the weighted
average number of ordinary shares, adjusted for any bonus element.
Fully-diluted EPS adjusts Basic EPS to reflect the impact if all
share purchase warrants and options were exercised.
w. Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings, using the
effective interest method.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. To the extent
that there is no evidence that it is probable that some or all of
the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services, and amortised over the period of
the facility to which it relates.
Borrowings are classified as current liabilities unless the
group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting
period.
x. Borrowing costs
General and specific borrowing costs directly attributable to
the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time
to get ready for their intended use or sale, are added to the cost
of those assets, until such time as the assets are substantially
ready for their intended use or sale.
Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in
the period in which they are incurred.
y. COVID-19
It is not possible to estimate the impact of the outbreak's
near-term and longer effects or Governments' varying efforts to
combat the outbreak and support businesses. This being the case, we
do not consider it practicable to provide a quantitative or
qualitative estimate of the potential impact of this outbreak on
the Company at this time.
The financial statements have been prepared based upon
conditions existing at 31 March 2020 and considering those events
occurring subsequent to that date, that provide evidence of
conditions that existed at the end of the reporting period. As the
outbreak of COVID-19 occurred in the last quarter of the financial
year and its impact mostly happened subsequent to the financial
year, its impact is considered an event that is indicative of
conditions that arose after the reporting period and accordingly,
no adjustments have been made to financial statements as at 31
March 2020 for the impacts of COVID-19.
2. Segmental analysis
Segment information has been determined based on the information
reviewed by the Board for the purposes of allocating resources and
assessing performance. No revenue is currently being generated.
Head office activities are mainly administrative in nature
whilst the activities in Zambia relate to exploration and
development work.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocate on
a reasonable basis.
31 March 2020 BVI Zambia Total
GBP 000's GBP 000's GBP 000's
------------------------------------ ---------- ---------- ----------
Result
Loss from continuing operations (1,471) (763) (2,234)
Interest and finance costs (303) - (303)
Loss on change of ownership status
(Zaco) (399) - (399)
Loss from discontinued operations (20,671) - (20,671)
(Loss) Profit before Income Tax (22,844) (763) (23,607)
---------- ---------- ----------
Other information
Capital additions - 2,353 2,353
Non-controlling interest - 896 896
---------- ---------- ----------
3,249 3,249
Assets
Non-current Assets 0 7,357 7,357
Inventory - 44 44
Current assets excluding cash
and cash equivalents 4,263 120 4,383
Cash and equivalents 169 - 169
---------- ---------- ----------
Consolidated total assets 4,432 7,521 11,953
---------- ---------- ----------
Liabilities
Non-current liabilities - 3,198 3,198
Current liabilities 2,247 826 3,073
---------- ---------- ----------
Consolidated total liabilities 2,247 4,024 6,271
---------- ---------- ----------
Slovakia and the DRC are no longer considered reportable
segments following the sale of the Company's assets in these
countries.
31 March 2019 UK/BVI Slovakia Zambia DRC Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
-------------------------------- ---------- ---------- ---------- ---------- ----------
Result
Operating (loss)/gain (1,320) (92) (1,511) - (2,923)
Loss on sale of shares
of Andiamo Exploration
Ltd (202) - - - (202)
Loss on change of ownership
status (Zamsort) (2,809) - - - (2,809)
Interest and finance costs (318) - - - (318)
(Loss) Profit before Income
Tax (4,649) (92) (1,511) - (6,252)
---------- ---------- ---------- ---------- ----------
Other information
Capital additions - - - - -
Non-controlling interest - - 582 114 696
---------- ---------- ---------- ---------- ----------
Assets
Non-current Assets 339 - 5,777 - 6,116
Available for sale financial
assets - - - - -
Held for sale assets - 6,000 - 21,035 27,035
Inventory - - 268 - 268
Current assets excluding
cash and cash equivalents 422 5 163 - 590
Cash and equivalents 1,196 - 30 - 1,226
---------- ---------- ---------- ---------- ----------
Consolidated total assets 1,957 6,005 6,238 21,035 35,235
---------- ---------- ---------- ---------- ----------
Liabilities
Non-current liabilities - - 1,891 - 1,891
Held for sale liabilities - 34 - 1,910 1,944
Current liabilities 836 - 607 - 1,443
---------- ---------- ---------- ---------- ----------
Consolidated total liabilities 836 34 2,498 1,910 5,278
---------- ---------- ---------- ---------- ----------
3. Expenses by nature
2020 2019
GBP 000's GBP 000's
Directors' fees 439 406
Wages and salaries 88 114
Office expenses 70 35
Travel and subsistence expenses 103 170
Professional fees - legal, consulting,
exploration 182 302
AIM related costs including Public Relations 207 183
Auditor's remuneration - audit 35 42
Stock option expense 287 337
Foreign exchange (gain)/loss (17) 196
Other expenses 77 24
Impairment of inventory 228 -
Zamsort administration costs 535 532
---------------------------------------------- ---------- ----------
Total operating expenses 2,234 2,341
---------------------------------------------- ---------- ----------
Auditors Remuneration
During the year, the Group obtained the following services from
the Company's auditor:
2020 2019
GBP 000's GBP 000's
Fees payable to the auditor for the
audit of the consolidated financial
statements 35 42
Fees payable to the auditor for other
services:
Tax advisory services - 3
--------------------------------------- ---------- ----------
Total 35 45
--------------------------------------- ---------- ----------
Employee information
2020 2019
Group Staff Costs comprised: GBP 000's GBP 000's
------------------------------ ---------- ----------
Wages, salaries and benefits 88 114
Zamsort wages and salaries 208 453
Charge to the profit or loss 296 567
---------- ----------
The average number of persons employed in the Group, including
Executive Directors, was:
2020 2019
Average number of persons employed: Number Number
Head office administration 7 12
Operations - 1
Zamsort administration 11 10
Zamsort operations 46 40
------- -------
64 63
------- -------
4. Disposals of Held for sale assets
During 2018 the Group confirmed its intention to dispose of
Sturec and announced a similar plan for Casa in 2019. During 2020
both assets were sold as summarised in (d)
The related financial information is set out below:
a) Results of disposal group prior to sale
2020 2020 2020 2019 2019 2019
Casa Slovakia Total Casa Slovakia Total
GBP GBP GBP GBP GBP
GBP 000's 000's 000's 000's 000's 000's
Expenses (41) (80) (121) (163) (25) (188)
Loss before income tax (41) (80) (121) (163) (25) (188)
Income tax - - - - - -
------------------------------- ---------- --------- ------- ------- --------- -------
Loss after tax (41) (80) (121) (163) (25) (188)
------------------------------- ---------- --------- ------- ------- --------- -------
Loss from discontinued
operations (41) (80) (121) (163) (25) (188)
------------------------------- ---------- --------- ------- ------- --------- -------
Other comprehensive income
from discontinued operations (29) (81) (110) - - -
------------------------------- ---------- --------- ------- ------- --------- -------
b) Cash flows of disposal Group prior to sale
2020 2020 2020 2019 2019 2019
Casa Slovakia Total Casa Slovakia Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Operating activities (29) (81) (110) 162 (27) 135
Investing activities (303) - (303) (1,419) - (1,419)
Financing activities 332 81 413 1,265 27 1,292
---------------------- --------- --------- --------- --------- --------- ---------
- - - 8 - 8
---------------------- --------- --------- --------- --------- --------- ---------
c) Assets and liabilities of disposal Group (i)
Assets classified as held for sale
2020 2020 2020 2019 2019 2019
Casa Slovakia Total Casa Slovakia Total
GBP GBP GBP GBP GBP GBP
000's 000's 000's 000's 000's 000's
Intangible assets - - - 20,881 5,801 26,682
Property, plant and equipment - - - - 159 159
Cash and cash equivalents - - - 8 7 15
Trade and other receivables - - - 146 2 148
Inventory - - - - 31 31
------------------------------- -------- ---------- -------- ------- --------- -------
- - - 21,035 6,000 27,035
-------- ---------- ---------------------------------------- ------- --------- -------
(i) In 2020 Held for sale assets and liabilities were sold as
summarised below in (d).
Liabilities directly associated with assets classified as held
for sale (i)
2020 2020 2020 2019 2019 2019
Casa Slovakia Total Casa Slovakia Total
GBP GBP GBP GBP GBP
GBP 000's 000's 000's 000's 000's 000's
Deferred consideration - - - 1,535 - 1,535
Trade and other creditors - - - 375 39 409
--------------------------- ----------- ----------------- -------- ------- --------- -------
- - - 1,514 39 1,553
----------- ----------------- ------------------------------------ ------- --------- -------
d) Disposal of assets Held for sale
-- On 7 February 2020 the Company announced the sale of its
Sturec assets in return for Australian$ 750,000 which has been
received and a royalty capped at AUD 11,000,000 calculated as AUD 2
per excess ounce if at any time during the 3 year period commencing
November 2021 the Sturec resource exceeds 1.5M ounces grading 2.5
g/t up to 7.0M ounces.
Proceeds of GBP 381,000 have been recorded in the accounts which
generated a loss of GBP5.584M.
-- On 18 March 2020 the Company announced the sale of its
shareholding in Casa Mining Limited in return for a US$ 5,000,000
interest-free Note payable on 19 March 2021 and a 3% Royalty
calculated on net smelter production capped at US$45,000,000. The
US$5M note is secured by a charge over the shares of Casa Mining
Limited.
There are a number of key factors which affect the valuation of
the Casa Royalty which has a face value of US$ 45,000,000. These
include (a) development and construction timeframe; (b) appropriate
discount factor; (c) availability of construction financing; (d)
political stability and (e) gold price.
Given these uncertainties the Company has elected to assign nil
value to the Royalty. The Company will reassess this carrying value
in future as the Misisi Project progresses along the development
curve.
Proceeds of GBP 4.032m have been recorded in the accounts which
generated a loss of GBP(15.087m) from the sale of the Misisi
project.
The total loss on disposal of assets held for sale is
GBP20.671m.
5. Taxation
2020 2019
GBP'000 GBP'000
-------------------------------- --------- ---------
Current income tax charge - -
Deferred tax charge/ (credit) - -
--------- ---------
Total taxation charge/ (credit) - -
--------- ---------
Taxation reconciliation
The charge for the year can be reconciled to the loss per the
consolidated statement of comprehensive income:
2020 2019
GBP'000 GBP'000
------------------------------------------------- --------- --------
Gain (Loss) before income tax (23,607) (6,782)
Tax on loss at the weighted average Corporate
tax rate of 1.13 % (2019: 10.00 %)
Effects of: 268 680
Permanent differences
Tax losses carried forward - -
Non-taxable income/Non-deductible expenses for - -
tax purposes (268) (680)
--------- --------
Total income tax expense - -
--------- --------
The deferred tax asset has not been provided for in accordance
with IAS 12 due to uncertainty as to when profits will be generated
against which to relieve any such asset. The Group does not have a
material deferred tax liability at the year end.
The tax rate used in 2020 is the weighted average rate of the
Republic of Zambia and British Virgin Islands. Unused tax losses
available in Zambia approximate Zambian Kwacha 75m at 31 December
2019 approximately GBP 3.3m
6. Dividends
No dividends were paid (2019: nil).
7. Key management remuneration
2020 2019
GBP 000's GBP 000's
---------- ----------
Key management remuneration 848 723
2020 Short term Share based Total
employee payments
benefits
GBP 000's GBP 000's GBP 000's
---------------------------- ---- ----------- ------------ ----------
Executive Directors
Nicholas von Schirnding 208 69 277
Rémy Welschinger * 97 53 150
Non-Executive Directors
Brian McMaster 36 14 50
Mumena Mushinge 36 14 50
Don Bailey 36 - 36
Jonathan de Thierry 36 14 50
Key Management Personnel
Vassilios Carellas (COO) 88 54 142
John Forrest (CFO until 31
October 2019) 56 37 93
593 255 848
----------- ------------ ----------
(* Appointed as a Director during the year)
(Mr Mushinge received USD 70k in fees from Zamsort Ltd as a
Director of the Company in the financial year to 31 March
2019.)
2019 Short term Share based Total
employee benefits payments
GBP 000's GBP 000's GBP 000's
-------------------------- ------------------- ------------ ----------
Executive Directors
Nicholas von Schirnding 174 165 339
Non-Executive Directors
Brian McMaster 35 20 55
Michael Foster * 26 22 48
Jonathan de Thierry 35 20 55
Don Bailey 30 104 134
Mumena Mushinge 6 - 6
Key Management Personnel
Vassilios Carellas (COO) 143 89 232
John Forrest (CFO) 94 64 158
543 484 1,027
------------------- ------------ ----------
(* Resigned as a Director during the year)
(Appointed as a Director during the year. Mr Mushinge received
USD 11,667 in fees from Zamsort Ltd in the period since his
appointment as a Director of the Company to 31 March 2019.)
No pension benefits are provided for any Directors (2019:
nil).
8. Earnings per share
The calculation of Earnings per share is based on the loss
attributable to equity holders divided by the weighted average
number of shares in issue during the year.
2020 2019
GBP 000's GBP 000's
---------- ----------
(Loss) Gain (25,855) (6,440)
Weighted average number of ordinary shares
(000s) 724,168 577,412
Potential diluted weighted average number
of shares (000s) 919,043 659,211
Basic earnings per share (expressed in pence) (3.57) (1.12)
Fully Diluted earnings per share (expressed (2.81) (0.98)
in pence)
Net Profit (loss) per share continuing operations
- Basic (0.72) (1.08)
Net Profit (loss) per share continuing operations
- Diluted (0.56) (0.95)
Net (loss) per share discontinuing operations
- Basic - (0.03)
Net (loss) per share discontinuing operations
- Diluted - (0.03)
9. Loan payable
2020 2019
GBP 000's GBP 000's
Loan payable 3,198 1,657
-------------- ---------- ----------
(i) The loan is payable to the 34% shareholder in Zamsort
Limited in the amount of USD 4M as at 31 March 2020. The loan is
unsecured and repayable on 31 December 2021.
(ii) The loan ranks equally with Arc's working capital loan to
Zamsort of USD 7.1M which is eliminated on consolidation of Zamsort
in the group accounts. This loan is unsecured and repayable on 31
December 2021.
In summary, the Company had loans to Zamsort Limited of USD
6.76M at 31 December 2018 and USD 7.1M at 31 March 2020.
10. Intangible assets
Deferred Deferred Deferred
Goodwill Exploration Exploration Exploration Total
Zamsort Casa Zaco Zamsort
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
-------------------------- ---------- ------------- ------------- ------------- ----------
Cost
At 1 April 2018 - 18,495 - - 18,495
Assets acquired on
purchase of Zamsort
Limited (see note 14) 671 - - - 671
Additions, net - 1,434 - 1,747 3,181
Currency gain - 1,122 - - 1,122
Reclassified as Deferred
Exploration (see note
14) (671) - - 671 -
Transferred to Assets
Held for Sale
(see note 5) - (21,051) - - (21,051)
Net book value as at
31 March 2019 - - - 2,418 2,418
---------- ------------- ------------- ------------- ----------
At 1 April 2019 - - - 2,418 2,418
Additions - - 10 1,924 1,934
Currency loss - - - (323) (323)
Net book value as at
31 March 2020 - - 10 4,019 4,029
---------- ------------- ------------- ------------- ----------
11. Fixed Assets
Processing Mining Motor Furniture
Plant Equipment Vehicles & Fittings Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
------------------------ ----------- ----------- ---------- ------------ -------------------
Cost
At 1 April 2018 - - - - -
Assets acquired on
purchase of Zamsort
Limited (see note 14) 2,487 378 188 38 3,091
Disposals - (175) (69) - (244)
Additions 1,149 71 - 11 1,231
Foreign exchange (387) (59) (28) (6) (480)
----------- ----------- ---------- ------------ -------------------
At 31 Mar 2019 3,249 215 91 43 3,598
----------- ----------- ---------- ------------ -------------------
At 1 April 2019 3,249 215 91 43 3,598
Disposals
Additions 449 (17) - (3) 429
Foreign exchange (515) (34) (15) (7) (571)
----------- ----------- ---------- ------------ -------------------
At 31 Mar 2020 3,183 164 76 33 3,456
----------- ----------- ---------- ------------ -------------------
Depreciation
At 1 April 2018 - - - - -
Assets acquired on
purchase of Zamsort
Limited (see note 14) - (271) (43) (23) (337)
Disposals - 83 17 - 100
Depreciation - (24) (23) (5) (52)
Foreign exchange - 40 7 3 50
----------- ----------- ---------- ------------ -------------------
At 31 Mar 2019 - (172) (42) (25) (239)
----------- ----------- ---------- ------------ -------------------
At 1 April 2019 - (172) (42) (25) (239)
Disposals
Depreciation - 100 (19) (8) 73
Foreign exchange 27 7 4 38
----------- ----------- ---------- ------------ -------------------
At 31 Mar 2020 - (45) (54) (29) (128)
----------- ----------- ---------- ------------ -------------------
Net book value - 31
March 2019 3,249 43 49 18 3,539
----------- ----------- ---------- ------------ -------------------
Net book value - 31
March 2020 3,183 119 22 4 3,328
----------- ----------- ---------- ------------ -------------------
12. Investment in subsidiaries
At 31 March 2019, the Company held interests in the share
capital of the following subsidiary companies. During 2020 the
following companies were sold as disclosed in Note 4:
-- Shares of Ortac Resources (UK) Limited which had subsidiaries
St Stephans Gold sro; Ortac sro and Carpathian Minerals sro;
-- Casa Mining Limited which had subsidiary Leda Mining Congo SA
Company Place of Business % Ownership held Nature of business
------------------------------- ----------------------------- ----------------- --------------------
Ortac Resources (UK) Limited England and Wales 100% Holding Company
St. Stephans Gold s.r.o . (*) Slovak Republic 100% Mineral Exploration
Ortac s.r.o. (*) Slovak Republic 100% Mineral Exploration
Carpathian Minerals s.r.o. (*) Slovak Republic 100% Mineral Exploration
Casa Mining Limited Republic of Mauritius 92% Mineral Exploration
Leda Mining Congo S.A. Democratic Republic of Congo 73% Mineral Exploration
Zamsort Limited Republic of Zambia 66% Mineral Exploration
Unico Minerals Limited (++) British Virgin Islands 100% Holding Company
Zaco Investments Limited (++) Republic of Zambia 52.5% Mineral Exploration
* Wholly owned subsidiary of Ortac Resources (UK) Limited
(Subsidiary of Casa Mining Limited)
(++ Zaco Investments Limited is a subsidiary of Unico Minerals
Limited which was incorporated as a subsidiary of the Company in
2019 in British Virgin Islands with registered office at Craigmuir
Chambers, Road Town, Tortola, BVI; Interest in Zaco has increased
to 72.5% since 31 March 2020.)
(Zamsort Limited registered office at 69B/6 Wite Wood Road
Lusaka Zambia)
The non-controlling interest shown within the primary statement
arises as a result of the Group owning less than 100% of a
subsidiary company.
13. Investment in associates
Set out below are the associates of the Group during the year
ended 31 March 2020.
Zaco Total
GBP 000's GBP 000's
--------------- ---------- ----------
1 April 2018 - -
Additions 339 339
Share of loss - -
---------- ----------
31 March 2019 339 339
---------- ----------
1 April 2019 339 339
Additions 60 74
Acquired > 50% (399) (413)
------ ------
31 March 2020 - -
------ ------
Zaco Investments Limited is a Zambian-registered company, now
owned 72.5% by Arc (52.5% at 31 March 2020). In 2020 the Company
increased its interest in Zaco from 42.5% to 52.5% and Zaco's
results were consolidated. The acquisition cost of this 52.5%
interest was GBP398,766. (Refer to Note 13a).
The Chairman of Arc has been appointed Chairman of Zaco. The
Zaco year end is being changed to 31 December.
13a Acquisition of Zaco Investments Limited ("Zaco")
Zaco is involved in the exploration for minerals in the Republic
of Zambia.
On 1 April 2019 the Company held a 42.5% interest in Zaco at a
cost of GBP339,000. The Company acquired equity control on 3
December 2019. As noted below and in Note 26 the Company currently
holds 72.5% of Zaco.
Consideration - GBP398,766
In 2018, the Company acquired 37.5% of the equity shares of Zaco
for cash of US$ 375,000 (GBP288,017).
After its acquisition of 37.5% of Zaco Limited, the Company was
offered a further 5% at the same pro rata cost, US$ 50,000. At the
time the Company was focused on financing its 5,800m Kalaba drill
program. Nicholas von Schirnding offered to make the purchase on
behalf of the Company. The Board accepted his offer and Mr von
Schirnding purchased the 5% block with the expectation that the
Company would purchase it from him when financial conditions
permitted. The 5% Zaco interest was subsequently purchased, in
January 2019, at a cost of US$55,000 (GBP41,985) including a
financing charge.
In July 2019, Arc further consolidated its interest in the Zaco
license from 42.5% to 47.5%. The additional 5% was acquired from
Limehouse Capital Ltd, a company that is wholly owned by Rémy
Welschinger, a director of the Company, for a consideration of USD
50,000 payable as 1.414m shares in Arc (GBP39,592).
In November 2019, Arc further consolidated its interest in the
Zaco license from 47.5% to 52.5%. The additional 5% was acquired
from Mr Mumena Mushinge, a director of the Company, for a
consideration of USD 37,500 (GBP29,173) payable in cash.
The fair value of net assets acquired at the acquisition date
was GBPnil.
The loss on acquisition of Zaco of (GBP398,766) is reported as a
Loss on change of ownership status in the Statement of
Comprehensive income.
If new information obtained within one year from the date of
acquisition about the facts and circumstances that existed at the
acquisition date identifies adjustments to the above amounts, or
any additional provisions that existed at the acquisition date, the
acquisition accounting will be revised.
Non-controlling interest
The non-controlling interest of Zaco Investments Limited at the
date of acquisition were measured at the fair value of these
interests. This fair value was estimated by the consideration
offered by the Company to acquire the controlling interest.
Impact of acquisitions on the results of the Group
The contribution to net loss of the Group by Zaco Investments
Limited was GBPNil and Group revenue includes GBPNil from the
operations of Zaco.
If this business was acquired at the beginning of the reporting
period, both the Group revenue and the Group loss for the fiscal
year would be unchanged.
The financial statements of Zaco Investments Limited have been
consolidated to its year end of 31 October 2019, as it is
impractical to consolidate the balances as at 31 March 2020. Zaco
is changing its year end date to 31 December.
Between 1 January 2020 and 31 March 2020 Zaco incurred expenses
of GBPNil and the consolidated financial statements have therefore
not been adjusted.
14. 2019 Acquisition of Zamsort Limited ("Zamsort")
Zamsort is involved in the mining of and exploration for
minerals in the Republic of Zambia. On 1 April 2018 the Company
held a 14% interest in Zamsort at a cost of GBP546,000. The Company
acquired equity control on 5 June 2018.
Consideration - GBP5,332,000
In May 2017 in exchange for a 14% equity interest in Zamsort the
Company agreed to convert GBP546,000 (US$828,472) of US$1,200,000
Secured Loan Notes issued to the Company in 2015 by Zamsort;
On 15 May 2018 the Company issued 102,083,333 shares with an
imputed cost of GBP3,072,708 to acquire a further 35% interest in
Zamsort, thereby increasing its interest to 49%;
On 5 June 2018 the Company issued 17,500,000 shares with an
imputed cost of GBP770,000 to acquire a 6% interest in Zamsort,
thereby increasing its interest to 55%, a controlling interest;
On 18 June 2018 the Company issued 12,000,000 shares with an
imputed cost of GBP509,400 to acquire a 6% interest in Zamsort,
thereby increasing its interest to 61%;
On 11 July 2018 the Company issued 10,000,000 shares with an
imputed cost of GBP420,000 to acquire a 5% interest in Zamsort,
thereby increasing its interest to 66%;
The acquisition resulted in Goodwill of GBP671,000 as
follows:
GBP 000s
Net assets acquired:
Cash and cash equivalents 62
Intangible assets 218
Fixed assets, net 2,753
Inventory 507
Trade and other receivables 151
Trade and other payables (385)
Shareholder loans (1,655)
---------
Total net assets acquired 1,651
Total Consideration for 6% of Zamsort shares (49%
- 55%) 770
Fair value of the associate at the Second Acquisition
Date 809
Fair Value of Non-Controlling interest at the Second
Acquisition Date 743
Less: Fair value of Zamsort (1,651)
Goodwill 671
---------
Goodwill has been allocated to Deferred exploration
If new information obtained within one year from the date of
acquisition about the facts and circumstances that existed at the
acquisition date identifies adjustments to the above amounts, or
any additional provisions that existed at the acquisition date, the
acquisition accounting will be revised.
Non-controlling interest
The non-controlling interest of Zamsort Limited at the date of
acquisition were measured at the fair value of these interests.
This fair value was estimated by the consideration offered by the
Company to acquire the controlling interest.
Impact of acquisitions on the results of the Group
The contribution to net loss of the Group was a loss of
GBP1,867,000 by Zamsort Limited. Group revenue includes GBPNil from
the operations of Zamsort.
If these businesses were acquired at the beginning of the
reporting period Group revenue would have been GBPNil, and loss for
the year from continuing operations would have been GBP895,000
more.
The directors of the Group consider these results to be
representative of the performance of the combined Group,
annualised, and provide a reference point for comparison against
periods in the future.
The financial statements of Zamsort Limited have been
consolidated to its year end of 31 December 2018, as it is
impractical to consolidate the balances as at 31 March 2019.
Between 1 January 2019 and 31 March 2019 Zamsort incurred
expenses of GBP393,000 and paid trade creditors GBP295,000 with
funds advanced by Arc Minerals Limited (GBP454,000) and the
minority shareholders (GBP234,000). As this expenditure was
material in value, the consolidated financial statements have been
adjusted to incorporate these transactions in accordance with IFRS
10 Consolidated Financial Statement.
15. Trade and other receivables
Group Group
2020 2019
Current trade and other receivables GBP 000's GBP 000's
------------------------------------- ---------- ----------
Other receivables 351 577
Loan Note - Casa sale 4,032 -
Prepayments - 13
Total 4,383 590
---------- ----------
Current trade and other receivables are all due within one year
of the balance sheet date.
All financial assets are held at amortised cost.
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivable mentioned above.
The Loan Note - Casa sale is secured by Casa shares which were
sold as discussed in Note 4 (d) (ii)
The carrying amounts of the Group's current and non-current
trade and other receivables are denominated in the following
currencies:
Group Group
2020 2019
Current trade and other receivables GBP 000's GBP 000's
------------------------------------- ---------- ----------
UK Pounds 160 427
US Dollars 4,032 163
Zambian Kwacha 191 -
Total 4,383 590
---------- ----------
16. Trade and other payables
Group Group
2020 2019
Current trade and other payables GBP 000's GBP 000's
--------------------------------------------- ---------- ----------
Trade payables, other payables and accruals 3,028 1,443
---------- ----------
3,028 1,443
---------- ----------
Included in trade and other payables are GBP 1,856,905 of
unsecured loan notes which are repayable within 12 months comprised
of
(i) USD 1.7M of unsecured convertible loan notes which carry an
interest rate of approximately 20% and are convertible at 4.5p
and
(ii) GBP 540,000 of 10% unsecured loan notes
On 15 May 2020 , USD 1.5M of the notes in (i) were converted to
79,426,868 shares.
The carrying values of trade and other payables are considered
to be a reasonable approximation of the fair value and are
considered by the Directors as payable within one year.
17. Share capital
Authorised GBP 000's
Unlimited ordinary shares -
of no par value
Number Nominal Average Gross Consideration
of shares value price per value
Called up, allotted, issued share GBP'000
and fully paid (pence)
----------------------------------- ------------ -------- ----------- --------------------
At 1 April 2017 82,134,987 -
------------ -------- ----------- --------------------
2.00 -
Financings for cash 151,666,667 - 3.00 3,700
Issued in relation to the
acquisition of
Casa Mining Limited 85,902,258 - 2.35 2,018
------------ -------- ----------- --------------------
As at 31 March 2018 319,703,912 - 5,718
------------ -------- ----------- --------------------
2.40 -
Financings for cash 223,625,025 - 4.50 6,759
Issued in relation to the
acquisition of
Casa Mining Limited 13,085,988 - 2.53 331
Issued in relation to the
acquisition of
Zamsort Limited 141,583,333 - 3.37 4,772
Issued to service providers
in lieu of fees 2,051,793 - 2.83 58
Issued to management in
lieu of fees 5,400,000 - 3.33 180
Issued pursuant to warrant
exercises 487,500 - 2.90 14
------------ -------- ----------- --------------------
As at 31 March 2019 705,937,551 12,114
------------ -------- ----------- --------------------
Issued in relation to the
acquisition of
5% of Zaco Investments
Limited 1,414,000 - 2.80 40
Issued under the Drill-for-Equity
Programme 14,746,970 - 2.80-4.78 535
Issued to creditors in
lieu of payment 9,116,165 - 3.10-3.82 291
Issued pursuant to warrant
exercises 6,712,811 - 2.00-2.80 152
------------ -------- ----------- --------------------
As at 31 March 2020 737,927,497 1,018
------------ -------- ----------- --------------------
Share issue costs in the amount of GBP215,618 were incurred in
the period and set off against the share premium account.
18. Share based payments and Warrants
Share Options
During the year the following share options were issued and
valued using the Black Scholes method:
Weighted Number Exercise Share Weighted Value
Avg Price price Avg (000s)
Price (pence) at grant Term **
(pence) (pence) (years)
1 April 2018 11.31 18,018,210 3.98 1,333
Expired - (1,812,097) - - - (350)
Granted 30 May
2018 - 12,900,000 4.50 3.40 5 211
Granted 12 June
2018 - 1,200,000 4.50 4.31 5 36
Granted 12 June
2018 - 2,500,000 7.00 4.31 5 68
Granted 29 October
2018 - 1,200,000 4.50 3.35 3 22
31 March 2019 7.93 34,006,113 3.97 1,320
1 April 2019 7.93 34,006,113 3.97 1,320
Expired - (200,000) - - - (609)
Granted 8 July
2019 - 15,240,002 4.50 2.35 4.25 263
Granted 22 November
2019 - 2,980,000 4.50 2.60 4.33 24
31 March 2020 3.62 52,026,115 3.44 998
Of the options granted in May 2018, 10.5M are subject to vesting
conditions linked to milestones. No other options are subject to
vesting conditions.
Options can be settled in cash and are typically granted for a
term between three and five years at the discretion of the Board of
Directors upon recommendation by the Remuneration Committee.
The weighted average exercise price of the options outstanding
at 31 March 2020 is 3.62 pence.
In the Black-Scholes model the key inputs for the options
granted in 2019 were Volatility as 65%, the Risk Free Interest Rate
as 0.88% and the dividend yield as 0%.
** Under IFRS 2 "Share-based Payments", the Company determines
the fair value of options issued to Directors, Employees and other
parties as remuneration and recognises the amount as an expense in
the Statement of Comprehensive Income with a corresponding increase
in equity.
The charge incurred during the year in relation to share based
payments was GBP287,000 (2019 GBP337,000).
Warrants
Grant Number Exercise Term Share
date Price (years) Price
(pence) at grant
pence
1 April 2018 10,975,000 2.00-5.50 0.1-2.61
1 April 2018 1,000,000 2.25 3.59 2.23
15 May 2018 4,666,667 2.40 1.13 3.01
15 May 2018 505,953 3.36 1.13 3.01
15 May 2018 2,000,000 6.00 1.13 3.01
16 May 2018 980,584 2.90 4.13 2.70
18 June 2018 4,620,000 6.00 1.22 4.245
1 October 2018 1,789,000 4.50 2.01 4.01
10 October 2018 44,400,014 6.50 2.53 3.65
31 October 2018 1,000,000 4.50 1.76 3.40
17 December 2018 2,041,094 3.20 2.22 2.95
19 February 2019 63,600,009 4.50 2.89 2.90
Exercised during
the year (487,500)
Expired during the
year (3,750,000)
TOTAL 31 March 2019 133,340,821 2.00-6.50 0.1-4.13
Weighted Average 5.01 2.49(i)
(1) Remaining term as at 31 March 2019
The charge incurred during the year in relation to warrants was
nil (201: nil).
Grant Number Exercise Term Share
date Price (years) Price
(pence) at grant
pence
1 April 2019 133,340,821 2.00-6.50 0.1-4.13
1 April 2019 550,176 2.55 4.00 2.525
3 May 2019 1,671,144 2.80 - 2.575
1 July 2019 10,000,000 4.50 2.25 3.100
4 December 2019 5,500,000 4.50 4.33 2.900
Exercised during
the year (6,712,811)
Expired during the
year (1,500,000)
TOTAL 31 March 2020 142,849,330 2.25-6.50 0.1-4.68
Weighted Average 5.52 1.60(i)
(2) Remaining term as at 31 March 2020
The charge incurred during the year in relation to warrants was
GBP84,000 (2019: nil).
19. Share premium
2020 2019
GBP 000s GBP 000s
------------------------------------------- --------- ---------
Opening Balance 50,222 38,324
Total Additions (see note 17 for details) 1,018 12,114
Share issue costs (9) (216)
As at 31 March 51,231 50,222
--------- ---------
See note 17 for a breakdown of share issues during the year.
20. Non-Controlling Interest (NCI)
Casa Zamsort Zaco Total
GBP 000s GBP 000s GBP 000s GBP 000s
------------------------------- --------- --------- --------- ---------
Balance at 1 April 2018 1,318 - - 1,318
Acquisition of 99.43% of
Casa Mining Ltd (1,204) - - (1,204)
Acquisition of 66% of Zamsort
Ltd - 582 - 582
As at 31 March 2019 114 582 - 696
--------- --------- --------- ---------
Disposal of 99.43% of Casa
Mining Ltd (114) - - (114)
Acquisition of 52.5% of
Zaco Investments Ltd - - 5 5
Investment by NCI in the
year - 309 - 309
As at 31 March 2020 - 891 5 896
--------- --------- --------- ---------
21. Financial instruments and capital risk management
Financial Risk Management
Financial Risk Factors
The Group's activities expose it to a variety of financial
risks: market risk (including foreign currency risk and price
risk), credit risk and liquidity risk. The Group's overall risk
management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the
Group's financial performance.
Risk management is carried out by the Board of Directors under
policies approved at Board meetings. The Board frequently discusses
principles for overall risk management including policies for
specific areas such as foreign exchange.
a) Market Risk
i) Foreign Exchange Risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the pound sterling, US Dollar and Zambian Kwacha.
Foreign exchange risk arises from recognised monetary assets and
liabilities, where they may be denominated in a currency that is
not the Group's functional currency. While the Zambian Kwacha has
depreciated 30% since 31 March 2019 the Kwacha risk is mitigated by
the fact that Zamsort would only have one month's cash requirement
on hand at any one time. Another significant risk in Zambia is a US
Dollar risk as the Shareholder Loan of our minority partner is
denominated in US Dollars. The Directors consider that, for the
time being, no hedging or other arrangements are necessary to
mitigate this risk.
On the assumption that all other variables were held constant,
and in respect of the Group and the Company's expenses the
potential impact of a 20% increase/decrease in the GBP:Kwacha
foreign exchange rate on the Group's loss for the year and on
equity is as follows:
Potential impact on Zambian kwacha expenses:
2020
Group
Increase/(decrease) in GBP:ZMK rate GBP 000's
--------------------------------------------- ----------
20% (153)
-20% 153
b) Credit Risk
Credit risk arises from cash and cash equivalents.
The Group considers the credit ratings of banks in which it
holds funds in order to reduce exposure to credit risk. The Group
will only keep its holdings of cash and cash equivalents with
institutions which have a minimum credit rating of 'A'.
The Group considers that it is not exposed to major
concentrations of credit risk.
The Group holds cash as a liquid resource to fund its
obligations. The Group's cash balances are held primarily in
Sterling. The Group's strategy for managing cash is to assess
opportunity for interest income whilst ensuring cash is available
to match the profile of the Group's expenditure. This is achieved
by regular monitoring of interest rates and monthly review of
expenditure forecasts. Short term interest rates on deposits have
for the fiscal year been very unattractive.
The Group has a policy of not hedging and therefore takes market
rates in respect of foreign exchange risk; however, it does review
its currency exposures on an ad hoc basis. Currency exposures
relating to monetary assets held by foreign operations are included
within the foreign exchange reserve in the Group Balance Sheet.
The currency profile of the Group's cash and cash equivalent is
as follows:
2020 2019
Cash and cash equivalents GBP 000's GBP 000's
--------------------------- ---------- ----------
Sterling 66 1,196
US Dollars 103 30
---------- ----------
At end of year 169 1,226
---------- ----------
On the assumption that all other variables were held constant,
and in respect of the Group's cash position, the potential impact
of a 20% increase in the GBP:USD foreign exchange rate would not
have a material impact on the Group's cash position and as such is
not disclosed.
c) Liquidity Risk
To date the Group has relied upon equity funding to finance
operations. The Directors are confident that adequate funding will
be forthcoming with which to finance operations. Controls over
expenditure are carefully managed.
The Group ensures that its liquidity is maintained by a
management process which includes projecting cash flows and
considering the level of liquid assets in relation thereto,
monitoring Balance Sheet liquidity and maintaining funding sources
and back-up facilities.
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets.
Level 2: other techniques for which all inputs that have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques that use inputs that have a significant
effect on the recorded fair value that are not based on observable
market such as industry knowledge and experience of the
Directors.
The movement in the levels during the year to 31 March 2018 are
attributable to the changes in ownership status during the period
and any additional equity purchases or fair value adjustments
required as a result.
Capital Risk Management
The Group's objectives when managing capital are to safeguard
the Group's ability to position as a going concern and to continue
its exploration and evaluation activities. The Group has capital,
defined as the total equity and reserves of the Group, of GBP
5,682,000 (2019: GBP29,957,000).
The Group monitors its level of cash resources available against
future planned exploration and evaluation activities and issues new
shares in order to raise further funds from time to time.
22. Commitments
Operating leases
There are no operating leases.
Exploration commitments
Ongoing exploration expenditure is required to maintain title to
the Group's mineral exploration permits. No provision has been made
in the Group financial statements for these amounts as the
expenditure is expected to be fulfilled in the normal course of the
operations of the Group.
23. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. There were no other transactions with
related parties, except as disclosed below:
Zaco Acquisition
After its acquisition of 37.5% of Zaco Limited, the Company was
offered a further 5% at the same proforma cost, US$ 50,000. At the
time the Company was focused on financing its 5,800m Kalaba drill
program. Nicholas von Schirnding offered to make the purchase on
behalf of the Company. The Board accepted his offer and Mr von
Schirnding purchased the 5% block with the expectation that the
Company would purchase it from him when financial conditions
permitted. The 5% Zaco interest was subsequently purchased at a
cost of US$55,000 including a financing charge.
In July 2019, Arc further consolidated its interest in the Zaco
license from 42.5% to 47.5%. The additional 5% was acquired from
Limehouse Capital Ltd, a company that is wholly owned by Rémy
Welschinger, a director of the Company, for a consideration of USD
50,000 payable as 1.414m shares in Arc (GBP39,592).
In November 2019, Arc further consolidated its interest in the
Zaco license from 47.5% to 52.5%. The additional 5% was acquired
from Mr Mumena Mushinge, a director of the Company, for a
consideration of USD 37,500 (GBP29,173) payable in cash.
In May 2020, Arc further consolidated its interest in the Zaco
license from 52.5% to 72.5%. The additional 20% was acquired from
Mr Mumena Mushinge, a director of the Company, for a consideration
of 10 million shares in Arc (GBP175,000).
Remuneration of Key Management Personnel
The remuneration of the Directors and PDMRs is set out in note
8.
Of the amounts set out in note 8:
GBP36,000 (2019 - GBP35,000) was paid to Gemstar a Personal
Services Company ("PSC") owned by Brian McMaster.
GBP88,000 (2019 - GBP55,000) was paid to VC Resources Ltd, a PSC
owned by Vassilios Carellas.
GBP56,000 (2019 - GBP94,000) was paid to Logwood Financial
Services, a PSC owned by John Forrest
GBP36,000 (2019 - GBP30,000 and 2.5M options) was paid to a PSC
owned by Don Bailey
A relative of Rémy Welschinger made a loan of EUR250k (GBP213k)
to the Company which is unsecured and repayable with 10% interest
on due for repayment 30 December 2020. Of this amount, EUR62.5k
including interest of EUR6.25k (total GBP61k) was converted to
equity as part of the Company's placing in May 2020, as
announced.
24. Contingent liability
Zamsort Limited is named in a lawsuit before the High Court in
Zambia for USD 265,000 of damages pertaining to a discussion
involving the former owners of Zamsort and a third party held in
2014. Legal advisors to Zamsort have advised that the claim is
without merit. A bond has been deposited with the court and is
included in current assets. The amount of the bond is 2.8M Zambian
Kwacha (GBP 125k), approximately 50% of the damages claimed.
25. Ultimate controlling party
There is no ultimate controlling party in the opinion of the
Board.
26. Events after the reporting period
In May 2020, Arc further consolidated its interest in the Zaco
license from 52.5% to 72.5%. The additional 20% was acquired from
Mr Mumena Mushinge, a director of the company, for a consideration
of 10 million shares in Arc.
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END
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October 12, 2020 11:34 ET (15:34 GMT)
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