Zanaga Iron Ore Company Audited Results for the Year to 31 December 2023
1 July 2024
2023 Highlights and post reporting period end events to 30 June 2024
Zanaga Iron Ore Project (the "Project" or the "Zanaga Project")
· 30Mtpa staged development project ("30Mtpa Project")
o 2024 Feasibility Study update process ("2024 FS update") completed, delivering positive results and further underlining the robust economics of the Company's 30 Mtpa Project (including both 12Mtpa Stage One ("Stage One"), plus 18Mtpa Stage Two expansion ("Stage Two")).
§ 12Mtpa Stage One
- Capital investment of
- Operating cost of
- Net Present Value of
- Internal Rate of Return of 26.2%
§ 18Mtpa Stage Two optional expansion
- Capital investment of
- Operating cost of
- Total combined Net Present Value of
- Internal Rate of Return of 28.2%
o Chinese iron ore technical expert engineering firm ("Chinese EPC Partner"), engaged to lead the 2024 FS update process, now undertaking an optimisation study on the applicability of unique technology relating to the Zanaga 30Mtpa Project ("Optimisation Study") with the potential to provide further capital and operating cost savings beyond the results of the 2024 FS Update.
o FEED phase preparation
§ Preparation for the Front End Engineering and Design (FEED) phase of the Zanaga Project is underway, including solicitation of cost and schedule estimates for the various workstreams associated with the FEED phase.
o Other strategic initiatives
§ Hydro power MoU signed with China Machinery Engineering Corporation ("CMEC") relating to hydroelectric power solutions for the Zanaga Project and associated funding of such power projects (announced on 29 December 2023)
§ Port MoU: Discussions underway with large scale port development companies interested in participating in the development of port infrastructure for the Zanaga Project.
§ Strategic partner initiative: Approaches recevied from multiple parties interested in the development of the Zanaga Project, particularly following the completion of the 2024 FS update. Discussions continue and the Company will provide further updates in due course.
· Early Production Project ("EPP Project" or "EPP") remains under investigation
o Multiple production scenarios remain under investigation on processing facilities and suitable logistics solutions, with a focus on an export solution through the
Corporate
· Loan funding agreement
o To fund the Project's continuing work programme and budget, as well as the working capital requirements of ZIOC, Glencore Projects entered into a loan facility (the "Loan Facility") with Jumelles Ltd in June 2022, providing up to
§ Loan repayable by 31 July 2024
§ As at 29 June 2024, following a number of repayment instalments, ZIOC had outstanding
· Shard Merchant Capital Ltd ("SMC") equity subscription agreements ("Shard ESAs")
o Second SMC equity subscription agreement (ESA) update ("2023 ESA")
§ Net proceeds of £1,667,755 (
§ On 28 June 2024, SMC subscribed for 12 million shares of no par value in ZIOC, as part of the final third tranche of the 2023 ESA
o New ESA signed with SMC on 29 June 2024 ("2024 ESA")
§ Following the successful completion of the 2023 ESA, ZIOC has entered into the 2024 ESA with SMC
§ Under the terms of the 2024 ESA the Company will issue and SMC will subscribe for up to 36 million ordinary shares of no par value in the Company ("Subscription Shares") in up to three tranches of up to 12 million shares each.
§ Pursuant to the 2024 ESA, SMC has undertaken to use its reasonable endeavours to place the relevant Subscription Shares that it has subscribed for and to pay to ZIOC 95% of the gross proceeds of any such sales.
o Proceeds of the Shard ESAs applied to general working capital, including the provision of further contributions to the Zanaga Project's operations
· Appointment of Mr Martin Knauth at Chief Executive Officer
o Senior mining executive with extensive experience in the industry spanning more than 30 years in a wide range of cultures, countries and commodities, with notable success in project development, operations and transformational growth phases
· Appointment of Shard Capital Partners LLP as joint Corporate Broker
· Cash balance of
Clifford Elphick, Non-Executive Chairman of ZIOC, commented:
"I am pleased to report that ZIOC has progressed through another critical milestone, delivering on expectations in completing the updated cost estimates of the 30Mtpa Feasibility Study with its Chinese EPC Contractor partner, while also advancing our understanding of the application of new iron ore processing technology to reduce estimated costs further. Following the streamlining of ownership and control of the Zanaga Project in 2022, the updated FS now enables ZIOC to engage with new strategic entities interested in participating in the Zanaga Project going forward."
The Company will post its Annual Report and Accounts for the year ended 31 December 2023 ("2023 Annual Report and Accounts") to shareholders on approximately 10 July 2024.
The 2023 Annual Report and Accounts will be available on the Company's website www.zanagairon.com today.
For further information, please contact:
Zanaga Iron Ore
Corporate Development and Andrew Trahar
Investor Relations Manager +44 20 7399 1105
Panmure Liberum Capital Limited
Nominated Adviser, Financial Scott Mathieson, John More
Adviser and Corporate Broker +44 20 3100 2000
Shard Capital Partners LLP
Corporate Broker Damon Heath
+44 207 186 9952
About us:
Zanaga Iron Ore Company Limited (AIM ticker: ZIOC) is an iron ore exploration and development company, with the Company's flagship asset being its 100% owned Zanaga Iron Ore Project located in the Republic of Congo, for which the Government Mining Licence, Environmental Permit and Mining Convention are all in place.
Chairman's Statement
Dear Shareholder,
Following the acquisition of the controlling shareholding in the Zanaga Project in December 2022, we continue to progress in-country activities with the intention of re-energising the 12Mtpa Stage One project following completion of the 2024 FS update process. Iron ore prices have maintained robust levels for a substantial period of time and high quality iron ore projects like the Zanaga Project are now well positioned for development.
Iron Ore Market
The iron ore market has demonstrated continued robust demand and pricing has remained stable in recent months. China continues to consume significant quantities of iron ore to feed its substantial steel industry and intitiatives to produce lower carbon emission 'green steel' provide furher support for premium pricing related to high grade iron ore products. This provides further impetus for the development of high grade iron ore projects such as the Zanaga Project.
2024 FS update process
In 2023 the Company partnered with a Chinese iron ore technical expert engineering firm ("Chinese EPC Partner") as part of a process to update the economic evaluation of the Zanaga 30 Mtpa staged development project.
Using the 2014 Feasibility Study's ("2014 FS") infrastructure designs, flowsheets and material take off lists, direct and indirect cost estimates were updated to current market pricing using Chinese major equipment and contractor pricing for both phases of 12 Mtpa Stage One haematite ("Stage One"), plus 18 Mtpa Stage Two magnetite expansion ("Stage Two") projects, inclusive of buried concentrate pipeline and port infrastructure.
A second phase of optimisation work ("Optimisation Study") is under consideration and involves investigating the potential to apply proprietary iron ore processing technology that the Chinese EPC Partner possesses, with the potential to provide further capital and operating cost savings beyond the results of the 2024 FS Update.
The 2024 FS update was completed to a (+/- 20% accuracy) full feasibility study level of definition, with the following positive results:
§ 12Mtpa Stage One
- Capital investment of
- Operating cost of
- Net Present Value of
- Internal Rate of Return of 26.2%
§ 18Mtpa Stage Two optional expansion
- Capital investment of
- Operating cost of
- Total combined Net Present Value of
- Internal Rate of Return of 28.2%
The Company believes these positive results provide much greater confidence in the Project's economic feasibility in today's market and cost environment, and with this, provides a key catalyst for potential strategic investors to consider funding of the next logical Project phase, being the front end engineering and design (FEED) program to further define the Project's physical elements and risk abatement strategies.
EPP Project
Whilst ZIOC's focus during 2023 was on advancing the 2024 FS update process, the Project Team continued to undertake a process to evaluate the potential development of an EPP Project that would be quicker to construct than the larger 30Mtpa staged development project and would utilise existing road, rail and port infrastructure.
The Project Team continued to advance efforts to develop optionality relating to the viability of the EPP Project. The Project Team has continued to evaluate the potential for the EPP Project to operate as a standalone project, or as an initial pathway to production during the construction period of the flagship 30Mtpa Staged Development Project.
Cash Reserves and Project Funding
At 31 December 2023 the Company had cash reserves of
In order to raise additional funding the Company entered a Subscription Agreement with SMC (as described above - see the Company's release of 28 June 2024.) The financing structure with SMC enables the Company to access funding for the costs that the Company is expected to meet in the near future. For illustrative purposes only, if the average price at which SMC places the final tranche of the 2023 ESA and all three tranches of the 2024 ESA (a combined total of 48,000,000 shares) was
The Company continues to review the costs of its operational activities with a view to conserving its cash resources. As part of such review, and in order to preserve the cash position of the Company, it has been agreed with the Directors since January 2023 that fees previously deferred would be reviewed.
Subscription Agreement with Shard Merchant Capital Ltd
The Company has been pleased with the success of the 2023 ESA with SMC which has provided the Company with access to funding through a relatively low cost structure that minimised dilution to shareholders.
The proceeds received by the Company from SMC pursuant to the Subscription Agreement have been applied to general working capital, including the provision of further contributions to the Zanaga Project's operations.
As a result the Company has entered into a new 2024 ESA with SMC. An overview of the two ESAs is provided below:
1) 2023 ESA
a. On 1 July 2023 ZIOC announced that the Company had entered into a Subscription Agreement with SMC, a financial services provider.
b. Under the Subscription Agreement, the Company agreed to issue and SMC agreed to subscribe for up to 36 million ordinary shares of no par value in the Company ("Subscription Shares") in three tranches of 12 million shares each
c. Net proceeds of
d. On 29 June 2024, SMC subscribed for 12 million shares of no par value in ZIOC, as part of the final third tranche of the 2023 ESA
2) 2024 ESA
a. The Company entered into a new Subscription Agreement (the 2024 ESA) with SMC on 29 June 2024.
b. Under the Subscription Agreement, the Company will issue and SMC has subscribed for 36 million ordinary shares of no par value in the Company ("Subscription Shares") in three tranches of 12 million shares each (First tranche to be issued immediately).
Chief Executive Officer appointment
On 14 December 2023, ZIOC appointed Mr Martin Knauth as Chief Executive Officer. Mr Knauth is a senior mining executive with extensive experience in the industry spanning more than 30 years in a wide range of cultures, countries and commodities, with notable success in project development, operations and transformational growth phases, as well as establishment of performance cultures. With previous experience in Australia, Kazakhstan, Madagascar, Cuba, the DRC and many other jurisdictions, working for such companies as Western Mining Corp, Vale, Sherritt Metals International, KAZ Minerals and Glencore. He has a strong record in establishing and maintaining positive relationships with governments, communities, employees and other Project stakeholders critical to the Company's success.
Mr Knauth holds a Bachelor's degree in Mining Engineering from the University of Queensland, a Masters degree in Mineral Economics from Curtin University and is a Member of the AusIMM.
Mr Knauth brings extensive experience in project development, operations and transformational growth phases in the mining industry. These positive attributes are essential to moving the Zanaga Project forward, especially in light of the recently announced strategic objectives of the Company.
Appointment of joint Corporate Broker
In March 2024 ZIOC appointed Shard Capital Partners LLP ("SCP") as joint Corporate Broker, alongside Panmure Liberum Capital Limited, who are also the Company's Nominated Advisor. The addition of SCP to our advisory team provides further support to ZIOC, and additional resources as the Company looks to advance to the next stage of development on the Zanaga Project.
Outlook
Following the completion of the 2024 FS Update, and with ZIOC now positioned as 100% owner of the Zanaga Project, we are now able to engage with strategic entities interested in partnering on the Zanaga Project going forward. It is pleasing to have secured the support of Glencore throughout the process of delivering the 2024 FS Update and we look forward to working with the Glencore team in unlocking value from the project for all stakeholders.
Despite globally uncertainty, the Project Team have continued to progress numerous workstreams with the potential to add significant value to the options available for the development of the Zanaga Project.
Our investigations of opportunities that have the potential to unlock existing infrastructure solutions, as well as options available for lowering capital and operating costs of the project have been a key focus of the team, and we hope to provide an update on these intitiatives in due course.
Clifford Elphick
Non-Executive Chairman
Business Review
The Zanaga Project remains a unique large scale tier one asset with multiple potential development options from a scale perspective.
The Project Team have dedicated significant effort to securing updated development costs associated with the flagship 30Mtpa project, and are pleased with the results of the 2024 FS Update, bringing the cost estimates of the 30Mtpa Zanaga Project in line with current market pricing. ZIOC's Chinese EPC Partner, who led the 2024 FS update process, also posseses substantial technical capabilities in iron ore process plant design and engineering, as well as unique technology expertise in iron ore process. The Optimisation Study underway has the potential to further enhance the value of the Project and we look forward to advancing this work going forward.
30Mtpa Staged Development Project
The Project Team's ultimate objective remains to develop the flagship 30Mtpa staged development mining project. As a reminder, the Stage One project plans to produce 12Mtpa of premium quality 66% Fe content iron ore pellet feed product at bottom quartile operating costs for more than 30 years on a standalone basis.
The Stage Two expansion of 18Mtpa is nominally scheduled to suit the project mine development, construction timing and forecast cash flow generation, and would increase the Project's total production capacity to 30Mtpa. The product grade would increase to an even higher premium quality 67.5% Fe content due to the addition of 18Mtpa of 68.5% Fe content iron ore pellet feed production, at an even lower operating cost. The capital expenditure for the additional 18Mtpa production, including contingency, could potentially be financed from the cash flows from the Stage One phase.
The Zanaga Project Team has continually taken steps to monitor evolving improvements into its strategy for assessing the options available for the development of the Zanaga Project. The Project Team maintained its view that high quality products will continue to achieve significant price premiums in the future and has sought to lock in this additional revenue benefit into the Project's development plan.
The Project Team will continue to engage in activity to ascertain opportunities for optimisation and improvement of the 30Mtpa staged development project and will update the market as these improvements develop.
2024 FS update study results
In 2023 the Company's Chinese EPC Partner led a process to update the economic evaluation of the Zanaga 30 Mtpa staged development project. Using the 2014 FS infrastructure designs, flowsheets and material take off lists, direct and indirect cost estimates were updated to current market pricing using Chinese major equipment and contractor pricing for both Stage One and Stage Two of the Zanaga Project, inclusive of buried concentrate pipeline and port infrastructure.
The Optimisation Study is under consideration and involves investigating the potential to apply proprietary iron ore processing technology that the Chinese EPC Partner possesses, with the potential to provide further capital and operating cost savings beyond the results of the 2024 FS Update.
2024 FS update results
|
|
Unit |
Stage One |
Stage Two (30Mtpa Total) |
|
Capital Cost |
US$ m |
1,935 |
1,871 |
|
Operating Cost (Average, Life of Mine) |
US$ /dmt |
31.5 |
24.9 |
|
Net Present Value |
US$ m |
3,681 |
7,357 |
|
Internal Rate of Return |
% |
26.2 |
28.2 |
Note: Iron ore prices based on AME Group's long term real iron ore price forecast for 65% Fe IODEX. Operating costs exclude royalties payable.
These results compare favourably against the previous 2014 FS capital and operating costs estimates, as outlined below;
|
|
Unit |
Stage One |
Stage Two (30Mtpa Total) |
|
Capital Cost |
US$ m |
2,219 |
2,489 |
|
Operating Cost (Average, Life of Mine) |
US$ /dmt |
32.1 |
25.7 |
Since 2014, the Company has conducted a number of technical and economic review exercises using third party western technical consulting firms, which resulted in high level estimations of the costs to develop the project at that time, but only to a Preliminary Economic Assessment (PEA) or Pre-Feasibility Study (PFS) level of definition. The 2024 FS update was concluded to a higher degree (+/- 20% accuracy) full feasibility study level of definition. In addition, the results provided by ZIOC's Chinese EPC Partner were independently reviewed and validated by a third-party technical consulting firm.
The Company believes these positive results provide much greater confidence in the Project's economic feasibility in today's market and cost environment, and with this, provides a key catalyst for potential strategic investors to consider funding of the next logical Project phase, being the front end engineering and design (FEED) program to further define the Project's physical elements and risk abatement strategies.
Corporate initiatives update
In September 2023, the Company outlined its strategic objectives, including the intention to secure MoUs with a number of potential partners to progress the Zanaga Iron Ore Project. An update on each MoU workstream is provided below:
1) Hydro power MoU
a) In December 2023, following CMEC's preliminary inspections and engineering of potential hydroelectric sites near the Zanaga Project, a memorandum of understanding ("MoU") was signed with China Machinery Engineering Corporation ("CMEC") relating to hydroelectric power solutions for the Zanaga Project and associated funding of such power projects. The following objectives were agreed:
i) Advance engineering and related studies for the identified hydroelectric sites near the Zanaga Project.
ii) Draft arrangements for the funding of development and operation of the identified hydroelectric project(s), between the government of the Republic of Congo and third Parties.
2) Port MoU
a) Port infrastructure discussions are underway with a large port infrastructure development firm seeking to expand the existing port of Pointe-Noire. Consideration is also being given to potential development solutions for a large bulk mineral port capable of supporting the 30Mtpa staged development project.
3) Strategic partner initiative
a) Following the completion of the acquisition of Glencore's shareholding in the Zanaga Project in December 2022, and with the benefit of the 2024 FS udpate process results, a number of potential strategic partners have approached ZIOC with an interest in participating in the development of the Zanaga Project. Discussions continue and the Company will provide further updates in due course.
Next Steps
Throughout the remainder of 2024, the Project Team will focus on engaging with our selected Chinese EPC partner to investigate applicability of new iron ore processing technology to the Zanaga Project, while continuing to investigate potential opportunities for smaller scale production utilising existing infrastructure, supporting the initiative to secure strategic partners interested in the development of the Project.
Financial Review
Results from operations
The financial statements contain the results for the Group's twelfth full year of operations following its incorporation on 19 November 2009. The Group made a total comprehensive loss in the year of
|
|
2023 |
2022 |
|
General expenses |
(2,739) |
(516) |
|
Net foreign exchange (loss) |
15 |
- |
|
Share of loss of associate |
- |
(436) |
|
Gain on revaluation of investment |
- |
9,050 |
|
Profit / (Loss) before tax |
(2,724) |
8,098 |
|
Share of other comprehensive income / (loss) of associate - foreign exchange |
- |
61 |
|
Reclassification of share of other comprehensive (loss) / income of associate |
- |
(3,447) |
|
Total comprehensive income / (loss) |
(2,724) |
4,712 |
General expenses of
Financial Position
ZIOC's Net Asset Value ("NAV") of
|
|
2023 |
2022 |
|
|
|
|
|
Investment in Associate |
- |
- |
|
Exploration and evaluation assets |
85,300 |
85,300 |
|
PPE |
648 |
703 |
|
Cash |
899 |
310 |
|
Net current assets/(liabilities) |
(1,030) |
(1,110) |
|
Net assets |
85,817 |
85,203 |
Subscription Agreement concluded with Shard Merchant Capital Ltd
As outlined in the Chairman's Statement above, on 1 July 2023 ZIOC entered into a 2023 ESA with SMC, a financial services provider. Under the terms of the agreement the Company will issue and SMC will subscribe for up to 36 million ordinary shares of no par value in the Company in up to three tranches of up to 12 million shares each.
Pursuant to the 2023 ESA, SMC has undertaken to use its reasonable endeavours to place the relevant Subscription Shares that it has subscribed for and to pay to ZIOC 95% of the gross proceeds of any such sales.
Cash flow
Cash balances increased by
Fundraising activities
The fundraising activities carried out in 2023 of
Reserves & Resource Statement
The Zanaga Project has defined a 6.9bn tonne Mineral Resource and a 2.1bn tonne Ore Reserve, reported in accordance with the JORC Code (2012) unaudited by MHA, and defined from only 25km of the 47km strike length of the orebody so far identified.
Ore Reserve Statement
The Ore Reserve estimate (announced by the Company on 5 May 2021) was prepared by independent consultants, SRK Consulting (UK) Ltd ("SRK") and is based on the 30Mtpa Feasibility Study and the 6,900Mt Mineral Resource (announced by the Company on 8 May 2014).
As stipulated by the JORC Code, Proven and Probable Ore Reserves are of sufficient quality to serve as the basis for a decision on the development of the deposit. Based on the studies performed, the mine plan as reported in the 2014 FS was reassessed in respect of the updated sales revenue, operating expenditure and capital expenditures and confirmed as at 31 December 2020 to be technically feasible and economically viable.
|
Ore Reserve Category |
Tonnes (MtDry) |
Fe (%) |
SiO2 (%) |
Al2O3 (%) |
P (%) |
|
Proved |
774 |
37.3 |
35.1 |
4.7 |
0.04 |
|
Probable |
1,296 |
31.8 |
44.7 |
2.3 |
0.05 |
|
Total |
2,070 |
33.9 |
41.1 |
3.2 |
0.05 |
Notes:
Long term price assumptions are based on a CFR IODEX 65%Fe forecast of US$90tdry (USc138/dmtu) with adjustments for quality, deleterious elements, moisture and freight.
Discount Rate 10% applied on an ungeared 100% equity basis
Mining dilution ranging between 5% and 6%
Mining losses ranging between 1% and 5%
Note: The full Ore Reserve Statement is available on the Company's website (www.zanagairon.com)
Mineral Resource
|
Classification |
Tonnes (Mt) |
Fe (%) |
SiO2 (%) |
Al2O3 (%) |
P (%) |
Mn (%) |
LOI (%) |
|
Measured |
2,330 |
33.7 |
43.1 |
3.4 |
0.05 |
0.11 |
1.46 |
|
Indicated |
2,460 |
30.4 |
46.8 |
3.2 |
0.05 |
0.11 |
0.75 |
|
Inferred |
2,100 |
31 |
46 |
3 |
0.1 |
0.1 |
0.9 |
|
Total |
6,900 |
32 |
45 |
3 |
0.05 |
0.11 |
1.05 |
Reported at a 0% Fe cut-off grade within an optimised Whittle shell representing a metal price of 130 USc/dmtu. Mineral Resources are inclusive of Reserves. A revised Mineral Resource, prepared in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012 Edition) was announced on 8 May 2014 and is available on the Company's website (www.zanagairon.com).
Note: The figures shown are rounded; they may not sum to the subtotals shown due to the rounding used.
The Mineral Resource was estimated as a block model within constraining wireframes based upon logged geological boundaries. Tonnages and grades have been rounded to reflect appropriate confidence levels and for this reason may not sum to totals stated.
Geological Summary
The Zanaga iron ore deposit is located within a North-South oriented (metamorphic) Precambrian greenstone belt in the eastern part of the Chaillu Massif in South Western Congo. From airborne geophysical survey work, and morphologically, the mineralised trend constitutes a complex elongation in the North-South direction, of about 47 km length and 0.5 to 3 km width.
The ferruginous beds are part of a metamorphosed, volcano-sedimentary Itabirite/banded iron formation ("BIF") and are inter-bedded with amphibolites and mafic schists. It exhibits faulted and sheared contacts with the crystalline basement. As a result of prolonged tropical weathering the BIF has developed a distinctive supergene iron enrichment profile.
At surface there is sometimes present a high grade ore (+60% Fe), classified as canga, of apparently limited thickness (<5m) capping a discontinuous, soft, high grade, iron supergene zone of structure-less hematite/goethite of limited thickness (<7m). The base of the high-grade supergene iron zone grades quickly at depth into a relatively thick, leached, well-weathered to moderately weathered friable hematite Itabirite with an average thickness of approximately 25 metres and grading 45-55% Fe.
The base of the friable Itabirite zone appears to correlate with the moderately weathered/weakly weathered BIF boundary, and fresh BIF comprises bands of chert and magnetite/grunerite layers.
Competent Persons
The statement in this announcement relating to Ore Reserves is based on information compiled by Dr Iestyn Humphreys, FIMM, AIME, PhD who is a Corporate Consultant, and Practice Leader with SRK. He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the JORC Code (2012). The Competent Person, Dr Iestyn Humphreys, confirms that the Ore Reserve Estimate is accurately reproduced in this announcement and has given his consent to the inclusion in the report of the matters based on his information in the form and context within which it appears.
The information in this announcement that relates to Mineral Resources is based on information compiled by Malcolm Titley, BSc MAusIMM MAIG, of CSA Global (UK) Ltd. Malcolm Titley takes overall responsibility for the report as Competent Person. He is a Member of the Australasian Institute of Mining and Metallurgy ("AUSIMM") and has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Competent Person in terms of the JORC Code. The Competent Person, Mr Malcolm Titley, has reviewed this Mineral Resource statement and given his permission for the publication of this information in the form and context within which it appears.
Definition of JORC Code
The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012) as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.
Principal Risks & Uncertainties
The principal business of ZIOC currently comprises managing ZIOC's interest in the Zanaga Project, including the Jumelles group, and monitoring the development of the Project and engaging in discussions with potential investors. The principal risks facing ZIOC are set out below. Risk assessment and evaluation is an essential part of the Group's planning and an important aspect of the Group's internal control system. Overall these potential risks have remained broadly constant over the past year with the exception of the implications of COVID-19 on the long term outlook for the iron ore market.
Risks relating to iron ore prices, markets and products
The ability to raise finance for the Project is largely dependent on movements in the price of iron ore. Iron ore prices have historically been volatile and are primarily affected by the demand for and price of steel and the level of supply of iron ore. Such prices are also affected by numerous other factors beyond the Company's and the Jumelles group's control, including the relative exchange rate of the U.S. dollar with other major currencies, global and regional demand, political and economic conditions, production levels and costs and transportation costs in major iron ore producing regions.
While it appears to be the case that there has been some degree of stabilisation of iron ore prices in the global market for iron ore, the duration of such stabilisation remains uncertain. The level of iron ore prices in the global market for iron ore continues to be subject to uncertainty. Although the 2014 FS identifies the product from the Project and the potential demand for such product within a range of iron ore prices, there are no assurances that the demand for the Project's product will be sufficient in quantity or in price to ensure the economic viability of the Project or to enable finance for the development of the Project to be raised. Furthermore, the range of iron ore prices in the 2014 FS will need to be reviewed so as to reflect changed market conditions and changed expectations relating to the supply and demand for iron ore. Such risk is reviewed constantly and any relevant changes considered.
Risks relating to an EPP
For some considerable period, an initiative has been and is being carried out to investigate the possibility of a low-cost small scale start-up, using existing infrastructure, focussing on a standard 62% Fe benchmark iron ore product or a high grade 65% Fe pellet feed iron ore product that would involve simple 'processing' applications. In conjunction with this, the possibility of a low-cost small scale start-up involving the production of a pellet feed concentrate and conventional pelletisation continues to be investigated. This initiative also involves the assessment of methods of providing the necessary power requirements as well as logistical support to enable the product to be transported to an available exit port. There will also be the need to put in place the appropriate contractual and permitting arrangements. There is a risk that such kind of start-up is found not to be viable or is not proceeded with for other reasons or is delayed. Such risk is reviewed constantly and any relevant changes considered.
Risks relating to financing the Zanaga Project
Any decision of the Company to proceed with construction of the mine and related infrastructure (or any variant such as a low capital cost, small scale start-up EPP Project) is itself dependent upon the ability of the Company to raise the necessary debt and equity to finance such construction and the initial operation of the mine (or any variant such as a low-cost small scale start-up). The Company may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all and should this occur, it is highly likely to pose challenges to the proposed development of the Zanaga Project and the proposed timeline for its development. Moreover, the poor current global equity and credit environment may pose additional challenges to the ability of the Company to secure equity or debt finance or to secure equity or debt finance on acceptable terms, including as to rates of interest. Current negative global market conditions and increasing political and geopolitical tensions could also adversely impact the ability to finance the Zanaga Project. Such risk is reviewed constantly and any relevant changes considered.
Risks relating to financing of the Company
The Company will not generate any material income until an operating stage of the Project has been constructed and mining and export of the iron ore has successfully commenced at commercial volumes. In the meantime the Company will continue to expend its cash reserves. Should the Company seek to raise additional finance, it may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all.
If construction of the mine and related infrastructure proceeds (including any preparatory steps associated with the construction of the mine and related infrastructure) or any small scale start-up proceeds, and ZIOC elects to fund its pro rata equity share of construction capital expenditure, there is no certainty as to its ability to raise the required finance or the terms on which such finance may be available.
If ZIOC raises additional funds (including for the purpose of funding the construction of the Project or any part of the Project, including any small-scale start-up) through further issuances of securities, the holders of ordinary shares could suffer significant dilution, and any new securities that ZIOC issues could have rights, preferences and privileges superior to those of the holders of the ordinary shares.
If the Company fails to generate or obtain sufficient financial resources to develop and operate its business, this could materially and adversely affect the Company's business, results of operations, financial condition and prospects. Current negative global market conditions and increasing political and geopolitical tensions could also adversely impact the ability to finance the Company. Such risk is reviewed constantly and any relevant changes considered.
Risk relating to Ore Reserves estimation
Ore Reserves estimates include diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserve estimates are by their nature imprecise and depend, to a certain extent, upon statistical inferences and assumptions which may ultimately prove unreliable. Estimated mineral reserves or mineral resources may also have to be recalculated based on changes in iron ore or other commodity prices, further exploration or assessment or development activity and/or actual production experience. Such risk is reviewed constantly and any relevant changes considered.
Host country related risks
The operations of the Zanaga Project are located mainly in the RoC. These operations will be exposed to various levels of political, regulatory, economic, taxation, environmental and other risks and uncertainties. As in many other countries, these (varying) risks and uncertainties can include, but are not limited to: political, military or civil unrest; fluctuations in global economic and market conditions impacting on the economy; terrorism; hostage taking; extreme fluctuations in currency exchange rates; high rates of inflation; labour unrest; nationalisation; changes in taxation; illegal mining; restrictions on foreign exchange and repatriation. In addition, the RoC is an emerging market and, as a result, is generally subject to greater risks than in the case of more developed markets.
HIV/AIDS, malaria and other diseases are prevalent in the RoC and, accordingly, the workforce of the ZIOC group and of the Jumelles group will be exposed to the health risks associated with the country. The operating and financial results of such entities could be materially adversely affected by the loss of productivity and increased costs arising from any effect of HIV/AIDS, malaria and other diseases on such workforce and the population at large.
Weather conditions in the RoC can fluctuate severely. Rainstorms, flooding and other adverse weather conditions are common and can severely disrupt transport in the region where the Jumelles group operates and other logistics on which the Jumelles group is dependent.
The host country related risks described above could be relevant both as regards day-to-day operations and the raising of debt and equity finance for the Project. The occurrence of such risks could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group. Such risk is reviewed constantly and any relevant changes considered.
Risks relating to the Project's licences and the regulatory regime
The Project's Mining Licence was granted in August 2014 and a Mining Convention has been entered into. With effect from 20 May 2016, the Zanaga Mining Convention has been promulgated as a law of the RoC, following ratification by the Parliament of the RoC and publication in the Official Gazette.
The holder of a mining licence is required to incorporate a Congolese company to be the operating entity and the Congolese Government is entitled to a free participatory interest in projects which are at the production phase. This participation cannot be less than 10%. Under the terms of the Mining Convention, there is a contingent statutory 10% free participatory interest in favour of the Government of the RoC as regards the mine operating company and a contingent option for the Government of the RoC to buy an additional 5% stake at market price.
The granting of required approvals, permits and consents may be withheld for lengthy periods, not given at all, or granted subject to conditions which the Jumelles group may not be able to meet or which may be costly to meet. As a result, the Jumelles group may incur additional costs, losses or lose revenue and its business, result of operations, financial condition and/or growth prospects may be materially adversely affected. Failure to obtain, renew, enforce or comply with one or more required approvals, permits and consents could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group. Mitigation of such risks is in part dependent upon the terms of the Mining Convention and compliance with its terms. Such risk is reviewed constantly and any relevant changes considered.
Transportation and other infrastructure
The successful development of the Project (including any low-cost small scale start-up) depends on the existence of adequate infrastructure and the terms on which the Project can own, use or access such infrastructure. The region in which the Project is located is sparsely populated and difficult to access. Central to the Zanaga Project becoming a commercial mining operation is access to a transportation system through which it can transport future iron ore product to a port for onward export by sea. In order to achieve this it will be necessary to access a port at Pointe-Indienne, which is still to be constructed, or some other exit port in the case of a low-cost small scale start-up.
The nature and timing of construction of the proposed new port are still under discussion with the government of the RoC and other interested parties. In relation to the pipeline and Project facilities at the proposed new port and (to the extent needed) other infrastructure, the necessary permits, authorisations and access, usage or ownership rights have not yet been obtained.
Failure to construct the proposed pipeline and/or facilities at the proposed new port and/or other needed infrastructure or a failure to obtain access to and use of the proposed new port and/or other needed infrastructure or a failure to do this in an economically viable manner or in the required timescale could have a material adverse effect on the Project.
In the case of a low-cost small scale start-up, failure to put in place the necessary logistical requirements (including trucking, rail transportation and port facilities) and/or other needed infrastructure or a failure to obtain access to and use of the proposed logistical requirements or a failure to do this in an economically viable manner or in the required timescale could have a material adverse effect on the Project.
The availability of reliable and continuous delivery of sufficient quantity of power to the Project at an affordable price will also be a significant factor on the costs at which iron ore can be produced and transported to any proposed exit port and will impact on the economic viability of the Project.
Reliable and adequate infrastructure (including an outlet port, roads, bridges, power sources and water supplies) are important determinants which affect capital and operating costs and the ability of the Jumelles group to develop the Project, including any low-cost small scale start-up. Failure or delay in putting in place or accessing infrastructure needed for the development of the Zanaga Project could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group. Such risk is reviewed constantly and any relevant changes considered.
Risks associated with access to land
Pursuant to the laws of the RoC, mineral deposits are the property of the government with the ability to purchase surface rights. Generally speaking, the RoC has not had a history of native land claims being made against the state's title to land. There is no guarantee, however, that such claims will not occur in the future and, if made, such claims could have a deleterious effect on the progress of development of the Project and future production.
The Mining Convention envisages that the RoC will carry out a process to expropriate the land required by the Zanaga Project and place such land at the disposal of the holder of the Mining Licence in order to build the mine and the infrastructure, including the pipeline, required for the realisation of the Zanaga Project. This means that the rights of the Jumelles company which holds the Mining Licence to the relevant land will be subject to negotiation between the Congolese government and such company. Alternatively, if the land is not declared DUP (i.e. is expropriated by the State under its sovereign powers) then the Jumelles group will have to reach agreement with the local land owners which may be a more time consuming and costly process. Such risk is reviewed constantly and any relevant changes considered.
Risks relating to timing
Any delays in (i) obtaining rights over and access to land and infrastructure; (ii) obtaining the necessary permits and authorisations; (iii) the construction or commissioning of the mine, the pipeline or facilities at or offshore an exit port or power transmission lines or other infrastructure; or (iv) negotiating the terms of access to the exit port and supply of power and other infrastructure (including an offshore loading facility); or (v) raising finance to fund the development of the mine and associated infrastructure, could prevent altogether or impede the development of the Zanaga Project, including the ability of the Zanaga Project to export its future iron ore products whether on the anticipated timelines or at projected volumes and costs or otherwise. Such delays or a failure to complete the proposed infrastructure or the terms of access to infrastructure or to do this in an economically viable manner, could have a material adverse effect on the business, results of operations, financial condition and prospects of the Company and/or the Jumelles group. Such risk is reviewed constantly and any relevant changes considered.
Environmental risks
The operations and activities of the Zanaga Project are subject to potential risks and liabilities associated with the pollution of the environment and the disposal of waste products that may occur as a result of its mineral exploration, development and production, including damage to preservation areas, over-exploitation and accidental spills and leakages. Such potential liabilities include not only the obligation to remediate environmental damage and indemnify affected third parties, but also the imposition of court judgments, administrative penalties and criminal sanctions against the relevant entity and its employees and executive officers. Awareness of the need to comply with and enforcement of environmental laws and regulations continues to increase. Notwithstanding precautions taken by entities involved in the development of the Project, breaches of applicable environmental laws and regulations (whether inadvertent or not) or environmental pollution could materially and adversely affect the financial condition, business, prospects and results of operations of the Company and/or the Jumelles group. Such risk is reviewed constantly and any relevant changes considered.
Health and safety risks
The Jumelles group is required to comply with a range of health and safety laws and regulations in connection with its business activities (including laws and regulations relating to the COVID-19 pandemic) and will be required to comply with further laws and regulations if and when construction of the Project commences and the mine goes into operation. A violation of health and safety laws relating to the Jumelles group and/or the Project's operations, or a failure to comply with the instructions of the relevant health and safety authorities, could lead to, amongst other things, a temporary shutdown of all or a portion of the business activity of the Jumelles group and/or the Project's operations or the imposition of costly compliance measures. Where health and safety authorities and/or the RoC government require the business activity of the Jumelles group and/or the Project to shut down or reduce all or a portion of its activities of operations or to implement costly compliance measures, whether pursuant to applicable health and safety laws and regulations, or the more stringent enforcement of such laws and regulations, such measures could have a material adverse effect on the financial condition, business, prospects, reputation and results of operations of the Company and/or the Jumelles group. Such risk is reviewed constantly and any relevant changes considered.
Risks relating to third party claims
Due to the nature of the operations to be undertaken in respect of the development of the Zanaga Project, there is a risk that substantial damage to property or injury to persons could be sustained during such development. Any such damage or injury could have a material adverse effect on the financial condition, business, prospects, reputation and results of operations of the Company and/or the Jumelles group. Such risk is reviewed constantly and any relevant changes considered.
Risks relating to outsourcing
The 2014 FS envisages that certain aspects of the Zanaga Project will be carried out by third parties pursuant to contracts to be negotiated with such third parties. Any low-cost small scale start-up is also likely to involve the undertaking of various key elements of the Project by third parties. There is a risk that agreement might not be reached with such third parties or that the terms of any such agreement are more stringent than currently anticipated; this could adversely impact upon the Project and/or the proposed timescale for carrying out the Project. Such risk is reviewed constantly and any relevant changes considered.
Fluctuation in economic factors
In terms of currency exchange rates, the Jumelles group's functional and reporting currency is the U.S. dollar, and most of its in country costs are and will be denominated in CFA francs and Euros. Consequently, the Jumelles group must translate the CFA franc and Euro denominated assets and liabilities into U.S. dollars. To do so, non-U.S. dollar denominated monetary assets and liabilities are translated into U.S. dollars using the closing exchange rate at the reporting period end date. Consequently, increases or decreases in the value of the U.S. dollar versus the Euro (and consequently the CFA franc) and other foreign currencies may affect the Jumelles group's financial results, including its assets and liabilities in the Jumelles group's balance sheets. These factors will affect the financial results of the Company. In addition, ZIOC holds the majority of its funds in Pounds Sterling, and incurs the majority of its corporate costs in Pounds Sterling, but its contributions to funding the Jumelles group in 2021 and 2022 are calculated in U.S. dollars. Consequently, any fluctuation in exchange rates between Pounds Sterling versus the U.S. dollar or the Euro, could also adversely affect the financial results of the Company. Furthermore, current fluctuations in inflation, interest rates, and supply chain reliability has the potential to adversely impact the Company and Jumelles today, while also potentially adversely impacting the economic viability of the Zanaga Project, as well as the ability to secure finance for the development of the Zanaga Project. Such risks are reviewed constantly and any relevant changes considered.
Cash resources
The Company has limited cash resources. Although the Company has taken steps to conserve and replenish its cash resources, there is a risk that a shortage of such cash resources will adversely affect the Company. Such shortage could result in further expenditure cuts being introduced by the Company, both in its internal and its external operations. Volatile and uncertain economic global conditions in means that there can be no certainty as to when the Zanaga resource is likely to be developed. The challenging economic conditions as well as difficulties of monetising this resource given its location impact upon the ability of the Jumelles group to raise new finance for the Project as well as on the Company's ability to raise new finance for itself. The Company's existing cash resources may continue to come under increasing pressure unless a more predictable investment, travel and trading climate materialises in the foreseeable future which benefits the Project and the Company can take steps which result in an improvement of its financial position. Such risk is reviewed constantly and any relevant changes considered.
Financial Statements
Consolidated statement of total comprehensive income for year ended 31 December 2023
|
|
|
2023 |
2022 |
|
|
Note |
|
|
|
Gain on revaluation of investment |
6b |
- |
9,050 |
|
General and administrative expenses |
|
(2,723) |
(516) |
|
Share of loss of associate |
6b |
- |
(436) |
|
Operating (loss) / profit |
|
(2,723) |
8,098 |
|
(Loss) / Pofit before tax |
|
(2,723) |
8,098 |
|
Taxation |
5 |
- |
- |
|
(Loss) / Profit for the year |
|
(2,723) |
8,098 |
|
Items that may be reclassified subsequently to profit or loss: Share of other comprehensive income of associate - foreign exchange translation |
6b |
- |
61 |
|
Reclassification of share of other comprehensive loss of associate |
6b |
- |
(3,447) |
|
Other comprehensive loss |
|
- |
(3,386) |
|
Total comprehensive (loss) / income |
|
(2,723) |
4,712 |
|
(Loss) / Earningsper share |
|
|
|
|
Basic (Cents) |
12 |
(0.4) |
0.3 |
|
Diluted (Cents) |
12 |
(0.4) |
0.3 |
(Loss) / Profit and total comprehensive income / (loss) for the year is attributable to the equity holders of the Parent Company and are from continuing operations.
The notes form an integral part of the financial statements.
Consolidated statement of financial position
as at 31 December 2023
|
|
|
2023 |
2022 |
|
|
Note |
|
|
|
Non-current assets Exploration and evaluation assets |
6a |
85,300 |
85,300 |
|
Property, plant and equipment |
6a |
648 |
703 |
|
|
|
85,948 |
86,003 |
|
Current assets |
|
|
|
|
Other receivables |
7 |
1,193 |
113 |
|
Cash and cash equivalents |
8 |
899 |
310 |
|
|
|
2,092 |
423 |
|
Total Assets |
|
88,040 |
86,426 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Lease liability |
9a |
104 |
104 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Loans and borrowings |
9b |
1,685 |
385 |
|
Trade and other payables |
9c |
423 |
724 |
|
Lease Liability |
9a |
11 |
11 |
|
Net assets |
|
85,817 |
85,202 |
|
Equity attributable to equity holders of the Parent Company |
|
|
|
|
Share capital |
10 |
317,027 |
313,689 |
|
Accumulated deficit |
|
(231,141) |
(228,418) |
|
Foreign currency translation reserve |
|
(69) |
(69) |
|
Total equity |
|
85,817 |
85,202 |
The notes form an integral part of the financial statements.
These financial statements were approved by the Board of Directors and were authorised for issue on 30 June 2024 and were signed on its behalf by:
Mr Clifford Elphick
Director
Consolidated statement of changes in equity
for year ended 31 December 2023
|
|
|
|
|
Foreign |
|
|
|
Note |
|
|
currency |
|
|
|
|
Share |
Accumulated |
translation |
Total |
|
|
|
Capital |
deficit |
reserve |
Equity |
|
|
|
|
|
|
|
|
Balance at 1 January 2022 |
|
270,935 |
(236,516) |
3,317 |
37,736 |
|
Profit for the year |
|
- |
8,098 |
- |
8,098 |
|
Other comprehensive loss |
|
- |
- |
(3,386) |
(3,386) |
|
Total comprehensive income for the year |
|
- |
8,098 |
(3,386) |
4,712 |
|
Transactions with owners in their capacity as owners: |
|
|
|
|
|
|
Issue of shares as consideration for acquisition of assets |
|
42,591 |
- |
- |
42,591 |
|
Consideration for share-based payments |
|
163 |
- |
- |
163 |
|
Balance at 31 December 2022 |
|
313,689 |
(228,418) |
(69) |
85,202 |
|
Balance at 1 January 2023 |
|
313,689 |
(228,418) |
(69) |
85,202 |
|
Loss for the year |
|
- |
(2,723) |
- |
(2,723) |
|
Other comprehensive income |
|
- |
- |
- |
- |
|
Total comprehensive income for the year |
|
- |
(2,723) |
- |
(2,723) |
|
Transactions with owners in their capacity as owners: |
|
|
|
|
|
|
Issue of ordinary shares |
|
2,395 |
- |
- |
2,395 |
|
Issue of shares as remuneration |
11 |
943 |
- |
- |
943 |
|
Balance at 31 December 2023 |
|
317,027 |
(231,141) |
(69) |
85,817
|
Consolidated cash flow statement
for year ended 31 December 2023
|
|
|
2023 |
2022 |
|
|
Note |
|
|
|
Cash flows used in operating activities |
|
|
|
|
(Loss) / Profit for the year |
|
(2,723) |
8,098 |
|
Adjustments for: |
|
|
|
|
Share based payments |
|
943 |
163 |
|
Net exchange loss |
|
16 |
- |
|
Gain on revaluation of investment in associate |
6b |
- |
(9,050) |
|
Share of loss in associate |
6b |
- |
436 |
|
Working capital changes: |
|
|
|
|
- Decrease in other receivables |
7 |
1,080 |
130 |
|
- (Decrease)/increase in trade and other payables |
9c |
(1,103) |
126 |
|
Net cash used in operating activities |
|
(1,787) |
(97) |
|
Cash flows used in investing activities |
|
|
|
|
Investment in associate |
6b |
- |
(95) |
|
Net cash used in investing activities |
|
- |
(95) |
|
Cash flows generated by financing activities |
|
|
|
|
Glencore loan |
|
1,300 |
- |
|
Proceeds from share issuance |
|
990 |
- |
|
Net cash flow generated by financing activities |
|
2,290 |
- |
|
Net increase/(decrease) in cash and cash equivalents |
|
503 |
(192) |
|
Cash and cash equivalents at beginning of year |
|
310 |
387 |
|
Acquired as acquisition of assets (refer note 6b) |
|
- |
115 |
|
Effect of movements in exchange rates on cash held |
|
86 |
- |
|
Cash and cash equivalents at end of year |
8 |
899 |
310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the financial statements
1 Business information and going concern basis of preparation
Background
Zanaga Iron Ore Company Ltd (the "Company"), was incorporated on 19 November 2009 under the name of Jumelles Holdings Limited. The Company changed its name on 1 October 2010. The Company is incorporated in the British Virgin Islands ("BVI") with registered office is situated at 2nd Floor, Coastal Building, Wickham's Cay II, Road Town, P.O. Box 2221, Tortola, British Virgin Islands. On 18 November 2010, the Company's share capital was admitted to trading on the AIM Market ("AIM") of the London Stock Exchange ("Admission"). The Company's principal place of business as an investment holding vehicle is situated in Guernsey, Channel Islands.
At 31 December 2010 the Company held 100% of the share capital of Jumelles Limited subject to the then Call Option.
On 14 March 2011 the Company incorporated and acquired the entire share capital of Zanaga UK Services Limited for
In 2007, Jumelles Limited became the special purpose holding company for the interests of its then ultimate 50/50 founding shareholders, Garbet Limited ("Garbet") and Guava Minerals Limited ("Guava"), in MPD Congo which, owns and operates 100% of the Zanaga Project in the RoC (subject to a minimum 10% free carried interest in MPD Congo in favour of the Government of the RoC).
In December 2009 Garbet and Guava contributed their then respective 50/50 joint shareholding in Jumelles to the Company.
Guava is majority owned by African Resource Holdings Limited ("ARH"), a BVI company that specialises in the investment and development of early-stage natural resource projects in emerging markets. Guava owns approximately 27.39% of the share capital of the Company.
At the time that Garbet was a shareholder in the Company, it was majority owned by Strata Limited ("Strata"), a private investment holding company based in Guernsey, which specialises in the investment and development of early-stage natural resource projects in emerging markets, predominately Africa. Until 3 April 2017 Garbet owned approximately 41.49% of the share capital of the Company. Pursuant to a transaction effected on 2 April 2017 Garbet ceased to hold any shares in the Company. As part of such transaction the shares in the Company which were held by Garbet were transferred directly or indirectly to Garbet's shareholders and the shareholders of Garbet's holding company, Strata.
Jumelles has three subsidiary companies, namely Jumelles M Limited, Jumelles Technical Services (UK) Limited and MPD Congo.
Transactions involving Xstrata and Glencore
· As a result of transactions entered into on 16 October 2009 and 3 December 2009, Xstrata acquired a majority stake in Jumelles in return for providing funding towards ongoing exploration of the Zanaga exploration licence area, the preparation of a pre-feasibility study (the "PFS") and a feasibility study (the "FS"). In addition a joint venture agreement which regulated the respective rights of the Company, Jumelles and Xstrata in relation to Jumelles was entered into. >Subsequently:
o Xstrata merged with the Glencore group on 2 May 2013 to form Glencore Xstrata and the holding company of the merged group subsequently changed its name to Glencore.
o the Feasibility Study was completed in March 2014 and paid for.
o In December 2022, ZIOC acquired Glencore's 50% plus one share in Jumelles in exchange for 286,340,379 new Shares in ZIOC, enabling ZIOC to secure 100% ownership of Jumelles
Relationship between Jumelles and its shareholders since February 2011 until December 2022
Since the acquisition by ZIOC of Glencore's majority stake in Jumelles in December 2022 the JVA is no longer effective and ZIOC has 100% ownership of Jumelles.
Future funding requirements and going concern basis of preparation
The Directors have prepared the accounts on a going concern basis. At 31 December 2023 the Company had cash reserves of
In order to raise additional funding the Company entered a Subscription Agreement with SMC (as described above - see the Company's release of 28 June 2024.) The financing structure with SMC enables the Company to access funding for the costs that the Company is expected to meet in the near future. For illustrative purposes only, if the average price at which SMC places the final tranche of the 2023 ESA and all three tranches of the 2024 ESA (a combined total of 48,000,000 shares) was
The Company continues to review the costs of its operational activities with a view to conserving its cash resources. As part of such review, and in order to preserve the cash position of the Company, it has been agreed with the Directors since January 2023 that fees previously deferred would be reviewed.
Volatility in currencies
Various factors, including the the Russia/Ukraine war and its impact on global markets as well as supply chain issues and inflation has resulted in increased volatility in currency rates applicable to Pounds Sterling. Such volatility is likely to continue. As the Company's cash resources are held in Pounds Sterling, such volatility could adversely affect the Company's financial position and results where it is obliged to make payments of sums denominated in other currencies. This particularly applies to contributions made by the Company to funding the Jumelles group as these amounts are calculated in United States dollars.
2 Material accounting policies
The material accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the United Kingdom("UK Adopted IFRS"). UK Adopted IFRS comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") as adopted by the United Kingdom.
These consolidated financial statements comprise the Company and its subsidiaries (together referred as the 'Group'), and the Company's investment in an associate which is accounted for using the equity method.
The Company's presentation currency and functional currency is US dollars. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
These financial statements were authorised for issue by the Company's board of directors on 30 June 2024.
New standards, amendments and interpretations
The following IFRSs standards and amendments are effective from 1 January 2023
· Definition of Accounting Estimates (Amendments to IAS 8)
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
· Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
· International Tax Reform - Pillar Two Model Rules - (Amendments to IAS 12)
The amendments listed above did not have a material impact on the amounts recognsied in prior periods and are not expected to significantly affect the current or future periods.
New and revised IFRS Standards in issue but not yet effective
· Lease liability in a sale and leaseback transaction (Amendments to IFRS 16)
· Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
· Non-Current Liabilities with Covenants ( Amendments to IAS 1)
· Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
· Lack of Exchangeability (Amendments to IAS 21)
·
These standards, amendments or interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
Measurement convention
These financial statements have been prepared on the historical cost basis.
The preparation of financial statements in conformity with UK Adopted IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.
Basis of consolidation
Subsidiaries
Subsidiaries are all entities over which the group has control. . The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
In case of acquisition of assets that do not qualify as a business, these are recognisedas acquired when the company obtains control over the asset, which is typically evidenced by legal ownership or the ability to direct the use and obtain the economic benefits.
Acquired assets are initially measured at their fair value, which represents the amount for which the asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.
Consideration paid for the asset acquisition is allocated to the individual assets and liabilities acquired based on their respective fair values at the date of acquisition. The fair value of acquired assets is determined using appropriate valuation techniques, such as market comparisons, income-based approaches, or other relevant methods.
The initial recognition and measurement of acquired assets and liabilities occur at the date when the company obtains control over the assets, which is typically the date of legal transfer or other events signalling control. Subsequent measurement depends on the nature of the asset and is driven by the applicable standards.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Changes in ownership interests
An entity remeasures the previously held equity interest to fair value at the date on which it obtains control and recognises any resulting gain or loss in profit or loss or other comprehensive income, as appropriate.
Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency').
(ii) Transactions and balances
Transactions in foreign currencies are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are generally recognised in profit or loss.
All foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within general and administrative expenses.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
· assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
· income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
· all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income. When a foreign operation is sold, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
Leases
Assets and liabilities arising from a lease are initially measured measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or if that rate cannot be readily determined the Groups incremental borrowing rate . Lease liabilities include the net present value of the following lease payments:
· fixed payments (including in-substance fixed payments), less any lease incentives receivable
· variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date
· amounts expected to be payable by the group under residual value guarantees
· the exercise price of a purchase option if the group is reasonably certain to exercise that option, and
· payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability
· any lease payments made at or before the commencement date less any lease incentives received
· any initial direct costs, and
· restoration costs.
Impairment of non financial assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
Share-based payments
Employees
The Group makes equity-settled share-based payments to certain employees and similar persons as part of a Long-Term Incentive Plan ('LTIP'). The fair value of options granted is recognised as an expense within general and administrative expenses, with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
· including any market performance conditions (e.g. the entity's share price).
· excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the entity over a specified time period).
· including the impact of any non-vesting conditions (e.g. the requirement for employees to save or hold shares for a specific period of time).
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity
Where awards were granted to employees of the Group's associate and similar persons, the equity-settled share-based payments were recognised by the Group as an increase in the cost of the investment with a corresponding increase in equity over the vesting period of the awards.
Non-employees
Where the Group receives goods or services from a third party in exchange for a fixed number of its own equity instruments, the equity instruments and related goods or services are measured at the fair value of the goods or services received. These are recognised as the goods are obtained or the services rendered. Equity instruments issued under such arrangements for the receipt of services are only considered to be vested once provision of services is complete.
Non-derivative financial instruments
Financial assets and financial liabilities are initially recognised when the group becomes a party to the contractual provisions of the instrument in accordance with IFRS 9.
Financial assets are initially recognised at their fair value, including, in the case of instruments not recorded at fair value through profit or loss, directly attributable transaction costs. Financial assets are subsequently measured at amortised cost, at fair value through other comprehensive income (FVTOCI) or at fair value through profit or loss (FVTPL) depending upon the business model for managing the financial assets and the nature of the contractual cash flow characteristics of the instrument.
Financial liabilities, other than derivatives, are initially recognised at fair value of consideration received net of transaction costs as appropriate and subsequently carried at amortised cost.
Non-derivative financial instruments in the balance sheet comprise other receivables, cash and cash equivalents, and trade and other payables.
(i) Impairment of financial assets
A loss allowance for expected credit losses is determined for all financial assets, other than those at FVTPL, at the end of each reporting period. The expected credit loss recognised represents a probability-weighted estimate of credit losses over the expected life of the financial instrument.
The expected credit loss allowance is determined on the basis of twelve month expected credit losses and where there has been a significant increase in credit risk, lifetime expected credit losses. Financial assets are credit impaired when there is no realistic likelihood of recovery.
(ii) Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or have expired.
On derecognition of a financial asset/financial liability in its entirety, the difference between the carrying amount of the financial asset/financial liability and the sum of the consideration received and receivable/paid and payable is recognised in profit and loss.
Other receivables
Other receivables amounts due from related parties and trade receivables, which are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognised at fair value. They are subsequently measured at amortised cost using the effective interest method, less loss allowance. See note 13 for a description of group's impairment policies.
Trade and other payables
Trade and other payables are initially recognised at the fair value of consideration received net of transaction costs as appropriate and subsequently measured at amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise balances with financial institutions.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.
When share capital recognised as equity is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are cancelled.
Financing income and expenses
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.
Borrowing costs
Borrowing costs are expensed in the period in which they are incurred unless they relate to a qualifying asset, in which these are capitalised.
Taxation
The income tax expense or credit for the period is the tax payable on the current period's taxable income, based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty, and any adjustment to tax payable in respect of previous years.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. . However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Segmental Reporting
The Group has one operating segment, being its investment in the Project, held through Jumelles.
Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
• the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and
• the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares
Exploration and evaluation assets
Subsequent Measurement
Subsequent to initial recognition, evaluation and exploration assets are carried at cost less any accumulated impairment losses. The company capitalizes costs incurred during the exploration and evaluation phase, provided these costs meet the criteria for asset recognition.
Reclassification
When technical feasibility and commercial viability of extracting a mineral resource are demonstrable, evaluation and exploration assets are assessed for impairment and any impairment loss is recognized before reclassification to development assets.
Impairment
Evaluation and exploration assets are reviewed for impairment indicators at each reporting date. An impairment loss is recognized if the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs of disposal and value in use.
Indicators of impairment include:
- The right to explore the area has expired or will expire in the near future and is not expected to be renewed.
- Substantive expenditure on further exploration and evaluation is not budgeted or planned.
- Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources, and the entity has decided to discontinue such activities in the specific area.
- Sufficient data exist to indicate that, although development in the specific area is likely to proceed, the carrying amount of the E&E asset is unlikely to be recovered in full from successful development or by sale.
Derecognition
Evaluation and exploration assets are derecognized upon disposal or when no future economic benefits are expected from their use. Any gain or loss arising from derecognition is included in the profit or loss for the period.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate components of the item of property, plant and equipment and each component is depreciated over its estimated useful life.
Depreciation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
- Fixtures and fittings 3-10 years
- Motor vehicles 4 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Subsequent events
Post year-end events that provide additional information about the Group's position at the end of each reporting period (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to financial statements where material. Please see note 17.
3 Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of expenses, assets and liabilities, and the accompanying disclosures as at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amounts of assets or liabilities affected in future periods.
Judgements
In the process of applying the Group's accounting policies, management has made the following judgements, which has the most significant effect on the amounts recognised in the consolidated financial statements:
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation undertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
· Given the material risk but also upside potential, in our opinion, detailed disclosure in the Financial Statements should be made that:
o the potential of the project is material, given the results of the 2014 FS, the material reserves, etc.
o the estimated Future Value considers the material risk at this phase, driven by the early/greenfield stage of the project, the relatively long development period of more than four years and large capital cost, and major project assumptions which might change in due course, but also country risk effects.
o the volatility of the markets, including the global uncertain geopolitical situation and country risks adds to the risks that affect the project.
o the sensitivity of the project to the weighted average cost of capital ("WACC") (and other major assumptions) could be indicated as: +/-0.5% change in the discount rate would change the value of the project by approximately -/
o due to the above factors, material risk and volatility of the Future Value could be expected under better/worse market or operational conditions.
(i) Deferred taxes
At each balance sheet, the Group assesses whether the realisation of future tax benefits is sufficiently probable to recognise deferred tax assets. This assessment requires the use of significant estimates with respect to assessment of future taxable income. The recorded amount of total deferred tax assets could change if estimates of projected future taxable income or if changes in current tax regulations are enacted. Refer note 5 for further information on potential tax benefits for which no deferred tax asset is recognised.
4 Note to the comprehensive income statement
Operating profit/(loss) before tax is stated after charging/(crediting):
|
|
2023 |
2022 |
|
|
|
|
|
Share-based payments (see Note 11) |
587 |
163 |
|
Net foreign exchange loss/(gain) |
16 |
(34) |
|
Directors' fees |
356 |
- |
|
Auditor's remuneration |
113 |
107 |
Other than the Company Directors, the Group did not directly employ any staff in 2023 (2022: Nil). The Directors received
5 Taxation
The Group is exempt from most forms of taxation in the BVI, provided the Group does not trade in the BVI and does not have any employees working in the BVI. All dividends, interest, rents, royalties and other expense amounts paid by the Company, and capital gains are realised with respect to any shares, debt obligations or other securities of the Company, are exempt from taxation in the BVI.
The effective tax rate for the Group is Nil % (2022: Nil %).
In case of the wholly-owned subsidiary, Jumelles Limited (acquired during the current year), the Avenant to the MPD Convention applied from August 2010 provides corporate income tax exemption to foreign companies providing services to MPD for the benefit of the Zanaga project during the exploration and feasibility phase of the project. In 2011 a service note from the Congolese tax authorities gave further precisions and interpretations on the tax exemptions. The Mine Operating Agreement signed in August 2014 contains a detailed tax regime and in effect at the authorisation date.
Under the Mine Operating Agreement provisions of corporate tax exemption are as follows:
Complete exemption from corporate income tax during the First Exemption Period of 5 years from the First Financial Year which is defined as the financial year of the mining code ("SEM") as:
(i) after the year, in the course of which the date of Commercial Production Stage 1 occurs.
(ii) in relation to which previously reported tax deficits (ordinary losses and amortisations deemed deferred) have been set off against taxable profits.
(iii) in the course of which the SEM achieves a taxable profit.
An additional period of complete exemption from corporate income tax for a period of 5 years. However this exemption will only apply to 50% of the taxable profit and will be applicable from the First Financial Year of the Second Exemption Period which refers to the financial year of the SEM as:
(i) after the year, in the course of which the date of Commercial Production Stage 2 occurs.
(ii) in relation to which it is established that the tax deficits previously reported (ordinary losses and amortisations deemed deferred) have been previously imputed in their totality to taxable profits.
(iii) in the course of which the SEM achieves a taxable profit.
Deferred tax assets
At 31 December 2023, the Company had no recognised deferred tax assets. The primary reason for this decision is the uncertainty surrounding the timing and likelihood of generating future taxable profits. The Company is currently in the exploration and evaluation stage, and it is not yet certain when , or if, it will begin generating profits.
6a Property, Plant and Equipment
|
|
Motor |
Right of |
Fixtures |
Exploration |
Total |
|
|
vehicles |
use asset |
and fittings |
assets |
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
Balance at 1 January 2022 |
43 |
100 |
603 |
85,300 |
86,046 |
|
Additions |
- |
- |
- |
- |
- |
|
Balance as at 31 December 2023 |
43 |
100 |
603 |
85,300 |
86,046 |
|
Depreciation |
|
|
|
|
|
|
Balance at 1 January 2022 |
43 |
- |
|
- |
43 |
|
Charge for period |
- |
- |
55 |
- |
55 |
|
Balance at 31 December 2022 |
43 |
- |
55 |
- |
98 |
|
Net book value |
|
|
|
|
|
|
Balance at 31 December 2023 |
- |
100 |
548 |
85,300 |
85,948 |
|
Balance at 31 December 2022 |
- |
100 |
603 |
85,300 |
86,003 |
The Right-of-use assets consist of office space and airstrip.
6b Investment in Associate
|
|
|
|
Balance at 1 January 2022 |
37,269 |
|
Share of profit or loss |
(436) |
|
Share of currency translation reserve |
61 |
|
Additional investment during the year |
95 |
|
Disposal - on account of acquisition of controlling stake |
(36,998) |
|
Balance at 31 December 2022 |
- |
|
Balance at 1 January 2023 |
- |
|
Share of profit or loss |
- |
|
Share of currency translation reserve |
- |
|
Additional investment during the year |
- |
|
Disposal - on account of acquisition of controlling stake |
- |
|
Balance at 31 December 2023 |
- |
On 16 December 2022, the Company acquired the remaining stake in Jumelles from Glencore, thereby gaining control, with 100% stake in Jumelles. The consideration for this acquisition was made by issuing ordinary shares of the Company.
Summarised financial information of the associate as on the date of acquisition is set out below.
|
|
|
15 December 2022 |
|
|
|
|
|
Non-current Assets: |
|
|
|
Property, plant and equipment |
|
703 |
|
Exploration and other evaluation assets |
|
85,300 |
|
Total non-current assets |
|
86,003 |
|
Current assets |
|
125 |
|
Non-current liabilities |
|
(100) |
|
Current liabilities |
|
(944) |
|
Net assets |
|
85,084 |
|
Share capital |
|
293,103 |
|
Additional paid in capital |
|
41,242 |
|
Translation reserve |
|
(6,112) |
|
Accumulated deficit |
|
(243,149) |
|
|
|
85,084 |
The acquisition was determined to involve assets that do not qualify as a business, therefore the purchase was an asset acquisition and not a business combination. This was primarily due to the absence of a skilled workforce and contracts for development or extraction activities. As a result, the Company allocated the consideration paid to the acquired assets and liabilities based on their respective fair values. These fair values were deemed equal to their existing carrying values as at the acquisition date.
The main assumptions used for the valuation were using a discounted flow model (DCF) using a discount rate of 18%.
In addition, the Company revalued its investment in the associate and recorded a gain in statement of comprehensive income in amount of
Previously accumulated Foreign currency translation reserve on this investment of
7 Other receivables
|
|
2023 |
2022 |
|
|
|
|
|
Receivables |
1,193 |
113 |
|
Other receivables |
1,193 |
113 |
8 Cash and cash equivalents
|
|
2023 |
2022 |
|
|
|
|
|
Cash and cash equivalents |
899 |
195 |
|
Acquired as acquisition of assets (refer note 6b) |
- |
115 |
|
|
899 |
310 |
9a Lease liability
|
|
2023 |
2022 |
|
|
|
|
|
Current portion |
11 |
11 |
|
Non-current portion |
104 |
104 |
|
|
|
|
9b Loans and borrowings
|
|
2023 |
2022 |
|
|
|
|
|
Loan from Glencore |
1,685 |
385 |
|
|
|
|
9c Trade and other payables
|
|
2023 |
2022 |
|
|
|
|
|
Accounts payable |
423 |
279 |
|
Other payables |
- |
445 |
|
|
423 |
725 |
No amounts payable are due in more than 12 months (31 December 2022: US$nil).
10 Share capital
|
In thousands of shares |
Ordinary Shares
|
Ordinary Shares
|
|
|
2023 |
2022 |
|
In issue at 1 January |
593,374 |
307,034 |
|
Shares issued |
51,615 |
286,340 |
|
In issue at 31 December |
644,989 |
593,374 |
The Company is able to issue an unlimited number of no par value shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. No dividends have been paid or declared in 2023 or in the prior year (2022: US$nil).
Share capital changes in 2023
24,000,000 shares were issued to Shard capital which were further placed into the market (12,000,000 post year end in January 2024), 13,981,828 shares issued to directors and 13,633,335 shares issued to consultants in 2023. There were no share repurchases.
Nature and purpose of reserves
Foreign currency translation reserve
The foreign currency translation reserve comprises of all foreign currency differences arising from translation of the financial statements of foreign operations.
11 Share-based payments
Employees
There are no new awards that have been issued during the current and previous years ended 31 December 2023 and 31 December 2022 respectively.
The following fully vested awards are currently in operation:
|
|
Award 6 (2014) |
Award 8 (2014) |
Award 9 (2014) |
Total |
|
|||||||
|
|
Weighted |
|
Weighted |
|
Weighted |
|
Weighted |
|
||||
|
|
Average |
|
Average |
|
Average |
|
Average |
|
||||
|
|
Exercise Price |
|
Exercise Price |
|
Exercise Price |
|
Exercise Price |
|
||||
|
|
(£) |
Number |
(£) |
Number |
(£) |
Number |
(£) |
Number |
||||
|
At 1 January 2022 * |
0.01 |
1,002,771 |
0.01 |
1,013,418 |
0.01 |
2,000,000 |
|
3,002,771 |
||||
|
|
|
|
|
|
|
|
( |
|
||||
|
Granted |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
||||
|
Forfeited |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
||||
|
Exercised |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
||||
|
Lapsed |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
||||
|
At 31 December 2022 * |
0.01 |
1,002,771 |
N/A |
1,013,418 |
0.01 |
Nil |
|
Nil |
||||
|
|
|
|
|
|
|
|
|
|
||||
|
At 1 January 2023 * |
0.01 |
1,002,771 |
0.01 |
1,013,418 |
0.01 |
2,000,000 |
|
3,002,771 |
||||
|
|
|
|
|
|
|
|
( |
|
||||
|
Granted |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
||||
|
Forfeited |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
||||
|
Exercised |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
||||
|
Lapsed |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
N/A |
Nil |
||||
|
At 31 December 2023 * |
0.01 |
1,002,771 |
0.01 |
1,013,418 |
0.01 |
2,000,000 |
|
3,002,771 |
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
Award 6 (2014) |
Award 8 (2014) |
Award 9 (2014) |
Total |
||||||||
|
Range of exercise prices *
|
|
( |
( |
|
||||||||
|
Weighted average fair value of share awards granted in the period * |
N/A) |
N/A) |
N/A |
N/A |
||||||||
|
Weighted average share price at date of exercise (£) |
N/A |
N/A |
N/A |
N/A |
||||||||
|
Total share awards vested |
1,137,338 |
1,013,418 |
4,000,000 |
|
||||||||
|
Weighted average remaining contractual life (Days) |
39 |
Nil |
Nil |
N/A |
||||||||
|
Expiry date |
29 July 2024** |
29 July 2024 |
29 July 2024 |
N/A |
||||||||
* Sterling amounts have been converted into US Dollars at the grant dates exchange rates of: Awards 1,2,
** Excepting 199,076 share options with expiry date 7 July 2023
The following information is relevant for determination of fair value of options granted :
|
|
Award 6 (2014) |
Award 8 (2014) |
Award 9 (2014) |
|
Option pricing model used |
Black-Scholes |
Black-Scholes |
Black-Scholes |
|
|
|
|
|
|
Weighted average share price at date of grant |
(US$0.31) |
(US$0.31) |
(US$0.31) |
|
Weighted average expected option life |
5.0 years |
4.0 years |
4.6 years |
|
Expected volatility (%) |
91% |
91% |
91% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend growth rate (%) |
Zero |
Zero |
Zero |
|
Risk-free interest rate (%) |
1.75% for |
1.75% for |
1.75% for |
|
|
12 month expected life |
12 month expected life |
12 month expected life |
|
|
2.25% in excess |
2.25% in excess |
2.25% in excess |
|
|
24 month expected life |
24 month expected life |
24 month expected life |
* Sterling amounts have been converted into US Dollars at the grant dates exchange rates of: Awards 1,2,
Non-employees
In October 2023 the Group issued 11,148,494 to board members and consultants for deferred fees plus a further 2,833,334 share under the retenion Scheme.
In August 2019 the Group entered into a new incentive plan which granted share options in the Group to two non-employee individuals and Harris Geoconsult Limited who provide consulting services to the Group. On 29 August 2019, 13,633,335 options were granted under this scheme. The scheme will be settled in equity instruments of the Group and is therefore treated as an equity-settled share-based payment arrangement. The options vest in multiple tranches based on the Group achieving key performance milestone including:
(a) The approval by Jumelles of the Early Production Project (EPP), including its potential technical and financial feasibility, as the basis for advancing the development of the Zanaga Project;
(b) Raising finance either for the Group or separately for the development phase of the Zanaga Project; or
(c) The completion of a significant merger or acquisition involving the Group or any member of the Jumelles Group acquiring a material interest (as determined by the Group board) in a third party or a third party acquiring a material interest (as determined by the Group board) in the Group or a member of the Jumelles Group.
All unvested options will also vest on the occurrence of certain events, such as a change of control of the Company, which has now occurred. Once vested all options are exercisable within seven years of the grant date of award. The options have a nominal exercise price of 0.01p (one hundredth of one penny). The number of share options are as follows:
|
In number of shares |
Number of options 2023 |
Number of options 2022 |
|
Granted during the year |
- |
- |
|
Exercised during the year |
13,633,335 |
- |
|
Outstanding at the end of the year |
- |
13,633,335 |
|
Exercisable at the end of the year |
- |
- |
The services to be provided in exchange for the options are unidentifiable at the date of the grant and therefore the Group has measured the fair value of the services with reference to the fair value of the options granted. The fair value is measured using a Black Scholes model. Measurement inputs and assumptions as follows:
|
|
|
2022 |
|
Fair value at grant date |
|
0.09 |
|
Share price at valuation date |
|
0.09 |
|
Exercise price |
|
Nominal |
|
Expected volatility (weighted average) |
|
N/A |
|
Option life (weighted average life in years) |
|
2.4 |
|
Expected dividends |
|
Nil |
|
Risk-free interest rate (based on national government bonds) |
|
N/A |
As the options are effectively nil-cost options, the expected volatility and risk-free rate does not impact the fair value under the Black Scholes model and therefore has been excluded from the inputs into the model. The share options are granted with a number of non-market performance conditions that relate to achievement of specific performance milestones for the Group as set out above. In addition, the option holders must continue to provide consulting services to the Group as at the vesting date. Such conditions are not considered in the fair value measurement on the grant date but to estimate the expected vesting period over which the equity-settled share-based payment charged to profit or loss. As at year end the expected vesting date of each tranche of options is between 30 June 2020 and 31 December 2021 resulting in a weighted average option life of 2.4 years.
The total expenses recognised for the year relating to equity-settled share-based payments is
In addition, there are 1,600,000 options outstanding which were issued to a consultant in 2014 at 18.5p that have vested but have not yet been exercised.
12 Earnings / (Loss) per share
|
|
2023 |
2022 |
|
Profit (Loss) ( |
(2,724) |
8,098 |
|
Weighted average number of shares (thousands) |
|
|
|
Basic |
|
|
|
Issued shares at beginning of period (a) |
318,081 |
307,034 |
|
Shares issued during the year (b) |
51,615 |
286,340 |
|
Weighted average of new shares issued (c) |
- |
11,767 |
|
Weighted average number of shares at 31 December - basic (a+c) |
644,989 |
318,081 |
|
Loss per share |
|
|
|
Basic (Cents) |
(0.4) |
0.3 |
|
Diluted (Cents) |
(0.4) |
0.3 |
13 Financial Risk Management and Fair value measurements
I. Financial Risk Management
The Group's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (comprising currency risk and interest rate risk). The Group seeks to minimise potential adverse effects of these risks on the Group's financial performance. The Board has overall responsibility for managing the risks and the framework for monitoring and coordinating these risks. The Group's financial risk management policies are set out below:
(a) 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 and arises principally from the Group receivables related parties. The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. At 31 December, the Group's maximum exposure to credit risk was as follows:
|
|
2023 |
2022 |
|
|
|
|
|
Cash and cash equivalents |
899 |
310 |
|
Receivables |
1,193 |
113 |
Significant concentrations of credit risk manifest with the Group's banking counterparties with which the cash and cash equivalents are held, and accounts receivable from Jumelles.
The Group has assessed its receivables for impairment in accordance with IFRS 9. Based on this assessment, the Company concluded that there are no expected credit losses (ECL) to be recognized in respect of these receivables.
(b) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations when due, or that it is unable, on an ongoing basis, to borrow funds in the market on an unsecured or secured basis at an acceptable price to fund actual or proposed commitments. Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and availability of adequate committed funding facilities.
The Group evaluates on a continuous basis, the amount of liquid funds that may be required for business operations, in order to secure funding needed for business activities.
The maturity profile of the Group's financial liabilities based on the contractual terms is as follows:
|
|