11 April 2019
Patagonia Gold
("Patagonia Gold" or "the Company")
Final Results for the Year Ended 31 December 2018
Patagonia Gold Plc (AIM:PGD), the mining and development company with gold and silver projects in
These results are presented in
The full audited report, including the consolidated Financial Statements shown below, is also available on the Company's website at www.patagoniagold.com.
2018 Financial Highlights
· Revenues of
· Operating cash costs reduced to
· Gross profit of
· Foreign exchange loss for the year of
· Hyper-inflationary net monetary position: loss of
· Debt levels reduced by
Operating Highlights
· Record production at Cap-Oeste amounting to 42,906 oz AuEq (5 per cent below the production guidance of 45,000 oz AuEq for 2018)
· Following the end of the reporting period, as announced on 19 February 2019, the decision was taken to close Lomada and put Cap-Oeste on care and maintenance as in 2019 neither operation had met its production targets and costs exceeded revenue
· Work continues to identify a viable option to mine the high-grade deposit that lies beneath the completed open pit at Cap-Oeste
· At Calcatreu, a 6,495m drill programme commenced in October 2018, with a view to converting a portion of the inferred resources into the indicated category
· Operations at Lomada were resumed at the end November 2018 and for the one month of operation in 2018, 486 oz Au were produced
· Exploration continued at the Company's newly named Dream Walker project in
Corporate Highlights
· In May 2018, the Company completed a Capital Reorganisation to reduce the number of Ordinary Shares in issue in order to improve its marketability
· In December 2018, the COSE-associated 1.5% net smelter returns royalty was sold to Metalla Royalty and Streaming Ltd for
· Also in December 2018, the Company announced the acquisition of four exploration blocks from Goldcorp Inc. in exchange for a 1% net smelter royalty on any future production
· In addition, in March 2019, the Company entered into a
Christopher van Tienhoven, CEO of Patagonia Gold, commented:
"While the closure of our two operating mines is disappointing, the financial arrangement with our major shareholder will ensure that we can progress the important drill programme and advance the Feasibility Study at Calcatreu. At the same time, we will carry on with our other exploration commitments in
The Annual Report and Accounts for the year ended 31 December 2018 will be available on the Company's website and will be posted shortly to shareholders. The Annual General Meeting of the Company will be convened in due course.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
Qualified Person's Statement
The scientific and technical information herein was reviewed by Dr. Walter Soechting, PGeo. Dr. Soechting is a geologist with over twenty-five years of experience in exploration for precious metal mineral deposits. Dr Soechting has experience in the type of deposit under consideration and in the type of activity conducted, and is a 'Qualified Person' as defined by NI 43-101. Dr. Soechting consents to the inclusion in the announcement of the matters based on the information in the form and context in which it appears and confirms that this information is accurate and not false or misleading.
About Patagonia Gold
Patagonia Gold Plc is an AIM-listed mining company that seeks to grow shareholder value through exploration, development and production of gold and silver projects in the Patagonia region of
For more information, please contact:
Christopher van Tienhoven, Chief Executive Officer
Patagonia Gold Plc
Tel: +54 11 5278 6950
James Spinney / James Dance / Jack Botros
Strand Hanson Limited (Nominated Adviser and Broker)
Tel: +44 (0)20 7409 3494
Chairman's Statement
I am pleased to present the 2018 Annual Report of Patagonia Gold Plc ("Patagonia Gold" or the "Company").
The 2018 financial year turned out to be a rather mixed year for the Company. Our efforts to operate and develop the business successfully have been carried out against the backdrop of a difficult economic environment in
Nevertheless, the Company's achievements during the year were not insignificant, notably recording our highest production level, delivering a record of approximately 42,900 oz AuEq at an average cost of
In March 2018, we published an updated resources statement for Calcatreu showing current contained metal of 1.17 million oz AuEq. Following receipt of the necessary permits, a 7,000m drill programme commenced in October 2018.
In terms of disposals and acquisitions, in December 2018, we sold the COSE royalty for
Earlier in the year we completed a capital reorganisation to reduce the number of Ordinary Shares in issue in order to improve the Company's marketability and, finally, we reduced our debt by, in aggregate,
Post year-end, in February 2019 we made the decision to close Lomada and put Cap-Oeste on care and maintenance as the expected revenue from production would not cover the operating costs. This was a difficult decision as the Company has lost its sole source of income. However, we remain optimistic about the opportunity to extract value from the Cap-Oeste underground resource by potentially mining the deposit and processing the ore at one of the nearby facilities.
Another area of focus in 2019 will be to advance Calcatreu towards a Feasibility Study with the aim of securing the necessary environmental and construction permits by the end of the year. This project is now the Company's flagship project and has the potential to deliver annual production of approximately 75,000 oz over a ten year life of mine.
Whilst high inflation in
I should like to express my gratitude to the Board, management and staff for their ongoing and ceaseless efforts over the past year to ensure the Company is in the best position to achieve its goals. I would like to also thank our committed shareholders, whose patience and loyalty are sincerely appreciated. I look forward to updating you on our progress during the course of the year.
Carlos J. Miguens
Non-Executive Chairman
10 April 2019
Report from the Chief Executive Officer
Given the tough economic climate within which we have had to operate during 2018, the year as a whole has been a success with record production, lower costs, higher revenues and a slight reduction in our debt.
Revenue for the year totalled
As announced earlier in the year, mining operations at the Cap-Oeste open pit ceased in July 2018 and the mine was put on care and maintenance in February 2019. From the end of July 2018, production was derived exclusively from reprocessed material. This is the ore that was originally placed on the leach pad but was unable to be recovered owing to its high clay content. The installation of an agglomeration circuit successfully addressed this problem and production subsequently more than doubled from last year to 42,906 oz AuEq (2017: 20,088 oz AuEq) but just missed our guidance of 45,000 oz AuEq, due to the lower than anticipated grades in the retreated material, technical issues with the newly-installed crushing circuit and labour disruptions.
With regard to operating costs, the continued devaluation of the Argentine Peso had a positive impact which resulted in cash costs for the year of
Re-handling and crushing of the stockpiled ore at Lomada resumed at the end of November 2018, producing 486 oz Au in its first month of operation.
Following the year end, the Company reviewed the production profile for 2019 for both Cap-Oeste and Lomada. Given the expected lower production volumes from Cap-Oeste and the lower than anticipated recoveries from Lomada, the Board took the decision to close Lomada and put Cap-Oeste on care and maintenance until a suitable solution to extract and process the high-grade underground resource from Cap-Oeste has been identified. In this regard, the Company is continuing to evaluate the options available to mine the high-grade COSE-style hypogene mineralisation which lies below the completed open pit and which is estimated to hold approximately 300,000 oz AuEq at 20g/t AuEq and treat it at a nearby facility.
Following our acquisition of Calcatreu, the Company has worked hard on a community relations programme to introduce Patagonia Gold to the community and surrounding areas. An updated resource estimate for Calcatreu was completed in March 2018, recording an increase in indicated and inferred resources to 16.4 million tonnes containing 1.17 million oz AuEq. The Company's focus is to convert a portion of the existing Inferred category resources into the Indicated category through additional drilling and studies, in order to increase the current level of confidence in the interpretation. The necessary permits to commence drilling were granted at the end of September 2018 and a 6,495m drilling programme commenced in early October 2018.
Calcatreu represents a significant asset for the Company; the Board believes that it has the potential to develop into a project with a ten year life and annual production of approximately 75,000 oz AuEq.
Following the disposal of the COSE project to Pan American Silver Corp. in 2017, in December 2018, the Company took the decision to sell its associated 1.5% net smelter returns royalty to Metalla Royalty and Streaming Ltd., for a total consideration of
Also in December 2018, the Company announced the acquisition of four exploration blocks from Goldcorp in exchange for a 1% net smelter royalty on any future production derived from the blocks if and when the properties are put into production, on this basis no asset or liability is currently recognised. The properties are located in
In February 2019, the Company announced a loan arrangement with its major shareholder Cantomi Uruguay S.A. ("Cantomi"), a company owned and controlled by the Company's Non-Executive Chairman, Carlos Miguens, that will enable the Company to meet its ongoing commitments over at least the following 12 months. In the meantime, the Company is actively pursuing options to extract value from the Cap-Oeste underground resource and further its flagship project, Calcatreu.
I echo the Chairman's sentiments in terms of gratitude to our management, staff and shareholders and look forward to another busy and exciting year ahead.
Christopher van Tienhoven
Chief Executive Officer
10 April 2019
Operations Report
The following is a summary of the Company's operations, together with an update on exploration activities for the year to date.
Calcatreu Project
The Company acquired the Calcatreu project from Pan American Silver in January 2018 and it has now become the Company's flagship project. During the year, the Company worked on a comprehensive exploration programme including a 6,495m drilling programme. Details of the exploration programme and results of the drilling campaign are covered in the Exploration Update section of this report.
In parallel with the exploration programme, the Company has worked on a community relations programme, to introduce Patagonia Gold to the local community and surrounding areas, in order to establish a relationship with the various institutions and stakeholders of Ingeniero Jacobacci (the town closest to the project and where the Company's local office is located) ("Jacobacci"). The Company presented its plans for the Calcatreu project, detailing each step that will take place in the development of the project.
The Company holds periodic meetings with all stakeholders where the main objective is to keep them informed of the progress at Calcatreu. It is hoped this will establish a relationship that is based on trust and confidence and will lead to the sustainable and safe development of the project with respect to the environment and in faithful compliance with applicable regulations. In addition, one of the main initiatives is to work with the local stakeholders in promoting the socio-economic development of Jacobacci, for the benefit of all of its inhabitants.
The Company's relationship with the community is progressing positively and includes various stakeholders, such as the local and provincial authorities and the nearby indigenous communities that surround the Calcatreu Project.
Cap-Oeste Project
Production from Cap-Oeste during 2018 was approximately 42,900 oz AuEq, approximately 5% below the guidance for the year of 45,000 oz AuEq. Cash costs for the year were
In July 2018, mining ceased at the open pit and operations were limited to the rehandling of the ore previously stacked on the leach pad. Owing to its high moisture content and considerable clay content a specialised roll crusher circuit was commissioned in July 2018 to enable this wet material to be treated without blocking the crushing equipment. During 2018 a total of 158,000 tonnes was mined and processed through the agglomeration circuit. In addition, 274,000 tonnes were reprocessed from the material previously placed on the leach pad. The total material processed for the year was approximately 433,000 tonnes at an average grade of 5.43 g/t AuEq. The overall recovery of the material processed was approximately 56.8%.
As a result of the lower than anticipated production levels in December 2018 and January 2019, a review was undertaken of the production forecast for the following months and given that the expected revenue would not cover costs the Company took the decision in February 2019 to put Cap-Oeste on care and maintenance.
With regard to the high-grade underground resource estimated to contain 300,000 oz at 20g/t AuEq, the Company is currently evaluating the possibility of mining this resource and potentially transporting the ore to a nearby processing facility for treatment.
Lomada de Leiva Project
The Lomada mine was closed in May 2016 while production from the ongoing leaching continued until November 2017. Given that the ore from the Lomada mine was originally placed on the heap leach pad without crushing, the Company decided to return to Lomada to reprocess this ore. For this purpose the Kleeman impact crusher that was originally acquired for Cap-Oeste was mobilised to Lomada, with the intention of crushing the ore and placing it on an extension of the leach pad. The Company expected to recover approximately 10,000 to 12,000 oz Au over a 15 month period. However, following just over two months of operation, the expected levels of production ounces were not achieved and in mid-February 2019 the Company took the decision to cease operations and proceed with the closure of Lomada.
The Company is currently preparing an update to the closure plan presented and approved by the provincial authorities in 2017. Once the updated plan is approved, the Company will commence with the closure and remediation of the Lomada project.
Exploration Update
Exploration during 2018 consisted mainly of regional reconnaissance, geological mapping, sampling, geophysics and drilling carried out at Rio Negro,
|
Activity |
Unit |
Volume |
||
|
|
|
|
|
Río Negro |
|
Stream Sediment Geochemistry |
Samples |
- |
45 |
- |
|
Soil - Lag Geochemistry |
Samples |
21 |
14 |
- |
|
Rock Chip - Float Sampling |
Samples |
146 |
14 |
32 |
|
Ground Magnetics |
Line-km |
200.3 |
131.3 |
18.9 |
|
Gradient Array IP |
Line-km |
- |
8.73 |
- |
|
Pole-Dipole IP |
Line-km |
- |
30.8 |
46.5 |
|
RC Drilling |
metres |
- |
613.5 |
- |
|
Samples |
- |
606 |
- |
|
|
Diamond Drilling |
metres |
- |
726.8 |
6,495 |
|
Samples |
- |
643 |
2,167 |
|
Calcatreu Project
The Calcatreu project is located in south central Rio Negro province approximately 80km south west of the town of Jacobacci. It lies on the NW - SE-oriented, regional-scale Gastre Fault System, a highly prospective belt, known to host several epithermal Au-Ag deposits. Patagonia Gold has also recently acquired new concessions, totalling more than 100,000 hectares (ha) along this belt in Rio Negro.
The 2018 exploration work at Calcatreu mainly consisted of project-scale geological mapping along with detailed IP-PDP (Induced Polarisation - Pole Dipole) survey, followed by a diamond drill programme.
The geophysical survey, consisting of 20 lines totalling 46.5km, covered the area between Castro Sur (to the north) and Veta 49 (to the south). Its objective was to detect the presence of hidden NNE trending dilational gashes, similar to that of V49, or any other structure with exploration potential for the development of additional mineral resources in the immediate vicinity of the Vein 49 / Nelson deposits, hosting the current mineral resource at Calcatreu. The survey allowed a subsequent target definition and ranking.
Accordingly, a drill programme comprising several geophysical-based drill targets has been designed. The first and main part of the programme consisted of drilling for 'blind' conceptual geophysical targets, whereas the last few drill holes were focused on expanding the known resource from Vein 49, Belen and Castro Sur, following ore shoots that remain open in down plunge directions.
Results from the 2018 exploration drilling campaign at Calcatreu, confirmed the existence of blind/covered, mineralised structures suggested by the geophysics (being Castro Sur Splay and Eastern). The programme was successful in the discovery of encouraging, new Au and Ag mineralisation on the Castro Sur, Amistad, Eastern, Vein 49 and Belen W targets. Some of these mineralised structures are open for expansion along strike to the northeast (Amistad Vein) and at depth (Vein 49).
The 6,495m drill programme was completed by December 2018 and consisted of 30 diamond holes, 6 of which cut gold mineralisation with significant intercepts. Among them, the best intercept was 4.40m @ 11.86 g/t Au (including 1.40m @ 34.10 g/t Au) in hole CCT18-674 (Castro Sur).
As the last reported NI43-101 compliant resource model was reported by MICON International in February of 2008 with prevailing metal prices of
|
Zone |
INDICATED RESOURCES |
||||||
|
kTonnes |
Grade (g/t) |
Contained Metal (kOz) |
|||||
|
Au |
Ag |
Au_equ |
Au |
Ag |
Au_equ1 |
||
|
Vein 49 |
5,688 |
2.9 |
26.8 |
3.2 |
528 |
4,893 |
592 |
|
Nelson |
1,400 |
1.6 |
18.6 |
1.9 |
74 |
839 |
85 |
|
Belen |
- |
- |
- |
- |
- |
- |
- |
|
Castro Sur |
1,728 |
1.6 |
18.1 |
1.8 |
88 |
1,008 |
101 |
|
|
|
|
|
|
|
|
|
|
TOTAL-Indicated |
8,816 |
2.4 |
23.8 |
2.8 |
690 |
6,740 |
778 |
|
Zone |
INFERRED RESOURCES |
||||||
|
kTonnes |
Grade (g/t) |
Contained Metal (kOz) |
|||||
|
Au |
Ag |
Au_equ |
Au |
Ag |
Au_equ1 |
||
|
Vein 49 |
2,198 |
1.8 |
17 |
2 |
128 |
1,201 |
144 |
|
Nelson |
1,477 |
1.5 |
15.5 |
1.7 |
70 |
736 |
80 |
|
Belen |
681 |
1.6 |
22.1 |
1.9 |
35 |
483 |
41 |
|
Castro Sur |
3,215 |
1.1 |
9.8 |
1.2 |
110 |
1,018 |
123 |
|
|
|
|
|
|
|
|
|
|
TOTAL-Inferred |
7,571 |
1.4 |
14.1 |
1.6 |
343 |
3,438 |
388 |
1AuEq calculations were carried out using a 76.5:1 Ag:Au ratio
An updated NI 43-101 report is being prepared which will also include the latest drilling results.
La Manchuria Project
The La Manchuria Project is highly prospective with over 145,000 oz AuEq of JORC Code compliant Indicated and Inferred resources already delineated. Brownfield exploration continued through mapping and rock chip sampling of a surface of ca. 2,000ha. Veinlets and narrow breccia zones indicative of hydrothermal activity were found at the Magali zone. Anomalous gold values were reported from Cecilia zone. A new drill programme for La Manchuria contemplates 2,000m in 14 holes. They are designed to test geophysical anomalies (Induced Polarisation/Resistivity/Chargeability and Magnetic Low Anomalies), as well as to test underneath gold anomalies from rock chip sampling at surface. An updated NI 43-101 report for this project is currently under way, and will include further exploration works.
Sarita Project
The Sarita Project, located in the SW of the Deseado Massif approximately 10km NW of Hunt Mining's Mina Martha Ag-Au mine, hosts a widespread system of banded low sulphidation Au-Ag veins, encompassing a small rhyolitic dome complex. Geologically, the area displays very similar structural and stratigraphic characteristics to Mina Martha, with Ag rich, polymetallic, veins hosted intermediate sulphidation style mineralisation, although the vein system remains largely untested.
The banded Ag-Au bearing quartz veins have developed within a set of NNW-SSE striking normal faults and constitute an extensive mineralised vein system, with more than 12km in total outcropping length.
Precious and base metal mineralisation has been recognised in quartz vein-breccias up to 3m wide at surface, composed of quartz and sulphides. Rock chips from discrete vein structures or aligned float have returned anomalous gold samples with up to 83.40 g/t Au and up to 15,444 g/t Ag, in separate samples. To date 16 diamond drill holes have been drilled for 1,754 m targeting the vein mineralisation. Geochemical results from drilling show gold and silver anomalies. Core recovery in some of the veins was poor and there are concerns that Au-Ag may have been lost. A new drilling proposal consisting of 2,000m in shallow exploration holes, has been prepared and it is intended that it will be carried out during the second quarter of 2019, using the Company's own drilling equipment.
San José Project (Uruguay)
Carreta Quemada
The Carreta Quemada (now Dream Walker) project is located within the east-west trending San Jose Greenstone Belt of early Proterozoic-age (+/- 2.1 billion years) in Uruguay, comprising greenschist to lower amphibolite facies metasediments and metavolcanics, with frequent, large granitic-granodioritic intrusives. The geological setting appears typical of the terranes that host some of the world's most prolific Orogenic Gold Belts, such as those of the same age in the West Africa Craton, which host many multi-million ounce deposits. It is located on a strong NW-striking regional-scale shear zone (the "Carreta Quemada Shear Zone"). Field observations and aeromagnetic data indicate a several kilometre wide, diffuse zone of NW-SE oriented lineaments and structures.
In the Carreta Quemada zone, the interception of NW and N trending structures seem to be areas favourable to mineralisation and are the focus of the current exploration efforts. The 2018 drill programme at Carreta Quemada was carried out along a 1km long, NNE-SSW trending, structural corridor, where the more brittle felsic units, especially where they are folded or faulted, and/or adjacent to the graphitic schists, are prone to carry gold mineralisation.
First pass drilling results from the 2018 exploration campaign confirmed the existence of a north-south trending, mineralised structure which can be traced for over at least 300m and remains open for expansion on strike and at depth. This initial drill programme was based upon anomalous geochemical rock chip sampling from an earlier trenching sampling programme, which resulted in 2m @ 16.2 g/t Au (sample 200282, DWTR-002) and 1m @ 1.25 g/t Au (sample 1960, DWTR-001), as announced in 2016.
The significant intercepts from the present drilling results are: 4.55m @ 4.7 g/t Au (including 0.7m @ 27.6 g/t Au) and 7.1m @ 1 g/t Au (incl. 1.55m @ 3.73 g/t Au) from drill hole DWDD-010; 3.9m @ 1.63 g/t Au, and 1.4m @ 1.67 g/t Au, from drill hole DWDD-009; and 1m @ 3.9 g/t Au and 1.3m @1.62 g/t Au, from drill hole DWDD-001. These intercepts are at an average depth of near 40m below surface and correspond to structures that are open both along strike and at depth. To the south, the results of a RC fence drilling demonstrated the possible continuation of this mineralised trend, and which resulted in 2m @ 1.87 g/t Au, from drill hole DWRC-008; and 3m @ 2.49 g/t Au, from drill hole DWRC-005. These RC holes are located near 1km to the south of the DD holes. The area between these two drill zones is still untested and represents a significant exploration potential.
Zona 13
Mineralisation is hosted within a sub-vertical 40m wide shear zone at the contact between a granodiorite body and Paleoproterozoic metandesites schist and intercalated metasediments. Mineralisation manifests as quartz-chlorite-sericite-carbonate-pyrite-arsenopyrite altered graphitic schist, with mylonites, cataclasites and breccias. Quartz occurs as stringers, porphyroblasts and breccia clasts.
RC drilling during mid-2018 confirmed the location of a regional auriferous shear zone at the Zona 13. This drill programme consisted of two RC holes, for a total of 122.5m. These holes are located at the eastern part of the area where the E-W to ENE trending Tambo Viejo shear zone intercepts NW striking faults. Significant intercepts from this programme resulted in 8m @1.19 g/t Au (incl. 2m @ 4 g/t Au), and 13m @ 2.07 g/t Au (incl. 2m @ 4.3 g/t /au and 2m @ 4.8 g/t Au) from hole Z13RC-001. Further exploration in this area will consist of three trenches followed by two drill holes to be located approximately 400m to the east of hole Z13RC-001.
The Zona 13 area remains open both to the East and to the West. Further exploration will consist of trenching and follow-up RC drilling designed to test the strike continuation of the mineralisation discovered.
Colla and Zona 10
Ground magnetic and IP surveys at Colla prospect confirmed a 2.2km long anomalous corridor coincident with known mineralisation. Geochemical results from regional pan concentrate sampling show anomalous samples from Colla (15.48 g/t Au) and Zona 10 (9.3 g/t Au). Further sampling will focus on better delineation of source areas.
Christopher van Tienhoven
Chief Executive Officer
10 April 2019
Strategic Report
Business review and future developments
The purpose of the review is to show how the Company assesses and manages risk and uncertainty and adopts appropriate policies and targets. Further details of the Group's business are also set out in the Chairman's Statement the Report from the Chief Executive Officer, and the Operations Report, which are incorporated in this report by reference.
Review of the year
Revenue for the year totalled
The increase in Cost of Sales to
Administrative costs decreased to
Exploration costs for the year totalled
The purchase of the Calcatreu project was completed in January 2018 and has become the Company's flagship project. During the year the Company focussed on a comprehensive exploration programme aimed at increasing the resource base. An extensive geophysics programme was undertaken to identify undercover mineralisation. In addition, the Company started a community relations programme to introduce Patagonia Gold into the community.
Operations at Cap-Oeste improved significantly during 2018, with production reaching a record 42,906 oz AuEq. Although the mine was closed in July 2018, the operation primarily consisted of reprocessing material previously placed on the leach pad that did not recover well due owing to a high clay content. In July 2018, a new crushing circuit was commissioned to treat the wet material from the heap leach pad. The mobile Kleeman impact crusher that was being used at Cap-Oeste was transferred to Lomada to reprocess the ore at that operation. Cap-Oeste was put on care and maintenance in February 2019, owing to forecast revenue being below production costs.
Lomada was closed in November 2017 and reopened in November 2018. The objective of returning to Lomada was to reprocess the ore that had originally been put on the heap leach pad but was not crushed. The Company was expecting to recover between 10,000 and 12,000 oz Au over a period of 15 months. After two months of operations, the targeted production levels were not being achieved and, in February 2019, the operation was closed.
Principal activities
The Company continues to hold investments in mineral exploration companies involved in the identification, acquisition, development and exploitation of technically and economically sound mineral projects, either alone or with joint-venture partners.
Patagonia Gold's growth strategy includes the following:
· The main focus for the Company going forward will be the Calcatreu project, where the Company plans to start work on a Feasibility Study.
· Pursuing the potential development of the high-grade Cap-Oeste underground resource and the option to potentially truck the ore to a nearby processing facility.
· The Company continues to monitor the situation in the Province of Chubut in the event there is a change in current legislation that would allow it to return to the Province and resume exploration activities that were paralysed when the mining ban was introduced with Law 5001 of 8 May 2003.
Principal risks and uncertainties
The Group operates in an uncertain environment that may result in increased risk. In February 2019, the Company announced the closure of both its operating units, Lomada and Cap-Oeste and currently relies on external financing, loans or equity raises to finance its activities going forward.
Financing
Despite a small repayment of debt during 2018, as at 31 December 2018, the debt level of the Company remained high at
Gold price
The gold price is a key element of the Company's performance. The price is determined by external factors which are beyond the Company's control. The movement in the price not only has an effect on the profitability of the business but also a direct impact on the Company's share price which ultimately impacts the Company's ability to raise finance.
Exploration and development risk
The Company had transformed itself from a pure exploration company to an operating company however, following the closure of Lomada and Cap-Oeste in February 2019, currently has no operating mines. The development of Calcatreu has become a key priority for the Company as well as pursuing the possibility of mining the high-grade resource at Cap-Oeste and extracting value from this deposit.
Competition
The competition for mining assets in Argentina has increased over the years but Patagonia Gold is in a strong position with a significant portfolio of mining properties in the Santa Cruz, Rio Negro and Chubut Provinces, as well as its project in Uruguay. In addition, the Company has many years of experience in the region, which gives it a competitive advantage vis-à-vis other players that are arriving or do not have the same level of experience and/or knowledge of the region.
Fiscal regimes
Argentinean fiscal policies are complex, and it is difficult to distinguish whether a future tax payment is possible or probable. Where a future tax payment is considered to be possible but not probable, no provision has been made in the accounts. Our in-country management team constantly monitors banking, customs and taxation developments and advises the Group on the handling of various issues including foreign exchange controls and cash transfers in and out of Argentina.
Currency
During 2018 the Argentine Peso devalued significantly which had a positive impact on locally denominated costs. However, inflation has not ceded and most of the benefits resulting from devaluation have diminished.
Environmental and other regulatory requirements
Existing and possible future environmental legislation, regulations and actions could cause additional expense, capital expenditures, restrictions and delays to the activities of the Group, the extent of which cannot be predicted. For exploration and production to continue on any properties, the Group must obtain and retain regulatory approval and there is no assurance that such approvals will continue. No assurance can be given that new rules and regulations will not be enacted or existing rules and regulations will not be applied in a manner that could limit or curtail the Group's operations. The Group invites Mine Secretariat Officials to inspect and comment on projects as they progress.
The necessary permits for the drilling campaign at Calcatreu completed at the end of 2018, were obtained in a timely manner, which allowed drilling to be completed on schedule.
The closure plan for Lomada is being prepared and will be presented to the corresponding authorities in Santa Cruz in due course.
Key Performance Indicators
The Board sets relevant Key Performance Indicators (KPIs), which for a company at Patagonia Gold's stage of development, are focused on managing the activities inherent in exploration and operational development. The KPIs for the Group are as follows:
|
Non-financial KPIs |
Financial KPIs |
||
|
Health and safety management |
Lost time injury frequency rate. |
Shareholder return |
Share price performance. |
|
Environment management |
Compliance with strict jurisdictional environmental policies. |
Production cash costs |
Monitoring of costs as a measure of operational efficiency |
|
Operational success |
The number of successful exploration drilling ventures and growth of resources. |
Gold Production |
Monitoring actual production against forecasts |
|
Human resource management |
Employee retention rate. Attracting qualified employees for key positions. |
Exploration expenditure |
Exploration cost per metre drilled.
|
|
|
|
Working capital |
Monitoring working capital. Ensuring adequate liquidity. |
Non-Financial KPIs
- Health and Safety Management: The Company's Health and Safety Department is staffed by five qualified and experienced personnel. During the year 2018, the Lost Time Injury Frequency Rate for the Company was 18 (2017: 37.09), the Lost Time Injury Incidence Rate was 30.72 (2017: 52.5) and the Medical Treatment Injury Frequency Rate was 0.012% per man/worked day (2017: 0.371%). The Company is committed to improving its safety record year on year.
- Environment Management: The Company's Environmental Department is staffed by two qualified and experienced personnel. Patagonia Gold is compliant with all the environmental standards in each of the jurisdictions in which it holds mining titles.
- Operations: In 2018, Lomada produced 486 oz Au which was 63% under budget. Production at Cap-Oeste of 42,906 oz AuEq missed our guidance of 45,000 oz AuEq by approximately 5%, for the following reasons: lower than anticipated grades in the retreated material, technical issues with the newly-installed crushing circuit and labour disruptions.
- Human Resource Management: the headcount at the end of 2018 was 202 employees 4.7% lower than 2017. The majority of the Company's employees live in the Province of Santa Cruz and in the nearest community to its operations, Perito Moreno. Despite being a relatively small player in the mining industry, the Company has managed to retain its staff in a competitive environment where the larger producers are able to offer higher salaries and higher annual increases in an inflationary environment. 110 employees were made redundant following the closure of Lomada and Cap-Oeste in February 2019.
Financial KPIs
- Shareholder Return: The Company's share price continues to be impacted by the downturn in the capital markets most notably in the precious metals sector. Patagonia Gold's share price varied between a minimum of
- Production Cash Costs: During 2018, the continual devaluation of the Argentine Peso had a positive impact which resulted in cash costs for the year of
- Gold Production: Gold production for 2018 from Cap-Oeste more than doubled from last year at 42,906 oz AuEq (2017: 20,088 oz AuEq) but missed our guidance of 45,000 oz AuEq by 5%, for the following reasons: lower than anticipated grades in the retreated material, technical issues with the newly-installed crushing circuit and labour disruptions. Re-handling and crushing of the stockpiled ore at Lomada resumed at the end of November 2018 and production for 2018 was 486 oz Au. Following the year end, the Company reviewed the production profile for 2019, for both Cap-Oeste and Lomada. Given the expected lower production from Cap-Oeste and the lower than anticipated recoveries from Lomada, the Board took the decision to close Lomada and put Cap-Oeste on care and maintenance, until a solution to extract and process the high-grade underground resource from Cap--Oeste has been identified. In this regard, the Company continuing to evaluate the options available to mine the high-grade COSE-style hypogene mineralisation which lies below the completed open pit and which holds approximately 300,000 oz AuEq at 20g/t AuEq and potentially treat it at a nearby facility.
- Exploration Expenditure: Exploration during 2018 consisted mainly of regional reconnaissance, geological mapping, sampling, geophysics and drilling carried out at Rio Negro, Santa Cruz and in Uruguay. Exploration drilling in Argentina was concentrated at Calcatreu, with 6,495m, whereas in Uruguay the Carreta Quemada Project was the main exploration focus, with 1,340m being drilled. Also in December 2018, the Company announced the acquisition of four exploration blocks from Goldcorp, in exchange for a 1% net smelter royalty on any future production. The properties are located in Santa Cruz and are either adjacent to or near our existing El Tranquilo block, thereby expanding the Company's potential mineral resources in the highly prospective El Deseado Massif region. Detailed exploration work will be carried out during 2019 in an effort to increase our inventory of resources.
- Working Capital: At 31 December 2018, working capital netted to
All significant information is detailed in the Operations Report and is published on our website at www.patagoniagold.com.
Risk factors
Details of the principal financial risk factors affecting the Company can be found in Note 24 to the financial statements.
Subsidiary companies
Details of the Company's subsidiaries can be found in Note 15 to the financial statements.
Further information
Further information can be found in the Report of the Directors.
On behalf of the Board of Directors
Christopher van Tienhoven
Executive Director
10 April 2019
Report of the Directors
The Directors present their report and the audited financial statements for Patagonia Gold and its subsidiaries, collectively known as the "Group", for the year ended 31 December 2018. All amounts are expressed in US dollars, except where indicated.
Financial instruments
The Company's treasury objective is to provide sufficient liquidity to meet operational cash flow requirements to allow the Group to take advantage of exploration opportunities while maximising shareholder value. The Company operates controlled treasury policies that are monitored by the Board to ensure that the needs of the Company are met as they evolve. The impact of the risks required to be discussed in accordance with IFRS 7 are summarised in Note 24 to the financial statements together with detailed discussion and sensitivity analysis relating to these risks.
Going concern
The attached financial statements have been prepared on a going concern basis which the Directors believe to be appropriate for the following reasons:
Until February 2019 Patagonia Gold operated the Cap-Oeste and Lomada mines. During 2018 Patagonia Gold produced 43,096 oz AuEq. In February 2019, the Company took the decision to close Lomada and put Cap-Oeste on care and maintenance. The Company is pursuing the viability of mining the high-grade underground resource at Cap-Oeste and potentially transporting the ore to a nearby processing facility. Patagonia Gold continues to evaluate this alternative and it is expected that a decision will be made during 2019.
In the meantime, Patagonia Gold has reverted to being a company that funds its activities from external sources such as debt or equity raises. In February 2019, the Company announced that its largest shareholder, Cantomi, a company owned and controlled by the Company's Non-Executive Chairman, Carlos Miguens, had provided a two year
The Directors are confident that the Group has sufficient available funding and options available to enable it to continue to meet its commitments as they fall due and to undertake the current planned programme of activity over the 12 months from the date of this Annual Report.
Accordingly, the financial statements do not include any adjustments which would be necessary if the Company and Group ceased to be a going concern.
Share capital
On 9 May 2018, Patagonia Gold undertook a capital reorganisation of the Company's existing ordinary share capital, reducing the number of existing ordinary shares in issue (the "Existing Ordinary Shares") by a factor of 100. Prior to the consolidation of the Company's share capital, 16 new ordinary shares were issued, so that the total number of ordinary shares were exactly divisible by the consolidation factor of 100.
The capital reorganisation consisted of: the sub-division of each Existing Ordinary Share of
As result of the capital reorganisation Patagonia Gold has in issue 23,634,749 New Ordinary Shares of
Financial results
The financial results are as anticipated and reflect the costs of managing and funding the Group's exploration activities and head office costs.
Financial Reporting in Hyperinflationary Economies
The group's subsidiary financial statements that are in hyperinflationary economies are prepared using the historical cost approach and have therefore had their current year and corresponding figures for their financial statements restated for the changes in general purchasing power of that subsidiary's functional currency (Argentine Peso). As a result, these subsidiaries' financial statements are stated in terms of the measuring unit current at the end of the reporting period. IAS 29 does not apply to the consolidated accounts, as the parent's functional currency and group's presentational currency are not in hyperinflationary economies. The subsidiary financial statements in hyperinflationary economies have used the Consumer Price Index (IPC) published by the National Institute of Statistics and Census (INDEC) as from January 2017 (base month: December 2016) and the Wholesale Price Index (IPIM) published by the INDEC to date, by computing for the months of November and December 2015, on which no INDEC information is available on changes in the IPIM, the IPC variation in the City of Buenos Aires. Considering such index, inflation amounted to 47.64% and 24.79% in the fiscal years ended December 31, 2018 and 2017, respectively. Following the adjustments made in complying with IAS 29, management have considered the recoverability of the impacted assets.
Subsequent events
Significant events since the year end are detailed in the Report of the Chief Executive Officer, and in the Operations Report, also see note 31 to the financial statements.
Future developments
Planned future developments are outlined in the Report of the Chief Executive Officer and in the Operations Report.
Dividends
The Directors do not recommend the payment of a dividend (2017: US$ nil).
Substantial shareholdings
As at 10 April 2019, the Company was notified of, or was aware of, the following interests of 3% or more in its issued share capital:
|
Ordinary Shares of |
Number |
Percentage |
|
Carlos J. Miguens |
12,741,212 |
53.91 |
|
Arconas International Limited |
1,625,133 |
6.88 |
|
|
|
|
Directors and Directors' interests
The Directors who held office during the year and their beneficial interests, including family interests, at the beginning and end of the year and at the date of this report, were as follows:
|
|
10 April |
31 December |
31 December |
|
Ordinary Shares of 1p: |
2019 |
2018 |
2017(1) |
|
Carlos J. Miguens |
12,741,212 |
12,741,212 |
1,274,121,151 |
|
Gonzalo Tanoira |
174,027 |
174,027 |
17,402,733 |
|
Christopher van Tienhoven |
23,291 |
23,291 |
2,329,075 |
|
Manuel de Prado |
40,357 |
40,357 |
4,035,660 |
(1) See Note 22
Directors' interests include shareholdings in their names and/or under controlled subsidiaries.
During the year the following payments were due by the Company to the Directors:
· to Carlos J. Miguens
· to Gonzalo Tanoira
· to Christopher van Tienhoven
· to Manuel de Prado
Of the above,
Christopher van Tienhoven received a bonus of
During 2018, no options were awarded to Directors as per the schedule below as an incentive.
Directors hold options in their names and/or under controlled subsidiaries and no Director exercised any options during the year.
At 31 December 2018, the Directors were interested in unissued ordinary shares granted to them by the Company under share options in their names and/or under controlled subsidiaries:
|
|
|
|
|
Due from |
|
|
|
|
|
Date of |
Exercise |
Ordinary |
which |
|
|
|
|
Name |
grant |
price |
Shares |
exercisable |
Expiry date |
|
|
|
|
|
|
|
|
|
|
|
|
C J Miguens |
23 June 2009 |
1,225p |
45,000 |
23 June 2009 |
22 June 2019 |
||
|
C J Miguens |
17 June 2010 |
1,500p |
11,000 |
17 June 2010 |
16 June 2020 |
||
|
C J Miguens |
10 February 2011 |
1,100p |
20,000 |
10 February 2011 |
9 February 2021 |
||
|
C J Miguens |
13 May 2011 |
1,100p |
9,000 |
13 May 2011 |
12 May 2021 |
||
|
C J Miguens |
31 January 2012 |
1,100p |
20,000 |
31 January 2012 |
30 January 2022 |
||
|
C J Miguens |
9 January 2013 |
2,275p |
90,000 |
9 January 2013 |
8 January 2023 |
||
|
C J Miguens |
19 September 2013 |
1,175p |
50,000 |
19 September 2013 |
18 September 2023 |
||
|
C J Miguens |
18 December 2017 |
100p |
50,000 |
17 December 2018 |
17 December 2027 |
||
|
G Tanoira |
23 June 2009 |
1,225p |
17,190 |
23 June 2009 |
22 June 2019 |
||
|
G Tanoira |
17 June 2010 |
1,500p |
5,000 |
17 June 2010 |
16 June 2020 |
||
|
G Tanoira |
13 May 2011 |
1,100p |
5,000 |
13 May 2011 |
12 May 2021 |
||
|
G Tanoira |
9 January 2013 |
2,275p |
10,000 |
9 January 2013 |
8 January 2023 |
||
|
G Tanoira |
18 December 2017 |
100p |
50,000 |
17 December 2018 |
17 December 2027 |
||
|
C van Tienhoven |
31 March 2015 |
250p |
100,000 |
31 March 2015 |
30 March 2025 |
||
|
C van Tienhoven |
18 December 2017 |
100p |
150,000 |
17 December 2018 |
17 December 2027 |
||
|
M de Prado |
12 September 2013 |
1,100p |
7,500 |
12 September 2013 |
11 September 2023 |
||
|
M de Prado |
18 December 2017 |
100p |
50,000 |
17 December 2018 |
17 December 2027 |
||
The Company's ordinary shares are traded on AIM and the GBP market price of those shares ranged between
Internal control
The Board has overall responsibility for the Group's system of internal control. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement.
There is an appropriate level of involvement by the Directors in the Group's activities. This includes the comprehensive review of both management and technical reports, the monitoring of foreign exchange and interest rate fluctuations, environmental considerations, government and fiscal policy issues, employment and information technology requirements and cash control procedures. Site visits are made as required both by certain Directors and senior management. In this way the key risk areas can be monitored effectively and specialist expertise applied in a timely and productive manner.
Directors' service agreements
Carlos J. Miguens, Christopher van Tienhoven and Manuel de Prado have service arrangements that provide for three months' notice of termination and that of Gonzalo Tanoira provides for six months' notice of termination.
Relations with shareholders
The Company maintains effective contact with principal shareholders and welcomes communications from private investors. Shareholders are encouraged to attend the Annual General Meeting, which is to be convened in due course, at which time there is an opportunity for discussion with members of the Board. Press releases together with other information about the Company are available on the Company's website at www.patagoniagold.com.
Directors' indemnification provisions
Under Article 230 of the Company's Articles of Association, subject to the provisions of the Companies Act 2006 (the "Act"), but without prejudice to any indemnity to which he may be otherwise entitled, every Director, Auditor, Secretary or other officer of the Company shall be entitled to be indemnified out of the assets of the Company against all costs, charges, losses, damages and liabilities incurred by him in the actual or purported execution and/or discharge of his duties or exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or office, provided that Article 230 shall be deemed not to provide for, or entitle any such person to, indemnification to the extent that it would cause Article 230 or any element of it, to be treated as void under the Act.
Auditors
Grant Thornton UK LLP has expressed willingness to continue in office. In accordance with Section 489(4) of the Act, a resolution to re-appoint Grant Thornton UK LLP as auditor of the Company will be proposed at the Annual General Meeting to be convened in due course.
By Order of the Board
Christopher van Tienhoven
Executive Director
10 April 2019
Directors' Responsibility Statement
In respect of the Directors' report and the financial statements.
The Directors are responsible for preparing the Strategic report, Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:
- Select suitable accounting policies and then apply them consistently;
- Make judgements and accounting estimates that are reasonable and prudent;
- State whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the financial statements; and
- Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that:
- In so far as each of the Directors is aware there is no relevant audit information of which the Company's auditor are unaware; and
- The Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Corporate Governance Statement
Introduction from the Chairman
The Board of the Company fully recognises the value and importance of good corporate governance particularly in the mitigation of risks and delivering long-term growth to its shareholders. On 8 March 2018, the London Stock Exchange issued revised rules for AIM-quoted companies, within which was a requirement (Rule 26) for AIM companies to apply a recognised corporate governance code from 28 September 2018.
Accordingly, in September 2018, the Company decided to apply the 2018 QCA Corporate Governance Code (the "Code") and this Corporate Governance Report for the year ended 31 December 2018 is based upon the Code. The principal means of communicating our application of the Code are this Annual Report and our website (www.patagoniagold.com).
The Board
The Board is comprised of the Non-executive Chairman, Carlos J Miguens, the Chief Executive Officer, Christopher van Tienhoven, and two Non-executive Directors, Gonzalo Tanoira and Manuel de Prado. There is a clear division of responsibilities between the Chairman, who is responsible for the operation of the Board, and the Chief Executive Officer, who is responsible for the management and strategy of the Company.
On appointment to the Board, all Directors receive an induction to familiarise themselves with the Company. The Directors have unrestricted access to management and receive briefings from them, which enable the Directors to keep abreast of the latest developments. Furthermore, the Company has implemented the appropriate procedures to support Directors in obtaining independent professional advice at the expense of the Company as and when required.
Role of the Board
The Board is responsible for the long-term success and ongoing management of the Company. In order to support this the Board maintains responsibility for a number of key matters, which include; a comprehensive review of both management and technical reports, the monitoring of foreign exchange and interest rate fluctuations, all environmental considerations, government and fiscal policy matters, employment and information technology requirements, cash control procedures, and communication with its shareholders and stakeholders.
Independent Directors
The Board acknowledges the length of service of the two appointed Non-executive Directors as being longer than the recommended guidelines; however, the Board values having this level of continuity. The Board also recognises the approval of share options issued to the Non-executive Directors as being a valuable remuneration incentive.
Throughout the year, the Board regularly monitors the independence of the Non-executive Directors, which includes an assessment of their character, judgement and other business issues which could materially interfere with the exercise of their judgement. After thorough consideration, the Board continues to deem both Gonzalo Tanoira and Manuel de Prado to be fully independent.
Time Commitments
The Directors devote a sufficient amount of time in order to discharge their duties to the Company both at and outside of Board Meetings. In order to ensure continuity of this commitment the Board meets at least six times a year. In addition to the formal Board Meetings, the Board will meet throughout the year as and when required for specific matters.
The time commitments of the Non-executive Directors are carefully reviewed by the Board and it is noted that Gonzalo Tanoira and Manuel de Prado devote three days a month to the Company. Details of the Directors' attendance at each of the scheduled Board and Committee Meetings for the 2018 financial year are listed below:
|
Board Meetings 2018: |
Directors' attendance |
|||
|
C. Miguens |
C. van Tienhoven |
G. Tanoira |
M. de Prado |
|
|
January 29 |
x |
x |
|
|
|
April 10 |
x |
x |
x |
x |
|
May 9 |
x |
x |
x |
x |
|
July 3 |
x |
x |
|
|
|
September 10 |
x |
x |
x |
x |
|
September 24 |
x |
x |
x |
x |
|
October 11 |
x |
x |
x |
x |
|
November 5 |
x |
x |
x |
x |
|
November 27 |
x |
x |
|
|
|
December 28 |
x |
x |
x |
|
|
|
Audit |
Remuneration |
Nomination |
|||
|
Held |
Attended |
Held |
Attended |
Held |
Attended |
|
|
C. Miguens |
April 9 |
|
May 4 |
x |
May 4 |
x |
|
G. Tanoira |
April 9 |
x |
May 4 |
x |
May 4 |
x |
|
M. de Prado |
April 9 |
x |
May 4 |
x |
May 4 |
x |
Board Composition
The Directors continue to remain satisfied that the Board is well balanced and that the Directors possess the sufficient breadth of skills, relevant experience, variety of backgrounds and knowledge to ensure the Board functions appropriately, without being dominated by any one Director. The Board acknowledges that there are currently no appointed female Directors, however, it will continue to review this moving forward to ensure the appropriate balance and diversity of the Board is maintained.
Board Evaluation
The Board reflects upon its performance through the year by reviewing the strategy and operations of the Company, to ensure they align with promoting its long-term success. To date, the Board has not undertaken a formal review of its effectiveness, but as part of its continued commitment to the corporate governance of the Company, it has been decided that an informal review will be undertaken during the 2019 financial year. Details, findings and resulting actions will be published in the 2019 Annual Report of the Company. Moving beyond this, the Board will carefully consider the requirement for an external board evaluation, in line with the growth of the Company.
Board Committees
In order to support the growth of the Company, the Board has delegated a number of responsibilities to its established Audit, Nomination and Remuneration Committees. Each Committee has approved Terms of Reference which have been reviewed and approved by the Board.
Audit Committee
The Audit Committee is chaired by Gonzalo Tanoira and is comprised of himself, Carlos J. Miguens and Manuel de Prado. The Committee has ultimate responsibility for the financial reporting and internal control procedures of the Company. The Board has taken the decision that a separate internal audit function is not appropriate at this time. However, this will continue to be reviewed in line with the growth of the Company.
Remuneration Committee
The Remuneration Committee is chaired by Carlos J. Miguens and is comprised of himself, Gonzalo Tanoira and Manuel de Prado. The Committee is responsible for making recommendations to the Board covering all aspects of remuneration for Executive Directors and Senior Management of the Company. In the implementation of its remuneration policies the Committee takes into account all appropriate factors, including industry standard executive remuneration, differentials between executive and employee remuneration and differentials between executives. The remuneration of the Non-executive Directors is determined by the Executive Directors
Nomination Committee
The Nomination Committee is chaired by Manuel de Prado, and is comprised of himself, Carlos Miguens and Gonzalo Tanoira. The Committee is responsible for making recommendations to the Board in respect of all new appointments. It also has responsibility for ensuring that the appropriate balance and skills of the Board are maintained to ensure it carries out its functions correctly, in addition to a suitable level of diversity to ensure the right culture and integrity of the Board is maintained. The Company's Articles of Association stipulate that one-third of the Directors (or if their number is not a multiple of three, the number nearest to but not greater than one-third), shall retire by rotation each year.
Shareholder and Stakeholder relationships
The Board fully understands its ultimate responsibility to shareholders and ensuring the long-term success of the Company. In alignment with this, the Board has responsibility for the ongoing governance, controls, risk management, direction and performance of the Company. The Board ensures that it regularly monitors the Company's exposure to key business risks in conjunction with the strategic direction of the Company.
The Board remains fully committed to ensuring regular communication is maintained with both its shareholders and stakeholders, and has identified its key stakeholders for engagement. The Chief Executive Officer has primary responsibility for maintaining this dialogue and developing an understanding of their views.
In order to support this engagement the Company website (www.patagoniagold.com) has a dedicated "Investors" section giving investors direct access to Company reports and press releases. There is also an enquiries mailbox facility (info@patagoniagold.com). All shareholders receive notice of the AGM, and the Board welcomes the attendance of all shareholders to encourage healthy two-way discussions.
Carlos J. Miguens
Non-Executive Chairman
10 April 2019
Audit Committee Report
Membership
The Board has established an Audit Committee with the appropriate Terms of Reference, which is comprised of Gonzalo Tanoira, Carlos Miguens and Manuel de Prado. The Committee reports to the Board in respect of its responsibilities.
Responsibilities
The Committee meets at least once a year to discuss its ongoing responsibilities to include such matters as the existing risk management and internal control systems in place, its financial reporting obligations and external audit findings.
An outline of the key responsibilities undertaken by the Committee in the year are set out below:
• Review of the Annual and Interim Accounts.
• Review of the Auditor's Report.
• Confirmation on the life of mine plans and associated documentation relevant to the going concern assumption in line with management's cash flow forecasts.
• Performance of sensitivity analysis on the assumptions included within the forecast.
• Matching results against management forecasts for the year ended 31 December 2018.
• Meeting with management to discuss the Directors' plans for future actions in relation to its going concern assessment, taking into account any relevant events subsequent to the balance sheet date.
Internal Controls
The Committee continues to monitor and review the Company's financial reporting and internal control procedures. It has been concluded that a separate internal audit function is not justified at this time because of the size and scope of the Company's business activities. However, as the company continues to grow the need for this function will be regularly assessed.
External Audit
The Board understands the importance of maintaining a relationship with the external auditors and in order to support this relationship the external auditor is invited to attend at least one meeting of the Audit Committee each year.
The Committee maintains the responsibility of making recommendations to the Board in respect of the appointment, reappointment and removal of the external auditors. In the reappointment of the Committee the Board carefully considers their performance in discharging the audit, the terms of engagement, and their independence.
The external auditor reports to the Committee on actions taken to comply with professional and regulatory requirements and is required to rotate the lead audit partner every five years.
Financial Reporting
The Committee monitors the integrity of the Annual and Interim Accounts of the Company, including the review of any significant reporting issues and judgements. Advise on the clarity of disclosure and information contained in the Annual Report and Accounts.
Gonzalo Tanoira
Non-Executive Director
10 April 2019
Remuneration Committee Report
Membership
The Board has established a Remuneration Committee with the appropriate Terms of Reference, which is comprised of Carlos Miguens, Gonzalo Tanoira and Manuel de Prado. The Committee reports to the Board in respect of its responsibilities.
Responsibilities
The Committee meets once a year to discuss its ongoing responsibilities to include such matters as recommendations to the Board on all aspects and policies relating to the remuneration of Executive Directors and Executive Officers of the Company.
An outline of the key responsibilities undertaken by the Committee in the year are set out below:
• An annual review of remuneration for all Executive Directors and Senior Managers of the Company. A particular emphasis was placed on those individuals based in Argentina, due to the difficult economic conditions in the country, which has resulted in very high inflation rates.
• In May 2018, following a recommendation by the Committee, the Board agreed to re-price certain outstanding share options that had been issued to employees in order to incentivise those individuals and reflect a more realistic price level given the current market.
• Review of the Auditor's Report.
• Confirmation on the life of mine plans and associated documentation relevant to the going concern assumption in line with management's cash flow forecasts.
• Performance of sensitivity analysis on the assumptions included within the forecast.
• Matching results against management forecasts for the year ended 31 December 2018.
• Meeting with management to discuss the Directors' plans for future actions in relation to its going concern assessment, taking into account any relevant events subsequent to the balance sheet date.
Carlos J. Miguens
Non-Executive Chairman
10 April 2019
Independent auditor's report to the members of Patagonia Gold plc
Opinion
Our opinion on the group financial statements is unmodifiedWe have audited the group financial statements of Patagonia Gold plc for the year ended 31 December 2018, which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. In our opinion, the group financial statements: give a true and fair view of the state of the group's affairs as at 31 December 2018 and of its loss for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act 2006. |
Separate opinion in relation to IFRSs as issued by the IASBAs explained in Note 1 to the group financial statements, the group in addition to complying with its legal obligation to apply IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB). In our opinion the group financial statements give a true and fair view of the consolidated financial position of the group as at 31 December 2018 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRSs as issued by the IASB. |
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the 'Auditor's responsibilities for the audit of the group financial statements' section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the group financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
|
|
Overview of our audit approachOverall materiality: $961,780 which represents 2% of the Group's total revenues; Key audit matters were identified as the accounting for the purchase of the Calcatreu deposit, the existence and valuation of stockpile, and going concern; and We performed full scope audit procedures of the group components in Argentina, which comprise 100% of the group's revenues. There were no key changes in scoping from the prior year. |
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the group financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the group financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Key Audit Matters |
How the matter was addressed in the audit |
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Accounting for the purchase of the Calcatreu deposit During the period the group completed the purchase of the Calcatreu deposit. We identified that management's determination of the accounting treatment of this purchase as an asset purchase and not a business combination included a number of areas of judgement as detailed in IFRS 3 in respect to inputs, processes and outputs. We therefore identified accounting for the purchase of the Calcatreu deposit as a significant risk, which was one of the most significant assessed risks of material misstatement.
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Our audit work included, but was not restricted to: · Obtaining and assessing the agreement with Pan American Silver in respect of the Calcatreu acquisition to confirm that the appropriate accounting treatment had been applied in accordance with the requirements of International Financial Reporting Standard (IFRS) 3 'Business Combinations'; and · · Obtaining management's assessment of the accounting treatment as an acquired asset, rather than a business combination, with reference to IFRS 3 and IFRS 6 and reviewed this in conjunction with the guidance provided in IFRS 3 B5-B12.
The group's accounting policy on asset purchases and business combinations is shown in note 3 to the financial statements.
Key observations We are satisfied that the acquisition of Calcatreu has been appropriately treated as an asset purchase and not as a business combination in accordance with the requirements of IFRS 3 as the acquisition provided no clear process or output.
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Going Concern The financial statements are prepared on a going concern basis in accordance with International Accounting Standard (IAS) 1 'Presentation of Financial Statements'. Under the going concern assumption, it is assumed that the group will continue in operation and that there is neither the intention nor the need to liquidate the business or to otherwise cease trading. There are key judgements relating to the adoption of this assumption by the Group, given that it continues to require additional finance for ongoing exploration activities, and that it took a decision in February 2019 to cease operations at Lomada and to place operations at Cap-Oeste overground mine into a "care and maintenance only" programme which has reduced the current expected future revenue streams. We therefore identified going concern as a significant risk, which was one of the most significant assessed risks of material misstatement.
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Our audit work included, but was not restricted to: · Challenging management's cash flow forecasts for the period to April 2020, examining and reperforming sensitivity analysis and where appropriate verifying key judgements to underlying workings and external information; · Confirmed that the life of mine plans agreed to resource predictions from third party experts and announcements made in the year and that the associated documentation was consistent with management's cash flow forecasts; · Performing sensitivity analysis on the assumptions included within the cashflow forecast; and · Comparing actual results for the year ended 31 December 2018 with management's forecasts for the period, agreeing the new financing in 2019 to signed contracts as well as matching Q1 results to the forecast provided. And
The group's accounting policy and detailed disclosures on going concern are shown in note 2 to the financial statements.
Key observations We have not identified any conditions or events that indicate that the directors' use of the going concern basis of accounting in the preparation of the group financial statements is not appropriate.
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Valuation and existence of Stockpile The measurement and valuation of ore stockpile included in inventory, together with its net realisable value, involves significant judgement by the directors as to the quantity and quality of the gold ore held in the stockpile. We consider that the decision by the Group in February 2019 to cease mining operations at Lomada and to put Cap Oeste into a care and maintenance program has increased the level of judgement associated with the valuation of inventory, specifically in relation to the ore stock pile. We therefore identified stockpile valuation and existence as a significant risk, which was one of the most significant assessed risks of material misstatement.
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Our audit work included, but was not restricted to: · Confirming the existence of the ore stockpile at the year end to qualified surveyor reports, underlying cost records and through physical inspection of the stock pile along with understanding of the relevant controls; · Assessing the accuracy of the write down of inventory calculations; and · Comparing the net realisable value of the ore stock pile to post year-end actual sales made to the end of March 2019 and assessing the reasonableness of the forecast sale volumes, values and expected cash generation from sales to the end of May 2019, being the stated date that leaching of the pile will cease.
The group's accounting policy on inventory valuation is shown in note 3 to the financial statements and related disclosures are included in note 18.
Key observations We are satisfied that inventory is included at the lower of cost and net realisable value in accordance with the Group's accounting policy and International Accounting Standard (IAS 2) 'Inventories' . |
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work.
We determined materiality for the audit of the group financial statements as a whole to be $961,780 which is 2% of total Group revenue. This benchmark is considered the most appropriate because revenues are fundamental to shareholder return and working capital, two key performance indicators which are closely monitored by users of the financial statements.
Materiality for the current year is higher than the level that we determined for the year ended 31 December 2017 to reflect the increase in total Group revenue.
We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial statement materiality for the audit of the group financial statements.
We determined the threshold at which we will communicate misstatements to the audit committee to be $48,100. In addition, we will communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds, for example in relation to directors' remuneration and related party transactions.
An overview of the scope of our audit
The overall approach to the group audit included performing a full scope audit of the financial information of all the group components.
Our approach was based on a thorough understanding of Patagonia Gold plc's business and is risk based.. Our work included:
evaluation by the group audit team of identified components to assess the significance of that component and to determine the planned audit response based on a measure of materiality;
a full scope approach was taken based on the materiality to the group and assessment of audit risk of the South American trading operations and activities of the Group;
detailed communications with the auditors of the components in Argentina including issuing group instructions, site visits to Buenos Aires, involvement in the planning and direction of the fieldwork and detailed review of the work performed by the component auditor; and
substantive testing of significant transactions, account balances and disclosures, the extent of which was based on various factors such as our overall assessment of the control environment, the effectiveness of controls over individual systems and the management of specific risks.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the group financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the group financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement of the group financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodifiedIn our opinion, based on the work undertaken in the course of the audit: the information given in the strategic report and the report of the directors for the financial year for which the group financial statements are prepared is consistent with the group financial statements; and the strategic report and the report of the directors have been prepared in accordance with applicable legal requirements. |
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the report of the directors.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors' responsibility statement, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of group financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the group financial statements, the directors are responsible for assessing thegroup's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the group financial statements
Our objectives are to obtain reasonable assurance about whether the group financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these group financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Other matter
We have reported separately on the parent company financial statements of Patagonia Gold Plc for the year ended 31 December 2018. That report includes details of the parent company key audit matters; how we applied the concept of materiality in planning and performing our audit; and an overview of the scope of our audit. That report includes an emphasis of matter.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Philip Westerman
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
10 April 2019
Independent auditor's report to the members of Patagonia Gold Plc
Opinion
Our opinion on the parent company financial statements is unmodifiedWe have audited the parent company financial statements of Patagonia Gold plc (the 'company') for the year ended 31 December 2018 which comprise the company statement of financial position, the company statement of changes in equity, the company statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.
In our opinion the parent company financial statements: give a true and fair view of the state of the parent company's affairs as at 31 December 2018 and of its loss for the year then ended; have been properly prepared in accordance with International Financial Reporting Standards Accounting Practice and as applied in accordance with the provisions of the Companies Act 2006; and have been prepared in accordance with the requirements of the Companies Act 2006. |
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the 'Auditor's responsibilities for the audit of the parent company financial statements' section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter - carrying value of investment in subsidiary companies
We draw attention to Notes 3 and 15 to the financial statements, which describe the carrying value of the parent company investment in its subsidiary companies. As described in Note 3, the directors consider that based on the cash flow projections prepared to December 2028, and the longer-term business plan that includes an assessment of resources available and potential cash and profit generation from these resources, that the prospects for the subsidiary company operations in South America remain positive. Based on the results of the review, the directors have determined that an impairment charge of $31.4 million (2017 $9.4 million) should be recognised in the parent company financial statements. The Directors recognise the assumptions detailed in Note 3 and Note 15 can have a significant effect on the recoverable amount and therefore the value of the impairment recognised. Should there be a change in the assumptions which indicated the impairment, this could lead to a revision of recorded impairment losses. Our opinion is not modified in respect of this matter.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the parent company financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the parent company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
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Overview of our audit approachOverall materiality: $357,000 which represents 0.5% of the company's total assets; The Key Audit Matter identified was the carrying value of the investment in subsidiaries; and We performed a full scope audit of the financial information of parent company. There were no key changes in scope from the prior year. |
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Key Audit Matter |
How the matter was addressed in the audit |
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Carrying value of investment in subsidiaries We therefore identified the carrying value of investment in subsidiaries as a significant risk, which was one of the most significant assessed risks of material misstatement. |
Our audit work included, but was not restricted to: Challenging management's cashflow model and their sensitivity analysis performed thereon. This comprised where appropriate agreeing key assumptions to related calculations or external support such as current gold price and third party forecasts; Reperforming the impairment assessment undertaken by management, and challenging management's recognition of the impairment charge against the carrying value of the investments in the current year as part of testing of the cashflow model detailed above; and Evaluating the disclosures within the financial statements in respect of any prevalent political risks that may affect the value of investments and challenging their reasonableness.
The parent company's accounting policy on the carrying value of investment in subsidiaries is shown in note 3 to the financial statements and related disclosures are included in note 15. Key observationsWe have concluded that the impairment charge in relation to the investment asset for the year is appropriate. |
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Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our work and in evaluating the results of that work.
We determined materiality for the audit of the parent company financial statements as a whole to be $357,000 which is 0.5% of the company's total assets. This benchmark is considered the most appropriate because as this entity exists as a holding company.
We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial statement materiality.
We determined the threshold at which we will communicate misstatements to the audit committee to be $30,000. In addition, we will communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds.
An overview of the scope of our audit
The overall approach to the audit included the audit team performing a full scope audit of the financial information of the parent company.
Our approach was based on a thorough understanding of Patagonia Gold plc's business and is risk based. We undertook substantive testing on significant transactions, account balances and disclosures, the extent of which was based on various factors such as our overall assessment of the control environment, the effectiveness of controls over individual systems and the management of specific risks.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodifiedIn our opinion, based on the work undertaken in the course of the audit: the information given in the strategic report and the report of the directors for the financial year for which the parent company financial statements are prepared is consistent with the parent company financial statements; and the strategic report and the report of the directors have been prepared in accordance with applicable legal requirements. |
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the report of the directors.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors' responsibility statement, the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of parent company financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the parent company financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the parent company financial statements
Our objectives are to obtain reasonable assurance about whether the parent company financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company financial statements.
A further description of our responsibilities for the audit of the parent company financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Other matters
We have reported separately on the group financial statements of Patagonia Gold plc for the year ended 31 December 2018. That report includes details of the group key audit matters; how we applied the concept of materiality in planning and performing our audit; and an overview of the scope of our audit.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Philip Westerman
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
10 April 2019
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2018
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