TIDMPAL

RNS Number : 1025L

Equatorial Palm Oil plc

08 January 2021

8 January 2021

EQUATORIAL PALM OIL PLC

("EPO")

CAPITAL METALS LIMITED

Interim Results for the six months ended 30 September 2020

Equatorial Palm Oil plc (AIM: PAL), the AIM listed Rule 15 cash shell, announces the unaudited interim results of Capital Metals Limited ("CML" or "the Company") for the six months ended 30 September 2020.

For further information, please visit www.epoil.co.uk or contact:

Equatorial Palm Oil plc:

   Michael Frayne (Executive Chairman)                                  + 44 (0) 20 7317 6800 

SPARK Advisory Partners (Nominated Adviser):

Neil Baldwin +44 (0) 20 3368 3554

Brandon Hill Capital Limited (Broker):

   Jonathan Evans/Oliver Stansfield                                          +44 (0) 20 3463 5000 

CML Chairman's Statement

The six months ended 30 September 2020 and subsequent period, have been transformative for CML towards the achievement of its objectives to list on a renowned international stock exchange for resource companies, and procurement of funding to significantly advance the Development Study and Work Programme of the Eastern Minerals Project in Sri Lanka (the "Project"), the principal asset of CML.

On 21 October 2020, EPO announced that it had reached conditional agreement with parties holding a majority of the shares (51.4 per cent.) ("CML Majority") in the Company, for EPO to acquire their shares in CML in exchange for ordinary shares in EPO. This proposed acquisition ("Proposed Acquisition") constitutes a reverse takeover transaction pursuant to the AIM Rules for Companies. Following the Proposed Acquisition, the Company's business will constitute all of EPO's business.

EPO issued the same offer to the remaining shareholders in CML, which if accepted, will result in the acquisition of up to 100 per cent. of the entire issued share capital of the Company ("CML Shares") for an aggregate total consideration of GBP15.84 million by the issue of up to 132,000,000 new Ordinary Shares in EPO ("Consideration Shares"). This equates to a price of 12 pence per Consideration Share to be issued following a proposed 20:1 share consolidation of EPO (equivalent to 0.6 pence per existing Ordinary Share of EPO).

The offer by EPO to all CML shareholders ("the Offer") specified, inter alia, the following terms:

- In consideration for the acquisition of the CML Shares, EPO proposed to issue 1.235 Consideration Shares for every 1 CML Share sold.

   -    That completion of the Proposed Acquisition is conditional, amongst other things, on: 

o the passing of resolutions at a general meeting which has been convened by EPO for 11 January 2020, to approve: the Proposed Acquisition, a 20:1 share consolidation, and a placing of, and subscription for, new ordinary shares ("Placing Shares" and "Subscription Shares") in EPO; and

o admission of the Placing Shares, Subscription Shares and Consideration Shares to trading on AIM becoming effective on or before 31 March 2021.

Completion of the Offer is conditional on acceptances being received from the holders of CML Shares holding more than 75 per cent. of the issued CML Shares (unless otherwise agreed between EPO and the Company, with the approval of the EPO's Nominated Adviser).

As at the date of publishing of these interim results of CML, EPO had received acceptances from the holders of CML Shares holding 98.76 per cent. of the issued CML Shares.

EPO has conditionally raised GBP2,085,000 through an oversubscribed placing and subscription (the "Placing") by its broker, Brandon Hill Capital Ltd, to support the proposed acquisition of CML and to provide funding for the Project.

Completion of the Proposed Acquisition is expected to take place on 13 January 2021.

The Project has an established JORC Resource of 17.2Mt, of which 84% is in the Measured and Indicated categories, with an average grade of 17.6% Total Heavy Minerals ("THM"), making it one of the highest grade deposits in the global peer group. Less than 5% of the Project area has been drilled to date and the JORC Resource is from surface to a depth of 3m. Exploration work has shown continuation beyond 3m and also returned grades in excess of 26% THM. Accordingly, the Company expects to be able to upgrade the size of the resource in due course. Additional adjoining exploration licences are also under application.

Given the very high grades and simplicity of processing, no blasting or chemicals are required, operating costs for development are expected to be low, whilst existing infrastructure, including a newly constructed port 32km away, is expected to ensure the capex for development of the Project is relatively low.

The Project has undergone extensive work over the last few years and permitting is at an advanced stage. The Environmental Impact Assessment ("EIA") is completed and the Company expects it to be released for public comment shortly. Based on detailed interaction with the relevant Sri Lankan authorities, the Company believes the EIA is likely to be granted in Q1 2021, with an industrial mining license subsequently issued soon thereafter.

Upon the issuance of an Industrial Mining License, the Company will look to finalise ongoing discussions with potential offtake partners. The Company envisages a demand for its product, which will primarily consist of ilmenite, rutile, zircon and garnet. Any offtake agreements are expected to provide some form of prepayment or financing initiatives, thereby mitigating any amounts required to be sourced by the Company to bring the Project into production. Construction is targeted to commence in Q4 2021, with first production in 2022.

Financial Review

The CML Group loss for the six months ended 30 September 2020 was $353,588 compared to a loss of $508,704 for the corresponding period in 2019, reflecting a significant reduction in administrative expenditure.

For the six months ended 30 September 2020, the CML Group's net cash used in operating activities was $28,894 (2019: net used of $255,526), reflecting the issue of shares in lieu of cash settlement of expenses in the amount of $195,000 during the period (2019: $Nil). The net cash outflows from investing activities decreased from $171,097 for the six months ending 30 September 2019 to $43,047 for the six months ended 30 September 2020, as the CML Group prioritized the achievement of a listing on AIM and fund raising to advance the Project. During the reporting period, the CML Group did not have any cash flows from financing activities, compared to $362,527 proceeds from the issue in equity in the corresponding period in 2019.

Cash and cash equivalents as at 30 September 2020 was $22,547 (31 March 2020: $114,150).

The CML Group total assets and net assets as at 30 September 2020 were $5,207,660 and $701,177 respectively (31 March 2020: $5,243,739 and $850,580 respectively).

Outlook

We are very pleased with the positive reception the Proposed Acquisition has received, as evidenced by the success of the oversubscribed Placing, as well as acceptances from over 98% of existing CML shareholders to the Offer, and the overwhelming support from EPO shareholders to date.

Following approval at the upcoming General Meeting of EPO on 11 January 2021, we will look to move through the final key permitting stages and expect to provide an update towards the end of Q1 2021. The Project is one of the highest grade mineral sands deposits globally and also benefits from a low capital cost requirement to production. These contribute to an attractive, high margin development. As we progress in 2021, we look forward to publishing further details on the expected economics and profitability of the Project, as well as providing operational updates as we target moving towards the commencement of construction in H2 2021 and first production in 2022.

Greg Martyr

Chairman - Capital Metals Limited

8 January 2021

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2020

 
                                                    Unaudited         Audited 
                                                   Six months 
                                                           to         Year to 
                                                  30 Sep 2020     31 Mar 2020 
                                                            $               $ 
----------------------------------------  ---  --------------  -------------- 
 Non-Current Assets 
 Exploration and evaluation expenditure             5,116,410       5,053,037 
 Property, plant & equipment                           64,121          71,891 
                                                    5,180,531       5,124,928 
----------------------------------------  ---  --------------  -------------- 
 Current Assets 
 Trade and other receivables                            4,582           4,661 
 Cash and cash equivalents                             22,547         114,150 
----------------------------------------  ---  --------------  -------------- 
                                                       27,129         118,811 
----------------------------------------  ---  --------------  -------------- 
 Total Assets                                       5,207,660       5,243,739 
----------------------------------------  ---  --------------  -------------- 
 Non- Current Liabilities 
 Borrowings                                           480,847         453,060 
 Deferred tax                                         440,784         440,784 
 Trade and other payables                           3,162,500       3,162,500 
----------------------------------------  ---  --------------  -------------- 
                                                    4,084,131       4,056,344 
 Current Liabilities 
 Trade and other payables                             422,352         336,815 
----------------------------------------  ---  --------------  -------------- 
                                                      422,352         336,815 
----------------------------------------  ---  --------------  -------------- 
 Total Liabilities                                  4,506,483       4,393,159 
----------------------------------------  ---  --------------  -------------- 
 Net Assets                                           701,177         850,580 
----------------------------------------  ---  --------------  -------------- 
 Equity 
 Share premium                             3        7,213,112       7,018,112 
 Other reserves                                       576,857         567,672 
 Retained losses                                  (7,088,792)     (6,735,204) 
----------------------------------------  ---  --------------  -------------- 
 Total Equity                                         701,177         850,580 
----------------------------------------  ---  --------------  -------------- 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2020

 
                                                            Unaudited       Audited 
                                                Unaudited      Period 
                                             Period ended       ended    Year ended 
                                                   30 Sep      30 Sep        31 Mar 
                                                     2020        2019          2020 
                                     Note               $           $             $ 
----------------------------------  -----  --------------  ----------  ------------ 
 Administrative expenses                        (353,695)   (509,460)   (1,029,644) 
 Operating Loss                                 (353,695)   (509,460)   (1,029,644) 
----------------------------------  -----  --------------  ----------  ------------ 
 Finance income                                       107         756         5,628 
 Loss Before Taxation                           (353,588)   (508,704)   (1,024,016) 
----------------------------------  -----  --------------  ----------  ------------ 
 Income tax expense                                     -           -             - 
----------------------------------  -----  --------------  ----------  ------------ 
 Loss for the period                            (353,588)   (508,704)   (1,024,016) 
----------------------------------  -----  --------------  ----------  ------------ 
 Loss for the period attributable 
  to owners of the Parent                       (353,588)   (508,704)   (1,024,016) 
----------------------------------  -----  --------------  ----------  ------------ 
 Other comprehensive income: 
 Items that may be reclassified 
  to profit or loss 
 Currency translation differences                   9,185     187,037       209,014 
 Expiry of options during 
  the year                                              -           -        43,881 
----------------------------------  -----  --------------  ----------  ------------ 
 Total comprehensive income 
  attributable to owners of 
  the Parent                                    (344,403)   (321,667)     (771,121) 
----------------------------------  -----  --------------  ----------  ------------ 
 Basic & diluted earnings 
  per shares - cents                  2            (0.33)      (0.49)        (0.96) 
----------------------------------  -----  --------------  ----------  ------------ 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2020

 
                                                                 Retained 
                               Share premium  Other reserves       losses        Total 
                                           $               $            $            $ 
---------------------------    -------------  --------------  -----------  ----------- 
Unaudited 
Balance as at 31 March 
 2019                              6,658,301         402,539  (5,755,069)    1,305,771 
                               -------------  --------------  -----------  ----------- 
Loss for the period                        -               -    (508,704)    (508,704) 
Currency translation 
 differences                               -         187,037            -      187,037 
                               -------------  --------------  -----------  ----------- 
Total comprehensive 
 loss for the period                       -         187,037    (508,704)    (321,667) 
                               -------------  --------------  -----------  ----------- 
Transactions with owners 
Issue of ordinary shares             372,152               -            -      372,152 
Share issue costs                          -               -            -            - 
                               -------------  --------------  -----------  ----------- 
Total transactions 
 with owners                         372,152         187,037    (508,704)       50,485 
                               -------------  --------------  -----------  ----------- 
Balance as at 30 September 
 2019                              7,030,453         589,576  (6,263,773)    1,356,256 
                               -------------  --------------  -----------  ----------- 
 
 
Audited 
Balance as at 31 March 
 2019                              6,658,301         402,539  (5,755,069)    1,305,771 
                               -------------  --------------  -----------  ----------- 
Loss for the period                        -               -  (1,024,016)  (1,024,016) 
Currency translation 
 differences                               -         209,014            -      209,014 
Total comprehensive 
 loss for the period                       -         209,014  (1,024,016)    (815,002) 
Transactions with owners 
Issue of ordinary shares             372,152               -            -      372,152 
Share issue costs                   (12,341)               -            -     (12,341) 
Expiry of options during 
 the year                                  -        (43,881)       43,881            - 
Total transactions 
 with owners                         359,811        (43,881)       43,881      359,811 
                               -------------  --------------  -----------  ----------- 
Balance as at 31 March 
 2020                              7,018,112         567,672  (6,735,204)      850,580 
                               -------------  --------------  -----------  ----------- 
 
 
Unaudited 
Balance as at 31 March 
 2020                              7,018,112         567,672  (6,735,204)      850,580 
Loss for the period                        -               -    (353,588)    (353,588) 
Currency translation 
 differences                               -           9,185            -        9,185 
Total comprehensive 
 loss for the period                       -           9,185    (353,588)    (344,403) 
Transactions with owners 
Issue of ordinary shares             195,000               -            -      195,000 
 
Total transactions 
 with owners                         195,000               -            -      195,000 
                               -------------  --------------  -----------  ----------- 
Balance as at 30 September 
 2020                              7,213,112         576,857  (7,088,792)      701,177 
                               -------------  --------------  -----------  ----------- 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 September 2020

 
                                                                    Unaudited      Audited 
                                                     Unaudited   Period ended   Year ended 
                                                  Period ended         30 Sep       31 Mar 
                                                   30 Sep 2020           2019         2020 
                                           Note              $              $            $ 
-----------------------------------------  ----  -------------  -------------  ----------- 
Cash flows from operating activities 
Loss before taxation                                 (353,588)      (508,704)  (1,024,016) 
Adjustments for: 
 Depreciation                                            6,103         13,501       17,905 
 Foreign exchange                                      (6,135)        221,107      275,199 
 Profit on sale of property, plant 
  and equipment                                              -              -      (4,396) 
 Interest expense                                       43,217              -       15,429 
 Interest income                                         (107)           (74)      (1,232) 
 Shares issued in lieu of cash 
  settlement of expenses                    3          195,000              -            - 
Changes in working capital: 
 Increase in trade and other receivables                    79         86,127      105,909 
 Increase / (decrease) in trade 
  and other payables                        5           85,537       (67,483)       48,321 
Net cash used in operating activities                 (29,894)      (255,526)    (566,881) 
                                                 -------------  -------------  ----------- 
 
Investing activities 
Interest received                                          107             74        1,232 
Disposal of property, plant and 
 equipment                                                   -              -       20,042 
Purchase of property, plant and 
 equipment                                  4            (144)          (397)        (530) 
Cash used in exploration activities                   (43,010)      (170,774)    (215,153) 
                                                 -------------  -------------  ----------- 
Net cash used in investing activities                 (43,047)      (171,097)    (194,409) 
                                                 -------------  -------------  ----------- 
 
Financing activities 
Proceeds from borrowings                                     -              -      428,472 
Proceeds from issue of equity                                -        362,527      362,527 
Cost of share issue                                          -              -     (12,341) 
Net cash from financing activities                           -        362,527      778,658 
                                                 -------------  -------------  ----------- 
 
Net (decrease)/increase in cash 
 and cash equivalents                                 (72,941)       (64,096)       17,368 
Cash and cash equivalents at beginning 
 of period                                             114,150         85,468       85,468 
Exchange differences on cash                          (18,662)         13,991       11,314 
Cash and cash equivalents and 
 end of period                                          22,547         35,363      114,150 
                                                 -------------  -------------  ----------- 
 

Major non-cash transactions

On 3 July 2019, the Company issued and allotted 55,000 new ordinary shares with no par value at a price of $0.175 each as consideration for consultants' fees.

On 1 July 2020, the Company transferred 1,300,000 ordinary shares from treasury to various consultants (500,000 shares) and directors (800,000 shares) in consideration for consulting and advisory services at a deemed issue price of $0.15 per share.

   1.      Basis of preparing of financial statements 

These condensed interim consolidated financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. As permitted, these interim financial statements have not been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'.

The interim financial statements do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended 31 March 2020, which were prepared in accordance with IFRSs as adopted by the European Union. The Independent Auditors' Report on the financial statements for the year ended 31 March 2020 was unqualified, but drawing attention to an emphasis of matter that the recoverable value of intangible assets is dependent on the Group obtaining the necessary licence renewals.

The interim financial statements have also been prepared under the historical cost convention, other than liabilities measured at fair value through profit or loss.

The interim financial statements are presented in United States Dollars rounded to the nearest dollar.

The comparative financial information for the year ended 31 March 2020 included within this report does not constitute the full statutory accounts for that period.

After making enquiries, the directors have a reasonable expectation that the Company has adequate access to financial resources and support from key shareholders to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly financial statements.

The condensed consolidated interim financial statements for the period ended 30 September 2020 have not been audited, nor have they been reviewed by the Company's auditors in accordance with the International Standard on Review Engagements 2410 issued by the Auditing Practices Board. The figures were prepared using applicable accounting policies and practices consistent with those adopted in the statutory annual financial statements for the year ended 31 March 2020.

The Board of Directors of the Company approved these interim financial statements on 8 January 2021.

   2.     Earnings per share 

The calculation of the basic and diluted earnings per share is calculated by dividing the loss for the period from continuing operations for the Group by the weighted average number of ordinary shares in issue during the period.

 
                                            Period       Period   Year ended 
                                          ended 30     ended 30       31 Mar 
                                         Sept 2020    Sept 2019         2020 
                                                 $            $            $ 
------------------------------------   -----------  -----------  ----------- 
Loss for the period                      (353,588)    (508,704)  (1,024,016) 
 
  Weighted average number of shares 
  in issue                             106,912,451  104,785,866  106,912,451 
 
Basic and diluted earnings per 
 share                                      (0.33)       (0.49)       (0.96) 
                                       -----------  -----------  ----------- 
 

There is no difference between the basic and diluted loss per share for each period as the effect would be to decrease earnings per share.

   3.      Share premium and other reserves 
 
                                       Number of shares  Share premium 
                                                                     $ 
-------------------------------------  ----------------  ------------- 
Issued and fully paid 
As at 31 March 2019                         104,785,866      6,658,301 
-------------------------------------  ----------------  ------------- 
Issue of new shares - 11 April 2019             382,300         66,902 
Issue of new shares - 26 April 2019             300,000         52,500 
Issue of new shares - 13 May 2019               810,714        141,875 
Issue of new shares - 3 July 2019 
 (1)                                            633,571        110,875 
Share issue costs                                     -       (12,341) 
-------------------------------------  ----------------  ------------- 
As at 31 March 2020                         106,912,451      7,018,112 
-------------------------------------  ----------------  ------------- 
Transfer of treasury shares - 1 July 
 2020 (2)                                             -        195,000 
As at 30 September 2020                     106,912,451      7,213,112 
-------------------------------------  ----------------  ------------- 
 

(1) 55,000 shares were issued as settlement of services to the Company in lieu of cash for a value of $9,625

(2) 1,300,000 treasury shares were transferred to various consultants and directors (800,000 shares) in consideration for consulting and advisory services at a deemed issue price of $0.15 per share.

Share capital is the amount subscribed for share at nominal value. The nominal value of shares is $0.00.

Share premium is the amount subscribed for share capital in exercise of nominal value.

 
                                        30 Sept  31 March 
                                           2020      2020 
                                              $         $ 
-------------------------------------   -------  -------- 
Foreign currency translation reserve    295,547   286,362 
Share option reserve                    281,310   281,310 
                                        -------  -------- 
                                        576,857   567,672 
                                        -------  -------- 
 
 
   4.     Events after the reporting period 

On 13 October 2020, the Company agreed with director Michael Frayne for the provision of a further $32,000 in funds to the Company for working capital purposes, through an amendment to the existing loan agreement, increasing the principal to $112,000.

On 17 October 2020, the Company transferred 975,000 shares from treasury to the holders of 10 million options over 10 million ordinary shares in the Company, with an exercise price of US$0.15 per share and an expiry date of 3 August 2021 ("the Options"), in consideration for the cancellation of the Options.

On 17 October 2020, the Company cancelled 3,131,667 shares held in treasury, resulting in nil shares being held in treasury.

On 21 October 2020, AIM quoted EPO announced that it had reached conditional agreement with the CML Majority for EPO to acquire their 51.4 per cent interest in the Company in exchange for ordinary shares in EPO.

The Proposed Acquisition constitutes a reverse takeover transaction pursuant to the AIM Rules for Companies. Following the Proposed Acquisition, the Company's business will constitute all of EPO's business.

EPO issued the same offer to the remaining shareholders in the Company which, if accepted, will result in the acquisition of up to 100 per cent. of the entire issued share capital of the Company for an aggregate total consideration of GBP15.84 million by the issue of up to 132,000,000 new Ordinary Shares in EPO. This equates to a price of 12 pence per Consideration Share to be issued following a proposed 20:1 share consolidation of EPO (equivalent to 0.6 pence per existing Ordinary Share of EPO).

The Offer by EPO to all CML shareholders specified, inter alia, the following terms:

- In consideration for the acquisition of the CML Shares, EPO proposed to issue 1.235 Consideration Shares for every 1 CML Share sold.

   -     That completion of the Proposed Acquisition is conditional, amongst other things, on 

o the passing of resolutions at a general meeting of EPO on 11 January 2021 to approve: the Proposed Acquisition, a 20:1 share consolidation, and a placing of, and subscription for, the Placing Shares and Subscription Shares in EPO; and

o admission of the Placing Shares, Subscription Shares and Consideration Shares to trading on AIM becoming effective on or before 31 March 2021.

Completion of the Offer is conditional on acceptances being received from the holders of CML Shares holding more than 75 per cent. of the issued CML Shares (unless otherwise agreed between EPO and the Company, with the approval of EPO's Nominated Adviser).

As at the date these interim financial statements were approved by the Board of Directors of the Company on 8 January 2021, EPO had received acceptances from the holders of CML Shares holding 98.76 per cent. of the issued CML Shares.

Completion of the Proposed Acquisition is expected to take place on 13 January 2021.

On 12 November 2020, the Company agreed with EPO for the provision of a loan of $50,000 for working capital purposes. The loan attracts an interest rate of 1% per month which if accrued will compound monthly. The loan is repayable within 12 months of the drawdown.

On 21 November 2020, convertible bonds issued by the Company in the principal amount of $282,630 were converted into 1,906,713 CML Shares together with interest of $7,718 which converted into 55,540 CML Shares. The balance of the convertible bonds issued by the Company in the principal amount of $75,000 are due to be paid on completion of the Proposed Acquisition, together with $33,705 of the interest that accrued in respect of the convertible bonds.

   5.     General information 

The principal activity of the Company and its subsidiaries is the exploration and development of mineral sands resources in Sri Lanka.

The Company is incorporated and domiciled in the British Virgin Islands. The address of its registered office is Vistra Corporate Services Centre, Wickhams Cay II, VG1110, Road Town, Tortola, British Virgin Islands.

   6.     Availability of this announcement 

Copies of this announcement is available from EPO's website www.epoil.co.uk and from 13 January 2021 at www.capitalmetals.com.

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END

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