TIDMEST
RNS Number : 6748F
East Star Resources PLC
23 March 2022
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23 March 2022
East Star Resources Plc
("East Star" or the "Company")
Final Results
East Star Resources Plc (LSE:EST), the Kazakhstan-focused gold
and copper explorer, announces its results for the period from
incorporation on 17 November 2020 to 30 November 2021. The Annual
Report and Financial Statements will be posted to shareholders in
due course and are available on the Company's website at
www.eaststarplc.com .
Highlights
-- Admitted to the Main Market of London Stock Exchange on 4 May
2021, raising gross proceeds of GBP2 million
-- Announced on 19 July 2021 an agreement to acquire Discovery
Ventures Kazakhstan ("DVK") by way of a reverse takeover
Post Period End Developments
-- Re-listed as a Kazakhstan focused gold and copper explorer on
10 January 2022 following completion of the acquisition of DVK and
an oversubscribed fundraising of GBP3.1 million
o DVK holds four mineral exploration licences in two producing
mineral belts in an 80/20 joint venture with the state mining
company
-- Alex Walker, CEO of DVK, appointed Director and CEO of the
Company (based full time in Kazakhstan) and David Minchin appointed
Director of the Company concurrent with the re-listing
-- Charles Wood stood down as Director of the Company concurrent with the re-listing
-- Announced on 26 January 2022 the first batch of assay results
from RC drilling in September 2021 on the Apmintas Licence - showed
outstanding high-grade intersections including a "discovery hole"
at the first drill target at "Novoe" which returned 63 metres at
4.51 g/t
-- Announced on 3 February 2022 historic data which added a new
target, 'Southern Shabdar', to the 2022 drill campaign
-- Announced on 4 February 2022 the award of a diamond drilling
contract for 5,000 metres of drilling in 2022 focused initially on
the Apmintas and Dalny Licences in the Chu-Ili belt
-- Announced on 7 March 2022 the completion of processing of 481
square kilometres of close spaced drone magnetics flown in
September 2021 over the Dalny Licence resulting in 11 target areas
prospective for gold mineralisation being identified
-- Announced on 8 March 2022 historical drill results acquired
over the "Eshkilitau II" target on the Apmintas Licence resulting
in the target being added to the 2022 drill programme
Sandy Barblett, Non-executive Chairman, commented:
"2021 saw the Company's shares being admitted to the London
Stock Exchange Main Market. Shortly after the listing, we secured
an agreement to acquire DVK, a company which has secured highly
prospective licences in Kazakhstan - a country which has ideal
conditions for mining.
The Board believes that 2022 will be a year of significant
growth for the Company as we look to advance our strategy and
create value for shareholders.
I would like to thank Alex Walker and his senior management team
based in Almaty and my fellow Board members and our shareholders
for their support as we travel on this exciting journey of building
this unique opportunity into a profitable company."
For further information visit the Company's website at
www.eaststarplc.com , or contact:
East Star Resources Plc
Alex Walker, Chief Executive Officer
Tel: +44 (0)20 7390 0234 (via Vigo Consulting)
Peterhouse Capital Limited (Corporate Broker)
Duncan Vasey / Lucy Williams
Tel: +44 (0) 20 7469 0930
Vigo Consulting (Investor Relations)
Ben Simons / Oliver Clark
Tel: +44 (0)20 7390 0234
About East Star Resources Plc
East Star Resources is focused on the discovery and development
of gold, copper, and base metal deposits in Kazakhstan. With an
initial four licences covering 1,432 km(2) in two mineral rich
belts, East Star is undertaking an intensive exploration programme,
applying modern geophysics to discover gold, copper, and base
metals in levels that were not previously explored. The Company
also intends to expand its licence portfolio in Kazakhstan. East
Star's management are based permanently on the ground, supported by
local expertise, and a joint venture with the state mining
company.
Follow us on social media:
LinkedIn:
https://www.linkedin.com/company/east-star-resources/
Twitter: https://twitter.com/EastStar_PLC
CHAIRMAN'S STATEMENT
I am pleased to present the financial statements for East Star
Resources plc (the "Company" or "East Star") for the period ended
30 November 2021.
In May 2021, East Star was admitted to trading on the main
market of the London Stock Exchange. In July 2021, the Company
announced that it had agreed to acquire Discovery Ventures
Kazakhstan Limited ("DVK"), a transaction that would see the
Company successfully re-list in January 2022, after the reporting
period end, as a Kazakhstan focused gold and copper explorer. We
are now delighted to present our first financial statements as the
relisted company.
DVK - now a wholly owned subsidiary of the Company, and the
Kazakhstan national mining company, Tau-Ken Samruk ("TKS"), have
formed a joint venture which initially covers four mineral
exploration licences (the "Licences") totalling more than 1,400
square kilometres, across two mineral districts, the Chu-Ili Belt,
with its endowment of orogenic and intrusion-related gold deposits,
and the Rudny Altai Belt, with world-class VMS deposits.
The Licences are currently held by TKS and the Company is in the
process of transferring them to two recently established Special
Purpose Vehicles ("SPVs"), Rudny Resources Ltd and Chu-Ili
Resources Ltd. DVK holds an 80 per cent. interest in the SPVs and
TKS holds a 20 per cent. interest.
Discovery Hole - First Drill Results from Apmintas Licence
On 26 January 2022, the Company announced the first batch of
assay results from reconnaissance Reverse Circulation (RC) drilling
undertaken in September 2021 on the Apmintas Licence in the Chu-Ili
Gold Belt in central Kazakhstan. The results showed outstanding
high-grade intersections including a "discovery hole" at the first
drill target at "Novoe" returning 63 meters at 4.51 g/t Au from
surface.
This and other data are currently being processed to determine
strike extent and direction and will be used in planning the
follow-up diamond drilling exploration expected to commence in Q2
2022.
On 3 February 2022, the Company announced the acquisition of
additional historic data which added a new target, 'Southern
Shabdar', to the 2022 drill campaign. The historical results
included:
o 24.9m @ 2.86 g/t Au
o 8.2m @ 13.0 g/t Au
o 5m @ 4.89 g/t Au from 53m
o 1m @ 24.8 g/t Au from 15m and 2m @ 39.3 g/t Au from 28m;
and
o 2m @ 39 g/t Au from 275m downhole
On 4 February 2022, the Company announced the award of a diamond
drilling contract to IG Copper and Gold Kazakhstan ("IGKZ") for
5,000 metres of drilling in 2022 focused initially on the Apmintas
and Dalny Licences in the Chu-Ili orogenic gold belt of central
Kazakhstan.
IGKZ is a wholly owned subsidiary of IG Global Group (IGG),
which holds direct and indirect interests in companies that
specialise in various disciplines across the spectrum of the mining
industry including mineral exploration, drilling, and mine
development.
On 7 March 2022, the Company announced the completion of
processing of 481 square kilometres of close spaced drone magnetics
flown in September 2021 over the Dalny Licence.
This has resulted in 11 target areas prospective for gold
mineralisation being identified along structurally prospective
sections of the first-order, deep-crustal faults totalling more
than 50km of strike. New targets have also been identified beneath
alluvial cover indicating the potential for sub cropping gold
mineralisation not previously identified in historic exploration.
The results widely confirm the Company's approach to the Chu-Ili
gold belt as a primary target for orogenic gold deposits in
addition to the traditional intrusion-related gold systems and
shale hosted gold deposits which have been seen to be repeated
consistently along the belt.
On 8 March 2022, the Company announced that historical drill
results acquired over the "Eshkilitau II" target on the Apmintas
Licence have led to "Eshkilitau II" being added as another target
for the 2022 drill programme.
Strategy
The Company is focused on identifying and developing gold and
base metals projects in prospective regions of Kazakhstan. The
Company's strategy is built on three main pillars:
-- Identify highly prospective exploration ground and
brownfields projects in known mineral districts with demonstrated
historical exploration success and limited application of modern
exploration techniques.
-- Develop proven and out-of-the-box concepts for potential
mineral targets and efficiently conduct exploration by application
of state-of-the-art methods and equipment.
-- Partner with existing companies via joint venture or farm-in.
Kazakhstan
The Board is especially pleased with the support from all our
stakeholders given the prevailing conditions in Kazakhstan at the
time of the Company's January 2022 relisting. We are pleased that
the tensions subsided within days and the Government of Kazakhstan
has since continued to demonstrate its ongoing commitment to
protecting foreign investor interests, reiterating that Kazakhstan
is still very much a place to do business.
We believe equally now in doing business in Kazakhstan as we did
when we first reviewed the prospectivity of the region and the
projects which the Company acquired due to the rich mineral
endowment of the country and its relatively low level of
exploration in comparison with other major mining jurisdictions.
The Company believes that the potential for making significant
commercial mineral discoveries is favourable through the
application of modern exploration methods.
Summary
The Board believes that 2022 will be a year of significant
growth for the Company as we look to advance our strategy and
create value for shareholders.
I would like to thank Alex Walker and his senior management team
based in Almaty and my fellow Board members and our shareholders
for their support as we travel this exciting journey of building
this unique opportunity into a profitable company.
Financial Overview
Funding
The Company is funded through investment from its shareholders,
having successfully raised gross proceeds of GBP2 million as part
of the initial listing on the London Stock Exchange ("LSE") on 5
May 2021 and subsequent to period end, raised additional gross
proceeds of GBP3.1 million following the re-admission to the LSE on
10 January 2022.
Revenue
Being an exploration company, East Star generated no revenue
during the year, but is focussing on the DVK assets or other
acquisition targets that we believe will generate revenue for the
Company in the future.
Expenditure
During the period, the Company completed its initial public
listing on the LSE and announced the acquisition of DVK, which was
completed post period end. Expenditure during the period was
focussed on the re-admission process and, following re-admission,
the Company has focussed its efforts and expenditure on progressing
its acquired projects and other potential acquisitions in line with
its strategy.
Liquidity, cash and cash equivalents
At 30 November 2021, the Company held GBP1.2 million, which is
all denominated in pounds Sterling, and added gross proceeds of
GBP3.1 million subsequent to period end following its successful
re-admission to the LSE.
Dividend
The Directors do not intend to declare a dividend in respect of
the period under review.
Sandy Barblett
Non-Executive Chairman
22 March 2022
STRATEGIC REPORT
Fair review of the business
The Company was incorporated on 17 November 2020 with a view to
undertake an acquisition of a target company or business within the
natural resources, exploration, development and production
sectors.
To enable to Company to pursue its principal activities, it
pursued an Initial Public Offering ("IPO") of its securities onto
the London Stock Exchange through a Standard Listing to raise the
necessary funds required for the execution of the business
strategy. The IPO was successfully completed during the period, and
the Company's shares were admitted for trading on 4 May 2021.
Following admission, the Company focused on its strategy of
identifying acquisition opportunities within the natural resources
exploration, development and production sector in Central Asia,
culminating in the announcement on 19 July 2021 that the Company
had entered into binding Heads of Terms to acquire 100% of the
share capital by way of a reverse takeover of Discovery Ventures
Kazakhstan Limited ("DVK"), a private Kazakhstan registered
company. DVK has negotiated the rights to certain prospective gold
and base metals exploration licences in the Chu-ili and Rudny Altai
mineral belts through a joint venture agreement with Kazakhstan
National Mining Company, Tau-Ken Samruk JSC.
The successful re-admission of the enlarged group took place on
10 January 2022.
Principal risks and uncertainties
There are a number of risks associated with newly listed
entities focused in the natural resources sector, especially in
Central Asia. The Board regularly reviews the risks to which the
Company is exposed and endeavours to minimise them as far as
possible.
The following summary, which is not exhaustive, outlines some of
the risks and uncertainties the Company may be exposed to:
Geopolitical
We all witnessed the unrest in January 2022 in Kazakhstan which
was quashed within days and the Government of Kazakhstan has since
demonstrated its ongoing commitment to protecting foreign investor
interests, reiterating that Kazakhstan is still very much a place
to do business.
In addition, the invasion by Russia into Ukraine is being
watched carefully as Kazakhstan shares a border with Russia. The
Kazakhstan President Kassym-Jomart Tokayev has been in dialogue
with both the Presidents of Ukraine and Russia since the start of
the invasion.
No operating history
The Company is a newly formed entity with no operating history
other than the successful admission to the London Stock Exchange
which was completed during the period with the re-admission of the
enlarged group taking place on 10 January 2022 with the acquisition
of DVK.
Risk Inherent in an Acquisition
Although the Company and the Directors will evaluate the risks
inherent in a particular target, they cannot offer any further
assurance that all of the significant risk factors can be
identified or properly assessed. Furthermore, no assurance can be
made that an investment in Ordinary Shares in the Company will
ultimately prove to be more favourable to investors then a direct
investment, if such an opportunity were available, in a target
business.
Exploration and development risks
Following the Company's acquisition in the natural resources
sector subsequent to period end, it is likely to be subject to a
high degree of risk as mineral exploration and development can be
highly speculative. The economics of developing mineral properties
are affected by many factors including the cost of operations,
variations of the grade of ore mined, fluctuations in the price of
the minerals being mined, fluctuations in exchange rates, costs of
development, infrastructure and processing equipment and such other
factors as government regulations, including regulations relating
to royalties, allowable production, importing and exporting of
minerals and environmental protection.
In addition, the grade of mineralisation ultimately mined may
differ from that indicated by drilling results and such differences
could be material. As a result of these uncertainties, there can be
no guarantee that mineral exploration and development of any of the
Company's investments will result in profitable commercial
operations.
Industry-specific risks
The Directors intend to focus on acquisition opportunities in
the natural resources sector (but the Company shall not be limited
to such sector). The natural resources sector is inherently tied to
the performance of the global economy and, in particular,
fluctuations in the price of global commodities. As a result,
segments of the natural resources sectors (or even the sector as a
whole) could be affected by changes in general economic activity
levels and others changes which are beyond the Company's control.
The revenues and earnings of the acquired business will rely on
commodities' prices, which may determine the value of that business
at the time of intended divestment of an investment by the Company.
The Company will be unable to control the prices for commodities,
which may adversely affect the Company's business, results of
operations, financial condition or prospects.
COVID-19
The impact of COVID-19 has had a materially adverse effect on
the global economy and overall business sentiment, which has the
potential to negatively impact the demand and price for gold and
base metals and have an impact on the financial position and
prospects of the Company. Since the outbreak of COVID-19, however,
despite falls in the copper and gold price during the peak of the
pandemic, at present the demand for gold and copper is emerging
strongly particularly due to increased demand from China and
COVID-19 related reductions in the mineral supply.
Section 172 Statement
Section 172 of the Companies Act 2006 requires Directors to take
into consideration the interests of stakeholders and other matters
in their decision making. The Directors continue to have regard to
the interests of the Company's employees and other stakeholders,
the impact of its activities on the community, the environment and
the Company's reputation for good business conduct, when making
decisions. In this context, acting in good faith and fairly, the
Directors consider what is most likely to promote the success of
the Company for its members in the long term. We explain in this
annual report, and reference below, how the Board engages with
stakeholders.
We aim to work responsibly with our stakeholders, including
suppliers. The key Board decisions made during the period and post
period end are set out below:
Significant events Key s172 matter(s) Actions and Steps
/ decisions affected
Entering into an agreement Shareholders and business Completion of the
to acquire the enlarged relationships RTO and re-admission
share capital of Discovery of the enlarged share
Ventures Kazakhstan capital to the London
through a Reverse Stock Exchange leading
Takeover transaction to greater likely
("RTO"). outcomes for shareholders
in the future.
-------------------------- ---------------------------
Key performance indicators
Appropriate key performance indicators will be identified in due
course as the business strategy is implemented.
Gender analysis
A split of our employees and directors by gender during the year
is shown below:
Male Female
Directors 3 nil
As the Company is only in its infancy employee gender is skewed
completely towards males. This does not reflect the attitudes of
the Company in anyway and the directors will look to promote
females in the workforce wherever possible.
Corporate social responsibility
We aim to conduct our business with honesty, integrity and
openness, respecting human rights and the interests of our
shareholders and employees. We aim to provide timely, regular and
reliable information on the business to all our shareholders and
conduct our operations to the highest standards.
Greenhouse Gas (GHG) Emissions
The Company is aware that it needs to measure its operational
carbon footprint in order to limit and control its environmental
impact. However, given the very limited nature of its operations
during the period, it has not been practical to measure its carbon
footprint. In the future, the Company will only measure the impact
of its direct activities, as the full impact of the entire supply
chain of its suppliers cannot be measured practically.
The Company has started early stage discussions with experts in
the measurement of GHG at our mining exploration properties post
period end and will have further discussions as we progress during
this year's drilling season.
The Company has not made separate disclosures relating to energy
consumption & efficiency as the entity consumed less than
40,000 kWh of energy during the period.
Health and Safety
We strive to create a safe and healthy working environment for
the wellbeing of our staff and create a trusting and respectful
environment, where all members of staff are encouraged to feel
responsible for the reputation and performance of the Company. We
aim to establish a diverse and dynamic workforce with team players
who have the experience and knowledge of the business operations
and markets in which we operate. Through maintaining good
communications, members of staff are encouraged to realise the
objectives of the Company and their own potential.
Sandy Barblett
Non-Executive Chairman
22 March 2022
KEY PERSONNEL
The only employees in the Company are the Directors, who are all
considered to be key management personnel.
Charles Wood, Age 47 - Non-Executive Director & Chairman
Charles Wood is an experienced capital markets professional with
20 years expertise in the management and financing of growth
companies internationally. He holds a Bachelor of Commerce and is a
fellow of the Financial Services Institute of Australasia (FINSIA).
Mr. Wood is a Partner of London based Corporate Finance boutique,
Orana Corporate LLP. He has considerable experience with both ASX
and AIM listed companies. He has held and holds a number of
Executive and Non-Executive roles in in public and private
businesses providing corporate finance, business development and
strategic advice.
Anthony Eastman, Age 47 - Non-Executive Director
Anthony Eastman is a member of the CAANZ and ICAEW and a Partner
at Orana Corporate LLP. Mr. Eastman has a number of years'
experience in financial management and corporate advisory services,
primarily in the natural resources sector, along with extensive
experience in the public company environment, having been a
director and company secretary of a number of ASX and UK listed
junior mining and oil & gas focused companies. He has
previously worked with Ernst & Young and CalEnergy Gas Ltd, a
subsidiary of the Berkshire Hathaway Group of Companies in both
Australia and the United Kingdom
Alexander ("Sandy") Barblett, Age 54 - Non-Executive
Director
Sandy Barblett has over 20 years' experience working with
private and public listed international companies. He sits as a
director and advises companies both private and listed on AIM and
the ASX in relation to raising private equity and general fund
raising, admission onto public markets, strategy and management
selection. Additionally, he has previously held senior leadership
roles within the technology sector, most notably with former FTSE
250 company Pace Plc.
Mr. Barblett has a Bachelor of Business from Curtin University
of Technology in Perth, Australia and a Bachelor of Law from the
University of Queensland; he previously worked for Minter Ellison
as a solicitor
Board Composition Subsequent to Year End
On re-admission to the London Stock Exchange on 10 January 2022
Charles Wood resigned as a non-executive director and chairman.
Simultaneously Mr Alexander Walker and Mr David Minchin joined the
board as Chief Executive Officer ("CEO") and non-executive director
respectively.
Alexander Walker, Age 37 - Chief Executive Officer
Alex Walker is an investment banker and resources executive with
more than 14 years' experience in natural resources investment with
Norwegian Bank, Pareto Securities, London-based investment bank,
Brandon Hill Capital and Australian broking firm Patersons
Securities. Mr. Walker co-founded and was the General Manager of
ScandiVanadium Ltd. He was also involved in the process of listing
ScandiVanadium Ltd on the Australian Securities Exchange. Mr.
Walker holds a MSc in Mineral and Energy Economics from Curtin
University of Technology, Graduate Diploma of Applied Finance,
BComm, BSocSci, and is a Graduate of the Australian Institute of
Company Directors.
David Minchin, Age 40 - Non-Executive Director
David Minchin is a geologist with over 15 years' experience in
production, exploration, and resource investment. Mr. Minchin has
worked for Rio Tinto and the British Geological Survey, as well
working as Senior Exploration Geologist for ICL-Boulby where he was
closely involved in the discovery of the 3.2 billion tonne
polyhalite deposit that was subsequently put into production and
extended operating mine life by over 30 years. Mr. Minchin has
worked as Director of Geology for AMED Funds, a London based
private equity group that focuses on exploration projects in
Africa. In this role, Mr. Minchin was part of the team responsible
for investing and monitoring approximately USD 450 million in
projects from exploration through to feasibility and across a range
of commodities. Mr. Minchin is currently CEO of Helium One Global
Limited, an AIM quoted company developing a significant primary
helium project in Tanzania and was formerly Managing Director of
ASX-listed ScandiVanadium.
DIRECTORS' REPORT
The directors present their report and financial statements for
the period ended 30 November 2021.
Principal activities
The Company was incorporated on 17(th) November 2020 under the
name Cawmed Resources Limited before changing its name to East Star
Resources Limited on 27 January 2021. The Company later registered
as a public limited company ("plc") on 3 March 2021. The principal
activity of the Company is that of identifying potential companies,
businesses or asset/(s) that have operations in the natural
resources exploration, development and production sector.
As alluded to in the strategic report above, in pursuing its
principal activities, the Company successfully completed the
acquisition of the entire enlarged share capital of DVK subsequent
to period end on 10 January 2022. Further details of this
transaction can be found at Note 21 in the notes accompanying the
financial statements.
Results
The Company recorded a loss for the period ended 30 November
2021 before taxation of GBP421,212.
Directors
The following directors have held office during the period and
to the date of these financial statements:
Charles Wood (appointed 17 November 2020) (resigned 10 January
2022)
Sandy Barblett (appointed 26 January 2021)
Anthony Eastman (appointed 26 January 2021)
Alexander Walker (appointed 10 January 2022)
David Minchin (appointed 10 January 2022)
Details of the Directors' holding of Ordinary Shares and
Warrants are set out in the Director's Remuneration Report.
Financial Risk & Management
The overall objective of the Board is to set policies that seek
to reduce risk as far as practical without unduly affecting the
Company's competitiveness and flexibility. Further details
regarding these policies can be referenced in Note 16.
Share Capital
Details of the Company's issued share capital, together with
details of the movements since incorporation, are shown in Note 14.
The Company has one class of Ordinary Share, and all shares have
equal voting rights and rank pari passu for the distribution of
dividends and repayment of capital.
Substantial Shareholdings
At 10 March 2022, the Company had been informed of the following
substantial interests over 3% of the issued share capital of the
Company:
Number of Shares Percentage Holding
------------------------------------------- ----------------- -------------------
JIM Nominees Limited 53,723,315 29.48
P H Nominees Limited 20,100,956 11.03
Pershing Nominees Limited 10,996,833 6.03
Thomas Grant and Company Nominees Limited 10,917,563 5.99
Reedbuck Nominees Pty Ltd 9,762,261 5.36
JIM Nominees Limited 8,792,400 4.82
Corporate Governance Statement
As a company being admitted to the Standard Segment of the
Official List, the Company is not required to comply with the
provisions of the UK Corporate Governance Code. Nevertheless, the
Directors are committed to ensuring that appropriate standards of
corporate governance are maintained, so far as is appropriate given
the Enlarged Group's current stage of development, the size and
composition of the Main Board and available resources. The Board
will aim to comply with the QCA Guidelines on Corporate Governance
("QCA Guidelines").
The Company complies with the QCA guidelines in all areas apart
from a slight deviation relating to Principle 7 (evaluate board
performance based on clear objectives). Given the size and nature
of the Company the Board does not consider it appropriate to have a
formal performance evaluation procedure in place for Non-Executive
Directors. The Board will closely monitor the need for formal
performance evaluation, in light of Principle 7 of the QCA Code, as
the Company develops.
The Board holds regular scheduled and other timely board
meetings as needs arise which require the attention of the
Directors. From the Company's IPO, the Board have been responsible
for the management of the business of the Company, setting the
strategic direction of the Company and establishing the policies of
the Company. It is the Board's responsibility to oversee the
financial position of the Company and monitor the business and
affairs of the Company, on behalf of the Shareholders to whom they
are accountable. Following the acquisition of DVK subsequent to
period end, these responsibilities have been expanded to include
the Enlarged Group.
The primary duty of the Board is to act in the best interests of
the Company at all times. The Board will also address issues
relating to internal control and the Enlarged Group's approach to
risk management and has formally adopted an anti-corruption and
bribery policy.
Board of Directors
For the period from incorporation to 30 November 2021 the Board
consisted of a non-executive Chairman and two non-executive
Directors. The Directors met regularly throughout the year to
discuss key issues and to monitor the overall performance of the
Company.
The Board has established an Audit Committee and a Remuneration
Committee effective from re-admission, with such committees having
formally delegated duties and responsibilities. Given the size and
structure of the current Board, it has been determined that the
Company it is not necessary to delegate the function of the
nomination of Directors and senior managers to a separate
nomination committee.
The Directors will actively seek to expand Board membership to
provide additional levels of corporate governance procedures at the
relevant opportunity and appointed Chief Executive Officer Mr Alex
Walker and Non-Executive Director David Minchin effective from
re-admission on 10(th) January 2022 to strengthen the board.
Audit Committee
For the period to 30 November 2021 there was no audit committee
in place. From re-admission the Company put in place an audit
committee comprising three members, being, Anthony Eastman (as
Chair), Sandy Barblett and Alex walker which will have primary
responsibility for monitoring the quality of internal control and
ensuring that the financial performance of the Enlarged Group is
properly measured and reported on and for reviewing reports from
the Company's auditors relating to the Enlarged Group's accounting
and internal controls.
The committee is also responsible for making recommendations to
the Board on the appointment of auditors and the audit fee and for
ensuring that the financial performance of the Enlarged Group is
properly monitored and reported. The audit committee will meet not
less than three times a year.
Remuneration Committee
For the period to 30 November 2021 there was no remuneration
committee in place. From re-admission the Company has instituted a
remuneration committee comprising two directors, Mr. Sandy Barblett
(as Chair) and Mr. Anthony Eastman, being responsible for both the
review and recommendation of the scale and structure of
remuneration for senior management. In reviewing the remuneration
policy of the Enlarged Group, this will include any bonus
arrangements or the award of share options with due regard to the
interests of the Shareholders and the performance of the Enlarged
Group.
The members of the committee shall serve for an initial term of
three years from re-admission, which will be extendable for a
maximum of two terms no longer than 3 years. The committee shall
meet at least twice per year.
Nominations Committee
As alluded to above no nominations committee has been
established will all matters to be considered by the Board as a
whole.
External Auditor
PKF Littlejohn were appointed auditors to the Company and have
expressed their willingness to remain in office. The Audit
Committee will meet with the auditor at least twice a year to
consider the results, internal procedures and controls and matters
raised by the auditor. The Board considers auditor independence and
objectivity and the effectiveness of the audit process. It also
considers the nature and extent of the non-audit services supplied
by the auditor reviewing the ratio of audit to non-audit fees and
ensures that an appropriate relationship is maintained between the
Company and its external auditor.
As part of the decision to recommend the appointment of the
external auditor, the Board considers the tenure of the auditor in
addition to the results of its review of the effectiveness of the
external auditor and considers whether there should be a full
tender process. There are no contractual obligations restricting
the Board's choice of external auditor. The Company has a policy of
controlling the provision of non-audit services by the external
auditor in order that their objectivity and independence are
safeguarded.
Internal financial control
Financial controls have been established so as to provide
safeguards against unauthorised use or disposition of the assets,
to maintain proper accounting records and to provide reliable
financial information for internal use.
Key financial controls include:
-- a schedule of matters reserved for the approval of the Board;
-- evaluation, approval procedures and risk assessment for acquisitions; and
-- close involvement of the Directors in the day-to-day operational matters of the Company.
Shareholder Communications
The Company uses a regulatory news service and its corporate
website (www.eaststarplc.com) to ensure that the latest
announcements, press releases and published financial information
are available to all shareholders and other interested parties.
The Annual General Meeting is used to communicate with both
institutional shareholders and private investors and all
shareholders are encouraged to participate. Separate resolutions
are proposed on each issue so that they can be given proper
consideration and there is a resolution to approve the Annual
Report and Financial Statements. The Company counts all proxy votes
and will indicate the level of proxies lodged on each resolution
after it has been dealt with by a show of hands.
Directors' Remuneration Report
Remuneration Policies (unaudited)
The remuneration policy of the Company was that pre initial
admission, there was nil remuneration for each Director, and then
from the date of initial admission, each Director shall be entitled
to a salary per annum from the date of Admission until the
completion of an acquisition.
Since re-admission subsequent to period end, a remuneration
committee has been appointed to reassess an appropriate level of
Directors' remuneration and it is envisaged that the remuneration
policy will assist to attract, retain and motivate Executive
Directors and senior management of a high calibre with a view to
encouraging commitment to the development of the Company and for
long term enhancement of shareholder value. The Board believes that
share ownership by Directors strengthens the link between their
personal interests and those of shareholders although there is no
formal shareholding policy in place.
The current Directors' remuneration comprises a basic fee and at
present, there is no bonus or long term incentive plan in operation
for the Directors.
Service contracts (unaudited)
The Directors entered into Service Agreements with the Company
and continue to be employed until terminated by the Company. In the
event of termination or loss of office the Director is entitled
only to payment of his basic salary in respect of his notice
period. In the event of termination or loss of office in the case
of a material breach of contract the Director is not entitled to
any further payment.
Each Director is paid at a rate per annum as follows:
Sandy Barblett GBP24,000 per annum
Anthony Eastman GBP24,000 per annum
Charles Wood GBP24,000 per annum
Approval by members (unaudited)
The remuneration policy above will be put before the members for
approval at the next Annual General Meeting.
Implementation Report
Particulars of Directors' Remuneration (audited)
Particulars of directors' remuneration, including directors'
warrants which, under the Companies Act 2006 are required to be
audited, are given in Note 15 and further referenced in the
Directors' report.
Remuneration paid to the Directors' during the year ended 30
November 2021 was:
Total
Base salary Pension Contribution
GBP GBP GBP
----------------- ------------ --------------------- -------
Sandy Barblett 14,000 - 14,000
Anthony Eastman 14,000 - 14,000
Charles Wood 14,000 - 14,000
------------ --------------------- -------
42,000 - 42,000
------------ --------------------- -------
There were no performance measures associated with any aspect of
the Director's remuneration during the period.
Payments to past Directors (audited)
There are no past Directors.
Payments for loss of office (audited)
There were no payments for loss of office.
Bonus and incentive plans (audited)
There were no bonus and incentive plans in place during the
period.
Political Donations
The Company did not make any donations to political parties in
the period.
Percentage change in the remuneration of the Chief Executive
(unaudited)
At period end the Company did not have a Chief Executive and as
such, no CEO disclosure has been presented.
Directors' interests in shares (audited)
The Company has no Director shareholder requirements.
The beneficial interest of the Directors in the Ordinary Share
Capital of the Company at 10 March 2022 were:
Ordinary Percentage of issued share capital 10 March 2022
Shares Performance shares %
------------------ ----------- --------------------- ---------------------------------------------------
Sandy Barblett 550,000 - 0.30
Anthony Eastman 500,000 - 0.27
Charles Wood 700,000 - 0.38
Alexander Walker 20,024,522 31,874,202 10.99
David Minchin 2,200,000 - 1.21
----------- --------------------- ---------------------------------------------------
23,974,522 - 13.15
----------- --------------------- ---------------------------------------------------
Performance Shares
Performance shares are yet to be issued. The performance
condition will be met and shares issued upon the confirmation of a
mineral resource on one of the Licences of one million ounces of
gold equivalent at an average grade of at least 2 grammes per tonne
of gold equivalent as defined by an independent professional firm
appointed by the Company to either JORC Code or NI 43-101
classification standards
The Directors held the following warrants at the end of the
period:
Granted during the As at Earliest date of Latest date of
Director period 10 Mar 2022 Exercise Price exercise exercise
----------------- --------------------- ------------- --------------- --------------------- ---------------------
Sandy Barblett 150,000 150,000 GBP0.05 4 May 2021 4 May 2023
Anthony Eastman 400,000 400,000 GBP0.05 4 May 2021 4 May 2023
Charles Wood 400,000 400,000 GBP0.05 4 May 2021 4 May 2023
David Minchin 2,000,000 2,000,000 GBP0.05 4 May 2021 4 May 2023
2,950,000 2,950,000
--------------------- -------------
The Directors held the following options at the date of this
report:
Options As at Date
Director Granted 10 Mar 2022 of grant Exercise Price
------------------ ---------- ------------- ------------ ---------------
Sandy Barblett 250,000 250,000 10 Jan 2022 GBP0.05
Alexander Walker 8,000,000 8,000,000 10 Jan 2022 GBP0.05
David Minchin 1,500,000 1,500,000 10 Jan 2022 GBP0.05
2,950,000 2,950,000
---------- -------------
The options above are only capable of being exercised upon the
satisfaction of certain vesting conditions detailed below:
1. one third of each option holders total options shall vest six
months from the date of Re-Admission;
2. a second third of each option holders total options shall
vest upon the Board of the Company determining (in its discretion
that) the share price of the Company has traded at a premium of 50
per cent. to the Fundraise Price (being GBP0.075 (7.5p)) for a
minimum of five consecutive trading days; and
3. the final remaining Options held by each option holder shall
vest upon the board of the Company determining (in its discretion
that) the share price of the Company has traded at a premium of 100
per cent. to the Fundraise Price (being GBP0.10 (10p)) for a
minimum of five consecutive trading days (each a Vesting Condition
and together the Vesting Conditions). Upon the achievement of a
Vesting Condition, the option holder shall be able to exercise the
vested options by no later than the fifth anniversary of the
relevant vesting date.
Interests of Employees
The Company's Corporate Governance Statement in this Annual
Report sets out (under board responsibilities) the processes in
place to safeguard the interests of employees.
Foster business relationships with suppliers, joint venture
partners and others
Potential suppliers and joint venture partners are considered in
the light of their suitability to comply with the Company's
policies.
Impact of operations on the community and environment
The Company has no current operations that impact upon the
community or environment, however upon a successful acquisition,
with ensure it reviews its Health, Safety & Environment ('HSE')
and other policies and works responsibly with suppliers, and
performance is monitored on an on-going basis.
Maintain a reputation for high standards of business conduct
The Corporate Governance section of this Annual Report sets out
the Board and Committee structures and extensive Board and
Committee meetings held during the year, together with the
experience of executive management and the Board and the Company's
policies and procedures.
Act fairly as between members of the Company
The Board takes feedback from a wide range of shareholders
(large and small) and endeavours at every opportunity to
pro-actively engage with all shareholders (via regular news
reporting-RNS) and engage with any specific shareholders in
response to particular queries they may have from time to time. The
Board considers that its key decisions during the year have
impacted equally on all members of the Company
Statement of directors' responsibilities
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable laws and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the company financial statements in accordance with
International Accounting Standards in conformity with the
requirements of Companies Act 2006. 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
company and the profit and loss of the company for that period.
In preparing the financial statements the Directors are required
to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and accounting estimates that are reasonable and prudent;
-- Ensure statements comply with International Accounting
Standards in conformity with the Companies Act 2006 for the period;
and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Company financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities
The financial statements are published on the Company's website
www.eaststarplc.com. The work carried out by the Auditor does not
involve consideration of the maintenance and integrity of this
website and accordingly, the Auditor accepts no responsibility for
any changes that have occurred to the financial statements since
they were initially presented on the website. Visitors to the
website need to be aware that
legislation in the United Kingdom covering the preparation and
dissemination of the financial statements may differ from
legislation in their jurisdiction.
Disclosure and Transparency Rules
Details of the Company's share capital and warrants are given in
Notes 14 and 15 respectively. There are no restrictions on transfer
or limitations on the holding of the ordinary shares. None of the
shares carry any special rights with regard to the control of the
Company. There are no known arrangements under which the financial
rights are held by a person other than the holder and no known
agreements or restrictions on share transfers and voting rights. As
far as the Company is aware there are no persons with significant
direct or indirect holdings other than the Directors and other
significant shareholders. The provisions covering the appointment
and replacement of directors are contained in the Company's
articles, any changes to which require shareholder approval. There
are no significant agreements to which the Company is party that
take effect, alter or terminate upon a change of control following
a takeover bid and no agreements for compensation for loss of
office or employment that become effective as a result of such a
bid.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual Report
or a cross reference table indicating where the information is set
out. The Directors confirm that there are no disclosures required
in relation to Listing Rule 9.8.4.
Auditor Information
The Directors who held office at the date of approval of the
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
Auditor is unaware; and each Director has taken all the steps that
he ought to have taken as a Director to make himself aware of any
relevant audit information and to establish that the Company's
Auditor is aware of that information
Events after the reporting period
On 10 January 2022 the Company completed the acquisition of the
enlarged share capital of Discovery Ventures Kazakhstan Limited
("DVK"). Concurrently, the Company completed the placing of 38.05
million shares and received subscriptions for 23.95 million shares
which were issued at 5 pence per share raising GBP3.1 million for
the Company. The net proceeds received by the Company post
transaction amounted to approximately GBP2.6 million which will be
used primarily to continue and advance the exploration activities
of DVK on licenses as detailed in the work program of the
prospectus.
Effective from re-admission on 10 January, Mr. Charles Wood
stood down as a Director of the Company and he signed and delivered
a resignation letter to the Board. Mr. Alexander Walker and Mr.
David Minchin been appointed as Directors of the Company with
effect from re-admission. Alex Walker has been appointed as Chief
Executive Officer of the Company and Mr Minchin has taken up a
non-executive director role.
There are no other significant events of the Company subsequent
to year end.
Directors' Indemnity Provisions
The Company has implemented Directors and Officers Liability
Indemnity insurance.
Going concern
After making enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. Further details
are given in Note 2.2 to the Financial Statements. For this reason,
the Directors continue to adopt the going concern basis in
preparing the financial statements.
On behalf of the board
Sandy Barblett
Non-Executive Chairman
22 March 2022
INDEPENT AUDITORS REPORT
Opinion
We have audited the financial statements of East Star Resources
Plc (the 'company') for the period ended 30 November 2021 which
comprise the Statement of Comprehensive Income, the Statement of
Financial Position, the Statement of Changes in Equity, the
Statement of Cash Flows and notes to the financial statements,
including significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable
law and international accounting standards in conformity with the
requirements of the Companies Act 2006.
In our opinion, the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 30 November 2021 and of its loss for the period then
ended;
-- have been properly prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (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 company
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 public interest
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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the company's ability to
continue to adopt the going concern basis of accounting included a
review of the company's forecast financial information which covers
a period of at least 12 months from when the financial statements
are authorised for issue. Management judgements and estimates have
been challenged and agreed to supporting documentations, such as
the review of bank statements as at 02 March 2022, post year end
management accounts, and post year end RNS announcements. We have
further assessed the mathematical accuracy of the forecast and
compared these to performance of the group post year end. We also
assessed the budgets in line in with our understanding of the
entity and management plans. We have also considered the impact
acquisition of the Discovery Ventures Kazakhstan Ltd would have on
the forecast including consideration of minimum spend requirements
on licenses held by that entity. From the detailed going concern
review, we have concluded that the use of going concern assumption
is reasonable.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
company's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of
materiality. The quantitative and qualitative thresholds for
materiality determine the scope of our audit and the nature, timing
and extent of our audit procedures.
Overall materiality was set at GBP34,000 based on a benchmark of
2% of net assets. Net assets were used as the basis for calculating
materiality as the company is not yet revenue generating, and we
consider net assets to be the most significant determinant of the
group's financial position and performance used by shareholders. We
also determine a level of performance materiality which we use to
assess the extent of testing needed to reduce to an appropriately
low level the probability that the aggregate of uncorrected and
undetected misstatements exceed materiality for the financial
statements as a whole. Performance materiality was set at
GBP22,100, calculated based on 65% of overall materiality.
We have agreed with those charged with governance that we would
report any individual audit difference in excess of GBP1,700 as
well as differences below this threshold that, in our review,
warranted reporting on qualitative grounds.
Our approach to the audit
In designing our audit, we determined materiality, as above, and
assessed the risk of material misstatement in the financial
statements. We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure
of the company. We looked at areas requiring the directors to make
subjective judgements, for example in respect of treatment of
convertible loan notes (identified as a key audit matter) and
selection of accounting policies, compliance with accounting
policies and disclosure in accordance with IFRS, the Company's Act
2006 and the Listing rules (identified as a key audit matter), and
the consideration of future events that are inherently uncertain.
Other judgmental areas include the valuation of share-based
payments. We also addressed the risk of management override of
internal controls, including evaluating whether there was evidence
of bias by the directors that represented a risk of material
misstatements due to fraud. The Company's key accounting function
is based in the United Kingdom and our audit was performed by our
team in London with regular contact maintained with the company
throughout.
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 our scope addressed this matter
Key Audit Matter 1
-------------------------------------------------------------
Convertible Loan Notes Our work in this area included:
During the period East Star has * Obtaining details and supporting agreements from the
subscribed for four, 12-month convertible company regarding the nature of financing
loan notes (CLNs) of US$175,000 arrangements.
each issued by DVK, the proceeds
of which will be used to continue
exploration at the Projects. There * Critically reviewing and challenging where the
is a risk that CLNs are not accounted appropriate the accounting treatment against the
for correctly in line with IFRS. terms of the agreement.
* Checking the current treatment by the company is
correct including classification and accounting
entries.
* Vouching movements in these balances (drawdowns,
repayments, interest) to agreements, supporting
calculations and bank statements as applicable.
* Reviewing disclosures made in the financial
statements and ensure these are accurate and
complete.
Based on the audit procedures performed,
we noted that the management had
incorrect valued the convertible
loan notes at face value, rather
than the redemption value on initial
recognition. In line with the criteria
under IFRS 9, all financial instruments
need be measured at fair value
on initial recognition. The redemption
value of the loan notes is the
best estimate of the fair value
at initial recognition. This was
discussed with the management and
an adjustment was raised to value
the convertibles at redemption
value.
For subsequent recognition, financial
instruments can only be measured
at amortized cost if certain conditions
are met under IFRS 9, convertible
loans met both the conditions are
IFRS 9 hence are subsequently measured
at amortized cost.
No further issues were noted on
our review of the convertible loan
notes.
-------------------------------------------------------------
Key Audit Matter 2
-------------------------------------------------------------
Selection of accounting policies, Our work in this area included:
compliance with accounting policies * Carrying out a review of the accounting policies
and disclosure in accordance with adopted by the company and ensuring these are in line
IFRS, Company's Act and the Listing with the requirements of IFRS, the Company's Act 2006
rules. and the Listing rules.
As this is the first period that
the company is preparing its statutory
financial statements, there is * Checking that the accounting policies are fully
a risk in relation to selection disclosed in the statutory financial statements.
of accounting policies, compliance
with those accounting policies
and that disclosure of the said Based on the audit procedures performed,
accounting policies may not be nothing has come to our attention
in line with the requirements of that would indicate inadequate
IFRS, the Company's Act 2006 and disclosure in the Financial Statements
the Listing rules. or use of inappropriate accounting
policies.
-------------------------------------------------------------
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 contained within the annual report. Our opinion
on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
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 course of 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 this gives rise to a material misstatement in the financial
statements themselves. 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.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion the part of the directors' remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial period for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements and the part of the directors'
remuneration report to be audited are not in agreement with the
accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the 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 financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company 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.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- We obtained an understanding of the company and the sector in
which it operates to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial
statements. We obtained our understanding in this regard through
discussions with management and industry research.
-- We determined the principal laws and regulations relevant to
the company in this regard to be those arising from the Companies
Act 2006, Listing Rules, Disclosure and Transparency Rules,
Anti-Bribery Act and Anti Money Laundering Regulations.
-- We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by
the company with those laws and regulations. These procedures
included, but were not limited to:
o enquiries of management
o review of minutes
o review of RNS publications
-- We also identified the risks of material misstatement of the
financial statements due to fraud. Aside from the non-rebuttable
presumption of a risk of fraud arising from management override of
controls, we did not identify any significant fraud risks.
-- As in all of our audits, we addressed the risk of fraud
arising from management override of controls by performing audit
procedures which included, but were not limited to: the testing of
journals; reviewing accounting estimates for evidence of bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or
non-compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events and
transactions reflected in the financial statements, as we will be
less likely to become aware of instances of non-compliance. The
risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities .
This description forms part of our auditor's report.
Other matters which we are required to address
We were appointed by Board of Directors on 7(th) January 2022 to
audit the financial statements for the period ending 30 November
2021 and subsequent financial periods. Our total uninterrupted
period of engagement is one year, covering the period ending 30
November 2021
Prior to our appointment as auditors of the company, we provided
services to the company in relation to assisting with the PLC
conversion of the entity and professional services rendered in
respect of reporting accounting work during the period. No non
audit services were provided to the company following our
appointment as auditors.
We are satisfied that it does not meet the definition of
accounting services under the FRC Ethical Standard which would be
subject to an outright prohibition under the FRC Ethical Standard.
This is because they do not involve the maintenance of accounting
records nor do they involve the preparation of financial statements
or other subject matter.
Our safeguards in respect of this non-audit service have centred
on the fact that the partner connected to the PLC conversion and
reporting accountant work was not involved in the audit engagement
in any capacity. The service did not involve making any judgements
on behalf of the management. We confirm that this safeguard was
applied and that it enables us to conclude that our professional
judgement and our audit report are not affected by the provision of
the services listed above and we remain independent of the company
in conducting our audit.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Eric Hindson (Senior Statutory Auditor) 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Statutory Auditor London E14 4HD
22 March 2022
STATEMENT OF COMPREHENSIVE INCOME
Period ending
30 November 2021
Note GBP
Continuing Operations
------------------------------------------------------------------------------------------- ----- ------------------
Gross Profit -
------------------------------------------------------------------------------------------- ----- ------------------
Administrative expenses 4 (518,600)
Other operating income -
Operating loss (518,600)
------------------------------------------------------------------------------------------- ----- ------------------
Finance Income 5 76,661
----- ------------------
Loss before taxation (441,939)
------------------------------------------------------------------------------------------- ----- ------------------
Taxation on loss of ordinary activities 8 -
------------------------------------------------------------------------------------------- ----- ------------------
Loss for the year from continuing operations (441,939)
------------------------------------------------------------------------------------------- ----- ------------------
Other comprehensive income 20,727
Total comprehensive loss for the year attributable to shareholders from continuing
operations (421,212)
------------------------------------------------------------------------------------------- ----- ------------------
Basic & dilutive earnings per share - pence 9 (0.92)
The statement of comprehensive income has been prepared on the
basis that all operations are continuing operations.
STATEMENT OF FINANCIAL POSITION
As at 30 November 2021
Note GBP
CURRENT ASSETS
Cash and cash equivalents 10 1,248,420
Trade and other receivables 11 71,448
Loan notes 12 608,465
Other current assets 9,902
TOTAL CURRENT ASSETS 1,938,235
----------------------------- ----- -----------------------
TOTAL ASSETS 1,938,235
----------------------------- ----- -----------------------
EQUITY
Share capital 14 695,402
Share premium account 14 1,500,868
Share based payment reserve 15 24,063
Retained Earnings (421,212)
TOTAL EQUITY 1,799,121
----------------------------- ----- -----------------------
CURRENT LIABILITIES
Trade and other payables 13 139,114
TOTAL CURRENT LIABILITIES 139,114
----------------------------- ----- -----------------------
TOTAL LIABILITIES 139,114
----------------------------- ----- -----------------------
TOTAL EQUITY AND LIABILITIES 1,938,235
==================================== =======================
The financial statements were approved by the board on 22 March
2022 by:
Anthony Eastman
Non-executive Director
22 March 2022
STATEMENT OF CHANGES IN EQUITY
Share based payment
Share Capital Share Premium reserve Retained Earnings Total Equity
GBP GBP GBP GBP GBP
Loss for the period - - - (441,939) (441,939)
Other comprehensive
income - - - 20,727 20,727
Total comprehensive
income for year - - - (421,212) (421,212)
Transactions with owners
in own capacity
Ordinary shares issued
on incorporation 1,000 - - - 1,000
Ordinary shares Issued
(8 March 2021) 297,502 - - - 297,502
Ordinary shares Issued
(4 May 2021) 396,900 1,587,598 - - 1,984,498
Broker warrants Issued
(4 May 2021) - - 24,063 - 24,063
Share issue costs - (86,730) - - (86,730)
Transactions with owners
in own capacity 695,402 1,500,868 24,063 - 2,220,333
------------------------- -------------- -------------- ------------------------ ------------------ -------------
Balance at 30 November
2021 695,402 1,500,868 24,063 (421,212) 1,799,121
========================= ============== ============== ======================== ================== =============
STATEMENT OF CASHFLOW
Period ending
30 November 2021
Note GBP
Cash flow from operating activities
Loss for the financial year (421,212)
Adjustments for:
Share based payment reserves 15 24,063
Foreign exchange movements (20,727)
Revaluation adjustments to fair value on convertible loan note 5 (76,661)
Changes in working capital:
(Increase) in trade and other receivables (81,350)
Increase in trade and other payables 13 139,114
Net cash outflow from operating activities (436,773)
Cash flows from investing activities
Purchase of convertible loan notes (511,077)
Net cash flow from investing activities (511,077)
---------------------------------------------------------------- ----- ------------------
Cash flows from financing activities
Proceeds from Issue of Shares 14 2,283,000
Share Issue Costs 14 (86,730)
Net cash flow from financing activities 2,196,270
---------------------------------------------------------------- ----- ------------------
Net increase in cash and cash equivalents 1,248,420
Cash and cash equivalents at beginning of the period -
Cash and cash equivalents at end of the period 10 1,248,420
---------------------------------------------------------------- ----- ------------------
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
East Star Resources Plc was incorporated on 17 November 2020 in
England and Wales and remains domiciled there with Registered
Number 13025608 under the Companies Act 2006, under the name Cawmed
Resources Limited. The Company subsequently changed its name to
East Star Resources Limited on 27 January 2021 and on 3rd March
2021 re-registered as a plc.
The address of its registered office is Eccleston Yards, 25
Eccleston Place, London SW1W 9NF, United Kingdom.
The principal activity of the Company is to seek suitable
investment opportunities primarily in the natural resources
sector.
The Company listed on the London Stock Exchange ("LSE") on 4(th)
May 2021. The Company was suspended from trading on 19(th) July
2021 whilst managing a reverse takeover transaction and was then
re-admitted to trading on 10th January 2021.
2. Accounting policies
The principal accounting policies applied in preparation of
these financial statements are set out below. These policies have
been consistently applied unless otherwise stated.
2.1 Basis of preparation
The financial statements for the period ended 30 November 2021
have been prepared by East Star Resources Plc in accordance with
UK-adopted International Accounting Standards ('IFRS').
2.2 Going concern
The financial statements have been prepared on a going concern
basis, which assumes that the Company will continue to meet its
liabilities as they fall due.
In January 2022 the Company successfully completed a Reverse
Takeover ("RTO") whilst simultaneously completing a placing that
allowed the Company to raise GBP3.1m gross. Post transaction the
Company had in excess of GBP3.5m in cash and consequently exhibits
a strong balance sheet position.
On acquisition of Discovery Ventures Kazakhstan Limited the
Company acquired the rights to 4 mining licenses within Kazakhstan.
The forecasted capital commitments of the Company have been
analysed carefully in relation to expected spends on each one of
the 4 mining licenses and the board is comfortable that the working
capital commitments can be fully satisfied by the current cash
position. Listed below are the major capital commitments of DVK in
US Dollars at the latest available exchange rate:
Licence rent: $455,710
Licence minimum spend requirement: $225,745
Restoration bond insurance: $53,750
EM survey: $494,316
Total commitments: $1,229,521
It is on these considerations that the directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the financial statements.
2.3 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, and
demand deposits with banks and other financial institutions.
2.4 Equity
Share capital is determined using the nominal value of shares
that have been issued.
The Share premium account includes any premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from the Share
premium account, net of any related income tax benefits.
Equity-settled share-based payments are credited to a
share-based payment reserve as a component of equity until related
options or warrants are exercised or lapse.
Retained losses includes all current and prior period results as
disclosed in the income statement.
2.5 Foreign currency translation
The financial statements are presented in Sterling which is the
Company's functional and presentational currency.
Transactions in currencies other than the functional currency
are recognised at the rates of exchange on the dates of the
transactions. At each balance sheet date, monetary assets and
liabilities are retranslated at the rates prevailing at the balance
sheet date with differences recognised in the Statement of
comprehensive income in the period in which they arise.
2.6 Financial instruments
IFRS 9 requires an entity to address the classification,
measurement and recognition of financial assets and
liabilities.
a) Classification
The Company classifies its financial assets in the following
measurement categories:
-- those to be measured subsequently at fair value (either
through OCI or through profit or loss);
-- those to be measured at amortised cost; and
-- those to be measured subsequently at fair value through profit or loss.
The classification depends on the Company's business model for
managing the financial assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains and losses will be
recorded either in profit or loss or in OCI. For investments in
equity instruments that are not held for trading, this will depend
on whether the Company has made an irrevocable election at the time
of initial recognition to account for the equity investment at fair
value through other comprehensive income (FVOCI).
b) Recognition
Purchases and sales of financial assets are recognised on trade
date (that is, the date on which the Company commits to purchase or
sell the asset). Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or
have been transferred and the Company has transferred substantially
all the risks and rewards of ownership.
c) Measurement
At initial recognition, the Company measures a financial asset
at its fair value plus, in the case of a financial asset not at
fair value through profit or loss (FVPL), transaction costs that
are directly attributable to the acquisition of the financial
asset.
Transaction costs of financial assets carried at FVPL are
expensed in profit or loss.
Debt instruments
Amortised cost: Assets that are held for collection of
contractual cash flows, where those cash flows represent solely
payments of principal and interest, are measured at amortised cost.
Interest income from these financial assets is included in finance
income using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in profit or loss
and presented in other gains/(losses) together with foreign
exchange gains and losses. Impairment losses are presented as a
separate line item in the statement of profit or loss.
Equity instruments
The Company subsequently measures all equity investments at fair
value. Where the Company's management has elected to present fair
value gains and losses on equity investments in OCI, there is no
subsequent reclassification of fair value gains and losses to
profit or loss following the derecognition of the investment.
Dividends from such investments continue to be recognised in profit
or loss as other income when the Company's right to receive
payments is established. Changes in the fair value of financial
assets at FVPL are recognised in other gains/(losses) in the
statement of profit or loss as applicable. Impairment losses (and
reversal of impairment losses) on equity investments measured at
FVOCI are not reported separately from other changes in fair
value.
d) Impairment
The Company assesses, on a forward-looking basis, the expected
credit losses associated with any debt instruments carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk. For
trade receivables, the Company applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
2.7 Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received net of any direct issue costs.
2.8 Taxation
Tax currently payable is based on taxable profit for the period.
Taxable profit differs from profit as reported in the income
statement because it excludes items of income and expense that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The liability for current tax
is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
2.9 Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements in conformity with
IFRSs requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expense.
Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial
statements, are disclosed below:
- Convertible Loan Notes: measured at fair value through the
profit or loss on recognition and amortized cost subsequently
- Share Based Payments: warrants valued using Black Scholes method
2.10 Share based payments
The Company has made awards of warrants on its unissued share
capital to certain parties in return for services provided to the
Company. The valuation of these warrants involved making a number
of critical estimates relating to price volatility, future dividend
yields, expected life of the options and interest rates. These
assumptions have been integrated into the Black Scholes Option
Pricing model in this instance to derive a value for any
share-based payments. These assumptions are described in more
detail in note 15.
The expense charged to the Statement of Comprehensive Income
during the year in relation to share based payments was
GBP24,063.
2.11 New standards and interpretations not yet adopted
At the date of approval of these financial statements, the
following standards and interpretations which have not been applied
in these financial statements were in issue but not yet effective
(and in some cases have not yet been adopted by the UK):
-- Amendments to IAS 1: Presentation of Financial Statements -
Classification of Liabilities as Current or Non-current (effective
date not yet confirmed)*
-- Amendments to IFRS 3: Business Combinations - Reference to
Conceptual Framework (effective 1 January 2022)*
-- Amendments to IAS 16: Property, Plant and Equipment (effective 1 January 2022)*
-- Amendments to IAS 37: Provisions, Contingent Liabilities and
Contingent Assets (effective 1 January 2022)*
-- Annual Improvements to IFRS Standards 2018-2020 Cycle (effective 1 January 2022)*
-- Amendments to IAS 8: Accounting Policies, Changes to
Accounting Estimates and Errors (effective date not yet
confirmed)*
-- Amendments to IAS 12: Income Taxes - Deferred Tax arising
from a Single Transaction (effective date not yet confirmed)*
*subject to UK endorsement
The effect of these new and amended Standards and
Interpretations which are in issue but not yet mandatorily
effective is not expected to be material.
The directors are evaluating the impact that these standards may
have on the financial statements of Company.
3. Segmental analysis
The Company manages its operations in one segment, being seeking
a suitable investment specifically in the natural resources sector.
The results of this segment are regularly reviewed by the board as
a basis for the allocation of resources, in conjunction with
individual investment appraisals, and to assess its
performance.
4. Operating Loss
Operating loss for the company is stated after charging:
Period ending
30 November 2021
GBP
Directors' fees 42,000
Professional Fees (Legal & accounting) 259,652
Listing expenses 145,383
Share based payments 24,064
Insurance 15,232
Other administrative expenses 32,269
-----------------------------
(518,600)
-----------------------------
5. Finance Income
Finance income consists of the revaluation of loan notes to fair
value:
Period ending
30 November 2021
GBP
Finance Income 76,661
-----------------------------
76,661
-----------------------------
6. Employees
The average number of persons employed by the Company (including
executive directors) during the period ended 30 November 2021
was:
No of employees
Management 3
---------------------------
3
---------------------------
The aggregate payroll costs of these persons were as
follows:
GBP
Wages and salaries 42,000
------------------
42,000
------------------
Directors did not accrue any salary until the completion of the
admission to the London Stock Exchange which occurred on 4 May
2021.
7. Auditor's Remuneration
Period ending
30 November 2021
GBP
Fees payable to the Company's auditor for the audit of the Company 35,000
Corporate Finance Fees 15,000
50,000
-----------------------------
The period covers from incorporation to 30 November 2021 and
includes accrued expenses relating to the 2021 audit.
8. Taxation
As at 30
November 2021
GBP
-------------------------------------- --------------------------
The charge / (credit) for the
year is made up as follows:
Corporation taxation on the results -
for the year
Taxation charge / credit for the -
year
--------------------------
A reconciliation of the tax charge
/ credit appearing in the income
statement to the tax that would
result from applying the standard
rate of tax to the results for
the year is:
Loss per accounts (421,212)
--------------------------
Tax credit at the standard rate
of corporation tax in the UK of
19% (80,030)
Other tax adjustments 80,030
-
--------------------------
The Company has total carried forward losses of GBP421,212. The
taxed value of the unrecognised deferred tax asset is GBP105,303
and these losses do not expire. No deferred tax assets in respect
of tax losses have not been recognised in the accounts because
there is currently insufficient evidence of the timing of suitable
future taxable profits against which they can be recovered.
On 11 March 2020 it was announced (and substantively enacted on
17 March 2020) that the UK corporation tax rate would remain at 19%
and not reduce to 17% (the previously enacted rate) from 1 April
2020. On 3 March 2021, the Chancellor announced that the
corporation tax rate will be increasing to 25% from 1 April
2023.
9. Earnings per share
The calculation of the basic and diluted earnings per share is
calculated by dividing the profit or loss for the year by the
weighted average number of ordinary shares in issue during the
year.
30 November 2021
GBP
Profit / (loss) attributable to shareholders of East Star Resources Plc (421,212)
Weighted number of ordinary shares in issue 45,833,339
Basic & dilutive earnings per share from continuing operations - pence (0.92)
------------------------------------------------------------------------- -----------------
There is no difference between the diluted loss per share and
the basic loss per share presented. Share options and warrants
could potentially dilute basic earnings per share in the future but
were not included in the calculation of diluted earnings per share
as they are anti-dilutive for the year presented. See note 14 for
further details.
10. Cash and cash equivalents
As at
30 November 2021
GBP
Cash at bank 1,248,420
-----------------------------
1,248,420
-----------------------------
11. Trade and other receivables
As at 30
November 2021
GBP
VAT receivable 71,448
--------------------------
71,448
--------------------------
12. Loan notes
As at 30
November 2021
GBP
Convertible Loan Note - DVK Kazakhstan 608,465
--------------------------
608,465
--------------------------
As part of the binding term sheet entered into on 31 October
2021 the Company also subscribed for 4 convertible notes in
Discovery Ventures Kazakhstan (DVK). The face value of the notes is
$175,000 USD and DVK had drawn down all 4 notes by 30 November
2021. The redemption value of the notes is $201,250 USD and the
value on the balance sheet has been reconciled to fair value
through the profit & loss. On completion of the RTO of DVK the
notes will convert into an inter-company loan with the Company
being the lender and DVK the borrower.
13. Trade and other payables
As at 30
November 2021
GBP
Trade payables 89,672
Payroll accruals 5,800
Accruals 43,500
Other payables 142
--------------------------
139,114
--------------------------
14. Share capital and share premium
Ordinary Shares Share Capital Share Premium Total
# GBP GBP GBP
Issue of ordinary shares on incorporation(1) 100,000 1,000 - 1,000
Issue of ordinary shares (2) 5,900,000 59,000 - 59,000
Issue of ordinary shares (3) 23,850,217 238,502 - 238,502
Issue of ordinary shares (4) 39,689,947 396,900 1,587,598 1,984,498
Share issue costs - - (86,730) (86,730)
---------------- -------------- -------------- ----------
At 30 November 2021 69,540,154 695,402 1,500,868 2,196,270
---------------- -------------- -------------- ----------
On incorporation on 17 November 2020, the Company issued 100,000
ordinary shares of GBP0.01 at their nominal value of GBP0.01.
On 8 March 2021, the Company issued 5,900,000 ordinary shares at
their nominal value of GBP0.01.
On 8 March 2021, the Company issued 23,850,217 ordinary shares
at their nominal value of GBP0.01
On admission to the Standard List of the LSE on 4 May 2021,
39,689,947 shares were issued at a placing price of GBP0.05.
The share premium represents the difference between the nominal
value of the shares issued and the actual amount subscribed less;
the cost of issue of the shares, the value of the bonus share
issue, or any bonus warrant issue.
The Company has only one class of share. All ordinary shares
have equal voting rights and rank pari passu for the distribution
of dividends and repayment of capital.
15. Share based payment reserves
As at 30 November 2021
GBP
Broker placing warrants Issued (1) 24,063
-----------------------
At 30 November 2021 24,063
-----------------------
On incorporation 6,000,000 founders warrants were issued on a
1:1 basis with the founders shares. These warrants expire 3 years
from the issue date and are exercisable at GBP0.05. Per IFRS 2
these warrants are not required to be valued.
On admission to LSE on 4 May 2021, 1,200,000 brokers warrants
were issued that entitle the warrant holder to subscribe for one
Ordinary Share at GBP0.05 per ordinary share. The estimated fair
values of options which fall under IFRS 2, and the inputs used in
the Black-Scholes model to calculate those fair values are as
follows:
Date of grant Risk
Number Share Exercise Expected Expected free Expected
of warrants Price Price volatility life rate dividends
--------------- ------------- -------- --------- ------------ --------- ------ -----------
4 May 2020 1,200,000 GBP0.05 GBP0.05 50.00% 3 0.15% 0.00%
Warrants
Number of Warrants Exercise Expiry date
Price
------------------------ ------------------- --------- ------------
On incorporation
Issued on 16 March 2021 6,000,000 GBP0.05 4 May 2023
Issued on 4 May 2021 1,200,000 GBP0.05 4 May 2024
------------------- ---------
At 30 November 2021 7,200,000 GBP0.05
------------------- ---------
The weighted average exercise price of the warrants exercisable
at 30 November 2021 is GBP0.05.
The weighted average time to expiry of the warrants as at 30
November 2021 is 2.05 years.
The 6,000,000 warrants issued on 16 March 2021 were issued
alongside the placing of ordinary shares and as such are not valued
separately.
16. Financial Instruments and Risk Management
Principal financial instruments
The principal financial instruments used by the Company from
which the financial risk arises are as follows:
30 November 2021
GBP
Financial Assets
Cash and cash equivalents 1,248,420
Trade and other receivables 71,448
Convertible loan note 608,465
1,928,333
----------------------------
Financial Liabilities
Trade payables 89,672
89,672
----------------------------
The financial liabilities are payable within one year.
General objectives and policies
As alluded to in the Directors report the overall objective of
the Board is to set policies that seek to reduce risk as far as
practical without unduly affecting the Company's competitiveness
and flexibility. Further details regarding these policies are:
Policy on financial risk management
The Company's principal financial instruments comprise cash and
cash equivalents, other receivables, trade and other payables. The
Company's accounting policies and methods adopted, including the
criteria for recognition, the basis on which income and expenses
are recognised in respect of each class of financial asset,
financial liability and equity instrument are set out in note 2 -
"Accounting Policies".
The Company does not use financial instruments for speculative
purposes. The carrying value of all financial assets and
liabilities approximates to their fair value.
Derivatives, financial instruments and risk management
The Company does not use derivative instruments or other
financial instruments to manage its exposure to fluctuations in
foreign currency exchange rates, interest rates and commodity
prices.
Foreign currency risk management
The Company does have some foreign currency exposure as loan to
Discovery Ventures Kazakhstan ("DVK") is denominated in US dollars.
However due to the low volume of transactions the Directors have
assessed the risk as minimal and decided that mitigation strategies
are not required at this stage of operations. The Directors will
continue to assess this risk at regular intervals going
forward.
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Company. The Company has adopted a policy of only dealing with
creditworthy counterparties. The Company's exposure and the credit
ratings of its counterparties are monitored by the Board of
Directors to ensure that the aggregate value of transactions is
spread amongst approved counterparties.
The Company applies IFRS 9 to measure expected credit losses for
receivables, these are regularly monitored and assessed.
Receivables are subject to an expected credit loss provision when
it is probable that amounts outstanding are not recoverable as set
out in the accounting policy. The impact of expected credit losses
was immaterial.
The Company's principal financial assets are cash and cash
equivalents and loan notes. Cash equivalents include amounts held
on deposit with financial institutions.
The credit risk on liquid funds held in current accounts and
available on demand is limited because the Company's counterparties
are banks with high credit-ratings assigned by international
credit-rating agencies.
Loan notes are issued to Discovery Ventures Kazakhstan Limited
which since been acquired by the Company. As a wholly owned
subsidiary the of East Star, DVK can be closely monitored by
directors to assess whether there are any indicators of
impairment.
No financial assets have indicators of impairment.
The Company's maximum exposure to credit risk is limited to the
carrying amount of financial assets recorded in the financial
statements.
Borrowings and interest rate risk
The Company currently has no borrowings. The Company's principal
financial assets are cash and cash equivalents and loan notes. Cash
equivalents include amounts held on deposit with financial
institutions. The effect of variable interest rates is not
significant.
Liquidity risk
During the period ended 30 November 2021, the Company was
financed by cash raised through equity funding. Funds raised
surplus to immediate requirements are held as cash deposits in
Sterling.
In managing liquidity risk, the main objective of the Company is
to ensure that it has the ability to pay all of its liabilities as
they fall due. The Company monitors its levels of working capital
to ensure that it can meet its liabilities as they fall due.
The table below shows the undiscounted cash flows on the
Company's financial liabilities as at 30 November 2021 on the basis
of their earliest possible contractual maturity.
Total Within 2 months Within 2-6 months
GBP GBP GBP
---------------------- ------- --------------------------- -----------------------------
At 30 November 2021
Trade payables 89,672 20,346 69,326
Payroll Accruals 5,800 5,800 -
------- --------------------------- -----------------------------
Capital management
The Company considers its capital to be equal to the sum of its
total equity. The Company monitors its capital using a number of
key performance indicators including cash flow projections, working
capital ratios, the cost to achieve development milestones and
potential revenue from partnerships and ongoing licensing
activities.
The Company's objective when managing its capital is to ensure
it obtains sufficient funding for continuing as a going concern.
The Company funds its capital requirements through the issue of new
shares to investors.
17. Financial assets and liabilities
Financial liabilities at amortised
Financial assets at amortised cost cost Total
GBP GBP GBP
2021
Trade and other receivables 71,448 - 71,448
Loan notes 608,465 608,465
Cash and cash equivalents 1,248,420 1,248,420
Trade and other payables - (89,672) (89,672)
1,928,333 (89,672) 1,838,661
----------------------------------- -------------------------------------- ----------
18. Related Party Transactions
Warrants issued to Directors and Director related entities
On incorporation, the Company issued 100,000 Ordinary Shares of
GBP0.01 at GBP0.01 per Ordinary Share for cash consideration of
GBP1,000 to Orana Corporate LLP, an entity of which Directors
Charlie Wood and Anthony Eastman are Partners. Subsequently these
shares were transferred to Director Charlie Wood.
On 24 December 2020, Ainslie Capital Limited and Tournesol
Consulting Limited (entities associated with Directors Charlie Wood
and Anthony Eastman respectively) each subscribed for 400,000
Ordinary Shares of GBP0.01 at GBP0.01 per Ordinary share (total of
800,000) for cash consideration, of which Charlie Wood had already
received the 100,000 shares as referred above.
All of these shares are paid up subsequent to period end.
Provision of services
During the year, GBP10,500 was incurred for the provision of
administrative and corporate accounting services from Orana
Corporate LLP, Anthony Eastman and Charles Wood are both directors
of East Star and Orana. GBP1,500 was owing at year end and are
included in trade & other payables - note 13.
Other than these there were no other related party
transactions.
19. Ultimate Controlling Party
As at 30 November 2021, there was no ultimate controlling party
of the Company.
20. Capital Commitments
As at 30 November 2021 there were no capital commitments for the
Company, however subsequent to period end, the Company completed
the successful acquisition of Discovery Ventures Kazakhstan, who
had the following capital commitments as at acquisition date
of:
Licence rent: $455,710
Licence minimum spend requirement: $225,745
Restoration bond insurance: $53,750
EM survey: $494,316
Total commitments: $1,229,521
Other than noted above there are no other capital commitments of
the Company.
21. Events Subsequent to period end
Acquisition of Discovery Ventures Kazakhstan Limited and related
placing/subscription
On 10 January 2022 the Company completed the acquisition of all
of the share capital of Discovery Ventures Kazakhstan Limited
("DVK"). At the same time the Company completed the placing of
38.05 million shares and received subscriptions for 23.95 million
shares which were issued at 5 pence per share raising GBP3.1
million for the Company. The Company net proceeds post transaction
amounted to approximately GBP2.6m.
The initial consideration for the acquisition is to be satisfied
in full by:
-- the issue of 45 million Ordinary Shares in the company, which
had a fair value of GBP2.25m based on the placing price of
GBP0.05
Contingent Consideration
-- The sellers shall have the right to receive a further 75
million performance shares based on the completion of the following
performance milestone:
o confirmation- of -a -mineral -resource -on -one -of -the
-Licences -of -at -least -one -million- ounces -of gold -equivalent
-at- an -average- grade -of -at -least -two -grammes- per -tonne
-of -gold -equivalent -as defined -by -an -independent-
professional- firm -appointed -by -the -Company -to -either -JORC
-Code or -NI 43-101-classification- standards
The initial estimate of the fair value of the assets acquired
and liabilities assumed of DVK at the date of acquisition based
upon the DVK balance sheet at 10 January 2022 are as follows:
GBP
-------------------------------------------------------- -----------
Property, plant and equipment 25,019
Trade and other receivables 865,793
Cash and cash equivalents 16,211
Other assets 144,579
Trade and other payables (117,249)
Loans and other borrowings (833,709)
-----------
Total identifiable net assets acquired 100,644
Consideration -
Initial consideration (recorded at the market
value of the shares issued) 2,250,000
Contingent consideration (recorded at the market
value of the shares issued as initial consideration) 3,750,000
Total consideration 6,000,000
-------------------------------------------------------- -----------
Goodwill acquired 5,899,356
-------------------------------------------------------- -----------
Goodwill relates to the accumulated "know how" and expertise of
the business and its staff. None of the goodwill is expected to be
deducted for income tax purposes.
The initial accounting for the acquisition of DVK includes the
contingent consideration in the calculation of goodwill. This
milestone relies on the confirmation of the mineral resources as
detailed above. As the Company progresses its explorative
activities it will look to apply a probability percentage to this
contingent consideration to give the most accurate depiction of
goodwill.
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