TIDMKEFI
RNS Number : 1769C
Kefi Gold and Copper PLC
09 June 2023
9 June 2023
KEFI Gold and Copper plc
("KEFI" or the "Company")
Results for the year ended 31 December 2022
KEFI (AIM: KEFI), the gold and copper exploration and
development company with projects in the Federal Democratic
Republic of Ethiopia and the Kingdom of Saudi Arabia, is pleased to
announce its audited financial results for the year ended 31
December 2022.
AGM and Annual Report
As announced on 2 June 2023 the Annual General Meeting ("AGM")
of the Company will be held at 11:00 a.m. (EEST) (9:00 a.m. BST) on
30 June 2023 at Hilton Park Nicosia,1 Achaion Street, Engomi,
Nicosia, 2413, Cypru s . The notice of AGM has been posted to
shareholders and is available for download on the Company's
website: https://www.kefi-goldandcopper.com
The Annual Report and Accounts for the year ended 31 December
2022 are also available on KEFI's website at
https://www.kefi-goldandcopper.com
Market Abuse Regulation (MAR) Disclosure
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
Enquiries
KEFI Gold and Copper plc
Harry Anagnostaras-Adams (Executive Chairman) +357 994 57843
John Leach (Finance Director) +357 992 08130
SP Angel Corporate Finance LLP (Nominated Adviser +44 (0) 20 3470
and Joint Broker) 0470
Jeff Keating, Adam Cowl
+44 (0) 20 7100
Tavira Financial Limited (Joint Broker) 5100
Oliver Stansfield, Jonathan Evans
+44 (0) 20 3934
IFC Advisory Ltd (Financial PR and IR) 6630
Tim Metcalfe, Florence Chandler
Further information can be viewed at
https://www.kefi-goldandcopper.com
EXECUTIVE CHAIRMAN'S REPORT
After some particularly frustrating years, the working
environment in both Ethiopia (security and regulatory) and Saudi
Arabia (regulatory) was transformed for the better during 2022. In
Ethiopia, we are finally close to launching the Tulu Kapi Gold
Project this year. And as we advance in both countries with an
early-mover position, we can now expect to report an escalating
stream of achievements. What a welcome outlook after years of
challenge and frustration!
We now enjoy highly supportive mine-regulatory working
environments in both countries which are also prioritising projects
like ours across all the relevant Government agencies. Given that
we have three advancing potential development projects in these
jurisdictions, the Company is now in a much better risk/return
position than it has ever been. It is indeed a refreshing change
and an exciting opportunity.
Financial markets, and the AIM Market in particular, have shown
some volatility and weakness flowing from global and UK political
events. This has reinforced KEFI's strategy of sourcing
predominantly project-level and subsidiary-level project
financing.
At the same time, both the Saudi and Ethiopian local equity
capital markets have shown particular interest in natural
resources, as have the Canadian and Australian mining-focused stock
markets. KEFI has appointed advisers to consider a dual-listing of
the Company's shares on major regional or mining-focused stock
exchanges.
Successful implementation of our plans will result in KEFI being
a leader in the Arabian-Nubian Shield with projected 2027 aggregate
annual production of 327,000 gold-equivalent ounces, in which KEFI
will have a beneficial interest of 150,000 gold-equivalent ounces.
These estimates reflect resources as they stood at 2021 and current
preliminary assessments.
Our reported Mineral Resources provide a solid starting position
for growth. Since mid-2020, KEFI's beneficial interest in the
in-situ metal content of our three projects has grown from 1.2
million gold-equivalent ounces to approximately 2.1 million
gold-equivalent ounces. KEFI's current market capitalisation of
circa GBP40 ($50) million equates to only $24 per gold-equivalent
ounce.
The growth in Mineral Resources is due to our progress in Saudi
Arabia in particular, where GMCO is now well-established as a
leading explorer/developer in the fast-emerging Saudi minerals
sector with:
-- one of the largest exploration teams in the country;
and
-- two major projects advancing towards development:
o Hawiah Copper Gold Project at the Pre-Feasibility Study ('PFS') stage; and
o Jibal Qutman Gold Project at the Definitive Feasibility Study ('DFS') stage.
GMCO's growth has coincided with the Saudi Government's widely
publicised recent initiatives to welcome international expertise
and fast-track the growth of its mining sector. In the past year or
so, we have been awarded 14 Exploration Licences ("ELs"), many
times the number we were awarded over the previous thirteen
years.
A notable reason for our solid position in the region is our
alliancing strategy. Our operating alliances are with the following
strong organisations:
-- Partners:
o in Saudi Arabia: Abdul Rahman Saad Al Rashid
and Sons Company Ltd ("ARTAR")
o in Ethiopia:
-- Federal Government of the Democratic Republic
of Ethiopia
-- Oromia Regional Government
-- Principal contractors:
o for process plants in both Ethiopia and Saudi
Arabia: Lycopodium
o for mining services in Ethiopia: PW Mining
-- Senior project finance lenders for Tulu Kapi:
o East and Southern African Trade and Development
Bank Ltd ("TDB")
o African Finance Corporation Limited ("AFC")
Ethiopia - Tulu Kapi
Having essentially overcome its recent security issues, Ethiopia
is demonstrating a clear determination to expedite economic
recovery and once again be among the world's top 10 growth
countries, as it was for nearly 20 years up to 2017. A key part of
the Ethiopian Government's strategy to achieve this strong growth
is for the mining sector to increase from 1% of GDP today to 10% of
GDP ten years from now. The Federal Government recently deployed
its world-recognized military around priority mining sites such as
Tulu Kapi and announced a number of incentives such as lower
royalty rates to reinforce its commitment to protect, support and
encourage our industry.
Tulu Kapi will be the country's first large-scale mining project
for some 30 years and is designed to the highest international
standards. It therefore is imposing many demands on a regulatory
system which the Ethiopian Government is upgrading.
There is significant potential to increase Tulu Kapi's current
Ore Reserves of 1.05 million ounces of gold and Mineral Resources
of 1.7 million ounces. Economic projections for the Tulu Kapi open
pit indicate the following returns assuming a gold price of
$1,815/ounce:
-- Average EBITDA of $153 million per annum (KEFI's now
planned c. 70% interest being c. $107million);
-- All-in Sustaining Costs ("AISC") of $947/ounce (note
that royalty costs increase with the gold price); and
-- All-in Costs ("AIC") of $1,189/ounce.
The assumptions underlying these projections are detailed in the
footnotes to the table on page 10 of this Annual Report.
Saudi Arabia - Jibal Qutman
Whilst GMCO has been on the ground since 2008, mining
de-regulation was only implemented over the past two years. This
has led to a surge in companies looking to enter the Saudi minerals
sector and one recent entrant has announced one of the largest
exploration programs ever committed anywhere - testament to the
international rating of the Saudi prospectivity. KEFI's beneficial
interest is planned to be 26.8% in GMCO and the shareholders'
agreement provides extra flexibility on a project-by-project basis
by catering for the possibility that one or other GMCO project can
be sole-risked by either shareholder if one partner chooses to opt
out.
Jibal Qutman was KEFI's first discovery in Saudi Arabia with
Mineral Resources in excess of 700,000 ounces of gold.
In mid-2022, formal notification was received from the Saudi
authorities that land access issues which halted our mine
development application in 2016 were resolved. This enabled GMCO to
commence the work required to complete a DFS, with site activities
again being allowed only from late 2022.
The current gold price and consensus outlook is considerably
higher than the $1,200/ounce used in our preliminary 2015 studies
when the Company lodged its initial Mining Licence application
based on mining the 200,000 ounces of oxide ore only, with a view
to a low-risk start-up pending expansion of the resources to
justify a larger development scenario. Another key change over the
past 8 years is that recently granted ELs now cover more than 35km
linear extent or 270 square kilometres of the prospective fault
zone north and south of the known Jibal Qutman deposits, thus
providing more opportunity to discover near-surface gold
mineralisation.
Development commitments will be duly considered after completion
of the DFS. And upon GMCO commitment, granting of the Mining
Licence, regulatory approvals and financing, GMCO could reasonably
target commissioning gold production at Jibal Qutman in 2025,
coincidentally around the same time as Tulu Kapi in Ethiopia.
Saudi Arabia - Hawiah
Hawiah was discovered in September 2019 and now ranks in
the:
-- top three base metal projects in Saudi Arabia; and
-- top 15% VMS projects worldwide.
Our drilling since 2019 has so far delineated a Mineral Resource
Estimate ("MRE") of 29.0 million tonnes at 0.89% copper, 0.94%
zinc, 0.67g/t gold and 10.1g/t silver. As a scale-comparison with
Tulu Kapi, Hawiah's in-situ metal content is now estimated to be in
the order of 2.48 million gold-equivalent ounces versus Tulu Kapi's
current 1.72 million ounces of gold.
Exploration commenced at the nearby Al Godeyer Project in early
2022 and drilling quickly confirmed similar copper-gold
mineralisation to the Hawiah VMS deposit. The recently announced
initial Al Godeyer MRE demonstrates the potential for satellite
orebodies to be discovered near the proposed Hawiah processing
plant.
We are finalising the Hawiah PFS and are continuing to drill to
upgrade and expand the resources within this major VMS
district.
Summary and Conclusion
We all know that getting one's timing right from an investment
viewpoint is an elusive task - not only are there are many company
specific issues, these are entwined with external factors such as
jurisdictional matters, metal prices and capital market cycles. It
is perhaps fair to say that KEFI's share price has largely drifted
with sectoral trends illustrated by the global Gold Junior Mining
Index (MVIS sub-index MVGDXJ). Notwithstanding that this index is
for much larger companies (market capitalisation >= $150
million) its performance pattern is similar to that of KEFI's share
price to date. The index was 68% at the time of KEFI's IPO in 2006,
historically peaked at 236% in 2011 when KEFI's historical share
price also peaked, and has declined since then to -8% on 16 May
2023.
So - what do we have to achieve to break out - to get ahead of
the pack? The fundamentals of the company have never been stronger;
nor have metal prices or the local jurisdictional conditions and
governmental support we are receiving. What we must do now is to go
into fast forward wherever possible without compromising safety and
financial commonsense. That will make our past years of frustration
worthwhile. It is also my view that capital markets behave
cyclically and it might be the case that we see a swing back to the
mining sector for capital allocation internationally, especially
directed at those companies who rank highly on ESG measures as well
as the measures for discovery, development and production.
KEFI is now preparing to develop the high-grade Tulu Kapi Gold
Project, completing its DFS-stage development studies on the Jibal
Qutman Gold Project, finalising the PFS for the Hawiah Copper-Gold
Project and prospecting exploration targets in Ethiopia and Saudi
Arabia. And the timing is now proving to be on our side.
Simultaneous with the triggering of full development at Tulu
Kapi, we intend to re-commence exploration programs in Ethiopia and
intensify our exploration program in Saudi Arabia. In Ethiopia, the
initial focus will be underneath the planned open pit where we
already have established an initial resource for underground mining
at an average grade of 5.7g/t gold. We also intend to follow-up
drilling which indicated good potential for nearby satellite gold
deposits in the Tulu Kapi District. In Saudi Arabia, further
drilling is being undertaken during 2023 at Hawiah, Jibal Qutman
and surrounding ELs. Regional prospecting programs will also
elevate as we are blessed with many other walk-up drill
targets.
Along with my fellow Directors, I am dedicated to the generation
of returns on investment. It has been frustrating that the working
environments of both Ethiopia and Saudi Arabia in recent years have
not allowed us to achieve targeted progress. However, I believe
that both situations have turned for the better and we are now
pushing forward.
By emphasising conventional project-level development financing,
we will reduce the pressure on KEFI shareholders and its foundation
partners to provide all the funding. In fact, at Tulu Kapi more
than 90% of the development capital is planned at the project or
subsidiary level from newly introduced regional investors, bankers,
contractors, and other syndicate parties. However, exploration and
other pre-development funding will likely continue to rely
exclusively on equity funding by KEFI and its foundation partners
in-country.
Going forward, one would normally expect that as milestones are
achieved, the Company's share price should naturally narrow the gap
between the Company's market capitalisation and what we believe to
be the significantly higher fundamental valuations of the Company's
projects using conventional measures such as NPV.
We are indeed at an opportune moment, created by our team's hard
work, your support and patience as shareholders and now metal
prices strengthening as we launch our projects within improved
political and regulatory environments. The Directors are deeply
appreciative of all personnel's tenacity, tireless efforts and
steadfast dedication together with the support the Company receives
from shareholders, our families and other stakeholders. Let us now
see some of the success the Company has worked for.
Recent developments have also triggered the next chapter of our
organisational development with several appointments having been
made, including Mr. Eddy Solbrandt as Group Chief Operating Officer
("COO") and Mr. Gareth Taylor as GMCO's COO along with several
other additions to the senior management team in both Ethiopia and
Saudi Arabia. The Board of Directors is also adjusting its
composition to handle approaching retirements and to add to the
range of skills and appropriate board expertise in preparation for
the substantial changes as KEFI moves into its exciting next stage
with the development of our projects.
Executive Chairman
Harry Anagnostaras-Adams
8 June 2023
FINANCE DIRECTOR'S REPORT
Financing Working Capital for KEFI's Activities to Date
KEFI has funded all activities to date with approximately GBP80
million equity capital raised at then prevailing share market
prices. This avoided superimposing debt-repayment risk onto
exploration, permitting and other risks that always exist during
the early phases of project exploration and development in
mining-frontier markets. We do however avail ourselves of
short-term unsecured advances from time to time as arranged by our
Corporate Broker to provide working capital pending the achievement
of a short-term business objectives.
The risks of management of working capital in the context of
such high-growth and high-risk exploration ventures is a matter
which is highlighted by the Directors in the Going Concern Note of
the Financial Statements which shareholders should refer to.
Financing Tulu Kapi Project Development
The current cost (including finance costs and working capital)
to develop Tulu Kapi is estimated to be c. $320 million, which was
last updated in late 2022. Our financing plans absorbed significant
cost-inflation at that time due to global supply chain strains for
the mining sector exacerbated by the COVID pandemic and the Ukraine
war. Whilst cost-inflation appears to have abated, pricing will be
updated again as at project launch and final finance arrangements
will be refined accordingly.
The various funding offers and commitments are made on a
non-binding basis for finalisation as we move to project launch . T
he financing syndicate has expressed willingness to adjust and
refine amongst itself in line with final procurement and budget
prices.
The $320 million funding package is now expected to be sourced
from $190 million debt (senior and subordinated) and $130 million
equity-risk capital (from Government $30 million, Regional
Investors $80 million and from KEFI's public shareholders $20
million). Over the course of the past year, we have materially
reduced (to $15 million) the portion of Regional Investors' equity
funding convertible into KEFI shares (as from Year 4 after
investment at then market prices, if not repaid by KEFI in cash in
the interim) by agreeing within the syndicate that a large
component of the investment by Regional Investors be in the form of
Equity-Risk Ranking Notes to be issued by TKGM (non-convertible
into shares).
Also, the conditionality of the finance closing process has now
been significantly de-risked. When I wrote to you last year, t he
top three conditions precedent required for final bank credit
approvals were dependent on Government and were as follows:
-- Our two banks to have the same rights and protections
in Ethiopia: in March 2023 Ethiopia and AFC announced
country membership - a significant step which also achieved
our goals in this respect ;
-- Security around our project to be permanently elevated
for the long term: in April 2023 the Government mobilised
the Federal military into the Tulu Kapi district to lay
world-class security foundations for our Project, which
now awaits successful completion of the remaining security
requirements; and
-- Banking procedures to be eased such that capital and operating
can be serviced promptly: whilst we were granted the right
to offshore banking some years ago, the detailed procedures
are only now being clarified and we are pleased with the
direction this matter is taking.
The resolution of the remaining (the third matter listed above)
critical condition will therefore facilitate final credit approvals
and signing of definitive documentation between the respective
syndicate members, which we still target to achieve in June 2023.
We are confident of these approvals from our long-standing and
hard-working syndicate but, of course, we must emphasise that the
pace of our progress overall is now essentially subject to the pace
of administrative progress with the relevant Government agencies.
Be that as it may, all parties are pushing and I am highly
confident of the outcome.
KEFI and the Project syndicate remain focused on achieving
Project launch as soon as practicable, commencing full construction
in Q4-2023, having by then triggered procurement and community
resettlement, and leading to gold production from open pit ore in
2025.
Ownership Value and Ownership Dilution
The GBP6.4 million Placing currently being completed (subject to
shareholder approval) will mainly be used to fund:
-- Project finance closing and project launch at Tulu
Kapi;
-- DFS-level development resource/reserve drilling plus
metallurgical and other studies at Jibal Qutman;
-- PFS-level development resource/reserve drilling plus
metallurgical and other studies at Hawiah; and
-- Earlier-stage exploration prospecting activities in
Saudi Arabia including drilling of satellite targets
proximal to our advanced projects as well as first-pass
prospecting in newly granted licences at other prospects
selected from the Company's proprietary database.
In announcing the Placing, we also foreshadowed an intention for
Directors and management to be offered the opportunity to
participate in the Placing at the same price and subject to
shareholder approval.
We strive to minimise ownership dilution by sourcing nearly all
development capital at the project or subsidiary level.
In respect of the Tulu Kapi Project, the $15 million portion of
the overall $320 million funding package which is planned to
involve future KEFI share issues (unless KEFI chooses to repay in
cash) will be via instruments convertible at prices prevailing
during the fourth year after settlement, when Tulu Kapi is in
production. In the shorter term, part of the finance plan is that
the successful launch of the Project will hopefully facilitate the
exercise of warrants currently on issue and exercisable at 1.6
pence per share, the proceeds of which are up to GBP14 million ($18
million). Alternatives are also planned.
From an ownership value perspective and measuring the Company's
underlying assets on an NPV basis, this approach has already
contributed to the indicative value of KEFI's share of its three
main assets having more or less tripled from $153 million in June
2020 to c.$352 million (GBP281 million(1)) in May 2023. The basis
for these estimates is KEFI's estimated beneficial interest,
post-financing, of the NPV of cash flows to shareholders as derived
using consensus forecast metal prices and other explanations
provided in the footnotes below.
Project Development Finance Risk Management
In designing the level of balance sheet debt gearing at the
operating joint-venture company level, the senior and subordinated
debt to equity ratio for TKGM is:
-- 59%:41% ($190 million: $130 million) excluding equity
funded historical pre-development costs; and
-- 47%:53% ($190 million: $213 million) including equity-funded
historical pre-development costs at average historical
FX conversion rates.
Also, for structuring the TKGM project finance, several key
parameters had a driving influence on our approach:
-- The breakeven gold price after senior and subordinated
debt service and taxes assuming a conservative gold price
of $1,550/ounce for the purpose of designing debt-obligations
is c.$1,189/ounce, say $1,200/ounce - whilst we note that
industry average AISC is c. $1,200/ounce and that over
the past 10 years the spot market gold price was under
$1,200/ounce for only 12.5% of the time.
-- At current analyst consensus gold price of $1,815/ounce,
senior and mezzanine debt could be repaid within approximately
2 years of production start.
We have conditionally assembled all the development finance,
mostly at the project level from the work of our strong but small,
efficient and economical corporate office in Nicosia, Cyprus. Other
than our Nicosia-based group management, financial
control/corporate governance team, all operational staff are
usually based at the sites for project work. This hands-on culture
increases efficiency at a lower cost for corporate overhead -
critical at this early stage.
Accounting Policy
KEFI writes off all exploration expenditure in Saudi Arabia but
we will review this upon completion of Board-approved DFS studies.
KEFI's carrying value of the investment in KME, which holds the
Company's share of Tulu Kapi is only GBP15.6 million as at 31
December 2022. It is important to note KEFI's planned circa.70%
beneficial interest in the underlying valuation of Tulu Kapi is
c.GBP125 ($156) million based on project NPV at a gold price of
$1,815/ounce and including the underground mine.
In addition, the balance sheet of TKGM at full closing of all
project funding will reflect (in Ethiopian Birr) all its fully
capitalised pre-development costs as well as its project finance
development package.
John Leach
Finance Director
8 June 2023
Footnotes:
-- NPV calculations are based on:
-- DFS financial model for Tulu Kapi open pit updated
for refinements in consultation with lenders, contractors
and input pricing updates generally plus PEA financial
model for Tulu Kapi underground mine. Current financial
models for Jibal Qutman and Hawiah;
-- (1)Spot prices as at 30 April 2023 of $1,989/ounce
for gold, $3.88/pound for copper, $1.20/pound for
zinc and $25/ounce for silver;
-- KEFI's beneficial interest in each project NPV
calculation was assumed to be 70% in TKGM and 27%
in JQ & Hawiah
-- (2)Long-term analysts' consensus prices which average
$1,815/ounce for gold, $4.22/pound for copper, $1.28/pound
for zinc and $23/ounce for silver (source: S&P Global
survey dated 2 May 2023); and
-- GBP/$ exchange rate = 1.25, 8% discount rate applied
against net cash flow to equity, after debt service
and after tax.
Consolidated statement of comprehensive income
Year ended 31 December 2022
Notes Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
Revenue - -
Exploration costs - -
Administrative expenses 6 (2,400) (2,190)
Finance transaction costs 8.2 (368) (84)
Share-based payments and warrants-equity settled 18 (366) (810)
Share of loss from jointly controlled entity 20 (2,792) (1,482)
Impairment of jointly controlled entity 20 (109) 418
------------ ------------
Operating loss 6 (6,035) (4,148)
Other income/(loss) - (75)
Gain on Dilution of Joint Venture 20 286 428
Foreign exchange loss (79) (8)
Finance costs 8.1 (527) (1,121)
------------ ------------
Loss before tax (6,355) (4,924)
Tax 9 - -
------------ ------------
Loss for the year (6,355) (4,924)
Loss attributable to:
-Owners of the parent (6,355) (4,924)
Loss for the period (6,355) (4,924)
Other comprehensive expense:
Exchange differences on translating foreign operations - -
Total comprehensive expense for the year (6,355) (4,924)
Total Comprehensive expense to:
------------ ------------
-Owners of the parent (6,355) (4,924)
------------ ------------
Basic and diluted loss per share (pence) 10 (0.180) (0.226)
The notes are an integral part of these consolidated financial
statements.
Statements of financial position
31 December 2022
The The The The
Group Company Group Company
Notes 2022 2022 2021 2021
--------- --------- --------- ---------
GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
Non--current assets
Property, plant and equipment 11 125 3 63 1
Intangible assets 12 31,356 - 28,361 -
Investment in subsidiaries 13.1 - 15,557 - 14,331
Investments in jointly 13.2 - - - -
controlled entities
Receivables from subsidiaries 15.2 - 9,998 - 7,292
31,481 25,558 28,424 21,624
--------- --------- --------- ---------
Current assets
Financial assets at fair 14 - - - -
value through OCI
Trade and other receivables 15.1 463 71 291 24
Cash and cash equivalents 16 220 45 394 149
--------- --------- --------- ---------
683 116 685 173
--------- --------- --------- ---------
Total assets 32,164 25,674 29,109 21,797
--------- --------- --------- ---------
EQUITY AND LIABILITIES
Equity attributable to
owners of the Company
Share capital 17 3,939 3,939 2,567 2,567
Deferred Shares 17 23,328 23,328 23,328 23,328
Share premium 17 43,187 43,187 35,884 35,884
Share options reserve 18 3,747 3,747 1,891 1,891
Accumulated losses (48,781) (52,929) (42,731) (47,310)
--------- --------- --------- ---------
Attributable to Owners
of parent 25,420 21,272 20,939 16,360
Non-Controlling Interest 19 1,562 - 1,379 -
--------- --------- --------- ---------
Total equity 26,982 21,272 22,318 16,360
Current liabilities
Trade and other payables 21 4,002 3,222 5,556 4,202
Loan and borrowings 23 1,180 1,180 1,235 1,235
--------- --------- --------- ---------
Total liabilities 5,182 4,402 6,791 5,437
--------- --------- --------- ---------
Total equity and liabilities 32,164 25,674 29,109 21,797
--------- --------- --------- ---------
The notes are an integral part of these consolidated financial
statements.
The Company has taken advantage of the exemption conferred by
section 408 of Companies Act 2006 from presenting its own statement
of comprehensive income. Loss after taxation amounting to GBP6.1
million (2021: GBP6.8 million) has been included in the financial
statements of the parent company.
On the 8 June 2023, the Board of Directors of KEFI Gold and
Copper PLC authorised these financial statements for issue.
Harry Anagnostaras-Adams John Edward Leach
Executive Director- Chairman Finance Director
Consolidated statement of changes in equity
Year ended 31 December 2022
Attributable to the owners of the Company
----------------------------------------------------------------------------------- -------- --------
Share Deferred Share Share Foreign Accum. Owners NCI Total
capital shares premium options exch losses Equity
reserve reserve
---------- ----------- --------- ---------- ------------ ---------- --------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2021 2,138 23,328 33,118 1,273 - (37,824) 22,033 1,204 23,237
Loss for the
year - - - - - (4,924) (4,924) - (4,924)
Total
Comprehensive
Expenses - - - - - (4,924) (4,924) - (4,924)
Recognition of
share-based
payments - - - 810 - - 810 - 810
Expired warrants - - - (192) - 192 - - -
Issue of share
capital
and warrants 429 - 2,985 - - - 3,414 - 3,414
Share issue
costs - - (219) - - - (219) - (219)
Non-controlling
interest - - - - - (175) (175) 175 -
---------- ----------- --------- ---------- ------------ ---------- --------- -------- --------
At 31 December
2021 2,567 23,328 35,884 1,891 - (42,731) 20,939 1,379 22,318
Loss for the
year - - - - - (6,355) (6,355) - (6,355)
Other - - - - - - - - -
comprehensive
expense
---------- ----------- --------- ---------- ------------ ---------- --------- -------- --------
Total
Comprehensive
expense - - - - - (6,355) (6,355) - (6,355)
Recognition of
share-based
payments - - - 366 - - 366 - 366
Expired warrants - - - (488) - 488 - - -
Issue of share
capital
and warrants 1,372 - 7,747 1,978 - - 11,097 - 11,097
Share issue ( 444 (444 ( 444
costs - - ) - - - ) - )
Non-controlling 18
interest - - - - (183) (183) 3 -
At 31 December 3,74 ( 48,78
2022 3,939 23,328 43,187 7 - 1) 25,420 1,562 26,982
---------- ----------- --------- ---------- ------------ ---------- --------- -------- --------
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
Share capital: (Note 17) Amount subscribed for ordinary share capital at nominal value
Deferred shares: (Note 17) Under the restructuring of share capital, ordinary shares of in the capital
of the Company
were sub-divided into deferred share.
Share premium: (Note 17) Amount subscribed for share capital in excess of nominal value, net of
issue costs
Share options reserve (Note 18) Reserve for share options and warrants granted but not exercised or lapsed
Foreign exchange reserve Cumulative foreign exchange net gains and losses recognized on
consolidation
Accumulated losses Cumulative net gains and losses recognized in the statement of
comprehensive income,
excluding foreign exchange gains within other comprehensive income
NCI (Non-controlling interest): (Note 19) The portion of equity ownership in a subsidiary not attributable to the
parent company
The notes are an integral part of these consolidated financial
statements.
Company statement of changes in equity
Year ended 31 December 2022
Share capital Deferred Share Share Accumulated Total
shares premium options losses
reserve
------------- --------- --------- --------- ------------ ------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2021 2,138 23,328 33,118 1,273 (40,736) 19,121
Loss for the year - - - - (6,766) (6,766)
Recognition of share-based
payments - - - 810 - 810
Forfeited options - - - - - -
Expired warrants - - - (192) 192 -
Issue of share capital
and warrants 429 - 2,985 - - 3,414
Share issue costs - - (219) - - (219)
------------- --------- --------- --------- ------------ ------------------
At 31 December 2021 2,567 23,328 35,884 1,891 (47,310) 16,360
Loss for the year - - - - (6,107) (6,107)
Recognition of share-based
payments - - - 366 - 366
Forfeited options - - - - - -
Expired warrants - - - (488) 488 -
Issue of share capital
and warrants 1,372 - 7,747 1,978 - 11,097
( 444
Share issue costs - - ) - - (444)
------------- --------- --------- --------- ------------ ------------------
At 31 December 2022 3,939 23,328 43,187 3,747 (52,929) 21,272
------------- --------- --------- --------- ------------ ------------------
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
Share capital (Note 17) Amount subscribed for ordinary share
capital at nominal value
Deferred shares: (Note 17) Under the restructuring of share
capital, ordinary shares of in the capital of the Company were
sub-divided into deferred share (Note 17).
Share premium: (Note 17) Amount subscribed for share capital in
excess of nominal value, net of issue costs
Share options reserve: (Note 18) Reserve for share options and
warrants granted but not exercised or lapsed
Accumulated losses Cumulative net gains and losses recognized in
the statement of comprehensive income
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of cash flows
Year ended 31 December 2022
Notes Year Year Ended
Ended 31.12.21
31.12.22 GBP'000
GBP'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (6,355) (4,924)
Adjustments for:
Depreciation of property, plant and equipment 11 24 17
Share based payments 18 - -
Issue of options 18 366 810
Gain on Dilution of Joint Venture 20.1 (286) (428)
Share of loss from jointly controlled entity 20 2,792 1,482
Impairment on jointly controlled entity 20 109 (418)
Exchange difference (53) 159
Finance costs 8.1 486 1,121
--------- ------------
(2,917) (2,181)
Changes in working capital:
Trade and other receivables (172) (75)
Trade and other payables (72) 806
--------- ------------
Cash used in operations (3,161) (1,450)
Interest paid - -
--------- ------------
Net cash used in operating activities (3,161) (1,450)
--------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Project exploration and evaluation costs 12 (3,477) (2,508)
Acquisition of property plant and equipment 11 (86) (46)
Proceeds from sale of financial assets at
fair value through OCI 14 - 54
Advances to jointly controlled entity 13.2 (1,682) (510)
--------- ------------
Net cash used in investing activities (5,245) (3,010)
--------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 17 6,849 1,045
Issue costs 17 (444) (219)
Proceeds from bridge loans 23.1.2 1,830 2,713
Repayment of convertible notes and bridge
loans 23.1.2 (3) -
--------- ----------
Net cash from financing activities 8,232 3,539
--------- ----------
Net decrease in cash and cash equivalents (174) (921)
Cash and cash equivalents:
At beginning of the year 16 394 1,315
--------- ------------
At end of the year 16 220 394
--------- ------------
Cash and cash equivalents in the Consolidated Statement of
Financial Position includes restricted cash of GBPnil (2021:
GBP20,000).
The notes are an integral part of these consolidated financial
statements.
Company statement of cash flows
Year ended 31 December 2022
Notes Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (6,107) (6,763)
Adjustments for:
Depreciation of property plant equipment 2 2
Share based payments 18 - -
Issue of options 18 366 810
Gain on Dilution of Joint Venture 20.1 (286) (428)
Share of loss from jointly controlled entity 20 2,792 1,482
Impairment on jointly controlled entity 20 109 (418)
Exchange difference (255) 1,767
Expected credit loss 113 43
Finance costs 486 1,121
---------- ---------------
(2,780) (2,384)
Changes in working capital:
Trade and other receivables (47) 82
Trade and other payables 17 1,562
---------- ---------------
Cash used in operations (2,810) (740)
Interest Paid - -
---------- ---------------
Net cash used in operating activities (2,810) (740)
---------- ---------------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property plant and equipment (4) -
Investment in subsidiary 13.1 (1,225) (651)
Advances to jointly controlled entity 13.2 (1,682) (510)
Loan to subsidiary 15 (2,615) (2,684)
---------- ---------------
Net cash used in investing activities (5,526) (3,845)
---------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 17 6,849 1,045
Issue costs 17 (444) (219)
Proceeds from bridge loans 23.1.2 1,830 2,713
Repayment of convertible notes and bridge loans 23.1.2 (3) -
---------- ---------------
Net cash from financing activities 8,232 3,539
---------- ---------------
Net (decrease) in cash and cash equivalents (104) (1,046)
Cash and cash equivalents:
At beginning of the year 16 149 1,195
---------- ---------------
At end of the year 16 45 149
---------- ---------------
Cash and cash equivalents in the Company Statement of Financial
Position includes restricted cash of GBPnil (2021: GBP20,000).
The notes are an integral part of these consolidated financial
statements.
Notes to the consolidated financial statements
Year ended 31 December 2022
1. Incorporation and principal activities
Country of incorporation
KEFI Gold and Copper PLC (the "Company") was incorporated in
United Kingdom as a public limited company on 24 October 2006. Its
registered office is at 27/28, Eastcastle Street, London W1W
8DH.The principal place of business is Cyprus.
Principal activities
The principal activities of the Group for the year were:
-- Exploration for mineral deposits of precious and base
metals and other minerals that appear capable of commercial
exploitation, including topographical, geological, geochemical,
and geophysical studies and exploratory drilling.
-- Evaluation of mineral deposits determining the technical
feasibility and commercial viability of development,
including the determination of the volume and grade of
the deposit, examination of extraction methods, infrastructure
requirements and market and finance studies.
-- Development of mineral deposits and marketing of the
metals produced.
2. Accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied throughout both periods presented in
these financial statements unless otherwise stated.
Basis of preparation and consolidation
The Company and the consolidated financial statements have been
prepared in accordance with UK adopted international accounting
standards in conformity with the requirements of the Companies Act
2006. They comprise the accounts of KEFI Gold and Copper PLC and
all its subsidiaries made up to 31 December 2022. The Company and
the consolidated financial statements have been prepared under the
historical cost convention, except for the revaluation of certain
financial instruments.
Business combinations
Business combinations are accounted for using the acquisition
method as at the acquisition date. Subsidiaries are all entities
over which the Group has power to direct relevant activities and an
exposure to variable returns. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They
are de-consolidated from the date that control ceases.
When the excess is positive, goodwill is recognised in the
statement of financial position, if the excess is negative, a
bargain purchase price is recognised in profit or loss.
Transaction costs, other than those associated with the issue of
debt or equity securities, that the Group incurs in connection with
a business combination are expensed as incurred.
Any contingent consideration payable is measured at fair value
at the acquisition date. If the contingent consideration is
classified as equity, then it is not re-measured, and settlement is
accounted for within equity. Otherwise, subsequent changes in the
fair value of the contingent consideration are recognised in profit
or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial
statements of subsidiaries have been included in the consolidated
financial statements from the date that control commences until the
date that control ceases.
An investor controls an investee if and only if the investor has
all the following:
An investor controls an investee when it is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee.
(a) power over the investee;
(b) exposure, or rights, to variable returns from its
involvement with the investee; and
(c) the ability to use its power over the investee to affect the
amount of the investor's returns.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any income and
expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Going concern
The assessment of the Group's ability to continue as a going
concern involves judgment regarding future funding available for
the development of the Tulu Kapi Gold project, advancement of the
Saudi Arabia exploration properties and for working capital
requirements. As part of this assessment, management have
considered funds on hand at the date of approval of the financial
statements, planned expenditures covering a period of at least 12
months from the date of approving these financial statements and
its suitability in the context of the Group's long term strategic
objectives. The Group also recognises that within the going concern
consideration period it will require funding for its share of the
construction development costs of the Tulu Kapi mine (Further
details on project financing plan are summarised in the Finance
Director's Report).
TKGM reactivated Tulu Kapi project launch preparations in
June-2022 with the signing of an initial Umbrella Agreement. This
was followed by a final Umbrella Agreement in April 2023. However,
funding requirements and project timing could still be impacted by
security concerns or other factors in Ethiopia. The Ministry of
Mines in Ethiopia has received official notification that the
project is currently progressing according to the planned timetable
and will continue to do so, provided that the security situation
remains satisfactory. There are a few remaining tasks that need to
be addressed, including the government's completion of necessary
regulatory requirements and the successful and timely finalization
of project financing. The Company maintains a close watch on the
condition of security and uses an independent security specialist
to provide ongoing situational assessments and reports. (Refer to
"Security Risk" section of the Principal Risks and Uncertainties
Report for additional details).The Tulu Kapi project financing
syndicate's arrangements with project lenders AFC and TDB for $190
million project loan facilities [has received approval of their
respective credit committees subject to normal conditions precedent
including KEFI raising additional equity (refer to "Financing Risk"
of the Principal Risks and Uncertainties Report for more details)],
are being formalised and definitive agreements are in
preparation.
In May 2023, the Company announced the successful completion of
an unconditional placement of GBP5.5 million and, subject to
shareholder approval at the annual general meeting on 30 June 2023,
a further placement of GBP0.9 million. As of the date of this
financial report, GBP5.1 million has been utilised by the Company
to bring creditors into normal trading terms, repay its debts and
increase working capital. The balance of the placements will be
received subject to shareholder approval and share placement
settlement terms. Forecasts show that the Group will require
additional funding in Q3 2023 to meet project development, working
capital needs and other planned expenditures. Should funding be
required before financial close (ie full funding) of the Tulu Kapi
Gold Project, the Company has potential access to short term
funding from shareholders and other alternatives on offer, but
currently not committed, as has been the case in the past.
Accordingly, and as set out above, this indicates the existence
of a material uncertainty which may cast significant doubt over the
Group and Company's ability to continue as a going concern and,
therefore, it may be unable to realise its assets and discharge its
liabilities in the normal course of business. Based on historical
experience and current ongoing proactive discussions with
stakeholders, the Board has a reasonable expectation that
definitive binding agreements will be signed. Accordingly, the
Board has a reasonable expectation that the Group will be able to
continue to raise funds to meet its objectives and obligations.
The financial statements therefore do not include the
adjustments that would result if the Group was unable to continue
as a going concern.
Functional and presentation currency
The individual financial statements of each Group entity are
measured and presented in the currency of the primary economic
environment in which the entity operates. The consolidated
financial statements of the Group and the statement of financial
position and equity of the Company are in British Pounds ("GBP")
which is the functional currency of the Company and the
presentation currency for the consolidated financial statements.
Functional currency is also determined for each of the Company's
subsidiaries, and items included in the financial statements of the
subsidiary are measured using that functional currency. GBP is the
functional currency of all subsidiaries.
1) Foreign currency translation
Foreign currency transactions are translated into the
presentational currency using the exchange rates prevailing at the
date of the transactions. Gains and losses resulting from the
settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies
are recognized in profit or loss in the statement of comprehensive
income.
2) Foreign operations
On consolidation, the assets and liabilities of the consolidated
entity's foreign operations are translated at exchange rates
prevailing at the reporting date. Income and expense items are
translated at the average exchange rates for the period unless
exchange rates fluctuate significantly in which case they are
recorded at the actual rate. Exchange differences arising, if any,
are recognized in the foreign currency translation reserve and as a
component of other comprehensive income, and recognized in profit
or loss on disposal of the foreign operation.
Revenue recognition
The Group had no sales or revenue during the year ended 31
December 2022 (2021: Nil).
Property plant and equipment
Property plant and equipment are stated at their cost of
acquisition at the date of acquisition, being the fair value of the
consideration provided plus incidental costs directly attributable
to the acquisition less depreciation.
Depreciation is calculated using the straight-line method to
write off the cost of each asset to their residual values over
their estimated useful life.
The annual depreciation rates used are as follows:
Furniture, fixtures and office equipment 25%
Motor vehicles 25%
Plant and equipment 25%
Intangible Assets
Cost of licenses to mines are capitalised as intangible assets
which relate to projects that are at the pre-development stage. No
amortisation charge is recognised in respect of these intangible
assets. Once the Group starts production these intangible assets
relating to license to mine will be depreciated over life of
mine.
Interest in jointly controlled entities
The group is a party to a joint arrangement when there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the group and at least
one other party. Joint control exists where unanimous consent is
required over relevant decisions.
The group classifies its interests in joint arrangements as
either:
- Joint ventures: where the group has rights to only the
net assets of the joint arrangement.
- Joint operations: where the group has both the rights to
assets and obligations for the liabilities of the joint
arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers:
- The structure of the joint arrangement.
- The legal form of joint arrangements structured through
a separate vehicle.
- The contractual terms of the joint arrangement agreement.
- Any other facts and circumstances (including any other contractual
arrangements).
The Group accounts for its interests in joint ventures using the
equity method. The Group accounts for its interests in joint
operations by recognising its share of assets, liabilities, and
expenses in accordance with its contractually conferred rights and
obligations.
Finance costs
Interest expense and other borrowing costs are charged to the
statement of comprehensive income as incurred and is recognised
using the effective interest method.
Tax
The tax payable is based on taxable profit for the period.
Taxable profit differs from net profit as reported in the statement
of comprehensive income because it excludes items of income or
expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. Tax is
payable in the relevant jurisdiction at the rates described in note
9.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax
liabilities are generally recognized for all taxable differences
and deferred tax assets are recognized to the extent that taxable
profits will be available against which deductible temporary
differences can be utilized. The amount of deferred tax is based on
the expected manner of realisation or settlement of the carrying
amounts of assets and liabilities, using tax rates that have been
enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off deferred tax assets against
deferred tax liabilities and when the deferred taxes relate to the
same fiscal authority.
Investments
Investments in subsidiary companies are stated at cost less
provision for impairment in value, which is recognized as an
expense in the period in which the impairment is identified, in the
Company accounts.
Exploration costs
The Group has adopted the provisions of IFRS 6 "Exploration for
and Evaluation of Mineral Resources". The company still applies
IFRS 6 until the project financing is secured. Once financing is
secured the project moves to the development stage.
Exploration and evaluation expenditure, including acquisition
costs of licences, in respect of each identifiable area of interest
is expensed to the statement of comprehensive income as incurred,
until the point at which development of a mineral deposit is
considered economically viable and the formal definitive
feasibility study is completed. At this point costs incurred are
capitalised under IFRS 6 because these costs are necessary to bring
the resource to commercial production.
Exploration expenditures typically include costs associated with
prospecting, sampling, mapping, diamond drilling and other work
involved in searching for ore. Evaluation expenditures are the
costs incurred to establish the technical and commercial viability
of developing mineral deposits identified through exploration
activities. Evaluation expenditures include the cost of directly
attributable employee costs and economic evaluations to determine
whether development of the mineralized material is commercially
justified, including definitive feasibility and final feasibility
studies.
Impairment reviews for deferred exploration and evaluation
expenditure are carried out on a project by project basis, with
each project representing a potential single cash generating unit.
An impairment review is undertaken when indicators of impairment
arise such as: (i) unexpected geological occurrences that render
the resource uneconomic; (ii) title to the asset is compromised;
(iii) variations in mineral prices that render the project
uneconomic; (iv) substantive expenditure on further exploration and
evaluation of mineral resources is neither budgeted nor planned;
and (v) the period for which the Group has the right to explore has
expired and is not expected to be renewed.
On commencement of development, Exploration and evaluation
expenditure are reclassified to development assets, following
assessment for any impairment.
Development expenditure
Once the Board decides that it intends to develop a project,
development expenditure is capitalized as incurred, but only where
it meets criteria for recognition as an intangible under IAS 38 or
a tangible asset under IAS 16 and then amortized over the estimated
useful life of the area according to the rate of depletion of the
economically recoverable reserves or over the estimated useful life
of the mine, if shorter.
Share based compensation benefits
IFRS 2 "Share based Payment" requires the recognition of equity
settled share-based payments at fair value at the date of grant and
the recognition of liabilities for cash settled share based
payments at the current fair value at each statement of financial
position date. The total amount expensed is recognized over the
vesting period, which is the period over which performance
conditions are to be satisfied. The fair value is measured using
the Black Scholes pricing model. The inputs used in the model are
based on management's best estimate, including consideration of the
effects of non-transferability, exercise restrictions and
behavioural considerations.
Where the Group issues equity instruments to persons other than
employees, the statement of comprehensive income is charged with
the fair value of goods and services received.
Convertible loan notes
Convertible loan notes are regarded as compound instruments,
consisting of a liability component and an equity component. The
component parts of compound instruments are classified separately
as financial liabilities and equity in accordance with the
substance of the contractual arrangement. At the date of issue, the
fair value of the liability component is estimated using the
prevailing market interest rate for a similar non-convertible
instrument. This amount is recorded as a liability on an amortised
cost basis until extinguished upon conversion or at the
instrument's maturity date. The equity component is determined by
deducting the amount of the liability component from the fair value
of the compound instrument as a whole. This is recognised and
included in equity, net of income tax effects, and is not
subsequently remeasured.
When the terms of a new convertible loan arrangement are such
that the option will not be settled by the Company in exchange for
a fixed number of its own equity instruments for a fixed amount of
cash, the convertible loan (the host contract) is either accounted
for as a hybrid financial instrument and the option to convert is
an embedded derivative or the whole instrument is designated at
fair value through profit and loss. Where the instrument is
bifurcated, the embedded derivative, where material, is separated
from the host contract as its risks and characteristics are not
closely related to those of the host contract. At each reporting
date, the embedded derivative is measured at fair value with
changes in fair value recognised in the income statement as they
arise. The host contract carrying value on initial recognition is
based on the net proceeds of issuance of the convertible loan
reduced by the fair value of the embedded derivative and is
subsequently carried at each reporting date at amortised cost.
Prior to conversion the embedded derivative or fair value
through profit and loss instrument is revalued at fair value. Upon
conversion of the loan, the liability, including the derivative
liability where applicable, is derecognised in the statement of
financial position. At the same time, an amount equal to the
redemption value is recognised within equity. Any resulting
difference is recognised in retained earnings. Where the Company
enters equity drawdown facilities, whereby funds are drawn down
initially and settled in shares at a later date, those shares are
recorded initially as issued at fair value based on management's
best estimation, with a subsequent revaluation recorded based on
the final value of the instrument at the date the shares are issued
or allocated. Where the value of the shares is fixed but the amount
is determined later, the fair value of the shares to be issued is
deemed to be the value of the amount drawn down, less any
transaction and listing costs.
Warrants
Warrants issued are recognised at fair value at the date of
grant. The charge is expensed on a straight-line basis over the
vesting period. The fair value is measured using the Trinomial
Model. Where warrants are considered to represent a transaction
cost attributable to a share placement, the fair value is recorded
in the warrant reserve and deducted from the share premium.
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date
that they are originated. All other financial assets are recognised
initially on the trade date, which is the date that the Group
becomes a party to the contractual provisions of the
instrument.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in
which substantially all the risks and rewards of ownership of the
financial asset are transferred. Any interest in such transferred
financial assets that is created or retained by the Group is
recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired.
Amortised cost: These are financial assets where the objective
is to hold these assets in order to collect contractual cash flows
and the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for
impairment. Trade and other receivables, as well as cash are
classified as amortised cost.
Financial asset at fair value through other comprehensive
income: Financial assets (debt) which are held with the objective
as above but which maybe intended to be sold before maturity and
also includes strategic equity investments (that are not
subsidiaries, joint ventures or associates) which would be normally
held at fair value through profit or loss, could on irrevocable
election be measured with fair value changes flow through OCI. On
disposal, the gain or loss will not be recycled to P&L.
Financial asset at fair value through profit and loss: Financial
assets not meeting the criteria above and derivatives.
Impairment of financial assets: Financial assets at amortised
cost consist of trade receivables, loans, cash and cash equivalents
and debt instruments. Impairment losses are assessed using the
forward-looking Expected Credit Loss (ECL) approach. Trade
receivable loss allowances are measured at an amount equal to
lifetime ECL's. Loss allowances are deducted from the gross
carrying amount of the assets
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, and call
deposits with maturities of three months or less from the
acquisition date that are subject to an insignificant risk of
changes in their fair value and are used by the Group in the
management of its short-term commitments.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and
subordinated liabilities on the date that they are originated. All
other financial liabilities are recognised initially on the trade
date, which is the date that the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities as
other financial liabilities. Such financial liabilities are
recognised initially at fair value less any directly attributable
transaction costs. After initial recognition, these financial
liabilities are measured at amortised cost using the effective
interest method.
Other financial liabilities comprise trade and other payables
and borrowings.
Financial assets and liabilities at fair value through the
profit or loss
Financial assets and liabilities at fair value through the
profit or loss comprise derivative financial instruments. After
initial recognition, financial assets at fair value through the
profit or loss are stated at fair value. Movements in fair values
are recognised in profit or loss unless they relate to derivatives
designated and effective as hedging instrument, in which event the
timing of the recognition in the profit or loss depends on the
nature of the hedging relationship. The Group does not currently
have any such hedging instruments.
New standards and interpretations applied
The following new standards and interpretations became effective
on 1 January 2022 and have been adopted by the Group.
Effective period
commencing on or
after
IFRS 3 Amendments to IFRS 3: References 01 January 2022
to Conceptual Framework
---- --------------------------------------- ------------------
IAS 16 Amendments to IAS 16: Property, 01 January 2022
Plant and Equipment: Proceeds
before Intended Use
---- --------------------------------------- ------------------
IAS 37 Amendments to IAS 37: Onerous 01 January 2022
Contracts - Cost of Fulfilling
a Contract
---- --------------------------------------- ------------------
Improvements Improvements to IFRS 1, IFRS 01 January 2022
to IFRSs' 9, IFRS 16 and IAS 41
---- --------------------------------------- ------------------
Amendments to (1) Amendments to IAS 8: Definition 01 January 2023
IAS 8 of accounting estimates
---- --------------------------------------- ------------------
Amendments to (1) Amendments to IAS 1 and IFRS 01 January 2023
IAS 1 and IFRS Practice Statement 2 - Disclosure
Practice Statement of accounting policies
2
---- --------------------------------------- ------------------
Amendments to (1) Amendments to IAS 12: Deferred 01 January 2023
IAS 12 tax related to assets and liabilities
arising from a Single transaction
---- --------------------------------------- ------------------
Amendments to (1) Amendments to IFRS 16: Liability 01 January 2024
IFRS 16 in a Sale and Leaseback
---- --------------------------------------- ------------------
Amendments IAS (1) Amendments to IAS 1: Classification 01 January 2024
1 of liabilities as current or
noncurrent
Amendments IAS (1) Amendments to IAS 1: Non-current 01 January 2024
1 Liabilities with Covenants
---- --------------------------------------- ------------------
(1)Not yet endorsed.
These amendments had no impact on the interim condensed
consolidated financial statements of the Group. The Group intends
to use the practical expedients in future periods if they become
applicable.
New standards, amendments and interpretations that are not yet
effective and have not been early adopted.
-- Revisions to the Conceptual Framework for Financial Reporting.
The principal accounting policies adopted are set out above.
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early.
The Group is currently assessing the impact of these new
accounting standards and amendments.
The Group does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the
group.
3. Financial risk management
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash
equivalents comprise cash at bank and in hand with an original
maturity date of less than three months. To mitigate our inherent
exposure to credit risk we maintain policies to limit the
concentration of credit risk and ensure liquidity of available
funds. We also invest our cash and equivalents in rated financial
institutions, primarily within the United Kingdom and other
investment grade countries, which are countries rated BBB- or
higher by S&P the Group does not have a significant
concentration of credit risk arising from its bank holdings of cash
and cash equivalents.
Financial risk factors
The Group is exposed to market risk (interest rate risk and
currency risk), liquidity risk and capital risk management arising
from the financial instruments it holds. The risk management
policies employed by the
Group to manage these risks are discussed below:
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group does not consider this risk
to be significant.
The Company has borrowings outstanding from its subsidiaries,
the ultimate realisation of which depends on the successful
exploration and realization of the Group's intangible exploration
assets. This in turn is subject to the availability of financing to
maintain the ongoing operations of the business. The Group manages
its financial risk to ensure sufficient liquidity is available to
meet foreseeable needs and to invest cash assets safely and
profitably.
Market risk - Interest rate risk
Interest rate risk is the risk that the value of financial
instruments will fluctuate due to changes in market interest rates.
The Group's operating cash flows are substantially independent of
changes in market interest rates as the interest rates on cash
balances are very low at this time. Borrowings issued at variable
rates expose the Group to cash flow interest rate risk. Borrowings
issued at fixed rates expose the Group to fair value interest rate
risk. The Group's management monitors the interest rate
fluctuations on a continuous basis and acts accordingly.
At the reporting date the interest rate profile of
interest-bearing financial instruments was:
2022 2021
GBP'000 GBP'000
------- -------
Variable rate instruments
Financial assets 220 394
------- -------
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 December
2022 would have increased equity and profit or loss by the amounts
shown below. This analysis assumes that all other variables, in
particular foreign currency rates, remain constant. Given current
interest rate levels, a decrease of 25 basis points has been
considered, with the impact on profit and equity shown below.
Equity Profit or Loss Equity Profit or Loss
2022 2022 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
-------- --------------- -------- ---------------
Variable rate instruments
Financial assets - increase of 100 basis points 2 2 4 4
Financial assets - decrease of 25 basis points (0.5) (0.5) (1) (1)
-------- --------------- -------- ---------------
Currency risk
Currency risk is the risk that the value of financial
instruments will fluctuate due to changes in foreign exchange
rates. Currency risk arises when future commercial transactions and
recognized assets and liabilities are denominated in a currency
that is not the functional currency of the entity.
The Group is exposed to foreign exchange risk arising from
various currency exposures primarily with respect to the Australian
Dollar, Euro, Turkish Lira, US Dollar, CHF, Ethiopian Birr and
Saudi Arabian Riyal. Since 1986 the Saudi Arabian Riyal has been
pegged to the US Dollar, it is fixed at USD/SAR 3.75. The Group's
management monitors the exchange rate fluctuations on a continuous
basis and acts accordingly.
The carrying amounts of the Group's foreign currency denominated
monetary assets and monetary liabilities at the reporting date are
as follows; with the Saudi Arabian Riyal exposure being included in
the USD amounts.
Liabilities Assets Liabilities Assets
2022 2022 2021 2021
----------- -------------- ------------ --------
GBP'000 GBP'000 GBP'000 GBP'000
Australian Dollar 188 0 67 -
Euro 215 29 366 -
US Dollar 2,014 26 2,126 12
Ethiopian Birr 779 537 1,256 511
Sensitivity analysis continued
A 10% strengthening of the British Pound against the following
currencies at 31 December 2022 would have increased/(decreased)
equity and profit or loss by the amounts shown in the table below.
This analysis assumes that all other variables, in particular
interest rates, remain constant. For a 10% weakening of the British
Pound against the relevant currency, there would be an equal and
opposite impact on the loss and equity .
Equity Profit or Loss Equity Profit or Loss
2022 2022 2021 2021
-------- --------------- -------- ---------------
GBP'000 GBP'000 GBP'000 GBP'000
AUD Dollar 19 19 7 7
Euro 19 19 37 37
US Dollar 199 199 211 211
Ethiopia ETB 24 24 74 74
-------- --------------- -------- ---------------
Liquidity risk
The Group and Companies raise funds as required on the basis of
projected expenditure for the next 6 months, depending on
prevailing factors. Funds are generally raised on AIM from eligible
investors. The success or otherwise of such capital raisings is
dependent upon a variety of factors including general equities and
metals mark sentiment, macro-economic outlook and other factors.
When funds are sought, the Group balances the costs and benefits of
equity and other financing options. Funds are provided to projects
based on the projected expenditure.
Carrying Amount Contractual Cash Less than 1 year Between 1-5 year More than 5 years
flows
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
The Group
31-Dec-22
Trade and other
payables 4,003 4,003 4,003 - -
Loans and Borrowings 1,180 1,180 1,180 - -
5,183 5,183 5,183 - -
---------------- -------------------- ----------------- ----------------- -----------------
31-Dec-21
Trade and other
payables 5,556 5,556 5,556 - -
Loans and Borrowings 1,235 1,235 1,235 - -
6,791 6,791 6,791 - -
---------------- -------------------- ----------------- ----------------- -----------------
The Company
31-Dec-22
Trade and other
payables 3,222 3,222 3,222 - -
Loans and Borrowings 1,180 1,180 1,180 - -
4,402 4,402 4,402 - -
---------------- -------------------- ----------------- ----------------- -----------------
31-Dec-21
Trade and other
payables 4,202 4,202 4,202 - -
Loans and Borrowings 1,235 1,235 1,235 - -
5,437 5,437 5,437 - -
---------------- -------------------- ----------------- ----------------- -----------------
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefit for other stakeholders
and to maintain an optimal capital structure to reduce the costs of
capital. This is done through the close monitoring of cash
flows.
The capital structure of the Group consists of cash and cash
equivalents of GBP220,000 (2021: GBP394,000) and equity
attributable to equity of the parent, comprising issued capital and
deferred shares of GBP27,267,000 (2021: GBP25,895,000), other
reserves of GBP46,934,000, (2021: GBP37,775,000) and accumulated
losses of GBP48,781,000 (2021: GBP42,731,000). The Group has no
long-term debt facilities.
Fair value estimation
The Group has certain financial assets and liabilities that are
held at fair value. The fair value hierarchy establishes three
levels to classify the inputs to valuation techniques to measure
fair value:
Classification of financial assets and liabilities
Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 - inputs other than quoted prices included within level
1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices);
and
Level 3 - inputs for the asset or liability that are not based
on observable market data (that is, unobservable inputs).
Fair value estimation
The fair value of trade and other receivables is estimated as
the present value of future cash flows discounted at the market
rate of interest at the reporting date. For receivables and
payables with a remaining life of less than one year, the notional
amount is deemed to reflect fair value. All other receivables and
payables are, where material, discounted to determine the fair
value.
Differences arising between the carrying and fair value are
considered not significant and no-adjustment is made in these
accounts. The carrying and fair values of intercompany balances are
the same as if they are repayable on demand.
The fair values of the Group's loans and other borrowings are
considered equal to the book value as the effect of discounting on
these financial instruments is not considered to be material.
As at each of December 31, 2022 and December 31, 2021, the
levels in the fair value hierarchy into which the Group's financial
assets and liabilities measured and recognized in the statement of
financial position at fair value are categorized are as
follows:
Carrying Amounts Fair Values
2022 2021 2022 2021
-------- -------- -------- --------
Financial assets GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents (Note 16)
- Level 1 220 394 220 394
Financial assets at fair value through - - - -
OCI (Note 14) - Level 2
Trade and other receivables (Note 15) 463 291 463 291
-------- -------- -------- --------
Financial liabilities
Trade and other payables (Note 21) 4,002 5,556 4,002 5,556
Loans and borrowings (Note 23) 1,180 1,235 1,180 1,235
-------- -------- -------- --------
4.Use and revision of accounting estimates and judgements
The preparation of the financial report requires the making of
estimations and assumptions that affect the recognized amounts of
assets, liabilities, revenues and expenses and the disclosure of
contingent liabilities. The estimates and associated assumptions
are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results
of which form the basis of making the judgments about carrying
values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
Accounting Judgement:
Going concern
The going concern presumption depends principally on securing
funding to develop the Tulu Kapi gold mining project as an
economically viable mineral deposit, and the availability of
subsequent funding to extract the resource, or alternatively the
availability of funding to extend the Company's and Group's
exploration activities (Note 2).
Capitalisation of exploration and evaluation costs
The directors consider that the project in its Licence areas in
Saudi Arabia has not yet met the criteria for capitalization. These
criteria include, among other things, the development of
feasibility studies to provide confidence that mineral deposits
identified are economically viable. Capitalized Exploration &
Evaluation costs for the Group's project in Ethiopia have been
recognized on acquisition, and have continued to be capitalised
since that date, in accordance with IFRS 6. The technical
feasibility of the project has been confirmed, and once the
financing is secure the related assets will be reclassified as
development costs in line with above.
Estimates:
Share based payments.
Equity-settled share awards are recognized as an expense based
on their fair value at date of grant. The fair value of equity
settled share options is estimated using option valuation models,
which require inputs such as the risk-free interest rate, expected
dividends, expected volatility and the expected option life, and is
expensed over the vesting period. Some of the inputs used are not
market observable and are based on estimates derived from available
data.
The models utilized are intended to value options traded in
active markets. The share options issued by the Group, however,
have several features that make them incomparable to such traded
options. The variables used to measure the fair value of
share-based payments could have a significant impact on that
valuation, and the determination of these variables require a
significant amount of professional judgement.
A minor change in a variable which requires professional
judgement, such as volatility or expected life of an instrument,
could have a quantitatively material impact on the fair value of
the share-based payments granted, and therefore will also result in
the recognition of a higher or lower expense in the Consolidated
Statement of Comprehensive Income. Judgement is also exercised in
assessing the number of options subject to non-market vesting
conditions that will vest. These judgments are reflected in note
18.
Impairment review of asset carrying values (Note 12)
Determining whether intangible exploration and evaluation assets
are impaired requires an assessment of whether there are any
indicators of impairment, by reference to specific impairment
indicators prescribed in IFRS 6 (Note 2). This requires judgement.
This includes the assessment, on a project-by-project basis, of the
likely recovery of the cost of the Group's Intangible exploration
assets in the light of future production opportunities based upon
ongoing geological studies. This also involves the assessment of
the period for which the entity has the right to explore in the
specific area, or if it has expired during the period or will
expire soon, if it is not expected to be renewed. Management has a
continued plan to explore. In the Tulu Kapi Gold Project
Information Memorandum dated November 2022 there were no indicators
of impairment. TKGM license developments are reflected in Note
12.
5.Operating segments
The Group has two operating segments, being that of mineral
exploration and corporate activities. The Group's exploration
activities are in the Kingdom of Saudi Arabia (through the jointly
controlled entity) and Ethiopia. Its corporate costs which include
administration and management are based in Cyprus.
Corporate Ethiopia Saudi Adjustments Consolidated
Arabia
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------- -------- ------------- --------------------
2022
Corporate costs (2,653) (112) - - (2,765)
Foreign exchange
gain/(loss) 172 (251) - (79)
Gain on Dilution
of Joint Venture - - 285 - 285
Net Finance costs (895) - - - (895)
----------------- ------------- -------- ------------- --------------------
(Loss)/gain before
jointly controlled
entity (3,376) (363) 285 - (3,454)
Share of loss from
jointly controlled
entity - - (2,792) - (2,792)
Impairment of jointly
controlled entity - - (109) - (109)
----------------- ------------- -------- ------------- --------------------
Loss before tax (3,376) (363) (2,616) - (6,355)
Tax - - - - -
----------------- ------------- -------- ------------- --------------------
Loss for the year (3,376) (363) (2,616) - (6,355)
----------------- ------------- -------- ------------- --------------------
Total assets 21,089 21,074 - (9,999) 32,164
Total liabilities 3,988 11,194 - (9,999) 5,183
----------------- ------------- -------- ------------- --------------------
Corporate Ethiopia Saudi Adjustments Consolidated
Arabia
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2021
Corporate costs (3,007) (68) - - (3,075)
Foreign exchange
(loss)/gain (1,777) 1,769 - - (8)
Gain on Dilution
of Joint Venture - - 428 - 428
Net Finance costs (1,205) - - - (1,205)
----------------- ------------- -------- ------------- --------------------
(Loss)/gain before
jointly controlled
entity (5,989) 1,701 428 - (3,860)
Share of loss from
jointly controlled
entity - - (1,482) - (1,482)
Reversal of Impairment
of jointly controlled
entity - - 418 - 418
================= ============= ======== ============= ====================
Loss before tax (5,989) 1,701 (636) - (4,924)
Tax - - - - -
================= ============= ======== ============= ====================
Loss for the year (5,989) 1,701 (636) - (4,924)
================= ============= ======== ============= ====================
Total assets 15,966 19,200 - (6,057) 29,109
Total liabilities 3,885 8,963 - (6,057) 6,791
================= ============= ======== ============= ====================
6. Expenses by nature 2022 2021
GBP'000 GBP'000
Depreciation of property, plant and equipment (Note 11) 24 17
Directors' fees and other benefits (Note 22.1) 582 535
Consultants' costs 205 238
Auditors' remuneration - audit current year 97 72
Legal Costs 283 737
Ongoing Listing Costs 174 125
Other expenses 322 166
Financial Project Advisory Costs 161 111
Shareholder Communications 299 121
Travelling Costs 253 68
--------- ---------
Total Administrative Expenses 2,400 2,190
Share of losses from jointly controlled entity (Note 5 and Note 20) 2,792 1,482
Impairment/ (reversal of impairment) of jointly controlled entity (Note 20) 109 (418)
Share based option benefits to directors (Note 18) 192 407
Share based benefits to employees (Note 18) 74 148
Share based benefits to key management (Note 18) 100 255
Share based benefits to suppliers - -
Cost for long term project finance (Note 8) 368 84
--------- ---------
Operating loss 6,035 4,148
--------- ---------
The Group's stages of operations in Saudi Arabia as at the
year-end and as at the date of approval of these financial
statements have not yet met the criteria for capitalization of
exploration costs. The Company only capitalises direct evaluation
and exploration costs for the Tulu Kapi gold project in
Ethiopia.
7. Staff costs 2022 2021
GBP'000 GBP'000
Salaries 1,299 1,170
Social insurance costs and other funds 281 220
Costs capitalised as exploration (1,516) (1,325)
-------- ---------
Net Staff Costs 64 65
-------- ---------
Average number of employees 51 49
-------- ---------
Excludes Directors' remuneration and fees which are disclosed in
note 22.1. TK project direct staff costs of GBP1,516,000 are
capitalised in evaluation and exploration costs and all remaining
salary costs are expensed. Most of the group employees are involved
in Tulu Kapi Project in Ethiopia
2022 2021
8. Finance costs and other transaction costs GBP'000 GBP'000
8.1 Total finance costs
Interest on short term loan 527 1,121
Total finance costs 527 1,121
--------- ---------
8.2 Total other transaction costs
Cost for long term project finance 368 84
--------- ---------
Total other transaction costs 368 84
--------- ---------
The above costs for long term project finance relate to
pre-investigation activities required to fund TK Gold project.
9. Tax 2022 2021
GBP'000 GBP'000
Loss before tax (6,355) (4,924)
-------- --------
Tax calculated at the applicable tax rates at 12.5% (794) (616)
Tax effect of non-deductible expenses 556 598
Tax effect of tax losses 270 70
Tax effect of items not subject to tax (32) (52)
-------- --------
Charge for the year - -
-------- --------
The Company is resident in Cyprus for tax purposes. A deferred
tax asset of GBP1,491k (2021: GBP1,409k) has not been accounted for
due to the uncertainty over future recoverability.
Cyprus
The corporation tax rate is 12.5%. Under certain conditions
interest income may be subject to defence contribution at the rate
of 30%. In such cases this interest will be exempt from corporation
tax. In certain cases, dividends received from abroad may be
subject to defence contribution at the rate of 20% for the tax year
2013 and 17% for 2014 and thereafter. Due to tax losses sustained
in the year, no tax liability arises on the Company. Under current
legislation, tax losses may be carried forward and be set off
against taxable income of the five succeeding years. As at 31
December 2022, the balance of tax losses which is available for
offset against future taxable profits amounts to GBP 11,931k (2021:
GBP 11,269k). Generally, loss of one source of income can be set
off against income from other sources in the same year. Any loss
remaining after the set off is carried forward for relief over the
next 5 year period.
Tax
Year 2018 2019 2020 2021 2022 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------- ------------- ------------- ------------- ------------- ------------
Losses carried
forward 1,753 2,110 3,790 2,402 1,876 11,931
------------- ------------- ------------- ------------- ------------- ------------
Ethiopia
KEFI Minerals (Ethiopia) Limited is subject to other direct and
indirect taxes in Ethiopia through its foreign operations. The
mining industry in Ethiopia is relatively undeveloped. As a result,
tax regulations relating to mining enterprises are evolving. There
are transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is
uncertain. The Group recognises liabilities for anticipated tax
audit issues based on estimates of whether additional taxes will be
due. Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will
impact the current and deferred tax provisions in the period in
which such determination is made.
The government of Ethiopia cut the corporate income tax rate for
miners to 25% more than three years ago from 35% and has lowered
the precious metals royalty rate to 7% from 8%. According to the
Proclamation, holders of a mining licence are required to pay
royalty on the sales price of the commercial transaction of the
minerals produced. Development expenditure of a licensee or
contractor shall be treated as a business intangible with a useful
life of four years. If a licensee or contractor incurs development
expenditure before the commencement of commercial production shall
apply on the basis that the expenditure was incurred at the time of
commencement of commercial production. The mining license
stipulates that every mining company should allocate 5% free equity
shares to the Government of Ethiopia.
United Kingdom
KEFI Minerals (Ethiopia) Limited is resident in United Kingdom
for tax purposes. The corporation tax rate is 19%. In December
2016, KEFI Minerals (Ethiopia) Limited elected under CTA 2009
section 18A to make exemption adjustments in respect of the
Company's foreign permanent establishment's amounts in arriving at
the Company's taxable total profits for each relevant accounting
period. This is an exemption for UK corporation tax in respect of
the profits of the Ethiopian branch.
10. Loss per share
The calculation of the basic and fully diluted loss per share
attributable to the ordinary equity holders of the parent is based
on the following data:
Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
Net loss attributable to equity shareholders (6,355) (4,924)
Net loss for basic and diluted loss attributable to equity shareholders (6,355) (4,924)
-------------- --------------
Weighted average number of ordinary shares for basic loss per share (000's) 3,537,301 2,178,908
Weighted average number of ordinary shares for diluted loss per share (000's) 4,632,172 2,351,643
-------------- --------------
Loss per share:
Basic loss per share (pence) (0.180) (0.226)
-------------- --------------
There was no impact on the weighted average number of shares
outstanding during 2022 as all Share Options and Warrants were
excluded from the weighted average dilutive share calculation
because their effect would be anti-dilutive and therefore both
basic and diluted earnings per share are the same in 2022.
11. Property, plant and equipment
Motor Vehicles Plant and equipment Furniture, fixtures and Total
office equipment
GBP'000
GBP'000 GBP'000
GBP'000
--------------- -------------------- ----------------------------- ---------
The Group
Cost
At 1 January 2021 71 102 86 259
Additions - 12 33 45
=============== ==================== ============================= =========
At 31 December 2021 71 114 119 304
Additions 42 11 33 86
Write-offs - - (15) (15)
--------------- -------------------- ----------------------------- ---------
At 31 December 2022 113 125 137 375
--------------- -------------------- ----------------------------- ---------
Accumulated Depreciation
At 1 January 2021 71 75 78 224
Charge for the year - 7 10 17
=============== ==================== ============================= =========
At 31 December 2021 71 82 88 241
Charge for the year 2 11 11 24
Write offs (15) (15)
--------------- -------------------- ----------------------------- ---------
At 31 December 2022 73 93 84 250
--------------- -------------------- ----------------------------- ---------
Net Book Value at 31 December
2022 40 32 53 125
--------------- -------------------- ----------------------------- ---------
Net Book Value at 31 December
2021 - 32 31 63
--------------- -------------------- ----------------------------- ---------
The above property, plant and equipment is in Ethiopia.
12. Intangible assets
Total exploration and project
evaluation cost
GBP'000
The Group
Cost
At 1 January 2021 24,776
Additions 3,851
--------------------------------------
At 31 December 2021 28,627
Additions 2,995
--------------------------------------
At 31 December 2022 31,622
--------------------------------------
Accumulated Amortization and Impairment
At 1 January 2021 266
--------------------------------------
At 31 December 2021 266
Impairment Charge for the year -
--------------------------------------
At 31 December 2022 266
--------------------------------------
Net Book Value at 31 December 2022 31,356
--------------------------------------
Net Book Value at 31 December 2021 28,361
--------------------------------------
Costs can only be capitalised after the entity has obtained
legal rights to explore in a specific area but before extraction
has been demonstrated to be both technically feasible and
commercially viable .
The addition of GBP3 million is directly associated with the
TKGM gold exploration project expenditure and is capitalized as
intangible exploration and evaluation cost. Such exploration and
evaluation expenditure include directly attributable internal costs
incurred in Ethiopia and services rendered by external consultants
to ensure technical feasibility and commercial viability of the
TKGM project.
The Company TKGM mining licence is in good standing to 2035
subject to normal compliance of Ethiopian mining regulations. The
Company has the attention of the Ethiopian Ministry of Mines,
National Bank of Ethiopia and the other Ministries and agencies and
expects to resolve outstanding issues. Once the specific details
regarding capital controls for internationally syndicated project
financing are officially confirmed and appropriate working
conditions are established to ensure smooth project operations, the
finance syndicate can proceed with seeking the necessary approvals.
At the moment final approvals are subject to the conditions
precedent in the hands of Government in respect of administrative
matters and security .
13. Investments
13.1 Investment in subsidiaries
The Company Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
Cost
At 1 January 14,331 13,680
Additions 1,226 651
Dissolutions - -
---------- -----------
At 31 December 15,557 14,331
---------- -----------
The Company carrying value of KEFI Minerals Ethiopia which holds
the investment in the Tulu Kapi Gold project currently under
development is GBP15,557,000 as at the 31 December 2022.
During the year management reviewed the value of its investments
in the Company accounts to the project estimated NPV value. The
result of the review shows that the NPV value is higher than the
cost recorded in the company accounts.
Date of Effective
acquisition/ Country of proportion
Subsidiary companies incorporation incorporation of
shares held
--------------------------------------- -------------- ----------------- ----------------
Mediterranean Minerals (Bulgaria) 08/11/2006 Bulgaria 100%-Direct
EOOD
KEFI Minerals (Ethiopia) Limited 30/12/2013 United Kingdom 100%-Direct
KEFI Minerals Marketing and 30/12/2014 Cyprus 100%-Direct
Sales Cyprus Limited
Tulu Kapi Gold Mine Share Company 31/04/2017 Ethiopia 95%-Indirect
Subsidiary companies The following companies have the address
of:
================================== ===========================================================
Mediterranean Minerals (Bulgaria) 10 Tsar Osvoboditel Blvd., 3rd floor,
EOOD Sredets Region, 1000 Sofia, the Republic
of Bulgaria.
KEFI Minerals (Ethiopia) 27/28 Eastcastle Street, London, United
Limited Kingdom W1W 8DH.
KEFI Minerals Marketing 2 Kadmou, Wisdom Tower, 1(st) Floor,
and Sales Cyprus Limited 1105 Nicosia, Cyprus.
Tulu Kapi Gold Mine Share 1(st) Floor, DAMINAROF Building, Bole
Company Sub-City, Kebele 12/13, H.No, New.
The Company owns 100% of Kefi Minerals (Ethiopia) Limited
("KME")
On 8 November 2006, the Company entered into an agreement to
acquire from Atalaya Mining PLC (previously EMED) the whole of the
issued share capital of Mediterranean Minerals (Bulgaria) EOOD, a
company incorporated in Bulgaria, in consideration for the issue of
29,999,998 ordinary shares in the Company. Mediterranean Minerals
(Bulgaria) EOOD owned 100% of the share capital of Do u Akdeniz
Mineralleri ("Dogu"), a private limited liability Company
incorporated in Turkey, engaging in activities for exploration and
developing of natural resources. Dogu was liquidated in 2020.
KME owns 95% of Tulu Kapi Gold Mine Share Company ("TKGM"), a
company incorporated in Ethiopia which operates the Tulu Kapi
project. The Tulu Kapi Gold Project mining license has been
transferred to TKGM. The Government of Ethiopia is entitled to a 5%
free-carried interest ("FCI") in TKGM. This entitlement is
enshrined in the Ethiopian Mining Law and the Ethiopian Mining
Agreement between the Ethiopian Government and KME, as well as the
constitution of the project company and is granted at no cost. The
5% FCI refers to the equity interest granted by the company holding
the mining license. The Ethiopian Government has also undertaken to
invest a further USD$20,000,000 (Ethiopian Birr Equivalent) in
associated project infrastructure in return for the issue of
additional equity on normal commercial terms ranking pari passu
with the shareholding of KME. Such additional equity is not
entitled to a free carry. Upon completion of each element of the
infrastructure and approval by the Company, related additional
equity will be issued. At the date of this report no equity was
issued.
The Company owns 100% of KEFI Minerals Marketing and Sales
Cyprus ("KMMSC"), a Company incorporated in Cyprus. The KMMSC was
dormant for the year ended 31 December 2022 and 2021. KEFI Minerals
Marketing and Sales Cyprus holds the right to market gold produced
from the Tulu Kapi Gold Project. It holds no other assets. It is
planned that KMMSC will act as agent and off-taker for the onward
sale of gold and other products in international markets.
13.2 Investment in jointly controlled entity
Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
The Group
At 1 January/31 December - -
Increase in investment 2,850 1,224
Exchange Difference 51 (160)
Loss for the year (2,792) (1,482)
(Impairment)/Reversal of impairment (109) 418
---------- -----------
On 31 December - -
---------- -----------
The Company
At 1 January/31 December - -
Increase in investment 2,850 1,224
Exchange Difference 51 (160)
Impairment Charge for the year (2,901) (1,064)
On 31 December - -
-------- --------
Date of acquisition/ Country of Effective proportion
incorporation incorporation of shares held
Jointly controlled entity
--------------------------- -------------------- -------------- --------------------
Gold and Minerals Co. 04/08/2010 Saudi Arabia 30%-Direct
Limited (GMCO)
The Company owns 30% of GMCO. More information is given in note
20.1. During the year the Company diluted its holding in GMCO from
31.2% to 30% and this resulted in a gain of GBP286,000.
14. Financial assets at fair value through Other Comprehensive
Income (OCI)
Relates to bond sold in Ethiopia to the public to finance the
construction of the Grand Ethiopian Renaissance Dam. The full
amount was repaid and received in January 2021.
Year Year Ended
Ended 31.12.21
31.12.22 GBP'000
GBP'000
The Group
At 1 January - 54
Foreign currency movement - -
Repayment - (54)
--------------- ----------
On 31 December - -
--------------- ----------
15. Trade and other receivables
15.1 Current Trade and other receivables
Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
The Group
Prepayments & other receivables 122 36
VAT receivable 341 255
----------- ----------
463 291
----------- ----------
Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
The Company
Other Debtors 7 15
Prepayments 64 9
71 24
----------- ----------
15.2 Receivables from subsidiaries
Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
The Company
Advance to KEFI Minerals (Ethiopia) Limited
(Note 22.2) (2) 3,253 3,166
Advance to Tulu Kaki Gold Mine Share Company
(Note 22.2) (1) 7,162 4,430
Expected credit loss (417) (304)
9,998 7,292
----------- ----------
Amounts owed by subsidiary companies total GBP10,642,000 (2021:
GBP7,819,000). A write-off of GBP227,000 (2021: GBP223,000) has
been made against the amount due from the non-Ethiopian
subsidiaries because these amounts
are considered irrecoverable.
The Company has borrowings outstanding from its Ethiopian
subsidiaries, the ultimate realisation of which depends on the
successful exploration and realisation of the Group's intangible
exploration assets.
Management is of the view that if the Company disposed of the
Tulu Kapi asset, the consideration received would exceed the
borrowings outstanding. Nonetheless, Management has made an
assessment of the borrowings as at 31 December 2022 and determined
that any expected credit losses would be GBP417,000 (2021:
GBP304,000) for which a provision has been recorded. The advances
to KEFI Minerals (Ethiopia) Limited and TKGM are unsecured,
interest free and repayable on demand. Settlement is subject to the
parent company's operating liquidity needs. At the reporting date,
no receivables were past their due date.
(1)The Company advanced GBP2,619,000 (2021: GBP2,628,000) to the
subsidiary Tulu Kapi gold Mine Share Company during 2022. The
Company had a foreign exchange translation gain of GBP113,000
(2021: Loss GBP800,000) the current year gain was because of a
minor appreciation of the Ethiopian Birr.
(2)Kefi Minerals (Ethiopia) Limited: during 2022, the Company
advanced GBPNil (2021: GBP56,000) to the subsidiary. The Company
had a foreign exchange translation gain of GBP87,000 (2021: Loss
GBP808,000) the current year gain was because of a minor
appreciation of the Ethiopian Birr.
The TKGM and KME loans are denominated Birr. The Company bears
the foreign exchange risk on these loans and any movements in the
Ethiopian Birr are recorded in the income statement of the
Company.
16. Cash and cash equivalents
Year Year
Ended Ended
31.12.22 31.12.21
GBP'000 GBP'000
The Group
Cash at bank and in hand unrestricted 220 374
Cash at bank restricted - 20
--------- ---------
220 394
--------- ---------
The Company
Cash at bank and in hand unrestricted 45 129
Cash at bank restricted - 20
--------- ---------
45 149
--------- ---------
17. Share capital
Issued Capital
The articles of association of the Company were amended in 2010
and the liability of the members of the Company is limited.
Issued and fully paid
Number of shares '000 Share Capital Deferred Share premium Total
Shares
At 1 January 2022 2,567,305 2,567 23,328 35,884 61,779
Share Equity Placement 13 Jan 2022 371,818 372 - 2,725 3,097
Share Equity Placement 25 April 2022 550,000 550 - 3,850 4,400
Share Equity Placement 18 May 2022 450,000 450 - 3,150 3,600
Share issue costs - - - (444) (444)
Warrants: fair value split of warrants
issued to shareholders. - - - (1,663) (1,663)
Broker warrants: issue costs (315) (315)
At 31 December 2022 3,939,123 3,939 23,328 43,187 70,454
---------------------- -------------- --------- -------------- --------
Number of shares '000 Share Capital Deferred Share premium Total
Shares
At 1 January 2021 2,137,927 2,138 23,328 33,118 58,584
Conversion of Warrants to Equity 12
April 2021 15,000 15 - 83 98
Share Equity Placement 21 Dec 2021 414,378 414 - 2,902 3,316
Share issue costs - - - (219) (219)
At 31 December 2021 2,567,305 2,567 23,328 35,884 61,779
---------------------- -------------- --------- -------------- -------
Number of Deferred Shares'000 GBP'000 GBP'000
Deferred Shares 1.6p 2022 2021 2022 2021
At 1 January - - - -
Subdivision of ordinary shares to deferred shares 680,768 680,768 10,892 10,892
=============== =============== ======== ========
At 31 December 680,768 680,768 10.892 10.892
--------------- --------------- -------- --------
Deferred Shares 0.9p 2022 2021 2022 2021
At 1 January 1,381,947 1,381,947 12,436 12,436
Subdivision of ordinary shares to deferred shares - - - -
========== ========== ======= =======
At 31 December 1,381,947 1,381,947 12,436 12,436
---------- ---------- ------- -------
The deferred shares have no value or voting rights.
2022
On the 13 January 2022 the Company admitted 358,867,797 new
ordinary shares of the Company at a placing price of 0.8 pence per
Ordinary Share and 12,950,147 new ordinary shares of the Company at
a placing price of 1.74 pence per Ordinary Share
The Company raised GBP8.0 million through the issue of
1,000,000,000 new Ordinary Shares at a placing price of 0.8 pence
per Ordinary Share. These new Ordinary Shares were admitted in two
tranches, 550,000,000 on 25 April 2022 and 450,000,000 on 18 May
2022, following shareholder approval of the conditional placement
at a
General Meeting of the Company.
2021
During April 2021, the Company issued 15,000,000 new ordinary
shares of 0.1p each in the capital of the Company at a price of
0.65p per share pursuant to receiving a notice from a warrant
holder to exercise warrants over these shares.
During the period the Company issued 414,375,788 Shares to
shareholders, for an aggregate consideration of GBP3,315,000. On
issue of the shares, an amount of GBP2,900,630 was credited to the
Company's share premium reserve which is the difference between the
issue price and the nominal value 0.1 pence. The funds raised were
issued to repay working capital, goods and services, and debt
repayments (note 18.3).
Restructuring of share capital into deferred shares
On the 28 June 2019 at the AGM, shareholders approved that each
of the currently issued ordinary shares of 1.7p ("Old Ordinary
Shares") in the capital of the Company be sub-divided into one new
ordinary share of 0.1p ("Existing Ordinary Shares") and one
deferred share of 1.6p ("Deferred Shares"). With effect from 8 July
2019 at 8.00am, each ordinary share in the Company has a nominal
value of 0.1p per share.
The Deferred Shares have no value or voting rights and were not
admitted to trading on the AIM market of the London Stock Exchange
plc. No share certificates were issued in respect of the Deferred
Shares.
18. Share Based payments
18.1 Warrants
In note 18 when reference is made to the "Old Ordinary Shares"
it relates to the ordinary shares that had a nominal value of 1.7p
each and were in issue prior to the 8 July 2019 restructuring.
Shares issued after the 8 July 2019 restructuring have a nominal
value of 0.1p and will be referred to as "Ordinary Shares".
2022
The Company issued 393,096,865 short-term shareholder warrants
to subscribe for new ordinary shares of 0.1p each at 1.6p per share
in accordance with the January 2022 share placement and as approved
by shareholders. The shareholder warrants will become exercisable
if, during a two-year period following the date of Second
Admission, the Warrant Trigger Event occurs. If the Warrant Trigger
Event occurs, then (i) the holders of the shareholder warrants must
exercise the shareholder warrants within 30 days from the
occurrence of the Warrant Trigger Event; and (ii) the shareholder
warrants will expire following the end of the 30-day period
referenced above if not exercised. The shareholder warrants shall
lapse two years following the date of Second Admission and will no
longer be capable of being exercised.
In April and May of 2022, the Company authorized the issuance of
500,000,000 shareholder warrants. These shareholder warrants
entitle the holders to subscribe for new ordinary shares of 0.1p
each at a price of 1.6p per share. Shareholders approved the
issuance of these shareholder warrants on May 17th, 2022. The
Company allocated one warrant for every two Placing Shares, with an
exercise price of 1.6 pence per share. The shareholder warrants
will be exercisable for a period of two years from the date of
Admission of the Placing Shares. The Company has elected that the
shareholder warrants become exercisable if, within two years of the
date of Admission of the Placing Shares, the on-market share
closing price of the ordinary shares reaches or exceeds 2.4 pence
for five consecutive days. This would be a 50% premium on the
shareholder warrants exercise price and is known as the "Warrant
Trigger Event." If the Warrant Trigger Event occurs, holders of the
shareholder warrants must exercise them within 30 days, and the
shareholder warrants will expire if not exercised by the end of
this period.
The Shareholder warrants will lapse two years following the date
of Second Admission and will no longer be capable of being
exercised.
The Company performed a fair value split by fair valuing the
shareholder warrants using Dilutive Variation of Trinomial Pricing
Model. and assumed that this value is the residual share amount.
The model also takes into account the dilution effect described
above and as such is an appropriate model for pricing warrants.
During May 2022, the Company issued 75,000,000 broker warrants
to subscribe for new ordinary shares of 0.1p each at 0.8p per share
to Tavira Securities Limited pursuant to the Placing Agreement. The
warrants expire within three years of the date of Second
Admission.
2021
During December 2021, the Company asked for shareholder approval
to issue 393,096,865 warrants, in connection with the December 2021
and January 2022 Placing Shares. The Placing shares have a right to
be issued one Ordinary Share for an exercise price of GBP0.016 and
exercisable following a Warrant Trigger Event provided that such
Warrant Trigger Event occurs during a two year period following the
17 January 2022 The Warrants will become exercisable provided that,
during a two year period following the January 2022 Admission, the
on market share closing price of the Ordinary Shares for five
consecutive days reaches or exceeds 2.4 pence (being a 50% premium
on the Warrant exercise price) (the "Warrant Trigger Event"). If
the Warrant Trigger Event occurs, then (i) the holders of the
Warrants may exercise the Warrants within 30 days from the
occurrence of the Warrant Trigger Event; and (ii) the Warrants will
expire following the end of the 30-day period referenced above if
not exercised. If the Warrant Trigger Event has not occurred within
two years following the 17 January 2022, then the Warrants shall
lapse and will no longer be capable of being exercised.
Details of warrants outstanding as at 31 December 2022:
Expected Life Number of warrants
Grant date Expiry date Exercise price Years 000's
19-Sep-18 20-Sep-23 2.50p 5 years 2,000
29 May 2020 29 May 2023 0.65p 3 years 5,000
20 Nov 2020 20 Nov 2023 1.60p 3 years 11,175
13 Jan 2022 13 Jan 2024 1.60p 2 years 393,097
18 May 2022 17 May 2024 1.60p 2 years 500,000
18 May 2022 17 May 2025 0.80p 3 years 75,000
986,272
-------------------
Weighted average ex. Number of warrants
Price 000's
Outstanding warrants at 1
January 2022 1.87p 45,125
- granted 1.54p 968,097
- cancelled/expired/forfeited 2.15p (26,950)
- exercised
------------------
Outstanding warrants at 31
December 2022 1.54p 986,272
------------------
The estimated fair values of the warrants were calculated using
the Black Scholes option pricing model and Trinomial Model when
deemed more appropriate.
The inputs into the model and the results for warrants and
options granted during the year are as follows:
Warrants Options
========================================================== ==========
29-May-20 20-Nov-20 13-Jan-22 18-May-22 18-May-22 17-Mar-21
========== ========== ========== ========== ========== ==========
Closing share
price at issue
date 1.06p 1.68p 0.77p 0.71p 0.71p 2.05p
========== ========== ========== ========== ========== ==========
Exercise price 0.65p 1.6p 1.60p 1.60p 0.80p 2.55p
========== ========== ========== ========== ========== ==========
Expected volatility 99% 101% 89.37% 81.079% 99.72% 89%
========== ========== ========== ========== ========== ==========
Expected life 3yrs 3yrs 2yrs 2yrs 3yrs 4yrs
========== ========== ========== ========== ========== ==========
Risk free rate -0.03% 0.05% 0.835% 1.459% 1.475% 0.028%
========== ========== ========== ========== ========== ==========
Expected dividend Nil Nil Nil Nil Nil Nil
yield
========== ========== ========== ========== ========== ==========
Estimated fair
value 0.73p 1.06p 0.22p 0.16p 0.42p 1.21p
========== ========== ========== ========== ========== ==========
Expected volatility was estimated based on the historical
underlying volatility in the price of the Company's shares.
Share options reserve table Year Year Ended
Ended 31.12.21
31.12.22 GBP'000
GBP'000
Opening amount 1,891 1,273
Warrants issued costs 1,978 -
Share options charges relating to employees
(Note 6) 74 148
Share options issued to directors and key management
(Note 6) 292 662
Forfeited options - -
Exercised warrants - -
Expired warrants (147) -
Expired options (341) (192)
---------------- ------------------
Closing amount 3,747 1,891
---------------- ------------------
18.2 Share options reserve
Details of share options outstanding as at 31 December 2022:
Grant date Expiry date Exercise price Number of shares 000's
------------ ------------- --------------- -----------------------
22-Mar-17 21-May-23 7.50p 6,750
01-Feb-18 31-Jan-24 4.50p 9,600
17-Mar-21 16-May-25 2.55p 92,249
-----------------------
108,599
-----------------------
Weighted average ex. Price Number of shares000's
--------------------------- --- -----------------------
Outstanding options at 1 January 2022 3.21p 127,610
- granted - -
- forfeited 2.90p (13,864)
- cancelled/ expired 7.85p (5,147)
--------------------------
Outstanding options at 31 December 2022 3.03p 108,599
-----------------------
The Company has issued share options to directors, employees and
advisers to the Group.
On 22 March 2017, 9,535,122 options were issued which expire
after six years, and vest in two equal annual instalments, the
first upon the achievement of practical completion of the planned
processing plant at the Tulu Kapi Gold Project an d the second upon
the achievement of nameplate capacity for a twelve-month
period.
On 1 February 2018, 9,600,000 options were issued to persons who
discharge director and managerial responsibilities ("PDMRs") and a
further 3,000,000 options have been granted to other non-board
members of the senior management team. The options have an exercise
price of 4.5p, expire after 6 years, and vest in two equal annual
instalments, the first upon the achievement of practical completion
of the planned processing plant at the Tulu Kapi Gold Project and
the second upon the achievement of nameplate capacity for a
twelve-month period.
On 17 March 2021, 85,813,848 options were issued to persons who
discharge director and managerial responsibilities ("PDMRs") and a
further 18,225,153 options have been granted to other non-board
members of the senior management team. The options have an exercise
price of 2.55p, expire after4 years, and vest in three equal
instalments, the first after one year, the second after two years
and the third after three years from the date of grant. Although
the directors approved and announced the issue of 119,747,339
options on the 17 March 2021 to certain directors and senior
managers only 104,039,001 options were eventually issued.
The option agreements contain provisions adjusting the exercise
price in certain circumstances including the allotment of fully
paid Ordinary shares by way of a capitalisation of the Company's
reserves, a subdivision or consolidation of the Ordinary shares, a
reduction of share capital and offers or invitations (whether by
way of rights issue or otherwise) to the holders of Ordinary
shares. The estimated fair values of the options were calculated
using the Black Scholes option pricing model. Expected volatility
was estimated based on the historical underlying volatility in the
price of the Company's shares.
For 2022, the impact of share option-based payments is a net
charge to income of GBP366,000 (2021: GBP809,000). At 31 December
2022, the equity reserve recognized for share option-based
payments, including warrants, amounted to GBP3,747,000 (2021:
GBP1,891,000).
18.3 Share Payments for services rendered and obligations
settled.
2022 Year
During the year the company granted the issuance of 515,796,693
new Ordinary shares which were distributed across the following
placements:
January 2022 Share Placement of 371,817,944
After the General Meeting held on 13 January 2022, the Company
authorized the issuance of 371,817,944 new Ordinary shares to
fulfil financial obligations totalling GBP3.1 million. In January
2022, a portion of these shares, specifically 358,867,797 new
ordinary shares, were issued at a price of 0.8 pence per Ordinary
Share, with the purpose of settling an amount of GBP2.87 million.
The remaining shares issued during January 2022, amounting to
12,950,147 new Ordinary Shares, were priced at VWAP of 1.74 pence
per Ordinary Share and were used to settle services and obligations
amounting to GBP0.23. million
April 2022 and May 2022 Share Placement of 143,978,749
During April 2022, the Company resolved its liabilities and
other obligations amounting to GBP0.63 million by issuing
79,188,312 new Ordinary Shares at a placing price of 0.8 pence per
Ordinary Share.
In May 2022, with the approval of shareholders at a General
Meeting, the Company settled liabilities and other obligations of
GBP0.52 million by issuing 64,790,437 Ordinary Shares at the
Placing Price of 0.8 pence per Ordinary Share.
2021 Year
On 21 December 2021, the Company announced the placing of
324,900,000 Settlement Shares to settle outstanding debts and
liabilities of approximately GBP2.6 million. The shares were issued
at a price of GBP0.008 per Ordinary Share.
The total shares set off during 2022 and 2021 for services and
obligations was as follows:
2022 2021
======================================= ============================
Name Number Amount Number Amount
of Remuneration of Remuneration
and Settlement and Settlement
Shares Shares
GBP'
000 GBP' 000 000 000
For services rendered
and obligations settled
H Anagnostaras-Adams 22,500 180 - -
J Leach 12,500 100 - -
Mark Tyler 3,125 25 - -
Richard Lewin Robinson 6,250 50 - -
Other employees and PDMRs 173,530 1,510 - -
Amount to settle other
Obligations 1,925 15 - -
Total share-based payments 219,830 1,880 - -
Amount to settle loans
Unsecured Convertible - - -
loan facility -
Unsecured working capital
bridging finance 295,967 2,368 324,900 2,599
515,797 4,248 324,900 2,599
The parties above agreed that the amounts subscribed in the
share placements during the year be set-off against the amount due
by the Company at the date of the share placement.
19. Non-Controlling Interest ("NCI")
Year Ended
GBP'000
As at 1 January 2021 1,204
Acquisitions of NCI -
Impact of 5% free carry on additions to assets during the year 175
Result for the year -
As at 1 January 2022 1,379
Acquisitions of NCI -
Impact of 5% free carry on additions to assets during the year 183
As at 31 December 2022 1,562
During 2018, the Government of Ethiopia received its 5% free
carried interest acquired in the Tulu Kapi Gold Project. The group
recognized an increase in non-controlling interest in the current
year of GBP183,000 and a decrease in equity attributable to owners
of the parent of GBP183,000.
The NCI of GBP1,562,000 (2021: GBP1,379,000) represents the 5%
share of the Group's assets of the TKGM project which are
attributable to the Government of Ethiopia.
The Mining Proclamation entitles the Government of Ethiopia
(GOE) to 5% free carried interest in TKGM. The 5% NCI reflects the
government interest in the TKGM gold project. The GOE is not
required to pay for the 5% free carry interest. The GOE can acquire
additional interest in the share capital of the project at market
price. The GOE has committed US $20,000,000 to install the off-site
infrastructure in exchange for earning equity in Tulu Kapi Gold
Mine Share Company. The shareholder agreement signed with the GOE
in April 2017 states that once the infrastructure elements are
properly constructed and approved by Company the relevant shares
will be issued to Ministry of Finance and Economic Cooperation
(MOFEC)
The financial information for Tulu Kapi Gold Mine Project as at
31 December 2022:
Year Year Ended
Ended
31.12.22 31.12.21
GBP'000 GBP'000
Amounts attributable
to all shareholders
Exploration and evaluation
assets 31,477 28,361
Current assets 381 329
Cash and Cash equivalents 175 244
32,033 28,934
Equity 31,254 27,573
Current liabilities 779 1,361
32,033 28,934
Result for the year - -
20. Jointly controlled entities
20.1 Joint controlled entity with Artar
Country of Effective proportion
Company name Date of incorporation incorporation of shares held at
31 December
Gold & Minerals Co.
Limited 3 August 2010 Saudi Arabia 30%
Gold & Minerals Co. Limited has the following registered
address: Olaya District. 659, King Fahad Road, Riyadh, Kingdom of
Saudi Arabia.
The summarised financial information below represents amounts
shown in Gold & Minerals Co Limited financial statements
prepared in accordance with IFRS and assuming they followed the
group policy of expensing exploration costs.
SAR'000 SAR'000 GBP'000 GBP'000
Amounts relating to the Year Year Ended Year Ended Year Ended
Jointly Controlled Entity Ended
31.12.22 31.12.21 31.12.22 31.12.21
100% 100% 100% 100%
Non-current assets 2,889 2,097 637 411
Cash and Cash Equivalents 9,470 5,798 2,090 1,136
Current assets 625 801 138 157
Total Assets 12,984 8,696 2,865 1,704
Current liabilities (4,106) (2,680) (906) (525)
Total Liabilities (4,106) (2,680) (906) (525)
Net Assets 8,878 6,016 1,959 1,179
Share capital 121,424 81,300 26,810 15,935
Capital contributions
partners 43,800 37,926 9,671 7,433
Accumulated losses (156,346) (113,210) (34,522) (22,189)
8,878 6,016 1,959 1,179
Exchange rates SAR to GBP
Closing rate 0.2208 0.1960
Income statement SAR'000 SAR'000 GBP'000 GBP'000
Loss from continuing
operations (42,995) (22,524) (9,493) (4,415)
Other comprehensive
expense - (246) - (48)
Translation FX Gain from - - - -
SAR/GBP
Total comprehensive
expense (42,995) (22,770) (9,493) (4,463)
Included in the amount
above
Group
Group Share 30.00% (2021:
31.21%) of loss from
continuing
operations (2,792) (1,482)
Joint venture investment GBP'000 GBP'000
Opening Balance - -
Loss for the year (2,792) (1,482)
FX Gain/(Loss) 51 (160)
Additional Investment 2,850 1,224
Impairment/Reversal (109) 418
Closing Balance - -
In May 2009, KEFI announced the formation of a new minerals'
exploration jointly controlled entity, Gold & Minerals Co.
Limited ("GMCO"), a limited liability company in Saudi Arabia, with
leading Saudi construction and investment group Abdul Rahman Saad
Al-Rashid & Sons Company Limited ("ARTAR"). KEFI is the
operating partner with a 30% shareholding in GMCO with ARTAR
holding the other 70%. KEFI provides GMCO with technical advice and
assistance, including personnel to manage and supervise all
exploration and technical studies. ARTAR provides administrative
advice and assistance to ensure that GMCO remains in compliance
with all governmental and other procedures. GMCO has five
Directors, of whom two are nominated by KEFI However, decisions
about the relevant activities of GMCO require the unanimous consent
of the five directors. GMCO is treated as a jointly controlled
entity and has been equity accounted. KEFI has reconciled its share
in GMCO's losses.
A loss of GBP2,792,000 was recognized by the Group for the year
ended 31 December 2022 (2021: GBP1,482,000) representing the
Group's share of losses in the year.
As at 31 December 2022 KEFI owed ARTAR an amount of GBP1,169,000
(2021: GBP285,700) - Note 21.1.
During 2022 the Company diluted its interest in the Saudi
joint-venture company Gold and Minerals Limited ("GMCO") from
31.21% to 30.00% by not contributing its pro rata share of expenses
to GMCO. This resulted in a gain of GBP285,900 (2021: GBP428,181)
in the Company accounts. The accounting policy for exploration
costs recorded in the GMCO audited financial statements is to
capitalise qualifying expenditure in contrast to the Group's
accounting policy relating to exploration costs which is to expense
costs through profit and loss until the project reaches development
stage (Note 2). Consequently, any dilution in the Company's
interest in GMCO results in the recovery of pro rata share of
expenses to GMCO.
21. Trade and other payables
21.1 Trade and other payables
The Group Year
Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
Accruals and other payables 2,427 2,499
Other loans 109 97
Payable to jointly controlled entity partner
(Note 20.1) 1,169 285
Payable to Key Management and Shareholder (Note
22.3) 297 2,675
4,002 5,556
Other loans are unsecured, interest free and repayable on
demand.
The Company Year Ended Year Ended
31.12.22 31.12.21
GBP'000 GBP'000
Accruals and other payables 1, 756 1,242
Payable to jointly controlled entity partner (Note
20.1) 1,169 285
Payable to Key Management and Shareholder (Note
22.4) 297 2,675
----------
3,222 4,202
----------
The fair values of trade and other payables due within one year
approximate to their carrying amounts as presented above.
22. Related party transactions
The following transactions were carried out with related
parties:
22.1 Compensation of key management personnel
The total remuneration of key management personnel was as
follows:
Year Year Ended
Ended 31.12.21
31.12.22 GBP'000
GBP'000
Short term employee benefits :
(1)Directors' consultancy fees 533 496
Directors' other consultancy benefits 49 39
(2)Short term employee benefits: Key management
fees 597 604
Short term employee benefits: Key management other
benefits - 32
1,179 1,171
Share based payments :
Share based payment: Director's bonus - -
(1)Share based payment: Directors' consultancy fees - -
Share option-based benefits to directors (Note 18) 192 407
(2)Share based payments short term employee benefits:
Key management fees - 272
Share option-based benefits other key management
personnel (Note 18) 100 255
Share Based Payment: Key management bonus - -
292 934
1,471 2,105
(1)Directors' fees paid to the Executive Director Chairman and
Finance Director are paid to consultancy companies of which they
are beneficiaries. Further details on Directors' consultancy and
other benefits are available on page 56 of the Annual Report.
(2)Key Management comprises Chief Operating Officer and the
Managing Director Ethiopia.
Share-based benefits
The Company issued 85,813,848 share options to directors and key
management during March 2021. These Options have an exercise price
of 2.55p per Ordinary Share and expire after 4 years and, in normal
circumstances, vest in three equal instalments, the first after one
year, the second after two years and the third after three years
from the date of grant.
Previously all options, except those noted in Note 18, expire
six years after grant date and vest in two equal annual
instalments, the first upon the achievement of practical completion
of the planned processing plant at the Tulu Kapi Gold Project and
the second upon the achievement of nameplate capacity for a
twelve-month period.
22.2 Transactions with shareholders and related parties
The Group
Name Nature of transactions Relationship 2022 2021
GBP'000 GBP'000
Receiving of management
and other professional
Winchcombe Ventures services which are capitalized Key Management
Limited as E&E expenditure and Shareholder - 554
Receiving of management
and other professional
services which are capitalized Key Management
Nanancito Limited as E&E expenditure and Shareholder - 232
- 786
The Company
Name Nature of transactions Relationship 2022 2021
GBP'000 GBP'000
KEFI Minerals Marketing Finance Subsidiary - -
and Sales Cyprus Limited
Tulu Kapi Gold Mine
Share Company(1) Advance Subsidiary 7,162 4,433
Kefi Minerals (Ethiopia)
Limited(2) Advance Subsidiary 3,253 3,166
Expected credit loss (417) (304)
9,998 7,295
(1) The TKGM and KME loans are denominated Birr. The Company
bears the foreign exchange risk on these loans and any movements in
the Ethiopian Birr are recorded in the income statement of the
Company. Further details on the movement of these loans are
available in Note 15.
Management has made an assessment of the borrowings as at 31
December 2022 and determined that any expected credit losses would
be GBP417,000 (2021:304,000).
The above balances bear no interest and are repayable on
demand.
22.3 Payable to related
parties
The Group 2022 2021
GBP'000 GBP'000
Name Nature of transactions Relationship
Key Management
Nanancito Limited Fees for services and Shareholder - 1,350
Winchcombe Ventures Key Management
Limited Fees for services and Shareholder - 834
Key Management
Directors & PDMR Fees for services and Shareholder 297 491
297 2,675
22.4 Payable to related parties
The Company 2022 2021
GBP'000 GBP'000
Name Nature of transactions Relationship
Key Management
Nanancito Limited Fees for services and Shareholder - 1,350
Winchcombe Ventures Key Management
Limited Fees for services and Shareholder - 834
Key Management
Directors & PDMR Fees for services and Shareholder 297 491
297 2,675
23. Loans and Borrowings
23.1.1 Short-Term Working Capital Bridging Finance
Currency Interest Maturity Repayment
Unsecured working capital bridging finance GBP See table On Demand See table below
2021
Unsecured working Balance 1 Jan Drawdown Amount Transaction Costs Interest Repayment Repayment Year Ended
capital bridging 2021 GBP'000 Shares Cash 31 Dec 2021
finance GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Repayable in cash
in less than a
year - 2,713 - 1,121 (2,599) - 1,235
- 2,713 - 1,121 (2,599) - 1,235
2022
Unsecured Balance 1 Jan Drawdown Amount Transaction Interest Repayment Repayment Year Ended
working capital 2022 Costs Shares/Netting Cash 31 Dec 2022
bridging GBP'000 GBP'000
finance GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Repayable in
cash in less
than a year 1,235 1,830 - 486 (2,368) (3) 1,180
1,235 1,830 - 486 (2,368) (3) 1,180
The short-term working capital finance is unsecured and ranks
below other loans. Although there was no binding agreement to
convert the loans into shares, the lenders agreed to convert the
debt into shares and the loan balance of GBP2,368,000 was fully
repaid in 2022 during the relevant share placements.
23.1.2 Reconciliation of liabilities arising from financing
activities
2021 Cash Flows
Reconciliation
Balance 1 Jan Inflow (Outflow) Fair Value Finance Costs Shares Balance 31 Dec
2021 Movement 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unsecured
working capital
bridging
finance
Short term
loans - 2,713 - - 1,121 (2,599) 1,235
- 2,713 - - 1,121 (2,599) 1,235
Convertible
notes
Sanderson
unsecured
convertible
loan facility
23.2 75 - - - - (75) -
75 - - - - (75) -
2022
Reconciliation
Balance 1 Jan Inflow (Outflow) Fair Value Finance Costs Shares/Netting Balance 31 Dec
2022 Movement 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unsecured
working capital
bridging
finance
Short term
loans 1,235 1,830 (3) - 486 (2,368) 1,180
1,235 1,830 (3) - 486 (2,368) 1,180
24. Contingent liabilities
The company has no contingent liabilities.
25. Legal Allegations
There is a pending legal case against the Company for an amount
of GBP 5.1 million from a claimant, Demissie Asafa Demissie (the
"Claimant"). The Company believes the claim for successful
provision of financial advisory services is spurious and without
merit. Nonetheless, the amount claimed can only be payable on
successful closing of the Tulu Kapi Project finance, which has yet
to occur. The Company is making a counter claim and vigorously
defending its position. The Company has engaged legal counsel to
represent its interests. At this time, it is not possible to
predict the outcome of this case or the potential impact it may
have on the Company's financial position or operations. The Company
will disclose any material developments related to this case as and
when required by applicable laws and regulations.
Having sought legal advice on this matter, the Group is of the
opinion that the allegations have no merit and that it is not
appropriate to recognise any contingent liability.
26. Capital commitments
The Group has the following capital or other commitments as at
31 December 2022 GBP4,238,000 (2021: GBP1,184,000),
31 Dec 2022 31 Dec 2021
GBP'000 GBP'000
Contracted for: Tulu Kapi Project costs 461 452
Not contracted for: Saudi Arabia Exploration costs
committed to field work d 3,777 732
27. Events after the reporting date
Share Placement May 2023
On June 5, 2023, the Company introduced 785,714,285 new ordinary
shares at a placing price of 0.7 pence per share, resulting in a
capital raise of GBP5.5 million. Additionally, a further GBP0.9
million is expected to be raised through the issuance of
133,145,208 ordinary shares at the same placing price. These
133,145,208 ordinary shares will be admitted after obtaining
shareholder approval for the conditional placement at the Annual
General Meeting.
The shares that were issued on 5 June 2023 as well as the
conditional placement shares that are to be approved on 30 June
2023, will be employed to extinguish the following obligations.
Name Number of Amount
Subscription
Shares
Current liabilities 000 GBP' 000
For services rendered 98,325 688
Loans and borrowings
Unsecured working capital bridging
finance 271,100 2,711
369,425 3,399
The parties above agreed that the amounts subscribed in the
share placements be set-off against the amount due by the Company
at the date of the share placement.
Dilution in Gold and Minerals
During 2023 the Company diluted its interest in the Saudi
joint-venture company Gold and Minerals Limited ("GMCO") from 30%
to 26.8% by not contributing its pro rata share of expenses to
GMCO.
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END
FR SSIFAAEDSELM
(END) Dow Jones Newswires
June 09, 2023 02:00 ET (06:00 GMT)
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